Patna High Court
The Union Of India (Uoi) vs The Municipal Commissioner Of The ... on 17 December, 1958
Equivalent citations: AIR1959PAT216, AIR 1959 PATNA 216
Author: V. Ramaswami
Bench: V. Ramaswami
JUDGMENT Ramaswami, C.J.
1. In the suit which is the subject-matter of this appeal the plaintiffs prayed for a decree for arrears of municipal taxes with regard to certain holdings owned and possessed by the defendant. It was alleged that the holdings were situated within the limits of the Bhagalpur Municipality and were subject to taxation under the Bihar and Orissa Municipal Act (VII of 1922). The amount of quarterly taxes payable for the third quarter of 1939-40 was Rs. 269/3/9.
The quarterly taxes were enhanced for the years 1944 to 1946 to Rs. 283/15/3 and for the years 1948-47 to Rs. 333/-/9. With effect from the first quarter of 1947-48 the quarterly taxes were enhanced to Rs. 365/1/-. In spite of the enhancement the defendant continued to pay at the old rate of Rs 255/8/6. The plaintiffs, therefore, brought the suit far recovery of a sum of Rs. 8500/-, being arrear of taxes from the third quarter of 1939-40 up to the third quarter of 1951-52.
The suit was contested by the defendant on the ground that the holdings were admittedly the property of the Central Government and the plaintiffs were not entitled to any decree for municipal taxes in the absence of any notification of the Central Government authorising the levy of taxes under Section 3 of the Railways Act (Act XXV of 1941). It was also contended that the plaintiffs' claim would otherwise be barred under Section 154 of the Government of India Act of 1935 and Article 285 of the Constitution of India.
It was alleged that no notification sanctioning the levy of the taxes was issued by the Central Government and, therefore, the plaintiffs were not entitled to recover the amount of the taxes claimed. The trial court dismissed the suit, but on appeal the lower appellate court has reversed the decree of the trial court and granted a decree to the plaintiffs in part for the municipal taxes claimed for the period from the third quarter of 1945-46 up to the third quarter of 1951-52, together with proportionate costs.
2. The sole question of law involved in this appeal is whether in the absence of the notification under Section 3 of the Railways Act (Act XXV of 1941) the plaintiffs are entitled to recover taxes in respect of the holdings that are admittedly the properties of the Union Government. As much of the argument in this case turned on the language of Section 154 of the Government of India Act, it is necessary to reproduce the section in full:
"154. Property vested in His Majesty for purposes of the Government of the Federation shall, save in so far as any Federal Law may otberwise provide, be exempt from all taxes imposed by, or by any authority within, a Province or Federated State:
Provided that, until any Federal law otherwise provides, any property so vested which was immediately before the commencement of Part III of this Act liable, or treated as liable, to any such tax, shall, so long as that tax continues, or continue to be liable, or to be treated as liable, thereto." It is necessary also to refer to Section 155 of the Government of India Act, which states as follows:
"155. (1) Subject as hereinafter provided, the Government of a Province and the Ruler of a Federated State shall not be liable to Federal taxation in respect of lands or buildings situate in British India or income accruing, arising or received' in British India:
Provided that-
"(a) where a trade or business of any kind is carried on by or on behalf of the Government of a Province in any part of British India outside that Province or by a Ruler in any part of British, India, nothing in this sub-section shall exempt that Government or Ruler from any Federal taxation in respect of that1 trade or business, or any operations connected therewith, or any income arising in connection therewith, or any property occupied' for the purposes thereof;
(b) nothing in this sub-section shall exempt a Ruler from any Federal taxation in respect of any lands, buildings or income being his personal property or personal income.
(2) Nothing in this Act affects any exemption from taxation enjoyed as of right at the passing of this Act by the Ruler of an Indian State in respect of any Indian Government securities issued before that date."
3. The two sections are complementary to each other and provide for the mutual exemption of the property of the Federation and the Federating States from taxation imposed by the other. The legal position in the English law is that the Crown is not bound by any statute, unless it is expressly named, and, therefore, the Crown is exempted from taxation unless it is rendered liable by the taxing statute either by express words or by-necessary implication.
As long ago as 1788 it was held by the Court of Appeal in Lord Amhcrst v. Lord Sommers, (1788) 2 TR 372, that certain premises Used as stables for the Regiment of Horse Guards were not liable to taxation. In 1857 a similar case arose with regard to liability to rates for occupation in respect of the 'Old Gun Wharf at Portsmouth: See R v. Stewart, (1857) 8 E1 and B1 360, and R v. Foster, (1857) 8 El and B1 380. It was held that the premises were exempt from the tax.
In 1883, in Coomber v. Justices of Berks, (1883) 9 AC 61, it was again held that a building used for the Country Police Station was free from liability to the poor-rate. At page 76 of the report it was observed by Lord Watson as follows:
"The exemption of the Crown from the incidence of rating statutes is a general privilege, and is nowise dependent upon the local or imperial character of the rate. It takes effect in all cases when the Crown is not named in the statute, or, I should prefer to say, in all cases where the enactments do not take away the privilege, either in express terms or by plain and necessary implication. There is not, in my opinion, one kind of Crown, exemption from the Statute of Elizabeth and an other kind of Crown exemption from the Income-tax Acts. In other words, it appears to me that the existence of the same kind and degree of interest, on the part of the Crown, which is deemed in law sufficient to protect an occupier from liability to the poor rate, must also be held sufficient to shield the owner of the bare legal estate against any demand for payment of income-tax."
4. In a later case in Hornsey Urban Council v. Hennell, (1902) 2 KB 73, it was held by the King's Bench Division that the Crown, not being named in Section 150 of the Public Health Act, 1875, was not bound by its provisions and was not liable under that section to pay in respect of the property owned and occupied for the purposes of the Crown any expenses of paying a street on which that property abuts. There is a similar principle of exemption contained in Section 125 of the British North America Act, 1876, which lays down in general terms as follows : --
"No lands or property belonging to Canada or any Province shall be liable to taxation".
5. There is a similar provision in Section 114 of the Commonwealth of Australia Act, 1900, which states as follows :--
"A State shall not without the consent of the Parliament of the Commonwealth ...... impose any tax on property of any kind belonging to the Commonwealth nor shall the commonwealth impose any tax on property of any kind belonging to a State;"
6. In India the legal position as to exemption of Crown properties was not definitely settled prior to the passing of the Government of India Act, 1935. It was, for example, held in Bell v. Municipal Commissioners for the City of Madras, ILR 25 Mad 457 that: --
"Under the Indian Councils Act, 1861, a Provincial Council has, subject to the same restrictions as those imposed by the Act on the Governor General's Council, power to affect the prerogative of the Crown by Legislation."
and the opinion was expressed that according to the uniform course of Indian Legislation, statutes imposing duties or taxes bind the Government unless the very nature of the duty or tax is such as to be inapplicable to the Government. Different views were, however, expressed in other case; see, for example, Secy. of State v. Mathura Bhai, ILR 14 Bom 213. The position, therefore at the time of the coming into force of the Constitution Act of 1935 was that many properties vested in the Crown were treated as liable to taxation.
The proviso to Section 154 therefore makes it clear that the properties which were liable or were treated as liable to taxes immediately before the 1st April 1937, that is, the date of commencement of Part III o£ the Act would not enjoy the exemption given by the main provisions of the section. The Parliament may be taken to have used the words "liable" or "treated as liable" with a view to avoid a final answer to the question regarding the liability of the Crown property to taxation in India prior to the coming into operation of Part III of the Government of India Act, 1935.
7. In 1941 the Railways (Local Authorities, Taxation) Act (Act XXV of 1941) was promulgated, and Section 3 (1) of that Act reads as follows : --
"3. (1) In respect of property vested in the Central Government, being property of a railway, a railway administration shall be liable to pay any tax in aid of the funds of any local authority, if the Central Government, by notification in the Official Gazette, declares it to be so liable."
Section 4 of the Act provides as follows :--
"4. The Central Government may, by notification in the official Gazette, revoke or vary any notification issued under Clause (1) of Section 135 of the Indian Railways Act, 1890; and where a notification is so revoked any liability arising out of the notification to pay any tax to any local authority shall cease, and where a notification is so varied the liability arising out of the notification shall be varied accordingly."
8. It is necessary in this connection to refer also to Section 135 of the Railways Act (Act 9 of 1890) which is to the following effect : --
"135. Taxation of railways by local authorities : -- Notwithstanding anything to the contrary in any enactment or in any agreement or award based on any enactment, the following rules shall regulate the levy of taxes in respect of railways and from railway administrations in aid of the funds of local authorities, namely : --
(1) A railway administration shall not be liable to pay any tax in aid of the funds of any local authority unless the Central Government has, by notification in the Official Gazette, declared the railway administration to be liable to pay the tax.
(2) While a notification of the Central Government under Clause (1) of this section is in force, the railway administration shall be liable to pay to the local authority either the tax mentioned in the notification or, in lieu thereof, such sum, if any, as an officer appointed in this behalf by the Central Government may, having regard to all the circumstances of the case, from time to time determine to be fair and reasonable.
(3) The Central Government may at any time revoke or vary a notification under Clause (1) of this section xx x x x"
9. There is evidence in the present case that a notification was issued by the Central Government under Section 135 (1) of the Railways Act, declaring the defendant railway administration to be liable to pay the tax. The notification is No. 270, dated the 12th June, 1890, and is reproduced below : --
"Under Section 135 of the Indian Railways Act, 1890, the Governor-General in Council is pleased, pending further orders under that section, to declare every railway administration to be liable, from and after the 1st May, 1890, to pay every tax which it was lawfully required by or on behalf of any local authority to pay in aid of the funds of such authority during the year ended on the 30th April, 1890."
The effect of the notification was continued by another notification No. 136, dated the 5th April, 1893. It was, however, argued on behalf of the defendant that a fresh notification was necessary under Section 3 of Act XXV of 1941 before the plaintiffs would be entitled to realise municipal taxes for the periods in question. In my opinion, this argument is unsound and must be rejected.
I think the case falls within the purview of Section 4 of Act XXV of 1941, and unless the notification already made by the Central Government under Section 135 of the Indian Railways Act has been varied or revoked by the Central Government under Section 4 of this Act, the liability of the defendant to pay municipal taxes continues to exist. There is a contract between the language of Section 4 and Section 3 of Act XXV of 1941.
In my opinion Section 4 refers to the existing liability of the railway property to be taxed, and Section 4 constitutes the Federal law contemplated by the proviso to Section 154 of the Government of India Act. On the other hand, Section 3 of Act XXV of 1941 refers to railway properties which were brought into existence after the crucial date, namely, after the 1st April, 1937, and in regard to such properties the main provision of Section 154 of the Government of India Act applies, and these properties are exempt from all taxes imposed by any authority within the Province or Federated State "save in so far as any Federal law otherwise provides."
It is clear, therefore, that the Federal law contemplated by the main part of Section 154 of the Government of India Act is provided by Section 3 of Act XXV of 1941 and with regard to such properties, namely, railway properties, which were brought into existence after the 1st April, 1937, Section 3 of Act XXV of 1941 enacts that the railway administration would be liable to pay the taxes if the Central Government by notification in the official gazette declares them to be so liable.
My concluded opinion, therefore, is that the present case is governed by Section 4 of Act XXV of 1941 and not by Section 3 of that Act. It is admitted by the defendant in this case that the properties were in existence before the 1st April, 1937, and that municipal taxes were being paid by the defendant from before that date for these properties. It follows, therefore, that the liability of these properties to tax continued even after the 1st April, 1937, under the proviso to Section 154 of the Government of India Act, 1935, and also under Art, 285 of the Constitution which states as follows : --
"285. (1) 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 authority within a State.
(2) Nothing in Clause (1) shall, until Parliament by law otherwise provides, prevent any authority within a State from levying any tax on any property of the Union to which such property was immediately before the commencement of this Constitution liable or treated as liable, so long as that tux continues to be levied in that State."
In my opinion, Section 3 of Act XXV of 1941 has no application to this case; and as the notifications issued by the Central Government under Section 135 of the Railways Act continue to exist and have not been varied or revoked by the Central Government by Section 4 of Act XXV of 1941, the defendant is liable to pay municipal taxes for the period as decreed by the lower appellate court.
10. For these reasons I would affirm the decree of the lower appellate court and dismiss the appeal with costs.
Kanhaiya Singh, J.
11. I agree.