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The Kerala Wakf Board Vs. the Union of India (Uoi) and ors. - Court Judgment

LegalCrystal Citation
SubjectConstitution
CourtKerala High Court
Decided On
Case NumberW.A. Nos. 55, 69 to 82 of 1974
Judge
Reported inAIR1975Ker123
ActsWakf Act, 1954 - Sections 3 and 46; Wakf (Amendment) Act, 1969; Constitution of India - Article 14
AppellantThe Kerala Wakf Board
RespondentThe Union of India (Uoi) and ors.
Appellant Advocate M.M. Abdul Kader, Adv.
Respondent Advocate M. Ratna Singh,; K. Prabhakaran,; M. Ramachandran,;
Cases ReferredM. Match Works v. Asst. Collector C. E.
Excerpt:
.....owned by wakf cannot be made a ground for supporting that impost such as fee at uniform rate on gross income of wakfs taking into account services rendered to each wakf violative of article 14 - discrimination arose out of fortuitous circumstances - no hostile discrimination in imposing uniform rate on gross income of wakfs - petition dismissed. - - ' the amendments effected to sections 3 (g) and 46 were clearly for the purpose of giving a different content to the definition of 'net income' for the purpose of the act. ' but in the case of agricultural properly cultivated by the wakfs a large amount will have to be expended for cultivation expenses and the gross income will not be anything like the 'net income' as understood above and it was suggested that this resulted in a levy..........were accepted and the sections were struck down.4. these appeals are taken by the kerala wakf board which was the first respondent in the original petitions. the second respondent in the petitions was the central government. the contention raised on behalf of the appellants before us by the advocate general was that section 3 (g) and section 46 of the act as amended by the amending act are not violative of article 14 of the constitution.5. we shall extract sections 3 (g) and 46 as they stood before the act was amended by the wakf (amendment) act, 1969 and as they are now after the amendment.before the amendmentafter the amendment'3. in this ad, unless the context otherwise requires,--'3. in this act. unless the context otherwise requires. --(g) 'net income' means the total.....
Judgment:

Govindan Nair, C.J.

1. These appeals arise from a common judgment of P. Subramonian Poti, J. in original petitions Nos. 2412/71, 4915/74, 3440/73, 5053/71, 4102, 4716, 3746, 5972, 4075, 4070, 1694, 4705 and 4129 of 1971, 1629/72 and 4420 of 1971 by which Sections 3 (g) and 46 of the Wakf Act, 1954 (for short the Act) as amended by the Wakf (Amendment) Act, 1969 have been declared to be violative of Article 14 of the Constitution of India.

2. For the purpose of considering the questions raised, the petitioners before the learned Judge agreed to treat original petition No. 2412/71 as typical of the petitions and rested their arguments on the basis of the facts stated in the affidavits and the petition, in that case There were two petitioners in that petition who were interested in the 8 schedule properties in the will executed by late Abdul Sathar Hajee Moosa Sait on 25-2-1099 (sic). Those properties formed the properties of the Dharmasthapanam described as the Abdul Sathar Hajee Moosa Sait Dharmasthapanam. The wakf created for charitable and religious purposes by the same testament had A schedule properties set apart for those, purposes.

3. Three main contentions were raised before the learned Judge two of which the learned Judge did not accept; and they were that Section 46 of the Act is an infringement of the right guaranteed by Article 26 of the Constitution, and that the obligation imposed by Section 46 called a fee was really a tax. An additional argument that the petitions were not maintainable as the petitioners could not be said to be aggrieved persons was also rejected by the learned Judge. But on the third main question whether Section 3 (g) and Section 46 of the Act as amended were violative of Article 14 of the Constitution, the contentions of the petitioners were accepted and the sections were struck down.

4. These appeals are taken by the Kerala Wakf Board which was the first respondent in the original petitions. The second respondent in the petitions was the Central Government. The contention raised on behalf of the appellants before us by the Advocate General was that Section 3 (g) and Section 46 of the Act as amended by the amending Act are not violative of Article 14 of the Constitution.

5. We shall extract Sections 3 (g) and 46 as they stood before the Act was amended by the Wakf (Amendment) Act, 1969 and as they are now after the Amendment.

Before the AmendmentAfter the Amendment'3. In this Ad, unless the context otherwise requires,--

'3. In this Act. unless the context otherwise requires. --

(g) 'net income' means the total income less any revenue, cess, rates and taxes payable to the Government or any local authority;

(g) 'Net annual income' in relation to a Wakf, means the gross income thereof from all sources in a year excluding only --

(i) land revenue, cess, rates and taxes payable to the Government or any local authority; and

(ii) donations given or offerings made with a specific direction that they shall form part of the corpus of the wakf; Provided that the interest or income, if any, accruing from such donations or offerings shall be taken into account in calculating the gross annual income;'

'46. (1) The mutawalli of every wakf shall pay annually to the Board such contribution not exceeding six per cent of the net annual income of such of its property as is situate in the State as the Board may, subject to the sanction of the State Government from time to time, determine ;

'46. (1) The mutawalli of every wakf shall pay annually to the Board such contribution not exceeding six per cent of the net annual income accruing in the State to the wakf as the Board may, sub-ject to the sanction of the State Gov-ernment, from time to time, determine :

Provided that no such contribution shall be payable by the mutawalli of a wakf of which the net annual income does not exceed one hundred rupees.

Provided that no such contribution shall be payable by the mutawalli of a wakf of which the net annual income does not exceed one hundred rupees.

(2) The Board may in the case of any particular wakf reduce or remit such contribution for such time as it thinks fit.

(2) The Board may in the case of any particular wakf reduce or remit such contribution for such time as it thinks fit.

(3) The mutawalli of a wakf may realise the contributions payable by him under sub-section (1) from the various persons entitled to receive any pecuniary or other material benefits from the wakf, but the sum realisable from any one of such persons shall not exceed such amount as shall bear to the total contribution pay-able the same proportion as the value of the benefits receivable by such person bears to the entire net annual income of the wakf :

(3) The mutawalli of a wakf may realise the contributions payable by him under sub-section (1) from the various persons entitled to receive any pecuniary or other material benefits from the wakf, but the sum realisable from any one of such persons shall not exceed such amount as shall bear to the total contribution pay-able the same proportion as the value of the benefits receivable by such per-son bears to the entire net annual income of the wakf:

Provided that if there is any income of the wakf available in excess of the amount payable as dues under this Act, other than as the contribution under sub-section (1), and in excess of the amount payable under the wakf deed, the contribution shall be paid out of such income.

Provided that if there is any income of the wakf available in excess of the amount payable as dues under this Act other than as the contribution under sub-section (1), and in excess of the amount payable under the wakf deed, the contribution shall be paid out of such income.

(4) The contribution payable under subsection (1) in respect of a wakf shall, subject to the prior payment of any dues to the Government or any local authority or of any other statutory first charge on the wakf property or the income thereof, be a first charge on the income of the wakf and shall be recoverable, on a certificate issued by the Board after giving the mutawalli concerned an opportunity of being heard, as an arrear of land revenue.

(4) The contribution payable under sub-section (1) in respect of a wakf shall subject to the prior payment of any dues to the Government or any local authority or of any other statutory first charge on the wakf property or the. income there-of be first charge on the income of the wakf and shall be recoverable, on a certi-ficate issued by the Board after giving the mutawalli concerned, an opportunity of being heard, as an arrear of land revenue.

(5) If a mutawalli realises the income of the wakf and refuses to pay or does not pay such contribution, be shall also be personally liable for such contribution which may be realised from his person or property in the manner aforesaid.'

(5) If a mutawalli releases the income of the wakf and refuses to pay or does not pay such contribution, be shall also be personally liable for such contribution which may be realised from his person or property is the manner aforesaid.'

6. This Court had to consider the meaning of the expression 'the total income' in Section 3 (g) of the Act before it was amended in Ibrahim Hassam Sait v. Kerala Wakf Board, 1964 Ker LT 367 = (AIR 1964 Ker 310). The answer given was what was stated by the Supreme Court in Navinchandra Mafatlal, Bombay v. Commissioner of Income- tax Bombay City, AIR 1955 SC 58 that the word income' in its ordinary, natural and grammatical meaning 'embraces any profit or gain which is actually received.' It was therefore held by this court that cultivation expenses will have to be deducted in arriving at the 'total income.' The amendments effected to Sections 3 (g) and 46 were clearly for the purpose of giving a different content to the definition of 'net income' for the purpose of the Act. Though Section 3 (g) as amended defines 'net annual income' and before the amendment, the definition was of 'net income', This change does not materially alter the situation. But the amended definition speaks of 'gross income from all sources in an year' excluding only: (i) land revenue cess, rates and taxes payable to the Government or any local authority; and (ii) donations given or offerings made with a specific direction that they shall form part of the corpus of the wakf; Provided that the interest or income, if any, accruing from such donations or offerings shall be taken into account in calculating the gross annual income;'. There can be little doubt that by the amendment, the 'net annual income' has come to mean something entirely different from the 'net income' as defined before the amendment. The ground on which the levy has been held to be violative of Article 14 by the learned Judge is that the impost fell unevenly and inequitably on the different wakfs. It was noticed that wakfs owning agricultural properties may either cultivate such properties themselves or give those properties on lease. In the former case the gross income of the wakfs concerned will be very much higher, than the rental income of wakfs that have leased out the properties and such rental income will also be the gross income and practically the 'net income' in the sense of profits and gains. In the former case the fee under Section 46 is related to the gross income and in the latter to 'net income' understood as 'profits and gains' and this is discriminatory. It was also suggested that in the cases of wakfs owning buildings and receiving rent income, the gross income will be the rent income and in such cases there will be little or no expenses for earning rent income and the gross income may practically be the 'act income' meaning 'profits and gains.' But in the case of agricultural properly cultivated by the wakfs a large amount will have to be expended for cultivation expenses and the gross income will not be anything like the 'net income' as understood above and it was suggested that this resulted in a levy which fell unevenly on wakfs dissimilarly situated which have been uniformly subjected to the same obligation. The learned Judge expressed himself thus:

'Therefore to take the gross receipts as deducted only by taxes and cess and the like as the basis for the levy of contribution would be to fix an arbitrary levy having differing incidence on different wakfs. In other words so long as what is taxed is not what ultimately comes into the hands of the owner as net income and the levy is not a percentage of such net income, the incidence of the levy varies from person to person.'

Reliance has been placed by the learned Judge on the well known decisions in Kunnathat Thathunni Moopil Nair etc. v. State of Kerala, AIR 1961 SC 552; East India Tobacco Co. etc. v. State of Andhra Pradesh, AIR 1962 SC 1733. The State of Andhra Pradesh v. Nalla Raja Reddy, AIR 1967 SC 1458. New Manek Chowk Spy. and Wvg. Mills Co Ltd. etc. v. Municipal Corporation of the City of Ahmedabad, AIR 1967 SC 1801, and Sugra Bibi v. Hasi Kummu Mia, AIR 1969 SC 884.

7. With great respect we arc unable to agree with the view taken by the learned Judge. It is a well known principle that a uniform fee without taking into account the varying abilities of different recipients to pay, is not a bad levy. In the Commr., Hindu Religious Endowments, Madras v. Sri Lakshmindra Thirtha Swamiar of Sri Shirur Mutt, AIR 1954 SC 282, it was observed thus in paragraph 44 of the judgment.

'Ordinarily, the fees are uniform and no account is taken of the varying abilities of different recipient to pay, vide Lutz on 'Public Finance' P. 215.' In the matter of imposing tax a very wide latitude is permitted to the legislature and a flexibility in the mutter of classification for the purpose of the imposition of tax which would not be countenanced in other matters; is also conceded. A well known passage from Willis on Constitutional Law, page 587, has been oft quoted by the Supreme Court in regard to the power of a State to tax. The passage reads thus;

'A State does not have to tax everything in order to tax something. It is allowed to pick and choose districts, objects, persons, methods and even rates for taxation if it docs so reasonably ............ The Supreme Court has been practical and has permitted a very wide latitude in classification for taxation.' Though a fee had to be reasonably related to the services rendered, subject to that the same principles are generally applicable in the matter of imposition of fee as well.

8. No doubt that an impost by way of tax or fee is subject to Article 14 of the Constitution had been held in more than one case by the Supreme Court. We may refer to AIR 1961 SC 552. The inequality can arise, either due to lack of classification or due to classification which is not related to the objects sought to be achieved by the statute. In this case it is alleged that the inequality arises from lack of classification. The imposition of fee by Section 46 of the Act, it is contended, fell unevenly and inequitably on wakfs governed by the Act. Further, the wakfs were dissimilar in that their profits and gains varied but the impost was on the gross income which affected them differently. It it therefore argued that this is violative of Article 14 of the Constitution. In considering the validity of this argument one aspect that has to be borne in mind is that:

'If there is equality and uniformity within each group, the law will not be condemned as discriminative, though due to some fortuitous circumstance arising out of a peculiar situation some included in a class get an advantage over others, so long as they are not singled out for special 'treatment.' (See Khandigc Sham Bhat and K. Krishna Bhatta v. Agricultural Income-tax Officer, Kasuragod, ATR 1963 SC 591).

9. Another well accepted principle is that the burden of proving inequality is on the person contending that there has been discrimination and it is not merely inequality that has to be proved but clear and hostile discrimination. Rollschaefer said in his Constitutional Law at p. 668 :

'The decisions of the Supreme Court in this field have permitted a State Legislature to exercise 'an extremely wide discretion' in classifying property for tax purposes so long as it refrained from clear and hostile discrimination against particular persons or classes. The burden is on a person complaining of discrimination. The burden is proving not possible 'inequality' but hostile 'unequal' treatment. This is more so when uniform taxes are levied.'

The above passage has been quoted with approval in the Twyford Tea Co. Ltd. v. The State of Kerala, AIR 1970 SC 1133.

10. The decisions of the Supreme Court in AIR 1961 SC 552 and in Patel Gordhandas Hargovindas v. The Municipal Commr., Ahmedabad, AIR 1963 SC 1742 at p. 1747 related to the imposition of land tax and a rate imposed by the Municipal Corporation of Ahmedabad on vacant lands situate within the municipal limits respectively. In the earlier case it was observed :

'Ordinarily a tax on land or land revenue is assessed on the actual or the potential productivity of the land sought to be taxed. In other words the tax has reference to the income actually made, or which could have been made, with due diligence, and, therefore, is levied with due regard to the incidence of the taxtion.' To the same effect is the statement in the latter case AIR 1963 SC 1742 at p. 1747:

'It will thus be clear from the various statutes to which we have referred and the various books on ratine in England that the rate always had The meaning of a tax on the annual value or rateable value of lands or buildings and this annual value or rateable value is arrived at by one of three modes, namely (i) actual rent ferched by land or building where it is actually let, (ii) where it is not left rent based on hypothetical tenancy, particularly in the case of buildings and (iii) where either of these two modes is not available, by valuation based on capital value from which annual value has to be found by applying a suitable percentage which may not be the same for lands and buildings, and it was this position which was finally brought out in bold relief by the Rating and Valuation Act, 1925.'

11. The decision in AIR 1961 SC 552 relied on by the learned Judge in the judgment under appeal and also that in AIR 1967 SC 1458 have been noticed by the Supreme Court in AIR 1970 SC 1133 and it was observed that the cases were peculiar to themselves and it was said with particular reference to Nallaraja Reddy's case AIR 1967 SC 1458.

'That case is peculiar to itself and cannot be called in aid since in this case there is a reasonable attempt to make the burden equal.'

Referring to the decisions in AIR 1967 SC 1801 and the State of Kerala v. Haji K. Haji K. Kutty Nahar, AIR 1969 SC 378, their Lordships observed that the question was one of rating and that those cases were decided on different principles:

'The proposition laid down was that fating only the floor area of a building as the basis for determination of the tax was an arbitrary method when buildings must have different rental values depending upon the nature of the construction, the kind of building and the purpose for which they can he used. These were held vital considerations in the rating of buildings and could not be ignored. These cases were decided on different principles and no analogy can be found merely because equal tax was imposed in diverse conditions.'

12. No decision has been cited before us which has laid down that a tax or a fee cannot be imposed on the gross income of a person or any other taxable entity, The enactments; The Madras Hindu Religious and Charitable Endowments Act, 1959 by Section 92 and The Orissa Hindu Religious Endowments Act, 1951 by Section 63 (4) have imposed the fee on the basis of the gross income of the Religious and Charitable Trusts. On principle there can be no objection to an impost which is related to the gross income. In the decision in Ratilal Panachand Gandhi v. State of Bombay, AIR 1954 SC 388 the concerned Act had related the contribution to gross receipt.

13. In AIR 1970 SC 1133 the majority judgment written by Hidayatullah, C. J. concluded by stating:

'19. Taking these principles into consideration we are satisfied that the law does not single out any particular plantation for hostile or unequal treatment. In fact it is nowhere proved in this case that tea has been discriminated against deliberately. As between different tea gardens, it is not possible to say that the difference in the yield is entirely due to natural circumstances and no other cause. It is, therefore, not possible to say that there is discrimination notwithstanding the uniform rate for each plantation based on the actual crop yielding area.'

Shelat, J, who wrote the dissenting judgment look a different view on the facts and held 'The differences in the yield must, therefore, be attributed to the differences in the soil, situation, water supply, rainfall etc.' thus holding that the differences were due to natural circumstances, a view which was, not accepted by the majority.

14. The inequalities alleged because of some wakfs having to pay more out of their net income (meaning profits and gains) proportionately, than others, it appears to us, arise from circumstances which are fortuitous. Alleged inequalities arising from the nature of enjoyment of properties or even the nature of the properties owned by a wakf cannot be made a ground for supporting the contention that an impost such as a fee at a uniform rate on the gross income of wakfs taking into account the services rendered to each wakf is violative of Article 14 of the Constitution as we are not able to discern any clear hostile discrimination or the singling out of any wakf or any class of wakfs for special or peculiar treatment. The discrimination if any, as stated already, seems to arise out of fortuitous circumstances. The following passage is apposite:

'The principle appears to be deducible from the decisions that discriminations due to fortuitous circumstances arising out of the peculiar situation in which one or some particular taxpayers find themselves are generally not invalid under requirements as to equality and uniformity in taxation, where it appears that such taxpayer or taxpayers are not singled out for special treatment and not taxed by a method which is not uniformly applied to other taxpayers of the same class ............ (American Jurisprudence Vol. 51. Section 180, page 240).'

It cannot also be said that the wakfs that are said to be adversely affected have no manner of control over its inclusion or exclusion from the alleged heavier levy:

'Another principle relating to classification for tax purposes which has authority in its support is that where a classification is such that the individual taxpayer has some control over his inclusion or exclusion therefrom, it cannot be considered unconstitutionally discriminatory. Thus, 'a statute imposing corporate franchise taxes which, because of the method employed in valuing as-per value stock, worked a difference in the amount of the tax as between corporations having the same amount of assets has been upheld on the theory that a corporation may choose for itself whether to bring itself within the operation of the asserted discrimination by deciding not to issue no-par shares.........'

(American Jurisprudence Vol. 51. Section 180, p. 241).

The object of the Act is to collect funds for the work that the Board has to undertake in view of the statutory obligations cast on the Board by the Act and for those purposes fee can be levied and it is not contended that the fee levied is unreasonable. The contention that it amounts to a tax has been rejected by the learned Judge and the conclusion is not questioned before us. Apart from the decision in AIR 1970 SC 1133 a number of other decisions have taken the view which would support what we have stated above.

15. Thus in D. Ramaraju v. State of A. P., AIR 1972 SC 828 it was observed :

'Dr. Singhvi on behalf of the appellants has referred to the fact that there is flat and uniform rate of cess for each acre in respect of all lands in a division irrespective of the quality and productive capacity of the land. It is urged that a flat and uniform rate for all lands in a division results in inequality and is violative of Article 14. In this connection, we find that the material on record, to which reference has been made earlier, shows that the rate of cess prescribed for each division has a rational nexus with the object of the Act and is based on intelligible differentia. The object of the Act is to raise funds for the implementation of schemes to secure protection of the lands, in the deltaic area from ravages of the floods. As the Act is designed to benefit the land in the divisions of the deltaic area, the levy of cess at uniform rate for each acre of the land in a division cannot be considered to offend the principle of equality. The floods strike equally all lands in the area and make no discrimination so far as the quality and productive capacity of those lands are concerned. In the circumstances it appears to be just and reasonable that each acre in a division should bear equal burden of the amount which is sought to be raised to fight the danger of floods and provide for an efficient system of drainage.' In a recent decision of the Supreme Court in M. Match Works v. Asst. Collector C. E., AIR 1974 SC 497 the question of classification has been discussed and the first head-note in the A. I. R. correctly depicts the dicta laid down by the decisions in this regard. We shall extract it:

'Bare equality of treatment regardless of the inequality of realities is neither justice nor homage to the constitutional principle. Another proposition which is equally settled is that merely because there is room for classification It does not follow that legislation without classfication is always unconstitutional. The Court cannot strike down a law because it has not made the classification which commends to the Court as proper. Nor can the legislative power be said to have been unconstitutionally exercised because within the class a sub-classification was reasonable but has not been made. The modern State, in exercising its sovereign power of taxation, has to deal with complex factors relating to the objects to be taxed, the quantum to be levied, the conditions subject to which the levy has to be made, the social and economic policies which the tax is designed to subserve, and what not. From the judicial inspection tower the Court may only search for arbitrary and irrational classification and its obverse namely, capricious uniformity of treatment where a crying dissimilarity exists in reality. Unconstitutionally and not unwisdom of a legislation is the narrow area of judicial review.'

16. We consider that the Act, the provisions therein the purposes for which the Board had been created, the functions that the Board will have to discharge and the purposes for which the fee has been levied and the manner in which it has been levied by gearing it to the gross income of the wakf have all to be viewed not on the basis of the principles laid down by the Supreme Court in AIR 1961 SC 552. AIR 1968 SC 1458; AIR 1967 SC 1801 and AIR 1969 SC 378 relied on by the learned Judge in dealing with the original petitions, but in the light of the pronouncement of the Supreme Court in AIR 1970 SC 1133; AIR 1972 SC 828 and in AIR 1974 SC 497 we are unable to discern any hostile discrimination in imposing a uniform rate on the gross income of the wakfs coming under the Act. With great respect we are unable to agree with the view taken in the judgment under appeal. We set aside the judgment under appeal and dismiss the original petitions. We direct the parties to bear their respective costs.


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