2010 (8) TMI 715 - HC - Indian Laws

Payment / reimbursement of income tax by the state government - salary and allowances - Members of Legislative Assembly - writ petition - constitutional validity - Held that - the State legislation is not a legislation for levy of income-tax. It merely provides for payment of income-tax by the State Government as against the assessees. The State legislation cannot, thus, be held to be suffering from the vice of repugnancy. - It is not necessary that if the benefit is given to one class, the same has to be extended to all. There is no doubt that there maybe more needy people who may need exemption from payment of tax asagainst Members of Assembly who are more privileged. This is a matter of legislative wisdom. We are only concerned with legality of the statute, no ground to interfere. The writ petition is accordingly dismissed.

Issues Involved:
1. Constitutionality of Section 3AA of the Punjab State Legislative Assembly (Salaries and Allowances of Members) Act, 1942.
2. Alleged encroachment on the legislative power of the Union.
3. Alleged violation of Article 14 of the Constitution of India.

Issue-wise Detailed Analysis:

1. Constitutionality of Section 3AA of the Punjab State Legislative Assembly (Salaries and Allowances of Members) Act, 1942:
The petitioner sought to quash Section 3AA of the Act, which mandates that the State Government pays the income-tax on salaries and allowances of Members of the Legislative Assembly. The petitioner argued that this provision unduly burdens the State exchequer and is unjustified in light of the financial hardships faced by other sections of society, such as farmers. The State defended the provision, asserting that it does not constitute discrimination and that the State Legislature was competent to enact such a law under entries 38 and 40 of List II of the Seventh Schedule to the Constitution.

2. Alleged Encroachment on the Legislative Power of the Union:
The petitioner contended that the subject of income-tax falls under entry 82 of List I of Schedule VII to the Constitution, and thus, the impugned provision encroaches upon the legislative power of the Union. The State countered that the legislation pertains to "salary and allowances to the Members of Legislative Assembly," which falls under the State List, and therefore, there is no encroachment on the Union's legislative powers. The Court noted that the impugned provision does not exempt MLAs from tax but merely shifts the tax payment responsibility to the State Government. The principles of legislative competence and the doctrine of pith and substance were applied, concluding that the State legislation does not suffer from the vice of repugnancy.

3. Alleged Violation of Article 14 of the Constitution of India:
The petitioner argued that the provision discriminates against other taxpayers who must pay their taxes from their own income. The State argued that MLAs form a distinct class, and thus, there is no violation of Article 14. The Court reiterated established principles that Article 14 forbids discrimination but allows classification if it has a rational nexus with the object sought to be achieved. The Court referenced several landmark judgments to elucidate these principles, asserting that classification must be based on an intelligible differentia and must relate rationally to the legislative objective. The Court determined that the classification of MLAs as a separate class for the purpose of tax payment by the State Government is not arbitrary and does not violate Article 14. The Court emphasized that legislative wisdom in making such classifications is not subject to judicial review as long as the classification is not palpably arbitrary.

Conclusion:
The Court concluded that there was no encroachment on the legislative power of the Union nor any violation of Article 14 of the Constitution. The writ petition was dismissed, upholding the constitutionality of Section 3AA of the Punjab State Legislative Assembly (Salaries and Allowances of Members) Act, 1942.

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