M.S. Menon C.J.
1. These appeals by the State of Kerala are from a common Judgment holding that the Kerala Buildings Tax Act, 1961, is ultra vires of Article 14 of the Constitution which provides that the State shall not deny to any person equality before the law or the equal protection of the laws within the territory of India. Entry 49 in List II (State List) of the Seventh Schedule to the Constitution empowers the State to impose taxes on lands and buildings; and the contention of the State is that the Kerala Buildings Tax Act, 1961, embodies a valid exercise of that power and that it does not in any way violate the equality guaranteed by the Constitution.
2. The Act, as directed in Section 1, extends to the whole of the State and has to be deemed to have come into force on the 2nd of March 1961. The charging section is Section 4. It consists of two sub-sections and three explanations.
3. Sub-section (1) of Section 4 provides that subject to the other provisions contained in the Act, there shall be charged a tax at the rate specified in the schedule to the Act in respect of every building the construction of which is completed on or after the 2nd March 1961 and which has a floorage of one thousand square feet or more; and Sub-section (2) of that section, that the tax shall be payable by the owner of the building. The three explanations read as follows:--
'Explanation 1. For the purposes of this section, the construction of a building shall be deemed to have been completed when it is ready for occupation or has been actually occupied, whichever is earlier.
Explanation 2. A building, which is not liable to be taxed under the provisions of this Act on account of its having a floorage of less than one thousand square feet, shall become liable to be so taxed if the floorage of the building is subsequently increased toone thousand square feet or more as computed in the manner specified in Section 6 by new constructions or additions or combinations.
Explanation 8. Where the floorage of a building, which has already been taxed, it subsequently increased by new extensions or additions or combinations, tax shall be computed on the total floorage of the building including that of the new extensions or additions or combinations, and credit shall be given to the tax already levied and collected in respect of the building before such extensions or additions or combinations.'
4. The expression 'building' is defined in Section 2 (d) of the Act. The definition is:
' 'building' means a house, out-house, garage, or any other structure, or part thereof, whether of masonry, bricks, wood, metal, or other material, but does not include any portable shelter or any shed constructed principally of mud, bamboos, leaves, grass or thatch or a latrine which is not attached to the main structure.'
5. Section 3 of the Act exempts certain buildings from the operation of the Act. They are buildings owned by the State Government, the Central Government or any local authority; and buildings used principally for religious, charitable or educational purposes or as factories or workshops. There is an explanation to Section 3. It says that 'charitable purpose' includes relief of the poor and medical relief.
6. The expression 'floorage' is defined in Section 2 (c) of the Act. The definition is:
' 'floorage' means the area included in the floor of a building, and, where a building has more than one floor, the aggregate area included in all the floors together.'
7. The computation of floorage is dealt with in Section 5 of the Act. It provides that the following provisions shall apply:
'(1) Where a building has only one floor, the floorage shall be the total area occupied by the basement of the building.
(2) Where a building has more than one floor, the floorage shall be the aggregate of the area occupied by the basement of the building and the areas covered by each of the floors above the basement.
(3) Where there are out-houses, garages, or other structures appurtenant to the main building, the floorage of such structures shall be computed in the manner specified in Clause (1) and (2), and the floorage so obtained shell be added on to the floorage of the main building.'
8. The rates of building tax, as indicated in Section 4 of the Act, are specified in the schedule to the Act. The schedule reads asfollows:
Where the total floorage of abuilding is less than 1000 square feet.
Where the total floorage of abuilding is 1000 square feet or more but does not exceed 2600 squarefeet.
10 nP. per sq. ft.
Where the total floorage of abuilding exceeds 2000 square feet but does not exceed 4000 squarefeet
20 nP. per sq. ft.
Where the total floorage of abuilding exceeds 4000 square feet but does not exceed 8000 squarefeet
30 nP. per sq. ft.
Where the total floorage of abuilding exceeds 8000 square feet but does not exceed 12.000 squarefeet.
40 nP. per sq. ft.
Where the total floorage of abuilding exceeds 12,000 square feet.
50 nP. per sq. ft.
9. A reading of Section 4 and of the Schedule makes it quite clear that the tax under the Act is levied on all buildings, other than those exempted under Section 3, on the basis of floorage and floorage alone; and that the tax has little or no relation either to the value or to the income of the buildings concerned. Various elements, not merely the floorage determine the value or income of a building: its character, the place where it is situated, the cost of its construction, the period for which it will endure and so on and so forth None of these have been taken into account.
10. A tax in order to be valid must be an imposition assessed in accordance with some reasonable rule of apportionment upon the person or property sought to be taxed. And there can be no doubt that a similar treatment in dissimilar circumstances will be as violative of the equality guaranteed to the citizen as dissimilar treatment in similar circumstances. It is settled law that equality spells a subjection only to laws that are equal, and that no law is equal unless it applies alike to all those in the same situation and applies differently to those in different situations.
11. Taxing laws are no exception to the doctrine of equality before the law or the equal protection of the laws. The doctrine is old in English law reaching back, it has been said, to the 40th article of the Magna Carta. But it is the Constitution of the United States that gave it its current form, the model for article 14 and the similar provision in other Constitutions.
12. None can deny that the concept of equality embodied in Art. 14 is of paramount importance in the maintenance of a democracy. In a comment entitled 'Equal Protection of the Laws in Malaysia and India' Harry K Groves said:
'There is, perhaps, no single provision of any democratic constitution about which one could say, 'if all else were lost yet this one remain, the Government could still be demo-cratic' But the provision for equality would come close to filling such a description. (American Journal of Comparative Law, Vol. 12, page 385)
13. Absolute equality, however, can never be a practical reality; and all laws have hence to be based on a classification of some kind or another. What brings down the wrath of Article 14 is not the existence of a classification but its lack of reasonableness.
14. The two conditions that must be satisfied in order to pass the test of permissible classification were clearly laid down in Budhan Choudhry v. State of Bihar. AIR I655 SC 191. They are:
(I) that the classification must be founded on an intelligible differentia which distinguishes persons or things that are grouped together from others left out of the group; and
(ii) that that differentia must have rational relation to the object sought to be achieved by the statute in question.
15. It is true that the power of the Legistature in respect of taxing statutes is of wide range and flexibility and that a larger discretion in the matter of classification it permitted in view of the inherent complexity of the fiscal adjustment of diverse elements. But, as pointed out by the Supreme Court in Khandige Sham Bhat v. Agricultural Income-tax Officer, AIR 1963 SC 591, the Legislature has nonetheless to adhere to the fundamental principle underlying the doctrine of equality.
16. The classification on the basis of floorage adopted in the Act is not founded on any intelligible differentia. An intelligible differentia in a case like this will have to be based not merely on floorage but also on value or income. A classification in a taxing statute is intended to equalise, as far as possible, the burden of taxation. And the burden of a buildings tax can never be equalised when It is based solely on floorage and ignores all' the other relevant considerations.
17. The Kerala Buildings Tax Act. 1991, as stated therein, is an Act to provide for the levy of a tax on buildings'. It is not an Act to restrict or regulate the floorage of new con-structions; and it is also not possible to say that there is any nexus between the classification on the basis of floorage adopted in 'the Act and the object for which its provisions have been enacted.
18. In Kunnathat Thathunni Moopil Nair v. State of Kerala, AIR 1961 SC 682, the validity of the Travancore-Cochin Land Tax Act, 1666 (as amended by the Travancore-Cochin Land Tax (Amendment) Act, 1967) came up for consideration. The preamble to that Act said that the Act was intended to provide for the levy of a low and uniform rate of basic tax on all lands in the State; and Section 4, the charging section:
'Subject to the provisions of this Act, there shall be charged and levied in respect of all lands in the State, of whatever description and held under whatever tenure, a uniform rate of tax to be called the basic lax.' Section 6 (l) of the Act provided that the basic tax shall be at the rate of two naya paisa percent of land per annum; and Section 6 (2), that the basic tax charged and levied at that rate shall be the tax payable to the Government in lieu of any existing tax in respect of the land.
19. The Supreme Court said: 'Article 265 imposes a limitation on the taxing power of the State in so far as it provides that the State shall not levy or collect a tax, except by authority of law, that is to say, a tax cannot be levied or collected by a mere executive fiat. It has to be done by authority of law, which must mean valid law. In order that the law may be valid, the tax proposed to be levied must be within the legislative competence of the Legislature imposing a tax and authorising the collection thereof and, secondly, the tax must be subject to his conditions laid down in Article 13 of the Constitution. One of such conditions envisaged by Article 18(2) is that the Legislature shall not make any law which takes away or abridges the equality clause in Art. 14, which enjoins the State not to deny to any person equality before law or the equal protection of the laws of the country. It cannot be disputed that if the Act infringes the provisions of Article 14, of the Constitution, it must be struck down as unconstitutional.' ;
'It may be rightly remarked that the Act obliges every person who holds land to pay the tax at the flat rate prescribed whether or not he makes any income out of the property, or whether or not the property is capable of yielding any income. The Act, in terms, claims to be 'a general revenue Settlement of the State' (Section 3). 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 regardto the incidence of the taxation. Under the. Act in question we shall take a hypothetical case of a number of persons owning and possessing the flame area of land. One makes nothing out of the land, because it is arid desert. The second one does not make any income, but could raise some crop after a disproportionately large investment of labour and capital. A third one, in due course of husbandry, is making the land yield just enough to pay for the incidental expanses and labour charges besides land tax or revenue. The fourth is making large profits, because the land is very fertile and capable of yielding good crops. Under the Act, it is manifest that the fourth category, in our illustration, would easily be able to bear the burden of the tax. The third one may be able to bear the tax. The first and the second one will have to pay from their own pockets, if they could afford the tax. If they cannot afford the tax, the property is liable to be sold, in due process of law, for realisation of the public demand. It is clear, therefore, that inequality is writ large on the Act, and is inherent in the very provisions of the taxing section. It is also clear that there is no attempt at classification in the provisions of the Act. Hence, no more need be said as to what could have been the basis for a valid classification. It is one of those cases where the lack of classification creates inequality. It is, therefore, clearly hit by the prohibition to deny equality before the law contained in Art. 14 of the Constitution.'
20. In Bhuvancswaraiah v. State of Mysore, AIR 1965 Mys. 170, the Mysore High Court had to consider the validity of an enactment similar to the one before us but with a more detailed attempt at classification the Mysore Buildings Tax Act, 1962. The Court struck down the Act on the ground that the classification in the Act based solely on floorage was not founded on any intelligible differentia and that the differentia on the basis of floorage had no rational relation to the object sought to be achieved by the Act. Govinda Bhat, J. said:
'The impugned Act levies a charge to tax solely and wholly on the basis of the size measured by the floorage area.' (Paragraph 123)
'The size, of the building, it is true, has a relation to the income or value, but that is only one of the factors that enters into the determination of the value of the property. (Paragraph 124)and Hegde J.: 'The mere fact of classification is not sufficient to relieve a statute from the reach of the equality clause. In such matters there should be not only a classification but the same should be based upon reasonable ground of some difference which bears a just and proper relation to the attempted classification and Is not a mere arbitrary selection. As mentioned earlier the object of the 'Act' is not to limit the floorage of the buildings in towns but to raise public revenue. Therefore, the classification on the basis of floorage has noJust relationship with the object of the 'Act.' Hence the Act suffers from lack of rational classification.' (Paragraph 32)
21. The purpose of judicial review in matters legislative is to test enacted law at the altar of enshrined values. And in the light of what is stated above we cannot but agree with the Judgment under appeal that the distribution of the burden of taxation under the Kerala Buildings Tax Act, 1961, is not equal, that the attempted classification in the Act is not a reasonable classification at all, that there is no rational relation between the object of the Act and the classification attempted, and that the Act has hence to be struck down as violatlve of Article 14 of the Constitution. We do so, and dismiss these appeals; but in the circumstances of the case without any order as to costs.
22. The conclusion we have reachedmakes it unnecessary to consider the contentions urged in the Original Petitions but notdealt with in the Judgment under appeal.Those contentions are left open for futuredetermination.