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Patel Gordhandas Hargovindas Vs. Municipal Commissioner, Ahmedabad - Court Judgment

LegalCrystal Citation
SubjectProperty
CourtSupreme Court of India
Decided On
Judge
Reported inAIR1963SC1742; (1964)66BOMLR68; (1963)GLR973(SC); [1964]2SCR608
ActsGovernment of India Act, 1935; Bombay Municipal Boroughs Act, 1925 - Sections 73 and 75; Bombay Municipal Boroughs Rules - Rules 243 and 350-A; Arbitration Act
AppellantPatel Gordhandas Hargovindas
RespondentMunicipal Commissioner, Ahmedabad
Cases ReferredIn Ralla Ram v. Province of East Punjab
Books referredWharton's Law Lexicon; Faraday "On Rating"; Halsbury's Laws of England, Third Edition (Vol. 32)
Excerpt:
property - capital value - government of india act, 1935, sections 73 and 75 of bombay municipal boroughs act, 1925, rules 243 and 350-a of bombay municipal boroughs rules and arbitration act - appeal against imposition of rate on vacant lands within municipal limits - appellant contended that rule 350-a read with rule 243 illegal and void - municipality had levied rate at a percentage of capital value of open land which was not entitled to do - appellants also contended that if act permitted levy of rate on percentage of capital value it would be ultra vires provincial legislature - assessment list prepared pursuant to said rule was contended to be illegal and void - trial court held that rule 350-a read with rule 243 was illegal and void and beyond authority given to respondent - in.....wanchoo, j.1. this appeal on a certificate granted by the bombay high court arises outof a suit brought by the appellants to challenge the imposition of a rate bythe respondent municipal corporation of ahmedabad on vacant lands situatewithin the municipal limits. the rate was levied under s. 73 of the bombaymunicipal boroughs act, no. xviii of 1925, (hereinafter referred to as the act)read with the explanation to s. 75 of the act. the municipality framed r. 350-afor rating open lands which provides that the rate on the area of open landsshall be levied at 1 per centum on the valuation based upon capital.'valuation based upon capital' was defined in r. 243 as the capitalvalue of lands and buildings as may be determined from time to time by thevaluers of the municipality, who shall take.....
Judgment:

Wanchoo, J.

1. This appeal on a certificate granted by the Bombay High Court arises outof a suit brought by the appellants to challenge the imposition of a rate bythe respondent Municipal Corporation of Ahmedabad on vacant lands situatewithin the municipal limits. The rate was levied under s. 73 of the BombayMunicipal Boroughs Act, No. XVIII of 1925, (hereinafter referred to as the Act)read with the explanation to s. 75 of the Act. The Municipality framed r. 350-Afor rating open lands which provides that the rate on the area of open landsshall be levied at 1 per centum on the valuation based upon capital.'Valuation based upon capital' was defined in r. 243 as the capitalvalue of lands and buildings as may be determined from time to time by thevaluers of the municipality, who shall take into consideration such reliabledate as the owners or the occupiers thereof may furnish either of their ownaccord or on being called upon to do so. The contention of the appellants wasthat reading the two rules together, the rate was levied at a percentage of thecapital value of open lands and this the municipality could not do. Twosubmissions were made in support of this contention. In the first place it wasurged that r. 350-A read with r. 243 was ultra vires Sections 73 and 75 inasmuch asit permitted the fixation of rate at a percentage of capital value and this wasnot permitted by the Act, for the word 'rate' used in s. 73(1)(i) hadacquired a special meaning by the time the Act came to be passed and meant atax on the annual value of lands and buildings and not on their capital value.In the second place, it was urged that if the Act permitted the levy of a rateon a percentage of capital value of the lands and buildings rated thereunder,it was ultra vires the Provincial Legislature because of item 55, List I, ofthe Seventh Schedule to the Government of India Act, 1935. The appellantsfinally contended that the assessment based on r. 350-A read with r. 243 wasultra vires and the assessment list prepared pursuant to the said rule wasillegal and void. They therefore prayed that r. 350-A read with r. 243 forassessment of vacant lands as well as the assessment charged on vacant landsunder the said rule since April 1, 1947, and the assessment lists for the year1947-48 which were prepared for that purpose be declared illegal and ultravires and further prayed that an order of permanent injunction might be madeagainst the respondent Municipality restraining it from collecting or causingto be collected from the appellants any sum of money as assessment for vacantlands for the year 1947-48 or for any year thereafter, based on capitalvaluation on the strength of the said rule.

2. The suit was resisted by the municipality. Its defence in substance wasthat the rule was intra vires and the assessment lists had been properlyprepared in accordance with the provisions of the Act and were not open to anyobjection. The trial court held that r. 350-A read with r. 243 was illegal andvoid and beyond the authority given to the municipality under s. 73 of the Act,inasmuch as it would amount to taxing the open lands as assets of individuals,within the meaning of item 55 of List I of the Seventh Schedule to theGovernment of India Act. The trial Court therefore decreed the suit and grantedthe relief as claimed by the appellants.

3. Then followed an appeal to the High Court which was allowed. The HighCourt held that the manner in which open lands were rated did not bring therate within item 55 of List I of the Seventh Schedule to the Government ofIndia Act, as the method employed was only a mode of levying the rate. The HighCourt therefore held that r. 350-A read with r. 243 was not ultra vires. As tothe other contention that the rule was ultra vires Sections 73 and 75 of the Act,the High Court held that even if it be assumed that by adopting the basis ofcapital value the municipality must determine the annual value of the propertyand levy rate on such value, it made no difference to the result, as themunicipality might levy much higher rate of tax on the annual value of theproperty determined on the basis of its capital value. The High Court pointedout that the municipality, by adopting this method, had done in one step whatcould be done in two steps, and that would have merely involved firstdetermining the capital value and then the annual value, and then fixing therate on the annual value at a much higher percentage. It was of the view thatit was all a matter of fixing a reasonable rate on open land, and if the ratewas otherwise reasonable it would be difficult to hold that the rule levyingthe rate was ultra vires Sections 73 and 75. Thereupon the appellants applied for acertificate of fitness to enable them to appeal to this Court, which wasgranted; and that is how the matter has come up before us.

4. The same two points which were raised in the High Court have been urgedbefore us. We shall first consider the point, whether r. 350-A read with r. 243is ultra vires Sections 73 and 75 of the Act. The relevant part of s. 73 is asfollows :-

'(1) Subject to any generalor special orders which the State Government may make in this behalf and to theprovisions of sections 75 and 76, a municipality may impose for the purposes ofthis Act any of the following taxes, namely :-

(i) a rate on buildings orlands or both situate within the municipal borough; .. .... ...... .......'

5. Section 75 provides the procedure preliminary to imposing any taxprovided under s. 73. The relevant part thereof is as follows :-

'A Municipality beforeimposing a tax shall observe the following preliminary procedure :-

(a) it shall, by resolutionpassed at a general meeting, select for the purpose one or other of the taxesspecified in section 73 and approve rules prepared for the purposes of clause(j) of section 58 prescribing the tax selected, and in such resolution and insuch rules specify. -

(i)... .... .... ....

(ii).... ..... ... ...

(iii) in the case of a rate onbuildings or lands or both; the basis, for each class of the valuation on whichsuch rate is to be imposed; ...................

6. Explanation - In the case of lands the basis of valuation may be eithercapital or annual letting value.'

7. It will be seen that though s. 73 opens with the words 'themunicipality may impose for the purposes of this Act any of the followingtaxes', the particular tax specified on lands or buildings is designatedas a rate on buildings or lands or both. The use of the word 'rate'in clause (i) of s. 73(1) must be given its due significance and the kind oftax which s. 73(1)(i) empowers the municipality to impose on lands andbuildings is a rate on lands and buildings. The contention on behalf of theappellants is that the words 'rate on buildings or lands' had come toacquire by the time the Act was passed a special meaning and the tax which s.73(1) permitted the municipality to impose on lands and buildings was that kindof tax which had come by then to be known as 'rate on buildings andlands'. It is urged that by the time the Act was passed, the words'rate on lands or buildings' signified a tax not on their capitalvalue but on their annual value and therefore when s. : [1959]1SCR379 permitted the municipality to impose a rate on buildings or lands or both itonly gave it jurisdiction to impose a tax by way of certain percentage on theannual value of lands or buildings and not by way of a percentage on theircapital value. Reliance in this connection is placed on the decision of thiscourt in The State of Madras v. Gannon Dunkerly and Co. : [1959]1SCR379 ,where this Court held that 'the expression 'sale of goods' was, at thetime when the Government of India Act, 1935, was enacted, a term of well-recognisedlegal import in the general law relating to sale of goods and in thelegislative practice relating to that topic and must be interpreted in Entry 48in List II in Sch. VII of the Acts as having the same meaning as in the Sale ofGoods Act, 1930'. It is urged that the legislative practice prevalent inEngland as well as in India up to 1925 showed that wherever the term'rate' was used in connection with local taxation it meant a tax onthe annual value of lands and buildings and not on their capital value. It istherefore necessary to look at the legislative history and practice to find outwhat the word 'rate' meant when the Act was passed in 1925.

8. The word 'rate' has come to our country for the purpose oflocal taxation from England. It will therefore be useful to find out whatexactly the word 'rate' when used in connection with local taxationmeant in England. The English Rating Law is largely derived from the PoorRelief Act, 1601 (43 Eliz. Cap. 2) which provided for raising 'weekly orotherwise, by taxation of every inhabitant, parson, vicar and other and ofevery occupier of lands, houses, tithes impropriate or propriations of tithes,coal mines or saleable underwoods, in the said parish in such competent sum andsums of money as they shall think fit, a convenient stock of flax, hemp, woolthread, iron and other necessary ware and stuff to set the poor on work'.The chief provision of this Act was to levy a tax on the occupier of lands andhouses and this tax in course of time came to be known as a rate. In'Rating Valuation Practice' by Benn and Lockwood, the authors observeas follows at p. 1 :-

'The purpose of rating Valuations is to arrive at afigure termed rateable value on which rates are levied upon the ratepayer at somuch in the pound in order to defray the expenses of local government. Thepresent rating law is largely derived from the Poor Relief Act, 1601, whichprovided for the levying of taxation on 'every occupier of land, house.....towards the relief of the poor'. Under this enactment occupiers were tocontribute to a poor rate according to their means but no specific method ofassessment was laid down. The annual value of a person's property within theparish gradually became recognised as the most satisfactory basis and this wasfirst given statutory approval in 1836'.

9. This passage shows that gradually by judicial decisions what was leviedon the occupier's lands and buildings under the Poor Relief Act came to beknown as a rate on the annual value of the property in beneficial occupationwithin the parish and this practice was given statutory approval in 1836. Theword 'rate' thus gradually came to be applied to such local taxationtill we find that the Poor Rate Act, 1801 was passed providing for certain appealsand other remedies to persons on whom rates were levied. Then came the PoorRate Assessment and Collection Act, 1869, which by its first section providedthat the occupier of any rateable hereditament shall be entitled to deduct theamount paid by him in respect of any poor rate assessed upon such hereditamentfrom the rent due or accruing due to the owner, and every such payment shall bevalid discharge of the rent of the extent of the rate so paid, thus affordingrelief to the occupier. This history will show that the rate was assessedgenerally on the occupier of lands and buildings on account of his beneficialoccupation of such lands and buildings. The very fact that the rate wasassessed on the occupier of lands and buildings leads clearly to the inferencethat the rate was to be levied on the annual value of the land or building tothe occupier and had nothing to do with the capital value of the land andbuilding to the owner. In other words, the rate was to be levied on the annualvalue of the land or building depending upon its letting value and not on thecapital value.

10. In 1869, another Act was passed known as the Valuation (Metropolis) Act,1869, which applied to the city of London. That Act defined a'ratepayer' as meaning 'every person who is liable to any rateor tax in respect of property entered in any valuation list'. It alsodefined 'gross value' as meaning 'the annual rent which a tenantmight reasonably be expected, taking one year with another, to pay for anhereditament'. Lastly, it defined the words 'rateable value' asmeaning 'the gross value after deducting therefrom the probable annualaverage cost of repairs, insurance, and other expenses as aforesaid'.Clearly therefore the rate under this Act was a tax leviable on the rateablevalue, which meant the gross value subject to certain deductions and the grossvalue was the annual rent which a tenant might reasonably be expected to pay.

11. Finally, in 1925, came the Rating and Valuation Act, 1925, which wasmeant to simplify and amend the law with respect to the making and collectionof rates by consolidation of rates and otherwise and to promote uniformity inthe valuation of property for the purpose of rates. This Act was passed aboutthe same time as the Act with which we are concerned; and it provided for thelevy of a general rate and the rateable value of a hereditament was to be thenet annual value thereof. In s. 68. the 'rate' was defined as a ratethe proceeds of which were applicable to local purposes of a public nature andwhich was leviable on the basis of an assessment in respect of the yearly valueof the property. 'Ratepayer' was defined to mean every person who wasliable to any rate in respect of property entered in any valuation list.'Gross value' was defined to mean the rent at which a hereditamentmight reasonably be expected to let from year to year, and'hereditament' meant any lands, tenements, hereditaments or propertywhich were or might become liable to any rate in respect of which the valuationlist was made under the Act. Section 22 provided how the rateable value whichwas the net annual value was to be arrived at from the gross value.

12. This history of the use of the word 'rate' for purposes oflocal taxation in English Law clearly shows that the word 'rate' wasused with respect to a tax which was levied on the net annual value or rateablevalue of lands and buildings and not on their capital value. It would thereforenot be wrong to say that in the legislative history and practice in Englandupto 1925, 'rate' for the purpose of local taxation meant a tax onthe annual value of lands and buildings liable to such taxation.

13. In Wharton's Law Lexicon, the word 'rate' is defined as a'contribution levied by some public body for a public-purpose, as a poorrate, a highway rate, a sewers rate, upon, as a general rule, the occupiers ofproperty within a parish or other area'. This again emphasises the factthat rate was levied not on owners of property but on occupiers, from which itfollows that it could only be levied for beneficial occupation, which, in itsturn would bring in the annual rental value so far as the occupier wasconcerned. The Rating and Valuation Act of 1925 to which we have alreadyreferred only gave final recognition to this meaning of the word'rate' and consolidated various rates prevailing for various purposesby providing for a general rate for all purposes. This general rate was raisedon so much of the pound of the rateable value of each hereditament according tothe valuation list.

14. The methods in use for the purpose of arriving at rateable value weregenerally three. Where the land or building was actually let, the valuation wasbased on the rent at which it was let. Where, however, the land or building wasnot let, two methods were evolved for the purpose of finding out the rateablevalue. The first was to assume a hypothetical tenancy (such as where the sameperson is the owner and occupier) and find out the rent at which the premiseswould be let. The second was based on the capital value of the premises. Butthe tax was not levied on the capital value itself; the capital value wasdetermined on the structural value of the building to be assessed by what wasknown to be contractor's method or contractor's test in addition to the marketvalue of the land. Sometimes the words 'effective capital value' werealso used since in some cases the actual capital cost of the building plus themarket value of land might for some reason or the other be ineffective i.e., itmight not be rent producing. Having arrived at the effective capital value itwas necessary to apply percentages thereto in order to arrive at the annualvalue. In England, the usual percentage in the case where the property was usedfor commercial purposes, was 5 per centum for the building and 4 per centum forthe land. It was after this annual value was arrived at that the rate wasimposed on this annual value : (see Complete Valuation Practice by Mustok Eveand Anstey, 5th Edn. pp. 253-258).

15. Faraday 'On Rating' also mentions that 'it is theoccupier who is rateable in respect of his occupation of rateableproperty' (p. 1). After referring to the Poor Relief Act, 1601, Faradaysays that later legislation had left the occupier as the main bearer of theburden of rate, and the basis of the rate is the beneficial occupation, meaningthereby the occupation of a hereditament for which somebody would be preparedto pay somebody net rent. Faraday also mentions the same three ways of valuingthis beneficial occupation for the purpose of arriving at the rateable value orannual value of lands and buildings, in order to levy the rate : (see Chap. IIof Faraday 'On Rating'.).

16. The same scheme is to be found in Ryde 'On Rating'. At p. 7 itis mentioned that the rateable person under the Poor Relief Act 1601 is theoccupier and not the owner of the land, though the liability is put in somecases by later Acts on the owner. Ryde further points out that the Poor ReliefAct of 1601 did not attempt accurately to define how the value of land was tobe measured, and it was for the first time in 1836 that the first statutorydefinition of 'net annual value' was given in the ParochialAssessments Act, 1836, thus giving statutory recognition to the practice whichwas being followed till then and this definition was 'the rent at whichthe hereditament might reasonably be expected to let from year to year, free ofall usual tenant's rates and taxes, and tithe, commutation rent charge, if any,and deducting therefrom the probable average annual cost of the repairs,insurance and other expenses, if any, necessary to maintain it in a state tocommand such rent' : (see pp. 242-243). The methods for arriving at thenet annual value are given as the same three, namely, (i) the actual rent ifthe premises were let, (ii) hypothetical tenancy, and (iii) capital cost fromwhich the annual value was determined at a certain percentage : (see ChaptersXII and XIV).

17. That it is the annual value and not the capital value which has alwaysbeen the basis of the rate upto 1925 is well brought out in the followingpassage at p. 329 of Ryde 'On Rating' :-

'Where property is of a kind that is rarely letfrom year to year, recourse, is sometimes had to interest on capital value oron the actual cost, of land and buildings, as a guide to the ascertainment ofannual value. There was some apparent, if not real, conflict of decisions uponthe question whether interest on capital value, or on cost, might be consideredat all; but the difficulty disappears if the rule be thus stated : the measureof net annual value is defined by statute as the rent which might reasonably beexpected; interest on cost, or on capital value, cannot be substituted for thestatutory measure, but in the absence of the best evidence, that is, actualrents, it can be looked at as prima facie evidence in order to answer thequestion of fact what rent a tenant may reasonably be expected to pay'.

18. It will thus be clear from the various statutes to which we havereferred and the various books on rating in England that the rate always hadthe meaning of a tax on the annual value or rateable value of lands orbuildings and this annual value or rateable value is arrived at by one of threemodes, namely, (i) actual rent fetched by land or building where it is actuallylet, (ii) where it is not let, rent based on hypothetical tenancy, particularlyin the case of buildings, and (iii) where either of these two modes is notavailable, by valuation based on capital value from which annual value has tobe found by applying a suitable percentage which may not be the same for landsand buildings, and it was this position which was finally brought out in boldrelief by the Rating and Valuation Act, 1925. It is clear further that it isnot the Rating and Valuation Act of 1925 which for the first time applied theconcept of net annual value and rateable value as the basis for levying a ratefor purposes of local taxation; that basis was always there for centuriesbefore the Act of 1925 was passed.

19. The present position is summed up in Halsbury's Laws of England, ThirdEdition (Vol. 32), paras 9 and 10. Paragraph 9 deals with the liability to therate in general and is in these terms :-

'The general rate is leviable by taxation of everyparson and vicar, and of every occupier of lands, houses, tithes, impropriate,propriations of tithes, coal mines, mines of every other kind, woodlands,sporting rights, and advertising rights. In certain cases the owner of propertyis rated in place of the occupier; and in a few instances, owners as such arerateable................................ .......................................................'

20. Paragraph 10 deals with the meaning and nature of rate in these terms :-

'The expression 'rate' means a rate the proceeds ofwhich are applicable to local purposes of a public nature and which is leviableon the basis of an assessment in respect of the yearly value of theproperty'.

21. This meaning of the word 'rate' in England is, as we haveshown above, not merely based on the Rating and Valuation Act, 1925; it isborne out to be so by English legislative history and practice even before theRating and Valuation Act of 1925, was passed. Therefore, it cannot be doubtedthat in England from where in this country we have borrowed the word'rate', that word had acquired a special meaning namely that it was atax on the annual value of lands and buildings found in one of the three modeswe have already indicated.

22. It is also pertinent to note that Land Tax as such was a different taxaltogether in England and was levied for the first time by the Land Tax Act of1797. Land tax is a charge on land, and not on the income likely to arise fromoccupation of land and the intention was that it should be borne by the ownerof the land. The existence of this tax as distinct from the rate on lands andbuildings brings out what the word 'rate' has always meant in localtaxation in England as indicated above : (see p. 332 of Benn and Lockwood onRating Valuation Practice, Fifth Edition).

23. Let us now look at the legislative history and practice in India upto1925. The Bombay City Municipal Act (No. III of 1888), by s. 139 provided forproperty tax. Section 154(1) thereof provided for valuation of propertyassessable to property taxes in these terms :-

'In order to fix the rateable value of any buildingor land assessable to a property tax, there shall be deducted from the amountof the annual rent for which such land or building might reasonably be expectedto let from year to year, a sum equal to ten per centum of the said annualrent, and the said deduction shall be in lieu of all allowances for repairs oron any other account whatever'.

24. It may however be noted that this Act did not use the word'rate', though it has used the words 'rateable value' in s.154.

25. The Bengal District Municipalities Act (No. III of 1884) provides by s.85 for a rate on the annual value of holdings situate within themunicipalities, and the word 'holding' is defined in this Act as'land held under one title or agreement'. By its very definition therate is on the annual value in this Act.

26. The Madras District Municipalities Act (No. IV of 1884) provides for atax on lands and buildings, and further provides that the tax shall be on theannual value of the buildings or lands or both. This Act does not use the word'rate' but what in actual fact it provides for is a rate based on theannual value of lands and buildings.

27. The Calcutta Municipal Act, (No. III of 1899) specifically uses the word'rate' and provides for imposition of rates on all buildings andlands by s. 147. Section 151 provides for valuation of buildings and lands forthe purposes of rate, and it is the annual value of lands and buildings whichis the basis of the rate, and that annual value is deemed to be the grossannual rent at which the land might reasonably be expected to let from year toyear (subject to certain deductions).

28. In North-Western Provinces and Oudh Municipalities Act (No. 1 of 1900),s. 59 provides for a tax on houses, buildings and lands situate within themunicipality, and the tax is based on their annual value. Here the word'rate' is not used but the tax is nothing other than a rate, for itis on the annual value of lands and buildings.

29. Section 59 of the Bombay District Municipalities Act (No. III of 1901),provides for the imposition of a rate on buildings or lands or both situatewithin the municipal district. The words in this Act are exactly the same as inthe Act under our consideration. Section 63 provides for the preparation ofassessment lists and clause (d) thereof lays down the annual letting value orother valuation on which the property is assessed.

30. In the Central Provinces Municipalities Act (No. XVI of 1903), s. 35provides for a tax on houses, buildings and lands, and the tax is not to exceed7 per centum of the gross annual letting value of the house, building or land.Here again the word 'rate' is not used although the tax is no morethan a rate.

31. The Madras Municipal Act (No. III of 1904) by s. 129 provides for thelevy of tax on buildings and lands. It has not used the word 'rate'but the levy is on the annual value of buildings and lands and the annual valueby s. 130 is deemed to be the gross annual rent at which the lands mightreasonably be expected to let from year to year or from month to month (subjectto certain deductions). It is remarkable how the words used in the variousIndian Acts are almost the same as in English statutes and how they follow theEnglish definitions of gross value or annual value almost word for word.Though, therefore, the word 'rate' was not used in this Act, the levywas on the annual value of the land.

32. Lastly, the Punjab Municipalities Act, (No. III of 1911) provides for atax on buildings and lands and it further provides various modes for assessmentone of which is based on the annual letting value. Two other ways are providedin this Act, namely, so much per square yard of the ground area and so much perfoot of frontage on streets and bazars. But that also does not change thenature of the tax which is not based on capital value.

33. It will thus be seen that all Indian statutes till 1911 dealing withmunicipal taxation impose a tax on the annual value of lands or buildingswithout always using the word 'rate'. In some of the statutes theword 'rate' is used but the tax is again on the annual value. Thelegislation on this subject has been summed up by Aiyangar in 'MunicipalCorporations in British India,' (Vol. III, 1914 Edn.) at p. 153 in thesewords :-

'All municipal corporations in British India areempowered to levy taxes on all buildings and lands within their local limitssubject to certain specific exemptions. The owners are made primarily liable insome municipalities, while in others both the owners and occupiers are madeliable. Taxes which they can levy form a fixed percentage on the rateable orannual values of all the said buildings and lands. The percentage varies in thedifferent municipalities and the mode of ascertaining the rateable or annualvalue also varies.'

34. Turning now to the Acts passed in India between 1912 and 1925, we findthe same state of affairs. The U. P. Municipalities Act, (No. II of 1916)provides for a tax on the annual value of buildings or lands or of both by s.128(1)(i).

35. The Madras City Municipal Act, (No. IV of 1919) imposes a property taxby s. 98. This tax is to be levied, under s. 99 on all lands and buildingswithin the city at such percentages of the annual value of buildings and landsas may be fixed by the council, subject to a maximum and minimum,. the maximumbeing 20%.

36. The Madras District Municipalities Act, (No. V of 1920) imposes aproperty tax by s. 81(1); it is to be levied, by its sub-s. (2), at suchpercentages of the annual value of buildings or lands as may be fixed by themunicipal council.

37. The C.P. and Berar Municipalities Act, (No. II of 1922) provides for atax payable by the owners of lands and buildings situate within the limits ofthe municipality, with reference to the gross annual letting value of thebuildings or lands.

38. The Bihar and Orissa Municipal Act, (No. VII of 1922) provides by s.82(1)(a) for a tax upon persons in sole or joint occupation of holdings withinthe municipality. Further by clause (b), (c), (d) and (e) of this section,provision is made for a tax on all holdings, a water tax, a lighting tax, and alatrine tax on the annual value of holdings. The other sections prescribe themaximum beyond which the taxes will not be levied. As the tax under s. 82(1)(a)is on occupation it necessarily follows that it could only be levied on theannual value.

39. It will thus be seen that these Acts which were passed between 1912 and1925, which repeal the earlier Acts also provide for taxation on lands andbuildings and though the word 'rate' is not used in any of theseActs, the tax is still on the annual value of lands and buildings. This showsthat there was a uniform legislative history and practice in India also thoughsometimes the impost was called a tax on lands and buildings and at others arate. But it was always a tax on the annual value of lands and buildings. Inany case wherever it was called a rate it was always on the annual value. Itwould therefore be not improper to infer that whenever the word'rate' is used with respect to local taxation it means a tax on theannual value of lands and buildings.

40. It will be clear further that in India up to the time the Act with whichwe are concerned was passed the word 'rate' had acquired the samemeaning which it undoubtedly had in English legislative history and practice upto the year 1925, when the Rating and Valuation Act came to be passedconsolidating the various rates prevalent in England. It would therefore beright to say that the word 'rate' had acquired a special meaning inEnglish legislative history and practice and also in Indian legislation wherethat word was used and it meant a tax for local purposes imposed by localauthorities, and the basis of the tax was the annual value of the lands orbuildings on or in connection with which it was imposed, arrived at in one ofthe three ways which we have already indicated. It seems to us therefore thatwhen in 1925 s. 73(1) of the Act while specifying taxes which could be imposedby a municipal borough used the word 'rate' on buildings or landssituate within the municipal borough, the word 'rate' must have beenused in that particular meaning which it had acquired in the legislativehistory and practice both in England and India before that date. The mattermight have been different if the words in clause (i) of that section were'a tax on buildings or lands or both situate within the municipal borough',for then the word 'tax' would have a wide meaning and would not beconfined to any special meaning. But the use of the word 'rate' inclause (i) definitely means that it was that particular kind of tax which inlegislative history and practice was known as a 'rate' which themunicipality could impose and not any other kind of tax. It is true that in theopening words of s. 73(1) it is said that the municipality may impose any ofthe following taxes, which are thereafter specified in cls. (i) to (xiv). But whenclause (i) specifies the nature of the tax as a rate on buildings or lands orboth we must find out what the word 'rate' used therein means, for itcould not be an accident that the word 'rate' was used in that clausewhen dealing with a tax on lands or buildings. Further if we find that the word'rate' had acquired a special meaning in legislative history andpractice in England and India before 1925 with reference to local taxation, itmust follow that when the word 'rate' was used in clause (i) insteadof the general word 'tax' it was that particular kind of tax whichwas known in legislative history and practice as a rate which themunicipalities were being empowered to impose. It may be added herewith someadvantage that the word 'tax' in the opening words of s. 73(1) hasbeen used in a general and all-pervasive sense as defined in s. 3(20) of theAct and not in any restricted sense; and therefore when the word'rate' is used in clause (i) it was clearly used not only in thespecific and limited sense, but also with the intention, to convey the meaningthat it had acquired by the time the Act was passed. It is remarkable that insome other clauses of s. 73(1) also the general word 'tax' has notbeen used, though of course all the imposts in cls. (i) to (xiv) are calledtaxes in the opening words of s. 73(1) for obvious reason. In clause (iii) thewords used are 'a toll on vehicles' which obviously mean that onlythat kind of tax which was known as toll which could be imposed on vehicles. Inclause (iv) the word used is 'octroi' on animals or goods, implyingthereby that kind of tax which was known as octroi could be imposed and not anykind of tax within the meaning of the general word 'tax'. Similarlyin clause (v) the words used are 'a terminal tax on goods' meaningthereby that kind of tax which was known as terminal tax could be imposed.Therefore when the first clause of s. 73(1) gives power to the municipality toimpose a rate on buildings or lands it meant that kind of tax which hadacquired a special meaning and was known as rate in the legislative history andpractice of England as well as of India upto then. That legislative history andpractice we have considered and it shows that the word 'rate'whenever used upto 1925 with reference to local taxation meant a tax on theannual value of lands and buildings and not a tax on the capital value.

41. It has however been urged that by virtue of the explanation to s. 75, itis open to the municipality in the case of lands to use two bases of valuation,namely, either capital or annual letting value. That is undoubtedly so. But itdoes not mean that because the municipality is empowered to use capital as onebasis of valuation it has been empowered when fixing a rate to fix it as somuch percentage of the capital value. That explanation carries in our opiniononly the meaning which is in accordance with the practice in England and alsoin this country and it seems to us that it is that meaning which should begiven when the basis of valuation is capital. We have already pointed out thatin England also one basis of valuation for the purpose of a rate was to findout first the capital value or the effective capital value. Then a certainpercentage of the effective capital value was taken as the annual value and thetax was levied on the annual value so arrived at. In such a case though the taxwas levied on the annual value the basis of valuation would still be capital.Therefore the fact that the explanation used the words 'the basis ofvaluation may be capital' it does not mean that the tax would be at suchand such percentage of the capital; it only means that in order to arrive atthe annual value for purposes of levying a rate which is a tax on the annualvalue, the municipality may use the capital value and then a percentage thereonto arrive at the annual value. This would be in accordance with the third wayof arriving at annual value to which we have referred earlier. Therefore we areof opinion taking into account the fact that the word 'rate' has beenused in the first clause to s. 73(1), the explanation when it says that in thecase of lands basis of valuation may be capital, only means that that method ofvaluation which was in vogue in England and which we have described as thethird method of valuation may be used to arrive at the annual value from thecapital value and the rate may then be determined as a tax on the annual value.In this view of the matter r. 350-A read with r. 243 by which the municipalityhas fixed the tax on the basis of capital value directly is against theprovisions of s. 73(1)(i) and the explanation to s. 75. The whole difficulty inthis case has arisen because unfortunately the words 'rate' or'rateable value' have not been defined anywhere in the Act, thoughthey have been defined in some other contemporaneous statutes in force at thetime the Act was passed and to which we have already referred.

42. Our attention was drawn in this connection to an amendment made in theMadras District Municipalities Act, (No. V of 1920), by the insertion of sub-s.(3) in s. 81 of that Act. This was done in 1930 and provided that 'in caseof lands which are not used exclusively for agricultural purposes and are notoccupied by, or adjacent and appurtenant to, buildings' the property taxmay be levied at such percentages of the capital value of such lands or at suchrates with reference to the extent of such lands as may be fixed. Thisamendment was a sort of exception to s. 81(2), which provided generally forlevying these taxes at such percentages of the annual value of lands andbuildings as may be fixed by the municipal council. In the first place thisamendment made in 1930 cannot affect the legislative history and practice, asit was upto 1925 when the Act with which we are concerned was passed. Besidesthis was an express provision providing in so many words for levying propertytax at a percentage of the capital value in the case of certain exceptionallands. The amendment was made in 1930 before the Government of India Act, 1935,had come into force with its separate legislative lists and there could be noquestion then of the competence of the provincial legislature to make such anamendment. In any case this exceptional provision made after 1925 in expresswords cannot detract from the meaning of the word 'rate' particularlywhen the Act has not used the word 'rate' anywhere. Further theprovision in the Act with which we are concerned is not in express terms. Allthat the explanation provides is that in case of open lands, the basis of valuationmay either be capital or annual letting value. Valuation based on capital waswell-known in England with respect to the levy of rates as it was the thirdmethod to which we have referred. Therefore when the explanation uses thesewords it must in our opinion be held to refer to that well known method ofvaluation prevailing in England with respect to levy of rates and cannot beread to mean a percentage of the capital value itself. At any rate there are noexpress words in the explanation to that effect and therefore it should be readto mean the third method of valuation in force in England to which we havealready referred. The amendment therefore made in 1930 in the Madras Act doesnot in any way affect the legislative history and practice relating to the word'rate' which, as we have pointed out, was not even used in that Act.We may add that we express no opinion as to the validity of this amendmentafter the Government of India Act, 1935 and the Constitution of India have comeinto force.

43. It is however, urged that it really makes no difference whether the rateis levied at a percentage of the capital value or is a percentage of the annualvalue arrived at on the basis of capital value by fixing a certain percentageof the capital value as the yield for the year. It is true that mathematicallyit is possible to arrive at the same figure for the rate by either of thesemethods. Suppose that the capital value is Rs. 100/- and, as in this case, therate is fixed at 1 per centum of the capital value, it would work out to Re.1/-. The same figure can be arrived at by the other method. Assume that 4 percent is the annual yield and thus the annual value of the piece of land, thecapital value of which is Rs. 100/-, will be Rs. 4/-. A rate levied at 25 percent will give the same figure, namely, Re. 1/-. Mathematically, therefore itmay be possible to arrive at the same amount of rate payable by an occupant ofland, whether the rate is fixed at a particular percentage of the capital valueor a particular percentage of the annual value. But this identity would not inour opinion make any difference to the invalidity of the method of fixing therate on the capital value directly. If the law enjoins that the rate should befixed on the annual value of lands and buildings, the municipality cannot fixit on the capital value, and then justify it on the ground that the same resultcould be arrived at by fixing a higher percentage as the rate in case it wasfixed in the right way on the annual value. Further by fixing the rate as apercentage of the capital value directly, the real incidence of the levy iscamouflaged. In the example which we have given above, the incidence appears asif it is only 1 percent but in actual fact the incident is 25 percent of the annualvalue. Further if it is open to the municipality to fix the rate directly onthe capital value at 1 percent it will be equally open to it to fix it, say at10 percent, which would, taking again the same example, mean that the ratewould be 250 percent of the annual value and this clearly brings out thecamouflage. Now a rate as 10 percent of the capital value, may not appearextortionate but a rate at 25 percent of the annual value would be impossibleto sustain and might even be considered as confiscatory taxation. This showsthe vice in the camouflage that results from imposing the rate at a percentageof the capital value and not at a percentage of the annual value as it shouldbe. Lastly, municipal corporations are elected bodies and their members areanswerable to their electorates. In such a case it is necessary that theincidence of the tax should be truly known. Taking the example which we havegiven above, the municipal councillors may not feel hesitant in imposing a rateat 1 percent of the capital value, but if they were to impose it at 25% of theannual value they may hesitate to do so, because they have to face theelectorates also. We are therefore of opinion that though mathematically it maybe possible to arrive at the same figure of the actual tax to be paid as a ratewhether based on capital value or based on annual value, the levying of therate as a percentage of capital value would still be illegal for the reasonthat the law provides that it should be levied on the annual value and nototherwise. By levying it otherwise directly at a percentage of the capitalvalue, the real incidence of the rate is camouflaged, and the electorate notknowing the true incidence of the tax may possibly be subjected to such a heavyincidence as in some cases may amount to confiscatory taxation. We aretherefore of opinion that fixing of the rate at a percentage of the capitalvalue is not permitted by the Act and therefore r. 350-A read with r. 243 whichpermits this must be struck down, even though mathematically it may be possibleto arrive at the same actual tax by varying percentages in the case of capitalvalue and in the case of annual value. It follows therefore that as the tax inthe present case is levied directly as a percentage of the capital value it isultra vires the Act and the assessment based in this manner must be struck downas ultra vires the Act.

44. In the view that we have taken of the meaning of the word'rate' with the result that r. 350-A read with r. 243 has to bestruck down as ultra vires the Act, it is not necessary to consider the secondquestion raised before us, namely, whether the explanation would be ultra viresthe Provincial Legislature because of item 55, List I, of the Seventh Scheduleto the Government of India Act, 1935, if it authorises the municipality to levythe rate at a percentage of the capital value. We have already said that thatis not the meaning of the words used in the explanation and the second pointtherefore does not fall to be considered.

45. We therefore allow the appeal and set aside the order of the High Courtand declare that r. 350-A read with r. 243 is ultra vires s. 73 of the Act readwith the explanation to s. 75. It is further declared that the assessment listfor the year 1947-48, published on January 25, 1948, by the municipality forlevying the said tax in so far as it is prepared under r. 350-A is illegal,ultra vires and void. The respondent municipality is therefore restrained fromrecovering from the plaintiffs, appellants the said tax on the open landsassessed in the said assessment list for that year and later years. The appealis hereby allowed with costs throughout in favour of the plaintiffs-appellants.

Sarkar, J.

46. The appellants are holders of vacant lands within the limits of therespondent Corporation. The Corporation framed a rule providing that the ratepayable on open lands would be on the basis of their capital value. Thequestion at issue is whether this rule is void.

47. The Corporation was formed under the Bombay Municipal Boroughs Act,1925, to two of the provisions of which only it is necessary to refer for thepurpose of this appeal. The first is s. 73 which provides that, 'amunicipality may impose for the purposes of this Act any of the followingtaxes, namely :- '(i) a rate on buildings or lands or both situate within themunicipal borough.' The other is s. 75 which states : 'A municipalitybefore imposing a tax shall observe the following preliminary procedure :- (a)it shall, by resolution.... select....... one or other of the taxes specifiedin s. 73 and approve rules...... prescribing the tax selected and in suchresolution and in such rules specify :-..... (iii) in the case of a rate onbuildings or lands or both, the basis, for each class of the valuation on whichsuch rate is to be imposed;......................................................................... Explanation- In the case of lands the basis of valuation may be either capital or annualletting value.' It is under this section that the rule in question wasframed. That rule so far as material is in these terms :

Rule 350-A. - '...... therate on open land shall be levied as under :-

(I).....................

(II) Rate on...... open land...shall be levied at 1% of the valuation based on capital..........'.

48. Rule 253 provides that 'Valuation based upon capital shall be theCapital value of buildings and lands as may be determined from time to time bythe valuers of the Municipality.'

49. There is no doubt that as a result of these sections and rules, theappellants were being made to pay 1% of the capital value of their lands asassessed by Corporation's valuers. The appellant's had some objection to the valuationon its merits but it is conceded that these cannot be raised in the presentproceedings. Learned counsel for the appellants has, therefore, confinedhimself entirely to challenging the Corporation's power to impose the levy onthe basis of the capital value of the lands.

50. The challenge has been based on two grounds, none of which, to my mind,is sustainable. It is first said that the Corporation's power to levy a tax onlands is confined by s. 73 to that variety of tax which is called a'rate' and a 'rate' is an impost which is leviable on thebasis of an assessment in respect of the yearly value of property. Hence, it iscontended, the Corporation had no power to levy any tax based on the capitalvalue of the lands and its rules giving authority to do so are, therefore,void.

51. The foundation on which this contention rests is that the expression'rate' has a technical meaning namely, a levy on the basis of yearlyvalue of property. Support for this contention is sought from various wellknown English text books on 'Rating.' I doubt very much if theseauthorities meant to say that a 'rate' must be based on yearly value;I think they stated, 'rates' are in fact based on yearly values. Thetwo are not, in my view, the same. Furthermore, in England the law of ratinghas always been statutory : see Hulsbury's Laws of England (3rd ed.) vol. 32 p.3. It would follows that all that these text books could say was that in allthe successive rating statutes the basis of yearly values has always been adopted.I am unable to agree that it follows from this that the expression rate can besaid to have acquired a technical meaning as referring only to an impost basedon annual value.

52. Reference was made at the Bar to the State of Madras v. Gannon Dunkerleyand Co. Ltd. : [1959]1SCR379 . In that case it was held that in decidingthe scope of an entry in a legislative list in the Government of India Act,1935 reference might legitimately be made to legislative practice and to thewell-recognised legal imports of terms used in that entry. It seems to me thatthe problem here is different. We have to decide what the plain English meaningof the word 'rate' is and not the scope of legislative power.

53. Now, as to the plain meaning, the Shorter Oxford Dictionary defines'rate' as 'amount of assessment on property for local purpose.' So inHalsbury's Laws of England (3rd ed.) vol. 32 p. 3 it has been said that'Rates are principal means by which money to defray local governmentexpenses is raised by direct levy on occupiers, or in certain cases owners, ofproperty within the area of the authority making the rate.' Rate,therefore, is an expression used to indicate an impost levied by a localauthority to raise funds for its expenses. Such an impost would be rateirrespective of the basis on which it is levied. Of course, the authoritycannot levy a rate, or indeed any impost, unless a statute gives it the powerto do so and the manner in which it can levy that impost must also be decidedby statute. Rate is only the name given to an impost and there is nothinginherent in its nature to indicate that the impost must be assessed in acertain way. I find nothing in the authorities to support the view that inEngland rate must always be levied on the basis of annual value and an impostnot so levied, would not be rate at all.

54. So far as our country is concerned, the foundation for the argument ismuch weaker. We have a large number of statutes in which an impost by a localauthority though based on annual value has been called 'tax'; see forexamples - The Bombay City Municipal Act (Act No. III of 1888), The MadrasDistrict Municipalities Act (Act No. IV of 1884). The North-Western Provincesand Oudh Municipalities Act, (Act No. 1 of 1900) and The Central Provinces MunicipalitiesAct (Act XVI of 1903). Our practice has, therefore, departed from the Englishpractice at least to this extent that we do not always call imposts levied forlocal government or municipal expenses, 'rates'. Also according toour legislative practice, even a 'tax' may be based on annual value;an assessment on the basis of an annual value need not necessarily be called a'rate'. It cannot, therefore, be said that in our country the world'rate' has acquired any technical meaning as indicating only animpost by a local authority assessed on the basis of annual value of property.Our legislatures have described the impost indifferently both as'tax' and as 'rate' as it suited them and have in each caseprovided for the method of its assessment. In fact s. 81(3) of the MadrasDistrict Municipalities Act, 1920 permits a municipality to levy 'propertytax' on certain lands 'at such percentages of the capital value ofsuch lands....... as it may fix'.

55. I also do not think that the argument had been presented to the HighCourt in this form. We have, therefore, not the advantage of the views of theHigh Court as to whether the expression 'rate' has acquired atechnical meaning. Neither do I think that much material had been placed beforeus by counsel for the appellants in this connection. All this makes itnecessary for us to be fully satisfied about the suggested technical meaning ofthe term 'rate' before we pronounce in its favour, and speaking formyself, I confess I am very far from being so satisfied.

56. There is yet another difficulty in the appellant's way. No doubt s. 73uses the word 'rate', but it is clear that the rate is a kind of taxfor the section says so. Section 75 gives the municipality the power to framerules specifying the basis of the valuation on which a rate on lands is to beimposed. The explanation to this section puts it beyond doubt that themunicipality may in the case of lands specify at its pleasure as the basiseither the capital value or the annual letting-value. The Act, therefore,contemplates a rate which can be based on capital value. Quite plainly,therefore, the word 'rate' has not been used in the Act in atechnical sense, even if it has one. It would follow that the rule underchallenge was properly framed under s. 75 read with the explanation.

57. It is however said that the explanation to s. 75 must be ignored as itis in conflict with main provision authorising the levy, namely, s. 73. Thecontention is that since s. 73 authorises only the imposition of a rate, thatis, an impost based on annual value, the explanation to s. 75 which permits theimpost to be based on capital value is outside the scope of the main provisionand hence must be left out. I am entirely unable to accept this contention. Thedifferent parts of a statute are not intended to be in conflict with each otherand, therefore, if not impossible they should be read as consistent parts of awhole. In the present case I find no difficulty in so reading them. Section 73empowers the imposition of a tax which it calls a rate. Section 75 authorisesthe tax to be assessed either on capital or on annual value. Obviously theintention is that the tax is not a rate in the technical sense, if there issuch a sense in which it must be based on the annual value. The word'rate' must be understood, whatever it might in its technical sensemean, to have been used in the statute to describe a tax the basis of which canbe capital value.

58. Then it was said that the explanation does not show that the basis ofthe tax was not intended to be annual value for one of the well known methodsof finding out the annual value is first to find out the capital value and thenfrom it the annual value by finding out what yearly income the capital wouldproduce if invested at a rate of interest which would be considered reasonableat the current market conditions, and it is only for the purpose of finding outthe annual value by this method that the explanation provides that the basis ofthe valuation for the imposition of the rate might be the capital value.

59. This seems to me to be quite an impossible contention. It is based onthe assumption that what is imposed being a rate which must be based on annualvalue, the explanation must be read so as to harmonise with it. If this werenot so, there would of course be no reason to contend that capital value hadbeen mentioned only as the first step for ascertaining the annual value. But,there is nothing in the explanation to show that capital value has beenmentioned only for the purpose of finding out the annual value from it. We haveto read many words into it to produce that result. Such a thing is notpermissible and there is no warrant for doing it either. Again, this readingdoes much more than bring about harmony; it makes the explanation quitesuperfluous, quite unnecessarily enacted. For, if the impost was a rate in thesense the appellants stated, it had necessarily to be based on annual value andthere was, therefore, no need to enact by the explanation how it was to bebased or to expressly provide that the annual value might be ascertained firstby finding out the capital value or by any to the other recognised methods ofdoing so for all such methods would necessarily be available. Since, however,statutes are not enacted unnecessarily, the explanation must have been putthere to serve a purpose. That purpose can only have been to provide that therate, a tax, authorised by s. 73 could be lawfully imposed on either of thebasis mentioned in the explanation. The contention of the appellants,therefore, that under s. 73 only an impost based on the annual value of thelands could be levied and r. 350-A read with r. 243 must be held to be beyondthe powers given by the Act, cannot be sustained.

60. I turn now to the other ground on which the power to impose the tax onthe basis of capital value was challenged. It was said that if the rulepermitting the imposition on the basis of capital value had been authorised bythe explanation to s. 75 or by any other provision in the Act, these provisionswould be void and illegal as they could be beyond the legislative competence ofthe Bombay Legislature by whom the Act was enacted. This argument was foundedon the Government of India Act, 1935.

61. The Bombay Act was passed in 1955, that is, before the Government ofIndia Act, 1935 was passed. The rule under which power was taken to impose therate on the basis of capital value was however framed in February 1947, thatis, long after the Government of India Act 1935. After the Government of IndiaAct had come into force, a new sub-section numbered sub-section (2) wasinserted in s. 73 of the Bombay Act which provided that 'Nothing in thissection shall authorise the imposition of any tax which the ProvincialLegislature has no power to impose in the Province under the Government ofIndia Act 1935.' It was, therefore, contended that the power to impose therate based on the capital value of lands even if conferred by s. 73 or s. 75 ofthe Bombay Act would be void unless it was a tax which the Bombay legislaturecould lawfully impose under the Government of India Act. This contention isperfectly legitimate. I think I should point out now that as this case isconcerned with assessment for the years 1947-48 and 1948-49, it is unnecessaryto consider the question of legislative competence of the legislature of theState of Bombay under the Constitution.

62. The question then is : Is the tax imposed in the present case outsidethe powers of the Provincial legislature under the Government of India Act,1935 The respective powers of the Provincial and Central legislatures asdefined by that Act are contained in Lists II and I in the Seventh Schedule toit. Under item 42 of List II, the Provincial Legislatures had power to pass anAct imposing 'taxes on lands and buildings.' The Corporation contendsthat the Bombay Act comes fully within item 42 of List II. The Appellants, onthe contrary contend that it is really a legislation under item 55 of List Iunder which the Central legislature has the power to legislate, to impose'taxes on the capital value of the assets, exclusive of agricultural land,of individuals and companies.' They say that this is so because the BombayAct permits the tax to be imposed on the basis of capital value of the lands.If this contention is correct, no doubt the imposition of the tax in this casewould be illegal and void.

63. As I have earlier said, in my opinion, the appellants' contention isunsound. In my view, the Bombay Act imposes a tax on lands and is, therefore,within item 42 of List II. The fact that it has provided for that tax beingquantified on the basis of the capital value of the land taxed does not take itout of item 42 of List II and place it under item 55 of List I. It is quiteobvious that in providing the two items, namely, item 55 of List I and item 42of List II, the makers of the Government of India Act contemplated twodifferent varieties of taxes. The Provincial Legislature had been given thepower to tax units of lands and buildings irrespective of their value and theCentral Legislature the power to tax the value of assets. As was said in theProvincial Treasurer of Alberta v. Kerr [1933] A.C. 710. 'Theidentification of the subject-matter of the tax is naturally to be found in thecharging section of the statute, and it will only be in the case of someambiguity in the terms of the charging section that recourse to other sectionsis proper or necessary.' Now the charging section in this case is in amanner of speaking s. 73. That permits only a tax on lands and buildings. Wehave not got in the records the resolution under s. 75 selecting the tax, onland and buildings as a tax which the municipality chose to impose. There is noquestion, however, that such a resolution was passed and it must have been interms of s. 73. The charging provision that we have in this case does not,therefore, travel outside the power conferred by item 42 in List II. Nor has itbeen suggested that it is ambiguous.

64. The only question, therefore, is whether by providing that the tax mightbe levied at 1% of the capital value of the land taxed, the entire scope of thecharging section is being altered and in reality the tax levied becomes a taxon capital asset I feel no doubt that the question must be answered in thenegative. The importance of the distinction between the levy of a tax and themachinery of its collection has often been pointed out by judicialpronouncements of the highest authority. One of the more recent of these is R.C. Jall v. Union of India : AIR1962SC1281 . I suppose the machineryof collection would include the measure of the tax; in any case, I think, theyare on a par. The subject-matter of taxation is obviously something other thanthe measure provided for the quantification of the tax.

65. In Ralla Ram v. Province of East Punjab [1948] F.C.R. 207., theFederal Court upheld a Provincial statute which imposed a property tax assessedon the annual value of the property and rejected the contention that such a taxwas really a tax on income which only the center could impose under item 54 ofList I. I think it may be legitimately said that if a tax expressly levied onland and made assessable on its annual value, that is, its income, is not byreason of such method of assessment a tax on income, a tax on land cannotbecome a tax on capital value of assets because it is made assessable on thebasis of the capital value of the land.

66. There are however other reasons why the tax in the present case cannotbe said to be a tax on the capital value of assets. This tax is leviable onland on the basis of its capital value even though the land may be subject to acharge and even though that charge may exceed the capital value of the land. Insuch a case for the purpose of assessment the charge can be completely ignoredand the tax levied notwithstanding that to the owner the property is of novalue in view of the charge. If the tax was in reality a tax on capital valueof assets it could not in the circumstances that I have imagined, be levied atall. That very clearly marks out the essential difference between this Act andan Act imposing a tax on capital value of assets. Another distinction is thatin the case of a tax on capital value of assets the tax can be levied only onindividuals owning the assets. That I think follows from the words of item 55of List I. Under s. 85 of the Bombay Act, however, the present tax can belevied on a person in occupation of the land who holds it on a building leasetaken from another. He is not the owner of it but nonetheless is liable to betaxed under the Act on the basis of the full capital value of the land and noton the value of his leasehold only. If the tax was on the capital value ofassets, such a person could not have been so taxed. Again, under the samesection a proportionate part of the tax which is primarily payable by the ownerunder the Act, may be recovered from a tenant in possession of the land andthis would of course not be possible if the Bombay Act, was an Act imposing atax on the capital value of assets of individuals for the assets, that is, landdid not belong to the tenant at all. I think, therefore, that the contention ofthe appellants that the Act really authorises the imposition of a tax on thecapital value of assets of individuals and is thus an Act which the Centrallegislature could pass under the Government of India Act and the Provinciallegislature could not, must be rejected.

67. I would for these reasons dismiss the appeal with costs.

BY COURT : In accordance with the majority opinion the appeal is allowedwith costs throughout.

68. Appeal allowed.


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