TaxTMI 
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1966 (9) TMI 158
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.... sough to be levied from petitioner. (3) The facts which are required to be stated to dispose of the two petitions are as follows: In both the petitions the common petitioner is Prathvi Cotton Mills Ltd., a company registered under the Indian Companies Act VII of 1913 (hereinafter called petitioner simpliciter). In Special Civil Application No. 846 of 1963, it is the sole petitioner. The second petitioner in Special Civil Application No. 765 of 1964 is one Laxminivas B. Rungta, a director and share holder of the above mills. In both the petitions, respondents are the Broach Borough Municipality, a body constituted under and governed by the provisions of the Bombay Municipal Boroughs Act, 1925 (hereafter called the Boroughs Act), and one V. M. Bhatt, its Chief Officer, who are respectively respondents Nos. 1 and 2. In the second petition, the State of Gujarat is the third respondent. The first respondent will be called Municipality simpliciter in the rest of this judgment. The municipality was governed by the Borough Act till 31st December 1964. The Boroughs Act was repealed by the Gujarat Municipalities Act, 1963 (hereafter called the Municipalities Act) which came into force on 1....
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....had since been constructed by petitioner. The total amount claimed in the two sets of bills was ₹ 23.159 including the arrears of ₹ 8,105 in respect of the previous year 1962-63. Petitioner resisted this claim also on the same ground as it did in respect of the previous demand and met with the same answer and threat. Therefore, petitioner filed the second petition bearing No. 765 of 1964. However, before the second petition was filed, the State Legislature had passed the Gujarat Imposition of Taxes by Municipalities (Validation) Act, 1963 (hereinafter called the Validation Act) which came into force on 26th January 1964. By this latter Act, the Legislature purported to validate the imposition, collection and recovery of taxes or rates assessee, inter alia, under the Boroughs Act and sough to confer authority on municipalities to collect and recover such taxes. After the two petitions were filed, the same Legislature also passed the Municipalities Act, which came into force on 1st January 1965. Section 99 of the latter Act was suitably amended to enable the Municipality to impose a tax on the capital value of lands and buildings, thereby enabling municipalities to get ov....
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....f clause (i) of section 58 prescribing the tax selected. The resolution and the rules were also required to specify certain other matters which it is not necessary to enumerate. Then, the municipality was required to publish the rules with a notice inviting objections, consider those objections and to submit the rules and the objections for the consideration and sanction of the State Government. Section 76 conferred power upon the State Government to sanction the rules aforesaid subject to such modifications as it might feel proper. Section 77 required the Municipality to publish the sanctioned rules together with a notice and to specify in that notice a date, not being less than one month from the date of the publication of such notice, from which the selected tax would come to be imposed. The District Municipalities Act of 1901 contained the same provisions relating to the imposition of taxes. These provisions came up for consideration before their Lordships of the Supreme Court in the case of Municipality of Anand v. State of Bombay AIR 1962 SC 988, as to when a tax is imposed under the above provision. Their Lordships held that a tax comes to be imposed only on the date specifi....
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....nicipalities Act. The second change, which requires to be noticed is that, whereas the provisions relating to assessment of lands and buildings were restricted under the boroughs Act to rates, they are extended under the Municipalities Act, to all taxes on buildings and/or lands. Section 279 of the Municipalities Act repeals the Boroughs Act, and sub-section 92) enacts the saving clause. The relevant part of clause (vi) of sub-section (2) of section 279 is as follows: "279. (1) (2) Notwithstanding the repeal of the said Acts - ……………… (vi) any ………….tax ………….. rules ……………made …………… imposed ……………in respect of the said boroughs . . . . . . . and in force immediately before the date of the commencement of this Act shall in so far as they are not inconsistent with the provisions of this Act be deemed to have been made …………. imposed '............... under this Act in respect of the borough and shall continue in force until it is superseded or mo....
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.... for different valuation of ₹ 10,000 each upto ₹ 50,000 and thereafter a uniform rate is given for excess of valuation beyond ₹ 50,000. Broadly speaking, the house tax for buildings and lands used for industrial purposes is one and a half times that for buildings and lands for purposes other than industrial. Rule 5 State that, the tax shall be levied and recovered as provided in the Boroughs Act. Rule 10 states that, in the case of a dispute about the succession to any person whose name is entered as owner of any property in the assessment list, the name of the person in actual occupation shall be entered as the owner in the assessment list and that, the house tax shall be recovered from him until the dispute is settled or an order of a competent Court is produced. The Chief Officer has been given the power to decide the question as to whose name should be entered in the assessment list, and the person whose name is so entered is rendered responsible for the payment of the house tax. Rule 12 casts an obligation on the purchaser of a property to pay all the arrears of the house tax due on the building or land purchased previous to the date of the purchase. The thir....
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....of the Supreme Court were divided on the first question and a majority of four Judges held that, a rate was a levy on beneficial occupation and that, the connotation of that term included only a levy based on annual letting value and could not take within its purview a levy based on capital value. On that interpretation of the term "rate". Their Lordships held that rule 350A and the consequential assessment and levy were void, and allowed the appeal. In that view of the matter, the majority of the learned Judges did not deal with the question of legislative competence and kept the question open. Sarkar J., however, after observing that the contention that a rate did not include a levy on capital value was not raised in the High Court, disagreed with the majority view and held that , a rate could be imposed on the basis of capital value. On that view of the matter, the learned Judge proceeded to deal with the question of legislative competence and, in agreement with the judgment of the Bombay High Court under appeal, the learned Judge held that the rate in question fell within the purview of Entry 42 in List II of Schedule VII of the Government of India, Act 1935, and was ....
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....e 265 inasmuch as it purports to confer authority to levy and collect tax for a period when there was in fact no such authority at all. Alternatively, petitioner contends that , even f it confers such authority, the Validation Act has misfired inasmuch as it has not armed the Municipality with the necessary authority to levy and collect the house tax by amending the taxing section of the Boroughs Act . alternatively, petitioner contends that, in any case, whereas the levy upto 26th January 1964 can be validated under the Validation Act the levy for the subsequent period from 27th January 1964 upto 31st December 1964 does not come within the purview of the Validation Act and the levy for the period beginning from 27th January 1964 to 31st March 1964 does not come within the purview of the Municipalities Act. In addition to this, petitioner contends that, the House Tax Rules and the house tax imposed thereunder are confiscatory in nature and, therefore, violative of his fundamental right enshrined in Article 19, clause (1), sub-clause (f). (8) Therefore, the submissions which Mr. Nanavati raises for the decision of this Court are as follows: (1) the Municipality had no power to le....
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....held, as the point is directly covered by the Supreme Court case of Gordhandas. Respondents, however, challenge the allegation that, the house tax is a rate. The learned Advocate General contends that, there is no warrant for the allegation or for making the assumption. Mr. Nanavati repels this contention with reference to the pleadings in Special Civil Application No. 846 of 1963. He draws our attention to the averments in the petition that the house tax was an impost under section 73 (1) (i) of the Boroughs Act contained in paragraphs 5 and 6 of the petition and the affidavit in reply filed by the Chief Officer of the Municipality for himself and on behalf of the Municipality, in which it is distinctly admitted that the contents of the aforesaid two paragraphs are substantially true. Mr. Shah on behalf of the Municipality and the Chief Officer concedes that this is so. But, he contends that, the admission has been made under a misapprehension of law and an incorrect of the resolution and the rules imposing the house tax. In any case, the learned Advocate General contends that, the admission made by the Municipality and its Chief Officer is not binding on the State. He contends th....
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....section 73 (1) (i) , it necessarily excludes the residuary tax and therefore, the second averment is fatuous and in law, the averment is virtually the same as the averment of the Municipality in the first petition. Mr. Nanavati contends that, the Municipality is the taxing authority and the State is the sanctioning authority for the impugned house tax and these authorities know best what tax they have imposed. He contends that, in any case, petitioner is entitled to assume, having regard to the aforesaid State of the pleadings, that respondents had admitted its contention that the house tax was a rate under S. 73 sub-section (1), clause (i), We have given our careful consideration to the rival contentions. On the whole, we have come to the conclusion that, though undoubtedly, there is a clear admission made by the Municipality and its Chief Officer in the first petition, we cannot say that there is any such admission in the second petition or in the pleadings of the State in the first petition. The learned Advocate General draws our attention to the fact that the provisions embodied in sections 78 to 89 in the Boroughs Act deal with not only a rate under section 73 (1) (i), but als....
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....the Government for a period of one year in the first instance. This period was extend from time to time and, ultimately, the house tax rules were sanctioned permanently by the Government by its sanction accorded on 17th January 1959. The question is whether, this house tax is a rate or a tax. If it is a rate, then, it must be struck down as illegal on the ground that, the tax is levied on the basis of the capital value and not on the basis of the annual letting value of lands and buildings. The illegally will arise on account of the fact that the term "rate" as used in section 73, sub-section (1), clause (i), can mean only a tax on the annual letting value of lands and buildings and cannot take within its c a tax based on capital value. Now, the main point of distinction between Gordhandas' case [1964]2SCR608 the relevant rule used the expression "rate" the House Tax Rules in the present case do not use any such expression. They use the wider term "tax" which may include a rate or not. Therefore whether the impugned house tax is a rate or a tax in the sense of non-rate tax, must depend upon the interpretation of the House Tax Rules. Mr. Nanavati....
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....vati contends that, the provisions in Schedule E are based upon this clause (a) (iii) of section 75. In our judgment, this is beinging the question. Undoubtedly, it is true that, when a rate in buildings or lands is imposed, the rules must specify the basis as laid down in clause (iii) aforesaid. But that does not mean that when the tax is no capital value, the basis for each class of capital the value cannot also be provided for. There is a residuary clause (iv) in section 75(a) which says that al other matters which the State Government may requires to be specified should be specified by the rules. If the basis for a tax is capital valuation, then it is quite clear clause (iii) will have to be provided for in the rules. But the difference between the two will be that, when dealing with clause (iii) the basis will be the annual letting value, in other basis will be have to be capital valuation. Mr. Nanavati is right that the rules do not directly provide for the preparation of the assessment list and the procedure to be followed for the assessment of the house tax. But, in our judgment, he is not wholly right. There are indications in the rules themselves that, the executive autho....
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....r aforesaid decision will obviate the necessity of considering the objections against the Validation Act and the Gujarat Municipalties Act. However, as the questions in regard to these matters were fully argued before us, we propose to record our decision thereon too. But, before we do so, we propose to decide the objection raised by petitioner on the ground of legislature competence of the State Legislature and the consequential incompetence in the Municipality to impose the house tax. It is quite obvious that, this question has, in any case, to be decided in the present petitions. It is true that it may not also arise for decision if he case is directly within the ratio of Gordhandas' case [1964]2SCR608 and Validation Act and the Municipalities Act are held not to apply to the facts of the present case and the former will save the tax so that in any case, the legislative competence of the municipal authorities does required to be decided. It is not necessary undertake a decision on this subject separately in regard to all the three acts. The second and the third submissions of Mr. Nanavati do take within their purview of legislative competence of the boroughs Municipality in ....
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....55 in the federal List aforesaid. Therefore, there is no dispute whatsoever that, the same questions which arise for determination in regard to the legislative competence of the State Legislature and the consequential competence of the Municipality in the present case, arose for decision by the Bombay High Court in Gordhandas' case 55 Bom LR 1028 :(AIR 1954 Bom 188). As already indicate, i that case the Bombay High Court took the view that the imposition of the impugned tax levied by the rule 350A fell within the legislative entry 42 of List II of the schedule to the Government of India Act, 1935. Therefore, there is no doubt whatsoever that, the ratio of that case is a binding precedent to this Court and the matter is no longer res integra. However, Mr. Nanavati contends that, that decision is now rendered effete and is no longer a binding precedent for a variety of reasons. Firstly, he contends that, even if it be assumed that the decision was a binding precedent at the time when it was given, it is no longer so now because the decision has been displaced by the decision of the Supreme Court in Gordhandas' case, reported in [1964]2SCR608 . He contends that, the decision h....
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....gislative history and practice. He draws our attention to the fact that the Supreme Court after considering the provisions of a number of Indian statutes including the three considered by Gajendragadkar J, has shown that the term "rate" or the context in which it was used, was always the reference to the annual letting value of lands and buildings and not their capital values. The learned advocate General suggests that this is not a correct reading of the judgment of Gajendragadkar J. he says that, in the passage referred to on pages 1035 and 1036 of the report (Bom LR): (at 99 193-194 of AIR) the learned Judge is not considering the legislative history and practice on the topic of rate, but he is considering the topic of municipal taxation and, therefore, there is no conflict between the view expressed by Gajendragadkar J and that expressed by the Supreme Court. We are unable to agree without his refinement of the learned Advocate General. Whilst this is so, we are unable also to agree with the submission of Mr. Nanavati that the decision of the Bombay High Court is robbed of its binding nature because of the above flaw in its reasoning. In the first instance, Mr. Nanava....
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....merits. But, we wish to make it absolutely clear that, we do not wish to , and cannot, consider those arguments for the purpose of holding that the above binding decision is erroneous. We do soon with a view to consider whether the matter should or should not be referred to a larger Bench. However, for the reasons to be presently recorded, we have, independently of the above decision, come to the conclusion that the State Legislature and consequently, the Municipality, have legislative competence to impose a tax on lands and buildings on the basis of capital value and, therefore, the question of making a reference to a larger Bench does not arise. (13) However, before we do this, we propose to indicate two more arguments which Mr. Nanavati advances in support of his proposition that the above decision is not binding. Firstly, Mr. Nanavati contends that, the above decision not is in conflict with the Full Bench decision reported in Byramjee Jeejeebhoy v. Province of Bombay. In that case, the Full Bench had to consider the vires of the urban immovable property tax. The contention which it was called upon to examined the whether that tax was within the competence of the Provincial Le....
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....nds. Therefore, in that case, the question as to the correct scope of the Federal Entry No. 55 did not directly arise for consideration. It would appear that Broomfield J. And Kania J. In the aforesaid case recorded definite conclusions as to whether, in order to attract entry 55, the tax should be on the whole of the assets of an individual or only on his partial assets. The case of Byramjee Jeejeebhoy is expressly referred to by Gajendragadkar J in his judgment and all the relevant passages have been considered in that case we are not convinced that Bombay case of Gordhandas AIR1954Bom188 is in any way in conflict with the case of Byramjee Jeaejjebhoy. Secondly, Mr. Nanavati contends that, Gordhandas' case AIR1954Bom188 is in any event in conflict with the decision of the Bombay High Court recorded in [1952]21ITR458(Bom) , J.M. Duggan v. commissioner of Income Tax. Bombay city. In that case, the validity of the imposition of capital gains tax imposed by the central Legislative was challenged. In that case, the Income Tax authorities justified the tax on the basis of entries Nos. 54 and 55 in the Federal List. Chagia C. J. Came to the conclusion that the tax fell in entry NO. ....
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....tention was rejected. That Division Bench pointed out, and with respect rightly, that the tax on capital value was a mode of imposing the tax and not the nature of the tax itself, and for that purpose they relied on the explanation to section 75 of the Municipal Boroughs Act, which explanation provides: 'In the case of lands the basis of valuation may be either capital or annual letting value.' This decision is binding on us, and apart from its being binding on use, we, with respect, agree with the view taken by the learned Judges." Under the circumstances in our judgment there is no merit in the contention of Mr. Nanavati that the Bombay case of Gordhandas AIR1954Bom188 is in conflict with Duggan's case: [1952]21ITR458(Bom) . (14) Before we conclude the above topic, we may mention that, Mr. Nanavati had urged that the minority decision recorded by Sarkar J. In Gordhandas' case: [1964]2SCR608 was not a binding authority. He based his contention upon articles 141 and 145 clauses (4) and (5) and rule No. 3 of Order XIII of the Supreme Court Rules. We are not called upon to decide this interesting question because, the learned counsel for respondents did not....
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....ust yield place to the Parliamentary legislative authority. Ours is a federal Constitution and it is now well recognised that both the Parliament and the State Legislatures have full, independent and plenary powers in their own fields. It is equally well recognised that, the first duty of a Court, when interpreting any entry in the respective List, is to interpret, that entry in its plain. Natural and grammatical meaning and to read it in its fullest and widest amplitude. This is the first task which is to be performed. If, on interpreting the entries in the aforesaid manner, any conflict is found between the two sets of entries respectively falling in the two different Lists, then, an attempt must be dame to reconcile the two entries, so as to make one consistent with the other. In attempting to do so, sometimes, the amplitude of the legislative power of the Parliament , and sometimes that of the State Legislatures, may have to be curtailed. In considering the question as to whether there is any such conflict in a given case, the impugned piece of legislation must be considered on the principle of pith and substance If, after making an effort in the above direction, the Court find....
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....rds "capital value". and further relies upon the distinction made in some of the cases between the real or economic value of assets and their capital value. (17) Turning firs to entry 49 in the State List, with great respect, we agree with the opinion expressed by Gajendragadkar J. In Gordhandas' case AIR1954Bom188 that the entry prima facie is of the widest amplitude and that there are no words of limitation therein. Under the entry, the impost has been designated a tax and not a rate and the unit of taxation is lands and buildings and not assets. On the other have the impost under entry 86 is on capital value of assets other than agricultural lands and not on assets. Contrasting the two entries, it is quite clear that, where as under entry 49, lands and buildings are units of taxation, under entry 86, the unit of taxation is the capital value of assets. Under entry 49 agricultural land can be the unit of taxation but, under entry 86, capital value of agricultural land cannot be such a unit. There is nothing in entry No. 49 which indicates that the tax is limited only to the ratable values, i.e., the annual letting values of lands and buildings As Broomfield J has p....
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....slative field of the concerned Legislatures and, that, the entries have been described in Article 246 as matters enumerated therein. Therefore, the entries describe or enumerate the subject matters of taxation. In determining this question, it is important to bear in mind that, the distinction which some of the decided cases have made between the measure of a tax or the machinery, by or through which a tax is to be collected, and the subject matter of taxation in construing the entries, the formal question is not of prime importance. The question of prime importance is to discover what the subject matter of an entry is. Viewing the two entries in the light of the above discussion, we have no doubt whatsoever that, broadly speaking, the subject-matter dealt with by entry 86 is a tax on capital value of assets, whereas the subject-matter dealt with by entry 49 is a tax on lands and buildings. Having regard to the meaning of the crucial words "assets" and "lands and buildings", and, having regard to the fact that, the Parliament's power of legislation in regard to assets is restricted only to their capital value whereas the States powers are not so restricted, ....
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....the task of effecting any reconciliation, much less, is there any scope for the application of the principles laid down by the Constitution in Article 246. Having regard to the fact that, the impugned house tax definitely levies a tax on the basis of capital value of lands and buildings and that, such a tax is directly within the competence of the State Legislature, there is no necessity to consider the application of the doctrine of pith and substance in construing the impugned house tax, in view of the fact that it does not trespass or purport to trespass upon the legislative field delineated by entry 86. (18) Before we end this discussion, we may not that has not only been approved by Sarkar J of the Supreme Court, but has also been followed by the two High Courts of Kerala and Orissa in Mammad Keyi v. Wealth Tax Officer, Calicut, AIR1962Ker110 and Badri Narayanamurthy v. Commissioner of Wealth Tax, B and O [1965]56ITR298(Orissa) . (19) In view of our aforesaid conclusion, we find that, the imposition of the house tax under the Boroughs Act and the continuance of such house tax under the Municipalities Act, being within the legislative competence of the State Legislature, will....
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....to have been valid and shall not be called in question merely on the ground that the assessment of the tax or rate on the basis of the capital value of the building or land, as the case may be, or on the basis of a percentage of such capital value was not authorised by law and accordingly any tax or rate, so assessed before the commencement of this Act and leviable for a period prior to such commencement but not collected or recovered before such commencement, may be collected and recovered in accordance with the relevant municipal law, and the rules made thereunder." (22) For the sake of convenience, we propose to divide section 3 of the Validation Act into five parts. The first part is the non obstante clause. The second part ends with the words "and not being based on annual letting value of the building or land, as the case may be." The third part begins with "and the imposition, collection and recovery of the tax or rate so assessed . . . . . ." and ends with "shall be valid and shall be deemed always to have been valid". The fourth part begins thereafter and ends with "or on the basis of a percentage of such capital value was not autho....
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....les and the levy shall not be questioned on the ground that, the levy was on the basis of capital value of a building or land or on the basis of a percentage of such capital value. The fifth and the final part embodies a positive injunction. It says that, such a tax or rate, if not already collected or recovered before the commencement of the Validation Act, "may be collected and recovered in accordance with the relevant municipal law and the rules made thereunder." (23) Now, Mr. Nanavati contends that, the whole section is bad, because, it violates Article 141 of the Constitution. This argument is based on the submission that the non obstante clause is invalid. Mr. Nanavati contends that, under Article 141, the law declared by the Supreme Court is binding on all Courts within the country. According to Mr. Nanavati, therefore, any law which is declared by the Supreme Court is sacrosanct and cannot be changed even by a legislative fiat. It is this argument of Mr. Nanavati which we have described above as indifferent. In our judgment, there is no merit in this contention. It is undoubtedly true that, decision on a point of law recorded in the judgment of the Supreme Court,....
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....t a tax may be validly levied, the tax gatherer must have authority of law at the time of the actual levy and, if that authority is missing at any of the stages of the aforesaid processes, the vice must attach to that stage for ever and cannot be removed even by a so veering Legislature. In other words, the contention of Mr. Nanavati is that, in regard to a tax, authority of law cannot be supplied retrospectively. Having regard to the analysis of section 3 which we have already given, there is no doubt whatsoever that this is exactly what the Validation Act does. Though the house tax was an illegal levy and cold not have been collected earlier without breaking Article 265, section 3 permits the tax already levied to be retained, or such part of the tax as was not already recovered, to be recovered in future. In our judgment, there is no merit in the above contention of Mr. Nanavati. In M. P. V. Sundararamier & Co. V. State of Andhra Pradesh [1958]1SCR1422 , their Lordships of the Supreme Court observed as follows in connection with the validity of section 2, of the Sales Tax Laws Validation Act, 1956. ". . . there is nothing express in Art. 286(2) imposing a restriction on t....
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.... However, in our judgment, the quotation which we have made from the latter part of the judgment does not leave any doubt that, in any case the latter passage represents the decision of their Lordships that, a tax can be validated retrospectively. In view of the above decision, in our judgment, there is no merit in the above contention of Mr. Nanavati that a tax cannot be retrospectively validated and even through so retrospectively validated, will continue to be hit by Article 265 in regard to the past levy and collection. Therefore, the fourth submission of Mr. Nanavati must be rejected. (25) But, Mr. Nanavati contends that, even if the State Legislature has the power to authorise a levy and its collection retrospectively, in fact and in law, the same has not been actually done in the present case. The argument of Mr. Nanavati is as follows: He contends that, the authority to levy a tax at all material times that is at the date when the house tax was levied and before the commencement of the Validation Act, was supplied to the Municipality by section 73 of the Act. He contends that, therefore, in order that the Municipality may have authority of law to retain the collections ill....
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....tion 29B of the Amending Act was to amend impliedly section 11 of the original Act. In our judgment, there is no merit in this distinction. Their Lordships of the Supreme Court have not based heir decision on any such distinction. They have definitely based their decision on the ground that, the original Act was not amended and they have definitely stated that it was not necessary to do so, because, what the Legislature intended was only to validate past acts. (26) Mr. Nanavati, however, relies very strongly upon a decision of the Madhya Pradesh High Court reported n AIR 1962 Madh Pra 342. Firm Dayalal Meghji and Co. V. State of Madhya Pradesh. Mr. Nanavati says that, his submission is directly supported by this decision of the Madhya Pradesh High Court. We do not agree. In our judgment, that case is clearly distinguishable from the facts of the present case and the facts obtaining in Mohammadbhais' Case AIR 1962 SC 1517 decided by the Supreme Court. Four notifications, Nos. 306 to 309 XVI-58, dated 30th December 1958 issued under the Minimum Wages Act, were struck down as invalid and inoperative by the Madhya Pradesh High Court in Anand Transport Co. (Private) Ltd. V. State o....
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....ion of minimum wages under the notification dated the 30th December, 1958 was not any Act done under any State law. Therefore what S 31 A purports to do is to validate an invalid Act done under a Central Act and which was required to be done in conformity with the procedure laid down in S. 5 of the principal Act." The Madhya Pradesh High Court thereafter posed a question for decision, and stated that the question which arose for decision before it was whether the State Legislature had the power to validate an Act done under a Central Act or a law made by Parliament? After so posing the question, the Madhya Pradesh High Court proceeded to answer it in the following way at page 347: "Now, it is well settle d that the power of validation by subsequent legislation of any defective law or Act done under any Act is subsidiary or ancillary to the power to deal with the particular subject specified in Lists I, II and III of the Seventh Schedule of the Constitution (see United Provinces v. Atiqa Begum. Piare Dusadh v. Emperor; and Mst. Jadao v. Municipal Committee, Khandwa. The power of validation is included in the power of legislation. It follows from this principle that an i....
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....pens to be levied by the Municipality, the only way in which that tax can be saved is by conferring retrospective authority on the municipality by suitably amending the Act itself and, in law, there is no other way of validating an invalid tax. The learned Advocate General repels this argument of Mr. Nanavati by contending that, the Municipality is a delegate of the State Legislature in the matter of taxation and that, if an Act of the delegate is found to be invalid, the principal has always an authority to validate the invalid Act of the delegate. Mr. Nanavati repels the above argument of the learned Advocate General by contending that the analogy of principal and delegate does not apply in the case of the aforesaid piece of legislation. He contends that, by enacting the Boroughs Act, the Provincial Legislature did not constitute the Municipality as its delegate in the matter of taxation, but, in law. What actually happened was that a definite authority was given or conferred by a sovereign Legislature upon a subordinate authority was given or conferred by a sovereign Legislature upon a subordinate authority to legislate on the subject of taxation. In our judgment, there is some ....
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....te General submits that, if section 3 of the Validation Act is correctly read, it not only saves the house tax levied in the past upto the date of the commencement of the Validation Act, but, it saves the House Tax Rules for the future and, according to the learned Advocate General, the moment the House Tax Rules ensure for the future, the authority which the Municipality lacked on account of the decision in Gordhandas' case [1964]2SCR608 would come to be conferred and, on account of the existence of the old but validated House Tax Rules, the Municipality would be in a position to levy the tax in future. Mr. Nanavati strongly resists this argument According to hi, the House Tax Rules are not saved for the future by section 3 of the Validation Act again with a view to scan its provisions from this limited aspect as to whether, the House Tax Rules are or are not saved for future. Now, Mr. Nanavati draws our attention to the face that the first, the second and the fifth part of section 3 do not deal with the validation of the tax rules at all. The non-obstante clause obviously does not deal with that topic. The second part does mention the rules, but they are refereed to only for ....
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.... any words which would enable the Municipality to assess collect of recover the house tax in future. In our judgment, the learned Advocate General is right in contending that, if once the tax rules are saved, it is not necessary for the Legislature to provide for future assessment collection and recovery. The aforesaid three things would naturally follow from the fact that the tax rules are validated. If the rule is valid and the consequent imposition then, the Municipality would automatically acquire the power of assessing the buildings and lands to quantity the tax and would naturally have authority of law to collect and recover the same. A still alternative argument of Mr. Nanavati is that, even if this be so, the House Tax Rules will not survive the repeal of the Boroughs Act by the Municipalities Act. As already stated, the latter Act repeals the former Act. But, however, there is a saving clause enacted in sub-section (2) of section 279 of the Municipalities Act. The clause relevant for the present purposes is clause (vi), the relevant portion of which we have already reproduced in a previous part of this judgment. Mr. Nanavati's contention is that, this clause (vi) is no....
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...., are the impugned tax and the impugned house Tax Rules not laws in force on the date of the commencement of the Gujarat Municipalities Act? He says that, having regard to the fact that the Validation Act has not been repealed, it must be regarded as a law in force and, if the tax and the rules are saved by that enactment, then, the impugned tax and the rules must be regarded to be laws in force on the date of the commencement of the Municipalities Act and as such, they would be saved. In our judgment, there is considerable force in the argument of the learned Advocate General, and we have no hesitation in upholding the same. Therefore, the sixth, seventh and the eighth submissions of Mr. Nanavati must be rejected. (29) However, before we part with the aforesaid three submissions, we may note one more argument which Mr. Nanavati advanced and which would have required consideration if we had held that the tax rules did not survive the validation Act. Mr. Nanavati's argument was that in any view of the matter, the impugned tax between 27th January 1964 and 31st of March 1964, would not be saved. This represents the seventh and a part of the eighth submissions of Mr. Nanavati Mr.....
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....nning from 1st April 1964 to 31st December 1964 and there will be no authority of law to recover the tax for the latter period. (30) That brings us to the ninth and the last submission of Mr. Nanavati, Mr. Nanavati's contention is that petitioner, and its director and shareholder, petitioner No. 2 in the second petition, have the fundamental right to hold property and that, that fundamental right is subject to the right of the State to make any law imposing reasonable restrictions on the exercise of that fundamental right in public interest. He contends that the tax being confiscatory in its nature and incidence, must be held to be an unreasonable restriction and, consequently, must be held to be violative of this aforesaid fundamental right. Respondents resist the aforesaid contentions on a number of grounds. Firstly, they contend that, the fundamental right of petitioner No. 2 of the second petitioner is not in any way affected at all and he has no right to complain. They say that, the tax is imposed on petitioner and there is nothing in the rules or the relevant law which makes petitioner No. 2 of the second petition responsible for the payment of the bills issued against p....
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....ssed by the Parliament by virtue of the powers conferred on it by Articles 10 and 11. It also pointed out that the fact that the Parliament had not chosen to make any such provision indicated that it was not the intention of the Parliament to treat corporations as citizens. Therefore, it is not disputed by Mr. Nanavati that, Article 19 is not applicable to a company like petitioner and petitioner, therefore, cannot move this Court for the protection of the fundamental right embodied in Article 19 which it in fact does not possess. In the same case, their Lordships also pointed out that, the identity of a company is entirely separate from that of shareholders and that, if the company does not possess a fundamental right, then, its shareholders cannot be allowed to file a petition under Article 32 on the ground that the company is nothing more than an association of share holders and members thereof. Petitioner No. 2 of the Second petition is a shareholder of the company. In our opinion, it does not make any difference that, in addition, he is a Director of petitioner company too in our judgment, a Director cannot stand on a better footing in regard to enforcement of a fundamental ri....
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....and in the way of petitioner during the period of the emergency. From the discussion of the previous submissions, it is quite and collection of the impugned tax is the Validation Act was passed during the existence of the emergency. Now, Article 358 enacts in specific terms that, while a proclamation of emergency is in operation, nothing in Article 19 shall restrict the power of the State to make any law which the State would but for the provisions contained in Part III, be competent to make. Mr. Nanavati has no effective answer to this part of Article 358. But, what Mr. Nanvati contends is that, though the law in the Validation Act may be unchangeable because of Article 358, the executive action is not protected and can be challenged. In our judgment, Mr. Nanavati is not right. The same Article 358 not only protects a law violative of Article 19 during the period of emergency, but it protects also any executive action, because, the Article also states in terms that, while a proclamation of emergency is in operation, nothing in Article 19 shall restrict the power if the State to take any executive action which the State would, but for the provisions contained in Part III, be compet....
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....the present case in that case, the liability of tax in respect of a forest land with which fetched an Income of ₹ 31,100/- per year without making any deductions for expenses of management came to about ₹ 54,000/-. On the face of it, such a tax will be confiscatory. Mr. Nanavati relies upon Gordhandas' case [1964]2SCR608 for taking four percent as the annual yield of an immovable property. It is true that their Lordships have indicated this to be the yield of an immovable property. However, in our judgment, there Lordships did not mean to lay down an invariable percentage yield. What an immovable property in a particular locality yields is mainly a question of fact and can be determined only on evidence produced in the case. In rent restriction cases, 83/4 percent of the capital value of a property is usually taken as the annual yield which a property owner can expect from his investment. This is so in the case of residential or business localities. The contention of respondents is that in the case of industrial properties, the yield is even more. In the present case, the affidavits filed on behalf of respondents show that, according to them, the yield expected in B....