Shah, J. - (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 of the 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.
(2.) The Indian Income-tax Act, 43 of 1961, was enacted by the Parliament to consolidate and amend the law relating to income-tax and super-tax. The Act came into force on April 1, 1962. The Parliament enacted Finance Act, 5 of 1964, to give effect to the financial proposals of the Central Government for the financial year 1964-65, and by S. 3 (1) of that Act it was provided: "Save as otherwise provided in Chapter XXII-A of the Income-tax Act, annuity deposit for the assessment year commencing on the 1st day of April, 1964 shall be made by every person to whom the provisions of that chapter apply at the rates specified in the Second Schedule." By S. 44 of the finance Act, Ch. XXII-A relating to annuity deposits containings Ss. 280-A to 280-X was that Chapter tax-payers of certain categories are required to make annuity deposits for every assessment year commencing from the assessment year 1964-65. By the Second Schedule to the Finance Act, rates of annuity deposits are prescribed. The deposit has to be made by the specified categories of tax-payers, having a total income exceeding Rs. 15,000/- at the prescribed percentages rising from 5 to 12 1/2 on the adjusted total income. By the Explanation to the Second Schedule, the expression "total income" under the Schedule means the total income computed in the manner laid down in the Income-tax Act without making any allowance under S. 280-O of the Act. A tax-payer who is a resident and falls within any of the following categories is liable to make the annuity deposit: (i) an individual, who is a citizen of India, (ii) a Hindu undivided family, (iii) an unregistered firm, (iv) an association of persons or a body of individuals, whether incorporated or not (other than a company or a co-operative society), and (v) an artificial juridical person referred to in sub-clause (vii) of Cl. (31) of S 2 of the Income-tax Act (other than a corporation established by a Central, State or Provincial Act). All non-residents and all companies and corporations and co-operative societies established by Central, State or Provincial Acts are accordingly exempted from the operation of the annuity deposits scheme. But a taxpayer who is required by S. 280-A to make an annuity deposit may exercise his option not to make it, by a notice in writing to the Income-tax Officer before the 30th of June of the assessment year. The option once exercised is irrevocable, and operates in respect of the assessment year and all subsequent years. The tax-payer who exercises the option has to pay beside the income-tax payable on his total income, additional income-tax which is equal to half of the amount which he saves by not making the deposit. But an individual who on the last day of the relevant previous year is more than seventy years of age is exempt from payment of this additional income-tax. Section 280-B defines, amongst other expressions, "adjusted total income", a percentage of which is by the second Schedule liable to be deposited as annuity deposit. Annuity deposit has to be made in advance on the adjusted total income of the previous year, at the rate or rates prescribed by any Central Act. Authors, play-wrights, artists, musicians and actors are permitted to make at their option, deposit upto 25 per cent of the amount dervied from their profession, in addition to the amount which they are required to make. A person receiving gratuity from his employer in excess of the amount exempt from income-tax has the option of making an annuity deposit not exceeding 50 per cent of the amount of gratuity chargeable to income-tax, in addition to the amount he is required to make. The annuity deposit is repayable in ten annual equated instalments of principal and interest at such rates as may be prescribed. The amount of annuity deposit payable by a tax-payer in any year is admissible as a deduction in computing his total income charged to tax for that year. If the adjusted total income of an assessee includes income chargeable to income-tax under the head "salaries", allowance has to be made in computing the income under that head, and if there be no income under that head or the annuity deposit required to be made exceeds the salary income, the whole of the balance of the annuity deposit is allowable as a deduction in computing the total earned income. The instalment of annuity due on any annuity deposit is chargeable to income-tax as earned income of the tax-payer in the year in which it becomes due. The Income-tax Officer on or after the 1st day of April in the financial year, may by order in writing, require the depositor who has been previously assessed to make an advance deposit computed in accordance with S. 280-E. The Income-tax Officer is also authorised to issue a demand notice and also to modify, if necessary, the notice of demand after regular assessment has been made. A depositor may make his own estimate of his adjusted total income for the previous year is less than the income in respect of which he is required to make the deposit. A tax-payer who fails to pay the annuity deposit by the due date is exposed to a penalty which may amount to as much as 50 per cent of the deposit required to be made by him. A taxpayer who received income of the nature of commission, which forms part of his adjusted total income, may defer making advance deposit, when commission is receivable periodically and is not received or adjusted by the payer in the depositor's account. A person who has not been previously assessed to income-tax is liable to pay penalty if he fails to make an advance deposit on his own estimate. The Income-tax Officer is entitled to determine annuity deposit on the basis of provisional assessment or regular assessment and he is entitled to recompute the annuity deposit, when the total income of the assessee is enhanced or reduced, or the status under which he is assessed is altered or when the registration of a firm is cancelled. Arrears of annuity deposit and penalty are recoverable in the manner provided in Ch. XXII-D of the Income-tax Act for the recovery of Income-tax.
(3.) Broadly stated, the scheme of Ch. XXII-A is that certain classes of taxpayers in the comparatively higher income groups are required to make out of their total income deposits at the specified rates on the adjusted total income, with the Central Government. The amount so deposited in made returnable with interest in ten annual instalments. In computing the total income of the year in which it is made the deposit is an admissible deduction. But the instalment due in any year is liable to be adjusted in the total income of the year in which it is due. The taxpayer however has the option not to pay the deposit, and pay tax on his total income and fitty per cent of the amount saved by not making the deposit.;