1960 (9) TMI 5 - SC - Income Tax

Whether the High Court did not correctly construe the proviso to sub-section (1) of section 6 of the U. P. Agricultural Income-tax Act (U. P. Act III of 1949)? Held that - It is indeed true, as has been, pointed out by learned counsel for the appellants, that the Act like the Indian Income-tax Act, 1922, contemplates an assessment for each year on the income of the previous year. That does not necessarily mean that the restriction imposed by the proviso to sub-section (1) of section 6 is limited to one year only. The proviso must be construed with reference to the language used and the scheme of section 6. That section mentions two alternative methods of computation, and by the substantive part of sub-section (1) gives the assessee an option to adopt any one of the two methods ; then comes the proviso which says that once the option is exercised, there can be no variation without the permission of the Board of Revenue. The appellants are seeking to read the words in any one year after the word computation in the proviso, and this they cannot be allowed to do. We are in agreement with the view expressed by the High Court. Appeal dismissed.

Summary

Issues:
Interpretation of proviso to sub-section (1) of section 6 - Whether restriction on varying method of computation applies to one year only or multiple years.
Application of mind by Board of Revenue in refusing permission to vary method of computation.
Constitutional validity of proviso to sub-section (1) of section 6 under Article 14 of the Constitution.

Analysis:

The Supreme Court heard two appeals and connected writ petitions concerning the interpretation of the proviso to sub-section (1) of section 6 of the U. P. Agricultural Income-tax Act. The appellants, two brothers holding agricultural lands, sought to change their method of computing agricultural income from gross proceeds of sale to a multiple method but were denied permission by the Board of Revenue. The High Court upheld the denial, leading to the appeals. The main issue was whether the proviso restricted the variation in the method of computation to one year only. The Court agreed with the High Court's interpretation that once the option was exercised, no variation could be made without the Board's permission, rejecting the appellants' argument for a limited restriction to one year. The Court emphasized the unqualified language of the proviso and its alignment with the scheme of the Act, emphasizing the absence of a right to vary the method post-return filing.

Regarding the application of mind by the Board of Revenue, the Court found that the Board had considered the relevant factors before refusing permission to the appellants. The Court noted that the Senior Member's approval of the note indicated a thoughtful decision-making process, dismissing the contention that the Board failed to apply its mind. The Court highlighted that the discretion vested in the Board was not per se discriminatory, as sufficient guidance was provided in the Act for the exercise of discretion under the proviso. The Court cited previous judgments to support that discretionary power does not equate to discriminatory power and emphasized the need for reasonableness in the Board's decision-making process.

Lastly, the Court addressed the constitutional validity of the proviso under Article 14 of the Constitution. It rejected the argument that the proviso lacked principles for guidance, leading to potential discriminatory application. The Court held that the provisions of section 6 itself provided adequate guidance for the Board's discretion, requiring a reasonable consideration of relevant factors. The Court declined the appellants' request to adduce additional evidence regarding other cases where the Board had permitted variation, stating that they were not sitting in appeal over the Board. Ultimately, the Court dismissed the appeals and writ petitions, affirming the decisions of the High Court and the Board of Revenue.