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TMI Blog1998 (6) TMI 58X X X X Extracts X X X X X X X X Extracts X X X X ..... such discontinuance or dissolution. Explanation.---For the removal of doubts, it is hereby declared that where before the discontinuance of such business or dissolution of a firm or association hitherto assessed as a firm or association, or, as the case may be, on the company, the crop is harvested and disposed of, but full payment has not been received for such crop, or the crop is harvested and not disposed of, the income from such crop shall, notwithstanding the discontinuance or dissolution be deemed to be the income of the company, firm or association for the year or years in which it is received or receivable and the firm or association shall be deemed to be in existence, for such year or years and such income shall be assessed as the income of the company, firm or association according to the method of accounting regularly employed by it immediately before such discontinuance or dissolution." Earlier section 26(4) was in existence with more or less the same language except that the entity of company, firm or association of persons was added beside the word "dissolution with discontinuance" in the amendment by Act No. 18 of 1997. Clause 2(1)(p) defining person was also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ence. The object of section 27(1) is to empower the Officer to assess the income of the firm which accrued prior to its dissolution even though by the time of the assessment, the firm has stood dissolved. The fiction cannot be extended to a case where the income is received after the dissolution of the firm by the erstwhile partners." It was held that under section 27 a dissolved firm could not be deemed to be in existence for the purpose of assessment in respect of the income derived after the date of dissolution. It was further observed : "There is nothing in this provision to indicate that where the firm is dissolved and some income is received after the dissolution in respect of agricultural produce supplied by the firm before its dissolution, the firm itself could be assessed in the year of receipt of income notwithstanding its dissolution. Even in Uddappa Gowda's case, referred to above, the Division Bench dealing with the Explanation to section 30(2) which had been added by means of an amendment has held that nowhere the Explanation creates a fiction about the Hindu undivided family being in existence for the purpose of the said income deemed to have been received by it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to section 26(4) fixes a liability on the dissolved firm whereas section 26(4) has cast that liability on the recipient and as such the provisions of the Explanation are beyond the scope of the main section and an uncertainty regarding the person on whom tax has to be levied has been created. The apex court in the case of Govind Saran Ganga Saran v. CST [1985] 60 STC 1, have made the following observations : "The components which enter into the concept of a tax are well known. The first is the character of the imposition known by its nature which prescribes the taxable event attracting the levy, the second is a clear indication of the person on whom the levy is imposed and who is obliged to pay the tax, the third is the rate at which the tax is imposed, and the fourth is the measure or value to which the rate will be applied for computing the tax liability. If those components are not clearly and definitely ascertainable, it is difficult to say that the levy exists in point of law. Any uncertainty or vagueness in the legislative scheme defining any of those components of the levy will be fatal to its validity." If the contention of learned counsel for the petitioners is exam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act it can help or assist the court in interpreting the true purport and intendment of the enactment, and right with which any person under a statute has been clothed or set at naught the working of an Act by becoming an hindrance in the interpretation of the same." In the case of C. A. Abraham v. ITO [1961] 41 ITR 425 (SC), the question regarding imposition of penalty after the dissolution of the firm was considered and it was held that the provisions for imposition of penalty are a part of the machinery for assessment of tax liability. In CIT v. Raja Reddy Mallaram [1964] 51 ITR 285 (SC), after the dissolution of association of persons, service of notice on one of its members was the subject-matter of dispute, whether it can be enforced against the other members who were not served. It was held that what can be assessed is the income of the association received prior to its dissolution and the members of the association would be jointly and severally assessed thereto in their capacity as members of the association. For the purpose of such assessment the procedure is that applicable for assessment of income of the association as if it had continued. The contention that the ot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l be deemed to be in existence of such year or years, as such income), shall be assessed as the income of such family or branch or Aliyasanthana family or Marumakkattayam tarwad or tavazhi according to the method of accounting regularly employed by it immediately before such partition." It was further observed thus : "In the Explanation it is set forth that in respect of pre-partition income, which is received after partition in respect of certain crops, such income should be treated as income in the hands of the erstwhile Hindu undivided family. It is clearly intended to bring into existence for the purpose of assessment the Hindu undivided family or such entity referred to in the Explanation. Thus, the defect pointed out by this court in Kenche Gowda's case [1988] 174 ITR 389, on the basis of the expression used under section 30(2), the Explanation as in existence then and the one that was dealt with in Uddappa Gowda's case, we must hold that the Explanation now introduced by Act No. 18 of 1994, were several defects pointed out in those two decisions. Thus, the defects pointed out stood cured." The validity of the Explanation was upheld. Therefore, this contention also has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ucrose content is the same for sugarcane in the State, the marginal difference being too inconsequential to build a case of discrimination or is blamable on the old machinery. Neither in intent nor in effect is there any discriminatory treatment discernible to the constitutional eye. Price is surely a safe guide but other methods are not necessarily vocational. It depends. Practical considerations of the administration, traditional practices in the trade, other economic pros and cons enter the verdict but, after a judicial generosity is extended to the legislative wisdom, if there is writ on the statute perversity, 'madness' in the method or gross disparity, judicial credulity may snap and the measure may meet with its funeral. Even so, taxing statutes have enjoyed more judicial indulgence. This court has uniformly held that classification for taxation and the application of article 14, in that context, must be viewed liberally not meticulously. We must always remember that while the executive and legislative branches are subject to judicial restraint, 'the only check upon our exercise of power is our own sense of self-restraint'." The following observations in Murthy Match Wor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions of article 14, 19 or 301 has to be exercised with circumspection bearing in mind that the power of the State to levy taxes for the purpose of governance and for carrying out its welfare activities is a necessary attribute of sovereignty and in that sense it is a power of paramount character. In what cases a taxing statute can be struck down as being unconstitutional is illustrated by the decision of this court in Kunnathat Thathuni Moopil Nair v. State of Kerala [1961] 3 SCR 77 ; AIR 1961 SC 552. In that case, a careful examination of the scheme of the relevant provisions of the Travancore-Cochin Land Tax Act (No. 15 of 1955) satisfied this court that the said Act imposed unreasonable restrictions on the fundamental rights of the citizens, conferred unbridled power on the appropriate authorities, introduced unconstitutional discrimination and in consequence, amounted to a colourable exercise of legislative power. It is in regard to such a taxing statute which can be properly regarded as purely confiscatory that the power of the court can be legitimately invoked and exercised..." In Khandige Sham Bhat v. Agrl. ITO [1963] 48 ITR 21 (SC), also the provisions of article 14 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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