Case ID: 1208

Judgment:
Appeal No.180 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 132(l) and 133(l)(c) 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) L.R. 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. 107(2) 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	 1941	(16 of 1941)	 which received the assent of the Governor Genera I on June (1) (1940) N.L.J. 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 16	1949	 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	 C.J. 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) A.I.R. (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 Dusadh	v. 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	 1939;and 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. 80A(3)(a) 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 A(2) 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 A(2) 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] F.C . R. 61	 referred to.