1960 INSC 0182 Rajputana Mining Agencies Ltd. Vs Union of India and Another Civil Appeal No. 26 of 1956, (S.K. Das, M. Hidayatullah, K.C. Das Gupta, J.C. Shah, N. Rajgopala Ayyangar JJ) 31.08.1960 JUDGMENT HIDAYATULLAH, J. - This is an appeal with the special leave of this court against the judgment of the High Court of Rajasthan dated April 22, 1954. The appellant is a private limited company, which was incorporated in 1945 in the former Kotah State. The income-tax authorities sought to tax its profits and income for the assessment year, 1950-51, corresponding to the previous year, 1949-50. The appellant claimed exemption under section 14(2)(c) of the Indian Income-tax Act, 1922, as it stood before the amendment in 1953, contending that the exemption stood good even after the amendment. This claim was rejected by the High Court, which was moved under article 226 of the Constitution. Hence this appeal. Prior to the integration of the Kotah State into the United State of Rajasthan in 1949, there was no income-tax law in force in Kotah State. Till the formation of the State of Rajasthan, there was no such law in force in any part of Rajasthan, except Bundi State. The Indian Finance Act of 1950 made the Indian Income-tax Act, 1922, applicable to the whole of India, except the State of Jammu and Kashmir, and suitable amended the Income-tax Act. Rajasthan then became, from April 1, 1950, a taxable territory. For the assessment year 1950-51, income-tax was sought to be imposed in the State of Rajasthan. One Madan Gopal Kabra moved High court under article 226 of the Constitution to restrain the taxing authorities from claiming tax for the period prior to April 1, 1950 contending that inasmuch as Rajasthan was not a taxable territory before April 1, 1950, no tax for a period prior to that date could be demanded. This court in appeal by the Department against the decision of the High Court of Rajasthan, which had accepted the contention, held that the tax was leviable. It is not necessary to give the details of the decision of the High Court of Rajasthan, which had accepted the contention, held that the tax was leviable. It is not necessary to give the details of the decision in that occasion. The judgment of this court is reported in Union of India v. Madan Gopal Kabra The present Appellant and fourteen others filed petitions under article 226 of the Constitution, urging fresh grounds by a later amendment. Their contention was that section 14(2)(c) of the Indian Income-tax Act, as it stood on April 1, 1950, granted an exemption, and that this exemption was not affected by the amendment of the said provision in 1953 even though the amendment was retrospective from April 1, 1950, unless the Finance Act, 1950, which applied the Income- tax Act to this Area was also amended. This contention was not accepted by the High Court which dismissed the petition under article 226, holding inter alia, that this point was also decided by this court against Madan Gopal Kabra. In this appeal, this point alone is argued, and it is contended that the point is still open for decision. Section 14(2)(c), as it stood before the amendment in 1953, read as follows : "The tax shall not be payable by an assessee........ (c) in respect of any income, profits or gains accruing or arising to him with in a Part B State, unless such income, profits or gains are received or deemed to be received in or are brought into the taxable territories in the previous year by or on behalf of the assessee, or are assessable under section 12B or section 42." The amendment provided : "In section 14 of the principal Act in clause (c) of sub-section (2), for the words and letter 'Part B State' the words 'the State of Jammu and Kashmir' shall be substituted and shall be deemed to have been substituted with effect from the 1st day of April 1950." The result of this amendment was described by this court in Kabra's case to be as follows :- "It may be mentioned here that the exemption from tax under section 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." Mr. N. C. Chatterjee appearing for the appellant contends that the point cannot be considered to have been finally decided, and that the remark is descriptive only of what the Parliament had purported to do. He claims that the point can and should be reconsidered. In support of his contention, he urges that the effect of the passing of the Indian Finance Act, 1950, and the application of the Indian Income-tax Act to Rajasthan and other Part B States was to incorporate the Indian Income-tax Act by reference in the Indian Finance Act with such modifications and amendments as were then made. Any subsequent amendment of the Indian Income-tax Act had no effect on the original Act as incorporated by reference in the Indian Finance Act, unless the later was suitable amended also. The argument which did not find favour in Kabra's case was again advanced though in another form., It is that the amendment operates from April 1, 1950, and that the income accrued prior to April 1, 1950, and it was still exempt, because t In our opinion both the arguments have no substance, and the position indicated by this court in the passage cited earlier, represents the true state of the law. To begin with, the exemption is in respect of liability to tax in any year of assessment, and the exemption in he assessment year 1950-51 was in regard to the income of the previous year, 1949-50, which is the subject-matter of tax in this case. The next argument misconceives the nature of the Indian Finance Act, 1950. By that Act, the Indian Income-tax Act was applied, but the Income-tax Act applied, but the Income-tax Act was not incorporated by reference in the Indian Income-tax Act was not incorporated by reference in the Indian Finance Act to become a part of it. The application of the Indian Income-tax Act made Rajasthan a taxable territory subject to the Indian Income-tax law, and Parliament was competent to enact a new law for the area, just as it did for the whole of the rest of India. The fiction in the amendment made the exemption to disa The appeals fails, and will be dismissed with costs. Appeal dismissed.