# WESTERN COALFIELDS LTD v. SPECIAL AREA DEVELOPMENT AUTHORITY, KORBA AND ANR

- **Citation:** [1982] 2 S.C.R. 1
- **Court:** Supreme Court of India
- **Decided:** 1981-11-26
- **Case number:** Civil Appeal Nos. 1025-26 of 1978
- **Bench:** Y.V. Chandrachud, D.A. Desai
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/western-coalfields-ltd-v-special-area-development-authority-korba-and-anr-8893
- **Pages:** 23

## Headnote

A
B
Madhya Pradesh Nagar Tatha Gram Nivesh Adhlnlyam (23 of 1973), S 69(d),
C
Madhya Pradesh Municipalities Act 1961, S. 127A and Madhya Pradesh Municipal
Carporation Act 1956, Ss. 135, 136.
Property Tax-Levy of-Whether special Area Development Authority has
all the powers of taxation which a Municipal Corporation or Municipal Council
has-Whether incorporation of earlier Act in a later Act or reference to the powers
conferred by earlier Acts.
D
Constitution of India 1950, Act 285(1}, M.P. Municipalities Act 1961, s. 147
Expln. and M.P. Municipal Corporatian Act 19S6, s. 141-Property tax on leased
lands-Land owned by State Government-Taken on lease by Company-Entire
share capital of company subscribed by Central Government-Liability to payment
of property tax-Whether arises.
.;
Coal Mines Nationalisation Act 1973, s. 5, Mines & Mineral (Regulation and.
Development} Act 1957 s. 2 and M.P. Nagar Tatha Gram Nivesh Adhinlyam 1973,
s. 69( dl-Power conferred on State Legislature to impose proptrty tax whether In
conflict with the power lo regu/a te and develop coal mine conferred by Nationalisation Act.
The Madhya Pradesh Municipalities Act, 196! by S. 127 (!) (i) empowered
a municipal council to impose, in the whole or any part of the municipality, "a
tax payable by the owners of houses, buildings or lands situated within the limits
of Municipality with reference to annual letting value of the house, building or
land called property tax". The corresponding provision in the Madhya Pradesh
Municipal Corporation Act, 1956 was section 132(1)(a), and it provided that "the
Corporation shall impose a tax payable by the owners of buildings or lands
situated within the city with reference to the gross annual letting value of the
building or land called the property tax". The procedure for imposition of taxes
was spelt out in section 129 of the Municipalities Act and section 133 of the
Municipal Corporation Act. Section 127 A was ins:rted in the Municipalities
Act for imposition of property tax and provided by sub-clause (I) that as and
from the financial year 1976-77 there shall be charged, levied and paid for each
financial year a tax on the lands or buildings or both situated in a municipality
at specified rates. Sub-clause (2) exempted properties owned by or vesting in the
Union Government, State Government or the Council from the levy. Similar
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SUPREME COURT REPORTS
(1982] 2 s.c.R.
I\
provisions were inse1ted in sections 135 and 136 of the Municipal Corporation
Act.
Respondent No. I was constituted the Special Area Development Authority
under section 65 of the Madhya Pradesh Nagar Tatha Gram Nivesh Adhiniyam
(23 of 1973). Clauses (c) and (d) of section 69 of the Act conferred upon the
Development Authority powers for the purpose of municipal administration and
(J
for the purpose of taxation. These clauses were inserted by Ordinance 26 of
1975 which came into force on February 27, 1976. The Ordinance was replaced
by the Madhya Pradesh Nagar Tatha Gram Nivesh (Sanshodhan) Adhiniyam
1976 (6 of 1976).
c
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I
On June 24, 1976 respondent I entered into an agreement with the appellant
company under wh.ich the company agreed to contribute a sum of rupees 3 lakhs
annually to the "seed capital" of the Authority in consideration of the Authority
agreeing not to exercise it< power of taxation or of levying any other charges on
the assets and activities of the company. The agreement was to remain in force
for a period of ten years beginning from the calendar year 1976 and the annual
paymen.ts due from 1977 were to be made in January every year. The appellant
company paid the contribution for the year 1976. In the same year the company
was called upon by the Sales Tax authorities to pay "the tax on the entry of
goods" which was introduced by the Madhya Pradesh Sthaniya Kshetra Me Mal
Ke Pravesh Par Kar Adhyadesh 1976 in substitution of octrpi tax.
While the
c·ompany wa5 pursuing that matter with the State Government, contending that
i

## Text

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WESTERN COALFIELDS LTD.
v.
SPECIAL AREA DEVELOPMENT AUTHORITY,
KORBA AND ANR.
November 26, 1981
(Y.V. CHANDRACHUD, C.J. AND D.A. DESAI, J]
A
B
Madhya Pradesh Nagar Tatha Gram Nivesh Adhlnlyam (23 of 1973), S 69(d),
C
Madhya Pradesh Municipalities Act 1961, S. 127A and Madhya Pradesh Municipal
Carporation Act 1956, Ss. 135, 136.
Property Tax-Levy of-Whether special Area Development Authority has
all the powers of taxation which a Municipal Corporation or Municipal Council
has-Whether incorporation of earlier Act in a later Act or reference to the powers
conferred by earlier Acts.
D
Constitution of India 1950, Act 285(1}, M.P. Municipalities Act 1961, s. 147
Expln. and M.P. Municipal Corporatian Act 19S6, s. 141-Property tax on leased
lands-Land owned by State Government-Taken on lease by Company-Entire
share capital of company subscribed by Central Government-Liability to payment
of property tax-Whether arises.
.;
Coal Mines Nationalisation Act 1973, s. 5, Mines & Mineral (Regulation and.
Development} Act 1957 s. 2 and M.P. Nagar Tatha Gram Nivesh Adhinlyam 1973,
s. 69( dl-Power conferred on State Legislature to impose proptrty tax whether In
conflict with the power lo regu/a te and develop coal mine conferred by Nationalisation Act.
The Madhya Pradesh Municipalities Act, 196! by S. 127 (!) (i) empowered
a municipal council to impose, in the whole or any part of the municipality, "a
tax payable by the owners of houses, buildings or lands situated within the limits
of Municipality with reference to annual letting value of the house, building or
land called property tax". The corresponding provision in the Madhya Pradesh
Municipal Corporation Act, 1956 was section 132(1)(a), and it provided that "the
Corporation shall impose a tax payable by the owners of buildings or lands
situated within the city with reference to the gross annual letting value of the
building or land called the property tax". The procedure for imposition of taxes
was spelt out in section 129 of the Municipalities Act and section 133 of the
Municipal Corporation Act. Section 127 A was ins:rted in the Municipalities
Act for imposition of property tax and provided by sub-clause (I) that as and
from the financial year 1976-77 there shall be charged, levied and paid for each
financial year a tax on the lands or buildings or both situated in a municipality
at specified rates. Sub-clause (2) exempted properties owned by or vesting in the
Union Government, State Government or the Council from the levy. Similar
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SUPREME COURT REPORTS
(1982] 2 s.c.R.
I\
provisions were inse1ted in sections 135 and 136 of the Municipal Corporation
Act.
Respondent No. I was constituted the Special Area Development Authority
under section 65 of the Madhya Pradesh Nagar Tatha Gram Nivesh Adhiniyam
(23 of 1973). Clauses (c) and (d) of section 69 of the Act conferred upon the
Development Authority powers for the purpose of municipal administration and
(J
for the purpose of taxation. These clauses were inserted by Ordinance 26 of
1975 which came into force on February 27, 1976. The Ordinance was replaced
by the Madhya Pradesh Nagar Tatha Gram Nivesh (Sanshodhan) Adhiniyam
1976 (6 of 1976).
c
D
E
F
G
H
I
On June 24, 1976 respondent I entered into an agreement with the appellant
company under wh.ich the company agreed to contribute a sum of rupees 3 lakhs
annually to the "seed capital" of the Authority in consideration of the Authority
agreeing not to exercise it< power of taxation or of levying any other charges on
the assets and activities of the company. The agreement was to remain in force
for a period of ten years beginning from the calendar year 1976 and the annual
paymen.ts due from 1977 were to be made in January every year. The appellant
company paid the contribution for the year 1976. In the same year the company
was called upon by the Sales Tax authorities to pay "the tax on the entry of
goods" which was introduced by the Madhya Pradesh Sthaniya Kshetra Me Mal
Ke Pravesh Par Kar Adhyadesh 1976 in substitution of octrpi tax.
While the
c·ompany wa5 pursuing that matter with the State Government, contending that
it was not liable to pay the entry tax by reason of the agreement, on January 4,
1977 respondent I made a further demand of Rs. 3 lakhs on the company for
contribution for the year 1977
That amount .not having been paid as provided
in the agreement, respondent l terminated the agreement by its letter dated
February 4, 1977.
By a notice issued under section 65 of the Madhya Pradesh Nagar Tatba
Gram Nivesh Adbiniyam 'Act of 1973' on February 21, 1977 and by another
notice issued under section 164(3) of the Madhya Pradesh Municipalities Act
1961 on April 15, 1977, the Chief Executive Officer of respondent 1 called upon
the company· to pay a sum of about Rs. 13 lakhs by way of property tax for the
year 1976-77. On July 16, 1977 the company was called upon to pay a further
sum ol about Rs. 13 lakhs as property tax for the year 1977-78.
The company disputed its liability to pay on the ground that no tax was
Jcviable on its property since the company was owned wholly by the Government
of India and that respondent I was estopped from levying the property tax by
reason of the agreement of 1976. Having failed to pursuade respondent I to
accept its point of view, and also having failed in the High Court the appellantcompany came to this Court in appeal.
In the appeals to this Court it was contended : (!) that respondent I can
exercise only such powers to levy property tax as the Municipal Corporation or
the Municipal Council had under the Madhya Pradesh Municipal Corporation
Act, I 956 or the Madhya Pradesh Municipalities Act, 1961 as these Acts stood
on February 27, 1976, when clause ( d) was inserteil in section 69 of the Act of
J 97J. Scciiou l Z7 A and section 135 which create and I evy the charge of property
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W. COALFiELDS V. DEVELOPMENT AUTHORiTY
lax having been inserted in the Municipalities Act and the Municipal Corporation
Act respectively with effect from April 1, 1976 i.e. subsequent to the insertion of
clause (d) in section 69 of the Act of 1973, Respondent 1 was incompetent to
exercise the powers of the Municipality or the Municipal Corporation under
section 127 A of the Municipal Corporation Act or section 136 of the Municipal
Corporation Act; (2) that respondent 1 cannot impose the property tax without
following the procedure prescribed by section 129 of the Municipalities Act and
section 133 of the Municipal Corporation Act; (3) that Article 285(1) of the
Constitution envisages that the property of the Union shall save in so far as
Parliament may by law otherwise provide be exempt from all taxes imposed by
a State or by any authority within a State. Section 127 A(2) of the Madhya
Pradesh Municioalities Act and section 136 of the Madhya Pradesh Municipal
Corporation Act also provide that the property tax shall not be leviable, on
"buildings and lands owned by or vesting in the Union Government". The
appellant companies being wholly owned by the Government of India, the lands
and buildings owned by the companies cannot be subjected to property tax;
(4) that the lands having been taken on lease for a period of 30 years by the
appellant companies, it is the State Government and not the appellant companies
who can be called upon to pay the tax; and (5) that Parliament enacted the Coal
Mines Nationalisation Act, 1973 for acquisition of coal mines and utilisation of
coal resources to subserve the common good. The lands and buildings on which
respondent 1 had imposed the property tax are used for the purposes of and are
covered by coal mines. ·The taxing power of the State legislature comes in
conflict with the power and function of the Union to regulate and develop the
mines as envisaged by the Nationalisation Act, and is an impediment since it
substantially increased the cost of the developmental activities.
Dismissing the appeals,
HELD: (i} Section 69(d) of the Act of 1973 must be read to mean that
respondent 1 shall have-all the powers of taxation· which a Municipal Corporation
or a Municipal Council has at the time when respondent 1 seeks to exercise
those powers. (14 A]
(ii) The Act of 1973 does not provide for any independent power of
taxation or any machinery of its own for exercising the power of taxation. It
rests content by referring to the provisions contained in the two Municipal Acts.
The three Acts are supplemental, from which it must follow that amendments
made to the earlier Acts after the en~ctment of section 69(d) shall have to be read
into that section. Without recourse to such a construction the power of taxation
conferred by ,that section will become ineffectual. (14 B-C]
(iii) A reading of the referenec to the two earlier Municipal Acls as a
reference to those Acts as they stand at the time when the power of taxation is
sought to be exercised by respondent I will not cause repugnancy
betwee~ the
_...
two earlier Acts on one hand·and the Act of 1973 on the other, nor will it cause
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any confusion in the practical application of the earlier Acts, because the Act of
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1973 does not contain any ind~pendent provision "' machinery for exercising the;
power of taxation. (14 DJ
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SUPREME coi.JkT REPORTS
(J 982) 2 s.c.k.
(iv) If an earlier legislation is incorporated into a later legislation, the
provisions of earlier law which are incorporated into the later law become a
part and parcel of the later law. Therefore, r amendments made in the earlier
law after the date of incorporation cannot by their own force, be read into the
later law. That is because the legislature, cannot be assumed to intend to bind
itself to all future amendments or modifications which may be made in the
earlier law. [12 D·El
( v) Where a statute is incorporated by reference into a second statute,
the repeal of the first statute by a third does not affect the second. Likewise,
where certain provisi;;ns from an existing Act have been incorporated into a
subsequent Act, no addition to the former Act, which is not expressly made appli·
cable to the subsequent Act, can be deemed to be incorporated in it.' [ 12G· 13A]
(vi) The broad principle that where a subsequent Act incorporates pro·
visions of a previous Act then the borrowed provisions become an integral and
independent part of the subsequent Act and are totally unaffected by any repeal
or amendment in the previous Act, is subject to four exceptions, one of which is
that the principle will not apply to cases "where the subsequent Act and the
previous Act are supplemental to each other". [13 DJ
Secretary of State for India in Council v. Hindustan Co-operative Insurance
Society, Limited, 58 Indian Appeals, 259, Clarke v. Bradlaugh, [1881] 8 Q.B.D. 63
69; Collector of Customs, Madras v. Nathe/la Samathu Chetty & Anr., [1962) 3
S.C.R. 786 and State of Madhya Pradesh v. M. V. Narasimhan, [1976] 1 SCR 6,
referred to.
In the instant case, subsequent amendments made to the Municipal Corpora·
tion Act and the Municipalities Act will also apply to the power of taxation pro·
vided for in section 69(d) of the Act of 1973. The Act of 1973 did not
by section
69(d),
incorporate
in its
true signification
any particular
provision of the two earlier Acts. It provided that, for the purpose of taxation,
the Special Area Development Authority shall have the powers whicl\ a Municipal
Corporation or a M'.10icipal Council has under the Madhya Pradesh Municipal
Corporation Act, 1956 or the Madhya Pradesh Municipalities Act, 1961. The
case, therefore, is not one of incorporation but of mere reference to the powers
conferred by the earlier Acts. [13 E·F]
2(i) Section 127A of the Municipalities Act and section 135 of the
Municipal Corporation Act create by their own force, the liability to be brought
to property tax and the right to levy that tax. Nothing further is required to be
done by the Municipality or the Municipal Corporation in order to impose the
property tax. The procedure preliminary to the imposition of other taxes which
is prescribed by sections 129 and 133 of the two Acts, can have no application
to the imposition of the property tax. [14 F-15 A]
(ii) The property tax is imposed by respondent 1 under section 127A of the
Municipalities Act and section 135 of the Municipal Corporation Act. It is not
imposed under section 127 of the former Act or section 132 of the latter Act.
It is, therefore, not necessary to follow the procedure prescribed by sections 129
and 133 of the respective Acts. [15 B·C]
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W. COALFiELOS v. DEVELOPMENT AUTHORITY
3.
Even though the entire share capital of the appellant companies has
been subscribed by the Government of India, it cannot be predicated that the
companies themselves are owned by the Government of India. The companies,
which ar: incorporated under the Companies Act, have a corporate personality
of their own, distinct from that of the Government of India. The lands and
buildings, are vested in and owned by the companies; the Government of India
only owns the share capital. [16 A-Bl
Rustom Cavasjee Cooper v. Union of India, [1970] 3 S.C.R. 530, 555, Heavy
Engineering Mazdoor Union v. The State of Bihar, [1969] 3 S.C.R. 995, Andhra
Pradesh State Road Transport Corporation v. The Income-tax Officer & Anr.
[1964] 7 S.C.R. 17 & Tamlin v. Hansaford [1950] K.B. 18 referred to.
4. The Explanation to section 147 of the Municipalities Act says that the
property tax has to be paid by the owner of the land or building and that a
tenant of land or building or both, who holds the same under a lease for an
agreed period, shall be deemed to be the owner thereof. Section 141(1) of the
Municipal Corporation Act provides that the property tax shall be paid primarily
by the owner. By sub-section (2) of section 141, the property tax levied on the
owner can also be recovered from the occupier of the land or the building.[180-E]
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5(i) The power conferred by the State Legislature on Special Area
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Development Authorities to impose the property tax on lands and buildings is
not in conflict with the power conferred by the Coal Mines Nationalisation Act
on the Union Government to regulate and develop coal mines so as to ensure
rational and scientific utilisation of coal resources. [21 G]
(ii) The paramount purpose behind the declaration contained in section 2
of the Mines and Minerals (Regulation and Development) Act, 1957 is not in
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any manner defeated by the legitimate exercise of taxing power under section
69(d) of the Act of 1973. [21 H·22A]
H.R.S. Murthy v. Collector of Chitoor and Another, [1964] 6 S.C.R. 666,
State of Haryana & Anr. v. Chanan Mal [1976] 3 SCR 688 and The lshwari Khetan
Sugar Mills (P) Ltd. v. The State of Uttar Pradesh & Ors. (1980] 3 SCR 331
referred to.
Baijnath Kedia v. State of Bihar & Ors. [1970] 2 S.C.R. 100, distinguished.
CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 1025-26 of
1978.
Appeals by special leave from the judgment order dated the
15th April, 1978 of the Madhya Pradesh High Court in Misc.
Petition Nos. 61 and 62/78 respectively.
With
Civil Appeal No. 213 of 1979
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SUPREME COURT REi>Okts
t 19821 2 s.c.tt.
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Appeal by special leave from the judgment and order dated
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the I 5th April. 1978 of the Madhya Pradesh High Court in Misc.
Petition
o. 555 of 1977.
L. N. Sinha, Attorney General, R. B. Dotar and Miss A.
Subhashini for the Appellants.
Y. S. Dharamodhikori, N. M. Ghatate and S. V. Deshpande
for the Respondent.
Y. S. Chitale, Suresh Sethi and S. K. Bhattacharya for the
applicant intervener Municipal Corpn. of Delhi.
Alto/ Ahmed for the applicant intervener J & K State Agro.
Industrial Corpn. Ltd.
S. K. Gambhir for the applicant.intervener State of M.P.
The Judgment of the Court was delivered by
CHANDRACHUD, C.J. These appeals by special leave involve
the question of the I egality of the demand for Property-tax made by
respondent I on the appellant Companies. Civil Appeal No. 213
of 1979 filed by the Bharat Aluminium Company Ltd. arises out of
Misc. Petition No. 555 of 1977 filed by it in the High Court of
Madhya Pradesh under Article 226 of the Constitution. Respondent
l is the Special Area Development Authority, Korba, District
Bilaspur, M.P., respondent 2 is its Chairman and respondent 3 is the
State of Madhya Pradesh. Since the three appeals raise similar questions, we will refer to the facts of Civil Appeal No. 213 of 1979 only.
Civil Appeals Nos. 1025 and 1026 of 1978 are by Western Coalfields
Ltd.
The appellant, Bharat Aluminium Company Ltd., is a Government Company incorporated under the Companies Act, 1956, the
entire share capital being owned by the Government of India.
Respondent" l, the Special Area Development Authority for the
Korba Special Area, is constituted under section 65 of the Madhya
Pradesh Nagar Tatha Gram Nivesh Adhiniyam (23 of 1973), referred
to hereinafter as 'the Act of 1973'. That Act was passed by the
Madhya Pradesh Legislature in order "to make provision for planning and development and use of land; to make better provision for
the preparation of development plans aQd zoning plans with a view
to ensuring that town planning schemes are made in a proper
manner and their execution is made effective; to constitute Town
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w. COALFIELDS v. DEVELOPMENT AUTHORITY (Chundrachud, C.J.) 7
and Couniry Planning Authority for proper implementation of town
and country development plan; to provide for the development and
administration of special areas through Special Area Development
Authority; to make provision for the c?mpulsory acquisition of land
required for the purpose of the development plans and for purposes
connected with the matters aforesaid".
Chapter VIII of the Act,
consisting of sections 64 to 71, is entitled "Special Areas". Section
64 .empowers the State Government to declare any area as a special
area by issuing a notification. - Section 55 provides that for every
Special Area there shall be a Special Area Development Authority
consisting of a Chairman and such other members as the Government may' determine from time to time. The Chairman 'and the
members of the Development Authority are appointed by the
Government. Section 68, which prescribes the functions of the
Development Authority, lays down by clauses (v) and (vi) that the
Development Authority shall
make provision for the municipal
services and municipal management of the Special Area. Section 69,
by clauses (c) and (d}, confers upon the Development Authority
powers for the purpose of municipal administration and for the
purpose of taxation. These two clauses of section 69 and clauses
(v) and (vi) of section 68 were inserted in their present shape by
Ordinance 26 of 1975 which came into force on February 27, 1976.
The Ordinance was replaced by the Madhya Pradesh Nagar Tatha
Gram Nivesh (Sanshodhan) Adhiniyam, 1976 (6 of 1976).
Section 69(d) of the Act of 1973 reads thus :
"69. Powers : The Special Area Development Authority shall
. (d) ·for the purpose of taxation have the powers which
·is n1unicipal corporation or a municipal council has, as the
case may be, under the Madhya Pradesh Municipal Corporation Art, 19.J6 (No. 23 of 1956} or the Madhya Pradesh Municipalities Act, 1%1 (No. 37 of 1961),
(a} where the municipal corporation of municipal
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council existed in such area prior to its designation as
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special area under section 64, according to the municipal law by which such special area was governed, and
(b) where no municipal corporation or municipal
council existed in such area prior to its designation as
special area under section 64, according to such of the
aforesaid Acts as the State Government may direct."
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SUPREME coullT REPORTS
( 1982] 2 S.C.)l.
Clauses (a) and (b) above are sub-clauses of clause (d). (They
should better have not been so numbered alphabetically since the
main clauses themselves are similarly numbered).
Since there was no Municipal Corporation or Municipal
Council in the Korba Special Area prior to the constitution of t~e
Development Authority, the Government was required under subclause (b) above to direct whether the Madhya Pradesh Municipal
Corporation Act,
1956, or the Madhya Pradesh Municipalities
Act, 1961, shall apply to the Korba Special Area for the purposes
of clauses (v) and (vi) of section 68 and clauses (c) and (d) of section 69.
Such a direction was first issued by Notification dated
January 28, 1976 published in the Government Gazette, dated
February 27, 1976 . by which the Development Authority, Korba,
was directed to exercise the powers and perform the functions of a
Class I Municipality constituted under the Madhya Pradesh Municipality Act, 1961. This Notification became effective from February
27, 1976 from which date Ordinance No. 26 of 1975 was made effective.
By another Notification, dated March 15, 1977, published in
Government Gazette, dated July 15, 1977, the Development Authority, Korba, was directed under the aforesaid clauses of sections 68
and 69 to exercise the powers and perform the functions under the
Madhya Pradesh Municipal Corporation Act, 1956.
Section 127(l)(i) of the Madhya Pradesh Municipalities Act,
1961 empowers a municipal council to impose, in the whole or any
part of the municipality, "a tax payable by the owners of houses,
buildings or lands situated within the limits of Municipality with
reference to annual letting value of the house, buildmg or land
called property tax". The corresponding provision in the Madhya
Pradesh Municipal Corporation Act, 1956 is section 132 (l)(a). It
says that "the Corporation shall impose a tax payable by the owners
of buildings or lands situated within the city with reference to the
gross annual letting value of the building or land called the property
tax". The procedure for imposition of taxes is contained in section
129 of the Municipalities Act and section 133 of the Municipal
Corporation Act.
In 1964, the Madhya Pradesh State Legislature had enacted
the Madhya Pradesh Nagariya Sthawar Sampatti Kar Adhiniyam,
which was made applicable to the whole State, including the urban
areas. By section 36 of the aforesaid Adhiniyam, local authorities
were prohibited from recovering the property tax from November
24, 1910.
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w. COALFIELDS v. DEVELOPMENT AUTHORITY (Ch.andrachud, c. J.) 9
Towards the beginning of 1976, the Government decided to
abolish octroi tax and to impose in its place a 'tax on the entry of
goods'. To compensate the municipal councils and the municipal
corporations for the loss arising from the abolition of the octroi tax,
the Government decided to confer powers on these bodies for
levying property tax.
For conferring powers to levy tax on the
entry of goods ia place of octroi tax, the Madhya Pradesh Sthaniya
Kshetra Me Mal Ke Pravesh Par Kar Adhyadesh, 1976 (6 of 1976)
was promulgated.
For conferring powers to levy property tax,
Ordinance No. 4 of 1976 was promulgated.
Both of these Ordinances were published in the Madhya Pradesh Gazette, dated April
30, 1976 from which date they came into force.
Ordinance No. 4
of 1976 inserted certain provisions in the Municipalities Act and the
Municipal Corporation Act. This Ordinance was replaced by Act
No. 50 of 1976.
By section 1(2) of that Act, the provisions inserted
in the Municipalities Act and the Municipal Corporation Act, with
which we are concerned, were deemed to have come into force with
effect from April l, 1976.
Section 127A which was inserted in the
Mnnicipalities Act for imposition of property tax reads as follows,
in so far as relevant :
"127A. (I) Notwithstanding anything contained in this
chapter, as and from the financial year 1976-77, there shall
be charged, levied and paid for each financial year a tax on
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the lands or buildings or both situate in a municipality
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other than class IV municipality at the rate specified in the
table below :
(i) where the annual letting
6 per centum
value exceeds Rs. 1,800
of the annual
but does not exceed
letting value.
Rs. 6,000.
(ii) x
x
x
x
x
x
x
(iii) x
x
x
x
x
x
x
(iv) x
x
x
x
x
x
x
(v)
where the annual letting
20 per centum
value exceeds
of the annual
Rs. 24,000
letting value
(2) The property tax levied under sub-section (I) shall
not be leviable in respect of the following properties,
namely:
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siJi>R.ili.iJJ coiJRt Rili>oRts
(1982] 2 s c R.
(a) building and lands owned by or vesting in
(i)
the Union Government;
(ii)
the State Government;
(iii)
the Council."
· Similar provisions were inserted in sections 135 and 136 of the
Municipal Corporation Act.
On June 24, 1976, respondent 1 (the Special Area Development
Authority, Korba) entered into an agreement with the appellant
Company under which the Company agreed to contribute a sum of
Rupees three lakhs annually to the "seed capital" of the Authority
in consideration of the Authority agreeing not to exercise its power
of taxation or of levying any other charges on the assets and activities of the Compapy under the Act of 1973 as amended from time
to time or under any other Act or notification. The agreement was
to remain in force for a period of ten years beginning from the
calendar year 1976 and the annual payments due from 1977 were
to be made in January every year. The appellant Company paid the
contribution for the year 1976 as agreed. In the same year, the
Company was called upon by the Sales Tax authorities to pay the
tax on entry of goods which was introduced in substitution of the
octroi tax. While the Company was pursuing that matter with the
State Government, contending that it was not liable to pay the entry
tax by reason of the aforesaid agreement, on January 4, 1977 respondent 1 made a further demand of Rs. 3 lakhs on the Company
for contribution for the year 1977. That amount not having been
paid as provided in the agreement, respondent 1 terminated the
agreement by its letter dated February 4, 1977.
The Company sent
a cheque for Rs. 3 lakhs to respondent 1 on April, 28, 1977.
By a notice issued under section 65 of the Act of 1973 on
February 21, 1977 and by another notice issued under section 164(3)
of the Madhya Pradesh Municipalities Act 1961 on April 15, 1977,
the Chief Executive Officer of respondent 1 called upon the Company
to pay a sum of Rs. 13,22, 160 by way of property tax for the year
J 976-77.
By a letter dated May 21, 1977 respondent 1 reduced the
demand by Rs. 3 lakhs being the amount paid by the Company by
way of contribution for the year 1977, under the agreement of 1976.
On July 16, 1977 the Company was called upon to pay a further
sum of Rs. 13,65,673.50 as property tax for the year 1977-78.
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The appellant Company disputed its liability to pay the aforesaid amounts on the grounds, principally, that no tax was leviable
on its property since the Company was owned wholly by the
Government of India and that respondent 1 was estopped from
levying the property tax by reason of the agreement of 1976. Having
failed to persuade respondent 1 to accept its point of view, the
Company filed o Writ Petition in the Madhya Pradesh High Court
asking that the demands be quashed. Civil Appeal No. 213 of 1979
by special leave is directed against the dismissal of the Writ Petition.
In the other two appeals (Nos. 1025 and 1026 of 1978), the
appellant, Western Coalfields Ltd., is also a hundred per cent undertaking of the Government of India. That Company has been called
upon by respondent I to pay property tax for the years 1976-77 and
1977-78 in the sum of Rs. 3,71,461 for each year. The Writ Petitions
(61 and 62 of 1978) filed by it were dismissed by the High Court,
following the judgment delivered in the Writ Petition filed by the
Bharat Aluminium Company Ltd.
Civil Misc. Petitions Nos. 13211 of 1979 and 3767 of 1980 are
for intervention by the Jammu and Kashmir State Agro Industries
Corporation Ltd. and the Delhi Municipal Corporation respectively.
The Delhi High Court has held in L.P.A. 105 of 1979 that the
Delhi Municipal Corporation has the power to levy property-tax on
the property of the Jammu and Kashmir State Agro Industries
Corporation Ltd., whose share capital is owned by the State of
Jammu and Kashmir and the Union of India in the proportion of
51 % and 49% respectively. In Special Leave Petition No. 10688 of
1979 filed against the judgment, the question raised is whether the
property of a public corporation owned wholly by the State Government and the Union Government is exempt from taxes by reason
of articles 285 and 289 of the Constitution. We have allowed both
the parties to intervene in these appeals.
The learned Attorney General, who appears on behalf of the
appellants, has raised four or five principal points, any one of which,
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if accepted, will result in the success of these appeals. However,
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we are unable to accept any of these.
The first contention of the learned Attorney General is that
respondent 1 can exercise only such powers to levy property tax as
the Municipal Corporation or the Muncipal Council had under the
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Madhya Pradesh Municipalities Corporation Act, 1956, or the
Madhya Pradesh Municipalities Act, 1961, as these Acts stood on,
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February 27, 1976, when clause (d) was inserted in its present form
in section 69 of the Act of 1973. It is urged that the provisions con·
ferring powers of taxation under the aforesaid two Acts must be
taken to have been incorporated in section 69(d) of the Act of 1973
and any subsequent change in those provisions by amendment of the
two Acts cannot be availed of by respondent I. Section 127A and
section 135 which, by their own force, create and levy the charge of
property tax were inserted in the Municipalities Act and the Municipal Corporation Act respectively with effect from April 1, 1976,
that is, subsequent to the insertion of clause (d) in section 69 of the
Act of 1973.
Relying on this, it is argued that respondent 1 was
incompetent to exercise the powers of the Municipality
or the
Municipal Corporation under section 127A of the Municipalities
Act or section 135 of the Municipal Corporation Act.
The answer to this contention will depend mainly upon whether
the provisions of the Municipalities Act and the Municipal Corporation Act were incorporated into the Act of 1973 by its section 69(d).
It is well· settled that if an earlier legislation is incorporated into a
later legislation, the provisions of earlier law which are incorporated
into the later law become a part and parcel of the later law. Therefore, amendments made in the earlier law after the date of incor·
poration cannot, by their own force, be read into the later law.
That is because the legislature, which adopts by incorporation the
existing provisions of another Jaw, cannot be assumed to intend to
bind itself to all future amendments or modifications which may be
made in the earlier law. In other words, the incorporating Act does
nothmg more than borrow certain provisions of an existing Act and
instead of setting out, verbatim, those provisions in its own creation,
refers to them as a matter of convenience in the mode of drafting.
(See Secretary of State for India in Council v. Hindustan Co-operative
Insurance Society Limited;(1) Craies on Statute Law, 7th Edition,
pages 360-361.)
The principle, broadly, is that where a statute is incorporated
by reference into a second statute, the repeal of the first statute by
a third does not affect the second (see Clarke v. Bradlaugh).(2) Like·
wise, logically, where certain provisions from an existing Act have
been incorporated into a subsequent Act, no addition to the former
Act, which is not expressly made applicable to the subsequcmt Act,
(I) 58 Indian Appeals 259.
(2) [1881] 8 Q.B.D. 63, 69,
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13
can be deemed to be incorporated in it. (see Secretary of State for
India in Council v. Hindus than Cooperative Insurance Society Ltd).
(supra) But these rules are not absolute and inflexible. In the case last
cited, the Privy Council qualified its statement of the law by saying
that the principle, that an amendment of the first law which is not
expressly made applicable to the subsequent incorporating Act
cannot be deemed to be incorporated into the second Act, applies
"if it is possible for the subsequent Act to function effectually
without the addition" (page 267). Besides, as held by a Constitution
Bench of this Court in the Collector of Customs, Madras v. Nathe/la
Samathu Chetty & Anr.(1) the decision of the Privy Council could
not be extended too far so as to cover every case in which the
provisions of another statute are adopted by absorption (see page
837).
Finally, in State of Madhya Pradesh v. M. V. Narasimhan(2)
this Court held, after an examination of the relevant decisions, that
the broad principle that where a subsequent Act incorporates provisions of a previous Act then the borrowed provisions become an
integral and independent part of the subsequent Act and are totally
unaffected by any repeal or amendment in the previous Act, is
subject to four exceptions, one of which is that the principle will
not apply to cases "where the subsequent Act and the previous Act
are supplemental to each other".
Applying these principles, we are of the opm1on that in the
instant case, subsequent amendments made to the Municipal Corporation Act and the Municipalities Act will also apply to the power
of taxation provided for in section 69(d) of the Act of 1973. The
Act of 1973 did not, by section 69(d), incorporate in its true signification any particular provision of the two earlier Acts. It provide>
that, for the purpose of taxation, the Special Area Development
Authority shall have the powers which a Municipal Corporation or
a Municipal Council has under the Madhya Pradesh Municipal
Corporation Act, 1956 or the Madhya Pradesh Municipalities Act,
1961. The case therefore is not one of incorporation but of mere
reference to the powers conferred by the earlier Acts. As observed
in Nathe/la Sampathu Chetty, there is a distinction between a mere
reference to or a citation of one statute in another and an incorporation which in effect means the bodily lifting of the provisions
of one enactment and making them part of another, so much so
that the repeal of the former leaves the latter wholly untouched.
(1) [1962] 3 S.C.R. 786.
(2) (1976] 1 S.C.R, 6,
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Section 69(d) of the Act of 1973 must accordingly be read to mean
that respondent 1 shall have all the powers of taxation which a
Municipal Corporation or a Municipal Council has for the time
being, that is to say, at the time when respondent 1 seeks to exercise
those powers.
The Act of 1973 does not provide for any independent power
of taxation o,r any machinery of its own for exercising the power of
taxation. It rests content by pointing its linger to the provisions
contained in the two Municipal Acts. The three Acts are therefore
supplemental, from which it must follow that amendments made to
the earlier Acts after the enactment of section 69( d) shall have to
be read into that section.
Without recourse to such a construction,
the power of taxation conferred by that section will become ineffectual. A reading of the reference to the two earlier Municipal Acts
as a reference to those Acts as they stand at the time when th.e
power of taxation is sought to be exercised by respondent 1, will
not, possibly, cause repugnancy between the two earlier ~cts on one
hand and the Act of 1973 on the other, nor indeed will it cause any
confusion in the practical application of the earlier Acts, because
the Act of 1973 does not contain any independent provJSJon or
machinery for exercising the power of taxation. The first contention of the Attorney General must therefore fail.
The second contention is that assuming that section I 27 A of
the Municipalities Act or section 135 of the Municipal Corporation
Act, which were introduced by an amendment made after the enactment of section 69(d), can be invoked for levying the property tax,
respondent I cannot impose that tax without following the procedure
prescribed by sections 129 and 133 of the aforesaid Acts, respectively. This contention is devoid of substance. Sections 127A and
135 create, by their own force, the liability to be brought to property tax and the right to levy that tax. They provide :
Notwithstanding anything contained in this chapter, as
and from the financial year 1976-77, there shall be charged,
levied and paid for each financial year a tax on the lands
or buildings or both ...... at the rate specified in the table
below :"
Nothing further is requ.ired to be done by the Municipality or the
Municipal Corporation in order to impose the property tax and
therefore the procedure preliminary to the imposition of other taxes
which is prescribed by [sections 129 and 133 of the two Acts, can
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[5
have no application to the imposition of the property tax. Apart
from this the position is put beyond doubt by the language of
sections 129 and 133 of two Acts. Section 129 of the Madhya
Pradesh
Municipalities
Act
prescribes
the
procedure
for
"the imposition of any tax under section 127". Similarly section 133 of the Madhya Pradesh Municipal Corporation Act
prescribes the procedure for ''the imposition of any tax under
section 132". The property tax is imposed by respondent 1 under
section 127A of the Municipalities Act and section 135 of the
Municipal Corporation Act. It is not imposed under section 127
of the former Act or section 132 of the latter Act. It is therefore
not necessary to follow the procedure prescribed by sections 129
and 133 of the respective Acts. This position is made clear, out of
abundant caution, by clause (4) of section 133 of the Municipal
Corporation Act, which provides that nothing contained in section
133 shall apply to the tax mentioned in clause (a) of sub-section (!)
of ·section 132, which shall be charged and levied in accordance
with section 135. Section 132( l)(a) refers to property tax.
The learned Attorney General contends that the taxing authority must all the same apply its mind to the question whether it
wants to bring to tax the land or the building or both. It is not
possible to accept this submission because sections 127 A and 135 of
the two Acts in question leave no such choice open to the taxing
authority. The obligation which the statute places upon it is to
impose tax on lands where there are lands only and they can be
taxed, on buildings where buildings alone can be brought to tax and
on both lands and buildings where lands are built upon and both
can be brought to tax. This is not, as said by the Attorney General
rationalising the taxing power. What we have said is the plain
meaning of the taxing provision.
The third contention of the Attorney General flows from the
provisions of article 285(1) of the Constitution which says that the
property of the Union shall, save in so far as Parliament may by
law otherwise provide, be exempt from all taxes imposed by a State
or by any authority within a State. Section 127 A(2) of the Madhya
Pradesh Municipalities Act and section 136 of the Madhya Pradesh
Municipal Corporation Act also provide that the property tax shall
not be: leviable, inter alia, on "buildings and lands owned by or
vesting in the Union Government". Relying on these provisions,
it is contended by the Attorney General that since the appellant
companies are wholly owned by the Government of India, the lands
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and buildings owned by the companies cannot be subjected to
property tax.