1942 (2) TMI 25 - Other - Income Tax

Summary

Issues Involved:
1. Validity of the Bihar Agricultural Income-tax Act.
2. Definition of "agricultural income" under the impugned Act.
3. Repugnancy to an Act of Parliament (Regulation I of 1793).
4. Necessity of the Governor-General's previous sanction.
5. Applicability of the impugned Act to permanently settled estates.

Issue-wise Detailed Analysis:

1. Validity of the Bihar Agricultural Income-tax Act:

The appellants, zamindars from Patna, challenged the validity of the Bihar Agricultural Income-tax Act (Bihar Act No. VII of 1938), arguing that it was ultra vires of the Bihar Legislature and lacked necessary sanctions. They contended that the Act required the previous sanction of the Governor-General, which was not obtained. The High Court dismissed the suit, and the appellants appealed to the Federal Court.

2. Definition of "agricultural income" under the impugned Act:

The appellants argued that the definition of "agricultural income" in the impugned Act was inconsistent with the definition in the Indian Income-tax Act (Central Act No. XI of 1922). Specifically, they pointed out that paragraph (c) of the definition in the Income-tax Act was omitted in the Bihar Act, making the latter's definition narrower. The Court found that the Provincial Legislature was entitled to impose a tax on some categories of agricultural income and not others. The appellants' contention that the definition in the impugned Act was wider than that in the Income-tax Act was not pressed before the Federal Court.

3. Repugnancy to an Act of Parliament (Regulation I of 1793):

The appellants argued that the impugned Act was repugnant to Regulation I of 1793 (the Bengal Permanent Settlement Regulation) and thus required the previous sanction of the Governor-General. The Court held that Regulation I of 1793 was not an Act of Parliament but an enactment by a subordinate legislative authority. Therefore, it did not fall within the meaning of "Act of Parliament" in Section 108(2)(a) of the Constitution Act.

4. Necessity of the Governor-General's previous sanction:

The appellants contended that the impugned Act required the previous sanction of the Governor-General under Section 108(2)(a) of the Constitution Act. The Court found that Regulation I of 1793 was not an Act of Parliament and thus did not require such sanction. The argument that the Regulation was a Governor-General's Act and required the Governor's consent under Section 299(3) of the Constitution Act was not raised before the Federal Court.

5. Applicability of the impugned Act to permanently settled estates:

The appellants argued that the impugned Act should not apply to income derived from permanently settled estates, invoking the rule of construction that general words in a later statute should not repeal earlier legislation on a particular matter. The Court held that Regulation I of 1793 related to the jama (land revenue) and not to the net income derived from agricultural land. The impugned Act, being a general measure of property taxation within the limits of the Provincial Legislature's power, did not derogate from the assurances given to zamindars by Regulation I of 1793. The Court also noted that the division of fiscal powers between the Centre and the Provinces under the Constitution Act allowed the Provinces to legislate on taxes on agricultural income.

Conclusion:

The Bihar Agricultural Income-tax Act was held to be validly enacted and not ultra vires of the Bihar Legislature. The appellants were required to comply with the notice issued by the Agricultural Income-tax Officer, Patna. The appeal was dismissed with costs.