1969 (4) TMI 28 - SC - Indian Laws

Whether the Madras Urban Land Tax Act, 1966 (12 of 1966) is constitutionally valid? Held that - In pith and substance the new Act in imposing a tax on urban land at a percentage of the market value is entirely within the ambit of entry 49 of List II and within the competence of the State Legislature and does not in any way trench upon the field of legislation of entry 86 of List I. The Act envisages a detailed procedure regarding submission of returns, the making of an assessment after hearing objections and a right to appeal to higher authorities. We are hence unable to accept the contention of the petitioners that the provisions of section 6 of the new Act are violative of article 14 of the Constitution. The imposition of the tax retrospectively from 1st July, 1963, cannot be said to be an unreasonable restriction. We, therefore, reject the argument of the petitioners on this aspect of the case. The Madras Urban Land Tax Act, 1966 (Act 12 of 1966), must be upheld as constitutionally valid. Appeal dismissed.

Summary

Issues Involved:
1. Constitutional validity of the Madras Urban Land Tax Act, 1966
2. Legislative competence of the Madras Legislature under entry 49 of List II of Schedule VII of the Constitution
3. Violation of Article 14 of the Constitution
4. Excessive delegation of authority
5. Unreasonable restriction on the right to acquire, hold, and dispose of property under Article 19(1)(f)
6. Retrospective operation of the Act

Issue-wise Detailed Analysis:

1. Constitutional Validity of the Madras Urban Land Tax Act, 1966
The primary question was whether the Madras Urban Land Tax Act, 1966 (Act 12 of 1966), is constitutionally valid. The court upheld the Act, rejecting the argument that it fell under Schedule VII, List I, entry 86 (taxes on the capital value of assets). The court emphasized that the legislative entries must be given a large and liberal interpretation and found no conflict between entry 86 of List I and entry 49 of List II. The court concluded that the Act, in imposing a tax on urban land at a percentage of the market value, is within the ambit of entry 49 of List II and does not encroach upon the field of legislation of entry 86 of List I.

2. Legislative Competence of the Madras Legislature under Entry 49 of List II of Schedule VII of the Constitution
The court examined whether the Madras Legislature was competent to enact the legislation under entry 49 of List II of Schedule VII of the Constitution, which reads: "Taxes on lands and buildings." The court rejected the argument that the Act fell under entry 86 of List I, stating that the basis of taxation under the two entries is distinct. Entry 49 of List II contemplates a levy of tax on lands and buildings as units, whereas entry 86 of List I is concerned with the capital value of the assets. The court held that the new Act is entirely within the ambit of entry 49 of List II and within the competence of the State Legislature.

3. Violation of Article 14 of the Constitution
The petitioners argued that the new Act violated Article 14 of the Constitution due to the lack of machinery for determining the market value. The court rejected this argument, stating that the opinion which the Assistant Commissioner has to form under section 6 of the new Act is not subjective but should be reached objectively upon relevant evidence after following the requisite formalities laid down in sections 7 to 11 of the new Act. The court emphasized that the Act provides a detailed procedure for the submission of returns, the making of an assessment after hearing objections, and a right to appeal to higher authorities, ensuring that the provisions of section 6 are not violative of Article 14.

4. Excessive Delegation of Authority
The High Court had struck down section 6 of the new Act on the ground of excessive delegation of authority, which was seen as violative of Articles 14 and 19(1)(f) of the Constitution. However, the petitioners' counsel did not support this reasoning in the Supreme Court. The court noted that the power of determining the value of the urban land being judicial or quasi-judicial in character, the doctrine of excessive delegation of authority had no application.

5. Unreasonable Restriction on the Right to Acquire, Hold, and Dispose of Property under Article 19(1)(f)
The petitioners argued that the Act imposed an unreasonable restriction on the right to acquire, hold, and dispose of property. The court rejected this argument, stating that the power of taxation is an essential attribute of sovereignty and that the quantum of tax, the conditions subject to which it is levied, and the social and economic policies it is designed to subserve are matters within the competence of the Legislature. The court held that the levy at 0.4% of the market value of the urban land is not confiscatory in effect and does not violate Article 19(1)(f).

6. Retrospective Operation of the Act
The petitioners contended that the retrospective operation of the law from 1st July 1963 made it unreasonable. The court rejected this argument, stating that the imposition of tax with retrospective effect does not per se render the law unconstitutional. The court noted that the retrospective operation was to cure the defect from which the earlier Act was suffering and was not unreasonable in the context of the legislative history of the present Act.

Conclusion
The Supreme Court upheld the Madras Urban Land Tax Act, 1966 (Act 12 of 1966), as constitutionally valid. The court set aside the judgment of the Madras High Court dated 10th April 1968 and ordered that the writ petitions filed by the petitioners be dismissed. Civil Appeals Nos. 21 to 23 were allowed, and Civil Appeals Nos. 46, 47, 125, and 274 were dismissed. There was no order regarding the costs of these appeals.