1. This is an appeal by the plaintiffs from the judgment of the District Judge of Cuttack dismissing their suit for a declaration that the Orissa Hindu Religious Endowments Act, 1939 (Orissa Act, IV of 1939) was ultra vires of the Orissa Legislature and for other consequential reliefs. The appellant plaintiffs are all Mahants of various Maths situated in the Province of Oriasa and the suit was brought by them in a representative capacity under Order X, Rule 8, Civil P. C. No evidence was led by either side and the sole question in dispute is a question of law regarding the competence of the Orissa Legislature to enact the Orissa Hindu Religious Endowments Act, 1939, hereinafter referred to as the impugned Act.
2. The impugned Act was passed by the Orissa Legislative Assembly and received the assent of the Governor. General on 31st August 1933. The Assembly passed the said Act in exercise of the legislative powers conferred on them by Sections 99(1) and 100(3), Government of India Act, 1935, read with items 34 and 64 of List II of Schedule VII to that Act. The assent of the Governor-General was obtained under Section 107(2) of that Act with a view to cure any repugnancy that may exist between any of its provisions and any of the provisions of an existing Indian law relating to matters in the Concurrent List.
3. One of the main grounds taken in the lower Court was that the whole of the impugned Act was ultra vires inasmuch as it applied to purely religious institutions whereas under item 34 of List II the legislative competence of the Provincial Legislature was limited to 'charities and charitable institutions, charitable and religious endowments.' An elaborate argument was advanced to the effect that though the Provincial Legislature may have the power to legislate in respect of institutions which were charitable and religious, it had no jurisdiction to legislate in respect of purely religious institutions. The learned lower Court rejected this argument by interpreting the word 'and' occurring in the said item as equivalent to 'or'. This argument was however rightly given up in this appeal. Item 34 of List II came up for interpretation before the Federal Court in Manikkasundara Bhattar v. R.S. Nayudu, A. I. R. (34) 1947 F. C. 1 : (I. L. R. (1946) Kar. P. C. 27) where it was held that the expression 'charities' was used in its most comprehensive sense and that it would include institutions which were of a purely religious character also. This point is thus concluded by the decision of the Federal Court.
4. Before discussing the legal questions involved in this appeal I may briefly describe the salient features of the impugned Act. The preamble says that the objection of the Act is 'to provide for the better administration and governance of certain Hindu religious endowments.' Public temples and Maths were brought within the scope of the Act and all the properties belonging to or given or endowed for the support of Maths or temples were defined as 'religious endowment' or 'endowment'. The extent clause (Section 2 (a)) made it however clear that the Act extended to the whole of what was then known as the Province of Orissa and that it applied only to Hindu public religious endowments. A statutory authority designated as 'Commissioner of Hindu Religious Endowments' (hereinafter referred to as the Commissioner) was constituted for the purpose of exercising general superintendence over all religious endowments and to secure the proper working of the Act. But his actions were subject to the general control of the Provincial Government and he himself was required to be a member of either the Judicial or the Executive Service of the Province. There are several provisions dealing with the nature of the control to be exercised by the Commissioner over Maths and temples and it is unnecessary to refer to them in detail. In Ch. VIII of the Act, the finacial provisions (Sections 49, 50 and 5l) were inserted and these provisions have been the main target of attack, I may quote Sub-section (1) of Section 49 which is the main charging provision in the whole Act.
'49 (1). Every math or temple and every specific endowment attached to a math or temple the annual income whereof exceeds Rs. 230 shall, for meeting the expenses of the Commissioner and the officers and servants working under him, pay annually a contribution at the following rates:
(a) at 11/2 per cent of the annual income when it exceeds Rs. 250 but not Rs. 2,000;
(b) at 2 per cent of the annual income when it exceeds Rs. 2,000 but not Rs. 6,000; and
(c) at 3 per cent of the annual income when it exceeds Rs. 5,000.
Explanation:--A math or temple or a specific endowment attached to a math or temple, the annual income whereof does not exceed Rs. 250 shall not be liable to pay any contribution for meeting the expenses of the Commissioner: 'Provided that the Provincial Government may, for special reasons, increase OE decrease the rates of contribution payable under this sub-section as they deem fit.'
5. Section 60 says that a fund shall be constituted by the contributions received under Section 49 and the grants or loans that may be made by the Government to that fund.
6. Section 51 describes in detail the procedure for the realisation of such contributions under the certificate procedure as if they were arrears of land revenue.
7. It will thus be seen that the entire scheme of the Act was to vest the general control and superintendence over the religious endowments of Maths and temples in the Commissioner and to confer on him certain powers with a view to enable him to exercise effective control over the trustees of the Maths and temples. Though the Act requires that the Commissioner should be a member of the Provincial Judicial or Executive Service and though his actions are subject to the general control of the Provincial Government Section 8 (1), the Legislature did not intend that he should act as a mere agent of the Government. On the contrary, the Legislature scrupulously refrained from conferring on the Government direct control over the maths and temples and vested the same in a separate statutory authority with well defined statutory powers. For the purpose of meeting the expenses of the Commissioner and his staff, every math and temple was required to pay an annual contribution at a rate which was fixed at some percentage of its annual income. The method of fixing the contribution was undoubtedly very similar to that followed in assessing income-tax. There is a minimum of Rs. 260 and as regards income above that limit a graduated scale has been followed and the percentage of the income required as contribution varies with the amount of the income. It is an unchallenged fact that the income of several maths and temples in the Province is derived not only from the landed properties but also from other sources such as receipts from investments, donations given by disciples and worshippers, income from urban properties, etc. The Rules framed under the Act (see Rule 160 of the O. H. R. E. Rules) recognise income from such sources.
8. Mr. Basu on behalf of the appellant challenged the validity of the Act on the following grounds; (1) The charging section is ultra vires because it is, in essence, a tax on income and as such is relatable to item 51 of List I of Schedule VII (except of course in respect of agricultural income) which is exclusively within the legislative competence of the Dominion Legislature (Section 100 (1), Constitution Act). (2) If the charging section is severed from the other provisions of the Act, it cannot be reasonably held that the Legislature would have enacted She impugned Act in its truncated form. (3) The impugned Act has no force outside the Province and consequently it cannot be operative in respect of the endowments situated outside the territorial of the Province of Orissa.
9. The Advocate-General's main contention is that the charging provision (Section 49 (1)) is relatable to item 54 read with item 34 of List II being in the nature of fees for the purpose of administering the said Act and as such within the legislative competence of the Orissa Legislature.
10. Therefore the main point of controversy is narrowed down to one question, namely, whether Section 49 (1) of the impugned Act is relatable to item 84 read with item 34 of List II or to item 64 of List I.
11. The principles to be followed in interpreting the Constitution Act, especially when there is some kind of overlapping between the powers of the Dominion Legislature and the powers of the Provincial Legislature, have been laid down in Subrahmanyam Chettiar v. Muttu-swami Goundan, A. I. R. (28) 1941 P. C. 47 : (I. L. R. (1941) Kar. f. c. 26) and reiterated in Ralla Ram v. The Province of East Punjab, A. I. R. (36) 1949 F. C. 81 ; (1948 F C. B. 207), following several decisions of the Privy Council the latest of which is Prafulla Kumar Mukherjee v. Bank of Commerce Ltd, Khulna, A. I. R. (34) 1947 P. C, 60 ; (74 I. A. 23 P. C.). Since the decision of Lord Watson in Union Colliery v. Bryden, 1899 A. c. 580 : (68 L. J. P. C 118), it, has been repeatedly laid down by the Privy Council that the 'pith and substance' of an impugned Statute should be considered with a view to determine whether it is within the legislative competence of a Legislature. Gwyer C. J. in Subrahmanyam Chettiar v. Muttuswami, A. I. R. (28) 1941 F, C. 47 at p. 61, has referred to these decisions and pointed out that for the purpose of determining whether the impugned Statute is legislation with respect to matters in List I or List II of Schedule VII, its pith and substance or true nature and character should be ascertained. To a similar effect is the following observations of the Privy Council in Governor-General in Council v. Prownce of Madras, A. I. R. (82) 1945 P. C. 98 : (I. L. R. (1945) Kar. P. C. 153):
'For in a Federal constitution, in which there is a division of legislative powers between Central and Provincial Legislatures, it appears to be inevitable that controversy should arise whether one or other Legislature is not exceeding its own, and encroaching on the other's constitutional legislative power, and in such a controversy apply in the present case, that it is not the name of the tax but its real nature, its 'pith and substance' as it has sometimes been said, which must determine into what category it falls.' The same principle was reiterated in Prafulla Kumar v. Bank of Commerce Ltd, Khulna, A. I. R. (84) 1947 P. C. 60 : (74 I. A. 23), in the well-known case dealing with the Money-lenders Acts of the various Provinces.
12. Judged by this principle, it appears that the pith and substance of the impugned provision (Section 49 (1)) is the raising of money for the sole purpose of 'meeting the expenses of the Commissioner, and officers and servants working under him'. It is true that in assessing the contribution on every institution the method of assessment followed by the Income-tax authorities has been adopted. But as has been pointed out in Byramjee Jeejeebhoy v. Province of Bombay, A. I. R. (27) 1940 Bom. 65 at p. 70 : (I. L. R. (1940) Bom. 68 F. B.), the method of assessment or the machinery for collection do not determine the nature of the levy. Similarly, the fact that a graduated form of levy is exacted does not necessarily make it income-tax (page 73 ibid). The impugned provision undoubtedly provides that a certain percentage of the income should be the basis of assessing the contribution and authorises the Provincial Government to increase or decrease the rate of contribution. But the Provincial Government's discretion is not entirely unfettered; because the words 'for meeting the expenses of the Commissioner and officers and servants working under him' occurring in that section completely fetter the power of the Government. That is to Bay, the Government cannot enhance the rate so as to collect by way of contribution, a sum in excess of the expenses of the Commissioner and his staff. There is no provision in the Act from which it can be reasonably inferred that the Legislature contemplated that there would be any sum in excess of the expenses of the commissioner and his staff, or else that the excess should be diverted to the general revenues On the other hand, the Legislature seems to have thought that the total Bum realised from such contributions may not suffice to meet the expenses of the commissioner and hence in Section 50 authorised the Government to give grants or loans and even fixed a statutory minimum for such grants and loans. A fair reading of Section 60 of that Act would indicate that the Legislature intended that there should be a separate fund distinct from the general revenues of the Province. The conclusion seems irresistible that though the Provincial Government may make grants to the fund they have no authority to utilise any sum out of the fund for any purpose other than that of meeting the expenses of the Commissioner and his staff.
13. This leads to the next question as to whether a levy imposed on a limited class of persons for the sole purpose of meeting the expenditure incurred in administering a special Act applicable to them, is a 'tax' or a 'fee'. If it be held to be a fee then the impugned provision would undoubtedly be relatable to items 54 and 34 of List II, The answer to this question depends on ascertaining what Parliament meant by the expression 'fee' occurring in item 64 of List II. The same expression occurs in item 69 of List I and item 36 of List III. The expressions 'taxes', 'duties' and 'cesses' also occur in several items and the question arises as to whether the Parliament intended that each of these expressions should have a different meaning. Section 311 (2) says that 'taxation' includes the imposition of any tax or impost whether general, local or special and 'tax' shall be construed accordingly. In view of this wide definition, 'duties' and 'cess' would undoubtedly be 'taxes' but 'fees' seem to stand on a different footing. Though 'fees' have nowhere been defined in the Government of India Act, in Sub-section (2) of Section 37 and Sub-section (2) of Section 82 it is clearly indicated that fees for license or fees for services rendered should not be deemed to be taxes and any Bill containing, provision for the payment of such fees would not be a taxing Bill for the purpose of following the special procedure prescribed in Sub-section (1) of both those sections.
14. For the purpose of ascertaining the essential distinction between 'fees' and 'taxes' it is useful to examine the views put forward by eminent writers on Public Finance. As pointed out by the Earl of Selborne in Attorney-General for Quebec v. Reed, (1885) 10 A. C. 141 : (54 L. J. P. C. 12)'those words must be understood with some reference to the common understanding of them which prevailed among those who had treated more or less scientifically such subjects before the Act was passed.' (See In re C. P. & Berar Sales of Motor Spirit and Lubricants Taxation Act, A I. R. (26) 1939 F. C. 1 at p. 35 : (I. L. R. (1939) Kar. 6), for the value to be attached to the definitions given by eminent text book writers). In Findley Shirras 'Science of Public Finance' occurs the following significant passage:
'Taxes are compulsory contributions to public authorities to meet the general expenses of Government which have been incurred for the public good and without reference to special benefits. Fees are payments primarily in the public interest for special services which people must accept whether willingly or not; ....... Fees are for governmental services, while prices are for services of a business character. They differ also from taxes in that they are payments for special benefits enjoyed by the payer, while taxes are for general benefits, expenses which are laid, as Adam Smith say, 'for the benefit of the whole society'. The essence of a tax is the absence of quid pro quo between the tax prayer and the public authority. Fees in Adam Smith's words are 'particular contributions (as opposed to general contributions) by persons who give occasion to this expense'. Fees are undoubtedly co-ordinate with taxes, and are sometimes grouped under the main head tax revenue, just as fees are grouped under non-tax revenue. It is indeed sometimes difficult to draw a clear line of distinction between taxes and fees.'
15. In chapter XI of the Report of the Indian Taxation Enquiry Committee 1924-25, vol. I, there is an interesting discussion regarding this subject. Though fees may in some instances, tend to become taxes, and though both of them may have two essential characteristics of being compulsory contributions levied from a section of the people for public purposes yet there is a well-recognised distinction between the two. Taxes are primarily imposed for revenue purposes, whereas fees are levied either for administrative purposes such as meeting the expenditure incurred in carrying into effect any statute, or for benefits conferred on the persons from whom the money is realised. If the amount of fee levied is disproportionate to the cost of administering a statute, the taxing element predominates and such fee may become tax. Such fee may be realised either in the form of a specified amount for the grant of a license (if the statute authorises the issue of licenses for administering the same) or else it may be in the form of a certain percentage of the income of those persons whom the statute purports to control. But so long as the object is not to raise money for revenue purposes, a 'fee' cannot become an 'income-tax' merely because it is assessed at a certain percentage of the income. Formerly a 'fee' was limited to a payment made in return for a specific benefit received, but in modern times that expression bas been given a wider connotation so as to include payments made for meeting the expenses of the officers and staff engaged in administering a statute or in controlling any trade or occupation even though there may not be any direct benefit to the payer. Indeed, in many instances such administrative control may be extremely irk-some to the person who is compelled to pay the fee; and it cannot be said that the public servants engaged in such administrative control are rendering any specific service, to anyone. It was argued that the Commissioner and his staff were not rendering any service to the Mahants and trustees of the maths and temples. This may be so, but as the object of the impugned Act is to provide for the better administration and governance or the maths and temples, the service of the Commissioner and his staff must be deemed to be for the benefit of the religious endowments and it is not open to a law Court to enter into an investigation as to whether the Commissioner is, in fact, rendering any such service.
16. The legislative practice of the Parliament also throws light on the point at issue. As pointed out by Lord Macmillan in Croft v. Dunphy, 1933 A. C. 156 at p. 165 ; (A. I. E. (20) 1933 P. C. 16):
'When a power is conferred to legislate on a particular topic it is important, in determining the scope of the power, to have regard to what is ordinarily treated as embraced within that topic in legislative practice and particularly in the legislative practice of the State which has conferred the power.'
17. This was reiterated by Lord Uthwatt in Wallace Brothers & Co., Ltd. v. Commissioner of Income-tax, Bombay, 1948 F. C. R. 1 at p. 16; (A. I. R. (35) 1948 P. C. 118), where after quoting the said observation of Lord Macmillan he observed :
'The point of the reference is emphatically not to seek a pattern to which a due exercise of the power must conform. The object is to ascertain the general conception involved in the words used in the enabling Act.'
18. An idea as to what the Parliament considered to be 'fee' as distinct from 'tax' willbe found from a study of the ParliamentaryLegislative Procedure described at pp. 744, 745,749 and 767 of May's Parliamentary Practice,Edn. 14. There, it has been pointed out thatBills dealing with taxation matters have aspecial procedure of their own ; they have to beinitiated in the form of a resolution movedin the Committee of Ways and Means by aMinister of the Crown. But Bills dealing withpayments for services rendered by departmentsof State imposed in the form of licences are notregarded as taxing Bills unless the proceeds arepayable into the Exchequer. Thus the Dye-stuffs (Impost Regulation) Act, 1930 (10 and11 Geo. V, Chap. 77) did not pass through theParliament as a taxing Bill because the feepermitted to be levied under that Act was limited to 'the purpose of providing for the expensesof the Board' in carrying that Act into execution. On the contrary the Whaling Industry(Regulation) Act. 1934 (24, and 25 Geo V,Chap. 49) was passed by the Parliament as ataxing Bill, because, though it provided for theissue of licenses on payment of fees (Section 5 (a))the charges for the fees were very high andmoreover the fees levied under that Act werepayable into the Exchequer (Section 16) (see p. 749 of May's Parliamentary Practice, 14th Edition.)The House of Commons carried the distinctionbetween two expressions as far as to permit theHouse of Lords to initiate legislation or toamend Bills dealing with imposition of fees andpenalties only, whereas the Commons havealways zealously claimed the exclusive right oflegislation over charges imposed on the people(Standing Order No. 44 of the House ofCommons (Public Business) 1936). What theCommons meant by the expression 'fees' will beclear from the following passage taken fromHalsbury's Laws of England, 2nd Edn., vol. 24at p 366 ;
'Such fees are imposed in respect ot benefit taken or service rendered under the Act and in order to the execution of the Act, and are not made payable into the Treasury or Exchequer or in aid of the public revenue and do not form the ground of public accounting.'
In this passage a clear distinction is made between 'benefits taken' by the payer of the fees and, 'service rendered' by the person who collects the fees and the definition of the expression is made applicable to both. That is to say there may be instances of services rendered by public officers without there being a corresponding benefit to the payer of the fees. The word 'service' is obviously used in this passage in its broad sense as including the official duties performed by an officer engaged in administering a statute.
19. An examination of the provision of the Government of India Act of 1919 or the Rules framed thereunder does not indicate arty contrary view. On the contrary, in Schedule II, of the Schedules Taxes Rates framed under that Act the expression 'tax' was given a wide definition so as to include a 'fee' also, thereby indicating that but for this inclusive definition the two expressions would have had different meanings.
20. From the foregoing discussion the following conclusion emerges. Though in a broad sense a fee may also be an impost when it is in the nature of a compulsory levy on certain classes of people, the Parliament has maintained a sharp distinction between 'fees' and 'taxes' in its legislative procedure. Where the imposition is in respect of the benefit taken by the person who is required to make the contribution or else where the imposition is for the service rendered by the authorities under an Act and for the purpose of execution of that Act and such contributions are not credited into the general revenues, they are not classified as taxes. The actual name given to the levy in a statute is immaterial. The purpose for which the levy is collected, the amount so collected (whether unduly high or otherwise) and the fund to which the levy is credited (whether to the general revenues or in a separate fund) these are material factors in determining whether the levy is a 'tax' or a 'fee'. Apparently it was this distinction which the Parliament imported into the Government of India Act also and the provisions of Sub-section (2) of Section 82 and Sub-section (2) of Section 34 bring out the distinction though they do not seem to be exhaustive of what was meant by the expression 'fees'.
21. If Section 47 of the impugned Act is carefully scrutinised in the light of the Parliamentary legislative practice, there seems to be no doubt that the contribution referred to in that section is a fee and not a tax. As already pointed out nothing out of the contribution can go to the general revenues of the Province. The purpose for which the contribution can be levied is strictly circumscribed by the Act itself to meet the expenses of the Commissioner and his staff whose sole duty is to administer the Act and make it effective. The mere fact that the Act does not provide for the collection of fees by the issue of licenses (as is usually provided in statutes dealing with fees) and provides for the imposition of the levy in accordance with the method adopted in collecting income tax, cannot alter the true nature of the levy if the tests laid down in the preceding paragraph are applied, I would therefore hold that it is not a tax at all and consequently it cannot be relatable to Item 54 of List I.
22. Mr. Basu's main contention on this point was that the contribution was in the nature of a compulsory levy and as such was ft tax, in Support of his argument he relied on City of Halifax v. Nova Scotia, Car. Works Ltd., 1914 A. c. 992; (A.I.R. (1)1914 P.C. 227 (2)). Though there is no doubt that compulsion is the essence of a tax it cannot be said that it distinguishes a tax from a fee. Even in a fee there may be compulsion especially against those classes of persons over whom the Act sanctioning the levy of fees imposes control. In Attorney General for Canada v. Attorney General for Ontario, 1937 A. c. 355 at p. 366 : (A. I. R. (24) 1937 P. C. 89), Lord Atkin left open the question as to whether a levy was a tax merely because of the compulsion applied in realising the same. To quote his words :
'Whether in such an Act as the present compulsion applied to an employed person to make a contribution to an insurance fund out of which he will receive benefit for a period proportionate to the number of his contributions is in fact taxation it is not necessary finally to decide.'
23. Mr. Basu then relied on In re A reference under the Government of Ireland Act, 1930 and Section 3, Finance Act (Northern Ireland) 1934, (1936) A. c. 352. But that decision is of no help in deciding the main question in She present case. There the sole question was whether a contribution levied in Northern Ireland by the Council of every County and County Borough to meet the cost of educational services was income tax or not. That contribution was payable into the Exchequer as public revenue and this made it clear that it was a tax and not a fee. Lastly I may refer to Lower Mainland Dairy Products Sales Adjustment Committee v. Crystal Dairy Ltd., 1933 A. C. 168 : (102 L. J. P. C. 17) on which also Mr. Basu has placed much reliance. The facts of that case are as follows : In British Columbia, the Provincial Legislature passed an Act known as the Dairy Products Sales Adjustments Act, 1920 authorising the appointment of an Adjustment Committee in a district of dairy farmers. The farmers were required to pay to the Committee a levy assessed according to the quantity of fluid milk sold. This levy was known as 'adjustment levy' and it was apportioned by the Committee amongst those farmers who had sold only milk products. The expenses of the Committee were met by a compulsory levy from the farmers known as 'expenses levy'. It was held that the adjustment levy was clearly a tax because it was compulsorily imposed by a statutory committee for a public purpose. It was also held that the 'expenses levy' was also a tax being ancillary to the adjustment levy. It is difficult to say if their Lordships would have held 'expenses levy' alone to be a tax if that Act had not authorised the imposition of any other levy. In such a case, it might have been contended with some force that the expenses levy being solely intended to cover the expenses of the Committee which was constituted for administering the Act was not 'a tax' as ordinarily understood. But in that particular case, the main levy was the adjustment levy which undoubtedly cannot be regarded as 'fee' by any sketch of imagination, As expenses levy was held to be ancillary to the adjustment levy, it was not dealt with separately. Apart from this distinguishing feature, decisions based on the construction of the British North America Act, 1867, cannot be applied without some qualification, in interpreting the Government of India Act, 1935. In the former Act Sections 91 and 93 contain a full list of the subjects over which the Dominion Parliament and the Provincial Legislature have respective powers of legislation. Significantly, there is no item relating to 'fees' in the list, whereas in the Government of India Act, in every list a separate item was expressly inserted dealing with fees. Item 9 in Section 92, B. N. A. Act, 1867 says :
'Shops, Saloon, Tavern, Auctioneer and other licences in order to the raising of a revenue for Provincial, Local or Municipal purposes.'
The words italicised show that the framers of that Act intended that any fee that may be imposed by issuing licenses may be for revenue purposes, thereby expressly removing by the statute itself the essential distinction between a fee and a tax. This was perhaps the main reason for Lord Atkin's observations in George Walkem v. L. M. D. P. Board. A. I. R. (26) 1939 P. C. 36 at p. 38 : (180 I. C. 638) to the following effect :
'If licenses are granted it appears to be no objection that fees should be charged in order either to defray the costs of administering the local regulation or to Increase the general funds of the province or for both purposes. The object would appear to be in such a case to raise a revenue for either local or provincial purposes.'
24. This decision is therefore based on the express provisions found in item 9 of Section 92, B. N. A. Act and cannot be an authority for the view that in the Government of India Act, 1985 also (where there are express provisions indicating a contrary view) a 'fee' may be raided for revenue purposes or else that it is not distinguishable from a 'tax.'
25. The second point of Mr. Basu must fail in view of my decision that Section 49 (1) of the impugned Act is not ultra vires but is relatable exclusively to items in the Provincial Legislative List. The question about the applicability of the doctrine of severability need not be discussed here.
26. The third point of Mr. Basu also appears to be without any substance. The impugned Act says clearly that it extends only to the whole of the Province of Orissa. Mr. Basu urged that the definition of the expression 'religious endowments' in Clause (12) of Section 6 is wide enough to cover all properties of the maths and temples even though some of the properties may be located outside the Province. It appears that in the lower Court it was conceded by the Government of Orissa that maths and temples have properties outside the Province. Mr. Basu's main argument is that in view of the wide connotation given to the expression 'religious endowments' the Act purports to control the properties of the maths situate outside the Province also and that to the extent of its extra-territorial application, it is invalid. In particular he referred to Section 12 which requires every math and temple to maintain a register showing particulars of all properties of the temple. He also referred to Section 58 which requires the sanction of the Commissioner for any kind of transfer of the property of the math or temple. In my view, the question of extra-territorial application of the Act does not arise at all. The Provincial Legislature has obviously no jurisdiction to legislate in respect of properties outside its territorial limits (see Section 99(1), Government of India Act) and the impugned Act does not purport to do so. The extent clause of the Act says clearly that the Act extends to the whole of the Province of Orissa. This clause would obviously control Section 58 and the Commissioner's sanction may not be required in respect of transfers of property located outside the Province. But this does not mean that the income derived by the math or temple from properties situated outside the Province should not be taken into consideration for the purpose of levying contribution under Section 49 or else for the purpose of specification of the particulars under Clause (c) of Sub-section (1) of Section 12. Once any income (which is movable property) of a math or temple is brought inside the Province from whatever source, it becomes property within the Province and as such within the scope of the impugned Act. Moreover, Section 12 of the impugned Act is a provision which applies to the trustees of the maths and temples and requires them to enter some particulars in a prescribed register. It is, therefore, an enactment applicable to a person residing within the Province and the competence of the Provincial Legislature to legislate in respect; of a person found with the Province admits of no doubt whatsoever.
27. I would therefore affirm the judgment of the lower Court and dismiss the appeal with costs.
28. I agree with my learned brother and should have been content with merely expressing my concurrence with his lucid judgment. Having regard, however, to the importance of the case and the points raised, it is right that I should give my reasons also for agreeing with bis view.
29. The suit has been brought for declaring that the Orissa Hindu Religious Endowments Act (Orissa Act, IV  of 1939) is ultra vires the Orissa Legislature. The plaint travels over a wide range of grounds for saying that the Act is ultra vires and refers to various sections of the Act for the purpose. In the issues, however, the question that was raised was not merely whether the Act as a whole is ultra vires, but also that particular sections thereof are in any case ultra vires (see Issue No. 7). Before us the argument is confined to Sections 49, 50, 51 and 24. In view of the recent Federal Court decision in Manikka-sundara Bhattar v. R.S. Nayudu, A. I R. (84) 1947 P. C. 1 ; (I. L. R. (1949) Kar. F. C. 27), the point that the subject-matter of the Act is not covered by item 34, List II of Schedule VII, Constitution Act is no longer urged. The argument pressed before us is that Sections 49, 50, 51 and 24 are ultra vires and if that is held to be so, the entire Act must be pronounced to be ultra vires. The argument is put ingeniously as follows :
30. The Act is, as the preamble states, to provide for the better administration and governance of certain Hindu Religious Endowments. The means by which that purpose is secured is by appointing a statutory authority in the person of a Commissioner under Section 7 of the Act and by vesting in him various large supervisory and administrative powers over the endowments and by providing the funds for his functioning by means of Section 49 of the Act, and by providing compulsory audit under Section 21 and also providing for the payment of the auditor under Section 24. It is, therefore, argued that if the charging sections, i. e., Sections 49 and 24 are found to be ultra vires, the whole structure of the scheme of the Act which depends on finance for its functioning falls to the ground. It is admitted that this argument would depend upon whether or not the impugned sections are severable from the rest of the Act and whether the Act can be given effect to even if the impugned sactions are found to be ultra vires. It was further argued that in case it is found that the impugned sections are severable from the rest of the Act, the appellants would he entitled at least to a declaration that the charging sections, namely, Sections 49, 50, 51 and 24 are ultra vires.
31. The main attack is against Section 49 of the Act which enjoins on Maths and temples payment of a contribution for meeting the expenses of the Commissioner and his staff. The contribution is on a basis of percentage of the annual income of the institution. Under Section 24, the audit fees are also payable on a basis not exceeding a certain percentage of income of the institution. These payments which are compulsory in nature and are calculated with reference to income, it is urged, amount to income tax, falling under item 54, List II of Schedule VII of the Constitution Act and accordingly the sections imposing them are said to be ultra vires the provincial legislature. The argument and the discussion has been mostly confined to Section 49, since the same considerations apply to Section 24 and Sections 50 and 51 are merely consequential.
32. There can be no doubt that the levy, under Section 49, in accordance with the statutory rules framed for the purpose, is based on income and to a substantial extent is analogous to income tax. Bat is it a tax on income as contemplated by item 54 of List II.
33. We have not been shown any definite or clear authority which indicates the distinction between a tax and a fee. It has been urged that compulsion is the essence of a tax white an element of option is inherent in a fee. The fees, levied under various Acts such as Births and Deaths Registration Act, Electricity Act, Forest Act, Companies Act and under the licensing provisions of various Acts, have been instanced as also the fees referred to in the English Fees Increase Act (13 George V, chapter IV) to show that such fees are payable only if the individual takes the benefit or obtains the service. In support of the view that compulsion is the essence of taxation, learned counsel for the appellants cites the cases in City of Halifax v. Nova Scotia, Gar Works Ltd. 1914 A. C. 992 : (A. I. R. (1) 1914 P.C. 227 (2)); Lower Mainland Dairy Products Sales Adjustment Committee v. Crystal Dairy Ltd., 1933 A C. 168: (102 L. J. P. C. 17) and Reference under the Government of Ireland Act, 1920 and Section 3, Finance Act, (Northern Ireland, 1934, 1936 A. c. 352. These cases while no doubt showing that compulsion is an essential feature of taxation, do not show that it is its distinguishing feature. In one sense in all levies under legislative or State authority there is an element of compulsion at one stage or other. We have therefore to look elsewhere for the distinguishing feature My learned brother has pointed out how the word 'fee' is understood in parliamentary practice as appears from Order, no. 44 of the House of Commons. Standing Orders relating to Public Business. (See May on Parliamentary Practice, Appendix, P. 1007). This standing order refers top2
'Fees imposed In respect of benefit taken or service rendered under the Act, and in order to the execution of the Act, and not made payable into the Treasury or Exchequer, or in aid of the public revenue'.
While this statement may or may not be complete or exhaustive as a definition of 'fee' it appears clearly to show that where a levy is:
(1) for benefit taken or service rendered under an act; (2) in order to the execution of the Act; (3) and not in aid of the public revenue, it is certainly not a tax and can be designated as a fee.
34. That a similar distinction has been maintained in the Constitution Act between a tax and a fee is indicated by the provisions of the analogous Section 82 thereof. The Constitution Act maintains distinction between the powers of Legislative Councils and Legislative Assemblies in regard to financial measures analogous to what exists between the House of Lords and the House of Commons IT is provided that certain specified financial measures cannot be introduced in the Legislative Council, but that a bill or amendment which provides for 'payment of fees for services rendered' is not to fall within the prohibition. There can be no doubt that the word 'fees' as used in this Section 82 can be legitimately understood in the sense in which it has been used in Order No. 44 of the Standing Orders of the House of Commons. In this connection, the antithesis between the phrases 'benefits taken' and 'services rendered' in Order No. 44 may be noticed. The former refers to something which depends on the option of the person charged while the latter is wide enough to include a service imposed irrespective of the wishes of the person charged. There is no reason why the word 'fees' when used in item 54 of List II of Schedule VII should not be understood in the same sense as in Section 82.
35. That a levy to raise a special fund for a special purpose need not be a tax is indicated in Attorney General for Quebec v. Waller Reed, (1885) 10 A. C. 141 at pp. 144, 145: (54 L. J P. C. 12) wherein their Lordships of the Judicial Committee say :
'It is not necessary for their Lordships to determine whether, if a special fund had been created by a provincial Act for the maintenance of the administration of justice in the provincial Courts, raised for that purpose, appropriated to that purpose, and not available as general revenue for general provincial purposes, in that case the limitation to direct taxation would still have been applicable.'
36. The question in the case was whether certain stamp duties collected in connection with administration of justice were direct or indirect taxation. Their Lordships came to the conclusion that it was an indirect levy and felt no doubt that it was an indirect tax owing to the absence of the above features. This is no doubt not a direct decision that such a levy is a fee, but is an indication in support of the above view.
37. Learned counsel for appellants, however, urges that even so the word 'fee' is related to the rendering of services, and that under the impugned Act, there are no services rendered to the various persons from whom the levies are made. This argument has however no force. As pointed out by my learned brother the concept of services by Government has undergone vast changes in modern times. The function of the State has ceased to be that of merely maintaining law and order and providing optional services. The care of the well-being of the public has become a normal function of the State. All administrative control undertaken and exercised for the benefit of the public or of sections thereof is 'service rendered' by the State, It is the sine qua non of such services undertaken in public interests that, where necessary, it is independent of the option of the individual concerned. It thus appears to me that the true distinction between a tax and a fee is not 'compulsion' as the learned advocate for the appellant contends, but the presence or absence of a 'quid pro quo' as pointed out by reputed economists like Adam Smith. In modern times the 'quid pro quo' has ceased to depend on the option of the individual. The basic idea that it is a quid pro quo is maintained in that a fee is not to be raised for general revenue purposes but only for a specified purpose, such as the administration of a particular Act enacted for public benefit and is to be limited to the finance required for the purpose. That fees are sometimes raised as part of general revenues such as 'court-fees or that taxation as defined in Section 311 (2) inclusive of special imposts, does not affect the question how the word 'fee' is to be normally understood.
38. In the present instance, Section 49 of the impugned Act does not use the word 'fee', but it clearly specifies the levy as an annual contribution for meeting the expenses of the Commissioner and the officers and servants working under him. It is of course required for the special purpose of administering the Act. It is not made part of the general provincial revenues as appears from Section 50. Under that section, the Government not only makes grants, but also grants loans. If the endowment funds were a part of the general exchequer, there could be no question of a loan by the Government to it. The section clearly says that the contributions received constitute a separate fund and it is not suggested that it is in excess of the requirements. Indeed as pointed out by the learned District Judge towards the closing portion of his judgment (P. 42 of the printed paper book) the appellants themselves appear to have suggested that the Endowments Office had been working at a substantial deficit met by loans from the Government for the time being. The levy is clearly therefore not a tax. I have also no difficulty in thinking that the contribution is for services rendered. The legislature has the right to think that the endowments which are within the scope of the Act require to be kept under effective administrative supervision to provide against mismanagement. Such administration to provide against mismanagement would undoubtedly constitute a service to the institutions irrespective of the opposition of any or all of the present incumbents thereof. Indeed, even in the ease of fees, which more clearly appear to be for the benefit of the individuals it will be found that the administrative control undertaken and the services rendered are as much in the larger public interests as in the interests of the individual. Even if therefore service and 'quid pro quo' are essential characteristics of a fee, the levy under Section 49 is a fee. It, therefore, appears to me to be clear that the levy contemplated by Section 49 is not a tax but a fee coming within item 54 of List II.
39. It is, however, urged that even though the contribution levied under Section 49 may be only a fee, under item 54, still it is a levy on income and encroaches on the field which has been specifically preserved to the centre as its close preserve and is hence invalid. Sections 138, 141 and 142-A, Constitution Act are also pointed out in this connection and it is said that to allow the Provinces to tap 'income' as the source for levies of this kind would upset the basis for the statutory financial arrangements. It is further said that this is not a case of a levy on something else affecting income only in an indirect way or incidentally, but is a levy on income itself and on nothing else, though the field of its operation and the quantum imposed may be very limited. It is suggested that for the levies both under the Central Income-tax Act as also under Section 49 of the impugned Act, the centre is the same and only the circumferences different and that to allow the provinces to impose a levy under the name of a fee even for the limited purposes of raising an ear-marked fund for a provincial subject would, in effect, result in imposing double income-tax on the individual affected. It is also said that to allow the provinces to impose a levy on income under the name of a 'fee' is to permit by an indirect method, what is prohibited directly.
40. While the argument is plausible, there are other considerations which must determine the question. In cases, where undoubtedly the re is overlapping, the validity or otherwise of an impugned provision is to be determined by determining the true nature thereof, by its 'pith and substance.' The 'pith and substance' of a particular impugned provision in an Act is not to be determined by merely detaching it from the rest of the Act. The Act, in the present case, in its main content is admittedly within the competence of the provincial legislature as relating to item 34 of List II. Section 49 of the Act is not directly a measure of taxation, but is a levy for the specified purpose of the Act. It is, therefore, a mere ancillary provision for carrying out the Act. Its validity must stand or fall with that of the main provisions of the Act itself.
'The extent of the invasion by the provinces into subjects enumerated in the Federal List has to be considered . No doubt it is an important matter, not, as their Lordships think, because the validity of an Act can be determined by discriminating between degrees of invasion, but for purposes of determining what is the pith and substance of the impugned Act. Its provisions may advance so far into Federal territory as to Know that its true nature is not concerned with provincial matters, but the question is not, has it trespassed more or less, but is the trespass whatever it be, such as to show that the pith and substance of the impugned Act is not money-lending but promissory notes or banking? Once that question is determined, the Act falls on one or other side of the line and can be seen as valid of invalid according to its true content.'
42. There can be no reasonable doubt that whether the levy under the impugned Section 49, is called a fee or a tax, its encroachment into the field of income-tax, if any, is only incidental and not direct. It does not cease to be incidental for the reason that the entire field of its operation is 'income' unlike as in the case cited above, Prafulla Kumar v. Bank of Commerce, Ltd., Khulna, A. I. R. (34) 1947 P. C. 60 : (74 I. A. 23 P. C.), where the encroachment is only partial and from a side. As pointed out by their Lord-ships in the above case the question is not 'has it trespassed more or less.' The principle of 'incidental' encroachment applies also where the encroachment is 'ancillary'. This is clearly elucidated by their Lordships in the above case in the passage following the one above extracted, where they say :
'This view places the precedence accorded to the three lists in its proper perspective. No doubt, where they come in conflict, List I has priority over Lists III and II and List III has priority over List II but, the question still remains, priority in what respect? DOES the priority of the Federal Legislature prevent the Provincial Legislature from dealing with any matter which may incidentally affect any item in its list or in each case has one to consider what the substance of an Act is and, whatever its ancillary effect; attribute it to the appropriate list according to its true character? In their Lordships' opinion the latter is the true view.'
43. This is a clear enunciation of the principle that what is to be determined is whether the purpose and effect of the impugned provision of the Act is direct or ancillary once the main content of the Act is within the competence of the Legislature. the above Privy Council decision has been noticed and expounded in a recent case in the Bombay High Court reported in Mulchand Khundanmal Jagtiani v. Raman Hiratal Shah, A. I. R. (36) 1949 Bom. 197 at p. 200 (2) : (51 Bom. L. R. 66), where it is pointed out :
'The main principle laid down in this case of the Privy Council is that the Provincial Legislature may deal with a federal subject if it is only an ancillary or incidental effect of the legislation provided that in substance it is dealing with a provincial subject.'
44. That the validity or otherwise of an ancillary provision must depend upon the true character of the main provision has been held in various cases. In Croft v. Dunphy, 1933 A. c. 156 at p 168 : (A. I. R. (20) 1933 P. C. 16), the expences levies (which probably were not open to objection otherwise) were pronounced invalid on the ground that it was ancillary to the main levy viz,, adjustment levy which was held to be invalid.
45. In George Walkem Shannon v. L. M. D. P Board A. I. R. (26) 1939 P. C. 36 : (180 I. C 638) the validity of the levy of a particular license-fee appears to have been upheld, inter alia, on the ground that it was ancillary to the main provisions of the Act. At page 38, their Lordships say :
'If regulation of trade within the province has to be held valid the ordinary method of regulating trade, i. e., by a system of licenses, must also be admissible. ... if licenses are granted It appears to be no objection that fees should be charged in order to defray the costs of administering the local regulation.'
46. In Lawson v. Interior Tree Fruit and Vegetable Committee, 1931-2 (Canada) D. L. R. 193, the main provisions of the Produce Marketing Act of British Columbia were held to be invalid on the ground that in their operation they affect inter-provincial trade. The provisions in the Act relating to levies on marketed products were also accordingly held to be invalid on the ground that they were ancillary provisions though the view is indicated that they might by themselves have been valid (see p. 198 of the report).'
47. It is a significant feature of the three lists of Schedule 7, Constitution Act, that the last item of each list provides for the imposition of fees in respect of the subjects in that list. If it was meant to refer only to sources of taxation referred to in that very list, it is purposeless. It seeing to me that it is meant to provide the power for an ancillary levy irrespective of the fact that the source may fall outside the particular list and may touch the sources in the other lists. It could not have been contemplated that entirely new sources would be discovered.
48. I am therefore satisfied that Section 49 of the impugned Act being a provision merely ancillary to the main provisions of the Act which admittedly are intra vires, and its effect by way of encroachment, if any, on the field of income tax being incidental, the provision is fully within the competence of the Provincial Legislature and this applies also to the provisions connected with Section 49 and to the analogous provision in Section 24. In this contest, it is not without some significance that the actual operation of the impugned levy is on a field which is wholly outside the actual operation of the Income-tax Act as at present. See Section 4 (3), Income-tax Act (which?) exempts income from religious endowments from taxation. It is also to be noted that the Central Legislature cannot touch a substantial portion of the field of the operation of Section 49 which relates to income from agricultural lands.
49. The next contention of the learned counsel for the appellants that because the definition of the word 'religious endowment, or endowment' in Section 6, Sub-section (12) comprises 'all' property and the Act contains various provisions relating to such property and because at least some of the institutions within the scope of the Act have admittedly properties outside the province and outside the dominion, the Act has a necessary extra-territorial operation and is hence invalid, may be briefly dealt with.
50. As pointed out by my learned brother the Act has to be construed with reference to the competence of the Legislature and the extent clause in the Act, viz. Section 2. In Macleod v. Attorney General for New South Wales. 1891 A. C. 455 : (60 L. J. P. C. 55), the words 'whosever and wheresoever' in a Provincial Act, were in spite of their generality, construed to refer only to those actually within the jurisdiction off the province and within its limits.
51. In the matter of Hindu Women's Rights to Property Act, 1937, A. I. R. (28) 1941 F. C. 72 at p. 76 (2) : (I. L. R. (1941) Kar. F. C. 148), their Lordships lay down that the Court is bound to construe the word 'property' in the Hindu Women's Rights to Property Act as referring only to those forma of property with respect to which the Legislature which enacted the 'Act was competent to legislate. It makes no difference on principle that in this case the word used in the definition of endowment is 'all' property and the question arises with reference to the extra-territorial situation of the property and not to the 'form' of property.
52. Further, in British Columbia Electric Ry. Co., Ltd. V. The King, A. I. R. (33) 1946 P. C. 130 at p. 185, their Lordships of the Judicial Committee point out that:
'A Legislature which passes a law having extraterritorial operation may find that what it hag enacted cannot be directly enforced, bat the Act is not invalid on that account and the Courts of its country must enforce the law with the machinery available to them.'
53. In the present case, the question whether specific provisions of the Act which may have an extra-territorial operation in respect of property outside the province are effective in respect of such property, does not arise. That will have to be determined on the facts, when such arises. It is enough to any that this is not a ground for pronouncing the Act itself to be in-valid. I think it desirable also to say that even the question whether the levy under Section 49 can be made in respect of income of extra-provincial properties whether income has been received in the province is one that does not call for a decision at present. When the question arises, it is a matter for consideration whether 'territorial connexion', of the person levied against, is not enough vide in Wallace Bros. & Co., Ltd, v. Commissioner of Income-tax, Bombay City and Bombay Suburban District, A. I. R, (35) 1948 P. C. 118 at p. 120 : (75 I. A. 86 P. C.).
54. The only other question chat remains which has been raised at the bar is that the impugned provisions of the Act are inseparable from the rest and if they are found to be invalid the whole Act is ultra vires, As pointed out by my learned brother in the view that we have taken this question does not call for decision. Since, however, the question has been raised the point may be briefly dealt with.
55. The argument is that the whole Act is ultra vires if the charging sections are ultra vires in as much as the charging sections are the foundation for the working of the Act. While no doubt it is necessary that for the working of an Act of this nature through the machinery of a Commissioner and his staff vested with large supervisory and administrative powers there should be finance it is not the essence of the scheme that the finance should be raised in the particular way. Section 8, Sub-section (2) of the Act provides that the Commissioner shall receive out of the funds of the endowments such salary as the Provincial Government may fix. From this general declaration it would follow, apart from anything else, that all the endowments which come within the purview of the Act are under a legal obligation jointly, to contribute to the salary of the Commissioner. If there was no specific provision defining how the contribution wag to be fixed and realised, the Courts, in a case of dispute, might have to determine it in soma reasonable way and might well fix it on the basis of income. But it cannot be said that the working of the Act will be rendered impossible though it may become cumbersome. Section 8 provides no doubt, only for salary But it is a matter for consideration whether it should not be construed, if necessary, as wide enough to include his expenses inclusive of his establishment. But even if a limited interpretation of 'salary' is adopted, it does not follow that the working of the staff is necessarily hampered. Section 50 in providing for grants and loans by the Government compulsorily by the use of the word 'shall' indicates that the ultimate responsibility for the finance is with the Government. Though no doubt Section 50 presupposes the existence of the endowments fund, the power to make the grants is not dependent on it and in any case the contributions to the salary under Section 8, would in themselves constitute the nucleus of an 'Endowment Fund.'
56. It cannot therefore be said that in the absence of the particular provision as to the quantum of levy of contributions under Section 49, the working of the entire Act is rendered impossible. It is no doubt true as found in the various cases to which our attention has been drawn that if some essential portions of an Act are found to be ultra vires, it cannot be said that the legislature would have maintained the Act in its truncated form and that therefore the entire Act must be held to be ultra vires. The following cases are cited in support of the argument Attorney-General for Manitoba v. Attorney-General for Canada. 1925 A. C. 561 : (94 L. J. P. C. 146) and Attorney-General for Canada v. Attorney General for Ontario, 1937 A. 0. 355 : (A. I. R. (24) 1937 P. C. 89). But this does not apply to a case where as in this, the substantive provisions of the Act and the machinery set up therefor are entirely within the competence of the legislature and what is attacked is merely the means of finding the expenses for its working. When it is found as in this case that independent of such provision, the intention of the Act is clear, that the endowments should contribute to the expenses in some measure and the Government are also bound to make grants for the same, it must be held that the charging sections are severable. It is sufficient to refer in this connection to the following cases. Toronto City Corporation v. York Corporation, 1938 A. c. 415 : (107 L. J. P. C. 49 and Attorney General of Alberta v. Attorney General of Canada, A. I. R. (35) 1948 P. C. 194 at p. 199 : (52 C. W. n. 236 P. C.). All the contentions raised on behalf of the appellants therefore fail and the appeal must be dismissed with costs.
57. By the Court - Since the question raised in this appeal is one of importance under the Government of India Act, a certificate will issue under Section 205 of the said Act that the case involves a substantial question of law as to the interpretation of the Government of India Act, 1935.