Law:

Section:

Section 8(1) of the Indian Finance Act, 1942, read with Indian Finance Acts 1943 to 1945 - Surcharge - Assessment years 1942-43 to 1945-46 - Whether Federal Legislature was competent to impose surcharge on income of petitioners/assessees under Finance Acts of 1942, 1943, 1944 and 1945 - Held, yes FACTS The petitioners were four partners of a firm. They under a "Voluntary Disclosure Scheme" with regard to profits which had escaped assessment made a disclosure of their income relating to assessment years 1942-43 to 1945-46, and proceedings were taken under section 34 of 1922 Act. There was a reassessment on all the four partners and total income was assessed, on which income-tax, super-tax and surcharge were levied. The petitioners filed instant petitions challenging the legality of the imposition of surcharge contending that the then Federal Legislature was not competent to levy the surcharge. HELD The power of the Federal Legislature to legislate was conferred by section 100, sub-sections (1) and (2) of Govt. of Indian Act, 1935. The first sub-section deals with the power of the Federal Legislature to legislate in regard to items contained in the First List which was exclusively within the power of the Federal Legislature. The Federal Legislature therefore had the power to legislate in regard to any subject contained in List I and item 54 relating to taxes on income was in that list. The items have to be given the widest possible amplitude. "Federal purposes" is not defined in the Government of India Act, 1935, nor is it defined in the General Clauses Act. But there is sufficient indication in section 138 of 1935 Act itself that the amounts recovered as surcharge were to form part of the revenues of the Federation and such revenues were to be expended for the purposes there indicated. Under section 124(4) of the Government of India Act, 1935 where powers and duties are conferred by section 124 upon a Province or a Federated State there shall be paid by the Federation to the Province or the Federated State such sum as may be agreed. Hence by the definitions given in the General Clauses Act no different concept of the words "purposes of the Central Government"…

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