1966 (3) TMI 102 - HC - Indian Laws

Madras Urban Land Tax Act, 1963 Declared Unconstitutional

The Buckingham and Carnatic Company Ltd. and Ors. Versus The State of Madras and Ors.

The Court declared the Madras Urban Land Tax Act, 1963, void for violating Article 14 of the Constitution. The Act's method of calculating tax based on ... - Issues Involved:1. Legislative competency of the Madras Urban Land Tax Act, 1963.2. Violation of constitutional limitations, specifically Articles 14 and 19(1)(f) of the Constitution.3. Validity of the tax schemes and demands under the Act.Issue-wise Detailed Analysis:1. Legislative Competency of the Madras Urban Land Tax Act, 1963:The petitioners challenged the Act on the grounds of legislative incompetency, arguing that it did not fall within the ambit of Entry 49, List II, Schedule VII of the Constitution, but rather within Entry 86 of List I. The Court held that Entry 49, which pertains to 'Taxes on lands and buildings,' is broad and comprehensive, allowing for the imposition of taxes on lands and buildings for general revenue purposes, not limited to local taxation. The Court emphasized that the language of the Entry should be given the widest amplitude, consistent with its plain meaning. The Court also distinguished between the tax on lands and buildings (Entry 49) and the tax on the capital value of assets (Entry 86), noting that the former is a tax on the land itself, while the latter is a tax on the net economic value of the totality of the assets.2. Violation of Constitutional Limitations:Article 14:The petitioners argued that the Act violated Article 14 of the Constitution by imposing an arbitrary and discriminatory tax. The Court found that the Act's method of calculating tax based on the 'average market value' of urban land in a sub-zone led to unequal taxation. The Court noted that this method resulted in lands of different market values being taxed at the same rate, leading to an unfair burden on owners of lower-valued lands. The Court held that the Act lacked proper classification and criteria for determining the tax, resulting in unequal incidence and distribution of the tax. Consequently, the Act was found to be violative of Article 14 due to its inherent inequality.Article 19(1)(f):While the petitioners also contended that the Act violated Article 19(1)(f) (right to property), the Court did not delve deeply into this argument. The Court noted that the Supreme Court had previously held that fundamental rights apply to tax laws, and any law contravening these rights would be void. However, due to the Presidential Orders suspending the operation of Article 19(1)(f) during emergencies, the Court did not provide a detailed analysis on this point.3. Validity of the Tax Schemes and Demands:The petitioners also challenged the specific tax schemes and demands made under the Act, arguing that they were arbitrary and led to unequal taxation. The Court found that the schemes and demands were based on the same flawed method of calculating the average market value, leading to unequal tax burdens. Given the Court's decision that the Act itself was void due to its violation of Article 14, the tax schemes and demands could not stand independently. The Court, therefore, quashed the schemes and demands as well.Conclusion:The Court declared the entire Madras Urban Land Tax Act, 1963, void and unenforceable due to its violation of Article 14 of the Constitution. The petitions were allowed, and the rules nisi were made absolute. The petitioners in W.P. Nos. 2191 of 1965 and 1614 of 1964 were entitled to costs, while no order as to costs was made in the rest of the petitions.