Case: Hari Krishna Bhargav Vs. Union Of India And Another

1. The petitioner who is a trader at Meerut was ordered by the Income-tax Officer, D-Ward, Meerut, to pay Rupees 1,800/- as annuity deposit under Ch XXII-A ofthe Income-tax Act, 1961. The petitioner has filed this petition challenging the validity of the demand on the plea that Ch. XXII-A of the Income-tax Act is unconstitutional and is otherwise violative of the fundamental right guaranteed by Art. 14 of the Constitution.

Reasoning: . The power of assessment, and collection of annuity deposit is entrusted to Income-tax Officers, and the machinery of the Income-tax Act is utilised for that purpose. The annuity deposit is based on the total income of the taxpayer: if the taxpayer pays the deposit he is entitled to deduction of the amount in the computation of income-tax, and if he exercises the option not to pay the deposit, he is rendered liable to pay additional income-tax. The annuity deposit and the penalty payable for failure to make the deposit without exercising the option are made recoverable in the manner provided by Ch. XVII-D for the recovery of arrears of income-tax. If the Annuity Deposit Act were enacted as a separate Act, several provisions requiring references to the Income-tax Act and conferment of power upon the authorities constituted under the Income-tax Act would have had to be duplicated. To avoid repetition and cross references the Legislature has thought it proper to enact within the Indian Income-tax Act those provisions relating to annuity deposits and has conferred upon the Income-tax Officer power to assess and collect annuity deposits, and exercise of that power may not be cavilled even by a purist init is now settled by decisions of this Court (e.g.), Eunnathat Thathumni Moopil Nair v. State of Kerala, 1961-3 SCR 77  : (AIR 1961 SC 552  ), that a taxing statute is subject to the "conditions laid down in Art. 13 of the Constitution". A taxing statute may accordingly be open to challenge on the ground that it is expropriatary, or that the statute prescribes no procedure or machinery for assessing tax, but it is not open to challenge merely on the ground that the tax is harsh or14 of the Constitution guarantees equality before the law, and equal protection of the laws. But thereby the power of the Legislature to make a reasonable classification of persons, objects or transactions for attaining certain objectives is not excluded. If a classification is based on some real and substantial distinction, bearing a just and reasonable relation to the objects sought to be achieved, it is valid. It is true that an assessee whose total income does not exceed Rs. 15,000 is not liable to pay any annuity deposit, and the demand for annuity deposit, unlike income-tax is based on a progressively increasing percentage of the adjusted total income, and for a person having a total income exceeding Rs. 70,000 the rate of deposit is as high as 12 1/2 per cent. But neither the exemption of taxpayers having an income below Rs. 15,000 nor the progressively steeper rates of demand can be regarded as unreasonable. What is sought to be achieved by the Act is the twin objective of mobilisation of private savings for public purposes and imposing curbs on the inflationary trends in the economy of our country. To secure this purpose, provision has been made to collect what may reasonable by assumed to be surplus income or private savings so as to make them available for nationalis true that a slab system in vogue for the computation of non-corporate income-tax has not been adopted, and the demand of deposit is made at a steeply rising percentage on the adjusted total income. But that by itself is not a ground for regarding the levy as unreasonable. In order to do away the anomalies the Schedule of rates has provided marginal adjustments. It may also be noticed that simultaneously with the introduction of the annuity deposits scheme, the personal rates of income-tax have been reduced. Again it may be noticed that the scheme for the annuity deposits is in a sense not compulsory. By making a declaration it is open to an assessee not to make the contribution as required by the Act. He may elect not to make the deposit, and pay income-tax on his total income. If he has not attained the age of seventy years on the last day of the previous year he will also have to pay additional income-tax as prescribed by sub-s. (2) of S. 280-X There is undoubtedly a distinction made between persons who are below the age of seventy years on the last day of the previous year, and those who have attained that age: the former on exercising the option not to pay annuity deposits will have to pay tax on the total income and additional income-tax, the latter will only pay tax on total income but not additional income-tax. The Legislature is apparently of the view, having regard to the life span in our country, capacity to engage in gainful employment and other relevant circumstances, that the latter should be exempted from payment of additional tax. Every taxpayer who is otherwise required to make a deposit is permitted to declare his option under S. 280-X (1) and once he does so, he is not liable to make the annuity deposit. Such a taxpayer will be obliged to pay income-tax on his total income. Only a section out of this class of taxpayers are exempted from liability to pay additional income-tax. It is difficult to regard the provision exempting this class of persons from liability to pay additional tax as depriving other taxpayers below the age of seventy who have exercised the option under S. 280-X (1) of the guarantee of equal protection of the laws. The classification is prima facie reasonable, and the petitioner has placed no materials before us to prove that it is not genuine or has no rational nexus to the object sought to be achieved by the Parliament.