Judgment

DWIVEDI, J.:- The two petitioners have been assessed to agricultural income-tax by the State of Kerala under the Agricultural Income-tax Act, 1950 (hereinafter called the Act) as amended by the Agricultural Income-tax (Amendment) Act, 1970. The assessment is made at the rate of 75 per cent of their total income. They challenge the assessment on the ground that Section 2 (hh) and (kk) and clauses (2) and (3) of Part 1 to the Schedule of the Kerala Agricultural Income-tax (Amendment) Act, 1970 are violative of Art. 14 of the Constitution.

2. It will facilitate appreciation of the facts and the constitutional question in this case if the taxing provisions are noticed at this stage.

3. The Agricultural Income-tax Act was passed in 1950. In the beginning the Act was known as the Travancore-Cochin Agricultural Income-tax Act. Later as a result of the State s reorganisation the Act was renamed simply as Agricultural Income-tax Act, 1950. According to the preamble the Act was made to provide for levy of tax on agricultural income in the State of Kerala. Till the Amending Act of 1970, all companies were liable to pay tax according to their total income. The tax is chargeable under Section 3. Sub-section (1) thereof provided that the agricultural income at the rate or rates specified in the schedule to the Act shall be charged on the total agricultural income of the previous year of every person. It was a graduated rate. Section 2 (h) of the Amending Act of 1970 has redefined a Company as "a domestic company or a foreign company". Section 2(hh) defines a domestic company as "a company formed and registered under the Companies Act, 1956...and includes a company formed and registered under any law relating to companies formerly in force in any part of India". It is necessary that the registered office of the Company should be in India. Section 2(kk) defines a foreign company as "a foreign company within the meaning of Section 591 of the Companies Act, 1956...and includes any foreign association whether incorporated or not which the Government may, by general or special order declare to be a foreign company for the purposes of this Act".

4. Clause (2) of Part 1 of the Schedule to the Amending Act, 1970, provides for the rate of taxation chargeable from a domestic company . It is this:

A. Where the total agricultural income does not exceed Rs. 25,000. 45 per cent of the total agricultural income.

B. Where the total agricultural income exceeds Rs. 25,000 but does not exceed Rs. 1 lakh. 50 per cent of the total agricultural income.

C. Where the total agricultural income exceeds Rs. 1 lakh but does not exceed Rs. 3 lakhs. 55 per cent of the total agricultural income.

D. Where the total agricultural income exceeds Rs. 3 lakhs but does not exceed Rs. 10 lakhs. 60 per cent of the total agricultural income.

E. Where the total agricultural income exceeds Rs. 10 lakhs. 65 per cent of the total agricultural income.

5. The provisos to various alphabetical clauses have been omitted herefrom as they are not material. Clause (3) of Part 1 of the Schedule provides for the rate of tax chargeable from a foreign company. The rate fixed is 75 per cent of the total agricultural income.

6. It is obvious from the review of the aforesaid provisions that while in the case of domestic companies a graduated scale is fixed in the case of foreign companies a flat rate is fixed. Secondly, while the maximum rate of tax in the case of a domestic company is 65 per cent of the total income, it is 75 per cent, in case of all foreign companies.

7. The petitioner s contention is that this discrimination between a domestic company and a foreign company is violative of Art. 14 of the Constitution. The classification for the purposes of taxation is not based on any intelligible differentia; and the differentia, if any, has no rational relation to the purpose sought to be achieved to the taxing statute. Reliance is placed on Wheeling Steel Corporation v. C. Emory Glandi