TaxTMI 
TaxTMI 
TaxTMI 
1969 (4) TMI 28
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....he land at the rate of 0.4 per cent. on such market value. Section 3 of the Act of 1963 (which will be referred to as the old Act) provided that there shall be levied and collected for every Fasli year commencing from the date of the commencement of the Act, a tax on urban land from every owner of urban land at the rate of 0.4 per cent. of the average market value of the urban land in a sub-zone as determined under sub-section (2) of section 6. Section 7 provided for the determination of the highest and lowest market values in a zone. For determining the average market value, the Assistant Commissioner shall have regard to any matters specified in clauses (a) to (e) of sub-section (2) of section 6, namely: (a) the locality in which the urban land is situated; (b) the predominant use to which the urban land is put, that is to say, industrial, commercial or residential; (c) accessibility or proximity to market, dispensary, hospital, railway station, educational institution, or Government offices; (d) availability of civic amenities like water supply, drainage and lighting; and (e) such other matters as may be prescribed. The constitutional validity of Act 34 of 1963 was c....
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....al, as the case may be, such urban land would have fetched or fetch, if sold in the open market on the date of the commencement of this Act." Section 7 provides for the submission of returns by the owner of urban land and reads: "Every owner of urban land liable to pay urban land tax under this Act shall, within a period of one month from the date of the publication of the Madras Urban Land Tax Ordinance, 1966 (Madras Ordinance III of 1966), in the Fort St. George Gazette, furnish to the Assistant Commissioner having jurisdiction a return in respect of each urban land containing the following particulars, namely: (a) name of the owner of the urban land, (b) the extent of the urban land, (c) the name of the division or ward and of the street, survey number and sub-division number of the urban land and other particulars of such urban land, and (d) the amount which in the opinion of the owner is the market value of the urban land." Section 10 deals with the procedure for the determination of the market value by the Assistant Commissioner and states: " (1) Where a return is furnished under section 7 the Assistant Commissioner shall examine the return and make such enqui....
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.... pursuance of the notice under sub-section (1), the Assistant Commissioner shall, on the basis of the information obtained by him under section 9, by order in writing, determine the market value of the urban land and the amount of the urban land tax payable in respect of such urban land." Section 20 provides for an appeal to the Tribunal from the orders of the Assistant Commissioner: " (1) (a) Any assessee objecting to any order passed by the Assistant Commissioner under section 10 or 11 may appeal to the Tribunal within thirty days from the date of the receipt of the copy of the order. (b) Any person denying his liability to be assessed under this Act may appeal to the Tribunal within thirty days from the date of the receipt of the notice of demand relating to the assessment: Provided that no appeal shall lie under clause (a) or clause (b) of this sub-section unless the urban land tax has been paid before the appeal is filed. (2) The Commissioner may, if he objects to any order passed by the Assistant Commissioner under section 10 or 11, direct the Urban Land Tax Officer concerned to appeal to the Tribunal against such order, and such appeal may be filed within sixty day....
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....m on oath; (b) requiring the discovery and production of documents; (c) receiving evidence on affidavit; (d) issuing commissions for the examination of witnesses; and any proceeding before the Tribunal, the Board of Revenue, the Commissioner, the Assistant Commissioner, the Urban Land Tax Officer or any other officer empowered under this Act shall be deemed to be a judicial proceeding within the meaning of sections 193 and 228, and for the purposes of section 196 of the Indian Penal Code (Central Act XLV of 1860). (2) In any case in which an order of assessment is passed ex parte under this Act, the provisions of the Code of Civil Procedure, 1908 (Central Act V of 1908), shall apply in relation to such order as it applies in relation to a decree passed ex parte by a court." The validity of the new Act was challenged in a group of writ petitions before the Madras High Court on various constitutional grounds. By a common judgment dated the 10th April, 1968, a Full Bench of five Judges overruled all the contentions of the petitioners with regard to the legislative competence of the Madras Legislature to enact the new Act. However, the Full Bench by a majority of 4 to 1 str....
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.... the assumption that entries 86, 88 of List I and entry 48 of List II form a special group embodying any particular scheme. The directive principle embodied in article 39(c) applies both to Parliament and to the State Legislature and it is difficult to conceive how entries 86 to 88 of List I would exclude any power of the State Legislature to implement the same principle. The legislative entries must be given a large and liberal interpretation, the reason being that the allocation of the subjects to the lists is not by way of scientific or logical definition but by way of a mere simplex enumeratio of broad categories. We see no reason, therefore, for holding that entries 86 and 87 or List I preclude the State Legislature from taxing capital value of lands and buildings under entry 49 of List II. In our opinion there is no conflict between entry 86 of List I and entry 49 of List II. The basis of taxation under the two entries is quite distinct. As regards entry 86 of List I the basis of the taxation is the capital value of the asset. It is not a tax directly on the capital value of assets of individuals and companies on the valuation date. The tax is not imposed on the components of....
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....s and lands situated in a specified area at such rate not exceeding twenty per cent. of the annual value of such buildings and lands, as the Provincial Government may by notification in the Official Gazette direct in respect of each such rating area was not a tax on income, but was a tax on lands and buildings within the meaning of Item No. 42 of List II of the Seventh Schedule of the Government of India Act, 1935. In that case it was contended that under the provisions of the Punjab Act the basis of the tax was the annual value of the buildings and since the same basis was used in the Income-tax Act for determining the income from property and generally speaking the annual value is the fairest standard for measuring income and, in many cases, is indistinguishable from it, the tax levied by the impugned Act was in substance a tax on income. The court pointed out that the annual value is not necessarily actual income, but is only a standard by which income may be measured and merely because the Income-tax Act had adopted the annual value as the standard for determining the income, it did not follow that, if the same standard is employed as a measure for any other tax, that latter ta....
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....n would result in a large number of statutes being declared invalid because the Legislature enacting them may appear to have legislated in a forbidden sphere. Hence the rule which has been evolved by the Judicial Committee whereby the impugned statute is examined to ascertain its 'pith and substance', or its 'true nature and character', for the purpose of determining whether it is legislation with respect to matters in this list or in that: Citizens Insurance Company of Canada v. Parsons; Russel v. Queen; Union Colliery Co. of British Columbia v. Bryden; Att.- Gen. for Canada v. Att.-Gen. for British Columbia; Board of Trustees of Lethbridge Irrigation District v. Independent Order of Foresters. In my opinion this rule of interpretation is equally applicable to the Indian Constitution Act." For the reasons already expressed we hold that in pith and substance the new Act in imposing a tax on urban land at a percentage of the market value is entirely within the ambit of entry 49 of List II and within the competence of the State Legislature and does not in any way trench upon the field of legislation of entry 86 of List I. It was then said that as entry 49 of List II provides for ....
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.... the language used in the entry. This view is also borne out by authorities. In Raja Jagannath Baksh Singh v. State of U.P. the question at issue was whether the tax imposed by the U.P. Government on land holdings under the U.P. Large Land Holdings Tax Act, 1957 (U.P. Act 31 of 1957) was constitutionally valid. It was held that the legislation fell under entry 49 of List II and the tax on land would include agricultural land also. Similarly in H. R. S. Murthy v. Collector of Chittoor it was held that the land cess imposed under sections 78 and 79 of the Madras District Boards Act (Mad. Act No. XIV of 1920) and Mines and Minerals (Regulation and Development) Act (Act 67 of 1957), was a tax on land falling under entry 49 of the State List. We are of opinion that the argument of Mr. V.K.T. Chari on this aspect of the case must be rejected. We proceed to consider the argument that no machinery is provided for determining the market value and the provisions of the new Act, therefore, violate article 14 of the Constitution. The argument was stressed by Mr. V. K. T. Chari that the guidance given under the 1963 Act has been dispensed with and the Assistant Commissioner is not bound to ta....
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....r specifying amongst other things the amount, which in the opinion of the Assistant Commissioner, is the correct market value and directing the owner to attend in person at his office on a date specified in the notice or to produce any evidence on which the owner may rely. After hearing such evidence as the owner may produce and considering such other evidence as may be required, the Assistant Commissioner may fix the market value. The proceeding before the Assistant Commissioner is judicial in character and his opinion regarding the market value is reached objectively on all the materials produced before him. Section 20 provides for an appeal by the assessee objecting to the determination of the market value made by the Assistant Commissioner to a Tribunal within thirty days from the date of the receipt of the copy of the order. The Act requires that the Tribunal shall consist of one person only who shall be a judicial officer not below the rank of a subordinate judge. By section 30, the Board of Revenue is empowered either on its own motion or on application made by the assessee in this behalf, to call for and examine the records of any proceedings under the Act (not being a proc....
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....ed rates of yield. In this connection it was said that the new Act by imposing a tax on the capital value at a certain rate was not correlated to the income or rateable value and, therefore, violates the requirement of reasonableness. We are unable to accept the proposition put forward by Mr. Chari. It is not possible to put the rest of reasonableness into the strait jacket of a narrow formula. The objects to be taxed, the quantum of tax to be levied, the conditions subject to which it is levied and the social and economic policies which a tax is designed to subserve are all matters of political character and these matters have been entrusted to the Legislature and not to the courts. In applying the test of reasonableness it is also essential to notice that the power of taxation is genarally regarded as an essential attribute of sovereignty and constitutional provisions relating to the power of taxation are regarded not as grant of power but as limitation upon the power which would otherwise be practically without limit. It was observed by this court in Rai Ramakrishna v. State of Bihar: "It is, of course, true that the power of taxing the people and their property is an essentia....
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.... tax on the capital value of urban lands and the other on the annual value of lands and buildings exhaust an unreasonably high proportion of income. For instance, it is pointed out that in W. P. No. 2835 of 1967 the annual income on property was Rs. 6,000 and the proposed market value for the lands alone comes to Rs. 10,40,000. The urban land tax at 0.4 per cent of the market value is is Rs. 4,160 and the income-tax at the rate applicable to the petitioner was Rs. 1,234. The total tax burden in the aggregate under the three heads was Rs. 6,794, which exceeds the rental income. In W. P. No. 3686 of 1967 the municipal annual value was Rs. 4,095, the property tax was Rs. 1,098 and the urban land tax at 0.4 per cent. was Rs. 1,523. The proportion of the two taxes together to yearly or annual municipal value worked out to Rs. 62.5 per cent. It was, therefore, said that the taxes put together would practically exhaust the total income and the charging section in the new Act was unreasonable. The answer to the contention is that the charge is on the market value of the urban land and not on the annual letting value on which the municipal property tax is based. The basis of the two taxes b....
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.... provides that section 48 shall come into force on the date of the publication of the Act in the Fort St. George Gazette. Section 6 enacts that the market values of the urban lands shall be estimated to be the price which in the opinion of the Assistant Commissioner or the Tribunal such urban land would have fetched or fetch if sold in the open market on the date of the commencement of the Act, that is, from 1st July, 1963. The urban land tax is, therefore, payable from 1st July, 1963. It is contended on behalf of the petitioners that the retrospective operation of the law from 1st July, 1963, would make it unreasonable. We are unable to accept the argument of the petitioners as correct. It is not right to say as a general proposition that the imposition of tax with retrospective effect per se renders the law unconstitutional. In applying the test of reasonableness to a taxing statute it is of course a relevant consideration that the tax is being enforced with retrospective effect but that is not conclusive in itself. Taking into account the legislative history of the present Act we are of opinion that there is no unreasonableness in respect of the retrospective operation of the ne....
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....f the tax proposed to be retrospectively recovered that it introduced a serious infirmity in the legislative competence of the Bihar Legislature itself. The argument was rejected by this court and it was held, having regard to the relevant facts of the case, the restrictions imposed by the said retrospective operation were reasonable in the public interest under article 19(5) and (6) and also reasonable under article 304(b) of the Constitution. In our opinion the ratio of this decision applies to the present case where the material facts are of a similar character. In this context a reference may be made to a recent review of retroactive legislation in the United States of America: " It is necessary that the legislature should be able to cure inadvertent defects in statutes or their administration by making what has been aptly called 'small repairs'. Moreover, the individual who claims that a vested right has arisen from the defect is seeking a windfall since had the legislature's or adminstrator's action had the effect it was intended to and could have had, no such right would have arisen. Thus, the interest in the retroactive curing of such a defect in the administration of g....