Block assessement- Block period 91-92 to 2000-01-Surcharge,

Court :
SC

Brief :
The power to levy a surcharge on income-tax is traceable to article 271 read with entry 82 of list I of seventh schedule to the Constitution of India. That power is not traceable to section 4 of the 1961 Act. Every year the Finance Act is enacted by Parliament to give effect to the financial proposals of the Central Government. The rate at which a charge on the total income of the previous year is imposed under section 4(1) of 1961 Act is not laid down in the 1961 Act and, therefore, the said section provides that the charge has to be fixed by the Central Act. It is because of this, that income-tax is levied at different rates under the Finance Act. It must be borne in mind that the Income-tax Act deals with tax on income and nothing else. Therefore, in order that the charge should be a legal charge under section 4, it must be a tax on the income of the assessee. If the charge is the tax on anything else, then it would not be a valid charge. This is the only limitation upon the power or authority of Parliament to fix any rate it pleases. So long as the charge is on ¡¥total income¡¦ of the previous year, there is no limitation upon the power or authority of Parliament to fix any rate it pleases. However, if ¡¥rate¡¦ is understood to mean the fixing of the tax irrespective of ¡¥total income¡¦ and unconnected with ¡¥total income¡¦, then, Parliament would be travelling outside the ambit of section 4(1). The Income-tax Act, therefore, contains an elaborate machinery for ascertaining ¡¥total income¡¦ of an assessee. If Parliament has power to fix tax at a rate which has no connection with the ¡§total income¡¨, then the machinery set up under the 1961 Act becomes infructuous. Section 4(1) prescribes the subject-matter of the tax and the rate of that tax is prescribed by the legislature, either under the Act as in the case of section 113 of the 1961 Act, or vide the Finance Act. As long as the charge is on ¡¥total income¡¦ of the previous year and so long as the rate relates to the subject-matter of the tax, there is nothing to prevent Parliament from fixing the rate. But the rate must be applied to the ¡§total income¡¨ and the tax that an assessee has to pay must be at the rate in respect of total income of the previous year.

Citation :
Commissioner of Income-tax , Central II v. Suresh N. Gupta CIVIL APPEAL NO. 32 OF 2008 DECIDED ON 7-1- 2008.