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Sunil Chandra Nawn Vs. Union of India and ors. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtKolkata High Court
Decided On
Case NumberCivil Revision Case No. 3705 (W) of 1971
Reported in(1976)5CTR(Cal)180
AppellantSunil Chandra Nawn
RespondentUnion of India and ors.
Cases ReferredMark Graves vs. People of
Excerpt:
- orders. mukharji, j. :- in this application the question that arises for consideration, is whether the income-tax act, 1961 contains levies on capital assets and therefore to that extent wealth tax act, 1957 containing those levies has been impliedly repealed. this question arises in this application under article 226 of the constitution of india.2. at all the material times the petitioner had income from house property and land shares in companies and had earned certain income as directors remuneration. the petitioner is also an assessee under the wealth tax act and on the 12th of february, 1964 the petitioner was assessed to wealth tax for the assessment year 1962-63 under s. 16 (5) of the wealth tax act, 1957 on a net total wealth of rs. 10,00,000/-. on the 20th of february, 1964.....
Judgment:
ORDER

S. Mukharji, J. :- In this application the question that arises for consideration, is whether the Income-tax Act, 1961 contains levies on capital assets and therefore to that extent Wealth Tax Act, 1957 containing those levies has been impliedly repealed. This question arises in this application under Article 226 of the Constitution of India.

2. At all the material times the petitioner had income from house property and land shares in companies and had earned certain income as directors remuneration. The petitioner is also an assessee under the Wealth Tax Act and on the 12th of February, 1964 the petitioner was assessed to wealth tax for the assessment year 1962-63 under S. 16 (5) of the Wealth Tax Act, 1957 on a net total wealth of Rs. 10,00,000/-. On the 20th of February, 1964 Income-tax-cum-Wealth-tax Officer served a notice of demand directing the petitioner to pay wealth-tax of Rs. 8,000/- for the aforesaid assessment year. The petitioner presented an appeal to the Appellate Assistant Commissioner of Wealth Tax, Range-C, Calcutta, against the quantum of assessment. The Appellate Assistant Commissioner, however, by his order dated the 22nd of April, 1964 confirmed the assessment and dismissed the appeal. The petitioner, thereafter, presented an appeal before the Income-tax Appellate Tribunal on the 12th of May, 1967 dismissed the appeal. In the meantime the petitioner was assessed to income-tax for the aforesaid assessment year 1962-63 on the 27th of December, 1965 on the total income of Rs. 39,864/- which sum included capital gains of Rupees 10,723/- for the previous year ending on the 31st of March, 1962. The said capital gains according to the computations arose from the transfer of capital asset, namely, 37/1 Jatindra Mohan Avenue premises which was owned by the petitioner along with his brother, each having equal share. The petitioner preferred an appeal against the aforesaid assessment before the Appellate Assistant Commissioner and thereafter before the Appellate Tribunal but was unsuccessful before both the Authorities. On the 30th of March, 1965 the Income-tax-cum-Wealth-tax Officer forwarded a certificate under sub-sec. (2) of Section 46 of the Indian Income-tax Act, 1922, as applied for the purpose of wealth-tax by Section 32 of the Wealth Tax Act 1957, to the Collector, 24-Parganas, for the recovery of the wealth tax of Rs. 8,000/-. The Certificate Officer, Alipore, issued a notice on the 22nd of December, 1965 under Rule 2 of the Second Schedule the Income-tax Act, 1961. The petitioner filed objection and the Tax Recovery Officer by his order dated the 30th of May, 1968 overruled the said objection. Thereafter, the petitioner presented an appeal to the Additional District Magistrate, 24-Parganas, who by his order dated the 24th of September, 1969 allowed the objection and vacated the proceedings under the Second Schedule to the Income-tax Act, 1961, and directed the Certificate the Certificate Officer to proceed in accordance with law. Thereupon the Certificate Officer filed a certificate under Sec. 4 of the Bengal Public Demands Recovery Act, 1913, in pursuance of the certificate forwarded by respondent No. 2, being the Income-tax-cum-Wealth-tax Officer under Section 46 (2) of the Income-tax Act, 1922. On receipt of the said notice under Section 7 of the Bengal Public Demands Recovery Act, 1913, the petitioner filed objection denying his liability, contending, inter alia that the impugned certificate related to wealth-tax and the Wealth Tax Act, 1957 had been impliedly repealed with effect from the 1st of April, 1962 when the Income-tax Act, 1961 came into force. The said Certificate Officer by his order dated the 21st August, 1971 heard the objection and overruled the same. The petitioner challenges the said order of the Certificate Officer in this application under Article 226 of the Constitution and the petitioner also challenges the assessment of wealth-tax for the aforesaid assessment year.

3. Various points had been taken in this petition under Article 226 of the Constitution but Counsel for the petitioner urged only aspect of the matter. He and tax on capital assets having been introduced therein, in the said Income-tax Act, 1961, the Wealth Tax Act, 1957 so far as assessment year 1962-63 was concerned had ceased to exist. He drew my attention to Section 12-B of the Indian Income-tax Act, 1922 and Finance Act (No. 3), 1956, being Act No. 77 of 1956 which introduced capital gains tax in Section 12-B of the Indian Income-tax Act, 1922. He also drew my attention to the relevant provisions, i.e. Section 4, Section 45, Section 52 and S. 69 of the Income-tax Act, 1961. He also referred to the relevant provisions of the Wealth Tax Act, 1957 and referred to Sec.3 which is the charging section and the definition of 'valuation date' in S. 2(q) of the Wealth Tax Act, 1957 and S. 2(11) of the Indian Income-tax Act, 1922. He also drew my attention to the definition of 'net wealth' as provided in Section 2(m) of the Wealth Tax Act, 1957. He also referred me to Section 7 of the Wealth Tax Act, 1957 indicating that how the value of any asset other than cash for the purpose of the Wealth Tax Act had to be determined. The preamble to the Income-tax Act, 1961 was relied upon by him. In short his submission was that Section 4 of the Income-tax Act, 1961 read with Section 45, Section 52, Section 68, Section 69, Sections 69-A and 69-B of the Income-tax Act, 1961 were sections which essentially imposed taxes on the capital value of the assets and therefore tax on those items could have only been levied by virtue of entry 86 of list I of the 7th Schedule of Constitution. Sec. 3 read with Sec. 2 (m) of the Wealth Tax Act, 1957 in conjunction with Sec. 7 of the said Act, it was argued by Counsel for the petitioner, imposed levies on the value of the capital assets and that could only be justified, according to the Counsel for the petitioner, by virtue of the power of the Parliament as contained in entry 86 of list I of the 7th schedule to the Constitution. Counsel for the petitioner submitted that under our Constitution there could not be more than one imposition on the same subject by virtue of the competency enumerated in the legislative lists. According to him the two legislations on the same subject by virtue of the power in the items of the legislative list could not co-exist. He referred to the preamble of the Income-tax Act, 1961. The said preamble provides, that the Act was to consolidate and amend the law relating to income-tax and super-tax. He submitted that the object was to consolidate the other existing tax laws with a view to bring these within one Code complete in itself. In this connection Counsel referred me to the decision of the Judicial Committee in the case of the Administrator-General of Bengal vs. Premlal Mullick. ILR (1895) Cal 788 . Counsel drew my attention to the observations of Lord Watson appearing at p. 798 of the report to the effect that the very object of consolidation was to collect statutory law bearing upon a particular subject, and to bring it down date in order that it might form a useful code applicable to the circumstance existing at the time when the consolidating Act was passed. Relying on the aforesaid observations, Counsel submitted, the purpose of the Income-tax Act, 1961 was to consolidate all other taxation laws and, therefore, the imposition of levies on the capital value of the assets contained in other taxation provisions stood abrogated. Item 82 of List 1 of the 7th Schedule to the Constitution empowers Parliament to impose taxes on income other than agricultural income. It is identical to entry 54 of list 1 of the Government of India Act, 1935. Entry 86 of list 1 of 7th schedule empowers the Parliament to impose taxes on the capital value of assets, exclusive of agricultural land, on individuals and companies and also taxes on the capital of companies. It is in identical terms with entry 55 of list 1 of the Government of India Act, 1935. Entry 97 of list of the 7th Schedule empowers the Parliament to legislate on any other matter not enumerated in list II or list III including any taxes not mentioned in either of those lists.

4. The main question that has been canvassed before me, is; whether the Income-tax Act, 1961 in so far as its provisions impose levies on certain aspects of the capital assets, these are on capital assets and not on income. In this connection it would be relevant to refer to Section 45 of the Income-tax Act, 1961 which imposes tax on capital gains, Section 45 provides as follows :

'45. Capital gains - (1) Any profits or gains arising from the transfer of a capital asset effected in the previous year shall, save as otherwise provided in Sections 53 and 54 be chargeable to income-tax under the head 'Capital gains', and shall be deemed to be the income of the previous year in which the transfer took place.'

Section 52 of the Act empowers the Income-tax Officer to compute capital gains under Section 45 in certain cases of under-statement of the value. Section 68 of the Income-tax Act, 1961 provides that where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof, or the explanation offered by him is not opinion of the Income-tax Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year. Section 69 provides that where in the financial year immediately preceding the assessment year the assessee has made investments which are not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of the investments or the explanation offered by him is not, in the opinion of the Income-tax Officer, satisfactory, the value of the investments may be deemed to be the income of the assessee for such financial year. Section 69-A deals in the same line with unexplained money, bullion, jewellery, etc. Section 69-B deals with the amount of investments etc. not fully disclosed in the books of account. The question, is, whether these impositions on profits and gains arising from the transfer of capital assets or any unexplained investments or unexplained money or cash credits are taxes or impositions on capital value of assets. If these are taxes on income then these can only be justified by virtue of entry 82 of list I of the 7th schedule. If on the other hand these are impositions other than impositions on income being impositions on value of assets these must be justified by virtue of either entry 86 of list I or entry 97 of list II of the 7th schedule to the Constitution.

5. The Supreme Court had occasions to consider the validity of Wealth Tax Act, 1957 and in this connection had also occasion to consider the nature of the impositions imposed by the Wealth Tax Act, 1957. The first case which is relevant on this point to which I was referred to is the decision in the case of Sudhir Chandra Nawn vs. Wealth Tax Officer, Calcutta, 69 ITR 897. The Supreme Court observed that the charge imposed by Section 3 of the Wealth Tax Act, 1957, was on the 'net wealth on the corresponding valuation date' and not on the increase in the wealth of the assessee or accretion to the wealth of the assessee since the last valuation date. The Supreme Court found that there was no constitutional prohibition against Parliament levying taxes in respect of the same subject-matter or taxing events in successive assessment periods. The Wealth Tax Act, 1957, according to the Supreme Court, was within the legislative competence of Parliament under entry 86 of list I of the 7th schedule to the Constitution, and the tax which was contemplated by entry 86 of list I of Sch. VII to the Constitution was not directly a tax on lands and buildings which was attached to the capital value and assets of individuals and companies on the valuation date. The wealth tax was not imposed on the components of the assets of the assessee. It was imposed on the assets which the assessee owned and in determining the net wealth not only the encumbrances specifically charged against any item of asset, but the general liability of the assessee to pay his debts and to discharge his lawful obligations had to be taken into account. According to the Supreme Court entry 49 of list II contemplated levy of taxes on lands and buildings or both as units. It was not normally concerned with the division of interest or ownership in the units of lands or building which were brought to tax. Tax on lands and buildings was directly imposed on lands and buildings, and bore a definite relation to it. By legislation in exercise of powers under entry 86 list I, tax was contemplated to be levied on the value of the assets. In the case of Asst. Comm. of Urban Land Tax, Madras vs . Buckingham and Carnatic Co. Ltd. : [1970]75ITR603(SC) the Supreme Court observed that the Madras Urban Land Tax Act, 1966 in imposing taxes on urban lands at a percentage of the market value was entirely within the ambit of entry 49 of list II of the 7th schedule to the Constitution of India and was within the competence of the State Legislature and did not in any way trench upon the field of legislation of entry 85 of list I. As regards entry 86 of list I, according to the Supreme Court, the basis of taxation was the capital value of the asset. In the case of Union of India vs . Harbhajan Singh Dhillon : [1972]83ITR582(SC) , the Supreme Court had occasion to deal with the nature of imposition of Wealth Tax and as it stood prior to and after the 1969 amendment. The Supreme Court was considering whether Section 24 of the Finance Act, 1969 which incorporated amendments to the relevant provisions of the Wealth Tax Act, 1957, having the effect of including the capital value of agricultural lands in computing the net wealth for the purposes of wealth-tax was within the legislative competence of Parliament. The Supreme Court was of opinion that the Wealth Tax Act was not a law in respect of entry 49 of list II and did not impose a tax mentioned in entry 49. The Supreme Court was of opinion that the Wealth Tax Act was valid either under entry 86 of list I or read with entry 97 standing alone.

6. In the alternative Counsel for the petitioner contended that the basic legislative entry both for imposition of capital gains tax under the Income-tax Act, 1961 and Wealth Tax Act was entry 82 of list I of the schedule being the entry for tax on income. Counsel further submitted that for the purpose of making the two legislations constitutionally valid the theory that these were taxes on income had been resorted to; otherwise, the Income-tax Act, 1961 in as much as it imposed capital gains tax and the Wealth Tax Act, 1957 would become unconstitutional and invalid in view of the provisions of Article 270 of the Constitution. Counsel submitted that tax was compulsory exaction by public authority for public purposes and enforceable by law and was not payment for services rendered. Reliance in this connection was placed on the observations of the Supreme Court in the case of State of Rajasthan vs . Sajjanlal Panjawat : [1974]2SCR741 . Therefore, in order to be a valid tax, Counsel submitted, the tax should be for a public purpose and the purpose of the different taxes have been mentioned, according to Counsel for the petitioner, in the provisions of Chapter I, Part XII, of the Constitution dealing with Finance, Property, Contracts and Suits, etc. The Articles subsequent to Article 268 upto Art. 272 of the Constitution deal with the distribution of revenue between the Union and the States. A reference to those Articles would indicate that Wealth Tax or Capital Gains Tax is not one of the taxes referred to in those articles and unless these two taxes, namely, imposition of the Wealth Tax and the capital gains tax were treated as taxes on income and allocated in the manner contemplated by Article 270 of the Constitution, the imposition of the Wealth Tax and in the Capital Gains Tax in the Income-tax Act would be without purpose and as such invalid. Counsel therefore, submitted that this Court should not take a view about the nature or the provisions of the Wealth Tax Act or the Income-tax Act containing the provisions for imposition of capital gains tax which would ender these two provisions ultra vires the Constitution and avoid a construction leading to such a result and if such a course was adopted then these two legislations should be treated basically as taxes on income and, therefore, to be constitutionally valid must be based on the powers of the Parliament under entry 82 of list I of the 7th schedule. In that view of the matter counsel submitted, both those two legislations, that is to say, Income-tax Act, 1961 containing the provisions for imposition of capital gains tax and the Wealth Tax Act trenched upon the same field namely, the field permitting the Parliament to tax income and therefore, the latter legislation, that is to say, Income-tax Act, 1961 should be held to have repealed the provisions of the Wealth Tax Act, 1957. It was also urged that regard should be had to the legislative practice which permitted one legislation at a particular point of time in respect of the powers enumerated in the legislative field. Having regard to the legislative practice and if the two enactments, namely, Income-tax Act, 1961 containing inter alia the provisions for imposition of capital gains tax and the Wealth Tax Act providing for the imposition of tax on the capital value of the assets were construed as tax on income then the latter Act should be held to have repealed the former, as these two contained provisions on the same field of legislation.

7. In order to resolve the controversy that have been raised in this case it is necessary, in my opinion, to determine the following questions :-

I. What is the true nature and character of the Income-tax Act, 1961 in so far as it imposes tax on the capital gains and in so far as it imposes tax on unexplained source of money and or unexplained investments ?

II. To what field of legislative entry does this legislation containing different provisions belong ?

III. What is the true and character of the Wealth Tax Act, 1957 in so far as it imposes tax on the capital value of asset ?

IV. To what legislative field does the provision belong ?

V. If Wealth Tax Act, 1957 or the Income-tax Act, 1961 containing the provisions for the imposition of capital gains tax are legislation by virtue of entry 86 of list 1 of the 7th Schedule or by virtue of entry 97 of list 1 of the 7th Schedule or by any other entry of list 1 of the 7th Schedule are they void because no purpose is indicated ?

VI. Is there any repugnancy or inconsistency between the provisions of the Income-tax Act, 1961 and the Wealth Tax Act, 1957 ?

I have referred to the provisions of the Income-tax Act, 1961 and provisions of Section 45 of the said Act. Section 45 which charges capital gains provides that any profits or gains arising from the transfer of a capital asset effected in the previous year shall be chargeable to income-tax under the head 'capital gains' and 'shall be deemed to be the income' of the previous year in which the transfer took place. Section 52 merely provides for computation of the said capital gains in case of under-statement. Section 68, Section 69, Sections 69-A and 69-B similarly provide for taxation of cash credits and unexplained money or unexplained investments. The question, is, are these impositions taxes on income Income is, as has been said, in well known decisions. What comes in in whatever forms. Lord Wright in Kamakshaya Narain Singh vs. Comm. of Income-tax, 11 ITR 513 observed that income was a word difficult and perhaps impossible to define in any precise general formula. It was a word of widest connotation. The Indian Income-tax and Excess Profits Tax (Amendment) Act (Act XXII of 1947) which amended the Indian Income-tax Act, 1922 by enlarging the definition of the term 'income' in Section 2 (6-C) so as to include capital gain and adding a new head of income in Section 6 and inserting the new Sec. 12-B relating to capital gains of Indian Income-tax Act, 1922 was the subject-matter of consideration by the Supreme Court in the case of Navinchandra Mafatlal, Bombay vs . Commissioner of Income-tax, Bombay City : [1954]26ITR758(SC) . There the Supreme Court at p. 764 of the report referred to numerous authorities and the dictionary meaning to the word 'income'. According to the dictionary it means 'a thing that comes in'. The Supreme Court observed that the word 'income' in entry 54 in List 1 of the 7th Schedule to the Government of India Act, 1935 should be given its widest connotation. The Supreme Court held that capital gains were included in 'income'. In the case of Travancore Rubber and Tea Co. Ltd. vs . State of Kerala, : [1963]48ITR102(SC) : the Supreme Court was considering the word 'income' in entry 82 of list I and entry 46 of list II of the 7th Schedule to the Constitution and the Supreme Court was of the view that the word 'income' had a very wide meaning and was not restricted in its meaning to gross receipts after deducting the necessary expenses incurred for the purpose of getting those receipts. The Supreme Court, therefore, expressly approved the observations of the Supreme Court in the case of Navinchandra Mafatlal Bombay vs. Comm. of Income-tax, Bombay City (supra). The word 'income' therefore has very wide meaning and the same has been adopted to mean any thing which arises or comes in or accrues or results in gain. Under Section 45 or Section 69, Section 69-A and 69-B, the value and possession of certain assets are deemed to be income under the Income-tax Act, 1961 and taxed accordingly. Section 45 of the Income-tax Act taxed what is profit or gain arising as a result of a transaction and for the computation of that income the deeming provisions have been introduced. Section 68, Section 69-A and 69-B of the Income-tax Act, 1961 also deal with what are supposed to be receipts represented by cash credits or investments or accretions to property.

8. On the question whether I should rely on the observations of the Supreme Court in the case of Navinchandra Mafatlal, (supra), it was submitted that the said observations were made by the Supreme Court in an appeal from the decision in a reference under the Indian Income-tax Act, 1922 and Supreme Court was concerned with the vires of the Indian Income-tax and Excess Profits Tax (Amendment) Act. It is now well settled that the Supreme Court is not competent to decide the question of vires in an appeal from a reference under the Income-tax Act. Reliance was placed on the decision of the Supreme Court in the case K. S. Venkataram and Co. (P) Ltd. vs . State of Madras : [1966]60ITR112(SC) . Counsel for the respondents, however, contended that the observations of the Supreme Court were entitled to respect. Further, these observations even if these were obiter were binding on this Court. On the other hand, it was contended on behalf of the petitioner that in order to be an obiter the observations must be made by a Court competent to make those observations in relations to a particular matter but not relevant for the purpose of deciding the controversy before the Court. The observations made by the Supreme Court, according to Counsel for the petitioner, which had no jurisdiction to make the observations, were not even obiter and should be ignored. According to Counsel for the petitioner in an appeal under reference under Section 66(2) of the Indian Income-tax Act, 1922 the Supreme Court had no jurisdiction to go into the vires of the Act. Therefore, the Supreme Court was not authorised or competent to make the observations. In the premises, it was submitted that those observations should be ignored. It is not necessary for me to decide this controversy. I am in respectful agreement with the meaning given to the expression 'income' in the said decision of Navinchandra Mafatlal, supra, not because neither these observations are obiter of the Supreme Court nor because these observations are binding on me but because I am in respectful agreement with the reasoning expressed by these observations. Secondly, these observations have been approved by the Supreme Court itself in the case of Travancore Rubber and Tea Co. Ltd. vs . State of Kerala : [1963]48ITR102(SC) which was a decision given by Supreme Court in an application under Article 32 of the Constitution.

9. The Income-tax Act, 1961, therefore, in my opinion, with the aforesaid provisions to which learned Counsel has referred to, is still an Act on the income. The charging section being Section 4 of the Act makes that position clear. As it is a tax on income even with the provisions contained in Section 45, Section 68, Section 69 and Section 69-A the imposition is by virtue of the power to legislate under entry 82 of list 1 of the 7th Schedule to the Constitution.

10. The next question is what is the nature and character of the Wealth Tax Act, 1957. Section 3 is the charging section of the Wealth Tax Act, 1957 and it is a tax on the net wealth on the corresponding valuation date of every individual, Hindu undivided family and company. For the computation of the net wealth different sections provide the mode and procedure. It is tax on the factum of possession or these assets be longing to the assessee concerned. The nature of the imposition came up for consideration before the Supreme Court in the Case of Sudhir Chandra Nawn vs. Wealth Tax Officer, Calcutta, 59 ITR 897. The controversy that arose before the Supreme Court was whether the Wealth Tax Act, 1957 was a legislation which was under entry 49 of list II of the 7th Schedule or entry 86 of list I of the same Schedule. In other words, is the Wealth Tax a tax on the capital value of the assets or a tax on lands and buildings It was held by the Supreme Court that the tax imposed that the tax imposed by Section 3 of the Wealth Tax Act, 1957 was on the net wealth on the corresponding valuation date and not on the increase in the wealth of the assessee or accretions to the wealth of the assessee since the last valuation date. The Supreme Court further held that there was no constitutional prohibition against the Parliament levying tax in respect of the same subject-matter of taxing even in successive assessment periods. The Supreme Court held that the levy of tax was within the legislative competence of Parliament under entry 86 of list I of the 7th schedule to the Constitution. The tax which was contemplated by Entry of the 7th Schedule to the Constitution was not directly a tax on lands and buildings. It was a tax on the capital value of the assets of individuals and companies on the valuation date. The wealth tax was imposed on the components of the assets of the assessee. It was imposed on the total assets which the assessee owned and in determining the net wealth not only the encumbrances specifically charged against any item of asset, but the general liability of the assessee to pay his debts and to discharge his lawful obligations had to be taken into account. Entry 49 of the list II contemplated the levy of tax on lands and buildings or both as units. It was normally not concerned with the division of interest or ownership in the units of the lands or buildings. The validity of the Wealth Tax Act, 1957 after the Finance Act, 1969 which incorporated amendments to the relevant provisions of the Wealth Tax Act, 1957 by including the capital value of agricultural lands in computing the net wealth for the purpose of the wealth tax was subject-matter of challenge before the Supreme Court in the case of Union of India vs . Harbhajan Singh Dhillon : [1972]83ITR582(SC) . There the learned Judges of the Supreme Court held that Section 24 of the Finance Act, 1969 which incorporated the amendments to the relevant provisions of the Wealth Tax Act, 1957, included the capital value of agricultural lands in computing the net wealth for the purposes of wealth tax was within the legislative competence of the Parliament. The majority of the Judges was of the view that the Wealth Tax Act, 1957, as it stood prior to and after the 1969 amendment, fell within entry 97 of list I of schedule 7 of the Constitution. Sikri, C.J. who delivered the judgment of the majority of the Judges posed two questions namely, first, was the impugned legislation with respect to entry 49 of list II; and secondly, if it was not, was it beyond the legislative competence of the Parliament The majority of the learned Judges was of the view that it was unthinkable that the Constitution-makers, while creating a sovereign democratic republic, with held certain matters or taxes beyond the legislative competence of the legislatures in this country legislating either singly or jointly. There was therefore no field of legislation which would be beyond the power of either the Parliament or the State Legislature. The function of Article 246 (1) of the Constitution, read with entries 91 to 96 of list I was to give positive power to Parliament to legislative in respect of those entries. The object was not to debar Parliament legislating on a matter even if the other provisions of the Constitution enabled it to do so. Article 248 was framed in the widest possible terms. The controversy before the Supreme Court was whether the Act to levy tax after incorporating the capital value of agricultural wealth was an Act under entry 49 of list II or not. The majority of the learned Judges answered it by saying that it was not so. Therefore, according to the majority of the Judges of the Supreme Court the legislation, was valid either under entry 86 of list I read with 97 of list I, or entry 97 standing by itself. The Supreme Court also reiterated that the function of the legislative lists in the Constitution was not to confer powers but merely to demarcate the field. Mr. Justice Mitter who concerned with the judgment of the Chief Justice Sikri was of the view that the expression capital value of assets did not take in either the general liabilities of the individual owning them or in particular the debts owed in respect of them. According to the said learned Judge the subject-matter of wealth tax including or excluding agricultural lands, was not covered by entry 86 of list I read with Article 246, of the Constitution, but by entry 97 of list I read with Article 248 of the Constitution. The majority was of course of the view that the residuary power conferred by Article 248 covered power in respect of matters not dealt with in Article 246 and not be found in any of the three lists. According to the minority after the amendment the legislation was a piece of legislation covered by entry 49, list II and was, therefore, beyond the competence of Parliament and the Act suffered therefore from legislative incompetency. In my opinion, therefore tax under the Wealth Tax Act is a tax on the value of the assets and therefore as the Supreme Court observed that it must be a tax by virtue of entry 86 read with entry 97 of list I or entry 97 of list I of the 7th Schedule.

11. It is now necessary therefore to consider whether there is a possibility of the Wealth Tax Act, 1957 or the Income-tax Act, 1961 so far as it relates to imposition of tax on capital gains to be struck down as ultra vires because no purpose is indicated in respect of those levies. Counsel as mentioned hereinbefore relied on the theory that taxation was compulsory exaction for public purposes and if these impositions were not impositions in the nature of tax on income then there was no purpose indicated in Chapter XII of the Constitution. Therefore these taxes were for no purpose and as such not valid taxes. It is true that Articles 268, 269, 270, 271 and 272 deal with the allocation of funds between the Centre and the States and these Articles do not cover realisation by imposition on capital gains or on capital value of the assets. But Article 266 of the Constitution provides for consolidated fund in respect of revenues realised by the Centre. Counsel submitted that all revenues under Article 266 of the Constitution must be revenues as contemplated in Articles 268 to 272. I am unable to accept this contention. There is no warrant for cutting down the amplitude of revenues under Article 266 of the Constitution. Furthermore, Article 280 postulates formation of a Finance Commission for allocation of funds. Apart from that the validity of the taxation provision or the legislation in respect of tax imposed, in my opinion, must be judged by the provisions of the Article 248 of the Constitution read with list I. It may also be mentioned that the object of Act No. 27 of 1957, namely, the Wealth Tax Act, 1957, is to impose an annual tax on the net wealth of individuals, Hindu undivided families and companies. Apart from the fact that a composite tax system of this type of tax helps to satisfy the criterion of the ability to pay, it is consistent with the avowed goal of the attainment of a socialistic pattern of society. In that view of the matter the purpose is related to the economic planning, and in my opinion, would be a public purpose. There is another aspect of the matter, namely, the Supreme Court has pronounced that the Wealth Tax Act was a valid piece of legislation either under entry 86 read with entry 97 of list I or of entry 97 alone. In that view of the matter it is not open for this court to question the validity of the said piece of legislation. Counsel for the petitioner, however, contended that this aspect of the matter was not considered by the Supreme Court. He relied on the observations of Lord Halsbury in Quinn vs. Leathem, 1901 AC 495 at p. 506, that 'a case is only an authority for what it actually decides.' He further drew my attention to the observations of Mr. Justice Stone in the case Mark Graves vs. People of the State of New York, (1938) 306 US 466 : 83 LEd 927 to the following effect :-

'Judicial exegesis is unavoidable with reference to an organic act like our Constitution, drawn in many particulars with purposed vagueness so as to leave room for the unfolding future. But the ultimate touchstone of constitutionality is the Constitution itself and not what we have said about it.'

He therefore submitted that it was open for me judge this question afresh and consider whether the Wealth Tax Act was liable to be struck down. In view of the authority of the Supreme Court in the case of Ballahdas Mathuradas Lakhani vs . Municipal Committee, Malkapur : AIR1971Cal169 , this contention is not open to the petitioner. In any event, in the view I have taken there is purpose behind these impositions, I am unable to accept this contention in support of the petitioner.

12. The next question, that arises in this case, is whether there is any of repugnancy between the two legislations and as such the question of repal of the former by the later namely, repeal of Wealth Tax Act, 1957 by virtue of Income-tax Act, 1961. I have mentioned before that the two work in the different fields. One is in respect of income and the other is on the value of the property or possession. The principle of repeal is well settled. It has been observed in Maxwell 12th edition, at p. 193 that if the provisions of a later enactment are so inconsistent with or repugnant to the provisions of an earlier one that the two cannot stand together, the earlier is abrogated by the latter. This question was considered by the Supreme Court in the case of Northern India Caterers (Pvt.) Ltd. vs . State of Punjab : [1967]3SCR399 . A prior statute would be repealed by implication of its provisions were wholly in compatible with the subsequent one; or if the two statutes together would lead to wholly absurd consequences; or the entire subject matter were taken away by the subsequent statute. In view of the nature of the two enactments I have discussed before, this question does not arise.

13. Counsel then submitted that these two legislations being in the same field, having regard to the legislative practice it should be held that by implication the later statute had repealed the former one. As I have mentioned before these two statutes are on two different fields, one being on capital value of the assets or on the net wealth and the other is on the receipt of the income of an assessee. Therefore, even if there was any legislative practice to which the counsel referred to this theory does not affect the present position. Furthermore, such a legislative practice, if there is such, not affect the present position. Furthermore, such a legislative practice, if there is such, might require re-examination in view of the diversification of objects in the present arg.

14. In the aforesaid view of the matter, I am unable to accept, the contention that by implication the Income-tax Act, 1961 had repealed the Wealth Tax Act, 1957. If that is the position in law, the contentions urged on behalf of the petitioner must fail. In the premises this application fails and the rule nisi is discharged. The interim order is vacated. There will be no order as to costs.

15. There will be a stay of operation of the order for eight weeks from date.


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