TMI Blog1965 (10) TMI 80X X X X Extracts X X X X X X X X Extracts X X X X ..... ome-tax Act, annuity deposit for the assessment year commencing on the 1st day of April, 1964, shall be made by every person to whom the provisions of that Chapter apply at the rates specified in the Second Schedule. 3. By s. 44 of the Finance Act, Ch. XXII-A relating to annuity deposit containing Sections 280-A to 280-X was introduced into the Income-tax Act. By that chapter taxpayers of certain categories are required to make annuity deposits for every assessment year commencing from the assessment year 1964-65. By the Second Schedule to the Finance Act, rates of annuity deposits are prescribed. The deposit has to be made by the specified categories of taxpayers, having a total income exceeding ₹ 15,000 at the prescribed percentages rising from 5 to 12 1/2 on the adjusted total income. By the Explanation to the Second Schedule, the expression total income under the Schedule means the total income computed in the manner laid down in the Income-tax Act without making any allowance under s. 280-O of that Act. A taxpayer who is a resident and falls within any of the following categories is liable to make the annuity deposit : (i) an individual, who is a citizen of Indi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ludes income chargeable to income-tax under the head salaries , allowance has to be made in computing the income under that head, and if there be no income under that head or the annuity deposit required to be made exceeds the salary income, the whole of the balance of the annuity deposit is allowable as a deduction in computing the total earned income. The installment of annuity due on any annuity deposit is chargeable to income-tax as earned income of the taxpayer in the year in which it becomes due. The Income-tax Officer on or after the 1st day of April in the financial year, may by order in writing, require the depositor who has been previously assessed to make an advance deposit computed in accordance with s. 280-E. The Income-tax Officer is also authorised to issue a demand notice and also to modify, if necessary, the notice of demand after regular assessment has been made. A depositor may make his own estimate of his adjusted total income before the last installment is due, that is his adjusted total income for the previous year is less than the income in respect of which he is required to make the deposit. A taxpayer who fails to pay the annuity deposit by the due date is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dom under Art. 14 of equality before the law. 7. In our view there is no substance in any of the contentions. The Parliament has by Art. 246 read with Entry 82 in List I of the Seventh Schedule power to levy taxes on income other than agricultural income . The Indian Income-tax Act, 1961, and the provisions of the annual Finance Acts of the Parliament which authorise levy of income-tax at the rates prescribed thereby are undoubtedly enacted in exercise of the powers conferred by entry 82 in List I. Granting that the scheme of Ch. XXII-A is for borrowing money by the Central Government from the taxpayers in the higher income group at the rates prescribes, which is repayable in installments, power to legislate in that behalf is still within the competence of the Parliament by virtue of Entry 97 of List I of the Seventh Schedule. Counsel for the petitioner does not contend that power to collect annuity deposit is outside the Parliament's competence : he merely urges that the Parliament could not incorporate the provisions relatable to the exercise of the power of borrowings exercisable under Entry 97 in a legislation which was exclusively enacted in exercise of the powers unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... annuity deposits and has conferred upon the Income-tax Officer power to assess and collect annuity deposits, and exercise of that power may not be caviled at even by a purist in draftsmanship. 8. The argument that Ch. XXII-A is a colourable exercise of legislative power has no substance. As pointed out by this Court in K. C. Gajapati Narayan Deo and others v. The State of Orissa [1954]1SCR1 . . . the doctrine of colourable legislation does not involve any question of bona fides or mala fides on the part of the legislative. . . . Whether a statute is constitutional or not is .. .. always a question of power. . . . If the Constitution of a State distributes the legislative powers amongst different bodies, which have to act within their respective spheres marked out by specific legislative entries, or if there are limitations on the legislative authority in the shape of fundamental rights, questions do arise as to whether the legislature in a particular case has or has not, in respect of the subject-matter of the statute or in the method of enacting it, transgressed the limits of its constitutional powers. Such transgression may be patent, manifest or direct, but it may also b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessing tax, but it is not open to challenge merely on the ground that the tax is harsh or excessive. 11. The argument that the scheme of annuity deposit makes an unlawful discrimination between taxpayers is also devoid of force. Article 14 of the Constitution guarantees equality before the law, and equal protection of the laws. But thereby the power of the Legislature to make a reasonable classification of persons, objects or transactions for attaining certain objectives is not excluded. If a classification is based on some real and substantial distinction, bearing a just and reasonable relation to the objects sought to be achieved, it is valid. It is true that an assessee whose total income does not exceed ₹ 15,000/- is not liable to pay any annuity deposit, and the demand for annuity deposit, unlike income-tax is based on a progressively increasing percentage of the adjusted total income, and for a person having a total income exceeding ₹ 70,000/- the rate of deposit is as high as 12 1/2 per cent. But neither the exemption of taxpayers having an income below ₹ 15,000/- nor the progressively steeper rates of demand can be regarded as unreasonable. What is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax. Every taxpayer who is otherwise required to make a deposit is permitted to declare his option under s. 280-X(1) and once he does so, he is not liable to make the annuity deposit. Such a taxpayer will be obliged to pay income-tax on his total income. Only a section out of this class of taxpayers are exempted from liability to pay additional income-tax. It is difficult to regard the provision exempting this class of persons from liability to pay additional tax as depriving other taxpayers below the age of seventy who have exercised the option under s. 280-X(1) of the guarantee of equal protection of the laws. The classification is prima facie reasonable, and the petitioner has placed no materials before us to prove that it is not genuine or has no rational nexus to the object sought to be achieved by the Parliament. 13. The petition fails and is dismissed with costs. 14. Hidayatullah, J . I agree that this petition should be dismissed with costs. I agree generally with the reasons given by my brother Shah, but I wish to say that I do not rest my decision on entry No. 97 of List I of the Seventh Schedule. It was argued that entry No. 97 of List I must in any event cover t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he annuity deposit is in lieu of some tax and the machinery sections also take the aid of the machinery of the Indian Income-tax Act. As the enforcement of the provisions is by the agency of the Income-tax Department - and they are intimately connected with Income-tax - the provisions are very appropriately included in the Income-tax Act. No doubt the provisions for the management of the annuity deposits deal with matters slightly out of place in pure taxing measure but our Constitution has not created a water-tight compartment as is to be found in the Commonwealth of Australia Act. Our Income-tax Act can reasonably contain provisions on incidental matters and the management of annuity deposit under the scheme is such a matter. 16. It is argued that this is a case of borrowing which is defined in Art. 366(4) to include the raising of money by the grant of annuities, and loan is also required to be construed accordingly. It is submitted that if money was to be raised by the grant of annuities the action should have been by an Act giving effect to Art. 292. Article. 292 reads : 292. Borrowing by the Government of India. The executive power of the Union extends to borrow ..... X X X X Extracts X X X X X X X X Extracts X X X X
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