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Rajah D.V. Appa Rao Bahadur Vs. First Wealth-tax Officer - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtChennai High Court
Decided On
Case NumberWrit Petition Nos. 1252 to 1255 to 1963
Judge
Reported in[1969]72ITR741(Mad)
ActsWealth Tax Act, 1957; Constitution of India
AppellantRajah D.V. Appa Rao Bahadur
RespondentFirst Wealth-tax Officer
Appellant AdvocateV. Vedantachari and ;K.C. Rajappa, Advs.
Respondent AdvocateV. Balasubrahmanyan and ;J. Jayaraman, Advs.
Cases ReferredIn K. T. Moopil Nair v. State of Kerala
Excerpt:
direct taxation - construction - wealth tax act, 1957 and constitution of india - petitioner challenged constitutional validity of act which imposed tax in respect of buildings with respect to wealth tax - challenged on ground that it violated articles 19 (1) (f) of constitution of india - contended that wealth tax cannot be levied by legislation under entry 86 when tax was levied under entry 49 of state list on lands and building - enactment cannot be stuck down on ground that combined incidence of different taxing legislations under different jurisdictions violated fundamental right - enactments passed by different legislatures are fortiori and they cannot on any view be taken together as one piece of legislation. - - by entry 56 of list i, duties in respect of succession to.....veeraswami, j.1. these petitions for certiorari and prohibition raise a question of the constitutional vires of the wealth-tax act, 1957, in so far as it imposes an annual tax in respect of the net wealth, particularly buildings. a further question to be considered is whether the act violates article 19(1)(f) of the constitution of india. the petitioner is an ex-land holder of the jaggampeta 'a' and 'd' estates in the east godavari district but is now a permanent resident of madras. he owns, as he says, immovable properties consisting of one compact block of buildings in mylapore and royapettah high road worth rs. 8,70,505, movable properties in the form of capital in a certain producing concern of the value of rs. 58,458.79, national savings certificates and shares of rs. 79,700 and bank.....
Judgment:

Veeraswami, J.

1. These petitions for certiorari and prohibition raise a question of the constitutional vires of the Wealth-tax Act, 1957, in so far as it imposes an annual tax in respect of the net wealth, particularly buildings. A further question to be considered is whether the Act violates Article 19(1)(f) of the Constitution of India. The petitioner is an ex-land holder of the Jaggampeta 'A' and 'D' Estates in the East Godavari District but is now a permanent resident of Madras. He owns, as he says, immovable properties consisting of one compact block of buildings in Mylapore and Royapettah High Road worth Rs. 8,70,505, movable properties in the form of capital in a certain producing concern of the value of Rs. 58,458.79, National Savings Certificates and shares of Rs. 79,700 and bank deposits amounting to Rs. 5,012.19 and owes unsecured loans of Rs. 26,800 and non-business debts of Rs. 45,792.31. For the assessment year 1960-61, he apparently filed on January 25, 1961, a return disclosing total assets valued at Rs. 9,43,582.07 as on the valuation date which included Rs. 8,70,505 being the value of the buildings. On November 3, 1961, an assessment order was made by the respondent more or less on the basis of the return, practically accepting the value of the buildings as given by the petitioner. This order was reopened subsequently under Section 17 of the Act on certain grounds but this is not of any importance in the present context. On December 6, 1961, October 29, 1962, and September 29, 1963, the petitioner filed his returns for the subsequent years 1961-62, 1962-63 and 1963-64 in which he declared these buildings as part of his taxable assets. Pending the proceedings for these years, the petitioner addressed a letter to the respondent on October 30, 1963, questioning the legality of the proceedings on the ground that the levy of wealth-tax on buildings was beyond the legislative competence of Parliament and that the levy was also discriminatory in its incidence. A few days later he moved this court under Article 226 of the Constitution with these petitions.

2. Though, originally, the petitioner attacked the validity of Sections 3 and 4 of the Act as making an arbitrary classification in the matter of incidence or of the burden of the tax and selection of persons for purposes of wealth-tax, the argument has not been pursued but abandoned before us. The petitioner's submission on the legislative competence is two-fold, (a) entry 86 of the Union List does not include the capital value of buildings and (b) in any case, the entry does not authorise an annual recurring levy. It is said that the power to tax the value of lands and buildings entirely belongs to the State under entry 49 and the capital value of the assets contemplated in entry 86 of the Union List is, therefore, necessarily exclusive of the value of the lands and buildings. This precise ground is covered by B. & C. Co. Ltd. v. State of Madras : (1966)2MLJ172 , which is against the petitioner. A Division Bench of this court, to which one of us was a party in that case dealt with the constitutional validity of the Madras Urban Land Tax Act, 1963, and in that connection dealt with the true scope and ambit of each of the entries 49 in the State List and 86 in the Union List. The argument there was that the Urban Land Tax Act levied a tax on capital value of the urban lands and was, therefore, a law which fell within the ambit of entry 86 of the Union List and so it was necessarily outside the ambit of entry 49 of the State List. The basis for the contention was that a reading of the two entries 49 and 86 harmoniously and in the light of each other would exclude from the scope of the former entry a tax on land based on its market or capital value. This court held that the two entries were distinct and different from each other and did not either overlap or stand to any extent on a field common to both, so as to call for a reconciliation between conflicting areas of power and restricting the scope of one entry in order to define the limit of and give full effect to the other power and pointed out the distinction between the two heads of power at pages 625 and 626 :

'The charge under the entry (entry 49) is on the land or buildings; the incidence is on them, and lands and buildings are the subject-matter of the charge...The tax under entry 86, List I, of the Constitution, is on the capital value of the assets of individuals and companies or on the capital value of companies. This is not a tax on the asset itself but on its capital value which, as we think, means its real economic value. That again implies net value of the assets...... Further the tax under entry 86 falls on the owner of the assets which is clear from the words used 'of individuals and companies', and not occupiers......While the charge under entry 49 is on the land, and need not necessarily be from its owner but may be from the occupier thereof, the impost under entry 86 is not on the assets themselves of an individual but on their economic value, that is to say, their real value as reduced by the value of encumbrances thereon and is on the owner of the assets. In other words, the tax under entry 86 is on the net economic value of the totality of the assets.'

3. The argument in the present case is that entry 86 does not include lands and buildings which is somewhat the converse of the submission in B. & C. Co. Ltd. v. State of Madras but in principle the two approaches are basically identical. We are of the view that B. & C. Co. Ltd. v. State of Madras has correctly delimited and defined the mutual scope and nature of the two heads of power under entry 49 of the State List and entry 86 of the Union List and that the total assets mentioned in entry 86 comprehend and include lands and buildings. We find that the Orissa High Court in Vysyaraju Badri Narayanamurthy v. Commissioner of Wealth-tax : [1965]56ITR298(Orissa) expressed a similar view. The contention for the accountable person in that case was that construing entry 86 of List I and entry 49 of List II harmoniously, the 'assets' referred to in the former entry must be held to exclude all lands, whether agricultural or non-agricultural, and buildings, and the State Legislature alone had the right to legislate for the imposition of taxes on lands and buildings. Dealing with this point, Narasimham J. and R.K. Das J. observed :

'The word 'assets' in entry 86 of List I is not qualified by any limiting expression. On the other hand by excluding agricultural lands only the framers of the Constitution made it absolutely clear that all other assets would come within the scope of that entry......there is no reason why, inentry 86 of List I, only agricultural lands should have been expressly excluded. There was nothing to prevent the makers of the Constitution from excluding, from the scope of that entry, all lands, agricultural and non-agricultural, and also buildings. Apart from this reason I would with respect adopt the reason given by the Bombay High Court in Municipal Commissioner, Municipal Corporation of the City of Ahmedabad v. Gordhandas Hargovandas, : AIR1954Bom188 , while construing the corresponding entries (entry 55 of List I (Federal List) and entry 42 of List II (Provincial List) in the Government of India Act, 1935. There, the learned judges pointed out that the pith and substance of the two entries were fundamentally different. Entry 55 (here entry 86 of List I) dealt with capitalised value of assets whereas entry 42 (here entry 49 of List II) was not directly concerned with the capitalised value of lands and buildings, though in a particular piece of legislation the capital value may be taken as the basis for levying tax......The aforesaidBombay view has been adopted by the Kerala High Court in Mammad Keyi v. Wealth-tax Officer, Calicut : [1962]44ITR277(Ker) and by the Mysore High Court in Sri Krishna Rao L. Balekai v. Third Wealth-tax Officer : [1963]48ITR472(KAR) '.

4. The Orissa High Court noticed that the decision of the Bombay High Court had since been reversed by the Supreme Court in Patel Gordhandas v. Municipal Commissioner of Ahmedabad, : [1964]2SCR608 on a different point and not on a construction of entry 55 of List I and entry 42 of List II of the Government of India Act, 1935. But Sarkar J., who was in the minority in the Supreme Court decision, however, pointed out that 'the Provincial Legislature had been given the power to tax units of lands and buildings irrespective of their value and the Central Legislature the power to tax the value of assets'. In our opinion, therefore, the contention of the petitioner that entry 86 of the Union List does not include within its scope lands and buildings must be rejected and with it also the submission for the petitioner that on the same lands and buildings on which urban land tax has been levied under entry 49 of the State List, wealth-tax cannot be levied by legislation under entry 86.

5. As to the annual levy of wealth-tax, Mr. Vedantachari for the petitioner says that having regard to the collocation of the entries, legislative practice and the intention gathered by a reading of the entries together and in the light of each other, entry 86 of the Union List does not authorise such a levy but contemplates an imposition once and for all on the occasion of transfer of assets on modes other than those envisaged by entries 87 and 88 of the Union List. The Orissa High Court in Vysyaraju Badri Narayana-murthy v. Commissioner of Wealth-tax declined to accept a similar contention on the view :

'It is true that the power of taxation conferred by entries 82, 83, 84, 87 and 88 can be used only once, in respect of a taxable event, such as income, entry of goods, production of goods, death duty, succession duty, etc. But such a result flows from the nature of the taxable event which is the basis of those entries. Thus the same sum of money cannot accrue as 'income' more than once, the same goods cannot enter a country or leave a country except once, and similarly, a person can die only once and another person can succeed to an item of property only once. But as regard entry 86 of List I the taxable event is the ownership of the assets; and the ownership continues unless it is divested subsequently. There is also no principle of public finance in support of the view that a tax on the capitalised value of assets can be levied only once. The location of entry 86 in List I may be a mere accident of draftsmanship and too much importance should not be given to the collocation of the entries, if the language of a particular entry, on a reasonable construction does not support such a restrictive interpretation.'

6. With respect, we find ourselves in entire agreement with these observations. But Mr. Vedantachari contends that this view does not take note of what he calls the legislative practice. The Schedule Taxes Rules framed under Section 80A(3)(a) of the Government of India Act, 1919, enumerated the heads of the taxing power of the Legislative Council of a Province to be exercised without the previous sanction of the Governor-General for purposes of local Government or local authority. In Schedule I to the rules, entry 1 related to tax on land put to uses other than agricultural and entry 2 to a tax on succession or an acquisition by survivorship in a joint family and in Schedule II entry 2 related to a tax on land or land values and entry 3 to a tax on buildings. A tax on land used for non-agricultural purposes and a tax on succession or acquisition by survivorship in a joint family were intended to be levied for purposes of the local Government while a tax on land or land values and buildings was earmarked for purposes of local authority. Perhaps entry 2 in Schedule II covered land excluded from the purview of entry 1 of Schedule I. Entry 2 of Schedule I fixed the taxable event to the succession or acquisition by survivorship in a joint family. The scheme of distribution of taxing power adopted by the Government of India Act, 1935, was somewhat different. A clear cut dichotomy was made between agricultural and non-agricultural land. By entry 56 of List I, duties in respect of succession to property other than agricultural land were assigned to the Federal Government and so too by entry 55 of that List, taxes on capital value of the assets exclusive of agricultural land of individuals and companies as well as taxes on the capital of companies. Corresponding to entry 56 in the Central List, duties in respect of succession to agricultural land were assigned to the provinces by entry 43 of the Provincial List. Taxes on lands and buildings, hearths and windows were also assigned to the province under entry 42. The Concurrent Legislative List included entries 7 and 8, the first relating to wills, intestacy and succession save as regards agricultural land and the second with reference to transfer of property other than agricultural land ; registration of deeds and documents. These were topics of legislation not related to taxing power. In In re Powers of Federal Legislature to levy estate, duty, [1944] F.L.J. 215, the Federal Court of India, on a reference under Section 213 of the Government of India Act, 1935, ruled that entry 56 in List I did not include a power to levy estate duty. In view of this opinion. Parliament of the United Kingdom introduced entry 56(A) in List land entry 43(A) in List II which correspond respectively to entry 87 in List I and entry 48 in List II in the Constitution of India, 1950. Sir Patrick Spens, the learned Chief Justice, after noticing that the difference recognised in England between succession duty and estate duty was to some extent due to the history of those taxes in that country, pointed out that the difference also rested on a real and important difference in the bases on which the two taxes rested. The principle of aggregation and progression usually associated with the estate duty is sometimes adopted in respect of succession duty too. Writers and economists have dealt with succession duty and estate duty under the headings 'death duties', 'inheritance taxes' and 'duties on succession'. Findlay Shirras in his Science of Public Finance classifies death duties or inheritance taxes 'under two categories, an estate tax levied on the inheritance as a whole, and a succession duty or share tax on the separate portions going to the different beneficiaries'. The learned Chief Justice accepted this differentiation while pointing out that aggregation and progression as well as death as an occasion which may be common to both the estate duty and succession duty could not form the basis for the difference and said at page 220:

'There is one feature common to both taxes, namely, that the occasion for the levy is the death of a person; but while succession duty has reference to the acquisition of the property by the successor and generally takes into account the extent of the benefit derived by him and other considerations relevant from that point of view, the estate duty has reference to the value of the property constituting the estate of the deceased and is independent of the question as to who takes it.'

7. The learned Chief Justice, with whom Varadachariar J. agreed, further held that the word 'succession' in entry 56 was not capable of a wide significance in the dictionary sense so as to comprehend every kind of passing of property but the word had been used in the entry in the sense to be gathered from the provisions of the Indian Succession Act which broadly divides the subject of 'succession' into 'testamentary' and 'intestate' succession, the ordinary meaning of succession being the transmission by law or by the will of man, to one or more persons of the property and the transmissible rights and obligations of a deceased person. The court also in support relied on the indication by the collocation of the words 'wills', 'intestacy' and 'succession' in entry 7 of List III and the language in entry 21 in List II the corresponding provision in respect of agricultural land which speaks of 'transfer, alienation and devolution' and which also corresponds not only to entry 7 in List III, but also to entry 8, that is to say, transfer of property other than agricultural land ; registration of deeds and documents, The learned Chief Justice deduced at page 221 :

'...hence it (entry 21) deals with transfers inter vivos as well as testamentary dispositions and devolution. It is only reasonable to assume that entry 56 in List I and entry 43 in List II, which authorise the levy of duties in respect of succession, refer us back to the succession and devolution provided for elsewhere in the schedule.'

8. So far as the legislative practice was concerned, the majority of the court thought that there could be no doubt that in England, where the distinctions between the two duties were well known, a power to impose duties 'in respect of succession to property' would be regarded as most inaptly worded if it was intended to include a power to impose an estate duty and that if there be any legislative practice in India, it was to be found generally to use the word 'succession' in the narrower sense. It further agreed with the view that entry 55 in List I of the Government of India Act, 1935, which corresponds to entry 86 in List I of the Constitution of India, was not appropriate (o describe a levy in the nature of estate duty.

9. The argument for the petitioner before us is that while the several entries referred to by us deal with different modes of devolution, some of them had been chosen as the occasion or subject-matter for levy of tax under one or other lists. In case of testamentary devolution probate duty is levied ; in case of intestacy and succession, duties are imposed on issue of letters of administration or succession certificate besides succession duty; devolution by death attracts estate duty and certain transfers of property in the nature of conveyance are also taxes under the Stamp Act in the form of stamp duty. The heads of power of taxation are apportioned between the federation and the provinces keeping in view the nature of the property as agricultural or non-agricultural. Thus, the power to levy estate duty and duties in respect of succession to property other than agricultural land are assigned under entries 87 and 88 in List I of the Constitution of India to Parliament and similar power in respect of agricultural lands to the State Legislatures under entries 47 and 48 in the State List. There are topics of legislation assigned in each of the three lists which may cover other modes of devolution of property, as for instance survivorship, partition and adoption (entry 5 of List III), transfer of property other than agricultural land (entry 6 of that List) and transfer and alienation of agricultural land (entry 18 of List II). Mr. Vedantachari's argument is that entry 86 in List I of the Constitution of India has been inserted providing for levy of tax on the capital value of the assets, exclusive of agricultural land on the occasion of the devolution of such assets on modes other than those comprehended by the other taxing entries in the Union List. He says that the tax under that entry is attracted only on mutation or devolution of the assets. Though the argument is attractive, it is not, in our opinion, sound or correct.

10. It is true that there is nothing in the language of entry 86 to clearly indicate the event of the periodicity of the charge, But that would not, in our opinion, enable us to restrict the plain scope of the entry. A head of legislative power, as a rule, should be given its widest amplitude except to the extent the language clearly, and either expressly or by necessary implication limits it. In a scheme of distribution of legislative power in a system of federal set up consisting of the Union and the State with independent enumerated powers and also a concurrent list of powers, the scope of a particular legislative entry has, in case of seeming overlapping or conflict, to be denned not merely in the light of the words or expression conferring the power but also in the context of other entries in the same and other lists of power by adopting a harmonious construction. In cases of ambiguity in the language of an entry, resort to other aids of construction is permissible like the history of the legislation, legislative practice, if it exists, the state of the law as generally understood at the time of legislation or constitution making and perhaps on rare occasion even to reports of committees relating to a particular legislation, or proceedings of the debate in piloting a bill, to ascertain the true intention. But these aids will not prevail, we may caution, against the plain language employed by the Legislature which involves no ambiguity whatever. These principles of construction are so well settled that citation of authority is unnecessary. These rules were summed up by this court in B. & C. Co. Ltd. v. State of Madras:

'In construing or interpreting a head of authority or power to legislate as under each of the entries in the Lists, Schedule VII, it will not be right first to explore into the history and practice of prior legislation and then in the light and background of it, read an entry and then fix its scope and meaning. Under the Constitution, the legislative power is distributed between Parliament and State Legislatures by specific and express entries in the three Lists. These entries contain broad heads of power which should be given the widest amplitude, consistent, of course, with the actual language employed in the particular entry and also the comparative scope of parallel, related or other entries in each of the Lists. We should remember that the entries, occurring as they do, in so fundamental and such an organic document as the Constitution, which is meant to serve all the ages and apply to all situations, should receive a broad and liberal interpretation and cannot be restricted in scope and amplitude by preconceived or a priori reasoning or with reference to external factors. The most direct, proper and reasonable way of construing the entries is to look at the language itself in each of them, read and understand it in the grammatical and natural sense. Where the language of an entry is clear and unambiguous, it is not, in our opinion, permissible to depart from its plain tenor and scope, and import into it extraneous considerations in order to cut down or restrict its ambit and meaning. In fact, where the language is express and plain, no problem of construction normally arises. Where, however, there are two parallel or related entries in the same or different Lists, the apparent conflict will have to find its solution from a harmonious reading of such entries and an attempt at reconciliation fordelimiting the mutual scope and ambit of such entries. If the languageex facie is not plain or is ambiguous then naturally the aids of constructionwill have to be resorted to which will include sometimes reference toprevious history and practice of legislation.'

11. Now what does entry 86 say ?--' Taxes on the capital value of the assets, exclusive of agricultural land, of individuals and companies ; taxes on the capital of companies.' That means an imposition or charge on the net value of the assets not including agricultural land. The sub-stance of the taxing power is not trammelled or limited but is of wide sweep. The manner, frequency, occasion and the incidence of the charge on the net value of the assets as well as the procedure for levy and collection including, penalties and revenue offences in aid thereof are all matters which appear to be well within the ambit of the power. The power being expressed in terms of taxes on the capital value of the assets, the fullest amplitude of the expression will embrace and include all those matters. It will, therefore, be within the competence of the legislature to determine and legislate how, when and in what manner the taxes be levied on the capital value of the assets. The taxable event is the capital value which is also the subject-matter of the impost. No condition is prescribed that the taxes on the capital value of the assets can be raised only on the occasion of the mutation or traction of the assets in some manner. As we read entry 86, power thereunder is plenary in its range and character in raising taxes on the capital value of the assets.

12. We shall next consider whether there is anything in the collocation of the entries in List I or in the other Lists or the legislative practice, if it exists, which necessarily abridges the scope of entry 86. The arrangements of the entries in each of the Lists shows a dichotomy and an enumeration first of the heads of power comprising the subject of legislation followed by a grouping of powers of taxation sometimes referable to the heads of subject of legislation. Sundararamier & Co. v. State of Andhra Pradesh, : [1958]1SCR1422 held :

'The above analysis......leads to the inference that taxation is not intended to be comprised in the main subject in which it might on an extended construction be regarded as included, but is treated as a distinct matter for purposes of legislative competence. And this distinction is also manifest in the language of Article 248, Clauses (1) and (2) and of entry 97 in List I of the Constitution.'

13. The Supreme Court made this observation in a different context and in coming to the conclusion that the power of Parliament to legislate on inter-State trade and commerce under entry 42 does not include a power to impose a tax on sales in the course of such trade and commerce. Relying on the scheme of distribution of power as outlined by the Supreme Court in Sundayaramier & Co. v. State of Andhra Pradesh. Mr. Vedantachari argues that entries 86 to 88 in List I and entries 47 and 48 in List II confer powers of taxation with reference to the subjects of legislation under entries 5 and 6 in the List III. He is partly right in so far as the powers in relation to estate duty and duties in respect of succession to property are concerned. But we are not satisfied that entry 86 in List I is intended to cover an impost on movement or mutation of property otherwise than by death or by succession. We recognise that devolution by survivorship or in a manner of speaking, by partition, adoption, etc., has not been made the taxable event by any specific tax entry in the first two Lists. But, on that account, we do not feel justified to cut down the scope of entry 86. If the intention of entry 86 is as contended for the petitioner, there is no reason why a similar taxing power should not have been accorded to the State legislature to tax on the capital value of agricultural lands. Entry 49 in List II provides for taxes on lands and buildings but the nature and scope of the tax contemplated by that entry are essentially different from those under entry 86 in List I as has been held in B. & C. Co. Ltd. v. State of Madras. Further, 'buildings' which are mentioned in entry 49 in List II are not excluded from the purview of entry 86 of List I. A perusal of the several entries in the three Lists does not also lead to the conclusion that corresponding to each head of power on the subject of legislation there is in every case a taxing power in relation to it. The collocation and grouping of entries do not, in our opinion, permit such a general deduction. Reference has been made to Umayal Achi v. Lakshmi Achi, [1945] 1 M.L.J. 108; [1945] F.C.R. 1 24 in support of a contention that, in the context of the grouping of entries 86 to 88 in List I, the ambit of entry 86 should be restricted. The Federal Court in that case held that, though the word 'property was a general term capable of including agricultural land, nevertheless, it should be given a restricted meaning so as not to include agricultural land and that, on this view, the Hindu Women's Rights to Property Act, 1937, did not affect the devolution of agricultural land in the Governor's Provinces. The reason is thus stated at page 115:

'The court, as a court of construction, searched for a ' reasonable limitation' to these general words and so construed the words as not to attribute to the legislature an effort to enlarge its jurisdiction beyond the powers committed to it.'

14. No such situation arises in the construction of entry 86 and in that connection we are not faced with any such anomaly which faced the Federal Court. Entry 86; expressly exclude from its scope agricultural laud. No limitation on its scope can even otherwise be derived from the accident of entries 87 and 88 following entry 86 in List I. We can discover no common factor between entry 86 on the one hand and the two entries on the other immediately following nor is the arrangement of the tax entries one after the other in List I or List II on a particular pattern. It is not, therefore, possible to restrict the scope of entry 86 either on the view that it takes its complexion in the context of entries 87 and 88 or from the fact of their place in List lone after the other. One has only to peruse the rest of the tax entries to be convinced that there is necessarily no connection or relation or nexus between one tax entry and another in List I so as to restrict the mutual scope of each other. On this aspect of the case, we, with respect, again find ourselves in agreement, with Vysya-raju Badri Narayanamurthy v. Commissioner of Wealth-tax. One other limb of the argument for the petitioner is that when entry 49 in List II includes lands and buildings on the principle that the specific excludes the general, entry 86 in List I should be construed as excluding lands and buildings. The answer is found in Vysyaraju Badri Narayanamurthy v. Commissioner of Wealth-tax. If the argument is correct, there is no reason why entry 86 only excludes from its scope agricultural lands while, if that was the intention, the framers of the Constitution could have well expressly excluded lands and buildings, and not merely, agricultural land.

15. As for legislative practice, there is little of it so far as wealth-tax is concerned. Where there is ambiguity, legislative practice may, to a measure, be of assistance in construction and in that case it will be relevant and can be taken into account: State of Madras v. Cannon Dunkerley & Co. (Madras) Ltd., : [1959]1SCR379 and B. & C. Co. v. State of Madras. We have already referred to the Scheduled Taxes Rules and the distribution of legislative power relevant to present purposes in the Government of India Act, 1935, and also the Constitution. Wealth-tax as such was not known in our country prior to the Government of India Act, 1935, No doubt there was entry 55 in List I in Schedule VII of that Act, which corresponds to entry 86 in the Union List in the Constitution but there was no legislation in exercise of the legislative power until the Wealth-tax Act, 1957, was enacted. Our attention was invited to Todhunter's Report on the Indian Taxation, but we have not been able to extract from it any legislative practice in regard to tax on the capital value of the assets. All that we can find in it is that taxes on land and land values were assigned to the Provinces and so too taxes on buildings. Taxes on land and land values and buildings were of course under the devolution rules earmarked for the purpose of local authority and we know that the laws relating to local authorities provided for levy on lands and buildings in municipal or local areas and they have been and are assessed on capital value though the usual basis is the annual value. Under the Scheduled Taxes Rules, taxes on land put to non-agricultural uses and on succession or on acquisition by survivorship in a joint family were allocated for the purposes of the local Government. This was the source of power for levy of probate duty on testamentary devolution and duty on succession certificates and letters of administration. But none of these imposts had any resemblance in quality or incidence to a tax on the capital value of the assets. We find no basis for the theory that entry 55 in List I of the Government of India Act, 1935, was intended to cover tax on mutation of property in modes other than those comprehended by the Scheduled Taxes Rules and later certain subjects of legislation in List III in the Government of India Act, 1935. Entry 55 was introduced for the first time in the Constitution Act of 1935 but the power thereunder is not traceable or related to anything like legislative practice obtaining in this country before 1935. As annual wealth-tax, though so-called for convenience, and is levied on the value of the principal, is in essence only an impost on accrual and not on the principal itself. Nicholas Kaldor in his report on Indian Tax Reform says at page 191

'An annual tax on wealth, though it is levied on the value of the principal, is really a tax on accrual and not a tax on the principal itself--as for example, estate duties or a capital levy are. If all property yielded the same percentage of income, an income-tax and a wealth-tax would amount to the same thing. The two differ precisely because some property yields a large money income, other property a small income (or no money income at all) in relation to its current market value.'

16. He seems to think that annual tax on wealth is some sort of a supplement to tax on income, for, in his view, if a property does not yield money income, it must either yield an equivalent psychic income to the owner or it must be held in the expectation of a certain appreciation in value which makes it at least as attractive to the holder as other property on which a current money return is obtained. The capital gains brought within the scope of income taxation would seem to stand on a different footing. Such gains are treated as deemed income while the annual tax on wealth is a tax on the capital value of the assets, its incidence being measured at so much percentage on the net value as representing perhaps a part of the real or psychic income from such value. The concept of tax on capital value of the asset is sui juris and is not relatable to any legislative practice in respect of mutation taxes. We are, therefore, unable to accept the contention that levy of annual wealth-tax is in excess of the powers of Parliament under entry 86 in List I of the Constitution.

17. For the revenue Mr. Balasubramanyan contended that the petitioner could succeed only if he could show that the field of taxation now attacked was occupied by the State List and that on this view nothing turned on entry 86 and that in any case he could rely on the residuary power of Parliament to support the validity of the Wealth-tax Act, On the view we have already expressed, it is unnecessary to deal with this argument.

18. The further submission of Mr. Vedantachari is based on Article 19(1)(f) of the Constitution. He says that levy of wealth-tax is as a result of holding property and the levy prevents the petitioner from holding it because every year he has to pay the tax from the capital. Moreover, as he adds, all the other taxes, when aggregated, which the petitioner is called upon to pay under different fiscal enactments in relation to his lands and buildings, make the holding of property a burden which is neither in public interest nor reasonable. On these premises learned counsel strongly urges that the Wealth-tax Act violates Article 19(1)(f) of the Constitution. According to the petitioner, in respect of the lands and buildings, valued in the aggregate at Rs. 8,70,505, he had for the assessment year 1960-61 to pay corporation tax assessed at Rs. 14,614.18 per annum, wealth-tax at Rs. 7,783.97 per annum and income-tax at Rs. 17,780.08 for that year and that further the buildings require periodical and annual maintenance charges and annual repairs, the cost of which will take away at least 6 per cent. of the income from the buildings. Added to this, he says that urban land tax is payable from July 1, 1963, at Rs. 0.04 per cent. per annum and this amounts to Rs. 3,482. His complaint, therefore, is that if these compulsory outgoings are taken into account, there will be left nothing with him which can be regarded as income from the buildings in any sense and the result is that the holding of the lands and buildings in his hands is a real burden. In support of his contention that the wealth-tax is invalid as violating Article 19(1)(f), he relies upon Attorney-General of Alberta v. Attorney-General of Canada, A.I.R. 1939 P.C. 53.

19. The Privy Council in this case held certain bills to be ultra vires the Legislature of the Province of Alberta. These bills related to taxation of banks and regulation of their business. It was found that the effect of the legislation was to prevent the banks from carrying on their business. The tax proposed was based on the paid-up capitals and on the reserve funds of the banks wherever situated. The rate of taxation was prohibitive and was known to the Alberta Legislature to be prohibitive. In striking down the legislation the Privy Council said at pages 57 and 58 :

'It was rightly contended on behalf of the appellant that the Supreme Court and the Board have no concern, with the wisdom of the Legislature whose bill is attacked; and it was urged that it would be adangerous precedent to allow the views of members of the court as to the serious consequences of excessive taxation on banks to lead to a conclusion that the bill is ultra vires. Their Lordships do not agree that this argument should prevail in a case where the taxation in a practical business sense is prohibitive,'

20. The Privy Council had an alternative ground to hold the legislation to be invalid with which we are not concerned in the present context. Mr. Vedantachari, with demonstrable force, contends that the combined effect of the aggregate burden of taxes under different enactments in relation to the petitioner's holding of lands and buildings is so prohibitive that, as a result of its burden and impact, it has become practically useless to hold the properties in total violation of his fundamental right to acquire, hold and dispose of property. We do not think that the petitioner's complaint as to the aggregare burden imposed on him by the multiple taxation in relation to his lands and buildings is unreal or not justified, if the factual basis is correct. It is true that excessive taxation is a matter of policy and courts will have nothing to do with it, and would have no concern with the wisdom of the Legislature. Where, however, the taxation under a particular enactment is so excessive as, in its effect, to be prohibitive of holding property, it will on the principle of Attorney-General of Alberta v. Attorney-General of Canada--we are aware it had not to do with a fundamental right--be violative of the fundamental right and it may be difficult to save it on the ground of its being a reasonable restriction. Article 265 of the Constitution declares that no tax shall bo levied or collected except by authority of law and it is now Well settled that fiscal laws are also to conform to the fundamental rights. In K. T. Moopil Nair v. State of Kerala, : [1961]3SCR77 the Supreme Court struck down the Travancore-Cochin Land Tax Act, 1955, as amended in 1957 on the ground among others, that it violated Article 19(1)(f) of the Constitution. Observed the Supreme Court:

'The Act thus proposes to impose a liability on landholders to pay a tax which is not to be levied on a judicial basis..'

20. The Act also was held to be violative of Article 14 of the Constitution because it failed to make any proper classification and to relate the tax burden to the extent of the income from the lands. Be that as it may, the argument for the petitioner is not that the burden placed on him by the imposition of the wealth tax on his lands and buildings by itself is so prohibitive to the holding of the property. His point is, such a result flows from the aggregation of the burden placed on him by imposition to different taxes on his lands and buildings, under different fiscal enactments made by the Central and State Legislatures. The real difficulty, we feel, in giving relief to the petitioner in relation to Article 19(1)(f) springs from that fact,Is the court entitled to test the validity of the Wealth-tax Act in relationto Article 19(1)(f) by reference not to its own tax effect but to the aggregateeffect of the incidence of various kinds of taxes imposed by different enactments of the Central and State Legislatures on different bases and fordifferent purposes In our opinion, there is no warrant in the Constitutionfor striking down an enactment not because that by itself violates a constitutional limitation but on the ground that its effect combined or aggregatedwith the incidence of the different taxing legislations under different jurisdictions is having regard to the total burden and effect of such aggregation, violative of the fundamental right. We are inclined to think thatthe legislative competence with reference to the constitutional limits shouldbe ascertained having regard only to each legislation by itself and the caseof enactments passed by different Legislatures like the Centre and theState is a fortiori and they cannot on any view be taken together, as onepiece of legislation for the purpose.

21. The petitions fail and are dismissed with one set of costs. Counsel's fee, Rs. 250.


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