# D. C. GOUSE AND CO. ETC v. STATE OF KERALA & ANR. ETC - **Citation:** [1980] 1 S.C.R. 804 - **Court:** Supreme Court of India - **Decided:** 1979-09-21 - **Case number:** Civil Appeal No. 1524 of 1978 - **Bench:** Y. V. Chandrachud, V. R. Krishna !Yer, N. L. Untwalia, P. N. Shinghal, A. D. Koshal - **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/d-c-gouse-and-co-etc-v-state-of-kerala-anr-etc-7849 - **Pages:** 32 ## Headnote Kera/a Building Tax Act, 1975-Constitutional validity of-Act itnposed a non-recurring tax based on capital value-State Legislature if competent to impose. The Kcrala Building Tax ,,'\ct, 1975 passed by the State Legislature under C Entry 49 of List II (Taxes on lands and buildings) is imposed as a non-recurrine tax on buildings, constructed on or after April 1, 1973, the "capital value'" of which exceeds Rs. 2,0,000 /-. The term "capital value" is defin~d to mean the value arrived at by multiplying th.e "annual value" of a building by sixteen. "Annual value" means the gross annual rent on which the buildin& may, at the tim~ of completion, be expected to let from month to month or from year ro year. Section 6 prdVides that the anoual value of a building shall be the annual D value fixed for that building in the assessment books of the local authority (which includes a Municipal Corporation or a municipality and so on) within whose area the building is situate. Section 6(4) provides that in determining the annual value of a building regard, must be had to the location of the building, the nature and quality of the structure of the building, the capability of the building and so on. An assessee objecting to the assessment of building ta"t assessed or denying the Jiability may appeal to the Appellate Authority under E s. 11. But no appeal lies unless the building tax due has been paid. Although no appeal lies from the decision of the Appellate Authority, provision is made for reference to the District Court on a question of law and the District Collector is given power to vevise the order of the Appellate Authority and the Government has the power of revision against the order of the District Collector. Jurisdiction of Civil Court is barred by s. 27 of the Act. F G H The High Court, having upheld the validity of the Ac4 the appellants in their appeals impμgned the view of the High Court. It WM contended on behalf of the appellants that (I) the tax levied on buildings being a tax on the capital value of the assets falls within the scope of entry 86 of List I of the Seventh Schedule and, therefore, is beyond the legislative competence of the State Le~islature; (2) th~ Act was unconstitu· tional in that it imposed a tax on buildings retrospectively (over a period of 2 yea.rs of its enactment); (3) it was not merely a_ tax on buildings but a t<\X on the buildings, and lands of those buildings; ( 4) the method of determining the capital value of a building on the basis "of its annual value is hypothetical and arbitrary and is, therefore, unconstitutional. HEID : 1 There is no force in the argument that the State Legislature was not competent to impose a tax on the buildings under entry 49 of List II. [818 BJ (a) Article 366(28) defines tax to, include imposition of any tax whether general, local or special. The word "tax" in its widest sense includes all money \ / D. C, GOUSE V. KERALA 805 raised by taxation and includes tax levied both by the Central and State Legis· A Iatures as well as rates and charges levied by local autho~ities. [815 D-E] (b) The term "asset&" referred to in entry 86 of List I means "Property iJl general, all that one owns." If a tax is levied on "all that one owns" or his total assets, it would fall within the pllrview of entry 86 and therefore would be outside the.legislative competence of the State Legislature. On the other hand, if ~ tax is directly imposed on "buildings" it will bear direct relation to the 'uildings owned by the assessee. Though the building owned by an· assessee is a B. component of his total assets, the tax under entry '86 will not bear any direct or definable relation to his building. A tax on "huildings" is, therefore, a direct tax on buildings as such. It is not a personal tax without reference to any particular. property. [815 H, 816 A-BJ \ (c) A tax has two elements : the person, thing or activity on which it is imposed anJ the amount of the tax. The amount of tax· may be measured in ## Text _Characters 0–39,981 of 82,505. This is a partial read: ask again with offset=39981 for what follows._ 804 D. C. GOUSE AND CO. ETC. v. STATE OF KERALA & ANR. ETC. September 21, 1979 B (Y. V. CHANDRACHUD, C.J., V. R. KRISHNA !YER, N. L. UNTWALIA, P. N. SHINGHAL AND A. D. KOSHAL, JJ.J Kera/a Building Tax Act, 1975-Constitutional validity of-Act itnposed a non-recurring tax based on capital value-State Legislature if competent to impose. The Kcrala Building Tax ,,'\ct, 1975 passed by the State Legislature under C Entry 49 of List II (Taxes on lands and buildings) is imposed as a non-recurrine tax on buildings, constructed on or after April 1, 1973, the "capital value'" of which exceeds Rs. 2,0,000 /-. The term "capital value" is defin~d to mean the value arrived at by multiplying th.e "annual value" of a building by sixteen. "Annual value" means the gross annual rent on which the buildin& may, at the tim~ of completion, be expected to let from month to month or from year ro year. Section 6 prdVides that the anoual value of a building shall be the annual D value fixed for that building in the assessment books of the local authority (which includes a Municipal Corporation or a municipality and so on) within whose area the building is situate. Section 6(4) provides that in determining the annual value of a building regard, must be had to the location of the building, the nature and quality of the structure of the building, the capability of the building and so on. An assessee objecting to the assessment of building ta"t assessed or denying the Jiability may appeal to the Appellate Authority under E s. 11. But no appeal lies unless the building tax due has been paid. Although no appeal lies from the decision of the Appellate Authority, provision is made for reference to the District Court on a question of law and the District Collector is given power to vevise the order of the Appellate Authority and the Government has the power of revision against the order of the District Collector. Jurisdiction of Civil Court is barred by s. 27 of the Act. F G H The High Court, having upheld the validity of the Ac4 the appellants in their appeals impμgned the view of the High Court. It WM contended on behalf of the appellants that (I) the tax levied on buildings being a tax on the capital value of the assets falls within the scope of entry 86 of List I of the Seventh Schedule and, therefore, is beyond the legislative competence of the State Le~islature; (2) th~ Act was unconstitu· tional in that it imposed a tax on buildings retrospectively (over a period of 2 yea.rs of its enactment); (3) it was not merely a_ tax on buildings but a t<\X on the buildings, and lands of those buildings; ( 4) the method of determining the capital value of a building on the basis "of its annual value is hypothetical and arbitrary and is, therefore, unconstitutional. HEID : 1 There is no force in the argument that the State Legislature was not competent to impose a tax on the buildings under entry 49 of List II. [818 BJ (a) Article 366(28) defines tax to, include imposition of any tax whether general, local or special. The word "tax" in its widest sense includes all money \ / D. C, GOUSE V. KERALA 805 raised by taxation and includes tax levied both by the Central and State Legis· A Iatures as well as rates and charges levied by local autho~ities. [815 D-E] (b) The term "asset&" referred to in entry 86 of List I means "Property iJl general, all that one owns." If a tax is levied on "all that one owns" or his total assets, it would fall within the pllrview of entry 86 and therefore would be outside the.legislative competence of the State Legislature. On the other hand, if ~ tax is directly imposed on "buildings" it will bear direct relation to the 'uildings owned by the assessee. Though the building owned by an· assessee is a B. component of his total assets, the tax under entry '86 will not bear any direct or definable relation to his building. A tax on "huildings" is, therefore, a direct tax on buildings as such. It is not a personal tax without reference to any particular. property. [815 H, 816 A-BJ \ (c) A tax has two elements : the person, thing or activity on which it is imposed anJ the amount of the tax. The amount of tax· may be measured in many ways. There is a distinction between the subject matter of a tax and the standard by which the amount of tax is measured. Thus a building may be the subject matter of a tax like wealth tax (entry 86 List I) or it may also be the subject of a direct tax under entry 49 of List IL . The two taxes being separate and distinct, they do not O\'er-lap each other. Therefore the .tax imposed in the instant case is well within the competence of tb_e legislature. [816 E-F] Sudhir Chandra Nawn v. 'wealth Tax Officer, Calcutta·& Ors., [1969) 1 SCR 108; Assisralll Commission£r of Urban Land Tax and Ors. v. The Buckingham and Carnatic Co, Ltd., Etc., [1970] 1 SCR 268 referred to. \ · (d) It is settled law that the quantum of tax levied by the taxing statute and the CGllditions subject to which "it is levied are matters within the competence of the legislature and so long as ilie tax is not confiscatory or extortionate · the :reasonableness of thei tax cannot be questioned in a court of law. [828 D-EJ Rai R_amkrisfma & Ors. v. Th~ State of Bihar, [1964] 1 SCR. 897; K111111atl1at Thathunni Moopil Nair v. Tlic State ofi Kerala & Anr., [1961] 3 SCR 77 referred to. 2(a). The Act is not retr06pective in the strictly technical sense of the term. A statute is deemed to be retrospective, when it takes away or . impairs any c 'E vested right acquired under existing laws or creates a 1'eW obligation in respect F of the transactions or considerations already past. The Act, though passed in April 1975, had imposed a tax on buildings with retrospective effect from April 1973-. By so doing it has not taken away or impaired any vested right of the owner of the building acquired under any existing law. Absence of an earlier taxing statute cannot be said to create a "vested right" under any existing law. Nor has any new obligation or disability been attached in re.'>pect of any earlier transaction. If the language of the enactment shows that ·the legislature thought G it expedient to authorise the making of retrospective rates, it can· fix the period as to which the rate may be retrospectively made. [818 D-H] Bradford Union v. Wilts, (1868) LR 3 Q.B. 616; The Tata Iron & Steel Co. Ltd. v. The State of Bihar, [1958] SCR 1355 referred to_. · (b) The choice of the legislature to. impose a tax on buildings with effect from April 1, 1973 cannot be said to be discriminatory. The choice of a date as H a basis for Classification cannot be dubbed as arbitrary even if no particular rea,,on . ~ forthcoming unless it is shown that it was capricious or whimsk:al. 15---625SCI/79 A . ,'B I> H 806 SUPREME COURT REPORTS [1980] 1 S.C.ll. Similarly unless i,t is shown that the fixing of the date is very wide of the reasonable mark the decision of the legislature must be accepted. [819 C-Dl In the instant case, after the 1961 Act was struck down by this Court in 1968 the Government declared its intention to introduce a fresh Bill so. as to bring a new. Act into force from April 1970. After its introd.uction in th~ Assembly it was referred to a Select Committee which recommended that t~ Act s.hould be brought into force from April 1, 1973. Two Ordinances giving effect to the provisions of the draft Bill were promulgated and eventually the Bill became an Act in April, 1975. These facts would not show that the choice of the date of April 1, 1973 was unreasonable or that it was wide of the reasonable mark. [819 E-G] 3(a). What entry 49 of List II permits is the levy of "taxes oa lands and buildings." It is permissible under this entry to levy a tax either oe lands ·as .well as buildings, or on lands, or on buildings, if the legislature decides to impose a tax only on buildings, the tax would be imposed on all that goes to make or constitute a building. [82Q B-C] (b) The word "building" means "that which is built; a structure, edi6c;c;" The natural and ordinary meaning of a "building" is, a "a fabric of which it is composed, the ground upon which its wall5 stand and the ·ground embracerl within those walls." Enrty 49 includes the side of the building as its component part. [820 C-D] ·(c) The definition of the term "building" in the Act makes it clear that a house, outhouse, garage or any other structure cannot be erected without the ground on which it is to stand. The expression "building" includes the fabric of which it is composed, the· ground upon which its walls stand and the ground within thoee walls because the ground would not have a separate existence, apart from the building. The ground referred to in Entry 49 List Il would not be the subject matter of a separate tax, apart from .the tax on the building standing on it. That being so there is no occasion to tax the site separately or to ascertain its value and add it to the value of the fabric. [82.0 F-0] (d) This i:? also the ,Position in the case of appurtenances. An appurtenance belongs to the building concerned and has no existence of its own. An appurtenance, it its true sense, is: an integrated part of the building to which it belongs. [826 F-G] ( e) In the matter of fixing the annual value of the building under s. 6 f'f'JJ:ard must be had to the "location of the building" and the "value of the land on which the building comtrncted", but it does not benr on the annual valae of the ground of the building which does not have .an existence of it~ own. apart from the building. It is therefore futile to contend that as factors (a) and (f) of sub«ction 4 of s. 6 refer to the location of the building and the value of the land, the law recognises the separate existence or entity Qf the ground on which the buildings stands, so that the tax imposed under it is a tax both on lands and buildings and both entities should be separately recognised :hid determined, and taxed as such [821 C-E] 4(a) When the State Legislature had decided to impose a tax, it was open to it to decide how best to levy it. One: of t1* usu·a1 modes of levying tax ·iq to make provision for determining the "rate", or annual value of the bhild- ,fog. Rateable value is the same as the net annual value .of the building. But D. C. GOUSE V. KERALA 807 · if. the Vegislature- d(X:ides to levy a tax on bllildings once for all or, as a "nonA ' .A. 1·ecurring" tax on buildings, it has to go beyond the annual value, and work out the capital value which could be; done on the basis of capital cost of consUuction of the building or its market value or on the basis of rent arrived at l?Y what is known as "higgling of the market'' multiplying it by a number which would best serve the purpose of determining the value of the building and then to specify the rate of tax on it. [822 C-F] i ~ .. ( • I ) (~) If the Legislature chOse to adopt the· annual value as the basis for working out the capital vaJue it cannot be blamed for it because besides oth'er advantages ~it is readily ava1lable from the records of local authorities and is a quite simple and reliable basis· to \\'Ork upon. [828 B·C] (c) The various methods of properly valuation are the various facets to a di;ficult problem and no one method is perfect or final or above criticism. The multiple of sixteen adopted cannot be said to suffer from any constitutional or legal infirmity. [830 G-HJ (d) The capital value of a building is not merely th'e cost of itsi bricks and mortar. It may be difficult to provide a ready or convenient basis of taxation. There can be Ilo objection if the Legislature decides to levy th'e annual Value of a building and prescribes a uniform formula for JeterminiBg its capital value. The four well·accepted methods for arriving at the annual vaJue of the building, are : (1) The "competitive or comparative method"; (2) the "profits basis"; (3) the "contractor's method"; and ( 4) the "unit method". These tour methods can be applied either singly or in con1bination. [823 B·E] (e) The fundamental object of each of these method~ is to find out the rent which the tenant might reasonably be expected to pay for a building. It is the expectation which is to be reasonable and not necessarily the rent, i0r the reasona-ble expectation would exclude any so-calleel. black market rent. Bwt t.Qere is no rule of law as to the method of valuation to be adopted for determining the annual value of a building. If the Legislature selects the m~thod .of determining the annual value on the basis of rent, that is the, best evidence, of value 1 • If it ~s been fixed by the higgling of the market there is neither reason nor authority for holding that it is hypothetical or arbitrary. [R>.,} G-iH, 824 A-BJ (f) The provisions of the Act, taken together, contain the entire scheme for the levy and collection of the building t>x on the capital value of building. The expression "capital value" is not the cost of ,construction of the building or its market value as wealth but is only a working expr'ession which, roughly stated, is the taxable' value of the building. The State Legi51.ature •.vas quite competent to select that as the basis for assessing the building tax. [824 D-E] (g) There is no inherent illegality if the gross income of the property wereto be capitalised for th'e purpose of determining the value of the property, firstly, because there is nothing to prevent the Legislature from making the expected gross annual rent and thereby the annual value of a building from being the unit for multiplication by sixteen for arriving ~t its capital value for charging tax under s. 5. Secondly, by virtue of s. 6 the annual value form• the basis for determining ·the capital value -of the building for the purposes of the Act. However what is really taken as the annual volue under tho definition in s. 2(a) is not the gross annual rent but the net rent after allowing for the B C' D E F G H A ,• .C D F G H 808 SUPREME COURT REPORTS [1980] 1 s.c.R. cost of its repairs etc. It is hot therefore factually correct to say that the annual value of the buildings in •the State is determined on the b8Sis of theit groos an.nual rent. without ariy deduction on account of repairs. Nor is it correct to say that the determination of the capital value was arbitrary as it was arrived at by multiplying the gross annual rent by sixteen. The gross value of a bnilding is of~ .made the datum point by statute and there is nothing unusllal or illegal ai>oQt it particularly when there are statutable deductions from it. [825 C-Hl (h) Section 6(1) accepts the annual value of a building in the books of the local· authorities as correct. But. that would not justify the argument that doing .. so is illegal or ulireasona.ble as long "'' it "can be showo that what is · entered in tho assessment books of the local authorities has been ainved' at · in accorda.oce with a satisfactory procedliie · laid down for it in the statutes · conc:emed. If the procedure prescribe4 .in,, th~t .Act. is unexceptionable, th~re, is nothing ·illegal or unconstitutional if a.oothel; taxing statute provides that the annual value fixed by it shall l>e ac~ted ·as correct and .wculd form. the. basis fur the ca.Jculation of any other tax permissible under another statute. In such cases there is nO necessity for proVidin'g 'ailothef machinery ·in the lJth~r Act and Rules. Moreover ss. 9 to 16 of the Act c.ontain the procedure end tho machinery for the assessment of the building tax on the returns filed u,;cier ss. 7 and 8. These provisions are adeqnate" in .all re$peCts and are not, open , to challenge. [831 F-H, 832 A-BJ 5. (a) The argument that th~ capital 'value,of a building, is bQUnd to {lilfqr 1 according to- its location, amenities and. aPPnrtCnances etc. and. that ascertainment of the capital value by multipfying the annual value by sixteen is discriminatory and 'iolative of Art. 14, loses sight of the fact that the i.egislature has defined the annual value to mean the .. annual rent at which -a.. buildilig may be expected to let. [833 H, 834 A-Bl (b) A building in an important locality with attractive appurtenance is expected to fetch a higher rent than a building without th0 (From the Judgment and Order dated 23-6-78 of the Kerala High E Court in O.P. No. 4140!;76-H) · CIVIL· APPEAL NO. 169 OF 1979 (From the Jridglneti~'aid·Order dated 28-6-77 of thq Kerala High: . Court in O.P. No. 3117/77} CIVIL APPEAL NOS: 148-150/79, 304-305/79 AND 409/79 · (From the Judgments and Order~ dated 27-6-78, 28-6-78, 20-6-78, ·\ 27-6-78, of the Kerala High Court in O.P. Nos. 1941/77, 1903/77, 5176/78, 1047/,77(G) and 1306i77E) . F CIVIL APPEAL NOS. 2254, 2255/78 .AND 267 OF 1979 , (From the Judgments and Orders dated 27-6-78, 21-6-78 and 2.7-6-78 of the Kerala High Court in O.P. -No. 93/77, 5396/75 atjd . 2277 /76-D respectively) · , 6 (.From the Judgments and Orders dated 21-6-78 and''30-6-78 of the· Kerafa High Court in O.P. Nos. 5416/(75 and 4782/77C) WRIT PETITION NOS. 4375 OF 1978 & 143/79 li (Under Article 32 of the Constitution) H . CIVIL Af P;EAL,l•fO.· :W .OF 1979 (From the Jurlgment and Orde.r dated 12-6-1978 of the Kerala · High Court in O.P. No. 4042/74) D. C. GOUSE V. KERALA 813 SPECIAL LEAVE PETITION (CIVIL) NO. 6298 OF 1978 A (From the Judgment and Order dated 5-7-78 of the Kemla Higb •Court in O.P. No. 983/76) SPECIAL LEAVE PETITION (CIVIL) NOS: 1137-1138/79 (From the Judgments and Orders dated 7-8-78 and 27-6-78 of the :Kerala High Court in O.P, Nos. 3474/77'and 1950/77) SPECIAL LEAVE PETITION (CIVIL) NOS: 4861-4862 & 6154-56/79 B (From the Judgments and Orders dated 26-6-78, 27-6-78 .26-6-78, 28-6-78 and 30-6-78 of the Kerala High Court in O.P. Nos. C 638/77, 1530/77, 5485/78, 2950/77 and 884/78) . P. Govindan Nair (C.As. 1524, 2092-2095/78, 27, 29, 303, 310 and 311/,79 T. C. Raghavan (CA 266), T. L. Anantha Sivan and N. Sudhakaran, for the Appellants iu CAs. 1524, 2091-2092, 2093- :2103, 2136/:78, 6, 27"31, 50-52, 100, 266, 303, 310. 311, 309, 472 and 47'3/79; . D Anil B. Divan (1543-46 and 1556), S. B. Saharya, K. V. Kuriakose (in all except 1995, 1997, 1998, 29-31, 197, 500 and V. B. Saharya cfqr' the Appellants, in C.As. 1543-46, 1656, 1689-99, 1981-2004, 2105, 2324, 2351-2352, 2354, 2415-2419, 2497, 2587 /178, 67"71, 12~-131, 197, 265, 420, 544-545 and 500/79. , E P. A. Francis, (1966) -K. Sudhakaran (1967), P. Parameswaran (1966-67) A. S. Nambiar.foir the Appellants in 1965, 1966, 1967, 2203, 2204, 2205, 2206, 2353 and 2503/78, 1, 72 and 168/>79, . ·168/79, 2063/78 and for the Petitioner in W.P. 143/79. P. Kesava Pillai and S. K. Das Gupta for the Appellants in CAs. F 2104, 2350 and 2401/78 . . P. Govindan Nair and Mrs. Saroja Gopalkrishnan for the Appellants :in 1860-64/78. · ·~~ J ' s: K. Mehta, P. N. Puri and EMS Anam for the Appellants in C.A. 2256, 2257/78, 333, and.500/79 and 2026/79. G S. Balakrishnan for the Appellants in CA 2207 /78 and for Peti- ·tioner in W.P. 4375/79. G. B. Pai069), K.J. John and Manzqlkwnar for the Appellants ; m C.A. 39 and t'i59/79. · · · · ·· ' · . · · i' . i • ,,., ' ,-:: . ' P. Govindan Nair, Mrs. Baby Krishnan and N. Sudhakaran for the H Appellants. C.A. 148-50, 304-305 abd 409/79 and for the Petitioners in SLP Nos. 4062, 4061, 6298, 5141, 6154-6156/78. 814 SUPREME COURT REPORTS [1980] 1 S.C.R. A A. T. M. Sampath and P. N. Ramalingam for the Appellants in· CA 2254 and 2255/78 and 267 /79. ) B c D K. P. P. Pillai for the Appellants in C.A. 542 and 571/79. N. Sudhakaran for the Petitioners in SLP 1137-1138/79. M. M. Abdul Khader and K. M. K. Nair for the Respondents in all matters. The Judgment of the CQurt was delivered by SHJNGHAL, J. These cases relate to the validity of certain· provisions of the Kerala Building Tax Act, 1975, hereinafter referred to as the Act, and are directed against the judgment of the Keral~ High Court dated June 12, 1978,, by which the validity of those provi·· sions has been upheld. We have heard these cases together and shall' deal wits them in this judgment. In order to appreciate the controversy, it will be convenient to· make a brief mention of th~ background of the Act. The Legislature of the Kerala State wanted to impose a tax onj buildings, and passed the Kerala Building Tax Act, 1961, which came · into force on March 2, 1961. Its validity was challenged, and by his judgment dated November 20, 1964, a learned Single Judge of the· lligh Court held it to be invalid and unconstitutional. The divisi~ E bench took the same view in its judgment dated July 7, 1966, and' dismissed the appeal of the State. The matter came to this Court, and it also dismissed. the appeal by its judgment dated August 13,. 1968, reported in State of Kerala v. Haji K. Haji K. Kutty Nalia and· others. (1) This was so because the Legislature had adopted merely F G the floor area of the building a~ the basis of the tax irrespective of all' other considerations. The intention to introduce a fresh Bill and to· levy a non-recurring tax on building was stated in the Finance Minis-- ter's budget speech of 1970-71. A Bill was published some time inc. June, 1970, and it was stated there that the Act would be brought into forc01 with effect from April 1, 1970. The Bill was introduced in the Legislative Assembly on July 5, 1973, and was referred to a Select Committee. The Committee submitted its report <1ll Marcn 28, 197 4. It recommended that the Act may be brought into force from. April 1, 1973. As the Bill could not be taken up during the budget session, the Governme11t of the State promulgated the Kerala Building Tax Ordinance, 1974, on, July 27, 1974 to give effect to the provisions B of the Bill as reported by the Select Committee. It was followed by another ordinance dated November 18, 1974 on the lines of thdc (!) [1969] I S.C.R. 645. ) D. c. GOUSE v. KERALA (Shinghal, J.) 815 earlier ordinance. The Bill was passed soon after, and the Governor gawc his assent to it on April 2, 1975. Several writ petitions were filed in the High Court to challenge its constitutional validity, and we have made a mention of the High Court's impugned judgment dated June 12, 1978, from which the present cases have arisen. While four Hon'ble Judges of the High Court haveJ upheld the validity of the Act, a different view has been taken by Eradi, J. The question which arises for consideration at the threshold is that relating to the competence of the State Legislature to enact the Jaw, on which considerable stress, has been laid by Mr. P. A. Francis. He has argued that the subject-matter Q!j the Act being a tax on buildings, it i~ a tax on the capital value of the assets of an indhidual or company and falls within the scope of entry 86 of List I ofi the Seventh Schedule of the Constitution, and not under entry 49 of List II, so that it was beyond the legislative competence of State Legislature. The question is whether this is m TI1e word "tax" in its widest sense includes all money raised by taxation. It therefore includes taxes levied by the Central and the State Legislatures, and also these known as "rates'', or other charges1 levied by local authorities under statutory powers. "Taxation" \Jas therefore been defined in clause (28) of articl() 366 of the Constitution to include "the imposition of any tax qr impost, whether general or local or special," and it has been directed that "tax" shall be "construed accordingly." Chapter I of Part XI of the; Constitutiol\ deals with the distribution of legislative powers. Article 246 of that chapter states, inter alia, the exclusive powers of the Parliament and the State Legislatures according as the matter is enumerated in List I or List II of the Seventh Schedule. Entry 86 of List I, qn which reliance has been placed by Mr. Francis, reads as follows :- ' "86. Taxes on the capital value of assets, exclusive of agricultural land, of individuals and companies; raxes on the capital of companies." Now the word "assets" has been defined in the Century Dictionary (which is an encyclopedic lexicon of the il,"1.glish lai~guage) a~ follows.- · B D • E F G "Property in general; all that one owns, considered as H appiicable to the payment of his debts .... A~ a singular. Any portion of one's property or effects so considered." c D E ,. F 816 · SUPREME COURT REPORTS So if a tax is levied on all that orie oWIIS, or his total assets, · it would fall within the purview of entry 86 of List I, and would \J!l outside the legislative competence of a State Legislature, e.g. a tax on one's entire wealth. That entry would not authorise a tax imposed on any of the componeuts of the assets of the assessee. A tax; directly on one's laRds nud buildings will not therefore be a tax under entry 86. On the other hand, entry 49 of List H is as fol!ows,- "49. Taxes on lands and buildings." If therefore a tax is. directly imposed ou "buildings", it will bear :a direct relation to the buildings owned by •thei assessee. rn may be that the building o'.'med by an assessee may be a componen~ Olf hfs totirl assets, but a tax under entry 86 will not bear any direct or definable relation to his building. A tax on "buildings" is . therefore a direct tax on tlie · allGessee.'s. buildings as such, and is not a personal tax without reference to any particular property. , It has to be appreciated that in almost all cases, a tax has two elemnts which have been precisely stated by Seervai in his "Coustitu: tional Law of India," second edition·, volume·2, as follows, at page 1258,- "Another principle for reconciling apparently conflicting tax entries follows from the fact that a tax ha~ two elements : the person, thing o.r activity on which the tax is impbsed, and the amount of the tax. The amount may be measured in many ways; but ·decided cases establish a clear distinction between the subject matter of a tax and·the standard by which the amount of tax is measured. These two elements are described as the subject of a tax and the "measure of a tax." It may well be that one's building may imperceptibly .be the subject matter of tax, say the wealth-tax, as a component of his assets, under entry 86 (List I); and it may al~o be supjected to tax, say a direct tax under entry 46 (List II), but as the two taxes are separate and distii:i.ct imp0sts, they cannot be said to nv;:r-lap .othe< and would W within the competence .d the Legislatnres concerned. . ...... )'~_, ·,, .... -- '"f...;' ' ; Reference m this connection may be made to Sudhir ChandraNmM v. Wef;llt{lcTax Officer, Calcutta and· athers.(1) The petitioner there ,challenged the demand for the reco'.'.ery of wealth. tax on the ground, inter .alia,. that since. the expression "net wealth" included the builaiilgs of the assessee and the power to levy tax on theni was refen:ed to the (I) [1969] I S.C.R. 108. D. c. GOUSE v. KERALA (Shinghal, 1.) 817 State Legislature under eutry 49, List II, Parliament was not competent io levy the tax under entry 86 of List I. This Court rejected the challenge and laid down the law as follows,- ' "The tax which is imposed by entry 86 List I of the Seventh Schedulei is not directly a tax on lands and buildings. It is a tax imposed on the capital value of the assets of individuals and companies, on the valuation date. The tax is not imposed on the components CJ1f the assets of the assessee : it is imposed on the total assets which the assessee owns, and in determining the net wealth not only the, encmnbrances specifically charged against any item of asi;et, but the general liability of tire assessee to pay his debts and to discharge his lawful obligations have to be taken into account. Tax on lands and buildings. is directly imposed on lands and buildings, and bears a definite relation to it. Tax on tlie capital value of assets bears no definable relation to landS alld buildings which may form a component of the total assets of the assessee. · By legislation in exercise of power' uuder entry 86 List I tax is contemplated to be levied on the value of the assets. For the purpose of levyirig tax under entry 49 List II the State Legislature may adopt for deter- ' miriing the incidence of tax the annual or the capital value of the lands and buildings. But the adoption of the! annual or capital value of lands and buildings for determining tax liability will not, in O!UT judgment,. ~'lfe the fields of legisfa- . tion und~ the two entries overlapp~ ~. . . The decision in Sudlzir Chandra Nawn's case was followed by this Court in Assistant Commissioner of Ur/Jan. Land Tax and others v. The Buckhingham and Carnatic Co. Ltd., Etc.(1) whree the vifes of tJie Madras Urban Land Tax Act, 1966, was challenged with referen~e to entry 86 of List I of the Se.venth Sche~· '.l'tle; .legal. position on that aspect of the controversy was reite as follows - · ' ' . "But in a normal case a tax on capital value of assets bears no definable relation to lands and buildingij which may or may not form a comopnent 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 nnits. It is not concerned with the division of interest or ownership in the nnits of lands or buildings which are brought to tax.· Tax cm lands and buildings, is directly imposed on lanc!S irid bnilclings, (!)· (1970] I S. C. R. 268. A E F- SIS SUPREME COURT REPORTS [1980] 1 $.C.R. and bears, a.c:lefinite relatio0i to it. Tax on, the capital value of assets bears no definable relation to lands and buildings which may form a component of the total assets of the assessee." ) There is therefore no force in the argument that the State Legisla1B ture was not competent to impose; the tax on buildings under entry 49 or List II of the Seventh Schedule of the Constitution. J . .e ,£ .G .e We may as well put aside the other argument that the Act is unconstitutional as it was passed on April 2, 1975 but has imposed a tax on buildings with retrospective effect from April 1, 1973 . Craies on Statute Law, seventh edition, has stated th" Co.-240 U.S.