{"id":131983,"date":"1991-02-15T00:00:00","date_gmt":"1991-02-14T18:30:00","guid":{"rendered":"https:\/\/www.legalindia.com\/judgments\/spences-hotel-pvt-ltd-and-anr-vs-state-of-west-bengal-and-ors-on-15-february-1991"},"modified":"2016-11-22T14:11:36","modified_gmt":"2016-11-22T08:41:36","slug":"spences-hotel-pvt-ltd-and-anr-vs-state-of-west-bengal-and-ors-on-15-february-1991","status":"publish","type":"post","link":"https:\/\/www.legalindia.com\/judgments\/spences-hotel-pvt-ltd-and-anr-vs-state-of-west-bengal-and-ors-on-15-february-1991","title":{"rendered":"Spences Hotel Pvt. Ltd. And Anr vs State Of West Bengal And Ors on 15 February, 1991"},"content":{"rendered":"
Supreme Court of India<\/div>\n
Spences Hotel Pvt. Ltd. And Anr vs State Of West Bengal And Ors on 15 February, 1991<\/div>\n
Equivalent citations: 1991 SCR (1) 429, \t 1991 SCC (2) 154<\/div>\n
Author: K Saikia<\/div>\n
Bench: Saikia, K.N. (J)<\/div>\n
           PETITIONER:\nSPENCES HOTEL PVT. LTD. AND ANR.\n\n\tVs.\n\nRESPONDENT:\nSTATE OF WEST BENGAL AND ORS.\n\nDATE OF JUDGMENT15\/02\/1991\n\nBENCH:\nSAIKIA, K.N. (J)\nBENCH:\nSAIKIA, K.N. (J)\nPUNCHHI, M.M.\n\nCITATION:\n 1991 SCR  (1) 429\t  1991 SCC  (2) 154\n JT 1991 (1)   479\t  1991 SCALE  (1)225\n\n\nACT:\n     West Bengal Entertainments and Luxuries\t (Hotels and\nRestaurants)   Tax   Act,   1972-Section    4-Luxury\tTax-\nImposition   of\t  flat\t or  fixed rate\t on  basis  of\tair-\nconditioned  floor  space-Whether  permissible,\t valid\t and\nlegal.\n\n\n\nHEADNOTE:\n     The  appellant company was carrying on the business  of\nrunning\t a hotel, bar and restaurant where it  had  provided\nair-conditioning.   The\t second\t respondent,  Collector\t  of\nCalcutta, sought to levy luxury tax on the company under the\nprovisions of the  West\t Bengal\t Entertainments and Luxuries\n(Hotels\t and  Restaurants) Tax Act, 1972 calculated  at\t the\nflat  or fixed rate of an annual sum of Rs.100 for every  10\nSq. meters of the floor area provided with air-conditioning.\nThe  appellant's  representation showing that  the  tax\t was\ndiscriminatory was rejected  by\t the Collector.\t There-upon,\nthe appellants read a petition in the High Court.\n     The  appellants  in  their\t writ  petition\t inter\talia\ncontended  that\t the  Act  had imposed\ta  flat\t rate  on  a\nspecified   air-conditioned  floor  space  in\thotels\t and\nrestaurants which may be differently situated with reference\nto  their  localities,\tclientele,  services  and  amenities\nrendered, the Act made no distinction on any of these bases,\nas such it, did not even attempt a reasonable classification\nof  these  different  types  or\t categories  of\t hotels\t and\nrestaurants,   hence   it   suffered  from   the   vice\t  of\ndiscrimination under Art. 14 of the Constitution.\n     Before this Court, the appellants while reiterating the\ncontentions  urged  before the High Court, argued  that\t the\nlegislature  while  imposing  a\t tax  was  bound  under\t the\nConstitution to make appropriate classification and  failure\nto  do\tso  resulting  in  clubbing  dissimilar\t hotels\t and\nrestaurants  for  the purpose of luxury tax amounted  to  an\nerror\tby  inaction;  where  the incidence  of\t a  tax\t was\ndistributed in a manner which was irrational or arbitrary or\nwhere  lack  of classification created inequality,  the\t tax\nwould be violative of Article 14; and the provision for air-\nconditioning had no direct nexus with the income  earned  by\nthe different hotels and restaurants, and on the same ground\nsection\t 4 of the luxury tax Act must be declared  violative\nof Article 14 of the Constitution.\n\t\t\t\t\t\t       430\n     On behalf of the respondents it was contended that\t the\nlegislature  had  made the classification in  selecting\t the\nhotels and restaurants for the purposes of luxury tax in  as\nmuch as only the air-conditioned hotels and restaurants\t had\nbeen  subjected to tax; that the legislature had the  widest\nlatitude  in the matter of such classification. and  that  a\nsystem of taxation need not be absolutely perfect and  micro\ndivision and mini classification may not always be made.\n     Dismissing the appeal this Court,\n     HELD:  (1)\t A  taxing statute will be  struck  down  as\nviolative of Art. 14 if there is no reasonable basis  behind\nthe  classification  made  by it, or,if the  game  class  of\nproperty,  similarly  situated,\t is  subjected\tto   unequal\ntaxation. [442G]\n     Kunnathat Thathunni Moopil Nair v. The State of Kerala,<\/a>\n[1961]\t3 SCR 77; I. T. O. v. Lawrence Singh, AIR (1968)  SC\n658=(1968) 2 SCR 165; State of Andhra Pradesh v. Nalla Raja,\nAIR<\/a> (1967) SC 1458 1967] 3 SCR 28, referred to.\n     (2)  The luxury tax charged under section 4 of the\t Act\nis  a  tax on the mere provision for luxury and not  on\t the\nhotel  property\t or equipment. The measure or unit  and\t the\nrate  of  taxation  are uniform for  all  within  the  group\nsubjected  to tax. Further classification within  the  group\nwas  not considered necessary by the legislature  which\t had\nwide  latitude\tin the matter of classification\t keeping  in\nview  the  nature of the taxable event.\t The  tax  therefore\ncould not be said to be discriminatory. [447D-F]\n     (3)  Whether a particular tax is discriminatory or\t not\nmust  necessarily be considered in light of the\t nature\t and\nincidence  of  that particular tax and cannot be  judged  by\nwhat has been held in the context of other taxes except\t the\ngeneral\t propositions. The precedents relating\tto  property\ntaxes  such was as land tax, building tax,  plantation\ttax,\nand  even income tax or a service tax will not be of  direct\nrelevance to a luxury tax, as it is neither a property\ttax,\nnor an income tax but a tax on the provision for luxury.  In\ncase  of  tax  on provision  for  luxury  different  aspects\npeculiar to the tax have to be borne in mind. [443G]\n     (4) What exactly is meant by equality in taxation\tmay,\nhave  to  be looked at from different  angles  in  different\nkinds of taxes. [444E]\n     (5)  The ability or capacity to pay has no\t doubt\tbeen\nregarded as\n\t\t\t\t\t\t       431\nthe  test  in  determining  the\t justness  or  equality\t  of\ntaxation. It is the goal towards which the system has  been,\nas it must be, steadily working. [444C]\n     (6) Taxation will not be discriminatory if, within\t the\nsphere\tof  its\t operation, it\taffects alike  all   persons\nsimilarly  situated. It, however, does not prohibit  special\nlegislation,  or legislation that is limited either  in\t the\nobjects to which it is directed, or by the territory  within\nwhich it is to operate. [445F]\n     (7) The equal protection of the law's provision in\t our\nConstitution prohibits a discrimination by the State against\nits  own  citizens  as well as to one  in  their  favour  in\nimposing the luxury tax. The provision requiring luxury\t tax\nto  be equal and uniform has to be interpreted in  light  of\nits  characteristics. The luxury tax is 'uniform' as  it  is\nequal  upon   all persons belonging to the  described  class\nupon  which  it\t is  imposed, namely,  the  owners  of\tair-\nconditioned hotels and restaurants. [446G-H]\n     (8) Equality and uniform policy means uniform and equal\nrates of assessment and taxation which has been followed  in\nthis  tax.  The concept of equality and\t uniformity  has  to\nadjust\tfrom  time to time to new and advancing\t social\t and\neconomic  conditions and needs of public finance and  fiscal\npolicy, of course within constitutional limitations. [447B]\n     Express  Hotels  Private  Ltd.  v.\t State\tof  Gujarat,<\/a>\n[1989]3 SCC 677; New Manek Chowk Spinning and Weaving  Mills\nCo  Ltd\t v.  Municipal Corporation of the City of Ahmedabad,<\/a>\n[1967]\t2  SCR 679; Ram Prasad Narayan Sahi &  Anr.  v.\t The\nState of Bihar,\t [1954] 4 SCR  1129; Steelworth v. State  of\nAssam,<\/a> [1962] Supp. 2 SCR 589; Ganga  Sagar Corpse. v. State\nof  U.P., AIR [1980] SC 286: [1980] 1  SCR   769;  Khyerbari\nTea  Co.  v. State of Assam, AIR<\/a> (1964) SC  935;  State\t  of\nKerala\tv.  Haji K. Haji K. Kutty Naha,<\/a> [1969]\t1  SCR\t645;\nSpences Hotel Pvt. Ltd. v. State of West Bengal,<\/a> [1975]\t Tax\nL.R.  1890; East India Hotels Ltd. v. State of West  Bengal,\nAIR<\/a> (1990) 6 SCR 2029; State of Rajasthan v. Mukachand\t and\nOrs.,  [1964]  6  SCR  903;  State  Of Maharashtra & Ors. v.\nMadhukar Balkrishna Badiya & Ors.,<\/a> [1988] 4 SCC 290; Twyford\nTea  Co. Ltd. & Anr. v. The State of Kerala,<\/a> [ 1970]  3\t SCR\n383;  Elel  Hotels and Investments Ltd. & Ors  v.  Union  of\nIndia,<\/a>\t[1989] 3 SCC 698; Gopal v. State of U.P.,  [19641  4\nSCR  869; Ravi Verma v. Union of India, AIR (1969) SC  1094;\n(1969)\t3 SCR 827; D.S. Nakara v. Union of India,<\/a>  [1983]  1\nSCC 305 and Bank of Baroda v. Rednam Negachaya Devi,<\/a>  [1989]\n4 SCC 470.\n\n\n\nJUDGMENT:\n<\/pre>\n
CIVIL APPELLATE JURISDICTION CIVIL: Civil  Appeal  No.\t406
\nof 1976.\n<\/p>\n
\t\t\t\t\t\t       432<\/span><\/p>\n
     Appeal by Certificate from the Judgment and Order dated
\n2.1-1975  of  the Calcutta High Court in Appeal No.  137  of
\n1974.\n<\/p>\n
     G.L.  Sanghi, Dhruv Mehta, Aman Vachhar and S.K.  Mehta
\nfor the Appellant.\n<\/p>\n
     Tapas Ray and G.S. Chatterjee for the Respondents.
\n     Harish  N. Salve, Lalit Bhasin, Ms. Nina Gupta,   Vibhu
\nBhakru, Pranab Mullick and Vineet Kumar for the Intervener.\n<\/p>\n
     The Judgment of the Court was delivered by
\n     K.N. SAIKIA, J. This appeal by certificate is from\t the
\nJudgment  of  the  Calcutta High   Court    dated   2.1.1975
\ndismissing the appeal No. 137 of 1974.\n<\/p>\n
     The second appellant is a share-holder and Director  of
\nthe  first appellant Company M\/s. Spences Hotel, Pvt.  Ltd.
\nhereinafter   referred\tto  as ‘the  Company’\thaving\t its
\nregistered office, and carrying on the business of running a
\nhotel,\tbar  and  restaurant,  at  No.\t4  Wellesley   Place
\nCalcutta.  The\tsaid  hotel, bar and  restaurant  have\tbeen
\nprovided  by the Company with air-conditioning\t through   a
\ncentral\t   air-conditioning   plant  which,   according\t  to
\nappellants,  would normally run between months of March\t and
\nOctober\t each  year  remaining\tunused\tfor the rest of\t the
\nyear.\n<\/p>\n
     The  second  respondent, Collector of Calcutta  by\t his
\nMemo  No. 4600(86) A.T. dated November 9, 1972 directed\t the
\ncompany\t to make ad hoc payment of tax under the  provisions
\nof  the West Bengal Entertainments and Luxuries (Hotels\t and
\nRestaurants)  Tax  Act,\t 1972  (W.  B.\tAct  XXI  of   1972)
\nhereinafter referred to as ‘the Act’, calculated at the flat
\nor  fixed rate of an annual sum of Rs. 100 for every 10\t sq.
\nmetres\tor part thereof in respect of so much of  the  floor
\narea  of the hotel which was provided with luxury i.e.\tair-
\nconditioning.  Again by Memo No. 1161\/A.T.  dated  13.3.1973
\nthe second respondent called   upon the Company to  expedite
\nthe submission of the blue print of the space provided\twith
\nmeans for air-conditioning, failing which appropriate  legal
\naction\twould  be taken. The second  appellant\tsubmitted  a
\nrepresentation showing that the tax was discriminatory\tand,
\ntherefore,  illegal and void, but the second  respondent  by
\nhis Memo No. 5166\/ A.T. dated 22.12.1972 replied that  there
\nwas nothing discriminatory in it.\n<\/p>\n
\t\t\t\t\t\t       433<\/span><\/p>\n
     The appellants in their writ petition under Article 226
\nof  the Constitution of India in the High Court of  Calcutta
\ncontended  that\t the  provisions of the Act  and  the  Rules
\nframed\tthereunder, enabling the respondents to levy  luxury
\ntax,  were unconstitutional and void,  and consequently\t the
\nnotices and memos issued  to  the  appellants  were  without
\njurisdiction  and  amounted  to\t  colourable   exercise\t  of
\npower  practising  fraud on legislative powers; and  it\t was
\nprayed\tinter  alia  that  the\tAct  and  the  Rules  framed
\nthereunder  be declared illegal and void being\tultra  vires
\nthe  constitution of India; that a writ of mandamus  or\t any
\nother appropriate writ be issued commanding the\t respondents
\nand  each of them not to give any or any further  effect  to
\nthe Act, Rules, and the notices.\n<\/p>\n
     A\tlearned Single Judge dismissed the writ\t application
\nby  order dated March 6, 1974 but granted stay of  operation
\nof  his\t order\ttill  April  30,  1974\ton  which  date\t the
\nappellants  preferred therefrom the appeal No. 137  of\t1974
\nand  the  Division Bench  also\tgranted\t  stay\tpending\t the
\nappeal\tbut  directed  the appellants to deposit  a  sum  of
\nRs.6,000 towards luxury tax with the Registrar of the\tHigh
\nCourt,\twhich the appellants did; and after hearing  by\t the
\nimpugned Judgment and order dated January 2, 1975  dismissed
\nthe  appeal,  but  granted certificate of fitness to  appeal
\ntherefrom to this Court.\n<\/p>\n
     In\t the  High  Court  it was  first  contended  by\t the
\nappellants  that  under Entry 62 of List 11 of\tthe  Seventh
\nschedule taxes could  be imposed only on luxuries i.e.\tobj-
\nects or articles of luxury, but the impugned Act instead  of
\nimposing  tax on air-conditioners as articles of luxury\t has
\nimposed\t tax on air-conditioned floor space and as  such  it
\nwas a property tax on the basis of floor space and not a tax
\non  any apparatus, instrument of articles of luxury  and  as
\nsuch  ultra vires the powers of the state  legislature.\t The
\nsecond\tcontention was that Section 4 of the Act  imposes  a
\nflat  rate  of\tRs.  100  per  annum  on  a  specified\tair-
\nconditioned floor space in hotels and restaurants which\t may
\nbe differently situated with reference to their\t localities,
\nclientele, services and amenities rendered and the Act makes
\nno distinction on any  of these bases and as such it did not
\neven attempt a reasonable classification of these  different
\ntypes\tor  categories\tof  hotels  and\t restaurants,\tand,
\ntherefore, it suffered from the vice of discrimination under
\nArt. 14 of the constitution.\n<\/p>\n
     Mr.   G.  L.  Sanghi,  the\t learned  counsel  for\t the
\nappellants, fairly submits that in view of the\tConstitution
\nBench  decision in Express Hotels Private Ltd. v.  State  of
\nGujarat and Anr,<\/a> [1989] 3 SCC 677,
\n\t\t\t\t\t\t       434<\/span>
\nbefore which Bench the West Bengal petition was also  there,
\nthe  above  first contention stands  concluded\tagainst\t the
\nappellants.  The  second contention, however,  according  to
\ncounsel, was not urged before the Constitution Bench and  as
\nsuch  is  still\t open to the  appellants.  Reiterating\tthat
\ncontention counsel submits that the State has levied  luxury
\ntax at a flat rate of an annual sum of Rs. 100 for every  10
\nsquare metres, or part thereof in respect of so much of\t the
\nfloor  area  of\t a  hotel  which  is  provided\twith  luxury
\nirrespective  of the locality, quality, standard or size  of
\nthe  hotels and restaurants; there is no attempt  whatsoever
\nby the State to classify and in fact the tax is sought to be
\nimposed\t indiscriminately without discernment; and there  is
\ntotal  failure on the part of the state in  not\t recognizing
\nthe inherent differences in hotels and restaurants.  Counsel
\nproduces a list of classified hotels which according to him,
\nclearly shows vast differences between different hotels\t and
\nthis  is magnified not only by the fact of  different  rates
\ncharged\t but  also different  kinds  of\t services\/facilities
\nprovided. The appellants also refer to criteria for one star
\nhotels, which, it is submitted, show that the levy of tax on
\nfloor  area  has no nexus with the subject of  tax,  namely,
\nluxuries. Regarding the flat rate it is submitted that\tthis
\nCourt  has in more than one case deprecated the practice  of
\nimposition  of\ttax  at\t flat rate  and\t he  relies  on\t the
\ndecisions in Kunnathat Thathunni Moopil Nair v. The State of
\nKerala\tand Anr.,<\/a> [ 1961] 3 SCR 77 (90-92); New Manek  Chowk
\nSpinning  and  Weaving Mills Co. Ltd. & Ors.,  v.  Municipal
\nCorporation  of the City of Ahmedabad & Ors.,<\/a> [ 1967] 2\t SCR
\n679 (692) and State of Kerala v. Haji K. Haji K. Kutty\tNaha
\n&  Ors.,<\/a>  [ 1969] 1 SCR 645 (649). Counsel  further  submits
\nthat  there  is no nexus or co-relation\t between  floor\t and
\nspace  of  a  hotel and the extent  of\tluxury\tprovided  on
\naccount\t of  air-conditioning  and the\tprovision  for\tair-
\nconditioning  or air-cooling is not a material factor  which
\nwould determine the extent of use and benefit and quantum of
\nincome to be received from a given area of  air-conditioning
\nfloor space. Depending on the quality and nature of  several
\nother amenities provided by hotels and restaurants, some  of
\nthese establishments are able to give more space per  capita
\nto their residents and customers for a certain rate or\trent
\nor  price  than other hotels and  restaurants  of  different
\nstandards, although both are air-conditioned or\t air-cooled.
\nIt  is\tsubmitted that a very old hotel\t of  otherwise\tpoor
\nstandard situated in the outskirts of the city and an  ultra
\nmodern expensive hotel with excellent amenities situated  in
\nthe  best locality would be charged with the same amount  of
\nluxury tax if the extent of floorage of both were the  same,
\nonly  because  both are air-conditioned.  This\tclubbing  of
\nunequals  for  the purposes of imposition of luxury  tax  is
\ndiscriminatory.\t “Because my hotel is situated\toutside\t the
\ncongested area and my space
\n\t\t\t\t\t\t       435<\/span>
\nis wider and my rooms are bigger and my floor space is\tmore
\nshould I be made to pay more tax than the five stars  hotels
\nwhose  earnings\t and   rates are much higher than  those  of
\nmine?” According to counsel the legislature while imposing a
\ntax  is\t bound under the Constitution  to  make\t appropriate
\nclassification\tand failure to do so resulting\tin  clubbing
\ndissimilar hotels and restaurants for the purpose of  luxury
\ntax amounts to an error by inaction.\n<\/p>\n
     Mr. H.N. Salve, the learned counsel for the  intervener
\nM\/s East India Hotel Ltd., submits that where the  incidence
\nof  a tax is distributed in a manner which is irrational  or
\narbitrary   or\t where\tlack   of   classification   creates
\ninequality, the tax would be violative of Article 14 of\t the
\nConstitution  of  India. In the instant case,  according  to
\ncounsel,   neither  the\t charge,  nor  the  rate,  but\t the
\n‘measure’,  that  is  the  air-conditioned  floor  space  of
\nassumed homogeneity or uniformity that suffers from the vice
\nof non-classification causing inequality in incidence of the
\ntax.\n<\/p>\n
     Mr. Tapas Ray, the learned counsel for the respondents,
\nsubmits,   inter  alia,\t that  the  Legislature\t  made\t the
\nclassification\tin selecting the hotels and restaurants\t for
\nthe  purpose  of  luxury  tax  inasmuch\t as  only  the\tair-
\nconditioning  hotels and restaurants have been subjected  to
\ntax and non-air-conditioned ones left out. The\tLegislature,
\ncounsel\t submits, has the widest latitude in the  matter  of
\nsuch  classification and so long as luxury has been  defined
\nwith  reference\t to a named space,  namely,  air-conditioned
\nhotels\tand  restaurants, there\t could\tbe  no\tquestion  of
\ninfringement  of Article 14. The prescribing of a flat or  a
\nfixed  rate for a certain measure of  air-conditioned  space
\nwould  also  not  amount to discrimination  all\t such\tair-
\nconditioned   space   being  treated equally.  A  system  of
\ntaxation,  it is submitted, need not be\t absolutely  perfect
\nand micro division and mini classification may not always be
\nmade.\n<\/p>\n
     The  precise question, therefore, is whether Section  4
\nof  the Act can be held to be ultra vires the Article 14  of
\nthe  Constitution  of  India for failure  to  make  required
\nclassification\tand for imposition of luxury tax on flat  or
\nfixed rate only on the basis of air-conditioned floor space.\n<\/p>\n
     The Act is one “to provide for the imposition of  taxes
\non  entertainments and luxuries in hotels and  restaurants”.
\nAs  defined  in\t Section  2(b)\t“entertainment”\t means\t any
\nexhibition,  performance, amusement, game,  sport,  cabaret,
\ndance or floor show and includes performance by any  singer,
\nmusician or bandsman provided in any
\n\t\t\t\t\t\t\t436<\/span>
\nhotel  or  restaurant. As defined in 2(ca) “hotel”  means  a
\nbuilding  or  part  of a building or  any  place  where\t any
\nactivity  or business is carried on in providing lodging  or
\nboarding  or  any  kind of accommodation,  with\t or  without
\nsupply\tof food, drinks or refreshments, to the\t members  of
\nthe  public  on payment or for any  consideration  with\t the
\nobject\t of  making  profit.  As  defined  in\tclause\t (h)
\n“restaurant”  includes an eating-house. “Luxury” as  defined
\nin  clause (d) means provision for air-conditioning  through
\nair-conditioner\t or  central air-conditioning or  any  other
\nmechanical  means  provided in any of the rooms, or  in\t any
\npart of a building which constitutes a hotel or\t restaurant;
\nand “luxury tax” as defined in clause (e) means a tax levied
\nunder Section 4 of the Act.\n<\/p>\n
     Section   4  is  the  charging  Section  dealing\twith
\nliability for luxury tax. At the relevant time it said:\n<\/p>\n
\t  “There  shall be charged, levied and paid to\t the
\n\t  State Government a luxury tax by the proprietor of
\n\t  every\t hotel\tand restaurant (in  which  there  is
\n\t  provision  for  luxury)  and\tsuch  tax  shall  be
\n\t  calculated at the rate of an annual sum of  rupees
\n\t  one  hundred for every ten square metres or\tpart
\n\t  thereof in respect of so much of the floor area of
\n\t  the hotel which is provided with luxury.”<\/p><\/blockquote>\n
     For appreciation of the rival arguments it is necessary
\nfirst to ascertain the taxable event in the above provision.
\nThe  question is whether the taxable event is the  existence
\nor  provision  for  air-conditioning or its  use  or  income
\nderived from it. In Spences Hotel Pvt. Ltd. v. State of West
\nBengal,<\/a>\t reported in 1975 Tax L.R. 1890 (1892) the  Calcutta
\nHigh Court took the view:\n<\/p>\n
\t  “In view of the social and economic  structure  of
\n\t our  country there can be no doubt  that  an\tair-
\n\t conditioned   space  whether  in  hotel  or  in   a
\n\t restaurant is a luxury by itself. People enter into
\n\t these\t   spaces     for     enjoyment\t    of\t   a
\n\t luxury………………….  The  comfort  that  a
\n\t person\t derives  in  a hot summer day\tin  an\tair-
\n\t conditioned  space is a luxury particularly in\t the
\n\t context of the conditions in which the masses\tlive
\n\t in   India  today.  In\t our  opinion,\t the   State
\n\t legislature  is competent to impose a tax  on\tthis
\n\t luxury.”\n<\/p>\n
\t  This\tCourt  approved the above  view\t in  Express
\nHotels\tPvt.  Ltd.  case (supra).  The\tsubmission  that  as
\nSection 4 of the West Bengal Act
\n\t\t\t\t\t\t       437<\/span>
\nenvisaged  a tax on the mere existence for the provision  of
\nthe luxury even if luxury was not utilized by any person and
\nhence  it was beyond the scope of the legislative entry\t was
\nrejected  observing  that  the concept of  luxuries  in\t the
\nlegislative  entry  took  within it  everything\t that  could
\nfairly and reasonably be said to be comprehended in it. On a
\nperusal\t of Section 4 of the Act there arises no doubt\tthat
\nit  is the provision for air-conditioning to the measure  of
\nspace  which  is the taxable event and not the\tarticles  or
\nproperties through or by which it is provided nor the income
\nderived therefrom. As has been observed in East India Hotels
\nLtd. v. State of West Bengal and Ors., AIR<\/a> 1990 SC 2029, the
\nsubmission  that there must be both giving and receiving  of
\nluxury and that a tax on the mere existence of luxury  would
\nbe  insufficient to support a law imposing the tax  was\t not
\naccepted  and it was held by this Court that  taxable  event
\nneed not necessarily be the actual utilisation or the actual
\nconsumption  of\t the  luxury and that  a  luxury  which\t can
\nreasonably  be said to be amenable to a\t potential  consumer
\ndoes  provide  the  nexus for  valid  enactment.  Mr.  Salve
\ncorrectly submitted that the charging event is the provision
\nfor  air-conditioning in a hotel or restaurant as a  luxury.
\nThus the taxing event is the provision for  air-conditioning
\nin hotels and restaurants, its mere existence,\tirrespective
\nof the means of doing so and irrespective of its utilisation
\nor  the\t income derived therefrom. The\targuments  regarding
\ndiscrimination,\t therefore, must be relevant to this  taxing
\nevent.\n<\/p>\n
     We\t may  now examine  the\tcases  relied  on   by\t the
\nparties.  Kunnathat  Thathunni Moopil Nair v. The  State  of
\nKerala\tand  Anr.<\/a>(supra) is a case on land tax and not a tax
\non service or provision. By Section 4 of the Travancore Land
\nTax  Act 1955 as amended by Act 10 of 1957 all lands in\t the
\nState of whatever description and held under whatever tenure
\nwere  to be charged and levied a uniform rate of tax  to  be
\ncalled\t the  basic  tax.  Section  7  gave  power  to\t the
\nGovernment  to\texempt from the operation of  the  Act\tsuch
\nlands  or  class  of lands which  the  Government  might  by
\nnotification,\tdecide.\t  The\tappellants   forest   owners
\nchallenged  the\t provisions  of the Act\t on  the  ground  of
\ncontravention,\t amongst  others,  of  Article\t14  of\t the
\nConstitution in asmuch as the Act did not have any regard to
\nthe quality of the lands or its productive capacity and\t the
\nlevy  of a tax at a flat rate of Rs.2 per acre imposed\tvery
\nunreasonable  restrictions on the right to hold property.  A
\nConstitution Bench of this Court held that a taxing  statute
\nwas  not  wholly immune from attack on the  ground  that  it
\ninfringed  the\tequality clause in Article  14,\t though\t the
\ncourts\twere  not  concerned with the  policy  underlying  a
\ntaxing\tstatute or whether a particular tax could  not\thave
\nbeen imposed in a different way or in a way that the
\n\t\t\t\t\t\t       438<\/span>
\ncourt  might think more just and equitable.   Examining\t the
\nprovisions this Court observed that the Act had no reference
\nto  income,  either actual or potential, from  the  property
\nsought\tto be taxed.  It obliged every person who held\tland
\nto pay the tax at a flat rate prescribed, whether or not  he
\nmade  any income out of the property, or whether or not\t the
\nproperty  was capable of yielding any income.  It  was\talso
\nobserved  that ordinarily a tax on land or land revenue\t was
\nassessed on the actual or potential productivity of the land
\nsought\tto be taxed and the tax had reference to the  income
\nactually  made, or which had been made with  due  diligence,
\nand,  therefore,  tax  was levied with\tdue  regard  to\t the
\nincidence of the taxation.  Under the provisions of the\t Act
\nas some persons owning and possessing the same area of land,
\nbut earning no income, the land being  arid  desert,  others
\nearning\t only\tsome  income  by  raising   possible   crops
\nmaking\t heavy\t  investments,\t and others  earning  income
\nsufficient  to\tpay  the  tax  only,  while   still   others
\nearning\t sufficient income out of  the\tfertile\t land,\t the
\ntax   would  affect the pockets\t of  the  different   owners
\ndifferently.  This  Court  accordingly held that  inequality
\nwas  writ large\t on  the  Act  and  was\t inherent   in\t the
\nvery  provisions of  the  taxing  section  and\tthat   there
\nwas  no\t attempted classification  and\tnothing\t more\tneed
\nbe  said  as  to  what\tcould\thave been the basis for\t the
\nvalid classification.  It  is  accordingly  argued  both  by
\nMr. Singhvi and Mr. Salve that\tin  the\t instant  case\t the
\nprovision   for\t air-conditioning  has\t no   direct   nexus
\nwith   the  incomes  earned  by\t  the different hotels\t and
\nrestaurants  and  on  the  same\t ground\t Section  4  of\t the
\nAct  must  be  declared\t violative  of\tArticle\t 14  of\t the
\nConstitution.\n<\/p>\n
     State  of Kerala v. Haji K.  Haji\tK.  Kutty   Naha   &
\nOrs.  (supra)  was a  case  challenging\t Section  4  of\t the
\nKerala\t Buildings   Tax   Act,\t 1961.\tUnder  that  section
\nbuildings  constructed\tafter  the  coming  into  force\t  of
\nthe  Act  and\thaving\ta  floor  area\t of   one   thousand
\nsquare\t feet\tor   more  were\t subjected  to\ttax  on\t   a
\ngraduated   scale.  The\t tax  was  levied  on  the basis  of
\nfloor  area only and no classification\twas  attempted.\t  It
\nwas   held that in enacting the provision  no\tattempt\t  at
\nany    rational\t  classification  had  been  made  by\t the
\nLegislature   and  it  had  not\t taken\tinto   consideration
\nthe  class to which a  building\t belonged,  the\t nature\t  of
\nconstruction,  the  purpose  for  which\t it  was  used,\t its
\nsituation,   its  capacity  for\t profitable user and   other
\nrelevant   circumstances   which  had  a  bearing   on\t the
\nmatters\t of  taxation.\tMerely\tthe  floor   area   of\t the
\nbuilding  was  adopted as the basis of tax irrespective\t  of
\nall   other  considerations.  This  Court observed that\t the
\nlaw   by   which   a   tax   was   levied   must   not\t  be
\ninconsistent  with  any provision of the  Constitution\t and
\nthat   the   validity  of  the taxing statute  was  open  to
\nquestion    on\t the   ground\tthat   it   infringed\t the
\nfundamental    rights.\t  When\t objects     persons\t and
\ntransactions   essentially
\n\t\t\t\t\t\t       439<\/span>
\ndissimilar were treated by the imposition of a uniform\ttax,
\ndiscrimination\tmight itself in some cases result in  denial
\nof  equality.  This Court further observed that in  view  of
\nthe  inherent  complexity  of fiscal  legislation  a  larger
\ndiscretion was available to the Legislation in the matter of
\nclassification,\t so  long as it adhered to  the\t fundamental
\nprinciples underlying the doctrine of equality.\t Though\t the
\nLegislature  had wide range of flexibility in the matter  of
\nclassification\tthere must not be denial of equality in\t the
\nmatter of taxation, and the High Court was accordingly\theld
\nto have been justified in holding that the charging  section
\nof  the\t Act  was violative of the equality  clause  of\t the
\nConstitution.\n<\/p>\n
     In State of Rajasthan v. Mukachand and Ors., [ 1964]  6
\nSCR  903,  the\tvalidity  of  Sections\t2(e)  and  7(2)\t  of
\nJagirdar’s Debt Reduction Act (Rajasthan Act 9 of 1937)\t was
\nchallenged.  Section 2(e) defined ‘debt’ to mean an  advance
\nin  cash  or in kind including any transaction which  is  in
\nsubstance  a debt but not including an advance as  aforesaid
\nmade on or after impugned part of Section 2(e).\n<\/p>\n
     In\t  New  Manek  Chowk  Spinning  and  Weaving    Mills
\nCo.    Ltd.   and Ors.\tv.  Municipal  Corporation  of\t the
\nCity\tof   Ahmedabad\t and   Ors.<\/a> (supra)   the   question
\nwas   whether  under  the   Bombay   Provincial\t   Municipal
\nCorporation   Act  (49\tof  1949)  levy\t of   property\t tax
\non   textile factories at flat rate per 100 sq. ft. of floor
\narea was violative of  Article 14 of  the  Constitution.   A
\nConstitution  Bench  of\t this  Court  held  that the  method
\nof  levy  of   tax  on\tthe  basis   of\t  floor\t  area\t was
\nagainst\t the provision\tof  the\t Act  and  the\tRules\tmade
\nthereunder    and    that    the  rateable  value  of\t the
\nproperty  must\tbe  assessed  after  determining  the
\nrack  rent  or the annual  rental  value   in\trespect\t  of
\neach  premises\twhich was  to  be  computed  on\t the   basis
\nof   the   annual  rent\t for  which    the   property  might
\nreasonably  be expected\t to  be\t let  from  year  to   year.
\nThe method of taxation\ton  the\t basis\tof  floor  area,  it
\nhad   been  observed, was sure to give rise to\tinequalities
\nas  there  had\tbeen  no  classification of factories on any
\nrational basis.\n<\/p>\n
     In\t  State\t  of   Maharashtra   &\t Ors.\tv.  Madhukar
\nBalkrishna   Badiya<\/a>
\n\t\t\t\t\t\t       440<\/span>
\n& Ors., [ 19881 4 SCC 290, the validity of the Bombay  Motor
\nVehicles Tax Act, 1958 (65 of 958) sections 3(1-C) and\t9(6)
\n(as  amended  by Maharashtra Acts 14 of 1987,  33  of\t1987
\nand  9\tof  1988)  which  levied  `one time tax’ at 15 times
\nthe  annual  rate  on  motor  cycles   and   tricycles,\t was
\nchallenged. It was held by this\t Court\tthat  the  Act\t did
\nnot   suffer  from  any\t vice  of  discrimination   on\t the
\nground\t that\tthe   company-owned vehicles were taxed\t  at
\nthree\ttimes\tthe  rate  payable  by\tindividuals  as\t the
\nsystem was prevailing historically. It was also\t held\tthat
\nin cases of fiscal legislation wide discretion was conferred
\non   the   legislature in the matter of\t classification\t and
\nthat   the  Court  would  ordinarily be slow in\t interfering
\nwith the statute on ground  of\tdiscrimination\tif  a set of
\nfacts justified the same.\n<\/p>\n
     In\t Twyford Tea Co.  Ltd.\t&  Anr.\t v.  The  State\t  of
\nKerala\t&  Anr.,<\/a> [1970] 3  SCR\t383  the  Kerala  Plantation
\n(Additional  Tax)  Act,\t 1960 (Act  17\tof  1960)  and\tthe
\nKerala\tPlantation  (Additional\t Tax)  Amendment  Act,\t1967
\n(Act   19  of  1967)  were  challenged.\t The  Act  of\t1960
\nlevied\tan  additional\ttax  on\t  plantations.\t Plantations
\nmeant\tland   used for\t   growing    Cocoanut,\t   Arecanut,
\nRubber,\t   Coffee,    Tea,    Cardamom\tand  Pepper.   Under
\nSection\t  3   of  the  Act,  for  each\tfinancial   year   a
\nplantation tax additional to the basic tax charged on\tland
\ntax  under  the Land Tax Act, 1955 was payable at  the\trate
\nmentioned  in  Schedule\t I  of the Act, the rate being\tRs.8
\nper  acre.  The\t plantations  of  5  acres  or below held by
\na  person  did\tnot attract  tax.   For\t  the\tpurpose\t  of
\nfinding\t out the extent of the plantation in acres held\t  by
\na   person   a\tmethod\tof calculation was  laid   down\t  in
\nSchedule   11.\tThe  1960  Act\twas  amended by\t  the\t1967
\nAmendment   Act.   By\tthe   Amending\t Act\tthe\tword
\n‘additional’ was removed from all places and it was declared
\nthat   the  tax\t was additional to the land revenue  or\t any
\ntax in\tlieu  thereof,\tif  any,  payable in respect of such
\nland.  The  unit  of  assessment  was  changed\tfrom acre to
\nhectare\t and  the rate of tax in Schedule I was\t raised\t  to
\nRs.50\tper  hectare. The tax was payable in respect  of   2
\nhectares  of  plantations  or more with\t an  exemption\t for
\nthe   first  hectare.  According  to  the  new\tSchedule  11
\nthe  extent of plantation for the purpose  of  tax  in\t the
\ncase   of   Cocoanut,\tArecanut,   Rubber,   Coffee\t and
\nPepper\t plantations   was arrived at by dividing the  total
\nnumber\tof trees,  plants  or  vines  standing\tthereon\t  by
\na   number  specified  in  each\t case.\tTwyford\t  Tea\t Co.
\nchallenged  the\t Act   after   amendment   mainly   on\t the
\nground\t of  violation of Article 14 urging that there\twere
\ndifferences  of\t fertility  and\t rainfall in  the  different
\nareas where  the  plantations  were  situated  and   figures
\ncompiled   by  the  Tea\t Board\twere  placed  to  show\t the
\ndifferences    in yield\t between  different   estates,\t and
\nMoopil\t Nair’s\t  case\t(supra)\t was relied  on\t  to   argue
\nthat  the  uniform  tax\t on  unequals  resulted\t in  dis-\n<\/p>\n
\t\t\t\t\t\t       441<\/span><\/p>\n
crimination  (a) as between the tea  plantations  themselves
\nand  (b) as between different kinds  of\t  plantations.\t The
\nlegislative\t competency\twas    also\t challenged.
\nHidayatullah,\tC.J.   speaking\t  for\t the\tConstitution
\nBench  while  dismissing the  petitions\t  held\t that\tthe
\nlegislature  had  a wide  range\t of  selection\tand  freedom
\nin   appraisal\tnot  only  in  tile objects of taxation\t and
\nthe manner of taxation\tbut  also  in  the  determination of
\nthe  rate or rates applicable. If  production  were   always
\nto   be\t taken\tinto account there would  have\t to   be   a
\nsettlement   for  every\t year and the tax  would  become   a
\nkind\tof    income-tax.    The    burden    of     proving
\ndiscrimination\twas always  heavy  and\theavier\t still\t was
\nthe   proving in taxing statute.  The  burden  was  on\t the
\nperson\t  complaining\tof   discrimination  to\t prove\t not
\npossible inequality but hostile unequal\t  treatment, more so
\nwhen  uniform  taxes  were  levied.  The  State\t could\t not
\nbe  asked  to demonstrate equality.   The   petitioners\t  in
\nthat  case  could  not single out any particular plantations
\nfor   hostile  or  unequal  treatment.It was observed\tthat
\nin   Moopil   Nair’s   case  the  tax\twas   held   to\t  be
\ndiscriminatory\tbecause\t it paid no  heed  to\tquality\t  or
\nproductive  capacity of land and the tax was also held to be
\nconfiscatory   since   owners\tof  unproductive  land\twere
\nliable\t to   be  eliminated  by  slow\tdegrees\t  unlike  in
\nTwyford\t  case\t where\t tax  was  only\t  levied   in\tcrop
\nyielding   land determining  the  extent  of  crop  yielding
\nplantation.   It  was  observed that a uniform tax may\tfall
\nmore  heavily  on  plantations\tthan  on  others because the
\nprofits were widely discrepant but  that  by  itself   could
\nnot involve discrimination for then hardly any\ttax   direct
\nor  indirect  would escape the same censure.\n<\/p>\n
     In\t  Elel\tHotels\tand  Investments  Ltd  &   Ors.\t  v.
\nUnion  of   India,<\/a> [1989]  3  SCC  698,\t Venkatachaliah,  J.
\nspeaking    for\t   the\t  Constitution\t Bench\t held\tthat
\nclassification of hotels on the basis of  room\tcharges\t for
\nthe  purpose  of  levy\tof  tax could  not  be\tsaid  to  be
\ndiscriminatory\tas  the legislature had wide  discretion  in
\ntaxing\tobjects,  persons  and\tthings.\t  It  was  said\t  at
\nparagraph 20:\n<\/p>\n
\t  “It is now well settled that a very wide  latitude
\n\t  is  available to the legislature in the matter  of
\n\t  classification of objects, persons and things\t for
\n\t  purposes  of\ttaxation.  It must need\t to  be\t so,
\n\t  having regard to the complexities involved in\t the
\n\t  formulation of a taxation policy.  Taxation is not
\n\t  now  a  mere\tsource of raising  money  to  defray
\n\t  expenses of government.  It is a recognised fiscal
\n\t  tool to achieve fiscal and social objectives.\t The
\n\t  differentia  of  classification  presupposes\t and
\n\t  proceeds on the premise that it distinguishes\t and
\n\t  keeps apart as a distinct class hotel with  higher
\n\t  economic
\n\t\t\t\t\t\t       442<\/span>
\n\t  status  reflected in one of the indicia  of\tsuch
\n\t  economic   superiority.   The\t   presumption\t  of
\n\t  constitutionality   has   not been  dislodged\t  by
\n\t  the\tpetitioners   by   demonstrating   how\teven
\n\t  hotels, not  brought into the\t class,\t have\talso
\n\t  equal\t or higher  chargeable\treceipts   and\t how
\n\t  the\t assumption    of  economic  superiority  of
\n\t  hotels to which the Act  is  applied\tis erroneous
\n\t  or irrelevant.<\/p><\/blockquote>\n
     In Ram  Prasad  Narayan  Sahi  &  Anr.  v.\t The   State
\nof   Bihar   and Ors.,\t[1953]\t4  SCR\t1129   wherein\t the
\nSathi  Lands  (Restoration)   Act, 1950 declaring settlement
\nof  land  with\tparticular  individual\twas  challenged\t  on
\nthe  ground  of\t discrimination.  Mukherjee,  J.    speaking
\nfor the Court observed that the equal protection clause\t  in
\nArticle\t 14  of\t the Constitution aimed\t at  striking\tdown
\nhostile\t   discrimination   and\t  applied  to  all   persons
\nsimilarly  situated,  but  it  was  certainly  open  to\t the
\nlegislature  to classify particular   legislative   objects;
\nhowever,   such\t selection or differentiation must  not\t  be
\narbitrary   and\t should\t rest  upon  rational  basis  having
\nregard to the object which the legislature had in view.\n<\/p>\n
     The  intrinsic complexity of  fiscal   adjustments\t  of
\ndiverse\t  elements  and wide discretion\t and   latitude\t  of
\nthe   legislature  in  the  matter  of\tclassification\t for
\ntaxation    purposes\twas   emphasised    by\t  Sabyasachi
\nMukharji,    J.\t   as\the   then   was,   in\t State\t  of
\nMaharashtra   &\t  Ors.\t v. Madhukar  Balakrishna  Badiya  &
\nOrs.,<\/a>\t(supra)\t  which\t was  a\t case\tunder\tthe   Bombay
\nMotor\tVehicles   Tax\t Act,\t1958\t(as    amended\t  by
\nMaharashtra Act 14 of 1987). In para 14 of the report it was
\nsaid:\n<\/p>\n
\t  “About discrimination it is well to remember\tthat
\n\t  a  taxation  law cannot claim\t immunity  from\t the
\n\t  equality  clause in Art.  14 of the  Constitution
\n\t  but in view of the intrinsic complexity of  fiscal
\n\t  adjustments\t of\tdiverse\t    elements,\t   a
\n\t  considerably\twide discretion and latitude in\t the
\n\t  matter  of classification for taxation purpose  is
\n\t  permissible.”\n<\/p><\/blockquote>\n
From  the propositions of law enunciated in the above  cases
\nby  this Court, it is well settled that a taxation  will  be
\nstruck\tdown  as  violative  of\t Art.  14  if  there  is  no
\nreasonable  basis behind the classification made by it,\t or,
\nif  the\t same  class of\t property,  similarly  situated,  is
\nsubjected  to  unequal taxation as was held in L  T.  0.  v.
\nLawrence  Singh, AIR 1968 SC 658 (661): 1968 2 SCR 165.\t  If
\nthere is no reason for the classification then also the\t law
\nwill  be struck down.  However, as was held in Kunnathat  v.
\nState  of  Kerala, (supra) and State of\t Andhra\t Pradesh  v.
\nNalla  Raia,  AIR<\/a>  1967 SC 1458: [1967] 3  SCR\t28,  if\t the
\ntaxation  imposes
\n\t\t\t\t\t\t       443<\/span>
\na similar burden  on  every  one  with\treference  to\tthat
\nparticular   kind and extent of property, on the same  basis
\nof  taxation,  the  law\t shall\tnot be open to attack on the
\nground\tthat  the  result  of  the  taxation  is  to  impose
\nunequal\t burdens on  different\tpersons.  It  was  held\t  in
\nSteelworth of  taxation\t  of V. State of Assam, [1962] Supp.
\n2 SCR 589, that in law of taxaton of income it is  competent
\nfor  the   legislature\t to  graduate  the   rate   of\t tax
\naccording to the ability to pay. In Gattga Sagar Corpse.  v.
\nState of  U.  P., AIR 1980 SC 286: [1980] 1  SCR  769\talso
\nit  has\t been  held  that  in  the matter of  taxation\tlaws
\nthe    court   permits\t a   greater   latitude\t   to\t the
\ndiscretion   of\t the  legislature  and\tin   Khyerbari\t Tea
\nCo.   v.   State  of Assam, AIR<\/a> 1964 SC 935  (94t)  it\t has
\nbeen  held  that  in  tax  matters  the State is allowed  to
\npick  and  choose  districts,  objects,\t  persons,   methods
\nand even rates for  taxation  if  it  does  so\t reasonably.
\nIn  Twyford  Tea Co. v. State of Kerala,<\/a> (supra) it has been
\nobserved  that\twhen  a\t statute divides the objects of\t tax
\ninto groups or categories, so  long  as\t there\tis  equality
\nand  uniformity\t within\t each  group,  the  tax\t cannot\t  be
\nattacked  as  violative\t of  Art.  14,\t although   due\t  to
\nfortuitous  circumstances  or  a particular  situation\tsome
\nincluded    within   a\t group\t may   get   some  advantage
\nover  others, provided\tof  course  they  are\tnot   sought
\nout   for  special  treatment.\tIt  has\t  repeatedly\tbeen
\nheld,\t for\texample,   in Khyerbari Tea  Co\t –  (supra),
\nGopal  v.  State of U. P.  I  AIR  1964\t SC  –\t 370  (375):
\n(1964)\t4  SCR 869  and\t Steelworth  v.\t State\t of   Assam,<\/a>
\n(supra)\t  and Ravi Varma  v.  Union  of\t India,\t  AIR\t1969
\nSC   1094:  (1969)  3  SCR  827,  that as to  what  articles
\nshould be taxed is a question of  policy  and  there  cannot
\nbe  any\t complaint  merely because   the   legislature\t has
\ndecided\t   to\tNakara\t&  Ors.\t v.  Union  of<\/a>\ttax  certain
\narticles  and not others. In D.S India, [ 1983] 1  SCC\t305,
\nDesai,\t J.   even   expressed\t that\ttoo   microscopic  a
\nclassification may also be violative of\t Art.  14.  It\t was
\nreiterated   in\t Bank  of   Baroda    v.-Rednam\t   Nagachaya
\nDevi,\t [1989]4  SCC 470 that\tthe burden is always on\t the
\nperson\talleging  the\tviolation  of\tArt.   14   of\t the
\nConstitution  of  India\t to  raise   specific\tpleas\t and
\ngrounds\t and  to  prove it.\n<\/p>\n
     Whether  a particular tax is  discriminatory   or\t not
\nmust   necessarily be considered in light of the nature\t and
\nincidence   of\tthat  particular  tax and cannot be   judged
\nby  what  has  been  held  in  the  context  of\t other taxes
\nexcept the general  propositions.  The\tprecedents  relating
\nto   property  taxes  such  as\tland  tax,   building\ttax,
\nplantation  tax,  and  even income tax or a service tax will
\nnot  be\t of  direct relevance to a   luxury tax,  as  it  is
\nneither\t a property tax, nor an income tax  but\t a  tax\t  on
\nthe  provision for luxury. In case  of\ttax   on   provision
\nfor   luxury  different aspects peculiar to the\t  tax\thave
\nto   be\t  borne\t  in  mind.  The  system   of  taxation\t has
\nchanged\t a great deal from  Kautilya  to  kaldor  and\teven
\n\t\t\t\t\t\t\t444<\/span>
\nthereafter.  The history of taxation is one of evolution  as
\nis  the case in all human affairs.  Its progress is  one  of
\nconstant   growth  and\tdevelopment  in\t keeping  with\t the
\nadvancing  economic  and social conditions; and\t the  fiscal
\nintelligence of the State has been advancing  concomitantly,
\nsubjecting  by\tnew  means  and\t methods  hitherto   untaxed
\nproperty, income, service and provisions to taxation.\tWith
\nthe change of scientific, commercial and economic conditions
\nand ways of life new species of property, both tangible\t and
\nintangible gaining enormous values have come into  existence
\nand  new  means\t of  reaching and  subjecting  the  same  to
\ncontribute  towards  public  finance  are  being  developed,
\nperfected  and put into practical operation by the  legisla-
\ntures\tand  courts  of\t this  country,\t of  course   within
\nconstitutional limitations.  The ability or capacity to\t pay
\nhas  no doubt been regarded as the test in  determining\t the
\njustness  or equality of taxation.  It is the  goal  towards
\nwhich the system has been, as it must be, steadily  working.
\nThe  equality,\tjustness  and  fairness\t of  this  ideal  is
\nrealised when one reflects upon the vast wealth\t accumulated
\nby  the advantaged ones but not by people in  general.\t The
\nidea  of distributive justice is more or less  intuitive  in
\nthis  regard.  This, however, has to harmonise well  with  a
\nproportional system of taxation, that is to say, a tax at  a
\nfixed and uniform rate in proportion to the taxable event, a
\nmeasure\t of  providing air-conditioned space.\tIn  possible
\ncases of simple space taxation or pollution taxation  courts
\nmay  be\t a  little embarrassed in attempting  to  apply\t the
\nprinciple  of ability or capacity to pay.  What, exactly  is
\nmeant  by  equality in taxation may, therefore, have  to  be
\nlooked at from different angles in different kinds of taxes.
\nThis  reminds us what John Stuart Mill said in Chapter V  of
\nUtilitarianism.\n<\/p>\n
\t “Some\tpeople\tmay think that\tthey  have  rational
\n\t insight into the truth of the proposition that\t men
\n\t ought\tto be taxed equally, others that  they\thave
\n\t such insight into truth of the proposition that men
\n\t ought to be taxed in proportion to what they  earn,
\n\t others\t that  they have rational insight  into\t the
\n\t truth of the proposition that men ought to be taxed
\n\t more  than  in proportion to what they\t earn.\t Can
\n\t they  be sure that in thinking this, they  are\t not
\n\t simply,  being\t influenced by the  imaginative\t and
\n\t quasi-aesthetic  appeal  of making  the  amount  of
\n\t payments proportionate to the number of people,  or
\n\t making it proportionate to their incomes?”
\n     It\t may  be,  that\t this  truth  is  simply  that\t our
\nimagination  disposes us to think in terms  of\tdistributive
\njustice.  It is, therefore, pertinent to observe that  along
\nwith the insight into a particular truth or an
\n\t\t\t\t\t\t       445<\/span>
\naesthetic value, the  expediency  and  practicability  of  a
\nparticular   taxation  has  also  to  be  borne\t  in   mind.
\nAs   was  pointed   out\t  by   Gustav Radbruch in his  Legal
\nPhilosophy (P. 90):\n<\/p>\n
\t “Justice  demands that equals be  treated  equally,
\n\t different  ones  differently  according  to   their
\n\t differences;\tbut   it   leaves  open\t  the\t two
\n\t questions,    whom    to    consider\t equal\t  or
\n\t different,   and   how\t to  treat   them.   Justice
\n\t determines  only   the form of law. In order to get
\n\t the  content  of  the\tlaw,  a\t second\t idea\tmust
\n\t be    added,\tviz.   expediency.   The    question
\n\t of  justice  has   been   raised    and    answered
\n\t independently\t  of questions\tof   expediency\t  or
\n\t suitability\tfor   any   purpose, including\t the
\n\t purpose  of  the  state.  But\twithin\tthe   frame-
\n\t work  of the question of the purpose of  law,\t the
\n\t state\t for  the  first time enters the  scope\t  of
\n\t our   investigation.  Since  law, or  an  essential
\n\t part of it, is the will  of  the  state,  and\t the
\n\t state,\t  or  an  essential  part  of  it,   is\t  an
\n\t institution of\t law,  the questions of the  purpose
\n\t of  law   and\t the  purpose  of   the\t  state\t are
\n\t inseparable.”\n<\/p>\n
     What  then\t ‘equal\t protection  of\t  laws’\t  means\t  as
\napplied\t  to  taxation? Equal protection  cannot   be\tsaid
\nto  be\tdenied\tby  a  statute\twhich operates alike on\t all
\npersons and property similarly situated, or   by proceedings
\nfor   the   assessment\tand  collection\t of   taxes    which
\nfollows\t the  course  usually  pursued\tin  the\t State.\t  It
\nprohibits   any\t  person  or  class of persons\tfrom   being
\nsingled\t out  as  special  subject  for\t discrimination\t and
\nhostile legislation; but is does not require equal rates  of
\ntaxation on different classes  of  property,  nor  does\t  it
\nprohibit   unequal  taxation so\t long  as   the\t  inequality
\nis  not\t based\tupon  arbitrary\t classification.\n<\/p>\n
     Taxation  will not be discriminatory if,\twithin\t the
\nsphere\t of   its  operation, it affects alike\tall  persons
\nsimilarly   situated.\tIt,  however,\tdoes   not  prohibit
\nspecial legislation, or legislation that is  limited  either
\nin the objects to which it is directed, or by the  territory
\nwithin which  it  is to operate. In the words of Cooley:  It
\nmerely\t requires   that   all\tpersons\t subjected  to\tsuch
\nlegislation   shall   be   treated   alike,    under\tlike
\ncircumstances\tand  conditions,  both\tin  the\t  privileges
\nconferred   and\t  in   the liabilities imposed. The rule  of
\nequality required  no  more  than  that\t the same means\t and
\nmethods\t   be\t applied    impartially\t   to\t all\t the
\nconstituents of each class, so that the law  shall   operate
\nequally\t  and\tuniformly  upon all   persons\tin   similar
\ncircumstances.\t Nor  does  this  requirement  preclude\t the
\nclassification\tof   property,\t trades,   profession\t and
\nevents\t for taxation-subjecting one kind to one   rate\t  of
\ntaxation,   and\t another  to  a different rate.\t “The\trule
\nof  equality  of  taxation  is\tnot  intended  to
\n\t\t\t\t\t\t       446<\/span>
\nprevent a State from adjusting its system of taxation in all
\nproper\tand reasonable ways.  It may, if it  choses,  exempt
\ncertain\t classes of property from any taxation at  all,\t may
\nimpose\tdifferent specific taxes upon different\t trades\t and
\nprofessions.”  “It  cannot be said that it  is\tintended  to
\ncompel\tthe State to adopt an iron rule of equal  taxation.”
\nIn the words of Cooley:\n<\/p>\n
\t “Absolute  equality   impossible.   Inequality\t  of
\n\t taxes\t means substantial  differences.   Practical
\n\t equality  is\tconstitutional equality.  There\t  is
\n\t no  imperative\t requirement   that   taxation shall
\n\t be   absolutely   equal.   If\t there\t were,\t the
\n\t operations  of government  must  come\tto  a  stop,
\n\t from  the   absolute\timpossibility of  fulfilling
\n\t it.   The  most  casual  attention  to\t the  nature
\n\t and  operation\t of  taxes  will  put  this   beyond
\n\t question.\t    No\t single\t   tax\t  can\t  be
\n\t apportioned  so  as  to  be  exactly  just and\t any
\n\t combination  of taxes\tis  likely   in\t  individual
\n\t cases\t  to  increase\tinstead\t of   diminish\t the
\n\t inequality.”\n<\/p>\n
\t (Cooley on Taxation, 4th Edn. Vol.l.p. 558)
\n     “Perfect  equality\t intaxation  has  been\t said\ttime
\nand    again,\t to   be  impossible\tand    unattainable.
\nApproximation  to  it  is  all\t that\tcan   be had.  Under
\nany    system\t of   taxation,\t   however,    wisely\t and
\ncarefully  framed,  a\tdisproportionate   share   of\t the
\npublic\t burdens   would   be thrown  on  certain  kinds  of
\nproperty,    because   they   are   visible   and  tangible,
\nwhile  others  are  of\ta  nature  to  elude  vigilance.  It
\nis   only  where   statutes   are   passed   which    impose
\ntaxes\t on   false   and   unjust principle,\tor   operate
\nto   produce  gross  inequality,  so  that  they  cannot  be
\ndeemed\t in   any   just   sense   proportional\t  in   their
\neffect\t on   those  who are to bear  the   public   charges
\nthat   courts  can  interpose  and  arrest  the\t course\t  of
\nlegislation   by   declaring\tsuch\tenactments    void.”
\n“Perfectly  equal  taxation”, it  has\tbeen   said,   “will
\nremain\t an   unattainable   good  as long   as\t  laws\t and
\ngovernment    and    man    are\t    imperfect.”\t    ‘Perfect
\nuniformity  and perfect equality of taxation’, in  all\t the
\naspects\t in  which  the
\nhuman mind can view it, is a baseless dream.\n<\/p>\n
     The  equal\t protection of the law’s  provision  in\t our
\nConstitution prohibits a discrimination by the State against
\nits  own  citizens  as well as to one  in  their  favour  in
\nimposing the luxury tax.  The provision requiring luxury tax
\nto  be equal and uniform has to be interpreted in  light  of
\nits  characteristics.  The luxury tax is ‘uniform’ as it  is
\nequal upon all persons belonging to the described class upon
\nwhich it is   imposed, namely, the owners of air-conditioned
\nhotels and restau-\n<\/p>\n
\t\t\t\t\t\t       447<\/span><\/p>\n
rants.\tThe Act requires the luxury tax to be in  proportion
\nof or proportional the air-conditioned space and it requires
\nthe tax to be uniform upon the same class of owners of\tair-
\nconditioned  hotels  and restaurants which  means  that all
\nsimilarly  situated owners shall be treated alike.  It\tdoes
\nnot suffer from lack of classificaion but instead  impliedly
\nauthorises it by leaving out non-air-conditioned hotels\t and
\nrestaurants. Equality  and  uniform  policy  means   uniform
\nand  equal  rates  of\tassessment and taxation\t which\t has
\nbeen   followed\t in  this  tax.\t The  concept\tof  equality
\nand   uniformity  has  to  adjust  from\t time  to  time\t  to
\nnew    and  advancing social and  economic  conditions\t and
\nneeds\tof  public   finance  and fiscal policy,  of  course
\nwithin constitutional limitations.\n<\/p>\n
     The    submission\t  that\t  the\t incidents     falls
\ndifferently   on   different  classes  of  hotel  owner\t  is
\nnot  tenable  inasmuch\tas  the\t impact\t is  the result\t  of
\nhaving\tdifferent  measures  of\t air-conditioned  space\t  by
\ndifferent   owners.   This  luxury  tax\t having\t  not\tbeen
\nbased\ton  income   earned therefrom the classification  of
\nthe owners on basis  of\t income\t or  stars  is\t irrelevant.
\nThe   question\tthat   different   proportions\t  of\tair-
\nconditioned   spaces  are  used\t in  different\thotels\t and
\nrestaurants   earning\tdifferent proportions of  income  is
\nalso  not relevent as the  tax\tis  not\t based\ton   use  of
\nthe  space.   The   kinds   of\t air-conditioning   or\t the
\nimplements   used   are also not relevant. It is a  tax\t  on
\nthe   mere  provision  for  luxury  and\t not on\t the   hotel
\nproperty   or  equipment,  as  we   have    already    said.
\nThe measure or unit and the rate  of  taxation\tare  uniform
\nfor   all   within  the group subjected\t to   tax.   Further
\nclassification\t within\t  the  group   was   not  considered
\nnecessary  by  the  legislature\t which\thad  wide   latitude
\nin   the  matter of classification keeping   in\t  view\t the
\nnature\tof   the  taxable  event. We accordingly  hold\tthat
\nthe  luxury  tax  charged  under  s.  4\t of  the  Act  could
\nnot\tbe     said    to     be     discriminatory,\t and
\nconsequently,\tthe impugned notices also could not be\tsaid
\nto be illegal or void.\n<\/p>\n
     The  result  is  that  this  appeal  fails\t and  it  is
\ndismissed  with\t costs quantified at Rs.5,000  (Rupees\tFive
\nThousand only).\n<\/p>\n
R. S. S.\t\t\t\t    Appeal dismissed.\n\t\t\t\t\t\t       448<\/span>\n\n\n\n<\/pre>\n","protected":false},"excerpt":{"rendered":"
Supreme Court of India Spences Hotel Pvt. Ltd. And Anr vs State Of West Bengal And Ors on 15 February, 1991 Equivalent citations: 1991 SCR (1) 429, 1991 SCC (2) 154 Author: K Saikia Bench: Saikia, K.N. (J) PETITIONER: SPENCES HOTEL PVT. LTD. AND ANR. Vs. RESPONDENT: STATE OF WEST BENGAL AND ORS. DATE OF […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_lmt_disableupdate":"","_lmt_disable":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[30],"tags":[],"class_list":["post-131983","post","type-post","status-publish","format-standard","hentry","category-supreme-court-of-india"],"yoast_head":"\nSpences Hotel Pvt. Ltd. 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