ADINARAYANA SETTY K V Vs. INCOME TAX OFFICER

JUDGEMENT

(1.) IN this petition under article 226 of the Constitution, Sri K. Srinivasan, the learned counsel for the assessee-petitioner, has advanced three contentions. They ar : (1) As there is conflict between section 3 of the INdian INcome-tax Act, 1922 (to be referred to as "the Act" hereinafter) and section 23(5)(a) of the Act, the former being the charging section, should prevail over the latter, which according to him, is a machinery section; (2) section 23(5)(a) is ultra vires as the same was beyond the legislative competence of Parliament when it was enacted in 1956; and (3) section 14(2)(aa) is void as it offends article 14 of the Constitution.

(2.) TO appreciate the contentions advanced, it is necessary to mention the material facts. The assessment which is impugned in the present proceedings relate to the assessment year 1960-61, the previous year ending on March 31, 1960. The petitioner was a partner of a registered firm. The income of the registered firm was assessed to tax and the petitioner's share in that income was also assessed to tax. The contention of the petitioner is that the levy made on him on the basis of his share of income in the firm is an invalid levy. It is conceded by Sri Srinivasan, that if section 23(5)(a) of the Act is a valid provision, then the imposition made cannot be held to be invalid. It is for that reason that he was hard put to contend that section 23(5)(a) is an invalid provision. We shall now proceed to examine the various grounds urged by him in support of his contention that section 23(5)(a) is invalid.

(3.) SECTION 23(5)(a) clearly enunciates that in respect of the income earned by a registered firm, not only the registered firm is assessable to tax, but also its partner, to the extent of his share in the income of that firm. The controversy whether section 23 as a whole is a machinery section or not appears to me to be an academic one. So long as the intention of the legislature is clearly gatherable from the provision in question, the setting in which the provision is placed is immaterial. Quite clearly - and on this point there is no controversy - section 23(5)(a) requires the assessing authorities not only to assess the registered firm in respect of its income, but also to assess its partners to the extent of his share in the firm's income, which means section 23(5)(a) is a charging section. It must be remembered that section 3 is a general provision dealing with assessees as a class, whereas section 23(5)(a) is a special provision providing for the assessment of registered firms as well as their partners. If there is any conflict, about which I do not propose to pronounce, between these two provisions, the special provision must prevail as against the general provision. This much appears to me to be absolutely clear. Neither the Act nor the Constitution prohibits double taxatio : See Cantonment Board, Poona v. Western India Theatres Ltd. The fact that both the registered firm as well as its partners received their income from the same source is not a relevant consideration for the purpose of section 23(5)(a). For the purpose of the Act, the registered firm is an entity by itself. Its income is liable to be taxed in its hand. Similarly, the share of profits realised by the partner of the registered firm has to be deemed as income of the partner in view of section 23(5)(a). Therefore, the same is again liable to tax. For the purposes of the Act, a deemed income can also be made the subject-matter of ta : see Commissioner of Income-tax v. Bhogilal Laherchand. Whether both the registered firm as well as its partners should be subjected to tax in respect of the same earning is a matter of legislative policy. If the provisions of a taxing statute are clear on a given point and if those provisions are validly enacted, then this court cannot sit in judgment over the soundness of the policy enunciated in those provisions. If there is any conflict between section 3 and section 23(5)(a), in my opinion, the latter provision should prevail for the reasons already mentioned. From this it follows that section 23(5)(a) cannot be held to be an invalid provision as being in conflict with section 3.