JUDGMENT
M.B. Shah, J.
1. It is the contention of the petitioner that by a registered sale deed dated June 23, 1961, the petitioner sold land bearing Survey No. 80, admeasuring 11,977 sq. yards for a consideration of Rs. 1,11,505; the petitioner received a notice dated July 21, 1962, issued by respondent No. 2 under section 139(2) of the Income-tax Act, 1961, for filing of the return of income for the assessment year 1962-63. In response to the said notice, the petitioner filed a return of income dated November 20, 1962, in the status of an association of persons showing the income as “Nil”. It is contended by the petitioner that the said return of income filed was treated as invalid and was ordered to be filed on February 12, 1964. Prior to that, the petitioner received a second show-cause notice dated August 27, 1963, under section 148 of the Income-tax Act in his capacity as the karta and manager of the alleged Hindu undivided family of Chimanlal Narbheram Thakore. Again the petitioner submitted a return showing the income as “Nil”. Thereafter, the said proceedings were dropped for which the petitioner received a letter dated March 10, 1967. Subsequently, a third notice under section 148 was received by the petitioner on March 28, 1967. Despite the objections raised by the petitioner, the assessment order dated March 18, 1968, was passed by the second respondent assessing the petitioner as liable for capital gains tax for the sum of Rs. 82,046.
2. That order was challenged by the petitioner before the Appellate Assistant Commissioner of Income-tax, Ahmedabad. The Appellate Assistant Commissioner remanded the matter with a specific direction to give a remand report. That remand report was received by the Appellate Assistant Commissioner on September 29, 1973. The Appellate Assistant Commissioner finally allowed the appeal by his order dated August 5, 1976. Against that order, the Department preferred an appeal before the Income-tax Appellate Tribunal. The petitioner filed a cross-appeal. The appeal filed by the Department was dismissed.
3. It is contended by the petitioner that because of the illegal assessment order, the petitioner was required to pay various amounts, in all Rs. 26,598.50, from May 25, 1967, to August 8, 1968. It is his contention that by the order dated February 23, 1970, respondent No. 2 had imposed penalty of Rs. 10,984 under section 271(1)(a) of the Income-tax Act. The petitioner had paid the said amount. Thereafter, the petitioner had also paid by way of penalty the sum of Rs. 4,102 pursuant to the order dated February 11, 1970, passed by the Inspecting Assistant Commissioner under section 271(1)(c) read with section 274(2) of the Income-tax Act. It is contended that because the order passed by the Income-tax Officer is set aside by the Appellate Assistant Commissioner, the petitioner was entitled to recover Rs. 26,598.50 along with the penalty of Rs. 15,086 (Rs. 10,984 + Rs. 4,102) paid by him with interest. The petitioner had admitted that the respondent had refunded the amount of income-tax and penalty amount of Rs. 10,984 by two instalments being the aggregate amount of Rs. 41,685. However, no interest is paid on the said amount. Hence, it is prayed that –
(a) the respondents may be directed to refund to the petitioner, the sum of Rs. 4,102 paid by the petitioner by way of penalty under section 271(1)(c) read with section 274(2) of the Income-tax Act;
(b) the words and figures “after 31st day of March, 1975”, occurring in sub-section (1A) of section 244 of the Income-tax Act, be declared as violative of article 14 of the Constitution of India;
(c) the respondents be directed to pay interest on refund. It is to be noted that, in spite of service of notice, no affidavit-in-reply is filed on behalf of the respondents.
4. At the time of hearing of the petitioner, it is contended that the petitioner is entitled to get refund of the amount paid by him with interest from the date of payment as provided under section 244(1A) of the Income-tax Act for which the necessary calculations are produced at annexure “E” to the petition. In the alternative, it is contended that that part of section 244(1A) which fixes the cut-off date “31st day of March, 1975” is violative of article 14 of the Constitution of India, as it is fixed arbitrarily. The learned Advocate-General submitted that the prescription that only in a case where any amount has been paid be an assessee after the 31st day of March, 1975, in pursuance of any order of assessment or penalty, which is in excess of the amount which such assessee is liable to pay as tax or penalty, the assessee would be entitled to get refund of the excess amount with interest as specified therein, is illegal, because –
(i) by prescribing a date, artificially two classes of persons who have paid tax or penalty in excess are created – one class of persons is the persons who have paid tax in excess prior to March 31, 1975, and the other class of those persons who have paid tax after March 31, 1975. He further submitted that those persons who have paid tax in excess in pursuance of the order of assessment prior to March 31, 1975, cannot be discriminated against by not paying interest on the refund amount from the date of payment; and
(ii) that there is no reason or nexus sought to be achieved for giving preferential treatment to those persons who have paid tax or penalty in excess after March 31, 1975. He further submitted that when tax in excess is paid, the date of payment is not at all relevant for grant of refund with interest.
5. With regard to the refund of the amount of Rs. 4,102, Mr. Shelat, learned counsel appearing on behalf of the respondents, vehemently submitted that the present petition for refund of the amount is not maintainable because the petitioner ought to have approached the appropriate authority by filing a proper application. In the alternative, he submitted that, as the matter was admitted by this court, this court may direct the petitioner to approach the appropriate authority for refund of the said amount and also to direct the respondents to consider the said application on the merits.
6. With regard to the constitutional validity of the provisions, he submitted that section 244(1A) of the Income-tax Act is not violative of article 14 of the Constitution because the said sub-section was inserted by the Taxation Laws (Amendment) Act, 1975, with effect from October 1, 1975. Therefore, the Legislature has given the benefit to those assessees who had paid the tax in excess after March 31, 1975. He submitted that, for grant of the same benefit, that is to say, for refunding the amount with interest, it is not necessary that the Legislature should grant interest on refund to those assessees who have paid tax in excess even prior to the insertion of the said sub-section.
7. He also relied upon the circular dated January 11, 1977, issued by the Board, which, inter alia, provides that section 244(1A) will be applicable only if the refund has arises out of orders in appeal or other proceedings passed on or after October 1, 1975, and payment has been made after March 31, 1975. He submitted that in those cases where the assessment orders are passed after insertion of section 244(1A) and payment is made after March 31, 1975, the amount is to be refunded with interest from the date of payment till the date of refund. He submitted that section 244(1A) specifically provides to the aforesaid effect. He further submitted that, in any case, it was open to Parliament to prescribe a cut-off date to the effect that if the tax is paid in excess after March 31, 1975, in pursuance of the order of assessment, then on such refund of the excess amount, the Central Government shall pay interest from the date of payment and it cannot be said that prescription of such date is arbitrary or violative of article 14 of the Constitution of India.
8. For appreciating the rival contentions raised by learned counsel for the parties, it would be necessary to refer to the relevant provisions under Chapter XIX pertaining to refunds of excess tax or penalty paid by the assessee under the Income-tax Act. This provision can broadly be divided into two groups – (i) where the claim for refund is to be made, sections 238, 239 and 243 provide the procedure for it, and (ii) other sections provide for cases where no claim is required to be made and the concerned officer is required to refund the amount in pursuance of the order passed in appeal or in any other proceedings. The said sections are sections 240, 241 and 244. Section 237, inter alia, provides that, if any person satisfies the Income-tax Officer that the amount of tax paid by him for any assessment year exceeds the amount with which he is properly chargeable for that year, he shall be entitled to a refund of the excess. Section 238 provides as to who would be entitled to file an application for refund. Section 239(1), inter alia, provides that every claim for refund shall be made in the prescribed form and verified in the prescribed manner. Sub-section (2) provides limitation within which an application for refund can be filed. Section 243 provides that in the cases where the Income-tax Officer does not grant the refund as provided therein, the Central Government shall pay the assessee the said amount with interest. In the present case, we are not required to deal with these sections. As against this, section 240 provides that where, as a result of any order passed in appeal or other proceeding under the Act, refund of any amount becomes due to the assessee; the Income-tax Officer shall refund the amount to the assessee without his having to make any claim in that behalf. However, section 241 empowers the Income-tax Officer to withhold the refund in a case where an order giving rise to a refund is the subject-matter of an appeal or further proceedings. Section 244 provides for payment of interest on such refund. Section 240 and the relevant part of section 244, with which we are concerned, are as under :
“240. Where, as a result of any order passed in appeal or other proceeding under this Act, refund of any amount becomes due to the assessee, the Income-tax Officer shall, except as otherwise provided in this Act, refund the amount to the assessee without his having to make any claim in that behalf.
244. (1) Where a refund is due to the assessee in pursuance of an order referred to in section 240 and the Income-tax Officer does not grant the refund within a period of three months from the end of the month in which such order is passed, the Central Government shall pay to the assessee simple interest at twelve per cent. per annum on the amount of refund due from the date immediately following the expiry of the period of three months aforesaid to the date on which the refund is granted.
(1A) Where the whole or any part of the refund referred to in sub-section (1) is due to the assessee, as a result of any amount having been paid by him after the 31st day of March, 1975, in pursuance of any order of assessment or penalty and such amount or any part thereof having been found in appeal or other proceeding under this Act to be in excess of the amount which such assessee is liable to pay as tax or penalty, as the case may be, under this Act, the Central Government shall pay to such assessee simple interest at the rate specified in sub-section (1) on the amount so found to be in excess from the date on which such amount was paid to the date on which the refund is granted :
Provided that. . . . . . . .”
9. Admittedly, sub-section (1A) is inserted with effect from October 1, 1975. Prior to the addition of sub-section (1A), where refund was payable to the assessee in pursuance of an order passed in an appeal or other proceedings under the Act, the Income-tax Officer was required to refund the said amount within a period of three months from the end of the month in which such order is passed with simple interest at the rate of 12 per cent. per annum on the amount of refund from the date immediately following the expiry of the period of three months aforesaid to the date on which the refund is granted. Because of sub-section (1), the Income-tax Officer was duty bound to refund the excess amount within a period of three months from the end of the month in which such order was passed. If such amount is not paid within the said period, then the assessee was entitled to recover the said amount with simple interest at the rate of 12 per cent. per annum after the expiry of three months from the date of the order by which he is entitled to get a refund. By inserting sub-section (1A), the law with regard to payment of interest is changed and it is provided that on such amount, the assessee shall be entitled to get interest from the date of payment and not from the date of the order. While inserting the enactment, the Legislature has taken care to see that this benefit is given only to those persons who have paid tax in excess after March 31, 1975.
10. The question, therefore, arises as to whether such fixation of date is arbitrary ?
11. The learned Advocate-General submitted that sub-section (1A) is inserted in section 244 with the specific object that interest is paid on refund of excess tax or penalty from the date of the payment of such amount to the date of grant of refund, but after excluding a period of one month from the date of the order in appeal. For this purpose, he referred to clause 57 of the Notes Clauses for the Taxation Laws (Amendment) Bill, 1973 (see [1973] 89 ITR (St.) 116). He further submitted that, as per the Bill, clause 57 is as under (see [1973] 89 ITR (St.) 56) :
“(1A) Where the whole or any part of the refund referred to in sub-section (1) is due to the assessee, as a result of any amount having been paid by him in pursuance of any order of assessment or penalty and such amount or any part thereof having been found in appeal or other proceeding under this Act to be in excess of the amount which such assessee is liable to pay as tax or penalty or both, as the case may be, under this Act, the Central government shall pay to such assessee simple interest at the rate specified in sub-section (1) on the amount so found to be in excess –
(i) from the date such amount was paid or
(ii) where such amount was paid in instalments, from the date or dates on which any payment made came to be in excess of the amount due from such assessee as a result of the appeal or other proceeding,
12. to the date on which the refund is granted :
Provided that no interest under this sub-section shall be payable for a period of one month from the date of the passing of the order in appeal or other proceeding :
Provided further that where any interest is payable to an assessee under this sub-section, no interest under sub-section (1) shall be payable to him in respect of the amount so found to be in excess.”
13. Considering the aforesaid provision in the Bill, he submitted that the main purpose of the addition of section 244(1A) was to refund the amount paid in excess to all assessees with simple interest from the date of payment till the date on which the refund is granted.
14. In our view, this submission is without any substance. Admittedly, the aforesaid Bill was referred to the Select Committee and the Select Committee had presented its report on March 20, 1975 (see [1975] 99 ITR (St.) 19 – relevant at page 27). The Select Committee had suggested insertion of sub-section (1A) in section 244 with modification and it was suggested that “only payment” of disputed taxes made after March 31, 1975, will be entitled to interest”.
15. Further, considering section 244(1) of the Act, it is clear that where, as a result of any order passed in appeal or other proceeding under the Income-tax Act, refund of any amount becomes due to the assessee, and the Income-tax Officer does not grant refund within a period of three months from the end of the month in which such an order is passed, the Central Government is required to pay to the assessee simple interest at the rate of 12 per cent. per annum on the amount of refund due from the date immediately following the expiry of the period of three months till the date on which the refund is granted. With effect from October 1, 1975, sub-section (1A) is added with the specific purpose of granting interest from the date of payment in certain cases. It provides that if such refund is due to the assessee, in cases where (i) the assessee had paid the amount after March 31, 1975, in pursuance of any order of assessment or penalty; and (ii) such amount or part thereof has been found in appeal or other proceedings under the Act to be in excess of the amount which such assessee is liable to pay as tax or penalty under the Act, then the Central Government shall pay to such assessee simple interest at the rate of 12 per cent. per annum on the amount so found to be in excess from the date on which such amount was paid to the date on which the refund is granted. The first proviso provides that where the amount so found to be in excess was paid in instalments, such interest shall be payable on the amount of each such instalment or any part of such instalment, which was in excess, from the date on which such instalment was paid to the date on which the refund is granted. The second proviso provides that no interest shall be payable for a period of one month from the date of passing of the order in appeal or other proceeding. The third proviso Specifically provides that where any interest is payable to an assessee under this sub-section, no interest under sub-section (1) shall be payable to him in respect of the amount so found to be in excess. Considering the aforesaid scheme of sections 240, 244(1) and 244(1A), it is apparent that with effect from October 1, 1975, sub-section (1A) is added to pay interest on refunds from the date of payment and not from the date when the assessment order for tax or penalty is set aside. Therefore, an additional right is conferred in favour of those assessees who have paid tax or penalty after March 31, 1975. The purpose may be to induce the assessees to pay tax or penalty even though the appeal or other proceedings for setting aside the levy of tax or penalty are pending. But this would not mean that, if the benefit is conferred to the assessees who paid tax or penalty after March 31, 1975, such benefit should always be conferred to other assessees who had paid tax or penalty prior to March 31, 1975. In such a situation, it is for the Legislature to prescribe the eligibility criteria and/or the cut-off date. It is apparent that the law was enacted from October 1, 1975, and, therefore, normally it would come into force from that date and the benefit conferred by the said provisions would be available from that date only. But here, it seems that, the Legislature has conferred the benefit from a specific date, i.e., March 31, 1975, because of accounting year which begins from April 1, 1975.
16. However; the learned Advocate-General relied upon the decision of the Supreme Court in the case of B. Prabhakar Rao v. State of A. P. [1985] Supp SCC 432; AIR 1986 SC 210, to substantiate his contention that fixation of a cut-off date in the present case is arbitrary. In our view, the said decision would not in any way be helpful in deciding the question involved in the present case, because in that very case, the court has observed that a situation such as the one before them had never presented itself to the court previously. The court further observed as under (at page 221 of AIR 1986 SC) :
“Make this case a precedent for justice say one side; let this not be the first say the other. We have had cases where the age of superannuation had been raised from 55 to 58 years; we have had cases where having earlier raised the age of superannuation from 55 to 58 years, there was later a change of policy and the age of superannuation was once again reduced to 55 years. But this is the first occasion – neither our researches nor those of the learned counsel have been able to trace another case of this kind – where the age of superannuation was first raised from 55 to 58 years, there was then a change of policy a few years later reducing the age of superannuation from 58 to 55 years and finally there was again, within a few months, a reversion to the higher age of superannuation of 58 years. The cases of Bishun Narain Misra v. State of U. P., AIR 1965 SC 1567 and K. Nagaraj v. State of A. P., AIR 1985 SC 551, belong to the second category of cases. In Bishun Narain Misra’s case, AIR 1965 SC 1567, by a notification dated November 27, 1957, the Government of Uttar Pradesh raised the age of superannuation from 55 to 58 years.”
17. It should be noted that in the aforesaid case, the judgment was rendered because of the peculiar facts and circumstances emerging from the Ordinance issued by the Andhra Pradesh Government. In the supplementary judgment delivered by Balakrishna Eradi J., it is clarified as under (at page 231 of AIR 1986 SC) :
“We are not to be understood as laying down that whenever the age of superannuation of Government employees or of employees of local authorities, etc., is enhanced, the benefit of such enhancement should be extended not merely to persons in service on the date on which the change is effected but also to persons who have already retired from service prior to that date. It is now well-established by decisions of this court that the Government has full power to effect a change in the age of superannuation of its employees on relevant considerations. If in the exercise of such power the age of superannuation is enhanced purely by way of implementation of a policy decision taken by the Government, such alteration can legally be brought about with prospective effect from the date of the commencement of the operation of the Ordinance, Act or Rules and no question of violation of article 14 or 16 of the Constitution will arise merely because the benefit of the change is not extended to employees who have already retired from service.”
18. The court again and again emphasised that in the context of the telling facts and circumstances which conclusively show that the object and purpose of the legislation was to set right the injustice that had been done, there was no rationale or reasonable nexus or basis for separately classifying the employees who had retired from service prior to the date of commencement of Ordinance 23 of 1984 and who are the persons most affected by the wrong by denying to them the benefit of the rectification of the injustice. The court has stated that solely on this ground those petitions were allowed and the reliefs were granted. Even in the last paragraph of the supplementary judgment rendered by Khalid J., it is observed (at page 231 of AIR 1986 SC) : “I respectfully agree with the judgment prepared by my learned brother Reddy J., I am also in entire agreement with my learned brother Eradi J., about the limited scope of the principles laid down in these eases on their peculiar facts.”
19. From the aforesaid discussion by the Supreme Court, it is apparent that the case was decided because of the peculiar facts and circumstances. The court has also emphasised that alteration can legally be brought about with prospective effect from the date of commencement of the operation of the Act and no question of violation of article 14 will arise merely because the benefit of change is not extended to the employees who have already retired from service.
20. Further, while dealing with the case of D. S. Nakara v. Union of India, AIR 1983 SC 130, the Supreme Court in the case of Krishna Kumar v. Union of India, AIR 1990 SC 1782 (paragraph 18), has observed (at page 1793), “the doctrine of precedent, that is being bound by a previous decision, is limited to the decision itself and as to what is necessarily involved in it; it does not mean that this court is bound by the various reasons given in support of it, especially when they contain ‘propositions wider than the case itself required’.” The court has further observed that in Nakara’s case, AIR 1983 SC 130, it was never required to be decided that all the retirees formed a class and no further classification was permissible.
21. In the present case, by insertion of sub-section (1A) in section 244, the law with regard to grant of interest on the refund amount of excess tax or penalty is altered with prospective effect. Therefore, there cannot be any question of violation of article 14. It is not necessary that the Legislature should grant similar benefit to those persons who have paid tax or penalty as per the order prior to the coming into operation of the Act.
22. Further, with regard to cut-off date, the Supreme Court in the case of Hathising Mfg. Co. Ltd. v. Union of India, AIR 1960 SC 923; [1960-61] 18 FJR 181 (paragraph 28) (at page 931 of AIR 1960 SC) observed as under :
“Article 14 strikes at discrimination in the application of the laws between persons similarly circumstanced; it does not strike at a differentiation which may result by the enactment of a law between transactions governed thereby and those which are not governed thereby. If the argument that discrimination results when by statute, a civil liability is imposed upon transactions which were otherwise subject to such liability be accepted, every law which imposes civil liability will be liable to be struck down under article 14 even if it comes into operation on the date on which it is passed, because immediately on its coming into operation, discrimination will arise between transactions which will be covered by the law after its coming into force and transactions before the law came into force which will not naturally be hit by it.”
23. The court further observed that the power of the Legislature to impose civil liability in respect of transactions completed even before that date on which the Act is enacted does not appear to be restricted. If, as is conceded – and in our judgment rightly – by a statute imposing civil liability in respect of post enactment transactions, no discrimination is practised, by a statute which imposes liability in respect of transaction which have taken place after a date fixed by the statute but before its enactment, it cannot be said that discrimination is practised. The court further observed that article 14 strikes at discrimination in the application of the laws between persons similarly circumstanced; it does not strike at a differentiation which may result by the enactment of a law between transactions governed thereby and those which are not governed thereby.
24. Applying the aforesaid law, it cannot be said that the two groups of assessees, those who have paid excess tax or penalty prior to March 31, 1975, and after March 31, 1975, are similarly circumstanced and, therefore, denial of benefit to one group does not infringe rights guaranteed under the Constitution. By insertion of sub-section (1A), the benefit of granting interest from the date of payment is given in respect of post enactment payment of excess tax or penalty.
25. While dealing with such contention, the Supreme Court in the case of Union of India v. Parameswaran Match Works, AIR 1974 SC 2349, 2352. (paragraph 10) has observed that the choice of a date as basis for classification cannot always be dubbed as arbitrary even if no particular reason is forthcoming for the choice unless it is shown to be capricious or whimsical in the circumstances. The court has also observed that when it is seen that a line or a point there must be and there is no mathematical or logical way of fixing it precisely, the decision of the Legislature or its delegate must be accepted unless we can say that it is very wide of any reasonable mark. As stated above, in the present case, as sub-section (1A) was incorporated with effect from October 1, 1975, the Legislature has prescribed the date March 31, 1975, so as to give benefit in that accounting year. Hence, it would be difficult to hold it in any way capricious or whimsical in the circumstances.
26. Further, it is established law that in the matter of granting concession or exemption from tax, the Government has a wide latitude of discretion. It need not give exemption or concession to everyone in order that it may grant the same to someone.
27. While dealing with the contention that the Expenditure Tax Act is violative of article 14 of the Constitution of India, the Supreme Court in the case of Federation of Hotel and Restaurant Association of India v. Union of India, AIR 1990 SC 1637; [1989] 178 ITR 97 (SC) has observed that the Legislature enjoys a wide latitude in the matter of selection of persons, subject-matter, events, etc., for taxation, the tests of the vice of discrimination in a taxing law are, accordingly, less rigorous; Legislature does not, as an old saying goes, have to tax everything in order to be able to tax something; it is also recognised that no precise or set formulae or doctrinaire tests of precise scientific principles of exclusion or inclusion are to be applied; the test could only be one of palpable arbitrariness applied in the context of the felt needs of the times and societal exigencies informed by experience. In that case, the court has also referred to its earlier decision in the case of Jaipur Hosiery Mills Pvt. Ltd. v. State of Rajasthan [1970] 26 STC 341; AIR 1971 SC 1330, wherein the court has observed as under (at page 122 of 178 ITR) :
“. . . it has to be borne in mind that in matters of taxation, the Legislature possesses large freedom in the matter of classification. Thus, wide discretion can be exercised in selecting persons or objects which will be taxed and the statute is not open to attack on the mere ground that if taxes some persons or objects and not others. It is only when within the range of its selection the law operates unequally and cannot be justified on the basis of a valid classification that there would be a violation of article 14.”
28. After considering various decisions, the court has observed, “the legislative assumption cannot be condemned as irrational. It is equally well-recognised that judicial veto is to be exercised only in cases that leave no room for reasonable doubt. Constitutionality is presumed”.
29. The law on the subject was also considered by the Supreme Court in the case of Spences Hotel Pvt. Ltd. v. State of West Bengal [1991] 2 SCC 154. The court observed that taxation will not be discriminatory if, within the sphere of its operation, it affects alike all persons similarly situated. It, however, does not prohibit special legislation, or legislation that is limited either in the objects to which it is directed, or by the territory within which it is to operate; the rule of equality requires no more than that the same means and methods be applied impartially to all the constituents of each class, so that the law shall operate equally and uniformly upon all persons in similar circumstances. The Legislature may exempt certain classes of property from any taxation at all, may impose different specific taxes upon different trades and professions. The relevant discussion in paragraph 26 is as under (at page 170) :
“What then ‘equal protection of laws’ means as applied to taxation ? Equal protection cannot be said to be denied by a statute which operates alike on all persons and property similarly situated, or by proceedings for the assessment and collection of taxes which follows the course usually pursued in the State. It prohibits any person or class of persons from being singled out as special subjects for discrimination and hostile legislation; but it does not require equal rates of taxation on different classes of property, nor does it prohibit unequal taxation so long as the inequality is not based upon arbitrary classification. Taxation will not be discriminatory if, within the sphere of its operation, it affects alike all persons similarly situated. It, however, does not prohibit special legislation, or legislation that is limited either in the objects to which it is directed, or by the territory within which it is to operate. In the words of Cooley : It merely requires that all persons subjected to such legislation shall be treated alike, under like circumstances and conditions, both in the privileges conferred and in the liabilities imposed. The rule of equality requires no more than that the same means and methods be applied impartially to all the constituents of each class, so that the law shall operate equally and uniformly upon all persons in similar circumstances. Nor does this requirement preclude the classification of property, trades, profession and events for taxation – subjecting one kind to one rate of taxation, and another to a different rate. ‘The rule of equality of taxation is not intended to prevent a State from adjusting its system of taxation in all proper and reasonable ways. It may, if it chooses, exempt certain classes of property from any taxation at all, may impose different specific taxes upon different trades and professions’. ‘It cannot be said that it is intended to compel the State to adopt an iron rule of equal taxation’. In the words of Cooley :
‘Absolute equality is impossible. Inequality of taxes means substantial differences, practical equality is constitutional equality. There is no imperative requirement that taxation shall be absolutely equal. If there were, the operations of Government must come to a stop, from the absolute impossibility of fulfilling it. The most casual attention to the nature and operation of taxes will put this beyond question. No single tax can be apportioned so as to be exactly just and any combination of taxes is likely in individual cases to increase instead of diminish the inequality’.”
30. The aforesaid two judgments were referred to and relied upon by the Supreme Court in the case of Sri Srinivasa Theatre v. Govt. of Tamil Nadu, AIR 1992 SC 999. The court observed that Parliament and the Legislatures are accorded a greater freedom and latitude in choosing the persons upon whom and the situations and stages at which it can levy tax.
31. Considering the aforesaid settled law, in our view, the constitutionality of section 244(1A) of the Income-tax Act is required to be presumed. It cannot be said that Parliament has prescribed the cut-off date arbitrarily or capriciously. The cut-off date was prescribed because of the suggestion made by the Select Committee. However, the amendment came into force with effect from October 1, 1975, and, as the Legislature was required to prescribe a stage from which it would be applicable, has prescribed by providing that refund of excess tax or penalty paid after March 31, 1975, shall be given with interest from the date of its payment. Within the sphere of operation of sub-section (1A), it operates alike on all persons similarly situated, that is to say, it applies uniformly upon all the assessees in similar circumstances. It was for the Legislature to decide whether payment of excess tax or penalty should be refunded with interest from the date of payment before the amendment law came into force and by such prescription it cannot be said that it would be hit by article 14. Further, because the benefit of granting interest from the date of payment is given to the assessees who have paid excess tax or penalty after March 31, 1975, it is not necessary that similar benefit should be given to the assessees who have paid it prior to March 31, 1975. In this view of the matter, there is no substance in the contention that section 244(1A) more particularly prescription of the date as “after the 31st day of March, 1975” occurring in sub-section (1A) of section 244 of the Income-tax Act is arbitrary or violative of article 14 of the Constitution of India.
32. Lastly, it was contended that the Department has not refunded an amount of Rs. 4,102 and some part of interest over the penalty amount paid by the petitioner in pursuance of the order dated February 11, 1970, passed by the Inspecting Assistant Commissioner under section 271(1)(c) read with section 274(2) of the Act. It would be difficult for us to find out as to whether the said amount is refunded with interest or not as provided under section 244(1) of the Act. Considering the fact that the petition was pending before this court and that it is difficult to find out whether the amount is refunded or not, it is directed that it would be open to the petitioner to approach the appropriate authority by filing an application for grant of refund as provided under the Act. If the petitioner files an application for refund of the remaining amount on or before October 1, 1994, the appropriate authority would pass an order in accordance with law.
33. In the result, rule discharged with no order as to costs with the aforesaid directions.
