MIS. SOUTHERN TECHNOLOGIES LTD. v. JOINT COMMISSIONER OF INCOME TAX, COIMBATORE

A under Sbction 36(1 )(viia) or under Section 430. Keeping in mind an important role assigned to banks in our market economy, we are of the view that the restriction, if any placed on NBFC by not giving them the benefit of deduction, satisfies the principle of "reasonable justification". B Before concluding. we may cite the following judgments of this Court in the context of the constitutional validity of Sections 36(1 )(vii a) and 430 of the IT Act.

C In the case of R.K. Garg v. Union of India (1981) 4 sec 675 this Court held that every legislation, particularly in economic matters, is essentially empiric and it is based on experimentation. There may be possibilities of abuse but on that account alone it cannot be struck down as invalid. These can be set right by the legislature by passing amendments. The 0 Court must, therefore, adjudge the constitutionality of such legislation by the generality of its provisions. Laws relating to economic activities should be viewed with greater latitude than laws touching civil rights such as freedom of speech, religion, etc. Moreover, there is a presumption in favour of the constitutionality of a statute and the burden is upon him who attacks it to show that there has been a clear transgression of the constitutional principles. The legislature understands and correctly appreciates the needs of its own people, its laws are directed to problems made manifest by experience and its discrimination is based on adequate grounds. There may be cases where the legislation can be condemned as arbitrary or irrational, hence, violative of Article 14. But the test in every case would be whether the provisions of the Act are arbitrary and irrational having regard to all the facts and circumstances of the case. Immorality, by itself, cannot be a constitutional challenge as morality is essentially a subjective value. The terms "reasonable, just and fair'' derive their significance from the existing social conditions. H

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OF INCOME TAX, COIMBATORE [S.H. KAPADIA, J.]

In the case of Bhavesh D. Parish v. Union of India, (2000) A 5 SCC 471, this Court laid down that while considering the scope of economic legislation as well as tax legislation, the courts must bear in mind that unless the provision is manifestly unjust or glaringly unconstitutional, the courts must show judicial restraint in iriterfering with its applicability. Merely because a B statute comes up for examination and some arguable point is raised, the legislative will should not be put under a cloud. It is now weil settled that there is always a presumption in favour of the constitutional validity of any legislation unless the same is set aside for breach of the provisions of the Constitution. The C system of checks and balances has to be utilised in a balanced manner with the primary objective of accelerating economic growth rather than suspending its growth by doubting its constitutional efficacy at the threshold itself. D

18Copy pinpoint18. In the case of State of Madras v. V. G. Row 1952 SCR 597, this Court observed as follows:

"It is important in this context to bear in mind that the test of reasonableness, wherever prescribed, should be applied to each individual statute impugned, and no abstract standard, or general pattern of reasonableness can be laid down as applicable to all cases. The nature of the right alleged to have been infringed, the underlying purpose of the restrictions imposed, the extent and urgency of the evil sought to be remedied thereby, the disproportion of the imposition, the prevailing conditions at the time, should all enter into the judicial verdict."

19Copy pinpoint19. In the case of Barclays Mercantile Business Finance G Ltd. v. Mawson (Inspector of Taxes), 2005 (1) All ER 97, the House of Lords observed that "a tax is generally imposed by reference to economic activities or transactions which exist in the real world". When an economic activity is to be valued, it is open to the law makers to take into account various factors like H

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A public investments, disclosure and transparency in the matter of maintenance of accounts, reflection of true and correct profits, etc. This is precisely what is done by RBI Directions 1998.

20Copy pinpoint20. Conclusion For the afore-stated reasons, we find no merit in the Civil Appeals filed by the NBFCs, so also in the Transferred Cases, and, accordingly, the same are dismissed with no order as to C costs.

D.G. Appeals dismissed.