1990 (9) TMI 71 - SC - Income Tax

Whether there had been an increase in the rent and rule 6 of Schedule II which dealt with the value of the building for the purposes of property tax was inapplicable as the levy under the old Act on the basis of the rental value and enhancement could be done according to the procedure contained in Schedule VII, rule 10 of the old Act? Held that - The power to tax is a sovereign power and is legislative in character and it has to be exercised within constitutional limitations. The statutes relating to municipal taxes may be changed according to the existing legislative rules of State policy unless forbidden by the Constitution from doing so. An irregular assessment may also be regularised with retrospective effect within the same constitutional limitations. Where the court has not already declared invalid a taxing measure which was of doubtful validity, it is permissible for the appropriate Legislature to validate it by retrospective legislation. No legal fiction is involved in such a case. Mr. Subba Rao s submission has, therefore, to be rejected. The Government Order impugned before the High Court has been covered and validated by the above provisions, the Government Order itself covered the period after the repeal of the old Act and till the date of commencement of the Fourth Amendment, so that no interregnum was really there. The assessment made according to the provisions of the old Act was validated as actions taken by the Council pursuant to the impugned Government Order and not under the provisions of the old Act which was already repealed. While referring to the old Act, the Government Order did not revive the Act but only prescribed the same procedure as was found in the repealed Act as a transitory measure. The validity of section 4(1) of the Fourth Amendment Act having not been challenged before the High Court, we do not find any infirmity in the impugned judgments of the High Court. Appeal dismissed.

Summary

Issues Involved:
1. Validity of G.O. Ms. No. 255 dated June 15, 1973.
2. Authority of the Government to rescind previous orders under rule 12 of Schedule IX.
3. Validity of the Andhra Pradesh Municipalities (Fourth Amendment) Act, 1975.
4. Retrospective application of the Fourth Amendment Act.
5. Validity of property tax assessments made during the transitional period from 1969 to 1973.

Detailed Analysis:

1. Validity of G.O. Ms. No. 255 dated June 15, 1973:
The judgment discusses the challenge against G.O. Ms. No. 255 issued by the Government of Andhra Pradesh, which directed the Vijayawada Municipal Council to continue levying property tax under the provisions of the old Act. This order was contested by house property owners, who argued that the transitional power under rule 12 had already been exercised by earlier Government Orders directing taxes to be levied under the new Act. The single judge accepted this contention, stating, "The language of the rule is clear that once the Government by general or special order, otherwise directs, the power to levy tax under the old Act is exhausted." However, the actions taken under G.O. Ms. No. 255 were later validated by the Andhra Pradesh Municipalities (Fourth Amendment) Act, 1975.

2. Authority of the Government to rescind previous orders under rule 12 of Schedule IX:
The appellants argued that once the Government had directed taxes to be levied under the new Act, it exhausted its power under rule 12, and it could not rescind previous orders and re-direct taxes to be levied under the old Act. The Division Bench upheld the single judge's finding that the Government's power under rule 12 ceased after the initial direction. However, the Fourth Amendment Act validated the actions taken under the rescinded orders, thus addressing this issue.

3. Validity of the Andhra Pradesh Municipalities (Fourth Amendment) Act, 1975:
The Fourth Amendment Act was enacted to validate the actions taken by municipal councils under the old Act during the transitional period. Section 4 of the Act explicitly validated the levy and collection of property tax made in pursuance of actions taken by municipal councils, stating, "the levy and collection of property tax made in pursuance of such action shall for all purposes be deemed to be, and to have always been, made in accordance with law." The validity of this Act was not challenged in the High Court.

4. Retrospective application of the Fourth Amendment Act:
The appellants contended that the Fourth Amendment Act did not retrospectively amend the substantive law relating to the method of assessment, and thus, invalid assessments could not be validated. The court, however, held that the Legislature intended to validate actions taken under the general orders and under the old as well as the new Act. The amendment to section 87 of the new Act provided the basis of assessment, and section 4(1) of the Fourth Amendment Act validated the actions taken during the transitional period.

5. Validity of property tax assessments made during the transitional period from 1969 to 1973:
The appellants argued that there was no valid law to enable the Municipal Council to levy taxes under the old Act during this period. The court noted that the Fourth Amendment Act validated the actions taken under the impugned Government Orders, thus addressing the issue of the validity of property tax assessments made during the transitional period. The court stated, "the assessment made according to the provisions of the old Act was validated as actions taken by the Council pursuant to the impugned Government Order and not under the provisions of the old Act which was already repealed."

Conclusion:
The appeal was dismissed, and the court found no infirmity in the impugned judgments of the High Court. The Fourth Amendment Act effectively validated the actions taken under the old Act during the transitional period, and the Government's authority to issue and rescind orders under rule 12 of Schedule IX was upheld. The retrospective application of the Fourth Amendment Act was deemed valid, ensuring the continuity and legality of property tax assessments made during the transitional period.