1962 (4) TMI 5 - SC - Income Tax

Whether the U.P. Zamindari Abolition and Land Reforms Act (U.P. Act 1 of 1951) is unconstitutional and void inasmuch as it is beyond the legislative competence of the U.P. Legislature, and this contention raises the question about the construction of entry 49 in List II of the Seventh Schedule of the Constitution? Held that - The fact that agricultural income having been specifically provided by entry 46 cannot be deemed to be included in entry 49, does not justify the argument that the word lands in the latter entry does not include agricultural lands. There can be no doubt that the Act was within the legislative competence of the U.P. Legislature and so, the challenge to its validity on the ground that it has been passed without legislative competence must be rejected. Whenever the validity of a taxing statute is challenged on the ground that it contravenes article 14 or article 19, the challenge cannot be thrown out on the preliminary ground that a tax law is beyond such challenge, but its merits must be carefully examined. Therefore, in our opinion the challenge to the validity of the Act on the ground that it contravenes article 31(2) is not well-founded. The petitioner has not stated the extent of the rent which he is required to pay for his land-holdings. He holds the lands as bhumidar and the respondents contend that the rent recovered from bhumidars is very law. It was even suggested during the course of argument by Mr. Aggarwal that the rent recovered from the bhumidars would not exceed 1% of the gross income and in some cases it may even be less. Unfortunately, the petitioner has not made any statement about this important particular. The operation of the rates prescribed by the Schedule is based on the annual valuation of the lands, and the said valuation is determined ultimately on the basis of the rent, so that unless the rent is known, the extent of the impost cannot be adequately judged. Therefore, in our opinion, on the material adduced by the petitioner before us, it is impossible to accept the argument that the tax levied by the Act is confiscatory. Besides, as we have already seen, the scheme of the present Act does not disclose any constitutional infirmity either in its charging sections or in the sections providing for the procedure for the levy of the tax and its recovery. That is why we feel no hesitation in holding that there is no substance in the plea that the Act is a colourable piece of legislation. Appeal dismissed.

Issues Involved:
1. Legislative Competence of the U.P. Legislature to pass the Act.
2. Violation of Fundamental Rights under Articles 14, 19, and 31.
3. Validity of the Rates Fixed by the State Government.
4. Whether the Act is Confiscatory and a Colorable Piece of Legislation.

Detailed Analysis:

1. Legislative Competence of the U.P. Legislature to pass the Act
The petitioner contended that the U.P. Legislature was not competent to pass the U.P. Large Land Holdings Tax Act (1957) as it did not have the authority to tax agricultural lands under Entry 49, List II of the Seventh Schedule of the Constitution. The court held that the word "lands" in Entry 49 includes agricultural lands. It was emphasized that constitutional words conferring legislative power must be interpreted liberally to give effect to their wide amplitude. The court rejected the argument that agricultural lands are excluded from "lands" in Entry 49, stating that the word "lands" includes all lands, whether agricultural or not. Therefore, the Act was within the legislative competence of the U.P. Legislature.

2. Violation of Fundamental Rights under Articles 14, 19, and 31
The petitioner argued that the Act violated Articles 14, 19, and 31 of the Constitution. The court acknowledged that a taxing statute can be challenged on the grounds of violation of fundamental rights. However, it held that the Act did not contravene Articles 14 or 19(1)(f). The court found that the policy of the Act was to augment state revenues by taxing large land-holdings, which was a rational classification. The court also held that the discretion given to the State Government under Section 5(1) to prescribe multiples for determining annual value was not unfettered or uncanalised and did not amount to an unreasonable restriction. Regarding Article 31, the court stated that a taxing statute does not acquire or requisition property and thus cannot be challenged under Article 31(2). The court concluded that the Act met the requirements of Article 31(1) as it was a valid law.

3. Validity of the Rates Fixed by the State Government
The petitioner contended that the rates fixed by the State Government were invalid as they did not comply with Section 5(1) of the Act. The court rejected this argument, stating that Section 5(1) allowed the State Government discretion to prescribe different multiples for different districts or classes of land. The court found that the State Government had complied with Section 5(1) by issuing a notification that prescribed multiples for different types of land. The court held that the rates fixed were valid and did not contravene Articles 14 and 19(1)(f).

4. Whether the Act is Confiscatory and a Colorable Piece of Legislation
The petitioner argued that the Act was confiscatory in character and amounted to a colorable piece of legislation. The court held that a taxing statute cannot be challenged merely on the ground that it imposes an unreasonably high burden. However, it can be challenged if it is a colorable exercise of legislative power. The court found that the petitioner had not provided sufficient evidence to prove that the tax was confiscatory. The court noted that the petitioner's calculations were not substantiated and that the respondents' counter-affidavit showed a reasonable tax burden. The court concluded that the Act was not confiscatory and did not amount to a colorable piece of legislation.

Conclusion
The petition was dismissed, and the court upheld the validity of the U.P. Large Land Holdings Tax Act (1957). The court found that the U.P. Legislature was competent to pass the Act, that the Act did not violate Articles 14, 19, and 31, that the rates fixed by the State Government were valid, and that the Act was not confiscatory or a colorable piece of legislation.

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