P. VISHWANATHA SHETTY, J.

( 1 ) THE appellant in this appeal is a Banking Company governed by the banking Regulations Act, 1949 and registered under the Companies Act, 1913. The appellant assailed the constitutional validity of the provisions of the Interest Tax Act, 1974 (hereinafter referred to as 'the Act') in Writ petition No. 5926 of 1997. The learned Single Judge by means of his order dated 18th June, 1999 dismissed the writ petition. Aggrieved by the said order this appeal is presented.

( 2 ) CHALLENGING the constitutional validity of the Interest Act, Sri G. Sarangan, learned Senior Counsel appearing along with Sri S. Parthasarathi urged four contentions. Firstly, he submitted that the impugned Act has to be struck down as being beyond legislative competence of the Parliament. Elaborating this submission, the learned Counsel pointed out that the legislative competence for the impugned Act has to be necessarily referable to Article 366 (29), Entry 82 of List I of Schedule VII of the Constitution, i. e. , 'tax on Income'; since the impugned Act does not provide for deduction of basic expenditure or outgoing like interest payable by Bank to its depositors, and also deduction of administrative expenses incurred by the Bank for carrying out its activities and makes the levy of interest tax on total gross receipts, it ceases to be a tax on income and as such is unsustainable in law on the ground of lack of legislative competence. In other words, it is his submission that by seeking to include what cannot form part of the interest and levying the tax thereon, i. e. , the discounts and commitment charges, the concept of interest is expanded to include what is not 'income'. It is also his submission that the Interest Act, structurally, functionally and in the mode of ascertainment, forms part of income and therefore it cannot be traced to Entry 97 of List I of Schedule VII. In support of his submission, Sri Sarangan referred to us the observations made in Kanga and Phalkiwala, Volume I, viii Edition, page 455, footnote 8 and also the decisions of the Hon'ble supreme Court in the case of Commissioner of Income-tax, Gujarat v Ms. S. C. Kothari and in the case of Nallapparaju Mirja Atchutharamaraju and others v Krutteventi Perraiu Garu and Others".

( 3 ) SECONDLY, by way of an alternative submission to the first submission, he submitted that since the legislative competence of the interest tax could be traced to Entry 82 of List I of Schedule VII which provides for levy of tax on income; and once the power of Legislature is exercised by providing levy of tax on income under the Income-tax Act, it is not permissible again to charge the same incident of tax by another tax by giving a different nomenclature when the power of the second tax is traceable to the same entry. According to the learned Counsel, this levy has to be struck down on the ground that it is hit by principles of double taxation and it is a colourable piece of legislation.

( 4 ) THIRDLY, he submitted that the Act is liable to be struck down on the ground that it is highly arbitrary, unreasonable and violative of rights guaranteed to the appellant under Article 14 of the Constitution of India. Attack based on Article 14 is highlighted on two premises. Firstly, on the ground that the levy per se is unreasonable and arbitrary as the said levy singles out credit institutions defined under Section 2 (5-A) of the Act and they are picked up for hostile discrimination while other persons who are similarly situated like the appellant who are also in receipt of interest are not subjected to interest tax; and secondly, on the ground that the discrimination in the impugned Act is writ large inasmuch as all credit institutions which are not similarly and identically situated are treated alike and tax is sought to be levied on them uniformly. Elaborating this submission, the learned Counsel pointed out that all the credit institutions defined under Section 2 (5-A) of the act are

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