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TMI Blog1993 (12) TMI 7X X X X Extracts X X X X X X X X Extracts X X X X ..... tion No. 324 of 1980 alone need be looked into, Paragraphs Nos. 12, 14 and 16 of the affidavit read as follows: " 12. It is submitted that the pith and substance of the Finance Act is to levy tax on agricultural income. This has been made clear from the Finance Minister's Budget Speech for 1973-74. The provision for aggregation of agricultural income with non-agricultural income was introduced by the Finance Act, 1973, and it appears from the Finance Minister's Budget Speech for 1973-74 that the object of the aggregation was in effect to tax the agricultural income. The Finance Minister stated as follows in his Budget Speech: "As Honourable Members are no doubt aware, the Committee on Taxation of Agricultural Wealth and Income has sugge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g section of the Income-tax Act, 1961, and the same meaning has been given to the terms in the Finance Act. Agricultural income has not been contemplated as an item to be included in the total income in the definition of the charging section, and that, therefore, it cannot be taken into account as aggregate as if it were comprised in the total income. It is submitted that agricultural income is not income at all contemplated for the purpose of levy of tax under the Income-tax Act, 1961 (vide section 10(1) of the Income-tax Act, 1961), and consequently cannot be treated as income or even deemed to be income as forming part of the total income even for rate purposes. It is respectfully submitted that section 2(2) in so far as it enables the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... determination of the rate of tax. However, this rule would apply only if there are no provisions to the contrary. The provisions of the Finance Acts of 1973 and 1974 make such specific provisions and this rule would not render the provisions invalid. Income-tax is a tax on income of the previous year and it would not cover something which is not the income of the previous year or made fictionally so. However, there is nothing to prevent the Legislature from fixing the rate and from permitting the rate to fluctuate in relation to some outside factor but the rate must be applied to the total income under the Income-tax Act and the tax that an assessee had to pay must be at a rate in respect of the total income. The Finance Acts of 1973 and 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ode of computation of the rate of tax as provided by the impugned provisions is adopted. This classification is reasonable and based on intelligible differentia. It is not unconnected with the objects of the taxing statute. Therefore, the contentions raised against the validity of sections 2(6), 2(7)(e) and Part IV of the First Schedule to the Finance Act, 1973, and sections 2(2), 2(7)(b)(ii),2(8)(e) and Part IV of the First Schedule to the Finance Act, 1974, must be rejected and the petitions dismissed. " The learned judges of the Division Bench of the Karnataka High Court (see [1986] 161 ITR 589), while repelling identical contentions, held as follows : "A State Legislature has the competence to enact a law with respect to entry 46 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... position than the assessees without agricultural income. The provisions of the Finance Act selects assessees with agricultural income because of the belief of Parliament that capacity to pay tax increases with the increase in the income. The purpose of classification is to subject the assessees with agricultural income who are in a position of economic superiority to a higher rate of tax on their 'net income' only. Making the burden of tax on the net income heavier in proportion to the increase in the agricultural income cannot be said to be unreasonable. An assessee with agricultural income occupies a position of economic superiority by reason of his larger income and to make his tax liability heavier is not arbitrary but is only an attemp ..... X X X X Extracts X X X X X X X X Extracts X X X X
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