Mst. Jadao Bahuji Vs. Municipal
Committee, Khandwa & ANR  INSC 127 (29 March 1961)
AIYYAR, T.L. VENKATARAMA DAS, S.K.
CITATION: 1961 AIR 1486 1962 SCR (1) 633
CITATOR INFO :
R 1962 SC1753 (19) D 1965 SC1174 (4,13) RF
1975 SC1389 (25)
Tax on Trade-Maximum limit imposed by
Constitution Act -Validating Act for -period prior to imposition of limit-If
affected by limit-Khandwa Municipality ( Validation of Tax) -Act, 1941 (16 of
1941)-Government of India Act, 1935, S. 142-A.
In 1922, the Municipal Committee, Khandwa
imposed a tax on the trade of ginning and pressing cotton by means of steam or
mechanical process. Certain suits were filed challenging the validity of the
tax and ultimately in 1937, the Privy Council held that the tax had not been
validly imposed. In 1941, the Governor enacted the Khandwa Municipality
(Validation of Tax) Act, 1941, which sought to validate the tax imposed in
1922. In the meantime, s. I42-A was introduced in the Government of India Act,
1935, sub-s. (2) Of which provided that the 'total amount payable in respect of
any one person by way of taxes on professions, trades, callings and employments
shall not, after March 31, 1939, exceed Rs. 50 per annum'. The appellant
contended that the validating Act was hit by s. 142-A(2) and to the extent that
it imposed a tax above Rs. 50 per person per annum it was invalid.
Held, that the Validating Act was not hit by
S. I42-A (2) Government of India Act, 1935. The powers of the Indian
Legislatures included a power to pass retrospective and validating laws.
Section 142-A(2) which put a limit on the amount of tax did not affect laws
relating to a period prior to March 31, 1939, but affected only those relating
to periods after that date. It circumscribed the legislative power by putting a
date-line after which a tax in excess of Rs. 50 for a period after the dateline
could not be collected unless it came within the proviso. The Validating Act
imposed the tax in excess of Rs. 5o not after March 31, 1939, but before it.
The United Provinces v. Atiqa Begum, 
F.C.R. 110 and Piare Dusadh v. King Emperor,  F.C . R. 61, referred to.
CIVIL APPELLATE JURISDICTION: Civil Appeal
No.180 of 1959.
Appeal from the judgment and order dated June
30, 1955 of the former Nagpur High Court in Misc. First Appeal No. 162 of 1949.
80 634 N. C. Chatterjee and B. P. Maheshwari,
for the appellant.
G. C. Mathur, for the respondents.
1961. March 29. The Judgment of the Court was
delivered by HIDAYATULLAH, J.-This appeal, by certificate under Arts.
132(l) and 133(l)(c) of the Constitution, has
been filed against an order of the High Court at Nagpur dated June 30, 1955.
Though the facts necessary to decide the
appeal lie within a comparatively narrow compass, the case itself has had a
long and somewhat unique history. In July, 1922, the Municipal Committee,
Khandwa, resolved to impose a tax on the trade of ginning and pressing cotton
by means of steam, or mechanical process, and after sundry procedure, a
notification was published on November 25, 1922 in the Central Provinces and
Berar Gazette, imposing the tax. Certain traders including the appellant,
affected by the tax, filed suits seeking injunction against the Municipal
Committee on the ground that the tax was invalid and illegal. Meanwhile, the
Municipal Committee had served notices on the present appellant, and demanded
and recovered the tax for 1923-24.
The appellant then filed a second suit for
refund of the tax paid by her on the ground that the imposition of the tax was
illegal and ultra vires. The suits had varying fortunes in the Courts in India,
till they reached the Privy Council.
The Judicial Committee by its first decision
remitted the cases for additional evidence, while the appeals were kept
pending. The decision of the Judicial Committee is reported in Radhakrishan
Jaikishan v. Khandwa Municipal Committee (1). After the additional evidence was
received, the Judicial Committee pronounced its decision, which is reported in
Badhakishan Jaikishan v. Municipal Committee, Khandwa (9). The Judicial
Committee held that the tax was not validly imposed by the Municipal Committee,
and reversing the decree of the Judicial Commissioner, decreed the suits.
(1) (1933) L.R. 611 A. 125. (2) (1937) L.R.
64 LA. 118.
635 The Provincial Legislature then passed
the Khandwa Ginning and Pressing Cotton Tax Validating Act 8 of 1938,
validating, the tax. The Act contained only one operative section, which read
"2. Notwithstanding anything contained
in the Central Provinces Municipal Act, 1903, or the Central Province
Municipalities Act, 1922, or any decree or order of a civil court, the tax on
the trade of ginning and pressing cotton by means of steam or mechanical process
within the limits of the Khandwa municipality which was imposed by Notification
No. 2639-1298- VIII, dated the 21st November, 1922, shall be deemed to have
been legally imposed from the date of its imposition to the date on which this
Act comes into force.
Explanation.-All decrees or orders of a civil
court directing a refund of the tax already recovered by the committee of the
said municipality or restraining the committee from recovering the tax shall be
deemed to have no legal effect." The appellant had, in the meanwhile,
applied for the execution of the decrees, and the Validating Act was pleaded in
bar. This plea was upheld by the executing Court, but the High Court at Nagpur,
on appeal, rejected it and ordered the executions to proceed. The decision of
the High Court is reported in Firm Radhakishan v. Municipal Committee, Khandwa
(1). The reason given by the High Court was that the Explanation, though not
the operative part of the Validating Act, conflicted with 0. 45 R. 15 of the
Code of Civil Procedure, and that the assent of the Governor-General had not
been obtained, as required by is. 107(2) of the Government of India Act, 1935.
Meantime, the Provincial Legislature had been
dissolved, and the Governor had assumed all the powers of the Provincial
Legislature under s. 93 of the Government of India Act,.
1935. The Governor,- with the assent of the
Governor- General enacted the second Validating Act intituled the Khandwa
Municipality (Validation of Tax) Act, 1941,(16 of 1941), which received the
assent of the Governor-Genera I on June (1) (1940) N.L.J. 638.
636 30, 1941, and was published in the C. P.
and Berar Gazette on July 11, 1941. That Act, omitting parts not relevant here,
read as follows:
"2. The tax the imposition of which
purported to be sanctioned in the Notification of the Local Government
(Ministry of Local Self- Government) No. 2639-1298-VIII, dated the 21st
November 1922, shall be, and shall be deemed always to have been, validly
recoverable by the Municipal Committee of Khandwa in respect of the period from
the 21st November 1922 to the 31st March 1938 (both dates inclusive).
3. Where the net sum recovered from any
person before the commencement of this Act on account of the said tax is less
than the aggregate of the sum recoverable from such person, the balance shall
be payable to the said Municipal Committee on demand made at any time after the
commencement of this Act and, if not paid within fifteen days from the date of
the demand, shall be recoverable by any method available under the Central
Provinces Municipalities Act,, 1922, for the recovery of a tax imposed there
under or by such other method as the Provincial Government may by rule
4. For the purposes of section 3 the net sum
recovered from any person means the aggregate sum recovered from such person
less any sum refunded to him and less so much of the amount of any decree or
order for the payment of money executed by him against the said Municipal
Committee as represents an amount previously paid by him on account of the said
5. Nothing in this Act shall preclude the
execution against the said Municipal Committee of any decree or order for the
payment of money arising out of a payment on account of the said tax but upon
the execution of such decree or order so much of the amount thereof as
represents a sum previously paid on account of the said tax shall be payable to
and recoverable by the said Municipal Committee in accordance with section 3.
6. The Khandwa Ginning and Pressing Cotton
Tax Validating Act, 1938, is hereby repealed." 637 The Provincial
Government framed a rule, which, shortly stated, provided for the recovery of
the IV amount by way of execution application made to the very Court, which
executed the decree.
The Municipal Committee deposited the
decretal amount in Court, which was withdrawn by the appellant on furnishing
security. On August 7, 1947, the Municipal Committee filed its application
under the rule for execution of the decree.
Objections were raised by the appellant, but
were disallowed, and the Municipal Committee realised the amount of the tax
from the surety. The appellant had raised many objections, but we are concerned
with one only, viz., that the Act was ultra vires the Provincial Legislature
and consequently the Governor, being repugnant to a. 142-A, which was
introduced in the Government of India Act, 1935, and which imposed a limit of
Rs. 50 on taxes on professions, trades and callings after March 31, 1939.
On November 16,1949, an appeal was taken by
the present appellant to the High Court at Nagpur. This appeal was heard by
Sinha, C. J., and Mudholkar, J. (as they then were). Mudholkar, J. held that by
the second Validating Act which was passed after March 31, 1939, the limit of
Rs. 50 per annum imposed by the second sub-section of s. 142-A was exceeded,
'and that the Act was thus ultra vires, the Governor. Sinha C., J., was of the
contrary opinion. The case was then laid before Deo, J., who agreed with Sinha,
C. J., and the appeal was dismissed. The appellant then obtained the
certificate, and filed this appeal.
Section 142-A of the Government of India Act,
1935, is as follows:
"142-A. (1) Notwithstanding anything in
section one hundred of this Act, no Provincial Law relating to taxes for the
benefit of a Province or of a municipality, district board, local board or
other local authority therein in respect of professions, trades," callings
or employments shall be invalid on the ground that it relates to a tax on
(2) The total amount payable in respect of any
638 one person to the Province or to any one municipality, district board,
local board, or other local authority in the Province by way of taxes on
professions, trades, callings, and employments shall not, after the
thirty-first day of March nineteen hundred and thirty-nine, exceed fifty rupees
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 professions, 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 to the contrary is made by a law of the Federal Legislature,
have effect in relation to that Province, municipality, board or authority as
if for the reference to fifty rupees per annum there were substituted a
reference to the 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 Federal Legislature; and any law of the Federal Legislature made
for any of the purposes of this proviso may be made either generally or in
relation to any specified Provinces, municipalities, boards or authorities.
(3) The fact that the Provincial Legislature
has power to make laws as aforesaid with respect to taxes on professions,
trades, callings and employments, shall not be construed as limiting, in
relation to professions, trades, callings and employments, the generality of
the entry in the Federal Legislative List relating to taxes on income."
Simultaneously with the introduction of s. 142-A, Entry No. 46 in the
Provincial Legislative List, which had till then stood as "Taxes on
professions, trades, callings and employments" was amended by the addition
of the words "subject, however, to the provisions of section 142-A of this
The impugned Act was passed by the Governor
under s. 90 of the Government of India Act, 1935. Under sub-s. (3) of that
section, it had the same force and 639 effect and was subject to disallowance
in the same manner as an Act of the Provincial Legislature assent- led to by
the Governor. The impugned Act was enacted with the concurrence and assent of
the Governor-General and thus complied with all the formalities required for
The powers of the Provincial Legislatures
under the Legislative Lists have been the subject of numerous decisions by the
Federal Court and also by this Court. It has been pointed out that these powers
are as large and plenary as those of Parliament itself. These powers, it has
been held, include within themselves the power to make retrospective laws; and
as pointed out by Gwyer, C.J. in The United Provinces v. Atiqa Begum (1), the
burden of proving that Indian Legislatures "were subject to a strange and
unusual prohibition against retrospective legislation lay upon those who
asserted it". This has not been asserted in this case, as, indeed, it
could not be, after the decision of the case cited by us. In the case before
the Allahabad High Court, out of which the appeal before the Federal Court had
arisen [sub nom Mst. Atiqa Begum v. U. P. (2)], it was held that retrospective
legislation was not possible in view of the provisions of s. 292 of the
Government of India Act, 1935, which continued all law in force in British
India immediately before the commencement of Part III of the Act, until altered
or repealed or amended by a competent Legislature or other competent authority.
This view was not accepted by the Federal Court, which held that s. 292 of the
Act did not prevent Legislatures in India from giving retrospective effect to
measures passed by them. There have been numerous occasions on which
retrospective laws were passed, which were upheld by the Federal Court and also
by this Court. It is not necessary to cite instances, but we refer only to the
decision in M. P. V. Sundararamier & Co. v. The State of Andhra Pradesh
(3), where this Court approved the dictum of the Federal Court.
Retrospective legislation being thus open to
the (1)  F.C.R. 110. (2) A.I.R. (1940) All. 272.
(3)  S.C.R. 1422.
640 Provincial Legislatures, the Act of the
Governor had the same force. Retrospective laws, it has been held, can validate
an Act, which contains some defect in its enactment. Examples of Validating
Acts which rendered inoperative, decrees or orders of the Court or
alternatively made them valid and effective, are many. In Atiqa Begum's case
(1), the power of validating defective laws was held to be ancillary and
subsidiary to the powers conferred by the Entries and to be included in those
powers. Later, the Federal Court in Piare Dusadh,v. King Emperor (2) considered
the matter fully, and held that the powers of the Governor General which were
conterminous with those of the Central Legislature included the power of
validation. The same can be said of the Provincial Legislatures and also of the
Governor acting as a Legislature.
The only question thus is whether the power
to pass a retrospective and validating law was taken away by the enactment of
s. 142-A and the amendment of the Entry in the Government of India Act. It is
on this point that the difference in the High Court arose. The amendment of the
Entry is of no special significance, because it only subjects the otherwise
plenary powers to the provisions of s. 142-A. Apart from the implications
arising from that section, the supremacy of the Legislature to pass
retrospective and validating laws was unaffected. We have thus to see what s.
142-A enacted and to what extent it trenched upon the powers of the Provincial
Legislature and the Governor.
Mr. N. C. Chatterjee, in arguing the case,
adopted the line of reasoning of the minority view in the High Court. He
pointed out that a. 142-A was enacted to achieve three purposes. The first was
that it removed doubts whether the charge of tax on professions, etc., would be
regarded as income-tax. The second was that it put a limit upon the powers of
the Provincial Legislature to enact a law imposing a tax in excess of rupees
fifty after March 31, 1939;and thirdly it preserved only existing valid laws
already in force, which imposed a tax in excess of the amount indicated. He (1)
 F.C.R. 110. (2)  F.C.R. 61.
641 contended that the second sub-section and
the proviso covered the entire field, and a law passed after March 31, 1939,
could not freshly impose a tax in excess of the limit and this was such a law.
Under the scheme of the Government of India
Act, 1935, income-tax, though a Central levy, was, under s. 138 (1),
distributable among the Provinces and for which an elaborate scheme prepared by
Sir Otto Niemyer was accepted and embodied in the Government of India
(Distribution of Revenues) Order in Council, 1936. The Centre could levy a
surcharge for federal purposes. Taxes on trades, -professions and callings,
which were taxes already leviable by the Provinces under Schedule 11 of the
Rules made by the Governor-General in Council under .s. 80A(3)(a) of the
Government of India Act, were also included in the Provincial Legislative List
as a source of revenue for the Provinces. It was, however, felt that these
taxes might come into clash with tax on income in the Federal List, and also if
unlimited in amount, might become a second tax on income to be levied by the
Provinces. It was to remove these contingencies that s. 142-A was enacted.
Sub-section (1) provided I-,hat, a tax on professions, etc., would not be
invalid on the ground that it related to a tax on income.
Sub-section (3) was a counterpart of sub-s.
(1), and provided that the, generality of the Entry in the Federal Legislative
List relating to taxes on income would not be construed as in any way limited
by the power of the Provincial Legislature to levy a tax on professions, etc.
The fields of the two taxes were thus
demarcated. No other implication arises from these two sub-sections.
It was also apprehended that under the (guise
of taxes on professions, etc., the Provincial Legislatures might start their
own scheme of a tax on income, thus subjecting incomes from professions etc.,
to an additional tax of the nature of income-tax. A limit was therefore placed
upon the amount which could be collected by way of tax on professions, etc.,
and that limit, was Rs. 50 per annum per person. The, second 642 sub-section
achieved this result. It was, however, realised that the tax being an old tax,
there were laws under which the limit of Rs. 50 was already exceeded in
relation to a Province, municipality, board or like authority, and the
imposition of such a limit might displace their budgets after March 31, 1939. A
proviso was, therefore, added to the second sub-section that if in the
financial year ending with the thirty-first day of March, nineteen hundred and
thirty-nine there was in force in the case of any Province, etc., a tax on
professions, trades, callings or employments the rate or the maximum rate of
which exceeded Rs. 50 per annum, the provisions of the second sub-section shall
have effect, (unless for the time being provision to the contrary was made by a
law of the Federal Legislature) as if instead of Rs. 50 per annum there was
substituted a reference to the rate or maximum rate exceeding Rs. 50.
Where no such law was passed by the Federal
Legislature, the tax even in excess of Rs. 50 continued to be valid.
There can be no doubt that if a law was
passed after the amendment and sought to impose taxes on professions etc., for
any period after March 31, 1939, it had to conform to the -limit prescribed by
s. 142A (2). The prohibition in the second sub-section operated to circumscribe
the legislative power by putting a date-line after which a tax in excess of Rs.
50 per annum per person for a period after the date-line could not be
collect-id unless it came within the proviso. But neither sub-s. (2) nor the
proviso speaks of a period prior to March 31, 1939. The sub-section speaks only of "the total amount payable...... after the thirty- first day of March,
nineteen hundred and thirty. nine".
These words are important. They create a
limit on the amount leviable as tax for a period after that date. But if a law
was passed validating another which imposed a tax for a period prior to the
date indicated, it would be taxing professions etc., in excess of Rs. 50 not
after March 31, 1939, but before it. Neither the Entry nor the section either
directly or indirectly prohibited this, nor did they create any limit for the
prior period. The Validating Act, though 643 passed in 1941, can be read only
as affecting a period for which there was no limit. If the sub-section said
that tax shall not be payable in excess of Rs. 50 without indicating the period
or date, the argument would have some support, but it puts in a date, and the
operation of the prohibition is confined to a period after that date.
The Validating Act, being thus completely
within the powers of the Governor, could remove retrospectively the defect in
the' earlier Act. Though it reimposed the tax from the date of the earlier Act,
it took care to impose the tax for a period ending with March 31, 1938. The impugned Act did not need the support of the proviso, because it did not fall
within the ban of the second sub-section. In our opinion, the Validating Act of
1941 was within the powers of the Governor, and was a valid piece of
The appeal fails, and is dismissed with