1959 (9) TMI 64 - HC - Income Tax

Summary

Issues Involved:
1. Constitutionality of the Gift Tax Act concerning agricultural land.
2. Legislative competence of Parliament to enact the Gift Tax Act.
3. Interpretation of legislative entries in the Constitution.
4. Aggregation of gifts for tax assessment purposes.
5. Specific grievances regarding individual assessments under the Gift Tax Act.

Issue-wise Detailed Analysis:

1. Constitutionality of the Gift Tax Act concerning agricultural land:
The principal question raised in all these petitions relates to the constitutionality of the Gift Tax Act in so far as it seeks to levy tax on gifts of agricultural land. The validity of the Act in so far as it affects agricultural land is attacked on the ground that it was beyond the competence of Parliament to make laws concerning agricultural land. The contention pressed upon us is that the power to make laws with respect to any of the matters enumerated in List II is exclusively vested in State Legislatures, and consequently, it is not competent for the Parliament to legislate on any subject within the domain of State Legislatures.

2. Legislative competence of Parliament to enact the Gift Tax Act:
The argument is elaborated thus. The expression "land" is used in a generic sense and the words that follow "that is to say etc." introduce a general concept and the following clauses "rights in or over land etc." are added only by way of explanation or illustration and do not introduce any limitation on the subjects included in the item. It should not be understood in a narrow or limited sense but should be interpreted as extending to all ancillary or subsidiary matters which can reasonably be said to be comprehended in it. The Constitution has enumerated the subjects committed to the sphere of the respective Legislatures, List I with reference to the topics falling under the appointed field of the Union, List II with reference to those of the States, and List III contains matters in regard to which both the Parliament and the State Legislatures have concurrent jurisdiction. The Constitution has treated the two powers separately for purposes of legislative competence.

3. Interpretation of legislative entries in the Constitution:
The entries in the Legislative Lists are heads of legislative power and should be construed liberally and should not be read in a restricted or pedantic sense. Each entry has to be understood with reference to another so that none of the entries may be so read as to make any of them meaningless or nugatory. The argument of the counsel for the petitioners that at the time when the Constitution was framed, gift tax would not have been within the contemplation of the constitution makers is devoid of force. It is precisely to cover cases, which were not within the contemplation of the Constituent Assembly, that this provision was conceived to enable Parliament to meet any contingency that might arise in the future.

4. Aggregation of gifts for tax assessment purposes:
There remains the question of whether it is permissible for the Gift Tax Officer to aggregate all the gifts made by an assessee during a relevant year for the purpose of assessment. The charging section itself contemplates the aggregation of the gifts made during a particular year. This notion is communicated by each one of the relevant sections. There can be little doubt, on a study of the various sections of the Act, that, in computing the rates of tax, the totality of the gifts made by an individual in the course of the relevant year should be taken into account. The Act throughout proceeds on the assumption that it is the totality of the gifts that determine the rate. There is no scope for the contention that each gift by itself should form the basis of assessment.

5. Specific grievances regarding individual assessments under the Gift Tax Act:
In W.P. No. 458 of 1959, it is argued that neither of the two gifts is subject to gift tax for the reason that one is not a transfer but only a partition of the family properties and the other does not exceed the limit imposed by section 5(2), being a gift in favor of the wife of the petitioner. If so, it is open to the petitioner to raise this point before the authorities concerned. In W.P. No. 459 of 1959, the complaint is that the authorities concerned have arbitrarily fixed the value of the gift. This is also a matter to be considered by the Department. Any question, which is foreign to this enquiry, can be gone into by the Revenue.

Conclusion:
On this discussion, it follows that the Gift Tax Act is not open to challenge on any ground and is intra vires even in so far as it affects the transfer of agricultural land. All the petitions are dismissed with costs. Advocate's fee Rs. 75 in each. Petitions dismissed.