ASHOK BHUSHAN,J. - (1.) The constitutional validity of Section 115-O of the Income Tax Act, 1961 (hereinafter referred to as '1961, Act') as inserted by Finance Act, 1997 is in issue in these appeals. The Civil Appeal No. 9178 of 2012 and Civil Appeal No. 9180 of 2012 have been filed by the Union of India against the common judgment dated 28.07.2006 of Calcutta High Court by which judgment although, Calcutta High Court has upheld the constitutionality of Section 115-O, but a rider has been put that additional income tax to be charged under Section 115-O can only be on 40 per cent of income which is taxable under Income Tax Act. The Civil Appeal No. 9179 of 2012 has been filed by the writ petitioner who had also challenged the constitutional validity of Section 115-O before the Gauhati High Court which writ petition has been dismissed vide judgment and order dated 22.06.2007. The Gauhati High court had also noted the judgment of Calcutta High Court dated 28.07.2006 as referred to above. All the appeals have been heard together and are being decided by this common judgment.
(2.) The facts giving rise to Civil Appeal No. 9178 of 2012 and 9180 of 2012 needs to be briefly noted. Several writ petitions were filed before the Calcutta High Court questioning the vires of Section 115-O of the 1961 Act. The petitioner's case in the writ petition is that the petitioner is a Tea Company which cultivate tea in gardens and processes it in its own factory/plants for marketing the same. The cultivation of tea is an agricultural process although, the processing of tea in the factory is an industrial process. The agricultural income is within the legislative competence of the State and not in the legislative competence of the Parliament. Section 115-O imposes tax on the dividend distributed by the company which is nothing but imposing the tax on agricultural income of the writ petitioner. The petitioner M/s Tata Tea Company Ltd. and others filed a Writ Petition No. 1699 of 2000 where the vires of Section 115-0 was challenged. The writ petition was dismissed by learned Single Judge vide its judgment dated 20.9.2001 against which judgment, appeals were filed before the Division Bench of the Calcutta High Court. Division Bench vide its judgment dated 28.7.2006 disposed of the appeals, setting aside the judgment of the learned Single Judge. Operative portion of the judgment of the Division Bench is as follows: "We are, however, in agreement with Dr. Pal on a limited issue. We are of the view that L 50/- as a whole could not be taxes at the prescribed rate of additional tax. Such additional tax would be levied on L 20/- being 40% of L 50/-. Hence, at the end of the day the company would have to pay income tax at the prescribed rate on L 40/- as well as additional income tax at the prescribed rate on L 20/-. Result The judgment and order of the learned Single Judge is set aside. We hold that the provision of section 115-O is constitutional and we have given the proper interpretation of the subject section as observed hereinafter. The appeals are disposed of accordingly without any order as to costs."
(3.) Union of India questioning the said judgment has come up in Civil Appeal No. 9178 of 2012 and Civil Appeal No. 9180 of 2012.;