Rama Jois, J.
1. These three appeals arise out of a common order, in W. P. Nos. 157, 158 and 212 of 1972, in which the constitutional validity of S. 101 of the City of Bangalore Municipal Corporation Act, 1949 (the Act' for short), which took away the exemption from payment of property-tax in respect of buildings and lands exclusively used for educational Purposes by educational institution not receiving grant-in-aid from the Government, had been challenged, but was rejected by the learned single Judge.
2. (i) The material facts, which are not in dispute, are as follow:- The appeal in W. A. No. 210/74 is by Baldwin Girls, High School, Bangalore; the appeal W. A. No. 211/74 is by Baldwin Boys' High School, Bangalore; and the appeal in W. A. No. 253 of 1974 is by Cluny Convent High School, Bangalore.
(ii) The buildings owned by the management of the three high schools are exclusively used for educational purposes. The schools have been recognised by the Education Department of the State Government all along. However, the managements have not chosen to apply and to receive grants from the Government under the provisions of the Grant-in-aid Code for Secondary Schools in Karnataka State ('Grant-in-aid Code' for short). Section 101(c) of the Act incorporated a provision for exempting institutions run purely on philanthropic lines approved by the Corporation. In exercise of the power under the said provision, the Corporation had exempted the buildings of the three schools from payment of property-tax.
(iii) The Act was amended by Act 10 of 1966 with effect from 1-4-1966. By S. 21 of the amending Act that portion of S. 101 (c) which empowered the Corporation to exempt institutions run on philanthropic lines from property-tax, was deleted. The Act was further amended by Act 3 of 1969. This was also given effect to from 1-4-1966. By S. 9 of the amending Act., cls. (e) (i) and (e) (ii) were added to S. 101 of the Act. The effect of the amendment was, that the buildings and lands exclusively used for educational purposes by educational institutions were exempted from tax provided they were receiving grant-in-aid from the Government. As a result, educational institutions, though recognized by the Department of Public Instruction and though their buildings were used exclusively for educational purposes, were deprived of the exemption from payment of property-tax on such buildings, which they enjoyed for over 16 years from 1949 to 1966 unless they also applied and took financial grant from the Government under the Grant-in-aid Code.
(iv) After the aforesaid two amendments made to the Act, one by Act 10 of 1966 and another by Act 3 of 1969, the appellants-institutions became liable to pay property-tax on their buildings used for running the high-schools and accordingly the Corporation demanded the appellants to pay the tax. The appellant institutions, however, resisted the demand for payment of property-tax. They pointed out to the Corporation and the Government that their institutions could not be discriminated against in the matter of exemption from property-tax on the ground that they were not receiving grant-in-aid from the Government. As the Corporation could not, in view of the amendments. accede to the claims of We appellant-institutions, they presented the writ petitions.
3. The contention of the appellants in the writ petitions was that the Act in so far it restricted the exemption from payment of property-tax to the buildings of educational institutions receiving grant-in-aid and took away the exemption in respect of Government recognised educational institutions not receiving grant-in-aid from the Government was violative of Art. 14 of the Constitution.
4. The petitions were dismissed by a common order dt. 7th Mar. 1974.
5. During the pendency of this appeal, an important subsequent event has happened. The Act was replaced by the Karnataka Municipal Corporation Act, 1976 (the 1976 Act' for short) which came into force on 1-6-1977. Section 110 of the 1976 Act grants exemption in respect of buildings or lands exclusively used for educational purposes by Government recognised educational in situations. The resultant position is that t he, appellants institutions being admittedly Government recognised institutions and admittedly the buildings in question being exclusively used for educational purposes, they stand exempted from payment of property-tax in view of S. 110 of the 1976 Act with effect from 1-6-1977.
6. The question which survives for consideration is whether the provision o! the Act which classified Government recognised educational institutions into two categories, namely, (i) those , receiving, grant-in-aid from the Government and (ii) those not receiving grant-in-aid from the Government and continued the exemption from payment of property-tax on the buildings used exclusively for educational purposes of the former, and took away such exemption for the latter between 1-4-1966 t) 1-6-1977 proceeded on a differentia which had no nexus with the object of the law and was therefore violative of Art. 14 of the Constitution.
7. The learned single Judge upheld the validity of the impugned provision on the following grounds:
(i) The classification of educational institutions into two categories, viz., (1) those receiving grant-in-aid from the Government, and (2) those not receiving the grant-in-aid, is based on an intelligible differentia.
(ii) The object of giving exemption was -
(a) to lessen the ' financial burden on educational institutions which are imparting education either free or at a cheaper rate to all the citizens irrespective. of their religion, caste and creed; and
(b) if no exemption is granted in favour of grant-in-aid institutions, the State Government itself may have to increase the quantum of grant-in-aid payable to them which would ultimately turn out to be a futile exercise in accountancy, and therefore, there was nexus between the classification and the object sought to be achieved and, therefore the provision was not violative of Art. 14 of the Constitution.
8. Sri V. Krishna Murthy, learned counsel for the Appellant-institutions, submitted that the -view taken by the learned single Judge was erroneous. He urged the following contentions:
(i) Though the Legislature has a very wide discretion in the matter of enacting tax laws and particularly in the of granting exemption, still the provisions are not totally immune tack, and if in a given case, it established that those in whose favour exemption is granted and those exemption is not given are situated having regard to the object of grant of exemption, the provision to the extent it denies exemption would violative of Art. 14. In the present case the distinction made between Government recognised educational institutions receiving grant-in-aid and there not receiving grant-in-aid for the denial of exemption from payment of property-tax, respectively has no rational basis and, therefore, the offending portion of the Impugned provision is liable to be struck down as violative of Art. 14 of the Constitution.
(ii) The distinction made by the learned single Judge on the ground that educational institutions receiving grant-in-aid are those institutions which are financially weaker and consequently, if they were not exempted from property tax the Government itself would have to bear the tax, was not a valid one, for under the Grant-in-aid Code, the basis for giving financial grant is not the financial weakness of the institution, but every recognized, educational institution, if it seeks grant from the Government, will be given the grant and, therefore, if the appellant, institutions applied for grant, they would also be eligible for grant and if they took the grant, they would also automatically become entitled to exemption from payment of property tax.
9. In support of the submission, that even a provision providing exemption from payment of tax is not immune from attack on the ground of violation of Art. 14 of the Constitution and the exemption provision in the present case is violative of Art. 14, the learned counsel for the appellants relied on the judgment of the Supreme Court in In-come-tax Officer v. Lawrence Singh : 68ITR272(SC) .
10. Learned Advocate General and Sri A. Jagannatha Shetty, learned counsel for the Corporation. resisting the Contention urged for the appellant-institutions and submitted as follows: In ,he matter of taxation, the Legislature enjoys the widest amount of discretion. In order to tax something, the Legislature is not required to tax every thing and similarly the Legislature, if in its wisdom decides that certain types of exemption should be granted, it is not obligatory for the Legislature to grant similar exemption to all other persons. The grant-in-aid institutions fall under a well defined category, and they are run on no loss no profit basis. The appellant-institutions do not fall within the exempted class as they are not receiving grant-in-aid from the Government. In support of their submission, they relied on the following observation of the Supreme Court in the case of State of Bombay v. Balsara, AIR 1951 SC 318, It reads -
'(21) The -scheme of Chap. IV of the Prohibition Act, in which the impugned provision finds a place, seems 'inter alia' to relax the law in favour of certain persons or groups of persons or: institutions by introducing the system of passes, licences, permits and authorisations. A few examples will show that the legislature did not proceed without making any classification.
** ** **I find therefore wrong 'prima facie' in the legislature according special treatment to persons who form a class by themselves in many respects and-who have been treated as such in various enactments and statutory provisions. In my opinion, therefore, S. 39, in, so far, as 'it affects the military and- naval messes and canteens, warships & troopships cannot be held to be invalid. So far as the cargo-boats are concerned, it was contended on behalf of the petitioner that no rational differentiation could be made between them and the passenger boats, and there was no conceivable ground for granting exemption or concession of any kind to the former. Here again, we cannot assume that the legislature has proceeded arbitrarily. The cargo-boats being slower boats have to be on the sea for long periods, the number of persons affected by the exemption is comparatively small, and they are mostly sojourners who stay at the port for a short time and then go away. These considerations may well have induced the legislature to show some concession to them, and we cannot say that these are irrelevant considerations. The provision relating to exemption of cargo-boats should therefore be held to be valid.'
11. It is well settled that the Legislature has a very wide discretion in the matter of enacting taxing legislations and in particular in the matter of granting of exemption from payment of tax, the Legislature enjoys the widest amount of discretion. This position is not questioned by the appellant-institutions. It is equally well settled that taxing legislations are also not immune from the attack on the ground of violation of Art. 14 of the Constitution, though the scope for interference is certainly very limited. Therefore unless the exemption provision is patently discriminatory and cannot be supported on any rational basis, it is not open for this Court to hold that because exemption is not given to all, it is violative of Art. 14. However, if in a given case, a provision providing for exemption, brings about a patent discrimination between two classes of persons similarly situated in all respects, in relation to the object of granting exemption, as had happened in the case of Lawrence Singh, : 68ITR272(SC) and cannot be supported on, any rational basis the Provision would amount to violation of the mandate of Art. 14. In the case of Lawrence Singh, the constitutional validity of S. 4(3) of the Income-tax Act, 1961 which provided that the income of a person belonging to scheduled tribe and residing in the specified areas, was exempt from tax, provided he was, not in the service of the Government. The Supreme Court struck down that part of the provision which denied exemption to Government servants on the ground that it was violative of Art. 14. Relevant portions of the judgment read:
'(9) The complaint in this case is that within the range of the selection made by the State for the purpose of exemption, namely, members of certain scheduled tribes residing in specified areas, the law operates unequally and the inequality in question cannot be justified on the basis of any valid classification.
(10) There can be no distinction between the income earned by a Government servant and that earned by a person serving in a company under a private individual. More or less similar is the case in respect of the income earned by persons, practising one or more of the Professions. Admittedly the income earned by the members of the scheduled tribes residing in Khasi-Jaintia Hills excepting in the case of Government servants is exempt from income-tax be it as salaried officers, lawyers, doctors or persons in other walks of life. Is there any legal basis for this differentiation? Prima facie it appears that Government servants have been discriminated against and the discrimination in question is 'writ large on the face of the provisions in question.
** ** **(14) The exemption in question was 'not given. to. individuals either on the basis of their social status or economic resources. It was given to a class. Hence individuals as individuals do not come into the picture. We fail to see in what manner the social status and economic resources of a Government servant can be different from that of another holding a similar position in a corporation or that of a successful medical practitioner, lawyer, architect, etc. To over paint the picture of a Government servant as the embodiment of all power and prestige would sound ironical. Today his position in the society to put it at the highest is no higher than that, of others who in other walks of life have the same income. For the purpose of valid classification what is required is not some imaginary difference but a reasonable and substantial distinction . having regard to the purpose of the law.
(15) It was lastly contended by the learned- Solicitor-General a contention which was not taken either in the return or before the High Court or in the appeal memo - that it is not possible to strike down only a portion of Section 4 (3) (xxi) of the Indian Income-tax Act, 1922 and S. 10(26) of the Income-tax Act, 1961, namely, the words 'provided that such member is not in the service of government' found in Section 4 (3) (xxi) of the Indian Income-tax Act, 1922 and the words 'who is not in the-service of Government in S. 10(26) of the Income-tax Act, 1961, as those words are not severable from the rest of the provisions in which they appear. Further according to him it cannot be definitely predicted that the legislature would have granted the exemption incorporated in those provisions without the exception made in the case of Government servants. Therefore, if we hold that those provisions as their stand are violative of Art. 14, then we must strike down the aforementioned Ss. 4 (3) (xxi) and 10(26) in their entirety. We are unable to accept the contention that the words mentioned above are not severable from the rest of the provision in which they appear. They are easily severable. Taking into consideration the reasons which persuaded the legislature to grant the exemption in question we have no doubt that it would have granted that exemption even if it was aware of the fact that it was beyond its competence to exclude Government servants from the exemption in question.' We have to examine the validity of impugned provision in the light of the ratio of the aforesaid decision.
12. (1) The question, therefore, for consideration is whether the provisions of the Act, as amended with effect from 1/4/1966 brought about any such patent discrimination against Government recognised educational institution not receiving financial aid from the Government.
(2) In order to find out the answer to the question we must first ascertain the basis for the grant of exemption from property-tax to the buildings- exclusively used for educational purposes. Under Entry 'I I of the 7th Schedule to the Constitution 'Education' is a State subject and under Art. 45 of the Constitution. it is an obligatory duty of the State to provide for the imparting of free and compulsory education up to 14 years which means up to and inclusive of higher secondary classes. In discharging the obligatory functions, the State wout4 have to incur expenditure in respect of construction of buildings, payment of salary for the members of the staff of the school, for equipment, furniture and many other incidential expenses, when ever the Government intends to establish educational institutions. This burden of the State to a certain extent is discharged by private educational institutions, Whether the institutions receives grant-in-aid from the Government or not, the fact remains that the educational institutions owned by private bodies discharge a part of the obligation of the State and the benefit of it directly accrues to the People. This was obviously the basis for grant of exemption right from IV50 to all educational institutions which were run on no loss no profit basis.
(3) A passage on the Point from wills in Constitutional Law quoted in the judgment under appeal reads:_
'Of course, there is no reason for the Government to tax its own property or agencies or the property of Government, and private agencies which are relieving the Government of some of is burdens probably ought to be relieved by exemptions from the burdens of taxation.'
(Underlining by me).
There is no dispute that the appellant institutions as also grant-in-aid institutions do relieve the State of its burden to certain. extent. In fact institutions like appellant-institutions which do not receive grant, from the, Government, relieve the burden on the State to a greater extent. It is obviously for this from the beginning of the Act all these institutions have been exempted from payment of property fax on buildings used exclusively for educational purposes.
13. (1) If that has been the basis for grant of exemption for over 16 years, the next point for consideration is, whether there was any rational basis for classifying these institutions into two classes as those receiving grant-in-aid from the Government and those not receiving grant-in-aid and take away the exemption in respect of the latter between the period 1/4/66 and 1/6/77.
(2) There is no dispute that, appellant institutions are Government recognized. It, institution. The rule contained in the Grant-in-aid Code includes the rules for recognition. The relevant rules are :
'8. Definitions- Unless context requires otherwise, the following words and phrases used in this Code have the meanings hereby assigned to them.
** ** **(c) 'Educational Institution' means the school or institution by a management and recognised by the Department of Public Instruction in Mysore.
** ** **(e) 'Management, means and includes a Local Body which maintains an Educational Institution or Institutions or a registered association, or registered body of persons which maintain a recognised Educational Institution or Institutions Or the Managing Committee or the Committee of an Educational Institution or Institutions which are registered and recognised as such by the Department, as Provided in para (b).
** ** **(g) Recognised Educational Institution' means an Educational Institution recognised as such and providing approved courses of study and training according to the prescribed rules and preparing pupils for examinations conducted by the Department or those approved it.
** ** ** CHAPTER IV
GENERAL CONDITION FOR START ING OR RECOGNITION OF NEW
10. General conditions for Starting.-
(1) Conditions for starting:-
(i) The institution shall be open to all the communities without any distinction regarding creed, caste or religion.
(ii) The Department should be satisfied about the need for the (locality) and it does not involve any unhealthy competition with an existing institution of the same category in the neighbourhood, if any. The education requirement should be, as far as possible, the main criteria for deciding about the necessity and location for High Schools.
(iii) The Education imparted should be satisfactory in all respects. The Department should be satisfied in regard to (i) the premises, (ii) the equipment, (iii) the number of teachers and their qualifications, and (iv) the financial resources of the institution as detailed hereunder. The institution should send up pupils for such Public Examinations as are conducted or approved by the Department.
(a) Accommodation- A Pucca High School building should be constructed as follows for starting the VIII Standard of High School.
VIII Standard. Class Room ...1Science Room ...1Office-cum-Headmaster's Room ...1Girls' Waiting Room ...1Craft Room ...1Library-cum-Reading Room ...1All rooms should be of classroom size of 13'x24' or as per Type Design Scheme. They can be changed to suit the requirements of Public Works Department or experts on the subject. It is better if the building is ready before the school is to be opened in June. If it is not possible the date may be extended for one year from the date of opening. In that case a suitable rented building can be accepted from the date of opening for one year as a special case.
IX StandardClass room ...1Laboratory (30'x25') . ...1The Laboratory should be constructed before the opening of IX Standard.
X StandardClass Room ...1Games Room ...1One hall for multipurpose use 25'x60' XI StandardClass Room ...1Laboratory ...1(b) Equipment.:-
VIII Standard(a) Library (includine 2 setsof text books) ... Rs. 500(b) Maps, Charts, etc. ... Rs. 500(c) Laboratory Equipment ... Rs. 2000(d) Furniture: these must be dual desks, 5 almirahs (2 tables with glass shutters and one should be steel), 6 tables and a dozen chairs. IX StandardLibrary ... Rs. 500Laboratory equipment ... Rs. 2000Furniture - Required number of duel desks, 2 tables and 3 chairs.
Note.- If science electives are introduced, further laboratory equipment at Rs. 2,000 per year for 3 years has to be purchased.
X Standard - (b) equipment.Library Rs. 500Laboratory Rs. 2000 Furniture required number of dual desks, 2 tables. and 3 chairs.
XI StandardLibrary Rs. 500Laboratory equipment Rs. 2000Furniture: required number of dual desks, 2 tables and three chairs.
(c) Play Ground- There must be a leveled area of 5 acres for play ground and site of the school. It should be ordinarily in one and the same place. It may be insisted upon within six months from the date of opening of the school. 'The Deputy Director of Public Instruction may relax this requirement for valid reasons.
(d) Stability Fund.- A stability fund of Rs. 10,000, should be maintained. before permanent recognition is to be granted. If necessary it, may be invested in lands to be evaluated by Revenue authorities to be equivalent to Rs. 10,000. In the first year, before opening of the school, there should be a cash deposit of Rs. 5000. The balance of Rs. 5,000 should be deposited by the end of the third year. This stability fund should not . be operated upon but in' case of emergency and should be operated upon only with the previous written approval of the Director of Public Instruction in Mysore, Bangalore.
(e) Sanitary Conditions:
Urinals:- 5 compartments for boys, 2 for girls
Latrine:_ Sceptic type latrines with 3 compartments.
11. Application for starting a Secondary School shall be made to the Director of Public Instruction through the concerned Deputy Directors at least five clear months before the commencement, of the academic year. Information regarding accommodation, furniture and apparatus, staff proposed to be appointed, fee, rates proposed to be charged and free studentship to be given out, proposed of their own funds. Funds at the disposal of the Management to abide by rules laid down by the Department, should be given in the application for permission to open a school. In no case should the, institution be started unless the previous permission of the Department is obtained. No school started without such a permission will be considered for recognition. The Director of Public, Instruction will send a reply to the application for starting a school within 3 months from the date of receipt of application or the subsequent date on which complete information is received.
12. General conditions of Recognition, (i) (a) Recognition- Educational Institutions may be admitted to recognition by the Department provided they conform to the rules set forth hereunder. Such recognition entitles the management (a) to present pupils for the examinations conducted by the Department, 1and (b) to apply for grant-in-aid. Under this Code.
(b) (i) Every institution seeking recognition shall be under the Management of a Committee of persons or a society registered under either the Societies Registration Act. 1860 or the Bombay Public Trust Act, 1,950 or any other Act that may be specified by Government, shall act in the capacity of Trustees and shall be answerable for the maintenance of the institutions and the fulfillment of all the conditions of recognition and aid and for the observance of such rules as may be prescribed from time to time
The Management shall appoint a correspondent or a Secretary, the Managing Committee shall include the Head, Master of the institution and one member of the teaching staff at least.
(ii) In the case of group of schools managed by a non-official body, there shall be a Managing Committee for the Schools as a whole. A Municipal Corporation or Council or Taluk Board or a District or Municipal School Board or Panchayat shall be considered to be a Managing Committee for this purpose.
In the case of Institutions run by Local Bodies, the number of Head Masters and teachers to be included in the Management shall be determined by the respective bodies.
(iii), The Department may however exempt individual cases from the operation -of the rule,
(c) Every institution shall be subject to the inspection of the Department, -The institution shall abide by such instructions as may be issued as a result of the inspection.
All., institutions should be secular. Attendance at religious instruction in denominational institutions should be voluntary. Such classes shall be conducted out of regular school hours.
(d) The institution shall follow approved curricula, use approved text books and maintain the standard prescribed. They shall follow the prescribed rules regarding (i) qualifications of teachers and other employees, (ii) the admission' of pupils, their attendance, examinations and promotions, (iii) the number of working days in the year and the total number of working hours. (iv) the maintenance of school records, registers and sending of periodical returns.
The, Department reserves to itself the right to forbid or prevent the use of any book or books.
(e) The institution shall also follow any other directions that may be issued by the Department for its satisfactory working.'
(Underlined by us).
(3) The aforesaid provisions indicate, as far as recognition of secondary schools established by private managements are concerned, the rules of recognition are common to institutions receiving grant-in-aid and not receiving, grant-in-aid. The rules which lay down conditions for payment of grant are those found in Chap. Ill. Rule 9 found at the commencement of the Chapter reads:
9. General Conditions of Aid Grant-in-aid is permissible only to those institutions which have received recognition from . the Department. It is subject to the following main conditions:-'
(Underlined by us).
Under R. 9 every recognised institution -is eligible to get the grant-in-aid. The other conditions imposed in the Chapter are those incidental to the payment of grant i.e., in the matter of fee to be charged, accounts to be maintained, etc.,
(4) It may be seen that the condition regarding admission, of students without discrimination, on grounds of caste creed etc., standards of education to be imparted, qualification of teachers, number of teachers to be appointed and. in respect of every other important matter, the institutions receiving grant-in-aid and those not receiving grant-in-aid are required to conform to the same standard. Every recognised institution is eligible to seek grant if it so chooses subject to fulfilling, certain additional condition regarding fee structure, submitting accounts for inspection and seeking of prior sanction, for expenditure. All the conditions are natural and incidental to the receiving- of public funds from the Government, all eligible as far as the important of education according to the prescribed standard,, and through teachers possessing prescribed qualification and the condition that every citizen is eligible to be admitted and . that those institutions should be secular only, both types of institutions are similarly situated,
(5) Even so there can be no doubt that the classification of institutions into two categories, viz., (i) institutions receiving grant-in-aid from Government, and (d) institutions not receiving the grant, can be regarded as a reasonable classification, the basis being the institutions which have accepted certain additional conditions imposed as a condition for payment of grant, and the institutions have not done so.
14-15. The next question for considerations whether the classification had any nexus with the objects sought to be achieved by the law granting the exemption, The object of granting exemption from payment of property-tax on buildings, as the provision indicates is in respect of buildings wholly used for educational purpose. Thus the public purpose for which the building is utilised or in other words, the public utility of the building by its exclusive user for running an educational institution is the dominant aspect for giving the exemption. This is for the reason, as pointed out earlier the imparting of education to the citizens is an obligatory and primary duty of the State and a part of this obligation is discharged by recognised educational institutions. From this point of view, all recognised educational Institutions, stand in the same position and there is no difference at all.
16. The learned single judge has observed that as far as grant-in-aid institutions are, concerned....,if property-tax is levied on them, the said burden also would have to be borne by the State, which means the institutions are financially weaker and, therefore, they require support either in the form of additional grant or by wav of exemption. If the criteria for giving grant-in-aid under the Grant-in-Aid Code was the financial unsoundness of an educational institution the reasoning perhaps would have been forceful. But the rules do not lay down any such criterion. In fact, it was not disputed by the respondents that the appellant institutions are also eligible to take grant-in-aid, and if they applied and took the grant, they would in addition to the securing of financial grant also secure exemption from payment of property-tax in respect of their building, used exclusively for educational purposes. Thus it is clear the financial instability or weakness is not the criteria for the grant-in-aid, and, therefore, not also the basis for granting exemption from property tax. The grant-in-aid rules lay down that in order to secure grant, the institution has to deposit stability fund which means the management must be financially sound.
17. The learned single Judge has referred to the exemption from payment of fees or lower rate of fees charged by the grant-in-aid institution and the higher rate of fee charged by appellant-institutions to the pupils and has observed that grant-in-aid institutions are required not to collect the fees or to charge lower rate of fee, i.e., at, the rate prescribed by the Government and the appellant institutions charge higher fee.
18. We find it difficult to agree that the above difference has any nexus to the grant of exemption from payment of property-tax. In this behalf, it is necessary to point out, that the entire salary of teachers and other members on the establishment of grant-in-aid institutions are paid by the State, but the institutions which do not receive such grant, would have to meet the establishment charges from the fees received from the pupils, There can be no doubt that If the appellant-institutions have been charging exhorbitant rate of fees, and were making profit out of the amount so received that would constitute a sound basis for not granting of exemption from payment of property-tax to them and granting exemption to grant-in-aid institutions on this aspect of the matter the undisputed position is that for over 16 years the corporation had exempted the appellant institutions not making any profit. For the period in question also, the appellant institutions he furnished their audited balance-sheet and have averred that they are run on no loss no profit basis. It is seen from these accounts that the institutions are, not making any profit. This fact is also not disputed by the respondent. On this aspect of the matter, the learned single Judge has also stated thus:-
'It may be that the petitioners not be making any profit in spite of the fees being charged at the rates mentioned above and that they are imparting high standard of education.'
(Underlined by me)
From the above facts, the following aspects emerge.
(i) The income of the appellants from the fees charged is just sufficient to meet the expenditure.
(ii) That being the rate of fees charged when the institutions were exempt from payment of property-tax, the levy of tax would certainly compel the institution to revise the fee structure and enhance the rate of fee
The increase of fee at secondary school level is certainly against the directive principle enshrined in Art. 45 of the Constitution.
19. It is also necessary to point, out that the pupils who have got themselves admitted to the appellant institutions. are also persons to whom the State owes a duty under Art. 45 to provide free education up to secondary school level and if those institutions are closed down, it would be obligatory for the State to provide them free secondary education. Thus there can be no doubt that the appellant institutions are discharging a part of the obligatory function of the State, as a result of which, the financial bur den on the State is reduced to that extent. As the very basis for granting exemption from payment of tax is the discharge of a' part of the obligatory function of the State in the present case the imparting of secondary education to the citizens up to 14 years, by private educational institutions, we do not find that the legislature had any justification to deny the appellant-institutions the exemptions from payment of property tax in respect of the building used by them exclusively for educational purposes.
20. The learned single judge has said that apart from the fact that no fee or low fee is charged in aided institutions. the admission to institution receiving aid is open to all citizens irrespective of caste, creed etc., in view of Art. 29(2) of the Constitution. But in fact, this is no basis for differentiation as identical condition is imposed, on all educational institutions as a pre-condition for according recognition.
21. Apart from this, we think, that there is a clear and implied admission on the part of the respondents that the appellant-educational institutions and those receiving grant-in-aid from the Government are similarly situated in so far it relates to the granting of exemption from payment of property-tax. The provisions of the Act before and -after amendment and S. 110 of the 1976 Act read:-
'110. General Exemptions: The following building and lands shall be exempted from the property tax.
(c) places used for the charitable purpose of sheltering the destitute or animals and orphanages, homes and schools for the deaf and dumb asylum for the aged and fallen women and such similar institutions run purely on philanthropic lines as are approved by the corporation. The underlined words were omitted, by S. 21 of the Act 10 of 1966 published on 31-3-1966 which came into force with affect from 1-4-1966.
Clauses (e-1) and (e-2) were added to S. 101 of the Act by S. 9 of the Act 3 of. 1969 with effect from 1-4-1W. They read-
' (e-l) building or lands exclusively used for student hostels which are not established or conducted for profit.
(e-2) buildings and lands exclusively used for educational purposes by educational institutions (receiving grant-in-aid from the Government).'
Section 110(i)(a) and (b) of the Karnataka Municipal Corporation Act, 1976 reads :-
. '110 General exemptions: The following buildings and lands shall be exempted from the property tax:-
(i) building or lands exclusively used for,
(a) Students hostels which are not established or conducted for profits;
(b) educational purposes by recognised educational institutions;
(i) First it may be seen from S. 101 of the Act as it stood prior to 1966 it empowered the corporation to exempt the buildings belonging to educational institutions from payment of property-tax if the institutions were run on philanthropic lines Admittedly the corporation itself had granted exemption for more than 17 years from 1949 to the appellants on the basis that the institutions are run on philanthropic lines and are -not run on commercial basis.
(ii) Secondly, in the 1976 Act, the Legislature itself, has recognised that there is no distinction between grant-in-aid institutions and those not receiving grant-in-aid, in the matter. The only basis laid down for grant of exemption vide S. 110 of the 1976 Act is that the educational institutions should be recognised by the Government.
What is the inference which could be drawn from the above provisions? The observations of the Supreme Court in the case of General Manager, Southern Railways v. A. V. R. Siddhanti, : (1974)ILLJ312SC are apposite. In the said case, when two classes of civil servants were treated during an earlier period as belonging to one class- and subsequently they were sought to be bifurcated, while considering the question as to whether they were similarly situated or not, the fact that they were treated equally by the State itself for several years, was considered as the basis for holding that they were similarly situated. The relevant portion of the judgment reads:
'33. True that the initial onus of showing that the proceedings of 1957 and 1961, in question were discriminatory and as such, violative of Arts. 14 and 16 of the Constitution, was on the respondents: but in the peculiar circumstances of the case, such onus had been prima facie discharged by them. Their claim to relief is founded on the Railway Board's decision of Oct. 16, 1952 , which proceeds on an in-built postulate and implied admission that all the personal recruited to the Grain-Shop department were members of the same class or unit of service, and as such entitled alike to the fixation of their seniority with reference to 'the beginning of their service.' it was then the turn of the Board to show that the inference arising from its admission, or treatment of all persons directly recruited, as members of one unified service of the Grain Shop Department was wrong.' Applying this reasoning it requires to be held that there has been an in-built postulate and an implied admission flowing from the provisions of the Act and the exemption granted thereunder, and Section 110 of 1976 Act that the educational institutions whether they were, receiving grant-in-aid from the Government or not, they are similarly situated for the purpose of exemption from paying of property tax and this is an additional reason to bold that the impugned provision had nexus to the object sought to be achieved and, therefore, discriminatory against recognised educational institutions not receiving grant on a ground which has no nexus to the object of exemption.
22. There is another clause in the aforesaid provisions which demonstrates the irrationality of the denial of exemption to the appellant institutions. Throughout the buildings in which hostels are run by educational institution are exempted from payment of property tax if they are not run for profit. In this behalf the averment in the petition is that in view of such provision the hostel buildings of the appellant institutions were and are exempted from the tax. That averment is not controverted. We find it difficult to appreciate, how, if. hostel buildings belonging to appellant schools exempted, their schools buildings can be excluded from exemption, on an. rational basis.
23. For these reasons, we are of the opinion that S. 101(e-2) 'of the Act which limited the exemption from payment of property-tax only to grant-in-aid institutions and excluded the institutions not receiving grant-in-aid from the Government from such exemption, is violative of Art. 14 of the Constitution.
24. Now the next question for consideration is whether the entire clause, ]namely (e-2) of S, 101 of the Act should be struck down or only that portion which brought about discrimination should be struck down? This depends upon the application of doctrine , of severability.
25. The above principle is also well settled. If on a consideration of the entire scheme of an Act, the court is of the view that if the Legislature was conscious of the fact that the provisions incorporated in the enactment would come into conflict with Fundamental Rights, it would have enacted the provision omitting the offending provision, the portion which offends the provisions of the Constitution is severable and that portion alone should be struck down. If on the other hand, the court comes to the conclusion on the examination of the scheme of the Act, that the Legislature would not have enacted the provision at all without such exception or reservation then the entire provision is liable to struck down,
26. We have set out earlier, the provisions of the Act, and the provisions as amended on 1-4-1966 and as it now stands under the 1976 Act. The provisions unmistakably indicate that the Legislative intention has always been to grant exemption from payment of property tax in respect of buildings belonging to private educational institutions used exclusively for educational purposes. In particular this intention is patent in S. 110 of, 1976 Act enacted during the pendency of these appeals. Therefore there can be little doubt as to what the Legislature would have done if it was aware that the restricting of the exemption from payment of property-tax only to grant-in-aid educational institutions would come into conflict with Art. 14 of the Constitution. It would have granted exemption to all the institutions whether receiving grant-in-aid or not and would not have taken away the exemption for the grant-in-aid institutions also. There-fore, in a situation like this, the court should strike down only the offending provision provided the rest of the provision would be complete and workable. (See: Lawrence Singh : 68ITR272(SC) . Railway Board v. Pitchumani; : (1972)ILLJ112SC ; D. S. Nakara v. Union of India, : (1983)ILLJ104SC and Commr. of Income-tax v. Mhadeshwara Lorry : 129ITR516(KAR) .
27. We 'are therefore of the view that the appropriate order' which W'6 should 1984 -make in these cases is to strike down the words 'receiving grant-in-aid from the Government' found at the end of clause (e-2) of S. 101 -of the Act and if those words are struck down, the clause would read:
'building and lands exclusively used for educational purposes by educational institution.' which would be complete in itself and there would be no ambiguity. We would like to make it. clear that the expression 'educational institution' in the context means 'educational institution' recognised by the 'education department'.
28. Learned Advocate General, however, pleaded that instead of striking down S. 101 (e-2) we may restrain the respondents from -collecting taxes from the appellants as the section is no longer in force after the commencement of the 1976 Act. In this behalf he submitted that if we were to strike down the provision, other educational institutions, who have paid the tax during the interregnum are likely to come forward with a claim for refund of the amount and there is no justification to allow that consequence to ensue as they have paid the tax without questioning the validity of the provision.
29. We find it impermissible to adopt such a course for the reason that so long S. 101 (e-2) of the Act is not struck down, the demand of tax -by the corporation from the appellants would be in accordance with law and, therefore, it could not be legitimate for this Court to issue a writ for not collecting a tax which it is entitled to collect under the law. In fact, in order to avoid such eventuality, when the matter was heard on the last occasion in May 1979, by a Bench consisting of one of us (Rama Jois, J.) learned Advocate General took time submitting that he would file a memo stating that the respondents would not be collect the tax from the appellants. For that purpose, the matter was being adjourned from time to the request of the Advocate, Though it, is more than 31 years, memo has been filed. Therefore the ter was heard again by us and were reserved. We cannot accede request of the Advocate, General, find it legally impermissible to direct the corporation not to collect the tax from the appellants . without striking down the impugned provision.
30. For the reasons- aforesaid. we make the following order:
(i) The writ appeals are allowed, order under appeal is set aside.
(ii) The writ petitions are allowed.
(iii) The words 'receiving grant-in-ail from the Government' incorporated at the end of S. 101(e)(ii) of the City of Bangalore Corporation Act, 1949 as amended by Act 3/69 with retrospective effect from 1-4-1966 are struck down as violative of Art. 14 of-the Constitution. As a consequences a writ or mandamus us shall, issue to the respondents not to compel the appellants to pay property tax on the building in which the appellants educational institutions are being run for the period commencing from 1-41966 to 1-6-1977.
(iv) No costs.
QRDER ON ORAL APPLICATION FOR GRANT OF CERTIFICATE TO APPEAL TO SUPREME COURT,
After the above judgment in the writ appeals was pronounced by us, learned Advocate General made an oral application under Art. 134A of the Constitution for grant of a certificate under Art. 133(1) of the Constitution to appeal to Supreme Court from the judgment just now pronounced. The provisions which are held to be violative of Art. 14 were part of a statute which is itself no longer in force, having been repealed and substituted by a new 'legislation, viz., 'The Karnataka Municipal Corporation Act, 1976.'
That apart in reaching the conclusion as to the unconstitutionality of the pro, visions we have applied t he principles enunciated by the Supreme Court in Income-tax Officer v. Lawrence Singh : 68ITR272(SC) . In our opinion, these appeals do not involve any substantial question or questions of law of general importance needing to be decided by the Supreme Court. We, accordingly, refuse the certificate sought for and reject the oral application made by the learned Advocate General.
31. Petition allowed.