Patna High Court
Bank Of Bihar Ltd. vs Commissioner Of Buxar Municipality And ... on 28 July, 1965
Equivalent citations: AIR1966PAT357, AIR 1966 PATNA 357
JUDGMENT Tarkeshwar Nath, J.
1. This application by the Bank of Bihar Ltd. under Articles 226 and 227 of the Constitution of India is for the issuance of a writ in the nature of certiorari quashing the decision, dated the 30th May 1962, of the Revising Committee of the Buxar Municipality and the demand notices issued by the said Municipality.
2. The petitioner (the Bank of Bihar Ltd.) is a joint stook Company transacting business is a banker within the limits of the Patna Municipal Corporation, Patna, and the petitioner was assessed to the professional tax as a joint stock company under the provisions of Sections 128 (1) (i) and 177 read with Clause 1(1)(a) of the second schedule of the Patna Municipal Corporation Act (Bihar Act 18 of 1952). The petitioner has several branch offices in the State of Bihar, Uttar Pradesh and West Bengal and one of the branch offices was at Buxar. The petitioner received a demand notice for professional tax under Section 128 of the Bihar and Orissa Municipal Act (Act VII of 1922), on the 20th July 1981. and was directed to pay professional tax of Rs. 250 for the year 1960-61 (vide Annexure A). The petitioner filed objections mainly on the ground that the office or the petitioner at Buxar was only a branch office and not a joint stock company as mentioned in Clause 1 (a) of the fourth schedule to the Bihar and Orissa Municipal Act and the said branch office was not liable to be assessed as a joint stock company. Moreover, me monthly valuation in respect or the premises occupied by the said branch office was Rs. 100 only and as such it was liable, if at all, to professional tax under Clause 1 (b) (d) of the fourth Schedule to the said Act.
The copy of the objection petition has been marked Annexure 'B'. The said objections were considered by the Revising Committee of the Buxar Municipality and a copy (Annexure 'C') of its decision, dated the 30th May 1962, was lent to the petitioner by a letter, dated the 2nd June 1962. The copy of the letter has been marked Annexure 'D'. The said Committee overruled the objections holding that the branch office of the Bihar Bank at Buxar was carrying on banking business for making profit within the Buxar Municipal area and as such the Bank had to take out half yearly license and pay the professional tax assessed on it. The assessment of Rs. 125 as professional tax half yearly was held to be fully justified. On the 21st June 1962, the petitioner received another demand notice, dated the 7th June 1962, in respect of the professional tax for the two kists of 1960-61 and 1961-62 each and a copy of this demand notice has been marked Annexure 'E'. The ease of the petitioner was that the said notice of demand was ab initio void as it purported to be under Section 128 of the Bihar and Orissa Municipal Act and not under Section 82 (1) (ff) and Section 150-A of the said Act.
In these circumstances, the petitioner made a prayer for the quashing of the said order or the Revising Committee and the notices of demand. Subsequently, the petitioner filed additional grounds in support of the petition indicating that the Bihar Municipal (Amendment) Act. 1958 (Bihar Act XXXII of 1938) amending Section 82 and inserting Sections 150-A to 130-1 and the fourth schedule were ultra vires, in so far us it infringed the equality clause enshrined in Article 14 of the Constitution of India and imposed unreasonable restrictions in contravention of Article 19 (1) (g) of the Constitution of India. Another ground was that the proviso to Clause (sic) in Sub-section (1) of Section 82 as it stood after the amendment was discriminatory on the very face of it, inasmuch as it conferred uncontrolled and arbitrary powers on the State Government to exempt certain classes of profession, trade or callings, according to the sweet will or the executive.
3. Learned counsel for the petitioner (the Bank of Bihar Ltd.) submitted at the outset mat the Commissioners of Buxar Municipality (respondent 1) had no jurisdiction to assess the petitioner in respect of me business which was carried on by me branch office of the petitioner at Buxar and the petitioner as joint stock company was transacting business as a banker within the limits of the Patna Municipal Corporation only. The contention was that the petitioner had no doubt branch offices at several places and one happened to be at Buxar, but the head office of the petitioner was within the jurisdiction of the Patna Municipal Corporation and the profit, if any accrued at Patna and not at Buxar. Learned counsel pointed out that the branch office at Buxar was under the supervision and control of the Directors of the Bihar Bank Ltd. and the Joint stock company had one paid up capital and not separate ones in respect of each branch. The Bank of Bihar Ltd. had no doubt its branch offices in various towns within the jurisdiction of various Municipalities, but it was not liable to pay professional tax separately to all those Municipalities in respect of the business which was carried on by those branch offices and the present assessment in respect of the business of the branch office at Buxar was not justified even according to Clause 1 (a) of the fourth schedule to the Bihar and Orissa Municipal Act, 1922.
Before dealing with these contentions, I would refer to some of the provisions of the Bihar and Orissa Municipal Act, 1922. Section 82 (1) provide as follows:--
"The Commissioners may, from time to time, at a meeting convened expressly for the purpose of which due notice shall have been given, subject to the provisions of this Act and with the sanction of the State Govt., impose within the limits of the municipality the following taxes and fees, or any of them:--
*** *** (ff) a tax on the trades, professions, callings and employments specified in the Fourth Schedule at such rates not exceeding the rates specified therein as may from time to time be determined by the Commissioners at a meeting:
Provided that the rates determined by the Commissioners at a meeting shall be subject to exemption of classes of professions, trade and callings to be taxed as the State Govt. may direct.
Section 150-A reads thus:
'Tax on professions, trades, callings and employments.--When it has been determined that a tax shall be imposed on professions, trades, callings and employments, every person who exercises within the Municipality, either by himself or by an agent or representative, any of the professions, trades, callings or employments specified in the Fourth Schedule and who is liable to pay such tax, shall take out a half-yearly license and pay the tax assessed on him in pursuance of Clause (ff) of Sub-section (1) of Section 82:
Provided that such tax shall be imposed on the income accrued within the municipality during the year next preceding the year for which the tax is imposed.
Provided further that nothing in this section shall be deemed to apply to any person who exercises any such profession, trade, calling or holds any employment within the municipality, and whose taxable income does not exceed fifteen hundred rupees per annum or the value of whose place of business does not exceed ten rupees per mensem or whose income from employment does not exceed twenty-four hundred rupees per annum;
Provided also that any person liable to pity the tax under this section may, if he so desires, on application to the Commissioners, take out a yearly license on payment of the full amount of the tax due for the whole year:
Provided also that the grant of such a license shall not be deemed to affect the liability of the licensee to take out a license under any other sections of this Act.
Explanation:--(1) The taxable income of any person liable to pay the tax under this section shall be deemed to be the amount computed in accordance with the provisions of the Indian Income-tax Act, 1922, and where any such person is not subject to assessment of income-tax under the said Act, his taxable Income shall be the amount which shall be computed, so far as may be, in accordance with the procedure laid down in the said Act.
2. The onus of proving the amounts of the taxable income computed under the said Act shall lie on the person liable to pay the tax under this section." The Fourth Schedule according to Sections 82(1)(ff) and 150-A is reproduced below, so far it is relevant.
"Tax on trades, professions, callings and employment, Every license shall be granted under one or the other of the clauses mentioned In the second column of the following table and there shall be paid half-yearly from 1st April to 30th September and 1st October to 81st March for the same a tax not exceeding the amount mentioned in that behalf in the third column or the table.
Serial No. Classes Maximum half-yearly Tax 1 2 3 Rs.
A. p
(a) Joint stock company transacting business within the municipality for profit or as a benefit society of which the paid up capital is equivalent to
(a) Rs. 1,00,000 or more 125 0
0.
(b) Rs. 75,000 or more but less than Rs. 1,00,000 100 0
0.
(c) Rs. 50,000 or more but less than Rs. 75,000 76 0
0.
(d) Less than Rs. 50,000 50 0
0."
4. The position thus is that Section 82(1)(ff) of the Bihar and Orissa Municipal Act (hereinafter referred to as the Municipal Act) gives a general power to the Commissioners of a Municipality to impose within the limits of the Municipality a tax on the trades, professions, callings and employments specified in the Fourth Schedule at the rates indicated in that Schedule. The decision to impose such a tax has to be arrived at in a meeting of the Municipal Commissioners convened expressly for that purpose and the sanction of the State Government has to be obtained for imposition of the said tax. After this decision to impose such a tax, every person who exercises within the Municipality either by himself or by an agent or representative, any of the professions, trades, callings or employments specified in the Fourth Schedule has to take out a half yearly license in accordance with the provisions of Section 150-A. The Fourth Schedule lays down the scale of tax and a joint stock company transacting business within the Municipality for profit of which the paid-up capital is equivalent to rupees one lac or more, has to pay Rs. 125 maximum half yearly tax.
There are certain nets about which there can be no dispute. The petitioner (the Bank of Bihar Ltd.) is a joint stock company and it carries on the business of banking, having its head office at Patna. One branch office is at Buxar and the banking business is being carried on within the Municipality of Buxar. Learned counsel fairly conceded that the petitioner was transacting business within the Municipality of Buxar, but he contended that in spite of the transaction of that business the petitioner was not liable to professional tax according to 1(a) of the Fourth Schedule inasmuch as the head office of the petitioner was in Patna and the profit, if any, accrued within the jurisdiction of the Patna Municipal Corporation and not within the limits of the Buxar Municipality. He submitted that there was one balance sheet in respect of the banking business of the petitioner which disclosed the total assets, liabilities, profit and loss and as such the petitioner was liable to pay professional tax to the Patna Municipal Corporation only. In support of it, learned counsel referred to the judgment of Beassley, J. in the civil suit (on the original side) between Bombay Co. Ltd. v. Municipal Council, Dindi-gul, AIR 1929 Mad 146 (2).
The defendants, the Municipal Council of Dindigul purporting to act under Section 92 of the Madras District Municipalities Act, 1920, and Rule 16, Schedule 9 to that Act had assessed the plaintiff company to companies' tax for certain years. The plaintiff company paid that tax and then filed that suit to recover the sums so paid on the ground that it did not transact business in Dindigul. Section 92 provided that "if the Chairman publishes a notification under Section 80 that a companies' tax shall be levied every company transacting business within the municipality for profit or as a benefit society shall after the date specified in the said notification pay a half-yearly tax on its paid up capital on the scale shown in Schedule 4, if and as soon as it has transacted business in the municipality for the period laid down in Section 95". The plaintiff company used to purchase cotton and groundnuts at Dindigul through an agent but the contracts with reference to those purchases were concluded in Madras and the produce was sold abroad.
Besides this, the plaintiff company happened to be the managing agent of another company, namely, the Tinnevelly Cotton Press Co. Ltd.. which undoubtedly carried on business in Dindigul and elsewhere through the agency of the plaintiff company. A question arose as to whether the Municipal Council of Dindigul was entitled to assess the plaintiff company to companies' tax. It was held that the plaintiff company merely by reason of the purchase of goods at Dindigul through an agent could not be said to have transacted business at Dindigul But the other vexed question was as to whether the plaintiff company by carrying on business in Dindigul, namely, that of managing agent of Tinnevelly Cotton Press Co. Ltd., for which it was remunerated, became liable to tax under Rule 16 of Schedule 4 of the said Act or under its proviso. It was conceded on behalf of the plaintiff company that a part of the profits earned by it in respect of the management of the Tinnevelly Company's business was the remuneration or four annas per 300 Ibs. bale of cotton pressed at Dindigul. But the principal question was whether that remuneration was earned in Dindigul or it was the result of the management of the Tinnevelly Cotton Press Co. Ltd. by the plaintiff company in Madras where all the operations in the Madras Presidency of the Tinnevelly Cotton Press Co. were controlled in such a way as to-make the place, where the plaintiff company traded, Madras and not Dindigul.
His Lordship relied on the case of San Paulo (Brazilian) Ry. Co. v. Carter, (1896) AC 31, where it was held that where a trade was carried on either wholly in the United Kingdom or partly within and partly outside the tax to be levied was to be computed on full amount of the balance of the profits or gains of the trade and not only upon the actual sums annually received in the United Kingdom. Lord Halsbury had pointed out in the judgment of that case that it was a question of fact where the trade was carried on and that it might be true to say that the phrase might be understood in two different senses; it may be the locality of the goods or the land which were the subjects of the trade, or it may be the place in which the conduct and management, the head and brain of the trading adventure, were situated. Lord Halsbury was dealing with a case under the Income-tax Act and the tax had to be computed on full amount or the balance of the profits or gains of the trade. Beaseley, J. applied the tests Said down by Lord Halsbury and held that, although certain profits were earned in Dindigul for the plaintiff company, the business was controlled from Madras and the profits must be held to be earned in Madras, where the plaintiff Company's business was being carried on.
In those circumstances, his Lordship held that the plaintiff company was transacting its own business and that of managing agent for the Tinnevelly Cotton Press Co. in Madras, its profits were earned in Madras and that it was liable to be assessed in Madras and not in Dindigul. The facts of the case relied upon by learned counsel are entirely different. The plaintiff there happened to be only the managing agent for the Tinnevelly Cotton Press Co. and the affairs of the latter company were being conducted from Madras and the profits were earned in Madras. The Bank of Bihar Ltd. has several branches. One Branch office may be running at a loss, whereas the other might be able to earn some profit. It is true that the balance sheet of the petitioner would be one for the entire business, but the figures in that balance sheet can be arrived at by calculating the profit and loss of the several branch offices.
In any event the materials for coining to the conclusion as to whether any profit accrued within the limits of the Buxar Municipality are not available and it is not necessary to go into that question, inasmuch as the relevant words in 1(a) of the Fourth Schedule are "transacting business within the Municipality for profit". In order to come within the four corners of this clause, it is essential that the joint stock company should transact business within the Municipality for earning profit. In other words, the purpose of the business should be to earn profit and whether the profit actually accrues or not is besides the point. Once the position is accepted that the petitioner was a joint stock company and that it transacted business within the Buxar Municipality for profit, there can be no escape from the conclusion that the petitioner was liable to pay professional tax.
5. Learned counsel for the Commissioners of Buxar Municipality (respondent 1) refuted these contentions and submitted that the assessment in question was quite valid and justified. He referred to Landale and Clark Ltd. v. Chairman of Jalpaiguri Municipality, AIR 1937 Cal 551. The petitioners there were convicted under Section 500, Bengal Municipal Act, 1932 (Bengal Act 15 of 1932), for failure to take out a trade license and pay the half yearly trade tax under Section 182 and the conviction was upheld on appeal. An application in revision was filed before the High Court and the case of the petitioners was that they were not liable under the law to take out the license or pay the tax. Section 123, Sub-section (1), Clause (f) of the Bengal Municipal Act gave the statutory authority to the Municipality to impose a trade tax, and Section 182 created the liability to take out a trade license and pay the trade tax. Both the sections, required that the trade on which the lax was imposed, or in respect of which the license was to be taken out and the tax paid must be specified in Schedule 4 of the Act. The Sessions Judge had found that the branch office of the petitioners in Jalpaiguri purchased jute within the limits of the Jalpaiguri Municipality at rates not exceeding those intimated from the head office in Calcutta and the jute purchased was pressed, baled and stored, and then distributed direct to customers from Jalpaiguri according to instructions issued from Calcutta.
The Railway receipts were not sent direct to the customers, but were forwarded to Calcutta and sent on from there to the customers. Accordingly, it could not be disputed that what the company (Petitioners) did through its agent within the Jalpaiguri Municipality was "business" and that such business was for "profit". Schedule 4 of the Act laid down the scale of taxes and a company transacting business within the Municipality for profit or as a benefit society of which the paid up capital was equivalent to more than rupees 10 lacs had to pay Rs. 200 maximum half yearly tax. While considering Schedule 4, Biswas, J. observed as follows:
"It is not necessary under Schedule 4 that the profit must be received or realized within the municipality; all that is required is that the business should be for profit. It is not denied that the purchase of jute and its despatch thereafter were operations by which the company intended to make a profit. The Memorandum of Association of the Company has not been proved, but it is common case that they are dealers in jute, and the buying of jute must necessarily form an essential part of their business, The ultimate object of such business must be profit. It is hardly necessary to point out that the object of Section 182 is not to tax profits and hence the question as to the place of accrual of profit or whether profit has actually accrued or not is perfectly immaterial. Any argument based on cases on Income-tax Acts would be therefore wholly irrelevant."
Their Lordships approved the view taken by Jack, J. in Burmah Shell Oil Storage and Distributing Co. of India, Ltd. v. Sudhansu Bhusan Chatterjee, AIR 1936 Cal 477 and held that the imposition of the tax by the Jalpaiguri Municipality was quite valid and there was no ground for setting aside the conviction and sentence of the petitioners. This decision is be all fours and I have already indicated that as to whether any profit accrued to the present petitioner within the limits of the Buxar Municipality is immaterial. It should be mentioned here that Section 82 of the Bihar and Orissa Municipal Act corresponds with some minor changes to Section 123 of the Bengal Municipal Act, 1932. Clause (f) of Section 123 of the Bengal Municipal Act gave power to the Commissioners to imposs tax on the trades, professions and callings specified in Schedule 4 at such rates as may be fixed by the Commissioners within the maximum lates fixed in the said schedule. Clause (ff) of Section 82 of the Bihar and Orissa Municipal Act also authorises the Commissioners to impose such taxes and the word "employments" has been added in Clause (ff). The charging Section 150-A of the Bihar and Orissa Municipal Act corresponds substantially to Section 182 of the Bengal Municipal Act. Schedule 4 of each Act lays down the scale of taxes.
6. A question arose in AIR 1936 Cal 477 as to whether the petitioner company was actually carrying on trade in Howrah so as to be liable to take out a license. It was admitted that the company had a capital of not less than rupees twenty lacs and that they received oil from various places, and stored it in their Howrah premises and distributed it to their customers from there, the transactions being negotiated in Calcutta. In the ordinary sense of the term, they must be said to be carrying on their trade both in Howrah and in Calcutta and, although their Head Quarters were in Calcutta and the business was arranged in Calcutta, the evidence indicated that deliveries were made from Howrah on delivery orders which were sent from the Calcutta Office. As all the business arrangements were made in Calcutta, it was contended that the trade was being exercised in Calcutta only. It was held that, although the transactions were negotiated elsewhere the petitioner company was carrying on trade in Howrah and they were liable to take out a license. Jack, J. observed that the income-tax cases where tax was levied on profits were not quite analogous.
Learned counsel for respondent 1 referred to Bata Shoe Co. Ltd. v. Commissioners of Burdwan Municipality, AIR 1949 FC 12. A suit was instituted there by the Bata Shoe Co. Ltd., (hereinafter referred to as the Company) for declaration that the assessment of a trade tax on it by the Commissioners of the Burdwan Municipality under Schedule IV of the Bengal Municipal Act (15 of 4932) was illegal and ultra vires, and for certain other connected reliefs. The paid up capital of the company was rupees ten lacs and it manufactured and sold shoes. It had a large number of shops for retail sales, two of which were situated within the jurisdiction of the Burdwan Municipality and in respect of those two shops the Commissioners of the said Municipality had imposed a license tax of Rs. 200 under item 1 of Schedule IV of the said Act. One of the questions raised was that the Municipality had acted illegally in making the assessment. The view taken by Biswas, J., who delivered judgment in AIR 1937 Cal 551 was approved by their Lordships (of the Federal Court) and it was held that the assessment of the tax was valid and justified.
7. The second proviso to Section 150-A of the Bihar and Orissa Municipal Act lays down that nothing in Section 150-A would apply to any person who exercised any such profession, trade, cal-ling or holds any employment within the municipality, and whose taxable income did not exceed fifteen hundred rupees per annum or the value of whose place of business did not exceed ten rupees per mensem or whose income from employment did not exceed twenty-four hundred rupees per annum. Sub-section (2) of Section 150-A provides that the onus of proving the amounts of the taxable income computed under the said Act (Indian Income-tax Act) shall lie on the person liable to pay the tax under this section. The petitioner company made no attempt to establish that it came within the exception laid down in the second proviso. The Revising Committee dealt with these objections raised by the petitioner and found that the branch office of the petitioner at Buxar was carrying on banking business within the Buxar Municipal area for making profit and hence the assessment of professional tax was valid. It further found that there was nothing to indicate that the paid-up capital was less than rupees one lac. Accordingly, the objections were overruled by the order dated the 30th May, 1965 (Annexure 'C'). Having considered these matters, I am of the opinion that the assessment of the tax in question was valid and there is 110 merit in the objections raised by the learned counsel.
8. Learned counsel for the petitioner urged another point. He contended that Section 82(1) (ff) of the Bihar and Orissa Municipal Act gave an arbitrary power to the Municipal Commissioners to fix the rates of professional tax and this provision was hit by Article 14 of the Constitution of India. He submitted that, although the delegation of the power to the Municipal Commissioners to impose professional tax might be valid, yet the power given to them to fix different rates contravened the provisions of Article 14. This provision in the said Act, according to him, was discriminatory and it was unconstitutional. No principle or basis or policy for discrimination having been laid down the provision itself should be held to be ultra vires. Section 82(1)(ff) itself provides that the Commissioners can impose a tax on the trades, professions, callings and employments which were specified in the Fourth Schedule at such rates not exceeding the rates specified therein. Section 150-A as well provides that every person who exercises within the Municipality either by himself or by an agent or by a representative any of the professions, trades, callings or employments specified in the Fourth Schedule has to take out a half yearly license.
The position thus is that Sections 82(1)(ff) and 150-A have to be read along with the Fourth Schedule which lays down the scale of taxes payable by the joint stock companies, mill Owners, merchants, bankers, commission agents, brokers, legal practitioners and other persons mentioned in that Schedule. The maximum half yearly taxes have been fixed in that Schedule. All joint stock companies transacting business within the Municipality for pro-fit or as a benefit society of which the paid up capital was equivalent to rupees one lac or more are liable to pay Rs. 125 maximum half yearly tax separately. If the paid up capital is Rs. 75,000 or more but less than rupees one lac, then the maximum half yearly tax is Rs. 100 only. It cannot be said that, according to this Schedule one joint stock company having a paid up capital of rupees one lac or more will pay Rs. 100 maximum half yearly tax and the other joint stock company having the same amount of paid up capital is liable to pay Rs. 125 maximum half yearly tax This kind of discrimination cannot be envisaged according to this Fourth Schedule. Moreover, it has not been shown in the present case that the Commissioners of Buxar Municipality have assessed professional tax at a rate lower than Rs. 125 half yearly in respect of any joint stock Company.
In AIR 1949 FC 12 its well it was observed that Schedule 4, which was a part of the Bengal Municipal Act, must be read along with Sections 123 and 182 and every attempt should be made to reconcile any seeming conflict which might appear to exist between those provisions. The maximum amount of half yearly tax has been fixed in the Fourth Schedule and it is open to the Municipal Commissioners to impose taxes within that limit and joint stock companies, having a paid up capital of rupees one lac or more cannot be asked to pay more than Rs. 125 as half yearly tax. Learned counsel for the petitioner referred to a further affidavit filed on behalf of the petitioner indicating that the Allahabad Bank Ltd. and the State Bank of India also had their branch offices at Buxar, but the Allahabad Bank Ltd., was assessed to professional tax in 1960-61 and the State Bank of India was not at all assessed. There is a supplementary affidavit on behalf of respondent 1 to the effect that the State Bank of India could not be assessed as it was exempted from all taxes under Article 285 of the Constitution of India and the Allahabad Bank of Buxar was not assessed earlier due to mistake of the employees of the Municipality. Article 285(1) of the Constitution of India provides that the property of the Union shall, save in so far as Parliament may by law otherwise provide, be exempt from all taxes imposed by a State or by any other authority within a State. So far the branch office of the Allahabad Bank at Buxar is concerned, there has been an assessment and the mistake has been rectified. I thus do not find any merit in the contention that the provisions of Section 82(1)(ff) contravened in any manner the provisions of Article 14 of the Constitution of India.
9. Learned counsel further urged that the proviso to Section 82(1)(ff) gave an unlimited and uncontrolled power to the State Government to exempt certain classes of professions, trades and callings from the payment of professional tax and this part of me proviso was unconstitutional. Learned counsel referred to Ram Krishna Dalmia v. Justice S.R. Tendolker, AIR 1958 SC 588 and pointed out the following passage at p. 546 from the Judgment of S.R. Das, C. J.
"...... the Court will strike down the statute if it does not lay down any principle or policy for guiding the exercise or discretion By the Government in the matter of selection or classification, on the ground that the statute provides for the delegation of arbitrary and un-controlled power to the Government so as to enable it to discriminate between persons or things similarly situate and that, therefore, the discrimination is inherent in the statute itself. In such a case the Court will strike down both the law as well as the executive action taken under such law A portion of this passage and other portion were quoted in Kunnathat Thethunni Moopil Nair v. State of Kerala, AIR 1961 SC 552. In this latter case, a question arose as to whether the Travancore-Cochin Land Tax Act 15 of 1955, as amended by a subsequent Act, was constitutional. Section 4 of that Act provided that subject to the provisions of that Act there shall be charged and levied in respect of all lands in the State, of whatever description and held under whatever tenure, a uniform rate of tax to be called the basic tax. Section 5 provided inter alia the rate of the tax which by the amendment, was Rs. 2 per acre and the basic tax charged and levied at that rate shall be the tax payable to the Government in lieu of any existing tax in respect of land. Section 7 provided that the said Act was not applicable to lands held or leased by the Government or any land or class of lands which the Government might, by notification in the Gazette, either wholly or partially exempt from the provisions of that Act A question arose about the validity of these provisions. The said Act obliged every person who held land to pay the tax at the 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. B.P. Sinha, C.J. observed as follows:
"The Act, in terms, claims to be a "general revenue settlement of the State' (Section 3). Ordinarily, a tax on land or land revenue is assessed on the actual or the potential productivity of the land sought to be taxed. In other words, the tax has reference to the income actually made, or which could have been made, with due diligence and, therefore, is levied with due regard to the incidence of the taxation. Under the Act in question we shall take a hypothetical case of a number of persons owning and possessing the same area of land. One makes nothing out of the land, because it is and desert. The second one does not make any income, but could raise some crop after a disproportionately large investment of labour and capital. A third one, in due course of husbandry, is making the land yield just enough to pay for the incidental expenses and labour charges besides land tax or revenue. The fourth is making large profits because, the land is very fertile and capable of yielding good crops. Under the Act, it is manifest that the fourth category, in our illustration, would easily be able to bear the burden of the tax. The third one may be able to bear the tax. The first and the second one will have to pay from their own pockets, if they could afford the tax. If they cannot afford the tax, the property is liable to be sold, in due process of law, for realisation of the public demand. It is clear, therefore, that inequality is writ large on the Act and is inherent in the very provisions of the taxing section. It is also clear that there is no attempt at classification in the provisions of the Act. Hence, no more need be said as to what could have been the basis for a valid classifloation. it is one of those cases where the lack of classification creates inequality. It is, therefore, clearly hit by the prohibition to deny equality before the law contained in Article 14 of the Constitution. Furthermore, Section 7 of the Act, quoted above, particularly the latter part, which vests the Government with the power wholly or particularly to exempt any land from the provisions of the Act, is clearly discriminatory in its effect and, therefore, infringes Article 14 of the Constitution. The Act does not lay down any principle or policy for the guidance of the exercise of discretion by the Government in respect of the election contemplated by Section 7."
The provisions of Sections 4 and 7 were declared to be unconstitutional, in view of the provisions of Article 14 and Sections 4, 5-A and 7 offended Article 19(1) (f) of the Constitution also. The question as to whether this proviso to Clause (ff) of Section 82 (1) was unconstitutional was raised in Misc. Judl. Case No. 1245 of 1962 and Misc. Judl Cases Nos. 514, 516 and 550 to 555 of 1963, Rohtas Industries Ltd., Dalmianagar v. State of Bihar and decided by this Court on the 5th May, 1965 (Pat), and it was held that the said proviso was not invalid. G.N. Prasad, J., who delivered the main judgment in those miscellaneous judicial cases referred to the decision of the Supreme Court in AIR 1961 SC 552 and observed that this decision was of no avail in the cases before him, as there was a significant difference between the terms of the second part of the proviso to Clause (ff) of Section 82(1) of the Bihar Act and Section 7 of the Travancore-Cochin Act, inasmuch as the Bihar Act contemplated power to grant exemptions to 'Classes' of professions, trades and callings to be taxed, whereas the Travancore-Cochin Act gave unrestricted power to the Government to exempt "any land" besides any 'class of lands' from the provisions of that Act, and, by reason of the power to exempt any land, the Government in the Travancore-Cochin Act had been given ,un-canalised, unlimited and arbitrary power to pick and choose in the matter of grant of total or partial exemption from the provisions of the Act.
His Lordship further pointed out that that was not the position in the Bihar Act and no power was given to the State Government to grant exemption to any particular individual at its sweet will. The power to grant exemption could only be exercised in respect of certain classes of professions, trades and callings to be taxed. His Lordship referred to AIR 1938 SC 538 and declined to strike down the said proviso to Clause (ff) as invalid. Another significant fact to be noted is that there was no scope for the application of the doctrine of severability in the Travancore-Cochin Act, inasmuch as the charging Sections 4 and 7 authorising the Government to grant exemptions from the provisions of the Act were the main provisions of the statute which had to be declared unconstitutional. The position with regard to the exemption clause contained in the said proviso to Clause (ff) is different. G.N. Prasad, J. referred to this aspect of the case in his judgment and observed that "even if the exemption clause Contained in the said proviso were to be struck down as invalid, the rest of the proviso and the main body of Clause (ff) would stand unaffected and only the provision for giving exemption from the professional tax to certain classes of persons would disappear". Learned counsel has not been able to indicate any ground for holding that the view taken in those miscellaneous judicial cases was erroneous. Besides this, the present case has nothing to do with the exemption clause contained in that proviso. The validity or invalidity of the said exemption clause will not, in any way, affect the imposition of the professional tax, so far the petitioner in the present case is concerned.
10. Lastly, learned counsel for the petitioner submitted that Section 82(1)(ff) of the Bihar and Orissa Municipal Act was unconstitutional, as the State Legislature had no authority to enact a law with regard to a tax on the capital value of companies, as such legislation fall within entry No. 86. of List I of the Seventh Schedule of the Constitution of India. He referred to the Fourth Schedule of the said Act which provided maximum rates of taxes, with reference to the paid-tip capital of joint stock companies transacting business within the municipality for profit and urged that Section 82(1)(ff) read along with Section 150-A and the Fourth Schedule meant to tax the share capital of the joint stock companies. This contention was made in Calcutta Chemical Co. Ltd. v. Bhagalpur Municipality, AIR 1962 Pat 465, as well, but was negatived. Learned Government Advocate for the State of Bihar (respondent 2) relied upon this decision. A Division Bench of this Court held in that case that the legislation contained in Section 82(1)(ff) and the Fourth Schedule of the Bihar and Orissa Municipal Act fell within item 60 of List II of the Seventh Schedule of the Constitution, under which the State Legislature had authority to make a law for imposing taxes on professions, trades- callings and employments.
Having regard to the language of Section 82(1)(ff) of the statute and the Fourth Schedule, and having also regard to the context and scheme of the Bihar and Orissa Municipal Act, their Lordships were of the opinion that to reality and in pith and substance the impugned legislative provisions fell within item 60 of the State List and not under item 86 of the Union List, Their Lordships' view was that the tax imposed by Section 82(1)(ff) of the Act and the Fourth Schedule was a tax on the trade of the company and was not a tax upon the share capital of the company, although the Fourth Schedule provided the yard-stick for measuring the quantum of tax to be imposed on joint stock companies, but that was only ancillary to the power of the State Legislature to tax trades and professions and callings. It was manifest that the ceiling of professional tax to be imposed on a joint stock company was measured with reference to the share capital, but that tax thereby did not become a tax upon the share capital of the company. Their Lordships further held, in that case, that there was no conflict or repugnancy between the provisions of Section 150-A and the Fourth. Schedule of the Bihar and Orissa Municipal Act. This decision was referred to and relied upon by G.N. Prasad, J. in Misc. Judl. Case No. 1245 of 1962 dated 5-5-1965 (Pat) and other cases (already referred by me) and his Lordship held that there was no scope for challenging the competency of the State Legislature in inserting Clause (ff) in Section 82(1) of the Act and incorporating Sections 150-A to 150-E and the Fourth Schedule in the Municipal Act. Learned counsel for the petitioner has not been able to show that the decisions of these two Division Benches were erroneous in any manner and should not be followed.
11. For the reasons set forth above, I am of the opinion that the assessment of the professional tax in question by the Commissioners of Buxar Municipality (respondent 1) was valid and the decision (Annexure 'C') dated the 30th May, 1962, of the Revising Committee of the said Municipality and the notices of demand cannot be quashed, The petitioner had not made out a case for grant of a writ in the nature of certiorari or any other writ. In the result, the application is dismissed with consolidated cost of Rs. 200.
U.N. Sinha, J.
12. I agree.