TMI Blog1974 (4) TMI 32X X X X Extracts X X X X X X X X Extracts X X X X ..... essment on the ground that section 2(hh) and (kk) and clauses (2) and (3) of Part I to the Schedule of the Kerala Agricultural Income-tax (Amendment) Act, 1970, are violative of article 14 of the Constitution. It will facilitate appreciation of the facts and the constitutional question in this case if the taxing provisions are noticed at this stage. The Agricultural Income-tax Act was passed in 1950. In the beginning, the Act was known as the Travancore-Cochin, Agricultural Income-tax Act. Later, as a result of the State's reorganisation, the Act was renamed simply as Agricultural Income-tax Act, 1950. According to the preamble the Act was made to provide for levy of tax on agricultural income in the State of Kerala. Till the Amending Act of 1970, all companies were liable to pay tax according to their total income. The tax is chargeable under section 3. Sub-section (1) thereof provided that the agricultural income at the rate or rates specified in the Schedule to the Act shall be charged on the total agricultural income of the previous year of every person. It was a graduated rate. Section 2(h) of the Amending Act of 1970 has redefined a company as a domestic company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on is that this discrimination between a domestic company and a foreign company is violative of article 14 of the Constitution. The classification for the purposes of taxation is not based on any intelligible differentia and the differentia, if any, has no rational relation to the purpose sought to be achieved by the taxing statute. Reliance is placed on Wheeling Steel Corporation v. C. Emory Glander where the U.S.A. Supreme Court has said : After a State has chosen to domesticate foreign corporations they are entitled to equal protection with the State's own corporate progeny, at least to the extent that their property is entitled to an equally favourable ad valorem tax basis. It may be pointed out that the Indian Income-tax Act, 1922, also makes a distinction between a domestic company and a foreign company. But that circumstance per se would not help the State of Kerala. The impugned legislation, in order to get the green light from article 14, should satisfy the classification test evolved by this court in a catena of cases. According to that test (1) the classification should be based on an intelligible differentia, and (2) the differentia should bear a rational r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mate guardians of the liberties and welfare of the people in quite as great a degree as the courts'. (See State of West Bengal v. Anwar Ali Sarkar. [1952] S. C. R. 284, 303 (S. C.).) The contention of the petitioners would have to be examined in the light of the foregoing considerations. The only relevant statement of fact in the petitions is that the petitioners are joint stock companies with limited liability and have been incorporated in the United Kingdom. One of them has its registered office in Scotland, and the other in England. Both of them carry on business also in this country, and particularly in the State of Kerala. In Kerala their main business is one of cultivation and marketing of plantation crops such as tea. It is also alleged that the impugned statute seeks to treat as unequal companies which are equally circumstanced. No other facts are disclosed in the petitions. No comparison is made between the domestic companies and foreign companies carrying on agriculture in Kerala in regard to their financial standing, magnitude of their business inside and outside the country, the fertility of the land owned by them and the quality of the plantation crops raise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of foreign companies. On these considerations it cannot be said that the classification of companies into domestic and foreign companies has no rational relation to the purpose of the impugned provisions. Our view receives strong support from the court's opinion in D. P Joshi v. State of Madhya Bharat [1955] 1 S. C. R. 1215, 1228 (S. C.). . That case related to the question of admission of students in a medical college in the State of Madhya Bharat. According to a direction of the State of Madhya Bharat, all students admitted to the college were required to pay a prescribed fee. But students who were not bona fide residents of Madhya Bharat were also required to pay capitation fee of ₹ 1,500. A student who was not a bona fide resident of Madhya Bharat challenged the capitation fee as being violative of article 14. The majority of the court overruled the contention. Speaking for the court, Venkatarama Ayyar J. said : The object of the classification underlying the impugned rule was clearly to help to some extent students who are residents of Madhya Bharat in the prosecution of their studies, and it cannot be disputed that it is quite a legitimate and laudable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ller of Nurenburg v. Superntendent Presidency Jail, Calcutta [1955] 1 S. C. R. 1284, 1295 (S. C.).this court upheld the classification of foreigners into those who are British subjects and those who are not British subjects for the purpose of preventive detention. The court said there : ....... it is easily understandable that reasons of State may make it desirable to classify foreigners into different groups. K. T. Moopil Nair v. State of Kerala and State of Kerala v. Haji K. Kutty Naha deal with taxing statutes. In the first case, the State of Kerala had imposed a uniform tax levy on land. The taxing provisions were struck down as violative of article 14 because according to the court there was no classification of persons for the purpose of taxation. In the other case, a uniform building tax was imposed on buildings according to their floor area. The taxing provisions were struck down as being discriminatory for total lack of any classification of persons or buildings. The impugned Act of 1970 does not suffer from this vice. So these cases also do not help the petitioners. We are of opinion that the impugned provisions of the Amending Act of 1970 are not violative of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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