GOPAL MILLS CO. LTD Vs. BROACH BOROUGH MUNICIPALITY

JUDGEMENT

(1.) THESE six first appeals raise common questions of municipal taxation, under the Bombay Municipal Boroughs Act, 1925. We will first deal with First Appeal No. 28 of 1953 which arises out of special civil suit No. 4 of 1951 which was filed by the plaintiffs on April 7, 1951. In that suit the plaintiffs prayed for a declaration that certain taxes imposed by the Broach Municipality were illegal. They asked for an injunction restraining the municipality from recovering these taxes and they also asked for a refund of taxes for the year 1950 -51 which they had paid under protest and also refund of part of the amount of taxes paid for the year 1949 -50. Bills were submitted by the Broach Municipality to the plaintiffs on July 20, 1950, and these bills were for taxes for 1950 -51 and for arrears of part of the taxes for the year 1949 -50 in respect of properties used for industrial purposes. The plaintiffs paid the amounts claimed under the bills under protest between October 23, 1950, and December 19, 1950. The amounts paid were approximately Rs. 41,000 including distress warrant fee of about Rs. 1,856. They served upon the municipality a statutory notice under Section 206A of the Municipal Boroughs Act on December 31, 1950, and filed the suit out of which this appeal arises. The learned trial Judge gave relief to the plaintiffs in respect of the general sanitary cess which had been imposed on the laud belonging to the plaintiffs on the ground that no sanction had been obtained for sanitary cess on the land from Government. He also gave relief to the plaintiffs in respect of arrears for 1949 -50 relating to a tax on industrial premises, and the reason why this relief was given was stated by the learned Judge to be that the demand made was illegal because in that year the municipality's machinery to levy this tax was not ready. He, therefore, gave a declaration with regard to these two taxes and also decreed a refund to the extent of Rs. 7,287 -15 -0. He dismissed the plaintiffs' suit with regard, to the other contentions and with regard to the claim for refund to the extent of Rs. 33,436 -14 -0. The plaintiffs failed in substantiating their claim that the house tax levied by the municipality was illegal, that the general sanitary cess on buildings and on land under buildings was illegal, that the lighting tax imposed by the municipality was illegal, and the special educational cess was illegal. The plaintiffs have now come in appeal in respect of the reliefs which were refused to them by the trial Court.

(2.) A certain background to this controversy has got to be stated in order to appreciate what the contentions of the appellants are. On October 30, 1912, Government by a resolution gave sanction to the municipality to levy house tax on the market value on buildings and the assessment was to be according to the schedule to this resolution. On December 23, 1931, the Government passed another resolution giving sanction to the municipality to substitute the word 'capital.' for the word 'market'. Therefore the tax was to be on the capital value and not on the market value of the buildings. On April 29, 1944, Government by a resolution sanctioned the levy of a general sanitary cess on buildings and the rate was to be 8 annas on every rupee of the house tax. On February 20, 1947, Government by a resolution sanctioned house tax on capital value of lands and buildings and by this resolution they also increased the rate of house tax. They also sanctioned the imposition of a lighting tax which was to be 25 per cent, of the house tax, and they also sanctioned the imposition of a special education cess which was to be 50 per cent, of the house tax. On December 5, 1949, Government by a resolution sanctioned a house tax on business premises and industrial premises and the tax was to be assessed at a special rate of one and a half times the house tax on non -industrial and business premises. On February 20, 1950, Government by a resolution sanctioned an increase in the rate of house tax. These taxes have been challenged before us by Mr. Rajni Patel on behalf of the appellants on various grounds, and we now proceed to consider the grounds urged by Mr. Rajni Patel before us.

(3.) THE next contention which has not been very seriously pressed is that the taxation to the extent that it imposed a higher rate on business and industrial premises offends against Article 14 of the Constitution. It is suggested that if a discrimination is made between residential premises and business and industrial premises, the assessee owning industrial or business premises is denied equality before the law. It is clear that there is a rational basis for the classification between business and industrial premises and residential premises, and if a higher rate of tax is imposed upon business and industrial premises, it is pursuant to a classification which is clearly rational, and if the classification is made on a rational basis, then the resulting difference or discrimination cannot be said to offend against Article 14 of the Constitution. In this connection Mr. Thakore, who appears in two other appeals where similar questions arise, has also attempted to argue that this was a tax on business which was not within the competence of the State Legislature and therefore of the municipality. It is difficult to understand how this tax can be considered to be a tax on business. The tax is independent of any profits made in the business carried on in the particular premises. The tax would be imposed even if the business made a loss. Therefore it is clear that the real nature of the tax is property tax and not tax on business.