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TMI Blog1968 (1) TMI 21X X X X Extracts X X X X X X X X Extracts X X X X ..... rm of capital in a certain producing concern of the value of Rs. 58,458.79, National Savings Certificates and shares of Rs. 79,700 and bank deposits amounting to Rs. 5,012.19 and owes unsecured loans of Rs. 26,800 and non-business debts of Rs. 45,792.31. For the assessment year 1960-61, he apparently filed on January 25, 1961, a return disclosing total assets valued at Rs. 9,43,582.07 as on the valuation date which included Rs. 8,70,505 being the value of the buildings. On November 3, 1961, an assessment order was made by the respondent more or less on the basis of the return, practically accepting the value of the buildings as given by the petitioner. This order was reopened subsequently under section 17 of the Act on certain grounds but this is not of any importance in the present context. On December 6, 1961, October 29, 1962, and September 29, 1963, the petitioner filed his returns for the subsequent years 1961-62, 1962-63 and 1963-64 in which he declared these buildings as part of his taxable assets. Pending the proceedings for these years, the petitioner addressed a letter to the respondent on October 30, 1963, questioning the legality of the proceedings on the ground that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e incidence is on them, and lands and buildings are the subject-matter of the charge ... The tax under entry 86, List I, of the Constitution, is on the capital value of the assets of individuals and companies or on the capital value, of companies. This is not a tax on the asset itself but on its capital value which, as we think, means its real economic value. That again implies net value of the assets ...... Further the tax under entry 86 falls on the owner of the assets which is clear from the words used ' of individuals and companies ', and not occupiers ...... While the charge under entry 49 is on the land, and need not necessarily be from its owner but may be from the occupier thereof, the impost under entry 86 is not on the assets themselves of an individual but on their economic value, that is to say, their real-value as reduced by the value of encumbrances thereon and is on the owner of the assets. In other words, the tax under entry 86 is on the net economic value of the totality of the assets." The argument in the present case is that entry 86 does not include lands and buildings which is somewhat the converse of the submission in B. C. Co. Ltd. v. State of Madras but ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court in Sri Krishna Rao L. Balekai v. Third Wealth-tax Officer ". The Orissa High Court noticed that the decision of the Bombay High Court had since been. reversed by the Supreme Court in Patel Gordhandas v. Municipal Commissioner of Ahmedabad on a different point and not on a construction of entry 55 of List I and entry 42 of List II of the Government of India Act, 1935. But Sarkar J., who was in the minority in the Supreme Court decision, however, pointed out that " the Provincial Legislature had been given the power to tax units of lands and buildings irrespective of their value and the Central Legislature the power to tax the value of assets ". In our opinion, therefore, the contention of the petitioner that entry 86 of the Union List does not include within its scope lands and buildings must be rejected and with it also the submission for the petitioner that on the same lands and buildings on which urban land tax has been levied under entry 49 of the State List, wealth-tax cannot be levied by legislation under entry 86. As to the annual levy of wealth-tax, Mr. Vedantachari for the petitioner says that having regard to the collocation of the entries, legislative practice a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ses and a tax on succession or acquisition by survivorship in a joint family were intended to be levied for purposes of the local Government while a tax on land or land values and buildings was earmarked for purposes of local authority. Perhaps entry 2 in Schedule II covered land excluded from the purview of entry 1 of Schedule I. Entry 2 of Schedule I fixed the taxable event to the succession or acquisition by survivorship in a joint family. The scheme of distribution of taxing power adopted by the Government of India Act, 1935, was somewhat different. A clear cut dichotomy was made between agricultural and nonagricultural land. By entry 56 of List I, duties in respect of succession to property other than agricultural land were assigned to the Federal Government and so too by entry 55 of that List, taxes on capital value of the assets exclusive of agricultural land of individuals and companies as well as taxes on the capital of companies. Corresponding to entry 56 in the Central List, duties in respect of succession to agricultural land were assigned to the provinces by entry 43 of the Provincial List. Taxes oil lands and buildings, hearths and windows were also assigned to the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estate of the deceased and is independent Of the question as to who takes it." The learned Chief Justice, with whom Varadachariar J. agreed, further held that the word " succession " in entry 56 was not capable of a wide significance in the dictionary sense so as to comprehend every kind of passing of property but the word had been used in the entry in the sense to be gathered from the provisions of the Indian Succession Act which broadly divides the subject of " succession " into " testamentary " and " intestate " succession, the ordinary meaning of succession being the transmission by law or by the will of man, to one or more person's of the property and the transmissible rights and obligations of a deceased person. The court also in support relied on the indication by the collocation of the words " wills ", " intestacy " and " succession " in entry 7 of List III and the language in entry 21 in List II the corresponding provision in respect of agricultural land which speaks of " transfer, alienation and devolution " and which also corresponds not only to entry 7 in List III, but also to entry 8, that is to say, transfer of property other than agricultural land; registration of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hip, partition and adoption (entry 5 of List III), transfer of property other than agricultural land (entry 6 of that List) and transfer and alienation of agricultural land (entry 18 of List II). Mr. Vedantachari's argument is that entry 86 in List I of the Constitution of India has been inserted providing for levy of tax on the capital value of the assets, exclusive of agricultural land on the occasion of the devolution of such assets on modes other than those comprehended by the other taxing entries in the Union List. He says that the tax under that entry is attracted only on mutation or devolution of the assets. Though the argument is attractive, it is not, in our opinion, sound or correct. It is true that there is nothing in the language of entry 86 to clearly indicate the event of the periodicity of the charge. But that would not, in our opinion, enable us to restrict the plain scope of the entry. A head of legislative power, as a rule, should be given its widest amplitude except to the extent the language clearly and either expressly or by necessary implication limits it. In a scheme of distribution of legislative power in a system of federal set up consisting of the Union ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... grammatical and natural sense. Where the language of an entry is clear and unambiguous, it is not, in our opinion, permissible to depart from its plain tenor and scope, and import into it extraneous considerations in order to cut down or restrict its ambit and meaning. In fact, where the language is express and plain, no problem of construction normally arises. Where, however, there are two parallel or related entries in the same or different Lists, the apparent conflict will have to find its solution from a harmonious reading of such entries and an attempt at reconciliation for delimiting the mutual scope and ambit of such entries. If the language ex facie is not plain or is ambiguous then naturally the aids of construction will have to be resorted to which will include sometimes reference to previous history and practice of legislation." Now what does entry 86 say ?-" Taxes on the capital value of the assets, exclusive of agricultural land, of individuals and companies; taxes on the capital of companies." That means an imposition or charge on the net value of the assets not including agricultural land. The substance of the taxing power is not trammelled or limited but is of wid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and entries 47 and 48 in List II confer powers of taxation with reference to the subjects of legislation under entries 5 and 6 in the List III. He is partly right in so far as the powers in relation to estate duty and duties in respect of succession to property are concerned. But we are not satisfied that entry 86 in List I is intended to cover an impost on movement or mutation of property otherwise than by death or by succession. We recognise that devolution by survivorship or in a manner of speaking, by partition, adoption, etc., has not been made the taxable event by any specific tax entry in the first two Lists. But, on that account, we do not feel justified to cut down the scope of entry 86. If the intention of entry 86 is as contended for the petitioner, there is no reason why a similar taxing power should not have been accorded to the State legislature to tax on the capital value of agricultural lands. Entry 49 in List II provides for taxes on lands and buildings but the nature and scope of the tax contemplated by that entry are essentially different from those under entry 86 in List I as has been held in B. C. Co. Ltd. v. State of Madras . Further, " buildings " which ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ealth-tax . One other limb of the argument for the petitioner is that when entry 49 in List II includes lands and buildings on the principle that the specific excludes the general, entry 86 in List I should be construed as excluding lands and buildings. The answer is found in Vysyaraju Badri Narayanamurthy v. commissioner of Wealth-tax . If the argument is correct, there is no reason why entry 86 only excludes from its scope agricultural lands while, if that was the intention, the framers of the Constitution could have well expressly excluded lands and buildings, and not merely agricultural land. As for legislative practice, there is little of it so far as wealth-tax is concerned. Where there is ambiguity, legislative practice may, to a measure, be of assistance in construction and in that case it will be relevant and can be taken into account: State of Madras v. Gannon Dunkerley Co. (Madras) Ltd. and B. C. Co. v. State of Madras. We have already referred to the Scheduled Taxes Rules and the distribution of legislative power relevant to present purposes in the Government of India Act, 1935, and also the Constitution. Wealth-tax as such was not known in our country prior to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me percentage of income, an income-tax and a wealth-tax would amount to the same thing. The two differ precisely because some property yields a large money income, other property a small income (or no money income at all) in relation to its current market value." He seems to think that annual tax on wealth is some sort of a supplement to tax on income, for, in his view, if a property does not yield money income, it must either yield an equivalent psychic income to the owner or it must be held in the expectation of a certain appreciation in value which makes it at least as attractive to the holder as other property on which a current money return is obtained. The capital gains brought within the scope of income taxation would seem to stand on a different footing. Such gains are treated as deemed income while the annual tax on wealth is a tax on the capital value of the assets, its incidence being measured at so much percentage on the net value as representing perhaps a part of the real or psychic income from such value. The concept of tax on capital value of the asset is sui juris and is not relatable to any legislative practice in respect of mutation taxes. We are, therefore, una ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Alberta. These bills related to taxation of banks and regulation of their business. It was found that the effect of the legislation was to prevent the banks from carrying on their business. The tax proposed was based on the paid-up capitals and on the reserve funds of the banks wherever situated. The rate of taxation was prohibitive and was known to the Alberta Legislature to be prohibitive. In striking down the legislation the Privy Council said at pages 57 and 58 : " It was rightly contended on behalf of the appellant that the Supreme Court and the Board have no concern with the wisdom of the Legislature whose bill is attacked, and it was urged that it would be a dangerous precedent to allow the views of members of the court as to the serious consequences of excessive taxation on banks to lead to a conclusion that the bill is ultra vires. Their Lordships do not agree that this argument should prevail in a case where the taxation in a practical business sense is prohibitive." The Privy Council had an alternative ground to hold the legislation to be invalid with which we are not concerned in the present context. Mr. Vedantachari, with demonstrable force, contends that the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to article 19(1)(f) springs from that fact. Is the court entitled to test the validity of the Wealth-tax Act in relation to article 19(1)(f) by reference not to its own tax effect but to the aggregate effect of the incidence of various kinds of taxes imposed by different enactments of the Central and State Legislatures on different bases and for different purposes ? In our opinion, there is no warrant in the Constitution for striking down an enactment not because that by itself violates a constitutional limitation but on the ground that its effect combined or aggregated with the incidence of the different taxing legislations under different jurisdictions is having regard to the total burden and effect of such aggregation, violative of the fundamental right. We are inclined to think that the legislative competence with reference to the constitutional limits should be ascertained having regard only to each legislation by itself and the case of enactments passed by different Legislatures like the Centre and the State is a fortiori and they cannot on any view be taken together as one piece of legislation for the purpose. The petitions fail and are dismissed with one set of costs. Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X
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