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Issues Involved:
1. Whether Rule 350-A read with Rule 243 is ultra vires Sections 73 and 75 of the Bombay Municipal Boroughs Act, 1925. 2. Whether the imposition of a rate based on the capital value of lands is within the legislative competence of the Provincial Legislature under the Government of India Act, 1935. Issue-wise Detailed Analysis: 1. Ultra Vires of Rule 350-A and Rule 243 with respect to Sections 73 and 75 of the Act: The appellants challenged the imposition of a rate by the respondent Municipal Corporation of Ahmedabad on vacant lands, arguing that Rule 350-A read with Rule 243 was ultra vires Sections 73 and 75 of the Bombay Municipal Boroughs Act, 1925. They contended that the municipality could not levy a rate as a percentage of the capital value of open lands. The appellants argued that the term "rate" in Section 73(1)(i) had acquired a special meaning by the time the Act was passed, signifying a tax on the annual value of lands and buildings, not on their capital value. The trial court found Rule 350-A read with Rule 243 to be illegal and void, as it amounted to taxing open lands as assets of individuals, within the meaning of item 55 of List I of the Seventh Schedule to the Government of India Act. The High Court, however, held that the method employed for rating open lands was merely a mode of levying the rate and did not bring the rate within item 55 of List I. The High Court also opined that the municipality, by adopting the capital value method, had done in one step what could be done in two steps, and if the rate was otherwise reasonable, it would be difficult to hold that the rule was ultra vires Sections 73 and 75. Upon appeal, the Supreme Court examined the legislative history and practice in England and India, noting that the term "rate" in local taxation traditionally referred to a tax on the annual value of lands and buildings. The Court concluded that the word "rate" in Section 73(1)(i) must be given its due significance, meaning a tax on the annual value of lands and buildings. The explanation to Section 75, which allowed the basis of valuation to be either capital or annual letting value, did not authorize the municipality to levy the rate directly as a percentage of the capital value. The Court held that Rule 350-A read with Rule 243 was against the provisions of Section 73(1)(i) and the explanation to Section 75, and thus ultra vires. 2. Legislative Competence under the Government of India Act, 1935: The appellants also contended that if the Act permitted the levy of a rate as a percentage of the capital value, it was ultra vires the Provincial Legislature because of item 55, List I, of the Seventh Schedule to the Government of India Act, 1935. This item pertained to taxes on the capital value of the assets of individuals and companies, which was within the legislative competence of the Central Legislature. The Supreme Court, however, found it unnecessary to consider this issue in depth, given its conclusion that Rule 350-A read with Rule 243 was ultra vires the Act based on the interpretation of the term "rate" as a tax on the annual value of lands and buildings. The Court noted that the explanation to Section 75 did not authorize the municipality to levy the rate directly as a percentage of the capital value, and thus the second point did not fall to be considered. Conclusion: The Supreme Court allowed the appeal, set aside the order of the High Court, and declared Rule 350-A read with Rule 243 as ultra vires Section 73 of the Act read with the explanation to Section 75. The assessment list for the year 1947-48, prepared under Rule 350-A, was declared illegal, ultra vires, and void. The respondent municipality was restrained from recovering the said tax on open lands assessed in the said assessment list for that year and later years. The appeal was allowed with costs in favor of the appellants.
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