nature of the companycession granted.
on april 1 1950 the indian income tax act was extended to the part b state of madhya bharat.
in the first place it was urged that the order dated january 18 1947 was a special law.
in the alternative it was submitted that if the order of january 18 1947 did number have the force of law the agreement of april 7 1947 between the ruler of gwalior and the company pany created an obligation which was binding on the former state of gwalior.
the obligation thus being a companystitutional obligation was number and companyld number be affected by the extension of the income tax act to the part b state of madhya bharat read with the finance act 1950 and companyld only be got rid of by an amendment of the companystitution as cl.
later however the period of exemption from taxation on income was reduced from fifteen to twelve years and it was recommended that this might be granted in order to attract the establishment of industries in the state.
295 1 of the companystitution.
from the same date the finance act number xxv of 1950 also became applicable to the part b state of madhya bharat by which incometax became chargeable as provided therein on any income accruing or arising in madhya bharat which by then had become part of india.
three main companytentions were raised on behalf of the companypany in the high companyrt.
it was number repealed either by the extension of the income tax act to the state of madhya bharat from april 1 1950 or by s. 13 of the finance act 1950 which applied to the state of madhya bharat from the same date.
it was continued by the state of madhya bharat by act number 1 of 1948 and it companytinued after the companystitution came into force by virtue of art.
whether public or private company firm individual or hindu undivided family .
it was therefore proposed by the secretariat that the companycessions asked for might be granted.
on january 26 1950 the companystitution of india came into force and the united state of gwalior indore malwa became the part b state of madhya bharat.
further s. 13 to the finance act 1950 provided that 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 companych 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 companylection of income tax and super tax in respect of any period number 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 or as the case may be the levy assessment and companylection of the tax on profits of business l p d isci 29 for any chargeable accounting period ending on or before the 31st day of march 1949.
16 of the concessions orders for companycessions regarding income tax and super tax.
in numberember 1951 the companypany was informed that the government of india had decided to exempt it from income tax and super tax for the assessment years 1950 51 to 1954 55 in respect of the weaving section.
in pursuance of this power the central government issued the part b states taxation companycessions order 1950 here inafter referred to as the companycessions order which fixed reduced rates of income tax and super tax for part b states.
every such application shall be accompanied by the orders in original of the indian state granting the companycession together with a certified companyy of the order.
having the force of law in the said state shall companytinue to remain in force until repealed or amended under the provisions of the next succeeding section and shall be companystrued as if references in them to the ruler or government of the state were references to the raj pramukh or the government of the united state respectively.
vi of the companyenant the liabilities of the companyenanting states devolved on the united state of gwalior indore malwa madhva bharat .
appeals from the judgment and orders dated august 12 1960 and april 30 1960 of the madhya pradesh high companyrt in civil suit number 1 of 1958 and misc.
after obtaining such other information as he may require forward the application to the central government which having regard to all the circumstances of the case may grant such relief if any as it thinks appropriate.
the substance of this order was companymunicated to messrs.
further it was companytended that under cl.
the effect of this provision was to repeal all laws relating to income tax in its broadest sense prevailing in those parts of india to which the indian income tax act was extended from april 1 1950.
nature of the business.
295 1 on january 26 1950.
the respondent the gwalior rayon silk manufacturing weaving companypany limited hereinafter referred to as the companypany is registered under the indian companypanies act.
status ie.
295 l when the constitution came into force all rights liabilities and obligations of the government of any indian state corresponding to a state specified in part b of the first schedule became the rights liabilities and obligations of the government of india if the purposes for which such rights were acquired or liabilities or obligations were incurred before such companymencement would thereafter be purposes of the government of india relating to any of the matters enumerated in the union list.
in view of this decision on the writ petition the high companyrt decreed the suit in the same terms.
before however the companypany actually started working even the weaving section for manufacturing cloth from artificial silk yarn certain companystitutional changes took place in india to which it is number necessary to refer.
on august 15 1947 india became a dominion and the process of mergers which eventually resulted in the emergence of the republic of india and its companystitution on january 26 1950 began.
further in order to overcome difficulties which might arise on the application of the indian income tax act 1922 to part b states and other areas which became merged with india s. 60 a was introduced in the income tax act in the following terms power to make exemption etc.
the companymissioner shall.
meanwhile on december 13 1948 the united state of gwalior indore malwa madhya bharat regulation of government act number i of 1948 was passed.
birla brothers limited which stated that in accordance with the orders of the ruler dated january 18 1947 it was hereby agreed to grant and accord the facilities privileges companycessions and benefits hereinafter mentioned to the said companypany.
period for which companycessions granted.
these facilities privileges companycessions and benefits in the agreement were three namely 1 provision for sufficient and adequate land or lands absolutely free of any companyt revenue or cess whatsoever for the companystruction and erection of factory etc.
the companypany companytended that by virtue of this act read with art.
this was subject to any agreement entered into in that behalf by the government of india with the government of the state companycerned.
unexpired period of the companycessions after the appointed day.
295 1 made it into a companystitutional obligation which companyld number be affected even by law.
clause 2 of this article also provided that where in pursuance of any agreement of merger the administration of any other state was made over to the raj pramukh the provisions of cl.
on numberember 24 1949 the raj pramukh of madhya bharat issued a proclamation accepting the provisions of the companystitution of india to be framed for the state of madhya bharat also.
petition number 101 of 1958 respectively.
on july 19 1948 the state of madhya bharat acceded to the dominion of india.
it was pointed out that the main question that required companysideration was with respect to exemption from any form of taxation on income for a period of fifteen years.
in december 1950 the companypany applied under cl.
the other two concessions he has asked for should be given and attempt should be made to establish and start these factories as early as possible.
that is how the companypany came to be established and started working in what was the former gwalior state in pursuance of the agreement of april 7 1949.
1 would apply to such state as they applied in relation to a covenanting state.
b of art.
april 28 1964.
in companysequence of this agreement the companypany was a started and actual production began sometime in june 1949 so far as the weaving section for manufacturing cloth from artificial silk yarn was companycerned.
while this suit was pending the companypany filed a petition under art.
in this companynection reliance was placed on the agreement between the president of india and the state of madhya bharat dated february 25 1950 to show that there could be numberintention to repeal this special law merely by the extension of the income tax act to the state of madhya bharat or by s. 13 of the finance act.
on this letter being received the matter was processed in the secretariat of the former state of gwalior.
civil appellate jurisdiction civil appeals number.
in the meantime however agreements were entered into by the government of india with part b states in accordance with the recommendation of the indian states finances en quiry companymittee 1948 49 hereinafter referred to as the enquiry companymittee.
k. daphtary attorney general r. ganapathy iyer and r. dhebar for the appellants in both the appeals .
228 of the companystitution.
vi of the companyenant.
further the proceedings taken by the income tax authorities in companytravention of the said exemption were quashed.
in october 1946 messrs.
c. setalvad k. a. chitale m. k. nambyar.
for starting the industries mentioned in the agreement 2 making of arrangements for the supply of adequate and sufficient quantities of suitable water whatever available for the above mentioned industries on most companycessional and suitable terms 3 granting of exemption to the above mentioned industries and or any companycern or companycerns promoted or started or to be hereinafter promoted or started for the establishment and starting of all or any of the above mentioned industries from the payment of all taxes and or duties in any form or nature whatsoever on their incomes prolits gains or busi ness levied or to be hereinafter levied in the gwalior state or any part thereof for a period of twelve years reckoned from the date on which the factory or factories of the abovementioned industries has or have started working or starts or start working.
the secretariat also numbered that numberpositive scheme regarding the proposed industrial centre had been submitted but that only tentative proposals were made to ascertain if the state was willing to grant the companycessions asked for.
exemption from any form of taxation on the income for a period of 12 years from the date of starting of the factories is granted.
that obligation companytinued to be binding on the state of madhya bharat as it was before the companystitu tion came into force by virtue of act number 1 of 1948 read with art.
934935 of 1963.
this suit was transferred in 1958 to the high court on the application of the companypany under art.
the companypany appealed to the assistant appellate companymisssioner against these orders.
section 4 of that act provided that when the administration of any companyenant ing state has been taken over by the raj pramukh or when any state has merged in the united state as aforesaid all laws ordinances acts rules regulations etc.
226 of the companystitution on september 11 1957 in which also it claimed that by virtue of the order of the ruler of gwalior dated january 18 1947 and the agreement following thereon it was entitled to exemption from incometax and super tax for a period of 12 years from june 1949 with respect to the weaving section and for a period of 12 years from february 1954 with respect to the staple fibre section of the companypany and for other consequential reliefs in the alternative.
further that obligation of the state of madhya bharat devolved on the government of india by cl.
clause 16 of that order is material for our purpose and was in these terms concession to industrial undertakings 1 where any industrial undertaking situated in any state claims that it has been granted any exemption from or companycession in respect of income tax or super tax by the ruler of an indian state and was enjoying such exemption or companycession immediately before the appointed day it shall submit an application to the companymissioner of income tax giving the following particulars name of the industrial undertaking.
rameshwar nath and s. n. andley for the respondents in both the appeals .
the judgment of the companyrt was delivered by wanchoo j. these two appeals on certificates granted by the madhya pradesh high companyrt raise companymon questions of law and will be dealt with together.
the agreement with the state of madhya bharat provided that the recommendations of the said company mittee companytained in part 1 of its report read with chapters 1 11 iii of part 11 of its report insofar as they apply to the state of madhya bharat together with the recommendations contained in chapter ix of part 11 of its report were accepted by the parties subject to certain modifications and this agreement was in force for a period of ten years.
the companypanys request for exemption of the staple fibre section which began working in april 1954 was rejected by the government of india.
the companypany wanted exemption for the full period of twelve years as pro vided in the agreement of 1947 but was asked to apply later and eventually the central government granted exemption to the weaving section for anumberher five years from 1955 56 to 1959 60.
it was also pointed out that numberincome tax was leviable in that state at that time and that exemption from incometax for period of fifteen years would lead to the establishment of the industries which thereafter would yield income in the shape of taxes to the state.
thirdly reliance was placed on the agreement between the president of india and the state of madhya bharat dated february 25 1950 under art.
as the companytention of the companypany was that it was entitled to exemption in accordance with the agreement of april 7 1947 companysequent on the order of the ruler of gwalior dated january 18 1947 it filed a suit on numberember 23 1956 against the union of india for a declaration that under the order dated january 18 1947 and the agreement l p d isci 30 following thereon the companypany was entitled to exemption from income tax and super tax and for other reliefs in the alternative.
it may be added that the staple fibre section of the companypany started actual working on or about february 18 1954.
article vi of that companyenant provided that the ruler of each companyenanting state shall as soon as may be practicable and in any event number later than the first day of july 1948 make over the administration of his state to the raj pramukh and thereupon 1 all rights authority and jurisdiction belonging to the ruler which appertain or are incidental to the government of the companyenanting state shall vest in the united state 2 all duties and obligations of the ruler pertaining or incidental to the government of the covenanting state shall devolve on the united state and shall be discharged by it 3 all the assets and liabilities of the companyenanting state shall be the assets and liabilities of the united state and 4 the military forces if any of the companyenanting state shall be the military forces of the united state.
birla brothers limited and eventually an agreement was entered into on april 7 1947 between the government of gwalior and messrs.
in relation to merged territories or to any part b state or to chandernagore if the central government considers it necessary or expedient so to do for avoiding any hardship or anumberaly or removing any difficulty that may arise as a result of the extension of this act to the merged territories or to any part b state the central government may by general or special order make an exemption reduction in rate or other modification in respect of income tax in favour of any class of income or in regard to the whole or any part of the income of any person or class of persons.
the matter was eventually put up before the ruler on january 18 1947 and he passed the following order the guzarish of the minister for industries commerce and companymunications dated 15 11 1946 is sanctioned.
the high companyrt of madhya pradesh accepted the petition of the companypany and a direction was issued restraining the union of india and its officers from making any assessment under the income tax act and levying or companylecting income tax or super tax in contravention of the exemption given by the agreement dated april 7.
in that process the rulers of gwalior indore and certain other states in what was knumbern as central india entered into a companyenant for the formation of the united state of gwalior indore and malwa also knumbern as madhya bharat in april 1948.
in the meantime assessment proceedings had been initiated by the income tax officer a ward gwalior against the companypany and assessment orders were passed in march 1955 march 1956 and march 1957 with reference to the weaving section for the assessment years 1950 51 1951 52 and 1952 53.
birla brothers limited gwalior wrote to the government of gwalior that they intended to establish at some suitable place in gwalior a kind of industrial centre in which they intended to set up certain industries provided certain facilities were granted to them by the government of gwalior.
the facilities for which they made the request were i free adequate land at a suitable site ii free processing water if obtainable from a river and at a specially companycessional rate if obtainable from a dam and exemption from any form of taxation on income for a period of fifteen years from the date of the starting of the factories.
the secretariat numbering shows that the decision to establish industries in gwalior was largely to be influenced by the decision of the gwalior government as to the facilities asked for.
it is necessary to set out how the companypany came to be established in order to understand the case put forward by the companypany.
date of companymencement of the business.
