TMI Blog1989 (5) TMI 50X X X X Extracts X X X X X X X X Extracts X X X X ..... as a definite connotation in the interpretation of such words in such statutory contexts. The matter is one of construction as to whether any particular service falls within the section and not one of constitutionality. A taxing statute is not, per se, a restriction of the freedom under article 19(1)(g). The policy of a tax, in its effectuation, might, of course, bring in some hardship in some individual cases. But that is inevitable, so long as law represents a process of abstraction from the generality of cases and reflects the highest common factor. Every cause, it is said, has its martyrs. Then again, the mere excessiveness of a tax or even the circumstance that its imposition might tend towards the diminution of the earnings or profits of the persons of incidence does not, per se, and without more, constitute violation of the rights under article 19(1)(g). Appeal dismissed. - Writ Petition No. 1395 of 1987, 1538, 1540, 1541, 1542, 1598, 1600, 1669, 1671 of 1987, 287 of 1988, & 1660, 1670 - - - Dated:- 2-5-1989 - Judge(s) : SABYASACHI MUKHERJEE., R. S. PATHAK., S. NATARAJAN JJ. K. Parasaran, Attroney-General for India, B. Datta, Additional Solicitor-General, Dr. V. G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rged in support of the challenge. The first petitioner therein is the Federation of Hotel and Restaurant Association of India, which is said to be a representative body of over 1,000 member-petitioners in India. Petitioners Nos. 2 to 5 are said to be the Regional Associations of the Federation and petitioners. Nos. 6 and 7 are two hotel companies which own several hotels in India. Petitioners Nos. 8 and 9 are Indian citizens who are the directors and shareholders of petitioners Nos. 6 and 7, respectively. Petitioner No. 10 is a practising chartered accountant who claims to use the services in the several hotels in India owned by the members of the Federation. The array of petitioners is quite comprehensive so as to include all interests affected so as to satisfy the requisite standing to sue from all points of view. The Expenditure Tax Bill No. 90 of 1987, preceding the impugned Act was introduced in the Union Legislature on August 26, 1987. It became an Act on September 14, 1987. It extends to the whole of India except the State of Jammu and Kashmir. The requisite notification under section 1(3) of the Act was issued on October 14, 1987, appointing November, 1, 1987, as the date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch other services as are normally included by a hotel in room rent, but does not include charges for food, drinks and any services other than those referred to in sub-clauses (a) and (b)." Section 3 is the crucial provision which lays down the differentia for the classification of the hotel to which the Act applies. That section provides that the Act shall apply in relation to any "chargeable expenditure", incurred in a hotel wherein the "room charges" for any unit of residential accommodation at the time of incurring of such expenditure are Rs. 400 or more per day per individual. The levy of tax is confined to such class of hotels which satisfy that statutory standard. Where, however, composite charges are payable in respect of both residential accommodation and food, then the "room charges" for purposes of determination of the criteria attracting the Act shall have to be apportioned in the manner to be prescribed. Section 3 enables the assessing officer to determine the "room charges" on such reasonable basis as he may deem fit where : "(i) a composite charge is payable in respect of residential accommodation, food, drinks and other services, or any of them, and the case i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (d) such other particulars as may be prescribed. The incidence of the tax is on the persons who incur the "chargeable expenditure" in the class of hotels to which the Act applies. Section 7 enjoins upon the "person responsible for collecting" the duty to collect the taxes and pay the same to the credit of the Central Government. The "room charges" of Rs. 400 per day per individual stipulated in section 3 is the differentium which keeps apart the class of hotels to which the Act applies. The petitioners say that section 3 merely defines the place, viz., the hotel where a room carries a charge of Rs. 400 per day marked on it and the rest of the incidents and consequences of the provisions of the Act envisage the levy of a tax on the "luxuries" provided at such a place. The legislation, it is urged, is squarely within entry 62 of List 11 within the State power. The Act, it is contended, does not impose an "expenditure-tax" but taxes "luxuries". Even if the legislation has an "expenditure dampening" objective and seeks to inhibit, by creation of disincentives, ostentatious and wasteful expenditure, the classification, it is said, has no rational basis. Persons similarly situated and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e impost is a misnomer as the concept of "expenditure-tax" as known to law and recognised by the theorists of public finance is not a tax on a few stray items of expenditure but is a term of art which has acquired a technical import as "nomen juris" and that the impost envisaged by the Act, in its true nature and character, is no more and no less than a tax on luxuries under entry 62, List II, within the State's exclusive power. Learned counsel urged that the delicate balance in the demarcation in a federal polity of legislative powers between the Union and the States would impose on the Union, the repository of the residuary power, the sensitive task of recognising both the line of demarcation as well as the constitutional mandate and a disciplined reluctance not to cross it. The contention as to lack of legislative competence emphasises two aspects-one with a negative implication and the other of a positive import. Negatively, it is urged that the impost is not, and does not satisfy the concept of an "expenditure-tax" which has a technical connotation both in law and in public finance. A tax on certain stray items of expenditure is not, it is contended, a general "expenditure-tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ced on the basis of the recommendations of Prof. Nicholas Kaldor. Prof. Kaldor had been invited to come to India by the Indian Statistical Institute to make an investigation of the Indian tax system in the light of the revenue requirements of the Second Five Year Plan. In his report, he recommended the introduction of a direct tax on personal consumption expenditure as a limb of comprehensive and self-checking system comprising the income-tax, (which was already in operation in India), a tax on capital gains (which had been tried for two years in the post-war period and then withdrawn), an annual tax on net wealth, a general gift-tax and a tax on personal expenditure. He envisaged that these five levies would be assessed simultaneously on the basis of a single comprehensive return, (emphasis supplied) "Under the scheme of expenditure taxation suggested by Prof. Kaldor, a taxpayer would not be required to give any detailed account of his outlays on consumption but only a statement of his total outlay as part of comprehensive tax return showing all his receipts, investments, etc., and all the items for which he claimed exemption ...... "In India too, although the expenditure tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of this court at page 479 of the report, according to learned counsel, is that what distinguished an "expenditure-tax" from a levy under entry 62 of List II, was that the scheme of taxation took into account the totality of expenditure over a unit of time, as distinct from sums laid out on stray purchases of luxuries. Shri Palkhivala, then, submitted that the notion of expenditure-tax, as recognised by legislative practice is a relevant factor. In Croft v. Dunphy [1933] AC 156 (PC), Lord Macmillan held that when power is conferred on the Legislature on a particular topic, it is important, in determining the scope of the power, to have regard to what, in legislative practice, is ordinarily treated as embraced within the topic and particularly in the legislative practice of the State which has conferred the power. In Wallace Brothers and Co. Ltd. v. CIT [1948] 16 ITR 240 (PC) ; [1948] L. R. 75 IA 86, Lord Uthwatt referred to the permissibility and, indeed, the importance of referring to the legislative practice as to what is ordinarily treated as within the topic of legislation in understanding the scope of a legislative power. The notion of expenditure-tax in the scheme of the Ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s are absolutely exhausted that one can think of falling back upon a nondescript." Shri Palkhivala recalled the following, words of caution sounded by Chinnappa Reddy J. in International Tourist Corporation v. State of Haryana [1981] 2 SCR 364 ; AIR 1981 SC 774, 777 : "Before exclusive legislative competence can be claimed for Parliament by resort to the residuary power, the legislative incompetence of the State Legislature must be clearly established. Entry 97 itself is specific that a matter can be brought under that entry only if it is not enumerated in List 11 or List III and in the case of a tax if it is not mentioned in either of those lists. In a federal Constitution like ours where there is a division of legislative subjects but the residuary power is vested in Parliament, such residuary power cannot be so expansively interpreted as to whittle down the power of the State Legislature. That might affect and jeopardise the very federal principle. The federal nature of the Constitution demands that an interpretation which would allow the exercise of legislative power by Parliament pursuant to the residuary powers vested in it to trench upon State legislation and which would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es or that one aspect of the taxable event in the sale of goods had impermissibly been isolated for the creation of an artificial idea "expenditure", suffers from certain basic fallacies. The legislative powers, it is urged, recognise the demarcation of distinct aspects of the same matter as distinct topics of legislation and the present challenge to legislative competence overlooks the dichotomy of distinct aspects of the same matter constituting distinct fields of legislation, the line of demarcation, though sometimes thin and subtle, being real. Learned Attorney-General further contended that the measure adopted for the levy of the tax does not necessarily determine its essential character and that the object on which the expenditure is laid out might be an item of luxury or it might not be one ; or the "expenditure" might constitute the price of the goods but, what is taxed is the "expenditure" aspect which, in itself, is susceptible of recognition, as a distinct topic of legislation. We have bestowed our careful consideration to these rival contentions. The principal question is whether the tax envisaged by the impugned law is within the legislative competence of the Union P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nature and character', for the purpose of determining whether it is legislation with respect to matters in this list or in that." This necessitates an "essential of federal Government, the role of an impartial body, independent of general and regional Governments", to decide upon the meaning of decision of powers. The court is this body. The position in the present case assumes a slightly different complexion. It is not any part of the petitioners' case that "expenditure-tax" is one of the taxes within the States' power or that it is a forbidden field for the Union Parliament. On the contrary, it is not disputed that a law imposing "expenditure-tax" is well within the legislative competence of the Union Parliament under article 248 read with entry 97 of List 1. But the specific contention is that the particular impost under the impugned law, having regard to its nature and incidents, is really not an "expenditure-tax" at all as it does not accord with the economists' notion of such a tax. That is one limb of the argument. The other is that the law is, in pith and substance, really one imposing a tax on luxuries or on the price paid for the sale of goods. The crucial questions, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te and distinct imposts. If, in fact, they overlap, that may be because the taxing authority, imposing a duty of excise, finds it convenient to impose that duty at the moment when the excisable article leaves the factory or workshop for the first time on the occasion of its sale . ." Referring to the "aspect" doctrine, Laskin's "Canadian Constitutional Law" states (at p. 115) "The `aspect' doctrine bears some resemblance to those just noted but, unlike them, deals not with what the 'matter' is but with what it 'comes within' . . "....it applies where some of the constitutive elements about whose combination the statute is concerned (that is, they are its 'matter'), are kind most often met with in connection with one class of subjects and others are of a kind mostly dealt with in connection with another. As in the case of a pocket gadget compactly assembling knife blade, screwdriver, fishscaler, nailfile, etc., a description of it must mention everything but in characterising it the particular use proposed to be made of it determines what it is." ". . . I pause to comment on certain correlations of operative incompatibility and the 'aspect' doctrine. Both grapple with the is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... goods may effect a switch of expenditure from imported to home-produced goods ; devaluation of the nation's currency may have the same effect as imports become more expensive. See EXPENDITURE-DAMPENING POLICIES." Learned Attorney-General also referred to the following observations in the British Tax System [by J. A. Kay M. A. King] to indicate that a tax on expenditure need not necessarily be an expenditure-tax in the economists' reckoning of things : "An annual expenditure tax, which seeks to measure an individual's spending in each separate year of assessment, poses very serious administrative problems, because it requires that his assets be assessed annually. . . "....But there is a much easier way of reaching a more accurate answer. You simply measure how much foreign currency you took with you, add the amount of currency you bought while abroad, and subtract what was left when you got back. You measure, not the expenditure itself, but the sources of the expenditure, and can thus achieve a simple and reliable measure on the basis of a small number of recorded (and readily verifiable) transactions." It is trite that the true nature and character of the legislation must ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at 61, this court dealt, with the scope of the residuary power under entry 97, List 1. Referring to the following observations of Lord Loreburn in Attorney-General for Ontario v. Attorney-General for Canada [1912] AC 571 at 581 (PC) : "Now, there can be no doubt that under this organic instrument the powers distributed between the Dominion on the one hand and the provinces on the other hand, cover the whole area of self-government within the whole area of Canada. It would be subversive of the entire scheme and policy of the Act to assume that any point of internal self-government was withheld from Canada." (emphasis supplied) It was held that the last portion of the above excerpt applied a fortiori to the Constitution of the Sovereign Democratic Republic. Sikri C. J. proceeded to observe [1972] 83 ITR 582, 604 [1972] 2 SCR 33 at 61 "If this is the true scope of residuary powers of Parliament, then we are unable to see why we should not, when dealing with a Central Act, enquire whether it is legislation in respect of any matter in List II for this is the only field regarding which there is a prohibition against Parliament. If a Central Act does not enter or invade these prohib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... value of the fare and freight. Repelling the contention, Hidayatullah J., speaking for the court, said (at p. 1484 of AIR 1961 SC) : "...We do not agree that the Act, in its pith and substance, lays the tax upon income and not upon passengers and goods. Section 3, in terms, speaks of the charge of the 'tax in respect of all passengers carried and goods transported by motor vehicles', and though the measure of the tax is furnished by the amount of fare and freight charged, it does not cease to be a tax on passengers and goods. . ." indeed, reference may be made to the following statement in Encyclopaedia Britannica [Vol. 14, page 459 ] on "Luxury Tax" "A different approach to luxury taxation, much less frequently found, seeks to single out the luxury component of spending on a given object rather than taxing specified goods and services as luxuries. One example of this is the Massachusetts 5% tax on restaurant meal of $. 1 or more . ." (emphasis supplied). The submissions of the learned Attorney-General that the tax is essentially a tax on expenditure and not on luxuries or sale of goods failing within the State power, must, in our opinion, be accepted. As contended by the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... every way to restaurants located in applicable hotels, from the point of view of their decor, furnishing, the range of the menu, the pricing of the items, the standards of service. The clientele of such restaurants is also as affluent as the class of people who patronise restaurants which are located in applicable hotels. Furthermore, many of the said independent restaurants are far more luxurious and expensive than restaurants and/or dining rooms attached to applicable hotels in the City of Bombay which have one or more rooms charging a daily tariff of rupees 400 or more per person." It is now well settled that though taxing laws are not outside article 14, however, having regard to the wide variety of diverse economic criteria that go into the formulation of a fiscal policy, the Legislature enjoys a wide latitude in the matter of selection of persons, subject-matter, events, etc., for taxation. The tests of the vice of discrimination in a taxing law are, accordingly, less rigorous. In examining the allegations of a hostile, discriminatory treatment, what is looked into is not its phraseology, but the real effect of its provisions. A Legislature does not, as an old saying goes, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te is not open to attack on the mere ground that it taxes some persons or objects and not others. It is only when within the range of its selection the law operates unequally and cannot be justified on the basis of a valid classification that there would be a violation of article 14. " In Hira Lal Rattan Lal v. S TO [1973] 2 SCR 502, 510, 51 [1973] 31 STC 178, 185, 186 (SC), this court said: "....It is open to the Legislature to define the nature of the goods, the sale or purchase of which should be brought to tax. The Legislature was not incompetent to separate the processed or split pulses from the unsplit or unprocessed pulses and treat the two as separate and independent goods. " ". . . But the Legislature has wide powers of classification in the case of taxing statutes." "....The classification between the processed or split pulses and unprocessed or unsplit pulses is a reasonable classification. It is based on the use to which those goods can be put. Hence, in our opinion, the impugned classification is not violative of article 14." In State of Gujarat v. Shri Ambica Mills Ltd. [1974] 3 SCR 760, 784 ; AIR 1974 SC 1300, 1314, Mathew J. said: "Statutes are directed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ample freedom to select and classify persons, districts, goods, properties, incomes and objects which it would tax, and which it would not tax. So long as the classification made within this wide and flexible range by a taxing statute does not transgress the fundamental principles underlying the doctrine of equality, it is not vulnerable on the ground of discrimination merely because it taxes or exempts from tax some incomes or objects and not others. Nor the mere fact that tax falls more heavily on some in the same category, is by itself ground to render the law invalid. It is only when within the range of its selection, the law operates unequally and cannot be justified on the basis of a valid classification, that there would be a violation of article 14." In the present case, the bases of classification cannot be said to be arbitrary or unintelligible nor as being without a rational nexus with the object of the law. A hotel where a unit of residential accommodation is priced at over Rs. 400 per day per individual is, in the legislative wisdom, considered a class apart by virtue of the economic superiority of those who might enjoy its custom, comforts and services. This legisl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and arbitrary. It is pointed out that the expression "or other similar services" in clause (d) of section 5 is non-specific and vague. This argument does not commend itself to us. It is true that when the statute says "other similar services" it does not contemplate that the "other services" shall, in all respects, be the same. If they were the same, then words would, indeed, be unnecessary. These were intended to embrace services like but not identical with those described in the preceding words. The content of the expression "other similar services" following, as it does, the preceding expressions "by way of beauty parlour, health club, swimming pool or . . ." has a definite connotation in the interpretation of such words in such statutory contexts. The matter is one of construction as to whether any particular service falls within the section and not one of constitutionality. We find contention (b) is also not acceptable. Re: Contention (c) It is urged that the provisions of the Act impose an unreasonable restriction on the petitioners' fundamental right under article 19(1)(g). It is averred in the petition : ". . . The various taxes to which the hotel industry is subj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erests of the community or the country as indeed every noble cause claims its martyr." Contention (c) is also insubstantial. In the result, for the foregoing reasons, these petitions fail and are dismissed. However, in the circumstances of the case, there will be no order as to costs. RANGANATHAN J. -I have perused the judgment of my learned brother, Venkatachaliah J., in this batch of writ petitions as well as in the two connected batches of matters, viz., C. A. Nos. 338 and 339 of 1981, and W. P. Nos. 254-261 of 1981. 1 respectfully agree with his conclusions in all these matters but wish to add a few words, primarily in so far as the constitutional validity of the Expenditure-tax Act, 1987, is concerned. As my learned brother has set out, analysed and discussed in detail the provisions of the various statutes, the validity of which is in question, I shall avoid repetition of the same and confine myself only to the consideration of the crucial issues for determination. The contentions of the assessees in the three batches of cases above referred to, prima facie sought to make out a state of direct collision between a group of State enactments on the one hand and a couple ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stands on the same footing as entry 62 for the purposes of the present case, no separate reference is made to entry 54 hereinafter). This is clear because the short title to each of the above enactments describes it as an Act to provide for the "imposition " or "the levy and collection" of tax on "luxuries" or "entertainment and luxuries" in or provided in "hotels" or "hotels and restaurants" or "hotels and lodging houses". Although "luxuries and entertainments" may be provided or availed of in various ways and could all be made the subject-matter of a tax by virtue of the entry above referred to, these enactments are confined only to one type of such entertainments and luxuries, viz., those provided in hotels, restaurants or lodging houses, as defined under the relevant enactments. Also, only certain specified classes of entertainments or luxuries provided in such places are brought to tax. The details of the imposition, levy and collection of the taxes vary with the enactments and need not be repeated here. It is quite clear from the scheme of the legislations that they all fall within the scope of entry 62 of List 11 set out earlier. My learned brother has held so and I agree. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by Parliament by enacting the Expenditure-tax Act, 1957 (hereinafter referred to as "the 1957 Act"). The validity of the above Act was challenged before this court but unsuccessfully. The decision of this court is reported as H. H. Prince Azam Jha Bahadur v. ETO [1972] 83 ITR 92 (SC) ; [1972] 1 SCR 470. The nature and scope of the Act have been dealt with in the above decision and it is unnecessary to repeat the same here. The 1957 Act was withdrawn after a few years ; to be precise, with effect from the assessment year 1965-66. It was given up both because it was found to be too cumbersome and difficult to administer and also because the yield of revenue therefrom was not substantial due to the limited number of assessees it covered. After it was given up, as already mentioned, the 1980 Act occupied the field for a very short time, the pendency of writ petitions challenging its validity having perhaps largely contributed to its withdrawal. After some interval, now, Parliament has come in with the 1987 Act. The ambit and scope of this Act along with, on the one hand, its distinguishing features, as contrasted with the 1957 and 1980 Acts and its similarities, when compared to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y within the competence of the State Legislatures and are not liable to be challenged. It seems equally clear that the pith and substance of legislation of the 1980 Act is, as held by Venkatachaliah J., traceable to entry 82 of List 1. In interpreting the scope of the legislative entries in the three lists, we have to keep in mind that, while on the one hand it is desirable that each entry in each of the lists should receive the broadest interpretation, it is equally important, on the other, that the three lists should be read together and harmoniously. Our attention was drawn to some of the entries in List 11 which show that the legislative power in respect thereof are to be exercised subject to the powers of Parliament envisaged under List 1, vide entries Nos. 2, 17, 22, 23, 24, 26, 27, 32, 33 and 50. There is no doubt that these entries have to be read subject to the entries of List I which have been mentioned or the powers of Parliament referred to therein. These, however, are instances of entries which, on their very language, are controlled by entries in List 1. But even apart from these instances, the language of clauses (1) and (3) of article 19 makes it clear that the po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... endorsed with approval by this court. A tax on a few items of expenditure, it is said, is not necessarily the same as an expenditure tax. Referring to the decisions of this court upholding the levy of wealth-tax and gift-tax in so far as it affected agricultural lands : GTO v. D. H. Hazareth [1970] 76 ITR 713 ; [1971] 1 SCR 195 and Union of India v. H. S. Dhillon [1972] 83 ITR 582 (SC) ; [1972] 2 SCR 33, it is submitted that the decisions may well have been different had they been concerned with an imposition only on "lands and buildings" by reference to their capital value or only on "agricultural lands" on the occasion of a gift. It is difficult to accept the contention that the tax cannot be considered to be an expenditure-tax because it is not on "expenditure" generally but is restricted to specific types of expenditure. There is no legal; judicial, economic or other concept of expenditure-tax that would justify any such restrictive meaning. If, conceptually, the expenditure incurred by a person can be a subject-matter with reference to which a tax can be levied, there is no reason why such taxation should not be restricted only to certain items or categories of expenditure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this legislation, Parliament considered that it was not worthwhile or possible to impose a tax on all expenditure and that it would be sufficient, expedient or necessary to impose such a levy only on lavish spending in certain directions, that cannot certainly be precluded on any theory of established legislative practice, as was done in State of Madras v. Gannon Dunkerley and Co. (Mad) Ltd. [1959] SCR 379, in respect of sales tax. In that case, the legislative trend prevalent over decades was relied upon in interpreting the expression "sale of goods" used in the Constitution. But there the court was concerned with a legal term "sale" which had acquired a definite connotation in law and in legislative instruments and that analogy cannot be availed of to interpret the scope of entry 97. On the other hand, even a fairly long established legislative practice under which income-tax levy by the Centre was restricted to items of income stricto sensu (as contrasted with capital gains) was not considered sufficient to place that type of restriction on the interpretation of the expression "taxes on income" used in the Central Legislative List: vide, Navinchandra Mafatlal v. CIT [1954] 26 IT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uries or the person who enjoys them. The object of expenditure-tax is also similar and that can also be levied either on the person who spends the moneys directly, or through some other person, or even from the person who benefits by the incurring of such expenditure. The provision of a luxury and the payment for it are only obverse sides of the same coin and cannot, from any practical point of view, be considered as two separate and independent subject-matters of taxation. It is a well-settled proposition that the entries in the legislative lists should be given the broadest connotation and, hence, a tax on luxuries by reference to the expenditure thereon will fall clearly under the entry in the State List. The pith and substance of both sets of legislation, therefore, falls only under entry 62 of the State List. This being so, entry 97 of List I will have no applicability at all ; that can be called in aid only to cover matters not specifically enumerated or taxes not mentioned in List II or 111. It is, therefore, not possible, it is urged, to sustain the validity of the 1987 Act by reference to entry 97 of list I. The learned Attorney-General sought to meet this contention in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ling with only certain types of expenditure relatable to luxuries, it can be said to be, in pith and substance, not a tax on luxuries, then we may hold that Parliament can legislate with reference to it and, for purposes of convenience, take advantage of its description as a tax on expenditure to rest it on entry 97 of List I. In other words, entry 97 of List I cannot come to our rescue unless we are in a position to say that the substance of the Central legislation in question is not a tax on luxuries, entertainments or amusements. This takes us to the first part of the argument of the learned Attorney-General. Is there a tenable and true distinction between the tax on expenditure levied by the Act and a tax on luxuries ? Are Parliament and the State Legislatures dealing with the same "matter" and taxing one and the same thing, though describing it differently or are they taxing two different matters or things ? Shri Palkhivala says that the subject-matter of taxation is "luxury" and that it is meaningless to consider the expenditure incurred on it as a separate and distinct subject-matter. The acceptance of such an argument, he says, will lead to double taxation in respect of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o take the more general power, that which extends to the whole of India as subject to an exception created by the particular power, that which extends to the province only." (emphasis added) A similar reference to the "aspect" of legislation can be seen in Kerala State Electricity Board v. Indian Aluminium Co. Ltd., AIR 1976 SC 1031, 1044 ; [1976] 1 SCR 552 at p. 573-74 : "The argument of the learned Solicitor-General appearing on behalf of the Kerala Electricity Board in support of his submission that the legislation falls under entries 26 and 27 of List 11 may be summarised as follows : Those entries do not enable the State Legislatures to legislate with regard to all conceivable goods like arms, ammunition, atomic minerals, etc., as was argued by Mr. Sen. A Legislature, while legislating with respect to matters within its competence, should be deemed to know its limits and its legislative authority and should not be deemed to be legislating beyond its jurisdiction. One thing that has always got to be kept clear in one's mind is that there may be more than one aspect with regard to a particular subjectmatter". (emphasis added) Relying on this principle, and backed by these ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... city may attract excise duty at the point of its captive consumption (under entry 84 of List I) and also a tax on the consumption or sale of electricity (referable to entry 53 of List 11). The power to levy taxes with respect to "property" has created similar problems. All States (or corporations and municipalities therein) levy property tax on the owner or occupier which is almost universally measured by reference to its annual value (viz., the rent it would fetch if let from year to year). The Income-tax Act also charges a tax on the same basis. In other words, in a realistic and practical sense, the tax was levied by both Legislatures on the same amount and with reference to the same matter. But both levies have been upheld under the 1935 Act, the former as a "tax on lands and buildings, hearths and windows" (entry 42 of List II) and the latter as a tax on income (under entry 34 of List I). Ralla Ram [1948] FCR 207, AIR 1949 FC81, pointed out that they were different types of levies one on land and buildings (generally, but not necessarily, measurable by reference to the income derived or capable of being derived) and the other on the income (actually or notionally) derived fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in urging that, merely because the 1987 Act as well as the State Acts levy taxes which have ultimate impact on persons who enjoy certain luxuries, the pith and substance of both cannot be considered to be the same. The object of a tax on luxury is to impose a tax on the enjoyment of certain types of benefits, facilities and advantages on which the Legislature wishes to impose a curb. The idea is to encourage society to cater better to the needs of those who cannot afford them. For instance, a luxury tax may, to cite a catchy example, encourage construction of "Janata" hotels rather than five star hotels. Such a tax may be on the person offering the luxury or the person enjoying it. It may be levied on the basis of the amount received for providing, or the amount paid for or expended for enjoying, the luxury. Conceivably, it could be on different bases altogether. The object of an expenditure-tax and, that, conceptually, there can be an expenditure-tax is borne out by Azam Jha's case [1972] 83 ITR 92 (SC) is to discourage expenditure which the Legislature considers lavish or ostentatious. The object of the first would be to discourage certain types of living or enjoyment while that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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