TMI Blog1975 (7) TMI 4X X X X Extracts X X X X X X X X Extracts X X X X ..... an appeal to this court under article 133(1)(a) and (c) of the Constitution. The appellant is a co-operative society engaged in the business of banking. Its total income for the assessment year 1963-64 was computed by the respondent at Rs. 10,00,098. Out of this, Rs. 9,48,335 was its business income while Rs. 51,763 was its income from other sources. Since under section 81(i)(a) of the Income-tax Act, 1961, a cooperative society engaged in the business of banking is not liable to pay income-tax on its business income, the tax amounting to Rs. 23,845.47 was charged on Rs. 51,763 only though for the purposes of rate the income was taken at Rs. 9,48,335 in view of section 110 of the Act. Applying the Finance Act, 1963 (XIII of 1963), the respondent computed the residual income of the appellant at Rs. 5,39,386 and levied on it an additional surcharge of Rs. 52,828.60. Thus, the total tax levied on the appellant came to Rs. 23,845.47 plus Rs. 52,828.60, i.e., Rs. 76,674.07. The main grievance of the appellant before the High Court was that whereas its taxable income was only Rs. 51,763, a tax of Rs. 76,674.07 was imposed on it. The relevant provisions of the Finance Act were acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t apply, shall further be increased by an additional surcharge for purposes of the Union (hereinafter referred to as additional surcharge) calculated in the manner provided in the said Schedule." Section 2(8) provides that : " For the purposes of Paragraphs A and C of Part I of the First Schedule, the expression 'residual income' means the amount of the total income as reduced by--- (a) the amount of the capital gains, if any, included therein ; and (b) the amount of tax (exclusive of additional surcharge) which would have been chargeable on such reduced total income if it had been the total income no part of which had been exempt from tax and on no portion of which deduction of tax had been admissible under any provisions of the Income-tax Act or this Act." Section 3 provides that : " Notwithstanding anything contained in the provisions of Chapter VII or Chapter VIII-A or section 110 of the Income-tax Act or sub-section (5) of section 2 of this Act, in calculating any relief, rebate or deduction in respect of income-tax payable on the total income of an assessee which includes any income on which no income-tax is payable or in respect of which a deduction of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lant's income from other sources was alone taxable under the Act of 1961 and a tax of Rs. 23,845.47 was imposed on that income. The Finance Act of 1963 subjects " residual income " to certain charges and such income was computed admittedly correctly at Rs, 5,39,386. An additional surcharge of Rs. 52,828.60 was levied on the residual income. Thus, on the assumption that the Finance Act, validly and on a true interpretation, imposes the additional surcharge on residual income, the tax imposed on the appellant is Rs. 23,845.47 Plus Rs. 52,828.60. The total tax of Rs. 76,674.07 thus imposed is far less than the appellant's total taxable income arrived at by the addition of its non-business income and the residual income. That leads to the inquiry first as regards the scope of a Finance Act and then as regards the interpretation of the Finance Act of 1963. Learned counsel for the appellant, during the course of his arguments, gave up the challenge to the power of Parliament to impose a new charge by a Finance Act. This concession was properly made. By article 246(1) of the Constitution, Parliament has the exclusive power to make laws with respect to any of the matters in List I of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... avartti C.J., delivering the judgment of a Division Bench, observed that the Finance Acts, though annual Acts, are not necessarily temporary Acts, for they may and often do contain provisions of a general character which are of a permanent operation. In Hari Krishna Bhargav v. Union of India an assessee challenged the scheme of annuity deposits on the ground that Parliament had no competence to incorporate in the Income-tax Act a provision which was substantially one relating to borrowings by the Central Goverment from a class of taxpayers. That scheme was introduced by Finance Act 5 of 1964, which incorporated Chapter XXII-A containing sections 280A to section 280X in the Income-tax Act, 1961. The challenge was repelled by this court on the ground that if Parliament had the legislative competence to pass an Act for collecting annuity deposits from taxpayers, nothing contained in the Constitution disentitled it " as a matter of legislative arrangement to incorporate the provisions relating to borrowing from taxpayers in the Income-tax Act or any other statute." This discussion became necessary in spite of the appellant's concession on Parliament's legislative competence becau ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome-tax " payable according to the rates applicable under the operation of the Finance Act, 1963, on his total income, the same proportion as the salary income bears to the total income. The question which arose for consideration was whether the words " income-tax payable according to the rates applicable under the operation of the Finance Act, 1963," included surcharges which were leviable under the Act of 1963. The question was answered by this court in the affirmative. As the judgment shows, " the essential point for determination " was " whether surcharge is an additional mode or rate for charging income-tax " (page 351). The court held that it was. The question before us is whether, even if the surcharge is but an additional mode or rate for charging income-tax, the Finance Act of 1963 authorises by its terms the levy of additional surcharge on income which is exempt from income-tax under the Income-tax Act, 1961. In K. Srinivasan's case the court declined to express any opinion on the distinction made by the High Court that surcharges are levied under the Finance Act while income-tax was levied under the Income-tax Act (page 351). In the instant case it is not disputed by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income-tax is in fact payable or whether, as contended by the revenue, the Finance Act provides for the levy of a new and independent charge. According to the appellant, these provisions of the Finance Act do not, directly or indirectly, bring about any amendment to section 81(i)(a) of the Income-tax Act but merely prescribe that in cases where the income-tax is payable, " the amount of income-tax ...... shall be increased by the aggregate of the surcharges ". The heading " Surcharges on income-tax " under which provision is made in the Finance Act for the calculation of a surcharge, a special surcharge and an additional surcharge is also said to bear out the contention that the levy of additional surcharge on the residual income cannot be dissociated from the main charge of income-tax. We are unable to accept this contention. Article 269(1) of the Constitution provides that the duties and taxes mentioned therein shall be levied and collected by the Government of India but shall be assigned to the States in the manner provided in clause (2). Article 270(1) provides that taxes on income other than agricultural income shall be levied and collected by the Government of India and d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al income is not the same as the business income of a co-operative bank, which is exempt under section 81(i)(a) from income-tax. For ascertaining the residual income, the total income is reduced by the amount of capital gains and further by the amount of tax (other than additional surcharge) which would have been charged on such reduced total income on the assumption that the whole of it was liable to be brought to tax. Thus, in the instant case, the additional surcharge is not levied on the appellant's business income of Rs. 9,48,335 which is exempt from income-tax and super-tax. It is levied on the residual income of Rs. 5,39,386 which is arrived at after deducting gross taxes (exclusive of additional surcharge) amounting to Rs. 4,60,712 from the assessee's gross income of Rs. 10,00,098. By section 3 of the Finance Act of 1963, no account can be taken of the additional surcharge in calculating any relief, rebate or deduction in respect of income-tax payable on the total income of an assessee which includes any income on which no income-tax is payable or in respect of which a deduction of income-tax is admissible. Section 3, by its terms, has precedence over anything contained ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his is so, not because additional surcharge is payable by law on non-business income but because it is payable on residual income and residual income, by definition, includes non-business income as reduced. In fact, it consists of the amount of total income as reduced by the amounts mentioned in clauses (a) and (b) of section 2(8). Relying on United Commercial Bank Ltd. v. Commissioner of Income-tax East India Housing and Land Development Trust Ltd. v. Commissioner of Income-tax and K. V. Al.M. Ramanathan Chettiar v. Commissioner of Income- tax, the appellant's counsel urged that income-tax is a single levy, that it is one tax and not so many taxes separately levied on several heads of income. This partly is the same argument in a different disguise that an assessee who is not liable to pay income-tax cannot be made liable to pay additional surcharge under the Finance Act, 1963. We have rejected that contention. Partly, the argument is designed to establish co-relation with section 146 of the Income-tax Act, 1961, by which, when any tax, interest, penalty, fine or any other sum is payable in consequence of any order passed under the Act, the Income-tax Officer has to serve upon ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
