LexKHANDIGE SHAM BHAT AND OTHERS versus THE AGRICULTURAL INCOME TAX OFFICER
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.... 809 3 s.c.R. SUPREME COURT REPORTS "'1 KHANDIGE SHAM BHAT AND OTHERS v. THE AGRICULTURAL INCOME TAX OFFICER (B. P. SINHA, 0. J., K. SuBBA RAo, J; C. SHAH, N. RAJAGOPALA AYYANGAR and J. R. MUDHOLKAR, JJ.) Agricultural Income ta.t: - Temporary amendment of enactment consequent on reorganisation of States - Territorial classification in aefining previous year. If discriminatory- M oae of ascertaining rate - lf reasonable-Kerala Agricultu- ral Act, 1950 (Kerala 22 of 1950 ), as amenaed by Kerala Act 11 of 1959, s.2A - Constitution of Jnaia, Art 14. This petition challenged the constitutional validity of s. 2A of the Kerala Agricultural Income Tax Act, 1950 as amended by Kerala Act 11 of 1959, under which the peti- tion er was assessed to agricultural income tax, on the ground tint the section infringed Art. 14 of the Constitution. Under the States Reoganisation Act, 1956, Kasargod Taluk where the petitioner had his agricultural land and which was in the State of Madras, became a part of the Malabar District of the State of Kerala when that State came into being on November I, 1956. By the Travancore Cochin Agricultural Income Tax (Amendment) Act, 1957, the State Legisluture extended the earlier Act of 1950 to the erstwhile Madras areas. But the Kerala High Court held that agricu~tural income in such areas could not be assessed to tax for the assessment year 1957-1958 whereas similar income in other areas of the State remained liable to tax, the income accured between November I, 1.1956, and March 31, 1957, i.e. after the Madras areas became part of the Kerala State, could not also be taxed. In order to remedy this anomalous position brought about by the reorganisation of States the Kerala State Legislature inserted the impugned section in the ori- ginal Act, which provided as follows,- "Notwithstanding anything contained in cl. (G) ~f Section 2, "previous years'' for the assessment for the finacial year commencing from the Ist day of April 1958 and so far as such assessment relates to the agricultural income derived from lands situated in the Malabar District referred to in sub-section (2) of section 5 of the States Reorganization Act, l ~56(Central Act 37 of 1957), shall be the whole p~riod I " : '1 196!1 -- .August 99. 1962. Khatu#i1a Sham .Btir.d .. Aqricultu,.al lncomt·lax O Iicl1 • 810 SUPREME COORT REPORTS (1963] commencing on the !st day of November, 1956 and ending on the 31st day of March, 1958, or, if the accounts of the assessee have been made up to a date within the fincial year ending on the 31st day of March 1958, then at the option of the assessee, the period commencing on the !st day of Novem- ber, 1956, and ending on the aforeiaid date to which, the accounts have been so made up: provided that - - (i) notwithstanding anything continued in section 3 and 56, the agricultural income tax and super tax chargeable on the total agricultural income of the previous year as reckoned in this section shall be at the rates applicable to the 'average annual income-' according to the Schedule; such 'average annual income' shall be an amount bearing to the aforesaid total agricultural income the same proportion as the period of twelve months bears to the period of the previous year as defined in this section; and (ii) the limit of exemption from chargeablity to tax shall be determined with reference to the average annual income." It was urged on behalf of the petitioners that classifica- tion of the State into two parts i.e. Madras area aed Travan- core arf'a made by the impugned provision had no rational relation to the object of the Act and was discriminatory and that the basis adopted for ascertaining the rate of tax was arbitrary and unreasonable. Htlrl, that the contentions must fail. In order to judge whet her a law was discriminatory what had primarily to be looked into was not its phraseology but its real effect. If there was equality and uniformity within each gronp, the law could not be discriminatory, though due to fortuitous circumstances in a pecular situation some included in a class might get some advantage over others, so long as they were not sought out for special treatment. Although taxation laws could be no ~xception to this 1ule, the courts would, in view of the inherent com- plexity of fiscal adjustment of diverse elements, permit a larger discretion to the Legislature-in the matter of classifi- cation s
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