S.T. Desai, J.
1. This petition for a writ of certiorari or a writ of mandamus or a writ of prohibition raises a rather important question of the construction of Section 35 (10) of the Income-tax Act. Sub-section (10) of Section 35 was introduced by amendment brought about by the Finance Act, 1956. We shall have occasion to refer to the amendment little later in our judgment. The facts succinctly stated are these. The petitioner-the New Shorrock Spg. and Mfg. Co. Ltd., which carries on business of manufacturing and selling textiles has its registered office at Ahmedabad. The first respondent is the Income-tax Officer having jurisdiction to assess the petitioner. The assessment years in respect of which this petition arises are 1950-51. 1951-52 and 1952-53.
2. For the assessment year 1950-1951 (previous year ending 31-12-1949) the Income-tax Officer had passed an order on 18-1-1951 assessing the total income of the petitioner-mills at Rs. 30,30,622/-. At that time, in accordance with the provision contained in Clause (1) of the Proviso to Paragraph B of Part I of the Schedule to the Finance Act of 1950, he allowed the rebate of one anna in a rupee on the undistributed profits of Rs. 6,43,621/-. The rebate so allowed amounted to Rs. 40,226/-.
3. It will be convenient to reproduce the provision of law relating to that rebate. It is to be found in the First Schedule to the Finance Act of 1950:
'In the case of every company-
xxxxx
(i) where the total income as reduced by six and a half annas in the rupee and by the amount if any, exempt from income-tax, exceeds the amount of any dividends (including dividends payable at a fixed rate) declared in respect of the whole or part of the previous year for the assessment for the year ending on 31-3-1951. and no order has been made under Sub-section (1) of Section 23A of the Income-tax Act, a rebate shall be allowed at the rate of one anna per rupee on the amount of such excess.'
4. For the assessment year 1951-52 (previous year ending 31-12-1950) the Income-tax Officer passed an order on 31-1-1952 and assessed the total income of the petitioner mills at Rs. 27,43,730/-. In that year also he allowed similar rebate of one anna per rupee. That was under clause (i) of the Proviso to Paragraph B of Part I to the Schedule to the Finance Act, 1951 and it was on the undistributed profits of Rs. 4,04,348/- and amounted to Rs. 25,084.
(5) For the assessment year 1952-53 (previous year ending 31st December 1951), the Income-tax Officer assessed the total income of the petitioner-mills at Rs. 34,51,284/-. In that year also he allowed similar rebate of one anna per rupee, which was under clause (i) of the proviso to Paragraph B of Part I of the Schedule to the Finance Act of 1952. In that year, the undistributed profits of the Mills company came to Rs. 8,07,363/- and the amount of rebate allowed for that year was Rs. 50,460/-. It may be mentioned that in respect of the assessment for the first two years, there was subsequent review in 1954 of the orders but that is immaterial for the purpose of this petition.
(6) For the assessment year 1953-54 (previous year ending 31-12-1952) the assessment order showed that the petitioner-mills had incurred losses. The Mills, however, declared and paid dividends aggregating to Rs. 10,92,000/- for the accounting year ending 31-12-1952 and the dividends were paid out of profits made by the company in the earlier years. The balance-sheet of the company for the year ending 31-12-1952 stated that the dividends had been distributed from:
'(a) Profits of the aforesaid year and /or
(b) the reserves formed out of the profits or accumulated profits of the following 'previous years' which have been subject to tax.Year ending 31-12-1937Year ending 31-12-1949Year ending 31-12-1950Year ending 31-12-1951'
7. In March 1958 the first respondent called upon the petitioner-mills to show cause why action should not be taken under Section 35(10) of the Act, as, according to him, dividends declared by the Mills for the assessment year 1953-54 aggregating to Rs. 10,92,000/- had come out of reserves of earlier years on which rebate of one anna in the rupee for the years 1950-51, 1951-52 and 1952-53 had been allowed on undistributed profits. There was some correspondence and ultimately the first respondent passed orders on the mills company under Section 35(10) of the Act, terms of which Sub-section are as follows:
'Where, in any of the assessments for the years beginning on the 1st day of April of the years 1948 to 1955 inclusive, a rebate of income-tax was allowed to a company on a part of its total income under clause (i) of the proviso to Paragraph B of Part I of the relevant Schedules to the Finance Acts specifying the rates of tax for the relevant year, and subsequently the amount on which the rebate of Income-tax was allowed as aforesaid is availed of by the company, wholy or partly, for declaring dividends in any year, the amount or that part of the amount availed of as aforesaid as the case may be shall, by reason of the rebate of Income-tax allowed to the company and to the extent to which it has not actually been subjected to an additional Income-tax in accordance with the provisions of clause (ii) of the proviso to Paragraph B of Part I of the Schedules to the Finance Acts above referred to, be deemed to have been made the subject of incorrect relief under this Act, and the Income-tax Officer shall re-compute the tax payable by the company by reducing the rebate originally allowed, ax if the re-computation is a ratification of a mistake apparent from the record within the meaning of this section and the provisions of sub-section (1) shall apply accordingly, the period of four years specified there-in being reckoned from the end of the financial year in which the amount on which rebate of Income-tax was allowed as aforesaid was availed of by the company wholly or partly for declaring dividends'.
The mills company challenged the right of the first respondent to pass those orders and raised before him various contentions, which it is not necessary to set out here. In the petition, the mills company has raised various contentions some of them being that Section 35(10) of the Act is ultra vires the Constitution being in contravention of certain fundamental rights there guaranteed and being in violation of the provisions of Section 265 of the Constitution. One of the contentions set out in the petition is that the provisions of Section 35(10) being added only by the Finance Act of 1956 had no application to the case of the mills company because to apply the provisions of Section 35(10) to the mills company would be to give retrospective operation to those provisions. The contention is that the provisions of Section 35(10) became operative only from 1-4-1956 and the original assessment orders had been made much before that and the assessments had become final and conclusive before 1-4-1956. Very briefly stated the contention is that those assessments cannot be affected or touched or altered in any manner by any subsequent legislation introduced for the first time by Section 35(10) in 1956.
(8) The contentions relating to ultra vires and violation of fundamental rights have not been urged before us by Mr. Kolah, learned Counsel for the petitioner-mills. The only contention which is pressed before us, it is said, falls under two heads: (1) the assessments in question had become final before the 1st of April 1956 and on a proper construction of Section 35(10) those assessments do not fall within the purview of the Section; (2) Section 35(10) properly read is not intended to have any retroactive operation. It seems to us that these are phases of the same argument. It will be convenient to set out here Section 28 of the Finance Act of 1956 whereby Section 35(10) was introduced for the first time in the Income-tax Act:
'The amendments made in the Income-tax Act by Section 4 and clause (b) of Section 15 shall be deemed to have come into force on the 1st day of April 1955 and the amendments made by Sections 3 to 27 inclusive shall come into force on the 1st day of April 1956.'
The amendment by way of introduction of Section 35(10) was brought about by Section 19. It is one of the provisions which Section 28 says 'shall come into force on the 1st day of April 1956'. There is no dispute and there can be no dispute that Section 35(10) came into force on the 1st day of April 1956, but the dispute is as to the precise effect of the coming into force of that section on 1-4-1956 in the light of the provisions of Section 35(10) itself. In a case of the nature before us the prospective or retrospective operation of Section 35(10) cannot depend merely on the words 'shall come into force on the 1st day of April 1956' if there is something in Section 35(10) itself which shows that the rule laid down in it was to become operative in respect of certain matters of previous years: The major premise of Mr. Kolah's argument is that the assessment of the mills company was changed by the provisions contained in sub-section (10). It is said that the assessment is sought to be altered and affected by those provisions. He has drawn our attention to instances where the Legislature in giving retrospective operation to a provision of law had used certain words. He has asked us to contrast those words with the words in Section 28 'shall come into force on the 1st day of April 1956'. At one stage of the argument the suggestion seemed to us to to be that assessments which had been completed before 1st April 1956 could not be touched by the amended provisions introduced by incorporating Section 35(10), but when the argument was developed Mr. Kolah stated that in a sense Section 35 did apply to completed assessments and in a sense it did not apply to completed assessments and the distinction rather fine or perhaps over-refine is that Section 35(10) could apply only in respect of assessment completed before 1-4-1956 if dividend was declared after 1st April 1956. Otherwise Section 35(10) it is said, would not apply. Now, as we shall presently point out, the language of the Section is quite clear and it is difficult to see on what principle or authority or reason this arbitrary distinction is to be drawn.
9. Before we proceed to examine the language of Section 35(10) and analyse the section we would like to preface our judgment with a few general observations. We have often quoted and we may quote once again the celebrated observation of Mr. Justice Rowlatt which have now become classical:
'In a taxing Act one has to look merely at what is clearly said. There is no room for any in tendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used.'
One safe and infallible principle which is of guidance in these matters is to read the words through and see if the rule is clearly stated. If the language employed gives the rule in words of sufficient clarity and precision, no more requires to be done. Indeed, in such a case the task of interpretation can hardly be said to arise: Absoluta sententia expositor non indiget. The language used by the Legislature best declares its intention and must be accepted as decisive of it. We may permit ourselves to make some further observations of the nature we have made before about the interpretation of provisions said to be retroactive in their operation. The general rule indubitably is that where a statute is passed altering the law it is to be presumed as intended to apply to a state of facts coming into existence after the Act. It is a fundamental and a firmly established rule of interpretation that a statute which deals with matters of substantive law- and taxation is a matter of substantive law- would not be construed to have retrospective operation unless such a construction appears very clearly in the terms of the Act or arises by necessary implication. Now, the use of the expression 'retrospective operation' is at times vague and misleading. In a broad general sense it may be right to say that a statute has retrospective operation when it purports to touch facts or events which took place before the enactment came into force. It is sometimes used in a different sense when vested rights are sought to be affected. It is sometimes loosely used in the context of certain fictions of law which the law-maker deems it necessary to introduce in existing laws for the purpose of setting certain matters right or avoiding certain mischief which might be possible but for the change in the law; and this is done by laying down that certain facts or things which did not in fact exist shall be deemed to have existed. This last need not necessarily be called retrospective legislation. It may be more appropriate to describe it as ex post facto legislation of a curative nature. It is unsusceptible of dispute that Section 35(10) lays down a fiction of law. It is also unsusceptible of dispute that by this fiction juris the Legislature has laid down a rule which is intended to embrace rebates which were granted in the past before the commencement of the Rule. The inherent oppressiveness- or at least hardship- of retroactive operation in case of statutes creating new penalties or liabilities or ex post facto deprivation of concessions in matters of taxation and other matters has always induced Courts to view changes in law aimed so to operate, with extreme care and to express the inhibition in unmistakable terms. In examining the language of Section 35(10) and in reaching a conclusion as to the meaning of the language fairly read, we shall be doing so in the light of the observations just made.
10. Section 35 deals with rectification of mistake. Section 35(10) is intended to lay down certain provisions in respect of rebate on Income-tax allowed to a company on a part of its income by virtue of the concessions given by the Finance Acts of 1948 to 1955 and as the initial words clearly show it deals with rebates granted in respect of any of the assessments for the years 1948 to 1955 inclusive. Then it proceeds to state the condition in which or the event on the happening of which the rebate is to be deemed to have been given by a mistake apparent from the record. That condition or event is that the company to which such rebate of income-tax had been allowed has availed of the amount on which the rebate was allowed, meaning thereby the undistributed profits, for declaring dividends in any subsequent year. The expressions 'subsequently' and 'for declaring dividends in any year' in the sub-section have reference to the words 'in any of the assessments for the years beginning on the 1st day of April of the years 1948 to 1955 inclusive'. That in our judgment, permits of no doubt and little debate. We leave out certain words in sub-section (10) which deal with matters of detail, and doing so, we find that the words that follow are the crucial words. They are made in the context of rebates made and the amount of undistributed profits on which rebates were granted being availed of by the company for paying dividends in subsequent years, and the crucial words are that in such a case the amount of undistributed profits availed of by the company on which rebate had been allowed 'shall be deemed to have been made the subject of incorrect relief under this Act.' In such a case the Income-tax Officer is authorised to recompute the tax payable by the company by reducing the rebate originally allowed as if the recomputation is a rectification of a mistake apparent from the record. The substance of the matter, evidently, is that something which had in fact not taken place, something which was not incorrect when done, relief which was correctly given when it was given, all that is to be deemed to have been made the subject of an incorrect relief under the Act and it is to be deemed that the recomputation necessary for the purpose of setting the matter right is nothing more than a rectification of a mistake apparent from the record. It may be said that rebate which was the subject matter of the relief is to be recalled because of an event which subsequently happened and although the rebate was granted strictly in accordance with the provisions relating to the concessions made by even though there was no mistake in the matter of granting that rebate or relief, what was done is nevertheless to be deemed to have been made by mistake. In modern statutes the expression 'deemed' is used a great deal and for many purpose. It is at times used to introduce artificial conceptions which are intended to go beyond legal principles or to give an artificial construction to a word or phrase. It is not possible to list the purposes for which legal fictions may be created by statute. We have had occasion in tax cases to refer to the judgment of the Supreme Court in the State of Bombay v. Pandurang Vinayak, : 1953CriLJ1049 where their Lordships observed:
'When a statute enacts that something shall be deemed to have been done, which in fact and truth was not done, the court is entitled and bound to ascertain for what purposes and between what persons the statutory fiction is to be resorted to and full effect must be given to the statutory fiction and it should be carried to its logical conclusion.'
Then their Lordships proceeded to quote certain observations of Lord Asquith which have now be come classical. In East End Dwelling Co., Ltd. v. Finsbury Borough Council, (1952) A.C. 109, Lord Asquith observed:
'If you are bidden to treat an imaginary state of affairs as real, you must surely, unless prohibited from doing so, also imagine as real the consequences and incidents which, if the putative state of affairs had in fact existed, must inevitably have flowed from or accompanied it..... The statute says that you must imagine a certain state of affairs; it does not say that having done so, you must cause or permit your imagination to boggle when it comes to the inevitable corollaries of that state of affairs'. Far from there being any prohibition in the present case, the statute enjoins that what when done was not a mistake what was correct relief granted according to the provisions of the Finance Acts in operation at the relevant times, shall nevertheless be deemed to have been made by mistake and the relief granted shall be deemed to have been incorrectly granted. By virtue of this deeming provision, the granting of rebate must be assumed even factually to have been made as a result of a mistake apparent from the record although in fact and in truth no such mistake had ever been made. Therefore, the crucial question that we have to put to ourselves is: What is the point of time at which the mistake was made and the relief incorrectly given? The 1st of April 1956 has no cogency to the point under consideration. It is a date after which the Income-tax Officer can sit down for the first time to think as to what is it that is to be deemed by him to have taken place by or through a mistake. Apart from that the 1st of April 1956 the date so strongly relied on by Mr. Kolah, has no bearing on the interpretation of this section. Indubitably the section says that relief which was properly given, which was legally given, is to be deemed to have been incorrectly given. Rebate which was justifiably granted and correctly granted is to be deemed to have been granted under a mistake apparent on the record. As already stated we put to ourselves the question as to when the rebate can be said to have been incorrectly given : when was the relief granted by a mistake? and the answer inescapably must be that it was when the relief was granted by permitting rebate, and if that be the true position and we have no doubt that it is so - it is extremely difficult to see how the principle of construction and the inhibition against retroactive operation can have any real effect on or can in any manner govern the enactment we are called upon to internet. The language of Section 35(10) is very clear. It is one of these few sections in the Act which do not permit of any doubt as to what the law maker intended. It is not possible for one to see any difficulty of ascertainment of what the Legislature has said it meant. Therefore, on a fair reading of Section 35(10) it seems to us that the Income-tax Officer had the power to pass those orders.
11. But it is said by Mr. Kolah that there are decisions which are indicative of the contrary view. Before we examine those decisions, we may refer to certain general observations of Lord Dunedin in Whitney v. Commrs. of Inland Revenue, (1924) 10 Tax Cas 88 where the eminent Judge very vividly and clearly brought out the three stages in the imposition of a tax:
'Once that it is fixed that there is liability, it is antecedently highly improbable that the statute should not go on to make that liability effective. A statute is designed to be workable and the interpretation thereof by a Court should be to secure that object, unless crucial omission or clear direction makes that end unattainable. Now there are three stages in the imposition of a tax: there is the declaration of liability, that is the part of the statute which determines what persons in respect of what property are liable. Next, there is the assessment. Liability does not depend on assessment. That, ex hypothesi, has already been fixed. But assessment particularises the exact sum which a person liable has to pay. Lastly, come the methods of recovery, if the person taxed does not voluntarily pay'.
The declaration of liability of the assessee-mills was by the statute itself. The assessment in respect of the relevant years was made much prior to 1956. But says Mr. Kolah, that assessment is being altered and effected by giving effect to Section 35(10). In our opinion it would not be accurate to say that the effect of Section 35(10) is to assess the mills company over again or to reopen the assessment already made. It is stressed that some change or some alteration is being made. Of course, some change or alternation is being made. That is the very purpose of Section 35(10). But the question is what is the nature of that change or alternation? The assessment, strictly speaking is not being changed or affected. There is only recomputation of a restricted nature vis-a-vis the rebate. What is permitted to be done by operation of the deeming provision is that the rebate is wholly or partially to be recalled as it is to be deemed to have been allowed through a mistake and relief which was granted, is to be deemed to have been incorrectly granted. Therefore in our opinion, it would not be correct to say as learned Counsel strongly asserted that his assessment was being disturbed and/or in a sense he was being assessed over again. Nor can it be said that the finality of that assessment has been really affected. The essessment depended on the income of the company for the relevant years. There is to be no recomputation of the income of the company for the relevant years. That has already been done. The only thing to be done is to ascertain what was the amount of undistributed profits in respect of which rebate had been granted that was availed of by the company wholly or partially for declaring dividend in any subsequent years. That is not assessment There is not in word in Section 35(10) which would even faintly suggest that there was to be anything of the nature of assessment in the sense in which that expression is to be understood in the present context. The order made by the Income-tax Officer may be considered. In effect the original order of assessment as made said: This is your income. this is the amount of tax you have to pay after bringing into play the various provisions of the Income Tax law having bearing on your assessment. The dividend you have declared leaves undistributed profits. In accordance with law, I give you a rebate or a drawback or a discount and shall only recover from you the balance after subtracting the amount of such drawback from the amount of tax which you are liable to pay and bound to pay. It is difficult to see how this restricted recomputation can properly be said to be alternation or modification or any change in the assessment actually made. But even assuming that this can be regarded as an alteration in the assessment finally made in the earlier years, that does not affect the conclusion we have reached on the question of construction of Section 35(10). In a broad general sense, it is true that there is finality about an order of assessment. Whatever be the position in law as to this doctrine of finality - and it is not necessary for us in this petition to examine the matter in detail - one thing is clear that Section 35 can operate despite any such broad general doctrine. Question of rectification obviously would only arise in case of an assessment which is finalised. Section 34 which deals with the reopening of assessments when income has escaped assessment also has bearing on this doctrine of finality.
12. To turn to the decisions to which our attention has been drawn by Mr. Kolah. In Chatturam v. Commissioner of Income-Tax, (1947) 15 I.T.R. 302: AIR 1947 FC 32 the Federal Court had occasion to consider certain principles of taxation and dispute about retrospective operation of certain provisions. There is nothing in the observations there made which lend any support to the argument of Mr. Kolah. Particular reliance was placed by Counsel on the recent decision of the Supreme Court in Venkatachalam v. Bombay Dyeing and Mfg. Co. Ltd. : [1958]34ITR143(SC) . Statutes which give retrospective operation to their provisions may have different objects in view and the purpose may be to lay down different rules. Mr. Kolah is right when he says that in case of different enactments different words are used in giving retrospective operation. Now, the meaning of the words employed in Section 35(10) and the question whether the rule laid down in those words is to affect any rebates granted in the past can only be determined from the words themselves and the object of the rule if there is language appropriate to that object or purpose. Other enactments with different objects in view and intended to serve different purposes would necessarily have been enacted in different language. Therefore comparison of the language of one enactment whereby retroactive operation was sought to be given by the lawmaker is of little guidance in matters of this type and it is unnecessary for us to examine the provision which required to be considered in the case before their Lordships of the Supreme Court. There are, however, certain observations in the case which, we may respectfully say so, afford guidance on the question before us and we may quote them, Before doing so, we may observe that they were made in a different context:
'The argument for the respondent is that the assessee his obtained a right under the order passed by the Income-tax Officer to claim credit for the specified amount under Section 18A(5) and the said right cannot be taken away by the retrospective operation of Section 13 of the Amendment Act. The same argument is put in another form by contending that the finality of the order passed by the Income-tax Officer cannot be impaired by the retrospective operation of the relevant provision. In our opinion this argument does not really help the respondent's case because the order passed by the Income-tax Officer under Sec. 18A (5) cannot be said to be final in the literal sense of the word. This order was and continued to be liable to be modified under Section 35 of the Act. What the Income-tax Officer has purported to do in the present case is not to revise his order in the light of the retrospective amendment made by Section 13 of the Amendment Act alone, but to exercise his power under Section 35 of the Act; and so the question which falls to be considered in the present appeal centres round the construction of the expression 'mistake apparent from the record' usedin Section 35. That is why we think the principle of the finality of the orders or the sancity of the existing rights cannot be effectively invoked by the respondent in the present case'.
It is true that the observations, as we have already said, were made in a different context. But we have quoted these observations solely for the purpose of showing that the doctrine of finality is not of the nature sought to be made out by learned counsel.
13. In the result, the petition fails and will be dismissed with costs.