PETITIONER: RAJA JAGANNATH BAKSH SINGH Vs. RESPONDENT: THE STATE OF UTTAR PRADESH AND ANOTHER DATE OF JUDGMENT: 04/04/1962 BENCH: AYYANGAR, N. RAJAGOPALA BENCH: AYYANGAR, N. RAJAGOPALA GAJENDRAGADKAR, P.B. MAJMUDAR S.B. (J) SARKAR, A.K. GUPTA, K.C. DAS MUDHOLKAR, J.R. CITATION: 1962 AIR 1563 1963 SCR (1) 220 CITATOR INFO : RF 1963 SC1667 (12) R 1964 SC 925 (44,70) F 1969 SC1094 (15) R 1970 SC 169 (8,11) R 1972 SC 845 (14) R 1976 SC1742 (7) R 1978 SC 68 (94) F 1980 SC 271 (41,49) R 1990 SC 85 (22) ACT: Land Holding--Notice of Assessment-- Determination of annual value-Constitutional validity of enactment- U. P. Large, Land Holdings Tax Act, 1957 (U. P. 31 of 1957), ss. 7 (2), 5 (1)-Constitution of India, Arts. 14, 19 (1) (b), 31, Sch. VII, List II, Entry 49. HEADNOTE: This petition challenged the constitutional validity of a notice of assessment served under s.7 (2) of the U. P. Large Land Holdings Tax Act, 1957. The 'High Court had found against the petitioner. His case was that the relevant provisions of the Act were unconstitutional as the State Legislature was incompetent to pass the Act, that the Act violated Arts. 14, 19 and 31 of the constitution and that the rates fixed by the State Government under s. 5(1) of the Act were invalid as being contrary to that section. The impugned Act has since been repealed by the U. P. Imposition of ceiling of Land Holdings Act, 196 1, with effect from the 30th June, 196 1. Held, that the contentions were without substance and the petition must fail. The cardinal rule of interpreting the words used by the Constitution in conferring legislative power was that they must receive the most liberal construction and if they are words of wide amplitude the construction must accord with it. If a general word was used it must be so construed as to extend to all ancillary or subsidiary matters that can be reasonably included in it. So construed, there could be no doubt that the word land' in Entry 49, List 11, 7th Schedule includes all lands, whether agricultural or non- agricultural. Since the impugned Act imposed tax on land holdings, it was within the competence of the State Legislature and its validity was beyond challenge. Navinchandra Nafatlal, Bombay v. Commissioner of Income-tax, [1955] 1. S.C.R. 829, and United Provinces v. Mt. Atiqa Begum, [1940] F. C. R. 110, referred to. The word 'may' in s.5(1) of the Act could not in the 221 context mean shall or must'. While prescribing the maximum limit of the multiple which could not be exceeded, that section rightly left it to the discretion of the State Government to adjust it suitably to local requirement and the quality of the land involved. The notification issued the State Government under s. 5(1) must, therefore, be held to have complied with the statutory requirements prescribed therefor. It is now settled law that a taxing statute can be challe- nged on the ground that it infringes a fundamental right guaranteed by the Constitution. Mohammad Yasin v. Pown Area Committee, Jalabad, [1952] S. C. R. 578, State of Bombay v. United Motors (India) Ltd. [1953] S. O. R. 1069, The Bengal Immunity Company Ltd. V. State of Bihar, [1955] 2 s C. R. 603, Ch. Pika Ramji v. State of U. P. [1956] S. C. R. 393 and Balaji v. Income tax Officer, [1962] 2 S. C. R. 983, relied on. Ramjilal v. Income tax Officer, [1951]1 S. C. R. 127 and L. H. Jamkhani v. Union of India, [1955] 1 S. C. R. 769, considered M. Cullock v. Maryland, [1819] 4 L. ed. 579, referred to. Therefore, a taxing statute can be challenged under Art. 14 if it purports to impose on the same class of property, similarly situated an incidence of taxation which leads to obvious inequality. The legislature can freely choose its objects of taxation, fix the rate and classify persons and properties for that purpose, and the classification, if rational, cannot be challenged merely because the rates are different for different classes or objects. But if the taxing status contravenes Art. 14 of the Constitution in its operation, the Courts are free to interfere. Similarly if it provides no machinery or procedure for the recovery or assessment of the tax, so that the- imposition partakes of the character of a purely administrative affair, the statute can, in a proper case, be challenged under Art. 19 (1) ( f). A taxing statute that affects no fundamental rights meets the requirement of Art. 31 (1). Article 31 (2) can have no application to such a statute even though the tax may be excessive and may ultimately lead to the loss of the assessee's property. This is evident from the provisions of Art 31 (2A) and 31 (5) (b) (i), Section 5 (1) of the impugned Act did not confer no unbettered power on the State Government so as to contravene Art. 14 and 19 (1) ( f ) of the Constitution. 222 No taxing statute can be said to be a colourable legislation simply because the tax it levies is excessive. The plea of colourable legislation can succeed only when the relevant circumstance are strong enough to justify the inference that it is so and so it amounts to a fraud. K. T. Moopil v. State of Kerala, held in applicable. JUDGMENT:
ORIGINAL JURISDICTION : Petition No.327. of 1. 960.
Under Article 32 of the Constitution of India for
enforcement of Fundamental Rights.
J. P. Goyal for the Petitioner.
K. L. Misra, Advocate-General for the State of Uttar
Pradesh, C. B. Aggarwala, K. S. Hajela and C. P. Lal for
the Respondents.
1962. April 4. The Judgment of the Court was delivered by
GAJENDRAGADKAR, J.–The petitioner Raja Jagannath Baksb
Singh was a Taluqadar of Rehwan Estate in District Rai
Bareli, under the U.P. Zamindari Abolition and Land Reforms
Act (U.P. Act 1 of 1951), the petitioner’s Zamindari
property vested in the State Government, and the groves and
other agricultural land were left with the petitioner as a
Bhumidar under the said Act. In 1957, the U. P. Legislature
passed the U. P. Large Land Holdings Tax Act (No. XXXI of
1957) (hereinafter called the Act) and under section 7(2) of
the Act the petitioner was served with a notice along with a
provisional assessment of the annual value of the land in
his possession for the year 1365 fasli. Similar notices
were served on the petitioner subsequently for the years
1366 and 1367 fasli. In response to the said notices, the
petitioner filed his returns and objected to the annual
value of the land calculated by the assessing authority.
After the petitioner received notices for the years 1365 and
1366 fasli,
223
he filed writ petition in the Allahabad High Court
challenging the validity of the said notices on the ground
that the material provisions of the. Act on which the said
notices were based ultra vires and unconstitutional. These
writ petitions were numbered 3146 of 1958 and 1354 of 1959
in the said High Court. Several other writ petitions bad
also been filed by other assesses challenging the validity
of the Act, and the whole group of these petitions was heard
together by the Allahabad High Court. In substance, the
pleas, made by the petitioners challenging the validity of
the Act were rejected by the High Court and it was held that
the Act was valid and constitutional, vide Oudh Sugar Mills
Ltd., Hargaon v. State of U. P. (1). This decision was
pronounced on the 12th of October, 1959.
On the 22nd November, 1960, the petitioner filed three
petitions in this Court under Art. 32 of the Constitution.
These petitions were Nos. 325, 326 & 327 of 1960. These
three petitions were directed against the notices served on
the petitioner for the years 1365, 1366 and 1367 fasli
respectively. Out of these petitions, the first two were
dismissed on the ground that they were barred by
resjudicata. It is common ground that after the Allahabad
High Court dismissed the petitioner’s writ petitions, he
applied for and obtained a certificate from the said High
Court to appeal to this Court, but he failed to deposit the
necessary security for printing charges as required by the
rules of the Allahabad High Court, and, in consequence, on
the 9th August, 1960, the certificate granted to him was
cancelled. That is how the two writ petitions which
purported to challenge the validity of the notices served on
the petitioner for the two years 1365 and 1366 fasli were
held to be barred by res judicata. On the petitioner’s writ
petition No. 327 of 1960 which is concerned
(1) A.I.R. 1960 All. 136.
224
with the assessment for the year 1367 fasli, rule was
ordered. to be issued by this Court and it is on this rule
that the present petition has come for final disposal before
us today. This writ petition is confined to the assessment
levied on the petitioner for the year 1367 fasli.
It appears that for the relevant year a notice has been
served on the petitioner under s. 7(2) of the Act and a tax
of Rs. 15,838/92 nP was assessed on his total holding of
1152A-IIB-IB with a valuation of Rs. 44,464/88nP. After
hearing the petitioner, the Assessing Authority has decided
that the amount recoverable from the petitioner by way of
tax for the relevant year is Rs. 14,882/86nP. The
petitioner contends that since the Act is unconstitutional,
it is not open to respondent No. 1, the State of U. P. and
respondent No. 2, the assessing authority to claim the said
tax from him on his holding.
The petitioner’s case is that the relevant provisions of the
Act are unconstitutional because the U. P. Legislature was
not competent to pass the Act. He also contends
alternatively that the said Act violates the fundamental
rights guaranteed by Articles 14, 19 and 31 and as such, is
void. According to him, the rates fixed by the State
Government in pursuance of the authority conferred on it by
section 5(1) of the Act, are invalid because in fixing the
said rates, the State Government has not complied with the
provisions of the said section. Broadly stated, it is on
these three grounds that the validity of the Act is
challenged. These grounds are denied by the respondents and
it has been alleged by them that the U. P. Legislature was
competent to pass the Act, that the Act does not violate the
fundamental rights guaranteed by Articles 14, 19 and 31 and
that the rates have been fixed in accordance with the
provisions of s. 5(1) of the Act.
225
Before. dealing with these. contentions, it is necessary to
consider briefly the scheme of the Act.
The Act has been passed because the Legis-lature thought it
expedient to provide for the imposition and collection of a
tax on large land holdings. Section 28 of the Act repeals
the earlier U. P. Agricultural Income Tax Act, 1948. It may
The pointed out that this Act itself has been subsequently
repealed by section. 45 of the U. P. Imposition of Ceiling
of Land Holdings Act 1961 (1 of 1961) as from the 30th June,
1961, so that as from the 30th June, 1961, this Act is no
longer in force.
Under the Act, ,land” means land, whether assessed to land
revenue or not, which is held or occupied for a purpose
connected with agriculture, horticulture, animal husbandry,
pisciculture or poultry farming and includes uncultivated
land held by a land-holder as such [s. 2 (15)]; and acc-
ording to s. 2(16), ‘,land-holder” means (i) an
intermediary, where the land is in his personal cultivation
or is held as sir, khudkasht or grove and (ii) any other
person who holds or occupies land otherwise than as-(a) an
asami, (b) a sub-tenant, (e) a tenant of sir, or (d) a
sirtan, and includes a manager or principal officer, as the
case may be. These two definitions give an idea as to the
property over which the Act purports to impose a tax and as
to the person from whom the tax is recoverable. Section 4
defines a “land-holding”. It provides that “land-holding”
means the aggregate of all land held or occupied on the
first day of July each year by a land-holder, whether in his
own name or in the name of any member of his family, and all
such land shall be deemed to form part of the land holding
of such land-holder. With the rest of the section we are
not concerned in the present petition. It is the land-
holding thus defined which is the subject matter of taxation
imposed by s. 3. Section 3(1) provides that there shall,
save as hereinafter provided, be
226
charged levied and paid, for each agricultural year, on the
annual value of each land holding, a tax, hereinafter called
the “Holding Tax” at the rates specified in the Schedule.
The proviso to s. 3 makes it clear that no such tax shall be
charged on , any land holding the area whereof does not
exceed 30 acres. Sub-section (2) empowers the State Govern-
ment to exempt or remit in whole or in part, for such period
as it may think fit and as often as it may consider
necessary, the holding tax chargeable under sub-section (1)
in respect of any class or classes of land holdings as may
be prescribed. Under sub-section (3) the land covered by
building with the area appurtenant thereto which does Dot
exceed five acres, shall be excluded in computing the area
of land under the proviso to sub-section (1). The Schedule
prescribes the rates of the Holding Tax. No tax is levied
up to Rs. 3,600/- of annual valuation. When the annual
valuation exceeds Rs 3,600/the rate is prescribed on a
graded scale beginning with 5nP in a rupee when the annual
valuation is between Rs. 3,600/- to Rs. 5,000/- and ending
with 60 napes in a rupee where the annual valuation exceeds
Rs. 30,000/-. The intermediate rates are 10 nP in a rupee,
25nP in a rupee and 40nP in a rupee and they are prescribed
for where the annual valuation is between Rs. 5,001/- to Rs.
10,000/-, Rs. 10,001/-to Rs. 20,000/-and Rs. 20,001/-to Rs.
30,000/-respectively. Thus, reading section 3 and the
Schedule together, it follows that where the annual
valuation of the landholding exceeds Rs. 3,600/-, tax is
leviable at a graded scale and is recoverable from the land
holder, subject to conditions (a) & (b) specified in the
Schedule.
Section 5(1) provides for the determination of the annual
value. It lays down that the annual value of a land holding
shall be deemed to be an amount equal to the rent payable
for the land or lands included therein multiplied by such
multiple
227
not exceeding 12-1/2 as may be prescribed and different
multiples may be prescribed for different districts or
portions of districts or for different classes of lands
included in a land holding. Section 5(2) provides that for
the purposes of sub-section (1), the rent payable shall be
deemed to be an amount calculated at the sanctioned
hereditary rates applicable to the land or lands included in
the land holding and where there are no sanctioned heredi-
tary rates, on such principles as may be prescribed,
provided that the State Government may, where such rates
were sanctioned prior to the first day of July, 1927,
enhance the rates by such percentage not exceeding fifty as
may be specified by notification in the Official Gazette and
different percentages may be specified for the different
classes of lands and for different areas of Uttar Pradesh.
The scheme of taxation evidenced by sections 3, 4 and 5 is
thus clear. Where the area covered by a land holding
exceeds 30 acres, the tax is leviable, The tax is leviable
at the rates prescribed by the Schedule and the rates
prescribed by the Schedule are fixed by a reference to the
annual value of the land determined in the manner provided
by s. 5. That, in effect, is the result of the relevant
provisions of Chapter II of the Act which deals with the
imposition of holding tax.
Chapter III consists of ss. 6 to 16 which are concerned with
the procedure prescribed for the assessment of holding tax.
Section 6 deals with the Assessing Authority. Section 7
requires notice regarding return of land holdings to be
served on the assessee. Section 8 deals with the levy of
the assessment and prescribes an enquiry in connection
therewith. Section 9 provides that proceedings may be taken
against the legal representative of the assessee. Section
10 deals with notice of demand. Section 11 allows an appeal
against the assessment of holding tax. Section 12 permits a
228
revision to be preferred to the Board of Revenue and s. 13
makes the order passed by the Board of Revenue final.
According to s. 14 the procedure prescribed by the relevant
provisions of the U.P. Land Revenue Act, 1901, are made
applicable to the proceedings before the Board of Revenue
under s. 12. Section 15 deals with cases of land holdings
that escaped assessment and s. 16 empowers the appropriate
authority to rectify mistakes. It would thus be seen that
Chapter III provides for the procedure which has to be
followed before levying a tax on the assessee. This
procedure contemplates a notice to be given to an assessee
who would be heard, and gives the assessee a right to make
an appeal and to move the Board in revision. Chapter IV
deals with the payment of Holding Tax, and provides that tax
shall be payable by the land-bolder and that in case the
land-holder dies, it has to be paid by his legal
representative. Under a. 19, the said tax shall be payable
in four equal installments. The last Chapter deals with
miscellaneous provisions to which it is unnecessary to
refer, excepts. 24 which, inter alia, bars a suit in a
Civil Court to set aside or modify any assessment made under
the Act.
The first contention which has been raised by Mr. Goyal
before us is that the Act is unconstitutional and void
inasmuch as it is beyond the legislative competence of the
U. P. Legislatur , and this contention raises the question
about the construction of Entry 49 in List II of the 7th
Schedule of the Constitution. This Entry relates to taxes
to lands and buildings. The argument is that ‘Lands’ in the
context does not include agricultural lands and so, the U.
P. Legislature was not competent to levy the tax. In
considering the merits of this argument, it is necessary to
bear in mind that we are interpreting the words used in the
Constitution and it is an elementary cardinal rule of
interpretation that the words used in the
229
Constitution which confer legislative power. must receive
the most liberal construction and if they are words of wide
amplitude, they must be interpreted so as to give effect to
that amplitude. It would be out of place to put a narrow or
restricted construction on words of wide amplitude in a
Constitution. A general word used in an entry like the
present one must be construed to extend to all ancillary or
subsidiary matters which can fairly and reasonably be held
to be included in it, vide, Navinchandra Mafatlal, Bombay v.
Commissioner of Income Tax (1) and United Provinces v. Mt.
Atiqa Begum (2). If this principle is borne in mind, it is
obvious that the words “lands” cannot be interpreted in the
manner suggested by Mr. Goyal. The word “lands” is wide
enough to include all lands, whether agricultural or not,
and it would be plainly unreasonable to assume that it
includes non-adricultural lands but does not include
agricultural lands.
It is, however, urged that since Entry 46 in list II refers
to taxes on agricultural income, it follows that
agricultural income is not included in Entry 49. That, no
doubt, is true; if the State Legislature purports to impose
a tax on agricultural income, it would be referable to Entry
46 and not Entry 49 and in that sense, agricultural income
is not covered by Entry 49. But it must be remembered that
both Entries 46 and 49 are in List II and it would make no
difference whether the State legislation imposing taxes on
agricultural income is sustained by reference to Entry 46
rather than by reference to Entry 49. Therefore, the fact
that agricultural income having been specifically provided
by Entry 46 cannot be deemed to be included in Entry 49,
does not Justify the argument that the word ‘,lands” in the
latter Entry does not include agricultural lands.
(1) (1955) 1 S.C.R. 829, 836.
(2) (1940) F.C.R. 110, 134.
230
It is then argued that when the Constitution wanted to refer
to agricultural land, it has used the expression
agricultural land’ as, for instance. Entries 86, 87 and 88
in List 1. This argument is entirely fallacious. The three
Entries in which agricultural land has been specifically
mentioned clearly indicate that agricultural land had to be
excluded from their purview and so, it was necessary to
describe the land as agricultural land in the context. The
-fact that the necessity of the context required the use of
the expression agricultural land, in the said three Entries,
cannot possibly lead to the conclusion that wherever the
word ‘land’ is used, it should mean non-agricultural lands.
We have, therefore, no hesitation in rejecting the argument
that Entry 49 in List II does not take in agricultural
lands. If agricultural lands are included in the said
Entry, the validity of the Act would be beyond challenge, as
in substance and in fact, it imposes a tax on land holding
and as such, is within the competence of the State
Legislature. As we have already seen the scheme of the Act
is to impose a tax on land holdings, though the measure of
the tax has to be determined by its annual value as is
ascertained in the manner prescribed by section 5. The
object of the tax is land holding and the extent of the tax
leviable is determined in the light of the annual value of
the land. Thus there can be no doubt that the Act was
within the legislative competence of the U. P. Legislature
and so, the challenge to its validity on the ground that it
has been passed without legislative competence must be
rejected.
Mr. Goyal then contends that the multiple prescribed by the
State Government is invalid because it has been prescribed
in a manner contrary to the mandatory requirement of a.
5(1). This argument proceeds on the assumption that s. 5(1)
imposes an obligation on the State Govt. to adopt different
231
multiples in different districts and in reference to
different classes of laud included in the land holding. Mr.
Goyal suggests that when s. 5 (1) provides that the rent may
be multiplied by such multiple not exceeding 12 1/2 as may
be prescribed and different multiples may be prescribed for
different districts or portions of districts or for
different classes of land included in a land holding, the
Legislature intended that different multiplies must be
prescribed as therein indicated. In other words, “may” in
the context means “,must” and since different multiples have
not been prescribed for different districts and in reference
to different classes of land, the multiple value of the
petitioner’s land holding cannot be determined under the
uniform multiple prescribed by the State Government. In our
opinion, there is no substance in this argument. It is
quite clear that’ the word ” may” in the context cannot
mean “shall” or “must”. Section 5 (1) has prescribed the
maximum limits of the multiple which may be adopted and it
has left to the discretion of the State Government to adopt
such multiple for different districts or by reference to
different classes of land as it may deem proper. In other
words, having prescribed the maximum beyond which the
multiple will not go, discretion has been left to the State
Government to make suitable adjustments according to the
requirements of local condition and varying qualities of
lands.
In fact, the notification issued by the State Government on
the 23rd April, 1958, shows that it has complied with the
provisions of 5 (1). Under this notification, the multiple
of 12-1/2 has been fixed for determining the annual value
throughout U. P. for agricultural lands, but in respect of
different kinds of groves planted before 1st July, 1957, the
multiple is prescribed at 5 for the whole
232
of the State. Then there a variation made in respect of
Kumaun Division and the district of Tehri-Garhwal. In
respect of groves planted on or after the 1st July, 1957,
the multiple is prescribed at 4 for the 1st year, 2 for the
second year and nil for the 3rd and subsequent years. The
notification further provides for reduced multiples as
specified in it in respect of ‘banjar’ or user land newly
brought under cultivation subject to the conditions therein
specified. It would thus be seen that in prescribing the
multiple, the State Government has classified lands and has
varied multiple accordingly. Therefore, there can be no
doubt that the notification issued by the State Government
under s. 5 (1) has complied with the statutory requirements
prescribed therefore.
Mr.Goyalthen contends that if the word “may” is construed as
giving discretion to the State Government and not imposing,
an obligation on it, then s. 5 (1) contravenes Art. 19 (1)
(f) as well as Art. 14; and his argument is that the
charging section also contravenes the said two Articles as
well as Art. 31. This contention raises the familiar
problem as to whether a taxing statute is subject to the
provisions of Part III of the Constitution or not; and it
arises in regard to a statute which has been, passed for the
purpose of only raising revenue. The power of taxation is,
no doubt, the sovereign right of the State; as was observed
by Chief Justice Marshall in Mulloch v. Maryland (1): “The
power of taxing the people and their property in essential
to the very ‘existence of Government, and may be
legitimately exercised on the objects to which it is
applicable to the utmost extent to which the Government may
choose to carry it”. In that sense, it is not the function
of the Court to enquire whether the power of taxation has
been reasonably exercised either in respect of the amount
taxed or
(1) (1819) 4 L. ed. 579. 607.
233
in respect of the property which is made the object of the
tax’. Article 265 of the Constitution provides that no tax
shall be levied or collected, except by authority of law;
and so, for deciding whether a tax has been validly levied
or not, it would be necessary first to enquire whether the
Legislature which passes the Act was Competent to pass it
or. not. But that is not the only enquiry which is relevant
in deciding the validity of ‘a taxing statute. Since a
taxing statute is a law, it is a law for the purpose of Art.
13 and so, its validity can be challenged on the ground that
‘is contravenes one or the other of the fundamental rights
guaranteed by part Ill. It is thus clear that a citizen can
challenge the validity of a taxing statute on the ground
that it offends Art. 14 of the Constitution. At one stage,
it appears to have been assumed in some of the earlier
decisions of this Court that Art. 31 was concerned with
deprivation of property otherwise than by imposition or
collection of tax and inasmuch as the right conferred by
Art. 265 is not a right conferred by Part III of the Consti-
tution, it could not be enforced under Art. 32. In these
decisions, certain general observations were made which
would indicate that the fundamental rights guaranteed in
Part III could not be invoked in respect of taxing statutes,
vide, Ramjilal v. Income-Tax Officer, Mohindergarh (1), and
Laxmanappa Hanumantappa Jamkhandi v. The Union of India (2).
But in recent years, there has been a consensus of opinion
in the decisions of this Court that the validity of the
legislation imposing a tax can be challenged not only on the
ground of lack or absence of legislative competence, but
also on the ground that the impugned legislation violates
the fundamental right guaranteed by Part III of the
Constitution, vide Mohammad Yasin v. The Town Area
Committee, Jalalaba.
(1) [1951] S. C. R. 127.
(2) [1955] 1. S. C. R. 769, 772.
(3) [1952] S. C. R. 578,
234
State of Bombay v. The United Motors (India) Ltd. The,
Bengal Immunity Company Ltd. v. The State, of Bihar (2).
Ch. Tika Ramji v. The State of Uttar Pradesh, (3) and
Balaji v. Income Tax Officer. (4). Therefore, it must now
be taken to be settled that the validity of a tax law can be
challenged on the ground that it infringes one or the other
of the fundamental rights guaranteed by Part III, and so,
the argument that the tax with which we are concerned is
invalid because it offends against Arts. 14 and 19 (1)(f),
cannot be rejected as inadmissible.
A taxing statute can be held to contravene Art. 14 if it
purports to impose on the same class of property similarly
situated an incidence of taxation which leads to obvious
inequality. There is no doubt that it is for the
Legislature to decide on what objects to levy, what rate of
tax and it is not for the Courts to consider whether some
other objects should have been taxed or whether a different
rate should have been prescribed for the tax. It is also
true that the legislature is competent to classify persons
or Properties into different categories and tax them
differently, and if the classification thus made is
rational, the taxiing statute cannot be challenged merely
because different rates of taxation are prescribed for
different categories of persons or objects. But, if in its
operation, any taxing statute is found to contravene Art.
14, it would be open to Courts to strike it down as denying
to the citizens the equality before the law guaranteed by
Art. 14.
Similarly, if a taxing statute makes no specific provision
about the machinery to recover tax and the procedure to make
the assessment of the tax and leaves it entirely to the
executive to devise such machinery as it thinks fit and to
prescribe such procedure as appears to it to be fair, an
occasion
(1) [1953] S. C. R. 1069.
(3) [1956] S. C. R. 393.
(2) [1955] 2 S. C. R. 603.
(4) (1962)2 S. C. R. 983.
235
may arise for the Courts to consider whether the failure to
provide for a machinery and to prescribe a procedure does
not tend to make the imposition of the tax an unreasonable
restriction within the meaning of Article 19 (5). An
imposition of tax which in the absence of a prescribed
machinery and the prescribed procedure would partake’ of the
character of a purely administrative affair can, in a proper
sense, be challenged as contravening Art. 19 (1) (f).
Therefore, whenever the validity of a taxing statute is
challenged on the ground that it contravenes Art. 14 or Art.
19, the challenge cannot be thrown out on the preliminary
ground that a tax law is beyond such challenge, but its
merits must be carefully examined.
The position, however. is different when the challenge is
made on the ground that the Act is inconsistent with Art.
31. So far as Art. 31 (1) is concerned, all that it
requires. is that no person can be deprived of his property
save by authority of law, and as we have just observed, the
authority of law postulated by Art. 31 (1) is obviously the
authority of a valid law. If the law is not valid because
it offends against Art. 14 or Art. 19 or some other
fundamental right guaranteed by Part III then the imposition
of tax levied by it cannot be said meet the requirements of
Art. 31 (1). But if the Act in question is otherwise valid,
then the Art. 31 (1) is complied with. Article 31 (2) would
be inapplicable to a taxing statute because the taxing
statute does not purport to acquire or requisition any
property. It may be that the imposition of the tax levied
by the statute is excessive and may ultimately lead to the
loss of the assessee’s property, but even so, it cannot be
said that by virtue of the Act, the property has been
acquired or requisitioned. Article 31 (2A) clearly brings
out the limits of the application of Art. 31 (2).
Similarly, Art. 31 (5) (b) (i) specifically provides that
nothing in Cl. (2) shall affect the
236
provisions of any law which the State may hereafter make for
the purpose of imposing or levying any tax or penalty. Thus
it is clear that the provisions of Art. 31 (2) cannot be
invoked in impeaching the validity of a taxing statute and
so, we come back to the position that a taxing law which
does not offend against any of the fundamental rights
guaranteed by Part 111, would justify the imposition of a
tax and would meet the requirements of Art. 31 (1).
Therefore, in our opinion the challenge to the validity of
the Act on the ground that it contravenes Act. 31 (1) is not
well-founded.
Let us now turn to the merits of the argument that s. 5 (1)
contravenes Arts. 14 and 19 (1) (f)._It is urged that since
discretion has been left to the State Government to
prescribe the multiple without any guidance, the
prescription of the necessary multiple by the State
Government at its own sweet-will will amount to an
unreasonable restriction under Art. 19(5) and so, Art. 19
(1) (f) must be held to have been contravened. On the same
ground, it is said that Art. 14 has also been contravened.
We are not impressed by this argument. It is ‘clear that
the policy of the Act is to argument the revenues of the
State and for that purpose, the tax has been levied on land
holdings, subject to the important proviso that holdings the
area whereof does not exceed thirty acres would not be
taxed. In other words, it is only big holders whose land
holdings are subjected to tax by this Act. Even so, the
basis adopted for levying the tax is ultimately the rent
payable for the land or lands in question and taking the
basis of the said rent, the annual value of the land is
required to be determined by adopting a suitable multiple.
Section 5 (1) prescribes the maximum limit of this multiple
and leaves it to the discretion of the State Government to
adjust the multiple as local conditions and conditions of
land may require. It would obviously not have been prac-
ticable for the Legislature to provide for different
237
multiples in respect of different districts or in regard to
difference classes of lands. Having laid down the general
policy in that behalf, the Legislature naturally left the
adjustment of the multiple to the discretion of the State
Government because the said adjustment had to be made in the
light of local conditions and by reference to the class of
the land. Therefore, we do not think that the discretion
left to the State Government can be said to be unfettered or
uncanalised so as to amount to an unreasonable restriction
as contended by Mr. Goyal; as we have already pointed out
the notification issued by the State Government prescribing
the multiple has clearly complied with the requirement of s.
5 (1). We must accordingly hold that the challenge to the
validity of s. 5 (1) on the ground that it contravenes
Articles 14 and 19 (1) (f)must fail.
Then it is urged that the rates fixed by the Schedule
contravene Arts. 14 and 19. It is not easy to appreciate
this argument. Section 5 (1) makes it clear that the rent
is to be taken as the basis for fixing the annual value and
s. 5 (2) provides for the method of calculating the said
rent. Thus the rent being determined, the annual value has
to be ascertained by adopting a suitable multiple and it is
on the annual value. thus determined that the Schedule
prescribes a grading scale of rates, for Holding Tax. The
tax being on land holding,the measure of the tax is thus
fixed in the light of the annual value of the land holding.
In other words, the land holding is taxed on the basis of
its annual value and it is difficult to understand how the
Schedule can be successfully challenged as being
inconsistent with Arts. 14 and 19 (1) (f).
That leaves one more question to be considered. Mr. Goyal
argues that the Act is confiscatory in (character and must
be struck down as being a colorable piece of legislation,
and in support. of this argument he suggests that the rates
prescribed
238
by the Schedule are so heavy that the assessees would
virtually have to part with their properties within a short
time in order to bear the burden of the tax. This plea
raises the question as to whether a taxing statute can be
challenged on the ground that the burden of tax imposed by
it is unreasonably high or excessive. We have already seen
that the provisions of Art. 31 (2) cannot be invoked in
challenging the validity of a taxing statute on the ground
that the tax levied is unreasonably high and we have also
noticed that if the taxing statute does not contravene any
other fundamental right guaranteed by part III, it would
normally be treated as a valid law by whose authority tax
can be collected without infringing Art. 31 (1). Though the
validity of a taxing statute cannot be challenged merely on
the ground that it imposes an unreasonably high burden, it
does not follow that a taxing statute cannot be challenged
on the ground that it is a colourable piece of legislation
and as such, is a fraud on the legislative power conferred
on the Legislature in question. If, in fact, it is shown
that the Act which purports to be a taxing Act is a
colourable exercise of the legislative power of the
Legislature, then that would be an independent ground on
which the Act can be struck down. Colourable exercise of
legislative power is not a legitimate exercise of the said
power and as such, it may be open to challenge. But such a
challenge can succeed not merely by showing that the tax
levied is unreasonably high or excessive, but by proving
other relevant circumstances which justify the conclusion
that the statute is colourable and as such, amounts to a
fraud.
As an illustration of such a colourable statute, we As an
illustration of such a colourable statute, may refer to the
decision of this Court in K. P. Moopil Nair v. State of
Kerala (1). In that case, the provisions of’ Sections 4 and
7 of the Travancore-Cochin Land Tax Act (XV of 1955) as
(1) [1961] 3. S. C R. 77.
239
amended by Act X of 1957, were declared to be
unconstitutional in view of the provisions ‘of Articles 14
and 19 (1) (f) of the Constitution. These provisions along
with the provisions of section 5A which was held to
contravene Art. 19 (1 ) (f), were the main provisions of the
Act and as such, as soon as the said provisions were struck
down as unconstitutional the whole Act inevitably became
void. In dealing with the validity of the said Act, this
Court had occasion to consider also the confiscatory
character of its operative provisions. On making
calculations, it was found that the petitioner who
challenged the validity of the said Act in that case was
making an income of Rs. 3,100 per year out of his forests
and his liability for taxation in respect of the forest land
amounted to Rs. 54,000. So, it was held that the provisions
of the Act were confiscatory. It would thus be noticed that
the main sections of the Act were found to be discriminatory
and were also found to have imposed unreasonable
restrictions on the citizens’ right to hold property.
Besides, it appeared that in their effect they were
confiscatory, in character. In other words, careful
examination of the material provisions of the Act disclosed
a design to impose a discriminatory tax and make its
realisation amenable to an executive fiat. Consistently
with this design, the Act had levied an impost which was
confiscatory in character. The judgment of this Court shows
that the confiscatory character of the levy imposed by the
Act proved to be the proverbial last straw on the camel’s
back. It is in the light of these facts that the whole of
the Act was struck down. This decision illustrates how a
taxing statute though ostensibly passed in exercise ,of the
legislative powers conferred on the Legislature, can be
struck down as being a colourable exercise of the said
power. In other words, the conclusion that a taxing statute
is colourable would not and cannot normally be raised merely
on the
240
finding that the tax imposed by it is unreasonably high or
heavy, because the reasonableness of the extent of the levy
is always a matter within the competence of the Legislature.
Such a conclusion can be reached where in passing the Act
the Legislature has merely adopted a device and a cloak to
confiscate the property of the citizen taxed. If, however,
such a conclusion is reached on the consideration of all
relevant facts, that is a separate and independent ground
for striking down the Act. There is no doubt that the
decision in the case of K. T. Moopil Nair is not an
authority for the proposition that in testing- the validity
of a taxing statute ‘, the Court can embark upon. an enquiry
whether the tax imposed by the statute is unreasonably high
and whether it should have been fixed at a lower level.
Let us now see what the petitioner has proved in the present
case in support of his plea that the Act is confiscatory and
should, therefore, be struck down as a colourable piece of
legislation. It appears that when the petition was first
filed, it had not clearly made out a case on this. point.
The petitioner had, no doubt, alleged that approximately
3/5th of the income had to be utilised for the cost of
production in terms of raw materials, labour, capital and
the risk taken by the farmer, and so, according to the
petitioner, only 1/5th of the gross agricultural income can
be termed to be the net agricultural income of the farmer.
On this basis, the Act was described as confiscatory. Later
on, an application for amendment of the petition was filed
on the 30th January, 1961, and in this application, some
additional facts were alleged in support of the plea that
the Act is confiscatory. In paragraph 6 of this amendment
petition, it was sought to be shown that 14% of the gross
produce had to be spent in purchasing seeds, 14% was
required to be spent or irrigation facilities, 14% for
ploughing the fields and 14% for extra labour and general
241
management and 15% would be needed to pay rent. On this
calculation, it was urged, that the tax levied by the Act
was confiscatory and as such, amounted to a colourable piece
of legislation.
The allegations thus made by the petitioner have been denied
by the respondents in their counter-affidavit. The
calculations made in the counter affidavit show that the
gross income of the petitioner is Rs. 1, 07,362. According
to the counteraffidavit, cost of cultivation would not
exceed 40% and that amounts to about Rs. 42,000. Deducting
this total cost of cultivation from the gross income, the
petitioner would be left with a net income of Rs. 65;362 and
on this net income of Rs. 65,362 he is called upon to pay a
tax of Rs. 14,882/86 nP. If the facts stated in the counter
affidavit are accepted as true, it is obvious that the tax
imposed on the petitioner cannot by any stretch of
imagination be deemed to be confiscatory.
In this connection., it is significant that in his’
amendment petition, the petitioner has not stated the extent
of the rent which he is required to pay for his land
holdings. He holds the lands as Bhumidar and the
respondents contend that the rent recovered from Bhumidars
is very low. It was even suggested during the course of
argument by Mr. Aggarwal that the rent recovered from the
Bhumidars would not exceed 1% of the gross income and in
some cases, it may even be less. Unfortunately, the
petitioner has not made any statement I about this important
particular. The operation of the rates prescribed by the
Schedule is based on the annual valuation of the lands, and
the said valuation is determined ultimately on the basis of
the rent, so that unless the rent is known, the extent of
the impost cannot be adequately judged. Therefore, ,in our
opinion, on the material added by the petitioner before us,
it is impossible to accept the
242
argument that the tax levied by the Act is confiscatory.
Besides, as we have already seen, the scheme of the present
Act does not disclose any constitutional infirmity either in
its charging sections or in the sections providing for the
procedure for the levy of the tax and its recovery. That is
why we feel no hesitation in holding that there is no
substance in the plea that the Act is a colorable piece of
legislation.
In the result,the petition fails and is dismissed with
costs.
Petition dismissed.
