Khandige Sham Bhat & Ors Vs. The
Agricultural Income Tax Officer [1962] INSC 245 (29 August 1962)
SUBBARAO, K.
SINHA, BHUVNESHWAR P.(CJ) SHAH, J.C.
AYYANGAR, N. RAJAGOPALA MUDHOLKAR, J.R.
CITATION: 1963 AIR 591 1963 SCR (3) 809
CITATOR INFO :
R 1963 SC 630 (28) R 1964 SC 370 (10,11) F
1967 SC1458 (23) RF 1967 SC1895 (23) RF 1969 SC 378 (3,4) RF 1970 SC1133
(18,32) R 1972 SC 828 (20,34) R 1972 SC 845 (14,15) R 1973 SC1034 (18A) R 1974
SC 497 (21) R 1974 SC 849 (9) R 1975 SC1234 (25) F 1980 SC 271 (34) R 1980 SC
959 (4) R 1980 SC 959 (4) R 1980 SC1382 (75) R 1983 SC 634 (21) R 1988 SC2062
(14)
ACT:
Agricultural Income tax Temporary amendment
of enactment consequent on reorqanisation of States-Territorial classification
in defining previous year. If discriminatory--Mode of ascertaining rate If
reasonableKerala Agricultural Act, 1950 (Kerala 22 of 1950), as amended by
Kerala Act 11 of 1959, s.2A Constitution of India, Art 14.
HEADNOTE:
This petition challenged the constitutional
validity of s. 2A of the Kerala Agricultural Income Tax Act, 1950 as amended by
Kerala Act II of 1959, tinder which the petitioner was assessed to agricultural
income tax, on the ground that the section infringed Art. 14 of the
Constitution. Under tile States Reoganisation Act, 1956, Kasargod Taluk where
the petitioner had his agricultural land and which was in the State of Madras,
became a part of the Malabar District of the State of Kerala when that State
came into being on November 1, 1956. By the Travancore Cochin Agricultural
Income Tax (Amendment) Act, 1957, the State Legislature extended the earlier
Act of 1950 to the erstwhile Madras areas. But the Kerala High Court held that
agricultural income in such areas could not be assessed to tax for the
assessment year 1957-1958 whereas similar income in other areas of the State
remained liable to tax, the income accrued between November 1, 1. 1956, and
March 31, 1957, i.e. after the Madras areas became part of the Kerala State,
could not also be taxed. In order to remedy this anomalous position brought
about by the reorganisation of States the Kerala State Legislature inserted the
impugned section in the original Act, which provided as follows, "Notwithstanding
anything contained in cl. (G) of Section 2, "previous years" for the
assessment for the financial year commencing from the 1st day of April 1958 and
so far as such assessment relates to the agricultural income derived from lands
situated in the Malabar District referred to in subsection (2) of section 5 of
the States Reorganization Act, 1956 (Central Act 37 of 1957), shalt be the
whole period 810 commencing on the 1st day of November, 1956 and ending on the
31st day of March, 1958, or, if the accounts of the assessed have been made up
to a date within the fincial year ending on the 31st day of March 1958, then at
the option of the assessee, the period commencing on the 1st day of November,
1956, and ending on the aforesaid date to which, the accounts have been so made
up:
provided that (i) notwithstanding anything
continued in section 3 and 56, the agricultural income tax and super tax
chargeable on the total agricultural income of the previous year as reckoned in
this section shall be at the rates applicable to the 'average annual income' according
to the Schedule; such average annual income' shall be an amount bearing to the
aforesaid total agricultural income the same proportion as the period of twelve
months bears to the period of the previous year as defined in this section; and
(ii) the limit of exemption from chargeability to tax shall be determined with
reference to the average annual income." It was urged on behalf of the
petitioners that classification of the State into two parts i.e. Madras area
and Travancore area made by the impugned provision had no rational relation to
the object of the Act and was discriminatory and that the basis adopted for
ascertaining the rate of tax was arbitrary and unreasonable.
Held, that the contentions must fail.
In order to judge whet her a law was
discriminatory what had primarily to be looked into was not its phraseology but
its real effect. If there was equality and uniformity within each group, the
law could not be discriminatory, though due to fortuitous circumstances in a
peculiar situation some included in a class might get some advantage over
others, so long as they were not sought out for special treatment.
Although taxation laws could be no exception
to this rule, the courts would, in view of the inherent complexity of fiscal
adjustment of diverse elements, permit a larger discretion to the Legislature
in the matter of classification so long as there was no transgression of the
fundamental principles underlying the doctrine of classification. The power of
the Legislature to classify must necessarily be wide 811 and flexible so as to
enable it to adjust its system of taxation in all proper and reasonable ways.
Shri Ram Krishna Dalmia v. Shri Justice S. R.
Tendolkar [1959] S.C.R. 287 Purshottam Govindji Halai v. Shree B.M Desai,
[1955] 2 S.C.R 887 and Kunnathat Thathunni Moppil Nair v. State of Kerala,
[1961] 3 S.C.R. 77, referred to The object of the classification made in the
definition of 'previous year' by the impugned section was not to discriminate
against the agriculturists of the Madras area but to remove the difference that
existed between them and those of the other areas of the State, due to
historical reasons, by im. posing the tax on the assessees in the Madras area
for the period November 1, 1956, to March 31, 1957. There could therefore, be
no doubt as to the existence of a reasonable nexus between the classification
and the object of the legislation.
It was not correct to say a law based on
geographical or territorial classification could be constitutionally valid only
if it was a preexisting Act, and not if it was enacted after the merger. The
law might be a preexisting law or one enacted after merger. The validity of
classification did not wholly depend on the source of law but also on the
circumstances that prevailed in the two parts merged into one by historical
events.
Shri Kishan Singh v. State of
Rajasthan,[1955] 2 S. C. R 531 and Purshottam Govindji Halai v. Shri B.M.
Desai, [1953] S.C.R. 887. referred to.
Nor was it correct to say that the mode of
the ascertaining the average annual income for fixing the rate was arbitrary
and unreasonable. Although a taxation law was as much subject to Art. 14 of the
constitution as any other law, the court would not for obvious reason
meticulously scrutinize the impact of its burden on different persons or
classes and would not strike down the law on the ground that not the one but
another method of assessment should have been adopted, unless it was convinced
that the method adopted was capricious, fanciful, arbitrary or clearly unjust.
Although no Act, permanent or temporary,
could violate Art.
14, the fact that the impugned legislation
was to enure for a year to tide over the situation, must have some bearing in
judging the reasonableness of the method selected and it could not be struck
down as unreasonable on the ground that there was better alternatives.
ORIGINAL JURISDICTION : Writ Petition No. 103
of 1961.
Petitions under Art. 32 of the Constitution
of India for enforcement of Fundamental Rights.
G. S. Pathak and R. Gopalakrishnan, for the
petitioners.
H. N. Sanyal, Additional Solicitor-General of
India and Sardar Bahadur, for the respondents.
1962. August 29. The Judgment of the Court
was delivered by SUBBA RAO, J.-These two petitions filed under Art. 32 of the Constitution
by different parties are directed against the Agricultural Income-tax Officer,
Kasaragod, and the State of Kerala, for a declaration that s, 2A of the Kerala
Agricultural Income-tax Act, 1950, as amended by Kerala Act 11 of 1959,
(hereinafter referred to as the Act) is constitutionally void and for quashing
the orders of assessment made by the first respondent pursuant to the said
provisionAs it is common case that the decision in the first petition would
govern the second one, it would suffice if the facts in the first petition were
given.
Kasaragod Taluk, wherein the agricultural
lands of the petitioner's family are situate, formed part of the district of
South Kanara in the Madras State. Under the States Reorganization Act, 1956
(Central Act 37 of 1956) the Kerala State comprising the following territories
was formed: (a) the territories of the existing State of Travancore-Coching
excluding the territories transferred to the State of Madras by Section 4; and
(b) the territories comprised in (i) Malabar District, excluding the islands of
Laccadive and Minicoy, and (ii) Kasaragod Taluk of South 813 Kanara District.
Under the Act the territories comprised in Kasaragod Taluk of South Kanara
District and the District of Malabar in the Madras State were constituted into
a separate district known as the Malabar District in the State of Kerala. For
convenience of reference we shall hereinafter describe the territories carved
out of the Madras State as Madras area and the rest as T-C area. After the formation
of the State of Kerala on November 1, 1956, the laws in force in the State of
Madras were continued in the Madras area and those in force in the
Travancore-Cochin State were continued in the T.C. area. In the T.C. area
agricultural income was liable to tax under the Travancore-Cochin Agricultural
Income-tax Act (22 of 1950) which came into force on April 1, 1951. After the
formation of the Kerala State, the Legislature of that State enacted the
Travancore Cochin Agricultural Income-tax (Amendment) Act, 1957.
Where under the earlier Act of 1950 was
extended to the Madras area with appropriate amendments. Under the said Act
agricultural income derived from lands situated throughout the State of Kerala
became assessable with effect from assessment year 1957 58. Pursuant to the
provisions of that Act the Income-tax authorities started proceedings to assess
the income derived from lands situated in the Madras area for the year 1957-58,
On a petition filed by some of the assessees, the Kerala High Court held that
the State of Kerala had no authority to levy tax on agricultural income which
accrued before November 1, 1956, from lands situated in the Madras area and
that the assessments for 1957-58 were not sustainable under the Act even in
respect of income which arose after November 1, 1956, on the ground that the
previous year, as defined under the Act, was a period of twelve months ending
on March 31, preceding the year for which assessment was to be 814 made. The
result of the decision was that agricultural income derived from lands in the
Madras area was not liable to tax for the assessment year 195768., whereas
similar income from agricultural lands situated in the T.C. area was liable to
tax, indeed, the income accrued between November 1, 1956, and March 31, 1957,
i. e., the income accrued after the Madras area became part of the Kerala
State, also could not be taxed. To remedy the situation brought about by
historical reasons in the two geographical parts of the Kerala State, the
Government of Kerala promulgated on January 12, 1959 the Agricultural
Income-tax (Amendment) Ordinance 11 of 1959. Subsequently the Kerala
Legislature passed the Agricultural Income-tax (Amendment) Act 11 of 1959
replacing the earlier Ordinance, hereinafter called the Amending Act.
Before the Amending Act was passed,, the
petitioner, who has lands in different villages in Kasaragod Taluk, submitted a
return of the income of his family for the assessment year 1957-58, and on June
30, 1958, the concerned Income-tax Officer determined the petitioner's net
income for the accounting period April 1, 1956, to March 31, 1957, and the tax
payable thereon. The petitioner preferred an appeal to the Assistant
Commissioner of Agricultural Income-tax, Kozhikode, against the order of the
Income-tax Officer questioning the said assessment on the ground, inter alia
that the assessment was made arbitrarily. When that appeal was pending, the
judgment of the Kerala High Court was delivered and subsequently Ordinance II
of 1959 was promulgated. The Assistant Commissioner, therefore, set aside the
order of the Income-tax Officer on the basis of the decision of the Kerala High
Court and remanded the matter to the Agricultural Income. tax Officer for
disposal in accordance with law. After remand, on March 23, 1959, the
Income-tax 815 Officer issued a notice to the petitioner to submit his return
of agricultural income for the assessment year 195758 in accordance with the
provisions of the Ordinance and the subsequent Amending Act replacing the said
Ordinance.
On November 10, 1960, the Income-tax Officer
determined the net income of the petitioner for the assessment year 1958 59 at
Rs. 87,745.36 and assessed the tax at Rs. 21,920.41; the tax was calculated on
the average net annual income of the petitioner for 12 months under the proviso
to s. 2A of the Act. The petitioner seeks to set aside that assessment on the
ground that the said section offends Art-14 of the Constitution and therefore
the assessment was bad.
Mr. Pathak, Learned counsel for the petitioner,
argues that the classification of Kerala State into two parts, i.e., the Madras
area and the T-C area, has no rational relation to the object of the Act,
namely, imposition of agricultural income-tax, for., as the two parts belong to
the same State, no post-amalgamation law can treat assessees of the same State
differently in the matter of taxation. He further contends that there is
discrimination between assessees of Kasaragod Taluk and those of the other part
of the Madras area inasmuch as under s.2A of the Act the average annual income
would be the average annual income of 12 months out of 17 months, with the
result that the assessees of Kasaragod Taluk whose entire income accrued after
November 1, 1956, were unjustly discriminated from assessees of the other part
of the Madras area whose income accrued only before November 1, 1956. He also
contends that in any view the basis adopted for ascertaining the rate was
arbitrary and unreasonable as 24 months' income was taken as income for 17
months.
816 Learned Additional Solicitor General, on
the other hand, seeks to sustain the assessment on the ground that the
classification was based on historical reasons, that on the face of the Act all
the assessees falling within the class to which s.2A applies are treated alike,
that the State is entitled to adopt one of the many modes available for
ascertaining the rate, that whatever basis is adopted for ascertaining the rate
there is bound to be some hard cases and that circumstance cannot conceivable
affect the validity of the law.
At the outset it would be convenient to
notice briefly the law on the doctrine of classification. The law on the
subject is well settled and it does not require restatement in extenso. It
would suffice if we noticed the principles relevant to the enquiry. The law has
been neatly and succinctly summarized in Shri Ram Krishna Dalmia v. Shri
Justice S. R. Tendolkar (1) thus:
"It is now well established that while
article 14 forbids class legislation, it does not forbid reasonable classification
for the purposes of legislation. In order, however, to pass the test of
permissible classification two conditions must be fulfilled, namely, (i) that
the classification must be founded on an intelligible differential which
distinguished persons or things that are grouped together from others left out
of the group and, (ii) that differentia must have a rational relation to the
object sought to be achieved by the statute in question. The classification may
be founded on different bases, namely, geographical, or according to objects or
occupations or the like. What is necessary is that there must be a nexus
between the basis of classification and the object of the (1) [1959] S.C.R.
279.296-297.
817 Act under consideration. It is also well
established that article 14 condemns discrimination not only by a substantive
law but also by a law of procedure." Though a law ex facie appears to.
treat all that fall within a class alike, if in effect it operates unevenly on
persons or property similarly situated, it may be said that the law offends the
equality clause. It will then be the duty of the court to scrutinize the effect
of the law carefully to ascertain its real impact on the persons or property
similarly situated. Conversely, a law may treat persons who appear to be
similarly situated differently; but on investigation they may be found not to
be similarly situated. To state it differently, it is not the phraseology of a
statute that governs the situation but the effect of the law that is decisive.
If there is equality and uniformity within each group, the law will not be
condemned as discriminative, though due to some fortuitous circumstance arising
out of a peculiar situation some included in a class get an advantage over
others, so long as they are not singled out for special treatment. Taxation law
is not an exception to this doctrine : vide Purshottam Govindji Halai v. Shree
B. N. Desai, Additional Collector of Bombay (1) and Kunnathat Thatunni Moopil
Nair v. State of Kerala (2). But in the application of the principles, the
courts, in view of the inherent complexity of fiscal adjustment of diverse
elements, permit a larger discretion to the Legislature in the matter of
classification, so long it adheres to the fundamental principles underlying the
said doctrine. The power of the Legislature to classify is of "wide range
and flexibility" so that it can adjust its system of taxation in all
proper and reasonable ways.
(1) [1955] 2 S.C.R. 887. (2) [1961] 3 S.C.R.
77.
818 Now Let us look at the impugned section.
Section 2A of the Act reads :
"Notwithstanding anything contained in
clause (0) of section 2, "previous year" for the assessment for the
financial year commencing from the 1st day of April 1958 and so far as such
assessment relates to the agricultural income derived from lands situated in
the Malabar District referred to in sub-section (2) of-section 5 of the States
Reorganization Act, 1956 (Central Act 37 of 1956), shall be the whole period
commencing on the 1st day of November, 1956 and ending on the 31st day of
March, 1958, or, if the accounts of the assessee have been made up to a date
'within the financial year ending on the 31st day of March 1958, then, at the
option of the assessee, the period commencing on the 1st day of November, 1956
and ending on the aforesaid date to which, the accounts have been so made up :
Provided that (i) notwithstanding anything
contained in sections 3 and 56, the agricultural income-tax and super-tax
chargeable on the total agricultural income of the previous year as reckoned in
this section shall be at the rates applicable to the "average annual
income" according to the Schedule ; such "average annual income"
shall be an amount bearing to the aforesaid total agricultural income the same
proportion as the period of twelve months bears to the period of the previous
year as defined in this section ; and 819 (ii) the limit of exemption from
chargeability to tax shall be determined with reference to the "average
annual income".
The Malabar District in the state of Kerala
is constituted by combining Kasaragod Taluk of the South Kanara District and
the District of Malabar of the Madras State. For the purpose of assessment for
the financial year 1958-59 in respect of agricultural income derived from the
said district, s. 2A of the Act gives a special definition of "previous
year". Under that definition, "previous year" commences from
November 1, 1966 and ends on March 31, 1958, i.e., a period of 17 months ; but
the assessee can elect a lesser period as "previous year" if his
accounts are made up to a date within the financial year ending on March 31,
1958, that is to say he can elect any date commencing from April 1, 1957, to
March 31, 1958, if his accounts are made up to that date in which case the
"previous year" so for as he is concerned will commence from November
1, 1956, and end on the said date so chosen by him. The proviso to the section
prescribes a mode of ascertaining the rate of tax in regard to the said income
: it lays down that in respect of the said income the rates are those
applicable to the ",average annual income" according to the Schedule.
The "average annual income", as defined in the proviso, will be
twelve-seventeenths of the total income of the previous year as defined in the
sections Under the section, therefore, the assessee in the Madras area will be
liable to pay agricultural income-tax on the income accrued to him during the
17 months commencing from November 1, 1956, and ending on March 31, 1958, but
the rate of tax payable by him is that applicable to the "average annual
income " so defined.
The question is whether this section
infringes Art. 14 of the constitution or whether it can be justified on the
basis of the 820 doctrine of classification. In the narration of facts we have
stated why it became necessary for the Legislature to insert s.2A in Act 22 of
1950. By reason of the States Reorganization Act, the said Madras area became
part of the Kerala State on November 1, 1956. By reason of the decision of the
Kerala High Court, agricultural income-tax could not be imposed in respect of
income accrued to assessees in the Madras area between April 1, 1956, and March
31, 1957, and it was also not possible to tax them for their income even for
that part of the year after it became part of the Kerala State: with the
result, the legislature was confronted with two geographical divisions in
respect of one of which the said law of agricultural income-tax could not be
enforced while the a ssessees in the T-C area were liable to agricultural
income-tax in regard to their income from their lands for the year commencing
from April 1, 1956, and ending on March 31, 1957, the income of the
agriculturists in the Madras area could not be reached by that law in respect
of the whole or part of that year. These differences between the two parts of
the State which originated from historical reasons were the basis of
classification for the purpose of taxation. The object of' making the
classification was not to discriminate against the agriculturists of the Madras
area but to bring them into line with the agriculturists from the rest of the
Kerala State in so far as the liability to pay agricultural income-tax was
concerned. The existing law bad therefore to be appropriately adapted for
securing this end. In these circumstances, can it be said that there was no
reasonable nexus between the classification and the object of the legislation?
The object of the legislation thus was to impose agricultural income-tax on
assessees in the Madras area and also in respect of the period between November
1, 1956, and March 31, 1957, which could not be done under preexisting law. The
821 differences between the two parts of the State have reasonable nexus to the
said object. Because of the said differences the legislature thought that the
definition of "Previous year" should be so amended in respect of the
Madras area that the assessees in that area may not escape payment of
agricultural income-tax in respect of the period after the said area formed
part of the Kerala State. It is argued that this Court sustained the
constitutional validity of a law on geographical and territorial bases only in
a case where the said law was a preexisting law in an erstwhile State which
continued to be law in the area of that State after it merged in the larger
unit, and that it cannot be invoked where the law is for the first time enacted
after the merger, for, it is said, in that event the law governs the new State
as an indivisible unit. Reliance is placed upon the decision of this Court in
Shri Kishan Singh v, The State of Rajasthan(1) and Purshottam Govindji Halai v.
Shree B.M. Desai, Additional Collector of Bombay (2). But a perusal of the
Judgments does not bear out the contention. The validity of classification does
not wholly depend upon the source of law; the law may be a preexisting law or
one that was enacted after merger. What is important is to ascertain the
existing circumstances in the two parts merged into one by historical events in
order to determine whether the differences between the two have a reasonable
nexus to the object of the said law. For the reasons already stated, we hold
that the classification in the present case is founded on an intelligible
differentia between the assessees of the two parts of the State, and that the
said differences have rational relationship to the object of the Amending Act.
But it is said that the mode of ascertaining
the average annual income for the purpose of finding the (1) [1955] 2 S.C.R.
531.
(2) [1955] 2 S.C.R. 887.
822 rate is arbitrary and unreasonable and
that discrimination is inherent in such a law adopting such arbitrary process.
This argument is elaborated thus: The major
income of the petitioner's family is from are cannot, pepper and cocoanut;
the said crops are gathered between the months
of November and March; the season for harvesting arecanut in Kasaragod Taluk is
from November to March; the whole year's pepper and cocoanut are gathered
between the months of January and March; therefore, the income from arecanut,
pepper and cocoanut accrued to the petitioner between November 1, 1956 and
March 31, 1957, is the income for the entire year; but under the proviso to s.
2A of the Act, the said income is treated as the income for 5 months only, with
the result that 24 months' income is treated as 17 months' income; this is an
arbitrary assumption underlying the provision; instead it should have taken
12/24th of the total income as the average annual income. This arbitrary method
of fixing the average annual income involved the payment of higher rate of tax
by the assessees in Kasaragod Taluk as compared to the assessees in other parts
of the State. It is suggested that a more reasonable course would have been to
tax the assessees in the Madras area for the income that accrued to them during
the 5 months by treating the said income as the income for the entire year
commencing from April 1, 1956, and ending on March 31, 1957, and that in that
event not only their income for the said period could not have escaped taxation
but it would have also avoided the unjust treatment meted out to them in the
rate of tax. Prima facie there appears to be some plausibility in this
argument; but a closer examination discloses that though the method suggested
may have been better than the method actually adopted, the hardship in
individual cases cannot in any event be avoided. It is true taxation law cannot
823 claim immunity from the equality clause of the Constitution.
The taxation statute shall not also be
arbitrary and oppressive, but at the same time the court cannot, for obvious
reasons, meticulously scrutinize the impact of its burden on different persons
or interests. Where there is more than one method of assessing tax and the
Legislature selects one out of them, the court will not be justified to strike
down the law on the ground that the Legislature should have adopted another
method which, in the Opinion of the court, is more reasonable, unless it is
convinced that the method adopted is capricious, fanciful, arbitrary or clearly
unjust. From the standpoint of the test, let us look at the impugned
legislation. The taxability of the income accrued during the 5 months is not in
question. But the attack is on the manner in which the rate is ascertained. The
statute does not fix different rates for the two areas. The rate is the same
though it varies uniformly depending upon the different slabs of the annual
income of the previous year. The vice of the provision if at all, lies in the
mode of ascertaining the average annual income of the previous year and it is
true that if the said mode is arbitrary, the same arbitrariness would attach to
the rate. But the rate must necessarily relate to the annual income of ,he
previous year. Diverse methods may be adopted by the Legislature to ascertain
the annual income for fixing the rate, namely : (1) 12/17 of total income of
the 17 months ; (2) the 5 months' income being treated as 12 months' income and
the annual average income ascertained as 12/24th or half of the total income
accrued during the 17 months; (3) it may adopt the first 12 months' or the last
12 months or the middle 12 months' income as the annual income ; and (4)
treating the 5 months' income as 12 months' income and separately taxing it
without clubbing it with the income of the subsequent year. Whatever 824 method
is adopted, there is bound to be hardship in some cases and advantage in
others. For instance, under the Agricultural Income-tax Act assessees getting
an income below Rs. 3,000/are exempted from taxation. Under the impugned
section the limit for exemption from taxation shall be determined with
reference to the average annual income.
Suppose the annual income for the 12 months
commencing from April 1, 1957, and ending on March 31, 1958, is above Rs. 3,000/;
the assessees in the T-C area would be liable to pay income-tax, but a
particular assessee in the Madras area may have earned comparatively smaller
income during the 5 months bringing down the average annual income below Rs. 3,000/and
he escapes assessment altogether. Assume again that the assessee gets more than
Rs, 3,000/daring the 5 months ; but he may have got very low income in the
succeeding 12 months with the result that his annual average income may fall
below the range of taxable income, while the assessee in the T-C area, who has
got a similar income for 1956-57, would be liable to tax. It is also true that
if the assessee in the Madras area gets very high income during those 5 months
and little less than the taxable income during the succeeding 12 months, his
income, which would have escaped taxation, would be liable to tax. These
illustrations prove that the section does not always work to the disadvantage
of assessees similarly situated like the petitioner, but its effect would
depend upon fortuitous circumstances, such as the quantum of income accrued
during the 5 months and during the succeeding 12 months. That apart under the
section an option is given to the assessee to select his accounting year
commencing from November 1, 1956, and ending on a date within March 31, 1958,
upto which his accounts have been made. If an agriculturist in the Malabar area
had made up his accounts on a date which 825 does not exceed a period of 12
months from November 1, 1956, he cannot have any complaint on the score that
the rate fixed is arbitrary. But it is said that agriculturists in the Madras
area do not keep accounts or at any rate would not have kept accounts before
the Amending Act and therefore this argument is not realistic. But the record
does not disclose that agriculturists of Malabar area dealing in cash crops,
like are canut, do not keep accounts or make up their accounts on a particular
date. Anyhow, the law gives an option to agriculturists to adopt an alternative
method in case the rate fixed on the basis of average annual income would be
disadvantageous to them. The fact that they do not keep such an account could
not be an argument to support the arbitrariness of the legislation. But these
advantages or disadvantages to individual assessees are accidental and
inevitable and are inherent in every taxing statute as it has to draw a line
somewhere and some cases necessarily fall on the other side of the line. That
apart, the tabular statements showing the area order the principal crops and
their harvesting and marketing seasons in the Kerala State does not establish
that in Kasaragod Taluk the entire crop of the year was harvested after
November and in the rest of Kerala before November. The following is the said
statement:
826 T. C. area Crop 6 -Districts (in acres)
Paddy 9,07,108 Tapioca 4,89,884 Cocoanut 7,74,667 Arecanut 50,534 Cardaraon
65,879 Pepper 87,216 Tea 78,043 Coffee 5,198 Rubber 2,10,703 Lemongrass 35,000
MADRAS AREA Total area for Palghat Calicut Cannanore Kerala State (in acres)
(in acres) 4,67,5442,77,9232,46,22918,98,804 8,45540,13414,8245,53,207
45,4492,36,2951,19,01411,75,425 17,29235,23620,7711,23,833 4,2842,60099373,756
8,44931,58596,6662,23,916 1,4599,8013,68592,988 4,90926,7873,16640,060
10,10435,60014,2192,70,626 4,50050040,000 827 Crop Harvestiag Marketing Season
Season Paddy Autumn, August September to October. October.
Winter: December January to February:
February.
Summer : March to April.
February to March.
Tapioca November to Dec. to Feb. & June
& July July to Aug.
to Aug.
Cocoanut Arecanut 1. TravancoreJune to Nov.
Cochin Nov. to March
2. S. Malabar June to November
3. N. Malabar Nov. to March Cardamon August
to October to December January Pepper November to December to January February
Tea Coffee November to September to March April Rubber Lemongrass Juno to
September September 828 It shows that in Cannanore, which includes Kasaragod
Taluk, only arecanut, popper, tea, coffee and rubber are harvested after
November, but in the case of paddy, tapioca coconut and lemongrass the
harvesting season is before November ;
cardamon is gathered partly before November
and partly after November. The same is the position in regard to the entire
State except in respect of arecanut ; even in respect of arecanut, it is harvested
in the Madras area other than Cannanore before November. The net result of this
analysis is that in regard to a large extent of land cultivated in Kerala the
harvesting season is the same in respect of all the crops except arecanut and
even in the case of arecanut out of 1,23,833 acres cultivated with that crop
the harvesting season in regard to 20,771 acres alone commences after November.
In such a situation it cannot be said that the Legislature has arbitrarily,
with an evil eye, selected the most advantageous period for the purpose of
fixing the rate of taxation. The said discussion leads to the only conclusion
that the Legislature in its sincere attempt to meet a difficult situation made
a law adopting one of the diverse methods open to it and even the method
adopted cannot be said to be either unreasonable or arbitrary, as the overall
picture indicates that it works fairly well on all similarly situated, though
some hardship may be caused to some in the implementation of the law which is
almost inevitable in every taxation law. We cannot, therefore, say that in the
present case the one method adopted instead of another is either arbitrary or
capricious.
The next argument is that there is
discrimination between assessees in Kasaragod area and those in the rest of the
Madras area in that in the case of arecanut the assessees of Madras area, other
than Kasaragod Taluk, would be in a better position as they gather their crops
before November.
The 829 assessees of the Madras area under
the Act formed one class and s. 2A applies to all of them : s. 2A applies to
both parts of the Madras Area, i. e., the Malabar area and the South Kanara
area. In both the cases the income of the assessees that accrued before
November 1, 1956 was not taxable; in both the cases the income that accrued
thereafter is liable to tax. The rate also is the same.
The statement only shows that all the crops,
except arecanut, are gathered by the assessees of the entire area during the
same period. The fact that in the case of one of the crops the assessees in the
Malabar area harvested earlier cannot be a ground for holding that the law has
made an unjust discrimination between persons belonging to the same class, but
that is due only to the fortuitous circumstance of some assessees gathering the
crops earlier than others. As we have pointed out, the arecanut crop is only
one of the many crops in that area and the extent of its cultivation in
Kasaragod Taluk is comparatively lesser than that in the entire area of the
State or even the Madras area. We cannot, therefore, say that the law made an
unjust discrimination between persons belonging to the same class.
There is another aspect which may have a
bearing on the question raised. The impugned section is a temporary provision
intended to apply only for one year to tide over a difficult situation brought
about by the reorganization of States. It is true that every law, whether it is
temporary or permanent, cannot infringe Art. 14 of the Constitution;
but in considering the question of
reasonableness of the legislation this circumstance will have some bearing,
particularly when the legislature Selected one of the many methods open to it.
Though the method selected may not be as good as others, we cannot hold that it
is unreasonable and, therefore, liable to be struck down.
830 In the result the petition is dismissed
with costs.
It is common case that this decision will
govern the other petition also, namely, Writ Petition No. 104 of 1961. The said
petition also is dismissed with costs. There will be one set of hearing fee.
This order is without prejudice to the order for costs made on 16-3-1962.
Petitions dismissed.
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