TaxTMI 
TaxTMI 
TaxTMI 
1981 (2) TMI 2
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.... accruing to him in the true sense of that term, the liability that was sought to be imposed under the Act in respect of his residential house was, therefore, in its pith and substance a tax on building falling under entry 49 of List II of the Seventh Schedule to the Constitution and hence Parliament could not impose the said liability under a law made in exercise of its legislative power under entry 82 of List I of the Seventh Schedule to the Constitution which authorised it only to levy taxes on income other than agricultural income. The High Court rejected the plea of the petitioner and dismissed the writ petition. The petitioner has now applied to this court for special leave to appeal against the decision of the High Court.' When the petition came up for hearing on February 5, 1981, before us, we did not find that there was any ground to grant special leave to appeal but since the case was argued with some persistence, we decided to give reasons, for rejecting the prayer of the petitioner which we proceed to give hereunder: Section 4 of the Act lays down that where any Central Act enacts that income-tax shall be charged for any assessment year at any rate or rates, income-ta....
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....ion empowers Parliament to levy " taxes on income other than agricultural income ". Now it is well-settled that the entries in the Lists in the Seventh Schedule to the Constitution should not be read in a narrow or restricted sense and each and every subject mentioned in the entries should be read as including within its scope all ancillary and subsidiary matters which can, fairly and reasonably be comprehended in it. Words in the Constitution conferring legislative power should receive a liberal construction and should be interpreted in their widest amplitude. The expression " income " according to the Oxford Dictionary means "a thing that comes in ". Income may also be defined as the gain derived from land, capital or labour or any two or more of them. In Resch v. Federal Commissioner of Taxation [1942] 66 CLR 198, 224 Dixon J., of the High Court of Australia, observed: " The subject of the income tax has not been regarded as income in the restricted sense which contracts gains of the nature of income with capital gains, or actual receipts with increases of assets or wealth. The subject has rather been regarded as the substantial gains of per sons or enterprises considered ove....
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.... property which is owned by the trader and is assessed under Sched. A, an allowance for the annual value is made in computing the profits of the trade. " (emphasis supplied). In Governors of the Rotunda Hospital, Dublin v. Coman [1920] 7 TC 517, 586, 587 which was a case arising from Ireland. Lord Atkinson observed thus : " It would, I think, be well to bear in mind that, to use Lord Macnaghten's words in his celebrated judgment in the London County Council v. Attorney General [1900] 4 TC 265 ; [1901] AC 35 (HL). 'Income-tax... is a tax on income'. When the amount of the income to be taxed under the Act of 1842 and the Acts amending it comes to be measured, different standards are selected, and the words 'profits or gains ' are used in reference to all the Schedules in the Act of 1842 to describe the income, the subject of charge. The standard selected as a measure of the amount of the income to be taxed under Schedule A in respect of lands, tenements, hereditaments and heritages capable of occupation is the annual value. If the owner of such Properties as these should be himself in occupation of them, it by no means follows that he will, in fact, derive from them an income equal....
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.... computation of income is made on the basis of presumed income. In D. M. Vakil v. CIT [1946] 14 ITR 298 (Bom), which was a case arising under the Indian Income-tax Act, 1922, the High Court of Bombay held that under section 9 of that Act the tax was payable by an assessee in respect of the bona fide annual value of the property irrespective of the question whether be received that value or not. The High Court of Gujarat has also taken the same view in Sakarlal Balabhai v. ITO [1975] 100 ITR 97. There is one other circumstance which persuades us to take the view that computation of income for purposes of levy of income-tax in accordance with s. 23(2) of the Act is justifiable under entry 82 of List I of the Seventh Schedule to the Constitution. It is to be borne in mind that the Government of India Act, 1935, was enacted when the Indian I.T. Act, 1922, was in force, Section 9 of the Indian I.T. Act, 1922, provided for the levy of income-tax on the basis of the bona fide annual value of the property even when it was in the occupation of the assessee for the purposes of his own residence. While enacting entry 54 of List I of the Seventh Schedule to the Government of India Act, 1935, ....