# [1965] 1 S.C.R. 581

- **Citation:** [1965] 1 S.C.R. 581
- **Court:** Supreme Court of India
- **Decided:** 1964-10-05
- **Bench:** P. B. Gajendragadkar, K. N. Wanchoo, M. Hidayatullah, Raghubar Dayal, J. R. MuDHOLKAR
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/1965-1-s-c-r-581-3352
- **Pages:** 11

## Headnote

Kerala Profession Tax (Validation and Re-assessment) Act, 1958 (Ac•
No. XIV of 1958), s. 2.-Whether violative of Art. 276 of the Constitution.
Travancore District Municipalities Act 23 of 1116 M.E.-Section 325Power to make and amend rules under the section whether includes power
to give retrospective operation to rules.
The Quilon Municipality levied, in the pre-Constitution period, a profession tax under powers conferred by the Travancore District Municipalities Act (Act 23 of 1116 M.E., corresponding to 1940 A.D.). The tax was
leviable on a half-yearly basis on companies and persons transacting bHsiness in the municipal area for not less than a certain period in a year. The
rates were laid down in rule 16 of the Second Schedule to the aforesaid Act,
and were on a graduated scale varying with the income of the asscssee.
Under Rule 18(2), as it originally stood the income of an assessee tral.sacting business inside as well as outside the area of the Municipality was to be
deemed to be a pres~ribed percentage of the turnover of the business inside
the Municipality.
A proviso was however added to Rule 18(2) in 1947
which laid down that in the case of the assessees who were assessed to
income-tax under the Travancore Income-tax Act, the income for the
purpose of levying the profession tax would be computed in the following
manner i.e. the profits earned by the assessee in the whole State as disclosed
by the assessment under the said Act would be divided in the proportion
of the turnover of the business inside and outside the Municipality and the
portion thus found attributable to the business in the tvlunicipal area v.·ould
be subjected to profession tax.
In 1950, after the promulgation of the
Constitution, s. 3 of the Finance Act (Act 25 of 1950)
repealed
the
Travancore Income-tax Act and re-placed it by the Indian Income-tax Act,
1922. Thereafter Municipalities in l'ravancore began to construe the references to the Travancore Income-tax Act in rule 18 as references to the
Income-tax Act, but this procedure was held to be illegal by the TravancoreCochin High Court by a judgment delivered in 1955.
The appropriate
authority, thereupon by Notification dated 15th February 1956, amended
rule 18 to provide, inter alia, that, with effect from 1-4-50 references to the
Travancore Income-tax Act in that rule would be read as references to the
Indian Income~tax Act, and income under the proviso to sub~rule (2) V.'oti!U
be computed with reference to the income in the whole of the lndi;1n
Union instead of the income in the whole
of Travancore
State.
The
amended proviso was also struck down by the High Court, on the ground
that it was retrospective in operation.
Thereupon the Kernla Legislature
passed the Kerala Profession Tax (Validation and Re-asse-;smcnt) Act,
1958 (Act 14 of 1958) which in s. 2 provided that the levv of the tox
under the aforesaid amendment would remain valid and \\'Ould not he open
to challenge on the ground that it had retrospective operation.
The respondents who were taxed by the Quilon Municipality under the amended
proviso challenged the Validating Act before the Kerala High Court contending that it was a post-Constitution law which in imposing a profession
582
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[1965] I S.C.R.
tax of more than Rs. 250 per year on certain cl•S5~ of asscs.ccs cootravened the terms of An. 276(2) of the Constitution. This contention wu
upbeld by the High Court.
Aggrieved thereby, the Quilon Municipality
appealed to the Supreme Court.
It was contended on behalf of the appellants that what the impugned
Act did was merely to adapt the machinery for the assessment and levy of
the tax tO a situation arising out of the repeal of the Travancorc Income-tax
Act and its replacement by the Indian Income-tax Act in 1950, and therefore
there was no contravention of An. 276(2). Nor \Vas the Article contravened by the retrospectivity given to the provision in question.
HELO: (1) The proviso lo rule 18(21 introduced in 1947 was no

## Text

,.
"'-
..
1.
~-
581
A COMMISSIONER, QUILON MUNICIPALITY, QUILON, AND
ANOTHER
B
c
D
E
F
G
H
v.
M/S. HARRISONS & CROSFIELD LTD.
October 5, 1964
(P. B. GAJENDRAGADKAR, C.J., K. N. WANCHOO,
M. HIDAYATULLAH, RAGHUBAR DAYAL AND
J. R. MuDHOLKAR JJ.)
Kerala Profession Tax (Validation and Re-assessment) Act, 1958 (Ac•
No. XIV of 1958), s. 2.-Whether violative of Art. 276 of the Constitution.
Travancore District Municipalities Act 23 of 1116 M.E.-Section 325Power to make and amend rules under the section whether includes power
to give retrospective operation to rules.
The Quilon Municipality levied, in the pre-Constitution period, a profession tax under powers conferred by the Travancore District Municipalities Act (Act 23 of 1116 M.E., corresponding to 1940 A.D.). The tax was
leviable on a half-yearly basis on companies and persons transacting bHsiness in the municipal area for not less than a certain period in a year. The
rates were laid down in rule 16 of the Second Schedule to the aforesaid Act,
and were on a graduated scale varying with the income of the asscssee.
Under Rule 18(2), as it originally stood the income of an assessee tral.sacting business inside as well as outside the area of the Municipality was to be
deemed to be a pres~ribed percentage of the turnover of the business inside
the Municipality.
A proviso was however added to Rule 18(2) in 1947
which laid down that in the case of the assessees who were assessed to
income-tax under the Travancore Income-tax Act, the income for the
purpose of levying the profession tax would be computed in the following
manner i.e. the profits earned by the assessee in the whole State as disclosed
by the assessment under the said Act would be divided in the proportion
of the turnover of the business inside and outside the Municipality and the
portion thus found attributable to the business in the tvlunicipal area v.·ould
be subjected to profession tax.
In 1950, after the promulgation of the
Constitution, s. 3 of the Finance Act (Act 25 of 1950)
repealed
the
Travancore Income-tax Act and re-placed it by the Indian Income-tax Act,
1922. Thereafter Municipalities in l'ravancore began to construe the references to the Travancore Income-tax Act in rule 18 as references to the
Income-tax Act, but this procedure was held to be illegal by the TravancoreCochin High Court by a judgment delivered in 1955.
The appropriate
authority, thereupon by Notification dated 15th February 1956, amended
rule 18 to provide, inter alia, that, with effect from 1-4-50 references to the
Travancore Income-tax Act in that rule would be read as references to the
Indian Income~tax Act, and income under the proviso to sub~rule (2) V.'oti!U
be computed with reference to the income in the whole of the lndi;1n
Union instead of the income in the whole
of Travancore
State.
The
amended proviso was also struck down by the High Court, on the ground
that it was retrospective in operation.
Thereupon the Kernla Legislature
passed the Kerala Profession Tax (Validation and Re-asse-;smcnt) Act,
1958 (Act 14 of 1958) which in s. 2 provided that the levv of the tox
under the aforesaid amendment would remain valid and \\'Ould not he open
to challenge on the ground that it had retrospective operation.
The respondents who were taxed by the Quilon Municipality under the amended
proviso challenged the Validating Act before the Kerala High Court contending that it was a post-Constitution law which in imposing a profession
582
SUPREME
COURT
REPORTS
[1965] I S.C.R.
tax of more than Rs. 250 per year on certain cl•S5~ of asscs.ccs cootravened the terms of An. 276(2) of the Constitution. This contention wu
upbeld by the High Court.
Aggrieved thereby, the Quilon Municipality
appealed to the Supreme Court.
It was contended on behalf of the appellants that what the impugned
Act did was merely to adapt the machinery for the assessment and levy of
the tax tO a situation arising out of the repeal of the Travancorc Income-tax
Act and its replacement by the Indian Income-tax Act in 1950, and therefore
there was no contravention of An. 276(2). Nor \Vas the Article contravened by the retrospectivity given to the provision in question.
HELO: (1) The proviso lo rule 18(21 introduced in 1947 was not a
mere machinery provision.
Under rule 18(2) as it originally stood the
iOcome of :di asscssecs transac1ing busincs.;; bo1h inside and outside the
Municipality \\'as, for the purpose of levying profession tax, computed on
the basis of a perccniagc of the turn~vcr inside the n1unicipality.
The
proviso created a different procedure in the case of those who were assessed
to incom·~-tax by linking up their income for the purpose of the profcsaion
tax with their profits in the whole State as assessed under the 1-ravancorc
Income-t::ix . .\ct. Thus a new cl2ss of assessccs c:tme into being y.rhich had
not exist~d before th_e provi'iO \\';1s en2cted. l'he method of computing
income la.id do\''" in the pr.)viso v.·as also likely to rcsull in a different
incidence of ta\ liability in the case of t!lose c,1vered hy it.
Considering
all this, t!1e argument that the proviso did not affect either the basis or the
incidence or the tax. could not he accepted. [588 F).
(ii) The amendment of 1956 linked up the determination of the profit.
liable to profession tax v.·ith the Indian Income-tax Act instead of the
Travancorc Incom~tax Acf.
Also, under the amended proviso to rule
18(2), the profits in the \\·hole of the Indian Union ::ind not merelv in
the State of Tr;ivancurc, v.·oL.dj he the h;1sis of con1pu1ing income for' the
purpose of levying profes.'iicn t;1x. The provisions of the Indian and Travancore Income-tax Act~ were different and the territory of the Indian Union
v.·as much larger than ·lhal of ·rravancore, and :hcse differences were likely
to affect the
ta.~ li:i.bility of those covered by
the said amendment.
[590 E-F].
(iii) The argument that 1he Kerala Le~islature was competent to give
retrospectivity to a validating Jaw and that since the legisl<iture had validated
the amendment to the proviso ::is from Arri! 1950, 1hc amendment was
valid, could not be acceptc<l. The rrovi'!o had been given opcr;ition subsequent to tbe commencement of the Constitution and the provision!\ of
.Art. 276 v.·ould therefore stand in the way of the legish?ture which validated
11. [590 F-li].
Mst. ladc.o Bahuii v. Municipal Commiltee. Khandwa. [1961] 2 S.C.R.
636, distil'lguished.
Crv1L APPELLATE Jt:RIS!JtCT'ON: Civil Appeals Nos. 415 to
419 of 1964.
Appeals from the judgment and decree datea April 12, 1961,
of the Kcrala High Court in 0.P. Nos. 88 of 56, 240 of 1956E,
117 of 1957. 50 of 1958 and 156 of 1958.
C. K. Darh:wy. At1orney-Gcneral and V. A. Syeid MuhamA
B
c
D
F
G
mad. for the appellants (in all the appeals).
H
G. Ii. Pai. J. B. Dadachanji, 0. C. Mathur and Ravinder
Narain for th~ respondents (in all appeals).
A
B
c
D
E
F
COMMR. V. HARRISONS & CROSFIELD (Mudholkar I.)
583
The Judgment of the Court was delivered by
Mudbolkar J,
The only point which arises for decision before
u~ in this group of five appeals from a common judgment delivered
by the High Court of Kerala in six writ petitions, five of which
were preferred by the respondents and one by M/s. Brooke Bond
(India) Ltd., is whether s. 2 of the Kerala Profession Tax
(Validation and Re-assessment) Act, 1958
(Act No. XIV of
1958) is invalid on the ground that it violates the provisions of
Art. 276 of the Constitution.
'
The relevant part of Art. 276 of the Constitution runs thus :
"276(1) Notwithstanding llllything in Article 246
no law of the Legislature of a State relating to taxes
for the benefit of the State or of a municipality district
board, local board or other local authority therein in
respect of professions, trades, callings, or employments
shall be invalid on the ground that it relates to a tax
on income.
1
Provided that if in the financial year immediately
preceding the collllllencement of this Constitution there
was in force in the case of any State or any such municipality, board or authority a tax on professions, trades,
callings or employments
the rate, or the maximum
rate, of which exceeded two hundred and fifty rupees
per annum, such tax may continue to be levied until
provision to the contrary is made by Parliament by law,
and any law so made by Parliament may be made
either generally or in relation to any specified States,
municipalities, boards or authorities."
It is common ground that before the Constitution came into force
the Quilon Municipality had, in exercise of the power conferred
by s. 91 of the Travancore District Municipalities Act, 23 of
1116 M.E. corresponding to the year 1940 (hereafter referred
to as the Act) imposed a profession tax upon every company
G and every person who, among other things, transacts business
within the limits of the municipality for not less than a certain
period during a year.
Sub-section (1) of s. 91 further provides
that a company or person liable to pay the tax shall pay a halfyearly tax assessed in accordance with the rules mentioned in
H Schedule II.
The Schedule contains, amongst other things, rules,
and rules 16 and 18 are the only rules relevant for consideration
in these. appeals. .Rule 16 sets out slabs of half-yearly income
for the purpose of assessment of companies and persons to the
L!Sup./65-12
584
SUPREME
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REPORTS
(1965) I S.C.R.
tax.
In this rule the assessees are divided into 12 classes.
Jn
A
the first class come assessees whose half-yearly income exceeds
Rs. 21,000 who have to pay a tax of Rs. 275 per half-year.
Next below it is cl. (2) which. provides that those whose halfyearly income exceeds Rs.
18,000 but does
not exceed
Rs. 21,000 shall pay a tax of Rs. 225 every half-year.
The
liability of assessees whose incomes are below Rs. 18,000 goes
B
on diminishing in each lower slab.
Then there is a proviso to
sub-r. (1 ) which runs thus : ·
"Provided that a company whose half -yearly income
is more than twenty-one thousand rupees shall, notwithstanding anything contained in this or any other rule,
c
pay in addition
to the maximum half-yearly tax of
rupees two hundred and seventy-five and additional half.
yearly tax on such excess calculated at the rate of 0ne
rupee per one hundred rupees or part thereof."
With respect to assessees falling within the first slab the proviso
D
thus imposes an additional tax over and above Rs. 275 every
half-year.
We are not concerned with the remaining sub-rules
of r. 16.
Rule 18 contains three sub-rules but we are concerned
only with sub-rr. (I) and (2) and they are as follows :
"(1) Where a company or person transacts business in any half-year exclusively in the area of a single
municipality, the income of such company or person
from the transaction of such business
shall,
for the
purpose of levying profession-tax under this Act during
the half-year, be deemed to be-
( a) where income-tax is assessed on such company
or person under the Travancore Income-tax Act for the
year, comprising the half-year, one-half of the amount
at which the . profits and gains of such business are
computed under Section 8 .of the Travancore Incometax Act for the purpose of assessing the income-tax;
and
(b) where the amount of the said profits and
gains is not ascertainable or where such company or
person is not assessed to income-tax, such percentage
as our Government may prescribe, of the turn-over of
the business transacted in the area of the municipality
during the half-year or where this is also unascertainable during the corresponding half-year of the previous
year.
E
F
G
H
A
B
COMMR. v. HARRISONS & CROSFIELD (Mudholkar J.)
58 5
( 2) Where a company or person transacts business
partly in the area of a municipality and partly outside
such area, the income of such company or person from
the transaction of business in the area of the municipac
lity shall, for the purpose of levying profession-tax
under this Act, be deemed to be the percentage prescribed under clause (b) of sub-rule ( 1) of the turn-over
of the business transacted in such area during the
half-year or the corresponding half-year of the previous year, as the case may be."
By a notification of August 28, 194 7 the appropriate authority
C empowered by s. 325 of the Act to frame rules added the following proviso to sub-r. (2) :
D
E
"Provided that in the case of a company or person
assessable to income tax, the total profits earned by the
company or person as disclosed
by the Income-tax
assessment for the whole State for the year comprising
the half-year for which the profession tax is to be levied,
shall be divided in the proportion of the turn-over of
the business of the company or person in the Municipality and outside, for purposes of assessment to profession tax."
By the operation of s. 3 of the Indian Finance Act, 25 of
195'0 the Travancore Income-tax Act stood repealed and the
municipal authorities construed the reference to the Travancore
Income-tax Act in sub-I'. ( 1) of r. 18 as reference to the Indian
Income-tax Act.
They also construed the reference to the TraF vancore Income-tax Act in the proviso to sub-r. (2) in the same
way.
In Harrisons and Crosfield Ltd. v. Commissioner of Qui/on
Municipality(') the Travancore-Cochin High Court held that the
proviso had only provided for the adoption of certain figures
representing the total profits as disclosed by the Income-tax
assessment for a particular year in which the emphasis was upon
G the assessable area, which,
after the coming into force ol the
Indian Income-tax Act in the State of Travancore became impossible of ascertainment and that, therefore, the entire proviso was
tendered obsolete.
Thereafter, the appropriate authortiy amended sub-rr. (1) and (2) of r. 18 by notification dated February
15, 1956 as follows:
H
" ( 1) In clause (a) of sub-rule ( 1) of rule 18-
(I) I.L.R. 1955 T.C .. 1003.
586
SUPREME
COURT
REPORTS
(1965) I S.C.R
(a) for the words 'Travancore Income Tax Act'
wherever they occur, the words and figures
'Indian
Income Tax Act, 1922' shall be substituted.
(b) for the word and figure 'Section 8' th~ word
and figure 'Section 1 O' shall be substituted.
(2) In the proviso to sub-rule (2) of Rule 18 for
the words 'whole State' the words 'whole of the Indian
Union' shall be substituted.
These amendments shall
be deemed to have come into effect from !st April
1950."
A
B
The validity of tiic 2mcnJmcnts was chailcnged bdor~ the High C
Court in Highland ?rod:tcc Co. Ltd. v. The Commissivner,
Alieppey Municipal Co1111cil(')
on the ground that the power
conferred by s. 325 of the Act to frame rules could not be exercised so as to give retrospective operation to any rule.
The
High· Court accepted the contention and thereupon Act 14 of
1958, the validity of s. 2 of which is challenged before us, was
D
enacted by the Kerala Legislature.
That provision reads thu5 :
"Validation of the levy or collection of profession
tax under the Travancore District Municipalitie; Act,
1116 : Notwithstanding any judgment, decree or order
of any court, the amendments to the Taxation
and
Finance Rules contained in Schedule II to the Travancore District Municipalities Act, 1116 (XXIII of
1116) made by Notification No. LS. 11-13975/53/
DD dated 15th February, 1956 of the Government of
the former State of Travancore-Cochin, shall be deemed
to have come into force with effect from the first day
of April, 1950 and the validity of the levy or coUection of professioa tax made under the said Act and
Rules shall not be caUed in question on the ground that
the amendments made by the
notification aforesaid
cannot have any retrospective operation, and any profession tax so levied but not collected may be coUected
as if the said amendment had been validly made with
effect from the first day of April, 1950."
E
F
G
It will be clear from the language of this provision that the legislature purported to validate the levy and collection of the tax
under the amended proviso by validating the amendment of the
H
proviso.
The High Court struck down this section and now the
(I) O.P. Nos. 196 lo 202 or 1955 decided in Octohcr, t956.
COMMR. v. HARRISONS & CROSFIELD (Mudholkar J.)
587
A Qmlon Municipality and its Commissioner have come up before
us in appeal.
B
The learned Attorney-General who appears for the appellants
contends that what the Act does is merely to adapt the machinery
for the assessment and levy of the tax to a situation arising out
of the repeal of the Travancore Income-Tax Act by s. 3 of the
Indian Finance Act, 1950 and replacing that Act by the Indian
Income-tax Act.
It, therefore, according to
him,
does not
infringe the provisions of Art. 276 of the Constitution.
He also
contends that the retrospectivity given to the provision does not
infringe . the aforesaid
constitutional provision.
In support of
c the contention he has relied upon the decision in Mst.
Jadao
Bahuji v. Municipal Committee Khandwa(').
Before dealing with the effect of the amendment made to the
proviso added in the year 194 7 we must first consider whether the
proviso merely purported to create a machinery for implementing the tax.
We will assume that under s. 3 25 of the Act it
D
was competent to the State Government of Travancore to enact
the proviso which it did in the year 1947. If we look at r. 18(2)
as it stands it is clear that it did provide the means of assessing
profession tax upon a company or person transacting business
partly in the area of the municipality and partly outside such
E area.
Under sub-r. (2) what the assessing authority had to do
was to ascertain what was the turn-over of the business transacted
by the assessee within the municipal area and calculate the profits
which the assessee will be deemed to have earned on the basis
of the percentage prescribed by the Government under cl. (b) of
sub-r. (1). Thus, the basis for taxation
was the amount of
F
profits deduced in this manner. Now, if we look at the proviso
as it stood when it was first enacted in February, 1947 it would
be clear that it contemplates the division of the profits earned
by the assessee in the whole State between the turn-over of the
business within the municipal area and the turn-over of the business outside the area.
The total profits would, under the proviso,
G be the amount disclosed by the income-tax assessment for the
whole State and their division was to be in the proportion of the
turn-over of the business within the municipality and outside it.
Obviously, therefore, what the proviso did was to introduce a
new basis for assessment of the taxable income.
We say so
because the assessment of profits in this way links up their comH putation with the income assessed for levying income-tax. Under
the Travancore Income-tax Act only a certain set of deductions
(t) [1961] 2 S.C.R. 636.
588
SUPREME
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REPORTS
(1965] I S.C.R.
were permissible. Now, if an assessee has in fact expended
money for certain purposes but such expenses are not allowable
deductions under the Travancore Income-tax Act, it would follow
that the profits calculated by reference to the income-tax assessment may work out higher than those actually earned by the
assessee.
We do not know what was the percentage prescribed
by the Government of Travancore under cl. (b) of sub-r. (1) of
r. 18.
But it is possible that the assessable profits determined
with reference to that provision may have· been less than those
determined under the proviso. In any case it cannot be said
with certainty that the profits arrived at would have been identical in the two cases.
From the fact that the State enacted the
proviso it would not be unreasonable to assume that the State
thereby expected that the municipality would earn more income
than under a computation made under sub-r. (2) or r. 18 read
with cl. (b) of sub-r. ( 1) of r. 18.
Another thing which the proviso of 194 7 did was to take out
of the category of assessees dealt with by sub-r. (2) of r. 18
such companies or persons as were assessable to
income-tax.
Sub-rule (2) as it stood, treated companies and persons transacting business partly in the area of the municipality and partly
outside such area on a uniform footing irrespective of the question
whether a company or a person was assessed to income-tax or
not.
For the first time the proviso put in a separate class those
who were assessed to income-tax.
The proviso thus affected the
basis of assessment of tax and did not merely deal
with
the
procedure for assessing the tax.
In the circumstances we cannot accept the contention of the
learned Attorney-General that the proviso did not affect either
the basis or the incidence of the tax but merely provided a
machinery for irr.plementing the tax.
Therefore, while dealing with the amendment made in the
year 1956 we have to bear in mind that it was made in a provision concerning the basis of taxation.
The question then would
be whether the amended proviso was likely to enhance an
asscssce's liability.
No doubt, the object was to adapt the earlier
proviso to the situation created by the repeal of the Travancore
Income-tax Act.
But whatever was its object. we have to ascertain its effect on an asscssce's liability to pay the profession tax.
The proviso as it otjginally stood had linked up the dete··
mination of the profits liable to tax under the rules with the
Travancore Income-tax Act.
The amendment of sub-r. ( 1) of
A
c
D
E
F
G
H
COMMll. v. HARRISONS & CROSFIBLD (Mudholkar J.)
58~
A r. 18 bas the effect of linking it up with the Indian Income-tax.
Act By the amendment of the proviso ·the words "the whole of
Indian Union" are now to be read therein for the words "the
whole Staie". Mr. Pai for the
respondent contended that in
consequence of the amendment the total profits earned by a company or person as disclosed by the income-tax statement for the
whole of India will now have to be divided in the same proportion as the tum-over of the business of the company or person
within the municipality bore to the turn-over outside the municipality, for the purpose of assessment of the tax.
The result of
this, according to him, may sometimes be that a much larger
C amount of profits will have to be taken into account for assessing
the tax than under th.e unamended proviso.
He says that the
amount of assessable profits would depend upon the permissible
deductions under the Indian Income-tax Act and that if they are
fewer than before the result would be that assessable profits determined under the Indian Income-tax Act would be higher than
D those under the Travancore Income-tax Act.
As no detailed
comparison of the provisions of the Travancore Income-tax Act
as in force at the date of the amendment with those of the Indian.
Income-tax Act was made during the argument, we are not in
a position to say whether in fact the assessable profits under the
Indian Income-tax Act would have been larger than those under
E the Travancore Act at that time.
We cannot, however, deny
the possibility of the permissible deductions under the
Indian
Income-tax
Act being fewer than those under the Travancore
Act as it stood at the date of its repeal.
Again,
since
the
amendment introduces a different statute with reference to which
assessable profits
are to be ascertained it is possible that the
•-
amended proviso may enhance the tax liability not only of
assessees fa'ling within the first slab but also of assessees falling
in the lower slabs.
Mr. Pai has sought to demonstrate by reference to actual
figures that in respect of certain periods the present assessee's
(;
liability to pay the tax as ascertained under the amended proviso
would be higher than what it would have been under the unamended proviso.
These figures are to be found in three statements filed· in the High Court by the respondents and marked as
Exs. 4, 13 and 23.
The statements are identical and we would
H
only refer to the first of them.
In column 1 of Ex. 4 is mentioned the year of assessment;
in the second column the turnover within the Quilon Municipality
is set out; in the third column the turn-over relating to profits
590
SUPREMB
COURT
REPORTS
(1965] I S.C.R.
asses.~ab!e to Travancore Income-tax Act is set out; in the fourth
A
~olumn the turnover in India is set out; in the fifth colwnn income assessable under the Trayancore Income-tax Act,
had it
been in force, is set out; in the sixth column income assessed
under the fndian Income-tax Act is set out.
From these figures
income computed as per proviso to r. 18 ( 2) before its amendment has been set out. If 'X' is the figure in col. 5; 'Y' is the
figure in col. 3 and 'Z' the figure in col. 2, the amount of income
before the amendment of the proviso would then be : 'Y x z. We
might call it Tl:( I)' [i.e. 'taxable income (I)'].
In the last
column of the statement the taxable income computed as per
B
the proviso after its amendment is set out.
This is arrived at by
dividing the income assessed under the Indian Income-tax Act
which we will call 'A' by the turn-over in India which we will
call 'B' and multiplying it by the turnover within the Quilon
Municipality i.e. 'Z'.
The taxable income thus arrive:! at i.e.
A xi.' migh• he called 'TI (2 )'.
It would appe~r by the comparison of the figures in col. 7 with those in col. S that in respect
of the periods ending on June 30, 1949; June 30, I 950; June
30, 195 l; June 30, 1954
and June 30, I '155 Tl (2) is lower
than Tl ( l).
But in respect of periods ending on June 30, 1952;
June 30, 1953 and June 30, 1956 TI(2) is higher than Tl(!).
Since the Attorney-General does not accept the correctness of the
figures in columns 2 to S we will regard them as merely hypothetical.
But even on the basis of these hypothetical figures it
is apparent that by applying the amended proviso the quantum
of liability to pay tax on the same turn-over with respect to the
same period would, in certain cases, be higher than what it would
have been by applying the unamended proviso.
The burden of
tax is thus liable to be increased in certain circumstances.
We have already pointed out that the amendment of 1956
was to operate as from April, 1950, that is, from a point of
time coinciding with the repeal of the Travancore Income-tax Act.
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D
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F
But then the proviso is given operation subsequent to the commencement of the Constitution, and the provisions of Art. 276
G
would stand in the way of the legislature which validated it.
The learned Attorney General relying upon the decision of
this Court in ·Mst. !adao Bah11ji's case(') contended that the
Kerala legislature was competent
to give retrospectivity to a
validating law and that since the legislature
has validated the
amendment to the proviso as from April, 1950, the amendment
H
is valid and took effect from that date.
The decision
upon
(1) [1961] 2 S.C.R. 636.
COMMR. v. HARRISONS & CROSFIELD (Mudholkar I.)
591
A which he has relied is distinguishable.
That was a case in which
the Validating Act had validated the imposition of a tax in excess
of Rs. 50 not for a period subsequent to March 31, 1939 but
for a period prior to that date. The contention of the assessee
was that as the Validating Act was passed subsequent to the
B
c
D
E
coming into force of s. 142-A of the Government of India Act,
1935 it was beyond the competence of the proviricial legislature.
This contention was rejected by this Court.
The case before us.
however, is different because· the Validating Act purported to
validate a profession tax to an extent above Rs. · 250 subsequent
to the commencement of the Constitution. Tht following observations of this Court in that case in fact militate against the
contention of the learned Attorney-General :
"There can be no doubt that if a law was passed
after the amendment and sought to impose taxes on
professions etc., for any period after March 31, 1939,
it had to conform to the limit prescribed by
s. 142-A(2). The prohibition in the second subsection operated to circumscribe the legislative power
by putting a date-line after which a tax in excess. of
Rs. 50 per annum per person for a period after the
date-line could not 'be collected unless it came within
the proviso." (p. 642).
For all these reasons the amendment
must,
therefore, be
regarded as violating the provisions of Art. 276 ana we hold
that the Kerala Legislature was incompetent to enact s. 2 of the
Validating Act.
We accordingly dismiss the appeals with costs.
There will be one set of hearing fees.
Appeals dismissed.