Luxury tax on larger residential buildings upheld as a reasonable classification under legislative power and Article 14.

Section 5A of the Kerala Building Tax Act, 1975 was upheld as a valid luxury tax on residential buildings with a plinth area of 278.7 square metres or more completed on or after 1 April 1999. The levy fell within the State Legislature's power under Entry 62 of List II, and the Court held that luxury taxes need not all be imposed under a single enactment. Classification by plinth area was treated as a reasonable distinction between necessity and luxury, and the absence of a separate definition of luxury did not make the provision arbitrary. Limiting the levy to residential buildings and to those completed after the cutoff date was found to have a rational nexus with the object of the tax, so the Article 14 challenge failed.

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Issues: Whether Section 5A of the Kerala Building Tax Act, 1975, levying luxury tax on residential buildings with a plinth area of 278.7 square metres or more completed on or after 1 April 1999, is constitutionally valid and consistent with Article 14 of the Constitution of India.

Analysis: The levy was upheld as a valid exercise of legislative power. The State Legislature was held competent to impose a tax on luxuries under Entry 62 of List II of the Seventh Schedule to the Constitution of India, and it was not bound to levy all luxury taxes under a single enactment. The classification of residential buildings into those below and those at or above the prescribed plinth area was found to be a reasonable classification based on a rational distinction between necessity and luxury. The Court also held that the use of plinth area as the basis of levy was a permissible legislative method and that the absence of a separate definition of luxury did not render the provision arbitrary. The choice to tax only residential buildings, and only those completed on or after the specified cutoff date, was held to have a rational nexus with the object of the levy and did not offend Article 14.

Conclusion: Section 5A was held to be constitutionally valid, and the challenge to the luxury tax levy failed.

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