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TMI Blog1991 (2) TMI 403X X X X Extracts X X X X X X X X Extracts X X X X ..... maining unused for the rest of the year. The second respondent, Collector of Calcutta by his Memo No. 4600(86) A.T. dated November 9, 1972 directed the company to make ad hoc payment of tax under the provisions of the West Bengal Entertainments and Luxuries (Hotels and Restaurants) Tax Act, 1972 (W. B. Act XXI of 1972) hereinafter referred to as 'the Act', calculated at the flat or fixed rate of an annual sum of Rs. 100 for every 10 sq. metres or part thereof in respect of so much of the floor area of the hotel which was provided with luxury i.e. air conditioning. Again by Memo No. 1161/A.T. dated 13.3.1973 the second respondent called upon the Company to expedite the submission of the blue print of the space provided with means for air-conditioning, failing which appropriate legal action would be taken. The second appellant submitted a representation showing that the tax was discriminatory and, therefore, illegal and void, but the second respondent by his Memo No. 5166/ A.T. dated 22.12.1972 replied that there was nothing discriminatory in it. The appellants in their writ petition under Article 226 of the Constitution of India in the High Court of Calcutta contended that the pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nch decision in Express Hotels Private Ltd. v. State of Gujarat and Anr, [1989] 3 SCC 677, before which Bench the West Bengal petition was also there, the above first contention stands concluded against the appellants. The second contention, however, according to counsel, was not urged before the Constitution Bench and as such is still open to the appellants. Reiterating that contention counsel submits that the State has levied luxury tax at a flat rate of an annual sum of Rs. 100 for every 10 square metres, or part thereof in respect of so much of the floor area of a hotel which is provided with luxury irrespective of the locality, quality, standard or size of the hotels and restaurants; there is no attempt whatsoever by the State to classify and in fact the tax is sought to be imposed indiscriminately without discernment; and there is total failure on the part of the state in not recognizing the inherent differences in hotels and restaurants. Counsel produces a list of classified hotels which according to him, clearly shows vast differences between different hotels and this is magnified not only by the fact of different rates charged but also different kinds of services/facilitie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er M/s East India Hotel Ltd., submits that where the incidence of a tax is distributed in a manner which is irrational or arbitrary or where lack of classification creates inequality, the tax would be violative of Article 14 of the Constitution of India. In the instant case, according to counsel, neither the charge, nor the rate, but the 'measure', that is the air-conditioned floor space of assumed homogeneity or uniformity that suffers from the vice of non-classification causing inequality in incidence of the tax. Mr. Tapas Ray, the learned counsel for the respondents, submits, inter alia, that the Legislature made the classification in selecting the hotels and restaurants for the purpose of luxury tax inasmuch as only the airconditioning hotels and restaurants have been subjected to tax and non-air-conditioned ones left out. The Legislature, counsel submits, has the widest latitude in the matter of such classification and so long as luxury has been defined with reference to a named space, namely, air-conditioned hotels and restaurants, there could be no question of infringement of Article 14. The prescribing of a flat or a fixed rate for a certain measure of air-conditioned spac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome derived from it. In Spences Hotel Pvt. Ltd. v. State of West Bengal, reported in 1975 Tax L.R. 1890 (1892) the Calcutta High Court took the view: "In view of the social and economic structure of our country there can be no doubt that an airconditioned space whether in hotel or in a restaurant is a luxury by itself. People enter into these spaces for enjoyment of a luxury...................... The comfort that a person derives in a hot summer day in an airconditioned space is a luxury particularly in the context of the conditions in which the masses live in India today. In our opinion, the State legislature is competent to impose a tax on this luxury." This Court approved the above view in Express Hotels Pvt. Ltd. case (supra). The submission that as Section 4 of the West Bengal Act envisaged a tax on the mere existence for the provision of the luxury even if luxury was not utilized by any person and hence it was beyond the scope of the legislative entry was rejected observing that the concept of luxuries in the legislative entry took within it everything that could fairly and reasonably be sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ugh the courts were not concerned with the policy underlying a taxing statute or whether a particular tax could not have been imposed in a different way or in a way that the court might think more just and equitable. Examining the provisions this Court observed that the Act had no reference to income, either actual or potential, from the property sought to be taxed. It obliged every person who held land to pay the tax at a flat rate prescribed, whether or not he made any income out of the property, or whether or not the property was capable of yielding any income. It was also observed that ordinarily a tax on land or land revenue was assessed on the actual or potential productivity of the land sought to be taxed and the tax had reference to the income actually made, or which had been made with due diligence, and, therefore, tax was levied with due regard to the incidence of the taxation. Under the provisions of the Act as some persons owning and possessing the same area of land, but earning no income, the land being arid desert, others earning only some income by raising possible crops making heavy investments, and others earning income sufficient to pay the tax only, while still o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e must not be denial of equality in the matter of taxation, and the High Court was accordingly held to have been justified in holding that the charging section of the Act was violative of the equality clause of the Constitution. In State of Rajasthan v. Mukachand and Ors., [ 1964] 6 SCR 903, the validity of Sections 2(e) and 7(2) of Jagirdar's Debt Reduction Act (Rajasthan Act 9 of 1937) was challenged. Section 2(e) defined 'debt' to mean an advance in cash or in kind including any transaction which is in substance a debt but not including an advance as aforesaid made on or after impugned part of Section 2(e). In New Manek Chowk Spinning and Weaving Mills Co. Ltd. and Ors. v. Municipal Corporation of the City of Ahmedabad and Ors. (supra) the question was whether under the Bombay Provincial Municipal Corporation Act (49 of 1949) levy of property tax on textile factories at flat rate per 100 sq. ft. of floor area was violative of Article 14 of the Constitution. A Constitution Bench of this Court held that the method of levy of tax on the basis of floor area was against the provision of the Act and the Rules made thereunder and that the rateable value of the property must be assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment was changed from acre to hectare and the rate of tax in Schedule I was raised to Rs.50 per hectare. The tax was payable in respect of 2 hectares of plantations or more with an exemption for the first hectare. According to the new Schedule 11 the extent of plantation for the purpose of tax in the case of Cocoanut, Arecanut, Rubber, Coffee and Pepper plantations was arrived at by dividing the total number of trees, plants or vines standing thereon by a number specified in each case. Twyford Tea Co. challenged the Act after amendment mainly on the ground of violation of Article 14 urging that there were differences of fertility and rainfall in the different areas where the plantations were situated and figures compiled by the Tea Board were placed to show the differences in yield between different estates, and Moopil Nair's case (supra) was relied on to argue that the uniform tax on unequals resulted in dis-crimination (a) as between the tea plantations themselves and (b) as between different kinds of plantations. The legislative competency was also challenged. Hidayatullah, C.J. speaking for the Constitution Bench while dismissing the petitions held that the legislature had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... keeps apart as a distinct class hotel with higher economic status reflected in one of the indicia of such economic superiority. The presumption of constitutionality has not been dislodged by the petitioners by demonstrating how even hotels, not brought into the class, have also equal or higher chargeable receipts and how the assumption of economic superiority of hotels to which the Act is applied is erroneous or irrelevant. In Ram Prasad Narayan Sahi & Anr. v. The State of Bihar and Ors., [1953] 4 SCR 1129 wherein the Sathi Lands (Restoration) Act, 1950 declaring settlement of land with particular individual was challenged on the ground of discrimination. Mukherjee, J. speaking for the Court observed that the equal protection clause in Article 14 of the Constitution aimed at striking down hostile discrimination and applied to all persons similarly situated, but it was certainly open to the legislature to classify particular legislative objects; however, such selection or differentiation must not be arbitrary and should rest upon rational basis having regard to the object which the legislature had in view. The intrinsic complexity of fiscal adjustments of diverse elements and wid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as been observed that when a statute divides the objects of tax into groups or categories, so long as there is equality and uniformity within each group, the tax cannot be attacked as violative of Art. 14, although due to fortuitous circumstances or a particular situation some included within a group may get some advantage over others, provided of course they are not sought out for special treatment. It has repeatedly been held, for example, in Khyerbari Tea Co - (supra), Gopal v. State of U. P. I AIR 1964 SC - 370 (375): (1964) 4 SCR 869 and Steelworth v. State of Assam, (supra) and Ravi Varma v. Union of India, AIR 1969 SC 1094: (1969) 3 SCR 827, that as to what articles should be taxed is a question of policy and there cannot be any complaint merely because the legislature has decided to Nakara & Ors. v. Union of tax certain articles and not others. In D.S India, [ 1983] 1 SCC 305, Desai, J. even expressed that too microscopic a classification may also be violative of Art. 14. It was reiterated in Bank of Baroda v.-Rednam Nagachaya Devi, [1989]4 SCC 470 that the burden is always on the person alleging the violation of Art. 14 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty or capacity to pay. What, exactly is meant by equality in taxation may, therefore, have to be looked at from different angles in different kinds of taxes. This reminds us what John Stuart Mill said in Chapter V of Utilitarianism. "Some people may think that they have rational insight into the truth of the proposition that men ought to be taxed equally, others that they have such insight into truth of the proposition that men ought to be taxed in proportion to what they earn, others that they have rational insight into the truth of the proposition that men ought to be taxed more than in proportion to what they earn. Can they be sure that in thinking this, they are not simply, being influenced by the imaginative and quasi-aesthetic appeal of making the amount of payments proportionate to the number of people, or making it proportionate to their incomes?" It may be, that this truth is simply that our imagination disposes us to think in terms of distributive justice. It is, therefore, pertinent to observe that along with the insight into a particular truth or an aesthetic value, the expediency and practicability of a pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... milar circumstances. Nor does this requirement preclude the classification of property, trades, profession and events for taxation-subjecting one kind to one rate of taxation, and another to a different rate. "The rule of equality of taxation is not intended to prevent a State from adjusting its system of taxation in all proper and reasonable ways. It may, if it choses, exempt certain classes of property from any taxation at all, may impose different specific taxes upon different trades and professions." "It cannot be said that it is intended to compel the State to adopt an iron rule of equal taxation." In the words of Cooley: "Absolute equality impossible. Inequality of taxes means substantial differences. Practical equality is constitutional equality. There is no imperative requirement that taxation shall be absolutely equal. If there were, the operations of government must come to a stop, from the absolute impossibility of fulfilling it. The most casual attention to the nature and operation of taxes will put this beyond question. No single tax can be apportioned so as to be exactly just and any combinatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olicy, of course within constitutional limitations. The submission that the incidents falls differently on different classes of hotel owner is not tenable inasmuch as the impact is the result of having different measures of air-conditioned space by different owners. This luxury tax having not been based on income earned therefrom the classification of the owners on basis of income or stars is irrelevant. The question that different proportions of airconditioned spaces are used in different hotels and restaurants earning different proportions of income is also not relevant as the tax is not based on use of the space. The kinds of air-conditioning or the implements used are also not relevant. It is a tax on the mere provision for luxury and not on the hotel property or equipment, as we have already said. The measure or unit and the rate of taxation are uniform for all within the group subjected to tax. Further classification within the group was not considered necessary by the legislature which had wide latitude in the matter of classification keeping in view the nature of the taxable event. We accordingly hold that the luxury tax charged under s. 4 of the Act could not be said to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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