Law: Income Tax Act, 1922

Section: 2(6C),3,4,4(1),7(1),22,66(1)

(a) Income-tax Act (XI of 1922)---Preamble--Income-tax Ordinance (XXXI of 1979), Preamble--Basic principles underlying both the Statutes--What is not income under the Income-tax Act/Ordinance can be made income by a Finance Act-¬Exemption granted by Income-tax Act/Ordinance can be withdrawn by Finance Act or the efficacy of that exemption may be reduced by the imposition of a new charge. There are two basic facts about the Income-tax Act. The first is that the Income-tax subjects to tax not the income of the assessee in the year of assessment but in the previous year and the other basic fact is that the liability to tax arises not by reason of the provisions of the Act but by reason of the fact that a Central Act fixes the rate at which the assessee is liable to pay tax and it is by reason of the Central Act that the income of the previous year of the assessee becomes liable to tax. If these two basic facts are borne in mind, then the position in law becomes very clear and very simple. The Income-tax Act or Income-tax Ordinance is a permanent Act or Ordinance while the Finance Acts are passed every year and their primary purpose is to prescribe the rate at which the income-tax will be charged under the Income-tax Act or Ordinance. But that does not mean that a new and distinct charge cannot be introduced under the Finance Act. Exigencies of the financial year determine the scope and nature of its provisions. If the Parliament has the legislative competence to introduce a new charge of tax, it may exercise that power either by incorporating that charge in the Income-tax Act, or by introducing it in the Finance Act or for the matter of that in any other Statute. This is generally determined by the consideration whether the new charge is intended to be more or less of a permanent nature or whether its introduction is dictated by the financial exigencies of the particular year. , Therefore, what is not income under the Income-tax Act can be made income by a Finance Act. An exemption granted by the Income-tax Act can be withdrawn by the Finance Act or the efficacy of that exemption may be reduced by the imposition of a new charge. (b) Income-tax Act (XI of 1922)--…

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