LexABDULLABHAI M. BHAGAT, ETC. versus THE INCOME-TAX OFFICER, SPECIAL CIRCLE, MADRAS
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March zz. 512 SUPREME COURT REPORTS ABDULLABHAI M. BHAGAT, ETC. v. [1962] THE INCOME-TAX OEFICER, SPECIAL CIRCLE, MADRAS (S. K. DAS, J. L. KAPUR, M. HIDAYATULLAH, J. c. SHAH and T. L. VENKATARAMA AIYAR, JJ.) Income Tax-Surcharge-"Federal purposes" and "for the purposes of the Central Government", Meaning of-Finance Act, 1942 (XII of 1942), s. 8(1)-Government of India Act, 1935 (25 and 26 Geo. V. Ch. 42), ss. IOO, 124(1), I38(1) Proviso (b), 313, Seventh Schedule item 54, List I, General Clauses Act, I897 (IO of r897), ss. 3(8ab) (a), r8a. The petitioners as partners of a registered firm were assess- ed to income-tax for the relevant assessment years. Thereafter they made a disclosure of their income nnder a "Voluntary Dis- closure Scheme" regarding profits which had escaped assess- ment, and on reassessment of the disclosed income income-tax, super-tax and surcharge were levied. The levy of surcharge but not income-tax and super-tax was challenged as unauth'Orised. Held, that the power to legislate for levy of tax on income was conferred upon the Federal Legislature by s. 100 sub-ss. (1) and (2) of the Government of India Act, 1935, and item 54 of List I of the Seventh Schedule and the Federal Legislature was competent under that entry to legislate in regard to the levy of a surcharge on tax; s. 138(1) proviso (b) did not restrict the amplitude of that legislative power. The term "Federal pur- poses" in s. 138 is not defined in the Government of India Act nor in the General Clauses Act; but there is sufficient indication in the section itself that surcharges were to form part of the Revenues of the Federation and such Revenues were to be expended for the purposes therein mentioned. The concept of the words "purposes of the Central Government" under the General Clauses Act was not different from what was intended by the use of the words "Federal purposes" ins. 138(1) proviso (b) of the Government of India Act. ORIGINAL JURISDICTION: Petitions Nos. 140 and 177 to 191 of 1959. Petitions under Article 32 of the Constitution of India for enforcement of Fundamental Rights. M. R. M. Abdul Karim and K. R. Choudhury, for petitioners. K. N. Rajagopala Sastri and D. Gupta, for respon- dents. • • • ' ' • 1 S.C.R. SUPREME COURT REPORTS 513 1961. March 22. The Judgment of the Court was delivered by KAPUR, J.-These are sixteen petitions under Art. 32 of the Constitution challenging the legality of the imposition of surcharge imposed on the income of the assessees under the Finance Acts of 1942, 1943, 1944 and 1945. The assessment relates to four assessment years 1942-43, 1943-44, 1944-45 and 1945-46. The petitioners are four partners of a firm named Mohammedaly Sarafaly & Co., Madras, which was carrying on business in hardware, stocks, shares, etc. For the assessment years 1942-43 to 1945-46 this firm was treated as a registered firm under the Indian Income-tax Act and therefore the partners were asses- sed on their respective shares of the profits from the business of the firm. All assessments were completed before 1949 and total income for the purpose of as- sessment for those four years was about Rs. 29,00,000. In 1955 the petitioners under a 'Voluntary Disclosure Scheme' with regard to profits which had escaped assessment made a disclosure of their income and proceedings were taken under s. 34 of the Income-tax Act. In the month of April, 1959, there was a re- assessment on all the four partners and the total in- come for the four assessment years thus came to about Rs. 35 lakhs which included Rs. 29 lakhs already assessed. On that income, income-tax, super-tax, and surcharge were levied. The surcharge, according to the petition was Rs. 3,82,791. It is this surcharge which is impugned as being without the authority of law inasmuch as the then Federal Legislature, it is submitted, was not competent to levy the surcharge. Provision for sn rcharge was made under s. 8( 1) of the Finance Act, 1942 (Act XII of 1942). This sec- tion may now be quoted:- Section 8(1) "Subject to the provisions of sub-sec- tions (2) and (3),- (a) income-tax for the year beginning on the 1st day of April, 1942, shall be charged at the rates specified in Part I of Schedule II increased in the cases to which sub-paragraph (b) of paragraph A 65 x96x Abdullabhai 1'.1. Bhagat v. The Income-tax Officer, Special Circle, Madras Abdutlabhai M. Bhagat v. The Incotne-tax
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