LexUNION OF INDIA & ORS. versus M/S. TATA TEA CO. LTD. & ANR.
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[2017] 12 S.C.R. 655 UNION OF INDIA & ORS. v. ' M/S. TATA TEA CO. LTD. & ANR. (Civil Appeal No. 9178 of2012) SEPTEMBER20, 2017 [A. K. SIKRI AND ASHOK BHUSHAN, JJ.] A B c Income Tax Act, 1961 - s.115-0 (as inserted by Finance Act, 1997) - Constitutional validity of - Challenge to, by tea companies carrying on the business of cultivating tea leaves in their tea gardens and processing it in their factory for marketing the same - Section 115-0 imposes additional tax on the dividend distributed by a Company - Plea of tea companies that income out of which dividend was distributed by them was agricultural income to the extent of 60%, tax on which could only be imposed by State Legislature (under List II, Entry 46) and the Parliament transgressed its legislative D power in enacting s.115-0 as Parliament has no legislative competence to tax agricultural ·income - Held: When dividend is declared to be distributed and paid to company s shareholder it is not impressed with character of source of its income, i.e. which on facts is agricultural income - F11rthe1; entries in the VIJ1h Schedule are not powers but fields of legislature - Words in the respective entries have to be given the widest scope of their meaning - Each general word should extend to ancillary or subsidiary matter which can be comprehended in it - As per Entry 82 of List I Union/ . Parliament has full power to legislate in the field of "taxes on income", excluding only tax on agricultural income - Income as defined in s.2(24) of the 1961 Act is an inclusive definition specifically including "dividend" - S.115-0 pertains to declaration, distribution or payment of dividend by domestic company - Thus, imposition of additional tax on dividend is covered under Entry 82, E F List I - The pith and substance of s.115-0 is clearly covered by 0 Entry 82, List I - Further, the provisions of s.115-0 cannot be said to be directly included in the .fteld of tax on agricultural income - Thus, any entrenchment, if at all, by the provisions of s.115-0 on the field covered by Entry 46, List II is only incidental and the legislation cannot be annulled on the ground of such incidental 655 H 656 A B SUPREME COURT REPORTS [2017) 12 S.C.R. trenching in the field of State Legislature - S.115-0 held to be within the legislative competence of Parliament - Constitution of India - Chapter I, Part XI, Art.246 - VJJlh Schedule- List I, Entry 82 and List II, Entry 46 - Finance Act, 1997 - Chapter XllD - Income tax Act, 1922 - Government of India Act, 1935 - Interpretation of Statutes - Principle of pith and substance. Interpretation of Statutes - Constitution of India - VII'" Schedule- List I, Entry 82 and List II, Entry 46 - Overlapping in the entries - Duty of Courts - Held: In the event of any overlapping is . found in two Entries of the Lists in the Seventh Schedule or two C legislations. it is the duty of the Court to find out its true intent and pwpose and to examine the particular legislation in its pith and substance - Doctrines/Principles - Doctrine of pith and substance. D E Words & Phrases - "Dividend" - Nature of - Discussed - Income Tax Act, 1961. Income Tax Rules, 1962 - r.8 -Income from the manufacture of tea - Tea companies carrying on the business of cultivating tea leaves in their tea gardens and processing it in their factory for marketing the same - 40% of tea companies' income is taxable as income derived from business - Writ petitions by tea companies before Calcutta High Court challenging the vires of s.115-0 of the 1961 Act - Writ petition dismissed by Single Judge of High Court - In appeal, Division Bench though upheld the constitutionality of s.115-0 but held that such additional tax as levied by s.115-0 on the profit distributed as dividend, will be payable only on 40% income which is the taxable income of the tea companies - Propriety of F Held: Provisions of s.115-0 are well within the competence of Parliament - To put any limitation in the said provision shall be altering the provision of s. 115-0 which is not warranted - Income Tax Act, 1961 - s.115-0. Disposing of the appeals, the Court G HELD: 1. The Finance Act, 1997 inserted a new Chapter H XIlD in the Income Tax Act 1961 with heading "special provisions relating to tax on distributed profits on domestic companies". Section 115-0, sub-sections (1), (2) and (3) in the 1961 Act was inserted by Finance Act, 1997. [Para 10][66
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