2006 (3) TMI 89 - HC - Income Tax

Constitutional Validity of provisions of section 54F of the Income-tax Act, 1961 - contention of learned counsel for the petitioner that in the subsequent years exemption under section 54F of the Act was extended to two residential houses and, therefore, depriving during the assessment year 2000-01 of such an exemption by extending it to one residential house is discriminatory, violative of the fundamental rights and ultra vires the Constitution of India, cannot be accepted. - Central Government is empowered to have its own policy for allowing exemption - Each assessment year is an independent unit. The liability to tax and the exemptions provided in each assessment year may be different. This is entirely in the realm of Parliamentary discretion and policy. The objects and reasons for granting and withholding of exemption may vary from time to time. The same cannot be allowed to be questioned on the ground of discrimination. Therefore, the challenge to the validity of the aforesaid provision cannot be sustained

Summary

Issues involved:
1. Quashing of orders related to income tax assessment
2. Constitutionality of section 54F of the Income-tax Act, 1961

Quashing of orders related to income tax assessment:
The petitioner sought to quash orders related to income tax assessment, including those passed by the Commissioner of Income-tax, Income-tax Officer, and Income-tax Appellate Tribunal. The High Court noted that the orders had merged into the appellate order. The petitioner had an alternative remedy of appeal to the Division Bench of the court under specific sections of the Income-tax Act. As such, the court declined to entertain the petition concerning the quashing of the orders, citing the availability of an alternative and efficacious remedy for the petitioner.

Constitutionality of section 54F of the Income-tax Act, 1961:
The challenge was made to section 54F of the Income-tax Act, 1961, as it stood in the year 2000-01, on the grounds of vagueness and discrimination. The petitioner argued that the provision was discriminatory as it applied only for the assessment year 2000-01. The court examined the relevant portion of section 54F and noted that it provided for exemption in the case of investment in a residential house following the transfer of a non-residential asset. The court found the provision to be clear in its contemplation of exemption for a non-residential house, thereby rejecting the argument of vagueness.

The petitioner further contended that the extension of the exemption to two residential houses in subsequent years made the limitation to one residential house in the assessment year 2000-01 discriminatory and violative of fundamental rights. The court held that the Central Government has the authority to determine its policy for granting exemptions, and each assessment year is independent in terms of tax liability and exemptions. The court emphasized that the variation in exemptions from year to year falls within the realm of Parliamentary discretion and policy, dismissing the challenge to the validity of the provision.

In conclusion, the court dismissed the writ petition, stating that the challenge to the validity of section 54F of the Income-tax Act, 1961, as it stood in the year 2000-01, could not be sustained. The petitioner was given the option to file a statutory appeal before the Division Bench of the court within a specified timeframe.

This detailed analysis of the judgment provides a comprehensive overview of the issues involved and the court's reasoning and decision regarding each issue.