Case: Raja Jagannath Baksh Singh Vs. The State Of Uttar Pradesh And Another

1. The petitioner Raja Jagannath Baksh Singh was a Taluqdar of Rehwan Estate in District Rai Bareli, Under the U. P. Zamindari Abolition and Land Reforms Act (U. P. Act I of 1951), the petitioners Zamindari property vested in the State Government, and the groves and other agricultural land were left with the petitioner as a Bhumidar under the said Act. In 1957, the U. P, Legislature passed the U. P. Large Land Holdings Tax Act (No. XXXI of 1957) (hereinafter called the Act) and under Section 7(2) of the Act the petitioner was served with a notice along with a provisional assessment of the annual value of the land in his possession for the year 1365 fasli. Similar notices were served on the petitioner subsequently for the years 1366 and 1367 fasli. In response to the said notices, the petitioner filed his returns and objected to the annual value of the land calculated by the assessing authority. After the petitioner received notices for the years 1365 and 1366 fasli, he filed a writ petition in the Allahabad High Court challenging the validity, of the said notices on the ground that the material provisions of the Act on which the said notices were based were ultra vires and unconstitutional. These writ petitions were numbered 3146 of 1958 and 1354 of 1959 in the said High Court. Several other writ petitions had also been filed by other assessees challenging the validity of the Act, and the whole group of these petitions was heard together by the Allahabad High Court. In substance, the pleas made by the petitioners challenging the validity of the Act were rejected by the High Court and it was held that the Act was valid and constitutional, vide Oudh Sugar Mills Ltd., Hargaon v. State of U. P. AIR 1960 All 136  . This decision was pronounced on the 12th of October, 1959.2. On the 22nd November, 1960, the petitioner filed three petitions in this Court under Art. 32 of the Constitution. These petitions were Nos. 325, 326 and 327 of 1960. These three petitions were directed against the notices served on the petitioner for the years 1365, 1366 and 1367 fasli respectively. Out of these petitions, the first two were dismissed on the ground that they were barred by Res Judicata. It is common ground that after the Allahabad High Court dismissed the petitioners writ petitions, he applied for and obtained a certificate from the said High Court to appeal to this Court, but he failed to deposit the necessary security for printing charges as required by the rules of the Allahabad High Court, and, in consequence, on the 9th August, 1960, the certificate granted to him was cancelled. That is how the two writ petitions which purported to challenge the validity of the notices served on the petitioner for the two years 1,365 and 1366 fasli were held to be barred by res judicata. On the petitioners writ petition No. 327 of 1960 which is concerned with the assessment for the year 1367 fasli, rule was ordered to be issued by this Court and it is on this rule that the present petition has come for final disposal before us today. This writ petition is confined to the assessment levied on the petitioner for the year 1367 fasli.

Reasoning: In considering the merits of this argument, it is necessary to bear in mind that we are interpreting the words used in the Constitution and it is an elementary cardinal rule of interpretation that the words used in the Constitution which confer legislative power must receive the most liberal construction and if they are words of wide amplitude, they must be interpreted so as to give effect to that amplitude. It would be out of place to put a narrow or restricted construction on words of wide amplitude in a Constitution. A general word used in an entry like the present one must be construed to extend to all ancillary or subsidiary matters which can fairly and reasonably be held to be included in it, vide, Navinchandra Mafatlal, Bombay v. Commr. of Income Tax, (S) AIR 1955 SC 58   at p. 61, and United Provinces v. Mt. Atiqa Begum, AIR 1941 FC 16 at p. 25. If this principle is borne in mind, it is obvious that the words "lands" cannot be interpreted in the manner suggested by Mr. Goyal. The word "lands" is wide enough to include all lands, whether agricultural or not, and it would be plainly unreasonable to assume that it includes non-agricultural lands but does not include agriculturalno doubt, is true; if the State Legislature purports to impose a tax on agricultural income, it would be referable to Entry 46 and not Entry 49 and in that sense, agricultural income is not covered by Entry 49. But it must be remembered that both Entries 46 and 49 are in List II and it would make no difference whether the State legislation imposing taxes on agricultural income is sustained by reference to Entry 46 rather than by reference to Entry 49. Therefore, the fact that agricultural income having been specifically provided by Entry 46 cannot be deemed to be included in Entry 49, does not justify the argument that the word "lands" in the latter Entry does not include agriculturalargument is entirely fallacious. The three Entries in which agricultural land has been specifically mentioned clearly indicate that agricultural land had to be included from their purview and so, it was necessary to describe the land as agricultural land in the context. The fact that the necessity of the context required the use of the expression agricultural land in the said 3 Entries, cannot possibly lead to the conclusion that wherever the word land is used, it should mean non-agricultural land. We have, therefore, no hesitation in rejecting the argument that Entry 49 in List II does not take in agricultural lands. If agricultural lands are included in the said Entry, the validity of the Act would be beyond challenge, as in substance and in fact, it imposes a tax on land holding and as such, is within the competence of the State Legislature. As we have already seen, the scheme of the Act is to impose a tax on land holdings, though the measure of the tax has to be determined by its annual value as is ascertained in the manner prescribed by section 5. The object of the tax is land holding and the extent of the tax leviable is determined in the light of the annual value of the land. Thus there can be no doubt that the Act was within the legislative competence of the U. P. Legislature and so, the challenge to its validity on the ground that it has been passed without legislative competence must beargument proceeds on the assumption that S.5(1) imposes an obligation on the State Government to adopt different multiples in different districts and in reference to different classes of land included in the land holding. Mr. Goyal suggests that when S. 5(1) provides that the rent may be multiplied by such multiple not exceeding 12 1/2 as may be prescribed and different multiples may be prescribed for different districts or portions of districts or for different classes of land included in a land holding, the Legislature intended that different multiples must be prescribed as therein indicated. In other words, "may" in the context means "must" and since different multiples have not been prescribed for different districts and in reference to different classes of land, the multiple value of the petitioners land holding cannot be determined under the uniform multiple prescribed by the State Government. In our opinion, there is no substance in this argument. It is quite clear that the word "may" in the context cannot mean "shall" or "must". Section 5(1) has prescribed the maximum limits of the multiple which may be adopted and it has left it to the discretion of the State Government to adopt such multiple for different districts or by reference to different classes of land as it may deem proper. In other words, having prescribed the maximum beyond which the multiple will not go, discretion has been left to the State Government to make suitable adjustments according to the requirements of local conditions and varying qualities of lands.14. In fact, the notification issued by the State Government on the 23rd April, 1958, shows that it has complied with the provisions of S. 5(1). Under this notification, the multiple of 12 1/2 has been fixed for determining the annual value throughout U. P. for agricultural lands, but in respect of different kinds of groves planted before 1st July, 1957, the multiple is prescribed at 5 for the whole of the State. Then there is a variation made in respect of Kumaun Division and the district of Tehri-Garhwal. In respect of groves planted on or after the 1st July, 1957, the multiple is prescribed at 4 for the 1st year, 2 for the second year and nil for the 3rd and subsequent years. The notification further provides for reduced multiples as specified in it in respect of banjar or user land newly brought under cultivation subject to the conditions therein specified. It would thus be seen that in prescribing the multiple, the State Government has classified lands and has varied the multiple accordingly. Therefore, there can be no doubt that the notification issued by the State Government under S. 5(1) has complied with the statutory requirements prescribedit must now be taken to be settled that the validity of a tax law can be challenged on the ground that it infringes one or the other of the fundamental rights guaranteed by Part III, and so, the argument that the tax with which we are concerned is invalid because it offends against Arts. 14 and 19(1)(f), cannot be rejected as inadmissible.16. A taxing statute can be held to contravene Article 14 if it purports to impose on the same class of property similarly situated an incidence of taxation which leads to obvious inequality. There is no doubt that it is for the Legislature to decide on what objects to levy what rate of tax and it is not for the Courts to consider whether some other objects should have been taxed or whether a different rate should have been prescribed for the tax. It is also true that the legislature is competent to classify persons or properties into different categories and tax them differently, and if the classification thus made is rational, the taxing statute cannot be challenged merely because different rates of taxation are prescribed for different categories of persons or objects. But, if in its operation, any taxing statute is found to contravene Art. 14, it would be open to Courts to strike it down as denying to the citizens the equality before the law guaranteed by Art. 14.17. Similarly, if a taxing statute makes no specific provision about the machinery to recover tax and the procedure to make the assessment of the tax and leaves it entirely to the executive to devise such machinery as it thinks fit and to prescribe such procedure as appears to it to be fair, an occasion may arise for the Courts to consider whether the failure to provide for a machinery and to prescribe a procedure does not tend to make the imposition of the tax an unreasonable restriction within the meaning of Article 19(5). An imposition of tax which in the absence of a prescribed machinery and the prescribed procedure would partake of the character of a purely administrative affair can, in a proper sense, be challenged as contravening Art. 19(1)(f). Therefore, whenever the validity of a taxing statute is challenged on the ground that it contravenes Art. 14 or Art, 19, the challenge cannot be thrown out on the preliminary ground that a tax law is beyond such challenge, but its merits must be carefully examined.18. The position,, however, is different when the challenge is made on the ground that the Act is inconsistent with Art. 31. So far as Art, 31(l) is concerned, all that it requires is that no person can be deprived of his property save by authority of law, and as we have just observed, the authority of law postulated by Art. 31(1) is obviously the authority of a valid law. If the law is not valid because it offends against Art. 14 or Art. 19 or some other fundamental right guaranteed by Part III, then the imposition of tax levied by it cannot be said to meet the requirements of Art. 31(1). But if the Act in question is otherwise valid, then the Art, 131(1) is complied with. Article 31(2) would be inapplicable to a taxing statute because the taxing statute does not purport to acquire or requisition any property. It may be that the imposition of the tax levied by the statute is excessive and may ultimately lead to the loss of the assessees property, but even so, it cannot be said that by virtue of the Act, the property has been acquired or requisitioned. Article 31(2A) clearly brings out the limits of the application of Art. 31(2). Similarly, Art. 31(5)(b)(i) specifically provides that nothing in cl. (2) shall affect the provisions of any law which the State may hereafter make for the purpose of imposing or levying any tax or penalty. Thus, it is clear that the provisions of Art. 31(2) cannot be invoked in impeaching the validity of a taxing statute and so, we come back to the position that a taxing law which does not offend against any of the fundamental rights guaranteed by Part III, would justify the imposition of a tax and would meet the requirements of Art. 31(1). Therefore, in our opinion the challenge to the validity of the Act on the ground that it contravenes Art. 31(2) is not wellare not impressed by this argument. It is clear that the policy of the Act is to augment the revenues of the State and for that purpose, the tax has been levied on land holdings, subject to the important proviso that holdings the area whereof does not exceed thirty acres would not be taxed. In other words, it is only big holders whose land holdings are subjected to tax by this Act. Even so, the basis adopted for levying the tax is ultimately the rent payable for the land or lands in question and taking the basis of the said rent, the annual value of the land is required to be determined by adopting a suitable multiple. Section 5(1) prescribes the maximum limit of this multiple and leaves it to the discretion of the State Government to adjust the multiple as local conditions and conditions of land may require. It would obviously not have been practicable for the Legislature to provide for different multiples in respect of different districts or in regard to different classes of lands. Having laid down the general policy in that behalf, the Legislature naturally left the adjustment of the multiple to the discretion of the State Government because the said adjustment had to be made in the light of local conditions and by reference to the class of the land. Therefore, we do not think that the discretion left to the State Government can be said to be unfettered or uncanalised so as to amount to an unreasonable restriction as contended by Mr. Goyal; as we have already pointed out the notification issued by the State Government prescribing the multiple has clearly complied with the requirement of S. 5(1). We must accordingly hold that the challenge to the validity of S. 5(1) on the ground that it contravenes Articles 14 and 19(1)(f) must5(1) makes it clear that the rent is to be taken as the basis for fixing the annual value and S. 5(2) provides for the method of calculating the said rent. Thus, the rent being determined, the annual value has to be ascertained by adopting a suitable multiple and it is on the annual value thus determined that the schedule prescribes a grading scale of rates for Holding Tax. The tax being on land holding, the measure of the tax is thus fixed in the light of the annual value of the land holding. In other words, the land holding is taxed on the basis of its annual value and it is difficult to understand how the Schedule can be successfully challenged as being inconsistent with Arts. 14 and 19(1)have already seen that the provisions of Art. 31(2) cannot be invoked in challenging the validity of a taxing statute on the ground that the tax levied is unreasonably high and we have also noticed that if the taxing statute does not contravene any other fundamental right guaranteed by Part III, it would normally be treated as a valid law by whose authority tax can be collected without infringing Art. 31(1). Though the validity of a taxing statute cannot be challenged merely on the ground that it imposes an unreasonably high burden, it does not follow that a taxing statute, cannot be challenged on the ground that it is a colourable piece of legistion and as such, is a fraud on the legislative power conferred on the Legislature in question. If, in fact, it is shown that the Act which purports to be a taxing Act is colourable exercise of the legislative power of the Legislature then that would be an independent ground on which the Act can be sturck down. Colourable exercise of legislative power is not a legitimate exercise of the said power and as such, it may be open to challenge. But such a challenge can succeed not merely by showing that the tax levied is unreasonably high or excessive but by proving other relevant circumstances which justify the conclusion that the statute is colourable and as such, amounts to a fraud.The allegations thus made by the petitioner have been denied by the respondents in their counter-affidavit. The calculations made in the counter-affidavit show that the gross income of the petitioner is Rs. 1,07,362. According to the counter-affidavit, cost of cultivation would not exceed 40 per cent, and that amounts to about Rs. 42,000. Deducting this total cost of cultivation from the gross income, the petitioner would be left with a net income of Rs. 65,362 and on this net income of Rupees 65,362 he is called upon to pay a tax of Rs. 14,882/86nP.If the facts stated in the counter-affidavit are accepted as true, it is obvious that the tax imposed on the petitioner cannot by any stretch of imagination be deemed to be confisatory.25. In this connection, it is significant that in his amendment petition, the petitioner has not stated the extent of the rent which he is required to pay for his land holdings. He holds the lands as Bhumidar and the respondents contend that the rent recovered from Bhumidars is very low. It was even suggested during the course of argument by Mr. Aggarwal that the rent recovered from the Bhumidars would not exceed 1 per cent of the gross income and in some cases, it may even be less. Unfortunately, the petitioner has not made any statement about this important particular. The operation of the rates prescribed by the Schedule is based on the annual valuation of the lands, and the said valuation is determined ultimately on the basis of the rent, so that unless the rent is known, the extent of the impost cannot be adequately judged. Therefore, in our opinion, on the material adduced by the petitioner before us, it is impossible to accept the argument that the tax levied by the Act is confiscatory. Besides, as we have already seen, the scheme of the present Act does not disclose any constitutional infirmity either in its charging sections or in the sections providing for the procedure for the levy of the tax and its recovery. That is why we feel no hesitation in holding that there is no substance in the plea that the Act is a colourable piece of legislation.