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PETITIONER: RAM BACHAN LAL

       Vs.

RESPONDENT: THE STATE OF BIHAR

DATE OF JUDGMENT: 28/02/1967

BENCH: SIKRI, S.M. BENCH: SIKRI, S.M. RAO, K. SUBBA (CJ) SHAH, J.C. RAMASWAMI, V. VAIDYIALINGAM, C.A.

CITATION:  1967 AIR 1404            1967 SCR  (3)   1  CITATOR INFO :  RF         1988 SC1737  (72)

ACT: Bihar  and Orissa Municipal Act (B.& O. Act 7 of 1922),  Ss. 82(1) (ff), 15OA-E, 388 and 389-Profession tax-If  infringes fundamental  rights--Constitution of India, Arts. 14,  19  & 31.

HEADNOTE: The  respondent-Notified Area  Committee-imposed  profession tax  under  the  Bihar and Orissa Municipal  Act,  1922  and issued  demand  notices to the petitioner.   The  petitioner filed   a  petition  under  Art.  32  of  the   Constitution challenging the provisions of Act as infringing Arts. 14, 19 and  31 of the Constitution on the grounds that (i) Ss.  388 and 389 of the Act gave arbitrary power to the Government to constitute either a municipality under s. 4 of the Act or  a notified  area committee under s. 388; (ii) the rate of  tax to  be  levied  had  been left  to  the  discretion  of  the Commissioner and the Government without giving any  guidance as to the amount of tax; (iii) proviso (iv) to s. 82(1)  was void   as  it  did  not  give  any  indication  as  to   the circumstances  under which the Government should direct  the Commissioners  to levy tax under s. 82(1)(ff); (iv) the  Act did  not  lay down proper procedure for the  assessment  and determination of the tax-, and (v) no appeals or  references were provided in the Act and the only remedy of an  assessee who  was aggrieved by the assessment, was to file  a  review under s. 150E. Held : The petition must be dismissed. (i)  Sections 4 and 388 of the Act give sufficient  guidance to  the  Government.   Section  4(i)  contemplates  a   town containing  not  less than five thousand inhabitants  and  a town of a particular density of population, and further that three-fourths of the adult male population should be engaged in pursuits other than agriculture.  These requirements show that  the area has reached such a stage of development  that the Government should constitute a municipality in the area. Section 388 would come into picture only if the requirements

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of  s. 4 are not satisfied but yet the Government  considers it  necessary to make administrative provisions for  all  or any of the purposes of this Act. [7 C-D] (ii) Schedule  IV specified the maximum amount of  tax  that can be levied and s. 150 D lays down the purposes for  which the tax can be utilised.  This gives sufficient guidance  to the Commissioners or the State Government to fix the rate of tax. [7 G] The  Corporation  of  Calcutta v. Liberty  Cinema  [1965]  2 S.C.R. 477. relied upon. (iii)     The  Government will only direct the  Commissioner to levy the tax if the Commissioners do not carry out  their duty properly. [8 C-D) (iv) Explanation (i) to S. 150-A of the Act clearly provides that  if  a  person is assessable to income  tax  under  the Indian  Income  Tax Act, 1922 his taxable  income  would  be determined  according  to the provisions of the  Income  Tax Act. and if he is not assessable, his taxable income 2 would  be computed as far as may be in accordance  with  the procedure laid down in the said Act. (v)  In  the  circumstances,  S. 150-E  gives  a  reasonable remedy to an aggrieved party.  Section 150-E(2) directs that the application has to be heard and determined in accordance with  the procedure laid down in Ss. 115, 117, 118 and  119. The subject-matter of Profession Tax is not very complicated and the procedure provided for the assessment and review  is reasonable. [8 E-F] Rohtas Industries Ltd., Dalmianagar v. State of Bihar [1965] Bihar L.J.R. 886, referred to.

JUDGMENT: ORIGINAL JURISDICTION : Writ Petition No. 194 of 1966. Petition under Art. 32 of the Constitution of India for  the enforcement of fundamental rights. B.   Sen and K. K. Sinha, for the petitioner. B.   P. Jha, for the respondents. The Judgment of the Court was delivered by Sikri, J. In this petition under art. 32 of the Constitution a notice of demand issued by the Dehri-Dalmianagar  Notified Area Committee demanding Rs. 100/- on account of  Profession Tax  levied under the Bihar and Orissa Municipal  Act,  1922 (B.  &  0. Act VII of 1922)-hereinafter referred to  as  the Act-for  the period 1963-64 to 1965-66 from the  petitioner, Shri Ram Bachan Lal, Land Officer, who is in the  employment of  Rohtas  Industries Ltd., Dalmianagar, is  sought  to  be quashed  on the ground that the provisions of the Act  under which it has been issued infringe the fundamental rights  of the   petitioner   under  arts.  14,  19  and  31   of   the Constitution. The  Dehri-Dalmianagar Notified Area Committee  was  consti- tuted by notification dated May 23, 1942, issued in exercise of the powers conferred by sub-s. (1) of S. 388 of the  Act. Section 388 reads as follows : "388.  Constitution of notified area-               (1)   The State Government may by notification               declare   that   it  is  necessary   to   make               administrative provision for all or any of the               purposes of this Act in any area specified  in               the notification, other than a municipality or               a cantonment.               (2)   An  area  in  respect of  which  such  a               notification has issued is hereinafter  called

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             a notified area." Section 389 enables the State Government to impose  taxation in,  apply  enactments to and constitute  committee  in  the Notified area.  This section reads thus : 3               "389.   Power  to impose  taxation  in,  apply               enactments  to and constitute  Committees  in,               notified area.-               That State Government may by notification:-               (a)   apply or adapt to a notified area or  to               any  part of a notified area any provision  of               this   Act   which  may  be   applied   to   a               municipality,  or any rule or by-Law in  force               or which can be made in any municipality under               this or any other Act;               (b)   impose in a notified area or in any part               of  a  notified area any tax  which  could  be               imposed  by the Commissioners if the  notified               area were a municipality; and               (c)   appoint or make rules for appointment or               election  of  a  committee to  carry  out  the               purpose of this Act in the notified area."               In  exercise  of the powers under  s.  389  by               notification dated May 23, 1941, the  Governor               of  Bihar  applied to the  notified  area  the               following provisions of the Act               "Chapter I Section 3.               Chapter   11  Sections  21-27,  29-48,   51-52               clauses (b), (c) and (d).               Chapter III Sections 58-78 and 81.               Chapter  IV Sections 82(1)(b), (c), (f),  (i),               and  Sections 82(2), 84, 86-88,  98-150,  154-               163.               The whole of Chapters V, VI, VII, VIII and X.               Chapter XI section 340, 341 and 342-343.               The whole of Chapters XII and Xlll."               The  Act  was amended by the  Bihar  Municipal               (Amendment)  Act,. 1953. (Bihar Act  XXXII  of               1953).  It inserted cl. (ff) in sub-s.(1) of               s. 82, which reads as follows :               "82.  Power to impose taxes.-               (1)   The  Commissioners  may,  from  time  to               time, at a meeting convened expressly for  the               purpose,  of which due notice shall have  been               given,  subject to the provisions of this  Act               and with the sanction of the State Government,               impose  within the limits of the  municipality               the following taxes and fees, or any of them               (ff)   a  tax  on  the  trades,   professions,               callings  and  employments  specified  in  the               Fourth Schedule at such               4               rates   not  exceeding  the  rates   specified               therein as may from time to time be determined               by the Commissioners at a meeting;               Provided  that  the rates  determined  by  the               Commissioners at a meeting shall be subject to               the  approval  of  the  State  Government  and               subject  to such modification in the rates  of               taxes and exemption of classes of  profession,               trades  and callings to be taxed as the  State               Government may direct."               Proviso (iv) was added to sub-s. (1) of s.  82               of the Act by Bihar Act III of 1959, and reads               as follows

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             "Provided that the Commissioners-               (iv)  shall,  if  so  directed  by  the  State               Government  by  notification,  impose   within               limits  of a municipality the taxes  mentioned               in  clauses  (c),  (b), (f) or  (ff)  at  such               rates,  subject  to the  maxima  specified  in               sections  84  and  85 and the  First  and  the               Fourth   Schedules,  and  from   such   dates,               notwithstanding  anything  contained  in  this               Act, as may be specified in the notification." The  Bihar  Municipal (Amendment) Act, 1953,  also  inserted Chapter  IV-A,  which  deals with  the  tax  on  profession, trades, callings and employments.  Chapter IV-A consists  of s.  150A to s. 150E.  Section 150A provides that the  person liable  to  pay  such a tax shall  take  out  a  half-yearly licence  and  pay the tax assessed on him  in  pursuance  of clause (ff) of sub-section (1) of section 82, provided  that such  tax shall be imposed on the income accrued within  the municipality  during  the year next preceding the  year  for which  the  tax  is imposed.  The  second  proviso  ,exempts persons  whose taxable income does not exceed Rs. 1,500  per annum  or  the  value of whose place of  business  does  not exceed  Rs.  10 per mensem or whose income  from  employment does not exceed Rs. 2,400 per annum.  The explanations to s. 150A may be set out :               "Explanation  (1)-The  taxable income  of  any               person  liable  to  pay  the  tax  under  this               section  shall  be  deemed to  be  the  amount               computed in accordance with the provisions  of               the Indian Income Tax Act, 1922, and where any               such  person is not subject to  assessment  of               income-tax  under  the said Act,  his  taxable               income  shall  be the amount  which  shall  be               computed. so far as may be, in accordance with               the procedure laid down in the said Act.               Explanation  (2).-The  onus of  providing  the               amounts  of the taxable income computed  under               the said               5               Act shall lie on the person liable to pay  the               tax under this section." Section   150B  enables  the  Commissioners  to   call   for information.   Section 150C renders statements  and  returns furnished  under s. 150B confidential.  Section 150D,  which deals  with  the application of money received from  tax  on professions, trades, callings and employments, reads thus :               "150D.     AR   moneys   collected   by    the               Commissioners,   on  account  of  a   tax   on               professions, trades, callings and  employments               imposed under clause (ff) of sub-section (1) of               section 82, shall-               (1)   in any municipality in which there is  a               provision  for the supply of piped  water,  in               accordance  with  a  scheme  for  water-supply               sanctioned  under  section  292,  be   applied               notwithstanding anything contained in this Act               and  after  deduction  of  such  proportionate               share   of   the  cost   of   collection   and               supervision  as the Commissioner at a  meeting               may  fix, in whole or in part and  subject  to               such conditions and exceptions, if any, as the               State Government may direct, in defraying  the               expenses   on   account   of   extending    or               maintaining  the’water supply and in  repaying               or  paying  interest  on  debts  incurred   in

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             connection  with the scheme of the said  water               supply  and where only a part of the  proceeds               of  the tax is so applied, the  balance  shall               form part of the municipal fund;               (2)   in any other municipality in which there               is  no such provision for the supply of  piped               water form part of the municipal fund."               Section  150E  provides  for  review  in   the               following terms :               "  150E.   Application  for  review.-(1)   Any               person who is dissatisfied with the assessment               of  the total income or taxable income or  the               determination of the amount of tax payable  by               him  or  who  disputes  his  liability  to  be               assessed  may  apply to  the  Commissioner  to               review  the assessment of his total income  or               taxable  income or the amount of tax  assessed               upon  him or to exempt him from the  liability               to be assessed.               (2)   Every  application presented under  sub-               section (1)     shall, as nearly as may be, be               heard  and determined in accordance  with  the               procedure laid down in sections 115, 117,  118               and   119,  as  if  such   applications   were               applications presented under section 116." On  March 1, 1957, the Governor of Bihar applied the  provi- sions of cl. (ff) of sub-s. (1) of s. 82, and sections  150A to 6 150E, of the Act to the Dehri-Dahuianagar Notified area.  It appears  that  the  petitioner  was  not  aware  that  these provisions   had  been  applied  to  the   Dehri-Dalmianagar Notified  area.   On March 4, 1957, the  Governor  of  Bihar sanctioned the imposition by the Dehri-Dalmianagar  Notified area  Committee of the tax on trades, professions,  callings and  employments.   The notification provided that  the  tax shall be levied at the maximum rates specified in the Fourth Schedule  of  the Act.  On March 23, 1959, the  Governor  of Bihar,  in exercise of the powers conferred by proviso  (iv) to  sub-s.  (1) of s. 82 directed the Commissioners  of  the Municipalities  as  well as the  Notified  Areas  Committees specified in the Schedule, which included  Dehri-Dalmianagar Notified  Area Committee, to levy tax mentioned in cl.  (ff) of sub-s. (1) of s. 82 at the maximum rates specified in the Fourth  Schedule to the said Act with effect from  April  1, 1959.    Thereupon  the  Dehri-Dalmianagar   Notified   Area Committee  imposed  the  profession tax  and  sent  separate demand  notices  to the petitioner for  the  years  1963-64, 1964-65  and  1965-66, and later sent  the  impugned  demand notice covering all these three years. Number of points had been raised in the petition but Mr.  B. Sen,  the learned counsel who appeared for  the  petitioner, has  raised only two points before us.  He urged ( 1 )  that ss.  3  8  8  and 389 of the Act  violate  art.  14  of  the Constitution, and (2) that s. 82(1) (ff), ss. 150A to  150E, and the Fourth Schedule offend arts. 14, 19(g) and 31 of the Constitution. Regarding the first point, the ground of attack was that ss. 388 and 389 give arbitrary power to the Government either to constitute  a  municipality  under s. 4 of  the  Act  or  to constitute a notified area committee under s. 388.  It would be noticed that the Notified Area Committee was  constituted as long ago as 1942.  Without deciding the point, we  assume that Mr. B. Sen is entitled to challenge the validity of ss. 388  and 389.  It seems to us that there is no substance  in

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this point.  Section 4(1)(a) and (b)    provide as under               "4. Declaration of intention to constitute  or               alter limits of municipality.-               (1) (a) When the State Government is satisfied               that   three-fourths   of   the   adult   male               population of any town are engaged on pursuits               other  than  agriculture and  that  such  town               contains   not   less   than   five   thousand               inhabitants, and an average number of not less               than  one thousand inhabitants to  the  square               mile  of  the  area of such  town,  the  State               Government   may  declare  its  intention   to               constitute   such  town,  together   with   or               exclusive  of  any railway  station,  village,               land or               7               building   in  the  vicinity  of  such   town,               municipality,  and to extend to it all or  any               of the provisions of this Act.               (b)   When  the State Government is  satisfied               that  any  municipality,  or  any  area  in  a               municipality,  does not fulfil the  conditions               specified   in   clause  (a),  or   when   the               Commissioners at a meeting have made a  recom-               mendation in this behalf, the State Government               may  declare -its intention to  withdraw  such               municipality  from the operation of this  Act,               or   to   exclude   such   area   from    such               municipality." It  would  be  noticed  that s.  4(1)  contemplates  a  town containing  not  less than five thousand inhabitants  and  a town of a particular density of population, and further that three-fourths of the adult male population should be engaged in pursuits other than agriculture.  Now, these requirements show  that the area has reached such a stage of  development that the government should constitute a municipality in  the area.   Section 388 would come into the picture only if  the requirements  of  s.  4  are  not  satisfied  but  yet   the Government  considers  it necessary to  make  administrative provisions  for all or any of the purposes of this Act.   In our   opinion,  this  gives  sufficient  guidance   to   the Government and thus no arbitrary power has been conferred on the Government. Coming  to the second point, s. 82 is challenged on  various grounds.   First,  it is said that the proviso to  s.  82(1) (ff)  enables  the  Government  to  exempt  any  classes  of profession, trades or callings from the tax, without  giving any guidance as to which classes should be exempted.  We  do not  find  it  necessary to deal with  this  academic  point because, first, the Government has not exercised this  power and,  secondly, even if we were to hold this proviso  to  be violative  of  art. 14 it would be severable and  would  not give  any  relief to the petitioner.  The second  ground  of attack is that the rate of tax to be levied has been left to the  discretion of the Commissioners under s. 82(1)(ff)  and of  the  Government under proviso (iv) to s.  82(1)  without giving  any  guidance as to the amount of tax.   We  see  no force in this contention.  Schedule IV specifies the maximum amount  of tax that can be levied and s. 150D lays down  the purposes  for which the tax can be utilised.  This,  in  our view, gives sufficient guidance to the Commissioners or  the State Government to fix the rate of tax.  In The Corporation of  Calcutta v. Liberty Cinema(1) this Court,  by  majority, upheld the validity of s. 548 of the Calcutta Municipal Act. Speaking  for  the  majority, Sarkar J.,  as  he  then  was,

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observed:               "It  seems  to  us  that  there  are   various               decisions  of  this Court  which  support  the               proposition that for a               (1)   [1965] 2 S. C. R. 477.               8               statutory  provision for raising  revenue  for               the  purposes of the delegate, as the  section               now  under consideration is, the needs of  the               taxing  body  for carrying out  its  functions               under  the statute for which alone the  taxing               power   was  conferred  on  it,   may   afford               sufficient  guidance to make the power to  fix               the rate of tax valid." In view of these observations it is clear that s. 150D gives sufficient  guidance  to  the Commissioners  and  the  State Government to fix the rate, of taxation. Mr.  Sen  then urged that proviso (iv) to s. 82(1)  is  void because   it  does  not  give  any  indication  as  to   the circumstances  under which the Government should direct  the Commissioners  to  levy the tax under s. 8 2 (1) (ff  ).  It seems  to  us  that  the Government  will  only  direct  the Commissioners  to levy the tax if the Commissioners  do  not carry  out  their duty properly.  Chapter XIII of  the  Act, which has been applied to the Notified Areas, confers powers of  control on the State Government over the Notified  Areas and  the Government would only act under proviso (iv) to  s. 82(1) if it is necessary in view of the circumstances of the case. Mr. B. Sen then argued that the Act does not lay down proper procedure  for the assessment and the determination  of  the tax.   We see no force in this contention.  We have  already set  out  the  explanations to  S.  150A.   Explanation  (1) clearly  provides that if a person is assessable  to  income tax  under  the  Indian Income-tax Act,  1922,  his  taxable income  would be determined according to the  provisions  of the Indian Income-tax Act, and if he is not assessable,  his taxable  income  would  be  computed as far  as  may  be  in accordance with the procedure laid down in the said Act. Some  complaint  was  made about Explanation  (2)  that  un- necessary  burden was being placed on the person  liable  to tax,  but  we  are unable to  appreciate  this  point.   The assessee  has only to produce the order from  the  assessing authorities to establish the amount of his taxable income. The  last  complaint was that no appeals or  references  are provided  in the Act and the only remedy of an assessee  who was  aggrieved by the assessment is to file a review  tinder s.  150F.   In the circumstances we consider  that  s.  150E gives  a  reasonable remedy to an  aggrieved  person.   Sub- section  (2) of s. 150E directs that the application has  to be  heard  and determined in accordance with  the  procedure laid  down  in ss. 115, 117, 118, and II 9.  These  sections have been applied to the Notified Area Committees.  Under s. 117 a review would be heard by a Committee consisting of not less  than three Commissioners and the Committee is  further entitled to take evidence and to make such enquiries as 9 it deems necessary.  The subject-matter of Profession Tax is not  very  complicated  and,  in  our  view,  the  procedure provided for the assessment and review is reasonable. We  may mention that similar points were raised  before  the Patna High Court and the High Court rejected them in  Rohtas Industries Ltd.  Dalmianagar v. State of Bihar(1). In  the  result  the petition fails and  is  dismissed  with costs.

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Y.P.                                Petition dismissed. (1) [1965] Bihar L.J.R. 886. L4SupCI/67-2 10