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TMI Blog1939 (9) TMI 2X X X X Extracts X X X X X X X X Extracts X X X X ..... ct, which provides that no High Court shall have any original jurisdiction in any matter concerning the revenue. Why a High Court should be debarred from exercising jurisdiction which a subordinate Judge Could exercise, I do not know, but we have to take the Act as we find it. Before the section can apply, however, we must determine that the tax which is challenged is legal, if it is not, its imposition does not concern revenue, but is a nullity. To refuse jurisdiction to try this question would involve dismissing the case against the plaintiff without hearing him. This point was not seriously contested by the Advocate General. The material provision of Part VI of the Bombay finance Act, 1932, which were added by the Bombay finance Act, 1939, are as follows : Section 20 directs that Part Vi of the Act extends to the City of Bombay and the other places therein mentioned. Section 21 defines "annual letting value" in the City of Bombay as meaning the rateable value of buildings or land as determined in accordance with the provisions of the City of Bombay Municipal Act, 1888. Section 22 is the charging section and provides that there shall be levied and paid to the Provin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f any found within or upon such building or land belonging to the person liable to pay such tax. By the city of Bombay Municipal Act, 1888, it is provided in Section 139 that property taxes may be imposed for the purposes of the Act. Section 140 provides that the property taxed shall consist of a water tax, a halalkhore tax and a general tax which latter tax is to be of not less than eight and not mere than seventeen percent. of the rateable value of buildings and lands in the City. Section 154 provides : "In order to fix the rateable value of any building or land assessable to a property tax, there shall be deducted from the amount of the annual rent for which such land or building might reasonably be expected to let from year to year a sum equal to ten per centum of the said annual rent, and the said deduction shall be in lieu of all allowances for repairs or on any other account whatever". Section 212 provides that the property tax shall be a first charge upon the building or land subject thereto. The question which arises in this suit whether the imposition of the Urban Immovable Property tax, which I will herein after refer to as "the impugned tax" was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or item 55 of the Federal List and not with in the Provincial List, or (3) it may fall within both the Lists. In my opinion there can be no doubt that the impugned tax is a tax on land and buildings, and falls within item 42 of the Provincial List, unless it is excluded by reason of its falling within the Federal List. I also feel no doubt whatever that if the impugned tax falls within either item 54 or 55 of the federal List and also falls within item 42 of the Provincial List, the powers of the Indian Legislature must Prevail to the exclusion of the powers of the Provincial Government Item 54 of the Federal List embraces "Taxes on income", and in my opinion all the items in the Provincial List must be so construed as to exclude taxes on income. Some reliance was placed by the recent decision of the federal Court in the excise case. In the matter of the Central provinces & Berar Sales of Motor spirits and Lubricants Taxation Act, 1938 (1939 F. C. R. 18). The court there had to decide whether a tax on the sale of motor spirits was a tax on the sale of goods within item 48 of the Provincial List. The court held that although the tax would have comes within the general w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e annual value of property consisting of any buildings or lands appurtenant thereto of which he is the owner, other than such portions of such property as he may occupy for the purposes of his business, subject to allowances in respect of repairs, insurance premia, interest on mortgages, payments on account of land revenue, collection charges and vacancies. Emphasis is laid on the fact that the tax is based on annual value and not on actual income, although the Advocate-General contends that having regard to the allowances authorised the intention of the legislature is really to get at the actual income. Reliance is also placed by the plaintiff on authorities relating to income-tax charged on lands and buildings under Schedule A of the English Income-tax Act. In the case of London County Council v. Attorney-General (1901) A. C. 26 the question arose whether the tax paid on the rents and profits of land under Schedule A was properly speaking income-tax. The trial court held that it was not, since it was based on the estimated value of the property, and not on income. In dealing with this question Lord Macnaghten in a passage from his speech, which is often quoted, says this : " ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect to an onerous lease which produces less rent than the property could be let for at the time. It is argued that in imposing the impugned tax the legislature were not purporting or desiring to tax income. They were imposing a tax of 10 per cent on the rateable value, upon the owner of particular lands and buildings. In constructing the Government of India Act, 1935, the Court is entitled to look to the legislative practice prevailing in England and in India at the time when it was passed. On this principle the Court can clearly look at the provisions of the English and Indian Income-tax Acts, and the Court may also have regard to the fact, to which the Advocate-General had called dour attention, that taxes on lands and buildings imposed primarily upon the owner and made a charge upon the lands and buildings concerned have been been for many years a well recognised form taxation in India in Municipal affairs. In this inaction we were referred to the Bombay Municipal Acts, 1888, the Bombay district Municipal Act of 1925, the Madras Act IV of 1919, the Calcutta Municipal Act of 1923, the United Provinces Act of 1916, the Central Provinces Act, 1922 the Punjab Act III of 1911, the B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the question whether the tax an be raised by the Municipal authorities in the manner provided is a matter concerning the revenue, and that the jurisdiction of the Court to determine the question is barred by Section 226 of the government of India Act, 1935. I therefore express no opinion upon that question. The findings on the issues are - (1) see judgment (2) and (3) in the negative (4) and (5) see judgment The plaintiffs suit fails and must be dismissed with two sets of costs. Certificate under Section 205 granted. BROOMFIELD, J. - I have has the advantage of reading the judgment of the learned chief Justice, with in with respect I agree, and I shall content myself with a few observation on the most important issue in the case, namely, whether the Urban Immovable Property Tax is a tax on income. Relying on a dictum of Lord Macmillan in Croft v. Dunphy, 1933 A. C. 156 at p. 165 ("when a power is conferred to legislate on a particular topic it is important, in determining the scope of the power, to have regard to what is ordinarily treated as embraced within that topic in legislative practice and particularly in the legislative practice of the State which has conferre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... let. But the mode of assessment does not determine the character of a tax. It may also be the basis of assessment of a tax on capital e.g. in the case of succession to land under the Succession Duties Act in England; In re Elwes, (28 L. J. Exch. 46). Or again it may be the basis of assessment of rates such as the ordinary municipal rates in England, which are neither taxes on income nor taxes on property, but a personal charge on the occupier Clearly it is impossible to say that the employment of annual value as the measure of the impugned tax ins any indication that it is a tax on income. We have to discover what is the essential character of the tax, what it is "in pith and substance", apart from the mere machinery by which it is assessed, and we are to look mainly at the charging section of the Act for this purpose. But neither in the charging section snore in any other part can I find any clear evidence that it is intended to be, or is in effect, a tax upon income. By reason of the fact that the provision of the Bombay Municipal Act are made applicable, there is a deduction of ten per cent. from the annual letting value "in lieu of all allowance for repairs or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imposed of X Rupees on every house in Bombay, payable by the owner. That would be a crude and equal impost, but perfectly, legal. It would be more equitable, but still I imagine perfectly legal, if the tax were graded according to the size of the building, the number of storeys or rooms, or according to the extent of frontage on important streets, or according to the cost of construction. Why should it not be permissible to go a little further in the direction of making the amount of the tax correspond to the importance and value of the properties, by employing the standard basis of assessment of Municipal Property Taxes ? If annual value had been equivalent to income that would not be possible, for income may not be taxed by the Provincial Legislature. But when you speak of income being taxed, within the meaning of item 54, what has to be considered in my opinion is actual income and not the hypothetical income arbitrarily adopted for income-tax purposes. It was further 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssion is in respect of the plaintiffs case against the second and third defendants only, and I shall deal which it later on. The principal is whether the Finance Act is ultra vires the Provincial Legislature. The relevant sections of the material Acts are set out in the judgment of the learned Chief Justice. It will be useful first to summarise the recognised rules of construction of statues when the powers of the two legislatures are different. It subjects generally described. As to how the question should be approached in Citizens Co. v. Parsons, L. R. 7 A. C. 96, at page 109, it is stated as follows :- "The first question to be decided is, whether the Act impeached ......... falls within any of the classes of subjects enumerated in Section 92 and assigned exclusively to the legislatures of the Provinces; for if it does not, it can be of no validity, and no other question would then arise. It is only when an Act of the Provincial Legislature prima facie falls within one of these classes of subjects that the further questions arise viz., whether, notwithstanding this is so, the subject of the Act does not fall within one of the enumerated classes of subjects in Section 91, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not the form alone which it may have assumed under the hand of the draftsman. When there is an absolute jurisdiction vested in a legislature, the laws promulgated by it must take effect according to the proper construction of the language in which they are expressed. But where the law making authority is of a limited or qualified character obviously it way be necessary to examine, with some strictness, the substance of the legislation, for the purpose of determining what it is that the legislature is really doing. It is the duty of the Courts, however difficult it may be to ascertain in what degree, and to what extent authority to deal with matters falling within these classes of subjects (mentioned in the Central and Provincial Lists) exists in each legislature and to define, in the particular case before them, the limits of their respective powers. It could not have been the intention that a conflict should exist; and in order to prevent such a result the two sections must be read together and the language of one interpreted and where necessary modified by that of the others. In that way, in most cases, it may be found possible to arrive at a reasonable and practical construction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or Canada, (1939 A. C. 117), the following rule of construction was emphasised : "The object or purpose of the Act in question may also all for consideration..... It is not competent either for the Dominion or a provinces under the guise, or the pretence, or in the form of an exercise of its own powers, to carry out an object which is beyond its powers and a trespass on the exclusive powers of the other." In provincial Treasurer of Alberta v. Kerr, (1933 A. C. 710), the importance of the words in the taxing section was stressed in the following terms : "The identification of the Scheme of the tax is naturally to be found in the charging section of the statue. It will only be in the case of the some ambiguity in the terms of the charging section that recourse to the other sections is proper or necessary." On reading together item No. 54 in List I and Item No. 41 in List II it is clear that under the Constitution Act, Income, however derived, is divided in two parts; (1) Agricultural income and (2) the rest. Agricultural income is defined in the Constitution Act by a reference to the Indian Income-Tax Act, section 2(1). In order to determine the character of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this tax. It is necessary in this connection to consider what "income" under the Income-Tax Act means. In Commissioner of Income-tax v. Shaw Wallance & Co. (59 I. A. 206), their Lordships observed as follows : "Income, their Lordships think, under this Act, (Income-Tax Act) connotes a periodical monetary return coming in with some sort of regularity or expected regularity from definite sources. The source is not necessarily one which is expected to be continuously productive, but it must be one whose object is the prediction of a definite return, excluding anything in the nature of a windmill." Again in London County Council v. Attorney-General, (1901 A. C. 26 at p. 35), Lord Macnaghten stated as follows : "Income-Tax, if I may be pardoned for saying so, is a tax on income. It is not meant to be a tax on anything else. It is one tax, not collection of taxes essentially distinct. There is no difference in kind between the duties of Income-Tax assessed under Schedule D and those assessed under the Schedule A or any of the other Schedules of charge. One man has fixed property, another lives by his wits, each contributors to the tax if his income is above t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , it is essential character of the particular tax charged that it to be regarded, and the nature of the machinery - often complicated - by which the tax is to be assessed is not a assistance except in so far as it may throw light on the general character of the tax. After quoting the passage from Lord Macnaghtens Judgment defining "Income" quoted above) the judgment proceeds as follows : "On the other hand, the poor rate is levied in respect of the occupation of the hereditaments irrespective of a person income generally, and irrespective of whether the rate payer is in fact deriving or gains from such occupation. A dwelling house is a burden not a source of profit, for the occupier who pays the rent for it. He is stated on the value of the burden, while he remains unrated in respect of his whole profits be they from business or from investment. In their Lordships opinion, this marks the essential difference in character between in character between income-tax and rates and it is unnecessary to consider either and less important differences between them". Having regard to these observations and what is understood by the words "Income" under the Indi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a tax on the income. On the other hand, if the tax is on the lands and buildings themselves and the assessment is on a standard named by the legislature which may fluctuate or vary on the produce or income from it, it would be a tax on the property. As has been pointed out in In re : a Reference under Government of Ireland Act, (1936 A. C. 352), the measure of the tax is not itself the test. In determining the nature of the tax consideration may be given to the standard on which the tax is levied, but that is not the determining factor. The contention of the plaintiff must be that the impugned Act is for the purpose of taxing the owners income. According to him that is the essential nature and character of this tax. I do not find adequate words in the impugned Act to support that contention. 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 read with the other sections do not displace this character of the tax. An inanimate object cannot pay the tax. Therefore a tax on property must be paid by the owner or occupier. From the fact that the owner is liable to pay the tax it does not follow that the ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cipal purpose only. Under the Constitution Act of 1935 the power to levy the tax remains, while the limitation to the power is removed. It is difficult to believe that when enacting the Constitution Act the legislature intended to and did deprive the Provinces of this power. The terms of Section 22 of the impugned Act, including the measure by which the tax is to be calculated, are very similar to those found in the Provincial Acts which govern Municipal Acts of the Provincial Acts which govern Municipalities. It appears therefore more reasonable to hold that the power recognised to exist in Provincial Legislatures for so many years has not been intended to be curtailed. It was urged that the Municipal Acts of the Provincial Legislatures received the assent of the Governor-General in Council and thereby the encroachment of the Provinces was condoned. I do not think it is a sound argument. The power to legislate had been given by the Government of India Act, 1915, (as amended by the Act of 1919) and the Devolution Rules. That had nothing to do with the assent of the Governor-General in Council. The observations of Lord Macnaghten in London County Council v. Attorney-General (1901 A. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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