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Issues: Validity of additional surcharge on residual income, Interpretation of Income-tax Act and Finance Act, Comparison with previous court decisions
In this case, the petitioner, a cooperative bank, challenged an order by the Income-tax Officer related to the assessment year 1963-64. The petitioner argued that the additional surcharge levied on the residual income was invalid as it exceeded the taxable income computed for income-tax purposes. The petitioner contended that the Finance Act could not subject exempt income to additional surcharge. The court analyzed the provisions of the Income-tax Act and the Finance Act and found no support for the petitioner's objection. The court clarified that even though the business income of a cooperative society was exempt from tax under section 81 of the Income-tax Act, it still formed part of the total income of the previous year. The court distinguished a previous case where the Supreme Court held that income-tax was levied on actual income of the previous year. The court noted that in the present case, the exempt income had been part of the total income. Therefore, the additional surcharge was deemed valid. Moreover, the petitioner argued that the language of the Finance Act was not suitable for levying an additional surcharge on income exempted from tax under the Income-tax Act. The court explained that the language used in the Finance Act was to comply with constitutional provisions. The court concluded that in cases where income is not taxable due to an exemption, it may still be appropriate to levy an additional surcharge as an increase to the tax that would have been applicable if not for the exemption. The court dismissed the petition, upholding the validity of the additional surcharge on the residual income. The petitioner was ordered to pay costs and counsel's fees.
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