1968 (8) TMI 186 - SC - VAT and Sales Tax

Whether there has been denial of equal protection of the laws? Held that - Act 19 of 1961 which is challenged in the present case applies to the whole State of Kerala in respect of buildings completed on or after March 2, 1961, whatever may be the nature or class of the building, the use to which it is put, materials used in its construction and the extent of profitable user to which the building may be put, its cost and its economic rental. It is unnecessary in the circumstances to consider whether imposition of a tax only on buildings constructed after March 2, 1961, and exempting buildings completed before that date may not violate Art. 14 of the Constituiton. The High Court was, in our judgment, right in holding that the charging section of the Act is violative of the equality clause of the Constitution. Appeals dismissed

Summary

Issues:
Challenge to the validity of the Kerala Buildings Tax Act 1961 on the grounds of infringing the equality clause of the Constitution.

Analysis:
The appeals before the Supreme Court arose from a decision by the High Court of Kerala declaring the Kerala Buildings Tax Act 1961 as ultra vires the Legislature due to its infringement of the equality clause of the Constitution. The State of Kerala appealed this decision to the Supreme Court with special leave granted. The Act imposes a tax on buildings based solely on their floor area, without considering factors such as the purpose of the building, its location, construction materials, or economic rent. The Act applies uniformly across the State of Kerala, disregarding any rational classification for taxation based on relevant circumstances. The Court noted that the power of the Legislature to classify for taxation purposes is wide, but in this case, the Act failed to make any rational classification beyond floor area. The Court referenced previous judgments emphasizing that taxation laws must not infringe on fundamental rights, including the right to equality under Article 14 of the Constitution.

The Court highlighted that the Act's method of taxation solely based on floor area without considering other relevant factors amounted to a denial of equal protection of the laws. The Court drew parallels to a previous case where a similar tax based on floor area for factory buildings was deemed illegal under Article 14. The Court noted that the Act in question applied statewide to all buildings completed after a certain date, irrespective of their nature, use, construction materials, or economic viability. The Court held that the Act's charging section was indeed violative of the equality clause of the Constitution. Therefore, the appeals were dismissed, affirming the High Court's decision that the Act was unconstitutional in its current form.

In conclusion, the Supreme Court upheld the High Court's ruling that the Kerala Buildings Tax Act 1961 was unconstitutional due to its violation of the equality clause of the Constitution. The Act's uniform taxation based solely on floor area without considering other relevant factors was deemed arbitrary and inconsistent with the principles of equality before the law. The Court's decision serves as a reminder that taxation laws must adhere to constitutional provisions, including the right to equality, and must be based on rational classifications that consider all pertinent circumstances to avoid discrimination and uphold fairness in taxation.