MANOHAR LALL, AG. C.J. - The Appellate Tribunal has referred to us the following question for our opinion u/s 66(1) of the Indian Income Tax Act :-

"Is the assessment made legal and valid in view of the Bihar Validating Regulations I of 1941 and IV of 1942 "

It is impossible to get from the papers printed in the paper-book the relevant dates which are necessary to decide the question raised. It is to be regretted that notwithstanding the clear and repeated directions from this Court the Income Tax department persist in sending up an incomplete paper-book. This Court may have to take serious notice in future if the paper-book continues to omit the important orders and documents by mulcting the department in heavy costs to compensate the assessee for the harassment caused by adjourning the hearing of the case.

However, in the present case, the learned Advocate are agreed as to the important dates which are relevant for the purpose.

The assessment year of the assessee is 1939-40 for the accounting year 1938-39, which commenced on the 1st of April, 1938, and ended on the 31st March, 1939. The assessment was completed on the 14th February, 1940. The appeal against the assessment was disposed of on the 7th March, 1942. Two days before, on the 5th of March, 1942, the assessee took an additional ground that the assessment was ultra vires inasmuch as the Indian Finance Act of 1939 was not in operation on the date of the assessment, and that the Validating Acts or the Validating Regulations passed by the Bihar Governor were ultra vires. The Appellate Assistant Commissioner, whose order is not to be found in the paper-book, dismissed the appeal. The Appellate Tribunal disposed of the appeal of the assessee on the 31st of March, 1943. They came to the conclusion that the Validating Ordinance of 1942, applying the Finance Act of 1939 as well as the Income Tax (Amendment) Act, 1939, with retrospective effect, was intra vires of the Governor and made the assessment valid.

It is now convenient to refer to the relevant Acts passed by the Bihar Governor.

On the 13th of June, 1941, the Governor-General gave assent to Bihar Regulation I of 1941. The preamble of the Regulation shows that it was passed to remove doubts as to the operation of certain Acts of the Central Legislature in the partially excluded areas of the Province of Bihar to which the present assessment relates. By Section 2 of the Regulation certain provisions of the Indian Income Tax (Amendment) Act, 1939, were declared to have come into force on the 1st of April, 1939, and by Section 3 the Indian Income Tax Law Amendment Act, 1940, the Excess Profits Tax Act, 1940, and the Indian Finance Act, 1940, shall be deemed to have come into force in these excluded areas on the 26th of March, 1940, the 13th of April, 1940, and the 6th of April, 1940, respectively. By lamentable oversight the Indian Finance Act of 1939 was not mentioned in Section 3 of this Regulation. The result was that Bihar Regulation IV of 1942 had to be enacted by the Governor with the sanction of the Governor-General on the 30th June, 1942. By Section 3 of this Regulation it was provided that the Indian Finance Act, 1938, the Indian Finance Act, 1939, the Income Tax Law Amendment Act, 1940, the Excess Profits Tax Act, 1940, the Indian Finance Act, 1940, the Indian Finance (No. 2) Act, 1940, and the Indian Finance Act, 1941, shall be deemed to have come into force in the excluded areas on the 26th March, 1938, the 30th March, 1939, the 26th March, 1940, the 13th April, 1940, the 6th April, 1940, the 29th November, 1940, and the 31st March, 1941, respectively.

By Section 92(1) of the Government of India Act, 1935, it is enacted that no Act of the Federal Legislature, or of the Provincial Legislature, shall apply to an excluded area or a partially excluded area, unless the Governor by public notification so directs, and the Governor in giving such a direction with respect to any Act may direct that the Act shall, in its application to the area, or to any specified part thereof, have effect subject to such exceptions or modifications as he thinks fit.

By sub-section (2) of the same section it is provided that the Governor may make Regulations for the peace and good government of any area in a Province which is for the time being and excluded area, or a partially excluded area, and any Regulations so made may repeal or amend any Act of the Federal Legislature or of the Provincial legislature, or any existing Indian law, which is for the time being applicable to the area in question. It is then provided that Regulations made under this sub-section shall be submitted forthwith to the Governor-General and until he assents shall have no effect.

On these facts the question of law stated above arises for our decision.

Dr. Mitter on behalf of the assessee contends that the assessment is ultra vires for the following reasons :-

(i) That the Bihar Governor cannot encroach on the Central field with regard to any item in List I of the Seventh Schedule to the Government of Indian Act and in particular regarding item 54 "Taxes on income other than agricultural income;" (ii) that if the Regulation is treated to have been passed u/s 92(1) it is ultra vires as the Governor has no power to make the Regulation operate retrospectively; (iii) if however the Regulation is treated to have been passed u/s 92(2) the assessment is bad as the Governor even with the consent of the Governor-General cannot pass any Regulation which will affect the assessment which had already been completed on the date when this Act came into force; and (iv) the Income Tax Officer could not have applied the Indian Finance Act of 1939 because it was admittedly not in operation when the assessment proceedings began and were completed, and in the alternative the Income Tax Officer could not be deemed to have applied the Indian Finance Act of 1939 because he was not even aware of the existence of that Act on the relevant dates.

Mr. Baldev Sahay, who appeared for the Income Tax department, on the other hand, replied in an able argument that the contentions of the assessee were not sound because the Governor has plenary powers u/s 92(2) of the Government of India Act to pass any Regulation he likes provided it was for the peace and good government of the particular areas concerned and it was assented to by the Governor-General. He argues that it cannot be denied that the impugned Regulation was for the peace and good government of the areas covered by the present assessment. He also submitted that the Governor in the excluded area is not controlled by the fetters of any lists in the schedules of the Government of India Act.

In our opinion the argument of Mr. Baldev Sahay is well founded and must prevail.

The impugned Regulation is not passed u/s 92(1) of the Government of India Act, and, therefore, it is unnecessary to consider the argument of Dr. Mitter that this sub-section cannot authorise the Governor to extend an Act of the Central Legislature so as to operate retrospectively.

But the Governor has unlimited or, as it is called, plenary powers u/s 92(2) to make any Regulation for the peace and good government of the particular area in his Province. The only fetter is that the Act cannot come into force unless he has obtained the consent of the Governor-General which has been done in this case. As the Governor has plenary powers he can pass any Regulation whether it acts retrospectively or retroactively or is to come into operation in future or is to apply to pending assessments. But it was argued by Dr. Mitter that there was nothing in the preamble of the Act to indicate that it was for the peace and good government of the Province. In our opinion it is wholly unnecessary to make such a statement in the preamble if the very tenor and subject of the Regulation make it obvious that it is for the peace and good government of the area. This view has been taken by the highest authorities in a large number of cases. See, for instance, the case of Bhagat Singh. The argument advanced on behalf of the accused in that case was that the Ordinance promulgated by the Governor-General u/s 72 of the Government of India Act, 1915, which authorised him in case of emergency to promulgate Ordinances for the peace and good government of British India was invalid inasmuch as on the facts it could be found that the state of emergency did not exist and that the Ordinance did not conduce to the peace and good government in British India. Viscount Dunedin in delivering the judgment of the Board negatived these two contentions thus at page 171 :-

"The petitioners ask this Board to find that a state of emergency did not exist. That raises directly the question who is to be the judge of whether a state of emergency exists. A state of emergency is something that does not permit of any exact definition. It connotes a state of matters calling for drastic action, which is to be judged as such by some one. It is more than obvious that that some one must be the Governor-General, and he alone. Any other view would render utterly inept the whole provision. Emergency demands immediate action, and that action is prescribed to be taken by the Governor-General.

It is he alone who can promulgate the Ordinance.

In fact, the contention is so completely without foundation on the face of it that it would be idle to allow an appeal to argue about it.

It was next said that the Ordinance did not conduce to the peace and good government of British India. The same remark applies.

The Governor-General is also the judge of that. The power given by Section 72 is an absolute power, without any limits prescribed, except only that it cannot do what the Indian Legislature would be unable to do, although it is made clear that it is only to be used in extreme cases of necessity where the good government of India demands it."

And at page 173 their Lordships added that "although the Governor-General thought fit to expound the reasons which induced him to promulgate this Ordinance, this was not in their Lordships opinion in any way incumbent on him as a matter of law."

We are also unable to uphold the contention of Dr. Mitter that the Income Tax Officer should not have applied or rather could not apply the provisions of the Indian Finance Act of 1939 before they were extended to this area because the Regulation of 1942 clearly provides that the Indian Finance Act of 1939 shall be deemed to have come into force in the area on the 30th March, 1939. What is the meaning of the words "deemed to be" when found in a statute The matter was considered by their Lordships of the Judicial Committee in the case of Commissioner of Income Tax, Bombay v. The Bombay Trust Corporation Ltd. as agent of the HongKong Trust Corporation Ltd. The section there under consideration contained the words "for all the purposes of this Act, be deemed to be such agent." Viscount Dunedin made these observations at page 314 : "They are therefore to be deemed to be the agent who is chargeable to Income Tax, are deemed to be the assessee, the assessee being in terms of Section 2(2) defined as the person by whom Income Tax is payable. Now when a person is deemed to be something, the only meaning possible is that whereas he is not in reality that something the Act of Parliament requires him to be treated as if he were. It follows that although the High Court was perfectly right in holding that if Section 42 stood alone agent in that section would mean an agent in actual receipt of the profits or gains which were to be assessed, they failed to appreciate that Section 43 puts the person who comes within its terms artificially into the position of the agent and of assessee u/s 42." This is exactly the position here. It is, therefore, not pertinent point out that on the date when the Income Tax Officer started the assessment the Indian Finance Act of 1939 was in reality not in operation because the Regulation of 1942 directs that the Indian Finance Act of 1939 must be deemed to have been in operation on that date. It is also to be observed that the Income Tax Officer actually applied the provisions of the Indian Finance Act of 1939 to the assessment of this assessee believing that the Indian Finance Act of 1939 had extended to this area so that the assessment of the assessee had been made by him as if the Indian Finance Act of 1939 was actually in operation.

The contention of Dr. Mitter that there is no liability to tax unless the Finance Act has been passed is perfectly correct. In the case of Western India Turf Club the Lord Chancellor in delivering the judgment of the Privy Council observed at page 495 : "The argument which has been used in favour of the appeal seems to involve the fallacy that liability to tax attached to the income in the previous year. This is not so. No liability to tax attached to the income of this company until the passing of the Act of 1925, and it was then to be taxed at the rate appropriate to a company." The same view was taken by their Lordships of the Judicial Committee in Maharajah of Pithapuram v. Commissioner of Income Tax, Madras. Lord Thankerton in delivering the judgment of the Board made these observations at page 223 : "It should be remembered that the Indian Income Tax Act of 1922, as amended from time to time, forms a code which has no operative effect except so far as it is rendered applicable for the recovery of tax imposed for a particular fiscal year by a Finance Act. This may be illustrated by pointing out that there was no charge on the 1938-39 income either of the appellant or his daughters, nor assessment of such income until the passing of the Indian Finance Act of 1939, which imposed the tax for 1939-40 on the 1938-39 income and authorised the present assessment etc. " But this conclusion does not help the assessee because, as already stated, the effect of the Regulation of 1942 is that the Indian Finance Act of 1939 must be deemed to have been in operation on the date when the assessment proceedings started and on the date when they were completed.

The matter may be looked at from yet another point of view. The assessment proceedings had not become final because the assessee had appealed to the Appellate Tribunal and the appeal was actually pending when the Regulation of 1942 was enacted. As the Regulation expressly declared that the Finance Act of 1939 must be deemed to have been in operation from the 30th March, 1939, the Tribunal was in duty bound to apply the provisions of that Act on the date it was asked to declare that the whole assessment was ultra vires. This position may be thus illustrated by the case of Mukerjee, Official Receiver v. Ramratan Kuer. In that case during the pendency of the appeal to the Privy Council, the Bihar Tenancy (Amendment) Act, 1934, was passed which inserted Section 26(N) to the Act which provided that every person claiming an interest as landlord in any holding shall be deemed to have given his consent to every transfer of such holding made before January 1, 1923 etc. The decree of the Subordinate Judge was passed in 1930 several years before the enactment came into force. Sir Gorge Rankin delivering the judgment of the Board observed at page 51 : "In these circumstances, it appears to their Lordships that unless some saving can be implied as regards occupancy-holdings which, at the date of the commencement of the Act, are in question in a pending suit, Section 26(N) must be implied to the present case, and the plaintiffs appeal must fail in limine. Their Lordships are of opinion that no such saving can be implied. Section 26(N) is not a provision to the effect that action shall lie in certain circumstances, nor has it any reference directly to litigation. Its provision is that every person claiming an interest as a landlord shall be deemed to have given his consent to every transfer made before January 1, 1923. This is retrospective : the question is not whether general language shall be taken only in a prospective sense. The object of this section can only be to quiet titles which are more than ten years old, and to ensure that if during those ten years the transferee has not been ejected he shall have the right to remain on the land. Within this class the Legislature has not thought fit to discriminate against tenants whose right is under challenge in a suit, a course which it may well have regarded as invidious or unnecessary. As substantive rights of landlords and their accrued causes of action were to be abrogated, respect for pending suits over old transfers cannot be assumed." It is interesting to observe that Lord Thankerton during the course of the argument observed as follows at page 49 : "If the new Act declares that this transaction, being dated in 1916, shall be valid despite the fact that consent if not given by the landlord, would not this Court be bound by that The duty of a Court is to administer the law of the land at the date when the Court is administering it." Reference was made to Quiller v. Mapleson.

For these reasons the answer to the question is as follows :

The assessment is made legal and valid in view of the Bihar Regulation IV of 1942.

In view of the peculiar circumstances, I would direct that each party shall bear his own costs in this Court.

SINHA, J. - I agree.

DAS, J. - I agree.

Reference answered accordingly.