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TMI Blog1964 (3) TMI 13X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 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 out, and, as the validity of the State Act was impugned, impleaded the State of Madras also as a respondent. It would be seen from the foregoing that the question for consideration is whether the first respondent Corporation is entitled to levy a tax on pensioners in respect of the pensions received by them. In order to appreciate the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 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 for the first time it shall direct the Commissioner to publish a notice in the Official Gazette and in the local newspapers of its intention and fix a reasonable period not being less than one month from the date of publication of such notice in the Official Gazette for submission of objections. The Council may, after considering the objections, if ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... minology 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 the rules in Schedule IV to the levy of profession tax on pensioners, the Corporation continued to assess pensioners to the said tax and collected the same. The lacuna in the enactment was apparently noticed in 1942 when by a notification in the Official Gazette the Schedule was amended in exercise of the power conferred on Government by section 347(3) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, callings and employments ", and " taxes on income " fell within the exclusive Federal legislative power under Entry 54 of List I. By the Indo-Burma Miscellaneous Provisions Act, 1940, Parliament of the U. K. enacted section 142A to whose terms we shall advert later and by the same enactment entry 46 was amended and the words: "Subject, however, to the provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igh 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 Corporation only on and from April 1, 1937, and , therefore, the present tax was not in operation prior to the commencement of Part III of the Government of India Act, 1935, and not, therefore, saved by section 143(2) of that Act. (3) Besides, between April 1, 1937 to April 1, 1942, it was not lawfully levied by reason of the lacuna created by the words of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 resolution of the Council which was to have effect from April 1, 1937. In other words by reason of the repeal of the original section 111, the statutory charge to tax on pensions ceased in April, 1936. A charge was imposed again under the resolution of the Council effective from April 1, 1937, so that between April, 1936, to March 31, 1937, no charge was imposed by vir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. This, as we have pointed out earlier, was done only from April 1, 1942, so that in reality taxes on Pensioners were " lawfully " levied up to 1936 and then after a break from April 1, 1942, we use. the word " lawfully " on the assumption that this could have been legally done under the Government of India Act, 1935, a point already discussed. The learned judges of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uth 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 the Government of India Act and article 277 corresponding to section 143(2) of the Government of India Act was considered by this court in South India Corporation (P.) Ltd. v. Secretary, Board of Revenue, Trivandrum and this court said : " It is settled law that a special provision should be given effect to the extent of its scope, leaving the general provision to co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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