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TMI Blog1962 (4) TMI 5X X X X Extracts X X X X X X X X Extracts X X X X ..... 1367 fasli. In response to the said notices, the petitioner filed his returns and objected to the annual value of the land calculated by the assessing authority. After the petitioner received notices for the years 1365 and 1366 fasli, he filed a writ petition in the Allahabad High Court challenging the validity of the said notices on the ground that the material provisions of the Act on which the said notices were based were ultra vires and unconstitutional. These writ petitions were numbered 3146 of 1958 and 1354 of 1959 in the said High Court. Several other writ petitions had also been filed by other assessees challenging the validity of the Act, and the whole group of these petitions was heard together by the Allahabad High Court. In substance, the pleas made by the petitioners challenging the validity of the Act were rejected by the High Court and it was held that the Act was valid and constitutional : vide Oudh Sugar Mills Ltd., Hargaon v. State of U.P. This decision was pronounced on the 12th of October, 1959. On the 22nd November, 1960, the petitioner filed three petitions in this court under article 32 of the Constitution. These petitions were Nos. 325, 326 and 327 of 196 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds that the validity of the Act is challenged. These grounds are denied by the respondents and it has been alleged by them that the U.P. Legislature was competent to pass the Act, that the Act does not violate the fundamental rights guaranteed by articles 14, 19 and 31 and that the rates have been fixed in accordance with the provisions of section 5(1) of the Act. Before dealing with these contentions, it is necessary to consider briefly the scheme of the Act. The Act has been passed because the Legislature thought it expedient to provide for the imposition and collection of a tax on large land-holdings. Section 28 of the Act repeals the earlier U.P. Agricultural Income-tax Act, 1948. It may be pointed out that this Act itself has been subsequently repealed by section 45 of the U.P. Imposition of Ceiling on Land Holdings Act, 1961 (1 of 1961), as from the 30th June, 1961, so that as from the 30th June, 1961, this Act is no longer in force. Under the Act, " land " means land, whether assessed to land revenue or not, which is held or occupied for a purpose connected with agriculture, horticulture, animal husbandry, pisciculture or poultry farming and includes uncultivated land ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0nP. in a rupee and they are prescribed for where the annual valuation is between Rs. 5,001 to Rs. 10,000, Rs. 10,001 to Rs. 20,000 and Rs. 20,001 to Rs. 30,000 respectively. Thus, reading section 3 and the Schedule together, it follows that where the annual valuation of the land-holding exceeds Rs. 3,600, tax is leviable at a graded scale and is recoverable from the land-holder, subject to conditions (a) and (b) specified in the Schedule. Section 5(1) provides for the determination of the annual value. It lays down that the annual value of a land-holding shall be deemed to be an amount equal to the rent payable for the land or lands included therein multiplied by such multiple not exceeding 12 1/2 as may be prescribed and different multiples may be prescribed for different districts or portions of districts or for different classes of lands included in a land-holding. Section 5(2) provides that for the purposes of sub-section (1), the rent payable shall be deemed to be an amount calculated at the sanctioned hereditary rates applicable to the land or lands included in the land-holding and where there are no sanctioned hereditary rates, on such principles as may be prescribed, pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax shall be payable in four equal instalments. The last Chapter deals with miscellaneous provisions to which it is unnecessary to refer, except section 24 which, inter alia, bars a suit in a civil court to set aside or modify any assessment made under the Act. The first contention which has been raised by Mr. Goyal before us is that the Act is unconstitutional and void inasmuch as it is beyond the legislative competence of the U.P. Legislature, and this contention raises the question about the construction of entry 49 in List II of the Seventh Schedule of the Constitution. This entry relates to taxes on lands and buildings. The argument is that " lands " in the context does not include agricultural lands and so, the U.P. Legislature was not competent to levy the tax. In considering the merits of this argument, it is necessary to bear in mind that we are interpreting the words used in the Constitution and it is an elementary cardinal rule of interpretation that the words used in the Constitution which confer legislative power must receive the most liberal construction and if they are words of wide amplitude, they must be interpreted so as to give effect to that amplitude. It wou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot take in agricultural lands. If agricultural lands are included in the said entry, the validity of the Act would be beyond challenge, as in substance and in fact, it imposes a tax on land-holding and as such, is within the competence of the State Legislature. As we have already seen, the scheme of the Act is to impose a tax on land-holdings, though the measure of the tax has to be determined by its annual value as is ascertained in the manner prescribed by section 5. The object of the tax is land-holding and the extent of the tax leviable is determined in the light of the annual value of the land. Thus there can be no doubt that the Act was within the legislative competence of the U.P. Legislature and so, the challenge to its validity on the ground that it has been passed without legislative competence must be rejected. Mr. Goyal then contends that the multiple prescribed by the State Government is invalid because it has been prescribed in a manner contrary to the mandatory requirement of section 5(1). This argument proceed on the assumption that section 5(1) imposes an obligation on the State Government to adopt different multiples in different districts and in reference to di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ltiple accordingly. Therefore, there can be no doubt that the notification issued by the State Government under section 5(1) has complied with the statutory requirements prescribed therefor. Mr. Goyal then contends that if the word " may " is construed as giving discretion to the State Government and not imposing an obligation on it, then section 5(1) contravenes article 19(1)(f) as well as article 14 ; and his argument is that the charging section also contravenes the said two articles as well as article 31. This contention raises the familiar problem as to whether a taxing statute is subject to the provisions of Part III of the Constitution or not ; and it arises in regard to a statute which has been passed for the purpose of only raising revenue. The power of taxation is, no doubt, the sovereign right of the State ; as was observed by Chief Justice Marshall in McCulloch v. Maryland : " The power of taxing the people and their property is essential to the very existence of Government, and may be legitimately exercised on the objects to which it is applicable to the utmost extent to which the Government may choose to carry it ". In that sense, it is not the function of the court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt that the tax with which we are concerned is invalid because it offends against articles 14 and 19(1)(f) cannot be rejected as inadmissible. A taxing statute can be held to contravene article 14 if it purports to impose on the same class of property similarly situated an incidence of taxation which leads to obvious inequality. There is no doubt that it is for the legislature to decide on what objects to levy what rate of tax and it is not for the courts to consider whether some other objects should have been taxed or whether a different rate should have been prescribed for the tax. It is also true that the legislature is competent to classify persons or properties into different categories and tax them differently, and if the classification thus made is rational, the taxing statute cannot be challenged merely because different rates of taxation are prescribed for different categories of persons or objects. But, if in its operation, any taxing statute is found to contravene article 14, it would be open to courts to strike it down as denying to the citizens the equality before the law guaranteed by article 14. Similarly, if a taxing statute makes no specific provision about the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot be invoked in impeaching the validity of a taxing statute and so we come back to the position that a taxing law, which does not offend against any of the fundamental rights guaranteed by Part III, would justify the imposition of a tax and would meet the requirements of article 31(1). Therefore, in our opinion the challenge to the validity of the Act on the ground that it contravenes article 31(2) is not well-founded. Let us now turn to the merits of the argument that section 5(1) contravenes articles 14 and 19(1)(f). It is urged that since discretion has been left to the State Government to prescribe the multiple without any guidance, the prescription of the necessary multiple by the State Government at its own sweet will, will amount to an unreasonable restriction under article 19(5) and so article 19(1)(f) must be held to have been contravened. On the same ground, it is said that article 14 has also been contravened. We are not impressed by this argument. It is clear that the policy of the Act is to augment the revenues of the State and for that purpose the tax has been levied on land-holdings, subject to the important proviso that holdings the area whereof does not exce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uestion to be considered. Mr. Goyal argues that the Act is confiscatory in character and must be struck down as being a colourable piece of legislation, and in support of this argument he suggests that the rates prescribed by the Schedule are so heavy that the assessees would virtually have to part with their properties within a short time in order to bear the burden of the tax. This plea raises the question as to whether a taxing statute can be challenged on the ground that the burden of tax imposed by it is unreasonably high or excessive. We have already seen that the provisions of article 31(2) cannot be invoked in challenging the validity of a taxing statute on the ground that the tax levied is unreasonably high and we have also noticed that if the taxing statute does not contravene any other fundamental right guaranteed by Part III, it would normally be treated as a valid law by whose authority tax can be collected without infringing article 31(1). Though the validity of a taxing statute cannot be challenged merely on the ground that it imposes an unreasonably high burden, it does not follow that a taxing statute cannot be challenged on the ground that it is a colourable piece ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iscatory character of the levy imposed by the Act proved to be the proverbial last straw on the camel's back. It is in the light of these facts that the whole of the Act was struck down. This decision illustrates how a taxing statute, though ostensibly passed in exercise of the legislative powers conferred on the legislature, can be struck down as being a colourable exercise of the said power. In other words, the conclusion that a taxing statute is colourable would not and cannot normally be raised merely on the finding that the tax imposed by it is unreasonably high or heavy, because the reasonableness of the extent of the levy is always a matter within the competence of the legislature. Such a conclusion can be reached where in passing the Act, the legislature has merely adopted a device and a cloak to confiscate the property of the citizen taxed. If, however, such a conclusion is reached on the consideration of all relevant facts, that is a separate and independent ground for striking down the Act. There is no doubt that the decision in the case of K. T. Moopil Nair is not an authority for the proposition that in testing the validity of a taxing statute, the court can embark upo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as bhumidar and the respondents contend that the rent recovered from bhumidars is very law. It was even suggested during the course of argument by Mr. Aggarwal that the rent recovered from the bhumidars would not exceed 1% of the gross income and in some cases it may even be less. Unfortunately, the petitioner has not made any statement about this important particular. The operation of the rates prescribed by the Schedule is based on the annual valuation of the lands, and the said valuation is determined ultimately on the basis of the rent, so that unless the rent is known, the extent of the impost cannot be adequately judged. Therefore, in our opinion, on the material adduced by the petitioner before us, it is impossible to accept the argument that the tax levied by the Act is confiscatory. Besides, as we have already seen, the scheme of the present Act does not disclose any constitutional infirmity either in its charging sections or in the sections providing for the procedure for the levy of the tax and its recovery. That is why we feel no hesitation in holding that there is no substance in the plea that the Act is a colourable piece of legislation. In the result, the petition ..... X X X X Extracts X X X X X X X X Extracts X X X X
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