1986 (6) TMI 31 - HC - Income Tax

Court upholds constitutionality of Compulsory Deposit Scheme Act, finding it valid under legal precedents

D. Kumara Siddanna Versus First Income-Tax Officer And Another

D. Kumara Siddanna Versus First Income-Tax Officer And Another - [1986] 161 ITR 642, 27 TAXMANN 631 Issues:Challenge to the constitutional validity of the Compulsory Deposit Scheme (CDS) Act as unconstitutional, alleging violation of articles 14 and 19 of the Constitution.Analysis:The petitioner, a coffee planter, challenged the CDS Act as unconstitutional, contending that he was not liable to pay the compulsory deposit of Rs. 50,000 under the Act. The Act required certain income-tax payers with income exceeding Rs. 15,000 to make compulsory deposits for specified assessment years. The petitioner argued that the Act was expropriatory, beyond Parliament's competence, and violated constitutional provisions.The Court examined the provisions of the CDS Act and compared them to a similar case, Hari Krishna Bhargav v. Union of India, where the Supreme Court upheld the legality of compulsory deposits from taxpayers in higher income groups. The Court noted that Parliament had the authority to legislate for collecting deposits from taxpayers, and the Act was within its competence.Regarding the petitioner's argument that the Act subjected a specific class of taxpayers to hostile discrimination, the Court applied the principles laid down by the Supreme Court in R. K. Garg v. Union of India. The Court emphasized that laws related to economic activities should be viewed with greater latitude and that there was a presumption of constitutionality. The classification of taxpayers with income above Rs. 15,000 for compulsory deposits was deemed reasonable and in the interest of national economic development.The Court held that the CDS Act was not legislatively incompetent and did not violate article 14 of the Constitution. The decision was supported by the rationale that the Act aimed to mobilize private savings for public purposes and curb inflationary trends. The classification of taxpayers for compulsory deposits was found to be rational, intelligible, and in line with the Act's objectives.The Court dismissed the writ petition, ruling in favor of the constitutionality of the CDS Act. The parties were directed to bear their own costs in the case.In conclusion, the Court upheld the legality of the CDS Act, rejecting the petitioner's claims of unconstitutionality and violation of fundamental rights. The judgment emphasized the Act's objectives of national economic development and the rationality of classifying taxpayers for compulsory deposits based on income levels.