LexCOMMISSIONER OF INCOME TAX, KERALA versus K. SRINIVASAN
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A B c D £ G II COMMISSIONER OF INCOME TAX, KERALA v. K. SRINIVASAN November 5, 1971 3 09· [K. S. HEGDE, A. N. GROVER AND H. R. KHANNA, JJ.] Finance Act, 1964, s, 2-lncome-tax if includes 'surchar11e' According to s. 2(2) of the Finance Act, 1964, whero the total income of an assessee includes anv income chargeable, under the head 'salaries~ income-tax and super-tax payable by the assessee on the salary portion shall be the proportionate amount payable according to the rates pro- vided in the Finance Act, 1963. Under s. 2 of the Finance Act, 1963, incometax was to be char.ged at the rates specified in Part I of the First Schedule and super-tax at the rates specified in Part II of that Sc.hedule. The income-tax was to be increased, in certain cases mentioned, bv a. surcharge and a~ditional surcharge for the purpose of the Union and a special surchargi:, The assessee.:S main source of income was salary. For the previous year 1963-64 the Income-tax Officer levied surcharge anC. additional sur- charge in accordance with the rates prescribed by ti " Finance Act, 1963. The assessee contended that under s. 2(2) of the Finance Act. 1964 there was no mention of surCharge and hence only income-tax.. v..·hich ·was to· be worked out at the rates applicable under the Finance Act, 1963, was payable. The De!"'rtment and the Tribunal held that 'income-tax' included 'surcharge. On reference, the High Court held that the words 'income- tax' in s. 2(2) of the Finance Act, 1964, would not include 'surcharge' and 'additional surcharge' and he1d in favour of the assessee. Allowing the appeal to this Court, HELD : (I) Surcharge was levied for the first timo by the Indian Finance Act, 1940. It was omitted in some later Finan~e Act'\ but was re- introcluced in the Finance Act of 1951 and continued thereafter. The phraseology emQloyed in the various Finance Acts sh0wcd th•t the, word 'surcharge' has been used to either increase the rates vf in..:vme-tax and super-tax or to increase those taxes. Under s. 2 of t'ie Finance Act, 1971, the provisions of s. 2 and of the First Schedule to the Act, J 97C. shall apply in n~lation to income-tax for the asS'.!Ssment year commencing on the first day of April 1971. Section 2 of the Finance, Act 1971, speaks only of inCorne-tax and not of any surcharge and, it is only in the modi- ftcations made in the Schedule to the Finance Act, 1970, that there is pro\"ision for a surcharge. Thus, the legislative histor•J of the Finance Acts, as also the practice, indicate6 that the term 'incon~e-tax' as employed in s. 2 of the Financo Act, 1964, includes 'surcharge' as also 'the special and the •dditional surch3rge' whenever provided. [3120-H; 313A-H; 314 A-BJ . (2) One of the meanings of surcharge is to charge in addition or to subject to an additional or extra charge. If that meaning is applied to s. 2 of the Finance Act, 1963, it would lead to the result that income-tax and super-tax were to be ct"iarged in four different ways or at 4 different rates which mav be described as. (a) the basio charge or rate. (b) sur- charge. (c) special surcharge, and (d) aclditional surcharge calculated in the manner provided in the Schedule. Rest in that way the additional charges formed a part of the income,tax ancl super-tax. According to Art. 271 notwithstanding anything in Arts. 269 anu 270 Parliament may at any time increase any of the duties or taxes referred to in those 310 SUPREME COURT REPORTS (1972] 2 S.C.R. Artidos by a surcharge for the purpose of the Union and the whole pro- ceeds of any such surcharge shall form part of the Consolidated Fund of India. The word 'surcharge.' has been used in this Article only for the purpose of separating it from the basic charge of tax or duty, for the pur- pose of d·istributing the prooeeds of the same between the Union and the :States. [,315 A-El (3) Obiter. The legislative power of Parliament to levy taxes and duties is contained in Arts. 245 and 246(1), read with the relevant entries in List I of the Srventh Sohedule. Entry 82 in List I relates to taxes on income other than agricUltural in~ome. Income-tax, supe1-tax and sur- charge would all fall under !his entry. It is in exeroise of this legislative power that Parliament enact} the provilions relating to them in th~ Finance Act of each year. Sections 4 and 95 of the Income.tax Act, 1961, only provide that where any Central Act enacts that in
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