State of M.P. Vs.
Rakesh Kohli & ANR.
[Civil Appeal No. 684
of 2004]
[Civil Appeal No.
1270 of 2004]
JUDGMENT
R.M. Lodha, J.
1.
The
only point for consideration here is, whether or not the Division Bench of the
Madhya Pradesh High Court was justified in declaring Clause (d), Article 45 of
Schedule 1-A of the Indian Stamp Act, 1899 (for short, ‘1899 Act’) which was
brought in by the Indian Stamp (Madhya Pradesh Amendment) Act, 2002 (for short,
‘M.P. 2002 Act’) as unconstitutional being violative of Article 14 of the
Constitution of India.
2.
The
above point arises in this way. Two writ petitions came to be filed before the
Madhya Pradesh High Court. In both writ petitions initially it was prayed that
Clauses (f) and (f-1), Article 48, Schedule 1- A brought in the 1899 Act by
Section 3 of the Indian Stamp (Madhya Pradesh Amendment) Act, 1997 (for short,
‘M.P. 1997 Act’) be declared ultra vires. During the pendency of these petitions,
the 1899 Act as applicable to Madhya Pradesh was further amended by the M.P.
2002 Act. The respondents, referred to as writ petitioners, amended their writ petitions
and prayed that Clause (d), Article 45 of Schedule 1-A of the 1899 Act as substituted
by M.P. 2002 Act be declared ultra vires.
The writ petitioners set
up the case that original Article 48 of the 1899 Act, Schedule 1-A prescribed stamp
duty payable at Rs. 10/- if attorney was appointed for a single transaction. By
M.P. 1997 Act, Article 48 Clause (f) was substituted by Clauses (f) and (f-1). Clause
(f-1) provided that where power of attorney was executed without consideration
in favour of person who is not his or her spouse or children or mother or
father and authorizes him to sell or transfer any immovable property, the stamp
duty would be leviable as if the transaction is conveyance under Article 23.
Explanation II inserted by M.P. 1997 Act provided that where under Clauses (f) and
(f-1), duty had been paid on the power of attorney and a conveyance relating to
that property was executed in pursuance of power of attorney between the executant
of the power of attorney and the person in whose favour it was executed, the
duty on conveyance should be the duty calculated on the market value of the
property reduced by duty paid on the power of attorney.
By M.P. 2002 Act, stamp
duty relating to power of attorney has been prescribed in Article 45 of
Schedule 1-A. Clause (d) thereof prescribes stamp duty at two per cent on the
market value of the property which is subject matter of power of attorney when
power of attorney is given without consideration to a person other than father,
mother, wife or husband, son or daughter, brother or sister in relation to the
executant and authorizing such person to sell immovable property situated in
Madhya Pradesh. The writ petitioners pleaded, inter alia, that the distinction
between an agent who was a blood relation and who was an outsider carved out in
Article 45, Clause (d) was legally impermissible. The provision violates
Article 14 of the Constitution as it has sought to create unreasonable
classification.
3.
The
State of Madhya Pradesh stoutly defended the challenge to the above provisions
and stated before the High Court that the matter of rate of stamp duty was
solely in the domain of State Legislature and none of the provisions of the
Constitution was offended by the above provisions.
4.
The
Division Bench of the High Court has accepted the constitutional challenge to
Clause (d), Article 45 of Schedule 1-A brought in the 1899 Act by M.P. 2002 Act
and held that the said provision was violative of Article 14 of the
Constitution of India. The Division Bench gave the following reasoning: “11. As
far as clauses (d) is concerned, it lays a postulate that postulate [sic] that
when the power of authority is given without consideration to a person other than
the father, mother, wife or husband, son or daughter, brother or sister in relation
to the executant and authorizing such person to sell immovable property, 2% on
the market value of the property is to be collected.
Submission of Mr.
Agrawal is that this clause is absolutely unreasonable and smacks of
arbitrariness, as there is no rationale to include the category of persons who
have been included and to leave out to all other persons. Mr. S.K. Yadav, learned
Government Advocate submitted that near relatives can constitute a class by
itself and all others can fit into a different category and, therefore, the said
provision does not offend the concept of classification, as there is intelligible
differentia. On a first blush the aforesaid submission of the learned counsel
for the State appears to be quite attractive, but on a deeper probe it is not
what it is. In the guise of the classification something has been stated in the
said provision. One can give certain examples.
One may not have kith
or kin and intact [sic] even that case to deprive him to execute the power of attorney
for selling the property, unless 2% is paid on the market value is arbitrary. The
provisions may pass the test of classification but it would not pass the
requirement of the second limb of Article 14 of the Constitution which
ostracises arbitrariness, unreasonable and irrationality. The State may have a
laudable purpose but the laudable purpose alone cannot sustain the provision.
The matter would been [sic] different had it included a rider that it is
executed in favour of any other for consideration or some other purposes is not
the situation. In view of the same, we are of the considered opinion, the
aforesaid provision is defiant of Article 14 of the Constitution. Accordingly, we
have no hesitation to declare the same as violative of Article 14 of the Constitution.”
5.
Ms.
Vibha Datta Makhija, learned counsel for the appellant — State of Madhya
Pradesh – submitted that the High Court was in error in declaring Clause (d),
Article 45, Schedule 1-A as violative of Article 14 of the Constitution of
India. She would submit that the test of challenge to a legislative provision was
completely different from that of an administrative action. A legislative
provision cannot be struck down as being arbitrary, irrational or unreasonable.
She further submitted
that the classification made in Clause (d) of Article 45, Schedule 1-A had intelligible
differentia with a direct nexus to the object of the 1899 Act. The object of
the 1899 Act is to collect proper stamp duty on an instrument or conveyance on
which such duty is payable. This is to protect the State revenue. The
legislative wisdom took into consideration that genuine power of attorney documents
would be executed by the executants without consideration mostly in favour of kith
and kin to complete sale transactions on behalf of the executants. The said category
attracts lower stamp duty than power of attorney executed in favour of third parties/strangers
since such power of attorney document would be for extraneous reasons.
6.
Learned
counsel for the State of M.P. also submitted that the wisdom of the Legislature
in protecting the revenue and carving out genuine classes from others had been
well recognized. The court cannot sit in judgment over their wisdom. She relied
upon decisions of this Court in Balaji v. Income Tax Officer, Special Investigation
Circle, Akola and others[1]; State of A.P. and others v. Mcdowell and Co. and others[2];
Ramesh Chand Bansal and Others v. District Magistrate/Collector Ghaziabad and
others[3]; Veena Hasmukh Jain and another v. State of Maharashtra and others[4];
Hanuman Vitamin Foods Private Limited and others v. State of Maharashtra and
another[5]; Karnataka Bank Limited v. State of Andhra Pradesh and others[6];
Government of Andhra Pradesh and others v. P. Laxmi Devi (Smt.)[7]; Union of India
v. R. Gandhi, President; Madras Bar Association[8] and Suraj Lamp and
Industries Private Limited v. State of Haryana and another[9].
7.
The
respondents despite service have not chosen to appear.
8.
The
definition of ‘conveyance’ is contained in Section 2(10) of the 1899 Act which
reads as under: “S.2. Definitions.—In this Act, unless there is something repugnant
in the subject or context,-- (10) "Conveyance" includes a conveyance
on sale and every instrument by which property, whether movable or immovable,
is transferred inter vivos and which is not otherwise specifically provided for
by Schedule I.
9.
Section
2(21) defines ‘power of attorney’. It reads as follows : “S. 2(21)
“Power-of-attorney” includes any instrument (not chargeable with a fee under
the law relating to court-fees for the time being in force) empowering a
specified person to act for and in the name of the person executing it;”
10.
The
1899 Act has been amended from time to time by the Madhya Pradesh State
Legislature insofar as its application to the State of Madhya Pradesh is
concerned. The stamp duty on power of attorney was originally prescribed in
Article 48, Schedule - 1-A of the 1899 Act. Clause (f) in original Article 48,
Schedule 1-A read as under: “SCHEDULE-1A Stamp Duty on Instruments (See section
3) Description of Instruments Proper Stamp Duty 1) (2) 48.Power of Attorney, as
defined by Section 2(21), not being a Proxy [No. 52]. (f) when giving for consideration
The same duty as Conveyance and authorizing the attorney to (No. 23) for a market
value sell any immovable property; equal to the amount of the consideration.”
11.
Section
3 of the M.P. 1997 Act brought in amendment in the 1899 Act, inter alia, as
under : “In Schedule 1-A of the Principal Act, in Article 48,--
i) For clause (f),
the following clauses shall be substituted, namely:-
(f)
when given for consideration and authorizing the attorney to sell or transfer
any immovable property.
|
The
same duty as a conveyance under Article 23 on the market value of the
property
|
(f-1)
when given without consideration in favour of persons who are not his or her spouse
or Children, or mother or father and authorizing the attorney to sell or
transfer any immovable property
|
The
same duty as a conveyance under Article 23 on the market value of the
property
|
ii) the existing
explanation shall be renumbered as explanation I thereof and after explanation
I as so renumbered, the following explanation shall be inserted, namely :-
“Explanation
II:--Where under clause (f) and (f-1) duty has been paid on the power of attorney
and a conveyance relating to that property is executed in pursuance of power of
attorney between the executant of power of attorney and the person in whose
favour it is executed, the duty on conveyance shall be the duty calculated on
the market value of the property reduced by duty paid on the power of
attorney”.
The Objects and
Reasons for the above amendment were to check the tendency to execute power of
attorney authorising the attorney to sell or transfer immovable property in
place of a conveyance deed and to increase the revenue of the Government in the
State of Madhya Pradesh.
12.
Article
48 in the 1899 Act as amended by M.P. 1997 Act was substituted by M.P. 2002
Act. The new provision, Article 45 in respect of power of attorney in Schedule
1-A which was brought in by M.P. 2002 Act reads as follows :
“SCHEDULE-1A
Stamp
Duty on Instruments
(See
section 3)
Description
of Instrument
|
Proper
Stamp Duty
|
45. Power
of attorney [as defined by section 2(21)] not being a proxy:-
when
authorizing one person or more to act in single transaction, including a
power of attorney executed for procuring the registration of one or more documents
in relation to a single transaction or for admitting execution of one or more
such documents;
|
Fifty
rupees
|
when
authorizing one person to act in more than one transaction or generally; or
not more than ten persons to act jointly or severally in more than one
transaction or generally;
|
One
hundred rupees
|
when
given for consideration and authorizing the agent to sell any immovable
property.
|
The
same duty as a conveyance (No. 22) on the market value of the property.
|
when
given without consideration to a person other than the father, mother, wife
or husband, son or daughter, brother or sister in relation to the executant
and authorizing such person to sell immovable property situated
in
Madhya Pradesh.
|
Two
percent on the market value of the property which is the subject matter of
power of attorney.
|
In
any other case
|
Fifty
rupees for each person authorized
|
Explanation-I.—For
the purpose of this article, more persons than one when belonging to the same
firm shall be deemed to be one person. Explanation-II.—The term ‘registration’ includes
every operation incidental to registration under the Registration Act, 1908 (16
of 1908).”
13.
In
our opinion, the High Court was clearly in error in declaring Clause (d),
Article 45 of Schedule 1-A of the 1899 Act which as brought in by the M.P. 2002
Act as violative of Article 14 of the Constitution of India. It is very
difficult to approve the reasoning of the High Court that the provision may
pass the test of classification but it would not pass the requirement of the
second limb of Article 14 of the Constitution which ostracises arbitrariness, unreasonable
and irrationality.
The High Court failed
to keep in mind the well defined limitations in consideration of the
constitutional validity of a statute enacted by Parliament or a State Legislature.
The statute enacted by Parliament or a State Legislature cannot be declared unconstitutional
lightly. The court must be able to hold beyond any iota of doubt that the violation
of the constitutional provisions was so glaring that the legislative provision
under challenge cannot stand. Sans flagrant violation of the constitutional
provisions, the law made by Parliament or a State Legislature is not declared
bad.
14.
This
Court has repeatedly stated that legislative enactment can be struck down by Court
only on two grounds, namely (i), that the appropriate Legislature does not have
competency to make the law and (ii), that it does not take away or abridge any of
the fundamental rights enumerated in Part – III of the Constitution or any other
constitutional provisions.
15.
In
Mcdowell and Co.2 while dealing with the challenge to an enactment based on
Article 14, this Court stated in paragraph 43 (at pg. 737) of the Report as
follows : “……..A law made by Parliament or the legislature can be struck down
by courts on two grounds and two grounds alone, viz., (1) lack of legislative
competence and (2) violation of any of the fundamental rights guaranteed in
Part III of the Constitution or of any other constitutional provision.
There is no third
ground………. …….. if an enactment is challenged as violative of Article 14, it can
be struck down only if it is found that it is violative of the equality
clause/equal protection clause enshrined therein. Similarly, if an enactment is
challenged as violative of any of the fundamental rights guaranteed by clauses
(a) to (g) of Article 19(1), it can be struck down only if it is found not
saved by any of the clauses (2) to (6) of Article 19 and so on. No enactment
can be struck down by just saying that it is arbitrary or unreasonable. Some or
other constitutional infirmity has to be found before invalidating an Act. An
enactment cannot be struck down on the ground that court thinks it unjustified.
Parliament and the legislatures, composed as they are of the representatives of
the people, are supposed to know and be aware of the needs of the people and
what is good and bad for them. The court cannot sit in judgment over their
wisdom
”
(Emphasis supplied)
Then dealing with the
decision of this Court in State of T.N. and others v. Ananthi Ammal and
others[10], a three-Judge Bench in Mcdowell and Co.2 observed in paragraphs 43
and 44 [at pg. 739) of the Report as under : “……Now, coming to the decision in
Ananthi Ammal, we are of the opinion that it does not lay down a different
proposition. It was an appeal from the decision of the Madras High Court striking
down the Tamil Nadu Acquisition of Land for Harijan Welfare Schemes Act, 1978 as
violative of Articles 14, 19 and 300-A of the Constitution. On a review of the
provisions of the Act, this Court found that it provided a procedure which was
substantially unfair to the owners of the land as compared to the procedure
prescribed by the Land Acquisition Act, 1894, insofar as Section 11 of the Act provided
for payment of compensation in instalments if it exceeded rupees two thousand. After
noticing the several features of the Act including the one mentioned above,
this Court observed: (SCC p. 526, para 7)
“7. When a statute is
impugned under Article 14 what the court has to decide is whether the statute
is so arbitrary or unreasonable that it must be struck down. At best, a statute
upon a similar subject which derives its authority from another source can be referred
to, if its provisions have been held to be reasonable or have stood the test of
time, only for the purpose of indicating what may be said to be reasonable in
the context.
We proceed to examine
the provisions of the said Act upon this basis.” 44. It is this paragraph which
is strongly relied upon by Shri Nariman. We are, however, of the opinion that the
observations in the said paragraph must be understood in the totality of the
decision. The use of the word ‘arbitrary’ in para 7 was used in the sense of being
discriminatory, as the reading of the very paragraph in its entirety discloses.
The provisions of the Tamil Nadu Act were contrasted with the provisions of the
Land Acquisition Act and ultimately it was found that Section 11 insofar as it
provided for payment of compensation in instalments was invalid. The ground of
invalidation is clearly one of discrimination. It must be remembered that an Act
which is discriminatory is liable to be labelled as arbitrary. It is in this sense
that the expression ‘arbitrary’ was used in para 7.”
16.
The
High Court has not given any reason as to why the provision contained in clause
(d) was arbitrary, unreasonable or irrational. The basis of such conclusion is
not discernible from the judgment. The High Court has not held that the provision
was discriminatory. When the provision enacted by the State Legislature has not
been found to be discriminatory, we are afraid that such enactment could not have
been struck down on the ground that it was arbitrary or irrational.
17.
That
stamp duty is a tax and hardship is not relevant in interpreting fiscal
statutes are well known principles. In Bengal Immunity Co. Ltd. v. State of
Bihar and others[11], a seven-Judge Bench speaking through majority in
paragraph 43 (at pg. 685) of the Report while dealing with hardship in the
statutes stated as follows : “……….If there is any real hardship of the kind
referred to, there is Parliament which is expressly invested with the power of lifting
the ban under cl. (2) either wholly or to the extent it thinks fit to do. Why
should the Court be called upon to discard the cardinal rule of interpretation
for mitigating a hardship, which after all may be entirely fanciful, when the
Constitution itself has expressly provided for another authority more competent
to evaluate the correct position to do the needful?”
18.
In
Commissioner of Income Tax, Madras v. R.SV. Sr. Arunachalam Chettiar[12], a
three-Judge Bench of this Court, inter alia, observed in paragraph 13 (at pgs.
1220-21) of the Report, “equity is out of place in tax law; a particular income
is either exigible to tax under the taxing statute or it is not.”
19.
In
the Income Tax Officer, Tuticorin v. T.S. Devinatha Nadar etc.[13], this Court
in paragraph 30 (at pg. 635) of the Report observed as follows : “30. From the
foregoing decisions it is clear that the consideration whether a levy is just
or unjust, whether it is equitable or not, a consideration which appears to
have greatly weighed with the majority, is wholly irrelevant in considering the
validity of a levy. The courts have repeatedly observed that there is no equity
in a tax. The observations of Lord Hatherley, L.C. in (1869) 4 Ch. A 735.
“In fact we must look
to the general scope and purview of the statute, and at the remedy sought to be
applied, and consider what was the former state of the law, and what it was
that the legislature contemplated,” were made while construing, a non-taxing
statute. The said rule has only a limited application in the interpretation of
a taxing statute. Further, as observed by that learned Judge in that very case the
question in each case is “whether the legislature had sufficiently expressed
its intention” on the point in issue.” The court highlighted that the court
could not concern itself with the intention of the Legislature when the
language expressing such intention was plain and unambiguous.
20.
In
P. Laxmi Devi (Smt.)7, a two-Judge Bench of this Court was concerned with a
judgment of the Andhra Pradesh High Court. The High Court had declared Section
47-A of the 1899 Act as amended by A.P. Act 8 of 1998 that required a party to
deposit 50% deficit stamp duty as a condition precedent for a reference to a Collector
under Section 47-A unconstitutional. The Court said in P. Laxmi Devi (Smt.)7 as
follows : “19. It is well settled that stamp duty is a tax, and hardship is not
relevant in construing taxing statutes which are to be construed strictly. As
often said, there is no equity in a tax vide CIT v. V.MR.P. Firm Muar. If the
words used in a taxing statute are clear, one cannot try to find out the intention
and the object of the statute. Hence the High Court fell in error in trying to go
by the supposed object and intendment of the Stamp Act, and by seeking to find
out the hardship which will be caused to a party by the impugned amendment of
1998. 20. xxx xxx xxx
21.
It
has been held by a Constitution Bench of this Court in ITO v. T.S. Devinatha
Nadar (vide AIR paras 23 to 28) that where the language of a taxing provision
is plain, the court cannot concern itself with the intention of the
legislature. Hence, in our opinion the High Court erred in its approach of
trying to find out the intention of the legislature in enacting the impugned
amendment to the Stamp Act.” While dealing with the aspect as to how and when
the power of the court to declare the statute unconstitutional can be
exercised, this Court referred to the earlier decision of this Court in Rt.
Rev. Msgr. Mark Netto v. State of Kerala and others[14] and held in para 46 (at
pg. 740) of the Report as under :
“46. In our opinion,
there is one and only one ground for declaring an Act of the legislature (or a
provision in the Act) to be invalid, and that is if it clearly violates some
provision of the Constitution in so evident a manner as to leave no manner of doubt.
This violation can, of course, be in different ways e.g. if a State Legislature
makes a law which only Parliament can make under List I to the Seventh Schedule,
in which case it will violate Article 246(1) of the Constitution, or the law violates
some specific provision of the Constitution (other than the directive principles).
But before declaring the statute to be unconstitutional, the court must be absolutely
sure that there can be no manner of doubt that it violates a provision of the
Constitution. If two views are possible, one making the statute constitutional
and the other making it unconstitutional, the former view must always be
preferred.
Also, the court must make
every effort to uphold the constitutional validity of a statute, even if that
requires giving a strained construction or narrowing down its scope vide Rt.
Rev. Msgr. Mark Netto v. State of Kerala SCC para 6 : AIR para 6. Also, it is
none of the concern of the court whether the legislation in its opinion is wise
or unwise.” Then in paras 56 and 57 (at pg. 744), the Court stated as follows: “56.
In our opinion adjudication must be done within the system of historically
validated restraints and conscious minimisation of the judges' personal
preferences. The court must not invalidate a statute lightly, for, as observed
above, invalidation of a statute made by the legislature elected by the people
is a grave step. As observed by this Court in State of Bihar v. Kameshwar
Singh: (AIR p. 274, para 52) “52. …
The legislature is
the best judge of what is good for the community, by whose suffrage it comes
into existence.…” 57. In our opinion, the court should, therefore, ordinarily defer
to the wisdom of the legislature unless it enacts a law about which there can
be no manner of doubt about its unconstitutionality.” 21. The Constitution
Bench of this Court in Mohd. Hanif Quareshi and others v. State of Bihar[15],
while dealing with the meaning, scope and effect of Article 14, reiterated what
was already explained in earlier decisions that to pass the test of permissible
classification, two conditions must be fulfilled, namely, (i) the classification
must be founded on an intelligible differentia which distinguishes persons or things
that are grouped together from others left out of the group and (ii) such
differentia must have rational relation to the object sought to be achieved by the
statute in question. The Court further stated that classification might be
founded on different basis, namely, geographical, or according to objects or
occupations or the like and what is necessary is that there must be a nexus
between the basis of classification and the object of the Act under
consideration.
22.
In
Mohd. Hanif Quareshi15, the Constitution Bench further observed that there was
always a presumption in favour of constitutionality of an enactment and the
burden is upon him, who attacks it, to show that there has been a clear violation
of the constitutional principles. It stated in paragraph 15 (at pgs. 740-741)
of the Report as under : “……..The courts, it is accepted, must presume that the
legislature understands and correctly appreciates the needs of its own people, that
its laws are directed to problems made manifest by experience and that its
discriminations are based on adequate grounds. It must be borne in mind that
the legislature is free to recognise degrees of harm and may confine its
restrictions to those cases where the need is deemed to be the clearest and
finally that in order to sustain the presumption of constitutionality the Court
may take into consideration matters of common knowledge, matters of common
report, the history of the times and may assume every state of facts which can be
conceived existing at the time of legislation………”
23.
The
above legal position has been reiterated by a Constitution Bench of this Court
in Mahant Moti Das v. S.P. Sahi[16].
24.
In
Hamdard Dawakhana and another v. The Union of India and others[17], inter alia,
while referring to the earlier two decisions, namely, Bengal Immunity Company
Ltd.11 and Mahant Moti Das16 , it was observed in paragraph 8 (at pg. 559) of
the Report as follows: “8. Therefore, when the constitutionality of an enactment
is challenged on the ground of violation of any of the articles in Part III of
the Constitution, the ascertainment of its true nature and character becomes
necessary i.e. its subject-matter, the area in which it is intended to operate,
its purport and intent have to be determined. In order to do so it is legitimate
to take into consideration all the factors such as history of the legislation, the
purpose thereof, the surrounding circumstances and conditions, the mischief
which it intended to suppress, the remedy for the disease which the legislature
resolved to cure and the true reason for the remedy.”
25.
In
Hamdard Dawakhana17, the Court also followed the statement of law in Mahant Moti
Das16 and the two earlier decisions, namely, Charanjit Lal Chowdhury v. Union
of India and others[18] and The State of Bombay and another v. F.N. Balsara[19]
and reiterated the principle that presumption was always in favour of
constitutionality of an enactment.
26.
In
one of the recent cases in Karnataka Bank Limited6, while referring to some of
the above decisions, in para 19 (at pgs. 262-263) of the Report, this Court
held as under: “19. The rules that guide the constitutional courts in discharging
their solemn duty to declare laws passed by a legislature unconstitutional are
well known. There is always a presumption in favour of constitutionality, and a
law will not be declared unconstitutional unless the case is so clear as to be
free from doubt; “to doubt the constitutionality of a law is to resolve it in
favour of its validity”. Where the validity of a statute is questioned and
there are two interpretations, one of which would make the law valid and the other
void, the former must be preferred and the validity of law upheld. In
pronouncing on the constitutional validity of a statute, the court is not
concerned with the wisdom or unwisdom, the justice or injustice of the law. If
that which is passed into law is within the scope of the power conferred on a legislature
and violates no restrictions on that power, the law must be upheld whatever a court
may think of it. (See State of Bombay v. F.N. Balsara.)”
27.
A
well-known principle that in the field of taxation, the Legislature enjoys a
greater latitude for classification, has been noted by this Court in long line
of cases. Some of these decisions are: M/s. Steelworth Limited v. State of
Assam [20]; Gopal Narain v. State of Uttar Pradesh and another.[21]; Ganga
Sugar Corporation Limited v. State of Uttar Pradesh and others[22]; R.K. Garg
v. Union of India and others[23] and State of W.B. and another v. E.I.T.A.
India Limited and others[24].
28.
In
R.K. Garg23, the Constitution Bench of this Court stated that laws relating to
economic activities should be viewed with greater latitude than laws touching civil
rights such as freedom of speech, religion, etc.
29.
While
dealing with constitutional validity of a taxation law enacted by Parliament or
State Legislature, the court must have regard to the following principles:
i.
there
is always presumption in favour of constitutionality of a law made by
Parliament or a State Legislature
ii.
no
enactment can be struck down by just saying that it is arbitrary or unreasonable
or irrational but some constitutional infirmity has to be found
iii.
the
court is not concerned with the wisdom or unwisdom, the justice or injustice of
the law as the Parliament and State Legislatures are supposed to be alive to
the needs of the people whom they represent and they are the best judge of the
community by whose suffrage they come into existence
iv.
hardship
is not relevant in pronouncing on the constitutional validity of a fiscal
statute or economic law and
v.
in
the field of taxation, the Legislature enjoys greater latitude for classification.
30.
Had
the High Court kept in view the above well-known and important principles in
law, it would not have declared Clause (d), Article 45 of Schedule 1-A as
violative of Article 14 of the Constitution being arbitrary, unreasonable and
irrational while holding that the provision may pass test of classification. By
creating two categories, namely, an agent who is a blood relation, i.e. father,
mother, wife or husband, son or daughter, brother or sister and an agent other than
the kith and kin, without consideration, the Legislature has sought to curb inappropriate
mode of transfer of immovable properties.
Ordinarily, where executant
himself is unable, for any reason, to execute the document, he would appoint
his kith and kin as his power of attorney to complete the transaction on his
behalf. If one does not have any kith or kin who he can appoint as power of
attorney, he may execute the conveyance himself. The legislative idea behind Clause
(d), Article 45 of Schedule 1-A is to curb tendency of transferring immovable
properties through power of attorney and inappropriate documentation.
By making a provision
like this, the State Government has sought to collect stamp duty on such indirect
and inappropriate mode of transfer by providing that power of attorney given to
a person other than kith or kin, without consideration, authorizing such person
to sell immovable property situated in Madhya Pradesh will attract stamp duty
at two per cent on the market value of the property which is subject matter of
power of attorney. In effect, by bringing in this law, the Madhya Pradesh State
Legislature has sought to levy stamp duty on such ostensible document, the real
intention of which is the transfer of immovable property. The classification,
thus, cannot be said to be without any rationale. It has a direct nexus to the
object of the 1899 Act. The conclusion of the High Court, therefore, that the impugned
provision is arbitrary, unreasonable and irrational is unsustainable.
31.
Consequently,
these appeals are allowed and the judgment of the Madhya Pradesh High Court
passed on September 15, 2003 is set aside. Writ petitions filed by the present respondents
before the High Court stand dismissed. No order as to costs.
…………………….J.
(R.M. Lodha)
…………………….J.
(H.L. Gokhale)
NEW
DELHI.
MAY
11, 2012.
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