Full Judgment Text
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 2773 OF 2012
PARIVAR SEVA SANSTHA ..... APPELLANT
VERSUS
AHMEDABAD MUNICIPAL CORPORATION ..... RESPONDENT
W I T H
CIVIL APPEAL NO. 10694 OF 2016
J U D G M E N T
SANJIV KHANNA, J.
1
Section 127 of the Gujarat Provincial Municipal Corporations
2
Act, 1949 (Bombay Act No. LIX of 1949) , as applicable to the State
3
of Gujarat, post the Gujarat Act No. 2 of 2007 , empowers a
4
Municipal Corporation to impose property tax either under Section
5
129 based on the rateable value of buildings and lands, or under
1
“ 127. (1) For the purposes of this Act, the Corporation shall impose the following taxes, namely :—
(a)Property taxes either under section 129 or under section 141 AA;
[ * ]”
2
For short, ‘GPMC Act’. Originally, the Bombay Provincial Municipal Corporations Act, 1949.
3
The Bombay Provincial Municipal Corporations (Gujarat Amendment and Validation) Act, 2007
4
Hereinafter referred as the’Corporation’.
5
“ 129. For the purposes of sub-section (1) of section 127 property taxes shall comprise the following
taxes which shall, subject to the exceptions, limitations and conditions hereinafter provided, be levied
on buildings and lands in the City:—
Signature Not Verified
Digitally signed by
Indu Marwah
Date: 2022.11.24
16:39:03 IST
Reason:
[ * ]
Civil Appeal No. 2773 of 2012 & Anr. Page 1 of 24
6
Section 141AA based on the carpet area of the buildings and
lands. The common question of law which arises in the
aforementioned appeals is whether the appellants, namely, Parivar
7
Seva Sanstha and Bai Gulab Hargovandas Jagjivandasni Dikarina
8
Dikarina Will Trust , are entitled to exemption from levy of general
tax in terms of clause (b) to sub-section (1) of Section 132 in cases
where the Corporation has exercised the option to levy property tax
on carpet area method under Section 141AA of the GPMC Act. An
additional issue which arises for consideration in the appeal
preferred by Appellant No. 2 Trust relates to the challenge to Rule
9
8B(4)(i) of the Taxation (Amendment) Rules 2001 , as applicable to
the Ahmedabad Municipal Corporation, on the ground that it is
unconstitutional, illegal and arbitrary as it violates the principle of
equality enshrined under Article 14 of the Constitution of India.
2. The first issue should not hold us for long as when we assort and
pigeonhole sub-sections under Chapter XI of the GPMC Act, it is
(c) a general tax of not less than twelve per cent. 2 but not more than thirty per cent of their
rateable value, which may be levied, if the Corporation so determines on a graduated
scale;
[ * ]”
6
“ 141AA. For the purposes of sub-section (1) of section127, property taxes shall comprise the
following taxes which shall, subject to exceptions, limitations and conditions hereinafter provided, be
levied on buildings and lands in the City:
[ * ]
(c) a general tax which may be levied in accordance with the provisions of section 141B, if
the Corporation so determines on a graduated scale;
[ * ]”
7
Hereinafter referred to as ‘Appellant No.1 Trust’.
8
Hereinafter referred to as ‘Appellant No. 2 Trust’.
9
Schedule-A, Chapter VIII of the GPMC Act. For short, ‘Taxation Rules’.
Civil Appeal No. 2773 of 2012 & Anr. Page 2 of 24
crystal clear that Sections 129 to 141A of the GPMC Act are
grouped together and are applicable when property tax is payable
on annual letting value/annual rateable value, whereas provisions
from Sections 141AA to 141F of the GPMC Act apply when property
tax is payable on the basis of carpet area method. We do not find
any good ground and reason to hold that clause (b) to sub-section
(1) of Section 132 of the GPMC Act, which grants exemption to
buildings and lands or portions thereof solely occupied and used for
public worship or for public charitable purposes, would apply when
property tax is calculated and is payable on the basis of the carpet
area method, which is to be computed and calculated in
accordance with the provisions of Section 141AA to Section 141F
of the GPMC Act. This aspect has been examined threadbare in
the two impugned judgments passed by the Gujarat High Court,
with which we agree. However, for the sake of clarity and
convenience, we would briefly record our reasons.
3. As noticed above, Chapter XI of the GPMC Act deals with municipal
taxation and sub-section (1) to Section 127 states and gives an
option to the Corporation to impose property tax either under
Section 129, or under Section 141AA of the GPMC Act. Section 129
states that the property tax shall comprise of the taxes, which shall,
subject to the exceptions, limitations and conditions thereinafter
Civil Appeal No. 2773 of 2012 & Anr. Page 3 of 24
10
provided, be levied on buildings and lands in the city. Section 132
of the GPMC Act states that general tax shall be levied in respect
of all buildings and lands in the city, the rateable value of which
exceeds Rs.600/-, save when a case is covered by exceptions
enumerated and listed in clauses (a), (b) and (c) of sub-section (1)
to Section 132 of the GPMC Act. Clause (b) to sub-section (1) of
Section 132 states that buildings and lands, or portions thereof,
solely occupied and used for public worship or for public charitable
purposes are exempt from payment of general tax leviable under
Section 132 of the GPMC Act. In other words, exemption under
clause (b) only applies when general tax is payable under sub-
section (1) to Section 132 read with Section 129 of the GPMC Act.
Clause (b) to sub-section (1) of Section 132 per se and ex facie
10
“ 132. (1) The general tax shall be levied in respect of all buildings and lands in the City, the rateable
value of which exceeds six hundred rupees except:
(a) buildings and lands solely used for purposes connected with the disposal of the dead;
(b) buildings and lands or portions thereof solely occupied and used for public worship or for a
public charitable purposes;
(c) buildings and lands vesting in the Government used solely for public purposes and not used
or intended to be used for purposes of trade or profit or vesting in the Corporation, in respect
of which the said tax, if levied, would under the provisions hereinafter contained by primarily
leviable from the Government or the Corporation, respectively.
(2) The following buildings and lands or portions thereof shall not be deemed to be solely occupied
and used for public worship or for a public charitable purpose within the meaning of clause (b) of sub-
section (1), namely:–
(a) buildings or lands or portions thereof in which any trade or business is carried on; and
(b) buildings or lands or portions thereof in respect of which rent is derived whether such rent is
or is not applied solely to religious or charitable purposes.
(3) Where any portion of any building or land is exempt from the general tax by reason of its being
solely occupied and used for public worship or for a public charitable purpose, such portion shall be
deemed to be a separate property for the purpose of municipal taxation.”
Civil Appeal No. 2773 of 2012 & Anr. Page 4 of 24
does not apply to taxes payable in terms of Section 141AA on the
basis of the carpet area method.
4. Section 141AA, which is an alternative mode of taxation and an
option available to the Corporation to impose tax on the basis of the
carpet area method, states that the property taxes shall comprise
of the taxes which shall, subject to exceptions, limitations and
conditions thereinafter provided, be levied on buildings and lands in
the city. Clause (c) to Section 141AA states that a general tax may
be levied in accordance with the provisions of Section 141B, if the
Corporation so determines, on a graduated scale. Sub-section (1)
to Section 141B states that for the purpose of clause (c) to Section
141AA of the GPMC Act, general tax, subject to such exceptions,
limitations and conditions thereinafter provided (and not
thereinbefore provided), shall be levied annually on the buildings
and lands in the city at such rate per square meter of the carpet
areas of the buildings and of the areas of land, which thereinafter
in the enactment has been referred to as ‘the rate of tax’, as the
Corporation may determine. Sub-section (2) to Section 141B states
that for the purpose of levy of tax on buildings in the city under sub-
section (1) to Section 141B, the buildings may be classified into
‘residential’ and ‘buildings other than residential’ and the
Corporation may determine one rate of tax for residential buildings
Civil Appeal No. 2773 of 2012 & Anr. Page 5 of 24
and the other rate of tax for buildings other than residential. The
proviso states that it shall be lawful for the Corporation to determine
for residential buildings, the carpet area of which does not exceed
40 square meters, such rate of tax as is lower than the rate of tax
determined for residential buildings. Sub-section (3) to Section
141B states that the rate of tax determined under sub-section (1)
read with sub-section (2) to Section 141B shall not, in respect of the
residential buildings, be less than Rs.10/- per square meter of
carpet area and more than Rs.40/- per square meter of carpet area.
In respect of buildings other than residential, it shall not be less than
Rs.20/- per square meter of carpet area and not more than Rs.80/-
per square meter of carpet area. Sub-section (4) to Section 141B
states that the Corporation, subject to the Taxation Rules, may
increase or decrease or neither increase nor decrease the rate of
tax determined under sub-section (1) read with sub-section (2) and
sub-section (3) to Section 141B in the case of residential buildings
having regard to factors, like, market value of the land where the
building is situated, the year of construction of the building, type of
the building, the duration of existence of the building, the type of
building, and whether the building is self-occupied or tenanted.
Similarly, in the case of buildings other than residential, the
following factors, namely, market value of the land in the area in
Civil Appeal No. 2773 of 2012 & Anr. Page 6 of 24
which the building is situated, the duration of existence of the
building, the purpose for which the building is used, and whether
the building is self-occupied or tenanted are to be taken into
consideration.
5. Keeping in view the aforesaid legislative scheme, there is hardly
any scope to urge and argue that clause (b) to sub-section (1) of
Section 132 of the GPMC Act, which relates to and grants
exemption from payment of general tax when rateable value is
computable under Section 129 read with Section 132 of the GPMC
Act, would apply in cases where property tax is payable by the
carpet area method. General tax in terms of clause (c) to Section
141AA has to be computed subject to such exceptions, limitations
and conditions provided in Sections 141B or thereinafter. It would
be, therefore, correct to hold that provisions from Section 141AA to
Section 141F form a complete code when tax has to be computed
and paid on the carpet area method, and for such computation,
reference cannot be made to the provisions of Sections 129 to 133
which relate to property tax payable on annual rateable value. This
position is also made clear by Section 141F, which states that
provisions of Section 140 and 141A shall apply in relation to
property taxes levied under Section 141AA, subject to modifications
specified in Appendix I-A. Therefore, only provisions of Section 140
Civil Appeal No. 2773 of 2012 & Anr. Page 7 of 24
and Section 141A have been made applicable when property tax is
levied and is payable in terms of Section 141AA of the GPMC Act.
Clause (b) to sub-section (1) of Section 132 of the GPMC Act is not
attracted and cannot be relied upon when property tax is payable
under Section 141AA of the GPMC Act.
6. The second aspect has to be also answered against the Appellant
No. 2 Trust. Rule 8B of the Taxation Rules, which relates to the
increase and decrease of rate of property tax determined for
‘buildings other than residential’, refers to several factors which
result in an increase or decrease, or neither increase nor decrease,
in the rate of tax applicable to the carpet area. Sub-rule (1) to Rule
8B states that for the purpose of determining the rate of tax for
buildings other than residential, the increase and decrease, or
neither increase nor decrease, shall be in terms of sub-rules (2),
(3), (4) and (5) to Rule 8B. Sub-rule (2) to Rule 8B relates to the
‘location factor’, sub-rule (3) to Rule 8B relates to the ‘age factor’,
sub-rule (4) to Rule 8B deals with the ‘use factor’, and sub-rule (5)
to Rule 8B deals with the ‘occupancy factor’. The said sub-rules (2)
to (5) to Rule 8B specify the rate by the multipliers specified therein.
In some cases, as in clause (b) to sub-rule (4) of Rule 8B relating
to the ‘use factor’, it is stated that the designated rate shall be
neither increased nor decreased, in respect of buildings used as
Civil Appeal No. 2773 of 2012 & Anr. Page 8 of 24
specified therein, and in clause (c) to sub-rule (4) to Rule 8B, it is
stipulated that the designated rate shall be decreased by a
multiplier of 0.0 in respect of buildings used as specified therein.
There are illustrations in sub-rule (7) to Rule 8B of the Taxation
Rules, which elucidate the manner in which the computation is to
be made under Rule 8B of the Taxation Rules. Sub-rule (2) to Rule
8D states that for the purpose of sub-rule (2) to Rule 8B, the
Commissioner shall classify the area of the city in which the
buildings other than residential buildings are situated into four
classes, namely, I, II, III, and IV, having regard to the market value
of the lands in the area. The classification so made shall be revised
once every four years. Sub-rule (5) to Rule 8D states that for the
purpose of sub-rule (4) to Rule 8B, the Commissioner shall have
the power to decide which property would fall in the category
mentioned in sub-rule (4)(a)(i)(ii)(iii) and (iv) and sub-rule (4)(b) and
(c) of Rule 8B of the Taxation Rules. Rule 8C of the Taxation Rules
deals with property tax for commercial and industrial units and
states that the property tax shall be levied at the rates stipulated
therein.
7. Clause (a)(i) to sub-rule (4) of Rule 8B, which relates to commercial
properties, reads as under:
Civil Appeal No. 2773 of 2012 & Anr. Page 9 of 24
“(a) The designated rate shall be increased by
multiplying it –
(i) by 7.0 in respect of the buildings used as under:
Bank, Dispensary, Hospital, Clinic, Maternity home,
Laboratory, Central Government office, Post office,
Commercial and / or industrial office, Oil companies
office, Offices of Corporations, Tuition classes, Typing
institutes, godowns and warehouses of the properties
falling in the above categories and those buildings
which do not fall within any other sub-clause of this
clause.
xx xx xx"
8. It may be also relevant to refer to clause (a)(iv) to sub-rule (4) of
Rule 8B, which specifically relates to educational and specified
social institutions, and reads as under:
“ (a)
xx xx xx
(iv) By 2.0 in respect of the buildings used as under:
Private Nursery (Bal-Mandir), Private and Govt.
Schools, Private and Govt. Colleges, University
Campus, Museum, Community halls, Social institutes
run by public charitable trust (for the welfare of women,
old people, deaf, dumb and blind, physically
handicapped, mentally retarded people) and non
grantable schools.
xx xx xx"
9. It is an undisputed position that Appellant No. 2 Trust was using
portions of the property/building as a hospital or a clinic. In view of
the aforesaid position, sub-clause (i) to clause (a) to sub-rule (4) of
Rule 8B of the Taxation Rules would be applicable and thereby, the
Civil Appeal No. 2773 of 2012 & Anr. Page 10 of 24
designated rate has to be increased by applying the multiplier of
7.0.
10. The contention of Appellant No. 2 Trust is that their clinic/hospital
is being used for charitable purposes as the fee demanded from the
patients and users is not the actual market fee. Reference in this
regard is made to sub-clause (iv) to clause (a) to sub-rule (4) of
Rule 8B of the Taxation Rules, whereby a multiplier of 2.0 is to be
applied in respect of social institutes run by a public charitable trust
for the welfare of women, old people, deaf, dumb and blind,
physically handicapped and mentally retarded people. Our
attention has also been drawn to clause (b) to sub-rule 4 of Rule 8B
of the Taxation Rules, which states that the designated rate shall
neither be increased nor decreased when the building is used as
grantable schools run by public charitable trusts, boarding-lodging-
hostels run by public charitable trusts, and religious institutions,
dharma-shala, ashram, and library.
11. As far as clause (b) to sub-rule (4) of Rule 8B of the Taxation Rules
is concerned, the same is clearly distinguishable, and the ‘use
factor’ enlisted thereunder is a separate category; the category
being grantable schools run by public charitable trusts, boarding-
lodging-hostels run by public charitable trusts, and religious
Civil Appeal No. 2773 of 2012 & Anr. Page 11 of 24
institutions, dharma-shala, ashram, and library. Appellant No.2
Trust cannot claim any parity with the aforesaid ‘use factors’, even
though the hospital/clinic run by them are run by public charitable
trusts. Sub-clause (i) to clause (a) to sub-rule (4) of Rule 8B of the
Taxation Rules enlists all buildings used as hospitals, dispensaries,
clinics, maternity homes, etc. They have all been classified under
one head. No distinction is made whether they are run by public
charitable trusts or not. The legislature is entitled to club and treat
the buildings as per the ‘use factor’ alike without falling foul of the
right to equality, as enshrined under Article 14 of the Constitution of
India.
12. Recently, this Court in Manish Kumar v. Union of India and
11
Others , has exhaustively referred to the case law on the subject
of reasonable classification under Article 14 of the Constitution of
India vide paragraphs 210 to 230 to observe that Article 14 frowns
upon what constitutes hostile discrimination but does not bar
classification which is reasonable. To answer whether a
classification is reasonable, one must look beyond the classification
to the purpose of law. A reasonable classification is one which
includes all persons who are similarly situated with respect to the
11
(2021) 5 SCC 1.
Civil Appeal No. 2773 of 2012 & Anr. Page 12 of 24
purpose of law. The purpose of law may be either elimination of
public mischief or achievement of some positive public good.
Reference in this regard was made to the decision in State of
Gujarat and Another v. Shri Ambica Mills Ltd., Ahmedabad and
12
Another , which elucidates and explains the distinction between
under-inclusive and over-inclusive classification. A classification is
under-inclusive when the State benefits or burdens persons in a
manner that furthers a legitimate purpose but does not confer the
same benefit or place the same burden on others who are similarly
situated. An over-inclusive classification is one, where it imposes a
burden on a wider range of individuals who are included in that
class of those attended with mischief at which the law aims.
Piecemeal approach to the general problem is permitted in under-
inclusive classification on the ground that legislative dealing with
problems of classification is usually an experimental matter. It is
impossible to tell how successful a particular approach may be,
what dislocations might occur, what evasions might develop, and
what new evils might be generated in the attempt. Administrative
expedients must be forged and tested. This decision also
propounds that laws regulating economic activity should be viewed
differently from the laws which touch or concern freedom of speech
12
(1974) 4 SCC 656.
Civil Appeal No. 2773 of 2012 & Anr. Page 13 of 24
or religion, voting, procreation, rights with respect to criminal
procedure, etc. Judicial deference should be given to legislature in
the field of economic regulation viz. the constitutional requirement
and need to vigorously enforce equal protection clause to strike
down legislative action in the area of fundamental human rights.
Equally, this Court in State of Jammu and Kashmir v. Shri Triloki
13
Nath Kosa and Others , has held that there is always a
presumption in favour of the constitutionality of an enactment and
the burden is upon the person who attacks it to show that there has
been a clear transgression of constitutional principles. A provision
cannot be struck down as discriminatory on any a priori reasoning.
The question of classification is primarily for legislative judgment.
Power to classify being extremely broad and based upon
consideration of executive pragmatism, the judicature cannot rush
in where the legislature varily treads. Generally, the two-fold test
applied by the courts is (i) the classification must be founded on an
intelligible differentia , and (ii) the differentia must have a rational
relation with the object sought to be achieved by the legislature in
question. If the object itself is not discriminatory, it should be held
that there is a reasonable classification because it has a rational
relation to the object sought to be achieved.
13
(1974) 1 SCC 19.
Civil Appeal No. 2773 of 2012 & Anr. Page 14 of 24
13. This Court in the case of Municipal Corporation of Delhi v.
14
Children Book Trust , had the occasion to examine the
provisions of Section 115(4) of the Delhi Municipal Corporation Act,
1957, a provision which had granted exemption to land and
buildings or portions thereof used for charitable purpose from
payment of municipal general tax by charitable institutions. In the
context of the legislation, a distinction was drawn between
charitable purpose under Section 115(4), and as then defined under
the Income Tax Act, 1961, to observe that the test under the
municipal act is both qualitative and quantitative. In other words,
voluntary contributions or support as a mean of sustenance or
maintenance should be satisfied before the assessee was granted
exemption on the ground that the building was being used for
charitable purposes. In other words, where an assessee is making
systematic profits, even though that profit is utilised for charitable
purposes, the assessee cannot claim exemption. Thus, where the
assessee could survive without receiving voluntary contributions, it
would be liable to pay general property tax. The term ‘contribution’,
for the purpose of the statute, was interpreted as something that
cannot amount to compulsive donation. The underlying reasoning
14
(1992) 3 SCC 390.
Civil Appeal No. 2773 of 2012 & Anr. Page 15 of 24
behind the said judgment is to ensure that such institutions take the
burden and provide for municipal revenue, which is necessary and
required for local needs. In a democratic set-up, a municipality
requires the proceeds from the taxes for their own administration
and therefore, there is a need to leave to these municipalities the
power to impose and collect taxes.
14. The Statement of Objects and Reasons for Amendment Act No. 3
of 1999, while enacting the option to levy property tax by applying
the carpet area method, records that the levy of property tax did not
provide sufficient revenue to the Corporation to meet the escalating
cost concerns, particularly in view of rapid urbanisation in the cities.
It is in this background it was necessary to provide alternative tax
on buildings and lands based upon the carpet area method.
However, at the same time, the legislation has provided the
minimum and maximum rate of tax. The power is given to the
Corporation to increase or decrease the tax for residential and non-
residential properties according to factors like location, age and
type of buildings.
15. Another aspect which we cannot ignore is the need to have clarity
and uniformity in the rate of tax. Discretion or variation of the rate
Civil Appeal No. 2773 of 2012 & Anr. Page 16 of 24
of tax based upon ascertainment of details etc., always leads to
litigation.
16. This Court in State of Bihar and Others v. Sachchidanand
15
Kishore Prasad Sinha and Others , had set aside the judgment
of the Patna High Court striking down the assessment rules as
being violative of Article 14 of the Constitution of India by relying
upon the earlier decision in Twyford Tea Co. Ltd. and Another v.
16
The State of Kerala and Another , wherein the Constitutional
Bench by majority had held that the legislature must have a wide
range of selection and freedom in appraisal not only in the objects
of taxation, and the manner of taxation, but also in the
determination of the rate or rates applicable. A person, to succeed
on the ground of discrimination, must show hostile unequal
treatment. This is more so when uniform taxes are levied. In this
connection it was stressed:
“15….This indicates a wide range of selection and
freedom in appraisal not only in the objects of
taxation and the manner of taxation but also in the
determination of the rate or rates applicable.
16.…The burden of proving discrimination is
always heavy and heavier still when a taxing
statute is under attack. … The burden is on a
person complaining of discrimination. The burden
is proving not possible ‘inequality’ but hostile
15
(1995) 3 SCC 86.
16
(1970) 1 SCC 189.
Civil Appeal No. 2773 of 2012 & Anr. Page 17 of 24
‘unequal’ treatment. This is more so when uniform
taxes are levied.”
This judgment in Sachchidanand Kishore Prasad Sinha
(supra) also refers to the earlier decision in R.K. Garg v. Union of
17
India and Others , that the laws relating to economic activities
should be viewed with greater latitude than laws touching civil
rights. The economic mechanism is highly sensitive and complex,
laws are not abstract propositions, do not relate to abstract units,
are not to be measured by abstract symmetry and exact wisdom
and nice adaption of remedy are not always possible. Every
legislation, especially in economic matters, is essentially empiric,
and it is based on experimentation or what one may call the trial
and error method. It may not provide for all possible situations or
anticipate all possible abuses. There can be crudities or inequities
in complicated experimental economic legislation but on that
account alone it cannot be struck down as invalid. In the context of
the impugned legislation, it was observed that the simplistic
approach of classification adopted in the said case cannot be
rejected on the ground that it is possible to evolve a classification
to cater to several distinctions. More importantly, and for the
present context, it was observed in Sachchidanand Kishore
17
(1981) 4 SCC 675.
Civil Appeal No. 2773 of 2012 & Anr. Page 18 of 24
Prasad Sinha (supra) that even if it is so evolved, not only would it
be too complex and elaborate, it would leave too much discretion
to the assessing authorities and thereby eliminate one of the main
objectives of the rules therein. One of the objects of the rules was
to withdraw discretion which can result in harassment and constant
threats of revision. These observations are of relevance because,
in the present case, all hospitals, dispensaries, clinics, maternity
homes etc., have been classified under one head, and thereby the
levy of taxation in such cases simplifies and is uniform. Discretion
is eliminated. Examination of facts, etc. is not required. We do not,
therefore, think that the classification made vide sub-clause (i) to
clause (a) to sub-rule (4) of Rule 8B of the Taxation Rules is
discriminatory and violative of Article 14 of the Constitution of India.
The object and purpose of this classification is to avoid litigation and
complexities which may arise in case there is a distinct and
separate taxation of hospitals, clinics, maternity homes, etc., stated
and claimed to be run for charitable purpose.
17. Sub-clause (iv) to clause (a) to sub-rule (4) of Rule 8B of the
Taxation Rules applies to educational and social institutions run by
public charitable trusts for the welfare of women, old people, deaf,
dumb, blind, physically handicapped or mentally retarded people.
These are separate categories and cannot be confused and treated
Civil Appeal No. 2773 of 2012 & Anr. Page 19 of 24
similarly and at par with hospitals, clinics, maternity homes, etc, as
elucidated in sub-clause (i) to clause (a) to sub-rule (4) of Rule 8B
of the Taxation Rules.
18. At this stage, we may refer to the case law relied upon by the
counsel for the appellant and distinguish the same. In State of
18
Kerala v. Haji K. Haji K. Kutty Naha and Others Etc. , a uniform
rate of general/property tax was sought to be imposed based
entirely on the total floor area regardless of the age, the location
and the use of the building. Different tax slabs were provided where
the total floor area would be 1000-2000 sq. ft., 2000-4000 sq. ft.
and so on. It is in this background that the classification was struck
down as being arbitrary as it had imposed a uniform tax slab
regardless of the class to which the building belongs, the nature of
construction, the purpose for which it is used, capacity for profitable
use, and relevant circumstances which have a bearing on the
matters of taxation. The decision in Deputy Commissioner of
19
Income Tax and Another v. Pepsi Foods Limited , had upheld
the striking down of the third proviso to Section 254(2-A) of the
Income Tax Act, 1961 on the ground that it was arbitrary and
offended Article 14 of the Constitution of India as assessees who
18
1969 1 SCR 645.
19
(2021) 7 SCC 413.
Civil Appeal No. 2773 of 2012 & Anr. Page 20 of 24
were not even responsible for the delay in the decision before the
tribunal were clubbed with those assessees responsible for
delaying the proceedings. In this context, it was observed that
Article 14 of the Constitution of India applies to tax legislation, albeit
greater freedom in the joints must be allowed by the courts in
adjudging the constitutional validity of the same. However, where
tax is imposed deliberately with the object of differentiating between
persons similarly situated, such tax is liable to be struck down.
Similarly, in State of Uttar Pradesh and Others v. Deepak
20
Fertilizers & Petrochemical Corporation Ltd. , a retrospective
notification withdrawing exemption in respect of NPK 23:23:0
fertilizer, while granting it to other NPK fertilizers, was struck down
as without there being any rational basis. The judgment specifically
records that the State was not able to satisfy that there was a good
reason for introducing a fresh set of notifications for one period and
another set of notifications for another period, either by amending
the notification or introducing a new notification to withdraw the
benefit given earlier. In Union of India and Others v. N.S.
21
Rathnam and Sons , noticing that the exemption was denied to
those who had paid customs duty under an alternative provision,
20
(2007) 10 SCC 342.
21
(2015) 10 SCC 681.
Civil Appeal No. 2773 of 2012 & Anr. Page 21 of 24
albeit at a lower rate, this Court, to ensure parity, had directed that
the assessees would be entitled to the benefit of the exemption
subject to the condition that they shall pay the differential amount
of their duty.
19. We may, in the end, refer to another decision of a Constitutional
Bench of this Court which supports our reasoning. In the case of
Ganga Sugar Corporation Ltd. v. State of Uttar Pradesh and
22
Others , the levy, which was uniform on all sugarcane purchases,
was attacked as ultra vires on the ground that the sucrose content
of various consignments could vary from place to place, the
variation being of the order of 8% to 10%, and yet a uniform levy by
weight was sanctioned by the impugned Act therein. Rejecting the
contention, it was observed by this Court that practical
considerations of the administration, traditional practices in the
trade, other economic pros and cons enter the verdict, but after a
judicial generosity is extended to the legislative wisdom, if there is
writ on the statute perversity, ‘madness’ in the method or gross
disparity, judicial credulity may snap, and the measure may meet
with its funeral. Otherwise, the benefit of uniformity in the
classification of taxation should not be struck down on the
22
(1980) 1 SCC 223.
Civil Appeal No. 2773 of 2012 & Anr. Page 22 of 24
application of Article 14 of the Constitution of India. It must be
viewed liberally and not meticulously. Thus, in the said case, the
contention that the price of the sugarcane should be the permissible
criteria for purchase tax was rejected. It was observed that marginal
difference of the sucrose content being too inconsequential would
not build a case for discrimination. We have referred to this decision
in the context that we have also taken into account the total
quantum of tax being paid in terms of the method of calculation as
prescribed by sub-clause (iv) to clause (a) to sub-rule (4) of Rule
8B of the Taxation Rules. The bills raised are not substantial so as
23
to warrant any interference.
20. However, we are also conscious that in some cases it is possible
that small organisations performing purely charitable work, which
meets both qualitative and quantitative criteria, may have to curtail
the charitable work in case the municipal taxes increase or are
enhanced. We would, in this context, like to reproduce the
observations of this Court in the case of Sachchidanand Kishore
Prasad Sinha (supra), which are as under:
23
Assessment Bill for 2001-2002 dated 05.01.2002 of Rs. 5.92/- per sq. ft.
Assessment Bill for 2002-2003 dated 27.08.2002 of Rs. 5.94/- per sq. ft.
Assessment Bill for 2003-2004 dated 27.04.2003 of Rs. 6.37/- per sq. ft.
Assessment Bill for 2004-2005 dated 21.05.2004 of Rs. 6.46/- per sq. ft.
Assessment Bill for 2005-2006 dated 27.05.2005 of Rs. 6.44/- per sq. ft.
Assessment Bill for 2006-2007 dated 14.06.2006 of Rs. 6.60/- per sq. ft.
Civil Appeal No. 2773 of 2012 & Anr. Page 23 of 24
“ 14. It is one thing to suggest that the rule-making
authority may consider making a further distinction on
the lines suggested and an altogether different thing to
strike down the rule itself on the ground of inadequate
classification...”
The aforesaid observation has been reproduced of abundant
caution and, we clarify, does not have any application in the factual
background of the present case.
21. Recording the aforesaid, we do not find any merit in the present
appeals and the same are dismissed. However, in light of the facts
of the case, there will be no order as to costs.
......................................J.
(SANJIV KHANNA)
......................................J.
(J.K. MAHESHWARI)
NEW DELHI;
NOVEMBER 24, 2022.
Civil Appeal No. 2773 of 2012 & Anr. Page 24 of 24