Retrospective agricultural income tax upheld where successor State had territorial nexus and prior inconsistent stand was rejected.

A successor State may validly impose retrospective agricultural income tax on income derived before 1 November 1956 from territories later integrated into it, because territorial nexus with the taxable source sustains legislative competence and the levy does not trench on another State's taxing power. The amendment to the definition of "State" in the Mysore Agricultural Income-tax Act, 1957 was therefore upheld as constitutionally valid. A further challenge that the income remained assessable under the repealed 1955 Act was rejected because the taxpayer had earlier taken the contrary position and, in any event, the prior determination negatived that contention. The assessment under the 1957 Act was not shown to be invalid.

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Issues: (i) Whether the amendment to the definition of the State in the Mysore Agricultural Income-tax Act, 1957, read with the charging provisions, could validly subject agricultural income derived before 1 November 1956 from lands later comprised in the new State of Mysore to tax. (ii) Whether the petitioner could contend that the agricultural income for the relevant period remained assessable under the Mysore Agricultural Income-tax Act, 1955, so as to invalidate the assessment proposed under the 1957 Act.

Issue (i): Whether the amendment to the definition of the State in the Mysore Agricultural Income-tax Act, 1957, read with the charging provisions, could validly subject agricultural income derived before 1 November 1956 from lands later comprised in the new State of Mysore to tax.

Analysis: The taxing power of a State is confined to its territory, but territorial nexus is sufficient where the taxable source is within the State. Agricultural income is taxable by reference to the source from which it is derived. The new State of Mysore was treated as the successor State in relation to the territories integrated into it, and the legislature was competent to enact retrospective or retroactive taxation for those territories. The amendment expanded the definition of the State so that lands within the territories specified in the States Reorganisation Act were covered, and the levy did not encroach upon the taxing power of any other State.

Conclusion: The provision was held constitutionally valid and the levy on income derived before 1 November 1956 was upheld against the petitioner.

Issue (ii): Whether the petitioner could contend that the agricultural income for the relevant period remained assessable under the Mysore Agricultural Income-tax Act, 1955, so as to invalidate the assessment proposed under the 1957 Act.

Analysis: The petitioner had earlier taken the position that the income for the relevant assessment year was taxable under the 1957 Act and had obtained a ruling on that basis. The petitioner was not permitted to adopt an inconsistent stand at a later stage and assert that the same income was still governed by the repealed 1955 Act. In any event, the prior determination negatived the contention that the 1955 Act controlled the assessment.

Conclusion: The contention based on continued operation of the 1955 Act was rejected and the assessment under the 1957 Act was not shown to be invalid.

Final Conclusion: The writ petition was dismissed because the challenged levy under the 1957 Act was upheld and the petitioner's alternative statutory objection was untenable.

Ratio Decidendi: A successor State may, by retrospective legislation, tax income derived from sources within territories integrated into it, where territorial nexus exists and the levy does not operate outside its own legislative sphere.

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