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TMI Blog1974 (4) TMI 32X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 or a foreign company". Section 2(hh) defines a domestic company and as "a company formed and registered under the Companies Act, 1956..... and includes a company formed and registered under any law relating to companies formerly in force in any part of India." It is necessary that the registered office of the company should be in India. Section 2(kk) defines a "foreign company" as "a foreign company within the meaning of section 5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 relation to the purpose of the legislation. The classification test is, however, not inflexible and doctrinaire. It gives due regard to the complex necessities and intricate problems of Government. Thus, as revenue is the first necessity of the State and as taxes are raised for various purposes and by an adjustment of diverse elements, the court grants to the State greater choice of classification in the field of taxation than in other spheres. According to Subba Rao J.: "..... the courts, in view of the inherent complexity of fiscal adjustment of diverse elements, permit a larger discretion to the legislature in the matter of classification, so long as it adheres to the fundamental principles underlying the said doctrine, Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 raised by them. It is not possible to hold on the meagre facts presented before us that domestic companies and foreign companies carrying on agriculture in the State of Kerala are equally circumstanced. There is no denying the fact that for various reasons a domestic company may be treated differently from a foreign company in the field of taxation. According to article 48 of the Constitution, it is a fundamental obligation of the State to make "endeavour to organise agriculture and animal husbandry on modern and scientific lines and to take steps for preservation and improving the breeds ..... of cows and calves and other much and draught cattle ". So it may be safely presumed that the State of Kerala should be striving to improve agriculture and ani ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent 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 objective for a State to encourage education within its borders. Education is a State subject, and one of the directive principles declared in Part IV of the Constitution is that the State should make effective provision for education within the limits its economy . . . . The State has to contribute for the upkeep and the running of its e ducational institutions. We are in this petition concerned with a medical college, and it is well-known that it requires considerable finance to maintain such an institution. If the State has to spend money on it, is it unreasonable that it should so order the educational system that the advantage of it would to some extent at least enure for the benefit of the State ? A concession given to the " residents of the Sta ..... X X X X Extracts X X X X X X X X Extracts X X X X
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