Case: The Municipal Council, Madurai Vs. R. Narayanan Etc

shall be used as a market. Such resolution clearly affects land within the jurisdiction of the board and on the passing of such a resolution the board gets the further power to issue licences for holding of markets on lands within its jurisdiction by a resolution and also the power to impose an annual tax thereon." (p.49) x x ".x x x x x"..s. 62(2) which used the words impose an annual tax thereon, clearly shows that the word thereon refers to any land for which a licence is issued for used as a market and not to the word market. Thus the tax in the present case being on land would clearly be within the competence of the state legislature." (p.5l)Generously following the line of thinking presented by Shri Chellaswamy, based on Ajoy Kumar (supra) we find difficulty in applying its ratio to s. 321 (2). There the tax was on land and the expression thereon underscores this idea. Once the tax is on land, the link between the tax and the land-user like running a market or hotel based on the let ting value is good, but in the p resent case there is nothing to indicate that it is a tax at all. Secondly, the phraseology does not suggest that it is a tax on the land or the building., on the other hand. it is on the licence-fee for plying a particular trade. It is not possible to blink at this vital distinction between Ajoy Kumar (supra) and the present case. Maybe that the Madurai Municipality is perfectly within its competence in imposing a property tax at any particular rate it chooses. The user of the land or building as a restaurant or hotel being the link as explained above, the fact that there is a tax on all property within the municipality does not mean that this local body cannot levy an additional tax or surcharge on the land or building if put to a particular specialist use. We see no impediment in the municipal authority taxing hotels at a certain rate exercising its power to impose property tax provided there are no other legal impediements in the way. We are not pursuing the existence or otherwise of other impediments because that does not fall for our consideration in this case.11. Shri A.. K. Sen is right is his submission that unlike in the Assam Act considered in Ajoy Kumar (supra) in the present case we do not even find the expression tax used.12. The Municipal resolution might have been saved had we been able to spell out a taxing power on property from s.321 (2) of the Act. For, there is no gainsaying the states right to tax land and buildings an d the nexus between the tax and the power may be land use. Since A running a restaurant or cinema house is clearly a use of building, a tax thereon, based on such user, is constitutionally impeccable. Such is not the case here.Thus the plea that s. 321 (2) lends itself to being regarded as a tax, indifferently described as fee, breaks down for two reasons. When the Legislature has carefully provided in s.78 (3) for previous invitation and consideration of objections to enhancement of tax levies, resort to the device of tax disguised as fee, under s.321 (2), may not require any such procedural fairness and discipline and thus will frustrate the processual protection written into the law in regard to fiscal measures. Secondly, Schedule V, with which s.321 is directly linked, sets out a host of petty and lucrative ventures all of which, theoretically, cannot be carried on except on land or buildings. Can it be that some flimsy or casual connection with terra firma will furnish the legal nexus between the tax imposed and the land on which the work is done ? For example, washing soiled clothes is an item in Schedule V. It is straining judicial credulity to snapping point to say that such trivial user justifies a tax on the land when washing is done. Running a hotel or market or permanent circus or theatre may stand on a different footing. The commonsense of the common man is the best legal consultant in many cases and eschewal of hyper-technical and over-sophisticated legal niceties helps the vision. We cannot list out what, in law, will serve as a nexus between land and tax thereon but, in a given case like in a hotel business, land-use may easily be discerned. The snag is that in the present appeals the levy is not on land but on the licence for business and bearing in mind the identity of the legal concept, we reject the contention that the impugned resolution was an innocent tax on proper ty. The case falls between two stools. It is not a fee ex concessionis it is not a tax ex facie. We further repel the request to read licence-fee in s. 321 (2) as land tax into every item of activity set out in Schedule V, from washing soiled clothes on a broad stone to using a central place as a posh restaurant.The cumulative result of the multiple submissions we have been addressed is that the impugned resolution is invalid. We do not bar the door for the Municipality or the State to pursue other ways to tax hotel-keepers, acting according to law and under the power to tax in Entry 49, List II, of the Seventh Schedule, while dismissing the Appeals13. The legal controversy in this case is stricken with more than marginal obscurity and indeed, has exercised our minds on the diverse aspects of law considerably. Moreover, the battle is between a local authority which is in need of financial resources to fulfill its functions and a host of hoteliers who flourish in private business. Bearing in mind the conspectus of circumstances, we regard this case as one where the proper order will be that parties do bear their own costs throughout.

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

Explanation:
0[ds]7. It is this provision of the Calcutta Act (s. 548) which fell for construction before this Court in Liberty Cinema (supra). While one may discern a broad scheme in that Act, there is some wobbling in the sense that a power to tax is oddly placed in a Chapter primarily concerned with licences and permissions. The Madras Act, on the other hand, speaks with more precision and relegates licences and licence fees to a Part different from Taxation and Finance. The procedure for each is also delineated separately. For these reasons we refuse to aceede to the contention that fee in s. 321 (2) is awe do not rest our conclusion solely on the location of s. 321 in a different Part from Taxation, while we recognise it as an indicator, among a variety of considerations of course, when drafting precision is absent, judicial caution has to befollowing the line of thinking presented by Shri Chellaswamy, based on Ajoy Kumar (supra) we find difficulty in applying its ratio to s. 321 (2). There the tax was on land and the expression thereon underscores this idea. Once the tax is on land, the link between the tax and thelike running a market or hotel based on the let ting value is good, but in the p resent case there is nothing to indicate that it is a tax at all. Secondly, the phraseology does not suggest that it is a tax on the land or the building., on the other hand. it is on thefor plying a particular trade. It is not possible to blink at this vital distinction between Ajoy Kumar (supra) and the present case. Maybe that the Madurai Municipality is perfectly within its competence in imposing a property tax at any particular rate it chooses. The user of the land or building as a restaurant or hotel being the link as explained above, the fact that there is a tax on all property within the municipality does not mean that this local body cannot levy an additional tax or surcharge on the land or building if put to a particular specialist use. We see no impediment in the municipal authority taxing hotels at a certain rate exercising its power to impose property tax provided there are no other legal impediements in the way. We are not pursuing the existence or otherwise of other impediments because that does not fall for our consideration in this case.11. Shri A.. K. Sen is right is his submission that unlike in the Assam Act considered in Ajoy Kumar (supra) in the present case we do not even find the expression tax used.The Municipal resolution might have been saved had we been able to spell out a taxing power on property from s.321 (2) of the Act. For, there is no gainsaying the states right to tax land and buildings an d the nexus between the tax and the power may be land use. Since A running a restaurant or cinema house is clearly a use of building, a tax thereon, based on such user, is constitutionally impeccable. Such is not the case here.Thus the plea that s. 321 (2) lends itself to being regarded as a tax, indifferently described as fee, breaks down for two reasons. When the Legislature has carefully provided in s.78 (3) for previous invitation and consideration of objections to enhancement of tax levies, resort to the device of tax disguised as fee, under s.321 (2), may not require any such procedural fairness and discipline and thus will frustrate the processual protection written into the law in regard to fiscal measures. Secondly, Schedule V, with which s.321 is directly linked, sets out a host of petty and lucrative ventures all of which, theoretically, cannot be carried on except on land or buildings. Can it be that some flimsy or casual connection with terra firma will furnish the legal nexus between the tax imposed and the land on which the work is done ? For example, washing soiled clothes is an item in Schedule V. It is straining judicial credulity to snapping point to say that such trivial user justifies a tax on the land when washing is done. Running a hotel or market or permanent circus or theatre may stand on a different footing. The commonsense of the common man is the best legal consultant in many cases and eschewal ofed legal niceties helps the vision. We cannot list out what, in law, will serve as a nexus between land and tax thereon but, in a given case like in a hotel business,may easily be discerned. The snag is that in the present appeals the levy is not on land but on the licence for business and bearing in mind the identity of the legal concept, we reject the contention that the impugned resolution was an innocent tax on proper ty. The case falls between two stools. It is not a fee ex concessionis it is not a tax ex facie. We further repel the request to readin s. 321 (2) as land tax into every item of activity set out in Schedule V, from washing soiled clothes on a broad stone to using a central place as a posh restaurant.The cumulative result of the multiple submissions we have been addressed is that the impugned resolution is invalid. We do not bar the door for the Municipality or the State to pursue other ways to taxacting according to law and under the power to tax in Entry 49, List II, of the Seventh Schedule, while dismissing the Appeals13. The legal controversy in this case is stricken with more than marginal obscurity and indeed, has exercised our minds on the diverse aspects of law considerably. Moreover, the battle is between a local authority which is in need of financial resources to fulfill its functions and a host of hoteliers who flourish in private business. Bearing in mind the conspectus of circumstances, we regard this case as one where the proper order will be that parties do bear their own coststhis contention, this Court held that the use to which the land was put furnished sufficient nexus for the Legislature to impose a tax on land. In that connection, the following observations lay down theed that the entries in the three legislative lists have to be interpreted in their widest amplitude and there fore if a tax can reasonably be held to be a tax on land it will come within entry 49. Further it is equallythat tax on land may be based on the annual value of the land and would still be a tax on land and would not be beyond the com petence of the State legislature on the ground that it is a tax on income: (See Ralla Ram v. The province of East Punjab: (1948 FCR 207). It follows therefore that the use to which the land is put can be taken into account in imposing a tax on it within the meaning of entry 49 of List II, for the annual value of land which can certainly be taken into account in imposing a tax for the purpose of this entry would necessarily depend upon the use to which the land is put." (p. 49).