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Manoharrao Gangadhar Rao Vs. Municipal Council and anr. - Court Judgment

LegalCrystal Citation
SubjectMunicipal Tax
CourtMadhya Pradesh High Court
Decided On
Case NumberMisc. Petn. No. 49 of 1965
Judge
Reported inAIR1966MP235
ActsCentral Provinces and Berar Municipalities Act, 1922 - Sections 66(1), 67(6) and 67(7); Government of India Act, 1935 - Sections 42A(2), 142A and 142A(2); Constitution of India - Article 276 and 276(2); Professions Tax Limitation Act, 1941 - Sections 2
AppellantManoharrao Gangadhar Rao
RespondentMunicipal Council and anr.
Appellant AdvocateY.S. Dharmadhikari and ;M.V. Tamaskar, Advs.
Respondent AdvocateR.S. Dabir, Adv. for Respondent No. 1
DispositionPetition dismissed
Cases ReferredBharat Kala Bhandar v. Municipal Committee
Excerpt:
- .....50 per annum, then the total amount payable by any person shall not exceed 'that rate of maximum rate' per annum. the combined effect of the proviso and the main sub-section (2), is to continue the taxes on trades, professions, callings and employments falling under the proviso and to prohibit any enhancement in the rate of those taxes after 31st march 1939.9. the flaw in the argument of the learned counsel for the petitioner lies in assuming that the rate of two annas per boza of ginned cotton of 392 lbs. weight and of two annas per each bale of pressed cotton of 392 lbs. weight prescribed by the notification dated the 23rd january 1938, standing by itself is the rate of tax leviable in respect of any one individual per annum. the annual rate of tax on an individual depends on the.....
Judgment:

Dixit, C.J.

1. By this application under Articles 226 and 227 of the Constitution, the petitioner challenges the validity of a tax levied on persons carrying on, within the Pandhurna Municipal limits, the trade of ginning and pressing cotton under a notification issued by the Governor of the Central Provinces and Berar on 23rd January 1938, and seeks a direction for restraining the Municipal Council, Pandhurna, from collecting the tax from him.

2. The petitioner, who claims to be the owner of Kekatpure Ginning and Pressing Factory, situated within the municipal limits of the respondent Municipal Council, contends that the tax is ultra vires because of the operation of Section 142A of the Government of India Act, 1935, and Article 276 of the Constitution; and that the tax is a tax on profession, trade or calling as contemplated by the aforesaid provisions and cannot exceed the maxima laid down in those provisions.

3. In order to appreciate this contention, it is necessary to refer to the relevant statutory provisions. Section 66(1)(b) of the Central Provinces and Berar Municipalities Act, 1922, empowered a municipal committee to impose in the whole or in any part of the municipality 'a tax on persons exercising any profession or art, or carrying on any trade or calling, within the limits of the municipality'. On 23rd January 1938, the State Government issued a notification under Section 67(7) of the Act of 1922 sanctioning the imposition by the respondent Municipal Committee, Pandhurna, of a tax under Section 66(1) (b) of the said Act' on persons carrying on the trade of ginning and pressing cotton by means of steam or mechanical process' within the limits of the municipality at the following rates--

'(a) For each boja of 392 lbs.--2 annas.

(b) For each bale of 392 lbs.--2 annas.'

The rules which were notified by the Government on 13th June 1938 for the assessment and collection of the tax, inter alia required every person carrying on within the limits of the municipality the trade of ginning or pressing cotton into bales, to furnish to the committee annually by the 1st of May a return in the form appended to the rules of the number of Bozas ginned and the number of bales pressed with the total weight in maunds.....

4. In 1940, a new section, Section 142A, was inserted in the Government of India Act, 1935, by Section 2 of the India and Burma (Miscellaneous Amendments) Act, 1940 enacted by the British Parliament (3 and 4 Geo. 6, Ch. 5). That section, so far as it is material here, ran as follows--

'142A. (1) Notwithstanding anything in section one hundred of this Act, no Provincial law relating to taxes for the benefit of a Province or of a municipality, district board, local board or other local authority therein in respect of professions, trades, callings or employments shall be invalid on the ground that it relates to a tax on income.

(2) The total amount payable in respect of any one person to the Province or to any one Municipality, district board, local board, or other local authority in the Province by way of taxes on professions, trades, callings and employments shall not, after the thirty-firstday of March nineteen hundred and thirty-nine, exceed fifty rupees per annum:Provided that, if in the financial year ending with that date there was in force in the case of any Province or any such Municipality, board or authority a tax on professions, trades, callings or employments the rate, or the maximum rate, of which exceeded fifty rupees per annum, the preceding provisions of this sub-section shall, unless for the time being provision to the contrary is made by a law of the Dominion Legislature, have effect in relation to that Province, Municipality, board or authority as if for the reference to fifty rupees per annum there were substituted a reference to that rate or maximum rate, or such lower rate if any (being a rate greater than fifty rupees per annum), as may for the time being be fixed by a law of the Dominion Legislature; and any law of the Dominion Legislature made for any of the purposes of this proviso may be made either generally or in relation to any specified Provinces, Municipalities, boards or authorities.'

The Central Legislature, purporting to act under the proviso to Sub-section (2) of Section 142A, enacted the 'Professions Tax Limitation Act, 1941' (Act No. XX of 1941), which came into force on 1st April 1942. Sections 2 and 3 of Act No. XX of 1941 are in the following terms--

'2. Notwithstanding the provisions of any law for the time being in force, any taxes payable in respect of any one person to a Province, or to any one municipality, district board, local board or other local authority in any province, by way of tax on professions, trades, callings or employments, shall from and after the commencement of this Act cease to be levied to the extent to which such taxes exceed fifty rupees per annum.

(3) The provisions of Section 2 shall not apply to any tax specified in the Schedule.'

The tax on persons exercising any profession or art, or carrying on any trade or calling within the limits of the municipality imposed under Clause (b) of Sub-section (1) of Section 66 of the C. P. and Berar Municipalities Act, 1922, is one of the taxes specified in the Schedule to the Act No. XX of 1941. Article 276 of the Constitution is as follows--

' 276. (1) Notwithstanding anything in Article 246, no law of the Legislature of a State relating to taxes for [he benefit of the State or of a municipality, district board, local board or other local authority therein in respect of professions, trades, callings or employments shall be invalid on the ground that it relates to a tax on income.

(2) The total amounts payable in respect of any one person to the State or to any one municipality, district board, local board or other local authority in the Stale by way of taxes on professions, trades, callings and employments shall not exceed two hundred and fifty rupees per annum;

Provided that if in the financial year immediately preceding the commencement of this Constitution there was in force in the case of any State or any such municipality, board or authority a tax on professions, trades, callings or employments the rate, or the maximum rate, of which exceeded two hundred and fifty rupees per annum, such tax may continue to be levied until provision to the contrary is made by Parliament by law, and any law so made by Parliament may be made either generally or in relation to any specified States, municipalities, boards or authorities.

* * * *'

5. It is clear, and it was not disputed before us, that the tax in question imposed by the Municipal Council, Pandhurna, is a tax on profession, trade, calling or employment within the meaning of Section 142A of the Government of India Act, 1935, and Article 276 of the Constitution. A tax of the nature imposed by the respondent Municipal Council has been held to be a tax on profession, trade, calling or employment in District Council, Bhandara v. Kishorilal, ILR (1949) Nag 87 : AIR 1949 Nag 190. Now, Sub-section (2) of Section 142A of the Government of India Act. 1935, fixed a ceiling to the total amount of tax payable in respect of any one person to the Province or to any one municipality, district board, local board, or other local authority in the Province by way of taxes on professions, trades, callings and employments, and provided that this total amount shall not, after 31st March 1939, exceed fifty rupees per annum. The proviso to Sub-section (2), however, saved the continuance of a tax on profession, trade, calling etc., which was in force during the financial year ending with 31st March 1939. Such a tax, even if it made any person liable to pay a total amount exceeding Rs. 50 per year, could continue to be lawfully levied so long as a provision to the contrary was not made by the Central Legislature. The Central Legislature enacted Act, No. XX of 1941, and by Section 2 thereof provided that any taxes payable in respect of any one person to a Province, or to any one municipality, district board, local board or other local authority by way of tax on professions, trades etc., shall, after the coming into force of the Act, cease to be levied to the extent to which such taxes exceed fifty rupees per annum. Section 3, read with paragraph 4 of the Schedule to Act No. XX of 1941, however, excluded the professional tax imposed under Section 66 (1) (b) of the C. P. and Berar Municipalities Act, 1922, from this limit of a maximum of Rs. 50 per annum payable by any one person by way of tax on profession, trade, calling or employment. The effect of the Professions Tax Limitation Act, 1941, was that if a tax imposed under Section 66 (1) (b) of the C. P, and Berar Municipalities Act, 1922, fell under the proviso to Sub-section (2) of Section 142A of the Government of India Act, 1935, the tax could continue to be levied after 31st March 1939 even if it made any person liable to pay a total amount exceeding Rs. 50 per annum.

6. Shri Dharmadhikari, learned counsel for the petitioner, did not challenge before us the validity of the imposition of the tax itself by the notification dated the 23rd January 1938. The only point that he pressed was that the profession lax imposed by the respondent-Council was no doubt in force in the financial year ending with 31st March 1939 but that it did not fall under the proviso to Sub-section (2) of Section 142A of the Government of India Act, 1935, inasmuch as the rate of tax imposed was two annas for each Boza of ginned cotton of 392 Lbs. weight and two annas for each bale of the same weight pressed, and that this rate did not exceed the limit of the rate of tax mentioned in the proviso. Learned counsel said that there was a distinction between the rate of a tax and the total amount which a person would be liable to pay during a certain period calculated at that rate; that the proviso to Section 142A(2) spoke of only that tax on professions, trades, callings etc., which was in force in the financial year ending with 31st March 1939 and 'the rate, or the maximum rate, of which exceeded fifty rupees per annum'; that it did not cover a tax 'the rate, or the maximum rate' of which was less than fifty rupees per annum even if such a tax made a person liable to pay in a year more than fifty rupees; that as the tax imposed by the Municipal Council, Pandhurna, did not fall under the proviso, therefore, under the first sub-section of Section 142A nothing in excess of Rs. 50 per annum could be recovered from the petitioner; and that as the tax which could lawfully be levied by municipality before the commencement of the Constitution being thus limited by the maximum amount of Rs. 50, the Municipal Council could not even under the proviso to Article 276(2) of the Constitution claim to recover more than Rs. 250 per annum from the petitioner as a tax on profession under the notification dated the 23rd January 1938.

7. We are unable to accede to this argument which does not take sufficient account of the fact that the effect of the proviso occurring in Section 142A of the Government of India Act, 1935, is to carve out an exception to the main provision contained in Sub-section (2) and to exclude from the provision, upon which the proviso has been engrafted, those taxes which but for the proviso would be within it. Now, what the substantive Sub-section (2) of Section 142A says is that the total amount payable in respect of any one person by way of taxes on professions, trades, callings and employments shall not after 31st March 1939 exceed Rs. 50 per annum. The proviso being an exception to the prohibition contained in Sub-section (2) must be construed so as to save those taxes on professions, trades, callings and employments which result in the total amount payable by any one person exceeding Rs. 50 per annum. This would be the natural and logical construction of the proviso. It is true that in its normal natural sense 'the rate or the maximum rate of a tax' is not the same thing as the amount calculated at that rate payable by a person within a certain period. But the meaning of the expression 'the rate, or the maximum rate, of which exceeded fifty rupees per annum' occurring in the proviso to Section 142A(2) must be determined in the context of the substantive Sub-section (2) of Section 142A. That sub-section speaks of the total amount payable in respect of any one individual per annum, and says that the total amount shall not exceed fifty rupees per annum after 31st March 1939. It thus fixes a limit to the 'per annum rating' of the tax in regard to any one individual. There is a distinction between the 'rate of a tax' and the 'rating per annum' of the tax in respect of any one individual, and it is this latter rating which has been dealt with by Sub-section (2) and the proviso thereto. The expression 'the rate, or the maximum rate, of which exceeded fifty rupees per annum' occurring in the proviso does not, therefore, mean the actual measure of the rate of tax prescribed by a body or authority which has imposed the tax. It has reference to the rate of tax mentioned in the substantive Sub-section (2) of Section 142A namely, 'the rate of tax leviable in respect of any one individual per annum'.

8. This is also clear from the direction contained in the proviso itself that if the rate of a tax on professions, trades, callings etc., in force in the financial year ending with 31st March 1939 exceeded Rs. 50 per annum, then 'the preceding provisions of this sub-section shall, ....... have effect in relation to that Province, Municipality, board or authority as if for the reference to fifty rupees per annum there were substituted a reference to that rate or maximum rate'. If Sub-section (2) is read with this substitution, then its effect is to lay down that if in the financial year ending with 31st March 1939 there was, in force a tax on profession, trade or calling, the rale, or the maximum rate, of which exceeded Rs. 50 per annum, then the total amount payable by any person shall not exceed 'that rate of maximum rate' per annum. The combined effect of the proviso and the main Sub-section (2), is to continue the taxes on trades, professions, callings and employments falling under the proviso and to prohibit any enhancement in the rate of those taxes after 31st March 1939.

9. The flaw in the argument of the learned counsel for the petitioner lies in assuming that the rate of two annas per boza of ginned cotton of 392 lbs. weight and of two annas per each bale of pressed cotton of 392 lbs. weight prescribed by the notification dated the 23rd January 1938, standing by itself is the rate of tax leviable in respect of any one individual per annum. The annual rate of tax on an individual depends on the number of bozas ginned and bales pressed. The construction put by the learned counsel on the words 'the rate, or the maximum rate, of which exceeded fifty rupees per annum' leads to anomalies or incongruities. If the Municipal Council, instead of prescribing the rate at two annas per each boza of ginned cotton or bale of pressed cotton of 392 lbs. weight, had prescribed the rate on the same basis, namely, two annas per 392 lbs. weight, taking the measure of 2500 maunds, then the rate would have exceeded Rs. 50 per 2500 maunds of cotton ginned and pressed. On the argument of the learned counsel for the petitioner the tax would have been fallen within the scope of the proviso. Thus, according to the learned counsel, the question whether a particular profession tax, which was in force in the financial year ending with 31st March 1939, is or is not covered by the proviso, would depend on the manner in which its rate has been expressed, and not on the fact whether at that rate the total amount payable by any individual per annum exceeds Rs. 50. It would be doing the British Parliament, which enacted Section 142A of the Government of India Act, 1935, and the framers of the Constitution the injustice of holding that they meant to enact the absurdity resulting from the argument advanced by the learned counsel for the petitioner.

10. The position then is that the tax imposed by the respondent Municipal Council under the notification dated the 23rd January 1938 was admittedly validly imposed. The tax fell under the proviso to Section 142A(2) of the Government of India Act, 1935, and was excluded from the bar imposed by Section 2 of the Professions Tax Limitation Act, 1941. Therefore, as we have endeavoured to point out earlier, even after 31st March 1939 the respondent Municipal Council was legally entitled to recover from the petitioner an amount exceeding Rs. 50 per annum on account of the tax. This lawfully levied tax was in force in the financial year immediately preceding the commencement of the Constitution. Consequently, it is saved by the proviso to Article 276(2) of of the Constitution. That proviso saved those taxes which were imposed prior to 31st March 1939, notwithstanding their exceeding the limit of Rs. 250 per annum, until Parliament legislates to the contrary. The result is that neither Section 142A of the Government of India Act, 1935, nor Article 276 of the Constitution prohibit the respondent Municipal Council from recovering from the petitioner an amount exceeding Rs. 50, or even Rs. 250 per annum on account of the tax imposed under the notification dated the 23rd January 1938.

11. The point raised in this petition is not directly covered by any authority. But there is in our mind no uncertainty as to the meaning of the expression 'the rate, or the maximum rate, of which exceeded fifty rupees per annum' to be found in the proviso to Section 142A(2) of the Government of India Act, 1935. It may, however, be added that the following observations made by a Division Bench of the Nagpur High Court, consisting of Hidayatullah C.J. and Kaushalendra Rao J. in Bharat Kala Bhandar v. Municipal Committee, Dhamangaon, Misc. Petn. No. 389 of 1954, D/- 12-4-1955 (Nag) lend support to the view taken by us. The learned Judges observed--

' IN our opinion the proviso, while reaffirming the limit of Rs. 50 and leaving it to the Central Legislature to vary the limit even to-the point of increasing that limit, does not say anything more than this that the profession tax levied upto 31st March 1939 shall continue unaltered at the same rate or the maximum rate, if any as before that date. To read the provision in any other way would do violence to the language used and is absolutely unwarranted. Thus the Municipality could continue to levy a profession tax albeit in excess of Rs. 50 p.a. provided the tax at that rate was collected before 31st March 1939 and the effect; of the proviso was to substitute that for the limit created by the second sub-section. In short what was saved by the proviso was only the rate then prevailing not the prior power to tax at any rates.'

12. For the above reasons, this petition is dismissed with costs of the respondent Municipal Council, Pandhurna. Counsel's fee is fixed at Rs. 200. The outstanding amount of security deposit, if any after deduction of costs, shall be refunded to the petitioner.


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