judgement:
Appeal No. 580 of 1962.
Appeal from the judgment and decree dated May 1, 1961, of the Madras High Court in Writ Petition No. 975 of 1959.
R.M. Seshadri.
and R. Gopalakrishnan, for the appellant.
R. Ganapathy lyer, for respondent No. 1.
A. Ranganadham Chetty and A. V. Rangam, for respondent No. 2.
March 3, 1964.
The Judgment of the Court was delivered by AYYANGAR, J.
This appeal comes before us by virtue of a certificate of fitness granted by the High Court of Madras under article 133(1)(c) of the Constitution against its judgment dismissing a petition filed by the appellant under article 226 of the Constitution seeking a writ of prohibition against the Corporation of Madras challenging the constitutional validity.
of a notice requiring the appellant to pay profession tax.
The appellant held office as the last Governor General of India.
Under section 3 of Central Act XXX of 1951 the appellant is entitled to a pension of Rs. 15,000/ per annum and has been drawing this sum residing in the city of Madras.
The Corporation of Madras the first respondent before us demanded profession tax from the appellant under section 111(1)(b) of the City Municipal Act, 1919 hereinafter called the Act for the year 1958 1959 on the ground of the appellant 's residence within the city for the period therein specified and his drawing the pension to which he was entitled.
The appellant addressed a communication to the Corporation asserting that this demand was illegal as the Corporation was empowered by the relevant constitutional provisions merely to levy a tax "on a profession, 965 trade, calling or employment" and that as he as a pensioner did not fall under any of these classes, the said demand was illegal.
The authorities of the Corporation, however, insisted on compliance with the demand on the ground that under the express terms of the Act persons in receipt of pensions were also liable to the tax.
The appellant thereupon filed a writ petition for the relief already set out, and as the validity of the State Act was impugned impleaded the State of Madras also as a respondent.
It would be seen from the foregoing that the question for consideration is whether the 1st respondent Corporation is entitled to levy a tax on pensioners in respect of the pensions received by them.
In order to appreciate the submissions made to us by learned Counsel for the appellant it would be necessary to set out the history of the legislation in relation to profession tax and the impugned tax on persons in receipt of pensions applicable to the City of Madras because it is on a construction of these provisions that the learned Judges of the High Court have upheld the validity of the levy and dismissed the appellant 's writ petition.
For this purpose it is not necessary to travel to any period anterior to the enactment of the Madras City Municipal Act (Madras Act IV of 1919) which with certain amendments to be referred to presently is still in force.
The Act received the assent of the Governor on March 26, 1919, of the Governor General in June, 1919 and came into force on publication in the Gazette which was in the same month.
Having been enacted while the powers of the Local Legislatures were governed by the Government of India Act, 1915, the constitutional validity of the legislation is not open to any challenge.
Section 111(1 of this enactment ran "Every person not liable for the companies ' tax.
who, within the city and for the period prescribed in Sec. 113, exercises a profession, art, trade or calling or holds an appointment, public or private, bringing him within one or more of the classes of persons specified in the taxation rules in Schedule IV shall pay by way of licence fee and in addition to any other licence fee 966 that may be leviable under this Act a tax as determined under the said rules but in no case exceeding rupees five hundred in the half year and such tax may be described as the profession tax.
" The Section had two explanations of which the second is material and this reads: Explanation 2 "A person in receipt of a pension paid from any source shall be deemed to be a person holding an appointment within the meaning of this section. ' The next change in the relevant provision was effected by Madras City Municipal Amendment Act, 193,6 (Madras Act X of 1936) which came into force on 14th April 1936.
By this amendment a new section section
III was substituted ,for the old one just set out, and under this Explanation (2) was deleted and the substituted provision ran : "III(1).
If the Council by a resolution determines that a profession tax shall be levied, every person not liable to the tax, on companies, who after the date specified in the notice published under sub sec.
(2) of Sec.
98 A in any half year (a) exercises a profession , art or calling or transacts business or holds any appointment, public or private (i) within the city for not less than sixty days in the aggregate, or (ii) outside the city but who resides in the city for not less than sixty days in the aggregate; or (b) resides in the city for not less than sixty days in the aggregate and is in receipt of any pension or income from investments, shall pay in addition to any licence fee that may 967 be leviable under this Act, a half yearly tax assessed in accordance with the rules in Schedule IV in no case exceeding rupees five, hundred.
" Along with this was added a new section section
98 A which ran : Sec. 98 A(1): "Before the council passes any resolution imposing a tax or duty for the first time it shall direct the Commissioner to publish a notice in the Fort St. George Gazette and in the local papers of its intention and fix a reasonable period not being less than one month from the date of publication of such notice in the Fort St. George Gazette for submission of objections.
The Council may, after considering the objections, if any, received within the period specified, determine by resolution to levy the tax or duty.
Such resolution shall specify the rate at which, the date from which and the period of levy, if any, for which such tax or duty shall be levied.
When the Council shall have determined to levy any tax or duty for the first time or at a new rate the Commissioner shall forthwith publish a notice in the manner laid down in sub section (1) specifying the date from which the rate at which and the period of levy, if any, for which such tax or duty shall be levied.
" At this stage it is necessary to refer to Schedule IV in accordance with which the tax has to be assessed under the terms of section 111(1).
In the Act as enacted in 1919 the relevant rule in Schedule IV divided persons assessed to profession tax etc.
into 8 classes, based upon the amount of ,monthly salary received in the case of those holding appointments, and income derived in the case of those in trade, art calling etc.
Each of these classes was again sub divided ,into two the first sub class comprising "Persons holding appointments upon a monthly salary" and the other of 968 "persons exercising any profession, trade, art, calling or transacting business".
It would be seen that having regard to Explanation 2 to section 111, as it stood in 1919, before its amendment by Act X of 1936 by reason of the provision which enacted that "persons in receipt of pension" were deemed to be "persons holding appointments" when the rule in Schedule IV referred to "persons holding appointments" it included by the statutory fiction pensioners who on the basis of the amount of pension which they derived were classified as "persons holding appointments" under the various classes.
But when this Explanation to section Ill was deleted by the Amending Act X of 1936 and when the new section 111,(1)(b) referred to the "half yearly tax assessed in accordance with rules in Schedule IV, it was urged that there could not have been an assessment of persons in receipt of pension unless they could be comprehended as within the category of persons holding appointments, or of persons exercising any profession, trade, or art or calling",as these were the only classes relevant to the present purpose who were within the scope of the rules under Schedule IV.
We shall refer to the submission based on this feature as regards the terminology employed in Schedule IV in its proper place.
The Corporation of Madras availed itself of the provisions of section 98 A and after the issue of the notices prescribed by it passed a resolution at a meeting held on March 31, 1937 to levy inter alia "profession tax" for the year 1937 38 at the rates which were specified in the resolution.
As regards "profession tax", the resolution read : "Resolved that the profession tax in respect of clauses 1, 2, 3, 4, 5 and 6 be fixed at the maximum rate and 25 per cent over and above the minimum rates prescribed in Schedule IV of the Act in respect of clauses 7, 8 and 9." This resolution further specified that the tax at the rates therein set out which were higher 'than what prevailed before, were to have effect from April 1, 1937.
Notwith standing the apparent inapplicability of the rules in Schedule IV to the levy of profession tax on pensioners, the Corporation continued to assess pensioners to the said tax and 969 collected the same.
The lacuna in the enactment was Apparently noticed in 1942 when by a notification in the Official gazette the Schedule was amended in exercise of the powers conferred on Government by section 347(3) of the Act.
Under the amendment instead of the words "Persons holding any appointment or persons exercising profession, trade or calling etc. "the classes 'Were divided, on the basis of "the half yearly income received by the individual specified in section 111(1)".
This amendment to the Schedule was directed to come into force from April 1, 1942.
The relevant terms of Schedule IV have continued up to date in the same from as amended in 1942 only the rate of tax has been progressively increased; first in 1950, then in 1958 and again in 1961, but in the view we take of the principal contention raised by the appellant it is not necessary to set out or deal with these increases.
Pausing here the ground upon which the demand for "profession tax" made by the Corporation was impugned may be briefly stated.
The power of the Corporation to levy the tax is dependent on the subject of the tax being within State legislative power under the Constitution.
The relevant 'entry in the Legislative Lists conferring taxing power on the State under which alone, if possible, the present levy could be supported was item 60 in the State List in Schedule VII of the Constitution reading: "Taxes on profession, trades, callings and ' employments.
" Being a "pensioner" cannot be a "profession, trade, business or calling", nor could a tax on a person because he is in receipt of a pension be said to be a tax on "employments".
The tax therefore under the last portion of section 111(1)(b) reading Profession tax on persons "in receipt of any pension or income from investments" is nothing but a tax on income falling within Entry 82 of the Union list.
If, therefore, the Corporation could not justify the tax as being within the State legislative power the only manner in which it could be done would be by reference to article 277 of the Constitution by which "taxes, duties, etc." ' which "were being lawfully levied" prior to the commencement of the 970 Constitution were permitted to be levied "notwithstanding that the tax was in the Union List" and "to be applied to the same purposes" as before.
Unless therefore the Corporation could make out that the tax now impugned was being lawfully levied from before the Constitution the levy would be illegal and besides there was the complication introduced by the enhancement of the rates of tax which, as stated earlier, were effected in April, 1950, April 1958 and in 1961.
Leaving aside for the moment the question of the effect of the enhancement of the rate, we have to see whether it has been established that the duty was lawfully levied by the Corporation prior to the Constitution.
The answer to the question whether it was "lawfully levied" prior to 26th January, 1950 when the Constitution came into force would depend upon the effect of certain provisions of the Government of India Act, 1935.
Under that enactment, as under the Constitution, the State legislative power as regards taxes of the nature now in controversy was couched in terms identical with that employed in entry 60 of the State List in the Constitution.
Entry 46 in the Provincial Legislative List under the Government of India Act, 1935 ran: "Taxes on profession, trades, callings and employments" : and "taxes on income" fell within the exclusive Federal 'Legislative power under Entry 54 of List I.
By the Indo Burma Miscellaneous Provisions Act, 1940 the Parliament of the U.K. enacted section 142 A to whose terms we shall advert later and by the same enactment entry 46 was amended and the words : "Subject, however, to the provisions of section 142 A" were added at the end of entry 46.
Here, again, it would be seen that if the right of the Corporation to levy profession tax on the pension received by a pensioner had to rest on the legislative entries it would fail because it was ,outside the legislative power of the Province under the Lists read with section 100 of that Act corresponding, to article 246 of the Constitution.
The validity of the levy during the period when the Government of India Act was in force i.e. between 1st April, 1937 and 25th January, 1950 was dependent on 971 its falling within the saving contained in section 143 (2) of the Government of India Act which ran : "Any taxes, duties, cesses or fees which, immediately before the commencement of Part III of this Act, were being lawfully levied by any Provincial Government, municipality or other local authority or body for the purposes of the Province, municipality, district or other local area under a law in force on the first day of January, nineteen hundred and thirty five, may, notwithstanding that those taxes, duties, cesses or fees are mentioned in the Federal Legislative List, continue to be levied and to be applied to the same purposes until provision to the contrary is made by the Federal Legislature." No doubt the Amending Act was not in force on 1st January, 1935 having been passed in April 1936, but this would not take it out of section 143 (2) because para.3 of the Indo Burma (Transitory Provisions) Order, 1937, being an Order in Council by His Majesty in Council authorised by section 310 of the Government of India Act, provided : "Para 3(1): For a period of two years from the commencement of Part III of the Indian Act, the provisions of subsection (2) of section one hundred and forty three of that Act (which authorises the continuance until provision to the contrary is made by the Federal Legislature, of certain provincial taxes falling within the Federal List) shall have effect as if the reference to the first of January nineteen hundred and thirty five were a reference to the commencement of the said Part Ill." It would follow, therefore, that for the present demand to be sustained as valid it would be sufficient if it was shown that the tax was lawfully levied immediately prior to the commencement of Part III of the Government of India Act, 1935, i.e., on 31st March, 1937.
The learned Judges of the High Court held that this condition was satisfied and on this basis they have dismissed the appellant 's petition.
972 Learned Counsel for the appellant submitted four points in support of the appeal : (1) That the amending Act X of 1936 Was not validly passed by reason of its contravening the Devolution Rules framed under section 45 A of the Government of India Act, 1919 by which Local Governments were given legislative power inter alia to levy taxes on professions, trades, etc.
but that the present tax which is really a "tax on income" was a Central subject outside the competence of the Local Legislature, (2) Even assuming that Act X of 1936 was valid, the tax which was permitted to be levied under it was, having regard to the terms of section 111 ( 1 ) a new tax which was levied for the first time by the resolution of the Corporation only on and from April 1, 1937 and, therefore, the present tax was not in operation prior to the commencement of Part III of the Government of India Act, 1935 and not therefore saved by section 143(2) of that Act, (3) Besides, between 1st April, 1937 to 1st April, 1942 it was not lawfully levied by reason of the lacuna created by the words of the rules in Schedule IV being inapplicable to the levy of a tax on pensioners, (4) The increase.
in the rates from 1937 onwards could not be justified even under section 143 (2) or article 277 and by reason of these changes in rates the tax became virtually a new tax and could not continue to be lawfully levied to any extent after the increases.
The first point need not detain us long.
Prima facie it would seem that there being no rigid distribution of legis lative power between the Central and Local Governments under the Government of India Act, 1919 any infraction of the rules made under the Devolution Rules framed under section 45 A would be validated by section 80 A(3) and section 84(2) of the Government of India Act, 1919.
The learned Judges of the High Court before whom this contention was urged rejected it, and the learned counsel submitted that the decision on this point was not correct.
But in the view that we took of the other submissions made to us, we did not hear learned counsel fully on this point and therefore do not propose to express any final opinion on the tenability of the argument on this head.
973 As preliminary to the consideration of the second point it would be necessary to advert to one feature of the change effected by the Amending Act of 1936 to the tax levy.
Under section 111, as it originally stood, the liability to pay the tax, i.e., the charge for the tax, was imposed by virtue of the statute itself, on persons who for the period prescribed "exercised a profession or trade or calling or held an appointment", persons in receipt of pensions being deemed to be persons holding appointments.
This structure as regards the imposition of liability was altered by the Amending Act.
Under the provision, as recast, before a liability to pay the tax could arise the Council had to determine by a resolution that profession tax shall be levied and it was only that resolution which brought the charge into operation.
Thus, the resolution of the Council was substi tuted for the statute itself as the mode by which the charge was to be imposed.
There was also a second change that was introduced by rendering residence for six months within the city, besides the receipt of pension in the city, a necessary ingredient of the chargeability of the "profession tax" on pensioners.
The effect of these two changes now calls for consideration.
On the amendment of section Ill by the Act of 1935 coming into force in April 1936, the statutory imposition of the charge to tax laid on persons in receipt of pensions within the city of Madras ceased, and the liability to tax as regards the period after that date was dependent on the passing of a resolution by the Council in terms of the amended section III( 1 ) of the Act.
In this con nection it has to be pointed out that though recourse to the procedure as respects previous publication etc.
prescribed by section 98 A was necessary only in the case of taxes newly levied, and might have been adopted in the present case because of the enhancement of the rates, still, a resolution ,of the Council was necessary to impose the tax as without it, no liability to profession tax would arise.
The charge to tax was imposed, as stated earlier by the resolution of the Council which was to have effect from April 1, 1937.
In other words by reason of the repeal of the original section III, the statutory charge to tax on pensions ceased in April 1936.
A charge was imposed again under the resolution of the Council effective from 1st April, 1937, so that 974 between April 1936 to 31st March, 1937, no charge was imposed by virtue of any "law".
Learned Counsel for the Appellant submits that this is in effect a new levy a levy of a tax which was not legally in existence on 31st March, 1937, and if this levy could not be supported as being sanctioned by section 143(2) of the Government of India Act, 1935, it is common ground that the lawfulness of the levy cannot be sustained.
We consider this submission well founded.
If the statutory charge to profession tax imposed on pensioners by the Act of 1919, was lifted by the Act of 1936, and the tax again came into operation only on 1st April, 1937, it would follow that there was no "levy of the tax" "immediately before" the commencement of Part III of the Government of India Act, 1935, so as to bring it within the saving in section 143(2) of that Act.
Besides, the two circumstances.
viz. : that residence within the city for a specified period was made a condition of the liability to the tax, as well as the increase in the rates would both serve to emphasise that the levy was a new one, with a different texture and not a continuance of the tax which was levied just prior to the 1st April, 1937.
Learned Counsel for the respondents the Corporation of Madras and the State have urged that it was in substance the old levy.
We are unable to agree.
The mere fact that prior to 1st April, 1937 the Corporation had under Act X of 1936 the power to bring the tax into force by a resolution does not on a proper construction of section 143(2) bring it within the range of those taxes or duties which "were being lawfully levied" prior to the commencement of Part III of the Government of India Act which alone are permitted to be continued to be levied notwithstanding that these duties were in the Federal Legislative List.
This question has been considered by us in great detail in The Town Municipal Committee, Amravati vs Ram Chandra Vasudeo Chimote and Another, etc.(1) in which judgment has been pronounced today and it is unnecessary to re examine the same.
The mere existence of a power to bring a tax into operation, cannot, as pointed out, be equated with "a tax (1) ; 975 which was being lawfully levied" before Part III of the Government of India Act, 1935.
The 3rd submission of learned Counsel for the appellant is also well founded.
The conclusion we have reached as to the effect of the amendment to section 111 by Act X of 1936, and of the tax being imposed by resolution of the Council from 1st April, 1937 not being a tax which was being lawfully levied immediately prior to 1st April, 1942, is reinforced by reference to the rules in Schedule IV which; remained unamended till 1942.
Under section 111(1) as amended, the tax could be levied only in accordance with the rules in Schedule IV and as those rules did not make a provision for the levy of a tax on pensioners, it would follow that the tax "was not being lawfully levied" on them.
As already pointed out, the relevant rules in that Schedule were framed at a time when Explanation 2 formed part of section III and "pensioners" were deemed to "hold appointments".
With the deletion of the Explanation, the fiction created by the original Madras Act IV of 1919 ceased and thereafter if the rules in Schedule IV had to be applied to them these had to be suitably modified.
This, as we have pointed out earlier, was done only from April 1, 1942, so that in reality taxes on pensioners were "lawfully" levied upto 1936 and then after a break from April 1, 1942, we use the word "lawfully" on the assumption that this could ' have been legally done under the Government of India Act, 1935, a point already discussed.
The learned Judges of the High Court have rejected the argument addressed to them under this head by reference to section 18 of the Madras General Clause Act corresponding to section 24 of the General Clauses Act (Central Act X of 1897).
With great respect to the learned Judges we do not see how this provision affords any assistance in the matter.
The Schedule and the rules continued without repeal or amendment when the new section III (1) was substituted in 1936, and when this section made a reference to the rules in Schedule IV it could only be a reference to the rules in the Schedule IV which stood ' unaltered.
If the phraseology employed in the Schedule was inappropriate to a class which fell within section 111(1), the, only effect would be that the tax could not be levied, because 976 of the defect in the law imposing the tax, but such a situation is not remedied by reference to the provision in the General Clauses Act on which the learned Judges have relied.
If, therefore, the, tax was one not lawfully levied just prior to April 1, 1937 and was one brought in after the Government of India Act, 1935 came into force, and really only from April 1, 1942 assuming this to be lawful it is obvious that the validity of this tax could not be sustained as a continuation of a lawful pre existing levy under section 143 (2).
In this view it is not necessary to consider the last of the points urged by learned Counsel and examine whether in case of an increase of rate, the entire tax would become a new tax and so unconstitutional or whether it is only the increase in the rate that would become unenforceable.
Learned Counsel for the respondent Corporation submitted that the tax could not be deemed to be a tax on income, as was suggested by the appellant, but was really a tax on employment because it was in consideration of past services during employment that pension was payable.
This argument was admittedly not urged before the learned Judges of the High Court and is obviously untenable.
The taxes specified in item 60 are taxes on the carrying on of a profession, trade, etc.
and would, therefore, apply only to a case of present employment.
The mere fact that a person has previously been in a profession or carried on a trade, etc.
cannot justify a tax under this Entry.
The tax on the receipt of pension or on the income from investments which is referred to in the last part of section 1 1 1 ( 1 ) is in truth and substance a tax on income and in fact the argument before the High Court proceeded on this basis, so have the learned Judges.
At the time the tax is levied the pensioner is in no employment but is only in receipt of income though it might be for past services, in an employment.
He next submitted that Act X of 1936 which had been enacted prior to the Government of India Act, 1935 was continued as an existing law by section 292 of the Government of India Act and as there was nothing in the Government of India Act against its continuance it would have effect 977 even if the terms of section 143 (2) were not satisfied by the present levy.
The learned Judges of the High Court accepted this submission.
In our opinion, they were in order.
The question of the correlation between article 372 corresponding to section 292 of the Government of India Act and article 277 corresponding to section 143(2) of the Government of India Act was considered by this Court in South India Corporation (P) Ltd. vs The Secretary, Board of Revenue, Trivandrum(1) and this Court said: "It is settled law that a special provision should be given effect to the extent of its scope, leaving the general provision to control cases where the special provision does not apply.
The earlier discussion makes it abundantly clear that the Constitution gives a separate treatment to the subject of finances, and article 277 saves the existing taxes etc.
levied by States, if the conditions mentioned therein are complied with.
While article 372 saves all pre Constitution valid laws, article 277 is confined only to taxes, duties, cesses or fees lawfully levied immediately before the Constitution.
Therefore, article 372 cannot be construed in such a way as to enlarge the scope of the saving of taxes, duties, cesses or fees.
To state it differently, article 372 must be read subject to article 277.
" Learned Counsel next drew our attention to section 142 A(1) of the Government of India Act, 1935 and faintly suggested that it might afford him some assistance.
This provision, again, was not adverted to before the learned Judges of the High Court and for a proper reason.
section 142 A(1) which corresponds to article 276(1) of the Constitution enacted : "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, (1) ; 134 159 S.C. 62 978 trades, callings or employments shall be invalid on the ground that it relates to a tax on income.
" This section would assist the respondent only if tax imposed were one on a profession, trade, calling, or employment and in that event the section provides that such a tax shall not be deemed to be a tax on income, but where the tax imposed is one not on a profession, etc.
at all, it does not mean that the State might levy a tax on income and call it "profession tax".
This is sufficient to dispose of a similar argument as regards the scope of the amended Entry 46 in the Provincial Legislature List (List II) to which we have adverted earlier.
The appeal accordingly succeeds and the appellant is held entitled to the relief prayed by him in the, filed in the High Court, viz., a writ of Prohibition against the respondent Corporation from enforcing the demand.
The appellant will be entitled to his costs from the respond ents here and in the High Court.
Appeal allowed.

summary:
The appellant held office as the last Governor General of India.
He has been drawing Rs. 15,000/ per annum as pension while residing in the city of Madras.
The Corporation of Madras demanded profession tax from him under section 111(i)(b) of the City Municipal Act, 1919 for the year 1958 59 on the ground of his residence being within Madras city and his drawing the pension to which he was entitled.
The appellant addressed a communication to the Corporation asserting that this demand was illegal as the Corporation was empowered by the relevant constitutional provisions merely to levy a tax "on a profession, trade calling or employment" and that as he as a pensioner did not fall under any of these classes, the said demand was illegal.
The Corporation did not accept the contention of the appellant and therefore, the appellant filed a writ petition under article 226 of the Constitution before the High Court.
The High Court dismissed the writ petition of the appellant.
The High Court granted a certificate under Art.133(1)(c ) of the Constitution to the appellant to file on appeal to the Supreme Court.
Hence the appeal.
The question before the Supreme Court was whetherthe Corporation was entitled to levy a tax on pensioners in respect of thepensions received by them in Madras City.
Held:(1) that the power of the Corporation to levy the tax is dependent on the subject of the tax being within the State Legislative power under the Constitution.
The present levy comes within the purview of item 60 in the State list in Schedule VIII of the Constitution, which reads as follows: "Taxes on profession, trades, callings and employments.
" Being a "pensioner" cannot be a "profession, trade, business or calling", nor could a tax on a person because he is in receipt of a pension be said to be a tax on 'employments".
The tax, therefore, under the last portion of sec.
111(1)(b) reading profession tax on persons "in receipt of any pension or income from investments" is nothing but a tax on income falling within Entry 82 of the Union List.
963 The taxes specified in item 60 are taxes on the carrying on of a profession, trade etc., and would, therefore, apply only to a case of present C. ' employment.
The mere fact that a person has previously been in a profession or carried on trade etc.
cannot justify a tax under this entry.
The tax on the receipt of pension or on the income from investments which is referred to in the last part of sec.
111(1) is in truth and substance a taxon income.
At the time the tax is levied the appellant pen sioner is inno employment but is only in receipt of income.
(ii) The present levy of tax cannot be saved by article 277 of the Constitution because the tax was a new levy and not a continuance of a tax which had been levied just prior to April 1, 1937.
On the facts of this case it was held that if the statutory charge to profession tax imposed on pensioners by the Act of 1919, was lifted by the Act of 1936, and the tax again came into operation only on April 1, 1937, it would follow that there was no "levy of the tax ' immediately before the commencement of Part III of the Government of India Act.
so as to bring it within the saving in section 143(2) of that Act.
Besides, the two circumstances, viz., that residence within the city for a specified period was made a condition of the liability to the tax, as well as the increase in the rates would both serve to emphasise that the levy was a new one, with a different texture and not a continuation of the tax which was leved just prior to April 1, 1937.
(iii)The mere fact that prior to 1st April, 1937 the Corporation had under Act of 1936 the power to bring the tax into force by a resolution does not on a proper construction of section 143(2) bring it within the range of those taxes or duties which "were being lawfully levied" prior to the commencement of Part III of the Government of India Act 1935, which alone are permitted to be continued to be levied notwithstanding that these duties were in the Federal Legislative List.
The mere existence of a power to bring a tax into operation, cannot be equated with "a tax which was being lawfully levied" before Part III of the Government of India Act, 1935.
The High Court erred in holding that section 292 of the Government of India Act applies to this case.
The Town Municipal Committee, Amravati vs Ramchandra Vasudeo Chimote, ; , South India Corporation (P) Ltd. V. The Secretary, Board of Revenue, Trivandrum, A.I.R. , relied on.
(iv)Under section 111(1) as amended, the tax could be levied only in accordance with the rules in Schedule IV and as those rules did not make a provision for the levy of a tax on pensioners, it would follow that the tax "was not being lawfully levied" on them.
The High Court erred in holding that such defect would be removed by section 18 of the Madras General Clauses Act.
(v)S. 142 A(1) of the Government of India Act, 1935 would assist the respondent 's case only if tax imposed were on a profession, trade, calling or employment.
In the present case, the tax is being imposed 664 on an income of a pensioner and so this provision has no application.
It is not the intention of Parliament that State might levy a tax on income and call it "profession" tax.


judgement:
Appeals Nos.
6 to 12 of 1963.
Appeals from the judgment and decree dated February 2, 1959 of the Madras High Court in Writ Petition Nos.
1. 2, 202, 203, 204, 309 and 373 of 1958.
A. Ranganadham Chetty and A. V. Rangam, for the appellants (in all the appeals).
R. Gopalakrishnan, for the respondent (in C.A. No. 11/63).
section V. Gupte, Additional Solicitor General and R. H. Dhebar, for interveners Nos. 1 and 2.
M. C. Setalvad, N. section Bindra and R. H. Dhebar, for intervener No. 3.
G. C. Kasliwal, Advocate General, Rajasthan, R. H. Dhebar and B. R. G. K. Achar, for intervener No. 4.
938 March 3, 1964.
The Judgment of the Court was delivered by SHAH, J.
"Whether sections 2 and 3 of the Madras Lignite (Acquisition of Land) Act XI of 1953 which seek to amend the Land Acquisition Act 1 of 1894 in their application to acquisition of lignite bearing lands are invalid because they infringe the fundamental right under article 31 of the Constitution of owners of lands whose property is to be compulsorily acquired is the only question which falls to be determined in this group of appeals.
Investigations conducted by the Geological Survey of India in 1947 revealed deposits of lignite in the South Arcot District of the State of Madras, and exploratory mining operations were commenced by the Government of Madras.
Discovery of deposits of lignite led to speculation in lands.
On October 6, 1948, the Government of Madras issued a "Press Note" announcing that the Government proposed to undertake legislation reserving power to compel any person who had purchased land on or after a date to be prescribed in 1947 in the lignite bearing areas to sell such lands to the Government at the rate at which it was purchased.
The Government also advised the owners of the lignite bearing lands in the Vriddhachalam and Cuddalore taluks not to sell their lands to speculators.
On January 7, 1953, the Government of Madras published a Bill to amend the Land Acquisition Act 1 of 1894 in certain respects.
The Bill was duly passed by the State Legislature on June 2, 1953 and received the assent of the President.
It was published as an Act on June 10, 1953 and came into force on August 20, 1953.
By this Act substantially three provisions are made: (1) that compensation for acquisition of lignitebearing lands under the Land Acquisition Act as amended, is to be assessed on the market value of the land prevailing on April 28, 1947, and not on the date on which the notification is issued under section 4(1) of the Land Acquisition Act; 939 (2) power is reserved under section 17 of the Land Acquisition Act to take possession in cases of urgency of lands for the purpose of working lignite mines in the areas in which the Madras Lignite (Acquisition of Land) Act XI of 1953 extends; and (3) in assessing the market value of the land on April 28, 1947, value of any non agricultural improvements on the land commenced, made or effected after that date are not to be taken into account, even if such improvements were made before the date of publication of the notification under section 4(1) of the Land Acquisition Act.
Pursuant to this Act, notifications under section 4(1) of the Land Acquisition Act were issued between the months of January and May 1957 notifying for acquisition certain lands in Vriddachalam taluk of the South Arcot District.
These notifications were followed by notifications under section 6 of the Land Acquisition Act.
Between the months of May and November 1957 the Land Acquisition Officer made his awards under section 11 of the Land Acquisition Act assessing compensation on the basis of market value of the lads on April 28, 1947 and ignoring in the computation of compensation the value of houses built or other non agricultural improvements made on the land since that date.
The owners of the lands affected by these awards submitted petitions under article 226 of the Constitution to the High Court of Judicature at Madras challenging the validity of the awards on the ground that the provisions of Madras Act XI of 1953 violated the fundamental right of the owners of the lands under article 31(2) of the Constitution.
They claimed that the Land Acquisition Officer was bound to award compensation for acquisition of their lands and buildings at the market value prevailing on the respective dates of the notifications under section 4(1), and that awards valuing the lands at the market rate prevailing on April 28, 1947, and excluding the value of buildings constructed after that date and trees thereon were without jurisdiction.
The petitioners accordingly claimed that writs of mandamus be 940 issued directing the State of Madras and the Land Acquisi tion Officers to refrain from taking possession of the land& and buildings from the petitioners without payment of adequate compensation and for other appropriate relief.
The High Court upheld the contention of the petitioners and declared that the awards made on the basis of the provisions of Madras Act XI of 1953 could not be sustained.
Against the order passed by the High Court, these appeals have been preferred by the State of Madras, with certificate of fitness granted by the High Court under article 132 of the Constitution.
The Madras Act XI of 1953 makes an important departure from the scheme of the Land Acquisition Act 1 of 1894.
Under the Land Acquisition Act 1 of 1894, a person interested in any land.
compulsorily acquired is entitled to the market value of his interest in the land at the date of the publication of the notification under section 4(1), and this compensation includes the value of all improvements agricultural and non agricultural made in the land upto the date of the notification.
By Madras Act XI of 1953, compensation made payable for compulsory acquisition of land is the value of the land on April 28, 1947, together with the value, of any agricultural improvements made thereon after that date and before publication of the notification under section 4(1).
The result of the Madras Act is therefore to freeze for the purpose of acquisition the prices of land in the area to which it applies, and the owners are deprived of the benefit of appreciation of land values since April 28, 1947, whenever the notification under section 4(1) may be issued and also of non agricultural improvements made in the land after April 28, 1947.
Departure from the provisions of the Land Acquisition Act is challenged as illegal on the ground that it deprives the owner of the land of just compensation for compulsory acquisition of his property.
Madras Act XI of 1953 was passed before the Constitution (Fourth Amendment) Act, 1955 was enacted, and we have to deal with the question of the validity of the Act in the light of the constitutional provisions contained in article 31 before the constitutional amendment.
We may 941 :make it clear that for the purpose of this judgment, we express no opinion on the question whether it is possible by enacting legislation after the amendment of article 31(2) by the Constitution (Fourth Amendment) Act, 1955 (which is not given any retrospective operation) to provide that compensation for compulsory acquisition of land may be fixed on the basis of market value prevailing on a date Anterior to the date of the issue of the notification under section 4(1).
Article 31 before it was amended by the Constitution (Fourth Amendment) Act 1955, by its cls.
(1) and (2) provided: "(1) No person shall be deprived of his property save by authority of law.
(2) No property, movable or immovable, including any interest in, or in any company owning, any commercial or industrial undertaking, shall be taken possession of or acquired for public purposes under any law authorising the taking of such possession or such acquisition, unless the law provides for compensation for the property taken possession of or acquired and either fixes the amount of the compensation, or specifies the principles on which, and the manner in which, the compensation is to be determined and given.
" It was held by this Court in Chiranjit Lal Chowdhuri vs, Union of India and others(1) and The State of West Benga vs Subhodh Gopal Bose and others(2) that cls.
(1) and (2, of article 31 relate to the same subject of "eminent domain", By article 31 therefore every person was protected agains, deprivation, of his property save by authority of law, an( the law authorising taking possession or acquisition of property for public purposes had to fix the quantum o compensation, or to specify principles on which compensa tion was to be determined for the, property.
taken possession of or acquired.
Power to legislate,, in respect of compensa tion for acquisition and requisitioning of property was (1) ; (2) ; 942 contained in Entry 42 List III of the Seventh Schedule and read as follows : "Principles on which compensation for property acquired or requisitioned for the purpose of the Union or of a State or for any other public purpose is to be determined, and the form and the manner in which such compensation is to be given.
" The Constitution therefore conferred by article 31(2) fundamental right upon every person, protecting his property against compulsory acquisition otherwise than by authority of law, and without just indemnification for loss suffered by him.
In The State of West Bengal vs Mrs. Bela Banerjee and others(1) this Court observed that when under Entry 42 List III the Legislature was given discretionary power to, lay down the principles which should govern determination of the amount to be given to the owner of the property appropriated, such principles must ensure that what is, determined as payable must be a just equivalent of what the owner has been deprived of, and that subject to this basic limitation the Constitution allowed free play to the legislative judgment as to what principles should guide the determination of the amount payable.
The Court therefore held that the West Bengal Land Development and Planning Act, 1948, which was enacted primarily for the settlement of immigrants who had migrated into West Bengal due to, communal disturbances in East Bengal and which by section 8 provided that the compensation to be awarded for compulsory acquisition to the owner of the land was not to exceed the market value on December 31, 1946, was ultravires the Constitution and void under article 31(2) of the Constitution.
It was observed at p. 564 : "Turning now to the provisions relating to compensation under the impugned Act, it will be seen that the latter part of the proviso to section 8 limits the amount of compensation so as not to exceed the market 'value of the land (1) ; 943 on December 31, 1946, no matter when the land is acquired.
Considering that the impugned Act is a permanent enactment and lands may be acquired under it many years after it came into force, the fixing of the market value on December 31, 1946, as the ceiling on compensation, without reference to the value of the land at the time of the acquisition is arbitrary and cannot be regarded as due com pensation in letter and spirit with the requirement of article 31(2).
" That principle must apply in adjudging the validity of Madras Act XI of 1953.
It may be assumed that April 28, 1947, was the date on which lignite deposits were discovered in the areas to which the Act is extended.
But there is no true relation between the acquisition of the lands in these cases and fixation of compensation based on their value on the market rate prevailing on April 28, 1947.
Fixation of compensation for compulsory acquisition of lands notified many years after that date, on the market value prevailing on the date on which lignite was discovered is wholly arbitrary and inconsistent with the letter and spirit of article 31(2) as it stood before it was amended by the Constitution, (Fourth Amendment) Act, 1955.
If the owner is by a, constitutional guarantee protected against expropriation of ' his property otherwise than for a just monetary equivalent, a law which authorises acquisition of land not for its true.
value, but for value frozen on some date anterior to the acquisition, on the assumption that all appreciation in its value since that date is attributable to purposes for which the State may use the land at some time in future, must be, regarded as infringing the fundamental right.
Counsel for the State of Madras relying upon the following observation of Patanjali Sastri, C.J., in Mrs. Bela Banerjee 's case(1) at p. 564: "The fixing of an anterior date for the ascertainment of Value may not, in certain circumstances, be (1) ; 944 .lm15 a violation of the constitutional requirement as, for instance, when the proposed scheme of acquisition becomes known before it is launched and prices rise sharply in anticipation of the benefits to be derived under it, but the fixing of an anterior date, which might have no relation to the value of the land when it is acquired, may be, many years later, cannot but be regarded as arbitrary", submitted that a law which merely fixes the market value on a date anterior to the date on which the owner is expro priated of his land, as determinative of the market value on which the compensation is to be based, cannot without further enquiry be regarded as infringing article 3 1 (2) of the Constitution.
In our view this observation cannot assist the State of Madras in saving the provisions of Madras Act XI of 1953 from the vice of infringing the constitutional guarantee under article 31 (2) of the Constitution.
The right which is guaranteed is undoubtedly the right to just indemnification for loss, and appreciation in the market value of the land because of the proposed acquisition may in assessing compensation be ignored.
Even the Land Acquisition Act provides for assessment of compensation ,on the basis of market value of the land not on the date on which interest of the owner of land is extinguished under section 16, but on the basis of market value prevailing oil the date on which the notification under section 4(1) is issued.
Whether this rule in all cases irrespective of subsequent developments ensures just indemnification of the expropriated owner so as to be immune from attack, does not call for comment in this case.
But any principle for determination of compensation denying to the owner all increments in value between a fixed date and the date of issue of the notification under section 4(1 ), must prima facie, be regarded as denying to him the true equivalent of, the land which is expropriated and it is for the State to show that fixation of compensation on the market value on an anterior date does not amount to a violation of the constitutional guarantee.
No materials have been placed by the State before this Court ,which would support any such case.
945 it is true that, the Province of Madras had issued a 'Press Note" in 1948 announcing that the Government proposed to undertake legislation reserving the power to compel any person who had purchased land in the lignite bearing areas to sell such land to them at the rate at which it was purchased.
The only intimation given thereby to the owners of lands was that the Government may undertake legislation for the purpose of purchasing lands at the price at which the speculators in land may have purchased them.
There is no evidence that any scheme for acquisition of land for mining of lignite was prepared in 1947 by the Government of Madras.
The mining operations in 1947 must, in the very nature of things, have been exploratory.
The statement of objects and reasons for the Act clearly discloses that initially mining operations were started by the Government on a small area.
Assuming that in appropriate cases, fixation of a date anterior to the publication of the notification under section 4(1) for ascertainment of market value of the land to be acquired, may not always be regarded as a violation of the constitutional guarantee, in the absence of evidence that compensation assessed on the basis of market value on such anterior date, awards to the expropriated owner a just monetary value of his property at the date on which his interest is extinguished, the provisions of the Act arbitrarily fixing compensation based on the market value at a date many years before the notification under section 4(1) was issued, cannot be regarded as valid.
It is a matter of common knowledge that since the termination of hostilities in the last World War there has been an upward tendency in land values resulting in appreciation In some areas many times the original value of lands.
No attempt has been made by the State to prove that appreciation in the market value of lands in the area since April 1947 was solely attributable to a scheme of land acquisition of lignite bearing lands.
To deny to the owner of the land compensation at rates which justly indemnify him for his loss by awarding him compensation at rates prevailing ten years before the date on which the notification under section 4(1) was issued amounts in the circumstances to a flagrant infringement of the fundamental right of the owner of the land under article 31 (2) as it stood when the Act was enacted.
134 159 S.C. 60 946 The validity of the provision relating to fixation of compensation had to be adjudged in the light of the constitutional protection guaranteed at the date when the Act was brought into operation, and any restriction of the constitutional protection by subsequent amendment of article 31(2) which has not been given retrospective effect, must be entirely ignored.
The provision which denies to the owner of land compensation for non agricultural improvements made by him since April 28, 1947, also infringes the protection of article 31(2).
Under section 3(a) of the Land Acquisition Act "land" is defined as including benefits to arise out of land, and things attached to the earth or permanently fastened to anything attached to the earth, and when tinder section 4(1) land is notified for acquisition, the acquisition is of the entirety of the interest of the owner in the land including underground rights if any, crops, trees and superstructures.
By the Madras Act the owner is deprived of the value of all non agricultural improvements including the value of non agricultural buildings, erected on the land after April 28, 1947.
It is not clear whether the non agricultural build ings constructed after the specified date are forfeited to the State on acquisition, or the owner is entitled to remove them.
In either case the owner is deprived of just value of his land including the superstructure, of which he is expro priated.
Denial to the owner of the land of the value of the structures constructed by him (even of those put up after April 28, 1947, with the knowledge that the Government may undertake legislation for the purpose of compulsory acquisition of the land) would still be denying to him just compensation for the loss suffered by him on account of compulsory acquisition of his holding, and would amount to infringement of article 31(2) of the Constitution.
We are therefore of the view that the provisions which require the Land Acquisition Officer and the Court to assess compensation of the land compulsorily acquired only on the market value of the land on April 28, 1947, together with the value of agricultural improvements on the land commenced, made or effected after that date, and before the date of the publication of the notification under section 4(1), 947 without taking into consideration the value of non agricul tural improvements made after that date, must be regarded as invalid.
We are not called upon to express any opinion on the question whether the power reserved under section 17 of the Land Acquisition Act as amended by section 2 of Madras Act XI of 1953 to take possession of lands under the emergency clause for the purpose of working lignite mines in the areas to which the Madras Lignite (Acquisition of Land) Act, 1953, extends is invalid.
No argument has been advanced by either side before us on this question.
Nor was the High Court called upon to consider the validity of that provision.
The appeals therefore fail and are dismissed.
The respondents in this group of appeals, except in appeal No. 11 of 1963, have not appeared in this, Court.
Therefore in appeal No. 11 of 1963 alone, the State of Madras will pay the costs of the respondent.
There will be no order as to costs in other appeals.
Appeals dismissed.

dataset_name: IN-Abs

summary:
The respondents in the above appeals are owners of certain lands which are to be compulsorily acquired udder Madras Lignite (Acquion of Land) Act, 1953.
This Act came into force on August 20, 53 before article 31 of the Constitution was amended by the Constituion (Fourth Amendment) Act, 1955.
By the said Act substantially o provisions which are material to the present appeals were made.
,e first was that compensation for acquisition of lignite bearing lands der the Land Acquisition Act is to be assessed on the market value the land prevailing on August 28, 1947 and not on the date on which notification is issued under section 4(1) of the Land Acquisition Act.
condly it was provided that in awarding compensation the value of non agricultural improvements commenced since April 28, 1947 win not taken into consideration.
In accordance with the above provisions, after issuing the notices as acquired under sections 4(1) and 6 of the Land Acquisition Act the Land acquisition Officer made awards regarding the lands of the respondents.
he respondents thereupon filed petitions under article 226 of the Constition before the High Court of Madras challenging the validity of the ward on the ground that the provisions of the Act relating to the ward of compensation violate article 31(2) of the Constitution [as it food before the Constitution (Fourth Amendment) Act, [955].
The High Court upheld the contention.
In appeal, Held: (i) The validity of the Act impugned in the present appeal ,is to be examined in the light of the provisions of article 31 of the constitution as they stood before the Constitution (Fourth Amendment) Act, 1955.
Chiranjit Lai Chowdhuri V. Union of India, [1950] S.C.R. 869, State of West Bengal vs Subodh Gopal Bose, ; , and State of lest Bengal vs Mrs. Bela Banerjee, ; , relied.
937 (ii) The principle laid down in Bela Banerjee 's case, that the ceiling on the compensation without reference to the value of the land at the time of the acquisition is arbitrary and cannot be regarded as due compensation in letter and spirit within the requirement of article 31(2), would apply to the impugned Act.
Fixation of compensation for compulsory acquisition of land notified many years after that date on the market value prevailing on the date on which lignite was discovered is wholly arbitrary and inconsistent with the letter and spirit of article 31(2) as it stood before the Constitution (Fourth Amendment) Act, 1955.
(iii) Any principle for determination of compensation denying to the owner all increments in value between a fixed date and the date of issue of the notice under section 4(1) of the Land Acquisition Act must prima facie, be regarded as denying him the true equivalent of the land which is ex propriated and it is for the State to show that fixation of compensation on the market value on an anterior date does not amount to a violation of the Constitutional guarantee.
In the present appeals no materials have been placed by the State which would support any such case.
(iv) Denial of compensation for the value of non agricultural improvements would be denying to him just compensation for the loss suffered by him on account of compulsory acquisition of his holding and would amount to infringement of article 31(2) of the Constitution.