Case: Union Of India Vs. The Lonavla Borough Municipality Of Lonavla, District Poon

this fresh notification as the liability of the Railway to pay that tax already existed under that notification of 1914.10. The second circumstance that we can take notice of is the historical background in which this notification of 26th July, 1917 was issued. It appears that, after the Rules for imposition of this consolidated tax came into force in 1916, the Municipality demanded payment of this consolidated tax from the G.I.P. Railway. Thereupon, the Agent of the G.I.P. Railway Company wrote a letter to the Secretary, Railway Board, Simla on the 1st December, 1916, stating that the Company did not agree that it should pay the new consolidated tax as it comprised a house tax and a water rate. The Company had its own arrangements for the supply of water and it was obviously unfair that it should be called upon to pay any tax which includes a water rate, when no municipal water was being consumed by the Railway at Lonavala The Secretary, Railway Board, forwarded this letter to the Secretary to the Government of Bombay, General Department, with a letter dated 12th December, 1916, enquiring whether the Agents information was correct and, if so, whether the Bombay Government had any remarks to offer on the Agents contentions. On 11th May, 1917, the Secretary to the Government of Bombay replied to the Secretary, Railway Board, pointing out that, originally, the Municipality proposed to levy a general water rate on all houses, in addition to the existing house tax, but, on representations from property owners of Lonavala and Khandala it had decided to impose a consolidated rate on buildings and lands in lieu of the house-tax and the proposed general water rate Consequently, they were levying, in lieu of house-tax a consolidated rate, which included a general water rate, on sliding scale, on all properties situated within the municipal limits The water rate imposed was not intended to cover expenses on any service rendered in the nature of a general tax as opposed to a service tax. In equity, the Railway Companys property in Lonavala had no better right to exemption than the properties of private individuals who, although they did not take private pipe connections, were paying the general water rate. In the circumstances, a request was made to the Secretary, Railway Board, to move the Government of India to declare the Administration of the G.I.P. Railway liable to pay to the Lonavala Municipality the consolidated tax on buildings and lands in lieu of the house-tax in respect of the railway properties situated within the municipal limits. It was suggested that the Schedule annexed to the notification dated 13th May, 1914 may be amended accordingly. It was in pursuance of this move by the Bombay Government that the notification of 26th July, 1917 was issued by the Central Government. That the notification of 26th July, 191? was issued in pursuance of this correspondence is clarified by the Memorandum dated 17th August. 1917, with which a copy of the new notification was forwarded by the Government of India, Railway Department (Railway Board) to the Secretary to the Government of Bombay. These circumstances in which the notification of 26th July, 1917 was issued, make it plain that the Government of India, when they used the expression "tax on buildings and lands" in the notification. intended to make the G.I.P Railway liable to the consolidated tax which had been imposed by the Municipality under the Rules of 1916.11. The decision of the Bombay High Court in Borough Municipality, Ahmedabad v. Ahmedabad Manufacturing and Calico Printing Co. Ltd., AIR l939 Bom 478 on interpretation of sections 73 and 110 of the Act of 1925 also supports the view that we have taken above. The question that arose in that case was whether the right of an appeal envisaged by using the expression "in the case of a rate on buildings or lands or both" in section 110 could be availed of in respect of a general water rate imposed under clause (x) of section 73 (1) which described that tax as a general water rate imposed in the form of a rate assessed on buildings and lands. It was held that there was no distinction between a rate on buildings or lands and tax in the form of a rate assessed on buildings or lands.In the case before us, on that analogy, a consolidated tax assessed as a rate on buildings and lands cannot be distinguished from a tax on buildings and lands.12. Reference may also be made to a decision of the Allahabad High Court in Raza Buland Sugar Co., Ltd., Rampur v. Municipal Board, Rampur, AIR 1962 All 83 where it was held that a water rate is a tax on buildings and lands and is not, in fact, a service tax chargeable in respect of water supplied. Counsel for the appellant referred to a decision of the Madras High Court in Municipal Council, Cuddappah v. M. and S. Ry. Co. Ltd., AIR 1929 Mad 746 , but that case is of no assistance as it turned on the special language which had been used in the Act and the notification which came up for consideration in that case. In fact, the expression that had to be interpreted was "property tax" and not tax on buildings and lands". We agree with learned counsel for the appellant that such assistance cannot be derived from the decision of this Court in Patel Gordhandas Hargorvindas v. Municipal Commr. Ahmedabad (1964) 2 SCR 608 = (AIR 1963 SC 1742 ) which was relied upon by the High Court. However, as we have held above, on the proper interpretation of the language used in the two Acts, the Rules, and the notification. and taking into account the circumstances under which the notification of 1917 was issued, the only conclusion that can be arrived at is that the Railway was made liable to this consolidated tax, so that the decision of the High Court is perfectly correct.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]8. It is also significant to note that the Rules which were framed by the Municipality under the Act of 1901 and by the Municipal Borough later under the Act of 1925 which were promulgated on the 4th May, 1916 and the 6th October, 1931 respectively, described the tax as a general rate on buildings and lands in Rule 1. It is true that, in the heading of the Rules, the expression used was that "the Rules were for the levy of a consolidated rate on buildings and lands" but, in the main provision, the tax was described only as "a general rate on buildings and lands". A general rate on buildings and lands is obviously a tax on buildings and lands and would, therefore, be covered by the notification of the Central Government dated 26th July, 1917.9. Apart from this interpretation which we have arrived at on the basis of the language used in the two Acts, the Rules, and the notification of the Central Government, there are two circumstances which indicate that this must be the correct construction of the notification issued by the Central Government. The first circumstance is that, when this notification was issued, the only tax which was being imposed by the Lonavala Municipality which the Central Government could have intended should become payable by the G.I P. Railway was the consolidated tax under clause (c) of the second proviso. There was no other tax which would have been covered by this notification. In fact, the notification would be meaningless if we were to hold that this consolidated tax is not covered by the expression "tax on buildings and lands". This notification was issued while the earlier notification of 1914 was already in existence and, if the intention was to cover only the rate mentioned in clause (i) of S. 59 (1), there was no need to issue this fresh notification as the liability of the Railway to pay that tax already existed under that notification of 1914.10. The second circumstance that we can take notice of is the historical background in which this notification of 26th July, 1917 was issued. It appears that, after the Rules for imposition of this consolidated tax came into force in 1916, the Municipality demanded payment of this consolidated tax from the G.I.P. Railway. Thereupon, the Agent of the G.I.P. Railway Company wrote a letter to the Secretary, Railway Board, Simla on the 1st December, 1916, stating that the Company did not agree that it should pay the new consolidated tax as it comprised a house tax and a water rate. The Company had its own arrangements for the supply of water and it was obviously unfair that it should be called upon to pay any tax which includes a water rate, when no municipal water was being consumed by the Railway at Lonavala The Secretary, Railway Board, forwarded this letter to the Secretary to the Government of Bombay, General Department, with a letter dated 12th December, 1916, enquiringwhether the Agents information was correct and, if so, whether the Bombay Government had any remarks to offer on the Agents contentions.On 11th May, 1917, the Secretary to the Government of Bombay replied to the Secretary, Railway Board, pointing out that, originally, the Municipality proposed to levy a general water rate on all houses, in addition to the existing house tax, but, on representations from property owners of Lonavala and Khandala it had decided to impose a consolidated rate on buildings and lands in lieu of the house-tax and the proposed general water rate Consequently, they were levying, in lieu of house-tax a consolidated rate, which included a general water rate, on sliding scale, on all properties situated within the municipal limits The water rate imposed was not intended to cover expenses on any service rendered in the nature of a general tax as opposed to a service tax. In equity, the Railway Companys property in Lonavala had no better right to exemption than the properties of private individuals who, although they did not take private pipe connections, were paying the general water rate. In the circumstances, a request was made to the Secretary, Railway Board, to move the Government of India to declare the Administration of the G.I.P. Railway liable to pay to the Lonavala Municipality the consolidated tax on buildings and lands in lieu of the house-tax in respect of the railway properties situated within the municipal limits. It was suggested that the Schedule annexed to the notification dated 13th May, 1914 may be amended accordingly. It was in pursuance of this move by the Bombay Government that the notification of 26th July, 1917 was issued by the Central Government. That the notification of 26th July, 191? was issued in pursuance of this correspondence is clarified by the Memorandum dated 17th August. 1917, with which a copy of the new notification was forwarded by the Government of India, Railway Department (Railway Board) to the Secretary to the Government of Bombay. These circumstances in which the notification of 26th July, 1917 was issued, make it plain that the Government of India, when they used the expression "tax on buildings and lands" in the notification. intended to make the G.I.P Railway liable to the consolidated tax which had been imposed by the Municipality under the Rules of 1916.11. The decision of the Bombay High Court in Borough Municipality, Ahmedabad v. Ahmedabad Manufacturing and Calico Printing Co. Ltd., AIR l939 Bom 478 on interpretation of sections 73 and 110 of the Act of 1925 also supports the view that we have taken above. The question that arose in that case was whether the right of an appeal envisaged by using the expression "in the case of a rate on buildings or lands or both" in section 110 could be availed of in respect of a general water rate imposed under clause (x) of section 73 (1) which described that tax as a general water rate imposed in the form of a rate assessed on buildings and lands. It was held that there was no distinction between a rate on buildings or lands and tax in the form of a rate assessed on buildings or lands.In the case before us, on that analogy, a consolidated tax assessed as a rate on buildings and lands cannot be distinguished from a tax on buildings and lands.12. Reference may also be made to a decision of the Allahabad High Court in Raza Buland Sugar Co., Ltd., Rampur v. Municipal Board, Rampur, AIR 1962 All 83  where it was held that a water rate is a tax on buildings and lands and is not, in fact, a service tax chargeable in respect of water supplied. Counsel for the appellant referred to a decision of the Madras High Court in Municipal Council, Cuddappah v. M. and S. Ry. Co. Ltd., AIR 1929 Mad 746 , but that case is of no assistance as it turned on the special language which had been used in the Act and the notification which came up for consideration in that case. In fact, the expression that had to be interpreted was "property tax" and not tax on buildings and lands". We agree with learned counsel for the appellant that such assistance cannot be derived from the decision of this Court in Patel Gordhandas Hargorvindas v. Municipal Commr. Ahmedabad (1964) 2 SCR 608  = (AIR 1963 SC 1742 ) which was relied upon by the High Court. However, as we have held above, on the proper interpretation of the language used in the two Acts, the Rules, and the notification. and taking into account the circumstances under which the notification of 1917 was issued, the only conclusion that can be arrived at is that the Railway was made liable to this consolidated tax, so that the decision of the High Court is perfectly correct.