Judgment

GROVER, J. :- This is an appeal by special leave from a judgment of the Kerala High court in an Income-tax Reference. Originally C. A. 1111/69 had been brought by certificate but the same has been found to be defective for want of reasons and has, therefore, to be revoked. Special leave was sought and has been granted.

2. The facts may be succienctly stated. The assessee s main source of income was salary from a limited company, (A. V. Thomas & Co. Ltd.). In the previous year ending on 30th March 1964 his total income from salary amounted to Rs. 42,900/-. In making the assessed the Income-tax Officer levied surcharge and additional surcharge in accordance with the rates prescribed by the Finance Act 1963. The assessee preferred an appeal to the Appellate Assistant Commissioner. It was contended before him on behalf of the assessee that the provisions of the Finance Act 1964 did not permit the Income-tax Officer to levy surcharge and additional surcharge in accordance with the provisions of Finance Act of 1963. In other words it was contended that under sub-s. (2) of S. 2 of the Finance Act of 1964 only income-tax was payable in the proportion in which the salary stood to the total income, the income-tax being worked out at the rates applicable under the Finance Act 1963. There being no mention of any surcharge in the subsection income-tax was alone laviable which did not include surcharge. The Appellate Assistant Commissioner did not accede to these contentions. He was of the view that surcharge was only another form of income-tax. The matter was taken to the Appellate Tribunal which upheld the levy of the surcharge and the additional surcharge. On a reference being sought the following question of law was referred to the High Court :

"Whether the words "income-tax" in the Finance Act of 1964 in sub-section (2) (a) and sub-s. (2) (b) of S. 2 would include surcharge and additional surcharge".

The High Court answered the question in the negative and in favour of the assessee.

3. Section 2 of the Finance Act 1964 which is headed as "income-tax and super tax" provides in sub-s. (1) that income-tax and super-tax shall be charged at the rates specified in Parts I and II of the First Schedule respectively and that in cases to which certain paragraphs of those parts apply these taxes shall be increased by a surcharge for the purpose of the Union. According to sub-s. (2) where the total income of an assessee not being a company includes any income chargeable under the head "salaries" income-tax and super tax payable by the assessee on the salary portion of the total income shall be the proportionate amount payable according to the rates provided in the Finance Act 1963. Under S. 2 of the Finance Act 1963 income-tax was to be charged at the rates specified in Part I of the First Schedule and super tax at the rates specified in Part II of that Schedule. The income-tax was to be increased in cases mentioned by a surcharge and additional surcharge for the purpose of the Union and a special surcharge. The super tax was, however, to be increased by a surcharge for the purpose of the Union and a special surcharge. It will be noticed that S. 2 (2) of the Finance Act 1964 did not contain mention of any of the surcharges. This led to the controversy which resulted in the reference.

4. Before the High Court the assessee relied on Ss. 4 and 95 of the Income-tax Act 1961, hereinafter called the Act . These sections provide for charge of income-tax and super-tax. It was pointed out that surcharge was treated in the Finance Acts as a tax different from the income-tax and super-tax and that surcharge was levied by the Finance Act while the income and super taxes were levied by the Act. Reference was made in this connection to the First Schedule to the Finance Act 1963. Part I of that Schedule dealt with Income-tax and surcharge on income-tax. Under that heading were given the rates of income-tax as also the rates of surcharge. Similarly Part