1970 (6) TMI 5 - HC - Income Tax

Mysore Agricultural Income Tax Act - petitioner is a public limited company which owns plantations in the area of the former State of Mysore - levy of tax on income derived before 1-11-1956

Issues Involved:
1. Whether the proceedings of the respondent are barred by limitation under the Mysore Agricultural Income-tax Act, 1957.
2. Whether the income derived from lands prior to October 31, 1956, is taxable under the Mysore Agricultural Income-tax Act, 1957.
3. Constitutional validity of the Mysore Agricultural Income-tax Act, 1957, as amended by Mysore Act No. 25 of 1962.

Detailed Analysis:

Issue 1: Limitation of Proceedings
The petitioner contended that the assessment proceedings for the financial year 1957-58 were barred by limitation under the Mysore Agricultural Income-tax Act, 1957. However, this argument was rejected based on the previous ruling in Devon Tea and Produce Co. Ltd. v. State of Mysore, where it was established that the agricultural income for the period ended March 31, 1957, is taxable under the provisions of the Mysore Agricultural Income-tax Act, 1957, and not under the Mysore Agricultural Income-tax Act, 1955. As a result, the proceedings were not barred by limitation.

Issue 2: Taxability of Income Derived Prior to October 31, 1956
The petitioner argued that the income derived from lands prior to October 31, 1956, was not taxable under the new State of Mysore since it was derived outside the new State. This argument was initially supported by the Karnataka High Court in Bhairao Rao Maloji Rao Ghorpade v. Agricultural Income-tax Officer but was later overturned by the Supreme Court in State of Mysore v. Bhairao Rao Maloji Rao Ghorpade. The Supreme Court held that the amended definition of "State" or "State of Mysore" under Mysore Act No. 25 of 1962 covered all lands in the territories specified in sub-section (1) of section 7 of the States Reorganisation Act, thus making the income derived from such lands taxable under the Act even for the period prior to November 1, 1956.

Issue 3: Constitutional Validity of the Amended Act
The petitioner challenged the constitutional validity of the Mysore Agricultural Income-tax Act, 1957, as amended by Mysore Act No. 25 of 1962, arguing that it had extra-territorial effect and was thus ultra vires of the Constitution. The court analyzed the legislative competence under Article 245 and 246 of the Constitution, which allows the State to legislate for the whole or any part of the State. The court held that the new State of Mysore, being the successor State, had the power to levy tax on agricultural income derived from lands situated in the territories integrated into the new State. The court found sufficient territorial nexus for the new State to levy tax on income derived from lands before November 1, 1956, and dismissed the argument of extra-territorial effect. The court respectfully dissented from the view taken by the Full Bench of the Kerala High Court in a similar case.

Conclusion:
The writ petition was dismissed, and the court upheld the validity of the assessment proceedings under the Mysore Agricultural Income-tax Act, 1957, as amended. The court found no merit in the arguments regarding limitation and extra-territorial effect, thus affirming the constitutional validity of the Act. No costs were awarded.

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