AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
1954 (11) TMI 6
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.... his co-owners during the relevant accounting year which was the calendar year ending on the 31st December, 1946, to a private limited company known as Mafatlal Gagalbhai & Company Ltd. The profit on the sale of the said properties amounted to Rs. 18,76,023 and the appellant's half share therein came to the sum of Rs. 9,38,011 which was included in the assessment under Section 12-B. In April 1948, the appellant appealed from the said order to the Appellate Assistant Commissioner contending that Section 12-B of the Act authorizing the levy of tax on capital gains was ultra vires the Central Legislature. The Appellate Assistant Commissioner by his order dated the 5th April, 1949, dismissed the appeal. A further appeal to the Income-tax Appellate Tribunal was dismissed by its order dated the 30th June, 1950. Being aggrieved by the order of the Appellate Tribunal the appellant applied to it under Section 66(1) of the Act for raising certain questions of law. The Appellate Tribunal, agreeing that certain questions of law did arise out of its order, drew up a statement of the case which was agreed to by the parties and referred to the High Court the following questions :-- " (1) Wh....
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....er it necessary to discuss whether the legislation was covered by entry 55 in List I of the Seventh Schedule. In our opinion the view taken by Tendolkar, J., with respect to entry 54 is correct and well-founded. In the course of a lucid argument advanced with his usual ability and skill Mr. Kolah submitted that entry 54 which deals with " taxes on income " does not embrace within its scope tax on capital gains. "Income", according to him, does not signify capital gains either according to its natural import or common usage or according to judicial interpretation of relevant legislation both in England and in India. He submitted that the learned Chief Justice was entirely right in the view that there was a clear line of demarcation that had always been observed by English lawyers and English jurists between income and capital, that the English legislative practice had always recognised this difference and that as the word had come to acquire a certain meaning and a certain connotation by reason of such legislative practice in England, the British Parliament which enacted the Government of India Act, 1935, must be regarded as having understood and used that word "income" in entry 5....
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....otation of the word "income" outside the particular statute. If we hold, as we are asked to do, that the meaning of the word "income" has become rigidly crystallised by reason of the judicial interpretation of that word appearing in the Income-tax Act then logically no enlargement of the scope of the Income-tax Act, by amendment or otherwise, will be permissible in future. A conclusion so extravagant and astounding can scarcely be contemplated or countenanced. We are satisfied that the cases relied on by Mr. Kolah and referred to in the judgment of the learned Chief Justice do not, as we read them, establish the broad proposition that the ordinary English word "income" has acquired a particularly restricted meaning. The case of Wallace Brothers & Co. Ltd. v. Commissioner of Income-tax was not concerned with ascertaining the meaning of the word "income" at all. The problem there was whether the foreign income of an English company which was a partner in a firm carrying on business in Bombay and whose Indian income was greater than its foreign income could be treated as a resident within the meaning of Section 4-A. It was in that context said in that case that in determining the scop....
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....t page 134 none of the items in the Lists is to be read in a narrow or restricted sense and that each general word should be held to extend to all ancillary or subsidiary matters which can fairly and reasonably be said to be comprehended in it. It is, therefore, clear--and it is acknowledged by Chief Justice Chagla--that in construing an entry in a List conferring legislative powers the widest possible construction according to their ordinary meaning must be put upon the words used therein. Reference to legislative practice may be admissible for cutting down the meaning of a word in order to reconcile two conflicting provisions in two Legislative Lists as was done in the C. P. and Berar Act case or to enlarge their ordinary meaning as in the State of Bombay and Another v. F. N. Balsara. The cardinal rule of interpretation, however, is that words should be read in their ordinary, natural and grammatical meaning subject to this rider that in construing words in a constitutional enactment conferring legislative power the most liberal construction should be put upon the words so that the same may have effect in their widest amplitude. What, then, is the ordinary, natural and grammati....