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TMI Blog1981 (2) TMI 2X X X X Extracts X X X X X X X X Extracts X X X X ..... culated in accordance with s. 23(2) of the Act in respect of a house in the occupation of the assessee for the purposes of his own residence. The petitioner who is an assessee under the Act contended before the High Court of Madhya Pradesh in a petition filed under art. 226 of the Constitution that the inclusion of any amount under s. 23(2) of the Act in his income was unconstitutional as there could be no income at all in such a case accruing to him in the true sense of that term, the liability that was sought to be imposed under the Act in respect of his residential house was, therefore, in its pith and substance a tax on building falling under entry 49 of List II of the Seventh Schedule to the Constitution and hence Parliament could not impose the said liability under a law made in exercise of its legislative power under entry 82 of List I of the Seventh Schedule to the Constitution which authorised it only to levy taxes on income other than agricultural income. The High Court rejected the plea of the petitioner and dismissed the writ petition. The petitioner has now applied to this court for special leave to appeal against the decision of the High Court.' When the petition ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om that house. It is contended that the word " income only means realisation of monetary benefit and that in the absence of any such realisation by the assessee, the inclusion of any amount by way of notional income under s. 23(2) of the Act in the chargeable income was impermissible, as it was outside the scope of entry 82 of List I of the Seventh Schedule to the Constitution. Entry 82 of List I of the Seventh Schedule to the Constitution empowers Parliament to levy " taxes on income other than agricultural income ". Now it is well-settled that the entries in the Lists in the Seventh Schedule to the Constitution should not be read in a narrow or restricted sense and each and every subject mentioned in the entries should be read as including within its scope all ancillary and subsidiary matters which can, fairly and reasonably be comprehended in it. Words in the Constitution conferring legislative power should receive a liberal construction and should be interpreted in their widest amplitude. The expression " income " according to the Oxford Dictionary means "a thing that comes in ". Income may also be defined as the gain derived from land, capital or labour or any two or more ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his principle has been subject to adverse comment, but once the theory is appreciated, the method may be understood and any confusion of thought created by the words of the charging section, dispelled. The use to which land is put does not (apart from the excepted concerns mentioned in the proviso to para. 1 of Sched. A above) prevent it from being assessed under Sched. A; but if a trade which is not one of those excepted concerns is carried on on property which is owned by the trader and is assessed under Sched. A, an allowance for the annual value is made in computing the profits of the trade. " (emphasis supplied). In Governors of the Rotunda Hospital, Dublin v. Coman [1920] 7 TC 517, 586, 587 which was a case arising from Ireland. Lord Atkinson observed thus : " It would, I think, be well to bear in mind that, to use Lord Macnaghten's words in his celebrated judgment in the London County Council v. Attorney General [1900] 4 TC 265 ; [1901] AC 35 (HL). 'Income-tax... is a tax on income'. When the amount of the income to be taxed under the Act of 1842 and the Acts amending it comes to be measured, different standards are selected, and the words 'profits or gains ' are used in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ven to it in the English Income Tax Act, 1918 under which income attributable to property was chargeable under Schedule " A " thereof. Now, coming to the specific question of the charge arising under s. 23(2) of the Act, it is already seen that in Australia the annual value of the taxpayer's residence owned by himself or used rent-free is taken for consideration for purposes of levy of income tax. In England too in the case of a residence of the assessee, computation of income is made on the basis of presumed income. In D. M. Vakil v. CIT [1946] 14 ITR 298 (Bom), which was a case arising under the Indian Income-tax Act, 1922, the High Court of Bombay held that under section 9 of that Act the tax was payable by an assessee in respect of the bona fide annual value of the property irrespective of the question whether be received that value or not. The High Court of Gujarat has also taken the same view in Sakarlal Balabhai v. ITO [1975] 100 ITR 97. There is one other circumstance which persuades us to take the view that computation of income for purposes of levy of income-tax in accordance with s. 23(2) of the Act is justifiable under entry 82 of List I of the Seventh Schedule to t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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