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TMI Blog2001 (12) TMI 70X X X X Extracts X X X X X X X X Extracts X X X X ..... when the property in question has already been subjected to tax, the question of any further tax liability under the Act can arise merely on account of the transfer of such property ? (3) Whether, the change in ownership is wholly inconsequential ? (4) Whether, section 3, which is the main charging section, does authorise fresh levy on a property which has already suffered tax ? (5) Whether, clause (c) of section 3(1B) of the Act subjects the assessee to pay tax on rebuilt or enlarged building on which one time tax has been paid ? and (6) Whether, sections 13 and 15 of the Act are violative of article 265 of the Constitution of India which clearly lays down that no tax shall be levied or collected except by an authority of law ?" The short facts leading to the above case are as follows : Petitioner No. 1, East India Hotels Ltd., is a company duly incorporated under the Companies Act. The company has its operations all over the country including at Jaipur and at Udaipur in the State of Rajasthan. Petition No. 2, Shir O. P. Arora, is the shareholder of the company and is director deposits. The land which has been acquired by the petitioner-company at Udaipur is being sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om it subleased the land measuring 27.9 acres. The aforesaid transaction has been recorded in a sub-lease deed dated March 21, 1996, and was duly registered with the Sub-Registrar of Deeds, Udaipur, on the same day. By the aforesaid sub-lease deed the petitioner company had transferred a smaller plot of 2 7.9 acres for the. remaining term of the lease, i.e., for a period of 69 years for construction and running thereon a first class medium rate hotel. However, respondent-No. 2 has initiated proceedings for fresh assessment by issuing notice under section 22 dated nil requiring the petitioner company to supply the necessary information latest by July 22, 1997. In due compliance' with the, aforesaid notice, the petitioner company, through its authorised representative, represented to respondent No. 2, inter alia, that in view of the option under section 3(1B) of the Act having already been exercised by the previous owner and an O. T. T. certificate having been issued by respondent No. 2, no further proceedings could validly be taken out against the petitioner company at all. The Assistant Director, Land and Building Tax Department, Udaipur, issued a notice dated August 29, 1997, u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,00,232 per annum for 1994-95, 1995-96 and 1996-97. By the same ex parte proceedings respondent No. 2 has also carried out an adjustment in terms of the amendment introduced in the Act of 1964 by the Finance Act, 1997, whereby the appointed date has been shifted to April 1, 1997, land a revaluation as on April 1, 1997, is required to be made under section 14 of the Act of 1964. Respondent No. 2 instead of carrying out a fresh valuation of the subject land has merely enhanced the tax liability to the maximum ceiling limit of 150 per cent. of the existing liability. Consequently, be has enhanced the annual tax liability to Rs. 1,49,47,348 and for, arriving at the aforesaid tax liability, the value has been enhanced to Rs. 1,75,11,88,000. As per the case of the petitioner, only after receipt of the assessment order, the petitioner company came to know that on October 3, 1997, the matter was purportedly fixed on October 13, 1997, and that due to the absence of the petitioner or its authorised representative, the ex parte best judgment assessment was made. It is submitted that the assessment order had been passed by the new incumbent in the office of respondent No. 2 who as per the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .18 crores. According to the petitioner, this action of respondent No. 2 also renders the alternative remedy prescribed in section 16(1) of the Act of 1964 as not only nugatory and onerous but also inefficacious and burdensome inasmuch as the petitioner company has been burdened with the requirement of depositing a minimum sum of Rs. 98,99,732 in case the petitioner company wishes to dispute any part or portion of the action of respondent No. 2. That being aggrieved and dissatisfied with the orders dated October 13, 1997, and October 28, 1997, and the assessment proceedings, the petitioner company submitted an application before the Rajasthan Taxation Tribunal, which had been dismissed in limine by the Tribunal vide order dated December 8, 1997. Being aggrieved by the aforesaid orders, the consequential demand, the recovery proceedings thereto, and the impugned order dated December 8, 1997, the petitioners have filed the present writ petition before this court. Shri Rajendra Mehta, learned counsel appearing for the petitioner, raised the following contentions at the time of hearing : (1) The levy of tax under the Act of 1964 is being done on the basis of entry 49 of List ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 13 shall be effective only when it is established that the owner has not already been paying tax. (9) Sections 13 and 15 of the Lands and Buildings Tax Act, 1964, are violative of article 265 of the Constitution of India. The writ petition was resisted by the respondents. According to them article 14 does not forbid reasonable classification of persons, objects and transactions by the Legislature for the purpose of attaining specific ends ; and, that, what is necessary in order to pass the test of permissible classification under article 14 is that the classification must not be arbitrary, artificial or evasive ; but, must be based on real and substantial distinction bearing a just and reasonable relation with the object sought to be achieved by the Legislature. The learned Advocate-General submitted that there is always a presumption in favour of the constitutionality of a statute and the burden is upon the person who attacks it to show that there has been a clear transgression of the constitutional principles. He submitted that another rule of equal importance is that laws relating to economic activities should be viewed with greater latitude than laws touching ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 15 of the Act whenever any land or building is acquired by transfer or otherwise or any building is built, rebuilt, or enlarged ; or, any change has taken place in the ownership of the land and building then the assessing authority can amend the assessment order as per the provisions of sections 13 and 15 of the Act. Though, in the instant case, it is true that the tax exemption certificate was issued to the original owner and, that, no liability can under the Act be cast on that person : but, since there is change of ownership, the proceedings can be initiated by the Assistant Director by giving a notice under section 22 of the Act in view of the provisions of sections 13 and 15 of the Act. Thus, it was submitted, a combined reading of section 3(1B), section 13 and section 15 of the Act makes it otherwise clear that when there is change of ownership the assessing authority can amend/reassess the assessment order. Arguing further, the learned Advocate-General submitted that different kinds of properties may be subjected to different rates of taxation and, so long as there is a rational basis for the classification, article 14 of the Constitution will not come in the way of such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fter the commencement of the Rajasthan Urban Land Tax (Amendment) Act, 1973, the tax on lands and buildings situate in such area shall be levied and collected with effect from the commencement of the year following the year during which the area is declared a cantonment or is constituted a municipality : (1A) for removal of doubt it is declared that the tax shall be levied on land or building or both separately as units. (1B) (a) An assessee may pay one-time-tax in lieu of the tax payable for each year under sub-section (1). (b) The one-time-tax shall be the amount of tax arrived at after multiplying the amount of yearly tax, assessed and levied under the provisions, of this Act, by the calculation factor, not exceeding ten, to be notified by the State Government in the Official Gazette, from time to time. (c) Where any building, on which one-time-tax has been paid, is so rebuilt or enlarged as to make the assessee liable to pay an enhanced or additional amount of tax under this Act, he shall be liable to pay the amount of enhanced or additional yearly tax or one-time-tax. (2) The tax shall be in addition to any other tax for the time being payable in respect of the land ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, made under section 15 or in any appeal under section 16 or revision under section 19, shall remain in force (a) for a period of three years from the date of commencement of the Rajasthan Urban Land Tax (Amendment) Act, 1973 ; or (b) for such further period not exceeding twenty years as the Government may direct. (2) (i) After the expiration of the period of three years referred to in clause (a) of sub-section (1), the Government may, and after the expiration of the further period referred to in clause (b) of subsection (1), the Government shall, direct revision of the tax. (ii) Notwithstanding anything in this section, fresh revision of tax shall be carried out with effect from 1st April, 2000, so however, that such revision shall not affect the lands and buildings for which one-time-tax in lieu of annual tax has already been deposited or is deposited under the provisions of sub-section (1B) of section 3, on or before 31st March, 2000." Vide notification No. FB(14)FD/Tax-Div. 97, dated April 1, 1997, State Government hereby directs that revision of tax be carried out and that such revision will take effect from 1st April, 1997, provided that such revision of tax on 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder as appears to it to be necessary by reason of (a) the rate of tax having been altered under the provisions of this Act; or (b) any change having taken place in the ownership of the land or building; except by way of inheritance ; or (c) the land or building having become, or ceased to be, liable to tax ; or (d) any building having been substantially damaged or destroyed or any building having been built, rebuilt or enlarged ; the order so amended or corrected shall, subject to any order in appeal or revision, be effective from the commencement of the year following the year during which any of the events mentioned in clauses (a) to (c) take place and in case of clause (d), from the commencement of the year following the year during which such building, rebuilding or enlargement is completed or such building or enlarged portion is occupied, whichever is earlier and in other cases, from such date as the assessing authority may direct : Provided that no order under this section shall be made unless the owner of the land or building has been afforded a reasonable opportunity of being heard and of producing evidence." In support of his contentions, Mr. Mehta cited the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee to pay his debts and to discharge his lawful obligations have to be taken into account. It is further held : "In certain exceptional cases, where a person owes no debts and is under no enforceable obligation to discharge any liability out of his assets it may be possible to break up the tax which is leviable on the total assets into components and attribute a component to lands and buildings owned by an assessee. In such a case the component out of the total tax attributable to lands and buildings may in the matter of computation bear similarity to a tax on lands and buildings levied on the capital or annual value under entry 49, List 11. But in a normal case a tax on capital value of assets bears no definable relation to lands and buildings which may or may not form a component of the total assets of the assessee. But entry 49 of List 11, contemplates a levy of tax on lands and buildings or both as units. It is not concerned with the division of interest or ownership in the units of lands or buildings which are brought to tax. Tax on lands and buildings ;Is directly imposed on lands and buildings, and bears a definite relation to it. Tax on the capital value of assets bears ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of levying tax under entry 49, List II, the State Legislature may adopt for determining the incidence of tax the annual or the capital value of the lands and buildings. But the adoption of the annual or capital value of lands and buildings for determining tax liability will not make the fields of legislation under the two entries over lapping. The two taxes are entirely different in their basic concept and fall on different subject matters'. The Supreme Court further observed that : "The requisites of a tax under entry 49, List 11, may be summarised thus : (1) It must be a tax on units, that is lands and buildings separately as units. (2) The tax cannot be a tax on totality, i.e., it is* not a composite tax on the value of all lands and buildings. (3) The tax is not concerned with the division of interest in the building or land. In other words, it is not concerned whether one person .owns or occupies it or two, or more persons own or occupy it. In short, the tax under entry 49, List II, is not a personal tax but a tax on property." D. G. Gouse and Co. (Agents) P. Ltd. v. State of Kerala, AIR 1980 SC 271 : The Supreme Court, in that case, while dealing with, entr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nditions must be satisfied, i.e., (i) it must be a tax on units, i.e., land and buildings separately as units ; (ii) the tax cannot be a tax on totality, i.e., it is not a composite tax on the value of all lands and buildings ; and (iii) the tax is not concerned with the division of interest in the building or land ; in other words, the tax was not concerned whether one person owned or occupied the land or building or two or more persons occupy or own it." One-time tax payment : Steel Authority of India Ltd. v. State of M. P., AIR 1999 SC 1630; [1999] 4 SCC 76 : In Steel Authority of India Ltd. v. State of M. P., the Supreme Court, at para. 25 observed as follows : "Though Mr. Bhanthia has urged that as no reply was sent to the letter of the State Government dated September 25, 1958, therefore, there was no contract under article 299 of the Constitution of India between the Central Government and the State Government regarding the non-payment of land revenue, we are unable to accept the contention of learned counsel inasmuch as by the conduct of the parties it is very clear that both the Governments agreed with the terms mentioned in the letter of the State Government d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... found is different from the one available here and nothing has been stated in the counter affidavit about the evils sought to be remedied. About the objects sought to be achieved nothing is stated in the counter affidavit except the plea raised in paragraphs 12 and 13 that it is a beneficial legislation to the extent that the vehicle owners need not visit the transport office for a period of 15 years. No data is given in the counter affidavit as discussed at the apex court case in State of Maharashtra v. Madhukar Balkrishna Badiya, AIR 1988 SC 2062. The said submission has no merits as the Supreme Court and the Division Bench of this court considered all the aspects elaborately and upheld the introduction of the one-time tax. A further contention that the above two judgments are in respect of two wheelers and three wheelers and, therefore, not applicable to the present case, cannot also be considered. There is no discrimination between the same class of vehicles. Therefore, in our view, the petitioners are liable to remit the amounts required under the Motor Vehicles Taxation Act. The contention of the petitioners that the Motor Vehicles Taxation Act is compensatory for the use of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 13 of the Rajasthan Land and Buildings Taxation Act, 1964, has been assailed. The learned Advocate-General has relied on the passage occurring in the judgment which reads thus : "The submission of Bafna is that in accordance with the provisions of article 245 of the Constitution of India, the power of legislation of Parliament and the State Legislature has been given and the Seventh Schedule is having three lists, namely, List I the Union List, List II the State List and List III the Concurrent List. Under List I, entry 86, authorises Parliament to legislate in respect of the tax on the capital value of the assets, exclusive of agricultural land of individual and companies ; tax on the capital of companies. List II, entry 49 provides for power to legislate 'tax on the land and building'. According to Mr. Bafna, the provisions contained in section 13(1)(b) or outside the legislative competence of the, State Legislature as the tax on transfer is in fact a tax on the capital value of the assets and not a tax on land and building." According to learned counsel for the petitioners, the legislative effect under the entry 49, List II, of the Seventh Schedule contemplates levy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll the transfers have been considered as a separate category. In order to see that the provisions of sections 13 and/or 14 of the Act are beyond the legislative competence or overlaps so as to fall within entry 86 of List 1, it has to be shown that the tax is leviable on totality of all assets owned by the assessee on the ground of aggregation. This is not the position. The tax here is on the land and building separately as units and not by aggregating different units. It is no doubt correct that the tax under entry 49, List II, is not concerned with the division of interest in the land or building or in other words, it is not concerned as to whether one person owns or occupies it or more persons own or occupy it, it is an assessment on the basis of the value of the land and building when it is so acquired or transferred. The persons who acquire by way of transfer or otherwise any property, constitute a separate category by themselves and the said provisions cannot be said to be violative of article 14 of the Constitution of India. The tax remains a tax on the land and building. The components of concept of tax namely measurement or value is the lands and buildings on which the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before the revising authority, as the case may be. It is held that a registered document would not be necessary nor the tax could be realised from two persons namely, builder and purchaser in respect of one unit and only that person who is owner in accordance with the definition of section 2(10) of the Act i.e., who is entitled to receive the rent shall be assessable in respect of each and individual separate unit. In the result, the writ petitions are partly allowed as indicated hereinabove. Parties are left to bear their own costs." The above judgment in Rajputna Hotels Pvt. Ltd.'s case, in our view, is not directly on the point and is distinguishable on facts and law. In the said case, the Division Bench appears to have examined the constitutional validity of section 13 of the Act. The court came to the conclusion that section 13 creates a further charge in respect of the land and building which is acquired by transfer or otherwise and this charge is based on the basis that the transferee cannot claim that the tax should be levied on the market value of the property as was assessable in the hands of the previous owner. The question regarding the applicability of section 13 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he law laid down by the Supreme Court for the purposes of article 141 of the Constitution of India. We may usefully refer to, in this context, the decision rendered by the Supreme Court in Kunhayammed v. State of Kerala [2000] 245 ITR 360 ; [2000] 6 SCC 359 and a few other judgments. In State of U. P. v. Synthetics and Chemicals Ltd. [1992] 87 STC 289 ; [1991] 4 SCC 139, the Supreme Court, at paras. 40 and 41, has observed as follows : " 'Incuria' literally means carelessness'. In practice per incuriam appears to mean per ignoratium. English Courts have developed this principle in relaxation of the rule of stare decisis. The 'quotable in law' is avoided and ignored if it is rendered, 'in ignoratium of a statute or other binding authority'. Young v. Bristol Aeroplane Co. Ltd. [1944] 1 KB 718 (CA), Same has been accepted, approved and adopted by this court while interpreting article 141 of the Constitution which embodies the doctrine of precedents as a matter of law. In Jaisri Sahu v. Rajdewan Dutbey [ 1962] 2 SCR 558 this court, while pointing out the procedure to be followed when conflicting decisions are placed before a Bench, extracted a passage from Halsbury's Laws of England ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be a law declaring to have a binding effect as is contemplated by article 141 of the Constitution of India. On a consideration of the entire material placed before us, the relevant rules and the decisions cited by learned counsel appearing on either side, we are of the opinion that the writ petition has to be allowed as prayed for the following further reasons. In the instant case, respondent No. 2, the assessing authority, has erred in proposing to subject the land under consideration to fresh assessment irrespective of the fact that the same had earlier been assessed in the hands of the previous owner who had also exercised the option in terms of the one-time tax scheme, prescribed under section 3(1B) of the Act and despite the certificate exempting the aforesaid land from future tax liability having been issued by his predecessor in violation of article 265 of the Constitution inasmuch as it seeks to levy and collect tax in violation of entry 49, List 11 of the Seventh Schedule as though it were being levied in accordance with the provisions contained in entry 86, List I of the Seventh Schedule to the Constitution. Thus the action of respondent No., 2 in initiating fresh proc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding or both separately as units. Under entry 49, List II of the Seventh Schedule, the State Legislature is competent to impose tax on lands and buildings or both as units. The State Legislature is not empowered under the said entry to impose tax on the capital value of the assets of a person. Such a tax on the total assets of the assessee can only fall within the domain of Parliament under entry 86 of List I of the Seventh Schedule to the Constitution of India. Land and building tax is thus not a tax on the assets of the person and, therefore, it is not a personal tax. In view of entry 49 of List II, the State Legislature is not competent to levy tax on the aggregate value of the assets of the person and thus no personal tax on the owner of the property is imposable. Therefore, the question of ownership of the property is irrelevant for levy of tax under the Act of 1964. In our view, when the tax under the Act of 1964 is upon the land or building; or, both, separately as units and when the property in question has already been subjected to tax the question of any further tax liability under the Act cannot arise merely on account of the transfer of such property. Under the schem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... " acquired by transfer or otherwise, used in clause (b) of this sub-section shall not include acquisition by inheritance", and section 15(b), which reads "any change having taken place in the ownership of the land or building ; except by way of inheritance" are beyond the legislative competence of the State Legislature. As already noticed, sub-section (1B) of section 3 of the Act provides for the payment of one-time tax. This section was introduced in 1988 to provide relief to the taxpayers who could discharge liability under the Act by depositing the one-time tax and free their mind from the anxiety to pay tax from year to year. Once such tax is paid, the property gets out of the purview of the Act and the same cannot be subjected to any further tax liability except in the circumstances as envisaged by clause (c) of sub-section (1B) of section 3 ; and, therefore, in our view, the liability to pay the tax is on the property and not on the owner and thus, if one time tax is paid in respect of a property, then there cannot be any liability to pay the tax in respect of such property even though the same is transferred. The benefit of one-time tax already paid is available to the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nlarged. The case on hand is not covered by clause (c) inasmuch as this only involves assessment of land. Hence, in view of the fact that one time tax in respect of the land in question has already been paid by the owner there is no question of amending the assessment order by subjecting the land to additional tax liability on the basis of change in its ownership. A property in respect of which one-time tax has been paid can only be subjected to tax liability in the hands of the owner or the transferee if it falls under the stipulations of clause (c). In this case, the exemption certificate has already been issued exempting the property in question from future liability under the Act and, therefore, in our view, no further assessment can be made by the authorities by way of reassessment or otherwise for re-determining the liability for payment of tax under the Act. The tax liability will only arise in a case where an additional portion is added or the property is rebuilt which will be subjected to separate assessment and the assessee will be at liberty to pay yearly tax on the basis of such separate assessment or the assessee may opt for payment of one-time tax in respect of suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntending to levy tax on the owners of the property are beyond the legislative competence and violative of article 265 of the Constitution of India and, therefore, are liable to be struck down. Accordingly, the writ petition, along with the petitions mentioned in the appended schedule, is allowed in the following terms : (a) The impugned assessment order for re-determination is quashed and set aside. Orders dated October 13, 1997 and October 28, 1997 and the demand notices issued in pursuance thereof are quashed and set aside. (b) It is declared that no fresh proceedings can be carried out in respect of land and building which has been once subjected to assessment and the option under the one-time tax scheme has been made in respect thereof. (c) Section 13(1)(b) and section 15(b), as referred to hereinabove and quoted hereinbelow "13. (1)(b) 'is acquired, by transfer or otherwise' and Explanation, .acquired by transfer or otherwise' used in clause (b) of this sub-section shall not include acquisition by inheritance." " 15. (b) any change having taken place in the ownership of the land or building ; except by way of inheritance or", are declared ultra vires the Constit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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