Holding

The demand notice for the Boja and Bale tax does not contravene Article 276(2) of the Constitution or Section 142A(2) of the Government of India Act, 1935 and is therefore valid.

Summary

The Municipal Council of Pusad imposed a Boja and Bale tax on ginning and pressing cotton under Section 66(1)(b) of the Central Provinces Municipalities Act, 1922, in 1932. Gokaldas Dossa & Co. Ltd. challenged the tax in 1967, arguing that it exceeded the ceiling limits set by Article 276 of the Constitution and the Profession Tax Limitation Act, 1941, and obtained a High Court order quashing the demand notice. On appeal, the Supreme Court held that the tax was valid because it was imposed before the 1941 Act came into force and therefore fell within the exemption provided by Item 4 of the Schedule to that Act. The Court further ruled that the continuation of such a tax, even if it exceeds the constitutional ceiling, is permissible under the proviso to Section 142A(2) of the Government of India Act, 1935 and Article 276(2) of the Constitution. Consequently, the appeal was allowed, the High Court judgment set aside, and the writ petition dismissed.

Issues considered

The tax imposed in 1932 violates the ceiling limit of Rs.250 per annum under Article 276(2) of the Constitution and Section 142A(2) of the Government of India Act, 1935.
Whether the Boja and Bale tax falls within the exemption under Item 4 of the Schedule to the Profession Tax Limitation Act, 1941.
Whether a tax imposed before the 1941 Act can continue to be levied despite exceeding the constitutional ceiling.

Legislation cited

Berar Municipal Law, 1886
Central Provinces and Berar Municipalities Act, 1922s. Section 66(1)(b), s. Section 67(5), s. Section 67(7)
Constitution of Indias. Article 276(2)
Government of India Act, 1935s. Section 142A(2)
Profession Tax Limitation Act, 1941s. Item 4 of Schedule, s. Section 3

Subjects

municipal taxprofession tax limitationconstitutional ceilingArticle 276Government of India ActexemptionBoja and Bale taxcontinuation of taxstatutory interpretation

Judgment

7

MUNICIPAL COUNCIL, PUSAD A

"·
GOKALDAS DOSSA & CO. LTD.
• November 13, 1979
[R. S. SARKARIA ~ND 0. CHINNAPPA REDDY, JJ.) B

•
l
CaltStltution of India 1950, Article 276(2), Government of Indio Act 1935,
S. 142At2), Central Provinces and B&ar Municipalities Act 1922, S. 66(l)(b) &
Profession Tax Limitation Act 1941, S 3 arid Item 4 of Schedule-Baja . and
Bal~ T(lx-Ta:r by municipality on ginning and pressing cotton-Continuance o.f
irnposifion in ex~s of constitutional limits-Validity of. C
Pu.sad was part of District Akola, which was one of the four Hydel'l\b•d
A11iped Districts, popularly known as Berar. These districts not forming a
part of British India, were administered by the Govemor-General·in-Cpuncil,
who enacted .. law applicable in Berar, known as the Berar Municipal Law,
1886. !
D
On January 22, 1924 1lle Governor-General-in-Council issued a notification
the effect of which was that the Berar Municipal Law, 1886, was repealed and
in its place the Central Provinces Municipalities Act, 1922 was made applicable
to Berar. Further, the taxes imposed under the Berar Municipal law were
.dct!med to have been imposed under the Central Provinces ~Iunicipalities Act,
\ 1922.
E
On August I, 1941, the C.P. and Berar Legislature enacted the C.P. and
Berar .Act as a result of which, the words "and Berar" were added after the
words "Central Provinces" in the Central Provinces Municipalities Act, 1922.

In the meanwhile, the Profession 1'ax Limitation Act, 194·1 'vas enacted by
the Dominion- Legislature in pursuance of the power given by the Government
of India Act, 1935, and it came into force on April 1, 1941. It proTided that F
after· its commencement, the Municipalities would not impose or levy taxes
which exceeded Rs. 50/- per arinum. However, by section 3 1 fead with Item 4
of the Schedule to the Act, any tax levied by a Municipality in respect of any
profession, trade, or calling imposed under section 66 (1 )(b) of the C.P.

.. Municipalities Act, 1922 was eXempted fron1 the aforesaid ceiling.

The appellant Municipality which was constituted .. a Municipal· Com- G
mittec under the Central ProTinces Municipalities Act 1922, imposed a tax
under 1cction 66(1)(b) read with section 67, sub-sections 5 and 7 of the said
Act on ginning and pressing cotwn by a notification dated January 9, 1932.
The tax was known as Boja and Bale Tax. It issued a demand noti.ce and a
bill in nw;pect of the said tax to the respondent firm who was doing the busi-
ness of ginning and pressing cotton within the limits of the municipality. The
objectioos: of the responde.nt having been turned down, they approached the R
High Court in a Writ Petition for a declaration that the Boja and Bale Tax
imposed on them was ultra vires and unconstitutional and that the demand
8 SUPREME COURT REPORTS [1980] 2 S.C.R.

A notice be quashed. The High Court allowed the writ petition and quashed the
demand notice on the ground that the tax was in excess of the ceiling limit
of Rs. 250/- per annum fixed in Article 276 of the Constitution.

In the appeal to this Court it was contended on behalf of the appellant, rely-
ing on the decision of this Court in A1unicipal Conunittee Akot v. Manila!
Manekji Pvt. Ud. & Anr. [1967] 2 SCR 100. th~t the Boja and Bale Tax having
B b<en imposed under the C.P. Municipalities Ac~ 1922, in 1932, 3Jld there being
no question of importing any deeming fiction the demand for the tax was valid.

Allowing the appeal,

HELD : 1. The demand notice in question does not contravene section
142A(2) of the Government of India Act, 1935, and Article 276(2) cf the
c Constitution and is valid. [15 A]

2. Jn Z..funic:ipal Con1nzittee, Akot v. Manilal Manekji Pi't. Ltd, & Anr.
[1967] 2 S.C.R. 100, this Court held that the word 'imposed' in Item 4 of the
Schedule to the Profession Tax Limitation Act, 1941, meant that the taxes which
can be continued to be levied should have been Imposed before the said Act
D came into foi;ce. [14 DJ

3. Jf the tax in question bad in fact been imposed under section 66(1) (b)
of the Central Provinces Municipalities Act, 1922, before the coming into force
of the 1941 Act, it would fall within the exemption of item 4 read with section
3 of the Profession Tax Limitation Act, 1941 and the continuance of such an
imposition in excess of the constitutional limit, will be in consonance with the
E proviso to section 142A(2) of the Government of India Act, 1935, <Uld also
Article 276(2) of the Constitution. [14 E-F]

In the instant case, tho tax was actually imposed under section 66(1)(b) of
the C.P. Municipalities Act, 1922, in 1932, when this Act was applicable and
in force in Berar by virtue of the notification dated January 22, 1924 issued by
the Governor-General-in-Council. Even if section 3 and item 4 of the 1941
F Act were to be strictly construed, the impugned tax will squarely fall within
the ambit of the exemption enacted in the aforesaid item 4. [l3 DJ

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 259 of 1970.

Appeal by Special Leave from the Judgment and Order dated 17-7-
G 1968 of the Bombay Hrgh Court (Nagpur Bench) in Special Civil
. Application No. 329/67.

M. N. Phadke and Naunit Lal for the Appellant.

A. G. Ramaparkhi for Respondent No. 1
H M. N. Shroff for Respondent No. 2.

S. B~ Saharya and V. B. Saharya for the Intervener.
MUNICIPAL COUNCIL v. GOKAL DAS (Sarkaria, !.) 9

The Judgment of the Court was delivered by

SARKARIA, J. This appeal by special leave is directed against a
judgment, dated July 17, 1968, of the Bombay High Court (Nagpur
' Bench). It arises out of these facts :

The appellant herein, Municipal Council, Pusad was constituted as B
a Municipal Committee under the Central Provinces Municipalities Act
1922. Thereafter, on January 9, 1932 the appellant with the sanction
of the local government, imposed a tax known as Boja Tax & Bale Tax
under section 66(1) (b) read with section 67, sub-sections (5) and (7)
~·· of the C. P. Municipalities Act on ginning and pressing cotton. The
rate fixed was Annas 2 for each Boja of 392 lbs. and Annas 4 for each c
Bale of 392 lbs. The respondents M/s. Gokuldas Dossa & Co. Ltd.
were doing the business of ginning and pressing cotton by mechanical
pr0cesses within the limits of the said Municipality. In pursuance of
tlie aforesaid Notification of January 9, 1932 imposing the tax, the
appellant on November 22, 1966 issued demand notice and a bill for
Rs. 3,971.75 in respe<:t of Boja and Bale Tax for the year 1965-66 D
requiring the respondents to pay that amount of tax. The respondents
submitted objections to this Demand on March 28, 1967. The objec-
tions were rejected by the appellant on April 7, 1967.
Aggrieved, the respondents filed a writ petition on April 9, .1967
in the High Court nnder Article 226 0'[ the constitution seeking a E
declaration that the Boja & Bale Tax imposed on them was ultra vires
and unconstitutional. They prayed that the Bale and Demand Notice
be quashed. They further claimed a writ of prohibition against the
appellant prohibiting it from recovering the tax from the respondent
beyond the maximun1 laid down in Article 276 of the Constitution.
F
The High Court by its order dated April 29, 1967 granted an
interim stay of the recovery of the tax from respondent no. 1. There-
after, by its judgment nnder appeal, the High Court allowed the writ
petition and quashed the Demand Notice on the ground that the tax
was in excess of the ceiling limit of Rs. 250 per annum fixed in
Article 276 of the Constitution. G

The High Court purporting to follow, what it says, "a series of
decisions" pronounced by !'1.at Court and the Supreme Court, has held
that the demand by way of Bale and Boja tax in excess of the limits
prescribed In Article 276 of the constitution is illegal. It, therefore,
quashed the demand notice in question. When the High Court ~poke H
of "a series of decisions" of the Supreme Court, it had, perhaps .. in
mind two decisions of this Court, namely : Municipal Committe, Akot
2-868SCI/79
10 SUPREME COURT REPORTS [1980] 2 S.C.R.

A v. Mani/al Manekji Pvt. Ltd. & Anr. (l) and Ballobhdas Matliuradas y
Lakhani & Ors. v. Municipal Com111ittee, Malkapur.(2)

Mr. M. N. Phadke, appearing for the appellant, submits that on
facts, the aforesaid two decisions of this Court are clearly distinguish-
able. According to the counsel, properly read, these decisions, support
n his C1)ntention that the demand for the Baja and Bale Tax of the
appellant is valid. It is pointed out that the tax with which this Court
\Vas concerned' in .'Vlunicipal Conunittee. ,4ko(s case {ibi<l) w·as a tax
levied under the old Municipal Law, which was by virtue of the notifi-
cation of January 27, 1924 deemed to be imposed under the C. P.
Municipalities Act, 1922; that it was on this ground that this Court
c strictly construing Item 4 of the Schedule to the Professions Tax Limi-
tation Act, 1941, held that only taxes i111posed under the C. P. Munici-
palities Act, 1922 and not those which arc deemed to be imposed und·~r
that Act by virtue of the deeming fiction. were saved by the proviso
to Article 142A(2) of the Government of India Act, 1935, and the
corresponding clause in Article 276 of the Constitution. Stress bas
0 been laid on the fact that, in the instant case, the tax was imposed
under the C.P. Municipalities Act, 1922, in 1932, and there was no
question of importing any deeming fiction.
As against this, Mr. Ratnaparkhi submits that the imposition in
question was directly hit by the ratio of Municipal Committee Akot's
case (ibid). Further, it is half-heartedly submitted, for tile irst time,
that even under the old law, the Municipal Committee coul<i levy a tax
on professions tp a maximum limit of Rs. 500 per annum, only.
Taking the last contention of Mr. Ratnaparkhi first, we find no
substance in the same. The C. P. Municipalities Act of 1922 does not .·~
fix any ceiling on the profession tax on professons that may be impos-
'F
ed by a Municipality. We therefore, have no hesitation in rejecting
this contention.
Before proceeding further, it is necessary to have an idea of the
various provisions bearing on the point in issue.
Pusad was a part of District Akola, which was oae of the four
Hyderabad Assi~ned Districts, popularly known as Berar. Those Dis-
tricts were not a part of British India but wert administered by the
Governor-General-in-Council under the India (Foreign Jurisdiction)
Order-in-Council of 1904. In exercise of those powers, the Governor-
General-in-Council ·enacted a law applicable i11 Berar, known as Berar
H Municipal Law, 1886, which enabled the Municipalities functioning
(\) [19671 2 S.C.R. 100.
(2) A.LR. 1970 S.C. 1002.
MUNICIPAL COUNCIL v. GOKAL DAS (Sarkaria, J.) 11

in Berar to impose professional taxes. On January 22, 1924, the A
' Governor-General-in-Council issued a notification, which so far as
material for our purpose, rau thus :
"No. 58-1.-In exercise of the powers conferred by the
Iudiau (Foreign Jurisdiction) Order-in-Council, 1902 and
of all other powers enabling him in that behalf, the G,overnor- B
General-in-Council is pleased to direct that the following
further amendments shall be made in the First Schedule to
the Notification of the Government of In.dia in the Foreign
Department No. 8510-I.B., dated the 3rd November, 1913,
applying certain enactments to Berar, namely : -
r c
After Entry No. 149, the following Entry shall be inserted
namely:-
150. The Central ·Provinces Municipalities Act, 1922
(II of 1922) (1) in section 2 : -
(a) for sub-section (1) the following shall be substituted, D
namely:-
"(!) The Berar Municipal Law, 1886, is hereby rep-
ealed."
(h) In Sub-Section (2), ~or the word "Acts" the word
"Law" shall be substituted." E
The effect of this notification was that the Berar Municipal Law, 1136
was repealed and Central Provinces Municipalities Act, 1922 was 1'1ade
applicable to Berar; and further, the taxes· imposed under the Berar
Municipal Law were deemed to have been imposed or assessed u•der
ihe Central Provinces Municipalities Act. F

Thereafter on January 9, 1932, a notification was issued im]1Josiag
the Boja and Bale Tax ~nder 5ection 66 (1) (b) of the C. P. Mu•ici-
·palities Act. 1922. The impugned demand notice was issued by virtue
of this notification. This tax came into force from the date of the
publication of the notification in the Central Provinces.
G
Section 142A(2) of the Government of India Act, 1935 provided
.as under : ,
"142A (2).-The total amount payable in respect of any
one person to the province or to any one Municipality, dis-
trict board, local board, or other local authority in the Pro- H
vince by way of taxes on professions, trades, callings and
employments shall not, after the thirty-first day of March,
12 SUPREME COURT REPORTS [1980] 2 s.c.R.

A nineteen hundred and thirty-nine, exceed fifty rupees per
annum:
Provided that, if in the financial year ending with that
date there was in force in the case of any Province or any
such municipality, board or authority a tax on pr;ofes~ions,
B trades, callings or employments the rate, or the maximum
rate, of which exceeded fifty rupees per annum, the preceding
provisions of this sub-section shall, unless for the time being
provision on the contrary is made by a law of the Dominion
Legislature, have effect in relation to that Province, munici-
pality, board or authority as if for the reference to fifty
c rupees per annum there was substituted a reference to that l
rate or maximum rate, or such lower rate, if any (being a
rate greater than fifty rupees per annum), as may for the
time being be fixed by a law of the Dominion Legislature; '
and any law of the Dominion Legislature made for any of
the purposes of this poviso may be made either generally or
D in relation to any specific Provh\.ces, municipalities, boards
or authorities."
In pursuance of the powers given by the Government of India Act,
1935, the Dominion Legislature enacted the Profession Tax Limitation
Act, 1941 which came into force on April 1, 1941. This Act provided
that after the commencement of that Act, the Municipalities would not
E
impose or levy taxes which exceeded Rs. 501- per annum. However,
by Section 3 of this Act, the taxes specified in the Schedule thereto
were exempted from this ceiling. Item 4 of the Schedule is in these
terms:
1
"The taxes on person exercising any profession or carry-
- F ing on any trade or calling within the limits of the Munici-
palities, imposed under clause (b) of Section 1 or Section 66
of the C. P. Municipalities Act, 1922."
On August 1, 1941, the C. P. and Berar Legislature enacted Act
15 of 1941 called C. P. and Berar Act, as a result of which, the words
G "and Berar" were added after the words "Central Provinces'' wherever
. occurring in the Central Provinces Municipalities Act, 1922.
A provision analogous to Section 142A (2) proviso is to be found
in the proviso to Article 276 (2) of the Constitution, which reads as
follows :
H "Provided that if in the financial year immediately preced-
ing the commencement of this Constitution there was in force
in the case of any State or any such municipality, board or

t
MUNICIPAL COUNCIL v. GOKAL DAS (Sarkaria, !.) 13

authority a tax on professions, trades, callings or employ- A
ments the rate , or .the maximum rate, of which exceeded two
hundred and fifty rupees per annum, such tax may continue
to be levied until provision to the contrary is made by .
Parliament by law, and any law so made by Parliament may
be either generally or in relation to any specified States,
municipalities boards or authorities." B

It will be seen from the above conspectus, that in order to qualify
for the ·exemption under item 4 in the Schedule to the Profession Tax
Limitation Act, 1941 (1941 Act, for short) from the limitation imposed
by Section 2 of that Act, the tax in question must have been imposed
under clause (b) of sub-Section (1) of Section 66 of the C.P. Munici- c
palities Act, 1922, before the 1941 Act passed by the Dominion Legis-
lature by virtue of the power derived from the enabling proviso to
Section 112A (2) of the Government of India Act, 1935, came into
force. This condition has been satisfied by the impugned tax. This
tax was actually imposed under section 66 (1 )(b) of the said Act of D
1922, in 1932, when this Act was applicable and in force in Berar
by virtue of the notification dated January 22, 1924 issued by the
Governor-General-in-Council. Thus, even if Section 3 and item 4 of ·
the 1941 Act were to be strictly construed, the impugned tax will
squarely fall within the ambit of. the exemption enacted in the aforesaid
item 4. E
Now. let us notice the Municipal Committee Akofs case (ibid)
which was presumably relied upon by the High Court. It will be
presently seen that this decision if properly read does not support the
decision under appeal. In that case, the impugned tax was not actually
imposed by the Municipal Committee after the coming into force of F
the 1941 Act, "under the C.P. Muuicipalities Act of 1922, but was
imposed under a notification Nq. 98, dated March 14, 1899. The
contention on behalf of the appellant, Municipal Committee was that
since this notification of 1899 would be deemed to be issued under the
Central Provinces and Berar Municipalities Act, 1922 (which only
changed the name of the C.P. Municipalities. Act of 1922), it would G
be a tax 'imposed' under Section 66 (1') (b) of the C.P. Municipalities
Act of 1922, within the contemplation of item 4 of the Schedule tG
the 1'141 Act. Sikri, J., speaking for the Court, repelled this conten-
tion in these terms :

"In our opinion the High Court came to the correct con- H
' clusi'On. First, item No. 4 is an exemption from the limita-
tion imposed by s. 2 of the· Professions Tax Limitation Act,
14 SUPREME COURT REPORTS [t980] 2 S.C.R.

A 1941, and the exemption must be construed strictly. Secondly,
the effect of s. 3 and item 4 of the Schedule is to continue
the leviability of a tax and, in our opinion, this item must
be construed strictly like· a taxing. statute. If Mr. Gupte had
been able to convince us that the item would be otiose if
this interpretation is put, there would be something to say
B in his favour. But the item will not be otiose even if we
do not treat item 4 as a case of misdescri ption but give t11e
plain meaning that .the Central Provinces Municipalities Act,
• 1922, means the Central Provinces Municipalities Act, 1922,
and not the Central Provinces and Berar Municipalities Act,
1922. Various taxes must have been imposed by the Munici-
f:.
c palities in the Central Provinces by virtue of notifications issu-
ed under s. 66(l)(b) of the Central Provinces Municipalities
Act, 1922, and they would fall within the ambit of item 4 ....
The word "imposed" . .. ill our view, means that the taxes
which can continue to be levied should have been imposed
D in tlze past before 1he Professionl Tax Limitation Act, 1941,
came inta force. This is in consonance• with s. 142A(2) of
the Government of India Act, 1935."

The crucial words are those which have been underlined. These words
clearly lay down that if the tax in question had, in fact, been imposed
E under Section 66 (l ) (b) of the Central Provinces Municipalities Act,
1922, before the coming into force of the 1941 Act, it woµld fall
within the exemption cf item 4 read with Section 3 of the Professions
Tax Limitation Act, 1941, and the continuance of such an inlposition
in excess of the constitutional linlit, will be in consonance with the
proviso to Section 142A(2) of the Gove~nment of India Act, 1935,
F
and also Article 276(2) of the Constitution.

Since in the instant c3se, the tax in question was impcsed under
Section 66(1) (b) of the C.P. Municipalities Act, 1922, in 1932, long
before the 1941 Act came into force, and no question of invoking any
G deeming fiction was involved, the ratio of Municipal Committee' Akot's
case, in fact, supports the contention of the appellant-Municipal Coun-
cil, and highlights the error in the High Court decision.

It is not necessary to discuss the case, Ballabhadas Mathwadas
H Lakhani & Ors. v. Municipal Committee, Malkapur (ibid), because it ,
simply follows the ratio of Municipal Committee, Akal v. Manilal y
Mnnekji Pvt. Ltd. and Anr. (ibid).

T
MUNICIPAL COUNCIL v. GOKAL DAS lSarkarid, !.) 15

In view of all that has been said above, we am of opinion that the A
demand notice in question does not contravene Section 142A(2) of
the Government of India Act, 1935, and Article 276(2) of the Con-
stitution, and is valid. Accordingly, we allow this appeal, set aside
' the judgment of the High Court and dismiss the writ petition of respon-
dent L Jcnyjng the parties to bear their own costs.
B

N.V.K. Appeal allowed_

\

/

~:

'

T .•.