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The State of Andhra Pradesh Vs. New Delhi Municipal Committee - Court Judgment

LegalCrystal Citation
SubjectConstitution
CourtDelhi High Court
Decided On
Case NumberCivil Writ No. 342 of 1969
Judge
Reported inAIR1975Delhi223; ILR1975Delhi84
ActsConstitution of India - Articles 246, 246(4), 289(1) and 372-A; Punjab Municipal Act, 1911; Government of India Act, 1935; Delhi Laws Act, 1912; Union Territories Laws Act, 1950
AppellantThe State of Andhra Pradesh
RespondentNew Delhi Municipal Committee
Appellant Advocate P. Ram Reddy,; Santosh Chatteri and; M.K. Ramamurtv, Sr
Respondent Advocate Bikramjit Navyar, Adv.
Cases ReferredKannivan v. Income
Excerpt:
a) the case debated on the nature of union taxation, whether it would be exempted to the properties belonging to the states and situated in the union territory of delhi - the house tax was levied as per the punjab municipal act, 1911 which was as applicable to the union territory of delhi - hence it was held that the properties of several states situated in the union territory of delhi were exempted from such tax by virtue of article 289(1) of the constitution of india b) the case debated whether 'state' includes union territories as per article 246 (4) of the constitution of india - it was held that there was distinction between ' state' and 'union territory' - thereforee when the definition could not be made applicable owing to the subject, hence the word 'state' would be referred to.....h.l. anand, j.1. the principal question that those petitions under article 226 of the constitution of india by the states of andhra pradesh. jammu and kashmir and punjab, in one of which the state of orissa was allowed to intervene, raise is whether the immovable property belonging to a state situated in the union territory of delhi is immune from house tax livable under the provisions of the punjab municipal act, 1911, as applicable to delhi (hereinafter to be referred to as 'the act') by virtue of the exemption granted to the property of a state from union taxation by article 289(l) of the constitution of india.2. certain subsidiary questions also arise in the several petitions as to the basis on which house tax should be levied, the method of computation of the annual value and the.....
Judgment:

H.L. Anand, J.

1. The principal question that those petitions under Article 226 of the Constitution of India by the States of Andhra Pradesh. Jammu and Kashmir and Punjab, in one of which the State of Orissa was allowed to intervene, raise is whether the immovable property belonging to a state situated in the Union Territory of Delhi is immune from house tax livable under the provisions of the Punjab Municipal Act, 1911, as applicable to Delhi (hereinafter to be referred to as 'the Act') by virtue of the exemption granted to the property of a State from Union Taxation by Article 289(l) of the Constitution of India.

2. Certain subsidiary questions also arise in the several petitions as to the basis on which house tax should be levied, the method of computation of the annual value and the quantification of the house tax but in the view that I have taken of the constitutional question none of the other questions would survive and it is, thereforee, unnecessary to give the facts or the circumstances leading to the present petitions save to mention that the properties in dispute were hitherto being assessed to house-tax by the New Delhi Municipal Committee, the respondent herein, and the house-tax was being paid until the States challenged its constitutionality.

3. On behalf of the various States it was argued that by virtue of Art. 289 of the Constitution, the property of a State was exempt from Union taxation subject to the exception incorporated in clause (2) of Article 289, that clause (2) of Article 289 would not operate because the operation of the exception is dependant on legislation by Parliament in that behalf and no such law has been made by Parliament: that 'Union taxation' would mean taxes which the Union is empowered to impose; that by virtue of Article 265 of the Constitution of India, every tax must have its Licensing in law and that the Union taxation must, thereforee be co-extensive with the Power of Parliament to make laws: that by virtue of Article 246(4) of the Constitution of India the power of Parliament to make laws extends not only to the subjects enumerated in the Union List, and the concurrent List but also to matters included in the State List in relation to any part of the territory of India not included in a State as also in respect of residuary subjects by virtue of Art. 248 of the Constitution of India; that by virtue of Part Viii of the Constitution of India, the Union Territory of Delhi is to be administered by the President and the laws of Parliament and any taxation which has its genesis in such a law or in law which is deemed to have been made by Parliament would be 'Union taxation': that the agency through which taxes are collected or the funds to which the proceeds go or the entity to which the funds are ultimately allocated are wholly irrelevant for the determination of the question as to whether a particular tax was part of Union taxation; that tax on property livable in the Union Territory of Delhi by virtue of the provisions of the Act, though relating to a matter that falls within the State List, would nevertheless be deemed to be Union Taxation because by virtue of the application of the Act to the Union Territory of Delhi, it would be deemed to have been incorporated in law made by Parliament and. thereforee, be treated as law made be Parliament by virtue of its power under clause (4) of Article 246 of the Constitution of India: and that properties of the various States situated in the Union Territory of Delhi would, thereforee, be exempt from tax on property.

4. On the other hand, it was contended on behalf of the New Delhi Municipal Committee (hereinafter to be referred as 'the Committee') that the test to determine if a tax formed part of Union taxation within the meaning of Article 289(1) was if the proceeds from it formed part of the Consolidated Fund of India under Article 266(1) of the Constitution of India: that the proceeds of tax on property under the Act did not form part of the Consolidated Fund of India but were kept by the Committee for its own purpose: that the tax on property was enumerated as one of the subjects in the State List; that the Act was a piece of State legislation and did not, by virtue of its application to the Union Territory of Delhi. Become a piece of Central legislation that by virtue of Article 246 of the Constitution of India the Union legislation and the State legislation are two different fields of legislative action and taxation which has its genesis in any of the matters enumerated in List I or List Iii alone would form -part of Union taxation, that the Act was not made by Parliament by virtue of power under Article 246(4) of the Constitution of India: that Union had no power to impose tax on property arid that the property of the various States in the Union Territory would thereforee, not be exempt from this tax. It was, however, not disputed that clause (2) of Article 289 would not be attracted because Parliament had not made any law in that behalf and that the scope of exemption would depend on the true interpretation of Article 289(1) of the Constitution irrespective of the use to which the property was being put.

5. What then is the true meaning of the expression 'Union Taxation' in Article 289(1) of the Constitution and what is the precise scope and limit of the exemption provided by it?

6.Article 289 and its complementary Article 285 read as under:-

'289 (1) The property and income of a State shall be exempt from Union taxation.

(2) Nothing in clause (1) shall prevent the Union from imposing or authorizing the imposition of any tax to such extent, if any, as Parliament may by law provide in respect of a trade or business of any kind carried on by, or on behalf of, the Government of a State, or any operations connected therewith, or any property used or occupied for the purposes of such trade or business, or any income accruing or arising in connection therewith.

(3) Nothing in clause (2) shall apply to any trade or business, or to any class of trade or business, which Parliament may by law declare to be incidental to the ordinary functions of Government.'

'285 (1) The property of the Union shall, save in so far as Parliament may by law otherwise provide, be exempt from all taxes imposed by a State or by any authority within a State.

(2) Nothing in clause (1) shall, until Parliament by law otherwise provides, prevent any authority within a State from leaving any tax on any property of the Union to which such property was immediately before the commencement of this Constitution liable or treated as liable, so long as that tax continues to be levied in that State.

7. The expression 'Union taxation' is not defined in the Constitution and is only used in Article 289. Even Art. 285, which is the corresponding provision giving exemption to the Property of the Union, is differentia worded and uses the expression 'all taxes imposed by a State or by any authority within a State' but does not use the expression 'State taxation' in contradistinction to 'Union taxation.'

8. Article 265 of the Constitution of India provides that every tax shall be levied or collected only by the authority I of law with the result that the power of the Union and the States to impose taxes within their respective spheres of Permissible taxation must be relatable to laws which they are competent to make with 'the result that the powers of the Union and the States to impose tax must be coextensive with the powers of their respective legislatures with reference to the distribution of legislative business provided in Part Xi of the Constitution read with the Union, the State and the concurrent Lists. Incidentally while the Union and State Lists enumerate matters which deal with taxation, the Concurrent List does not except with certain duties and fees. Article 248, however, when it refers to the residuary Powers of legislation and vests it in Parliament, not on provides for Parliament's exclusive powers to make laws with respect to any matter not enumerated in the Concurrent List or State List but takes care to add by clause (2) that 'such power shall include the power of making any law imposing a tax not mentioned in either of those Lists.'

9. It would, thereforee, be necessary to examine the scheme of the Constitution with regard to the demarcation of legislative powers between the Union Legislature and the State Legislatures to determine the true meaning and import of the expression 'Union taxation.'

10. India is a Union of States and its territories comprise the territories of the 'States' and the Union territories specified in the First Schedule. Including the Union Territory of Delhi, and such other territories as may be acquired by it. This is what Article 1 of the Constitution provides. The Constitution is federal in character and is based on a rigid division of executive powers between the Union and the States executives and a corresponding demarcation of legislative! Functions of the Union Legislature that is, the Parliament and the Legislatures of the States. Article 245 provides that subject to the provisions of the Constitution, Parliament may make laws for the whole or anorak of the territory of India and the Legislature of a State may make laws for the whole or any part of the State. Article 246, as indeed Chapter I of Part Xi of the Constitution. in which this Article occurs. Deals with the distribution of legislative powers. Clause (1) of this Article provides that Parliament would have exclusive power to make laws with respect to any of the matters enumerated in the Union List in the Seventh Schedule of the Constitution. Clause (2) provides for the concurrent power of Parliament and State legislatures with reload to matters enumerated in the Concurrent List, in the Seventh Schedule to the Constitution. Clause (3) deals with the power of the Legislature of a State to make laws for such a State or any part of it with respect to matters enumerated in the State List in the Seventh Schedule. Article 248 provides for the power of Parliament to make laws with respect to residuary matters, that is, matters not enumerated in any of the two Lists -the concurrent and the State.

11. Chapter I further provides for exceptions to the general rule of demarcation of legislative powers provided in clauses (1). (2) and (3) of Article 246 and Article 248. One of these exceptions is contained in clause (4) of Article 246 while the other categories of exceptions are contained in Articles 249 to 253 of the Constitution.

12. The exception provided for in clause (4) of Article 246 deals with 'any part of the territory of India not included in a State' and extends to such territories power of Parliament to make laws with respect not only to matters enumerated in the Union and the Concurrent List but also to matters enumerated in the State List. The Union Territory of Delhi is one such territory and a provision with regard to its administration, as indeed the other Union territories, is made in Part Viii of the Constitution. Article 239 in this part provides that every Union Territory shall be administered by the President acting, to such extent as he thinks fit, through an administrator to be appointed by him with such destination as he may specify. Articles 239-A. 239B and 240 deal with certain Union territories other than Delhi while Art. 241 deals with the constitution of High Courts in the various Union territories of India. It so happens that of the various Union territories enumerated in the First Schedule to the Constitution, the Union Territory of Delhi does not have a Legislature and it is for this reason that apart from the administration of the Union Territory, which is provided in Part Viii of the Constitution, provision had to be made for the enactment of laws with reared to such a territory and Clause (4) of Article 246 of the Constitution of India is that provision.

13. The exceptions provided for in Articles 249 to 253 of the Constitution, ho,wever, are by and large intended to deal with extra ordinary situations. Article 249, for example extends the power of Parliament to make laws with respect of any matter enumerated in the State List if the Council of States declares by a resolution by a requisites majority that such a course would be 'necessary or expedient in the national interest.' Article 250 however, empowers Parliament to make laws with respect to whole or part of India 'with respect to any of the matters enumerated in the State List while a Proclamation of Emergency is in operation.' Article 252 then empowers Parliament to make laws with respect to matters enumerated in the State List if the legislatures of two or more States resolve that such a course appears 'to be desirable'. Article 253 reserves to Parliament exclusive power to make laws for the whole or by part of the territory of India 'for implementing any treaty agreement or convention with any other country or countries or any decision made at any international conference, association or other body.'

14. A picture of distribution of legislative powers and demarcation of fields of taxation between the Union and the States and of their corresponding legislatures would be incomplete without a reference to the Provisions in Chap. I of Part Xii of the Constitution with regard to the financial matters notable Articles 266 to 275. Article 266 Provides that all revenues received by the Government of India, all loans raised by that Government and all moneys received by that Government in repayment of loans shall form one consolidated fund to be entitled 'the consolidated Fund of India,' and all revenues received by the Government of a State, all loans raised by that Government and all moneys received by that Government in repayments of loans shall form one consolidated fund to be entitled 'the Consolidated Fund of the State.' Article 267 then provides for the Contingency Fund of India and the Contingency Fund of the State. Article 268 provides for the distribution of the revenues between the Union and the States. Articles 268 provides that stamp duties and such duties of excise on medical and toilet preparations as are mentioned in the Union List shall be levied by the Government of India but shall be collected where they are legible within any Union territory by the Government of India while in other cases by the State within which such duties are respectively livable and that the proceeds of any such duties livable within any such State shall not form part of Consolidated Fund of India but shall be sent to that State. Article 269 makes provision with regard to taxes levied and collected by the Union but which would be assigned to the States while Article 270 provides for taxes levied and collected by the Union and distributed between the Union and the States. Article 271 provides for surcharge on certain duties and taxes for purposes of the Union and Article 272 provides for taxes which are levied and collected by the Union and may be distributed between the Union and the State. Article 273 makes provision for grants in lieu of export duty on jute products. Article 275 provides for grants from the Union to certain States. Article 280 provides for appointment by the President of a Finance Commission periodically to make recommendations to the President as to-

'(a) the distribution between the Union and the States of the net proceeds of taxes which are to be, or may be divided between them and the allocation between the States of the respective shares of such proceeds,

(b) the Principles which should govern the grants-in-aid of the revenues of the States out of the Consolidated Fund of India.'

15. It may be useful to mention that the Constitution provides for exemption of income and property of a State from Union taxation and the property of a Union from all taxes imposed by a State or by any authority within a State on a near reciprocal basis. While Article 289 exempts 'the property and income of a State' from 'Union taxation' except in case the Parliament authorizes the imposition of any tax in respect of a trade or business of any kind carded on by, or on behalf of, the Government of a State, or any operations connected therewith or any property used or occupied for the purposes of such trade or business, or any income accruing or arising in connection therewith. 'Article 285 property for exemption to the 'property of the Union' from all taxes imposed by a State or by any authority within a State.' Clause (2) of Article 285, however, exempts from the operation of clause (1) of that Article any levy of tax on any property of the Union within a State to which such property was immediately before the commencement of the Constitution liable or treated as liable so long as that tax continues to be levied in that State until Parliament by law otherwise provides.

16. On a review of the various Provisions in Part Xii of the Constitution, Sinha, C. J.. as he then was summed up the -position thus in Re. The Bill to Amend Section 20 of the Sea Customs Act. 1878 and Section 3 of the Central Excises and Salt Act. 1944. : [1964]3SCR787 :

'It will thus appear that Part Xii of the Constitution has made elaborate provisions as to the revenues; of the Union and of the States, and as to how the Union will share the proceeds of duties and taxes imposed by it and collected either by the Union or by the States. Sources of revenue which have been allocated to the Union are not meant entirely for the purposes of the Union but have to be distributed according to the principles laid down by Parliamentary legislation as contemplated by the Articles aforesaid, Thus all the taxes and duties levied by the Union and collected either by the Union or by the States do not form part of the Consolidated Fund of India but many of those taxes and, duties are distributed amongst the States and form part of the Consolidated Fund of the States. Even those taxes and duties which constitute the Consolidated Fund of India may be used for the purposes of supplementing the revenues of the States in accordance with their needs. The question of the distribution of the aforesaid taxes and duties amongst the States and the principles governing them as also the principles governing grants-in-aid of revenues of the States out of the Consolidated Fund of India are matters which have to be decided by a happy powered Finance Commission which is a responsible body designated to determine those matters in an objective way. It cannot, thereforee, be justly contended that the construction of Article 289 suggested on behalf of the Union will have the effect of seriously and adversely affecting the revenues of the States. The financial arrangement and adjustment suggested in Part-XII of the Constitution has been disciplined by the Constitution-makers in such a way as to ensure an acquirable distribution of the revenues between the Union and the States, even though those revenues may be derived from taxes and duties imposed by the Union and collected by it or through the agency of the States. On the other hand, there may be more serious difficulties in the way of the Union if we were to adopt the very wide interpretation suggested on behalf of the States. It will thus be seen that the powers of taxation assigned to the Union are based mostly on considerations of convenience of imposition and collection and not with a view to allocate them solely to the Union: that is to say, it wag not intended that all taxes and duties imposed by the Union Parliament should be expended on the activities of the Center and not on the activities of the States. Sources of revenue allocated to the States, like taxes on land and other kinds of immovable property, have been allocated to the States alone. The Constitution-makers realized the fact that those sources of revenue allocated to the States may not be sufficient for their purposes and that the Government of India would have to subsidize their welfare activities out of the revenues levied and collected by the Union Government. Realizing the limitations on the financial resources of the States and the growing needs of the community in a welfare State, the Constitution has made as already indicated, specific provisions empowering Parliament to set aside a portion of its revenues, whether forming part of the Consolidated Fund of India or not for the benefits of the States, not in stated proportions but according to their needs. It is clear, thereforee, that considerations which may apply to those Constitutions which recognize water-tight compartments between the revenues of the federating States and those of the federation do not apply to our Constitution which does not postulate any conflict of interest between the Union on the one hand and the States on the other. The resources of the Union Government are not meant exclusively for the benefit of the Union activities; they are also meant for subsidizing the activities of the States in accordance with their respective needs. irrespective of the amounts collected by or through them. In other words, the Union and the States together form one organic whole for the purposes of utilization of the resources of the territories of India as a whole.'

17. Bearing in mind the scheme of distribution of legislative powers and of taxation between the Union and States and the provision with regard to allocation of funds for the purpose of the Union and the States it becomes obvious that when Article 289(1) refers, to 'Union taxation', it means taxes which are livable by the Union or to put it differentia taxes which can be levied by the authority of Parliament and pertaining to matters on which Parliament is empowered, to legislate by virtue of the various constitutional provisions. The authority which collects the taxes or the entity to which the proceeds or part of the proceeds from such taxes is eventually allocated either under the Constitution or under the machinery set up by the Constitution would, thereforee, be wholly irrelevant for the purpose of a decision as to the true meaning of the expression 'Union taxation'. It is, thereforee, not possible to accept the contention that the test would be as to whether the proceeds would form part of the Consolidated Fund of India.

18. This conclusion is fully borne out by certain observations of the Supreme Court in Re: The Bill to Amend Section 20 of the Sea Customs Act (supra). In that case the provision of Article 289(1) of the Constitution of India fell for consideration before the Supreme Court as a result of a proposal to introduce in Parliament bill to amend Section 20 of the Sea Customs Act and Section 3 of the Central Excises and Salt Act with a view to applying, provision of the said two Acts to goods belonging to the State Governments in reared to which certain doubts arose as to whether the provisions of the Bill were inconsistent with Article 289 of the Constitution of India. The President of India referred under Article 143 of the Constitution of India certain questions for the opinion of the Supreme Court to ascertain if the proposed amendment would be constitutional. The question for the consideration of the Supreme Court was whether the provisions of Article 289 of the Constitution precluded the Union from imposing: or authorizes the imposition of custom duties on import or export or excise duties on the production and manufacture in India on the property of a State used for purposes other than those specified in clause (2) of the Article. By majority it was held that the provisions of Article 289(1) the Constitution of India were in the nature of an exception to the exclusive field of legislation reserved to Parliament and were limited to taxes 'on property' and on income of a State: that the immunity granted in favor of States had to be restricted to taxes levied directly on property and in-come and that even though import and export duty or duties of excises had reference to goods and commodities, they are not taxes on property directly and were not within the exemption under Article 289(1) of the Constitution. The contention before the Supreme Court on behalf of the Union was that Article 289(1) properly interpreted would mean that the immunity from taxation granted by it to the State was only in respect of tax on property and on income and that the immunity did not extend to all taxes and should not be interpreted so as to include taxation 'in relation to property.' The contention on behalf of the States was that in interpreting Article 289 of the Constitution, it must be held that the immunity was extended from 'all' Union taxation whether 'on -property' or 'in relation to property'. The contention of the Union prevailed and Sinha C. J., as he then was, and who spoke for the minority, observed. 'We are thereforee, of opinion reading Art. 289 and its complementary Article 285 together that the intention of the Constitution-makers was that Article 285 would exempt all property of the Union from all taxes on property levied by a State or by any authority within the State while Article 289 contemplates that all property of the States would be exempt from all taxes on property which may be livable by the Union.' The term 'Union taxation' was, thereforee, considered to be synonymous with taxes 'livable' by the Union so that the determining factor was the competence of the Union to levy the taxes and the corresponding competence of Parliament to make laws incorporating such a tax.

19. It must, however, be pointed out that from what has been said above it does not necessarily follow that taxes having their foundation in laws made by Parliament by virtue of what may convenient be described as its extraordinary powers provided for in Articles 249 to 253 of the Constitution must be treated as forming part of 'Union taxation'. This is so because it could be said with some justification that while legislating in exercise of those powers Parliament would not be exercising its own legislative functions but would, as it were, act-, in as a delegate of the State legislatures concerned or be deemed as if it was functioning as a State Legislature. In such cases different considerations may perhaps apply. It is unnecessary to carry this matter any further as being beyond the Scope of the controversy before us.

20. The question that then arises is whether tax on property livable under the Act could be said to be a tax livable by the Union. The answer is both in the affirmative and, the negative depending on the territory to which it relates and the legislature which authorizes its imposition. In so far as tax on property may be imposed in the various States in India by virtue of Entry 41 in the State List by the State legislatures or by statutes which could be de-ice to have been made by such a legislature it could not be considered a Union taxation by any stretch of imagination. The same is, however, not true where such a tax is levied by virtue of the authority of Parliament and. thereforee, of the Union to impose a tax as in the case of Union territory of Delhi. It has been noticed above that by virtue of Article 239 of the Constitution of India every Union territory has to be administered by the President through an administrators. By virtue of clause (4) of Article 246 of the Constitution. Parliament has -power to make laws with respect to the Union territories and where tax is imposed on property in such territories it would be Union taxation because such a tax would have its genesis in Parliament's power to make laws. In such a case, the Union taxation would not have relation to any particular List but to a particular territory and once it relates to a tax in that territory it could encompass all the Lists and this is so because the whole scheme of demarcation of taxing power between the Union and the States has relevance between the Union on the one hand and the various States on the other. No such demarcation exists or could be conceived in case of territories, which are administered by the Union itself. The demarcation then becomes irrelevant. In such a case, the Union executive as indeed the Union Legislature, that is the Parliament, becomes a repository of all executive and legislative powers respectively in relation to that territory and all taxation imposed in that territory would have to be under the authority of the Union and by virtue of laws made by Parliament and would, thereforee, be the tax of the Union and hence 'Union taxation'.

21. This conclusion also finds support from the conclusion arrived at by the Supreme Court in the above case. An argument was raised on behalf of the States that Article 289 could not have provided for exemption with regard to tax on property because tax on property legitimately belongs to the field of State Legislation by virtue of Entry 41 in List 11 and that, thereforee, the interpretation canvassed on behalf of the Union could not -prevail. This argument was dispelled by the Supreme Court and it was pointed out that such an argument ignored the provision of Article 246(4) of the Constitution of India. This is how Sinha. C. J. dealt with the argument:

'But it is said that there is no specific tax on property in List I and it is thereforee contended on behalf of the States that when property of a State was exempted from Union taxation, the intention of the Constitution-makers must have been to exempt it from all such taxes which are in any way related to poverty. thereforee, it is urged that the exemption is not merely from taxes directly on property as such but from all taxes which impinge on property of a State even indirectly like customs duties, or export duties or excise duties. It is true that List I contains no tax directive on property like List Il but it does not follow from that that the Union has no power to impose a tax directly on property under, any circumstances. Art. 246(4) gives power to Parliament to make laws with respect to any matter for any Part of the territory of India not included in a State notwithstanding that such matter is a matter enumerated in the State List. This means that so, far as Union territories are concerned Parliament has power to legislate not only with respect to items in List I but also with respect to items in List Il. thereforee, so far as Union territories are concerned, Parliament has power to impose a tax directly on property as such. It cannot thereforee, be said that the exemption of State property from Union taxation directive on property under Article 289(1) would be meaningless as Parliament has no power to impose any tax directly on property. If a State has any property in any Union territory that property would be exempt from Union taxation on property under Article 289(1). The argument thereforee that Article 289(1) cannot be confined to tax directly on property because there is no such tax provided in List I cannot be accepted.'

22. This decision is, thereforee, a clear authority for the proposition that Union taxation under Article 289(1) of the Constitution of India means tax livable by the Union by virtue of the competence of Parliament to make laws and would include laws which Parliament was competent to make for the Union Territory of Delhi by virtue of clause (1) of Article 289 (sic) (clause (4) of Article 246) of the Constitution including laws authorising imposition of tax.

23. Some of the other contentions raised on behalf of the Committee may now be considered.

24. The first contention of the Communities is that the Act was a State enactment in any event, it could not be said to have been made under Article 246(4) of the Constitution and, the tax imposed by it could not be fail to be a Union tax. This contention is based on a fundamental misconception as to the nature of the enactment and the effect of its application and later extension to the Union Territory of Delhi. A reference to the constitutional history of India would show that it is the Government of India Act. 1919 which for the first time declared 'responsible Government as an integral part of the British entirely to be the goal of constitutional development of India and it is this Act which for the first time placed certain subjects under the control of elected ministers and gave to the provinces, also for the first time. a quasi-independence of the Center by allotting to them sources of revenue of their own and assigning to them separate administrative and legislative spheres. The separation of legislative sphere affectedly subsequently under the Act was to furnish the basis for the distribution of legislative powers for the Federal Constitution which was introduced later by the Government of India Act, 1935 and still later by the Constitution of India. The form of Government in 1911, thereforee, when the Punjab Act came into force as Punjab Act No. 3 of 1911 was purely unitary and the concept of State or provincial legislative field as distinct from Central legislative field was unknown to the Constitutional law of India. All statutes then had their source in the Central legislative authority. It would, thereforee, be a misnomer to call an Act of 1911 as being a State or a provincial enactment at its inception except that it bore the name of a State or a Province and dealt with a part of the geographic territory of the then India known as Punjab. It is true that the continuation of this Act subsequently after the Government of India Act. 1935 gave it the stamp of state legislative enactment and it is the State legislature which amended it from time to time and it may, thereforee, be true to say that what was initially a central enactment became, as it were a provincial enactment after the Government of India Act, 1935 and a State enactment after the Promulgation of the Constitution of India. The position of this enactment. however, in relation to Delhi would be different. The Act was applicable to Delhi initially by virtue of the fact that until the year 1912, Delhi was only a district of the then province of Punjab and it is only in 1912 that the Governor General, with the prior approval of the Secretary of State for India, took the territory of Delhi under his immediate authority, and it became a province to be administered by a Chief Commissioner. The various Punjab enactments which were then in force in the territory of Delhi continued to be in force by virtue of the Delhi Laws Act of 1912 and later by the Part C States Laws Act of 1950 and the Union Territories Laws Act of 1950. The application and the later extension of this law to the Union Territory of Delhi was thereforee, not by the authority of the State Legislature but that the Central Legislature, that is, the Central Legislature under the Government of India Act followed by the Central Legislature under the Constitution of India, that is, the Parliament of India. This was by virtue of the powers of Parliament under Article 246(4) of the Constitution of India. It is true that at no stage was the Act as such enacted by Parliament and the provision of Clause (4) of Article 246 of the Constitution of India was not invoked but that would not change the character of the Statute in relation to the Union Territory of Delhi. This is so because the Act was extended to the Union Territory of Delhi under the various Statutes which were central Statutes. The Delhi Laws Act. 1912, the Union Territories (Laws) Act, 1950 as indeed the Part C States (Laws) Act. 1950 were all central statutes and when a provincial Act or an Act which may be treated as a provincial Act or State Act was extended to a territory by a particular legislature, it would be deemed to be the enactment of such a legislature and this principle is clearly recognized by the Supreme Court in the case of Mithan Lal v. State of Delhi, : [1959]1SCR445 , where the Supreme Court was concerned with the constitutionality of the Bengal Sales Tax. The contention before the Supreme Court in that case was that Section 2 of Part C States (Laws) Act, 1950 must be held to be bad as being revenant to Art. 248(2) of the Constitution of India in so far as it conferred on the Government authority to extend a taxation Law to Part C States. It was pointed out that this argument Proceeded on a misapprehension of the true scope of Article 246. It was further pointed out that Article 248 had reference to the distribution of legislative powers between the Center and the States mentioned in Parts A and B in the three Lists in Seventh Schedule and it provided that in respect of matters not enumerated in Lists including taxation, it was Parliament that had Dower to enact Laws and that it has no application to Part C States for which the governing provision was Art. 246(4). It was also pointed out that when a notification was issued by the appropriate Government extending a law of a Part A State to a Part C State. 'the law so extended derives its force in the State to which A is extended from Section 2 of Part C State (Laws) Act enacted by Parliament. The result of a notification issued under that Section is that the Provisioning of the law which is extended becomes incorporated by reference, in the Act itself, and thereforee, a tax imposed there under is a tax imposed by Parliament.' It is, thus. Clear that on the extension of the Act to the Union Territory of Delhi by the various Central Legislative enactments referred to above, it became a Central Act or an Act of Parliament as if made by virtue of power of Parliament to legislate for the Union Territory of Delhi by virtue of clause (4) of Article 246 of the Constitution of India. This contention must, thereforee, be rejected.

25. It is next contended on behalf of the Committee that it does not function under the supervision or control of the Central Government but functions under the Delhi Administration or the Administrator of the Union Territory of Delhi and that this would take the tax in question out of the class of Union tax. This argument betrays total ignorance of the origin of the Committee, the entity which administers the Union Territory of Delhi and amounts, if I may use the expression, to constitutional atheism on the part of the local body. The local body is a nominated body constituted under Section Ii of the- Act and by virtue of S 12 of the Act this could be done by the State Government. By virtue of Section 3(60) of the General Clauses Act, the State Government as respects anything done before the commencement of the Constitution in a Part C State shall be the Central Government in respect of anything done after the commencement of the Constitution but before the commencement of the Constitution (Seventh Amendment) Act, 1956 for the purpose of a Part C State, the Central Government and as respects anything done or to be done after the commencement of the Constitution (Seventh Amendment) Act, 1956 for a Union territory means the Central Government. At all the three relevant stages, thereforee, the State Government for the Union Territory of Delhi both after or before it was a Part C State, the State Government means the Central Government. It is the Central Government, thereforee, that had brought the local body into existence and the local body is. thereforee, a statutory creature of the Central Government. By virtue of the -provisions contained in Part Viii of the Constitution of India, the Union Territory of Delhi is to be administered by the President of India through an Administrator and this is what Article 239 provides. The Administrator of the Union Territory of Delhi has no independent constitutional or a legal existence of his own but is only an agent of the President and acts within the scope of such authority as may be conferred on him by the President. It is, thereforee, the President or the Union Government which administers the Union Territory of Delhi. To say, thereforee, that the local body is administered or is under the administrative control of the Administrator of the Union Territory of Delhi and not the Central Government is to deny the obvious. This contention must, thereforee. Fail.

26. It is next contended on behalf of the Committee that the various taxes imposed by the local body do not form part of the Consolidated Fund of India but are retained by the local body to meet the budgeter requirements and that the purpose for which these funds are scent would indicate the nature of the tax and be determinative of the question as to whether house tax is the Union tax. This argument is equally unconvincing. It has already been pointed out above that the true test to determine if a tax is a Union tax or not is to see the legislative competence so that if such a tax could be imposed by the authority of Parliament it could be a Union tax while if it could be imposed by the authority of the State legislature, it would be a tax imposed by the State. The test as to the fund to which the proceeds go or the entity, which ultimately gets such funds, would, thereforee, be wholly irrelevant. The body, which collects these taxes, would also not determine the nature of the tax.

27. There is, however, an aspect of the interpretation of clause (4) of Article 246 of the Constitution which involves an interesting controversy as to the true meaning of the expression 'State' used in Article 246(4) as indeed in various other Articles of the Constitution, the examination of which has led to some interesting results. The question was not raised before us but in view of the importance of the point I have thought it proper to deal with it as well.

28. Clause (4) of Article 246 of the Constitution of India empowers Parliament to make laws with respect to any matter 'for any part of the territory of India not included in a State.' Prior to its amendment by the Constitution (Seventh Amendment) Act, 1956 the clause read differently and by the clause as then worded, Parliament had been empowered to make laws with respect to any matter for any part of the territory of India ''not included in Part A or Part B of the First Schedule.' It would be useful to remember here that the Constitution as it stood before the reorganization of States, provided for Part A States, Part B States and Part C States. The Union territories then did not figure in the Constitution. Clause (4) of Article 246 as then worded, thereforee, empowered Parliament to make the laws with respect to the territories of India comprised. amongst others in Part C States. The expression 'State' is not defined by the Constitution but the definition of the expression in the General Clauses Act, as it stood before the aforesaid constitutional amendment also defined 'State' as meaning 'a Part A State, a Part B State or a Part C State.' After the aforesaid con situational amendment, however, S. 3(58) of the General Clauses Act was also modified Pursuant to the Adaptation of Laws Order, 1956 issued by virtue of the provisions of Article 372A of the Constitution of India and the amended definition has two parts. Part I deals with the meaning of 'State' before the commencement of the aforesaid constitutional amendment as meaning a Part A State a Part B State or a Part C State while the Part Ii of the definition, which deals with the period after the aforesaid constitutional amendment, the term 'State,' means 'a State specified in the First Schedule to the Constitution and shall include a Union territory'. It may also be useful to remember that the aforesaid constitutional amendment swept away the hitherto known Part A, Part B and Part C States and instead substituted for that the States and the Union territories and Article 1 of the Constitution was according1y amended by the said constitutional amendment.

29. The question that, thereforee arises is whether the expression 'State' used in clause (4) of Article 246 of the Constitution would be regulated by the amended definition of the expression under the General Clauses Act or not. If the expression 'State' under Article 246(4) is to be regulated by the amended definition of the expression 'State' by the General Clauses Act. the State shall include a Union territory with the result that the expression 'the territory of India not included in a State' in clause (4) of Article 246 would exclude the Union Territory of India and by virtue of Clause (4) of Article 246 of the Constitution of India, Parliament would have no Power to make laws with respect to the Union territories including the Union Territory of Delhi, if, however, the amended definition under the General Clauses Act would not regulates the expression 'State'. then the Union Territories would be excluded because the State in that event would mean Part A. Part B or Part C States and since the Union territories have ceased to be Part C States those territories would be excluded from the expression 'territory of India not included in a State' with the result that Parliament would be competent to make laws with respect to such territories with regard to all matters. It so happens, however. that the expression 'State' though conceptually well-known is left undefined by Article 366 of the Constitution of India, which is the constitutional lexicon incorporated in the Constitution itself. Article 367 of the Constitution, however, provides that, unless the context otherwise provides, the General Clauses Act, 1897 shall subject Ito any adaptations and modifications that may be made therein under Article 372 apply for the interpretation of this Constitution' as it applies for the interpretation of an Act of the Legislature of the Dominion of India. Article 372, inter alias, provides that for the purpose of bringing the provisions of any law in force in the territory of India into accord with the provision of the Constitution, the President may by order make such adaptations and modifications of such law, whether by wav of repeal or amendment or otherwise. The Power to make these modifications was, however, confined by Clause (3) of Article 372, as it originally stood, to two years but by the Constitution (First Amendment) Act, 1951 was extended to three years with the result that this power of the President expired on the expiry of three velars from the date of the commencement of the Constitution. Since the Constitution (Seventh Amendment) Act, 1956 brought about changes in the Constitution, which in term would have to be translated into the existing laws, power had to be found to make adaptations and modifications in those laws since the modification and adaptation could not then be made under Article 372. Article 372A was thereforee, added to the Constitution which empowers the President to make such adaptations and modifications in the existing laws as may be necessary for the purposes of bringing any provision of any law in force in India and in any part of it immediately before the commencement of the Constitution Seventh Amendment) Act, 1956 into accord with the provisions of the Constitution as amended by that Act. By Adaptations of Laws Orders, 1956 and 1957, the Provisions of the various statutes were according ale adapted and modified including Section 3(58) of the General Clauses Act to the effect referred to above. It was, however. Ignored that the General Clauses Act was made applicable for the interpretation of the Constitution by Article 367 only to the extent it adapted and modified under Article 372 so that adaptation or modification of any law including the General Clauses Act for purposes of Article 372A would perhaps not ensure for the purpose of interpretation of the Constitution under Article 367 of the Constitution because that Article specifically envisages only such adaptations and modifications as may be made by virtue of the provisions of Article 372. This has resulted in a near anomalous position.

30. In the case of H. L. Radhev v. Delhi Administration, : AIR1969Delhi246 , the question before a Division Bench of this Court was whether the President had power to make rules for Central services in Delhi. The answer to the question in turn depended on the decision of the question if the Union Territory of Delhi was or was not State. The contention was that after the Constitution (Seventh Amendment) Act. 1956. Section 3(58)(b) of the General Clauses Act, as modified by the Adaptation of Laws Order issued under Article 372A of the Constitution of India pursuant to the said Act defines the term 'State' as including the Union Territory of Delhi and, that Delhi was, thereforee, a State with the result that the President had no power to make rules for the Central Services in Delhi. The contention was repelled by the Division Bench on the ground that the definition of the term 'State' by Section 3(58)(b) of the General Clauses Act as adapted under Article 372 by the Adaptation of Laws Order. 1950 could be used to interpret the word 'State' used in the Constitution only when a State was a Part A. Part B or Part C State and the Union territory did not figure there at that time and that the definition of the term 'State' introduced by the General Clauses Act by the Adaptation of Laws Order. 1956 issued under Article 372A of the Constitution after the Constitution (Seventh Amendment) Act, 1956 could not apply to the interpretation of the Constitution inasmuch as Article 367(1) permitted the use of the General Clauses Act as adapted under Article 372 only far such purposes, and that the adaptation under Article 372A of the Constitution could not ensure for the purpose of interpretation of the Constitution. It was, thereforee, held that Union Territory of Delhi was not a state. It was further observed that before a Union territory could be said to be a legal entity it must possess the chief attributes of a legal person, namely, the power to enter into contracts and institute suits in its own name and that the Union Territory of Delhi did not possess any of these attributes. It was further observed that the Union Territory of Delhi has been excluded from the definition of the term 'Union territory' under Section 2 (1) of the Union Territories Act, 1963 with the result that those provisions did not apply to Delhi. It was also noticed that while some of the Union territories had their Legislative Assemblies with limited legislative Powers. Delhi did not have any and that Delhi was, thereforee, devoid of this feature of a legal personality. It was, thereforee, held that the Union Territory of Delhi was not a State with the result that the President had power to make rules for Central Services in Delhi.

31. In the case of Management of the Advance Insurance Co. Ltd. v. Gurudasmal. : AIR1969Delhi330 , the same Division Bench reiterated the above legal position in the following words.

'In our recent judgment in C. W. No. : AIR1969Delhi246 . H. L. Radhev etc. v. Delhi Administration etc. delivered on the 14th August 1968, we had occasion to point out that the General Clauses Act as adapted under Article 372 of the Constitution only applied to the interpretation of the Constitution. The changes introduced in the said Act by the subsequent adaptation made under Article 372A consequent on the Constitution (7th Amendment) Act, 1956, were not applicable to the interpretation of the Constitution. Consequent, the definition of a 'State' in Section 3(58)(b) of the General Clauses Act whereby a Union Territory is included in the definition of 'State' after the commencement of the Constitution (7th Amendment) Act. 1956, is not applicable to the interpretation of the Constitution.'

32. However, in the case of Management of Advance Insurance Co. Ltd. v. Shrl Gurudasmal, : [1970]3SCR881 , on appeal from the decision of the Division Bench of this Court in the case referred to above, the Supreme Court took the contrary view and held that the new definition of the expression 'State' in the General Clauses Act pursuant to the Adaptation of Laws Order issued by the President under Article 372A of the Constitution of India being appropriate to the purpose applied to the interpretation of the Constitution and the word 'State' in Entry 80 of the Union List, thereforee. Applied to Union territories as well. The contention that the provisions of the General Clauses Act would apply to the interpretation of the Constitution by virtue of Article 367 of the Constitution of India only to the extent it was adapted and modified under Article 372 so as to exclude any adaptation or modification under Article 372A was repelled an the around that the armament overlooks the provision of a fresh power of adaptation conferred on the President by Article 372A and that 'this was a fresh power equal and analogous to Article 372(2).' It was accordingly held that 'when the President adapted the General Clauses Act by giving new definition of 'State' the new definition appropriate to the purpose applied to the interpretation of the Constitution. The word 'State' in Entry 80 of Union List, thereforee. Applied to Union Territories also.'

33. In the case of Shiv KiruaI Singh v. V. V. Giri, : [1971]2SCR197 the question whether the Union Territory of Delhi was a 'State' and whether the expression 'State' would be regulated by the original definition under the General Clauses Act or the one that emerged after the Adaptation of Laws Order 1956 pursuant to Article 372A of the Constitution of India, was, however, answered, by the Supreme Court in the negative and it was held that the new definition which was a result of modifications and adaptations under Article 372A would not ample to the interpretation of the Constitution because Article 367 was not amended and it was not laid down that the General Clauses Act as adapted or modified under any Article other than Article 372, will also apply to the interpretation of the Constitution. Since, until its amendment in 1956, Section 3(58) of the General Clauses Act did not define 'State' as including Union Territories for purposes of interpretation of Article 54, the Union Territories cannot be treated as included in the word 'State.' It must, however be pointed out that Bhargava, J. alone adverted to this matter which was not discussed in the other opinions in that case.

34. We are, thus, faced with two conflicting decisions of the Supreme Court both by Benches comprised of 5 learned Judges and the question would, thereforee, be which of the two views should prevail with us. A Full Bench of this Court in the case of The Management of M/s. Partial Iran Works v. Union of India, C. W. P. No. 1495 of 1973, decided on 27-1-1975 = (reported in 1975 Lab Ic 1265 (Delhi) was concerned with the question, in the context of a reference to an industrial dispute under Section 10 of the Industrial Disputes Act, as to whether the Union Territory of Delhi was a 'State' or not on a reference of the question by this Bench. The Full Bench noticed the aforesaid conflict of opinion and invoked the Principle laid down by the Supreme Court in the case of Mattu Lal v. Radhev Lal. : [1975]1SCR127 , and feeling itself free to express its own opinion on what appeared to the Court to be the true mantas of the provision, expressed the view that the decision of this Court in Radhev's case (Supra) that Delhi was not a State appeared to be in accordance with the reasoning of Bhargava. J in the case of Shiv Kirpal Singh, : [1971]2SCR197 (Supra). The matter was, however, not carried further because in the view that the Full Bench took of the interpretation of the Provisions of the Industrial Disputes Act, the constitutional question did not survive.

35. To my mind the answer to the question whether the expression 'State' in clause (4) of Article 246 of the Constitution of India would include the territory comprised in the Union Territories would be the same whether or not the modified definition of the expression 'State' under the General Clauses Act would or would not apply to the interpretation of the Constitution of India, If the amended definition does not, and the Union territory is not included in the expression 'State' as held by the Supreme Court in one of the two judgments above, no difficulty arises. Even if the other view is to be preferred the expression 'State' under Article 246 would not include Union territories because there would be an obvious repugnancy in the context in which the expression 'State' is throughout in Article 246 of the Constitution of India, as was pointed out by Hidayatullah, C. J., as he then was, In the case of Advance Insurance Co.. : [1970]3SCR881 (Supra) even though the expression 'State' would be regulated by the new definition pursuant to the modification in Article 372A of the Constitution of India as including the Union Territory of Delhi there were a number of Articles of the Constitution in which the expression 'State' would not be given that meaning. Article 246 was one of the Articles pointed out by his Lordship. It was also pointed out that after the Constitution (Seventh Amendment) Act. 1956 India became a Union of States and the territories thereof specified in the First Schedule. Clause (2) of Article 1 then provides for the Union territories which are mentioned separately. There is, thus, a distinction between a 'State' and 'Union territory' which could not be lost sight of. It was pointed out that when the definition could not be made applicable owing to the context or the subject the word 'State' would refer to States in the First Schedule only. Such an occasion arose in the case of T. M Kannivan v. Income-tax Officer, : [1968]68ITR244(SC) . wherein Badhawat, J. exPlained at Page 640 that the definition of the word 'State' in two Parts in the adapted Section 3(58) of the General Clauses Act was repugnant to the subject and context of Article 246. The new definition would, thereforee not regulate the provisions of Article 246 of the Constitution of India and that being so, in interpreting clause (4) of Article 246 the distinction between the 'States' and the 'Union territories' cannot be lost sight of. There is another reason why the expression 'State' in clause (4) of Art. 246 of the Constitution of India must be read as excluding the Union territories because Clause (4) as it stands today was amended by the Constitution (Seventh Amendment) Act, 1956. Before the said amendment the expression 'Part A, Part B States' was used which was later substituted by the expression 'states' The territories then comprised in Part C States were thereforee excluded from the expression Part A and Part B with the result that in clause (4) as it then stood, Parliament was competent to make laws for the territories forming part of Part C States of India. The amendment was consistent with it because while using the expression 'State', it excluded the expression 'Union territories of India' so that the Parliament may continue to be competent to make laws with regard to the territories forming part of the Union territories.

36. In the result, the petitions succeed. The assessment and demands of house-tax in respect of properties of the petitioners are quashed and the Committee is restrained from levying or claiming any house-tax in relation to the said properties. The petitioners would also have their costs. Counsel's fee is fixed at Rs. 500/- in each case.

S.N. Shankar, J.

37. I agree.

38. Petitions allowed.


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