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TMI Blog1964 (4) TMI 11X X X X Extracts X X X X X X X X Extracts X X X X ..... I the zamindar would be entitled to compensation at 10 times the net income. The net income would be calculated by deducting from the gross income, inter alia, the average of the income-tax paid in respect of the income from big forest during 30 agricultural years preceding March 31, 1951. On November 30, 1951, the Compensation Officer determined the compensation payable to the respondent at Rs. 2,21,330-12-6. In arriving at that figure he deducted not only the income-tax payable by the respondent but also the super-tax and surcharge payable by him. The average of the income-tax paid by him during the material 30 years was only Rs. 3,760-2-9, but if the average of the super-tax and surcharge was included, the average came to Rs. 7,070-8-0. The result was that the net yearly income of the estate was reduced by Rs. 3,310-5-3 and compensation was paid to him on the basis of the amount so reduced. The respondent moved the Settlement Commissioner under section 15 of the Act for enhancement of the compensation, but the Commissioner confirmed the order of the Compensation Officer. Thereafter, the respondent filed an application in the High Court under articles 226 and 227 of the Constitut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the purpose of ascertaining the net income of an estate one of the deductible items is the average of the income-tax paid in respect of the income received from the big forest. That average is ascertained on the basis of the income-tax paid during the 30 agricultural years preceding the agricultural year in which the relevant date falls. The compensation payable is ten times the net income ascertained under the rules. The relevant date for the purpose of ascertaining the average is the date specified by notification by the State Government under section 3 of the Act : for instance, if the relevant date falls in the year 1951, the income-tax paid during the years 1921 to 1951 will afford the basis for arriving at the average. To appreciate the distinction between the concepts of income-tax and super-tax a brief history of their incidents will not be inappropriate. Under the Income-tax Act of 1886 the total income from various sources was not the criterion for assessment but the different sources alone were the basis for it. For the first time the 1918 Act introduced the scheme of total income for the purpose of determining the rate of tax. Under that Act several heads were enumer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es between the incidents of the two taxes. But two relevant differences may be noticed, namely : (i) though both the taxes are assessed on the total income of a person, the total income for the purpose of income-tax is computed on the basis of income classified under the different heads mentioned in section 6 of the Act, whereas super-tax is not concerned with the different heads, but is payable on the total income so ascertained; and (ii) while super-tax, except in a few cases, is payable by the assessee direct, the income-tax is payable by him direct as well as by deduction. While in the case of income-tax by reversing the process the tax attributable to a particular source can be ascertained, in the case of super-tax no such process is possible as the said liability springs into legal existence only after the total income is ascertained. The only possible method by which the said tax may be split up is by working out the proportion of the tax payable by the assessee in respect of an income from a particular source on the basis of the ratio the said income bears to the total income. But this method is not sanctioned by the Act. It is not legally possible to predicate what particu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herefore, it is not inappropriate to describe a particular tax as attributable to an income from a particular head, but it would wholly be inappropriate to describe that a part of the super-tax is payable in respect of an income from a particular source. The argument of Mr. Rajagopal Sastri, learned counsel for the respondent, that the 30 years mentioned in the rule takes us back to a period when there was no super-tax appears to be not sound, for, as we have stated earlier, super-tax was, payable in one form or other from the year 1917. That apart, if the income-tax takes in super-tax, the non-existence of super-tax in a particular year does not make any difference in ascertaining the average, for the income-tax for that year will be the income-tax without the addition of super-tax. This circumstance is not, therefore, of much relevance and we exclude it from our consideration. The argument that if the legislature intended not to exclude super-tax from the gross income, it would have expressly stated so in the rule is an attempt to put the shoe in the wrong foot. The proper approach, particularly in the case of an expropriatory statute, is to ask the question why the legislatu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the income received from big forest. As super-tax is not a charge in respect of the income from big forest, on the parity of reasoning it shall be held that the word " income-tax " used in clause (c) of rule (2) of Schedule I to the Act excludes super-tax. In Reckitt, In re : Reckitt v. Reckitt , a fund was bequeathed to trustees upon trust for investment and to pay out of the income of the investments " the annual sum of pound 5,000 free of income-tax during the life of the annuitant. The Court of Appeal held that the annuitant was entitled to have the sum paid to her without deduction on account of super-tax and that the trustees must pay the super-tax payable in respect of that sum out of the income of the fund. The conclusion turned upon the provisions of the will. Lord Hanworth M. R. distinguished the decision in Bates, In re : Selmes v. Bates on the ground that Russell J. founded his judgment upon the reference to deductions and also upon the direction to the trustees that a specified sum should be paid after deduction of income-tax in respect thereof and proceeded to observe that in the case before them no reference was made to the system, or the power of the trustees to ma ..... X X X X Extracts X X X X X X X X Extracts X X X X
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