http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 18  

PETITIONER: ASSISTANT COMMISSIONER OF URBAN LAND TAXAND OTHERS

       Vs.

RESPONDENT: THE BUCKINGHAM & CARNATIC CO.  LTD., ETC.

DATE OF JUDGMENT: 11/04/1969

BENCH: RAMASWAMI, V. BENCH: RAMASWAMI, V. HIDAYATULLAH, M. (CJ) SHAH, J.C. MITTER, G.K. GROVER, A.N.

CITATION:  1970 AIR  169            1970 SCR  (1) 268  1969 SCC  (2)  55  CITATOR INFO :  R          1971 SC1321  (4)  RF         1972 SC1061  (63,89,100,102,161,173)  RF         1972 SC2455  (8)  F          1980 SC 271  (11,34,43)  MV         1985 SC 421  (76)  R          1990 SC  85  (23)

ACT: Madras Urban Land Tax Act 1966-If violative of Arts. 14  and 19(1)(f) of the Constitution-Constitution of India  Schedule VII, Entry 49 List 2 and Entry 86 List 1-Scope of. Constitution    of    India    Art.    19(1)(f)-Unreasonable restriction-Act,  levying tax with retrospective  effect  if unreasonable restriction.

HEADNOTE: By  s. 3 of the Madras Urban Land Tax Act, 1963, a  tax  was levied on every owner of urban land at the rate of 0.4 %  of the  average  market value of the urban land  as  determined under  s.  6(2)  of  the Act.  The  vires  of  the  Act  was challenged  by  a writ petition and the  impugned  Act.  was struck  down on the ground that it violated Art. 14  of  the Constitution because the charging section levied the tax  on urban  land not on the market value of such land but on  the average  value of the land in a sub-zone-.   Thereafter  the State Legislature passed the Madras Urban Land Tax Act 12 of 1966  which omitted the provisions relating to  fixation  of average  market value in the sub-zone, and instead  provided in  s. 5 for the levy of a tax on urban land from the  owner at the rate of 0.4% of the market value of ’such urban land. The validity of the new Act was again challenged in a  group of writ petitions before the High Court which held that  the Madras  Legislature was competent to enact the new  Act  but that  it  was  violative of Arts. 14  and  19(1)(f)  of  the Constitution. In  appeals to this Court it was contended, inter  alia,  on behalf  of the  petitioners (1) that the impugned  Act  fell under Entry 86, List I and not under Entry 49 of List 2,  so

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 18  

that the State Legislature was incompetent to pass the  Act; furthermore  as Entry 49, List 2 provides for taxes on  land and  buildings, the impugned Act which imposed tax  on  land alone  could not be held to fall under the Entry; (ii)  that the machinery was provided for determining the market  value and   the   matter  having  been  left  to   the   arbitrary determination of the Assistant Commissioner, the  provisions of the new Act were violative of Art. 14 of the Constitution (iii)  that the Act was an unreasonable restriction  on  the right to acquire, hold and dispose of property and as  ’such was  violative  of  Art. 19 (1)  (f)  of  the  Constitution; furthermore together with the existing property tax under s. 100  of the City Municipality Corporation Act the tax  under the  impugned Act exhausted an unreasonably high  proportion of  income and on this account also it was  an  unreasonable restriction;  it  was  also contended  that  the  giving  of retrospective  operation to the Act from July, 1963 made  it unreasonable. HELD:  The  Madras  Urban  Land  Tax  Act  12  of  1966  was constitutionally    valid. (i)  In pith and substance the new Act in imposing a tax  on urban land at  a percentage of the market value is  entirely within the ambit of                             269 Entry  49 of List II and within the competence of the  State Legislature, it does not in any way trench upon the field of legislation of Entry 86 of List 1. [280 G-H] There  was no conflict between Entry 86 of List I and  Entry 49  of  List  II.  The tax under Entry 86  proceeds  on  the principle  of aggregation and is imposed on the totality  of the  net  value  of  an  assets.   Entry  49  of  List   II, contemplates a levy of tax on lands and buildings or both as units; it is not concerned with the division of interest  or ownership  in  the  units of land  or  buildings  which  are brought to tax. [278 E-F] The  legislative entries must be given a large  and  liberal interpretation, the reason being that the allocation of  the subjects to the Lists is not by way of scientific or logical definition but by way of a mere sixplex enumeratio of  broad categories. [277 G-H] Ralla  Ram  v. Province of East Punjab, [1948]  F.C.R.  207, Sudhir Chandra Nawn v. Wealth Tax Officer, A.I.R. 1969  S.C. 59;  Gallahagher  v. Lynn, [1937] A.C. 863 at  p.  870;  and Subrahmanyan  Chettiar v. Mittuswami Goundan, [1940]  F.C.R. 188 at 201; referred to. The legislative history of Entry 49, List II, does not  lend any  support  to  the  argument that Entry  49  of  List  if relating to tax on land and, buildings cannot be  separated. On  the other hand Entry 49 "Taxes on lands  and  buildings" should be construed as taxes on land and taxes on  buildings and there is no reason for restricting the amplitude of  the language used in the Entry. [281 G] Raja  Jagannath Baksh Singh v. The State of U.P.,  [1963]  1 S.C.R. 220; and H. R. S. Murthy v. Collector of Chittoor and Anr., [1964] 6. S.C.R. 666; referred to. (ii) The  provisions  of  s.  6 of  the  new  Act  were  not violative of Art. 14 of the Constitution. Having regard to the language and context of s. 6 of the new Act,  the  opinion which the Assistant Commissioner  has  to form  under  that section is not subjective but  should  foe reached   objectively  upon  the  relevant  evidence   after following the requisite formalities laid down in ss. 7 to  1 1 of the new Act.  The proceeding before the Assistant  Com- missioner is judicial in character and his opinion regarding the market value is reached objectively on all the materials

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 18  

produced before him. [282 F] (iii)     The  new Act was also not violative of Art.  19(1) (f) of the Constitution. It  is not possible to put the test of  reasonableness  into the straight jacket of a narrow formula.  The, objects to be taxed,  the  quantum  of tax to be  levied;  the  conditions subject  to which it is levied and the social  and  economic policies which a tax is designed to subserve are all matters of political character and these matters have been entrusted to  the Legislature and not to the Courts.  In applying  the test  of reasonableness it is also essential to notice  that the power of taxation is generally regarded as an  essential attribute  of  sovereignty  and  constitutional   provisions relating to the power of taxation are regarded not as  grant of  power  but  as limitation upon  the  power  which  would otherwise be practically without limit. [284 E] Rai Ramakrishna v. State of Bihar, A.I.R. 1963 S.C. 1667  at 1673; referred to. 270 The charge under the City Municipality Corporation Act was a tax  .,on the annual letting value whereas the charge  under the Act of 1966 was .on the market value of the urban  land. The  basis  of  the two taxes being different,  it  was  not permissible  to  club the two together and complain  of  the cumulative burden. As a general rule, so long as a tax retains its character as a  tax  and  is  -not  confiscatory  or  extortionate,   the reasonableness  of the tax cannot be questioned.  In so  far as  the new Act of 1966 was concerned, it could not be  said that the levy at 0.4% of the market value of the urban  land was confiscatory in effect [285 F] (iv) In view of the legislative background of the new Act of 1966,  which replaced the earlier Act of 1963, it could  not be said that the imposition of the tax retrospectively ’from July, 1963, was an unreasonable restriction. [289 B]

JUDGMENT: CIVIL  APPELLATE JURISDICTION: Civil Appeals Nos. 21 to  23, 46, 47, 125 and 274 of 1969. Appeals from the judgment and orders dated April 10, 1968 of the  Madras  High Court in Writ Petitions Nos. 387  of  1968 etc. S.   V. Gupte, G. Ramanujam and A. V. Rangam, for the appel- lants  (in C.As. Nos. 21 to 23 of 1969) and  the  respondent (in C.As. Nos. 46, 47, 125 and 274 of 1969). V.   K.  T. Chari, T. N. C. Rangarajan and D. N. Gupta,  for the  appellants  (in C.As. Nos. 46 and 47 of 1969)  and  the respondents (in C.As. Nos. 21 and 23 of 1969).  V. K. T. Chari, A. R. Ramanathan, T. N. C. Rangarajan  -and R.  Gopalakrishnan,  for the appellant (in C.A. No.  125  of 1969). K.   C. Rajappa, S. Balakrishnan and S. Laxminarasu, for the appellant (in C.A. No. 274 of 1969). K.   C.  Rajappa, S. Balakrishnan, S. Laxminarasu and N.  M. Ghatate, for the respondents (in C.A. No. 22 of 1969). The Judgment of the court was delivered by Ramaswami,  J.  In  these  appeals  which  have  been  heard together a common question of law arises for  determination, namely,  whether the Madras Urban Land Tax Act, 1966 (12  of 1966) is constitutionally valid. In 1963 the Madras Legislature enacted the Madras Urban Land Tax Act, 1963 which came into force in the city of Madras on the  1st  of  July, 1963.  In the Statement  of  Object  and

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 18  

Reasons  of  the 1963 Act it was stated  that  the  Taxation Enquiry                             271 Commission  and the Planning Commission were suggesting  the need  for  imposing  a suitable levy on lands  put  to  non- agricultural  use  in urban areas.   The  State  Government, after  examining the report of the Special Officer,  decided to levy a tax on urban land on the basis of market value  of the land at the rate of 0.4% on such market value.   Section 3  of the Act of 1963 (which win be referred to as  the  old Act)  provided that there shall be levied and collected  for every   fasli   year  commencing  from  the  date   of   the commencement  of  the Act, a tax on urban  land  from  every owner  of  urban  land at the rate of 0.4%  of  the  average market  value of the urban land in a sub-zone as  determined under  subsection  (2) of s. 6. Section 7 provided  for  the determination  of the highest and lowest market value  in  a zone.   For  determining  the  average  market  value,   the Assistant  Commissioner  shall have regard  to  any  matters specified in clauses (a) to (e) of sub-s. 2 of s. 6; namely:               (a)   the locality in which the urban land  is               situated;               (b)   the  predominant use to which the  urban               land  is  put,  that is  to  say,  industrial,               commercial or residential;               (c)   accessibility  or proximity  to  market,               dispensary,    hospital,   railway    station,               educational    institution,   or    Government               offices;               (d)   availability  of  civil  amenities  like               water supply, drainage and lighting; and               (e)   such other matters as may be prescribed. The constitutional validity of Act 34 of 1963 was challenged and in Buckingham & Carnatic Co., Ltd. v. State of Madras(1) a Division Bench of the Madras High Court held that the  im- pugned  Act fell under Entry 49, List 11 of Schedule VII  to the  Constitution and was within the legislative  competence of  the State Legislature.  But the, Act was struck down  on the  ground that Art. 14 of the Constitution  was  violated, because  the charging section of the Act levied the  tax  on urban land not on the market value of such urban land but on the  average value of the lands in the locality known  as  a sub-zone.   The new Act (Act 12 of 1966) was passed  by  the State  Legislature  after the decision of  the  Madras  High Court.   In the new Act provisions relating to  fixation  of average market value in the sub-zone were omitted.  Instead, section 5 of the new Act provides that there shall be levied and  collected from every year commencing from the  date  of the  commencement of the Act a tax on each urban  land  from the  owner  of such urban land at the rate of  0.4%  of  the market (1),(1966) II M.L.J. 172. 272 value of such urban land.  Section 2(10) defines "owner"  as follows "Owner includes-               (i)   any  person  (including a  mortgagee  in               possession)  for the time being  receiving  or               entitled  to  receive,  whether  on  his   own               account   or  as  agent,  trustee,   guardian,               manager or receiver for another person or  for               any religious or charitable purposes, the rent               or  profits  of  the  urban  land  or  of  the               building  constructed  on the  urban  land  in               respect of which the word is used;

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 18  

             (ii)  any  person  who  is  entitled  to   the               kudiwaram  in  respect of any inam  land;  but               does not include-               (a)   a shrotriemdar; or               (b)   any  person  who  is  entitled  to   the               melwaram  in respect of any inam land  but  in               respect  of  which land any  other  person  is               entitled to the kudiwaram.               Explanation.-For  the purposes of  clause  (9)               and  clause (10) inam land  includes  lakhiraj               tenures of land and shrotriam land. Section 2(13) defines ’land’ to mean any land which is  used or is capable of being used, as a building site and includes garden  or  grounds, if any, appurtenant to a  building  but does not include any land which is registered as wet in  the revenue  accounts  of  the  Government  and  used  for   the cultivation of wet crops."               Section 6 states               "For  the  purposes of this  Act,  the  market               value of any urban land shall be estimated  to               be  the  price  which in the  opinion  of  the               Assistant  Commissioner, or the  Tribunal,  as               the  case may be, such urban land  would  have               fetched  or fetch, if sold in the open  market               on the date of the commencement of this Act".               Section  7  provides  for  the  submission  of               returns by the owner of urban land and reads               "Every owner of urban land liable to pay urban               land tax under this Act shall, within a period               of one month from the date of the  publication               of  the Madras Urban Land Tax Ordinance,  1966               (Madras Ordinance 273 III of 1966) in the Fort St. George Gazette, furnish to  the Assistant  Commissioner  having  jurisdiction  a  return  in respect   of  each  urban  land  containing  the   following particulars, namely :-               (a)   name of the owner of the urban land,               (b)   the extent of the urban land,               (c)   the name of the division or ward and the               street,  survey number and subdivision  number               of  the  land and other  particulars  of  such               urban land,               (d)   the  amount which in the opinion of  the               owner is the market value of the urban land." Section  1 0 deals with the procedure for the  determination of the market value by the Assistant Commissioner and states :               (1)   Where   a  return  is  furnished   under               section  7  the Assistant  Commissioner  shall               examine the return and made such enquiry as he               deems  fit.  If the Assistant Commissioner  is               satisfied   that  the  particulars   mentioned               therein are correct and complete he shall,  by               order in writing determine the market value of               the  urban land and the amount of  urban  land               tax payable in respect of such urban land.               (2)   (a)  Where no examination of the  return               and   after   the   enquiry   the    Assistant               Commissioner   is  not  satisfied   that   the               particulars mentioned therein are correct  and               complete he shall serve a notice on the  owner               either to attend in person or at his office on               a  date  to be specified in the notice  or  to               produce  or cause to be produced on that  date

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 18  

             any  evidence on which the owner may  rely  in               support of his return.               (b)   The Assistant Commissioner after hearing               such  evidence  as the owner  may  produce  in               pursuance  of the notice under clause (a)  and               such   other   evidence   as   the   Assistant               Commissioner  may  require  on  any  specified               points  shall, by order in writing,  determine               the  market  value of the urban land  and  the               amount of urban land tax payable in respect of               such urban land.               (c)   Where the owner has failed to attend  or               produce  evidence in pursuance of  the  notice               under clause (a)     the             Assistant               Commissioner shall, on the basis of the  enquiry               made under clause (a), by order in writing  determin e               the market value of the urban land and the     amoun t               of  urban land tax payable in respect of  such               urban land." 274 Section 11 enacts : (1) Where the owner of urban land has failed to furnish  the return  under section 7 and the Assistant  Commissioner  has obtained the necessary information under section 9 he  shall serve  a notice on the owner in respect of each  urban  land specifying therein- (a)  the extent of the urban land, (b)  the  amount  which,  in the opinion  of  the  Assistant Commissioner, is the correct market value of the urban land, and direct him either to attend in person at his office on a date to be specified in the notice or to produce or cause to be produced on that date any evidence on which the owner may rely. (2)  After hearing such evidence, as the owner may produce  and  such  other evidence  as  the  Assistant  Com- missioner may require on any specified points, the Assistant Commissioner  shall,  by  order in  writing,  determine  the market value of the urban land and the amount of urban  land tax payable in respect of such urban land. (3)  Where  the  owner has failed to attend  or  to  produce evidence in pursuance of the notice under subsection (1) the Assistant   Commissioner   shall,  on  the  basis   of   the information  obtained  by him under section 9, by  order  in writing,  determine the market value of the urban  land  and the amount of the urban land tax payable in respect of  such urban land." Section  20 provides for an appeal to the Tribunal from  the orders of the Assistant Commissioner : "(1)  (a) Any assessee objecting to any order passed by  the Assistant Commissioner under section 10 or 11 may appeal  to the Tribunal within thirty days from the date of the receipt of the copy of the order. (b)  Any  person denying his liability to be assessed  under this Act may appeal to the Tribunal within thirty days  from the  date of the receipt of the notice 1 of demand  relating to the assessment :. Provided that no appeal shall lie under clause (a) or clause (b)  of this sub-section unless the urban land tax has  been paid before the appeal is filed.                             275               (2)   The  Commissioner may, if he objects  to               any order passed by the Assistant Commissioner               under section 10 or 11, direct the Urban  Land

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 7 of 18  

             Tax   Officer  concerned  to  appeal  to   the               Tribunal  against such order, and such  appeal               may  be filed within sixty days from the  date               of the receipt of the copy of the order by the               Commissioner.               (3)   The  Tribunal may admit an appeal  after               the expiry of the period referred to in clause               (a)  or  clause (b) of sub-section (1)  or  in               sub-section (2), as the case may be, if it  is               satisfied that there was sufficient cause  for               not presenting it within that period.               (4)   An  appeal  to the Tribunal  under  this               section  shall be in the prescribed  form  and               shall be verified in the prescribed manner and               shall  be  accompanied by such fee as  may  be               prescribed.               (5)   The  Tribunal  may  after  giving   both               parties to the appeal an opportunity of  being               heard, pass such orders thereon, as it  thinks               fit  and shall communicate any such orders  to               the  assessee and to the Commissioner in  such               manner as may be prescribed." Section  30  confers  power  of revision  in  the  Board  of Revenue: and is to the following effect :               (1)   The Board of Revenue may, either on  its               own  motion  or  on application  made  by  the               assessee in this behalf, call for and  examine               the  records of any proceeding under this  Act               (not being a proceeding in respect of which an               appeal lies to the Tribunal under section  20)               to  satisfy,  itself as to the  regularity  of               such  proceeding or the correctness,  legality               or  propriety of any decision or order  passed               therein and if, in any case, it appears to the               Board  of  Revenue that any such  decision  or               order  should be modified, annulled,  reversed               or  remitted for reconsideration, it may  pass               orders accordingly :               Provided  that the Board of Revenue shall  not               pass  any order under this subsection  in  any               case, where the decision or order is sought to               be revised by the Board of Revenue on its  own               motion,  if  such decision or order  had  been               made more than three years previously :               Provided  further  that the Board  of  Revenue               shall  not pass any order under  this  section               prejudicial to any 276               party   unless   he  has  had   a   reasonable               opportunity of making his representations."               -Section 33 states :               "(1)  The Tribunal, the Board of Revenue,  the               Commissioner,  the Assistant Commissioner,  or               the  Urban  Land  Tax  Officer  or  any  other               officer  empowered under this Act  shall,  for               the purposes of this Act, have the same powers               as  are  vested in a Court under the  Code  of               Civil Procedure, 1908 (Central Act V of 1908),               when trying a suit in respect of the following               matters, namely :-               (a)   enforcing  the attendance of any  person               and examining him on oath;               (b)   requiring  the discovery and  production               of documents;               (c)   receiving evidence on affidavit;

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 8 of 18  

             (d)   issuing commissions for the  examination               of witnesses;               and  any proceeding before the  Tribunal,  the               Board   of  Revenue,  the  Commissioner,   the               Assistant  Commissioner  the  Urban  Land  Tax               Officer  or any other officer empowered  under               this  Act  shall be deemed to  be  a  judicial               proceeding within the meaning of sections  193               and  228 and for the purposes of section  196,               of  the Indian Penal Code (Central Act XLV  of               1860).               (2)   In  any  case  in  which  an  order   of               assessment is passed ex parte under this               Act,  the  provisions  of the  Code  of  Civil               Procedure, 1908 (Central Act V of 1908), shall               apply in relation to such order as it  applies               in  relation to a decree passed ex parte by  a               Court." The  validity  of the new Act was challenged in a  group  of writ  petitions  before  the Madras High  Court  on  various constitutional grounds.  By a common judgment dated the 10th April,  1968 a Full Bench of five Judges overruled  all  the contentions   of   the  petitioners  with  regard   to   the legislative  competence of the Madras Legislature  to  enact the new Act.  However, the Full Bench by a majority of 4  to 1  struck  down s. 6 of the new Act as  being  violative  of Arts. 14, 19(1)(f) of the Constitution.  The State of Madras and  other  respondents to the writ  petitions  (hereinafter ,called  the respondents for the sake of convenience)  filed appeals                             277 Nos.  21  to 23 of 1969 under a certificate granted  by  the High  Court under Arts. 1,32 and 1 3 3 (I) (a), (b) and  (c) of  the  Constitution.  The  writ  petitioners  (hereinafter called the petitioners) have filed C.As Nos. 46, 47, 125 and 274  of  1969 against the same judgment  on  a  certificate, granted   by   the  High  Court  under  Art.  132   of   the Constitution. The  first  question to be considered in  these  appeals  is whether  the Madras Legislature was competent to  enact  the legislation under Entry 49 of List 11 of Schedule VII of the Constitution  which reads : "Taxes on lands and  buildings". It was argued on behalf of the petitioners that the impugned Act  fell  under  Schedule VII, List 1, Entry  86,  that  is "Taxes  on  the capital value of the  assets,  exclusive  of agricultural  land, of individuals and companies;  taxes  on the  capital  of companies." The argument of Mr.  V.  K.  T. Chari  may be summarised as follows : The impugned Act  was, both  in  form and substance, taxation of  capital  and  was hence  beyond the competence of the State  Legislature.   To tax on the basis of capital or principal value of assets was permissible  to Parliament under List 1, Entries 86  and  87 and to State under Entry 48 of List II.  Taxation of capital was  the  appropriate  method  provided  for  effecting  the directive  principle  under  Art. 39  of  the  Constitution, namely, to prevent concentration of wealth.  Article  366(9) contains a definition of ’estate duty’ with reference to the principal value.  Entry 86 of List I (Taxes on capital value of  assets  exclusive  of agricultural land)  and  Entry  88 (Duties  in respect of succession to such property)  form  a group  of  entries the scheme of which is to carry  out  the directive   principle  of  Art.  39(c).   The   Constitution indicated that capital value or principal value shall be the basis  of taxation under these entries and,  therefore,  the method  of  taxation  of  capital  or  principal  value  was

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 9 of 18  

prohibited even to Parliament in respect of other taxes  and to   the  States  except  in  respect  of  Estate  Duty   on agricultural  land.  Such in effect is the. argument of  Mr. V. K. T. Chari.  But in our opinion there is no warrant  for the assumption that entries 86, 88 of List I and Entry 48 of List  II  form  a special  group  embodying  any  particular ’scheme.   The  directive principle embodied in  Art.  39(c) applies both to Parliament and to the State Legislature  and it  is difficult to conceive how entries 86 to 88 of List  I would  exclude  any  power  of  the  State  Legislature   to implement the same principle.  The legislative entries  must be  given  a large and liberal  interpretation,  the  reason being  that the allocation of the subjects to the  lists  is not by way of scientific or logical definition but by way of a  mere sixplex enumeratio of broad categories.  We  see  no reason, therefore, for holding that the entries 86 and 87 of List  I preclude the State Legislature from  taxing  capital value of lands and buildings under 13SupCI69-4 278 Entry  49 of List II.  In our opinion there is  no  conflict between  Entry  86 of List I and Entry 49 of List  11.   The basis of taxation under the two entries is quite  -distinct. As  regards Entry 86 of List I the basis of the taxation  is the capital value of the asset.  It is not a tax directly on the capital value of assets of individuals and companies  on the  valuation  date.   The  tax  is  not  imposed  on   the components  of  the assets of the assessee.  The  tax  under Entry  86 proceeds on the, principle of aggregation  and  is imposed on the totality of the value of all the assets.   It is  imposed on the total assets which the assessee owns  and in  determining  the net wealth not  only  the  encumbrances specifically  charged  against any item of  asset,  but  the general  liability of the assessee to pay his debts  and  to discharge  his  lawful  obligations have to  be  taken  into account.  In certain exceptional cases, where a person  owes no debts and is under no enforceable obligation to discharge any liability out of his assets it may be possible to  break up  the  tax  which is leviable on  the  total  assets  into components and attribute a component to lands and  buildings owned by an assessee.  In such a case, the component out  of the  total fax attributable ’Lo lands and buildings  may  in the matter of computation bear similarity to a tax on  lands and  buildings levied on the capital or annual  value  under Entry  49, List II.  But in a normal case a tax  on  capital value  of  assets bears no definable relation to  lands  and buildings which may or may not form a component of the total assets  of the assessee.  But Entry 49 of List  II,  contem- plates  a  levy  of tax on lands and buildings  or  both  as units.  It is not concerned with the division cf interest or ownership  in  the  units of lands or  buildings  which  are brought  to  tax.  Tax on lands and buildings,  is  directly imposed  on  lands  and  buildings,  and  bears  a  definite relation to it.  Tax on the capital value of assets bears no definable  relation to lands and buildings which may form  a component   of  the  total  assets  of  the  assessee.    By legislation in exercise of power under Entry 86, List I  tax is  contemplated  to be levied on the value of  the  assets. For  the purpose of levying tax under Entry 49, List 11  the State Legislature may adopt for determining the incidence of tax  the  annual  or  the capital value  of  the  lands  and buildings.  But the adoption of the annual or capital  value of  lands and buildings for determining tax  liability  will not  make  the fields of legislation under the  two  entries overlapping.  The two taxes are entirely different in  their

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 10 of 18  

basic concept and fall on different subject’ matters.       In Ralla Ram v. Province of East Punjab(1) the Federal Court  held that the tax levied by section 3 of  the  Punjab Urban (1)  [1948] F.C.R. 207.                             279 Immoveable  Property  Tax Act, 17 of 1940 on  buildings  and lands  situated  in  a  specified  area  at  such  rate  not exceeding  twenty  per  cent. of the annual  value  of  such buildings  and  lands, as the Provincial Government  may  by notification  in the official Gazette direct in  respect  of each such rating area was not a tax on income, but was a tax on lands and buildings within the meaning of Item No. 42  of List  11 of the Seventh Schedule of the Government of  India Act,  1935.   In that case it was contended that  under  the provisions  of the Punjab Act the basis of the tax  was  the annual  value of the buildings and since the same basis  was used  in the Income-tax Act for determining the income  from property  and  generally speaking the annual  value  is  the fairest standard for measuring income and, in many cases, is indistinguishable  from it, the tax levied by  the  impugned Act was in substance a tax on income.  The Court pointed out that the -annual value is not necessarily actual income, but is  only  a  standard by which income may  be  measured  and merely  because  the Income-tax Act had adopted  the  annual value as the standard for determining the income, it did not follow  that, if the same standard is employed as a  measure for  any  other tax, that latter tax becomes also a  tax  on income.   It  was held by the Court that  in  substance  the property  tax  levied  by  s.  3,  Punjab  Urban  Immoveable Property Tax Act, 1940 fell within item 42 of the Provincial List  and was not a tax on income falling within item 54  of the  Federal  List  although the basis of the  tax  was  the annual  value  of  the building.  The  same  view  has  been expressed by this Court in Sudhir Chandra Nawn v. Wealth Tax Officer(1) wherein it was held that the power to levy tax on lands and buildings under Entry 49 of List II did not trench upon the power conferred on Parliament by Entry 88 of List I and,  therefore,  the  enactment of the Wealth  Tax  Act  by Parliament was riot ultra vires. The problem in this case is the problem of  characterisation of the law or classification of the law.  In other words the question  must be asked : what is the subject matter of  the legislation  in  its  "pith and substance" or  in  its  true nature and character for the purpose of determining  whether it  is  legislation with respect to Entry 47 of List  11  or Entry 86 of List 1. In Gallahagher v. Lynn 2 ) the principle is stated as follows :               "It  is well established that you are to  look               at  the  true  nature  and  character  of  the               legislation  the,  pith and substance  of  the               legislation.  If on the view of the statute as               a  whole, you find that the substance  of  the               legislation (1) A.I.R. 1969 S.C. 59. (2) [1937] C. 853  870 280               is  within the express powers, then it is  not               invalidated if incidentally it affects matters               which  are outside the authorized field.   The               legislation  must  not  under  the  guise   of               dealing with one matter in fact encroach  upon               the forbidden field.  Nor are you to look               only at the object of the legislator.  An  Act               may  have  a perfectly lawful object  e.g.  to               promote the health of the inhabitants, but may

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 11 of 18  

             seek   to  achieve  that  object  by   invalid               methods, e.g., direct prohibition of any trade               with  a foreign country.  In other words,  you               may’ certainly consider the clauses of an  Act               to see whether they are passed ’in respect of’               the forbidden subject." In   the  case  of  Subrahmanyan  Chettiar   v.   Muttuswami Goundan(1) Sir Maurice Gwyer, C.J. said :               "It  must inevitably happen from time to  time               that  legislation, though purporting  to  deal               with a subject in one list, touches also on  a               subject  in  another list, and  the  different               provisions of the enactment may be so  closely               intertwined that blind adherence to a strictly               verbal interpretation would result in a  large               number  of  statutes  being  declared  invalid               because  the  Legislature  enacting  them  may               appear  to  have  legislated  in  a  forbidden               sphere.  Hence the rule which has been evolved               by the Judicial Committee whereby the impugned               statute is examined to ascertain its ’pith and               substance’,   or   its   ’true   nature    and               character’,  for  the purpose  of  determining               whether  it  is legislation  with  respect  to               matters  in  this list or in that  :  Citizens               Insurance  Company  of  Canada  v.  Parsons();               Russell v. The Queen(3); Union Colliery Co. of               British Columbia v. Bryden(4); Att.  Gen.  for               Canada v. Att.  Gen. for British  Columbia(5);               Board  of  Trustees of  Lethbridge  Irrigation               District v. Independent Order of Foresters(6).               In my  opinion this rule of interpretation  is               equally applicable to the Indian  Constitution               Act." For  the reasons already expressed we hold that in pith  and substance  the new Act in imposing a tax on urban land at  a percentage of the market value is entirely within the  ambit of  Entry  49 of List II and within the  competence  of  the State  Legislature and does not in any way trench  upon  the field of legislation of Entry 86 of List I. (1) [194O] F.C.R. 188 at 201.   (2)  [1881] 7 A.C. 96. (3) [1882] 7                              5) 301 A.C. III.                (6) [1940] A.C. 513.                             281 It  was then said that as Entry 49 of List 11  provides  for taxes on lands and buildings, the impugned Act which imposes tax on lands alone cannot be held -to fall under that entry. It  was  submitted  that when  the  Legislature  taxed  land deliberately the legislation fell under List 11 of Entry 45, i.e., "land revenue, including the assessment and collection of  revenue,  the maintenance of land  records,  survey  for revenue  purposes  and records of rights and  alienation  of revenues’-’  and  not  under Entry 49  of  that  List.   The legislative history of Entry 49 of List 11 does not  however lend any support to this argument.  Before the Government of India  Act, 1935 lands and buildings were  taxed  separately and  all  that was done under the Government of  India  Act, 1935  and’ the Constitution was to combine the  two  entries relating to land and buildings into a single entry.  Section 45-A  of  the  Government of India Act,  1919  provided  for making  rules under the Act for the devolution of  authority in respect of provincial subjects to local Governments,  and for  the  allocation of revenues or other  moneys  to  those Governments.’  The  Government of India  by  a  notification

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 12 of 18  

dated  December  16, 1920 made rules  under  that  provision called-the "Scheduled Tax Rules".  These Rules contained two schedules.  The first Schedule contained eight items of  tax or, fee.  The Legislative Council of a Province may  without obtaining the previous sanction of the Governor General make and  take  into  consideration  any  law  imposing  for  the purposes  of  the  local  Government  any  tax  included  in Schedule  I. Schedule II contained eleven items of tax.   In making a law imposing or authorising any local authority  to impose  for the purposes of such local authority any tax  in Schedule  11, the Legislative Council required  to  previous sanction of the Governor General.  In Schedule II, item  No. 2  was  tax on land or land values and item 3 was a  tax  on buildings.   In  the Government of India Act, 1935  the  two entries  were  combined and List 11, Entry 42 is  "Taxes  on lands and buildings and hats and Windows".  The  legislative history  of Entry 49, List 11 does not, therefore, lend  any support to the argument that Entry 49 of List 11 relating to tax on land and buildings cannot be separated.  On the other hand  we  are of opinion that Entry 49 "Taxes on  lands  and buildings" should be construed as taxes on land and taxes on buildings and there is no reason for restricting the  ampli- tude  of the language used in the Entry.  This view is  also borne out by authorities.  In Raja Jagannath Baksh Singh  v. The  State of U.P.(1) the question at issue was whether  the tax  imposed by the U.P. Government on land  holdings  under the  U.P. Large Land Holdings Tax Act, 1957 (U.P. Act 31  of 1957)  ’was  constitutionally valid.  It was held  that  the legislation fell under Entry (1)  [1953] 1 S.C.R. 220. 282 49 of List 11 and the tax on land would include agricultural land  also.   Similarly in H. R. S. Murthy v.  Collector  of Chittoor  & Anr.(1) it was held that the land  cess  imposed under ss. 78 and 79 of the Madras District Boards Act  (Mad. Act No. XIV of 1920) and Mines and Minerals (Regulation  and Development) Act, (Act 67 of 1957) was a tax on land falling under  Entry 49 of the State List.  We are of  opinion  that the  argument  of Mr. V. K. T. Chari on this aspect  of  the case must be rejected. We  proceed  to consider the argument that no  machinery  is provided for determining the market value and the provisions of   the  new  Act,  therefore,  violate  Art.  14  of   the Constitution.   The  argument was stressed by Mr. V.  K.  T. Chari  that the guidance given under the 1963 Act  has  been dispensed  with and the Assistant Commissioner is not  bound to take into account, among other matters, the sale price of similar  sites, the rent fetched for use and  occupation  of the  land, the principles generally adopted in valuing  land under the Land Acquisition Act and the compensation  awarded in   recent  land  acquisition  proceedings.   We   see   no justification   for  this  argument.   The   procedure   for determining-  the market value and assessment of urban  land is  described  in  Chapter III of the new  Act.   Section  6 provides  that the market value of the urban land "shall  be estimated  to  be  the price which in  the  opinion  of  the Assistant Commissioner, or the Tribunal, as the case may be, such urban land would have fetched or fetch, if sold in  the open market on the date of the commencement of this Act." It was said on behalf of the petitioners that the opinion which the Assistant Commissioner has to form is purely  subjective and may be arbitrary.  We do not think that this  contention is correct.  Having regard to the language and context of s. 6  of  the new Act we consider that the  opinion  which  the Assistant Commissioner has to form under that section is not

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 13 of 18  

subjective  but  should  be  reached  objectively  upon  the relevant evidence after following the requisite  formalities laid  down  in ss. 7 to 11 of the new Act.  Instead  of  the Assistant  Commissioner  classifying  the  urban  land   and determining  the  market value in a zone,  the  present  Act requires  a return to be submitted by the  owner  mentioning the amount which, in the opinion of the owner, is the market value  of the urban land.  On receipt of the return, if  the Assistant  Commissioner  is satisfied that  the  particulars mentioned  are  correct and complete, he may  determine  the market  value as given by the owner of the land.  If  he  is not  satisfied with the return, he shall serve a  notice  to the owner asking him to attend his office with the  relevant -evidence in support of his return.  After bearing the owner and  considering  the  evidence  produced,  -the   Assistant Commissioner may determine the (1)  [1964] 6 S.C.R. 665. 28 3 market value.  In case the owner fails to attend or fails to produce   the  evidence,  the  Assistant   Commissioner   is empowered  to  assess the market value on the  basis  of  an enquiry  made by him.  Section 11 prescribes  the  procedure for  determining  the market value when the owner  fails  to furnish  a return as required under section 7.  The  section requires the Assistant Commissioner to serve a notice on the owner  specifying amongst other things the amount, which  in the  opinion of ’the Assistant Commissioner, is the  correct market value and directing the owner to attend in person  at his  office on a date specified in the notice or to  produce any  evidence  on which the owner may rely.   After  hearing such evidence as the owner may produce and considering  such other   evidence   as  may  be   required,   the   Assistant Commissioner  may  fix  the market  value.   The  proceeding before  the Assistant Commissioner is judicial in  character and  his  opinion  regarding the  market  value  is  reached objectively  on  all  the  materials  produced  before  him. Section 20 provides for an appeal by the assessee  objecting to  the  determination  of  the market  value  made  by  the Assistant Commissioner to a Tribunal within thirty days from the date of the receipt of the copy of the order.  The   Act requires that the Tribunal shall consist of one person  only who  shall  be a judicial officer not below the  rank  of  a Subordinate  Judge.  By section 30, the Board of Revenue  is empowered either on its own motion or on application made by the  assessee  in this behalf, to call for and  examine  the records  of  any  proceedings under the  Act  (not  being  a proceeding  in  respect  of  which an  appeal  lies  to  the Tribunal  under  s.  20)  , to  satisfy  itself  as  to  the regularity  of such proceeding or the correctness,  legality or propriety of any decision or order passed therein, and if it appears to the Board of Revenue that any such decision or order  should be modified, annulled , reversed  or  remitted for   reconsideration,  it  may  pass  orders   accordingly. Section  32  enables  the urban land  tax  officer,  or  the Assistant  Commissioner,  or  the Board of  Revenue  or  the Tribunal  to rectify any error apparent on the face  of  the record  at any time within three years from the date of  any order passed by him or it.  Section 33 confers power on  the Assistant   Commissioner  to  take  evidence,   to   require discovery  and  production  of  documents  and  to   receive evidence  on  affidavit  etc.   Thus  the  Act  envisages  a detailed  procedure  regarding submission  of  returns,  the making of an assessment after hearing objections and a right to  appeal  to higher authorities.  We are hence  unable  to accept the contention of the petitioners that the provisions

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 14 of 18  

of  s.  6  of the new Act are violative of Art.  14  of  the Constitution. It  is  necessary to state that the High Court  decided  the case in favour of the respondents mainly on the ground  that investment 284 of the power to determine value of the urban land under s. 6 of the Act constituted excessive delegation of authority and so violative of Arts. 19(1) and 14 of the Constitution. (see the  judgment  of Veeraswami, J., who  pronounced  the  main judgment in the High Court.  But Mr. V. K. T. Chari did  not support this line of reasoning, in his arguments before this Court.  On the other hand learned counsel conceded that  the power  of  determining  the value of the  urban  land  being judicial  or  quasi-judicial in character  the  doctrine  of excessive delegation of authority had no application. We pass on to consider the next contention raised on  behalf of the petitioners namely that the Act should be struck down as an unreasonable restriction on the right to acquire, hold and  dispose of property and as such violative of Art.  1  9 (1) (f) of the Constitution.  It was argued that the test of reasonableness  would be that the tax should not be so  high as  to make the holding of ’the property or the carrying  on of the activity (business or profession) which is subject to taxation,  uneconomic according to accepted rates of  yield. In this connection it was said that the new Act by  imposing a  tax  on  the  capital value at a  certain  rate  was  not correlated  to the income or rateable value and,  therefore, violates  the requirement of reasonableness.  We are  unable to  accept the proposition put forward by Mr. Chari.  It  is not  possible  to put the test of  reasonableness  into  the straight  jacket  of  a narrow formula, The  objects  to  be taxed,,  the  quantum of tax to be  levied,  the  conditions subject  to which it is levied and the social  and  economic policies which a tax is designed to subserve are all matters of political character and these matters have been entrusted to  the Legislature and not to the Courts.  In applying  the test  of reasonableness it is also essential to notice  that the power of taxation is generally regarded as an  essential attribute  of  sovereignty  and  constitutional   provisions relating to the power of taxation are regarded not as  grant of  power  but,  as limitation upon the  power  which  would otherwise be practically without limit.  It was observed  by this Court in Rai Ramakrishna v.   State of Bihar(1) :               "It is of course true that the power of taxing               the people and their property is an  essential               attribute of the Government and Government may               legitimately   exercise  the  said  power   by               reference  to  the-  objects to  which  it  is               applicable  to  the  utmost  extent  to  which               Government thinks it expedient to do so.   The               objects to be taxed so long as they happen  to               be  within the legislative competence  of  the               Legislature  can be taxed by  the  legislature               according  to  the exigencies  of  its  needs,               because (1) A.T.R. 1963 S.C. 1667 at 1673.                             28 5               there  can  be  no doubt  that  the  State  is               entitled  to raise revenue by  taxation.   The               quantum  of tax levied by the taxing  statute,               the conditions subject to which it is  levied,               the  manner  in  which  it  is  sought  to  be               recovered,   are   all  matters   within   the               competence of the Legislature, and in  dealing

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 15 of 18  

             with  the contention raised by a citizen  that               the taxing statute contravenes Art. 19  Courts               would  naturally be circumspect and  cautious.               Where for instance it appears that the  taxing               statute is plainly discriminatory, or provides               no  procedural  machinery for  assessment  and               levy  of the tax, or that it is  confiscatory,               Courts,  would be justified in  striking  down               the impugned statute as unconstitutional.   In               such  cases,  the character  of  the  material               provisions  of  the impugned statute  is  such               that the Court would feel justified in  taking               the  view  that,  in  substance,  the   taxing               statute is a cloak adopted by the  Legislature               for achieving its confiscatory purposes.  This               is  illustrated by the decision of this  Court               in the case of Kunnathat Thathunni Moopil Nair               v.  State of Kerala AIR 1961 S.C. 552 where  a               taxing  statute  was struck  down  because  it               suffered  from several fatal infirmities.   On               the  other hand, we may refer to the  case  of               Jagannath  Baksh  Singh  v.  State  of   Uttar               Pradesh AIR 1962 SC 1563 where a challenge  to               the  taxing  statute on the  ground  that  its               provisions were unreasonable was rejected  and               it was observed that unless the infirmities in               the  impugned statute were of such, a  serious               nature  as  to justify its  description  as  a               colourable exercise of legislative power,  the               Court would uphold a taxing statute." As  a  general  rule it may be said that so long  as  a  tax retains  it&. character as a tax and is not confiscatory  or extortionate,  the  reasonableness  of  the  tax  cannot  be questioned.  Mr. Chari submitted that the existing  property tax  under s. 100 of the City Municipal Corporation Act  and the tax on urban lands under the new Act both enacted  under Entry  49 of the State List, one of them imposing a  tax  on the capital value of urban lands and the other on the annual value  of lands and buildings exhaust an  unreasonably  high proportion of income.  I-Or instance, it is pointed out that in  W.P. No. 2835 of 1967 the annual income on property  was Rs. 6,000 and the proposed market value for the lands  alone comes  to Rs. 10,40,000.  The urban land tax at 0.4% of  the market  value  is Rs. 4,160 and the income-tax at  the  rate applicable  to the petitioner was Rs. 1.234. The  total  tax burden in the aggregate under the three beads was Rs. 6,794, which 286 exceeds  the  rental income.  In W.P. No. 3686 of  1967  the municipal  annual value was Rs. 4,095, the property tax  was Rs. 1,098 and the urban land tax at 0.4% was Rs. 1,523.  The proportion  of  the two taxes together to yearly  or  annual municipal value worked out to Rs. 62.5%. It was,  therefore, said  that the taxes put together would practically  exhaust the total income and the charging section in the new Act was unreasonable.   The  answer to the contention  is  that  the charge  is on the market value of the urban land and not  on the annual letting value on which the municipal property tax is based.  The basis of the two taxes being .different it is not permissible to club together the two taxes and  complain of the cumulative burden.  If the tax is on the market value of the urban land as it is in this case it does not admit of a  complaint  that  it  takes  away  an  unreasonably   high proportion of the income.  A tax on land values and a tax on letting value, though both are taxes under Entry 49 of  List

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 16 of 18  

II  cannot  be  clubbed  together  in  order  to  test   the reasonableness of one or the other for the purposes of  Art. 19 (I).  But so far as the new Act is concerned we  consider that the levy at 0.4% of the market value of the urban  land is by no means confiscatory in effect.  It was also  pointed out  by Mr. V. K. T. Chari that in certain cases the  market value  of the urban land was arrived at by applying what  is known  as the contractor’s method not to the building  which stands on the land whose value is, ascertained by that means but  to  some other building on a different land  taken  for comparison.  It was said that it was difficult enough for  a to  apply  the contractor’s method of valuation to  his  own building which could be done by a competent architect  after taking into account all measurements.  But it is  absolutely an  impossible  task to check up or make objections  to  the contractor’s method applied to another man’s property  which cannot   be   trespassed  upon.   It  was  said   that   the contractor’s method was the last resort in valuation when  a building  has to be valued apart from the land and  that  it was  a wrong application of the formula to use it  to  value the land without the building particularly when valuation of land  can  be made by applying the principles  of  the  Land Acquisition  Act.  But this argument has no bearing  on  the constitutional  validity  of  the charging  section  or  the machinery  provisions of the Act.  It is, however, open  ’to the  writ  petitioners  to challenge  the  validity  of  the particular  valuation  in any particular case by way  of  an appeal  under a statute or to move the High Court for  grant of writ under Art. 226 of the Constitution. The impugned Act provides for the retrospective operation of the  Act.  Section 2 states that except ss. 19, 47  and  48, other -sections shall be deemed to, have come into force  in the City of                             287 Madras  on the 1st day of July, 1963 and sections 19 and  47 shall  be  deemed  to have come into force in  the  City  of Madras  on the 21st May, 1966.  It also provides that s.  48 shall come into force on the date of the publication of  the Act  in the Fort St. George Gazette.  Section 6 enacts  that the  market values of the urban lands shall be estimated  to be  the  price  which  in  the  opinion  of  the   Assistant Commissioner  or  the Tribunal such urban  land  would  have fetched  or fetch if sold in the open market on the date  of the commencement of the Act,, that is, from 1st July,  1967. The  urban  land tax is, therefore payable  from  1st  July, 1963.  It is contended on behalf of the petitioners that the retrospective operation of the law from 1st July, 1963 would make it unreasonable.  We are unable to accept the  argument of the petitioners as correct.  It is not right to. say as a general   proposition  that  the  imposition  of  tax   with retrospective    effect    per   se    renders    the    law unconstitutional.  In applying the test of reasonableness to a  taxing statute it is of course a  relevant  consideration that the tax is being enforced with retrospective effect but that  is not conclusive in itself.  Taking into account  the legislative  history  of the present Act we are  of  opinion that  there  is  no  unreasonableness  in  respect  of   the retrospective  operation  of  the new  Act.   It  should  be noticed  that the Madras Act of 1963 came into force on  1st July,  1963 and provided for the levy of urban land  tax  at the  same  rate  as that provided under the  new  Act.   The enactment was struck down as invalid by the judgment of  the Madras  High Court which was pronounced on the  25th  March, 1966.   The  legislature by giving retrospective  effect  to Madras  Act 12 of 1966 that the urban land must be taxed  on

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 17 of 18  

the  date on which the 1963 Act came into force the new  Act cured  the defect from which the earlier Act was  suffering. In  Rai  Ramkrishna’s  case(1) the  question  at  issue  was whether the Bihar Taxation on Passengers and Goods  (Carried by Public Service Motor Vehicles) Act, 1961 (17 of 1961) was violative of Art. 1,9(5) and (6) of the Constitution for the reason  that it was made retrospective with effect from  1st April,  1950.  It appears-that the Bihar Finance ,Act,  1950 levied  a  tax  on passengers and goods  carried  by  public service  motor vehicles in Bihar.  In an appeal arising  out of  a suit filed by the passengers and owners of goods in  a representative capacity, the Supreme Court pronounced on the 12th  December,  1960 a judgment declaring Part III  of  the said Act unconstitutional.  Thereafter an Ordinance, namely, Bihar  Ordinance  No.  2 of 1961 was issued on  the  1st  of August, 1961 by the State of Bihar.  By this Ordinance,  the material  provisions  of the earlier Act of 1950  which  had been  struck down by this Court were validated  and  brought into force retrospectively from the (1) A.I.R. 1963 S.C 1667 288 date when the earlier Act had purported to come into  force. Subsequently,  the  provisions of the  said  Ordinance  were incorporated  in  the  Act, namely, the  Bihar  Taxation  on Passengers  and  Goods  (Carried  by  Public  Service  Motor Vehicles)  Act,  1961  which was duly passed  by  the  Bihar Legislature and received the assent of the President on 23rd September, 1961.  As a result of the retrospective operation of  this  Act, its material provisions were deemed  to  have come  into force on April 1, 1950, that is to say, the  date on which the earlier Act of 1950 had come into, force’.  The appellants  challenged  the validity of this  Act  of  1961. Having failed in their writ petition before the High  Court, the appellants came to this Court and the argument was  that the retrospective operation prescribed by s. 1 (3) and by  a part  of  s.  23 (b) of the Act so  completely  altered  the character   of  the  tax  proposed  to  be   retrospectively recovered  that  it introduced a serious  infirmity  in  the legislative competence of the Bihar Legislature itself.  The argument  was  rejected by this Court and it was  held  that having  regard  to  the  relevant  facts  of  the  case  the restrictions imposed by the said retrospective operation was reasonable  in the public interest under Art. 19(5) and  (6) and  also reasonable under Art. 304(b) of the  Constitution. In  our  opinion the ratio of this decision applies  to  the present  case  where  the material facts are  of  a  similar character. In  this context a reference may be made to a recent  review of retroactive legislation in the United States of America :               "It  is necessary that the legislature  should               be   able  to  cure  inadvertent  defects   in               statutes  or  their administration  by  making               what  has been aptly called  ’small  repairs’.               Moreover,  the  individual who claims  that  a               vested  right  has arisen from the  defect  is               seeking a windfall since had the legislature’s               or  administrator’s action had the  effect  it               was  intended to and could have had,  no  such               right  would have arisen.  Thus, the  interest               in the retroactive during ’of such a defect in               the administration of government outweighs the               individual’s  interest in benefiting from  the               defect.....  The  Court  has  been   extremely               reluctant to override the legislative judgment               as   to   the  necessity   for   retrospective

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 18 of 18  

             taxation,  not only because of  the  paramount               governmental  interest in  obtaining  adequate               revenues,  but also because taxes are  not  in               the  nature  of  a penalty  or  a  contractual               obligation but rather a means of  apportioning               the  costs  of  government  among  those   who               benefit from it.  Indeed, as early as 1935 one               commentator    observed    that     "arbitrary               retroactivity"  may continue .... to rear  its               head                                    289               in tax briefs, but for practical purposes,  in               this  field, it is as dead as wager  of  law."               (Charles  B. Hochman in 73 Harvard Law  Review               692 at p. 705). In view of the legislative background of the present case we are   of   opinion   that  the   imposition   of   the   tax retrospectively from 1st July, 1963 cannot be said to be  an unreasonable   restriction.   We,  therefore,   reject   the argument of the petitioners on this aspect of the case, For  these  reasons we hold that the Madras Urban  Land  Tax Act,   1966   (Act   12  of  1966)   must   be   upheld   as constitutionally  valid.   We  accordingly  set  aside   the judgment of the Madras High Court dated the 10th April, 1968 and  order  that  writ petitions filed  by  the  petitioners should  be  dismissed.   In other words C.As 21  to  23  are allowed  and C.As 46, 47, 125 and 274 are dismissed.   There will be no order with regard to costs of these appeals. CAs. 21 to 23 of ’69 allowed. R.K.P.S. C.As. 46, 47, 125 and 274 of ’69 dismissed. 290