State Bar Council Of Chhattisgarh, A Body Corporate Under Section 5Of The Advocates Act, 1961 v. Commissioner Of Income Tax, Bilaspur (C.g.), Aaykar Bhavan,Vyapar Vihar, Bilaspur (C.g.)Vyapar Vihar, Bilaspur (C.g

AFR HIGH COURT OF CHHATTISGARH, BILASPUR Writ Petition (T) No.6095 of 2007 (Order dated 10-5-2007 passed by the Under Secretary to theGovernment of India, Ministry of Finance (Department of Revenue),Central Board of Direct Taxes, New Delhi) State Bar Council of Chhattisgarh, A body corporate under section 5of the Advocates Act, 1961, situated at High Court Premises,Bilaspur (C.G.) through its officer on Special Duty and officiatingsecretary, V.A. Narayanan. ---- Petitioner Versus 1. Commissioner of Income Tax, Bilaspur (C.G.), Aaykar Bhavan,Vyapar Vihar, Bilaspur (C.G.)Vyapar Vihar, Bilaspur (C.G.) 2. Chief Commissioner of Income Tax (C.G.), New Central RevenueBuilding, Civil Lines, Raipur (C.G.) Building, Civil Lines, Raipur (C.G.) 3. Assistant Commissioner of Income Tax, Circle 1(1), Aaykar Bhavan,Vyapar Vihar, Bilaspur (C.G.)Vyapar Vihar, Bilaspur (C.G.) 4. Central Board of Direct Taxes, through Secretary, North Block, NewDelhi.Delhi. 5. Union of India, through Secretary, Ministry of Finance, Departmentof Revenue, North Block, New Delhiof Revenue, North Block, New Delhi 6. Director General of Income Tax (Exemption), Plot No.15, II Floor,Laxmi Nagar, District Centre, New Delhi Laxmi Nagar, District Centre, New Delhi ---- Respondents Writ Petition (T) No.167 of 2009 State Bar Council of Chhattisgarh, A body corporate under section 5of the Advocates Act, 1961, situated at High Court Premises,Bilaspur (C.G.) through its Secretary Anand Mohan Tiwari. ---- Petitioner Versus 1. Assistant Commissioner of Income Tax, Circle 1(1), Aaykar Bhavan,Vyapar Vihar, Bilaspur (C.G.)Vyapar Vihar, Bilaspur (C.G.) 2. Commissioner of Income Tax, Bilaspur (C.G.), Aaykar Bhavan,Vyapar Vihar, Bilaspur (C.G.)Vyapar Vihar, Bilaspur (C.G.) 3. Chief Commissioner of Income Tax (C.G.), New Central Revenue Page 2 of 20 Building, Civil Lines, Raipur (C.G.) 4. Central Board of Direct Taxes, through Secretary, North Block, NewDelhi.Delhi. 5. Union of India, through Secretary, Ministry of Finance, Departmentof Revenue.of Revenue. 6. Manager, State Bank of India, Branch High Court Campus, Bilaspur(C.G.) (C.G.) ---- Respondents AND Writ Petition (T) No.217 of 2009 State Bar Council of Chhattisgarh, A body corporate under Section5 of the Advocates Act, 1961, situated at High Court Premises,Bilaspur (C.G.) through its officer on Special Duty and officiatingsecretary, V.A. Narayanan. ---- Petitioner Versus 1. Assistant Commissioner of Income Tax, Circle 1(1), Aaykar Bhavan,Vyapar Vihar, Bilaspur (C.G.)Vyapar Vihar, Bilaspur (C.G.) 2. Commissioner of Income Tax, Bilaspur (C.G.), Aaykar Bhavan,Vyapar Vihar, Bilaspur (C.G.)Vyapar Vihar, Bilaspur (C.G.) 3. Chief Commissioner of Income Tax (C.G.), New Central RevenueBuilding, Civil Lines, Raipur (C.G.) Building, Civil Lines, Raipur (C.G.) 4. Central Board of Direct Taxes, through Secretary, North Block, NewDelhi.Delhi. 5. Union of India, through Secretary, Ministry of Finance, Departmentof Revenue, North Block, New Delhiof Revenue, North Block, New Delhi 6. Director General of Income Tax (Exemption), Plot No. 15, II Floor,Laxmi Nagar, District Centre, New Delhi Laxmi Nagar, District Centre, New Delhi ---- Respondents For Petitioner:Mr. Neelabh Dubey, Advocate. For Respondents / Income Tax Department: - Mr. Amit Chaudhari, Advocate. For Respondent No.6 / SBI in W.P.(T)No.167/2009: - Mr. Prasun Kumar Bhaduri, Advocate. Hon'ble Shri Justice Sanjay K. Agrawal Order On Board W.P.(T)Nos.6095/2007 & 167/2009 26/04/2018 1. Since common question of law and fact is involved in these threewrit petitions, they are heard together and are being disposed of bythis common order.writ petitions, they are heard together and are being disposed of bythis common order. 6. Director General of Income Tax (Exemption), Plot No. 15, II Floor,Laxmi Nagar, District Centre, New Delhi Laxmi Nagar, District Centre, New Delhi ---- Respondents For Petitioner:Mr. Neelabh Dubey, Advocate. For Respondents / Income Tax Department: - Mr. Amit Chaudhari, Advocate. For Respondent No.6 / SBI in W.P.(T)No.167/2009: - Mr. Prasun Kumar Bhaduri, Advocate. Hon'ble Shri Justice Sanjay K. Agrawal Order On Board W.P.(T)Nos.6095/2007 & 167/2009 26/04/2018 1. Since common question of law and fact is involved in these threewrit petitions, they are heard together and are being disposed of bythis common order.writ petitions, they are heard together and are being disposed of bythis common order. 2. The State Bar Council of Chhattisgarh is a statutory bodyconstituted under Section 3 of the Advocates Act, 1961 (for short,'the A Act') read with Section 24(2) of the Madhya PradeshReorganisation Act, 2000 (for short, 'the Act of 2000') with effectfrom 1-11-2000 upon carving out of the new State of Chhattisgarh.The undivided Bar Council of Madhya Pradesh was availing theexemption granted by the Central Government by notification dated9-8-1966 from taxation of its income other than those specificallyexcluded under Section 10(23A) of the Income Tax Act, 1961 (forshort, 'the IT Act'). constituted under Section 3 of the Advocates Act, 1961 (for short,'the A Act') read with Section 24(2) of the Madhya PradeshReorganisation Act, 2000 (for short, 'the Act of 2000') with effectfrom 1-11-2000 upon carving out of the new State of Chhattisgarh.The undivided Bar Council of Madhya Pradesh was availing theexemption granted by the Central Government by notification dated9-8-1966 from taxation of its income other than those specificallyexcluded under Section 10(23A) of the Income Tax Act, 1961 (forshort, 'the IT Act'). 3. The State Bar Council of Chhattisgarh started functioning with effectfrom 1-11-2000 upon reorganisation of the State of MadhyaPradesh, but did not make any application for fresh exemptionunder Section 10(23A) of the IT Act presumably on the ground thatthe notification issued by the Central Government exempting theBar Council of Madhya Pradesh from the provisions of the IT Actunder Section 10(23A), dated 9-8-1966 would also be applicable tothe Bar Council of Chhattisgarh by virtue of the provisionscontained in Section 2(f) read with Sections 78 and 79 of the Act of2000. But the understanding of the State Bar Council ofChhattisgarh did not act as the order of assessment Annexure P-1for the assessment year 2004-05 and 2005-06 came to be passedfrom 1-11-2000 upon reorganisation of the State of MadhyaPradesh, but did not make any application for fresh exemptionunder Section 10(23A) of the IT Act presumably on the ground thatthe notification issued by the Central Government exempting theBar Council of Madhya Pradesh from the provisions of the IT Actunder Section 10(23A), dated 9-8-1966 would also be applicable tothe Bar Council of Chhattisgarh by virtue of the provisionscontained in Section 2(f) read with Sections 78 and 79 of the Act of2000. But the understanding of the State Bar Council ofChhattisgarh did not act as the order of assessment Annexure P-1for the assessment year 2004-05 and 2005-06 came to be passed Page 4 of 20 by the assessing officer of the Income Tax Department assessingthe income ₹ 26,34,767/- and ₹ 40,98,770/-, respectively, andholding that the petitioner Council did not have any valid exemptioncertificate granted by the competent authority under the provisionsof sub-section (23A) of Section 10 of the IT Act leading to filing ofthese writ petitions challenging those orders of assessmentdirecting payment of tax liability. 4. The facts projected in the writ petitions by the petitioner Council are Page 4 of 20 by the assessing officer of the Income Tax Department assessingthe income ₹ 26,34,767/- and ₹ 40,98,770/-, respectively, andholding that the petitioner Council did not have any valid exemptioncertificate granted by the competent authority under the provisionsof sub-section (23A) of Section 10 of the IT Act leading to filing ofthese writ petitions challenging those orders of assessmentdirecting payment of tax liability. 4. The facts projected in the writ petitions by the petitioner Council are that the exemption granted by the Central Government to theerstwhile Bar Council of Madhya Pradesh by notification dated 9-8-1966 would constitute a law within the meaning of Sections 2(f), 78and 79 of the Act of 2000 and that would continue to operate andwould apply to the State Bar Council of Chhattisgarh, as it is not anew State Bar Council, though it is State Bar Council ofChhattisgarh constituted but by virtue of Section 24(2) of the Act of2000, it is a bifurcation of the undivided State Bar Council ofMadhya Pradesh into two Bar Councils namely, the Bar Council ofMadhya Pradesh and the Bar Council of Chhattisgarh by amendingSection 3(1)(a) of the A Act, therefore, no separate exemption is tobe granted by the Central Government by virtue of the provisionscontained in sub-section (23A) of Section 10 of the IT Act andunless the Central Government withdraws the exemption alreadygranted to the Bar Council of Madhya Pradesh on 9-8-1966, itwould continue to apply to the Bar Council of Chhattisgarh. It hasfurther been pleaded that the respondents did not understand thelaw properly and assessment orders were issued, then only the Page 5 of 20 petitioner by way of abundant precaution made an application videAnnexure P-2 on 4-8-2005 to the Central Government forexemption from the IT Act under the proviso to sub-section (23A) ofSection 10 of the IT Act and claimed exemption from payment of taxwith effect from 1-11-2000, but erroneously, the CentralGovernment granted exemption from assessment year 2006-07and onwards by order dated 10-5-2007. Thus, the assessmentorder has been questioned preliminary on two grounds firstly, thatthe notification dated 9-8-1966 granted by the Central Governmentunder sub-section (23A) of Section 10 of the IT Act would apply tothe State Bar Council of Chhattisgarh also till it is modified oramended under the proviso to sub-section (23A) of Section 10 ofthe IT Act; and secondly, that even though the application wasmade subsequently, but the Central Government partly granted theapplication and partly rejected by not granting exemption with effectfrom 1-11-2000 without assigning and any reason and withoutholding that the petitioner Council is not exempted from payment oftax from 1-11-2000 that is retrospective effect. Therefore, theimpugned orders be set aside. 5. Return has been filed by the respondents / Income Tax Departmentstating inter alia that no express order has been passed by theCentral Government in favour of the petitioner assessee grantingexemption under the provisions of sub-section (23A) of Section 10of the IT Act giving it retrospective effect or with effect from 1-11-2000 and when the application was made on 4-8-2005, theapplication has been considered and exemption has been grantedstating inter alia that no express order has been passed by theCentral Government in favour of the petitioner assessee grantingexemption under the provisions of sub-section (23A) of Section 10of the IT Act giving it retrospective effect or with effect from 1-11-2000 and when the application was made on 4-8-2005, theapplication has been considered and exemption has been granted Page 6 of 20 with effect from the assessment year 2006-07 and onwards, evenotherwise, the order impugned is appealable under Section 246 ofthe IT Act. Therefore, the writ petitions cannot be entertained andare liable to be dismissed. 6. No rejoinder has been filed. Page 6 of 20 with effect from the assessment year 2006-07 and onwards, evenotherwise, the order impugned is appealable under Section 246 ofthe IT Act. Therefore, the writ petitions cannot be entertained andare liable to be dismissed. 6. No rejoinder has been filed. 7. Mr. Neelabh Dubey, learned counsel appearing for the petitioner,would vehemently submit that the notification dated 9-8-1966exempting the Bar Council of M.P. from operation of the provisionsof the IT Act would apply automatically to the new Bar Council ofChhattisgarh constituted with effect from 1-11-2000 by operation ofthe Act of 2000 read with Sections 2(f), 78 and 79 of the Act of2000, as the notification dated 9-8-1966 would constitute a lawwithin the meaning of Section 2(f) of the Act of 2000 and, therefore,the order of assessment passed by the assessing officer of therespondents Department is per se without jurisdiction and withoutauthority of law. He would additionally submit that even otherwise,when the respondent Department did not follow the law mandatedby the Act of 2000 and assessment order was made, the State BarCouncil of Chhattisgarh was forced to claim exemption with effectfrom 1-11-2000, but erroneously, again the exemption was grantedwith effect from 1-4-2005 i.e. for assessment year 2006-07 andonwards, and did not assign any valid and acceptable reason fornot granting exemption with retrospective effect that is 1-11-2000which the petitioner Council was entitled by operation of law, as it isnot the case of the respondent Department that the petitionerCouncil is not entitled and not eligible for exemption under sub- Page 7 of 20 section (23A) of Section 10 of the IT Act with effect from 1-11-2000.Therefore, the impugned order is liable to be set aside. 8. Countering the argument, Mr. Amit Chaudhari, learned SeniorStanding Counsel appearing for the respondents Department,vehemently opposed the submissions made by Mr. Dubey, learnedcounsel for the petitioner, and would submit that the order beingappealable under Section 246 of the IT Act, the writ petitions cannotbe maintained and are liable to be thrown at the threshold withoutentering into merits of the matter. Further, replying the submissionon merits, Mr. Chaudhari would submit that once the applicationclaiming exemption was made on 4-8-2005, the competentauthority rightly held the petitioner Council to be entitled forexemption from next assessment year 2006-07 and with effect from1-4-2005 holding the petitioner Council to be entitled for exemptionunder sub-section (23A) of Section 10 of the IT Act, as such, thereis no jurisdictional error or illegality committed in the impugnedorders and the writ petitions deserve to be dismissed. 9. Mr. Prasun Kumar Bhaduri, learned counsel appearing for StateBank of India / respondent No.6 in W.P.(T)No.167/2009, wouldsubmit that the order of the Income Tax authority was complied within its letter and spirit. Bank of India / respondent No.6 in W.P.(T)No.167/2009, wouldsubmit that the order of the Income Tax authority was complied within its letter and spirit. 10. I have heard learned counsel for the parties and considered therival submissions made herein-above and also went through therecord with utmost circumspection.rival submissions made herein-above and also went through therecord with utmost circumspection. 11. Prior to reorganisation of the State of Madhya Pradesh by the Act of2000, the undivided State Bar Council of Madhya Pradesh was in2000, the undivided State Bar Council of Madhya Pradesh was in Page 8 of 20 10. I have heard learned counsel for the parties and considered therival submissions made herein-above and also went through therecord with utmost circumspection.rival submissions made herein-above and also went through therecord with utmost circumspection. 11. Prior to reorganisation of the State of Madhya Pradesh by the Act of2000, the undivided State Bar Council of Madhya Pradesh was in2000, the undivided State Bar Council of Madhya Pradesh was in Page 8 of 20 existence. The Central Government in exercise of power conferredunder sub-section (23A) of Section 10 of the IT Act, grantedexemption to the erstwhile State Bar Council of Madhya Pradesh bynotification No.37/3/66-IT(AI) dated 9-8-1966 exempting fromtaxation of its income other than those specifically excluded underSection 10(23A) of the Act of 1961. The notification dated 9-8-1966has not been produced by the petitioner. However, “Law of IncomeTax” authored by A.C. Sampath Iyengar (10[th] Edition) after Section10(23A) of the Act of 1961 enlists Approved Bar Councils ofdifferent States including Madhya Pradesh as under: - 12. That, during the continuance of above-stated notification dated 9-8-1966, the Act of 2000 came into force with effect from 1-11-2000. Aspecial provision relating to Bar Council and Advocates has beenmade in Section 24 of the Act of 2000, sub-sections (1) and (2) of which provide as under: - “24. Special provision relating to Bar Council andAdvocates.—(1) On and from the appointed day, in theAdvocates Act, 1961 (25 of 1961), in Section 3, in sub-section (1), in clause (a), for the words “and MadhyaPradesh”, the words “Madhya Pradesh and Chhattisgarh”shall be substituted. (2) Any person who immediately before the appointedday is an advocate on the roll of the Bar Council of theexisting State of Madhya Pradesh may give his option inwriting, within one year from the appointed day to the BarCouncil of such existing State, to transfer his name onthe roll of the Bar Council of Chhattisgarh andnotwithstanding anything contained in the Advocates Act, 1961 (25 of 1961) and the rules made thereunder, onsuch option so given his name shall be deemed to havebeen transferred on the roll of the Bar Council ofChhattisgarh with effect from the date of the option sogiven for the purposes of the said Act and the rules madethereunder.” 13. A careful perusal of Section 24(1) of the Act of 2000 would show that in clause (a) of sub-section (1) of Section 3 of the A Act, inplace of “Madhya Pradesh”, “Madhya Pradesh and Chhattisgarh”has been substituted. Thereafter, Section 3(1)(a) of the A Act stoodas under: - “3. State Bar Councils.—(1) There shall be a BarCouncil— (a) for each of States of Andhra Pradesh, Bihar, Gujarat,Jammu and Kashmir, Jharkhand, Madhya Pradesh,Chhattisgarh, Karnataka, Orissa, Rajasthan, UttarPradesh, Uttarakhand, Meghalaya, Manipur and Tripura,to be known as the Bar Council of that State;” 13. A careful perusal of Section 24(1) of the Act of 2000 would show that in clause (a) of sub-section (1) of Section 3 of the A Act, inplace of “Madhya Pradesh”, “Madhya Pradesh and Chhattisgarh”has been substituted. Thereafter, Section 3(1)(a) of the A Act stoodas under: - “3. State Bar Councils.—(1) There shall be a BarCouncil— (a) for each of States of Andhra Pradesh, Bihar, Gujarat,Jammu and Kashmir, Jharkhand, Madhya Pradesh,Chhattisgarh, Karnataka, Orissa, Rajasthan, UttarPradesh, Uttarakhand, Meghalaya, Manipur and Tripura,to be known as the Bar Council of that State;” 14. The aforesaid provision would clearly show that in place oferstwhile undivided Bar Council of M.P., two Bar Councils namelyM.P. and Chhattisgarh State Bar Councils have been constituted bythe provisions of the Act of 2000 and option was given to theAdvocates practicing in the Bar Council of Madhya Pradesh totransfer their names on the roll of the Bar Council of Chhattisgarhand entitlement to practice in the High Court of Chhattisgarh hasalso been conferred by virtue of Section 24(3) of the Act of 2000.Thus, the Bar Council of Chhattisgarh was constituted by virtue ofthe provisions contained in Section 24(1) of the Act of 2000 witheffect from 1-11-2000.erstwhile undivided Bar Council of M.P., two Bar Councils namelyM.P. and Chhattisgarh State Bar Councils have been constituted bythe provisions of the Act of 2000 and option was given to theAdvocates practicing in the Bar Council of Madhya Pradesh totransfer their names on the roll of the Bar Council of Chhattisgarhand entitlement to practice in the High Court of Chhattisgarh hasalso been conferred by virtue of Section 24(3) of the Act of 2000.Thus, the Bar Council of Chhattisgarh was constituted by virtue ofthe provisions contained in Section 24(1) of the Act of 2000 witheffect from 1-11-2000. 15. The State Bar Council of Chhattisgarh so constituted would be abody corporate by virtue of the provisions contained in Section 5 ofbody corporate by virtue of the provisions contained in Section 5 of Page 10 of 20 the A Act. Functions of State Bar Councils have been stated in Section 6 of the A Act, sub-section (1) of which provides as under: - “6.Functions of State Bar Councils.—(1) Thefunctions of a State Bar Council shall be— (a) to admit persons as advocates on its roll; (b) to prepare and maintain such roll; (c) to entertain and determine cases of misconductagainst advocates on its roll; (d) to safeguard the rights, privileges and interests ofadvocates on its roll; (dd) to promote the growth of Bar Associations for thepurposes of effective implementation of the welfareschemes referred to in clause (a) of sub-section (2) ofthis section and clause (a) of sub-section (2) of section7; (e) to promote and support law reform; (ee) to conduct seminars and organise talks on legaltopics by eminent jurists and publish journals andpaper of legal interest; (eee) to organise legal aid to the poor in the prescribedmanner; (f) to manage and invest the funds of the Bar Council; (g) to provide for the election of its members. (gg) to visit and inspect Universities in accordance withthe directions given under clause (i) of sub-section (1)of section 7; (h) to perform all other functions conferred on it by orunder this Act; (i) to do all other things necessary for discharging theaforesaid functions.” 16. The Supreme Court in the matter of Commissioner of Income Tax, Bombay v. The Bar Council of Maharashtra1 while dealing with the question of entitlement of the Bar Council of Maharashtra Page 11 of 20 for exemption under Sections 11 and 10(23A) of the IT Act hasnoticed the aforesaid object of the Bar Council and held as under: - (eee) to organise legal aid to the poor in the prescribedmanner; (f) to manage and invest the funds of the Bar Council; (g) to provide for the election of its members. (gg) to visit and inspect Universities in accordance withthe directions given under clause (i) of sub-section (1)of section 7; (h) to perform all other functions conferred on it by orunder this Act; (i) to do all other things necessary for discharging theaforesaid functions.” 16. The Supreme Court in the matter of Commissioner of Income Tax, Bombay v. The Bar Council of Maharashtra1 while dealing with the question of entitlement of the Bar Council of Maharashtra Page 11 of 20 for exemption under Sections 11 and 10(23A) of the IT Act hasnoticed the aforesaid object of the Bar Council and held as under: - “10.… It is clear that sub-section (1) lays down theobligatory functions while sub-section (2) indicates whatare the optional or discretionary functions that could beundertaken by the State Bar Council and from amongstthe obligatory functions it will be wrong to pick out oneand say it is the primary or dominant object or purpose.All the clauses of sub-section (1) will have to beconsidered in light of the main objective sought to beachieved as indicated in the Preamble. The functionsmentioned in clauses (a) and (b) of sub-section (1),namely, to admit persons as advocates on its roll and toprepare and maintain such roll, are clearly regulatory incharacter intended to ensure that persons with requisitequalifications who are fit and otherwise proper to beadvocates are available for being engaged by thelitigating public, the function prescribed in clause (c) hasbeen enjoined upon avowedly with the objective ofprotecting the litigating public from unscrupulousprofessionals by taking them to task for any misconducton their part; it is also one of the obligatory functions of aState Bar Council to promote and support measures forlaw reform as also to conduct law seminars and organisetalks on legal topics by eminent jurists, obviously with aview to educate the general public, the functionprescribed by clause (eee) is obviously charitable innature, the same being to organise legal aid to the poor.Amongst these various obligatory functions one underclause (d) is to safeguard the rights, privileges andinterests of the advocates on its roll and it is difficult toregard it as a primary or dominant function or purpose forwhich the body is constituted. Even this function apartfrom securing speedy discharge of obligations by thelitigants to the lawyers ensures maintenance of highprofessional standards and independence of the Barwhich are necessary in the performance of their duties tothe society. In other words, the dominant purpose of aState Bar Council as reflected by the various obligatoryfunctions is to ensure quality service of competentlawyers to the litigating public, to spread legal literacy,promote law reforms and provide legal assistance to thepoor while the benefit accruing to the lawyer-members isincidental. ...” 17. Now, the question would be, whether the law, includes notificationdated 9-8-1966 exempting the State Bar Council of M.P. underSection 10(23A) of the IT Act, applicable in the erstwhile undivided Page 12 of 20 State of M.P., would be applicable to the newly constituted State of Chhattisgarh including the State Bar Council of Chhattisgarh. 18. In order to answer that question, it would be appropriate to notice Section 2(f) of the Act of 2000 which defines what the law means and it states as under. It includes notification also. “(f) “law” includes any enactment, ordinance, regulation,order, bye-law, rule, scheme, notification or otherinstrument having, immediately before the appointed day,the force of law in the whole or in any part of the existingState of Madhya Pradesh;” 19. Thus, the above-stated definition of law includes notification dated Page 12 of 20 State of M.P., would be applicable to the newly constituted State of Chhattisgarh including the State Bar Council of Chhattisgarh. 18. In order to answer that question, it would be appropriate to notice Section 2(f) of the Act of 2000 which defines what the law means and it states as under. It includes notification also. “(f) “law” includes any enactment, ordinance, regulation,order, bye-law, rule, scheme, notification or otherinstrument having, immediately before the appointed day,the force of law in the whole or in any part of the existingState of Madhya Pradesh;” 19. Thus, the above-stated definition of law includes notification dated 9-8-1966, which is an exemption granted by the CentralGovernment to the erstwhile State Bar Council of M.P.. Thus, thenotification dated 9-8-1966 is a notification included in the above-stated definition of law under Section 2(f) of the Act of 2000. Government to the erstwhile State Bar Council of M.P.. Thus, thenotification dated 9-8-1966 is a notification included in the above-stated definition of law under Section 2(f) of the Act of 2000. 20. Part X of the Act of 2000 deals with Legal and MiscellaneousProvisions. Sections 78 and 79 of the Act of 2000, which comeunder Part X, respectively provide for Territorial extent of laws andPower to adapt laws, which state as under: -Provisions. Sections 78 and 79 of the Act of 2000, which comeunder Part X, respectively provide for Territorial extent of laws andPower to adapt laws, which state as under: - “78.Territorial extent of laws.—The provisions of PartII of this Act shall not be deemed to have effected anychange in the territories to which any law in forceimmediately before the appointed day extends or applies,and territorial references in any such law to the State ofMadhya Pradesh shall, until otherwise provided by acompetent Legislature or other Competent Authority beconstituted as meaning the territories with the existingState of Madhya Pradesh before the appointed day. 79.Power to adapt laws.—For the purpose offacilitating the application in relation to the State ofMadhya Pradesh or Chhattisgarh of any law made beforethe appointed day, the appropriate Government may,before the expiration of two years from that day, by order,make such adaptations and modifications of the law,whether by way of repeal or amendment, as may be necessary or expedient, and thereupon every such lawshall have effect subject to the adaptations andmodifications so made until altered, repealed oramended by a competent legislature or other competentauthority.” 21. The Supreme Court in the matter of Commissioner ofCommercial Taxes, Ranchi and another v. Swarn RekhaCokes and Coals (P) Ltd. and others2 considering the issue asto whether in light of the Bihar Reorganisation Act, 2000, the law inforce would be applicable to the State of Jharkhand, has clearlyheld that the law in force in the State of Bihar would be applicablein the State of Jharkhand unless modified by the competentLegislature or other competent authority. It was further held asunder: - necessary or expedient, and thereupon every such lawshall have effect subject to the adaptations andmodifications so made until altered, repealed oramended by a competent legislature or other competentauthority.” 21. The Supreme Court in the matter of Commissioner ofCommercial Taxes, Ranchi and another v. Swarn RekhaCokes and Coals (P) Ltd. and others2 considering the issue asto whether in light of the Bihar Reorganisation Act, 2000, the law inforce would be applicable to the State of Jharkhand, has clearlyheld that the law in force in the State of Bihar would be applicablein the State of Jharkhand unless modified by the competentLegislature or other competent authority. It was further held asunder: - “27.… The language in these sections is clear andunambiguous. These sections provide that the lawswhich were applicable to the undivided State of Biharwould continue to apply to the new States created by theAct. The laws that operated continue to operatenotwithstanding the bifurcation of the erstwhile State ofBihar and creation of the new State of Jharkhand. Theycontinue in force until and unless altered, repealed oramended. It is not disputed before us and indeed itcannot be disputed in view of the wide definition given to“law” in section 2(f) of the Act that the notification issuedunder section 7(3)(b) of the Bihar Finance Act, 1981 islaw within the meaning of Sections 84 and 85 of the Act.Thus, the notification published in the Bihar Gazette on22-12-1995 bearing SO No. 478 continues to operate inthe State of Jharkhand till such time as it is altered,repealed or amended. By virtue of Section 84, theterritorial references in any such law (which includes thenotification in question), to the State of Bihar shall beconstrued as meaning the territories within the existingState of Bihar before the appointed day, until otherwiseprovided by a competent legislature or other competentauthority. A conjoint reading of both these provisionsmakes it abundantly clear that the territorial references inany law in force immediately before the appointed daymust be construed as meaning the territories within theexisting State of Bihar before the appointed day. To facilitate their application in respect of the State of Biharor Jharkhand, the appropriate Government may, beforethe expiration of two years from that day, by order, makesuch adaptations and modifications of the law as it mayconsider necessary or expedient by way of repeal oramendment. Till such law is so repealed or amended inaccordance with law, it shall have effect. After theiramendment or alteration, they shall have effect subject tothe adaptations and modifications made. We, therefore,find no difficulty in holding that the notification of theGovernment of Bihar issued under Section 7(3)(b) of theBihar Finance Act, 1981 and published in the gazette on22-12-1995 being SO No. 478 is law as defined bySection 2(f) of the Act. The said notification holds thefield and applies to all the territories which comprised theundivided State of Bihar. The States of Bihar andJharkhand have been vested with power to make suchadaptations and modifications of the law as they mayconsider necessary or expedient. This they can do byissuance of order before the expiration of two years fromthe appointed day. After the adaptations andmodifications of the law, the law shall have effect as somodified or adapted till such time as a competentlegislature or other competent authority further alters,repeals or amends such law. 29.… The submission overlooks the provisions ofSections 84 and 85 of the Act, which create a legalfiction. It is well settled that in interpreting a provisioncreating a legal fiction, the court must ascertain thepurpose for which the fiction is created and having doneso, to assume all those facts and consequences whichare incidental or inevitable corollaries to the giving effectto the fiction. When the law requires that an imaginarystate of affairs should be treated as real, then unlessprohibited from doing so, one must also imagine as realthe consequences and incidents which, if the putativestate of affairs had in fact existed, must inevitably haveflowed from or accompanied it. As Lord Asquith in EastEnd Dwelling Co. Ltd. v. Finsbury Borough Council[3], AllER at p. 589 observed that having done so, you must notcause or permit your imagination to boggle when itcomes to the inevitable corollaries of that state of affairs.Section 84 bids us to imagine that despite the division ofthe erstwhile State of Bihar into two States, any law inforce immediately before the appointed day,notwithstanding territorial references in them, shall, untilotherwise provided by the competent legislature or othercompetent authority, be construed as meaning theterritories within the existing State of Bihar before theappointed day. In simple words, though the law may Page 15 of 20 refer to the State of Bihar, and though the State of Biharhas been bifurcated into two by creating the State ofJharkhand, the laws in force before the appointed daymust continue to operate in the territories which formedthe erstwhile State of Bihar. This, of course, is subject toamendment, alteration or repudiation by a legislature orother competent authority. The statutory notificationrelied upon, therefore, continues to operate throughoutthe territories which earlier constituted the State of Bihar.Under Section 85, they shall continue to operate untilrepealed or amended in the manner provided. As anatural consequence, the entrepreneurs are entitled tothe benefits and incentives provided in the saidnotification. ...” 22. Similarly, a Division Bench of this Court in the matter of Gurumukh 4Singh Hora v. State of Chhattisgarh and others has clearlyheld that all the laws including any enactment, ordinance,regulation, order, bye-law, rule, scheme, notification or otherinstruments which were having the force of law before theappointed day in the whole of the State of Madhya Pradesh were tobe continued in the State of Chhattisgarh as per the provisions ofSection 79 of the Act of 2000, and observed as under: - “14.It is true that as per sub-section (f) of Section 2 ofthe Act, 2000, all the laws including any enactment,ordinance, regulation, order, bye-law, rule, scheme,notification or other instruments which were having theforce of law before the appointed day in the whole of theState of Madhya Pradesh were to be continued in theState of Chhattisgarh as per the provisions of Section 79of the Act, 2000. 15.As per Section 79 of the Act, 2000, the State ofChhattisgarh was required to adapt the same before theexpiration of two years from the appointed day, by order,make such adaptations and modifications of the law,whether by way of repeal or amendment, as may benecessary or expedient, and thereupon every such lawshall have effect subject to the adaptations andmodifications so made until altered, repealed oramended by a competent Legislature of other competentauthority. ...” 15.As per Section 79 of the Act, 2000, the State ofChhattisgarh was required to adapt the same before theexpiration of two years from the appointed day, by order,make such adaptations and modifications of the law,whether by way of repeal or amendment, as may benecessary or expedient, and thereupon every such lawshall have effect subject to the adaptations andmodifications so made until altered, repealed oramended by a competent Legislature of other competentauthority. ...” 23. On the basis of aforesaid judgments (supra) and following theprinciples of law enunciated by the Supreme Court in SwarnRekha Cokes and Coals (P) Ltd.'scase (supra) and by theDivision Bench of this Court in Gurumukh Singh Hora (supra), Ihave no hesitation to hold that the notification dated 9-8-1966 is alaw within the meaning of Section 2(f) of the Act of 2000 which wasin existence in the erstwhile State of M.P. exempting the State BarCouncil of Madhya Pradesh under Section 10(23A) of the IT Actand would also be applicable to the State Bar Council ofChhattisgarh till it is modified or altered by the competent authorityby virtue of the provisions contained in Sections 78 and 79 of theAct of 2000. principles of law enunciated by the Supreme Court in SwarnRekha Cokes and Coals (P) Ltd.'scase (supra) and by theDivision Bench of this Court in Gurumukh Singh Hora (supra), Ihave no hesitation to hold that the notification dated 9-8-1966 is alaw within the meaning of Section 2(f) of the Act of 2000 which wasin existence in the erstwhile State of M.P. exempting the State BarCouncil of Madhya Pradesh under Section 10(23A) of the IT Actand would also be applicable to the State Bar Council ofChhattisgarh till it is modified or altered by the competent authorityby virtue of the provisions contained in Sections 78 and 79 of theAct of 2000. 24. Reverting to the facts of the present case, it is quite vivid that thenotification dated 9-8-1966 issued by the Central Governmentexempting the State Bar Council of M.P. from taxation of incomeother than those specifically excluded under Section 10(23A) of theIT Act, was applicable and was in force in the new State ofChhattisgarh with effect from 1-11-2000 and would fall within themeaning of law under Section 2(f) of the Act of 2000 and by virtueof that, the State Bar Council of Chhattisgarh was entitled to haveexemption under Section 10(23A) of the IT Act from the operation ofIT Act, but that was not understood properly by the Income TaxAuthorities and holding that the petitioner Council is not entitled forthe said exemption, the petitioner Council was assessed to incometax imposing tax liability to the extent indicated herein-aboveignoring the law in force at the time of assessment and the order ofnotification dated 9-8-1966 issued by the Central Governmentexempting the State Bar Council of M.P. from taxation of incomeother than those specifically excluded under Section 10(23A) of theIT Act, was applicable and was in force in the new State ofChhattisgarh with effect from 1-11-2000 and would fall within themeaning of law under Section 2(f) of the Act of 2000 and by virtueof that, the State Bar Council of Chhattisgarh was entitled to haveexemption under Section 10(23A) of the IT Act from the operation ofIT Act, but that was not understood properly by the Income TaxAuthorities and holding that the petitioner Council is not entitled forthe said exemption, the petitioner Council was assessed to incometax imposing tax liability to the extent indicated herein-aboveignoring the law in force at the time of assessment and the order of Page 17 of 20 Page 17 of 20 recovery was passed. In the considered opinion of this Court, thepetitioner Council was entitled and eligible to be exempted by virtueof the notification dated 9-8-1966 read with Sections 2(f), 78 and 79of the Act of 2000 with effect from 1-11-2000, as it was not modifiedor altered by the Central Government upon reorganisation of theState of Chhattisgarh with effect from 1-11-2000 by the Act of 2000and therefore the assessing authority has committed gravejurisdictional error in not holding so and proceeded to assess thetax liability of the petitioner Council under the IT Act. Since theorder itself is without jurisdiction and without authority of law, thealternative remedy would not come in the way of the petitioner.Apart from this, the writ petitions are pending since 2007 and 2009and thus, after eight years, the writ petitions cannot be thrown outon the ground of availability of alternative remedy when the partiesappeared and argued the issue and the case is reached to thestage of final hearing. Therefore, the plea of alternative remedyraised on behalf of the respondents is hereby rejected. 25. Even for the assessment year 2004-05, the petitioner Council filedappeal which was dismissed and the matter went up to the IncomeTax Appellate Tribunal and the Tribunal set aside the order holdingthat the matter is pending consideration before the High Court. appeal which was dismissed and the matter went up to the IncomeTax Appellate Tribunal and the Tribunal set aside the order holdingthat the matter is pending consideration before the High Court. 26. There is an additional reason for not upholding the order ofassessment passed against the petitioner. Though the petitionerCouncil claimed exemption with effect from 1-11-2000 in asubsequently made application, but the Central Government –competent authority under Section 10(23A) of the IT Act simplyassessment passed against the petitioner. Though the petitionerCouncil claimed exemption with effect from 1-11-2000 in asubsequently made application, but the Central Government –competent authority under Section 10(23A) of the IT Act simply Page 18 of 20 granted exemption from the assessment year 2006-07 and onwards by order dated 10-5-2007 and did not assign any reason asto why the petitioner is not entitled for exemption from 1-11-2000,especially when it is not the case of the respondent Departmentthat the petitioner Council has ceased to perform its functionsenumerated in Section 6 of the A Act and was not entitled forexemption with effect from 1-11-2000. In fact, the CentralGovernment has failed to notice the operation of Sections 2(f), 78and 79 of the Act of 2000, but despite the application having beenmade, the Central Government did not grant exemption from thedate from which the petitioner Council was entitled to and rejectedexemption from 1-11-2000 i.e. for 2004-05 and 2005-06 withoutassigning any reason and without even holding that the petitioner isnot entitled for exemption from that period under Section 10(23A) ofthe IT Act. 27. Thus, for the aforesaid reasons, the order of assessment passedagainst the petitioner subjecting the petitioner Council to tax liabilityunder the IT Act cannot be sustained. against the petitioner subjecting the petitioner Council to tax liabilityunder the IT Act cannot be sustained. 27. Thus, for the aforesaid reasons, the order of assessment passedagainst the petitioner subjecting the petitioner Council to tax liabilityunder the IT Act cannot be sustained. against the petitioner subjecting the petitioner Council to tax liabilityunder the IT Act cannot be sustained. 28. As a fallout and consequence of the above-stated discussion, theimpugned order of assessment dated 29-12-2006 (Annexure P-1)in W.P.(T)Nos.6095/2007 & 167/2009 for the assessment year2004-05 imposing tax liability of ₹ 26,34,770/- and the impugnedorder of assessment dated 26-12-2008 (Annexure P-1) in W.P.(T)No.217/2009 for the assessment year 2005-06 imposing tax liabilityof ₹ 40,98,770/- are hereby quashed being without jurisdiction andwithout authority of law. Consequently, the order of the Centralimpugned order of assessment dated 29-12-2006 (Annexure P-1)in W.P.(T)Nos.6095/2007 & 167/2009 for the assessment year2004-05 imposing tax liability of ₹ 26,34,770/- and the impugnedorder of assessment dated 26-12-2008 (Annexure P-1) in W.P.(T)No.217/2009 for the assessment year 2005-06 imposing tax liabilityof ₹ 40,98,770/- are hereby quashed being without jurisdiction andwithout authority of law. Consequently, the order of the Central Page 19 of 20 Government dated 10-5-2007 (Annexure P-3) passed by the UnderSecretary to the Government of India, Ministry of Finance(Department of Revenue), Central Board of Direct Taxes, New Delhialso stands modified to the above extent and penalty proceedingsinitiated against the petitioner are also quashed. The respondentIncome Tax Authorities are restrained from recovering the said taxfrom the petitioner. 29. Before parting with the record, I deem it proper to remind the dutyof the petitioner State Bar Council, as rendered by the SupremeCourt, to ensure quality service of competent lawyers to thelitigating public, to spread legal literacy, promote law reforms andprovide legal assistance to the poor and downtrodden people. Ihope and trust that the State Bar Council will follow and observethe duty of the Council religiously and scrupulously