# AND OTHERS v. THE BUCKINGHAM & CARNATIC CO. LID, ETC

- **Citation:** [1970] 1 S.C.R. 268
- **Court:** Supreme Court of India
- **Decided:** 1969-04-11
- **Case number:** Civil Appeals Nos. 21 to 23, 46, 47, 125 and 274 of 1969
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/and-others-v-the-buckingham-carnatic-co-lid-etc-4750
- **Pages:** 22

## Headnote

268
~ANT
COMMISSIONER OF URBAN LAND TAX
A
AND OTHERS
v.
THE BUCKINGHAM & CARNATIC CO. LID, ETC.
April 11, 1969
[M. HIDAYATULLAH, C.1.,
1 .. C. SHAH,
V. RAMASWAMI,
G. K. MITTER AND A. N. GROVER, 11.]
Madro.l Urban Lend Tax '4ct 1966-lf violative of Arts. 14
alld
19(1) U) of the Co11Jtitutlon--Co111tltutlo11 of India Schedule VII, Entry
49 LIM 2 and Entry 86 List 1-Scopt of.
Co11Jtltutlon of India Art. 19(1) (f)-Unreaso11able rutrlctlon-Acl,
/n;yi11g tax with retrospective effect if unreasonable restriction.
By s. 3 of the Madras Urban Land Tax Act. 1963, a tax was levied
on every owner of urban land at the rate of OA% of the average market
value of the usban .and os determined under '· 6(2) of the Act The
viru of the Act was challenged by a writ petition and the impugned Act.
wu struck down on the ground that it violated Art. 14 of the Comtitution because the charging section levied tho tax on urban land not on
the market value of such land but on the average value of the land
in a sub-zone.
Thereafter the State
legislature
passed the
Madras
Urban Land Tax Act 12 of 1966 which omitted the proviaions relating
to fixation of averaJIC market veluc in the sui>'l.one, and instead provided in s. 5 far the levy of a tax on urban land from the owner at tho
rue of 0.4% of the market value of such urban land.
The validity of
the new Act was again challenged in a aroup of writ petitions before
the Hi&h Court which held that the Madras le&islature was competent
to enact the new Act but that it was
violative
of Arts.
14
and
19(1) (f) of the Constitution.
In appeals to this Cou.'1 it was contended, inter alia, on behalf of the
pctitioocrs (i) that the impugned Act fell under Entry 86, List I and
not under Entry 49 of List 2, so th~t the State legiolature was incompetent to pass the Act; furthermore as Entry 49, List 2 provides for
tnea on land and buildings, the impugned Act which impooed tax on
land alone could not be held to fall under the
Entry;
(ii)
that the
machinery was provided for determining
the market value and
the
matter having been left to the arbitrary determination of the Assistant
fr«nmlai011Cr, the provisiNls of the new Act were violative of Art. 14
of the Constitution (iii) that the Act was an unreasonable reotriction on
the right to acquire, hold and diopooc of property and u •uch was
'l'iolatlve of Art. 19(1)(f) of the Comtitutio:i; furthermore together with
the exi.mng property·tax under s. 100 of the City Municipality Cd-para.
don Act the tsx under the impugned Act exhausted an unreasonably hish
proportion of income and on tliis account also it was an unreasonable
~ctioo; it was also contended that the .giving of retrospective operation to tho Act from July, 1963 made it unreasonable.
HF!D: The Ma<bs Urban Land Tax Act 12 of 1966 was coustitulionally valid.
(i) In pith and substance the new Act in impooinjl a tsx ob urban
land at a percentage of the market value is entirely within the ambit of
B
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ASST. COMMR, v. B. & C. LTD.
269
Entry 49 c:Jf List II and within the competence of the State Legislature;
it does not in any way trench upon the field of legislation of Entry
86 of List I. [280 G-H]
There was no conflict between Entry 86 of List l and Entrv 49 of
List II. The tax under Entry 86 proceeds on the principle of aggregation and is imposed on the totality of the net value of all assets. Entry
49 of List II, contemplates a levy of tax on lands and buildings or both
as units; it is not concerned with the division of interest or ownership in
the units of land or buildings which are brought to tax. [278 E--F]
The legislative entries must be given a large and liberal interpretation,
the reason being that the ,allocation of the subjects to the Lists ts not by
way of scientific or logical definition Mt by way of a mere sb:plex enu•
meratio of broad categories. [277 G-H]
Ra/la Ram v. Province of East Pun;ab, [1948] F.C.R. 207, Sudhlr
Chandra Nawn v. Wealth Tax Officer, A.LR. 1969 S.C. 59; Ga//ahc:

## Text

_Characters 0–39,920 of 56,186. This is a partial read: ask again with offset=39920 for what follows._

268
~ANT
COMMISSIONER OF URBAN LAND TAX
A
AND OTHERS
v.
THE BUCKINGHAM & CARNATIC CO. LID, ETC.
April 11, 1969
[M. HIDAYATULLAH, C.1.,
1 .. C. SHAH,
V. RAMASWAMI,
G. K. MITTER AND A. N. GROVER, 11.]
Madro.l Urban Lend Tax '4ct 1966-lf violative of Arts. 14
alld
19(1) U) of the Co11Jtitutlon--Co111tltutlo11 of India Schedule VII, Entry
49 LIM 2 and Entry 86 List 1-Scopt of.
Co11Jtltutlon of India Art. 19(1) (f)-Unreaso11able rutrlctlon-Acl,
/n;yi11g tax with retrospective effect if unreasonable restriction.
By s. 3 of the Madras Urban Land Tax Act. 1963, a tax was levied
on every owner of urban land at the rate of OA% of the average market
value of the usban .and os determined under '· 6(2) of the Act The
viru of the Act was challenged by a writ petition and the impugned Act.
wu struck down on the ground that it violated Art. 14 of the Comtitution because the charging section levied tho tax on urban land not on
the market value of such land but on the average value of the land
in a sub-zone.
Thereafter the State
legislature
passed the
Madras
Urban Land Tax Act 12 of 1966 which omitted the proviaions relating
to fixation of averaJIC market veluc in the sui>'l.one, and instead provided in s. 5 far the levy of a tax on urban land from the owner at tho
rue of 0.4% of the market value of such urban land.
The validity of
the new Act was again challenged in a aroup of writ petitions before
the Hi&h Court which held that the Madras le&islature was competent
to enact the new Act but that it was
violative
of Arts.
14
and
19(1) (f) of the Constitution.
In appeals to this Cou.'1 it was contended, inter alia, on behalf of the
pctitioocrs (i) that the impugned Act fell under Entry 86, List I and
not under Entry 49 of List 2, so th~t the State legiolature was incompetent to pass the Act; furthermore as Entry 49, List 2 provides for
tnea on land and buildings, the impugned Act which impooed tax on
land alone could not be held to fall under the
Entry;
(ii)
that the
machinery was provided for determining
the market value and
the
matter having been left to the arbitrary determination of the Assistant
fr«nmlai011Cr, the provisiNls of the new Act were violative of Art. 14
of the Constitution (iii) that the Act was an unreasonable reotriction on
the right to acquire, hold and diopooc of property and u •uch was
'l'iolatlve of Art. 19(1)(f) of the Comtitutio:i; furthermore together with
the exi.mng property·tax under s. 100 of the City Municipality Cd-para.
don Act the tsx under the impugned Act exhausted an unreasonably hish
proportion of income and on tliis account also it was an unreasonable
~ctioo; it was also contended that the .giving of retrospective operation to tho Act from July, 1963 made it unreasonable.
HF!D: The Ma<bs Urban Land Tax Act 12 of 1966 was coustitulionally valid.
(i) In pith and substance the new Act in impooinjl a tsx ob urban
land at a percentage of the market value is entirely within the ambit of
B
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A
B
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G
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ASST. COMMR, v. B. & C. LTD.
269
Entry 49 c:Jf List II and within the competence of the State Legislature;
it does not in any way trench upon the field of legislation of Entry
86 of List I. [280 G-H]
There was no conflict between Entry 86 of List l and Entrv 49 of
List II. The tax under Entry 86 proceeds on the principle of aggregation and is imposed on the totality of the net value of all assets. Entry
49 of List II, contemplates a levy of tax on lands and buildings or both
as units; it is not concerned with the division of interest or ownership in
the units of land or buildings which are brought to tax. [278 E--F]
The legislative entries must be given a large and liberal interpretation,
the reason being that the ,allocation of the subjects to the Lists ts not by
way of scientific or logical definition Mt by way of a mere sb:plex enu•
meratio of broad categories. [277 G-H]
Ra/la Ram v. Province of East Pun;ab, [1948] F.C.R. 207, Sudhlr
Chandra Nawn v. Wealth Tax Officer, A.LR. 1969 S.C. 59; Ga//ahc:gher v.
Lynn, [1937] A.C. 863 at p. 870; and Subrahma11yan Chettiar v. Mittu·
swami Goundan, [1940] F.C.R. 188 at 201; referred to.
Tbe legislative history of Entry 49, List II, does not lend any support
to the argument that Entry 49 of List II relating to tax on land and
buildings cannot be separated.
On the other band Entry 49 "Taxes on
lands and buildings" should be construed as taxes on land and taxes on
buildings and there is no reason for restricting the amplitude of the
language used in the Entry, [281 G]
Raja Jagannath Baksh Singh v. The State of U.P.,
[1963] 1 S.C.R.
220; and H. R. S. Murthy v. Collector of Chlttoor and Anr., [1964] 6
S.C.R. 666; referred to.
(ii) The p\"ovisions of s. 6 of the new Act were not violative of Art.
14 of the Constitution.
Having regard to the language and context of s. 6 of the new Act, the
opinion which the Assistant Commissioner has to form under that
section is not subjective but should loe reached objectively upon the
relevant evidence after following the requisite formalities laid down in
ss. 7 to 11 of the new Act. The proceeding before the Assistant Com·
missioner is judicial in character and his opinion regarding the market
valua is reached objectively on all the materials produced before him.
[282 Fl
(iii) The new Act was also not violative of Art. 19(!)(f) of the
Constitution.
It is not possible to put the test of reasonableness into the straight
jacket of a narrow formula. The objects to be taxed, the quantum of tax
to be levied, tl;te conditions subject to which it is levied and the social
and economic policies which a tax is designed
to subserve
are
all
matters of poiltical character and these matters have been entrusted to
the Legislature and not to the Courts. Jn applying the test of reaMnableness it is also essential to notice that the power of taxation is generally
regarded as an essential attribute of sovelreignty and constitutional provi·
sions relating to the power of taxation are ~egarded not as grant of power
but as limitation upon the power which would otherwise be practically
without limit . .[284 BJ
Rai Ramakrishna v. State of Bihar, A.LR. 1963 S.C. 1667 at
1673;
referred t0.
270
SUPREME COU.T REPORTS
[1970] I S.C.R.
Tbc charge under the City Municipality Corporation Act was a tax
on the annual letting value whereas the charge under the Act of I 966 wu
·OD the market value of the urban land. The oasis of the two tax.., being
different, it was not permissible to club the two together and complain
of the cumulative burden.
As a general rule, so Ion~ as a tax retains its character as a tax and
. is not confiscatory or extortionate, the reasoaableoess of the tax cannot
be questioned. In so far as the new Act of 1966 was concerned, it could
not be said that the levy at 0.4% of the market value of the urban land
was confiscatory in effect [285 F]
(iv) In view of the legislative baclcJ(found of the new Act of 1966,
which replaced the earlier Act of 1963, it could not be said that the
imposition of the tax retrospectively from July, 1963, WaJ an unreasonable
restriction. [289 BJ
CIVIL APPELLATE JURISDICTION : Civil Appeals Nos. 21 to
23, 46, 47, 125 and 274 of 1969.
Appeals from the judgment and orders dated April 10, 1968
of the Madras High Court in Writ Petitions Nos. 387 of 1968
A
B
c
C
D
S. V. Gupte, G. Ramanujam and A. V. Rangam, for the appellants (in C.As. Nos. 21 to 23 of 1969) and the respondent (in
C.As. Nos. 46, 47, 125 and 274 of 1969).
V. K. T. Chari, T. N. C. Rangarajan and D. N. Gupta, for the
I
appellants (in C.As. Nos. 46 and 4 7 of 1969) and the respon·
E
dents (in C.As. Nos, 21 and 23 of 1969).
V. K. T. Chari, A. R. Ramanathan,
T. N. C. Rangarajan
and R. Gopalakrishnan, for the appellant (in C.A. No. 125 of
1969).
K. C. Rajappa, S. Ba/akrishnan and S. Laxminarasu, for the
F
appellant (in C.A. No. 274 of 1969).
K. C. Rajappa, S. Balakrishnan, S. Laxminarasu and N. M.
Ghatate, for the respondents (in C.A. No. 22 of 1969).
The Judgment of the court was delivered by
~I,
J. In these appeals which have been heard
together a common question of law arises for determination,
namely, whether the Madras Urban Land Tax Act, 1966 ( 12 of
1966) is constitutionally valid.
In 1963 the Madras Legislature enacted the Madras Urban
Land Tax Act, 1963 which came into force in the city of Madras
·OD the 1st of July, 1963. In the Statement of Objects and
.Reasons of the 1963 Act it was stated that the Taxation Enquiry
G
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ASST. COMMR. v. B & c LTD. (Ramaswami, J.)
271
Commission and the Planning Commission were suggesting the
need for imposing a suitable levy on lands put to non-agricultural -
use in urban areas. The State Government, after examining the
report of. the Special Officer, decided to levy a tax on urban laod
on the basis of market value of the land at the rate of 0.4% 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% of the average market
value of the urban land in a sub-zone as determined under si:ibseetion (2) of s. 6. ·Section, 7 provided for the determination of
the highest and lowest market value 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-s. 2.
of s. 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, cir Government offices;
( d) availability of civil 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 challenged
and in Buckingham & Carnatic Co., Ltd. v. State ofMadras(1)
a Division Bench of the Madras High Court held that the impugned Act fell under Entry 49, List II of Schedule VII to the
Constitution and was within the legislative competence of the
State Legislature. But the Act was struck down on the ground
that Art. 14 of the Constitution was violated, because the charging section of the Act levied the tax on urban land not on the
market value of such urban land but on the average value of the
lands in the locality known as a sub-zone.
The new Act (Act
12 of 1966) was passed by the State Legislature after the decision
Of the Madras High Court.
In the new Act provisions relating
to fixation of average market value in the sub-zone were omitted.
Instead, section 5 ·of the new Act provides that there shall be
levied and collected from every year ~ommencing from the date
H
of the commencement of the Act a tax qII each urban land from
the owner of such urban land at the rate of 0.4% of the market
(1):(1966) II M.L.J. 172.
272
SUPREME COURT REPORTS
[1970] I S.C.R.
va1ue of such urban land.
follows :
Sect ion 2 ( I 0) defines "owner" as
"Owner includes--
(i) any person (including a mortgagee in possession) for the time being receiving o~ entitled to receive,
whether on his own account or as agent, trustee,
guardian, manager or receiver for a:-iother person or
for any religious or charitable purposes, the rent or
profits of the urban land or of the building constructed
on the urban land in respect of which the word is
used;
(ii) any person who is zntitled to the kudiwaram
in respect of any inam land; but does not include-
(a) a shrotriemdar; or
(b) any person who is entitled to the melwaram in
respect of any inam land but in respect of which
land any other person is entitled to the kudiwaram.
Explanation.-For the purposes of clause (9) and
clause ( 10) inam land includes lakhiraj tenures
of land and shrotriam land.
Section 2 ( 13) defines 'land' to mean any land which is used or
is capable of being used as a building site and includes garden or
grounds, if any, appurtenant to a building but does not include
any land which is registered as wet in the revCll'llle accounts of the
Government and used for the cultivation of wet crops."
Section 6 states :
"For the purposes of this Act, the market value of
any urban land shall be estimated to be the price which
in the opinion of the Assistant Commissioner, or the
Tribunal, 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
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ASST.' cdMMR. v. B & c L ro. (Ramaswami, J.)
273
ill of 1966) in the Fon 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 the street,
survey number and subdivision number of the
land and other particulars of such urban land,
( d) the amount which in the opinion of the owner
is the market value of the urban land."
C
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 made such enquiry as he deems fit. If the AssisD
tant Commissioner is satisfied that the particulars
mentioned therein are correct and complete he shall, by
order in writing detennine the market value of the
urban land and the amount of urban land tax payable
in respect of such urban land.
E
p
G
H
(2) (a) Where no examination of the return and
after the enquiry the Assistant Commissioner is not
satisfied that the particulars mentioned
therein
are
correct and complete he shall serve a notice on the
owner either to attend in person or at his office on a
date to be specified in the notice or to produce or cause
to be produced on that date any evidence on which the
owner may rely in support of his return.
'' (b) The Assistant Commissioner after hearing such
evidel'lfe as the owner may produce in pursuante of the
notice under clause (a) and such other evidenc:i as the
Assistant Commissioner may require on any specified
points shall, by order in writing, determine the market
value of the urban land and the amount of urban land
tax payable in respect of such urban land.
( c) Where the owner has failed to attend or produce evidence in pursuance of the notice under clause
(a) the Assistant Commissioner shall, on the basis of
the enquiry made under clause (a), by order in writing determine the market value of the urban land and
the~amount of urban land tax payable in respect of such
urban land."
274
SUPREME COURT REPORTS
[1970] 1 S.C.R.
··/
Section 11 enacts :
•.. (1) Where the owner of urban land has failed to
furnish the return under section 7 and the Assistant
Commissioner has obtained the necessary information
under section 9 he shall serve a notice on the owner in
respect of each urban land specifying therein-
/
( a) the extent of the urban land,
(b) the amount which, in the opllllon of the
.. Assistant Commissioner, is the correct market
value of the urban land, and direct him either to
attend in person at his office on a date to be
specified in the notice or to produce or cause
to be produced on. that date any evidence on
which the owner may rely.
(2) After' hearing such evidence, as the owner may
produce and such other evidence as the Assistant Com- ·
missioner may require on any . specified points, the
. Assistant Commissioner shall, by order in- writing,
determine the market value of the urban land· and the
amount of urban land tax payable in respect of such
urban land.
, ·
(3) Where the owner has failed to attend or to
A
B
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produce evidence in pursuance of the notice under subE.
. -.. section ( 1 ) the Assistant Commissioner shall, on the
basis of the information obtained by_ him Wider 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.
F
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ASST. COMMR. v. B & c LTD. (Ramaswami, J.)
. 275
(2) The Commissiop.er may, if he objeets-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 days from the
date of the receipt of the copy of the order by the Commissioner.
· \ ·
(3) The Tribunal may admit an appeal after the
expiry of the period referred to in clause (a) or
. clause (b) of sub-section (1) or in sub-section (2), as
the case may be, if it is satisfied that there was sufficient cause for not presenting it within that period. '
( 4) An appeal to the Tribunal under this section
shall be in the prescribed form and shall be verified in
the prescribed manner and shall be accompanied by .
such fee as· may be prescribed.
( 5) The Tribunal may after giving both parties to
the appeal an opportunity of being heard, pass such
orders thereon, as it thinks fit and shall co=unicate
any such orders to the assessee and to the Commissioner
in such manner as may be prescribed."
Section 30 confers power of revision in the Board of Revenue
and is to the following effect :
( 1) The Board of Revenue may, either on its ciwn
motion or on application made by the assessee in this
behalf, call for and examine the records of any proceeding under this Act (not being a proceeding in respect
of which an appeal lies to the Tnbunal under section
20) to satisfy itself as to the regularity of such proceeding or the correctness, legality or propriety of any decision or order passed therein and if, · in . any case, it
appears to the Board of Revenue that any such decision
or order should be modified, annulled, reversed or
remitted for reconsideration, it may pass orders
accordingly :
·
Provided that the Board of Revenue shall not pass
any order under this sub-section in any case, where the
decision or order is sought to be revised by the Board
of Revenue on its own motion, if such decision or order
H
had been made more th~n three years previously :
Provided further that the Board of Revenue shall not
. pass any order under this ·section prejudicial to any
276
SUPREME COURT REPORTS
(1970] l S.C.R.
party unless he has had a reasonable opportunity of
making his representations."
Section 3 3 states :
"(!) The Tribunal, the Board of Revenue, the
Commissioner, the Assistant Commissioner, or the
Urban Land Tax Officer or any other officer empowered under this Act shall, for the purposes of this
Act, have the same powers as are vested in a Court
under the Code of Civil Procedure, 1908 (Central
Act V of 1908), when trying a suit in respect of the
following matters, namely :-
(a) enforcing the attendance of any person and
examining him 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
p~
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
pmtions before the Madras High Court on various constitutional
grounds.
By a common judg'lient dated the I 0th 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 struck down s. G of the new Act as being
violative of Arts. 14, 19( 1 l(f) of the Constitution.
Th~ State
ol Madras and other respondents to the writ petitions (he,einafter
called the respondents for the sairn of convenience) filed nppeals
A
B
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H
ASST. COMMR. v. B & c LTD. (Ramaswami, J.)
277
A Nos. il to 23 of 1969 under a certificate granted by the High
Court under Arts. 132 and 133(1)\a), (b) and (c) of the Constitution. The writ petitioners (hereinafter called the petitioners)
have filed C.As Nos. 46, 47, 125 and 274 of 1969 against the
same judgment on a certificate granted by the High Court under
Art. 1.32 of the Constitution.
B
The first question to be considered in these appeals is whether
the Madras Legislature was competent to enact the legislation
under Entry 49 of List II of Schedule VII of the Constitution
which reads : "Taxes on lands and buildings". It was argued on .
behalf of the petitioners that the impugned Act fell under
C
Schedule Vll1 List I, Entry 86, that is "Taxes on the capital value
of the assets, exclusive of agricultural land, of individuals and
companies; taxes on the capital of companies."
The argumen'.
of Mr. V. K. T .. Chari may be summarised as follows : The
impugned Act was, both in form and substance, taxation of capital
and was hence beyond the competence of the State Legishture.
D
To tax on the bijsis of capital or principal value of assets was.
permissible to Parliament under List I, Entries 86 and 87 and to
State u11der Entry 48 of List II.
Taxation of capital was the
appropriate method provided for effecting the directive. ·principle
under Art.' 39 of the Constitution, namely, to prevent concentration of wealth.
Article '366~9j contains a definition of 'estate
duty' with reference to the principal value. Entry 86 of List I
E
(Taxes on. capital value of assets exclusive of agricultural land)
and Entry 88 (Duties in respect of succession to such property)
form a group of entries the scheme of which is to carry out the
directive principle of Art. 39(c). The Constitution indicated
that capital value or principal value shall be the basis of taxation
under these entries and, therefore, the method of taxation of capiF
ta! or principal value \\las prohibited even to Parliament in respect
of other taxes and to the States except in respect of Estate Duty
on agricultural land. Such in effect is the argument of Mr. V. K. T.
Chari. But in our opinion there is no warrant for the a'sumption that entries 86, 88 of List I and Entry 48 of List II form a
special 'group embodying any particular scheme.
The directive
G
principle embodied in Art. 39 ( c) applies both to Parliament ljnd
to the State Legislature and it is difficult to conceive how entrie•
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 bemg
that the allocation of the subjects to the lists is not by way of
H
scientific or · logical definition but by way of . a mere sixplex
enumeratio of broad categories. We see no reason, therefore, for
holding that the entries 86 and 87 of List I preclude the State
Legislature from trucing capital value of lands and buildings under
L13SupCI69-4
278
SUPREM~ COURT REPORTS
[ 1970] I S.C.I<
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 taxauon is th~ c:apital 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 the assets of the assessee.
The tax under
Entry R6 proceeds on the principle of aggregation and is imposed
on the totality of the value of all the assets.
It is imposed on the
total assets which the assessee owns and in determining the net
wealth not only rhe encumbrances specifically charged against any
item of asset, but the genera! liability of the assessee to pay his
debts and to discharge his lawful obligations have to be taken into
account.
In certain exceptional cases, where a person owes no
debts and is under no enforceable obligation to discharge any
liability out of his assets it may be possible 10 break up the tax
which is kviable on the total assets into components and attribute
a component 'to lands and bui!dings owned by an assessee.
Jn
such a case, the component out of the total tax attribu!able to
lands and buildings may in the matter of computation bear similarity to a tax on lands and buildings levied on the capital or
annual value under Entry 49, List II.
But in a normal case a
tax on capital value of assets bears .no definable relation to lands
and buildings which may or may not form a component of the
total assets of the assessee. But Entry 49 of List II. contemplates a levy of tax on lands and buildings or both as units. It is
not coneemed with the division ct interest or ownership in the
upits of lands or. buildings which are brought to ta~. Tax en
lands and buildings, is directly imposed on Jands and buildings.
and bears a definite relation to it.
Tax on the c1pit:il value of
assets bears no definab!e
relation to lands and buildings
which may form a component of the" total
assets of the
assessee.
By legislation in exercise of power under Entry 86.
List I tax is contemplated to be levied on the value of the assets.
For the purpose of levying rax under Entry 49. List II the Stare
Legislature may adopt for determining the incidence of tax tlK
annual or t_he capital value of the lands and buildings.
But the·
adoption of !he annual or capital value of lands and buildings for
dercrmining tax liability will not make the fields of legislation
under the two entries overlapping.
The two taxes are entirely
different in their bat.ic concept and fall on different subject
matters.
In Ra/la Ram v. Province of East Pu11jab( 1 ) the Federal
Court held that the tax_ levied by section 3 of the Punjab Urban
(I) \(948) F.C.R. 207.·
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279
Immoveable Property Tax Act, 17 of 1940 on buildings and lands
>Jtuated in a specified area at such rate not exce~ding iwenty per
cent. of the annual value of such buildings and lands, as the Provincial Government may by notification in the official Gazette
Jirect in respect of each such rating area was not a tax or income,
but was a tax on lands and buildings within the meaning of Item
No. 42 of List II of tl\e 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 anmtal
value of the buildings and since the same basis was used in the
Income-tax Act for determining the income from propei:ty 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 Jn
income. The Court pointed out thatlhe ·annual v!!lue is-not neces.
sarily actual income, but is'on!y a s!andard by which iricoll!e may
be measured and merely because the Income-tax Act had adopte(I
the annual value as the .standard for determining the iqeome, it
did not follow that, if the same standard is employed as .a measure .
for any other tax, that latter tax becomes also a tax.: on income.
It was held by the Court that in su.bstance the propert)' tax levied
by s. 3, Punjab .Urban Immovea.ble Property Tax Act, 1940 fell
within itein 42 of the Provincial Li§t' and was not a tax on income
falling within item 54 of the Federal List although· the basis of
the tax was the annual value of the building. The same view has
been expressed by this Court in Sudhir Chandra Nawn v. Wealth
Tax Officer(') wherein it was held that the power to levy tax on
lands and· bildings under Entry 49 of List II did not trench upon
the power conferred on Parliament by Entry 88 of List I and,
therefore, the enactment of the Wealth Tax Act by Parliament
was not ultra vires.
The problem in this case is the problem of characterisation of
the law or classification of the law. In other words the question
must be asked : what is the subject matter of the legislation in
its "pith and substance" or in its true nature and character for
the purpose of determining whether it is legislation with respect to
Entry 47 of List II or Entry 86 of List I.
In Gallahagher v.
Lynn(') the principle is stated as follows:
"It is well established that you are to look at the
true nature and character of the legislation the. pith and
substance of the legislation. If on the view of the statute
as a whole, you find that the substance of the legislation
(:)A.LR. 1%9 S.C. S9.
(2) [t 937J l\.C. 8Sht P. 870 -
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280
SUPREME COURT REPORTS
[ 1970) I S.C.R.
is within the express powers, then it is not invalidated if
incidentally it affects matters which are outside the
authorized field.
The legislation must not under the
guise of dealing with one matter in fact en~roach upon
the forbidden field.
Nor are you to look only at the
object of the legislator. An Act may have a perrectly
lawful object e .fi. to promote the health of the inhabitants, but may seek to achieve that object by invalid
methods, e.g., direct prohibition of any trade with n
foreign country. In other words, you may certainly
consider the clauses of an Act to see whether they are
passed 'in respect of the forbidden subject."
In the case of Subrahmanyan Chettiar v.
Muttuswami
Goundan (1) Sir Maurice Gwyer, C.J. said :
"It must inevitably happen from time to lime that
legislation, though purpotting to deal with a subject in
one list, touches also on a subject in another list, and
the different provisions of the enactment may be so
closely intertwined that blind adherence to ·a strictly
verbal interpretation 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('); Russell v. The Queen(');
1 Union Colliery Co. of British Columbia v. Bryden/..');
Alt. Gen. for Canada v. Att. Gen. for British Columbia('); Board of Trustees of Lethbridge Irrigation
District v. lndependent 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 IT and within the competence of the State Legis'lature and
does not in any way trench upon the field of legislation of Entry
86 of List I.
(I) !1940} F.C.R. I RS .'tt 201.
(3) [t882} 7 A.C. 829.
15J (IQ30} A.C. 111.
(2) [1881} 7 A.C. 96.
(4) [189Q} A.C. JSO.
(6l [1940[ A.C. 513.
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ASST. COMMR. v. B & c LTD, (Ramaswami, !.)
281
It was then said that as Entry 49 of List II provides for taxes
on lands and buildings, the impugned Act which imposes tax on
lands alone cannot. b.: held to fall under that entry. It was submitted that when the Legislature taxed land deliberately the
legislation fell under List II of Entry 45, i.e., "land revenue, including the assessment and collection of revenue, the maintenance
of land records, survey for revenue purposes and records of rights
and alienation of revenues" and not under Entry 49 of that List.
The legislative history of Entry 49 of List II does not however
lend any support to this argument.
Before the Government of
India Act, 1935 lands and buildings were taxed separately and
all that was done under the Government of India Act, 1935 and
the Constitution was to combine the two entries relating to land
and buildings into a single entry. Section 45-A of the Govel'llment of India Act, 1919 provided for making rules under the Act
for the devolution of authority in respect of provincial subjec~ t•
local Governments, and for the allocation of revenues or other
moneys to •those Governments.
The Government of India by a
notification dated December 16, 1920 made rules· under that provision called tire "Scheduled Tax Rules''. These Rule& contained
two. schedules.
'IJ!e first Schedule contained eight items of tax
or· fee. The Legislative Council of a Province may without obtaining the previous sanction of the Governor General make and take
into consideration any law imposing for the purposes of the Joe~
Government any tax included in Schedule I. Schedule II contained eleven. items of tax. In making a law imposing or authorising any local authority to impose for the purposes of such local
authority any tax in Schedule II, the Legislative Council required
ao previous sanction of the Governor General. In Schedule II,
item No. 2 was· tax on land or land values and item 3 was a tax
on buildings.
In the Government of Indi( Act,
1935
the
two entries were
combined and List II, Entry 42
. is "Taxes on lands and buildings
a;11d hats and Windows".
The
legislative
history
of Entry 49,
List
II docs
not, therefore, lend any support to the argument that Entry 49
of List II relating to tax on land and buildings cailriot be separated.
On the otl}er hand we are of opinion that Entry 49 "Taxes on
lands and buildings" should be construed as taxes on land and
taxes on buildings and there is no reason for restricting the amplitude of the language used in the Entry. This view is also borne
out by authorities. In Raja Jagannath Baksh Singh v. Thr State
of U.P. (') the question at issue was whether the tax imposed by
the U.P. Government on land holdinj!s 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
(fl [195)1 I S.C.R. 220.
i82
SUPREME COURT REPORTS
[ 1970) I S.C.R,
49 of List .II an~ the tax on land would include agricultural land
also.
Stmtlarly m H. R. S. Murthy v. Collector of Chittoor &
A nr. (
1
) it was held that the land cess imposed under ss. 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 'ln this aspect of the case must be rejected.
We proceed to consider the argument that no machinery is
prvvided for determining the market value and the provisions of
the new Act, therefore, violate Art. 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 take into account, among
other matters, the sale price o! similar sites, the rent fetched for
use and occupation of the land, the principles generally adopted
in valuing land under the Land Acquisition Act and the compensation awarded in rccen: land acquisition proceedings.
We see
no justification for this argument.
The procedure for determining the market value and assessment of urban land is de~cribed in
Chapter III of the new Act. Section 6 provides that the market
\lalue of the urban land "shall be estimated to be the price which
in the opinion of the Assistant Commissioner, or the Tribunal, 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." It was said on behalf of the petitioners that the opinion
which the Assistant Commissioner has to form is purely subjective and may be arbitrary. We do not think that this contention
is correct. Having regard to the language and context of s. 6 of
the new Act we consider that the opinion which the Assistant
. Commissioner. has to form under that section is not subjective
but should be reached objectively upon the relevant evidence
after following the requisite formalities laid down in ss. 7 to 11
of the new Act, Instead of the Assistant Commissioner classifying the urban land and determining the market value in a zone.
the present Act requires a return to be submitted by the owner
mentioning the amount which, in the opinion of the owner, is the
market value of the urban land. On receipt of the return, if the
Assistant Commissioner is satisfied that the particulars mentioned
are correct and complete, he may determine the market value as
given by the owner of the lan<l.
If he is not satisfied with the
return, he shall serve a notice to the owner asking him to nttcnd
his office with the relevant evidence in support cf his return. Af'.er
iaearing
the owner
and
considering the
evidence
produced,
the
Assistant
Commissioner
may
detem1ine
the
{I) [19641 6 ~.C.R. 61i5.
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ASST. COMMR .. V. B & c LTD. (Ramaswami, ].)
283
market value.
lj11 case the owner fails to attend or fails to
produce the evidence, the Assistant Commissioner is empowered
to assess the market value ·on the basis of an enquiry made by
him.
Section 11 prescribes the procedure for determining the
market value when the owner fails to furnish a return as required
under section 7. The section requires the Assistant Commissioner
to serve a notice on the owner 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 proceeding in respect of which an
appeal ,lies to the Tribunal under s.