2001 (3) TMI 89 - SC - Income Tax

State Officers lack authority to recompute agricultural income assessed by Central Officers under Assam law

Assam Company Ltd And Another Versus State Of Assam And Others

The Supreme Court held that State Officers do not have the authority to recompute agricultural income already assessed by Central Officers under the Assam ... Legislative Powers, State Legislature, Agricultural Income Tax, Interpretation OF STATUTES, Legislative Powers Issues Involved:1. Authority of State Officers to recompute agricultural income already assessed by Central Officers.2. Legislative competence of the State to enact laws allowing recomputation of agricultural income.3. Validity of Section 49 of the Assam Agricultural Income-tax Act and Rule 5 of the Assam Agricultural Income-tax Rules.4. Interpretation of constitutional provisions regarding agricultural income and legislative powers.Detailed Analysis:1. Authority of State Officers to recompute agricultural income already assessed by Central Officers:The appellants argued that the Agricultural Income-tax Officers of the State are bound by the computation of agricultural income made by the Income-tax Officer under the Central Act. They contended that the Assam Agricultural Income-tax Act does not specifically authorize State Officers to recompute agricultural income already determined by Central Officers. The High Court upheld the authority of State Officers to recompute agricultural income under certain circumstances, but the Supreme Court disagreed, stating that Section 49 of the State Act does not empower State Officers to recompute agricultural income already assessed by Central Officers. The Court emphasized that the State Act intended the agricultural income for the purpose of its levy to be that which is computed under the Central Act.2. Legislative competence of the State to enact laws allowing recomputation of agricultural income:The State contended that as agricultural income is a State subject under entry 46 of List II of the Seventh Schedule to the Constitution, the State has the legislative competence to enact laws empowering its Officers to recompute agricultural income. The High Court agreed with this view, but the Supreme Court found that the State Act did not specifically authorize such recomputation and that such a power cannot be read into Section 49 of the State Act.3. Validity of Section 49 of the Assam Agricultural Income-tax Act and Rule 5 of the Assam Agricultural Income-tax Rules:The Supreme Court examined Section 49 of the State Act and Rule 5 of the State Rules. It found that Section 49 does not empower State Officers to recompute agricultural income already assessed by Central Officers. The Court also found that Rule 5 of the State Rules, which allowed State Officers to refuse the computation made by Central Officers, was beyond the rule-making power under the Act and ultra vires the State Act. The Court held that the rule-making power must be within the limits of the authority conferred by the Act and must not enlarge the scope of the Act.4. Interpretation of constitutional provisions regarding agricultural income and legislative powers:The Supreme Court noted that Article 366(1) of the Constitution defines 'agricultural income' for the purpose of enactments relating to the Indian Income-tax Act. The Court held that the State Act intended to adopt the computation of agricultural income made under the Central Act. The Court emphasized that the interpretation of a statute should not lead to provisions becoming ultra vires and should avoid conflicts between the provisions of the same Act. The Court also noted that if the State authorities believe that the Central assessing authority has not made a proper assessment, they can invoke the jurisdiction of appellate or revisional authorities under the Central Act.Conclusion:The Supreme Court allowed the appeals and petitions, declaring the proviso to Rule 5 of the Assam Agricultural Income-tax Rules, 1939, to the extent it permits recomputation of agricultural income by State Officers, as ultra vires. The Court set aside the impugned orders of assessment and directed the Agricultural Income-tax Officers in Assam to reassess the agricultural income based on the computation made by Central Officers, subject to the right to seek relief under Chapter XX(E) of the Central Act. The appeals and petitions were allowed with no costs.