TMI Blog1970 (1) TMI 80X X X X Extracts X X X X X X X X Extracts X X X X ..... etitioners. The petitioner company is incorporated in India and the majority of its shareholders are Indians. It owns a tea estate in Kuttikanam area in the Peermade hills in Kerala State. The estate consists of 1006 hectares equal to 2486 acres of which 491 hectares equal to 1214 acres are tea plantations. According to the petitioners Peermade hills are in the Western Ghats and are divided into two main parts. Kuttikanam area roughly 33 sq. miles is situated at an altitude of 3400 to 3700 ft. and receives 150 to 200 inches of rainfall annually. The Periyar valley area roughly 60 sq. miles is situated at an altitude of 2800 to 3200 ft. and receives 100 to 150 inches rainfall annually. The Periyar valley area is more fertile than the Kuttikanam area. According to the petitioners statement M/s. Parkins Private Ltd., are the Managing Agents of Twyford Tea Company and also the Haileyburia Tea Estate. The former is in Kuttikanam and the latter in Periyar area. The extent of produce from these two areas is very different. Between the years 1963 to 1967 Twyford Tea Company produced 959 to 1211 kgs. per hectare while Haileyburia produced 1461 to 1845 kgs. per hectare. The other tea-est ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions of two bectares or more with an exemption for the first hectare. The method of calculation of the extent of plantation in hectares is restated in, Schedule II as follows Schedule II For the purposes of the assessment of plantation tax payable by a person, the extent of plantations held by him shall be deemed to be the aggregate of the following, expressed in hectares, namely :- (i) the quotient obtained by dividing the total number of bearing cocoanut trees standing on all lands held by him by 200; (ii) the quotient obtained by dividing the total number of bearing arecanut trees standing on all lands held by him by 1500; (iii) the quotient obtained by dividing the total Dumber of yield in rubber plants standing on all lands held by him by 450: (iv) the quotient obtained by dividing the total number of yielding coffee plants standing on all lands held by him by 1500; (v) the quotient obtained by dividing the total number of yielding pepper vines standing on all lands held by him by 1000; (vi) the extent of lands on which tea plants are grown which have begun to yield crops; (vii) the extent of lands on which cardamom plants -are grown which have be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is contended that it is discriminatory inasmuch as it, seeks to treat plantations of different kinds as it they were equal in all respects by reducing them to a common measure of hectares when it is not possible to do so regard being had to the different incomes derived from these plantations. We shall take up these questions one by one. The first question is of the competence of the State Legislature. There is no specific entry in the legislative Lists, Nos. 2 and 3 in the Seventh Schedule to the Constitution. The Land Tax Act 1955, as amended by the Travancore-Cochin Land Tax (Amendment) Act, X of 1957, was declared unconstitutional in its operative sections in K. T. Moopil Nair s([19611 3 S.C.R. 77) case. Immediately afterwards the Kerala Land Tax Act, 1961 was passed following an Ordinance and that Act is now included in the 9th Schedule to the Constitution at No. 3 8 and receives the protection of Art. 3 1 -B. The competency to impose land tax thus is no longer open to this pute. The present Act is challenged on the same lines as the former Act and the argument is rested upon the principles accepted in K. T. Moopil Nair s(1) case. It is, therefore, necessary to recall wha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and classify persons or things to whom its, provisions are to apply. In determining the question of the validity or otherwise of such a statute the Court will not strike down the law out of hand only because no classification appears on its face or because a discretion is given to the Government to make the selection or classification but will go on to examine and ascertain if the statute has laid down any principle or policy for the guidance of the exececise of discretion by the Government in the matter of the selection or classification. After such scrutiny the Court will strike down the statute if it does not lay down any principle or policy for guiding the exercise of discretion by the Government in the matter of selection or classification, on the ground that the statute provides for the delegation of arbitrary and uncontrolled power to the Government so as to enable it to discriminate between persons or things similarly situate and that, therefore, the discrimination is inherent in the statute itself. We have always to see what the statute does to make for equality of treatment. The contention here is that there is a uniform rate of tax per hectare which every owner of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re is an elaborate mechanism to determine the extent of the crop yielding plantation. The differences which have been pointed out may be the result of some fortuitous circumstance and even bad husbandry. The Court cannot regard the law to be discriminatory on the evidence produced in the case. may refer to a few cases which were also brought to our notice. In State of Andhra Pradesh Another v. Nalla Raja Reddy Ors.([19671 3 S.C.R. 28) the Andhra Pradesh Land Revenue (Additional Assessment) and Cess Revision Act (22 of 1962) was held to offend Art. 14. That Act was passed to bring uniformity in assessment of Land Revenue in the Telengana and Andhra areas of the State of Andhra Pradesh. An additional assessment at the rate of 75% of the yearly assessment was imposed on dry land and the total assessment was not to be less than 50 n.p. per acre. On wet lands the additional-assessment was to be 100% for lands irrigated from a Government source and 50% in the case of other wet lands and a minimum total demand was also prescribed. This Act was considered to be discriminatory as the minimum had no relation to the fertility of land, there was no relationship between the land and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... methods and even rates for taxation if it does so reasonably...... The Supreme Court has been practical and has permitted a very wide latitude in classification for taxation. This principle was approved by this Court in East Indian Tobacco Co. v. State of Andhra Pradesh( ) at page 409. Applying it, the Court observed: If a State can validly pick and choose one commodity for taxation and that is not open to attack under Art. 14, the same result must follow when the State picks out one category of goods and subjects it to taxation. This indicates a wide range of selection and freedom in appraisal not only in the objects of taxation and the manner of taxation but also in the determination of the rate or rates applicable. If production must always be taken into account there will have to be a settlement for every year and the tax would become a kind of income-tax. The next principle is that the burden of proving discrimination is always heavy and heavier still when a taxing statute is under attack. This was also observed in the same case of this Court at page 411 approving the dictum of the Supreme Court of the United States in Madden v. Kentucky( ) : In taxation even m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er cases of this Court. The same applies when the legislature reasonably applies a uniform rate after equalising matters between diversely situated persons. Simply stated the law is this: Differences in treatment must be, capable of being reasonably explained in the light of the object for which the particular legislation is undertaken. This must be based on some reasonable distinction between the cases differentially treated. When differential treatment is not reasonably explained and justified the treatment is discriminatory. If different subjects are equally treated there must be some basis on which the differences have been equalised otherwise discrimination will be found. To be able to succeed in the charge of discrimination, a person must establish conclusively that persons equally circumstanced have been treated unequally and vice versa. However, in Khandige Sham Bhat and others v. The Agricultural Income Tax Officer, at page 817 it was observed If there is equality and uniformity within each group, the law will not be condemned as discriminative though due to some fortuitous circumstance arising-out of a peculiar situation some included in a class get an advantage over oth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which by ss. 4 and 5 imposed in respect of all lands, of whatever description and tenure, -a uniform rate to be called the basic tax at the rate of 3 pies per cent per amnum in lieu of any existing tax in respect of the said land. -With the formation of the present State of Kerala under the reorganisation of States, the State Legislature passed the Travancore-Cochin Land Tax (Amendment) Act, X of 1957 by which the expressions the State of Kerala and the Land Tax Act were substituted for the words the State of Travancore-Cochin and the TravancoreCochin Land Tax Act respectively. The amendment Act also added a new section, S. 5A, which inter alia, provided for provisional assessment of the basic tax for lands so far not surveyed. The constitutional validity of Act XV of 1955, as amended by Act X of 1957, was challenged in this Court in Moopil Nair v. The State of Kerala([1961] 3 S.C.R. 77). The Act was struck down by this Court, inter alia, on the ground of its being violative of Arts. 14 and 19(1)(f). The judgment of this Court striking down the Act was pronounced on December 9, 1960. Before the case of Moopil Nair( ) was decided, the Kerala Legislature passed the impugn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by dividing the total number of yielding pepper vines standing on all lands held by him by 400. (vi) the extent of lands on which tea plants are grown which have begun to yield crops; and (vii) the extent of lands on which cardamom plants are grown which have begun to yield crops. Provided that where the total extent of land held by a person,which is cultivated with the aforesaid crops, is less than the aggregate calculated as above, the actual extent alone shall be deemed to be the extent of plantations held by him. Though the Schedule lays down different quotients in respect of lands cultivated with cocoanut and arecanut trees, rubber and coffee plants and pepper vines, they cannot achieve equality of the burden of the tax as yields of even the same crop cannot be equal or approximately equal by reasons of differences in the lands in one area from those in other areas depending on their soil, situation and a number Of other such factors. Furthermore, no explanation is forthcoming about the principle, if any, on which the quotient for each of the said categories wasfixed and whether they inter se work out reasonable equality among the plantations cultivating the said tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tly changed to ₹ 9.94 P. per hectare. Section 6 (2) provided that notwithstanding anything contained in sub-s. 1, where a land-holder liable to pay basic tax proved to the satisfaction of the prescribed authority that the gross income from any land was less than ₹ 10 per acre per annum (now changed to ₹ 24-70 P. per hectare), the basic tax payable on such land shall be at a rate fixed by the prescribed authority calculated at 1/5th of the gross income from such land. The second proviso to sub-s. 2 laid down that the Government may, having regard to the potential productivity of any land used principally for growing cocoanut, arecanut, pepper, tea, coffee, rubber, cardamom, or cashew or any other special crop, plant or tea that might be specified by the Government by notification, levy and collect basic tax at the rate of two, rupees per acre per annum on such land notwithstanding the fact that such crops, plants or trees have not begun to yield or bear and that for time being no income is made from the land or that the income made is less than ten rupees per acre per annum. Explanation (I) to s. 6 laid down that for the purpose of s. 6 gross income shall mean the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in Kerala itself varies from district to district ranging from about 350 Kgs. for the district of Ernakulam to as much as 1850 Kgs. for Trichur district. The production figure for the whole of the Kerala State appears to have remained steady throughout 1965 to 1967 as it varies from about 43000 Kgs. to 44000 Kgs. These figures indicate that different areas in the State where tea is grown differ in a very large way in productivity and fertility. These figures are taken from the Reports of the Tea Board, and therefore, can be safely regarded as reliable. In the counter-affidavit filed by the State these differences, no doubt, are not admitted. To show that such differences do not exist only. the example of one estate, Glennmari near Kuttikanam, is taken. It is urged that that estate has a larger production per hectare than the petitioners estate though-both happen to be situate in the same area. The respondents, however, have frankly conceded that the fertility of the land and the differences in productivity of estates in different areas are not relevant, for, the impugned tax is levied with reference to the specified user to which the land is put and not to its productivity, po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income, actual or potential; (3) that since the Act in terms claimed by s. 3 thereof to be a general revenue settlement of the State, the tax being one on land or land revenue had to be assessed and levied on the actual or potential pro activity of the land sought to be taxed : in other words, such a tax has reference to the income actually made or which could have been made, with due regard to its incidence, and (4) that the inequality writ large on the Act arose by reason of the absence of any classification of the land on which the tax was imposed. The argument which appears to have appealed to the learned dissenting Judge that the Act made a classification between holders of land according to the quantum of land held by them and that that classification was reasonably linked with the object of the Act to raise revenue for the State, failed to receive the approval of the rest of the Court. The fact that a person holds a large area of land and is taxed according to the area he holds cannot by itself mean that in taxing him he is meted out equal treatment as compared to a person who holds a lesser quantity of land but of a better and more productive quality, merely on the ground ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. But the proviso thereto laid down that the total assessment should not in any case be less than 50 nP. per acre per year, irrespective of the quality and_productivity of the soil. Every acre of dry land had thus to bear a minimum assessment of 50 nP. per acre per year. For wet lands also, a scheme was adopted which took no account of the quality and productivity of the soil. The Act was challenged on the ground of discrimination arising from the absence of classification as in the case of Moopil Nair([1961] 3 S.C.R. 77). In considering the challenge the Court observed : A statutory provision may offend Art. 14 of the Constitution both by finding differences where there are none and by making no difference where there is one. Decided cases laid down two tests to ascertain whether a classification is permissible or not, viz., (i) the classification must be founded on an intelligible differentia which distinguishes persons or things that are grouped together from others left out of the group; and (ii) that the differential must have a rational relation to the object sought to be achieved by the statute in question. The said principles have been applied by this Court to taxing s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ture in the matter of fiscal adjustment, the Courtwill at the same time insist that the statute in question, like any other statute, should not infringe Art. 14 either by introducing unreasonable or irrational classification between persons or properties similarly situated or by a lack of classification. Further, in examining the objection under Art. 14 the Court has not to go by the phraseology only of the provision under challenge, but its real impact on persons or properties. The challenge urged on behalf of the petitioners may now be examined in the light of these principles. Both the title and the preamble of Act XVII of 1960 in clear terms call the tax one in addition, as s. 3(5) declares it, to the basic tax, payable on lands falling under its purview, i.e., plantations, as defined by s. 2(6). A plantation, as defined by s. 2(6), means the land used for any one or more of the seven types,of trees and plants set out therein. The tax is thus chargeable in respect of lands which are plantations and not the rest of the lands however much their income may be. Apart from that, as stated in the State s counter-affidavit, the tax is imposed on the ground of the particular use to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pply, elevation and other relevant factors touching the lands they hold. The additional tax is by no means low as it is, after the passing of the amendment Act XIX of 1967, ₹ 50 per hectare, equivalent to ₹ 20 per acre. A person holding 1,000 acres of land of inferior soil would, by reason of such, an ad hoc tax, be bound to be hit harder than the one holding 1,000 acres of superior land with higher fertility or productivity. Such a result would not occur if the land is classified and the incidence of the tax is graded according, to its productivity and other relevant factors, In support of the Act it was argued that the impugned Act not only makes a classification between those who hold lands which are plantations and those who hold lands which are not plantations, but also makes a further classification within that classification by the method provided for calculating the extent of plantations in Sch. 11. That argument does not appear to be correct. The Schedule only provides the methods for calculating the extent of the plantations : (1) by means of quotients and (2) where tea and cardamom plants are cultivated by the actual extent of the land used for those purposes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y. The difference in yield in these different districts must clearly be due to the difference in the soil, situation and such other factors, for, it is nobody s case (at least not made out in the counter-affidavit of the respondents) that the cultivators in Ernakulam district use inferior seed or are less venturesome than those in Kottayam and Trichur districts. Such a difference in the average yield per hectare occurs also in other tea growing districts, namely, Cannanore, Palghat, Kozhikode, Trivandrum and Quilon, whose average yield per hectare during the years 1965 to 1967 was 950, 1490, 1575, 975 and 650. Kgs. respectively. Since these figures are from the statistics prepared by the Tea Board, they cannot be disputed. That such differences in the average yield occur also in the different districts of the States of Madras and Mysore is also clear. Surely, they cannot arise because the cultivators of one district are more adventurous or more technology-minded than those of the other districts. The differences in the yield must, therefore, be attributed to the differences in the soil, situation, water supply, rainfall etc. Imposing a uniform rate of tax in respect of lands whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ker- 619) a Division Bench of that very High Court held that what Act XVII of 1960 did was to tax lands comprised in plantations, not on the basis of their productivity but an the basis of their user. But the Division Bench held that the Act was just and equitable , and therefore, was not hit by Art. 14. At page 623 of the Report, the learned Judges observed that the yield would vary from crop to crop and place to place, but it is not the productivity of the soil that forms the foundation of the tax but its user in a specific way for a specific purpose . Though these two decisions cited Moopil Nair s case ([1961] 3 S.C.R. 77) , neither of them considered the result of the lands being uniformly taxed without classifying them according to their potentiality so that the incidence of the tax may be just and equitable. How a tax imposed uniformly without regard to the potentiality of the property taxed and without any classification on any other just basis works inequality is illustrated by the scrutiny by this Court of the Kerala Building Tax Act, XIX of 1961 in the State of Kerala v. Haji K. Kutty(A.I.R. 19 S.C. 378). After noting the uniform rate of the tax levied according to the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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