TMI Blog1968 (4) TMI 86X X X X Extracts X X X X X X X X Extracts X X X X ..... uence, held that the entire Act was void and unenforceable. Upon the present measure, arguments have been submitted before us, at considerable length, and covering a wide range of precedents and authorities. 2-3. I have had the advantage of perusing the judgment of my learned brother (Veeraswami, J.) in which every aspect of the matter in controversy has been dealt with, and analysed, exhaustively, and at length; also. I am in entire agreement with his conclusions. For these reasons, I have debated within myself whether I should deliver any separate judgment. But I have been impelled to do so, on one important ground. The arguments before us do not merely cover the present enactment; they have a wider significance, as attaching to the true interpretation of Entry 49 of List II of the Seventh Schedule of the Constitution, and have considerable potentialities for the future. Again, both the arguments on legislative competence and the assault on the measure upon the combined effect of Article 14 and Article 19, now that the Emergency has been lifted admit of several perspectives of approach. For these reasons, I am expressing my own view, as analytically as possible, and within a m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a directive principle that the operation of the economic system does not result in the concentration of wealth and means of production to the common detriment . Article 366(9) contains a definition of 'estate duty', with reference to the principal value. Entry 82 of List I (Taxes on income), Entry 86 (Taxes on the capital value of the assets, exclusive of agricultural land, of individuals and companies........) and Entry 88 (Duties in respect of succession to such property), from according to Mr. Chari, a constellation of Entries, of very considerable significance. Actually, these are not merely powers of taxation, in the restricted sense of an impost that could be levied by the Legislature, for the purpose of revenue they comprise an adumbrated scheme, by which the great principle of Article 39(c) is to be effected for the Nation. The Union reserves a power, to tap or take away accretions of wealth, where these are so vast as to threaten to disturb the economy to be achieved on a Socialistic pattern., Such increases are taken away, either as capital gains tax under Entry 82, or in the form of wealth tax and estate duties under Entries 86 and 87. Mr. Chari would agree wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assets. 'Capital levy', according to Kaldor and other Experts, is a single and total impost on wealth, or a proportion of wealth. generally caused by some emergency. With great respect to Chagla C. J., who appears in Duggan's case, , to treat 'capital value of assets' as equivalent to 'capitalised value'. I think that they have to be clearly distinguished. Mr. Balasubramaniam has placed before us some valuable excerpts on the etymology of the word 'assets' and it is car that this expression in the plural, signifies the total wealth of the individual, in the sense of 'net wealth', measured in terms of exchange value. 'Capitalized value' on the contrary is a mode by which, whether modes fail or are not practicable, the exchange or market-value is ascertained by a capitalization of income, at so many years' purchase, with the multiplier generally depending on the rate of interest on gilt-edged securities, Actually, even Experts in Economic Theory find it very difficult to distinguish between the incidence of a tax, whether it falls on capital or on income; I shall refer to this aspect in another context of discussion. For the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ses. The dicta of Lord Herschell in Bank of England v. Vagliano Brothers, (1891) AC 107 to the effect that an appeal to earlier decisions can only be justified on some special ground , were cited and followed. But in this matter of resort to prior legislative history, I do not think that too strict a view can be taken, for an important reason. The question whether the words are so plain and unambiguous, as they may seem at the first blush, or do conceal some difficulty in interpretation, may itself become controversial; in which case, the exclusion of all resort to legislative history, may involve the fallacy of a circular argument. As stated by Murphy, J., in Harridan v. Northern Trust Co., (1942) 317 US 476 = 87 law Ed 407 words are inexact tools at best, and for that reason there is wisely no rule of the law forbidding resort to explanatory legislative history no matter how 'clear the words may appear on superficial examination'. My own view is that legislative history, particularly with regard to construction of an Entry which embodies a power, is always relevant, and frequently illuminating. But I would entirely agree with the Division Bench and Veeraswami, J., in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alue of lands and buildings. Before proceedings to furnish my reasons for these conclusions, I shall refer to the case-law on this subject, somewhat briefly, in view of the extensive treatment of this by my learned brother (Veeraswami, J.) and to the documents of the Legislative history namely, the Devolution Rules, 1920, Schedule Taxes Rules, and White paper, 1931, placed before us by Mr. Balasubramaniam as well as the Government of India Act. 12. I might first refer to Byramjee Jeejeebhoy v. Province of Bombay, AIR 1940 Bom 65 (FB). This decision held that the Bombay Finance (Amendment) Act, 1939, was intra vires the State Legislature, and was valid. Beaumont, C. J., held that the impugned measure was not a tax on income, and, although it was a tax on lands and buildings, it was not a tax on the capital value of the lands and buildings. Broomfield, J., also distinguished the measure, as not within the mischief of item 55 in the Federal List Ralla Ram v. Province of East Punjab, 1948 FCR 207 = (AIR 1949 FC 81) upheld the validity of the Punjab Urban Immovable Property Tax Act, and the argument that this encroached on the Central List, as it amounted to a tax on income, was repe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nds and buildings for Local or Municipal purposes, on the lines of rate legislation in England and here as some portion or share of the annual yield or letting value. This does not show that the Entry or rather the width of its amplitude is confined to enactments of this mind alone. 13. The two decision that have been cited by learned counsel on this aspect of the arguments are, again, not decisive at all of the issue. In New Manek Chowk Spinning and Weaving Mills v. Municipal Corporation. their Lordships looked into the legislative practice with regard to the question whether the word land would include plants and machinery as part of the hereditament. The interpretation sought to be based on practice in the United Kingdom was repelled. In Diamond Sugar Mills Ltd. v. State of Uttar Pradesh, , the question arose with regard to the interpretation of the words local area in Entry 52 of List II of the Seventh Schedule. It was held that the premises of a factory could not constitute such a lock area within the meaning of the Entry. These decisions merrily emphasize that legislative history is not irrelevant, but that the problem is really one of interpretation on the tests of the ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ept the suggestion put forward by Mr. Chari, that Entry 86 of List I might conceivably, include a power to tax the entire assets of an individual without making any deductions for liabilities, such as mortgages, encumbrances or debts. Such a view would render the expression capital value of assets devoid of true meaning, in the sense of the logic of economic theory. if the burden extinguished the corpus of wealth, as my learned brother(Veeraswami, J.) has pointed out, there are really no 'assets' lift. Per contra, Entry 49 has nothing whatever to do with the individual or his wealth the tax runs with the land, as in this case, and the encumbrance on the land is irrelevant Even if the Union Legislature segregates for taxation a portion assets, such as a land and its building under Entry 86 that would be a different base of fiscal power, and a wholly different tax, Again the tax under Entry 79 could eventful onto occupier of the land, and not merely on the owner. Next I would unhesitatingly interpret Entry 49 as including a legislative competence to tax the capital value of the subject, for this reason. 16. There was an academic controversy some years back with regard to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... between the concerns of Local Bodies and Municipalities and of the State Government. The State Government may take over several projects, such as Electricity or Water Supply undertakings, which were run by Local Bodies and may allocate finances to such Bodies out of its own revenues. 18. I now proceed to notice a very interesting argument. My. Vednatachari urged, with a background of considerable scholarship in this field, that the measure before us really falls under Entry 45 of List II namely. 'Land revenue' in which case, quite different consequences, would follow as restricting the powers of the State Legislature We have been referred to Gopalan v. State of Madras 1958-2 Mad LJ 117 = (AIR 1958 Mad 539), and to the discussion in that decision on the history of land revenue'. WE have been also referred to the genesis of Khirai-free or 'Lakhiraj lands, to the Permanent Revenue Settlement, and to passages from Mclean's Manual of the Administration. In order to show the source of Article 276 of the Constitution. Mr. Vedantachari has made available to us the entire history of Local Taxation in Madras, including India Act XIV of 1856.Madras Act IX of 1865, Madr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... economic causes, and not to individual exertions, which do constitute, a fruitful source for equitable taxation. But in my view the argument conceals a fallacy to overlook which may be to perpetrate substantial injustice. It is true that building values and turban site values have sharply accelerated in recent years, owing to inflationary trends. It is true that persons possessing large areas of urban land, have found themselves richer by many multiples of wealth, owning to economic causes alone. But it is equally true. that may of the properties are merely properties with a few grounds of land and a building thereon, which have been acquired out of savings, by members of the middle class. They represent investments of hard-earned money, probably actuated by the belief that real estate' may further appreciate in value, while the purchasing power of money probably actuated by the belief that real estate' may further appreciate in value, while the purchasing power of money is continuously declining. In no sense can these investments be termed unearned increments possessed by these persons. Taxation, springing from any such idea, does not, infact, render justice, as between t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n be unlimited. The entire reasoning is somewhat academic, with regard to the present enactment, for Mr. Chari is not able to show that, granted legislative competence. the Act before us has to be struck down as 'confiscatory' in character. He has no doubt stressed its undesirable features which, in practice, would appear to lead to startling anomalies. But in respect of the charging provision itself, it is difficult to see how the combined impact of Article 19 and Article 14 necessarily destroys that provision. The mischief occurs elsewhere, as I shall presently show. 21. In view of the importance of the argument that Entry 49 of List II does no include the power to tax the capital value of lands and buildings, in any from, I would like to distinguish between the power itself, and the present enactment. In my view, the power is what I have held it to be and it cannot be confined either to rates legislation' or to taxation on annual letting value or yield, though legislative history or practice so far has been so confined, But, actually the Act, with which we are concerned, can be strictly justified, even on the restricted interpretation of Entry 49, and even if it w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... particularly for the view that, though the social philosophy and the scale of values of the Judges participating in the decision should play an important part in evaluating what would be 'reasonable under Article 19(5) nevertheless since the majority of the elected representatives of the people have authorised the restrictions. the judiciary must necessarily keep this in mind, before striking down any part of the Act under Article 14. I may also refer here to Balaji v. Income-tax Officer, AIR 1962 SC 552, Chhotabhai v. Union of India, , Khyberbari Tea Co, v. State of Assam, and Jawaharmal v. State of Rajasthan, . 24. But, bearing all these principles in mind, it nevertheless seems to me to be indisputable, that Section 6 of this Act is an excessive delegation of a power which is bound to work, in the circumstances in a most arbitrary and capricious manner. It is no answer to this argument to point out, as has been done, that the owner of the land has to submit a return, including his opinion of market Value, under Section 7, that the Commissioner collects information under Section 9, that the owner can produce evidence in pursuance of the notice under Section 10(2)(b) and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r less than the 0.4 percentage of the market-value determined with regard to the entire area, the tax could be more than the annual yield it self Mr. Chari has illustrated these startling anomalies by several instances as my learned brother (Veeraswami. J.) has pointed out. It may, perhaps, be stated that all this is the complication arising from the machinery and does not touch any part of the enactment itself. It could be argued that appropriate Rules can still be framed, and that though the authorities would appeal to have abandoned the method of capitalisation of annual letting value, as a means of estimating the market value, safeguards could still be provided. But the point is the Section 6 really appears to impose, on the concerned Assistant Commissioner, a task which is so impracticable, that the power becomes utterly arbitrary and capricious. The difficulty is illustrated form the following passage in Public Finance by U. K. Hisks (pages 174-176): The difficulty about site valuation lies on the side of the actual valuation. Only vacant sites are sold alone and even then improvements are often incorporated in them; in all other cases it is the unit of site and improv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch could well be related to the annual letting value or yield, which is perfectly ascertainable. In fact, Mr. Chari has even argued that the Corporation figures of such assessments are binding on the Government, on the principle of res judicata. 28. Concerning the retroactive provision, I do not desire to differ from my leaned brother (Veeraswami J.) in his view on this question. But I would add that where, as in this enactment, the assessments so far made are found to be arbitrary, capricious and unsustainable, because they have been made under Section 6, which has to be struck down, it appears to me that a retroactive provision of this kind could hardly be justified. 29. In conclusion, I desire to record my own sense of indebtedness, and on behalf of my learned brothers also, to all the learned counsel and the learned Advocate-General, who have spared no pains to make a study of available material and precedents and place them before us. In course of the extended arguments. Veeraswami, J. 30. The validity of the Madras Urban Land Tax Act 1966 is under attack in this batch of petitions under Article 226 of the Constitution either for certiorari, mandamus or prohibition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e and so too their annual Municipal letting values. Some of the petitioners have filed returns and others have not, giving particulars as to ownership, extent of the land with its location and the amount which, in the opinion of the particular owner, is the market value of such land. The Urban Land Tax Officers have in these cases either assessed the market value of the urban land concerned and sent a notice of demand of tax or proceeded by notice to inform owners to show cause against the proposed fixation of the market value. In non of the cases of urban lands with buildings assessed to Corporation Property Tax, have the authorities under the Act determined the market values of the urban lands by means of capitalisation at so may times of the annual Municipal letting value thereof. In a few of such cases, the market values of the urban lands including built-up sites have been arrived at on the basis or comparative basis of the contractor's method but as applied sometimes to another property consisting of land and building sold together. As illustrative of the facts, in W. P. No 2835 of 1937, the petitioner owns land and buildings bearing R. S. No. 3147 known as 'Claybrook ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Whereas the earlier Act the present on is in the measure of the urban land tax. Whereas the earlier Act changed tax on urban land at the rate of 0.4 per cent on the average market value of such land in a sub-zone as determined by the procedure prescribed thereunder and the Act was struck down as violative of the principle of equality, the Act under consideration with a view apparently to avoid that defect charges the urban land at the same rate of 0.4 per cent of the market value thereof and has dropped the provisions relating to be classification of the entire urban area into distinct zones and sub-zones and the elaborate procedure prescribed for arriving at the average market value on that basis for the purpose of levy of tax. The Act, which received the assent of the President on September 9, 1966 and was published in the Fort St., George Gazette Extraordinary as on the next day, replaced the Madras Urban Land Tax Ordinance, 1966. It bears the same preamble as the earlier Act and contains eight Chapters of which Chapters I, II and VI to VIII are more or less in pari materia with Chapters I, III, VII to IX respectively of the earlier Act. The Act came into force on the date of it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tution of Tribunals. Each Tribunal shall consists of one person only who shall be a Judicial Officer not below the rank of a Subordinate Judge. The charging Section 5 reads: Subject to the other provisions contained in this Act, there shall be levied and collected for every fasli year commencing from the date of the commencement of this Act, a tax on each urban land (hereinafter referred to as the urban land tax) form the owner of such urban land at the rate of 0.4 per centum of the market value of such urban land. The next section providing for determination of the market value of each urban land states: For the purposes of this Act, the market value of any urban land shall be estimated to be the price which the opinion of the Assistant commissioner, or the Tribunal, as the case may be, such urban land would have fetched or fetch, if sold the open market on the date of the commencement of this Act. Then follow provisions for submission of return by every owner or urban land in the prescribed manner within a specified time and containing the required particulars and for the procedure the assessing officers should follow in dealing with the returns or cases wher ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... espect of any urban land is in lieu of the ryotwari assessment, the assessment levied under certain Madras Acts relating to specific inams, the ground rent, the quit rent or any amount due under the Madras City land Revenue Act, 1851. Specific provision is made that the urban land tax is in addition to any tax on urban land payable under any other law for the time being in force. The Government is given the power to specify that urban land tax under the Act shall be in lieu of any other amount. The Government also has power to exempt or reduce urban land tax in respect of any class or urban lands or by any class of persons on ground of undue hardship and for this purpose, it may cancel or modify any order of assessment to urban land tax. Certain types of urban lands with reference to their corporate or public ownership or the nature or purpose of their uses have been exempted from the purview of the Act. There are two special provisions in the Act which are of a concessional character. One of them is that where the amount of urban land tax on any urban land exceeds one half of the amount of the annual rent payable in respect of such land or the building there on under the Madras Ci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any fiscal statute to effectuate the charge, namely, provision for returns, assessment and collection of tax, exceptions, exemptions, remedies and rule-making power are also found in the Act. That the subject-matter of the tax is the urban land itself is clear not only from charging section but also from certain other provisions of the Act. For instance Section 17 makes urban land tax to be a first charge on the urban land. Section 23 which makes urban land tax to be in lieu of certain taxes, Section 29 which exempts certain classes of lands from the purview of the Act and Section 22 which deals with survey of urban lands also confirm the position. In fact there has been no controversy before us that the tax imposed under the Act is on the urban land qua such land. The act judge from its charging and machinery provisions would, therefore, appear to fall squarely within the ambit of Entry 49 of the State List which is Taxes on lands and buildings. 35. But it is argued that the Act is in excess of the powers of the State legislature under that Entry because (a) it uses the market value of urban land as a measure of tax; (b) entry 49 of the State List authorises only a tax on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9;s power to make laws with respect to any of the matters enumerated in the Union List is exclusive not withstanding anything contained in clauses (2)and (3) of the Article. With respect to any of the matters mentioned in the Concurrent List, both Parliament and the State legislatures have power to make laws, but the Parliament and the State legislatures have power to make law, but the parliament can exercise such power notwithstanding anything in clause (3) and the State Legislature can do so only subject to clause (1) of the Article. The exclusive power of a State Legislature to make laws with respect to matters in the State List is, however, subject to clause(1) and (2) of Art. 246. Though the legislative fields under each of the Lists are thus mutually exclusive, it is so in the related sense indicated in Art. 246. While the scheme of distribution is on a disjunctive basis and is complete in itself, in the nature of things it is possible there is interlacing or overlapping of the fields of power or subject matters for legislation in the Entries in the same List or between them and those in one or both of the other Lists. In that event, reconciliation is called for and for this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he particular case before them, the limits of their respective powers. It could not have been the intention that a conflict should exists; and, in order to prevent such a result, the two Section, us to be read together, and the language of one interpreted, and, where necessary modified by that of the other. In this way, it may, in most cases, be found possible to arrive at a reasonable and practical construction of the language of the section so as to reconcile the respective powers they contain and given effect to all of them. In performing this difficult duty, it will be a wise course for those on whom it is thrown to decide each case which arises as best as they can, without entering more largely upon an interpretation of the statue than is necessary for the decision of the particular question in hand. Attorney-General for Ontario v. Attorney-General for Canada. 1912 AC 571 is mentioned and this has also been noticed by the Federal Court: In the interpretation of a completely self-government constitution founded upon a written organic instrument (such as the Government of India Act of 1935) it the text is explicit, the text is conclusive, alike in what directs and what ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tude of each of the enumerated powers should be applied. The cardinal rule of interpretation of the Entries, as of any statue, is that the grammatical and ordinary sense of the words is to be adhered to unless that course would lead to absurdity, repugnancy or inconsistency. In such a case, the grammatical and ordinary sense of the words must give way to a restricted or legalistic meaning to be decided by courts. Once the scope of legislative power under an enumerated head in the List is fixed, the question of competence of a legislation is approached with reference to the pith and substance doctrine. That is to say, in deciding whether a particular statute falls and does not fall within the ambit of a given head of power, we should find out the pith and substance or the purpose or the object of the legislation. The true intention and purpose of a legislation can also be determined from its legal effect. Bearing these principle of interpretation in mind, we have to approach the problem of determining the true scope and ambit of Entry86 in the Union List and entry 49 in the State List. Entry 86 is: Taxes on the capital value of the assets, exclusive of agricultural land ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r, a dictionary for accountants, assets'' in singular is defined as'' any owned physical object or right having a money value, an item of its costs, depreciated cost or less frequently some other value.'' The Author differentiaties property'' form asset'' and days that the latter means any balance-sheet item and is usually associated with costar the portion thereof recognized having a more restricted application is more often applied to items transferable between person, any right to issue and benefit is being safeguarded and governed by abode of law. It is further pointed out by him that accounting conventionally recognizes certain sources of wealth as assets but not other, typical examples for the former being cash, investments, claims, materials, supplies, goods in process of manufacture or for sale, land, plant assets, prepaid and trade-marks; an item of wealth may be an asset recognized in the accounts, even though not realizable in cash as for example a prepaid expense relating to an expected future activity, such anexpenditure being regarded as recoverable in the form of future services or beneft. Assets not conventionally recognize ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n also indicates the taxable event. What is important to not is that the principal value of all property in the aggregate is the subject-matter of taxation. Taxes on income other than agricultural income which is Entry 82 of the Union List have also their incidence on the agregate income, because the concept oft6ax on in ome is that it is a tax on the to totality of the income from all sources, such agregate income being the subject of taxation. 38. Entry 49in List II. Taxes on lands and buildings'', notwithstanding the plural used contemplates on the other hand, a tax on lands and buildings as units in contrast to Entry 86. Tax under entry 49 is on lands and buildings qua lands and buildings. I6 is true that lands and buildings of an individual may be included as part of his total assets and go in to the computation of the capital value of his assets for purposes of Entry 86 of the Union List. But, on that ground, it cannot be said that there is anything common between Entry 86 of the Unit List and Entry 49 of the State List. They contemplate taxed of different nature, character and concept both with reference to the subject of taxation and their incidence. while the t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Entries in lists and shows that wherever agricultural lands or income is excluded form the purview of the Entries in List I, they are brought within the purview of List II. We are inclined to think, therefore, that this is another reason why we should hold that the State Legislature under entry 49 is not prohibited from levying tax on the market value of lands and buildings including agricultural lands. As a matter of fact, the tax Entries in the Lists refer to the subject-matter of taxation and sometimes point to the individual on whom the tax is to be imposed or the taxable even but not the measure or manner of taxation. See Mathuraj Pillai v. State of Madras, . As we said, we are not persuaded to read capital value or principal value as but a measure and not the subject-matter of taxation. it is try that assets for purposes of Entry 86 may include urban lands and buildings. But on that grounds, it cannot be aid that lands, and buildings are taxed twice on their capital value, both under Entry 86 of the Union List and under Entry 49 of the State List. The two taxes are entirely different in their basic concept and fall on different subject-matters. A tax on the aggregate value o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , that no limit was prescribed as to the amount of tax which might be imposed and that as to the character of the tax or method of assessment the only restrictions, or the only ones which concerned the Court, at any rate, were that the Provincial Legislature could not tax income or capital value by reason of items 54 and 55 in the Center List. As to the scope of Entry 55, Broomfield. J. said: It was rather faintly suggested that if the impugned tax is not a tax on income it must be a tax on capital and within the mischief of item 55. What is meant by the capital value of assets in that item is by no means clear, and the argument threw little light on the matter. It may be what is intended is a tax on the total value of assets in the nature of capital levy. In any case the measure of the capital value of assets would appear to be the market price. That would obviously be affected by several factors, e.g., mortgages and charges, of which the impugned tax takes no account. Kania J., as he then was, observed. Section 22 of the Act in terms states that it is a tax on buildings and lands. The other words used in that section by themselves or reared with the other sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... individual or a company and assess a tax on the full value of the assets, there was no reason why the Legislature could not do something much less than that, namely, impose a tax only on the some assets and not on the full value but on a value arrived at after certain deductions. The question which the learned Chief Justice was the considering was whether the provision imposing income-tax on capital gains made by the Income-tax and Excess Profits Tax (Amendment) Act of 1947 was ultra vires which he answered in the negative. Gajendragadkar, J., as he then was, was not prepared to accept in the view of Chagla, C. J., With very great respect, I am unable to agree with this last observation. It is clear that the scope of Entry 42 in List II was not argued fully before the learned Chief Justice and, in fact, the Court was not directly called upon to consider the proper construction of the said Entry at all.......... At I have already pointed out, I have come to the conclusion that even if the capital alone of the lands is taken into consideration by the Municipal Corporation in determining the amount of tax to be levied on the open land, the tax does not become a tax on the capital va ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... certaining the capital value or the economic value of the assets. therefore deductions will necessarily have to be allowed of the value of encumbrance of such asset. Further the tax under entry 86 falls on the owner 'of the assets which is clear from the words used 'of individual and companies', and not occupiers. In some decided cases, the view has been expressed that the subject-matter of taxes under Entry 86 is the value of the totality if the assets. In our opinion, if we may say so with respect, that is the correct view to take. We are not persuaded by the contention that because under the General Clauses Act plural includes singular, even on of the assets of an individual can be taxed on its capital value under the Entry. The economic value of the assets of an individual is not and cannot be the same as the economic value of one of the assets of an individual. The economic value of the assets of an individual can possibly be determined only on consideration of the total position of the rights and liabilities in relation to the total assets, and the economic value of one of the assets cannot serve the purpose. It may be that a law made under Entry 86 to tax the cap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h of the entries 86 in the Union List and 49 in the State List is the correct view and should be confirmed. It may be mentioned that subsequent to 1966-2 Mad LJ 172 one of us sitting with Ramaprasada Rao. J. expressed a similar view in Rajah D. V. Apparao Bahadur v. First Wealth Tax Officer, W. P. Nos. 1252 to 1255 of1963, D/- 25-1-1969 (Mad) as to the scope of the two Entries. Reference judgment of Sarkar. J. in in which the learned Judge expressed his view thus: In my view the Bombay Act imposes a tax on lands and is, therefore, within item 42 of List II. The fact that it has provided for the tax being quantified on the basis of the capital value of the land taxed does not take it out of item 42 of List II and place it under item 55 of List I. It is quite obvious that in providing the two items, namely, item 55 of List I and item 42 of List II the makers of the Government of India Act contemplated two different varieties of taxes. The Provincial Legislature had been given the power to tax units of lands and buildings irrespective of their value and the Central Legislature the power to tax the value of the assets.......... a tax on land cannot become a tax on capital value of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by or are adjacent and appurtenant to buildings such percentages of the capital value of such lands or at such rates with reference to the extent of such lands amendment after the Government of India Act, 1935 and the Constitution of India had come into force. 41. Mr. Tiruvenkatachari suggested four possibilities of construction of Entries 86 in List II: (1) Entry 49 may include a tax on capital value of lands and buildings and being a special Entry, it is excluded from the scope of Entry 86: (2) Under both the Entries there can be tax on capital value and such a taxation under Entry 49 does not infringe Entry 86: (3) There can be no tax at all on lands and buildings under Entry 49 in view of Entry 86 and (4) Entry 86 relates to taxes on capital value while Entry 49 to a tax on annual letting value. Learned counsel argues that the last of these possibilities should and preferred as the only reasonable and sound construction. We are unable to accept this view. He says that the idea that tax contemplated by Entry 86 is on the totality of assets s is wrong. Where there is power to tax assets the Legislature is not complied to tax all of them or none. In support of this propositio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 86 has been used in the sense of real economic value of the totality of the assets and that economic value of the assets of the individuals is not and cannot be the same as the economic value of the assets of an individual can possibly be determined only on a consideration of the rights and liabilities in relation to the total assets and the economic value of one of the assets cannot serve the purpose. As to the distinction that a tax under Entry 86 cannot be imposed on an occupier but only on the owner, Mr. Tiruvenkatachari, if we understood him aright, contends that the occupier of lands can be made liable to a tax under that Entry. We cannot accept this view. There is nothing to support it in Paragraph 936 in 23 Halsbury (Third Editor). It only says that an occupier of lands is liable to land tax. This observation was made with reference to the English Land Tax Act, 1797 and is not apposite in the present context. The Entry itself speaks of asset of an individual or capital of a company and that makes it clear that the tax is on the owner and not on the occupier of the assets. Entry 49 of the State List does not say whether the tax thereunder should be on the market value or on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m does not result in the concentration of wealth and means of production to the common detriment and that the ownership and control of the material resources of the community are so distributed as best to subserve the common good. But he would say that that Entry 49 of the State List is qualified by Entries 86 as well ass 87 of the Union List. Learned counsel goes so far as to suggest that in a sense Entries 86 and 87 may not have been regarded as taxation Entries because prima facie the tax will have the effect of killing the tax yielding subject or activity. From this standpoint, he would add that Entry 49 is not meant for social purposes. We are not impressed by these considerations and they do not necessarily lead us to the conclusion that learned counsel wants us to draw. Reference was made to sub-clause (b)(I) of clause (5) of Article 31 of the Constitution in the course of the argument at his stage, but we do not think that this is of nay assistance in interpreting the scope of Entries 86 and 49. The imposition of taxes does not belong to the field of Eminent Domain and is not to be and cannot be viewed from the standpoint of compulsory acquisition of property. It seems to u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of a statue or a legislative Entry is plain and obvious. Whatever the antiquity, it cannot control the express and clear words of the Legislature. This will be particularly so when that Courts are called upon to interpret grant of heads of power by the Constitution. But there may be situations or circumstances or context which may warrant a departure from this rule, and history and legislative practice, ass an aid to construction, may become relevant and may well be invoked. 1966-2 Mad LJ 172 at p.181 referred to certain decisions on this aspect and stated: Where the language of an Entry is clear and unambiguous, it is not in our opinion, permissible to depart from its plain tenor and scope, and import into it extraneous consideration in order to cut down or restrict its ambit and meaning. In fact, where the language is express and plain, no problem of construction normally arises. Where however, there are two parallel or related Entries in the same and different Lists, the apparent conflict will have to find its solution from a harmonious reading of such entries and an attempt at reconciliation for delimiting the mutual scope and ambit of such Entries. If the language ex fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that the word rate'' was clearly used in England in respect of a tax which was levied on the net annual value or rateable value of lands and buildings and not on their capital value. The legislative history and practice in India was then traced with reference to Municipal enactments in the various Provinces from 1884 and it was observed: It will thus be seen that these Acts which were passed between 1912 and 1925, which repeal the earlier Acts also provide for taxation on lands and buildings, and though the word rate is not used in any of these Acts, the tax is still on the annual value of lands and buildings. This shows that there was a uniform legislative history and practice in India also though sometimes the impost was called a tax on lands and buildings and at other a rate. But it was always a tax on the annual value of lands and building...... It will be clear further that in India unto the time the Act with which we are concerned was passed, the word rate had acquired the same meaning which it undoubtedly had in English legislative history and practices upon the year 1925. when the Rating and Valuation Act came to be passed consolidating the various ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le 243 was ultra vires Sections 73 and 75 inasmuch as it permitted fixation of rate at a percentage of capital value which was not permitted by the Act, for the word rate'' used in Section 73(1) had acquired a special meaning by the time the Act came to be passed and meant a tax on the annual value of lands and buildings and not on their capital value. The other was that if the Act permitted the levy of a rate at a percentage of capital value of the lands and buildings rate d thereunder, it was ultra vireos the Provincial Legislature because of item 55 List I of the Government of India Act, 1935 which corresponds to Entry 86 of the Union List in the Constitution of India. The Bombay High Court dealt with both the contentions and decided against the assessee. The Majority Judgment of the Supreme Court ruled on the first limb of the argument but left open the second based on the scope of Entry 55 of List I of the Government of India Act, 1935. After tracing the history and legislative practice both in England and India as to the meaning of the word rate'', it held, as we said, that the word rate'' in section 73 should be given the meaning the word has acqui ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the incidence is 25 per cent of the annual value. Further if it is open to the Municipality to fix the rate directly on the capital value at 1 per cent it will be equally open to it to fix it say at 10 per cent which would, taking again the same example mean, that the rate would be 250 per cent of the annual value, and this clearly brings out the camouflage. Now a rate at 10 per cent of the capita; value may not appear extortionate but a rate at 250 per cent of the annual value would be impossible to sustain and might even be considered as confiscatory taxation. This shows the vice in the camouflage that results from imposing the rate at a percentage of the annual value as it should be. It was on this view that the Majority reversed the judgment of the Bombay High Court and declared Rule 350-A to be ultra vires Sections 73 and 75 if the Bombay Municipal Boroughs Act. It is noteworthy that in the course of the judgment, the Majority also said: The matter might have been different if the words in clause (i) of that section (Section 73(1)) were 'a tax on buildings or lands or both situate within the municipal borough' for then the word 'tax' would have a wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thought that the legislative practice as to the Municipal property practice as to the Municipal property taxation in the country concluded the scope of Entry 49 of the State List. We do not accept this view. The legislative practice referred to has no bearing whatever on the scope of that Entry which clearly uses the language Taxes on lands and building''. The definition of taxation in the Constitution makes it impossible to accept the contention that the word taxes in the Entry should be limited to the rate as understood in the Municipal property taxation. Further it should not be, lost sight of the Entry 49 is a grant of power and the legislative practice referred to has no relevance to the interpretation of the scope of the grant. It is true that the Constitution makers should be taken to have been aware of the legislative practice while drafting Entry 49 but nothing prevented them from using the word rate instead of taxes in Entry 49. We may add that it is not correct to say that because in authorising the Municipal property for local taxation the Legislature has in practice provided for its levy on the basis of a certain percentage of the annual letting value a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Provincial List of the Government of India Act, 1935. Entry 49 of the Government of India Act, 1935 uses the same language as Entry 52 of the State List. But items 7 and 8 in the Second Schedule use the words An Octroi and A terminal tax on goods imported into or exported from a local area, save where such tax is first imposed in a local area in which an octroi was not levied on or before the 6th July 1917. 'Octroi' means a tax on entry of goods into a town or a city or a similar area for consumption, sale or use therein. The Supreme Court referred to the meaning of Octroi as given in the Encyclopaedia Britannica and observed that the characteristic feature of an octroi tax was that it was on the entry of goods into an area administered by a local body. It then proceeded to say: It was with the knowledge of the previous history of the legislation that the Constitution makers set about their task in preparing the lists in the Seventh Schedule. There can be little doubt, therefore, that in using the words 'Tax on the entry of goods into a local area for consumption, use or sale therein', they wanted to express by the words 'local area' primarily a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... akes if quite clear that such a tax could be raised not merely for the benefit of a Municipality District Board. Local Board or other Local Authority but also for the benefit of the State. It will be neither proper nor reasonable to read taxes in these Entries as applicable to only Local Bodies, notwithstanding that the word taxes includes, as is clear from Art. 366(28), imposition of any tax or impost, whether general or local or special. 46. On the other hand a close study of the evolution of Entry 49 of the State List clearly shows that its scope cannot be limited, as has been contended for by the petitioners. Section 45-A of the Government of India Act, 1919, provided for making rules under the Act for the devolution of authority in respect of provincial subjects to local Governments and for the allocation of revenues or other moneys to those Governments, Section 80-A(3)(a) stated that the Local Legislature of any province might not without the previous sanction of the Governor-General make or take into consideration any law imposing or authorising the imposition of any new tax unless the tax was a tax scheduled as exempted from this provision by rules made under the Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has not been maintained in the distribution of powers between the Centre and the Provinces under the Government of India Act, 1935. In the White Paper'' containing the proposals for the Indian Constitutional Reform, three Lists of power were suggested, (1) exclusively Federal, (2) exclusively Provincial and (3) concurrent. In the First List, imposition and administration of taxes on income other than agricultural income or the income of corporation but subject to the power of the Provinces to impose surcharges, imposition and administration of duties on property passing on death other than land, imposition and administration of terminal taxes and the imposition and administration of taxes not otherwise specified in the List or the Provincial List, were included. In the Provincial List were found, among other, the legislative subjects like Local Self-Government, District Boards, matters relating to the constitution and power of Municipal Corporation, Improvement Trusts, and other local authorities established for the purpose of Local Self-Government and village administration, land revenue including assessment and collection of revenue and maintenance of land record, survey ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on and it may be noted that the power did not include to tax land which would otherwise form part of personal capital. The exclusion of land is to be found also in respect of duties on succession to property. In List II of the Revised List which pertained to Provinces, item 1 related to Local Self-Government etc., as found also in the original proposed item 1, item 22, Land Revenue including assessment and collection of revenue, maintenance of land records, survey for revenue purposes and records of rights and alienation of land revenue. Item 23 related to land tenures, including transfer and devolution of agricultural land and easements; item 19, duties of excise confined to certain articles; item 65, surcharges within such limits as may be prescribed by Order in Council on federal rates of income-tax and super-tax to be assessed on the incomes of persons (not companies) resident in the Provinces, and item 66, imposition of fees, taxes, cesses, or duties in connection with the subjects in this list and of taxation in any of the forms specified in the annexure thereto. This item suggests than the taxing powers were also related to and connected with the subjects of legislative powe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Federal or Provincial Legislatures and they could enact laws in exercise of exclusive powers for raising general revenues for the Provincial Government and raising revenues for the purpose of local bodies. This scheme, as it should be observed, is entirely different from that adopted by Schedules I and II to the Scheduled Tax Rules under the Government of India Act, 1919. In allocation of powers, the Government of India Act, 1935 did not adopt the report of the Joint Select Committee that some of the taxes could be raised in connection with the subject-matter of legislation under other entries in a particular List. In each of the two Lists, it enumerated the subjects of legislation first and then grouped and set out the tax items on after the other, the last item being fees in respect of any of the matters but not including fees taken in any Court. This is also the scheme adopted by the Constitution of India. This particular aspect of the matter was noticed by Sundararamier Co.. v. State of Andhra Pradesh, . Unlike before the Government of India Act, 1935 not only regrouped the legislative Entries in that manner but also made substantial changes to the scope of some of then in e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g as a law made by the State Legislature in its pith and substance imposes a tax on lands and buildings, irrespective of the machinery employed or the measure it adopts for quantifying the levy and collection of tax, it cannot be assailed on ground of want of legislative competency, It is in this context the definition of taxation and taxes by Art. 366(28) is important taxes on lands and buildings as a subject or head of power have themselves not acquired any special meaning and there is no reason why their grammatical and natural meaning in its fullest amplitude should not be accorded fullest amplitude should not be accorded to the head of power. We are, therefore, unable to read any limitations into Entry 49 of the State List as that it is confined to taxes on the annual letting value of lands and buildings for Municipal purposes. 47. Taxes in Entry 49 in the State List mean both Provincial taxes and taxes raised for the local bodies. The tax being on lands and buildings, there is no warrant for the supposition that it should be on their annual letting value or on the basis of their yield. The expression land'' is wide enough to include also agricultural land. held: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as a tax on lands or buildings, then it would appear that land revenue on vacant land would be indistinguishable from a tax on vacant land. We have already referred to the view of the Supreme Court that Entry 49 of the State List included agricultural land, in fact all kinds of lands. Apart from that, land revenue has an ancient history. From time immemorial it has been recognised and considered to be a common law prerogative right of the native Sovereigns of old succeeded by later Governments to a portion of the produce from land, whatever the theory on which the right was founded. As a matter of fact, there has been no statutory law which directly provided at least in this State for raising land revenue in the form which obtains here. There are a number of statutes which indirectly have recognised the ryotwari system of assessment of land revenue. As pointed out in 1958-2 Mad LJ 117 = (AIR 1958 Mad 539), the land revenue has two aspects: it is an inherent feature of the ryotwari system that the Government has a share, and as stated in Board's Standing Order 1, Rule 4, the assessment represents the commuted value of the Government's share of the Cultivation and (2) the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , as already noticed, imposes a tax on each urban land at the rate of 0.4 per centum of the market value of such land. It directs that it should be levied for every fasli year. Does the tax fall on the corpus or on the yield and this notional, from it? Normally speaking recurrence of incidence may be indicative of its being on the yield and this notion will be strengthened by the fact that the impost is at a flat rate and that it is of a small percentage in quantum though expressed to be of the market value of land. According to Nicholas Caldor the criterion for determining whether a particular tax falls on capital or income is not whether it is levied on the one or the other but whether it is singular (once-and-for all payment) or recurrent. He would regard the annual tax on capital as merely a particular species of income-tax even though it may be expressed as a percentage of a capital and not as percentage of income. It is true that as Gulati on 'Capital Taxation in a Developing Economy (India) points out that while capital tax is reckoned in terms of capital value, capital values are not perfectly correlated with changes in income from capital and that capital values do not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the general public. There are numerous decide cases on the subject and it is unnecessary to refer to them. In Atiabari Tea Co. Ltd. v. State of Assam, the proposition was applied. struck down a taxation statute as violative of fundamental rights under Articles 14 and 19 of the Constitution. also recognised that fundamental rights applied to taxing statutes though in that case the contention that the statute there offended Art. 19(1) was not accepted. We have, however not been shown a single authority in which a tax law was found to be competent legislatively but found to violate Art. 19(1) on the ground of unreasonableness. Unreasonableness is a very flexible and legalistic terms, the content, quality and the measure of which are bound to vary with the personal outlook and philosophy of each Judge on men and things, social and economic as well as political matters and policies. Also there appears to be force in the following view if Seervai in his Constitutional Law of India'' see page 292: It is submitted that the reasonableness of a taxing statute would be wholly beyond the competence of a Court for it involves an evaluation of factors which the /court is neither e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... market value. Even if it falls on the yields, we cannot even in that case hold it to be unreasonable so long as the yield is not related to the actual letting value which is not in the contemplation of the Act. Mr. Tiruvenkatachari in these cases in invoking Art. 19(1) of the Constitution not merely says that the incidence of the charging provision in the Madras urban Land Tax Act, 1966 is confiscatory in effect of the entire income from urban lands in many instances but he relies on certain other aspects to show that the Act infringes Art. 19(1)(f). But before going into these details certain preliminary facts which provide the background must be noticed. 54. As has been stated in the Report of the Special Officer for Urban taxation in 1962, which preceded the enactment of the Madras urban Land Tax Act, 1963, the Madras City has a total area of 49 square miles of which an extent of 20 square miles was newly added in 1947. An extent of 11,650 acres is occupied by residential buildings, 610 acres by buildings utilised for commercial purposes, 970 acres by industrial undertaking and the rest by public buildings, roads, waterways etc. Every one knows that the major portion of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a high proportion of the income. Learned counsel illustrates the haphazard incidence with reference to particular facts in some of the cases. In W. P. no. 2835 of 1967, we have already referred to the extent of the land and buildings owned by the petitioner therein and the rent it fetches per month. The annual income on the basis is ₹ 6000. The proposed market value for the lands alone comes to ₹ 10,40,000 at the rate of ₹ 13,000 per ground. The property tax for two half years comes to a total ₹ 1400. The urban land tax at 0.4 per cent of the market value is ₹ 4160 and the income-tax at the tare applicable to the petitioner that is 32.05 per cent on his income from the property is ₹ 1234. The total tax burden in the aggregate under the three heads is ₹ 6794. Outgoing itself is shown to exceed the income which cannot be increased because of the provision of the Madras Buildings (Lead and Rent Control) Act, 1960. The proposed market value for the land alone works out 190 times the capital value of land and building based on the Municipal; Annual value multiplied by 20 times. In W. P. No. 3683 of 1967 the Municipal annual value is ₹ 4095 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ck down as unreasonable on the basis of the cumulative tax effect of both the taxes levied n different bases on the income from the urban lands charged to tax. A tax on land values and a tax on letting value, though both are taxes under Entry 49 of the State List Taxes on lands and buildings'', cannot be clubbed together in order to test the reasonableness of one or the other of the impost for purposes of Art. 19(1). It has not been stated before us that the levy at 0.4 per cent of the market value of the urban land is by any means confiscatory of the land values. Another step in the argument for the petitioners based on Art. 19(1) is with reference to the procedure adopted in fixing the market value of particular urban land. In certain cases it is said that the market of the urban land has been arrived at by applying what is known as the contractor's method not to the building which stands on the land whose value is ascertained by that means but to some other building on a different land taken for comparison. Mr. Tiruvenkatachari says that it is difficult enough for a man to test the contractor's method of valuation to his own buildings which could be done by a co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 77 (Third Edition): Where neither actual rents nor the profits of trade afford evidence of annual rental value, a percentage of the cost of construction of structural value of the hereditament, or of a suitable hereditament, is soetimes taken as evidence. This observation from Halsbury shows that if a contractor's methods is to be applied at all, it may sometimes be permissible to apply to a suitable hereditament in order to find out the annual rental value of a particular building, but whether resort should be made to this process of finding out the annual letting value depend upon the circumstances of each case and the methods itself is not likely to be more than a rough and ready one for finding out such value. If the methods is not permissible or has been improperly and wrongly applied that is a matter in which the particular determination of the annual letting value or rent can be set aside but that will not by itself justify striking down the charging or any of the machinery provisions of the Art. Yet another argument of Mr. Tiruvenkatachari under the head of violation of Art. 19(1) is that the valuations of urban lands are made without reference to the Municip ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tate duty and probably court-fee levy and there is no provision in the Act enabling resort to Superior Courts in order to show that the assessment of market value is wrong or excessive or is for any reason illegal. But there is Art, 226 of the Constitution which an aggrieved assessee can resort to in proper cases. We also find that Section 4 provides that each Tribunal shall be a Judicial Officer not below the rant of Subordinate Judge as an appellate authority for the purposes of the Act. Usually taxing statues themselves provide for a reference or revision to the High Court on a point a law arising from the impugned orders. It is rather unfortunate that the Urban Land Tax Act, 1966 does not make a similar provision. But on that account we are not persuaded that the Act could be held to be unreasonable. Nor are we satisfied that because each urban land is defined as comprised in a survey number or a subdivision number and, therefore, separate valuation for each survey number or subdivision number is made calling for separate notice under the Act to the assessees, instead of treating the property as one, it becomes necessary for them to file so many appeals, the Act offends Art, 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ally, this result is sometimes avoided by making the amending law retrospective. Taxation by itself cannot be held to be unreasonable but at the same time if the retrospective taxation is excessive in the sense that it reaches and unreasonable back period which will seriously affect the finance of those concerned, it will be a question whether the retrospective effect is so excessive as to render it per se unreasonable. On this aspect of the matter. We may notice the following observations of the Supreme Court in : So, it would be idle to contend that merely because a taxing statue purports to operate retrospectively, the retrospective operation per se involves contravention of the fundamental right of the citizen taxed under Art. 19(1)(f) or (g). It is true that cases my conceivably occur where the Court may have to consider the question as to whether excessive retrospective operation prescribed by a taxing statues amounts to the contravention of the citizens' fundamental right; and in dealing with such a question, the Court may have to taken into account all the relevant and surrounding facts and circumstances in relation to the taxation. The Court was there concern ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of this Act. The Assistant Commissioner or the Tribunal is given the power under the section to determine the market value. In doing so, they can estimate the market prices. The estimation is left to their opinion, namely, what they opine to be the price for the urban land if sold in open market on July 1, 1963 would be the market value. What the criteria they should apply in estimating the prices and what method they should adopt in the process of doing it, has not been stated anywhere in the Act. Section 6 does not indicate whether in ascertaining the market price as on the anterior date, it could be guided by the prices settled by Court under the Land Acquisition Act or on the basis of comparable sale deeds or awards or capitalised values of lands with reference to multiples of annual letting value or by statutory determination of the market value of particular lands by public officers in exercise of the power under the relevant statutes as in the case of determination of fair rent under the provisions of the Madras Buildings (Leads and Rent Control) Act, 1960. Nor does the section indicate the methods to be applied in determining the market value of blocks of lands of va ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he zone or sub-zone making due allowances for the special features, if any, in any individual transaction, the rents fetched for the use and occupation of the lands in a zone or sub-zone, the principles generally adopted in valuing lands under the Land Acquisition, Act, 1894 and the compensation awarded in recent land acquisition proceedings after deducting the solatium, if any fir compulsory acquisition, should be kept in view. Some of these criteria were dropped by a later amendment of the Rule which however, need not detain us. But the point is that the earlier Act did give some guidance at least in determining the market value which is totally absent in the present Act. 62. We are aware that the Act outlines a scheme of submission of returns in which the assessees themselves are called upon to estimate the market values of the urban lands with which they are concerned which would be charged to tax. Where the Urban Land Tax Officers differ and assess on a different market value, remedies are provided for the assessees aggrieved by way of appeal which will be dealt with by a Judicial Officer of the status of the Subordinate Judge. We do not think that this in any way detracts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring in mind the definition of urban land'' in Section 2(13) which will include, in the case of a built up site, the site alone dissociated form the building, it was impressed upon is that the Madras Act 12 of 1966 has approached the problem of the levy of urban land tax from an entirely new angle not attempted hitherto by other State in India for the levy. The Taxation Enquiry Committee long ago, made suggestions for such a levy for augmenting State revenues. The report of a Special Officer, a senior Member of the Broad of Revenue has also stressed the desirability of tapping this source of revenue bearing in mind the sudden spurt in the prices of urban land in the decade the prices of urban land in the decade following 1960. But the Taxation Enquiry Committee did not outline the procedure now found in the Act for detaching, the case of built up sites, the land from the building for the purpose of calculating the market value of the land and the subsequent levy of a percentage on that market value as urban land tax. On the other hand it recommended the system of assessment on non-agricultural lands as it then prevailed in Bombay. The Bombay Act 1939 thus referred to, prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the site have to be assessed together. The annual value is to be calculated at the gross annual rent which the building and the site can be reasonably expected to let from month to month or from year to year less a deduction, in the case of building, of 10 per cent of the portion of the annual rent attributable to the building alone apart from the site and the adjacent land occupied as an appurtenant to the building, towards allowance for repairs etc. The proviso mentions the excepted case of a Government or Railway building and a building of a class not ordinarily let. From these expected cases the annual value shall be deemed to be 6 per cent of the total of the estimated market value of the land at the time of the estimation and the estimated cost of erecting the building at such time, after deducing for depreciation a reasonable amount not less than 10 per cent of the cost. 67. Before examining the constitutionality of Section 6, it is necessary to advert for a moment to certain principles in regard to the valuation of urban land in populated areas for the purpose of levy of tax. These principle have received attention at the hands of economic experts and other students of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owner can show that the present price is not higher than the previous price, when account is taken of the cost of any building made in the interval or where the tax would equal the amount of the increment. If the increase is less than 15 per cent no tax is levied; but in other instances from 2 to 25 per cent of the increment is taxed by the municipality, the greater the increment the higher the tax. The example of Frankfurt was followed by Cologne, Hamburg, and other cities. The third method is to tax only future increments. This necessitates the valuation land and buildings by expert valuers. This the scheme which became law in the United Kingdom by the Finance Act, 1910, involved the valuation of 11 million units of land, especially the site value, which meant the market value of land less the value of buildings and tax usually the incremental value of sites only, but it is not unusual to include the value of buildings and sites. Indeed much is to be said for including both. The scheme of 1910 in the United Kingdom broke down owing to complicated provisions for separating the value of the site from the value of building and other Improvements. A tax to absorb 20 per cent of all i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t though this section gives power to the assessing officer to make an estimate of the market value of asset it is not to be an arbitrary or unguided opinion: there is provision for statutory rules either framed or to be framed for his guidance for the purpose. In regard to the Wealth Tax Act, our attention was drawn to a circular issued by the Central Board of Revenue, CBI, No. 3-WT. of 1967 dated 28-9-1967:-- Land and Buildings; The value of lands and buildings should be estimated with due regard to the nature, size and locality of the property, the amenities available and the price prevailing for similar assets in the same locality or in the neighbourhood of that locality. Where the value is not easily ascertainable in this manner, the Wealth Tax Officer may adopt the capital value of the property determined by the appropriate authority in the latest assessment for purposes of property taxation, under the laws and regulations relating to municipalities and municipal corporations. However, where the municipal valuation is prima facie too low, having in view the rents actually received or where an assessment of capital value is not made by a Municipality, or the property is l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be manned by a judicial officer not below the rank of a Subordinate Judge. But the Tribunal so constituted is not the same as a Court of law. The Tribunal is a creation of the Act and has to function within the four corners of the Act. When there are no guiding lines in the Act or in the Rules under the Act for the purpose of fixing the market value of a built up urban land, whatever handicaps attach to the Assistant Commissioner in making a subjective estimate of the market value, by reason of the lacunae in the provisions of the Act will also attach to the decision of the Tribunal. 70. Before parting with the Land Acquisition Act, it is also necessary to bear in mind that fact that though Section 11 reads as if the acquiring officer has a full discretion in the matter of arriving at the valuation of the land to be acquired by a purely subjective process, in practice, he invariably follows certain important instruction in the Land Acquisition Manual As applied to the State of Madras. These instructions in the Land Acquisition Manual as applied to the State of Madras. These instructions embody a set of principle which the acquiring officers are required to follow, and they m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yield of medium tern securities having a currency at hat time of say 15-20 years should be taken as the basis with an addition of one per cent to such yield to work out the rate for a long-term security. From the above it would appear that when a building-cum-site, is acquired under the Land Acquisition Act, the acquiring officer is permitted to adopt as a proper method the capitalised value of the rental for the purpose of fixing the market value of building-cum-site. He is warned that it is fallacious to value land and building separately. He is also told that if the value of a building alone has to be fixed apart from the site in special cases, value on the basis of the original cost of construction can be adopted if there has been no sale in the neighbourhood of similar buildings or if the building in question has never been let out; obtain an estimate of the cost of the building from the Public Works Department. At the same time there is a caution that such estimate may be taken as a guide though not the sole determining factor in arriving at the market value. 71. The method referred to above for the valuation of buildings is often known as the contractor's method ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he site and then adding thereto the cost of construction of the building according to the prescribed rates, less depreciation. For the purpose of valuing the building, the statue has provided for different classification. No doubt the market value of the site enters into such determination, and no clue is given as to how the market value has to be ascertained after the site has been built upon. But in the case of a determination of fair rent under the Madras Buildings (Lease and Rent Control) Act (Madras Act 18 of 1960), in addition to the detailed procedure given in the Act and in the rules, there is provision for the dispute being referred to a Rent Controller with right of appeal and revision before a hierarchy of higher Tribunals where all issue regarding valuation can be canvassed. The detailed procedure for the determination of value of a building in the Madras Buildings (Lease and Rent Control) Act, indicates the difficulty of the problem of ascertaining urban land values especially when the land is a built up one and the consequent necessity for statutory guidance for making the appraisal, with judicial control by a Court of law. 73. In this connection, it has to be noti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... included originally a direction for taking into account the value determined for the site by the authorities in land acquisition proceedings, but this was altered subsequently to the value awarded by Courts, giving rise to the comment by Thiru. Chari that while the usually higher estimates by Courts for the value of the land would work in favour of the owners receiving compensation, it would work adversely from the point of view of urban land tax assessment, whereas the lower amounts fixed by the Land Acquisition Officer in a wards would work in favour of urban land tax assessees. A Bench of this Court consisting of two of us struck down the principle of valuation in the 1963 Act based on the Zonal system as discriminatory as well as vague and ambiguous, vide decision reported in (1966) 2 Mad LJ 172. Thus, the valuation on the basis of the zonal system has now gone completely out of the picture. But in the amended enactment which emerged in 1966, which is the Act now impugned before us, while the zonal system of valuation has been entirely left out no guiding lines have been substituted in its place, and the valuation has to depend upon the subjective opinion of two authorities, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act, the assessee has the right to adduce evidence regarding the market value of the urban land. It was urged that these provisions of the Act would give the assessee a very fair opportunity of putting forward his case and adducing adequate evidence in support of his valuation of the site. While the above argument at first blush seems plausible, a little further reflection will show that in the case of entirely built up sites in crowded parts of the City like George Town or Triplicane and those in parts of the City where houses are built wall to wall abutting long streets, an assessee who owns a building built several years ago, will be in no position to supply data for the value of the land on an anterior date like 1963 mentioned in the Act. If there is a recent sale of a building with its site somewhere in his neighbourhood, all that he can give is information about the value of building-cum site. He may not be in a position of engage a contractor for valuing the building covered by the sale of the property of a resident in some other street or locality who will be an utter stranger to him, further there are no guide lines provided either in the Act or in the Rules as to how ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... those that came before us for consideration. The significant point to note from these extract is that in several cases where the existing Property Tax and the proposed Urban Land Tax are taken together the burden thrown on the assessees is found to be oppressive; it also shows such a wide range of variation in the incidence that it is difficult to resist as levied under Section 6, falls unevenly on assessees. It may be called to mind also at this stage that the uneven impact of the levy was one of the main grounds on which this Court struck down the procedural section in the 1963 Act which prescribed the zonal method for estimating the land value when the matter came before a Bench on an earlier occasion in (1966) 2 Mad LJ 172. The Bench held that by reason of the unequal burden, Article 14 of the Constitution was violated. The same vice continues in the present scheme of valuation under Section 6 of the impugned Act. 77. This point can be illustrated by the figure supplies to us from the several individual assessments in the writ petitions before us. In Writ Petition No. 3683 of 1967 (a house in D'sylva Road, Mylapore, standing on 29.3 grounds occupied by the Managing Dire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nto focus the peculiar difficulties inherent in the problem of estimating urban land value, where, as in most parts of the Madras City, land has been built up several years ago, under the present method outlined in Section 6 of the Act to dissociate the land from the building, and leave the question of determination of the market value of the land to the unfettered discretion of the authorities appointed under the Act, without the provision of guide lines expressed in the Act or in the Rules, and without any provision for resort to a civil Court for correcting the erroneous determination based on a subjective valuation, unlike in the case of the Land Acquisition Act. I have already referred to the problem of site valuation as one which bristles with enormous difficulties in the case of built-up sites and how classical economists, dealing with science of public finance, have repeatedly stresses the formidable nature of the problem involved. 79. The learned Advocate-General invited us to give out suggestions for evolving proper principle of valuation, which the authorities would implement by amendments to the Act and framing of rules if necessary. But what I have already stressed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of ₹ 500/-. The annual letting value as determined by the Corporation of Madras for the property is ₹ 5460/-, and the property tax fixed by the corporation is ₹ 1,400/- per annum. The Assistant Commissioner of urban Land Tax issued a notice to the petitioner on 15-9-67 proposing to fix the market value of the suit urban land at ₹ 13,000/- per ground, and levying a tax of ₹ 4,160/- per annum, called upon the petitioner to state his objections. It is submitted by the petitioner that the notice issued by the first respondent ex facie proposes to fix an unreasonably high market value, ignoring the well-established principle of law applicable in the matter of fixing the market value of land. The levy us challenged on various grounds which will be referred to in due course. 82. The Madras Urban Land Tax Act, 1963 (Madras Act XXXIV of 1963) came into force in the City of Madras on the 1st day of July 1963. In the statement of objects and reasons for the introduction of the Madras Act XXXIV of 1963, it was stated that the Taxation Enquiry Commission and the Planning Commission were suggesting the need to impose a suitable levy on lands put to non-agricu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as permissible for the State to levy a tax for the State purposes (contrasted with a power to tax for municipal purposes). But the Act was struck down as violating Article 14 of the Constitution of India because the tax under the charging section (Section 3) of the Act is levied on an urban land not on the actual market value of such urban land,, but on the average value of lands in a locality known as sub-zone. The impugned Act (Act 12 of 1966) was passed by the Government after examining the judgment of this Court in 1966. In the new Act, the provision relating to fixation of average market value in the sub-zone was done away with. Instead Section 5 of the new Act provides that there shall be levied and collected for every fasli year commencing from the data of the commencement of the Act, a tax on each urban land from the owner of such urban land at the rate of 0.4 per centum of the market value of such urban land. Section 6 provides that the market value of any urban land shall be estimated to be the price which in the opinion of the Assistant Commissioner, or the Tribunal, as the case may be, such urban land would have fetched or fetch, if sold in the open market on the date o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... em II, Entry 49, and therefore it is not within the competence of the State Government. (2) The right to tax on capital value is open only under Entry 86 and Entry 87 of Item I, and that method of valuation is open regarding any other entry in List I, or List II, except Entry 48 which specifically mentions a duty on a capital value. (3) As the present tax is only on land and not land and building, the tax would not fall under List II, Item 49. (4) The power of the State Government to tax either on Entry 49 lands and buildings or Entry 45 land revenue can only be based on the share of the produce and must be related to the actual or imputed income. (5) Under List II, Entry 49, the State cannot tax except for municipal purposes. (6) The Act does not provide machinery or guidelines for determination of the market value and therefore violative of Articles 14 and 19 of the Constitution of India. (7) The Act imposes unreasonable restrictions on the rights to acquire, hole and dispose of property. 84. List I, Entry 86. Seventh Schedule is the following terms:-- Taxes on the capital value of the assets, exclusive of agricultural land, of individuals and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of goods'' was a term of well recognised legal import in the general law relating to the sale of goods and in the legislative practice relating to that topic and must be interpreted as having the same meaning as in the Sale of goods Act, 1930. The principle that a liberal construction must be put on the legislative power is understood to carry with it all ancillary and subsidiary powers in aid of the main topic of legislation, and of the purpose of preventing evasion and to provide for punishment for breach of the provisions of law. In cases of conflict, the doctrine of pith and substance is applied. In 1940 FCR 188= (AIR 1941 FC 47), the Federal Court held that the Madras Agriculturists Relief Act, 1938 was not in pith and substances a law with respect to negotiable instruments or promissory notes, and the fact that the debts were in practice evidenced by negotiable accidental circumstance which could not affect the validity of the enactment. 85. Reading Entry 49, List II in the Seventh Schedule, taxes on lands and buildings, in its ordinary, natural and grammatical meaning and giving it a liberal construction, it would include taxes both on income and the value of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o be accepted, for under Entry 48, List II, the State is empowered to levy estate duty in respect of agricultural land which duty is based on the principal value of property passing upon death. Thus, the plea that a tax on capital is beyond the competence of the State Government cannot be accepted. In this connection Article 31(5)(b)(i) of the Constitution may be noted. It provides that the provisions as to payment of compensation under Article 31(2) will not affect the provisions of any law which of the State may make for the purpose of imposing or levying any tax or penalty. The words any tax would indicate not only tax on income, but also tax on capital. In List II. several entries would indicate that the State can levy taxes on capital. In Entry 50, a tax can be levied on mineral rights. A tax on mineral rights would include a tax on capital. Entry 51 relates to duties of excise on certain goods and it must include a tax on capital. Entries 57 and 58 relate to taxes on vehicles including tramcars and taxes on animals and boats. It is significant that Entry 46 is taxes on agricultural income. If the Constitution intended that taxes on lands and buildings could only be on the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s held that the tax was in pith and substance a tax on land and buildings covered by Item 42 of the Provincial List. In the Government of India Act, 1935, corresponding to List II, Entry 49. In that case, though the annual value was used as the basis, the annual value was only notional and hypothetical income, and not the actual income. It was held that when a tax is levied on property, it will not be irrational to correlate it to the value of the property and to make some kind of annual value on the basis of the tax without intending to tax income. In the two cases cited, the tax on lands and buildings based on annual value was held to be not a tax on income, but a tax on lands and buildings. In Chagla, C. J. was of the view that that as the Central Legislature could impose a tax on the capitalised value of lands and buildings, the power of the Provincial Legislature is restricted to tax on lands and buildings. This view was dissented by Gajendragadkar. J. as he then was in . The learned Judge was of the view that even If the capital value of lands was taken into consideration by the Municipal Corporation for determining the amount of tax to be levied on the urban lands, the tax d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... perty tax may levied at such lands or at such rates will reference to the extent of such lands as any be fixed, observed that this amendment was an exception to Section 81(2) of the Act which provided generally for levying these taxes at such percentages of the annual value of lands and buildings as any be fixed by the Municipal Council. It was held that the explanation cannot be read as meaning a percentage of the capital value itself. The learned Judge refrained from expressing any opinion as to the legality of the Amendment after the Government of India Act, 1935 and the Constitution of India came into force. From this observation, it is contended that the question as to the validity of the levy of a tax on capital value of lands and buildings under Entry 49 is not valid. Delivering the minority judgment in the Gordhandas case, Sarkar, J. expressed the view that the fact that the Bombay Act had provided for the tax being quantified on the basis of the capital value of the land taxed, did not take it out of Item 42 of List II and place it under Item 55 of List I (Item 86 of List I of the Constitution), as it was quite obvious that in providing the two items the makers of the Gove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Item 2 is a tax on land or land values, and Item 3 is a tax on land or land values, and Item 3 is a tax on buildings. Item 11 related to a tax imposed in return for services rendered, such as (a) water rate (b) lighting rate, (c) scavenging, sanitary or sewage rate. (d) drainage tax and (e) fees for the use of, markets and other public conveniences. Under the same Rules, the Legislative Council of a Province may, without the previous sanction of the Governor-general, make and taken into consideration any law imposing, for the purposes of the local Government, any tax included in Schedule I of the Rules. Item I in Schedule I is a tax on land put to uses other than agriculture. Thus, while a tax on land put to uses other than agriculture may be used for the purpose of the local government taxes under Schedule II may be imposed for the purpose of the Local authority. It may be noted that in the Local Board Act 5 of 1884, by Section 64, in computing land values, the annual value of the land was only taken. While, the power of taxation in Item 1 in Schedule II may be confined to a tax based on annual value of the income, such restriction cannot be said to have been existed regarding ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... annexure is taxes on lands and buildings, animals, boats, hearths and windows; sumptuary taxes and taxes on luxuries. Considering the various entries in the white paper and in the revised lists prepared by the Joint Select Committee of parliament, there is nothing to indicate that the power of the provincial Government is confined only to tax income from lands and buildings and not on the capital value of lands and buildings. 90. When the Government of India Act, 1935 was passed, three lists, namely, Federal Legislative List, Provincial Legislative List and Concurrent legislative List, were provided for under Section 100 of the Act. Section 100 of the Act corresponds to Article 246 of the Constitution of India. Entry (42) in List II of Government of India Act, 1935, is taxes on lands and buildings, hearths and windows, and Entry (55) in List I is taxes on the capital of companies. When the Federal Legislative List, Provincial Legislative List were prepared for the Government of India Act, 1935, and the Union List, State List and the Concurrent List were made for the Constitution of India, there was no restriction placed on the power to levy tax on the income alone,. The distinct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... down on the ground that the premises of the factory would not be a local area coming within the entry. But the levy of a tax for entry of goods into a local area was held to be within the competence of the State government. It is clear therefore that the tax levied by the State under List II. Entry 49 cannot only be for the benefit of the municipalities and local boards, but also for the benefit of the State. The entries in the State List in the constitution of India, should therefore, have to be construed as empowering to tax not only for municipal purposes, but for securing revenue for State also. By the Government of India Act, 1935, the power of the Government to impose taxes whether on capital or income cannot be disputed. There is no basis for the contention that the entries relating to the State List relate to power of taxation with regard to income alone. Any such construction would go against the concept of a federal constitution. The Parliament and the State Legislatures have unlimited powers of taxation in respect of their respective lists subject to the fundamental rights. The legislative history cannot be of much assistance to the petitioner. In construing an entry in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o taxes on lands and buildings cannot be separated. The decided cases also do not lend any support to the contention of the petitioner,. In Gopalan v. State of Madras. in construing the words the circumstances under which, and the class or classes of cases in which'' occurring in Article 22(7)(a) of the Constitution of India, the Supreme Court negatived the contention that both the conditions should be fulfilled before a person is detained. The Supreme Court held that by the clause, as worded, the legislature intended that the power of preventive detention beyond three months any be exercised either if the circumstances in which or the class or classes of cases in which, a person is suspected or apprehended to be doing the objectionable things mentioned in the section. 93. In , it was contended that the State Legislature has power to legislature about forest under Entry 19 of the List and also as to lands under entry 18. There is no power to impose a tax on forests while there is power under entry 49 of that list to tax land. It was therefore contended that there is no power to impose tax on lands on which forest stand. The Supreme court held that 'land' in entr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and and buildings and a tax imposed by the State Legislature can validity co-exists, the Court observed that in the matter of double taxation by the State and Municipal bodies, a policy of forbearance, adjustment and co-ordinated action is no doubt necessary. The plea that the effect of both the taxes was confiscatory in nature was not gone into because of the declaration of Emergency by the President under Article 352 of the Constitution of India. Sri V. K. Thiruvenkatachari submitted that but for the declaration of Emergency, the Court would have declared that the effect of the double taxation is confiscatory in nature, and hence the enactment should be struck down. The decision does not support the contention of the petitioners that both the taxes cannot stand together, or that they should be levied by a co-ordinated action. Regarding the plea that it is confiscator in nature, it will be considered in due course. 95. The urban land tax is a tax on the market value of the urban land. The learned Advocate-General in reply to a question by the court made it clear that the tax is intended to be a tax on the market value of the urban land, irrespective of the income or the annual ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pplication form the owner, add to the annual rent aforesaid, an amount not exceeding the difference between the urban land tax payable under this Act and one half of the annual rent aforesaid. This section empowers the authorities, on the request of the owner, to enhance the rent, if the urban land tax levied on him exceeds six months rent from the land and buildings. Section 31 of the 1963 Act (Act 34 of 1963) provided for enhancement of the rent where the urban land tax payable was in excess of the annual rent payable was in excess of the annual rent payable in respect of such land or buildings. This Section is intended to cover certain classes of cases where the urban land tax is high in relation to the rent realised from the property. In the case of a building with extensive grounds around, as is the case in one of the writ petitions where the extent of land around the buildings is eighty grounds and the value of the ground is fixed at ₹ 10,000/- a ground, the rent realisable from the buildings will be low. Though originally, the enhancement of the rent was permissible under the old Act only in cases where the urban land tax levied was more than a year's rent, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the theory that the tax is on the basis of income cannot stand if the percentage of the tax is stepped up thereby exceeding the income from the land. The tax cannot be supported as a levy on the income. 96. The attack made against Act 12 of 1966 is that there is no guidance given and requisite machinery provided for determining the market value, as was given in the previous enactment relating to fixation of the market value, and therefore the Act. should be struck down. While Madras Act 34 of 1963 provided for the determination of the average market value in the zone, the present enactment, Act 12 of 1966, has changed the procedure. while determining the average market value under the 1963 Act; the Assistant Commissioner, under Section 6(2) of the Act shall have regard to (a) the locality in which the urban land is situated; (b) the predominant use to which the urban land is put, that is to say, industrial, commercial or residential; (c) accessibility or proximity to market, dispensary, hospital, railway station, educational institution, or government officers; (d) availability of civic amenities like water supply, drainage and lighting; and (e) such other matters as may be pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ccourt ruled that it cannot, for obvious reasons, meticulously scrutinize the impact of its burden on different persons or interest, and where there is more than one method of assessing tax and the legislature selects one out of them, the Court will not be justified to strike down the law on the ground that the legislature should have adopted another method which in the opinion of the Court, is more reasonable, unless it is convinced that the method adopted is capricious, fanciful, arbitrary or clearly unjust. The Court also expressed its view that the advantages or disadvantages to individual assessees are accidental and inevitable and are inherent in every taxing statute as it has to draw a line somewhere and some cases necessarily fall on the other side of the line. 98. The procedure prescribed for determination of the market value and assessment of urban land tax is given in Chapter III of the Act the tax is to be levied on the estimated price which in the opinion of the Assistant Commissioner it would fetch in the open market. this opinion is not subjective but should be formed according to the procedure laid down in Section 7 to Section 11 of the Act. Instead of the Assist ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (not being a proceeding in respect of which an appeal lies to the Tribunal under Section 20) to satisfy itself as to the regularity of such proceeding or the correctness, legality or propriety of any decision or order passed therein, and if it such decision or order should be modified, annulled, reversed or remitted for reconsideration, it may pass orders accordingly. Section 32 enables the urban land tax officers, or the Assistant Commissioner, or the Board of Revenue or the Tribunal to rectify any error apparent on the face of the record at any time within three years from the date of any order passed by him or it. Thus the Act envisages s detailed procedure regarding submission of returns, making of an assessment after hearing objections and a right to appeal to higher authority. The same procedure is adopted in many taxing statutes. 99. It is now well settled that tax laws are subject to fundamental rights under Articles 14 and 19 of the Constitution of India. But due to the inherent complexity of fiscal adjustment of diverse elements, a larger discretion to the Legislature in the matter of classification is permitted. The power of the Legislature to classify is of wide ran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d: The Act thus proposes to impose a liability on land-holders to pay a tax which is not to be levied on a judicial basis, because (1) the procedure to be adopted does not require a notice to be given to the proposed assessee; (2) there is no procedure for rectification of mistakes committed by the assessing authority; (3) the is no procedure a prescribed for obtaining the opinion of a superior Civil Court on question of law, as is generally found in all taxing statute, and (4) no duty is cast upon the assessing authority to act judicially in the matter, of assessment proceedings. Nor is there any right to appeal provided to such assessment as may feel aggrieved by the order of assessment. In , the Court held that if a taxing statue 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 executives to devise such machinery as it thinks fit and to prescribe such procedure as appears to it to be fair, the court may come to the conclusion that the tax is an unreasonable restriction within the meaning of Article 19(5) of the Constitution of India. In , the position is stated thus: (at pag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt or the High Court. 100. The procedure and the requisite machinery for fixing the market value is embodies in several other enactment. In the Wealth-tax Act, 1957, Section 7 provides that the value of any asset for the purposes of the Act shall estimated to be the price which in the opinion of the Wealth-tax Officer it would fetch if sold in the open market, on the valuation date; this opinion of the price should be formed in the manner prescribed in Chapter IV of the Act. Section 14 requires a person liable to tax to furnish to the Wealth-tax Officer a return in the prescribed rorm. Section 16 empowers the Welth-tax Officer to assess the net wealth of the assessee on the return furnished by the person. Sub-section (2) provides that if the Officer is not satisfied, he shall serve a notice on the assessee either to attend in person at his office on a date to be specified in the notice or to produce on that date any evidence on which the assessee may rely in support of his return. Sub-section(3) provides that after hearing the evidence produced, the officer may assess the net wealth of the assessee. Sub-section (5) empowers the officers to estimate the net wealth and the amoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecified in the notice or to produce or cause to be produced on that date. any evidence on which the person accountable may rely in support of his account. After hearing such evidence, the Controller may asses the principal value of the estate of the deceased and determine the amount payable as estate duty. Section 58(4) provides that when no account is produced or the person accountable fails to comply with the terms of the notice served under sub-section (2), the Controller shall make the assessment to the best of his judgment and determine the amount payable as estate duty. An appeal against the orders of the Controller is provided under Section 62 of the Act to the Appellate Controller, and a second appeal is provided to the Appellate Tribunal Under Section 64, the person accountable may present an application to the Appellate Tribunal requiring the Tribunal to refer to the High Court any question of law arising out of such order. 102. In the Madras Agricultural Income-tax Act, 1955 (Madras Act V of 1955), provision is made for submission of return of income and the assessment of tax on such return. Under Section 17 of the Act, if the Agricultural Income-tax Officer is satisf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on among all the persons interested in the land. The award of the Collector shall be final subject to a reference to a Court which the Collector is required to, make on the written application of the person interested objecting to the measurement of the land, the amount of compensation, the persons to whom it is payable, or the apportionment of the compensation among the persons interested. No doubt, in the Land Acquisition Act, the compensation is to be determined by a court. The failure to provide for reference to Court, in my view, will not vitiate a taxing statute when provision is made for an appeal to a Tribunal which is presided by a Sub-ordinate Judge. 104. In considering the validity of Section 5-A of the Travancore-Cochin Land Tax Act, 1955 which enabled the government to make a provisional assessment of the basic tax payable without any procedure, the Supreme Court in the Moopil Nair's case, stated supra, observed that the Act was silent as to the machinery and procedure to be followed in making the assessment leaving it to the executive to evolve the requisite machinery and procedure. The section did not make any provision for giving any notice before making asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dge should be the Tribunal. Sufficient opportunity to the assessees to present their cases and judicial determination along with a right of appeal to a judicial authority and a revision to the Board of Revenue are provided for. I there is any error apparent on the face of the record, or failure to follow the procedure laid done in the enactment, or when extraneous and irrelevant materials are taken into account in arriving at the market value, the assessee can always move the High Court for exercise of its jurisdiction under Article 226 of the constitution of India. 105. The contention of Sri V. K. Thiruvenkatachari that as the new enactment does not provide for determination of the market value as found in Section 6 of the 1963 Act, and the rules made there-under, the charging section should be struck down cannot be accepted. As already pointed out, the machinery for assessment has been changed. Instead of the Assistant Commissioner fixing up the market value for the zone, in the new Act provision is made for a person to submit a return regarding the market value of the urban land, and for the determination of the market value by the officer after hearing the person concerned a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lue of the landed property. So also, no rules have been framed under the madras Urban Land Tax Act. The observation of the Supreme court in the Standard Mills case, is equally applicable to Section 6 of the Act, and its validity cannot be questioned on the ground that the opinion of the officer as to the value is subjective or that no adequate machinery is provided for the determination of the market value. 106. In Gift Tax Officer v. Kastur Chand, construing the duty of the Gift Tax Officer to form an opinion and to make an estimate of the value of the property gifted, the court observed that the valuation is an art and not a precise science, and that his opinion is a judicial opinion. It is not final, it is justifiable, it is liable to be tested on appeal to the Appellate Assistant Commissioner. Thus the provision as to formation of an opinion and making an estimate of the value of the property by the officer is recognised in the Gift Tax Act. 107. It was submitted that forming an opinion as to the market value of the urban land in the absence of clear and specific rule is almost impossible and the entrustment of this duty to the officer cannot be held to be valid. It was s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... building is constructed is more difficult, and its market value cannot be determined with accuracy. In this connection, a suggestion made by Sri V. K. Thiruvenkatachari, the learned counsel for the petitioners, is worth mentioning. He submitted that if the purpose of the Act was to raise revenue by taxation, the legislature might have levied a surcharges on the property tax levied by the Corporation and thus avoided the difficulty in determining the market value of urban land and the expenses incurred in the administration of the Act. The learned counsel may be right in his submission. It may be that the State has embarked on a difficult task of valuing urban land. Whether it is advisable to resort to urban land tax or to levy a surcharge on the property tax is for the legislature to decide. So long as the legislature is competent to impose a levy on the market value of the urban land, however difficult the process of ascertaining the market value may be the Act imposing the tax cannot be struck down. The petitioners also cannot plead that in the absence of rules the market value cannot be satisfactorily determined. Urban land is defined as any land which building site and includes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e should be ascertained. In considering the market value, it is well settle that there need not be evidence of the existence of specified purchasers. It may be that there is no market for the property and hat the only imaginary bidder will be the officer acquiring the property. Even then, the market value will have to be determined. The courts have evolved a method of valuing land for which there is no market. Even easementary rights, the right to light and air have been valued. 109. In the Madras Court-fees and Suits Valuation Act, 1955, Section 7(g) provides that where the land is a house-site whether assessed to full revenue or not, poramboke land, or is land not falling within the descriptions (a) to (f), its market value should be taken as the basis for the purpose of Court-fee. There is no guidance in the Act for determination of the market value. It is often not possible to determine the market value with any degree of accuracy and it may vary according to the persons valuing it. Several methods for determining the market value will have to be adopted in arriving at as correct a valuation as possible. But the difficulties in arriving at as correct a valuation as poss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uting depreciation,. The Supreme Court held hat in computing the depreciation on the value of the building, the value of the site on which the building stands should be excluded. The Court held that if it is a first class substantial buildings, the rate is less, while it will be higher in the case of a third class building, and that it would be difficult to appreciate why the land under three times quicker than land under a first class building. It was held that land does not depreciate and if depreciation was allowed it would give a wrong picture of the true income. The Court accepted the value of the land on which the building stood and held that no depreciation was allowable on the cost of the land. The decision is an authority for the proposition that the land on which a building stands can be valued. In answer to a specific question by the Court, Sri V. K. Thiruvenkatachari, learned counsel for the petitioners admitted that it is possible to value the land on which building has been constructed. The objection to the validity of Section 6 on the ground that it is not possible to determine the market value according to the Section, and as such, the section should be struck down, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t a law providing for levy and collection of taxes is a law within the meaning of apart III of the Constitution, and therefore it must stand the test laid and therefore it must stand the test laid down by Article 13 of the Constitution. The 'law' in Article 265 of the Constitution must be value law. A law to be valid must not only be one passed by the Legislature in exercise of a power conferred on it, but must also be one that not infringe the fundamental rights declared by the Constitution. It is not for the Court to embark, on an enquiry whether a tax imposed by a statute is unreasonably high and whether it should be fixed at a lower level. In the Supreme Court held that a challenge to a taxing statute on the ground of colourable exercise of legislative power cannot succeed by merely showing that the tax is unreasonably high or excessive. In , the Supreme Court observed: (at page 1673). The quantum of tax levied by the taxing statute, the conditions subject to which it is levied, the manner in which it is sought to be recovered, are all matters within the competence of the legislature, and in dealing with the contention raised by a citizen that the taxing statut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trictions imposed by the Act are so unreasonable that they should be struck down on the ground that they contravene the fundamental rights guaranteed under Article 19(1)(f) and (g). In this case, it cannot be said that the retrospective operation has the effect of changing the nature of the statute so as to effect the power of the legislature itself. 113. In the Supreme Court has held thus: (at page 770). It is well recognised that the power to legislate includes the power to legislate prospectively as well as retrospectively,. and in that behalf a tax legislation is not different form any other legislation. If the legislature decided to levy a tax, it may levy such tax either prospectively or even retrospectively. When retrospective legislation is passed imposing a tax, it may in conceivable cases, become necessary to consider whether such retrospective taxation is reasonable or not. But apart from this theoretical aspect of the matter, the power to tax can be completely exercised by the legislature either prospectively or retrospectively. In the case cited retrospective effect was given in order to give effect to a particular provision in the enactment which was foun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er the land in question is a land which is liable to tax, that is, a land which comes under the definition urban land''. If it is not urban the authority will have not right to levy any tax. Though the power to determine the question whether a particular land is urban land or not is not specifically provided for in the section, it is implied. In construing Section 7-A (as inserted by Act 28 of 1963) of the Employees' Provident Funds Act, 1952, which provides that the authority may, by order determine the amount due from any employer under any provision of the Act or of the scheme, and for this purpose may conduct such enquiry as it may deem necessary a Bench of this Court in Regional Provident Fund Commr. v. K. R. S. T. Factory,. held that the section gives an opportunity to the employer to press his objections before the authorities mentioned therein, to ant claim for payment made against him, and this will include the ground that it is oppressive or unjust in nature. The decision can be read as an authority for the view that the authority before levying the tax must be satisfied that the land is liable to tax under the Act. 115. In the result, I hold that all the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earned brethren, I feel unconvinced that the present Act cannot be brought within the purview of Entry 49 and that it trenched on Entry 86 of the Union List. The new angle from which Mr. V. K. Thiruvenkatachari, learned counsel for the petitioners presented the case for the petitioners in the later part of his arguments on the question of competency, is no doubt attractive and tempting in its approach, offering a solution for several of the riddles raised in the course of arguments requiring reconciliation and clearance if the lists should be interpreted as intending the State Legislature also to levy tax on the market value of lands and buildings. The argument, as I understand it is, that a levy on capital value of property, however, small the percentage ma y be, is really a confiscatory measure aimed at the property itself, no doubt truly in accordance with the directive principles of State Policy formulated in Article 39 of Part IV of the Constitution. Having regard to the fact that it is a matter of high policy, and uniformity of law throughout the country is desirable the power in regard to taxing capital, it is said, is vested exclusively in the Union except in regard to agri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing a tax in the nature of an excess profits tax. It is needless in this brief reference for me to discuss the distinctions between capital tax and capital levy and capital value of property and capital assets of an individual. According to David A. Wells, (see Cooly on Taxation, Vol. I, Paragraph 7, at pages 72-73); ( Scientifically considered taxation is the taking or appropriating such portion of the product or property of a country or community as is necessary for the support of its Government, by methods that are not in the nature of extortion, punishment or confiscation ). Taxation under the Constitution includes any impost, whether general or local or special. The fact that a levy may lead to capital consumption will not make it the less a tax. The imposition of capital tax which may lead to capital consumption is a matter of fiscal policy and here we are concerned with the existence of power in the State Legislature to levy tax on capital value of land. 120. Reference may usefully be made to the opinion of the Federal Court in In re levy of Estate Duty 1944 FCR 317 at p. 328 = (AIR 1944 FC 73 at p.78) under the Constitution Act of 1935 before its amendment in 1945 by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the entry even Parliament cannot levy any tax on capital and cannot rely for any tax levy on capital on Entry 97. 121. It may be a matter of policy and good government to relate the tax specifically to the yield, unless special circumstances warrant a departure. But it cannot affect the power of the State. The power of taxation has been considered as an essential and inherent attribute of sovereignty and generally constitutional provision relating to the power for taxation are regarded not as grant of power but as limitation upon the power which would otherwise to practically without limit. True, ours is a controlled Constitution and the plenary powers of taxation have to be found in the Lists. But the only limitation on the power of taxation is found in the Constitution and I am unable to see from the entries in the List the limitations now suggested. The entry taxes on lands and buildings is wide in its coverage giving the language its normal and natural import. Traditional concept of fiscal policy and taxation are rapidly giving way before a fast changing world which today is far removed from what it was when the Constitution Act of 1935 was passed and enabling words in an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t to examine the substance of the Act and determine whether in substance the Legislation is beyond the powers of the Legislature or within its powers. The expressions used may not be conclusive of the character of the Act for the purpose of determining whether it is to be condemned or saved from condemnation. The court could certainly examine the effect of the Legislation, its object, purpose and design for ascertaining the true character of the enactment and the class or subject of Legislation to which it really belongs. But this inquiry in the present case, in my view, cannot save the Act. To start with if a percentage of the market price on lands and buildings should be construed as a measure, the market price in effect is looked upon as capitalisation based on yield. First it is an involved formula not contemplated by the Legislation. And to a specific question, the learned Advocate-General appearing for the State categorically stated that the Government's stand was that the market value alone was taken and not the annual letting value for computing the tax and that the local Government has power to tax on capital value. 123. So, apart from the express language of the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r of the tax is clearly identified by Sections 5 and 6 of the Act. Sections 25 and 26 providing certain concessions to the assessee cannot control or later the plain words of Sections 5 and 6 and relate the tax to the income from his property. Under Section 25 the owner of urban land where the land or the building thereon has been let out, is permitted in certain circumstances to add to the annual rent, an amount not exceeding the difference between the urban land tax payable under the Act and one half of the annual rent. Under Section 26 an owner-occupier of a building for residential purposes gets a concession of 25 per cent reduction in the amount of urban land tax payable on the urban land on which a building has been constructed and on the urban land appurtenant to such building. These two provisions are only concessions shown to the assessee of urban land tax. Section 25 does not lead to the inference that the real tax base is the income from the land. On the contrary, the section envisages the possibility of the tax exceeding half the rental income and there is no limit to the difference. The tax is not pegged down and kept below the annual rent. In this connection one may r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... result could be arrived at by fixing a higher percentage as the rate in case in case it was found in the right way on the annual value. further by fixing the rate as a percentage of the capital value directly, the real incidence of the levy is camouflaged...............................if it is open to the municipality to fix the rate directly on the capital value at 1 per cent it will be equally open to it to fix it,, say at 10 per cent, which would, taking again the same example, mean that the rate could be 250 per cent of the annual value, and this clearly brings our the camouflage. Now a rate at 10 per cent of the capital value may not appear extortionate but a rate at 250 per cent of the annual value would be impossible to sustain and might even be considered as confiscatory taxation. This shows the vice in the camouflage that results from imposing the rate at a percentage of the capital value and not at percentage of the annual value as it should be.................................... By levying it otherwise directly at a percentage of the capital value, the real incidence of the rate is camouflaged, and the electorate not knowing the true incidence of the tax may possibly be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 6 of the Act. I am strongly inclined to the view that while Section 5 is not constitutionally invalid under Articles 14 and 19(1)(f), Section 6 of the Act is clearly invalid under those Articles. I am not examining the attacks on the charging Section 5 under Article 19(1)(f) as it is considered in detail by my learned brother Veeraswami, J. This Article was not available to the owners of urban lands when Act XXXIV of 1963 was questioned before us. Nor is there anything for me to add on the vires of the retrospective provisions of the present Act. It is urged for the petitioners that the Act providing for imposition of tax on land only estimating the market price of the land part form the buildings thereon and the absence of any statutory directions for the ascertainment of the market value, makes the incidence of the charge haphazard, arbitrary and capricious. The base for taxation is the price the urban land in the opinion of the Assistant Commissioner or the Tribunal on appeal from him would have fetched if sold in the open market on the 1st day of July, 1963, a day more than three years prior to the Act. The absence of any provision to resort to the Civil Court when the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he market price of the land. Section 6 runs thus: For the purpose of this Act, the market value of any urban land shall be estimated to be the price which in the opinion of the Assistant Commissioner or the Tribunal, as the case may be, such urban land would have fetched or fetch, if sold in the open market on the date of the commencement of this Act. Section 7 of the Act provides for the owner of urban land submitting a return within the period prescribed containing inter alia the amount which in the opinion of the owner is the market value of the urban land. Under Section 8 if any owner of urban land fails to furnish the return under Section 7, the Assistant Commissioner may obtain the necessary information in respect of the particulars specified in Section 7, either by himself or through such agency as he thinks fit. The language here is not quite happy, for it looks as if the Assistant Commissioner has to obtain information of the amount which in the opinion of the owner is the market value of urban land. Under Section 10, the Assistant Commissioner has to determine the market value. When a return is furnished under Section 7, the Assistant Commissioner has to exami ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amount of the urban land. Under Section 20, an appeal is provided to the Tribunal under the Act from the determination of the Assistant Commissioner. Sub-clause (6) of Section 20 provides that any order passed by the Tribunal under Section 20 shall be final. The amount or urban land tax determined under Section 10 or 11, with the modification, if nay, made in any appeal under Section 20, shall, as per the provision in Section 13, remain in force for a period of ten years from the 1st day of July of the fasli year in which the urban land tax is so determined, or for the further period not exceeding ten years as the Government may direct. The Tribunal constituted under the Act is required, by Section 4, to consist of a person who shall be a judicial officer not below the rank of Subordinate Judge. Section 43(1) of the Act enables the Government to make rules to carry out the purposes of the Act. Section 43(2) provides that without pro-judice to the generality of the power given under Section 43(1) the rules may provide for certain specific matters with which we are not now concerned. 127. It is admitted for the State that no rules have been made under Section 43 for guidance to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctor's method'', is generally adopted by the authorities. This is made out by reference to the orders and notices issued by the authorities under the Act filed in the several cases before us. In the absence of evidence of sale of vacant sites for the purpose of valuing one person's land, it is said, the value of land in the neighbourhood arrived at by adopting the contractor's method to a sale of some third person's land with building there on is taken into consideration. It is urged that it would be practically impossible in greater part of the City to get evidence of the market price of land alone, apart from the price of land with buildings thereon. For the year 1964-65 the number of buildings severally assessed by the Corporation in the city was 1,01,055 and the number of vacant sites, 3,918 the total number of assesses of lands and buildings being 1,04,974. Under the Contractor's method where a particular property in the neighborhood has been sold, the cost of construction of the building is calculated providing for depreciation and that is deducted from the value of the land and building as sold. Learned counsel points out that while a person many ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at a plot consisting of a house and a garden is much more satisfactorily valued in the manner in which the District Judge has done, by capitalising the rental in the absence of other evidence which would give a more satisfactory value. In that case the annual rental value was ascertained at ₹ 680/- and taking 20 years' purchase the plots and buildings were estimated at ₹ 13,600/-. For ascertaining the value of the lands alone, the value of the buildings ₹ 6,300/- was deducted and the value of the lands worked out at ₹ 850/- an acre. It must be noted here that for ascertaining the value of the land, the annual value of land and building was capitalised and the cost of the building deducted. Reference may be made to Secy. of State v. Shunmugaraya, (1893) ILR 16 mad 369 (PC) where the Judicial Committee has to value the seven pagodas of Mahabalipuram under the Land Acquisition At, a difficult task. The State acquired the property for preservation of the monuments. The Privy Council held that taking into consideration the nature of the property and the absence of market value for temples and their architectural carving, the best method of valuation was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... udication with right as of course for an appeal to the High Court. Both under the Wealth Tax Act and Gift Tax Act, though the value of the property is the price which it would fetch if sold in open market, there are provisions giving an hierarchy of Tribunals. The Appellate Tribunal may refer the question of dispute value, when the assessee requires it, to the arbitration of two valuers one of whom is nominated by the appellant and the other, by the respondent. From the Appellate Tribunal there is a provision for reference to the High Court on question of law and also for appeal to the Supreme Court from the High Court when the High Court certifies that it is a fit case for appeal to the Supreme Court. Under the present Act is must be noticed that the order of the Appellate Tribunal, who is no doubt a Judicial Officer now below the rank of Subordinate Judge, is final. The fact that an aggrieved owner may apply to the High Court under Article 226 is no consolation, as the jurisdiction of the High Court under Article 226 is limited. In questioning a valuation which is not admittedly a precise Science, a citizen can hope for little chance to succeed on the merits, in an application un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to that particular kind and extent of property, on the same basis of taxation, the law shall not equality, even though the result of the taxation may be that the total burden on different persons may be unequal. When the validity of a tax is impugned as violative of Article 14, the Court cannot rest content with the apparent tenor and language of the statute. It is not the phraseology that governs the matter but the effect of the law. Under the Act in question, tax is levied at a flat rate of 0.4 per cent of the market value. whether the owner of urban land makes no income or some income or high income, however, high it may be, by his use of the land he has to pay the same rate of tax; To take an illustration, and owner of two grounds of urban land in a locality where the land value is determined at ₹ 10,000/- per ground will have to pay urban land tax at ₹ 80/- per fasli. He may have a small building on the property which he may have let out at a rent of ₹ 200/- per month. His immediate neighbor owning similarly two grounds having the finance to exploit the six stories building and be getting a monthly rental of ₹ 1,200/-. He too need pay as urban la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of persons owning and possessing the same area of land. One makes nothing out of the land, because it is arid desert. The second one does not make any income, but could raise some crop after a disproportionately large investment of labour and capital. A third one in due course of husbandry, is making the land yield just enough to pay for the incidental expenses and labour charges besides land tax or revenue. The fourth is making large profits, because the land is very fertile and capable of yielding good crops. Under the Act it is manifest that the fourth category, in our illustration, would easily be able to bear the burden of the tax. The third one may be able to bear the tax. the first and the second one will have to pay from their own pockets, if they could afford the tax. If they cannot afford the tax, the property is liable to be sold, in due process of law, for realisation of the public demand. It is clear therefore, that inequality is writ large on the Act and is inherent in the very provisions of the taxing section. It is also clear that there is no attempt at classification in the provisions of the Act. Hence no more need be said as to what could have been the basis for a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urdens of Government. In an exercise of the power to tax, the purpose always is that common burden shall be sustained by common contributions, regulated by some fixed general rule, and apportioned by the law according to some uniform ratio of equality. So the power is not arbitrary, but rests upon fixed principles of justice, which have for their object the protection of the tax-payer against exceptional and invidious exactions, and it is to have effect through established rules operating impartially. The following passage form the same volume is also pertinent: Equality to taxation means equality of sacrifice, that is, the apportioning the contributions of each person towards the expenses of Government, so that he shall feel neither more nor less inconvenience from his share of the payment than every other person experiences from his. equality does not mean an equal tax against each person or against each lot or piece of property. 132. The capacity or ability to pay in my opinion must be correlated with reference to the tax base under the consideration. Under the impugned Act it is shown that the same class of property similarly situated is subject to an incidence o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e number of buildings assessed in 1964-64 is 1,01,055 and the number of vacant lands 3,919. a few concrete cases from the petitions before us are illustrative of the glaring unequal incidence of the taxation. It will reveal that valuing the site or land apart from building can work great injustice on owners of site and building. In W. P. No. 2835 of 1967 urban land of the total extent of 80 grounds with buildings on a plinth area of about two grounds has been let out for a rent ₹ 500/- per month. the market value of the land proposed under the Act is ₹ 13,000/- per ground. Here the annual value adopted by the city corporation for the land is ₹ 5,460/- under the provisions of the Municipal Act. The corporation tax for one year is ₹ 1,400/-. the urban land tax as proposed comes to ₹ 4,160/- and it is said that the owner of the land has to pay income-tax at the rate applicable to him on the property. the total out goings from the property is stated to be ₹ 6,794/- as against the annual income of ₹ 6,000/-. If the value of the land with building thereon is ascertained by capitalising the annual value as is usually done by multiplying the annual ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e contractor's may not show such marked difference so as to lead to error. the following figures from some of the petitions before use graphically illustrate how unequal the tax incidence can be. W. Ps. Extent of land with buildings Corporation annual value. Market value of land alone under the Act. Proportion between capitalised value of land and buildings at 20 times annual value and market value of land alone under the Act--roughly 2835 80 grds ₹ 5,460/- ₹ 10,40,000/- 1 : 190 3683 29.3 ₹ 4,095/- ₹ 3,81,554/- 1 : 83 3893 70 gr. 650sq. ft. ₹ 25,115/- ₹ 10,55, 937 1 : 42 3552 1594 sq. ft. Business Locality ₹ 4,368/- ₹ 38,000/- 1 : 28 3459 1 gr. 1547 sq. ft. ₹ 10,074/- ₹ 62,000/- 1 : 6 3456 2 grs. 2135 sq. f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cide on what objects to levy what rate of tax and it is not for the court to should have been taxed or whether a difference 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 taxing statute cannot be challenged merely because different rates of taxation are prescribed for different categories of persons or objects. But if in operation any taxing statute is found to contravene Article 14, it would be open to courts to strike it down as denying to the citizens the equality before the law guaranteed by Article 14. In State of Andhra Pradesh v. Raja Reddy, , Subba Rao, C. J., delivering the judgment of the Court, reiterated the principle enunciated in Moopil Nair's case, and AIR 1963 AC 591 observing thus: It is, therefore, manifest that this Court while conceding a larger discretion to the Legislature to the matter of fiscal adjustment will insist that a fiscal statute just like any other statute cannot infringe Article 14 of the Constitution by introducing unreasonable discrimination betwe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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