M/S. DALMIA DADRI CEMENT CO. LTD. vs. THE COMMISSIONER OF INCOME-TAX
What did the Supreme Court hold?
The Tribunal held that Section 3 of Ordinance No. 1 of S. 2005, on its true construction, extinguished the right to tax concessions conferred on the appellant under the agreement dated April 1, 1938. Therefore, the appellant could not rely on that agreement after August 20, 1948. The Tribunal further held that the Covenant dated May 5, 1948, entered into by the Rulers of the states, is in whole and in parts an act of State. Consequently, Article VI of the Covenant could not be relied upon by the appellant for the enforcement of the rights conferred on him under the agreement with the Ruler of Jind as against the Rajpramukh of the new state. The reasoning was that when sovereignty passes from one state to another through a treaty, clauses recognizing existing rights of residents are acts of State and cannot be enforced in municipal courts unless recognized by the new sovereign. The Tribunal also found that the appellant failed to substantiate the plea of affirmance of the agreement by the Patiala State Union. Regarding the constitutional argument, the Tribunal held that since the tax concessions ended with the promulgation of the Ordinance, the appellant had no subsisting rights on the date the Constitution came into force, thus Article 19(1)(f) was inapplicable. The appeal and petition were dismissed.
What were the facts?
The appellant company, incorporated in 1938 in the erstwhile Jind State, obtained concessions from the Ruler, including a provision for assessment at concessional income-tax rates. In 1948, Jind merged with other states into a new state. Article VI of the merger Covenant stipulated that the new state would discharge all duties and obligations of the covenanting rulers. The new state's administration was taken over in August 1948, and an ordinance made laws of Patiala applicable, repealing laws of covenanting states. The new state later became part of the Union of India. The appellant contended that the income-tax concessions from the 1938 agreement should continue to apply. The revenue argued that the concessions were extinguished by the ordinance.
What were the issues?
1. Whether Section 3 of Ordinance No. 1 of S. 2005 extinguished the right to tax concessions conferred on the appellant under the agreement dated April 1, 1938, and whether the appellant could rely on that agreement after August 20, 1948? (Question of law) 2. Whether the Covenant dated May 5, 1948, is an act of State and if Article VI can be relied upon by the appellant for enforcing rights conferred by the agreement with the Ruler of Jind against the new state? (Question of mixed law and fact) Assessee's contentions: The appellant contended that the income-tax should be levied as provided in the agreement with the Ruler of Jind, dated April 1, 1938. They also argued that the tax concessions were rights to property protected by Article 19(1)(f) of the Constitution, entitling them to seek redress under Article 32. They relied on Virendra Singh and others v. The State of Uttar Pradesh. Revenue's contentions: The revenue argued that Section 3 of the Ordinance extinguished the tax concessions. They also contended that the Covenant was an act of State and Article VI could not be used to enforce the agreement against the new state. The revenue also argued that the appellant had no subsisting rights when the Constitution came into force.
Which sections of the Income-tax Act were involved?
Article 19(1)(f), Article 32, Article 295, Article 363
AI-generated summary — verify with the full judgment below
• S.C.R. SUPREME COURT REPORTS 729
In the result all the questions framed in this case ate answered in favour of the appellant. The order passed by the High .Court is set aside and the appeal is allowed with costs throughout. Appeal allowed. Cmuniissioner of Jncome-ta:r, Bombay v. M fs. Amritlal Bhogilal & Co. Gajendragadkar ] . M/S. DALMIA DADRI CEMENT CO. LTD. v. THE COMMISSIONER O.B' INCOME-TAX • (and connected petition) (S. R. DAS c. J., VENKATARAMA AIYAR, s. K. DAS, GAJENDRAGADKAR and VIVIAN BosE JJ.) Act of State-Covenant between States for merger--Rights of subjects of the Covenanting States-Enforcement in municipal courts of the New State-Income-tax-Concessional rates granted by the Covenanting State-Whether binding on the New State. The appellant company which was incorporated in 1938 in the erstwhile State of Jind obtained certain concessions from the Ruler of the State under an agreement dated April l, 1938, which, inter alia, provided that the State was to be allotted certain shares in the company without any payment and as regards income-tax the company was to be assessed at conces- sional rates. On May 5, 1948, the Ruler of Jind along w
The order continues below.
Read the full judgment
A free account opens 10 full judgments a month. Re-reading one you have already opened does not count again.
The summary, the parties, the sections and the citations above are open to everyone and always will be. Only the text of the order and the PDF are metered.
Recent GST High Court judgments
Search GST case law →- M/S. Middlex, Puri vs. Commnr. Of State Tax, Banijyakar Bhawan, CuttackOrissa · 14 Oct 2026
- M/S Maa Sunadei Indane Gramin Vitrak, Nayagarh vs. Commissioner Of CT And GST, Cuttack, OdishaOrissa · 14 Oct 2026
- Sunanda Raul vs. The Commissioner Of Commercial Taxes And Goods Nad Services Tax, OdishaOrissa · 14 Oct 2026
- Zakir Hussain Ali Khan vs. Additional Commissioner (Appeals), BhubaneswarOrissa · 14 Oct 2026
- M/S Manorama Nayak, Khorda vs. Assistant Commissioner Of State Tax, CT And GST, Bhubaneswar Iv Circle, KhurdaOrissa · 14 Oct 2026
