The judgment of the court was delivered by

SIKRI J.--This is an appeal on a certificate granted by the High Court of Bombay against its judgment dated February 24, 1961, dismissing the petition filed by the appellant under article 226 of the Constitution of India. This appeal raises a short question as to the construction of section 49E of the Indian Income-tax Act, 1922, hereinafter referred to as the Act. Before we deal with this question, it is necessary to set out the relevant facts.

The appellant, at the material time, carried on business not only in India but also outside India, i.e., Ceylon, the former States of Kolhapur and Kapurthala and other places. It is not necessary to give the facts relating to the income in Ceylon and Kolhapur because if the facts relating to the income made in Kapurthala are stated, these will bring out the real controversy between the appellant and the revenue. We may mention that it is common ground that the facts relating to Ceylon income and Kolhapur income are substantially similar.

On July 9, 1954, the appellant wrote a letter to the Income-tax Officer, Companies Circle, Bombay, stating that for the assessment year 1949-50, it was entitled to refund on the income taxed in Kapurthala State. It attached an original certificate for tax showing payment of Rs. 37,828-11-0, and requested that a refund order be passed at an early date. On June 27, 1956, the Income-tax Officer rejected the claim on the ground that the claim filed by the appellant was not within the time-limit of four years laid down in rule 5 of the Income-tax (Double Taxation Relief) (Indian States) Rules, 1939--hereinafter called the Indian States Rules. On December 18, 1956, the appellant filed a revision, under section 33A of the Act, against the said order, before the Commissioner of Income-tax, Bombay. The appellant stated in the petition that " unfortunately the company's assessment for the year in question was completed by the Income-tax Officer on the last day of the financial year 1953-54, i.e., March 31, 1954, being the last date on which their claim for double income-tax relief should have been lodged. In the absence of the assessment order being received by the company it was not physically practicable for the assessee to lodge its claim for double income-tax relief and as such the time prescribed under section 50 had already expired when the assessment order was received by the company. " The Commissioner made some enquiries. The appellant, in its letter dated June 30, 1958, replied that no provisional claim for double income-tax relief was made by the appellant within the time prescribed. The appellant reiterated its own plea that it was not " physically practicable " for the assessee to lodge its claim for double-tax relief within the time prescribed. The Commissioner, however, rejected the petition. He observed that " the assessment in the Kapurthala State was made on March 20, 1950, i.e., much before the assessment was completed by the Bombay Income-tax Officer. Nothing prevented the petitioner, therefore, from filing a provisional claim before the period of limitation was over. At least, it should have made such a claim before the Income-tax Officer at the time of assessment. I regret I cannot condone the delay in filing the claim as there is no provision under section 50 for such condonation. " The appellant then approached the Central Board of Revenue. The Central Board of Revenue, by its letter dated December 31, 1958, declined to interfere in the matter. The appellant did not take any steps to apply to the High Court under article 226 for quashing the above orders of the Commissioner of Income-tax or the Central Board of Revenue.

On August 28, 1959, the Income-tax Officer issued three notices of demand under section 29 of the Act in respect of the assessment years 1949-50, 1950-51 and 1951-52. The appellant then wrote a letter dated September 4, 1959, requesting the Income-tax Officer to set off the refunds to which the appellant was entitled pursuant to the provisions of Income-tax (Double Taxation Relief) (Ceylon) Rules, 1942, and read with the provisions of sections 49A and 48 of the Income-tax Act, in respect of the assessment years 1942-43, 1943-44 and 1944-45, relating to Ceylon, and the assessment years 1947-48 and 1949-50 relating to Kolhapur and Kapurthala, against the said demands. In this letter the appellant gave arguments in support of its request. In short, the argument was that although the applications claiming those refunds were submitted beyond the prescribed time-limit, nevertheless the appellant had a right still, pursuant to the provisions of section 49E, to call upon the Income-tax Officer to set off the refunds found to be due to the appellant against the tax demands raised by the Income-tax Officer on the appellant. The appellant also approached the Central Board of Revenue, urging similar points. The Central Board of Revenue, however, by its letter dated June 24, 1960, declined to interfere in the matter.

The appellant then on October 7, 1960, filed a petition under article 226 of the Constitution. After giving the relevant facts and submissions, the appellant prayed that the High Court be pleased to issue a writ in the nature of mandamus or a writ, direction or order under article 226 of the Constitution, directing the respondents to set off the refunds due to the petitioner under the aforesaid double taxation relief rules against the tax payable by it for the assessment year 1955-56. It appears that in the meantime the petitioner had paid tax for the assessment years 1949-50 and 1950-51, and the demand for Rs. 89,000.58 for the assessment year 1951-52 was kept in abeyance, and later when the assessment for 1955-56 was completed, the Income-tax Officer had agreed to keep in abeyance Rs. 79,430.19 out of the total demand relating to the assessment year 1955-56, till the decision of the Central Board of Revenue. The second prayer was that the High Court be pleased to issue writs in the nature of prohibition or other direction or order under article 226 of the Constitution prohibiting the respondents, their officers, servants and agents from demanding or recovering from the petitioner the tax payable by it for the assessment year 1955-56 without first setting off against that tax the refunds due to the petitioner under the aforesaid double-tax relief rules. It will be noticed that no prayer was made for quashing the order of the Commissioner, dated August 23, 1958, and the order of the Central Board of Revenue dated December 31, 1958. It was indeed contended by Mr. S. P. Mehta, the learned counsel for the appellant before the High Court, that the appellant was not challenging the orders of the Income-tax Officer rejecting his application for refund, but was only challenging the orders made by them rejecting its application for grant of set-off.

Mr. Viswanatha Sastri, the learned counsel for the appellant, first urged that as compliance with rule 5 of the Indian States Rules, 1939, was physically impossible, rule 5 did not apply, and consequently, the refund was due to the appellant notwithstanding rule 5. But we cannot go into the question whether rule 5 was rightly or wrongly applied by the income-tax authorities. The orders dated August 23, 1958, and December 31, 1958, cannot be attacked in these proceedings. Therefore, we must proceed on the basis that those orders were validly passed. We express no opinion whether the view of the income-tax authorities that rule 5 was applicable in the circumstances of the case was correct or not.

This takes us to the construction of section 49E. Section 49E reads thus :

" 49E. Power to set off amount of refunds against tax remaining payable.--Where under any of the provisions of this Act, a refund is found to be due to any person, the Income-tax Officer, Appellate Assistant Commissioner or Commissioner, as the case may be, may, in lieu of payment of the refund, set off the amount to be refunded, or any part of that amount against the tax, interest or penalty, if any, remaining payable by the person to whom the refund is due. "

The High Court held that section 49E of the Act did not give any assistance to the appellant, because according to it, there must be prior adjudication in favour of the appellant. The High Court observed that " the expression 'found to be due' clearly means that there must, prior to the date set-off is claimed, be an adjudication whereunder an amount is found due by way of refun