Law:

Section:

Section 45 of the Income-tax Act, 1961 [Corresponding to section 12B of the Indian Income-tax Act, 1922] - Capital gains - Chargeable as - Whether Indian Income-tax and Excess Profits Tax (Amendment) Act, 1947 which amended 1922 Act, by enlarging definition of term income in section 2(6C) of 1922 Act and introducing a new head of income in section 6 of 1922 Act and inserting new section 12B, was intra vires powers of Central Legislature acting under entry 54 in List I of Seventh Schedule of Government of India Act, 1935 - Held, yes FACTS The appellant was assessed to income-tax, for the assessment year 1947-48 on a total income including a sum representing capital gains assessed in the hands of the appellant under section 12B which represented his half share in certain immovable properties which were sold by him during the relevant accounting year. This was confirmed by the AAC and the Tribunal. On reference, the High Court held that the imposition of a tax under the head 'capital gains under section 12B by the Central Legislature was not ultra vires. On appeal to the Supreme Court : HELD Section 12B was inserted in the 1922 Act by the Indian Income-tax and Excess Profits Tax (Amendment) Act, 1947 which was a Central Act. Under section 100 of the Government of India Act, 1935, the Central Legislature was empowered to make laws with respect to matters enumerated in List I in the Seventh Schedule to that Act. Entry 54 in list I caused taxes on income other than agricultural income while entry 55 caused taxes on the capital value of the assets, exclusive of agricultural land, of individuals and companies, and taxes on the capital of companies. In construing an entry in a List conferring legislative powers the widest possible construction according to their ordinary meaning must be put upon the words used therein. The cardinal rule of interpretation, is that words should be read in their ordinary, natural and grammatical meaning subject to this rider that in construing words in a constitutional enactment conferring legislative power the most liberal construction should be put upon the words so that the same may have effect in their widest amplitude. Thus the word…

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