1. In this petition under article 226 of the Constitution, Sri K. Srinivasan, the learned counsel for the assessee-petitioner, has advanced three contentions. They ar : (1) As there is conflict between section 3 of the Indian Income-tax Act, 1922 (to be referred to as 'the Act' hereinafter) and section 23(5)(a) of the Act, the former being the charging section, should prevail over the latter, which according to him, is a machinery section; (2) section 23(5)(a) is ultra vires as the same was beyond the legislative competence of Parliament when it was enacted in 1956; and (3) section 14(2)(aa) is void as it offends article 14 of the Constitution.
2. To appreciate the contentions advanced, it is necessary to mention the material facts. The assessment which is impugned in the present proceedings relate to the assessment year 1960-61, the previous year ending on March 31, 1960. The petitioner was a partner of a registered firm. The income of the registered firm was assessed to tax and the petitioner's share in that income was also assessed to tax. The contention of the petitioner is that the levy made on him on the basis of his share of income in the firm is an invalid levy. It is conceded by Sri Srinivasan, that if section 23(5)(a) of the Act is a valid provision, then the imposition made cannot be held to be invalid. It is for that reason that he was hard put to contend that section 23(5)(a) is an invalid provision. We shall now proceed to examine the various grounds urged by him in support of his contention that section 23(5)(a) is invalid.
3. He firstly contended that there is conflict between section 3 and section 23(5)(a) and, therefore, section 23(5)(a) must yield the ground to section 3, as according to him, section 23(5)(a) is merely a machinery section. Section 3 of the Act say :
'3. Where any Central Act enacts that income-tax shall be charged for any year at any rate or rates tax at that rate or those rates shall be charged for that year in accordance with, and subject to the provisions of, this Act in respect of the total income of the previous year of every individual, Hindu undivided family, company and local authority, and of every firm and other association of persons or the partners of the firm or the members of the association individually.'
4. It is the contention of Sri Srinivasan that under section 3, the taxing authority can tax either the firm or its partners but not both. It is unnecessary to examine the correctness of this contention as in my opinion whatever might be the scope of section 3, the question is put beyond controversy in view of the amended section 23(5)(a) which read :
'23. (5) Notwithstanding anything contained in the foregoing sub-sections, when the assessee is a firm and the total income of the firm has been assessed under sub-section (1), sub-section (3) or sub-section (4), as the case may be, -
(a) in the case of a registered firm,
(i) the income-tax payable by the firm itself shall be determined; and
(ii) the total income of each partner of the firm, including therein his share of its income, profits and gains of the previous year, shall be assessed and the sum payable by him on the basis of such assessment shall be determine :...'
5. Section 23(5)(a) clearly enunciates that in respect of the income earned by a registered firm, not only the registered firm is assessable to tax, but also its partner, to the extent of his share in the income of that firm. The controversy whether section 23 as a whole is a machinery section or not appears to me to be an academic one. So long as the intention of the legislature is clearly gatherable from the provision in question, the setting in which the provision is placed is immaterial. Quite clearly - and on this point there is no controversy - section 23(5)(a) requires the assessing authorities not only to assess the registered firm in respect of its income, but also to assess its partners to the extent of his share in the firm's income, which means section 23(5)(a) is a charging section. It must be remembered that section 3 is a general provision dealing with assessees as a class, whereas section 23(5)(a) is a special provision providing for the assessment of registered firms as well as their partners. If there is any conflict, about which I do not propose to pronounce, between these two provisions, the special provision must prevail as against the general provision. This much appears to me to be absolutely clear. Neither the Act nor the Constitution prohibits double taxation : See Cantonment Board, Poona v. Western India Theatres Ltd. The fact that both the registered firm as well as its partners received their income from the same source is not a relevant consideration for the purpose of section 23(5)(a). For the purpose of the Act, the registered firm is an entity by itself. Its income is liable to be taxed in its hand. Similarly, the share of profits realised by the partner of the registered firm has to be deemed as income of the partner in view of section 23(5)(a). Therefore, the same is again liable to tax. For the purposes of the Act, a deemed income can also be made the subject-matter of ta : see Commissioner of Income-tax v. Bhogilal Laherchand. Whether both the registered firm as well as its partners should be subjected to tax in respect of the same earning is a matter of legislative policy. If the provisions of a taxing statute are clear on a given point and if those provisions are validly enacted, then this court cannot sit in judgment over the soundness of the policy enunciated in those provisions. If there is any conflict between section 3 and section 23(5)(a), in my opinion, the latter provision should prevail for the reasons already mentioned. From this it follows that section 23(5)(a) cannot be held to be an invalid provision as being in conflict with section 3.
6. It was next contended by Sri Srinivasan that Parliament had no legislative competence to enact section 23(5)(a). For finding out the source of the power of Parliament to enact the provision in question, we have to look to entry No. 82 in List I of the Seventh Schedule of the Constitution which read : 'Taxes on income other than agricultural income'. This entry is a legislative topic. Therefore, it must be read widely. The word 'income' is not defined in the Constitution. Hence we have to fall back on its natural and grammatical meaning, which means, 'a thing that comes in' and thus is a word of broadest 'connotation'. There is no gainsaying the fact that the fund that is subject to tax is a fund that comes into the chest of a firm and a portion of the fund flows into the hands of the partners of that firm. Therefore, in that sense, it is an income not only in the hands of the registered firm but also in the hands of its partners. Hence, I do not see any force in the contention of Sri Srinivasan that Parliament was incompetent to enact section 23(5)(a).
7. This takes us to the last contention of Sri Srinivasan that section 14(2)(aa) of the Act is void as it conflicts with the equality clause found in article 14 of the Constitution. Section 14(2)(aa) has intimate relationship with section 23(5)(a). Section 14(2) reads as follow :
'14. (2) The tax shall not be payable by an assessee -
(a) if a partner of an unregistered firm, in respect of any portion of his share in the profits and gains of the firm computed in the manner laid down in clause (b) of sub-section (1) of section 16 on which the tax has already been paid by the firm; or
(aa) if a partner of a registered firm, in respect of that portion of his share in the profits or gains of the firm as is equal to the difference between his share in the total income of the firm and his share in such total income excluding the income-tax, if any, payable by the firm, the shares in either case being computed in the manner laid down in clause (b) of sub-section (1) of section 1 :....'
8. Sri Srinivasan's grievance is that when a Hindu joint family is assessed to tax its members are exempt from tax, when an unregistered firm is subjected to tax, its partners are exempt from tax, but when it comes to the case of a registered firm, not only the firm is made liable to pay tax, but also its partners are made liable to pay tax. This, according to him, is a clear discrimination. But Sri Srinivasan in ignores the fact that while a registered firm is given considerable concessions in the matter of taxation, no such concessions are available either to a Hindu joint family or to an unregistered firm. The provisions of the Act have clearly differentiated a registered firm from other firms as well as from other associations of persons. A clear-cut classification is made between the several units and that classification is made in pursuance of the object of the Act and, therefore, the differentiation made between the several units cannot be considered as a discrimination coming within the mischief of article 14 of the Constitution.
9. For the reasons mentioned above, this petition fails and the same is dismissed with costs. Advocate's fee Rs. 100.
10. Petition dismissed.