1975 (3) TMI 21 - HC - Income Tax

Summary

Issues Involved:
1. Violation of Article 19(1)(f) of the Constitution.
2. Legislative competence under Entry 82 of List I of the Seventh Schedule.
3. Applicability of Article 31(5)(b)(i) and Article 31-C of the Constitution.

Issue-wise Detailed Analysis:

1. Violation of Article 19(1)(f) of the Constitution:

The petitioner argued that the provisions of Chapter XX-A of the Income-tax Act, 1961, as amended by the Taxation Laws (Amendment) Act, 1972, violated Article 19(1)(f) of the Constitution, which provides citizens the right to acquire, hold, and dispose of property. The petitioner contended that these provisions interfere with the fundamental right by imposing unreasonable restrictions on the right to fix consideration and bargain for the highest price for one's property. The court held that Article 19(1)(f) is subject to reasonable restrictions in the interests of the general public as per sub-article (5) of Article 19. The court found that the provisions of Chapter XX-A were aimed at countering tax evasion and black money, which are in the interest of the general public. Therefore, the restrictions imposed by Chapter XX-A were considered reasonable and not violative of Article 19(1)(f).

2. Legislative Competence under Entry 82 of List I of the Seventh Schedule:

The petitioner contended that Parliament lacked legislative competence to enact Chapter XX-A under Entry 82 of List I of the Seventh Schedule, which pertains to taxes on income other than agricultural income. The court noted that the Income-tax Act, including Chapter XX-A, falls within the ambit of Entry 82. The impugned provisions aim to impose penalties and check tax evasion, which are necessary for the effective administration of the Income-tax Act. The court emphasized that supplementary provisions to prevent tax evasion are integral to the power to raise taxes. Therefore, the amending Act of 1972 was within the legislative competence of Parliament under Entry 82.

3. Applicability of Article 31(5)(b)(i) and Article 31-C of the Constitution:

The petitioner argued that the acquisition proceedings under Chapter XX-A were not for a public purpose and did not fall within the scope of Article 31(5)(b)(i), which pertains to laws for imposing or levying any tax or penalty. The court held that the provisions of Chapter XX-A were in furtherance of the Directive Principles of State Policy, particularly Article 39(b) and (c), which aim to prevent the concentration of wealth and ensure the distribution of material resources for the common good. The court noted that Article 31-C, inserted by the 25th Amendment, protects laws giving effect to these principles from being challenged on the grounds of inconsistency with Articles 14, 19, or 31. Therefore, the impugned provisions were considered to be in the interest of the general public and within the purview of Article 31-C.

Conclusion:

The court dismissed the writ application, holding that the provisions of Chapter XX-A of the Income-tax Act, 1961, as amended by the Taxation Laws (Amendment) Act, 1972, were constitutional and within the legislative competence of Parliament. The court found that the restrictions imposed by these provisions were reasonable and in the interest of the general public, aimed at countering tax evasion and black money. The court also emphasized the need to balance individual property rights with the interests of society as embodied in the Directive Principles of State Policy.