TMI Blog1964 (3) TMI 13X X X X Extracts X X X X X X X X Extracts X X X X ..... pellant held office as the last Governor-General of India. Under section 3 of Central Act XXX of 1951 the appellant is entitled to a pension of Rs. 15,000 per annum and has been drawing this sum residing in the City of Madras. The Corporation of Madras--the first respondent before us--demanded profession tax from the appellant under section 111(1)(b) of the City Municipal Act (1919), hereinafter called the Act, for the year 1958-1959 on the ground of the appellant's residence within the city for the period therein specified and his drawing the pension to which he was entitled. The appellant addressed a communication to the Corporation asserting that this demand was illegal as the Corporation was empowered by the relevant constitutional provisions merely to levy a tax " on a profession, trade, calling or employment " and that, as he as a pensioner did not fall under any of these classes, the said demand was illegal. The authorities of the Corporation, however, insisted on compliance with the demand on the ground that under the express terms of the Act persons in receipt of pensions were also liable to the tax. The appellant thereupon filed a writ petition for the relief already set ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 36. By this amendment a new section--section 111--was substituted for the old one just set out, and under this Explanation 2 was deleted and the substituted provision ran : " III. (1) If the council by a resolution determines that a profession tax shall be levied, every person not liable to the tax on companies, who, after the date specified in the notice published under, sub-section (2) of section 98A, in any half year-- (a) exercises a profession, art or calling or transacts business or holds any appointment, public or private-- (i) within the city for not less than sixty days in the aggregate; or (ii) outside the city but who resides in the city for not less than sixty days in the aggregate ; or (b) resides in the city for not less than sixty days in the aggregate and is in receipt of any pension or income from investments, shall pay, in addition to any licence fee that may be leviable under this Act, a half yearly tax, assessed in accordance with the rules in Schedule IV, but in no case exceeding rupees five hundred." Along with this was added a new section, section 98A, which ran : " 98A. (1) Before the council passes any resolution imposing a tax or duty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion unless they could be comprehended as within the category of persons holding appointments, or of persons exercising any profession, trade, or art or calling--as these were the only classes relevant to the present purpose who were within the scope of the rules under Scedule IV. We shall refer to the submission based on this feature as regards terminology employed in Schedule IV in its proper place. The Corporation of Madras availed itself of the provisions of section 98A and after the issue of the notices prescribed by it passed a resolution at a meeting held on March 31, 1937, to levy, inter alia, " profession tax " for the year 1937-38 at the rates which were specified in the resolution. As regards " profession tax the resolution read : "Resolved that the profession tax in respect of clauses 1, 2, 3, 4, 5 and 6 be fixed at the maximum rate and 25 per cent. over and above the minimum rates prescribed in Schedule IV of the Act in respect of clauses 7, 8 and 9." This resolution further specified that the tax at the rates therein set out, which were higher than what prevailed before, were to have effect from April 1, 1937. Notwithstanding the apparent inapplicability of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e tax was in the Union List " and " to be applied to the same purposes as before. Unless, therefore, the Corporation could make out that the tax now impugned was being lawfully levied from before the Constitution the levy would be illegal and besides there was the complication introduced by the enhancement of the rates of tax which, as stated earlier, were effected in April, 1950, April, 1958, and in 1961. Leaving aside for the moment the question of the effect of the enhancement of the rate, we have to see whether it has been established that the duty was law fully levied by the Corporation prior to the Constitution. The answer to the question whether it was " lawfully levied " prior to January 26, 1950, when the Constitution came into force would depend upon the effect of certain provisions of the Government of India Act, 1935. Under that enactment, as under the Constitution, the State legislative power as regards taxes of the nature now in controversy was couched in terms identical with that employed in entry 60 of the State List in the Constitution. Entry 46 in the Provincial Legislative List under the Government of India Act, 1935, ran : " Taxes on profession, trades, calli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y-five were a reference to the commencement of the said Part III." It would follow, therefore, that for the present demand to be sustained as valid it would be sufficient if it was shown that the tax was lawfully levied immediately prior to the commencement of Part III of the Government of India Act, 1935, i.e., on March 31, 1937. The learned judges of the High Court held that this condition was satisfied and on this basis they have dismissed the appellant's petition. Learned counsel for the appellant submitted four points in support of the appeal : (1) That the amending Act, X of 1936, was not validly passed by reason of its contravening the Devolution Rules framed under section 45A of the Government of India Act, 1919, by which Local Governments were given legislative power, inter alia, to levy taxes on professions, trades, etc., but that the present tax which is really a " tax on income " was a Central subject outside the competence of the Local Legislature. (2) Even assuming that Act X of 1936 was valid, the tax which was permitted to be levied under it was, having regard to the terms of section 111(1) a new tax which was levied for the first time by the resolution of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the mode by which the charge was to be imposed. There was also a second change that was introduced by rendering residence for six months within the city, besides the receipt of pension in the city, a necessary ingredient of the chargeability of the " profession tax " on pensioners. The effect of these two changes now calls for consideration. On the amendment of section 111 by the Act of 1936, coming into force in April, 1936, the statutory imposition of the charge to tax laid on persons in receipt of pensions within the City of Madras ceased, and the liability to tax as regards the period after that date was dependent on the passing of a resolution by the Council in terms of the amended section 111(1) of the Act. In this connection it has to be pointed out, though recourse to the procedure as respects previous publication, etc., prescribed by section 98A was necessary only in the case of taxes newly levied, and might have been adopted in the present case because of the enhancement of the rates, still, a resolution of the Council was necessary to impose the tax as without it, no liability to profession tax would arise. The charge to tax was imposed, as stated earlier, by the resol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s pointed out, be equated with " a tax which was being lawfully levied " before Part III of the Government of India Act, 1935. The third submission of learned counsel for the appellant is also well-founded. The conclusion we have reached as to the effect of the amendment to section 111, by Act X of 1936, and of tax being imposed by resolution of the Council from April 1, 1937, not a tax which was being lawfully levied immediately prior to April 1, 1942, is reinforced by reference to the rules in Schedule IV which remained unamended till 1942. Under section 111(1) as amended, the tax could be levied only in accordance with the rules in Schedule IV and as those rules did not make a provision for the levy of a tax on pensioners, it would follow that the tax " was not being lawfully levied on them. As already pointed out, the relevant rules in that Schedule were framed at a time when Explanation 2 formed part of section 111 and " pensioners " were deemed to " hold appointments ". With the deletion of the Explanation, the fiction created by the original Madras Act IV of 1919 ceased and thereafter if the rules in Schedule IV had to be applied to them these had to be suitably modified. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rrying on of a profession, trade, etc., and would, therefore, apply only to a case of present employment. The mere fact that a person has previously been in a profession or carried on a trade, etc., cannot justify a tax under this Entry. The tax on the receipt of pension or on the income from investments which is referred to in the last part of section 111(1) is in truth and substance a tax on income and in fact the argument before the High Court proceeded on this basis, so have the learned judges. At the time the tax is levied the pensioner is in no employment but is only in receipt of income, though it might be of past services, in an employment. He next submitted that Act X of 1936 which had been enacted prior to the Government of India Act 1935 was continued as an existing law by section 292 of the Government of India Act and as there was nothing inthe Government of India Act against its continuance it would have effect even if the terms of section 143(2) were not satisfied by the present levy. The learned judges of the High Court accepted this submission. In our opinion, they were in error. The question of the correlation between article 372 corresponding to section 292 of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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