Patanjali Sastri, CJ.

1. This is an appeal from an order of the High Court of Rajasthan directing by writ issued under Art. 226 of the Constitution that the Union of India, appellant herein, should not levy income-tax on the income of the respondent accruing arising or received in Rajasthan (excluding the area of the former covenanting State of Bundi) prior to April 1, 1950.

2. The respondent resides and carriers on business in the district of Jodhpur in Rajasthan which is one of the Sates specified in Part B of the First Schedule to the Constitution (hereinafter referred to as part B States). In May 1950 the respondent was required to file a return of his income for the previous year, that is the year ending March 31, 1950, for assessment to income-tax, and subsequently was also asked to produce the relevant account books before the Income-tax Officer, Jodhpur on August 11, 1950.

Thereupon the respondent presented the petition, out of which this appeal arises, on August 23, 1950 invoking the jurisdiction of the High Court under Art. 226 of the Constitution for the issue of "a writ of mandamus or certiorari or other appropriate writ" directing the appellant not to take any action under the Indian Income-tax Act, 1922. (hereinafter referred to as the Indian Act) as amended by the Indian Finance Act, 1950, for the assessment or levy of income-tax on the income which accrued or arose to the respondent or was received by him prior to April 1, 1950 on the ground that such income was not liable to be charged "under the provisions of any law validly in force in Rajasthan".

3. The petition was heard by a Division Bench of the High Court (Nawal Kishor and Kanwarlal Bapna JJ.) who accepted the petition and issued a writ as already stated, overruling sundry preliminary objections to which no reference need be made as they have not been raised by the appellant before us.

4. As is well-known, after the Indian Independence Act, 1947 came into force, various Indian States (as they were then known) which had been recognised, subject to certain restrictions and limitations and material here, as independent principalities were brought into the Dominion of India from time to time under arrangements with their Rulers, and this process of accession and integration resulted in the expansion of the territory of India in successive states. So far as Rajasthan is concerned, the Rajputna States, as they were then called, integrated their territories into the United State of Rajasthan, and the new State acceded to the Dominion of India by an Instrument of Accession executed by the head of the State (Rajpramukh) on April 15, 1949, and accepted by the Governor-General of India on May 12, 1949. By cl. (3) of the Instrument the Rajpramukh accepted.

"all matters enumerated in Lists I and III of the Seventh Schedule to the Act (the Government of India Act, 1935) as matters in respect of which the Dominion Legislature may make laws for the United State, that nothing contained in the said Lists or in any other provisions of the Act shall be deemed to empower the Dominion Legislature to impose any tax or duty in the territories of the United State or prohibit the imposition of any duty or tax by the Legislature of the United State in the said territories."

This limitation on the power of the Dominion Legislature thus imposed by agreement between the two States was given effect to as a constitutional limitation by S. 101 of the Government of India Act, 1953 as adapted by the Governor-General in August 1949 in exercise of the powers conferred on him by the Indian Independence Act, 1947. That Section provided that

"nothing in this Act shall be construed as empowering the Dominion Legislature to make laws for an Acceding State otherwise than in accordance with the Instrument of Accession of that State and any limitation contained therein."

The position thus was that the Dominion Legislature had no power to make any law imposing any tax or duty in the territories of the United State of Rajasthan. In July 1949, however, the Indian States Finances Enquiry Committee appointed by the Government of India submitted their Report recommending, among other things, the financial integration of the Acceding States and the imposition of the Indian Income-tax in their territories as from the first day of April 1950. Meanwhile the framing of the Constitution of India by the Constituent Assembly, which also included duly appointed representatives of the Acceding States, was nearing completion, and in November 1949 the Rajpramukh, in exercise of his powers as the duly constituted head of the State, issued a Proclamation whereby he declared and directed that the "Constitution of India shortly to be adopted by the Constitution Assembly of India shall be the Constitution for the Rajasthan State as for the other parts of India, shall be enforced as such in accordance with the tenor of its provisions and that the provisions of the said Constitution shall, as from the date of its commencement, supersede and abrogate all other constitutional provisions inconsistent there with which are at present in force in this State."

5. The Constitution of India then came into force on January 26, 1950. It repealed the Government of India Act, 1953, including S. 101 thereof, and brought all the Part B States, including Rajasthan, within the Union of India, incorporating the territories of all those States in the "territory of India" as defined in Art. 1(2). It created a new Central Legislature for the Union called Parliament and empowered that Legislature by Art. 245 "to make laws for the whole or any part of the territory of India" subject to the provisions of the Constitution and, by Art. 246(1) read with Entry No. 82 of Lists I, it conferred exclusive power to make laws with respect to "taxes on income other than agricultural income".

In exercise of that power and pursuant to the recommendation of the Indian State Finances Enquiry Committee referred to above, Parliament enacted the Finance Act, 1950 (Act 25 of 1950) providing by S. 2(1) that income-tax and super-tax shall be charged "for the year beginning on the first day of April 1950" (i. e., 1950-51) at the rates specified in Parts I and II respectively of the First Schedule to that Act. Section 3 made certain amendments in the Indian Act "with effect from the first day of April 1950". Among these was the substitution of the present cl. (14-A) in S. 2 in the place of cl. (14-A) as it stood before. The new clause defines "taxable territories" as respects different period so as to correspond to the successive stages of expansion of the territory of India after the Indian Independence Act, 1947. The material part of that clause as amended runs thus :

"(14-A) "taxable territories" means ---

(a) ...........

(b) ..........

(c) ..........

(d) as respect any period after the 31st day of March, 1950, and before the 13th day of April, 1950, the territory of India excluding the State of Jammu and Kashmir and the Patiala and East Punjab States Union, and

(e) as respects any period after the 12th day of April, 1950, the territory of India excluding the State of Jammu and Kashmir;

Provided that the taxable territories shall be deemed to include -

(a) ..............

(b) the whole of the territory of India excluding the State of Jammu and Kashmir -

(i) as respects any period, for the purposes of Ss. 4-A and 4-B,

(ii) as respects any period after the 31st day of March, 1950, for any of the purposes of this Act, and

(iii) as respects any period included in the previous year for the purpose of making any assessment of the year ending on the 31st day of March, 1951, or for any subsequent year."

6. The definition, it may be observed in passing, is by no means a model of perspicuity. Parts of it seem redundant and even mutually contradictory. For instance, (leaving out the State of Jammu and Kashmir altogether in this discussion) whereas cl. (d) excludes the Patiala and the East Punjab States Union from the taxable territories as respects the period from April 1, 1950, to April 12, 1950, sub-cl. (ii) of cl. (b) of the proviso would seem to include that State also within such territories as respects the same period, and while cls. (d) and (e) of the substantive part of the definition when read together seem apt by themselves to bring the territory of India within the taxable territories as respects the period after March 31, 1950, sub-cl. (ii) of cl. (b) of the proviso apparently seeks to bring the same result by means of a fiction.

7. Now, the scheme of the Indian Act is to tax a person resident in the taxable territories during the previous year on all his income of the previous year whether accruing within or without the taxable territories and to tax a person not resident in the taxable territories upon his income accruing within the taxable territories during the previous year. Residence in the taxable territories has to be determined in accordance with the provisions of S. 4-A which, in the case of an individual, takes into account his having been in such territories within the five years preceding the year of assessment. If Rajasthan was a taxable territory in the year 1949-50 the respondent would be chargeable in respect of his income whether derived within or without Rajasthan.

It is however, argued on his behalf of Mr. Chatterjee that S. 3. of the Finance Act, 1950, having substituted the amended cl. (14-A) "with effect form the first day of April 1950", Rajasthan was not a taxable territory during the accounting year 1949-50, and that no income-tax being admittedly leviable in that State on the income accruing there in that year, the new cl. (14-A) should not be construed so as to impose liability to pay Indian income-tax on such income. Accordingly to learned Counsel the word "assessment" in sub-sl. (iii) of cl. (b) of the proviso must be taken to mean only computation of income and not the imposition of liability. In support of the construction he relied on the decision of the Privy Council in --- Commr. Of Income-tax, Bombay v. Khemchand Ramdas, AIR 1938 PC 175 [LQ/PC/1938/22] (A), where it was said that the word "assessment" was used in the Indian Income-tax Act as meaning.

"sometimes the computation of income, sometimes the determination of tax payable and sometimes the whole procedure laid down in the Act for imposing liability on the tax-payer".

Mr. Chatterjee reinforced the argument by referring to the repealing and saving provisions of S. 13 which he read as keeping alive a State law of income-tax in force in any Part B State "for the purpose of levy, assessment and collection of tax" not only in respect of the income of the year 1948-49 but also on the income of 1949-50 which is the previous year for assessment for the year ending March 31, 1951 (i.e. 1950-51). The result, therefore, according to him was that where any State law of income-tax was in force in any Part B State before April 1, 1950 so as to make the income of 1949-50 chargeable to tax, the amended clause (14-A) authorized the computation of such income for the purpose of taxation as, for example, in the State of Bundi. But where, as in the rest of the territory of Rajasthan, no income-tax was leviable on the income of the year 1949-50, the amendment by the Finance Act, 1950, which took effect only from April 1, 1950 did not, on its true construction bring the income of the year 1949-50 into charge under the Indian Act.

8. This argument found favour with the learned Judges in the High Court but we are unable to accept it. A short answer to it is provided by sub-cl. (i) of cl. (b) of the proviso under which the whole of the territory of India including Rajasthan is to be deemed taxable territory for the purpose of S. 4-A of the Indian Act "as respects any period". The words "any period" cannot be taken to mean "any period after March 31, 1950", for, the period referred to in the next clause is expressly limited in that sense. Those limiting words cannot be read into sub-cl. (i) which must, therefore, be understood as referring to any period before or after March 31, 1950. As already indicated residence in the taxable territories within the meaning of S. 4-A can, in some cases, relate back to as many as five years before the year of assessment, and that is obviously the reason why the period mentioned in sub-cl. (i) is not limited as in sub-cl. (iii) of cl. (b) of the proviso.

Indeed, if the words, "any period" in sub-cl. (i) were intended to mean any period after March 31, 1950, that sub-clause of the proviso which enacts a fiction, would be wholly unnecessary, for cl. (d) and (e) of the substantive part of the definition taken together clearly have the effect, as already stated, of making the territory of India a taxable territory during that period. If Rajasthan was thus a part of taxable territories during such period preceding the assessment year 1950-51, as would be necessary to make the respondent "resident" in such territories within the meaning of S. 4-A, then the income accruing or arising to him in Rajasthan during the year 1949-50 would be taxable though Rajasthan was not part of the taxable territories in that year, for, in the case of a person resident in the taxable territories, income accruing or arising to him without the taxable territories is also chargeable to tax under S. 4, sub-s. (1), cl. (b), sub-cl. (ii) of the Indian Act. This aspect of the matter does not appear to have been sufficiently appreciated in the Court below. The learned Judges say

"The first clause in proviso (b) means to say that the earlier residence in Part B States will be taken to be residence in taxable territories while taking account of the residence for a certain prior period".

Having thus correctly construed the clause, they failed to realise its effect on the operation S. 4(1)(b)(ii), for they proceeded to consider the construction of proviso (b)(iii) observing :

"The next important question calling for determination is whether Rajasthan became taxable territory during the financial year in this case, i. e., 1949-50, for, if the answer is in the negative, the petitioner must be held to be immune from liability to assessment of the income of that year."

This, as pointed out above, is a misconception. It may well be that proviso (b)(iii) was designed to bring the income, profits and gains of the year 1949-50 into charge under S. 4(1) (a) and S. 4(1) (c), in which cases receipt or accrual as the case may be, in the taxable territories is the test of chargeability. It may be mentioned here that the exemption form tax under S. 14(2)(c) of the Indian Act of income accruing within Part B States was abrogated, except as regards the State of Jammu and Kashmir, by the amendment of that provision with effect from the first day of April 1950.

9. Even assuming it were necessary for the revenue to bring the case within proviso (b)(iii) in order to sustain the charge on the respondents income accruing in Rajsthan during the year 1949-50, we are of opinion that the construction placed by the learned Judges on that clause cannot be supported. They assume that proviso (b) (iii) is a provision authorising assessment of income-tax, and proceed to discuss what the word "assessment" in that context should be taken to mean. Charge of income to tax and its computation are matters governed by other provisions of the Indian Act. All that S. 2(14-A) does is to define what the expression "Taxable territories" means in certain cases and for certain purposes wherever that expression is used in the various provisions of the Indian Act.

And as the expression is used in the charging Section 4 in connection with the conditions which are to determine liability to tax, sub-cl. (iii) of cl. (b) of the definition must, when read with S. 4 of the Indian Act, have reference to chargeability of income. The result is that Ss. 3 and 4 of the Indian Act, in the light of the definition in proviso (b) to the amended S. 2(14-A) and S. 2 of the Indian Finance Act, 1950 authorise the imposition of the Indian Income-tax and super-tax on the income derived by the respondent in the year 1949-50 in the territory of Rajasthan.

10. As already observed, the learned Judges below, in order to reinforce their construction of sub-cl. (iii) of cl. (b) of the proviso, read S. 13 of the Finance Act as keeping alive the law of income-tax in force in any Part B State for purposes of levy, assessment, and collection of tax in respect of the income of 1949-50. This, in our opinion, is not the effect of S. 13 on its true construction. After referring to the decision of the Privy Council to which reference has been made, the learned Judges say ---

"There are three stages in connection with the imposition of a tax. The first is the declaration of liability, the second is the assessment and the third is the collection. This clause made the territory a taxable territory for the purpose of making any assessment but not for the purpose of, chargeability. The chargeability is left to arise by some other law and that law is the previous State law referred to in S. 13, Finance at, 1950. It arise in a twofold manner. In the first place, under S. 6 of the General Clauses Act the repeal of the State law as from April 1, 1950, did not affect any liability incurred under the repeated enactment and secondly though the language used in S. 13 is very complicated, a careful perusal makes it clear that the State law is not only kept alive for the purpose of levy, assessment and collection of income-tax on the income of the year 1949-50, but also for the above purposes in the subsequent year.

The previous year in relation to the subsequent year 1951-52 is the year 1950-51 and the period not included therein would be the year 1949-50 and the State law is directed to apply if the income remains untaxed under the Indian law .......... . Therefore if somebody is liable to income-tax in any territory where such law is in force prior to April 1, 1950, but certain period has not been included while assessing him to income-tax but the chargeability existed, the proviso (b) (iii) would become applicable for such period as he was not charged but the liability had accrued, and the territory would become taxable territory for the purpose of making any assessment of the year 1950-51."

11. It will be seen that the basis on which this reasoning proceeds is that S. 13 of the Finance Act, 1950 saves the operation of the State laws relating to income-tax in Part B States in the year 1949-50 for the purpose of levy, assessment and collection, and it is those laws that imposed the liability to tax on the income accruing in those States during that year. This is a misapprehension of the true meaning and effect of S. 13. That Section so far as it is material here, runs thus :

Repeals and savings --- (1) if immediately before the 1st day of April 1950, there is in force in any Part B State other than Jammu and Kashmir or in Manipur, Tripura or Vindhya Pradesh or in the merged territory of Cooch-Behar any law relating to income-tax or super-tax or tax on profits of business, that law shall cease to have effect except for the purposes of the levy, assessment and collection of income-tax and super-tax in respect of any period not included in the previous year for the purposes of assessment under the Indian Income-tax Act, 1922 for the year ending on the 31st day of March 1951, or, for any subsequent year ........

A close reading of that provisions will show that it saves the operation of the State law only in respect of 1948-49 or any earlier period which is the period not included in the previous year (1949-50) for the purposes of assessment for the year 1950-51. In other words, there remained no State law of income-tax in operation, in any Part B State in the year 1949-50. No doubt, there is the phrase "or for any subsequent year" immediately following the words "for the year ending on the 31st day of March 1951". Relying on that phrase, the learned Judges argue thus : Take the "subsequent year" 1951-52. The previous year for making an assessment for that year would be 1950-51. The year 1949-50 "is a period not included" in that previous year. Therefore, S. 13 saves the operation of any law relating to income-tax in force in any Part B State in 1949-50 "for the purposes of the levy, assessment and collection of income-tax and super-tax in respect of that period", that is to say, the income accruing in 1949-50 in a Part B State continues to be chargeable under the State law.

But the learned Judges failed to see that on this reasoning, the same could be said of the income of 1950-51, 1051-52 etc. if you take the "subsequent year" to 1952-53, 1953-54 etc. and work backwords. On this construction of S. 13, the State law of income-tax would continue to operate for an indefinite period even after the commencement of the Constitution during which period the "Indian income-tax and super-tax would be leviable. In other words, the State law of income-tax in Part B States for the levy, assessment and collection would be in operation side by side with the Indian Act even after the financial integration of those States with the Indian Union --- a result manifestly repugnant to the policy underlying the Finance Act, 1950. No argument, therefore, could be logically based on the words "or for any subsequent period", which evidently were added with a view to catch the income of any broken period prior to April 1, 1950 which might otherwise escape assessment both under the repealed State law and the newly introduced Indian Act.

12. Nor can S. 6 of the General Clauses Act, 1897 serve to keep alive the liability to pay tax on the income of the year 1949-50 assuming it to have accrued under the repealed State law, for a "different intention" clearly appears in Sections 2 and 13 of the Finance Act read together as indicated above. In any case, no question of keeping any such liability alive could arise in the present case as admittedly no State law of income-tax was in operation in the territory of Rajasthan, except the former State of Bundi. On this view the whole basis of the reasoning of the learned Judges below falls to the ground.

13. Even so, it was contended, the Finance Act, 1950, in so far as it purports to authorise such levy is ultra vires and void as Parliament was not competent under the Constitution to make such a law. The argument was put in two ways. In the first place, it was said broadly that as the Constitution could not operate retrospectively as held by this Court in --- Keshvan v. State of Bombay, AIR 1951 SC 128 [LQ/SC/1951/3] (B), the power of legislation conferred by the Constitution upon Parliament could not extend so as to charge retrospectively the income accruing prior to the commencement of the Constitution. This is a fallacy.

While it is true that the Constitution has no retrospective operation, except where a different intention clearly appears, it is not correct to say that in bringing into existence new legislatures and conferring on them certain powers of legislation, the Constitution operated retrospectively. The legislative powers conferred upon Parliament under Art. 245 and Art. 246 read with list I of the Seventh Schedule could obviously be exercised only after the Constitution came into force and no retrospective operation of the Constitution is involved in the conferment of those powers. But it is different thing to say that Parliament in exercising the powers thus acquired is precluded form making a retroactive law. The question must depend upon the scope of the powers conferred, and that must be determined, with reference to the "terms of the instrument by which affirmatively, the legislative powers were created and by which, affirmatively, they were restricted" --- Queen v. Burah, 5 Ind App 178 (PC) (C).

Article 245 of the Constitution enacts that subject to its provisions Parliament may make laws for the whole or any part of the territory of India and Art. 246 proceeds to distribute legislative powers as between Parliament and the State Legislature in the county. Thus, these articles read with Entry No. 82 of List I of the Seventh Schedule empower Parliament to make laws with respect to taxes on income for the whole of the territory of India, and no limitation or restriction is imposed in regard to retroactive legislation. It is, therefore, competent for Parliament to make a law imposing a tax on the income of any year prior to the commencement of the Constitution.

14. It was said, however, that the line of decisions like --- 5 Ind App 178 (PC) (C) which defined the powers of legislatures created but the British Parliament could have no application to the Union Parliament which came into life as a new legislature on the commencement of the Indian Constitution. It could not be assumed that such a legislature had the power of making a law having retrospective operation in relation to a period prior to its birth unless the Constitution itself clearly and explicity conferred such power. In support of this argument certain observations of one of the Judges in an Australian case (--- Ex parte Walsh and Johnson: In re Yatcs, 37 CLR 36 at pp. 80, 81 (D) were relied on.

We are unable to accept the argument. Our Constitution, as appears from the preamble derives its authority from the people of India, and learned counsel conceded that it was open to the people to confer on the legislatures established by the Constitution, which they framed through their representatives, power to make laws having operation in relation to periods prior to the commencement of the Constitution. But it was insisted, such a power should be given in clearly expressed terms. There is, however, no question here of the Constitution operating retrospectively in bringing into existence the Union Parliament or the legislature of the State. The only question is what powers have been conferred upon these legislatures by the representatives of the people who framed the Constitution and, in determining that issue, the principles laid down in cases like --- Queen v. Burah (C) apply in full force. The observations in the Australian case, to which reference has been made, seem to us to go too far and cannot be accepted as sound constitutional doctrine.

15. Nor can it be said, in strictness, that the Finance Act, 1950 is retroactive legislation. That Act, as already noticed, purports by S. 2 to charge income-tax and super-tax at specified rates "for the year beginning on the 1st day of April 1950". The case is thus one where the statute purports to operate only prospectively, but such operation has, under the scheme of the Indian Income-tax law, to take into account income earned before the statute came into force. Such an enactment cannot, strictly speaking, be said to be retroactive legislation, though its operation may effect acts done in the past. Dealing with a statute authorising the removal of destitute widows from a parish, it was observed in an English case --- Queen v. St. Mary, White chapel, (1848) 12 Q B 120 at p. 127 (E) :

"It was said that the operation of the statute is confined to persons who have become widows after the Act passed and that the presumption against a retrospective statute being intended supported this construction. But we have before shown that the statute is in its direct operation prospective as it relates to future removals only and that it is not properly called a retrospective statute because a part of the requisite for its action is drawn from time antecedent to its passing".

It is, however, unnecessary to pursue this aspect of the matter further as we have held that Parliament has the power to make retroactive laws.

16. Secondly, it was said that S. 101 of the Government of India Act, 1935, which gave effect to the stipulation in the Instrument of Accession against the imposition by the Dominion Legislature of any tax or duty in the territory of the United State of Rajasthan, was kept alive, notwithstanding its repeal by Art. 395 of the Constitution, by S. 6 of the general Clauses Act, 1897 (which is made applicable to the interpretation of the Constitution by Art. 367(1) as a "right" or "privilege" acquired under the repealed enactment, and so continued to operate under Art. 372(1) as a constitutional limitation on the power of Parliament, with the result that Parliament had no power to impose tax contrary to S. 101 of the Government of India Act. 1935.

The argument is somewhat ingenious but there are obvious difficulties in the way of its acceptance. For one thing, S. 101 of the Government of India Act created no right or privilege in the subjects of the United State of Rajasthan which notwithstanding the repeal of the Section could be regarded as still ensuring for their benefit, Section 101 merely imposed a restriction upon the power of the Dominion Legislature to make laws for an acceding State inconsistent with the stipulations contained in the Instrument of Accession.

When that Section along with the rest of the Government of India Act, 1935 was repealed by the new Constitution, which has created new Legislatures with power to make retroactive laws, it is idle to suggest that rights or privileges acquired while the old Constitution Act was in force are preserved for ever for that must be the result of the argument by S. 6 of the General Clauses Act, which can have no application to such cases. Furthermore, it will be recalled that the Proclamation made by the Rajpramukh as Ruler of Rajasthan on November 23, 1949 declared and directed that the Constitution of India when brought into force "shall be the Constitution for the Rajasthan State" and it expressly "super-seded and abrogated all other constitutional provisions inconsistent therewith" which were then in force.

The competency of the Rajpramukh as the Ruler of the State to accept the Constitution of India as governing that State also was not challenged before us, and it is manifest that after such declaration and direction, no restriction imposed on the Dominion Legislature by the Instrument of Accession and enforced by S. 101 of the Government of India Act could prevail against the legislative powers conferred on Parliament by the Constitution of India. The difference in the constitutional position which previously existed between the Provinces and the Acceding States has thus disappeared except, of course, in regard to matters in which such distinction has been preserved by the Constitution itself, e. g., by Art. 238 and Art. 371.It follows that the amendment of S. 2, cl. (145-A) of the Indian Act, by the Finance Act, 1950, so as to authorise the levy of tax on income accruing in the territory of Rajasthan in the year 1949-50 is within the competence of Parliament and therefore valid.

17. We accordingly allow the appeal, and set aside the judgment of the High Court. We make no order as to costs.

18. Appeal allowed.