LexMADURAI DISTT. CENTRAL COOPERATIVE BANK LTD. versus THE THIRD INCOME-TAX OFFICER, MADURAI
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- .. , t 13 5 A MADURAI DISTT. CENTRAL COOPERATIVE BANK LTD. B c D E F G H v. THE THIRD INCOME-TAX OFFICER, MADURAI July 28, 1975 [Y. V. CilANDRACHUD, R. S. SARKARIA AND A. C. GUPTA, JJ.] Constitution of India-Article 246(1)-7th Schedule List I Entry 82- lncome-tax Act 1961-Sec. 2(8), 4 & Sl(i)(a)-Finance Act 1963-Sec. 2(1) (a), 2(8), 3, Part I, First Schedule-Whether tax can exceed taxable inconie- Finan<'e Act-Nature and scope of-Whether can impose fresh charge-Harshness r.:j a taxing statute if a ground for _chalfenge-Busint.?ss inco1ne of a cooperative society doing banking-Whether additional surcharge a tax-Whether additional surcharge call be levied 011 inco1ne exenzpted from payment of tax. The appellant is a Cooperative Society engaged in the business of banking. According to section 81(i) (a) of the Jncome Tax Act, 1961, a Cooperative Society engaged in the business of banking is not liable to pay income tax on its business income. The Finance Act, 1963, however, by section 2(i) (a), 2(8), 3, paragraph A(ii) of Part I of the First Schedule and clause C of that port:on of Part I called surcharge on Income Tax provides for levy of additional surcharge tor the purposes of the Union calculated on the amount of the residual income at the rates mentioned therein. The tp'.al income of the appellant for the assessment year 1963-64 was Rs. 10,00,098. Out of this Rs. 9,48,335 was its business income. The tax amounting to Rs. 23.845 wa_s charged on Rs. 51,763. Applying the Finance Act of 1963, the residual incOme of the appellant was computed a-: Rs. 5,39,386 and a surcharge thereon was levied of Rs. 52,828. Thus, the total '~ax imposed on the c:tppellant came to Rs. 76,674. The assessn1ent order passed by the Income Tax Officer levying the tax as aforesaid \l.'as :hallenged by the appellant in the High Court by a Writ Petition. The main grievance of tl]_e appellant before the High Court ·was that whereas its taxable income was only Rs. 51,763, a tax of Rs. 76,674 was imposed on it. The relevant provisions of the Finance Act were challenged as invalid on the ground that(i) they imposed additional surcharge on income which was -exempt fron1 tax undt-r \he provisions of the Income Tax Act and that (ii) the additional surcharge \vas intended as additional levy on the income tax and had no indepen- dent existence apart from· it. The High Court rejected these contentions. On a·n nppeal by certificate, dismissing the appeal, HELD'. 1. It is indisputable that the_ appellant is not required to pay income tax on ~he banking income. In view of section 81. It is also not liable to pay surcharge on its business in-come in view of section 99(l)(v). [139Cj 2. Thei grievance of the appellant that the tax levied upon it exceeds its taxable income can afford no true guide to the construction of the relevant provisions of the Income Tax Act or the Finance Act. Harshness of a· taxing statute, apart from a possible challenge to it under Art. 13 of the Constitution cannot be an invalidating circumstance. But, the grievanoo on this score is n!iu:on:eiv·~d. It assumes what has to be examined that no part of the income rxcmpted from Income Tax and Suoer Tax under the Income Tax Act can be brought to tax by a Finance Act. [140G-H] , 3. The concession of the counsel for the appellant giving up challenge to the power cf the Parliament to impose a new charge by Finance Act was properly made. Under Art. 246(1) of the Constitution, Parliament has the cx;:lusive pov.'er to make Jaws with respect '~o any of the matters in List I of the Se;venth Schedule. Entry 82 in List I relates to tax on income other than agricultural income. The Income Tax Act, 1961 and the annual Finance Acts are enacted by the Parliament in exercise· of the powers conferred by Art. 246( 1) read with entry 82 of List I. Once the Parliament has the legislative com- petence to enact a law with respect to certain subject n1atter, the limits of 136 SUPREME COURT REPORTS [1976J 1 S.C.R. that con1petence cannot be judged further by the form or manner in which that power is exercised. Exigencies of the Financial year determine the scope and nature of the provisions of the Finance Act. The primary purpose of the Finance Aci is to describe the rates at whi:::h the Income Tax will be charged under the Income Tax Act but that does not mean that new and distinct tax cannot be ch~rged under Finance Act. Therefore
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