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TaxTMI 
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1964 (9) TMI 75
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..... The "Act' confers on the Government power to make rules to carry out the purposes of the "Act". Accordingly rules have been made and published. (3) The validity of the "Act" was assailed on various grounds. It was contended that in pith and substance, though not in form, the "Act" imposed tax on the assessee's income or in the alternative on the capital value of his assets in the form of buildings, and, therefore, the "Act" is beyond the legislative competence of the State Legislature. It was next contended that the "Act" is a colorable piece of legislation as the motive in enacting the same was not to tax buildings but to take away a portion of the fabulous unearned income made by speculators and tax dodgers. It was said that S. 4 of the "Act", the charging section, is vague and unenforceable and consequently it is inoperative and if that section is struck down as being vague and unenforceable, as it should be, the other provisions in the "Act' being machinery provisions will have no independent existence and, therefore, the entire "Act" has to be held to be inoperative. The power granted to the Government to alter the first schedule was assailed on the ground ....
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....V. Is the impost under the "Act" amounts to double taxation and if so, is the same opposed to law? VI. Is S. 3(2) hit by Art. 14 of the Constitution and if that provision is void is the "Act" liable to the struck down? VII. Whether the provisions contained in S. 4 are violative of Art. 14 of the Constitution; and, therefore, the "Act" is liable to be struck down? and VIII. Whether the provisions contained in the "Act" to the extent they place restrictions on freedom of trade, commerce or intercourse with or within the State are invalid as no previous sanction of the President had been obtained for the introduction of the Bill which culminated in the "Act". (6) When the validity of an enactment is challenged on the ground that the Legislature has no competence to enact the same or that one or more of the provisions contained therein are opposed to one or the other of the fundamental rights guaranteed by the Constitution, it is the duty of the Court to first interpret the relevant provisions as that the challenge to their validity may be examined in its proper perspective. To pronounce on the question of validity, it is necessary to know the pit....
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....inition in any manner an artificial definition. To tax one thing the State need not tax everything. The State has extensive power of classification in the exercise of its taxation power. Hence no arguments can be properly advanced on the basis of the definition in question to support the plea that the impugned tax is a tax on income or a tax on capital assets. (10) It was next said that in view of the definition of the word "owner" and the provisions contained in Ss. 3, 4, 6 and 8 read with the schedules it would be seen that the levy in question is a levy on income or in the alternative it is a levy on the capital value of the assets of the assessees. The expression "owner" as defined in S. 2(7) includes "a person who for the time being is receiving or is entitled to receive, the rent of any building whether on his own account or on account of himself and others or as an agent, trustee, guardian or receiver for any other person or who should receive the rent to be entitled to receive it if the building or part thereof were let to a tenant". The "owner" is liable to pay the tax assessed in view of Ss. 4, 8 and 9, though he may not really own the "building". Hence it ....
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....larger area of floorage. Is this contention correct? (12) Clause (c) to sub-section (1) of S. 3 provides: "save in respect of buildings to which proviso (1) to sub-section (1) of S. 4 is applicable, residential buildings having a floorage of not more than one thousand square feet an non-residential buildings having a floorage of not more than two hundred and fifty square feet" are exempt from tax. This provision undoubtedly indicated that the Legislature did not intend to give the benefit of that provision to cases falling under the first proviso to sub-section (1) of S. 4. But has it effectuated that intention? For our purpose what is important is the charging section, i.e., S. 4(1). The main S. 4 (1) says: "There shall be charged, levied and paid tax (hereinafter referred to as 'building tax') in respect of total floorage of every building- (a) at the rate or rates specified in Ss. A and B of Part I of Schedule II on residential buildings and non-residential buildings, as the case may be, situated in every rating area specified in Part I of Schedule 1; (b) at the rate or rates specified in Ss. A and B of Part II of Schedule II on residential ....
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....ding an exception and taking out as it were, from the main enactment, a portion which, but for the proviso, would fall within the main enactment; ordinarily, it is foreign to the proper function of a proviso to read it as providing something by way of an addendum or dealing with a subject which is foreign to the main enactment; "It is a fundamental rule of construction that a proviso must be considered with relation to the principal matter to which it stands as a proviso"; therefore, it is to be construed harmoniously with the main enactment; it has to operate in the same field and if the language of the main enactment is clear it cannot be used for the purpose of interpreting the main enactment or to exclude by implication what the enactment clearly says unless the words of the proviso are such that that is its necessary effect. While this is the true rule of construction the Legislature by employing clear and unambiguous language may assign to a proviso a field larger than that occupied by the main section. After all what is of the essence in the ultimate analysis is the intention of the Legislature. If that intention is made clear, no rule of construction arises for considera....
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....f the proviso is as contended by the learned Advocate-General surely the tax liability of several of the assessees becomes heavier and no assessee will be benefited. Hence the construction placed by the learned Advocate-General is not benefited to the assessees. Therefore, we must adopt the rule of strict construction. (14) Bearing in mind the rules of construction set out above let us now examine the true scope of the proviso in question. While the main S. 4(1) says: "There shall be charged, levied and paid tax, " the proviso merely refers to a "levy" of tax. In the main section the word "charged" refers to imposition of the tax, "levied" to quantification and "paid" to collection. The word "levy" has several meanings. It is sometimes used in the sense of imposition of tax, sometimes to indicate quantification and sometimes even to steps taken for collection. See: Byramjee Jeejeebhoy v. Province of Bombay (FB). Hence the meaning of the word "levy" has to be gathered from the context in which it is used. As mentioned earlier, the main section has used the word "levied" to indicate quantification. Again in S. 27, the word "levy" is used to connote quantification. In the ....
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....bestowed in drafting the provisos to S. 4(1). There is no doubt that the Legislature wanted to levy more tax on non-residential buildings than on residential buildings. But the intention is not fully carried out as will be clear from the illustration given hereinbelow. (18) Let us take the case of a building having a floorage of 10,000 sq. ft.; if that building is a residential building, the tax payable is Rs. 2,475; if 5,000 sq. ft. out of that is residential and the remaining 5,000 sq. ft. non-residential, the tax payable on the residential portion is Rs. 750 and tax payable on the non-residential portion is Rs. 850, the total being Rs. 1, 625. There is no reason to think that the Legislature intended to levy less tax on a building which is partly residential and partly non-residential, than on a residential building. Numerous other incongruities were pointed out at the hearing. It is not necessary to refer to them. All that I need say is that the "Act" is an ill drafted piece of legislation. (19) It was next urged that what is taxed under S. 4(1), read with Schedule II, is the floorage of a building and not that building as such and therefore, the tax levied is not a "buil....
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....h may be based as much on political, as on economic considerations and that an allowance maybe made where the property is shown to produce no income, a fact which may be taken to show that the estimated value was found to be erroneous, cannot alter the nature of the tax." Dealing with the contention that the tax in question is a tax on the capital value of the assets of the assessee, the learned Judge observed: "....it is impossible to say that this tax, although it is a tax on lands and buildings, is a tax on the capital value of the lands and buildings. It is imposed without any relation to the capital value except so far as such value can be ascertained by reference to ratable value." In the course of his concurring judgment, Kania, J. (as he then was) observed: "It must be conceded that every tax, because it is a direct tax, does not necessarily become "income-tax". Also because there is a graduated tax it is not necessarily Income Tax." In another portion of his judgment His Lordship observed: "The attempt to classify taxes on property under heads like capital, income and occupation is not profitable, as the list in not exhaustive. On the other....
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.... the holding and not on the annual value or the capitalised value of the land but the annual value is only the measure of the tax. It went further and held that even if it be assumed that the income is the capitalised value of the land, the capitalised value is only the basis and not the object of taxation. Therefore the State Legislature was fully competent to enact the impugned Act under Entry 49 of the State List. It further held that the mere fact that the tax is on a progressive scale does not make the tax any less a tax on land; so also the mere fact that the landholder pays the tax would not change the nature of the tax. I am in respectful agreement with these observations. Hence I hold that tax levied under the "Act" is tax on buildings. The State Legislature had full competence to enact the same. In view of this conclusion, I refrain from going to the question whether the State Legislature had legislative competence to club together more buildings than one belonging to the same assessee and tax them as one unit. (21) It was strenuously urged on behalf of the petitioners that the "Act" is a colorable piece of legislation; the motive in enacting the same is not to levy ta....
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....e which the legislature resolved to cure and the true reason for the remedy. I fail to see how this decision bears on the question whether the "Act" is a colorable piece of legislation or not. Next reliance was placed on the decision of the Supreme Court in S.C. Prashar v. Vasantsen Dwarakadas, [1963]49ITR1(SC) wherein S.K. Das, J, observed (in paragraph 23 of the judgment); "....... It is indeed true that the Statement of Objects and Reasons for introducing a particular piece of legislation cannot be used for interpreting the legislation if the words used therein are clear enough. But the Statement of the Objects and Reasons can be referred to for the purpose of ascertaining the circumstances which led to the legislation in order to find out what was the mischief which the legislation aimed at." The rule laid down above has no application to the point in controversy before us. I have already interpreted the charging section. For its interpretation there is no need to fall back on the Statement of Objects and Reasons. Assuming that the said Statement is admissible in law, assuming further that the definition of "owner", the floorage basis and the graduated tax scale, al....
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....its of its powers, yet in substance and in reality it transgressed these powers, the transgression being veiled by what appears, on proper examination, to be a mere pretence or disguise. As was said by Duff, J. in Attorney General for Ontario v. Reciprocal Insurers 1924 AC 328: "Where the law making authority is of a limited or qualified character it may be necessary to examine with some strictness the substance of the legislation for the purpose of determining what is that the legislature is really doing The substance of the Act that is material and not merely the form or outward appearance, and if the subject-matter in substance is something which is beyond the powers of that legislature to legislate upon, the form in which the law is clothed would not save it form condemnation. The legislature cannot violate the constitutional prohibitions by employing an indirect method. In cases like these, the enquiry must always be as to the true nature and character of the challenged legislation and it is the result of such investigation and not the form alone that will determine as to whether or not it relates to a subject which is within the power of the legislative authority--Vi....
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....we should hold the "Act" to be inoperative, that question really does not arise for decision in view of the findings reached by me earlier. It is true, as seen earlier, that the charging section (section 4) is not happily worded. But then, it cannot be said that the same is incapable of judicial interpretation. If a section in a statute is capable of being judicially interpreted then the same cannot be held to be vague and unenforceable. (24) It was urged on behalf of some of the petitioners that Section 32 which gives power to the State Government to add to, omit, or vary any of the entries contained in Schedule I from time to time by means of Notification in the Official Gazette is an unguided and uncontrolled delegation of essential legislative power and therefore we should strike down the same. It was said that the power conferred on the Government under Section 32 is not a power to execute the law but a power to make law, because it is a matter of policy whether buildings situate in a particular town should be taxed or not and a decision on that question must be taken only by the Legislature. It was also contended that the grant of power to an outside authority to repeal or....
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....the fear of popular resentment. Taxes as defined by Cooley in his Constitutional Limitations "are burdens or charges imposed by the legislative power upon persons or property to raise money for public purposes". The power to tax rests upon public necessity, and it is inherent in every sovereignty. "However absolute the right of an individual may be, it is still in the nature of that right that it must bear a portion of the public burdens, and that portions must be determined by the legislature. This vital power may be abused; but the interest, wisdom and justice of the representative body, and its relation with its constituents, furnish the only security where there is no express contract against unjust and excessive taxation, as well as against unwise legislation generally." As observed by one eminent Judge that "it is unfit for the judicial department to inquire what degree of taxation is to the abuse, of the powers" If a legislature can by a single measure can tax a property till it is destroyed there is no doubt that it has power to do so so long as the intention is not to confiscate--there is no reason to hold that that power cannot be exercised by two or more installments.....
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....hat is not the case here. The learned Advocate-General did not point out to us any provision in the "Act" from which the policy underlying the exercise of the power conferred, can be gathered. (27) But, because Section 3(2) is invalid, it is not correct to say that the entire "Act" is void. That section is clearly separable. Its separation from the other provisions of the "Act" does not in any manner affect the legislative policy, nor its removal interferes with the efficacy of the other provision and is not in any manner interwoven into the structure of the "Act". Therefore, while I agree with the contention that Section 3 (2) is an invalid provision and therefore it has to be struck down, I do not agree with the contention that as a sequel to striking down Section 3(2) it is necessary to strike down the "Act." (28) By far the most important challenge directed against the "Act" is the one based on the equality clause in the Constitution. It was said that the mode and method of taxation adopted in the "Act" had brought about substantial inequality as regards the incidence of taxation. It was complained that classification of buildings on the basis of floorage taking into cons....
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....cts may be invalid as the dissimilar treatment of similar tax subjects. (29) In adjudging reasonableness of classification, the Supreme Court observed in Civil Appeal No. 491 of 1963, that the Courts recognise greater freedom in the Legislature and if the statute disclosed a permissible policy of taxation, the Courts will uphold it. The Courts undoubtedly lean more readily in favour of the presumption of constitutionality of a taxing statute but that is not to say that they will not strike down a statute unless it appear that the tax imposed deliberately with the object of differentiating between persons similarly circumstanced. It must be evident to any that the power to declare a legislative enactment void is one which the Judge, conscious of the fallibility of the human judgment, will shrink from exercising in any case where he can conscientiously and with due regard to duty and official oath decline the responsibility. As often observed that one of the principles which has to be borne in mind in examining the constitutionality of a statute is that it must be assumed that the Legislature understands and appreciates the needs of the people and the laws it enacts are directe....
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....kinds of property may be subjected to different kinds of taxation, but so long as there is a rational basis for the classification, Article 14 will not be in the way of such classification resulting in unequal burdens on different classes of properties; but if the same class of property similarly situated is subjected to in incidence of taxation, which results in inequality, the law may be struck down as creating an inequality amongst holders of the same kind of property. (30) I shall now proceed to examine the validity of Section 4, the charging section read with the Schedules, in the light of the principles noticed above. (31) Section 4 charges all buildings in the towns listed in the First Schedule, in accordance with the rates provided in Schedule II. The First Schedule lists 121 towns. These towns are classified into three categories. Eleven towns, including Bangalore Metropolitan Area, are included in Part 1, 17 towns are included in Part II and 93 towns are included in Part III. As mentioned earlier, we were told that this classification was made on the basis of population as ascertained at the last Census. Buildings situate in these towns are first classified into res....
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....t 40 ft x 21 ft each, that is measuring in all about 1, 683 sq. ft. at a monthly rental of Rs. 1885/-. that rents work out at Rs. 1.12 paise per sq. ft. per month. In the same building the Handloom House has taken on lease 2 shops at the rate of Rs. 0.45 per month per sq. ft. According to Madiman, while the site value at Bangalore ranges from Rs. 40/- per sq. yard to Rs. 283/- per sq. yard, the market value of land in the best or most sought after locality in Hubli is not more than Rs. 20/- per sq. yard. It may be noted that both Hubli and Bangalore are listed in Part I of Schedule I. The State has not chosen to deny there averments. Therefore, we have to proceed on the basis that they are true. (32) Value of sites differ from place to place in every town. They also vary from town to town. These variations are not nominal variations--differences are very appreciable. That is so far as the ground value is concerned. Now coming to the value of buildings, they must necessarily vary from building to building. Buildings charged with tax range from cow-sheds to palaces. Under the "Act" both a cow-shed situate in a slum area and an ultra modern cinema house in the best locality are cha....
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.... 558): "........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 possession 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 land yield just enough to pay for the incidental expenses and labour charges besides land tax or revenue, The fourth is making large profits, because the land is very fertile and capable of yielding good crops. Under the Act, it is manifest that the fourth category, in our illustration, would easily be able to hear the burden of the tax. The third one may be able to bear the tax. The first and second one will have to pay from their own pockets, if they could afford the ....
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....commerce or intercourse and hence invalid; even if the provisions concerned are considered as being regularly in character, as the Bill introduced into the Legislature had not received the previous sanction of the President as required by Article 304(b) of the Constitution. (38) It was urged by Sri Raghunathan, the learned counsel for the petitioner that his client's garage, workshops and offices are instrumentalities of trade and to charge them with "building tax" is to affect his trade. Hence the levy under the "Act" being not compensatory in character and the Bill not having received the previous sanction of the President before its introduction in the Legislature, those buildings cannot be held to have been validly charged with "building tax." (39) Let us now examine how far this contention is correct? Article 301 of the Constitution says that "subject to the other provisions of this Part, trade, commerce and inter-course throughout the territory of India shall be free." Article 302 deals with the power of Parliament to impose restrictions on trade, commerce and intercourse. For our present purpose that Article is not relevant. Article 303 has nothing to do with the p....
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....ay be accepted; (1) that regulation of trade, commerce and intercourse among the States is compatible with its absolute freedom, and (ii) that Section 92 is violated only when a legislative or executive act operates to restrict such trade, commerce and intercourse directly and immediately as distinct from creating some indirect or consequential impediment which may fairly be regarded as remote." On the point in controversy, it is not profitable to go in search of decisions rendered by Courts outside India, as in my opinion, that point is no more res integra, in view of the decisions of our Supreme Court in Atiabari Tea Co. Ltd. v. State of Assam, [1961]1SCR809 . Dealing with that question, this is what Gajendragadkar, J. (as he then was) speaking for the majority observed (at page 254) : "Thus considered we think it would be reasonable and proper to hold that restrictions freedom from which is guaranteed by Art. 302, would be such restrictions as directly and immediately restrict or impede the free flow or movement of trade. Taxes may and do amount to restrictions but it is only such taxes as directly and immediately restrict trade that would fall within the purview of ....
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....ubject to the other provisions of Part XIII, has been construed by this Court in [1961]1SCR809 and in [1963]1SCR491 . The majority view in the Atlabari Tea Co. case, [1961]1SCR809 which has been accepted in the Automobile Transport Case, [1963]1SCR491 , is as expressed by Ganjendragadkar, J. at page 860: "Thus considered we think it would be reasonable and proper to hold that restrictions freedom from which is guaranteed by Article 301, would be such restrictions as directly and immediately restrict or impede the free flow or movement of trade. Taxes may and do amount to restrictions; but it is only such taxes as directly and immediately restrict trade that would fall within the purview of Article 301... '' In my opinion, this decision concludes the matter and there is no further room, at any rate before this Court, for controversy whether the restrictions prohibited by Art. 301 include restrictions which operate indirectly as well? Hence I am unable to accept the contention of Sri. Raghunathan that the impugned "Act", in any matter, is hit by Art. 301 of the Constitution. (41) As I have earlier held that Section 4, the charging section, is violative of Ar....
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....me 'Rating Area' in disregard of the reasonable annual rent or capital value or type of building and its location, the exaction is arbitrary and has resulted in malapportiontment of the tax burden and therefore, the Act violates Articles 14 and 19(1)(f) of the Constitution of India. (47) Grounds I and II formulated above, cover questions I, II and VII formulated by my learned brother. (48) The petitions have been opposed on behalf of the State by the learned Advocate-General and his contentions were, that the impugned Act falls within Entry 49 of list II of Schedule VII of the Constitution of India, and that the basis of levy, is the total floorage area and not the capital or rental value, does not take the tax outside the scope of entry 49 of List. II; that the Legislature has absolute discretion to determine the standard for charging a tax liability and therefore, the challenge based on Articles 14 and 19(1)(f) are untenable. The learned Advocate-General has further contended that the further contention of the petitioner in W.P. 318/64 that the proviso (i) to section 4 is inconsistent with the scheme of the Act, and therefore, unenforceable, is wholly untenable. ....
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.... above fail, sub-section (2) of section 3, being severable, the rest of the Act can stand. (51) Section 4 is the corner stone of the Act; that is the charging section. The constitutionality of the Act rests entirely on its validity. It is necessary to set out that section in its entirety, which reads: "4. Levy of Buildings Tax. (1) There shall be charged, levied and paid tax (hereinafter referred to as 'buildings tax') in respect of total floorage of every building. (a) at the rate or rates specified in Sections A and B of Part I of Schedule II on residential buildings and non-residential buildings, as the case may be, situated in every rating area specified in Part I of Schedule I; (b) at the rate or rates specified in Sections A and B of Part II of Schedule II on residential buildings and non-residential buildings, as the case may be, situated in every rating area specified in Part II of Schedule I; (c) at the rate or rates specified in Sections A and B of Part III of Schedule II on residential buildings and non-residential buildings, as the case may be, situated in every rating area specified in Part III of Schedule I: ....
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....truction of the building is completed. Section 8 makes provisions for assessment and Section 9 provides for Notice of demand of the tax assessed. Sections 10, 11 and 12 deal with Appeals and Revisions. Section 25 empowers the State Government to make rules for carrying out the purposes of the Act. Section 27 enables the State Government, by notification in the official gazette, to empower the Local Authorities (Municipal Corporations etc.,) as may be specified in the notification, to levy and collect the tax on buildings situated in the area within the jurisdiction of such Local Authority. The Local Authority collecting the tax, however, is merely a collecting agent for the State and is entitled to retain ten per cent of the tax collected as the cost of collection, and is liable to pay the balance to the State Government. (52) Schedule I specifies the names of the Local Authorities in the State of Mysore and all the buildings, subject to the exceptions contained in sub-section (1) of Section 3, situated with the jurisdiction of the said Local Authorities, are charged to tax by Section 4. Schedule 1 is divided into Parts I, II and III, the basis of the division being the popul....
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....n that the unit of taxation under the Act is 'a building', my learned brother has not expressed any opinion on the question presented for decision whether the impugned tax falls within or outside, the scope of Entry 49 of List II of Schedule VII, in case it is held that the Act levies a charge to tax on the basis of the total floorage of all buildings (except exempted buildings) owned by an assessee in the same Rating Area. (54) The rules governing the construction of tax statutes are the same that govern any other statute, including the rules that the intention of the legislature governs, words are to be construed in their ordinary meaning, special words control general words, expression unius est exclusio alterius, construction as a whole, contemporaneous construction, construction in connection with other statutes etc. In the administration of the laws for the collection of the public revenue, it is in the first instance necessary to ascertain the legislative intent in their several provisions, and next to give effect to that intent in applying it to the subject-matter. The underlying principle of all construction is that the intent of the Legislature should be sought....
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.... is any ambiguity found, the construction must be in favour of the public; because it is a general rule that when the public are to be charged with a burden, the intention of the Legislature to impose that burden must be explicitly and distinctly shown." (1) The Law of Taxation by Dr. Cooley Vol. II, Para 503. The better rule according to Dr. Cooley, between the rules of strict construction and liberal construction, is the one stated in paragraph 505 of his treatise on taxation in Volume II. "Revenue laws are not to be construed from the standpoint of the tax-payer alone, nor of the government alone. Construction is not to assume either that the taxpayer, who raises the legal question of his liability under the laws, is necessarily seeking to avoid a duty to the State which protects him, nor, on the other hand, that the Government, in demanding its dues, is a tyrant, which, while too powerful to be resisted, may justifiable be obstructed and defeated by any subtle device or ingenious sophism whatsoever. There is no legal presumption either that the citizen will, if possible, evade his duties, or, on the other hand, that the government will exact unjustified or beyond its n....
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....o to Section 4 of the Mysore Buildings Tax Act, 1962 from the Statute Book as an unconstitutional piece of legislation." In paragraph 4 of the affidavit of the petitioner, filed in support of the said writ petition, after setting out portions of Section 4(1), Section 5, Section 6(1) and Rule 4(1) of the Rules, the grounds in support of the relief prayed for in paragraph 3(b) of the petition, have been set out thus: "5. From the foregoing, it is evident that the scheme of the Act is to levy buildings tax in respect of each building separately. 6. However, the proviso to Section 4 of the Acts reads: "Provided that- (i) Where more than one building in the same rating area is owned by the same person the buildings tax shall be levied on the aggregate floorage of all such buildings; (ii) If any building consists of both residential and non-residential portions the residential and non-residential portions shall be deemed to be separate buildings and the buildings tax shall be levied accordingly; (iii) if any residential building is converted into a non-residential use or otherwise, buildings tax shall be payable at the rates applic....
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....unt of its having a floorage of less than one thousand square feet, shall become liable to be so taxed if the floorage of the building is subsequently increased to one thousand square feet or more as computed in the manner specified in section 5 by new constructions or additions or combinations. Explanation 3.--Where the floorage of a building, which has already been taxed, is subsequently increased by new extensions or additions or combinations, tax shall be computed on the total floorage of the building including that of the new extensions or additions or combinations and credit shall be given to the tax already levied and collected in respect of the building before such extensions or additions or combinations. Explanation 4.--Where the floorage of a building which is not liable to be taxed under the provisions of this "Act on account of its construction having been completed before the first day of November 1956, is on or after the said day, increased by new extensions, additions or combinations, tax shall be computed only on the floorage of the new extensions or additions or combinations. (1) There shall be charged, levied and paid tax (hereinafter referred to as 'buildings....
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.... payable more than once under this Act." The Bill has undergone material alterations at the Select Committee stage. The Bill as introduced in the Mysore Legislative Assembly was an exact copy of the Kerala Buildings Tax Act, 1961 (Kerala Act 19 of 1961). The Bill provided for levy of tax at the rate or rates specified in Schedule II thereto, in respect of the total floorage of every building, the construction of which is completed on or after the 1st day of November 1956, which has a floorage of one thousand square feet or more. The Select Committee made the following material alterations in the Bill which was finally passed by the Legislature. (a) That all buildings in existence on the date of the commencement of the Act, and all buildings the construction of which is completed after the commencement of the Act, are charged to tax at slab rates prescribed in Para I, II and III of Schedule II of the Act; (b) Proviso (1) to sub-section (1) of Section 4 was introduced with the clear intent that where more than one building in the same Rating Area are owned by the same assessee, the tax should be computed on the basis of the aggregate floorage of all such building....
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....rother has rightly observed, is not happy; but the intention of the Legislature has been clearly indicated in that section as could be seen from the proviso (i) of sub-section (1) and the Explanations (1) and (2) of Section 4 If such was the intention, the word 'total' in the opening words of sub-sec (1) was unnecessary. The expression 'floorage' has been defined in sub-section (5) of Section 2 meaning the aggregate area included in all the floors together. If the intention of the Act was that the unit of taxation is 'a buildings' and not all buildings owned by the same assessee in the same rating area, the word 'total' preceding the expression "floorage of every building" in sub-sec (1) of Section 4 was wholly unnecessary. In my opinion, there is no ambiguity or doubt as to what the legislature intended to tax, as is evident by Section 4, and the said section charges to tax all buildings owned by an assessee in the same Rating Area as the unit of taxation on the basis of the aggregate floorage of all such buildings at the rates specified in Schedule II. (58) The pith and substance of the Act, in my judgment, is that it levies, for the support ....
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....ax extends to everything over which the sovereign power extends, but not to anything beyond its sovereign power. Even the Federal government's power of taxation does not include things beyond its sovereign power." The power of the State Government to impose taxes on lands and buildings, within its jurisdiction, is subject to Constitutional limitations on that power, which would otherwise be practically without limit. The said limitations are: (1) the scope of the power limited by Entry 49 of List II of Schedule VII; (2) the guarantee of Art. 14 against arbitrary exaction and in the case of property taxation the guarantee of reasonableness contained in Clause (6) of Art. 19. In [1964]5SCR975 the Supreme Court stated the law thus: "It is well settled that when a power in conferred on the Legislature to levy a tax, that power itself must be widely construed; it must include the power to impose tax and select the articles or commodities for the exercise of such power; it must likewise include the power to fix the rate and prescribe the machinery for the recovery of the tax. The power also gives jurisdiction to the Legislature to make such prov....
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.... be regarded as purely confiscatory that the power of the Court can be legitimately invoked and exercised." It is by applying the above principles of law, as enunciated by our Supreme Court, the two grounds of challenge to the Act formulated above have to be determined. I shall first deal with the Constitutional limitation on the power of the State contained in Entry 49 of List II of Schedule VII and next deal with the second ground of attack based on Arts. 14 and 19. Re: colorable legislation:-In order to appreciate the contention resting on this ground, it is necessary to determine the scope and ambit of the power of the State to levy tax on lands and buildings under Entry 49 of List II of Schedule VII. Article 246 of the Constitution reads :- "(1) Notwithstanding anything in clauses (2) and (3), Parliament has exclusive power to make laws with respect to any of the matters enumerated in List I in the Seventh Schedule (in this Constitution referred to as the "Union List"). (2) (Omitted as unnecessary.) (3) Subject to Clauses (1) and (2), the legislature of any State has exclusive power to make laws for such State or any part thereof with respect t....
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....ices rendered, such as: (a)a water rate; (b)a lighting rate; (c) a scavenging, sanitary or sewage rate; (d) a drainage tax; and (e) fees for the use of markets and other public conveniences." Vide paragraph 11 of the Report of the Taxation Enquiry Commission, 1953-54, Vol. III, page 358. (61) In exercise of the powers conferred by the Government of India Act, 1919 and the Devolution Rules made by the Governor-General, the concerned Provincial Governments enacted: (a) The Bombay Municipal Boroughs Act, 1925, which is in operation in the Bombay area of the new Mysore State; (b) The Madras District Municipalities Act, 1920, which is in operation in the Madras area of the new State of Mysore; (c) The Coorg Municipal Regulation, 1907, in operation in the Coorg area. The then Princely States of Mysore and Hyderabad enacted: i) The Mysore City Town Municipalities Act, 1933, which is operative in all the Municipalities except the Bangalore Municipal Corporation areas; ii) The City of Bangalore Municipal Corporation Act, 1949; and iii) The Hyderabad District Municipalities Act, 1956, ....
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....sis of the levy is not specified in the Act, the actual levy is one the basis of the annual rental value of the buildings. The City of Bangalore Municipal Corporation Act, 1949, Section 97 read with 99(2) empowers the Corporation by a resolution to determine the property tax to be levied at such percentage of the annual value of buildings and lands as may be fixed by the Corporation, provided that the aggregate of the percentage so fixed shall not be less than 121/2per cent or greater than 16 per cent of its annual value. The Hyderabad District Municipalities Act, 1956, by Section 96 read with Section 97 empowers the Municipalities situated within the Hyderabad area of the State to levy a property tax on lands and buildings provided that the aggregate of the percentage so fixed shall not in the case of any land or building be less than twelve and half per cent or greater than thirty per cent. In addition to the tax on property (lands and buildings) the various Municipalities and the Bangalore City Corporation, levy the following taxes: (1) Taxes on transfers of real property, based on the value of the property, and levied in addition to the state stamp duty. (2....
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....en 10% and 30% of annual value. In those few instances in which the tax rate is applied to "capital value", the rate is normally a fraction of 1%. In the State of Bombay, industrial and commercial property is taxed at higher rates than residential property. In some municipalities and municipal corporations, the rates are graduated according to the annual value of the property on scales running from 25% to 23%. Regressive rate scales in effect in some localities, under which the amount by which the annual value exceeds a designated figure is taxed at one half or one quarter of the regular rate, are being eliminated. Confessional rates which have been granted to property owners occupying their Exemptions and Remissions: Properties of the Central Government are exempt from local property taxes under the Constitution unless they were taxable before 1 April 1937. However, the Central Government has undertaken to pay for services rendered to it such as water and electricity, for which special rates are imposed, and also for such general services as street lighting and drainage which normally are accounted for within the general property tax rates. The Central Railway Board also ....
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....dians must form their own conclusions; but we venture to express the hope that they will, from the first, give full attention to them." (64) For what reason the Constitutional Reforms Committee of the British Parliament did not make a separate list of the sources of revenue for the exclusive use of the local authorities, is not apparent from the Report; it may, possibly be, because under Entry 13 of List II of Schedule VII of the Government of India Act, 1935, the entire subject of local government is included in the Provincial Legislative List. That entry reads: "Local Government, that is to say the constitution and powers of municipal corporations, improvement trust, district boards, mining settlement authorities and other local authorities for the purpose of local self-government or village administration, ". Annexure VI to the Report of the Joint Committee on Indian Constitutional Reforms enumerates the Lists of subjects intended to be allocated to the Centre Provinces and also the Concurrent List. List II of Appendix VI enumerates the exclusive subjects intended to be allocated to the Provincial Governments. The subject of 'tax on lands and buildings' su....
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....ed in the Rating Area shown in the Schedule to the said Act at such rate not exceeding twenty per cent of the annual value of such buildings and lands, as the State Government may by notification in the Official Gazette direct in respect of each such Rating Area. (67) No other State, before the people of India gave to themselves this Constitution of India, ever conceived the idea of levying a parallel tax on lands and buildings situate within the jurisdiction of Municipalities and Corporations. (68) The scheme of the Government of India Act, 1935, regarding the allocation of heads of subjects of legislation, so far as they are relevant for the purpose of these petitions, was re-incorporated, in the Constitution of India. It is relevant to state that the Constitution of India, did not expressly make any provision allocating the well-established sources revenue exclusively for the use of local self-governments. (69) The Constitution of India, by Articles 280 and 281 made provision for the constitution of the Finance Commission, which shall consist of the Chairman and four other Members to be appointed by the President, the qualifications of the members by law to be determine....
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....e structure and level of taxation of income on capital formation and maintenance and development of productive enterprise; (4)To examine the use of taxation as a fiscal instrument in dealing with inflationary or deflationary situations. (5) To consider other relevant matters; and (6) To make recommendations, in particular, with regard to (a) modifications required in the present system of taxation, and (b) fresh avenues of taxation. (70) The Finance Commission (1953-54), hereinafter referred to as the Commission after issuing a detailed questionnaire, invited representations from the State, Central and Local Self Governments and the public and an opportunity was afforded to all concerned. The Commission have dealt with the question of 'local finance and taxation' and their recommendations are contained in Volume 3 of their Report. (7) Report of the Taxation Enquiry Commission, 1953-54, Vol. III, page 362-363. (71) Strong representations were made, on behalf of the local-government authorities before the Commission that the local bodies should have a definite and assured source of tax revenue and that this should be secured by the inclusion i....
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....) a tax imposed in return for services rendered, such as: (a)a water rate; (b)a lighting rate; (c) a scavenging, sanitary or sewage rate; (d) a drainage tax; and (e) fees for the use of markets and other public conveniences." Examining these taxes, it is found that only in one State and in respect of one tax alone has there definitely been an encroachment to the direct detriment of the local bodies, viz., profession tax in Assam. The State Government levy the tax and the local bodies have not been permitted to levy it. In Madhya Pradesh, too, the State Government do levy a profession tax but at a relative low rate, at the same time they permit the local bodies also to impose a levy in the form of a tax on property and circumstances. The other tax which has been cited before as having been 'encroached upon' is the urban Immovable property tax in Punjab and Bombay. But here again it may be pointed out that, by and large the levy of the State tax has not been so operated as to stand in the way of the local bodies themselves raising or increasing the corresponding general property tax. It may be added that the Government of ....
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....uffice, in the sense of commending itself to State Governments, and that, consequently, no amendment of the Constitution will even eventually be needed." xx xx xx xx 15. The taxes to be reserved for exclusive utilisation should be such as may, in fact, be devolved Recommendation regarding the on local bodies. In the result we recommend taxes to be Reserved that the following taxes should be reserved for in the sense we have already explained:- (1) "Taxes on lands and buildings:' (2) Taxes on the entry of goods into the area of a local authority for consumption, use or sale therein, popularly known as octroi; (3) Taxes on vehicles other than those mechanically propelled; (4) Taxes on animals and boats; (5) Taxes on professions, trades, callings and employments; and (6) Taxes on advertisements other than advertisements published in the newspapers. In addition to these, we consider two other taxes, viz., the theatre or show tax, and the duty on transfer of property (levied along with the stamp duty collected by the Government) as suitable taxes for utilisation by local bodies and recommend th....
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...., when that State was ruled by the Communist Ministry, enacted the Kerala Buildings Tax Act, 1961, which was copied by the State of Mysore in the Bill as introduced in the State Assembly; but the Select Committee made the matter worse by making substantial alterations, to which I have already referred to. (74) What is the legal effect of the recommendations of the Commission laid before the Houses of Parliament, as provided under Art. 281 of the Constitution? Articles 280 and 281 are found in Chapter 1 of Part XII of the Constitution of India, dealing with Finance. Important Articles like Arts. 265 and 286 are found in the said Chapter. That Chapter provides, inter alia, for certain taxes and duties to be levied and collected by the Union Government but to be assigned to the States (vide, Art. 269). "Taxes on income other than agricultural income' is a Union subject coming within Entry 82 of the Union List of VII Schedule; yet Article 270 has made provision for distribution of the taxes on income levied and collected by the Union between the Union and the States in the manner prescribed. Until a Finance Commission as contemplated under Art. 280 was constituted, the President....
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....tion to State revenue, they should gradually withdraw from the field, and meanwhile allot the proceeds from the taxes to the local bodies concerned. (75) The hope entertained by the Commission by the setting up of a 'convention' however, was defeated by States, like Mysore and Kerala. It is a matter of deep regret that under the pattern of our Government under the Constitution, if the Commission's recommendations laid before both the Houses of Parliament under Art. 281, when no objections were taken by any of the State including Mysore, are not respected and the States like Mysore prefer to act on the recommendations of a non-statutory Committee called 'The Mysore Resources and Economy Committee', which had no legal status, the purpose of Arts. 280 and 281 will be defeated. 'The Mysore Resources and Economy Committee' in their report had made the following observations which were incorporated in the Statement of Objects and Reasons to the Bill, which was introduced in the Mysore Legislative Assembly : "A considerable amount of 'shy' money, and sums saved by escapement of taxes, is at present going into property deals in the cities and....
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....he other; recommendations of the Commission which are made periodically are intended to serve the said purpose. The Commission in Volume I of their Report at page 167, paragraph 70, have observed "that with the growing importance of public finance in our national economy, and the extent to which the Central, State and local constituents of the fiscal system are getting inter-linked, it is important to develop an integrated and national approach to problems of taxation and of expenditure, whether in the Central or in the State--local fields." (78) In the history of the development of the American Constitutional Law, we find an example, whereby an Act of the Congress it became necessary to set up an authority called 'The Inter-State Commerce Commission' in the year 1887, by the inter-state commerce Act. It is stated in 11 Am. Jur. Page 127, (8)(11 Am. Juris. Page 127) paragraph 153, that 'the rulings of the Commission upon points relating to Inter-State Commerce over which it has jurisdiction are entitled to great respect.......................... Commission's determination of fact will be accepted by the Courts if neither arbitrary nor unsupported by the ....
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....ome, were to deny the States their share of the revenues in accordance with the recommendations of the Commission, what would be the reaction of the States? (82) Our Constitution makers advisedly did not provide an exclusive list of sources of revenue for local self-governments, for the obvious reason, that under the Federal scheme of Government, the sovereign power is distributed between the Central and the States; the State Governments are sovereign in their allotted field. One of the subjects over which the States, under the State List, have exclusive jurisdiction is, the subject coming within Entry 5 (Local Government). When the entire subject of Local Government is within the exclusive legislative sphere of the State Legislature, it was appropriate to include those sources of revenue which under the Governor-General's Devolution Rules were allocated exclusively for the local governments, in the State List. By the provisions of Articles 280 and 281 contained in Part XII of the Constitution, provision was made for allocation of the sources of revenue as recommended by the Commission for the exclusive utilisation of the local governments. The impugned Act by its section 27....
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....islature in a particular case has or has not, in respect to the subject matter of the statute or in the method of enacting it, transgressed the limits of its constitutional powers. Such transgression may be patent, manifest or direct, but it may also be disguided, covert and indirect and it is to this latter class of cases that the expression "colorable legislation" has been applied in certain judicial pronouncements. The idea conveyed by the expression is that although apparently a legislature in passing a statute purported to act within the limits of its powers, yet in substance and in reality it transgressed these powers, the transgression being veiled by what appears, on proper examination, to be a mere pretence or disguise. As was said by Duff J. in 1924 AC 328. "Where the law making authority is of a limited or qualified character it may be necessary to examine with some strictness the substance of the legislation for the purpose of determining what is that the legislature is really doing." In other words, it is the substance of the Act that is material and not merely the form or outward appearance, and if the subject-matter in substance is something which is beyo....
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....y for the disease which the legislature resolved to cure and the true reason for the remedy; Bengal Immunity Co. Ltd. V. State of Bihar (S) [1955]2SCR603 ; R.M.D. Chamarbaughwala v. Union of India (S) [1957]1SCR930 ; Moti Das v. S.P. Sahi AIR1959SC942 . Another principle which has to be borne in mind in examining the constitutionality of ascertainment statute is that it must be assumed that the legislature understands and appreciates the need of the people and the laws it enacts are directed to problems which are made manifest by experience and that the elected representatives assembled in a legislature enact laws which they consider to be reasonable for the purpose for which they were enacted. Presumption is, therefore, in favour of the constitutionality of an enactment. Charanjit Lal Chowdhuri v. Union of India [1950]1SCR869 ; State of Bombay v. F.N. Bulsara (AIR 1951 SC 318); Mahat Moti Das v. S.P. Sahi AIR1959SC942 ." (86) In principle I see no difference, whether the constitutionality of a statute is challenged whether on the ground that it violates the Fundamental rights guaranteed in Part II of the Constitution or on the ground of want of legislative competence. ....
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....ce and Berar States of Motor Spirit and Lubricants Taxation Act, 1938. "The grant of power may be qualified by either express provisions in the same enactment, by implication of the contract and even by consideration arising out of the scheme of the Act." (91) Property taxes on lands and buildings have an ancient origin. In Athens, the land tax was originally levied on gross produce, but it gradually developed into a property tax imposed not only on land and houses but also on slaves, cattle, furniture and money. Rome taxed many forms of personality as well as realty. In Europe the early property taxes were levied on land but were gradually extended to buildings and cattle until they became general property taxes. As new types of movable and intangible property developed, evasion became prevalent and assessment difficult. The principle of the general property tax broke down and personal property taxes were gradually abandoned. By 1800, the base of European property taxes had largely dwindled down to land alone or land and buildings. (14) State and Local Taxation, page 643, by J.R. Hellerstein. (92)The system of taxation on land and buildings in various countries of t....
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....time, various classes of personal property were subject to taxation. The items selected--e.g. slaves, carriages, watches and clocks and money--were those that indicated unusual tax-paying ability. When these levies became numerous, they were combined in a single general property tax. The general property tax is a levy on all property; real and personal, tangible and intangible. Valuation of tax purposes is made by local assessors. The rate of the tax is determined annually by different taxing authorities, usually by the process of dividing estimated expenditures that are not provided for through other revenue sources by the value of taxable property. In other words, the property tax is usually the elastic element in the tax system, varying with expenditures. Up to the time of the American Civil War the tendency was, as indicated above, to combine various special levies into a general property tax. After the Civil War this tendency was reserved. One by one, various classes of property were withdrawn from the general property tax base, either to be taxed in other ways or to be exempted entirely. This tendency went so far in some states that only real estate remained....
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....uly burdensome in most areas. Equitable assessment would not, of course, make the tax a satisfactory measure of ability. However, approximately half of local expenditures are for street improvements, police and fire protection and other owners. Welfare activities, education and other functions which would not benefit property owners as such are supported in increasing measure by federal and state governments............." Local Taxation in England and Wales has been dealt with at pages 845-846. The relevant portions are: "LOCAL TAXATION IN ENGLAND AND WALES--- The sphere of local government in England and Wales, measured in terms of revenues and expenditures, is far more limited than is that of the national government. It is more limited, also than the sphere of local government in federal states, and in many other unitary states. In 1931-32 less than one-third of government expenditure in England and Wales was incurred by local authorities, and an even smaller portion of revenues came from independent local sources........... The local revenue system is very simple. All local units are supported largely from two sources--rates and grants. The first is....
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....reditament might reasonably be expected to let from year to year if the tenant undertook to pay all usual tenant's rates and taxes, if any necessary to maintain the hereditament in a state to command that rent." Specialized owner-occupied properties must receive special treatment. These are mostly business properties and the valuation is related to profits. Machinery is exempted. Provision was made for valuations every five years under the Rating and Valuation Act 1925 but actual changes in value became comparatively infrequent. This Act did not change methods of valuation materially, but it attempted to secure uniform valuations throughout the country. The base of the local rates was reduced from time to time by successive "deratings". The Agricultural Rates Act of 1896 exempted one-half of the rental value of agricultural land from local rates. In 1923 this exemption was increased to three-fourths, and in 1929 the total rental value of agricultural land was exempted. Agricultural buildings were exempted in 1925. The Local Government Act of 1929, which dated all agricultural land, also dated industrial properties and railroads, reducing the "net annual value" to which....
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....irect tax should fall upon the income of an asset rather than the asset itself. Thus "rates", which are levied for the purpose of defraying expenses of local government, are applied to the annual rental value of occupied real property'." (95) At page 67, under the head "Local Taxes on Real Property"--"Rates", after stating the historical background, it is observed thus: " "Rates" are local taxes levied for the purpose of defraying the expenses of the local government. The rental value of property provides the tax base', but rates are recoverable only against the person assessed with tax or against his personal property." At page 68 of the same treatise, it is stated as to who is the tax-payer as follows: " "The Taxpayer:--Rates are imposed upon the "occupier" of property, rather than upon the owner'. Whether or not property is "occupied" and who is the occupier frequently raise difficult questions of fact which have occasioned extensive litigation. In general, property is occupied if it is more or less in continuous use and the occupant is the person who has general control of the property or portion of the property in question. If the o....
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....rom the standpoint of its analogies with the tax on land, but is discussed rather from the standpoint of the differences that distinguish the two types of tax; and thus it is possible to examine separately the tax problems involved, in accordance with the true facts of the situation. According to Italian law, which may be taken as typical of law which regards buildings as a separate object of taxation, the subject of the tax is the owner of the building, or the occupant, or the one having the use of it; the objects of the tax are buildings and all other permanent structures, which are taxed in proportion to their net income. For the definition of taxable income the law takes as its standard of reference building which is rented, and not one which is inhabited by the owner; so that, in the first case, the income is given by the rental, and in the second, it is estimated, by analogy, from the rental value of other buildings in a similar condition and location. This total income is translated into net income by deducting a certain percentage of the rental for repairs, insurance, and all other possible sources of expenses or loss. This, in broad outl....
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....dings on the other as constituting a distinct class. In the case of factories, farm-buildings and workshops etc., they are not consumer's goods in the economic sense, but capital, which produce income by the production of goods or agricultural products. Therefore, in several countries like Italy, factories, workshops and farm-buildings are exempt from building tax. (98) In the Kerala Buildings Tax Act, 1961, factories and workshops are exempted. In the original Bill introduced in the Mysore Legislative Assembly, factories and workshops were intended to be exempted, but, the Select Committee deleted that exemption and brought them all under the net of taxation. (99) I have already dealt with the history of legislation on taxation of lands and buildings on urban Real Property since the commencement of British rule in India. In "Municipal Corporation in British India" (Vol. III, 1914 Edn.) at page 153, by Sri Iyengar the position has been summarised thus: "All municipal corporations in British India are empowered to levy taxes on all buildings and lands within their local limits subject to certain specific exemptions. The owners are made primarily liable in some mun....
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....ed in special cases of the type already noticed. With regard to properties of a class not ordinarily let or where the annual rent cannot be estimated, a percentage, not less than five per cent of (a) the estimated cost of construction of the building at the time of assessment (less a reasonable deduction on account of depreciation) plus (b) the estimated value of the site, may be taken as the annual rental value." I have already referred to the value to be given to the recommendations of the Commission laid before the Houses of Parliament under Art. 282 and not objected to by the States. (100) From the above historical review of the nature of property taxation on buildings, the following deductions follow: (1) that the tax has an ancient origin; (2) that the tax is a property tax; (3) In all countries of the world the tax is collected by the local authorities; (4) the basis of the tax is normally on the fair rental value, as recommended by the Finance Commission; (5) Normally, the tax in most of countries is on the 'occupier' of the building, though there is no legal bar to the levy of the tax on the owner; however, it is an occu....
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....n has, in our opinion been summed up very lucidly by the learned Chief Justice of the Lahore High Court in the following passage in his judgment : 'It may well have been the policy of the British Parliament to tax occupiers of lands and buildings, etc., and not the owners. In each of the Acts referred to by Mr. Narotam Singh the tax was in terms imposed upon the occupier. The fact that it was the policy of the British Parliament to tax occupiers cannot be used to construe the words appearing in Item 42. It appears to me that if Parliament when enacting the Government of India Act intended Provincial Legislatures to tax occupiers only and not owners of lands and buildings, they would have said so. It would have been the obvious thing to say and the fact that they did not say so, makes it clear, to my mind, that Parliament intended Provincial Legislatures to have power to impose any taxes on lands and buildings, hearths and windows, which they could legitimately do. When words in a statute are clear and unambiguous, effect must be given to the plain grammatical meaning of the words. By no stretch of imagination can it be said that item 42 is ambiguous. "The word....
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....h impost was reserved for the exclusive utilisation of Local Boards. In my judgment, the word 'taxes' in Entry 49 of the State List, having regard to the historical origin of the taxes on lands and buildings means nothing more or nothing less than 'rate' as construed by the Supreme Court in [1964]2SCR608 . I am not unaware of the observation, in the majority decision in that case, that, if the word 'taxes' had been used in Section 73 of the Bombay Municipal Boroughs Act, 1925, Rule 350-A read with Rule 243, the legality of which had been questioned in that case, may be intra vires. Any observation of the Supreme Court is entitled to the highest respect. The scope of Entry 49 of the State List, however, did not come directly for decision before their Lordships of the Supreme Court in that case. Their Lordships had no occasion to consider in that case the recommendations of the Finance Commission 1953-54 laid before the Houses of Parliament under Article 281. As already observed, the recommendations of the Finance Commission upon points referred to them by the President under Article 280, and thereafter laid before the Houses of Parliament, are entitled to ....
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....t, 1961, struck down by the Supreme Court, where the amount of compensation did not depend upon the value of the land acquired, but on the quantum of the property which the owner was deprived of. The Supreme Court held that such mode of payment of compensation violated Article 14 of the Constitution--Vide Karimbil Kunhikoman v. State of Kerala, AIR1962SC723 . (107) In my view, there is no difference in principle between the amount of compensation varying with the quantum of the property owned by the assessee, and a property tax on buildings levied on a progressive scale according to the number of buildings owned by the assessee in the same Rating area. (108) Before I depart from this subject of legislative competence and conclude my conclusions on the question of colorable legislation, I wish to make a few observations as to the colorable nature of the impugned legislation. (109) As already stated, the impugned Act levies a tax on buildings owned by the owner on a particular day during the existence of the building. That tax is not payable more than once under the Act in respect of the same building. The quantum of tax, as already observed, is dependent upon the number of ....
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....asis of the annual rental value. The very fact that a separate Act, as the impugned Act, was enacted to levy tax for state purposes, in my opinion, shows that the intention of the legislature really was to take a part of the wealth of the Urban property owners in the State. Therefore, it is a colorable piece of legislation. The name given to the tax and the apparent cloak or veil put on the statute cannot deceive the Court. The real pith and substance of the Act is a 'capital levy', and therefore, the impugned Act, in my judgment, is unconstitutional and hence void. (112) Re. Articles 14 and 19: The learned Advocate General has strenuously urged that the Statement of Objects and Reasons should not be looked into, in construing the legislative intention for the enactment of the impugned Act, that the yard-stick of floorage area selected by the legislature elected by the citizens residing in the State, is a matter of legislative policy and that the Court would not be justified in striking down the Act on the ground that a better basis to levy the charge, could have been devised. In other words, though the learned Advocate-General, did not state so, his argument amounts to ....
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....tructure of the Government which had been getting worse almost since the founding of the Republic. The flaw derived from the powers of legislature to fix the boundaries of Districts from which their own members are elected. As population shifted from country to City, these boundaries tended to remain unchanged or very little changed. The result was that the few voters in country districts could send too many representatives to State Houses and the many Voters in the city districts too few. This gave country legislators disproportionate power, which they used to resist changes in apportionment of voting districts and thus to preserve their own dominance. (115) The Supreme Court of U.S.A. held that mal-apportionment giving rise to inequality of voting power violated the Fourteenth Amendment to the Constitution. Though several States, conceding their delinquency in apportionment, accepted the verdict of the Supreme Court and started to comply, the rest refused. There were cries and complaints of the Supreme Court having usurped a legislative function. A Bill was introduced by one Mr. William Tuck of Virginia in the Congress, to deny the Federal Courts any jurisdiction over legislat....
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....lar periods. They differ from the forced contributions, loans and benevolence of arbitrary and tyrannical periods. In that they are levied by authority of law, and by some rule of proportion which is intended to insure uniformity of contribution and a just apportionment of the burdens of government. In an exercise of the power to tax, the purpose always is that a common burden shall be sustained by common contributions, regulated by some fixed general rule, and apportioned by law according to some uniform ratio of equality. So the power is not arbitrary, but rest upon fixed principles of justice, which have for their object the protection of the taxpayer against exceptional and invidious exactions, and it is to have effect through established rules operating impartiality." Pages 72-73. Para 7. "Taxation defined.--Taxation is a mode of raising revenue for public purposes. The term is ordinarily used to express the exercise of the sovereign power to raise a revenue for the expenses of government. It is the act of laying a tax, i.e., the process or means by which the taxing power is exercised. "Scientifically considered, " says Mr. David A. Wells, "taxation is the taking o....
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.... i.e. as they exist at the date of the valuation. Abdullabhai Lalji v. Executive Committee, Aden ILR 42 Bom 692 at p. 706: at p. 202). That is also the principle stated as early as 1886 by the High Court of Madras in Secy. of State v. Madras Municipality ILR 10 Mad 38 at p. 42, by a Bench which consisted of Mr. Justice Muttusami Ayyar, one of the greatest Jurists our country has produced. The value or the reasonable rent which a building would fetch depends upon a number of factors viz., the nature of the property, its local situation the demand for the building etc. The Queen v. London and North Western Rly. Co. (1874) 9 QB 134: (122) The impugned Act levies a charge to tax solely and wholly on the basis of the size measured by the floorage area. Whether the building is situate in the costliest locality in the Metropolitan city of Bangalore or a city like Gulbarga, the tax is the same. (123) The Mysore Rent Control Act, 1961, has exempted the buildings constructed after 1st August 1957, from its fair rent provisions; while buildings constructed before, are subject to the fair rent fixed under the various Rent Control Act. Fair Rent Acts for urban house property were first br....