Law: Income Tax Act, 1961

Section: 44,206

Income tax------Collection of tax at source---Constitution of India---Validity of provisions---Parliament competent to enact Ss. 44-AC & 206-C---Section 44-AC is not a charging section---Provisions do not violate Art.14 of Constitution---Non obstante clause in S.44-AC excluding provisions of S.28 to 43-C is not valid---Indian Income Tax Act, 1961, Ss.44-AC & 206C--¬Constitution of India, Art. 14, Sched., VII, List I, Entry 82. The heads of legislation in the lists should not be construed in a narrow and pedantic sense, but should be given a large and liberal interpretation. The word "income" occurring in Entry 82 in List I of the Seventh Schedule to the Constitution should be construed liberally and in a very wide manner and the power to legislate will take in all incidental and ancillary matters including the authorisation to make provision to prevent evasion of tax, in any suitable manner. The object in enacting sections 44-AC and 206-C of the Income Tax Act. 1961, was to enable the Revenue to collect the legitimate dues of the State from the persons carrying on particular trades in view of the peculiar difficulties experienced in the past. Trade or business produces or results in income which can be brought to tax. In order to prevent evasion to tax legitimately due on such "income", sections 44-AC and 206 were enacted, so as to facilitate the collection of tax on that income which is bound to arise or accrue, at the very inception itself or at the anterior stage. These provisions are akin to advance tax. The standard by which the amount of tax is measured, being the purchase price, will not in any way alter the nature and basis of levy, viz. that the tax imposed is a tax on income. It cannot be labelled as a tax on purchase of goods. The basis of a charge relating to income-tax is laid down in sections 4 to 9. Section 44-AC read with section 206-C are only machinery provisions and not charging section. What is brought to tax, though levied with reference to the purchase price and at an earlier point, is nonetheless income liable to be taxed under the income-tax Act. Article 14 of the Constitution applied to tax laws as well. The classification for…

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