P SUNDARI BAI Vs. STATE OF KERALA

JUDGEMENT

(1.) The Kerala Building Tax Act, 1975 (Act 7 of 1975) has been assailed in these writ petitions as violative of Articles 14 and 19 of the Constitution and also of Article 301. The Act has a history. The first Building Tax Act 1961 imposed a tax on a uniform basis depending on the floorage or the plinth area of the building. The levy was struck down as unconstitutional by a learned Judge of this Court in Kunhali Haji v. State (1965 Ker LT 390). The decision was confirmed on appeal by a Division Bench -- vide State of Kerala v. Haji K. Kunhipokker (1966 Ker LT 694) : (AIR 1967 Ker 114); and again on further appeal by the Supreme Court --Vide State of Kerala v. Haji K. Kutty (1968 Ker LT 649 : AIR 1969 SC 378). Almost similar legislation in Mysore was struck down in Bhuvaneswariah v. State of Mysore (AIR 1965 Mys 170)) and in Bombay, in Lokmanya Mills v. Barsi Municipality (AIR 1968 Bom 229). The impugned Act was preceded by Ordinance 10 of 1974, replaced by Act 16 of 1974.

(2.) The Act has been passed under entry 49 of List II --Taxes on Lands and Buildings. The heading of the Act is ; "An Act to provide for the levy of a tax on Buildings," It comes directly within the scope of the entry. Indeed, the legislative competence was hardly disputed. In substance the Act levies a tax on the construction of buildings completed on or after the 1st April, 1973, the "capital value" of which exceeds 20,000/- rupees, The tax is on a graded scale provided in the Schedule. Section 2 is the definition Section. Section 3 is the exemption Section. Factories and workshops are among the exemptions. The definitions of 'annual value' and 'capital value' under Sections 2 (a) and 2 (f) may be noted.

(3.) The attack against the above provisions has been on the following grounds. The computation of capital value at a multiple of sixteen times the annual value has been attacked as arbitrary and excessive. It was pointed out that the Bank rate, at the relevant time, was 10%; and based on the theory of reasonable return tor investments, the multiple of sixteen was very much on the high side. Next, it was stated that all types of buildings, both residential and nonresidential, had been subjected to the same basis of assessment irrespective of the fact that in big commercial towns in particular, like Cochin or Calicut, non residential buildings have an infinitely greater value than the residential ones. Exemption in favour of go-downs and factories alone was stressed. A further objection was raised on the different modes of procedure sanctioned by the relevant statutes in regard to the ascertainment of annual value to which the capital value has been geared by definition. The procedural difference was pointed out with respect to the provisions of the Kerala Municipal Corporations Act governing the three Corporations of Trivandrum, Cochin and Calicut; the Kerala Municipalities Act governing the Municipalities; and the Kerala Panchayats Act governing areas under the administration of the different Panchayats. Under the Kerala Municipal Corporations Act, the relevant provisions are to be found in Part II Schedule II, Rules 13, 14 and 25 of the Act. In the Municipalities Act, the relevant provisions are Section 150, and Schedule II Rules 8 and 9 and Section 100 Schedule II Rules 10, 13, 14, 24 (b) and Rule 29. In the Panchayats Act, the relevant provisions are Section 144 (2) of the Act and Rules 10 and 11 of the Taxation and Appeal Rules (see also Section 68, and Rules 3 and 4 of the Building Tax Rules, 1963). These provisions have been explained in para. 6 of O. P. No. 1333 of 1977 (to select only one instance). Attention was also called to Section 102 of the Municipal Corporations Act. Based on the above provisions, the inequities pointed out were that while the impugned Act itself purports to levy a tax on buildings - and not on lands -- the base of the tax chosen being annual letting value, and the procedure for assessing the same having been sanctioned by the provisions of the different statutes noticed supra, the value of the site of the building also enters into the calculation. Further, the procedural inequality disclosed by the three statutes was stressed. Under the Municipal Corporations Act, the annual value to be fixed by the Commissioner is subject to an appeal to a Standing Committee of the Corporation and a further appeal to the District Court having jurisdiction over the city, with a further prospect of review by the High Court on a reference on certain limited grounds. In the case of Municipalities and Panchayats on the other hand, the annual values are final-ly fixed by the executive authority who functions also as the revisional authority; and further, from the decision of the revisional authority the right of appeal is provided to the Panchayat or the Municipal Council. The decision of the Municipal Council is final; and the decision of the Panchayat is subject to a further appeal, to the Deputy Director of Panchayats. Neither under the Panchayats Act nor under the Municipalities Act is there any right of appeal to a civil court in respect of the annual values fixed by the Panchayat or Municipal Council; nor any provision for review by a judicial tribunal. The three different procedural provisions under the three different statutes in respect of the determination of the same concept of annual letting value to which the tax has been geared, has been attacked as discriminatory. An attack was also raised on the fixing of the date for the commencement of the Act, namely, the 1st April, 1973, as arbitrary.