C.A. Kunjuppu vs Second Addl. Income Tax Officer, Trichur

Menon, J.—The only contention pressed before me is the one embodied in para. 11 of the petitioner''s affidavit dated 31-3-1953:

Section 13 of the Finance Act 1950 in so far as it purports to retain the Cochin Income Tax Act in its entirety including the provisions in the said Act relating to income on capital gains which provisions are non-existent in the Income Tax Act of Travancore is unconstitutional in so far as it discriminates between the subjects of one and the same State. The said provision violates Art. 14 of the Constitution and is to that extent void.

The assessment year concerned is the Malayalam year 1123 (accounting year 1122). The original order of assessment in respect of that year demanded a tax of Rs. 1713-8-0 and the said amount was duly paid. Subsequently a further sum of Rs. 4487-5-0 was demanded by Ex. I, an assessment order dated 12-1-1052, and the controversy before me is about the validity of the subsequent demand which has been confirmed in appeal by the Appellate Assistant Commissioner by his order dated 23-4-1952 and by the Commissioner of income tax in revision by his order dated 23-1-1953. The relevant portion of Ex. I reads as follows:

This is a proceeding under S. 44, Cochin income tax Act, initiated on the discovery that the assessee had sold in the year of account a house property at Ernakulam for Rs. 20,000/-and had made capital profit. This however was not disclosed by him for his assessment of the year. Notice was therefore issued to him under S. 44, Cochin income tax Act, and the assessee has filed a revised return showing a capital profit of Rs. 3000/-. In evidence Mr. P.V. Seshadri Iyer, the assessee''s Auditor - Representative appeared and stated that the property was purchased by the assessee in the year 1118 M.E. for a consideration of Rs. 2743-8-5 and that "he had spent a sum of Rs. 12,000/- for its extension and improvements. A further sum of Rs. 1000/-is claimed as brokerage paid by him for the sale. Thus, according to the Auditor the total cost to the assessee on this property at the time of sale was Rs. 15743-8-0 and the profit earned is only the balance of Rs. 4256-8-0 as against Rs. 3000 shown by him in the revised return filed. When he was asked to substantiate the claims for expenses such as extension and improvement and brokerage paid, he informed me that he is not in a position to adduce any evidence at all The assessee being a business man with pucca accounts I do not understand why those huge expenses, if they were real as alleged, do not find a place in his accounts. Further my enquiries show that the building was not at all subjected to any such extensions and structural alterations and in fact the brokerage of Rs. 1000 which the assessee claims to have been paid was really paid by the purchaser Sri K.V. Padmanabhan and that too only Rs. 500/- to one Sri Sandhyavu who negotiated the sale. In these circumstances I would give credit to the assessee only an estimated sum of Rs. 2256-8-0 for petty repairs done. The excess that can be assessed under capital profits is thus fixed at Rs. 15,000/-.

The levy of income tax on capital gains though possible under the Cochin income tax Act, 6 of 1117, as amended by the Cochin income tax (Amendment) Act, 22 of 1122, was not possible in the Travancore State under the Travancore income tax Act, 23 of 1121, and the contention of the petitioner is that this amounts to a discrimination between two parts of the integrated State of Travancore-Cochin and will hence violate Art. 14 of the Constitution The answer must depend on the point of time when the tax liability arose, or whether it arose prior to 26-1-1950, the date when the Constitution came into force, or only subsequent thereto. According to the petitioner the earliest point of time when his liability could be deemed to have arisen is on 1-9-1950 when he was served with a notice under S. 44, Cochin income tax Act, 6 of 1117, and the Department commenced the proceedings which culminated in Ex. I. On the other hand, the respondent contends, and I think correctly, that the liability arose in the year in which the income was earned and the fact that the petitioner successfully avoided the liability until proceedings under S. 44 were started cannot postpone the accrual of that liability.

The tax is in respect of the accounting year which ended on the last day of Karkatakam 1122, that is, prior to the Constitution, and in the view I have taken no question of discrimination between two parts of the same State can possibly arise. Even the Covenant of integration by the Maharajas of Travancore and Cochin was signed only in May 1949.

The decision of the majority of the Judges in - Keshavan Madhava Menon Vs. The State of Bombay, , clearly supports my conclusion. They held that the Constitution is not retrospective in operation,. that there was no such thing as fundamental rights prior to the Constitution, that any question of inconsistency of existing laws with fundamental rights can only arise on and from the date those rights came into being and that the preservation of past inchoate rights or liabilities and pending proceedings to enforce the same is not foreign or abhorrent to the Constitution of India.

- The State of Rajasthan Vs. Rao Manohar Singhji, , was cited before me on behalf of the petitioner. There is nothing in chat decision which affects the statement of the law as embodied in the earlier decision of the Supreme Court mentioned in the Last preceding paragraph. All that I am concerned with in this case is the right to collect income tax in respect of capital gains which arose prior to the Constitution under the Cochin income tax Act, 6 of 1117, and as there is nothing in the Constitution which affects the right to collect the same this petition must fail and should be dismissed.

I dismiss the petition with costs, Advocate''s fee Rs. 100/-.