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TMI Blog1962 (8) TMI 67X X X X Extracts X X X X X X X X Extracts X X X X ..... For the Petitioner: G. S. Pathak and R. Gopalakrishnan For the Respondent: H. N. Sanyal, Additional Solicitor-General of India and Sardar Bahadur, JUDGMENT The judgment of the court was delivered by SUBBA RAO J. These two petitions filed under article 32 of the Constitution by different parties are directed against the Agricultural Income-tax Officer, Kasaragod, and the State of Kerala, for a declaration that section 2A of the Kerala Agricultural Income-tax Act, 1950, as amended by Kerala Act II of 1959 (hereinafter referred to as the Act) is constitutionally void and for quashing the orders of assessment made by the first respondent pursuant to the said provision. As it is common case that the decision in the first petition would govern the second one, it would suffice if the facts in the first petition were given. Kasaragod Taluk, wherein the agricultural lands of the petitioner's family are situate, formed part of the district of South Kanara in the Madras State Under the States Reorganization Act, 1956, (Central Act 37 of 1956) the Kerala State comprising the following territories was formed : (a) the territories of the existing State of Travancore-Cochin, excludi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 31, 1957, i.e. the income accrued after the Madras area become part of the Kerala State, also could not be taxed. To remedy the situation brought about by historical reasons in the two geographical parts of the Kerala State, the Government of Kerala promulgated on January 12, 1959, the Agricultural Income-tax (Amendment) Ordinance (II of 1959). Subsequently, the Kerala Legislature passed the Agricultural Income-tax (Amendment) Act (II of 1959) replacing the earlier Ordinance, hereinafter called the Amending Act. Before the Amending Act was passed, the petitioner, who has lands in different villages in Kasaragod Taluk, submitted a return of the income of his family for the assessment year 1957-58 and on June 30, 1958, the concerned Income-tax Officer determined the petitioner's net income for the accounting period April 1, 1956, to March 31, 1957, and the tax payable thereon. The petitioner preferred an appeal to the Assistant Commissioner of Agricultural Income-tax Kozhikode, against the order of the Income-tax Officer questioning the said assessment on the ground, inter alia, that the assessment was made arbitrarily. When that appeal was pending, the judgment of the Kerala High Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... available for ascertaining the rate, that whatever basis is adopted for ascertaining the rate, there is bound to be some hard cases and that circumstance cannot conceivably affect the validity of the law. At the outset it would be convenient to notice briefly the law on the doctrine of classification. The law on the subject is well settled and it does not require restatement in extenso. It would suffice if we notice the principles relevant to the enquiry. The law has been neatly and succinctly summarised in Ram Krishna Dalmia v. Shri Justice S. R. Tendolkar [1959] S.C.R. 270,296-297 thus : "It is now well established that while article 14 forbids class legislation, it does not forbid reasonable classification for the purposes of legislation. In order, however, to pass the test of permissible classification two conditions must be fulfilled, namely, (i) that the classification must be, founded on an intelligible differentia which distinguishes persons or things that are grouped together from others left out of the group and (ii) that that differentia must have a rational relation to the object sought to be achieved by the statute in question. The classification may be founded on dif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nization Act, 1956 (Central Act 37 of 1956), shall be the whole period commencing on the 1st day of November, 1956, and ending on the 31st day of March, 1958, or, if the accounts of the assessee have been made up to a date within the financial year ending on the 31st day of March, 1958, then, at the option of the assessee, the period commencing on the 1st day of November, 1956 and ending on the aforesaid date to which, the accounts have been so made up : Provided that (i) notwithstanding anything contained in section 3 and 56, the agricultural income-tax and super-tax as chargeable on the total agricultural income of the previous as reckoned in this section shall be at the rates applicable to the 'average annual income' according to the Schedule; such 'average annual income' shall be an amount bearing to the aforesaid total agricultural income the same proportion as the period of twelve months bears to the period of the previous year as defined in this section; and (ii) the limit of exemption from chargeability to tax shall be determined with reference to the 'average annual income'." The Malabar District in the State of Kerala is constituted by combining Kasaragod Taluk of the Sou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me-tax could not be enforced. While the assessees in the T-C area were liable to agricultural income tax in regard to their income from their lands for the year commencing from April 1, 1956 and ending March 31, 1957, the income of the agriculturists in the Madras area could not be reached by that law in respect of the whole or part of that year. These differences between the two parts of State which originated from historical reasons were the basis of classification for the purpose of taxation. The object of making the classification was not to discriminate against the agriculturists of the Madras area but to bring them into line with agriculturists from the rest of the Kerala State in so far as the liability to pay agricultural income-tax was concerned. The existing law had therefore to be appropriately adapted for securing this end. In these circumstances, can it be said that there was no reasonable nexus between the classification and the object of the legislation. The object of the legislation thus was to impose agricultural income-tax on assessee in the Madras area had also in respect of the period between November 1, 1956, and March 31, 1957, which could not be done under th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h; therefore, the income from arecanut, pepper and coconut accrued to the petitioner between November 1, 1956 and March 31, 1957, is the income for the entire year; but under the proviso to section 2A of the Act, the said income is treated as the income for 5 months only, with the result that 24 months' income is treated as 17 months' income; this is an arbitrary assumption underlying the provision; instead it should have taken 12/24th of the total income as the average annual income. This arbitrary method of fixing the average annual income involves the payment of higher rate of tax by the assessees in Kasaragod Taluk as compared to the assessees in other parts of the State. It is suggested that a more reasonable course would have been to tax the assessees in the Madras area for the income that accrued to them during the 5 months by treating the said income as the income for the entire year commencing from April 1, 1956, and ending on March 31, 1957, and that in that event not only their income for the said period could not have escaped taxation but would have also avoided the unjust treatment meted out to them in the rate of tax. Prima facie there appears to be some plausibility ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the impugned section the limit for exemption from taxation shall be determined with reference to the average annual income. Suppose the annual income for the 12 months commencing from April 1, 1957, and ending on March 31, 1958, is above Rs. 3,000; the assessee in the T-C area would be liable to pay income-tax, but a particular assessee in the Madras area may have earned comparatively smaller income during the 5 months bringing down the average annual income below Rs. 3,000 and he escapes assessment altogether. Assume again that the assessee gets more than Rs. 3,000 during the 5 months; but he may have got very low income in the succeeding 12 months with the result that his annual average income may fall below the range of taxable income, while the assessee in the T-C area, who has got a similar income for 1956-57, would be liable to tax. It is also true that if the assessee in the Madras areas area gets very high income during those 5 months and little less than the taxable income during the succeeding twelve months, his income, which would have escaped taxation, would be liable to tax. These illustrations prove that the section does not always work to the disadvantage of assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anore 4,67,5442,77,9232, 46,22918,98,804 8,45540, 13414 8245, 53,207 45,4492, 36,2951 19,01411, 75,425 17,29235, 23620 7711, 23,833 4,2842 66699373,756 8,44931,58596 6662,23,916 1,4599,8013 68593,988 4,9096,7873 16640, 060 10,10435,60014 21 2,70,626 4,50050040,000 Crop Harevesting Season Marketing Season Paddy Autumn, August to October. Winter : December to February Summer: February to March September to October. January to February. March to April Tapioca November to June July to Aug Dec. to Feb. July to Aug Cocoanut Arecanut 1.Travancore-Cochin June to Nov Nov. to March 2. S.Malabar June to November 3. N. Malabar Nov. to March.. Cardamom August to December October to January Pepper November to January December to February Tea Coffee November to March September to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... statement only shows that all the crops, except arecanut, are gathered by the assessees of the entire area during the same period. The fact that in the case of one of the crops the assessees in the Malabar area harvested earlier cannot be a ground for holding that the law has made an unjust discrimination between persons belonging to the same class, but that is due only to the fortuitous circumstance of some assessees gathering the crops earlier than others. As we have pointed out, the arecanut crop is only one of the many crops in that area and the extent of its cultivation in Kasaragod Taluk is comparatively lesser than in the entire area of the State or even the Madras area. We cannot, therefore, say that the law made an unjust discrimination between persons belonging to the same class. There is another aspect which may have a bearing on the question raised. The impugned section is a temporary provision intended to apply only for one year to tide over a difficult situation brought about by the reorganization of States. It is true that every law, whether it is temporary or permanent, cannot infringe article 14 of the Constitution; but in considering the question of reasonablenes ..... X X X X Extracts X X X X X X X X Extracts X X X X
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