SRINIVASAN K Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THIS is a reference made by the Madras Bench of the Income-tax Appellate Tribunal under Section 256 (1) of the Income-tax Act, 1961 on the application of the assessee. The question referred is:

(2.) THIS question has arisen out of an assessment for the year 1964-65. The assessee is an individual; and his total Income was assessed at Rs. 45,173. THIS was made up of Rs. 42,635 under the head salary and Rs. 2,535/- under the head other sources. THIS total income was charged to income-tax, super-tax and surcharges at the rates provided in the Finance Act, 1964. Sub-section (2) of Section 2 of this Act provides that when the total income of an assessee not being a company includes any income chargeable under the head salaries, income-tax and super-tax payable by the assessee on the salary portion of the total income shall be the proportionate amount payable according to the rates provided in the Finance Act 1963. Under the Finance Act 1963, income-tax shall be increased by a surcharge, special surcharge and additional surcharge, while super-tax shall be increased by a surcharge and special surcharge in the manner provided in the said Act. But Sub-section (2) of Section 2 of the Finance Act, 1964 did not mention any of these surcharges. Therefore, the assessee contended that the salary portion of his total income was chargeable only to Income-tax and super-tax, and not to any of the surcharges. The Appellate Tribunal rejected this contention, holding that income-tax and super-tax include the surcharges, and that the assessee was liable also to pay the surcharges as provided in the Finance Act 1963, even though they were not specifically mentioned in Sub-section (2) of Section 2 of the Finance Act, 1964.

(3.) THERE is no dispute that the charges are also taxes on income. They are levied by an increase of the income-tax and super-tax. But what is significant in the above provision is that surcharge is treated in the Finance Act as a tax different from income-tax and super-tax; and it is levied by the Finance Act, while the income-tax and super-tax are levied by the Income-tax Act. This is also obvious from the First Schedule to the Finance Act 1963. Part I of this schedule deals with "Income-tax and surcharges on income-tax". Then under this heading, it gives the rates of income-tax and also the rates of the surcharges in the case of different classes of assessees. Similarly Part II of this schedule deals with "Super-tax and surcharges on super-tax". Under this heading are given the rates of super-tax and the rates of the surcharges on super-tax. The Finance Act, 1964 contains similar provisions in the matter of fixation of the rates of income-tax and super-tax as well as levy and fixation of the rates of the surcharges. We shall only read Sub-sections (1) and (2) of Section 2 of this Act.