JOSEPH K J Vs. INCOME TAX OFFICER

JUDGEMENT

(1.) THESE writ petitions attack the constitutional validity of Section 2(6), 2(7)(e) and Part IV of the 1st Schedule of the Finance Act, 1973 ; and also Sections 2(2), 2(7)(b)(ii), 2(8)(e) and Part IV of the Finance Act, 1974. Section 2(6) and 2(7)(e) of the Finance Act, 1973, provides as follows :

(2.) MUTATIS Mutandis, the impugned provisions of the Finance Act of 1 974, practically repeat the same provisions. In brief, these sections of the two Acts allow the agricultural income of an assessee to be combined with his non-agricultural income for the limited purpose provided by the sections. That is to say, the agricultural income may be aggregated with the non-agricultural income for the limited purpose of evolving a higher slab or rate of tax. Roughly, and broadly put, that is the scheme of the provisions. This has been objected to. The provisions of the Finance Act providing for this mode of aggregation of agricultural and non-agricultural incomes came into force from the assessment year 1974-75. The provision thus made for aggregation of the two types of income is carried out also into the provisions of the I.T. Act dealing with the payment of advance tax. Section 207 of the I.T. Act provides for liability to pay advance tax, and Sections 208 to 219 regulate the mode and manner of payment of advance tax. Section 2, Clause (6) of the Finance Act, 1973, provides that the rate of advance tax under Section 208 of the I.T. Act is to be computed with reference to the aggregated income. Part IV of the Schedule provides for computation of the net agricultural income. These provisions should highlight the scope of the attack mounted by the petitioners.

(3.) THE "total income" referred to in Section 5 is computed in the manner laid down in the Act. With respect to these provisions the argument was that "agricultural income" is not now included in the total income :--vide Section 10(1) of the I.T. Act; and, therefore, when, under Section 4 the charge can be levied only on the total income, agricultural income cannot enter into the reckoning at all. This was emphasised with reference to the definition of "net agricultural income" in Section 2(7), Sub-section (e) of the Finance Act, 1973, and of Part IV of Schedule! of the Act, and, in particular, of Rule 11 thereof. THEse provisions, it was claimed, were quite inadequate to achieve the purpose of merging the agricultural income with the total income under the I.T. Act, for the purpose of subjecting the latter to tax; or to enter into the reckoning even for computation of the rate of tax. Reliance was placed on the decision of the 'Bombay High Court in CIT v. N.M. Raiji [1949] 17 ITR 180. THEre, the assessee was a partner in the firm of S.B. Billimoria & Co. from 1928. THE partnership was dissolved by a consent decree of the High Court of Bombay from the 9th October, 1942, and the assessee ceased to be a partner from that date. For the assessment year 1943-44, the assessee showed a personal income of, Rs. 6,535. THE share of the assessee in the firm from 1st January, 1942, to 9th October, 1942, was determined as Rs. 41,000. By reason of Section 25(4) of the Indian I.T. Act, 1922, the firm of Billimoria & Co. was not charged to any tax in respect of the period from 1st January, 1942 to 9th October, 1942. It was conceded that no tax was payable on the sum of Rs. 41,000 received by the assessee ; but the department contended that Rs. 41,000 must be included in the total income of the assessee for 1943-44, in order to ascertain the rate at which income-tax is payable by him. Proceeding to deal with that question, Chagla C.J., who spoke for the court, observed that the total income is to be computed and determined upon the various provisions of the Act as a whole. Observed the learned Chief Justice (p. 185) :