TMI Blog1969 (4) TMI 30X X X X Extracts X X X X X X X X Extracts X X X X ..... this view of the matter it is hardly necessary to invoke the 14th clause of section 73 which contains a residuary power to impose any other tax not expressly mentioned. Thus these appeals possess no merit after the passing of the Validation Act and must be dismissed. - 2197 OF 1966 - - - Dated:- 25-4-1969 - Judge(s) : M. HIDAYATULLAH., J. M. SHELAT., V. BHARGAVA., K. S. HEGDE., A. N. GROVER JUDGMENT The judgment of the court was delivered by HIDAYATULLAH C.J.--These matters arise under article 226 of the Constitution and are appeals by certificate granted by the High Court of Gujarat against its judgment and order, dated September 10, 1966. The appellant No. 1 is a company which has spinning and weaving mills at Broach and manufactures and sells cotton yarn and cloth. Respondent No. 1 is the Broach Borough Municipality constituted under section 8 of the Bombay Municipal Boroughs Act 1925. In the assessment years 1961-62, 1962-63 and 1963-64 the municipality purporting to act under section 73 of the Bombay Municipal Boroughs Act, 1925, and the Rules made thereunder imposed a purported rate on lands and buildings belonging to the respondent at a certain percentage of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ht not be the same for lands and buildings. It was held that in section 73 the word " rate " as used must have been used in the special sense in which the word was understood in the legislative practice of India before that date. Rule 350A which laid the rate on land at a percentage of the valuation based upon capital was, therefore, declared ultra vires the Act itself. In short, the word " rate " was given a specialised meaning and was held to mean a kind of impost on the annual letting value of property, if actually let out, and on a notional letting value if the property was not let out. The legislature of Gujarat then passed the Validation Act seeking to validate the imposition of the tax as well as to avoid any future interpretation of the Act on the lines on which rule 350A was construed. The Act came into force on January 29, 1964. After defining the expressions used in the Act and providing for its application, the Act enacted section 3 which concerned validation of impositions and collections of taxes or rates by municipalities in certain cases. That section reads as follows : " 3. Validation of imposition and collection of taxes or rates by municipalities in cert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said to take place effectively. The most important condition, of course, is that the legislature must possess the power to impose the tax, for, if it does not, the action must ever remain ineffective and illegal. Granted legislative competence, it is not sufficient to declare merely that the decision of the court shall not bind, for that is tantamount to reversing the decision in exercise of judicial power which the legislature does not possess or exercise. A court's decision must always bind unless the conditions on which it is based are so fundamed tally altered that the decision could not have been given in the altered circumstances. Ordinarily, a court holds a tax to be invalidly imposed because the power to tax is wanting or the statute or the rules or both are invalid or do not sufficiently create the jurisdiction. Validation of a tax so declared illegal may be done only if the grounds of illegality or invalidity are capable of being removed and are in fact removed and the tax thus made legal. Sometimes this is done by providing for jurisdiction where jurisdiction had not been properly invested before. Sometimes this is done by re-enacting retrospectively a valid and legal t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the entry. The doubt which is created by entry 86 of List I " Taxes on the capital value of assets ", no longer exists after the decision of this court in Sudhir Chandra Nawn v. Wealth-tax Calcutta. In that case the respective ambits of the two entries are explained. It is pointed out that unlike the tax contemplated by entry 49 (List II) the tax under entry 86 (List I) is not a direct tax on lands and buildings but on net assets, the components of which may be lands and buildings and other items of assets excluding such liabilities as may exist. The incidence of the tax is not on lands and buildings as units of taxation but on the net assets of which lands and buildings are only some of the components. This is not the case under entry 49 (List II) where the tax can be laid directly on lands and buildings as units of taxation. Therefore, a tax on lands and buildings is fully within the competence of the legislature and it is open to it to authorise the municipality to levy the same tax indicating the mode of levy. This the legislature has done by indicating the different modes which may be adopted in making the levy, one such mode being a percentage of the capital value. The ..... X X X X Extracts X X X X X X X X Extracts X X X X
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