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AI Drafter - (New and Powerful) ✕ Generate professional replies, appeals, opinions to Show Cause Notices, assessment orders, audit objections, and other legal communications using TaxTMI's AI Drafter.
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Issues: Whether section 4(2) of the Agricultural Income-tax Act, 1950, which deems agricultural income derived from land in the possession of a mortgagee to be the mortgagor's income and makes the mortgagor liable to tax, is constitutionally valid under Article 14 of the Constitution of India.
Analysis: Agricultural income derived or received by a possessory mortgagee is, in law, his income and not that of the mortgagor; the impugned provision therefore creates a deeming fiction that fastens tax liability on a person who neither derives nor controls the income. The scheme places mortgagors under possessory mortgages in a distinct class without any rational basis, while also creating serious practical difficulty in return filing and assessment because the mortgagor may not know the produce obtained by the mortgagee. The provision thus operates in a discriminatory manner and lacks a lawful and reasonable objective.
Conclusion: Section 4(2) of the Agricultural Income-tax Act, 1950 is void as offending Article 14 of the Constitution of India and is unconstitutional.
Ratio Decidendi: A taxing provision that deems another person's income to be the assessee's income, without a rational basis for the classification and without a workable assessment machinery, is discriminatory and violates Article 14.
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