TaxTMI 
TaxTMI 
TaxTMI 
1960 (12) TMI 76
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....sation of States, formed part of the State of Madras. The respondents to the petitions are: (1) the State of Kerala and (2) the District Collector, Palghat: These petitions are based on allegations, which are, more or less, similar, and the following allegations made in Writ Petition No. 42 of 1958 may be taken as typical and an extreme case, which was placed before us in detail to bring into bold relief the full significance and effect of the legislation impugned in these cases. The petitioner in Petition 42 of 1958 is a citizen of India, who owns forests in certain parts of Palghat Taluk in Palghat District, which was part of the State of Madras before the re-organisation of States. These forests are now in the State of Kerala. Up to the time that these forests were in the State of Madras, as it then was, the Madras Preservation of Private Forests Act, Madras Act XXVII of 1949, governed these forests. Even after these areas were transferred to the State of Kerala, the said Madras Act, XXVII of 1949, continued to apply to these forests. Under the said Madras Act the owners of forests, like the petitioner, could not sell, mortgage, lease or otherwise alienate any portion of their ....
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....e petitions have been opposed on behalf of the first respondent and the allegations and submissions made in the petitions are sought to be controverted by a counter affidavit sworn to by an Assistant Secretary of the Kerala Government in the Revenue Department. It is in similar terms, as a matter of fact printed in most of these cases. It is contended therein on behalf of the respondent that the petitions are not maintainable in as much as no fundamental rights of the petitioners have been infringed; that the allegations about the income, from the forest lands are not admitted; and by way of submission, it is added, they are irrelevant for the purposes of these petitions. It is stated that the Act was passed with a view to unifying the system of land tax in the whole of the State of Kerala. It is submitted that the validity of the Act has to be determined in the light of Art. 265 of the Constitution and that Arts. 19 and 31 were wholly out of the way. It is denied that the tax imposed was harsh or arbitrary, or has the effect of violating the petitioner's right of holding property; and it was asserted that the allegations in respect of income from the forests are entirely irrelevan....
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....t rate shall be the tax payable to the Government in lieu of any existing tax in respect of land. Section 6 lays down that any stipulation in any contract or agreement or lease or other transaction to pay land revenue assessment of any land shall be construed as stipulation for the payment of the amount of basic tax, as charged and levied under the Act. Section 7 is in these terms: "This Act is not applicable to lands held or leased by the Government or any land or class of lands which the Government may, by notification in the Gazette, either wholly or partially exempt from the provisions of this Act." Sections 8 and 9 provide for the continuance of the liability to pay certain dues in respect of existing tenures in addition to the basic tax in respect of lands covered by those tenures. Section 10 abolishes the irrigation assessment charged on certain tank beds and other water reservoirs named and described therein. Section 11 preserves the right of the Government to levy certain irrigation and water cesses and lays down that the Act shall not affect the power of the Government to levy any rate or alter any existing ra....
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....s been substituted in these terms: "3. Landholder when and to whom to pay kist.Every landholder shall pay to the Collector or other officer empowered by 'him in this behalf the land tax due from him on or before the day fixed for payment under the rules framed under s. 16 of the Land Tax Act, 1955." From a review of the provisions of the Act, as amended as aforesaid, it will be clear that the provisions of the Act lay down in barest outline the policy to impose a uniform and, what is asserted to be, a low rate of land tax on all lands in the State of Kerala. Unlike other taxing statutes, it does not make any provision for issue of notice to the assessee, nor is there any provision for submission of a return by the assessee. By s. 5A, it authorises the Government to make a "provisional assessment" in respect of land, which has not been surveyed, and such provisional assessment is made payable by the person made liable under the Act. It does not make any provision for any appeals in cases where the assessee may feel dissatisfied with the assessment. The Act does contemplate the making of "a regular....
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....rs and would not come within the purview of entry 18 read by itself or in conjunction with entry 45 of List II, but is law relating to forests under entry 19. If we tear the veil in which the real purpose and effect of the Act has been shrouded, 'it will I appear that the true character and effect of the Act is not to levy a tax on land, but to expropriate the private owners of the forests without payment of any compensation whatsoever. Lastly, it has been urged that the whole Act has been conceived with a view to confiscating private property, there being no question of any compensation being paid to those who may be expropriated as a result of the, working of the Act. This last argument is based on the assertion that the tax proposed to be levied on private property in the State of Kerala has absolutely no relation to the paying capacity of the persons sought to be taxed, with reference to the income they could derive, or actually did derive from the property. On behalf of the State of Kerala, the learned Advocate General has argued that, though in most of the cases, that is to say, except in seven petitions (Petitions 21, 22, 47, 49, 50, 51 and 54) the lands have not been surve....
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....ation in these cases, in view of the stand taken by the State of Kerala, is whether Art. 265 of the Constitution is a complete answer to the attack against the constitutionality of the Act. It is, therefore, necessary to consider the scope and effect of that Article. Article 265 imposes a limitation on the taxing power of the State in so far as it provides that the State shall not levy or collect a tax, except by authority of law, that is to say, a tax cannot be levied or collected by a mere executive fiat. It has to be done by authority of law, which must mean valid law. In order that the law may be valid, the tax proposed to be levied must be within the legislative competence of the Legislature imposing a tax and authorising the collection thereof and, secondly, the tax must be subject to the conditions laid down in Art. 13 of the Constitution. One of such conditions envisaged by Art. 13(2) is that the Legislature shall not make any law which takes away or abridges the equality clause in Art. 14, which enjoins the State not to deny to any person equality before the law or the equal protection of the laws of the country. It cannot be disputed that if the Act infringes the provisio....
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....not a confiscatory measure, as contended on behalf of the petitioners, has no reference to income, either actual or potential, from the property sought to be taxed. Hence, it may be rightly remarked that the Act obliges every person who holds land to pay the tax at the flat rate prescribed, whether or not he makes any income out of the property, or whether or not the property is capable of yielding any income. The Act, in terms, claims to be "a general revenue settlement of the State" (s. 3). Ordinarily, a tax on land or land revenue is assessed on the actual or the potential productivity of the land sought to be taxed. In other words, the tax has reference to the income actually made, or which could have been made, with due diligence, and, therefore, is levied with due regard to the incidence of the taxation. Under the Act in question we shall take a hypothetical case of a number of persons owning and possessing the same area of land. One makes nothing out of the land, because it is arid desert. The second one does not make any income, but could raise some crop after a disproportionately large investment of labour and capital. A third one, in due course of husbandry, is making the....
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.... the Court will not strike down the law out of hand only because no classification appears on its face or because a discretion is given to the Government to make the selection or classification but will go on to examine and ascertain if the statute has laid down any principle or policy for the guidance of the exercise of discretion by the Government in the matter of the selection or classification. After such scrutiny the Court will strike down the statute if it does not lay down any principle or policy for guiding the exercise of discretion by the Government in the matter of selection or classification, on the ground that the statute provides for the delegation of arbitrary and uncontrolled power to the Government so as to enable it to discriminate between persons or things similarly situate and that, therefore, the discrimination is inherent in the statute itself" (p. 299 of the Report). The observations quoted above from the unanimous judgment of this Court apply with full force to the provisions of the Act. It has, therefore, to be struck down as unconstitutional. There is no question of severability arising in this case, because both the charging sections, s. 4 and s. 7, aut....
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.... to be levied on a judicial basis, because (1) the procedure to be adopted does not require a notice to be given to the proposed assessee; (2) there is no procedure for rectification of mistakes committed by the Assessing Authority; (3) there is no procedure prescribed for obtaining the opinion of a superior Civil Court on questions of law, as is generally found in all taxing statutes, and (4) no duty is cast upon the Assessing Authority to act judicially in the matter of assessment proceedings. Nor is there any right of appeal provided to such assessees as may feel aggrieved by the order of assessment. That the provisions aforesaid of the impugned Act are in their effect confiscatory is clear on their face. Taking the extreme case, the facts of which we have stated in the early part of this judgment, it can be illustrated that the provisions of the Act, without proposing to acquire the privately owned forests in the State of Kerala after satisfying the conditions laid down in Art. 31 of the Constitution, have the effect of eliminating the private owners through the machinery of the Act. The petitioner in petition of 1958 has been assumed to own 25 thousand acres of forest land. T....
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....f the State of Kerala, in which the State of Travancore Cochin had been merged. The petitioners are owners of lands in the State of Kerala. The Act as amended and hereafter referred to as the Act, levied a certain basic tax on all lands in the State of Kerala. The petitioners say that the levy is illegal and violates their fundamental rights. It appears from the preamble that the Act was passed as it was deemed necessary to provide for the levy of a low and uniform rate of basic tax on all lands in the State. The Act provides that the arrangement made by it for the levy of the basic tax is to be deemed to be a general revenue settlement of the State. Section 4 of the Act is the charging section and it lays down that there shall be charged and levied in respect of all lands in the State, of whatever description and held under whatever tenure, a uniform rate of tax to be called the basic tax. Section 5 fixes the rate of the tax at 2 n.P. per cent which works out at Rs. 2 per acre per annum. This section also provides that the basic tax shall be the tax payable to the Government in lieu of any other existing tax in respect of land. Section 12 abolishes all cesses on land except irriga....
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....the area of the land held by them. The question then, is, is that differentia intelligible and has that differentia a rational relation to the object of the Act? Now it seems to me that both the tests are satisfied in the present case. The tax payers are classified according to the area of lands held by them. That is quite an intelligible basis on which to make a classification; holders of varying areas of land can quite understandably be placed in different classes. Next, has such a basis of classification, a rational relation to the object of the Act? The Act is a taxing statute. It is intended to collect revenue for the governmental business of the State. It says that one of its objects is to provide a low and uniform rate of basic tax. Another object mentioned is to replace all other dues payable to the Government in respect of the ownership of the land by a uniform basic tax. Why is it to be said that the use of the area of land held as the basis of classification has no rational relation to these objects. I find no reason. The object is to tax land held in the State for raising revenues. It is the holding of the land in the State that makes the owner liable to pay tax. It wou....
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....utional. In fact this case did not declare any statute invalid. Then it seems to me that if the contention of the petitioners is right, and land could be taxed only on its productivity, for the same reason, taxes on all other things would have to be correlated to the income to be derived from them. The result would be far reaching. I am not prepared to accept a contention producing such a result and no authority has been cited to lead me to accept it. It may be that as lands are not of equal productivity, some tax payers may be able to pay the tax out of the income of the land taxed while others may have to find the money from another source. To this extent the Act may be more hard on some than on others. But I am unable to see that for that reason it is unconstitutional. All class legislation puts some in a more disadvantageous position than others. If the classification made by the law is good, as I think is the case with the present Act, the resultant hardship alone cannot make it bad. It was said in Magonn v. Illinois Trust and Savings Bank(42 L.Ed. 1037, 1043), "It is hardly necessary to say that hardship, impolicy, or injustice of state laws is not necessarily an objection t....
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....nt cannot, therefore, pick and choose. A statute is intended to be legal and it has therefore to be read in a manner which makes it legal rather than in a manner which makes it illegal. If the Government did not make the provisional assessment in the case of all liable to such assessment, then the Government's action could be legitimately questioned. It has however not in fact been said in these petitions that in deciding to make the provisional assessment the Government has made any discrimination between the persons liable to such assessment. Section 5A (1) is also attacked on the ground that it is against rules of natural justice in that it does not say that in making the provisional assessment, any hearing would be given to the person sought to be assessed or requiring a return from him or giving him a right of appeal in respect of the provisional assessment made. It is true that the' section does not expressly provide for a hearing being given. It seems to me however that if according to the rules of natural justice the assessee was entitled to a hearing, an assessment made without giving him such a hearing would be bad. The Act must be read so as to imply a provision requiri....
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....s supplied the area of the lands held by them or the area had been determined after giving them a hearing. After the area has been determine , the amount of the tax payable is decided by a simple calculation at the rate of Rs. 2 per acre of land held and with regard to this, no hearing is required. Then again sub-see. (2) of s. 5A provides that the Government after conducting a survey of the lands mentioned in sub-sec. (1) under which provisional assessment is to be made, shall make a regular assessment and adjustments would have to be made in regard to tax already paid on the basis of the regular assessment. A point is made that there is no time limit fixed within which the regular assessment is to be made and so the Act leaves it to the arbitrary decision of the Government when to make the regular assessment. I do not think that this contention is correct. Properly read, the section in the absence of any indication as to time, means that regular assessment would have to be made as soon after the survey, as is reasonably possible. It is also said that s. 7 of the Act offends Art. 14. This section gives power to the Government to exempt from the operation of the Act such lands or ....
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....The lands of the petitioners are lands on which stand forests. It is said that under the Madras Preservation of Private Forests Act, (Act XXVII of 1949), which applies to the lands with which we are concerned as they are situated in an area which previously formed part of the State of Madras, the owners of the forests can work them only with the permission of the officer mentioned in that Act. It is said that the control imposed by the officer has been such that the income received from the forest is much less than the tax payable under the Act in respect of the land on which the forest stands. Taking by way of illustration Petition No. 13, it is pointed out that the income from the forest with which that petition is concerned was Rs. 8,477 for the year 1956-57 while the tax payable under the Act for more or less the same period was Rs. 1,51,000. I am unable to hold that because of this the Act offends Art. 19(1), (f) and (g). It is not stated that the land is not capable of producing any income other than the income from the forest standing on it. There is nothing to show that in all times to come the income from the land including the income from the forest, will be less than th....