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TMI Blog1986 (6) TMI 31X X X X Extracts X X X X X X X X Extracts X X X X ..... e Compulsory Deposit Scheme (Income-tax Payers) Act, 1974 hereinafter referred to as "the CDS Act"-after completing the assessment, issued a notice of demand exhibit A, under section 14(1) of the CDS Act, for compulsory deposit of Rs. 50,000. The petitioner gave a representation, exhibit C, that his income excluding the capital gains does not exceed the minimum prescribed and he is not liable to deposit any amount. The Income-tax Officer did not agree with the assessee and issued notice, exhibit B, under section 10 of the CDS Act to the petitioner calling upon him to show cause as to why penalty should not be levied on him for non-payment of the compulsory deposit in the relevant accounting year, i.e., on or before March 31, 1977. The petit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch person or if any other person is assessable under the Income-tax Act in respect of the total income of such person, the person so assessable shall make a compulsory deposit for that assessment year at the rates specified in the Schedule to the Act and Current income is also defined in sub-section (3) of section 3. Under section 5, a depositor, i.e., a person who is liable to make compulsory deposit, is required to make the compulsory deposit within the time specified in section 5. In certain cases, section 6 provides for an order being made by the Income-tax Officer directing persons failing to make compulsory deposit for that assessment year to make compulsory deposit with reference to his current income. Section 6 provides for payment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tters connected therewith or incidental thereto and is enacted in the interest of national economic development. The Act requires a specified class of income-tax payers in a comparatively higher income group to make compulsory deposit within the time specified at the rate specified in the Schedule. On the failure of the deposit by the person liable to make the deposit, he will be exposing himself to penalty under the penal provisions. The amount deposited is liable to be returned after a specified period and carried simple interest at the rate equal to bank deposit rate. It was argued on behalf of the petitioner that this Act provides for public borrowing by the Central Government from a selected class of assessees, the provisions are exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osit and pay tax on his total income and fifty per cent. of the amount saved by not making the deposit. It was argued in that case that (1) Parliament had no competence to incorporate in the Indian Income-tax Act, a provision which was substantially one relating to borrowings by the Central Government from class of taxpayers, (2) the provisions contained in this Chapter are enacted in colourable exercise of legislative power and that in any event they are so harsh and unconscionable that they may be regarded as expropriatory and on that account not within the legislative competence of Parliament, and (3) the provisions of section 280X and Schedule II are discriminatory and infringe the fundamental freedom under article 14. The Supreme C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... half is traceable to entry 97 in List I of the Seventh Schedule. That being so, the CDS Act, even if it is enacted for borrowing money as contended on behalf of the petitioner, was within the competence of Parliament. It was, however, argued that in the scheme in Chapter XXII-A, the taxpayer had an option not to pay the deposit but under the CDS Act, a taxpayer has no option and he has to make the deposit and, therefore, Hari Krishna Bhargav's case [1966] 59 ITR 243 is distinguishable. It is true that under the scheme under Chapter XXII-A, a taxpayer had the option not to pay the deposit. But if he exercised the option and decided not to pay the deposit, he had to pay the tax on his total income and 50% of the amount saved by not making the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he constitutional principles. Another rule of equal importance is that laws relating to economic activities should be viewed with greater latitude than laws touching on civil rights such as freedom of speech, religion, etc., We may now proceed to examine the correctness of the challenge made on behalf of the petitioner. If a classification is based on some real and substantial distinction, bearing a just and reasonable relation to the object sought to be achieved, the classification is valid. Parliament has always the power to make a reasonable classification of persons, objects or transactions for attaining certain objectives. As the preamble states, the Act is enacted to provide in the interest of national economic development for compu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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