Case: State Of Madhya Pradesh Vs. Bhopal Sugar Industries Ltd

1. Bhopal Sugar Industries Ltd.- hereinafter called "the Company-was incorporated under the Companies Act of the former Indian State of Bhopal. In 1953 the State of Bhopal which was then a Part C State under the Constitution of India enacted "The Bhopal State Agricultural Income-tax Act IX of 1953" providing for imposition and levy of tax on agricultural income. The Act was applied to the territory of the entire State of Bhopal and was brought into force on July 15, 1953.2. Bythe States Reorganisation Act, 1956 (No. 67 of 1956) territory of the Part C State of Bhopal was incorporated with effect from November 1, 1956, into the newly formed State of Madhya Pradesh. Section 119 of the State Reorganisation Act 1956 enacted that by the constitution of the reorganized State, no change in the laws in force which immediately before November 1, 1956, extended or applied to any constituent regions was effected and territorial references in the laws to an existing State shall, until otherwise provided by a competent Legislature or other competent authority be construed as meaning the territories within that State immediately before November 1, 1956. By the Madhya Pradesh Adaptation of Laws (State and Concurrent Subjects) Order, 1956, promulgated by the Government of the State, all laws in force in the regions which were newly incorporated into the reorganised State of Madhya Pradesh were with certain adaptations and modifications specified in the Order, to remain in force in those areas until altered repealed or amended, and by that Order the Bhopal Act IX of 1953 continued to remain applicable in the territory of the former Bhopal State, in the new State of Madhya Pradesh. Later the Legislature of the Madhya Pradesh State enacted the Madhya Pradesh Extension of Laws Act. 1958, extending several Acts-Central as well as State-to the entire territory of the State, but no alteration was made in the territorial operation of Bhopal Act IX of 1953. It is common ground that in the remaining territory of the State of Madhya Pradesh there was no law providing for levy of tax no agricultural income.3. The Company paid and continued to pay tax assessed under the Bhopal State Agricultural Income-tax Act, 1953, till some time in 1960. On authority 4, 1960, the Company presented a petition under Art. 226 of the Constitution in the High Court of Madhya Pradesh at Jabalpur for a writ declaring that Bhopal Act IX of 1953 was unconstitutional and void as being discriminatory and for appropriate directions, writs or orders restraining the State of Madhya Pradesh from giving effect to the Act. It was claimed by the Company that Bhopal Act IX of 1953 deprived the residents of the territory to which it applied of the protection of Art. 14 of the Constitution. The High Court upheld the plea of the Company and issued a writ restraining the State of Madhya Pradesh from enforcing the provisions of Bhopal Act IX of 1953, observing that the Act was "in clear contravention of the petitioners right under Art. 14 of the Constitution and must be declared void".

Reasoning:
9. In adjudging reasonableness of classification for the purpose of taxation, the Courts recognise greater freedom in the Legislature and if the statute discloses a permissible policy of taxation, the Court will uphold it. The Courts undoubtedly lean more readily in favour of the presumption of constitutionality of a taxing statute but that is not to say that they will not strike down a statute unless it appears that the tax was imposed deliberately with the object of differentiating between persons similarly circumstances. We may state that the observations to the contrary that in matters of taxation a statute may not be struck down "unless the Court finds that" the tax "has been imposed with a deliberate intention of differentiating between individual and individual" in 1962-2 SCR 619  was not strictly necessary for deciding that case, and was not intended to lay down nay special test applicable to taxing statutes in their relation to Art. 14 of thebe too strongly emphasized that to make out a case of denial of the equal protection of the laws under Art. 14 of the Constitution, a plea of differential treatment is by itself not sufficient. An applicant pleading that equal protection of the laws has been denied to him must make out that not only he had been treated differently form others but he had been so treated from persons similarly circumstanced without any reasonable basis, and such differential treatment is unjustifiably made. A mere plea that the Company and other agriculturists within the region of the former Bhopal State had to pay the agricultural income-tax whereas the agriculturists elsewhere had not to pay such tax, is not sufficient to make out a case of infringement of the fundamental right under Art. 14 of the Constitution.12. The State also did not place evidence before the High Court which would in the very nature of things be in its possession, showing a rational relation between the differential treatment and the classification and has also not placed any material before the Court throwing light on the question whether the continuance of the tax was justified: it merely chose to plead its case as on a demurrer. Both the State and the Company have by inadequate appreciation of the true position in law contributed to the manner in which the trial of the petition has proceeded. We would in the circumstances not be justified in dismissing the petition on a technical view of the burden of proof. We think that this is a case in which the parties should be given an opportunity to plead their respective cases adequately and to go to trial after the requisite evidence which has a bearing is brought before the Court.