Amargundappa, Arali Oil Miller, Gangavati Vs. Commissioner of Income-tax, Mysore - Court Judgment

Excerpt:
- mines and minerals (regulation and development) act (67 of 1957) section 9-a & mineral concession rules, 1960, rules 31 & 27: [ram mohan reddy, j] power to tax - levy of lease rent and supervision charges on leased forest land release of forest land for mining purposes in favour of petitioners subject to payment of lease rent and supervision charges - impost of lease rent and supervision charges not established to be by way of tax under article 265 in exercise of executive functions under article 162 of constitution. it is illegal being without authority of law. the preamble in the orders of the state government, impugned, discloses reference to particulars regarding recommendations made by the state to central government for release of forest land for mining purposes in favour of the petitioners and the approval conveyed by the central government, while the operative portion of the orders accords approval for the release of the said lands in favour of the lessees, subject to payment of lease rent and supervision charges, amongst other conditions such as payment of royalty, forest development tax and other taxes as per the prevailing rates, to the forest department. neither the orders impugned nor the statement of objections filed by the state disclose the jurisdiction of the state government to impose lease rent and supervision charges nor the method or rate at which the amounts are calculated. orders impugned do not disclose whether the primary purpose of the state government in imposing the lease rent and supervision charges is to regulate and, if so, it is not a tax, even if it is assumed that it is to raise revenue for the public. it is also not known as to whether the impost is partly for revenue or partly for regulation. it is also not known whether the levy has some direct and definite relationship with the land as a unit, or the mode of determining the value of the land such as annual or capital value or its productivity. the state having not discharged its obligation to establish that the impugned government orders are under articles 265 and entry 49, list ii, in exercise of executive function under article 162 of the constitution of india, in respect of a matter which the state legislature has not legislated upon, coupled with the absence of relevant material, the condition in the orders impugned to pay lease rent and supervision charges is not an impost in accordance with law. [ram mohan reddy, j.] constitution of india - articles 226 and 227 - lease rent and supervision charges on the leased forest land -demand notices by the state government - authority of the state government - challenge to - held, power to tax is not an incidental power under the constitution. the government has general authority to raise revenue and choose the methods of doing so. a financial levy must have a mode of assessment, though, is not determinative of the character of a tax. it is permissible to classify land by reference to its user as a separate unit for the purpose of levy of cess. the state having not discharged its obligation to establish that the impugned government orders are under article 265 and entry 49 list ii, in exercise of executive function under article 162 of the constitution of india, in respect of a matter which the state legislature has not legislated upon, coupled with the absence of relevant material, the condition in the orders impugned to pay lease rent and supervision charges is not an impost in accordance with law. as a consequence, the demand notices calling upon the petitioners to pay the balance lease rentals and supervision charges are without authority of law. - further held, it is also not known whether the levy has some direct and definite relationship with the land as a unit, or the mode of determining the value of the land such as annual or capital value or its productivity. the condition incorporated in the orders impugned to pay the tax is both sketchy and skimpy in details, unable to identify its primary object, so as to distinguish its ultimate or incidental results or consequences to determine the character of the levy. writ petitions are allowed.somnath iyer, j.1. this application involves the interpretation of section 13 of the indian finance act, 1950. the question arises in this way. 2. for the assessment years 1357f. and 1358f. the petitioner, who was the resident of the erstwhile state of hyderabad, was assessed to income-tax. the income-tax officer, raichur, who had the authority to make the assessment made the assessments on august 20, 1951, determining the tax payable by the petitioner for the year 1357f. to be rs. 5,042 and for the year 1358f. rs. 11,369. in the appeal preferred by the petitioner to the income-tax appellate tribunal, the assessments made by the income-tax officer were modified. the tax payable according to the order of the tribunal for the year 1357f. was rs. 1,437 and for the year 1358f. it was rs. 2,953. during the pendency of these appeals, the petitioner having committed default in the payment of the tax determined by the income-tax officer, penalties were imposed on him by the income-tax officer aggregating to a sum of rs. 2,400. these penalties were imposed in the years 1952 and 1953. 3. the hyderabad income-tax act, under which the assessment of the petitioner's income was made and the penalties referred to above were imposed, was repealed by section 13 of the indian finance act, 1950, with effect from april 1, 1950. but as provided by section 13 (1) of the indian finance act, the provisions of the hyderabad income-tax act continued to be in force for the purposes of levy, assessment and collection of income-tax and super-tax in respect of the periods specified in that sub-section. during the pendency of the appeals before the income-tax appellate tribunal the petitioner paid a sum of rs. 2,819 towards the tax payable by him for the year 1357f. and a sum of rs. 2,300 towards the tax payable for the year 1358f. it will, therefore, be seen that the tax paid by him for the year 1357f. was rs. 1,382 in excess of what was found by the appellate tribunal as payable by him. as a result of the final determination of the tax payable by the petitioner in the appeal decided by the income-tax appellate tribunal, the petitioner was entitled to a refund of the excess tax paid by him for the relevant assessment years. 4. but, the fact that the petitioner was ultimately declared to be liable only to pay a smaller sum of money than that determined by the income-tax officer to be payable by him would have no materiality if it is held that the defaults committed by the petitioner in the payment of income-tax entailed the imposition of penalty on him, on a proper construction of section 13(1) of the indian finance act. 5. the argument preferred by mr. jagannath shetty, appearing on behalf of the petitioner, is that although for the purpose of levy, assessment and collection of income-tax and super-tax, the hyderabad income-tax act continued to be in force and operative, its provisions in so far as they authorised the imposition of a penalty stood repealed with effect from april, 1, 1950, no longer making it possible for the income-tax officer, raichur, to impose the impugned penalties on the petitioner. 6. section 13(1) of the indian finance act reads : '13. repeals and savings. - (1) if immediately before the 1st day of april 1950, there is in force in any part b state other than jammu and kashmir or in manipur, tripura or vindhya pradesh or in the merged territory of cooch behar any law relating to income-tax or super-tax or tax on profits of business, that law shall cease to have effect except for the purposes of the levy, assessment and collection of income-tax and super-tax in respect of any period not included in the previous year for the purposes of assessment under the indian income-tax act, 1922 (xi of 1922), for the year ending of the 31st day of march, 1951, or for any subsequent year, or, as the case may be the levy, assessment and collection of the tax on profits of business of any chargeable accounting period ending on or before the 31st day of march, 1949...........' 7. it is clear from the provisions of this sub-section that except for the purposes of the levy, assessment and collection of income-tax and super-tax, in respect of the period specified in sub-section (1), the provision of the hyderabad income-tax act ceased to have effect and stood repealed with effect from april 1, 1950. it is only if it can be said that the imposition of a penalty is one which could be regarded as amount to levy, assessment for collection of income-tax or super-tax that it could be said that the provisions of the hyderabad income-tax act providing for the imposition of a penalty did not stand repealed with effect from april 1, 1950, but continued to be in force and operative. 8. it seems to us that the contention urged on behalf of the petitioners that the imposition of the penalties in this case on the petitioner cannot be regarded as assessments of income-tax or super-tax within the meaning of those expression occurring in section 13(1) of the finance act must succeed. there is, in our opinion, a great distinction between a tax and penalty. the provisions of the hyderabad income-tax act are similar to those of the indian income-tax act and it is clear that just as the scheme of the indian income-tax act makes a distinction between tax which may be demanded under the provisions of the act and a penalty which may be imposed under its provisions, the hyderabad income-tax act also makes a similar distinction. 9. under the provisions of the indian income-tax act interest by way of penalty may be imposed under section 18a. a penalty may be imposed under the provisions of section 28 and a penalty may also be imposed under the provisions of section 46 of the act. the fact that section 13(1) of the finance act refers only to the levy, assessment and collection of income-tax and super-tax and says nothing about penalty, although the income-tax act itself makes a distinction between a tax and a penalty is, in our opinion, almost conclusive of the fact that section 13(1) of the finance act did not intend that the provisions of the hyderabad income-tax act should continue to be operative or in force for the purposes of the imposition of a penalty under its provisions. 10. whatever may be the view that may be taken about the permissibility or the imposition of penalties under section 18a and section 28 on the basis of section 44(3) of the act, it is clear that no penalty which may be imposed under section 46 of the indian income-tax act can be regarded as income-tax or super-tax within the meaning of those expressions occurring in section 13(1) of the finance act. section 13(1) of the finance act preserves the provisions of the hyderabad income-tax act only for the purpose of the levy, assessment and collection of income-tax or super-tax and if a penalty, which may be imposed under the provisions of section 58 of the hyderabad income-tax under which the impugned penalties were imposed by the income-tax or super-tax within the meaning of those expression occurring in section 13(1) of the finance act, it is clear that the provision of section 58 of the hyderabad income-tax act were not preserved by section 13(1) of the finance act. 11. this writ petition, therefore, succeeds. we quash the impugned orders made by the income-tax officer and the penalties imposed by him. 12. in the circumstances we make on order as to costs. 13. petition allowed.