G. EKAMBARAPPA & ORS. vs. EXCESS PROFITS TAX OFFICER, BELLARY

CIVIL APPEAL No. 185/1966Supreme Court[1967] 3 S.C.R. 86402 May 1967Bench: 3 JudgesAuthor: J.C. SHAH, S.M. SIKRI, V. RAMASWAMI7 pages
AI SummaryDismissed

What were the facts?

The appellants, partners of a dissolved firm carrying on business in Bellary, were issued a notice in 1960 by the Excess Profits Tax Officer under Section 15 of the Excess Profits Tax Act, 1940, for assessment of escaped profits for the period October 30, 1943, to October 30, 1944. Bellary district was part of Part 'B' State of Mysore before November 1, 1956. The appellants contended that the Act ceased to apply to Bellary after the Adaptation of Laws (No. 3) Order, 1956, which excluded territories that were Part 'B' States immediately before November 1, 1956. This plea was rejected by departmental authorities and the High Court.

What did the Supreme Court hold?

The Supreme Court held that the Adaptation of Laws (No. 3) Order, 1956, effectively repealed the Excess Profits Tax Act, 1940, concerning the Bellary district. The Court reasoned that repeal, whether total or partial, attracts Section 6 of the General Clauses Act. Regarding the second issue, the Court affirmed that the liability to pay excess profits tax arises at the end of the chargeable accounting period, not merely when assessment proceedings are completed. Therefore, the liability for the period ending October 30, 1944, had accrued before the Adaptation Order. Consequently, the notice issued under Section 15 of the Act was legally valid, and the appellants remained liable for escaped taxation. The Court relied on precedents like Wallace Brothers & Co. v. Commissioner of Income-tax and Kalwa Devadattam v. Union of India.

What were the issues?

1. Whether the Adaptation of Laws (No. 3) Order, 1956, which made the Excess Profits Tax Act, 1940, inapplicable to territories that were Part 'B' States immediately before November 1, 1956, constituted a 'repeal' of the Act in respect of the Bellary district, thereby attracting Section 6 of the General Clauses Act. 2. Whether, assuming Section 6 of the General Clauses Act applied, the conditions of Section 6(e) were satisfied, specifically whether a 'liability' to pay tax had 'accrued' or been 'incurred' for the chargeable accounting period ending October 30, 1944, before the Adaptation Order of December 31, 1956. Assessee's Arguments: - The Adaptation Order did not amount to a 'repeal' but merely a non-application of the Act, thus Section 6 of the General Clauses Act was not attracted. - Even if Section 6 applied, no liability had accrued or been incurred as no assessment of escaped profits was completed before November 1, 1956. Revenue's Arguments: - The judgment does not explicitly record the revenue's arguments, but it implicitly relies on the High Court's reasoning that Section 6 of the General Clauses Act applied and that liability accrued at the end of the accounting period.

Which sections of the Income-tax Act were involved?

Section 15,Section 6,Section 6(e),Section 1(2),Section 53,Section 119,Section 120

AI-generated summary — verify with the full judgment below

G. EKAMBARAPPA & ORS. v. EXCESS PROFITS TAX OFFICER, BELLARY May 2, 1967 [J. C. SHAH, S. M. S!KRI AND V. RAMASWAMI, JJ.] Aclap1<1tio11 of Laws, Order (No. 3) dated December 31, 1956- Excess Profits Tax Act, 1940 made i11app/lcable to all areas forming part of a Part B State immediately before November I, 1956-IVhetlier tunounts to 'repeal' of Act in respect of such area-General Clauses Acl. s. 6 1vhether attracted.

General Clauses Act, S• 6(e)-Liabillty 'acer :ed or incurred'- Bellary district i11cluded i11 Part B State Immediately before NO\·ember I, 1956-Notice under E.tcess Profits Tax Act, s. IS Issued in 1960 ln respect of business carried on in sahl district in 1943-44-Terms of s. 6(e) General Clauses Acl whether satisfied-Liability 10 tax ll'hetlier .arises at eud of chargeable accounting period or lvhen assessntent pro· ceedings completed.

The District of Bellary originally belonged to the Part 'A' State of Madras in British India. On October l. 1953 it merged in the Part 'B'

State of Mysore. The Excess Profits Act, 1940 applied only to British India. · When Bellary District went to the Part 'B' State of Mysore the Act ceased to apply to it. After the

The order continues below.

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