COMMISSIONER OF INCOME TAX, BOMBAY Vs. DNMEHTA

JUDGEMENT

(1.) This is a reference made by the Commissioner of Income Tax on his motion under Section 66 (1), Income Tax Act, 1922, in which he raises two questions, the first one being, in effect, whether Section 24-B, which was added to the Income Tax Act by the Income Tax (Second Amendment) Act of 1933 has retrospective effect so as to apply to the case of a person dying before the Amendment Act was passed, and, secondly, whether, if the Amendment Act has retrospective effect, the Commissioner was justified in taking action against the assessee under Section 34, Income Tax Act. It was held by this Court in Commissioner of Income Tax V/s. Reid, which was decided at the end of the year 1930, that where a person dies after the commencement of the financial year, but before his income has been assessed for the purpose of income tax, his estate is not liable to pay the tax. The amendment Act was passed on 11 September, 1933, no doubt, with a view to removing the difficulties pointed out in that case. In the present case the only material facts are that on 20 April, 1932, a notice was served on Bai Avabai N. Mehta under Section 22 2. Income Tax Act, requiring her to make a return in respect of her income for the year 1932-33. She died on 6 May, 1932, before any return had been made, and the question which arises is whether her estate is liable for the tax in respect of the year 1932-33 under the provisions of the Amendment Act, she having died before the Act was passed. Section 11 of the Amendment Act provides that after Section 24 of the principal Act, the following Secs.shall be inserted, namely : Of the sections so inserted, Section 24-B is the material one for the present purpose. That provides in sub- Section (1) that Where a person dies, his executor, administrator or other legal representative shall be liable to pay out of the estate of the deceased person to the extent to which the estate is capable of meeting the charge, the tax assessed as payable by such person, or any tax which would have been payable by him under this Act if he had not died.

(2.) Then sub-sections (2) and (3) deal with methods of assessment, and for the present purpose it is only necessary to notice that each sub-section commences with the words, where a person dies. The view taken by the Commissioner is that the principal Act charges tax upon the deceased, and that the Amendment Act merely provides the machinery for making the charge effective so that once the machinery is there, the tax charged can be collected, whatever the date of the death of the deceased. It is, I think, correct to say that Section 3 of the principal Act charges the tax upon every one coming within the purview of the Act who was alive at the beginning of the financial year, but in the case of a person dying before assessment, that liability was inchoate only, and crystallized into an enforceable liability for the first time on the passing of the Amendment Act. It is therefore not quite accurate to say that the Amendment Act merely deals with machinery; it does for the first time impose an enforceable liability. The principle which must always be applied in construing a taxing Act is that the Government must show that the tax sought to be recovered has been imposed in language which admits of no reasonable doubt. The opening words of each sub-section to Section 24-B : Where a person dies, though the use of the present tense is not altogether appropriate on any reading of the Act, seem to me more appropriate to future than to past deaths. If the Legislature had intended the Act to have a retrospective effect, it would have been very easy to have said, dies whether before of after the passing of this Act. Inconvenience and hardship might be caused by making the tax payable out of an estate which has been distributed on the basis of the then existing law.

(3.) The Advocate General has relied on Section 19 of the Amendment Act, which introduces into the principal Act Section 49-B, under which a refund may be claimed by the personal representative of a decease person who was entitled to such refund, and he suggests that Section 24-B and 49-B should be read together and both given retrospective effect. But even if the latter section applies to a death before the Act came into force, it does not, I think, follow that we should give a similar meaning to Section 24-B. In my opinion the legislature has not shown with sufficient clearness an intention to make section 24-B retrospective, and I think therefore we must answer the first question in that sense.