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PETITIONER: MST.  JADAO BAHUJI

       Vs.

RESPONDENT: MUNICIPAL COMMITTEE, KHANDWA AND ANOTHER

DATE OF JUDGMENT: 29/03/1961

BENCH: HIDAYATULLAH, M. BENCH: HIDAYATULLAH, M. AIYYAR, T.L. VENKATARAMA DAS, S.K. KAPUR, J.L. SHAH, J.C.

CITATION:  1961 AIR 1486            1962 SCR  (1) 633  CITATOR INFO :  R          1962 SC1753  (19)  D          1965 SC1174  (4,13)  RF         1975 SC1389  (25)

ACT: Tax  on  Trade-Maximum  limit imposed  by  Constitution  Act -Validating Act for -period prior to imposition of  limit-If affected by limit-Khandwa Municipality ( Validation of  Tax) -Act,  1941 (16 of 1941)-Government of India Act,  1935,  S. 142-A.

HEADNOTE: In  1922, the Municipal Committee, Khandwa imposed a tax  on the  trade of ginning and pressing cotton by means of  steam or mechanical process.  Certain suits were filed challenging the  validity of the tax and ultimately in 1937,  the  Privy Council held that the tax had not been validly imposed.   In 1941,   the  Governor  enacted  the   Khandwa   Municipality (Validation of Tax) Act, 1941, which sought to validate  the tax  imposed  in  1922.   In  the  meantime,  s.  I42-A  was introduced in the Government of India Act, 1935, sub-s.  (2) Of which provided that the ’total amount payable in  respect of  any one person by way of taxes on  professions,  trades, callings  and employments shall not, after March  31,  1939, exceed Rs. 50 per annum’.  The appellant contended that  the validating Act was hit by s. 142-A(2) and to the extent that it  imposed a tax above Rs. 50 per person per annum  it  was invalid. Held,  that the Validating Act was not hit by S.  I42-A  (2) Government  of  India Act, 1935.  The powers of  the  Indian Legislatures  included  a power to  pass  retrospective  and validating laws.  Section 142-A(2) which put a limit on  the amount of tax did not affect laws relating to a period prior to  March  31,  1939, but affected only  those  relating  to periods  after that date.  It circumscribed the  legislative power by putting a date-line after which a tax in excess  of Rs.  50  for  a  period after  the  dateline  could  not  be collected unless it came within the proviso.  The Validating Act imposed the tax in excess of Rs. 5o not after March  31,

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1939, but before it. The  United Provinces v. Atiqa Begum, [1940] F.C.R. 110  and Piare  Dusadh v. King Emperor, [1944] F.C . R. 61,  referred to.

JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeal No.180 of 1959. Appeal  from the judgment and order dated June 30,  1955  of the former Nagpur High Court in Misc.  First Appeal No.  162 of 1949. 80 634 N.   C. Chatterjee and B. P. Maheshwari, for the appellant. G. C. Mathur, for the respondents. 1961.  March 29.  The Judgment of the Court was delivered by HIDAYATULLAH,  J.-This  appeal, by certificate  under  Arts. 132(l)  and  133(l)(c) of the Constitution, has  been  filed against an order of the High Court at Nagpur dated June  30, 1955. Though the facts necessary to decide the appeal lie within a comparatively narrow compass, the case itself has had a long and  somewhat unique history.  In July, 1922, the  Municipal Committee, Khandwa, resolved to impose a tax on the trade of ginning and pressing cotton by means of steam, or mechanical process,  and  after sundry procedure,  a  notification  was published on November 25, 1922 in the Central Provinces  and Berar Gazette, imposing the tax.  Certain traders  including the  appellant,  affected by the tax,  filed  suits  seeking injunction  against  the Municipal Committee on  the  ground that  the  tax  was invalid  and  illegal.   Meanwhile,  the Municipal  Committee  had  served  notices  on  the  present appellant,  and demanded and recovered the tax for  1923-24. The appellant then filed a second suit for refund of the tax paid by her on the ground that the imposition of the tax was illegal and ultra vires.  The suits had varying fortunes  in the  Courts in India, till they reached the  Privy  Council. The  Judicial Committee by its first decision  remitted  the cases  for additional evidence, while the appeals were  kept pending.  The decision of the Judicial Committee is reported in  Radhakrishan  Jaikishan v. Khandwa  Municipal  Committee (1).   After  the  additional  evidence  was  received,  the Judicial   Committee  pronounced  its  decision,  which   is reported  in Badhakishan Jaikishan v.  Municipal  Committee, Khandwa  (9).  The Judicial Committee held that the tax  was not   validly  imposed  by  the  Municipal  Committee,   and reversing  the decree of the Judicial Commissioner,  decreed the suits. (1) (1933) L.R. 611 A. 125.  (2) (1937) L.R. 64 LA. 118. 635 The  Provincial Legislature then passed the Khandwa  Ginning and   Pressing  Cotton  Tax  Validating  Act  8   of   1938, validating,  the tax.  The Act contained only one  operative section, which read as follows:               "2. Notwithstanding anything contained in  the               Central Provinces Municipal Act, 1903, or  the               Central Province Municipalities Act, 1922,  or               any decree or order of a civil court, the  tax               on the trade of ginning and pressing cotton by               means  of steam or mechanical  process  within               the  limits of the Khandwa municipality  which               was  imposed  by Notification  No.  2639-1298-               VIII, dated the 21st November, 1922, shall  be               deemed  to have been legally imposed from  the

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             date  of its imposition to the date  on  which               this Act comes into force.               Explanation.-All decrees or orders of a  civil               court  directing a refund of the  tax  already               recovered   by  the  committee  of  the   said               municipality or restraining the committee from               recovering the tax shall be deemed to have  no               legal effect." The  appellant  had,  in  the  meanwhile,  applied  for  the execution of the decrees, and the Validating Act was pleaded in  bar.  This plea was upheld by the executing  Court,  but the High Court at Nagpur, on appeal, rejected it and ordered the  executions to proceed.  The decision of the High  Court is  reported  in Firm Radhakishan  v.  Municipal  Committee, Khandwa  (1).  The reason given by the High Court  was  that the  Explanation,  though  not the  operative  part  of  the Validating  Act, conflicted with 0. 45 R. 15 of the Code  of Civil Procedure, and that the assent of the Governor-General had  not  been obtained, as required by is.  107(2)  of  the Government of India Act, 1935. Meantime, the Provincial Legislature had been dissolved, and the  Governor had assumed all the powers of  the  Provincial Legislature  under  s. 93 of the Government of  India  Act,. 1935.   The  Governor,-  with the assent  of  the  Governor- General  enacted  the second Validating  Act  intituled  the Khandwa  Municipality (Validation of Tax) Act,  1941,(16  of 1941), which received the assent of the Governor-Genera I on June (1)  (1940) N.L.J. 638. 636 30, 1941, and was published in the C. P. and Berar   Gazette on  July  11, 1941.  That Act, omitting parts  not  relevant here, read as follows:               "2. The tax the imposition of which  purported               to  be sanctioned in the Notification  of  the               Local  Government  (Ministry  of  Local  Self-               Government) No. 2639-1298-VIII, dated the 21st               November  1922, shall be, and shall be  deemed               always  to have been, validly  recoverable  by               the Municipal Committee of Khandwa in  respect               of  the period from the 21st November 1922  to               the 31st March 1938 (both dates inclusive).               3.    Where  the  net sum recovered  from  any               person before the commencement of this Act  on               account  of  the  said tax is  less  than  the               aggregate  of  the sum recoverable  from  such               person,  the balance shall be payable  to  the               said Municipal Committee on demand made at any               time  after the commencement of this Act  and,               if not paid within fifteen days from the  date               of  the  demand, shall be recoverable  by  any               method  available under the Central  Provinces               Municipalities Act,, 1922, for the recovery of               a  tax  imposed thereunder or  by  such  other               method  as  the Provincial Government  may  by               rule prescribe."               4.    For  the purposes of section 3  the  net               sum  recovered  from  any  person  means   the               aggregate sum recovered from such person  less               any  sum refunded to him and less so  much  of               the  amount  of any decree or  order  for  the               payment  of money executed by him against  the               said  Municipal  Committee  as  represents  an               amount previously paid by him on account of               the said tax.

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             5.    Nothing  in this Act shall preclude  the               execution against the said Municipal Committee               of  any  decree or order for  the  payment  of               money  arising out of a payment on account  of               the  said tax but upon the execution  of  such               decree or order so much of the amount  thereof               as represents a sum previously paid on account               of  the  said  tax shall  be  payable  to  and               recoverable by the said Municipal Committee in               accordance with section 3.               6.    The Khandwa Ginning and Pressing  Cotton               Tax Validating Act, 1938, is hereby repealed." 637 The  Provincial  Government framed a  rule,  which,  shortly stated, provided for the recovery of the IV amount by way of execution application made to the very Court, which executed the decree. The  Municipal  Committee deposited the decretal  amount  in Court,  which was withdrawn by the appellant  on  furnishing security.  On August 7, 1947, the Municipal Committee  filed its application under the rule for execution of the  decree. Objections   were   raised  by  the  appellant,   but   were disallowed, and the Municipal Committee realised the  amount of  the tax from the surety.  The appellant had raised  many objections,  but we are concerned with one only, viz.,  that the  Act  was  ultra vires the  Provincial  Legislature  and consequently  the  Governor, being repugnant  to  a.  142-A, which  was introduced in the Government of India Act,  1935, and which imposed a limit of Rs. 50 on taxes on professions, trades and callings after March 31, 1939. On  November  16,1949, an appeal was taken  by  the  present appellant  to  the High Court at Nagpur.   This  appeal  was heard  by  Sinha,  C. J., and Mudholkar, J.  (as  they  then were).  Mudholkar, J. held that by the second Validating Act which  was passed after March 31, 1939, the limit of Rs.  50 per annum imposed by the second sub-section of s. 142-A  was exceeded,  ’and  that  the Act was  thus  ultra  vires,  the Governor.   Sinha C., J., was of the contrary opinion.   The case was then laid before Deo, J., who agreed with Sinha, C. J.,  and  the  appeal was  dismissed.   The  appellant  then obtained the certificate, and filed this appeal. Section  142-A of the Government of India Act, 1935,  is  as follows:               "142-A.   (1)  Notwithstanding   anything   in               section one hundred of this Act, no Provincial               Law  relating  to taxes for the benefit  of  a               Province or of a municipality, district board,               local  board or other local authority  therein               in  respect of professions, trades,"  callings               or employments shall be invalid on the  ground               that it relates to a tax on income.               (2)   The  total amount payable in respect  of               any               638               one  person  to  the Province or  to  any  one               municipality, district board, local board,  or               other  local authority in the Province by  way               of taxes on professions, trades, callings, and               employments shall not, after the  thirty-first               day of March nineteen hundred and thirty-nine,               exceed fifty rupees per annum:               Provided that if in the financial year  ending               with that date there was in force in the  case               of  any  Province or  any  such  municipality,               board  or  authority  a  tax  on  professions,

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             trades, callings, or employments the rate,  or               the  maximum  rate, of  which  exceeded  fifty               rupees per annum, the preceding provisions  of               this  sub-section shall, unless for  the  time               being  provision to the contrary is made by  a               law of the Federal Legislature, have effect in               relation to that Province, municipality, board               or authority as if for the reference to  fifty               rupees  per  annum there  were  substituted  a               reference to the rate or maximum rate, or such               lower rate, if any, (being a rate greater than               fifty  rupees per annum) as may for  the  time               being  be  fixed  by  a  law  of  the  Federal               Legislature;  and  any  law  of  the   Federal               Legislature  made for any of the  purposes  of               this  proviso may be made either generally  or               in   relation  to  any  specified   Provinces,               municipalities, boards or authorities.               (3)   The fact that the Provincial Legislature               has power  to  make  laws  as  aforesaid  with               respect  to  taxes  on  professions,   trades,               callings   and  employments,  shall   not   be               construed   as   limiting,  in   relation   to               professions, trades, callings and employments,               the  generality  of the entry in  the  Federal               Legislative List relating to taxes on income." Simultaneously with the introduction of s. 142-A, Entry  No. 46  in the Provincial Legislative List, which had till  then stood  as  "Taxes  on  professions,  trades,  callings   and employments"  was  amended  by the  addition  of  the  words "subject,  however,  to the provisions of section  142-A  of this Act". The  impugned Act was passed by the Governor under s. 90  of the Government of India Act, 1935.  Under sub-s. (3) of that section, it had the same force and 639 effect and was subject to disallowance in the same manner as an  Act of the Provincial Legislature assent- led to by  the Governor.  The impugned Act was enacted with the concurrence and  assent of the Governor-General and thus  complied  with all the formalities required for such enactment. The   powers  of  the  Provincial  Legislatures  under   the Legislative   Lists  have  been  the  subject  of   numerous decisions  by the Federal Court and also by this Court.   It has  been  pointed out that these powers are  as  large  and plenary as those of Parliament itself.  These powers, it has been  held,  include  within themselves the  power  to  make retrospective laws; and as pointed out by Gwyer, C.J. in The United  Provinces v. Atiqa Begum (1), the burden of  proving that  Indian  Legislatures "were subject to  a  strange  and unusual  prohibition against retrospective  legislation  lay upon those who asserted it".  This has not been asserted  in this  case, as, indeed, it could not be, after the  decision of  the case cited by us.  In the case before the  Allahabad High Court, out of which the appeal before the Federal Court had arisen [sub nom Mst.  Atiqa Begum v. U. P. (2)], it  was held that retrospective legislation was not possible in view of the provisions of s. 292 of the Government of India  Act, 1935,  which  continued all law in force  in  British  India immediately before the commencement of Part III of the  Act, until  altered  or  repealed  or  amended  by  a   competent Legislature or other competent authority.  This view was not accepted by the Federal Court, which held that s. 292 of the Act  did  not  prevent Legislatures  in  India  from  giving retrospective effect to measures passed by them.  There have

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been  numerous  occasions on which retrospective  laws  were passed,  which were upheld by the Federal Court and also  by this  Court.  It is not necessary to cite instances, but  we refer  only to the decision in M. P. V. Sundararamier &  Co. v.  The  State  of  Andhra Pradesh  (3),  where  this  Court approved the dictum of the Federal Court. Retrospective legislation being thus open to the (1) [1940] F.C.R. 110.         (2) A.I.R. (1940) All. 272. (3)  [1958] S.C.R. 1422. 640 Provincial  Legislatures,  the Act of the Governor  had  the same  force.   Retrospective  laws, it has  been  held,  can validate   an  Act,  which  contains  some  defect  in   its enactment.   Examples  of  Validating  Acts  which  rendered inoperative, decrees or orders of the Court or alternatively made  them valid and effective, are many.  In Atiqa  Begum’s case (1), the power of validating defective laws was held to be  ancillary and subsidiary to the powers conferred by  the Entries  and  to be included in those  powers.   Later,  the Federal   Court  in  Piare  Dusadh,v.   King   Emperor   (2) considered the matter fully, and held that the powers of the Governor  General which were conterminous with those of  the Central  Legislature included the power of validation.   The same can be said of the Provincial Legislatures and also  of the Governor acting as a Legislature. The  only  question  thus is whether the  power  to  pass  a retrospective  and  validating  law was taken  away  by  the enactment of s. 142-A and the amendment of the Entry in  the Government  of  India  Act.  It is on this  point  that  the difference  in the High Court arose.  The amendment  of  the Entry  is  of  no  special  significance,  because  it  only subjects  the otherwise plenary powers to the provisions  of s.  142-A.   Apart from the implications arising  from  that section,   the   supremacy  of  the  Legislature   to   pass retrospective  and validating laws was unaffected.  We  have thus  to  see what s. 142-A enacted and to  what  extent  it trenched  upon the powers of the Provincial Legislature  and the Governor. Mr. N. C. Chatterjee, in arguing the case, adopted the  line of  reasoning  of the minority view in the High  Court.   He pointed  out  that  a. 142-A was enacted  to  achieve  three purposes.  The first was that it removed doubts whether  the charge  of  tax on professions, etc., would be  regarded  as income-tax.   The  second was that it put a limit  upon  the powers of the Provincial Legislature to enact a law imposing a  tax  in excess of rupees fifty after March  31,  1939;and thirdly  it  preserved only existing valid laws  already  in force,  which  imposed  a  tax  in  excess  of  the   amount indicated.  He (1) [1940] F.C.R. 110.            (2) [1944] F.C.R. 61. 641 contended  that  the  second  sub-section  and  the  proviso covered  the entire field, and a law passed after March  31, 1939, could not freshly impose a tax in excess of the  limit and this was such a law. Under  the  scheme  of the Government of  India  Act,  1935, income-tax,  though a Central levy, was, under s.  138  (1), distributable among the Provinces and for which an elaborate scheme  prepared  by  Sir  Otto  Niemyer  was  accepted  and embodied  in  the  Government  of  India  (Distribution   of Revenues)  Order in Council, 1936.  The Centre could levy  a surcharge   for   federal  purposes.    Taxes   on   trades, -professions and callings, which were taxes already leviable by the Provinces under Schedule 11 of the Rules made by  the Governor-General  in  Council  under .s.  80A(3)(a)  of  the

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Government   of  India  Act,  were  also  included  in   the Provincial  Legislative List as a source of revenue for  the Provinces.   It  was, however, felt that these  taxes  might come into clash with tax on income in the Federal List,  and also  if unlimited in amount, might become a second  tax  on income  to  be levied by the Provinces.  It  was  to  remove these contingencies that s. 142-A was enacted.   Sub-section (1)  provided I-,hat, a tax on professions, etc., would  not be invalid on the ground that it related to a tax on income. Sub-section  (3)  was  a  counterpart  of  sub-s.  (1),  and provided  that the, generality of the Entry in  the  Federal Legislative  List relating to taxes on income would  not  be construed  as  in  any  way limited  by  the  power  of  the Provincial  Legislature to levy a tax on  professions,  etc. The fields of the two taxes were thus demarcated.  No  other implication arises from these two sub-sections. It  was also apprehended that under the (guise of  taxes  on professions,  etc., the Provincial Legislatures might  start their own scheme of a tax on income, thus subjecting incomes from professions etc., to an additional tax of the nature of income-tax.   A limit was therefore placed upon  the  amount which could be collected by way of tax on professions, etc., and  that  limit,  was Rs. 50 per annum  per  person.   The, second 642 sub-section achieved this result.  It was, however, realised that  the tax being an old tax, there were laws under  which the  limit of Rs. 50 was already exceeded in relation  to  a Province,  municipality,  board or like authority,  and  the imposition  of  such a limit might  displace  their  budgets after  March 31, 1939.  A proviso was, therefore,  added  to the second sub-section that if in the financial year  ending with  the  thirty-first day of March, nineteen  hundred  and thirty-nine there was in force in the case of any  Province, etc., a tax on professions, trades, callings or  employments the  rate or the maximum rate of which exceeded Rs.  50  per annum,  the provisions of the second sub-section shall  have effect,  (unless  for  the  time  being  provision  to   the contrary was made by a law of the Federal Legislature) as if instead  of  Rs.  50  per  annum  there  was  substituted  a reference  to  the rate or maximum rate  exceeding  Rs.  50. Where no such law was passed by the Federal Legislature, the tax even in excess of Rs. 50 continued to be valid. There  can  be no doubt that if a law was passed  after  the amendment  and sought to impose taxes on  professions  etc., for  any period after March 31, 1939, it had to  conform  to the  -limit prescribed by s. 142A (2).  The  prohibition  in the   second  sub-section  operated  to   circumscribe   the legislative  power by putting a date-line after which a  tax in excess of Rs. 50 per annum per person for a period  after the date-line could not be collect-id unless it came  within the proviso.  But neither sub-s. (2) nor the proviso  speaks of a period prior to March 31, 1939.  The sub-section speaks only  of "the total amount payable...... after  the  thirty- first  day  of March, nineteen hundred  and  thirty.  nine". These  words  are  important.  They create a  limit  on  the amount leviable as tax for a period after that date.  But if a law was passed validating another which imposed a tax  for a  period  prior to the date indicated, it would  be  taxing professions  etc., in excess of Rs. 50 not after  March  31, 1939,  but  before it.  Neither the Entry  nor  the  section either directly or indirectly prohibited this, nor did  they create any limit for the prior period.  The Validating  Act, though                             643

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passed  in 1941, can be read only as affecting a period  for which there was no limit.  If the sub-section said that  tax shall not be payable in excess of Rs. 50 without  indicating the  period or date, the argument would have  some  support, but it puts in a date, and the operation of the  prohibition is confined to a period after that date. The Validating Act, being thus completely within the  powers of the Governor, could remove retrospectively the defect  in the’ earlier Act.  Though it reimposed the tax from the date of  the  earlier Act, it took care to impose the tax  for  a period ending with March 31, 1938.  The impugned Act did not need  the  support of the proviso, because it did  not  fall within  the ban of the second sub-section.  In our  opinion, the  Validating  Act of 1941 was within the  powers  of  the Governor, and was a valid piece of legislation. The appeal fails, and is dismissed with costs. Appeal dismissed.