Appeal No180 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
March 29
The Judgment of the Court was delivered by HIDAYATULLAH J
This appeal by certificate under articles 132l and 133lc 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 vs Khandwa Municipal Committee 1
After the additional evidence was received the Judicial Committee pronounced its decision which is reported in Badhakishan Jaikishan vs 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 LR 611 A 125
2 635 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 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 vs 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
1072 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 section 93 of the Government of India Act
The Governor with the assent of the Governor General enacted the second Validating Act intituled the Khandwa Municipality Validation of Tax Act 194116 of 1941 which received the assent of the Governor Genera I on June 1 1940 NLJ 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
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
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
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 161949 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 section 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 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 section 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 section 90 of the Government of India Act 1935
Under sub section
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 CJ in The United Provinces vs 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 vs U P 2 it was held that retrospective legislation was not possible in view of the provisions of section 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 section 292 of the Act did not prevent Legislatures in India from giving retrospective effect to measures passed by them
There have 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 vs The State of Andhra Pradesh 3 where this Court approved the dictum of the Federal Court
Retrospective legislation being thus open to the 1 2 AIR 1940 All 272
3  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 Dusadhv
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 section 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 section 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 section 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 1939and thirdly it preserved only existing valid laws already in force which imposed a tax in excess of the amount indicated
He 1 2 641 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 section 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 80A3a of the 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 section 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 section
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 section 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 section
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 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


Summary:
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 section I42 A was introduced in the Government of India Act 1935 sub section
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 section 142 A2 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 section 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 A2 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 1939 but before it
The United Provinces vs Atiqa Begum and Piare Dusadh vs King Emperor 1944 FC 
R 61 referred to