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TMI Blog1972 (1) TMI 33X X X X Extracts X X X X X X X X Extracts X X X X ..... o. II of 1971)). The petitioner was assessed to tax on the income from the said properties as if it was agricultural income for the years 1966-67, 1967-68 and 1968-69. By order dated March 12, 1971, the petitioner was assessed for the assessment year 1967-68 by the Agricultural Income-tax Officer, Kumali, who is the first respondent herein. It is evident from the assessment order itself that the petitioner filed returns in regard to that year. But the return was not accepted, the income being estimated. The petitioner filed an application under section 19 of the Act to cancel the assessment under section 18(4). But the complaint is that notwithstanding that, proceedings for recovery of tax were being taken. On these allegations the petitioner complains that the attempt at recovery of tax for the assessment for 1967-68 is illegal for more reasons than one. The Travancore-Cochin Agricultural Income-tax Act, 1950 (22 of 1950), came into force in the State of Travancore-Cochin from April 1, 1951. By Kerala Act 8 of 1957, it was extended to the Malabar District with effect from. April 1, 1957, and the name of the Act was changed into "The Agricultural Income-tax Act, 1950 ". The term ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lines of the definition in the Income-tax Act, 1961, by Act 12 of 1964 with retrospective effect from April 1, 1951, the date of commencement of the original Act." The definition of agricultural income had necessarily to be based on the definition of the same term in the Income-tax Act in force for the time being. This was because article 366(1) of the Constitution defined agricultural income as meaning " 'agricultural income' as defined for the purposes of the enactments relating to Indian income-tax ", unless the context otherwise required. Entry 46 in List 11 of the Seventh Schedule to the Constitution empowers the State legislature to enact laws relating to tax on agricultural income. The terra "agricultural income " in this entry had necessarily to be understood in terms of the definition of that term in the law relating to income-tax by reason of the provision in article 366(1) of the Constitution. That was the reason why Act 12 of 1964 was enacted to bring the definition of the term "agricultural income" into line with that in the Income-tax Act, 1961. Subsequently, this definition in the Income-tax Act was changed by the Taxation Laws (Amendment) Act, 1970 (42 of 1970), a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a Act 22 of 1950, in view of the definition in the Act. Soon followed the amendment in the Central Act. This amendment was followed up in the State enactment, as it should be, and Act 12 of 1971, which effected such amendment, made the definition retrospective from April 1, 1962. Thus, as the matter now stands, the definition of agricultural income is decined to be that received as rent or revenue derived from land used for agricultural purposes. By section 1(2) of Act 12 of 1971, section 2 is deemed to have come into force on April 1, 1962, and the remaining provisions from the 9th day of March, 1971. Section 3 validated all acts, proceedings or things done or taken or purporting to have been done or taken by any officer or authority in connection with assessment of agricultural income made or purporting to be made under Keral Act 22 of 1950, in regard to land not assessed to land revenue in the State or not subject to a local rate assessed and collected. This validation operated to validate all those orders which had been passed prior to the amendment by Act 12 of 1971. Exhibit P-1order, which was passed a few days prior to the enactment of Act 12 of 1971, was, thus, an order wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the date the Constitution came into operation. Article 366(1) of the Constitution of India reads thus : In this Constitution, unless the context otherwise requires, the following expressions have the meanings hereby respectively assigned to them, that is to say- (1) 'agricultural income' means agricultural income as defined for the purpose of the enactments relating to Indian income-tax ; The enactment now in force relating to Indian income-tax is the Income-tax Act, 1961, and after amendment of the definition of agricultural income in that Act by Taxation Laws (Amendment) Act, 1970 (42 of 1970), the definition is altered so as not to exclude income derived from lands which are not assessed to revenue by the State or subjected to any local rate from the scope of definition of agricultural income. As the Agricultural Income-tax Act stands now, as amended by Act 12 of 1971, the definition is in accordance with the definition in the Income-tax Act, 1961. But, counsel contends that there can be no amendment to the term "agricultural income" so as to depart from the definition of the term as contained in the Indian Income-tax Act, 1922. It is on the words of the definition in terms o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... defining agricultural income in the manner in which it is seen treated in article 366(1) of the Constitution. To read article 366(1) of the Constitution as inelastic, in the manner suggested by the counsel, would create very many anomalies apart from the fact that the very words of the definition do not call for such a construction. There is no express prohibition in the Constitution as to the amendment from time to time of the definition of the term "agricultural income" in the Union laws relating to income-tax. It is also unreasonable to suppose that the Constitution intended any such prohibition impliedly, when the nefinition in article 366(1) itself refers to the definition in the laws relating to income-tax and not to any definition in any Act as on January 26, 1950. If article 366(1) is read as defining "agricultural income" as defined in the laws relating to income-tax in force on the date of commencement of the Constitution, then while the State's power to legislate will depend on that definition, the Union will be free to treat even such agricultural income as non-agricultural income for the purpose of income-tax laws which will lead to taxation of the same income as agr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o enact a particular statute and it purports to so enact it and further validates its orders passed prior to such enactment by giving retrospective operation to the provisions enacted, there is no question of any inroad into the judicial process or any usurpation of the power of the courts. The courts sometimes strike down acts of the executive or rules purported to be made under enactments on the ground of want of competency or absence of jurisdiction. But, when jurisdiction is conferred subsequently by the legislature which is competent to enact on the subject and retrospectivity is given to such law the basis of the defect in the decisions declared invalid by the courts is removed and, consequently, validation would be possible. Earlier the courts might have invalidated the orders by reason of the absence of a base on which the orders could be sustained. But, when the legislature seeks to supply such base and it is competent to supply it because of its legislative power the validating statute is not open to attack as being one which attempts to usurp the functions and powers of the court or seeks to nullify what has been held as binding by an earlier adjudication. In an illumin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ject-matter and competence to make a valid law, it can at any time make such a valid law and make it retrospectively so as to bind even past transactions. The validity of a validating law, therefore, depends upon whether the legislature possesses the competence which it claims over the subject-matter and whether in making the validation it removes the defect which the courts had found in the existing law and makes adequate provisions in the validating law for a valid imposition of the tax." There may be cases where the validating legislation may have omitted to supply the base or to remove the cause of the invalidity. Such statutes have not succeeded in standing the test of validity. As an instance I may refer to the facts of the case in State of Tamil Nadu v. M. Rayappa. The Madras High Court earlier held that the provisions of the Madras Entertainments Tax (Amendment) Act does not change the law retrospectively and, therefore, the order passed by the Commercial Tax Officer, Erode, making a reassessment purported to be under that Act was illegal. Thereupon, resort was made to enacting section 7 of that Act making provision relating to validation of assessment and collection of ce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay not by itself render it objectionable on the ground of unreasonableness nor does this even, prima facie, indicate unreasonableness. To give retrospectivity to a legislation, even in relation to taxation, is a well-settled legislative practice. It may be that factors such as the Act beiag brought into force retrospectively for a number of years prior to the date of its enactment may render the burden on the citizen so heavy that he may not be able to meet the demand. It may be that, in the guise of taxation, retrospectivity may really be intended to confiscate property, the measure being a mere cloak or disguise. If it is shown that the measure is, by reason of its ultimate purpose or in its actual operation, confiscatory in character the courts may be justified in holding that such measure operates really as restriction on the fundamental right to hold and possess property guaranteed under article 19(1)(f) of the Constitution. But this is not to say that merely because there is a heavy incidence of tax it operates as such a restriction. The very purpose of conferment of power to tax is to raise revenue for the State and it is the very character or incidence of tax that it will ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cultivation of the particular commodity with which their parties are concerned are so high that it would be uneconomical to pay tax retrospectively. Agricultural income-tax is levied not on the gross income but only on the net income. The net income is arrived at after deducting the wages and such other expenses and, therefore, what is left to the assessee is alone taxed and the tax is only a portion of what is so left. As to whether he would have conserved this so as to make it available at a future date when a retrospective levy is imposed, I cannot do better than to quote the words of justice Gajendragadkar in the decision in Rai Ramkrishna v. State of Bihar : " Stated generally, it may not be unreasonable to assume that from the time when the Act of 1950 was brought into force it was known to all the owners that the legislature had imposed a tax in respect of passengers and goods carried by them and since then, and particularly after the amendment of 1954, they may have raised their fares and freights to absorb their liability to pay the tax to the State." It is not as if the attempt by the State to tax agricultural income from lands which were, not assessed to revenue was a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the quantum of tax imposed was heavy was sufficient to render the taxation measure one infringing the fundamental right. There is yet another attack to the Amendment Act. It is said that under the impression that there was no such valid provision requiring return to be filed in respect of agricultural income from lands not assessed to revenue, persons deriving income from such lands may not have filed returns and would not have challenged orders of assessment on the ground that such orders will not have any legal force. Therefore, the petitioner's case is that in such cases when orders are validated the assessees lose their right to challenge the orders which they would otherwise have. So far as the petitioner is concerned he has filed returns but including only income from lands other than the income which according to the petitioner he is not assessable to tax. A similar contention was raised before the Full Bench of the Kerala High Court in the case in Ananthanarayana lyer v. State of Kerala. The challenge therein was to the validity of the Sales Tax (Levy and Validation) Act, 1965. Dealing with the contention, the learned judges said thus : " It is suggested by the petiti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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