Federation of Hotel & Restaurant Association of India, Vs. Union of India & Ors [1989] INSC 170 (2 May 1989)
Mukharji, Sabyasachi (J) Mukharji, Sabyasachi (J) Pathak, R.S. (Cj)
CITATION: 1988 AIR 1291 1988 SCR (3) 998 1988 SCC (3) 91 JT 1988 (2) 519 1988 SCALE (1)1088
CITATOR INFO : R 1989 SC 19 (29) F 1989 SC 30 (3) F 1989 SC1256 (8) F 1989 SC1308 (11) R 1990 SC1106 (43) RF 1991 SC1173 (6)
ACT:
Hotel Expenditure Act, 1987: Sections 2-5, 6 and 24--Tax at 10% ad valorem on chargeable expenditure where room charges in hotels were Rs.400 per day per individual--Validity of--Competence of Parliament to impose--Classification of hotel for tax purposes-Whether arbitrary, violative of Article 14--Whether violative of Article 19(1)(g).
Constitution of India, 1950: Articles 14 and 19(1) (g), Articles 246 and 248, Entry 97 List I and Entries 54 and 62, List 11, Seventh Schedule--Hotel Expenditure Act, 1987---Legislative competence of Parliament to impose tax--Classification of hotels based on room charges--Whether arbitrary--Whether permissible--Whether Act imposed unreasonable restriction on freedom of trade.
Uttar Pradesh Taxation And Land Revenue Laws Act, 1975/ Maharashtra Tax On Luxuries (Hotels And Lodging Houses) Act 1987/ Kerala Tax On Luxuries In Hotels And Lodging Houses Act, 1976--Validity of.
HEAD NOTE:
The Expenditure Tax Act, 1987, envisaged a tax at 10% ad valorem on chargeable expenditure incurred in the class of hotels wherein room charges for any unit of residential accommodation were Rs.400 per day per individual. Section 5 of the Act defined chargeable expenditure to include expenditure incurred in or payments made in such class of hotels in connection with the provision of any accommodation, residential, or otherwise, food or drink whether at or outside the hotel, or for any accommodation in such hotel on hire or lease or any other services envisaged in that Section.
The petitioners, who were engaged in, or associated with the hotel industry challenged the constitutional validity of the Act on grounds of 919 lack of legislative competence and violation of Articles 14 and 19(1)(g) of the Constitution. It was contended that the Act, in its true nature and character, was not one imposing an expenditure-tax, as known to law, accepted notions of Public Finance, and to legislative practice but was, in pith and substance, either a tax on luxuries falling within Entry 62 of List II of the Seventh Schedule, or a tax on the consideration paid for the purchase of goods constituting an impost of the nature envisaged in entry 54 of List II, and was clearly outside the legislative competence of the Union Parliament; that the Act was violative of Article 14 as the basis on which the hotels were classified was arbitrary an unintelligible, having no rational-nexus with the taxingpolicy under the Act, inasmuch as persons similarly situated, and who incurred the same extent and degree of expenditure on the same luxuries, were differentiated on the sole basis that in one case the expenditure was incurred in a hotel where one of the rooms had a charge of Rs.400 per day per individual marked for it, while in the other though equally wasteful expenditure was incurred in a more luxurious restaurant, the latter expenditure was exempt, that even if more sophisticated and expensive food and drinks and other services, envisaged in clauses (a) to (d) of Section 5 were provided in a hotel or catering establishment which fell outside the class, the expenditure incurred thereon is unaffected by the law, that the standards and measures for the computation of the chargeableexpenditure under the Act was vague and arbitrary, that the expression 'other similar services' in clauses (d) of Section 5 was non-specific and vague; and that the Act was violative of petitioners' fundamental right under Article 19(1)(g) as it imposed unreasonable onerous restrictions on their freedom of business.
The respondent-Union of India sought to sustain the legislative competence of Parliament to enact the law under Article 248 read with Entry 97 of List I of the Seventh Schedule, contending that the law, in pith and substance, was not one 'with respect to luxuries under Entry 62, List 1, and the tax on expenditure, as the legislative had chosen to conceive it, was referrable to residuary power, that the economists' concept of such an expenditure tax was at best an idea of the manner of effectuation of fiscal programme and was no limitation on the legislative power, that the legislative-power recognised the demarcation of distinct aspects of the same matter as distinct topics of legislation and that the challenge to legislative competence overlooked the dichotomy of these distinct aspects, the line of demarcation, though sometimes thin and subtle, being real, that the measure adopted for the levy of the tax did not necessarily determine its essential character and that the object on which the expenditure was laid-out might or might not be an item of 920 luxury, or the expenditure might constitute the price of the goods but, what was taxed was the expenditure aspect which, in itself, was susceptible of recognition, as a distinct topic of legislation.
Dismissing the Writ Petitions, this Court
HELD: (R.S. Pathak, CJ., Sabyasachi Mukharji, S. Natarajan and M.N. Venkatachaliah--Per: Venkatachaliah, J.)
1.1 A law imposing the expenditure tax is well within the legislative competence of Union Parliament under Article 248 read with Entry 97 of List I. [940E-F]
1.2 The tax envisaged by the Expenditure Tax Act, 1987, is essentially a tax on expenditure and not on luxuries or sale of goods falling within the State power. The distinct aspect, namely, the expenditure aspect of the transaction failing with the Union power must be distinguished and the legislative competence to impose a tax thereon sustained.
[947D-E]
2.1 If a legislature with limited or qualified jurisdiction transgresses its powers, such transgression may be open, direct and overt, or disguised, indirect and covert.
The latter kind of trespass is figuratively referred to as "colourable legislation", connoting that although apparently the legislature purports to act within the limits of its own powers yet, in substance and in reality, it encroaches upon a field prohibited to it, requiring an examination, with some strictness, the substance of the legislation for determining as to what the legislature was really doing. [939E-F] Prafulla Kumar Mukherjee and Ors. v. Bank of Commerce, [1945] FCR 179, referred to.
2.2 Wherever legislative powers are distributed between the Union and the States, situations may arise where the two legislative fields might apparently overlap. It is the duty of the Courts, however difficult it may be, to ascertain to what degree and to what extent, the authority to deal with matters failing within these classes of subjects exists in each legislature and to define, in the particular case before them, the limits of the respective powers. It could not have been the intention that a conflict should exist; and, in order to prevent such a result the two provisions must be read together and the language of one interpreted, and, where necessary modified by that of the other. [939F-G] 921 Union Colliery Co. of British Columbia v. Bryden, [1899] AC 580 at 587; Lefroy Canada's Federal System., referred to.
2.3 The law 'with respect to' a subject might incidentally 'affect' another subject in some way; but that is not the same thing as the law being on the latter subject. There might be overlapping; but the overlapping must be in law.
The same transaction may involve two or more taxable events in its different aspects. But the fact that there is an overlapping does not detract from the distinctiveness of the aspects. [941E] Governor General in Council v. Province of Madras, [1945] FCR 179 (P.C.) at 193 and Laskin Canadian Constitutional Law, referred to.
2.4 The consequences and effects of the legislation are not the same thing as the legislative subject matter. It is the true nature and character of the legislation and not its ultimate economic results that matters. [944C]
2.5 The scope of the present legislation cannot be considered by reference to legislative practice because firstly, the question of legislative-practice as to what a particular legislative-entry could be held to embrace is inapposite while dealing with a tax which is suigeneris or non-descript imposed in exercise of the residuary powers so long as such tax is not specifically enumerated in Lists II
ing that the appropriate legislature had limited the notion of a tax of this kind within any confines. [944E-G] Walace Brothers and Company Ltd. v. Commissioner of Income Tax, Bombay City and Bombay Suburban District, [1948] LR 75, IA 86; Navinchandra Mafatlal v. CIT, Bombay City, [1955] 1 SCR 829; Union of India v. H.S. Dhillon, [1972] 2 SCR 33 at 61; Attorney General for Ontario v. AttorneyGeneral for Canada, [1912] AC 571 at 581; Croft v. Dunphy, [1933] AC 156 and Azam Jha Bahadur v. Expenditure Tax Officer, [1972] 1 SCR 470 referred to.
2.6 The subject of a tax is different from the measure of the levy. The measure of the tax is not determinative of its essential character or of the competence of the legislature. [946F-G] M/s. Sainik Motors v. State of Rajasthan, [1962] 1 SCR 517 and Encyclopaedia Britannica on Luxury Tax, Vol. 14 p. 459, referred to.
922
3.1 Though taxing laws are not outside Article 14, however, having regard to the wide variety of diverse economic criteria that go into the formulation of a fiscalpolicy, legislature enjoys a wide latitude in the matter of selection of persons, subject-matter, events, etc., for taxation. A legislature does not, have to tax everything in order to be able to tax something. if there is equality and uniformity within each group, the law would not be discriminatory. The tests of the vice of discrimination in a taxing law are, accordingly, less rigorous. [948G-H]
3.2 In examining the allegations of a hostile, discriminatory treatment what is looked into is not its phraseology, but the real effect of its provisions. The classification must be rational and based on some qualities and characteristics which are to be found in all the persons grouped together and absent in the others left out of the class.
Besides, differentia must also have a rational nexus with the object sought to be achieved by the law. However, no precise or set formulae or doctrinaire tests or precise scientific principles of exclusion or inclusion are to be applied. The test could only be one of palpable arbitrariness applied in the context of the felt needs of the times and societal exigencies informed by experience. [949A, C-E]
3.3 Classification based on differences in the value of articles or the economic superiority of the persons of incidence are well-recognised. A reasonable classification is one which includes all who are similarly situated and none who are not. In order to ascertain whether persons are similarly placed, one must look beyond the classification and to the purposes of the law. [949E-F] Jaipur Hosiery Mills Ltd. v. State of Rajasthan, [1970] 2 SCR 26; Hiralal v. State of U.P., [1973] 2 SCR 502; State of Gujarat v. Sri Ambika Mills Ltd., [1974] 3 SCR 760; G.K. Krishnan v. Tamil Nadu, [1975] 2 SCR 715; I.T.O. v. N. Takim Roy Limbe, [1976] 3 SCR 413; Secretary of Agriculture v. Central Roig Refining Co., [1949] 338 U.S. 604; M/s. Hoechst Pharmaceuticals Ltd. v. State of Bihar, AIR 1983 SC 1019 and Wallace Mendelson: Supreme Court Statecraft; The Rule of Law and Men, p. 4, referred to.
3.4 In the present case, the bases of classification cannot be said to be arbitrary or unintelligible nor as being without a rational nexus with the object of the law. A hotel where a unit of residential accommodation is priced at over Rs.400 per day per individual is, in the legislative wisdom, considered a class apart by virtue of the economic superiority of those who might enjoy its custom, comforts and services.
923 This legislative assumption cannot be condemned as irrational. Judicial veto is to be exercised only in cases that leave no room for reasonable doubt. Constitutionality is presumed. [952B-C]
3.5 The words "other similar services" in Section 5(d) were intended to embrace services like-but not identical with--those described in the preceding words. The content of the expression "other similar services" following, the preceding expressions "by way of beauty parfour, health club, swimming pool or ..... "has a definite connotation in the interpretation of such words in such statutory contents. The matter is one of construction whether any particular service fails within the section and not one of constitutionality. [953E-F]
4. A taxing statute is not, per-se, a restriction of the freedom under Article 19(1)(g). The policy of a tax, in its effectuation, might, of course, bring in some hardship in some individual cases. But that is inevitable, so long as law represents a process of abstraction from the generality of cases and reflects the highest common-factor. The mere excessiveness of a tax or even the circumstance that its imposition might tend towards the diminution of the earnings or profits of the persons of incidence does not, per-se, and without more. constitute, violation of the rights under Article 19(1)(g). [954F-G] Per Ranganathan, J. (Concurring),
5.1 In the context of the social and economic conditions that prevailed in India, it was a luxury for any person to stay in hotels charging high rents and providing various types of facilities, amenities and conveniences such as telephone, television, air-conditioner, etc. An expenditure on something which is in excess of what is required for economic and personal well-being would be expenditure on luxury although the expenditure may be of a nature which is incurred by a large number of people including those not economically well off. [958G-H] Abdul Kadir & Sons v. State of Kerala, [1976] 2 SCR 690, relied on.
5.2 The legislature has, particularly in a taxing statute, a considerable amount of latitude and it cannot be held that, in fixing the standards of indication of luxury, the legislature, has not applied its mind. In fact, the figures have been amended from time to time and, it has to be presumed that the legislature had good reason for fixing these standards. From the scheme of the legislations, the state legislations fall 924 within the scope of Entry 62, List I and are, therefore, clearly within the competence of the State legislatures and are not liable to be challenged. [959D; 957C]
6.1 In interpreting the scope of the legislative entries in the three lists, it has to be kept in mind that, while on the one hand, it is desirable that each entry in each of the lists should receive the broadest interpretation, it is equally important, on the other, that the three lists should be read together and harmoniously. [959E-F]
6.2 The power of the State legislature to make laws with respect to any of the matters enumerated in List II is subject to the exclusive power of Parliament to make laws with respect to any of the matters enumerated in List I.
Hence, if a matter is covered by an entry in the Union List, no restrictions can be read into the power of Parliament to make laws in regard thereto. [959G-H; 960A]
6.3 The legislative entries are so arranged that the power to enact laws in general and the power to impose taxes are separately dealt with. Under Article 246(1), the Parliament has exclusive powers to make laws with respect to any of the matters, including power to impose taxes, enumerated in List I. [960B-C] M.P.V. Sundararamier & Co. v. The State of Andhra Pradesh Another, [1958] SCR 1422 at pp. 1479 and 1490, referred to.
7. It cannot be held that the tax cannot be considered to be an expenditure tax because it is not on expenditure generally but is restricted to specific types of expenditure. There is no legal, judicial, economic or other concept of expenditure tax that would justify any such restrictive meaning. If, conceptually, the expenditure incurred by a person can be a subject-matter with reference to which a tax can be levied, such taxation can be restricted only to certain items or categories of expenditure, and its base need not necessarily be so wide as to cover all expenditure incurred by an assessable entity. Selection of objects and goods for taxation is the essence of any tax legislation and any limitation is an unlimited curtailment of this selective power of taxation of Parliament. [960H; 961A-B, F]
8.1 There is not much of legislative practice which would justify importing any limitation on the concept of a tax on expenditure under entry 97 of List I. Once it is granted that the tax need not exhaust the entire universe of the subject-matter, the extent of the subject matter 925 that should be covered or selected for imposing tax should be entirely left to Parliament subject only to any criteria of discrimination or unreasonableness that may attract the provisions of Part 1II of the Constitution. [962D-E, F-G] State of Madras v. Gannon Dunkerley Co., [1959] SCR 379;
Navinchanda Mafat Lal v. CIT. [1955] 1 SCR 829; Naynit Lal v. AAC, [1965] 1 SCR 909; Harikrishna Bhargava v. Union, [1966] 2 SCR 22 and Bhagwandas Jain v. Union of India, [1981] 2 SCR 808, referred to.
8.2 Legislative lists cannot be interpreted on the assumption that there is a deemed entry "Taxes on Expenditure" added to List I as a result of the decision in Azam Jha's case, [1972] 1 SCR 470. Entries cannot be added to the legislative Lists on the basis of decisions of this Court.
In Azam Jha's case, the pith and substance of the Act considered did not fail under any of the entries in List II or III. However, in the instant case, the legislation coveres only certain types of expenditure. The decision in Azam Jha's case cannot help in determining whether the Expenditure Act 1987 should be construed as imposing tax on expenditure or and on luxuries. [964A-C] Azam Jha Bahadur v. Expenditure Tax Officer, [1972] 1 SCR 470 distinguished.
9. Merely because the 1987 Act as well as the State Acts levy taxes which have ultimate impact on persons who enjoy certain luxuries, the pith and substance of both cannot be considered to be the same. The object of a tax on luxury is to impose a tax on the enjoyment of certain types of benefits, facilities and advantages on which the legislature wishes to impose a curb. The idea is to encourage society to cater better to the needs of those who cannot afford them.
Such a tax may be on the person offering the luxury or the person enjoying it. It may be levied on the basis of the amount received for providing, or the amount paid for or expended for enjoying, the luxury. Conceivably, it could be on different bases altogether. The object of an expenditure tax is to discourage expenditure which the legislature considers lavish or Ostentatious. The object of the first would be to discourage certain types of living or enjoyment while that of the second would be to discourage people from incurring expenditure in unproductive or undesirable channels. If a general Expenditure Tax Act, like that of 1957, had been enacted, no challenge to its validity could have been raised because it incidentally levied the tax on expenditure incurred on luxuries. The fact that there will be some overlapping then or that here there is a good deal of such 926 overlapping, because the States have chosen to tax only some types of luxuries and the Centre to tax, atleast for the time being, only expenditure which results in such luxuries, should not be allowed to draw a curtain over the basic difference between the two categories of imposts. [968E-H; 969A-B] This distinction is not obliterated merely because of the circumstances that both legislatures have chosen to attack the same area of vulnerability, one with a view to keep a check on 'luxuries' and the other with a view to curb undesirable 'expenditure'. [969C] Kerala State Electricity Board v. Indian Aluminium Co., [1976] 1 SCR 562; In the Central Provinces & Berar Sales of Motor Spirit and Lubricants Taxation Act, 1938, [1939] FCR 18; Province of Madras v. Boddu Paidanna & Sons, [1942] FCR 90; G.G.-in-Council v. Province of Madras, [1945] FCR 179;
Ralla Ram v. East Punjab, [1948] FCR 207; Bhagwan Dass Jain v. Union, [1981] 2 SCR 808; Hingir-Rampur Coal Co. Ltd. v. State of Orissa, [1961] 2 SCR 537 and Sainik Motors v. State of Rajasthan, [1962] 1 SCR 517, referred to.
A.H.F. Lefroy: Canadian Constitution and Laskin: Canadian Constitutional Law, referred to. & ORIGINAL JURISDICTION: Writ Petition No. 1395 of 1987. etc.
(Under Article 32 of the Constitution of India).
N.A. Palkhiwala, T.R. Andhyarujina, Soli J. Sorabjee, R. Dada, S. Ganesh, J.R. Gagrat, R.B. Aggarwala, P.G. Gokhale, V.B. Aggarwala, R.J. Gagrat, R.B. Hathikhanawala, R.F. Nariman, P.H. Parekh, Sanjay Bhartari, M.K. Menon, R.K. Dhillon, Ms. Rohini Chhabra, Ms. Sunita Sharma and Ms. Ayesha Misra for the Petitioners.
K. Parasaran, Attorney General, B. Datta, Addl. Solicitor General, Dr. V. Gauri Shankar, S.K. Dholakia, P.S. Poti, G.A. Shah, V. Jaganatha Rao, K. Sudhakaran, Ms. A. Subhashini, B.B. Ahuja, H.K. Puri, A Subba Rao, A.S.Bhasme, K.R. Nambiar, M.N. Shroff, M. Veerappa, R. Mohan, R. Ayyamperumal and J.P. Mishra for the Respondents.
The following judgments of the Court were delivered:
927 VENKATACHALIAH, J. In these writ-petitions under Article 32 of the Constitution of India, petitioners who are engaged in, or associated with, the Hotel Industry in India challenge the constitutional validity of the Expenditure-Tax Act, 1987 (Central Act 35 of 1987). The Act envisages a tax at 10 per cent ad valorem on 'chargeable-expenditure' incurred in the class of Hotels wherein "room-charges" for any unit of residential accommodation are Rupees Four Hundred per day per individual. The 'Chargeable-expenditure' as defined in Section 5 of the Act include expenditure incurred in or payments made in such class of hotels in connection with the provision of any accommodation, residential or otherwise, food or drink whether at or outside the hotel; or for any accommodation in such hotel on hire or lease; or any other services envisaged in that Section. However, any expenditure incurred in or paid for in "foreign exchange" or by persons who enjoy certain diplomatic privileges and immunities are exempt.
The challenge to the vires of the 'Act' is on grounds of lack of legislative-competence and of violation of the rights under Article 14 and 19(1)(g). Union of India seeks to sustain the legislative competence to enact the impugned law under Article 248 read with Entry 97 of List I of the Seventh Schedule.
2. Writ Petition No. 1395 of 1987 is quite comprehensive as to the array of parties and may generally be regarded as representative of the contentions urged in support of the challenge. The first petitioner therein is "The Federation of Hotel & Restaurant Association of India"--which is said to be a representative body of over 1,000 member-petitioners in India. Petitioners 2 to 5 are said to be the Regional Associations of the Federation and Petitioners 6 and 7 are two Hotel companies which own several hotels in India.
Petitioners 8 and 9 are Indian citizens who are the directors and shareholders of petitioners 6 and 7 respectively.
Petitioner 10, is a practising chartered-accountant who claims to use the services in the several Hotels in India owned by the members of the Federation. The array of petitioners is quite comprehensive so as to include all interests affected so as to satisfy the requisite standing to sue from all points of view.
3. The Expenditure Tax Bill No. 90 of 1987, preceding the impugned Act was introduced in the Union Legislature on 21.8.1987. It became an Act on 14.9.1987. It extends to the whole of India except the State of Jammu and Kashmir. The requisite notification under Section 1(3) of the Act was issued on 14.10.1987 appointing 1.11.1987 928 as the date on which the Act shall come into force.
The Expenditure Tax Bill No. 90 of 1987 states the following as its objects and reasons:
"The Bill seeks to impose a tax on expenditure incurred in hotels were the room charges for any Unit of residential accommodation are four hundred rupees or more per day per individual. This tax will be levied at the rate of ten per cent of the expenditure incurred in connection with provision of any accommodation, food, drinks, and certain other categories of services. This tax will not apply to expenditure incurred in foreign exchange or in the case of person enjoying diplomatic privileges." (Emphasis supplied)
4. A brief survey of the provisions of the Act is perhaps necessary to apprehend and assess the grounds of challenge in their true perspective. Section 4 is the charging section which says:
"Subject to the provisions of this Act, there shall be charged on and from the commencement of this Act, a tax at the rate of ten per cent of the chargeable expenditure." The expression 'chargeable-expenditure' is defined in clauses (a), (b), (c) and (d) of Section 5, which read:
"For the purposes of this Act, chargeable expenditure means any expenditure incurred in, or payments made to, a hotel to which this Act applies, in connection with the provision of,-(a) any accommodation, residential or otherwise;
or (b) food or drink by the hotel, whether at the hotel or outside, or by any other person at the hotel; or (c) any accommodation in such hotel on hire or lease; or (d) any other services at the hotel, either by the hotel or by any other person, by way of beauty parlour, health 929 club, swimming pool or other similar services." (Rest of the provisions of Section 5 are omitted as unnecessary for the present) The expression 'Assessee', 'Hotel', 'Room-charges' are some of the material expressions defined in the interpretation clause.
2(1) "assessee" means a person responsible for collecting the expenditure-tax payable under the provisions of this Act.
2(6) "Hotel" includes a building or part of a building where residential accommodation is, by way of business, provided for a monetary consideration.
2(10) "room charges" means the charges for a unit of residential accommodation in a hotel and includes the charges for-(a) furniture, air-conditioner, refrigerator, radio, music, telephone, television, and (b) such other services as are normally included by a hotel in room rent, but does not include charges for food, drinks and any services other than those referred to in sub-clauses (a) and (b). Section 3 is the crucial provision which lays down the differentia for the classification of the Hotel to which the 'Act' applies.
Section 3 is the crucial provision which lays down the differentia for the classification of the Hotel to which the 'Act' applies. That section provides that the 'Act' shall apply in relation to any 'chargeableexpenditure', incurred in a hotel wherein the "room-charges" for any unit of residential accommodation at the time of incurring of such expenditure are Rs.400 or more per day per individual. The levy of tax is confined to such class of Hotels which satisfy that statutory-standard. Where, however, composite charges are payable in respect of both residential accommodation and food, then the "room charges" for purposes of determination of the criteria attracting the Act shall have to be apportioned in the manner to be prescribed. Section 3 930 enables the assessing-officer to determine the 'roomcharges' on such reasonable basis as he may deem fit where:
.lm60 "(i) a composite charge is payable in respect of residential accommodation, food, drinks and other services, or any of them, and the case is not covered by the provisions of sub-section (2), or (ii) it appears to the Income-tax Officer that the charges for residential accommodation, food, drinks or other services are so arranged that the room charges are understated and other charges are overstated," Sections 6 and 24 envisage and provide for the authorities to administer Act and engrafts the machinery and procedure of the Income-tax Act. Section 6(1) says:
"Every Director of Inspection, Commissioner of Incometax, Commissioner of Income-tax (Appeals), Inspecting Assistant Commissioner of Income-tax, Income-tax Officer and Inspector of Income-tax shall have the like powers and perform the like functions under this Act as he has and performs under the Income-tax Act, and for the exercise of his power and the performance of his functions, his jurisdiction under this Act shall be the same as he has under the Income-tax Act." Section 24 provides:
"The provisions of the following sections and Schedules of the Income-tax Act the Income-tax (Certificate Proceedings) Rules, 1962, as in force from time to time, shall apply with necessary modifications as if the said provisions and the rules referred to expenditure-tax instead of to income-tax:
2(43B) and (44), 118, 125, 125A, 128 to 136 (both inclusive), 138, 140, 144A, 159 to 163 (both inclusive), 166, 167, 170, 171, 173 to 179 (both inclusive), 187, 188, 189, 220 to 227 (both inclusive), 229, 231, 232, 237 to 245 (both inclusive), 254 to 262 (both inclusive) 265, 266, 268, 269, 278B, 278C, 278D, 278E, 281, 281B, 282, 283, 284, 287, 288, 288A, 288B, 289 to 293 (both inclusive), the Second 931 Schedule and the Third Schedule:
Provided that references in the said provisions and rules to the "assessee" shall be construed as references to an assessee as defined in this Act." Section 8(1) provides that every "person responsible for collecting" the tax as defined in Section 2(8) shall, before the expiry of four months from the 31st day of March in each year furnish or caused to be furnished to the Income-tax Officer, in the prescribed form and varified in the prescribed manner a return in respect of the immediately preceding financial year showing
(a) the aggregate of the payments received in respect of "chargeable-expenditure";
(b) the amount of the tax collected;
(c) the amount of the tax paid to the credit of the Central Government; and
(d) such other particulars as may be prescribed.
The incidence of the tax is on the persons who incur the "chargeable-expenditure" in the class of hotels to which the Act applies. Section 7 enjoins upon the "person responsible for collecting" the duty to collect the taxes and pay the same to the credit of the Central Government. The "roomcharges" of Rs.400 per day per individual stipulated in Section 3 is the differentium which keeps apart the class of hotels to which the Act applies. Petitioners say that Section 3 merely defines the place, viz., the Hotel where a room carries a charge of Rs.400 per day marked on it and the rest of the incidents and consequences of the provisions of the 'Act' envisage the levy of a tax on the 'luxuries' provided at such a place. The legislation, it is urged, is squarely within Entry 62 of List II within the State-power.
The Act, it is contended, does not impose an "Expenditure Tax" but taxes 'Luxuries'. Even if the legislation has an "expenditure dampening" objective and seeks to inhibit, by creation of disincentives, ostentatious and wasteful expenditure, the classification, it is said, has no rational basis. Persons similarly situated and who incur the same extent and degree of expenditure on the same luxuries are differentiated on the sole basis that in one case the expenditure is incurred in a Hotel where one of the rooms has a charge of Rs.400 per day per individual marked for it, while in the other though equally wasteful expenditure is incurred in a more luxurious Restaurant, the latter expenditure is exempt. It is urged that even if more sophisticated and expensive food and drinks and other services, envisaged in clauses (a) to (d) of Section 5, are provided in a hotel or catering establishment which falls out-side the class, the expenditure incurred thereon is unaffected by the law.
932 This aspect of under-inclusiveness is assailed as violative of Article 14.
5. Petitioners further contend that the several provisions of the Act which impose certain statutory-obligations of an onerous nature, the breach of which are visited with penal consequences, render the law an unreasonable restriction on the petitioners' fundamental rights under Article 19(1)(g).
The contentions urged in support of the petitions admit of being noticed and formulated in the following terms:
(a) The 'Act', in its true nature and character, is not one imposing an 'Expenditure-Tax', as known to Law, accepted notions of Public Finance, and to legislative practice but is, in pith and substance, either a tax on Luxuries falling within Entry 62 of List II of the Seventh Schedule; or a tax on the consideration paid for the purchase of goods constituting an impost of the nature envisaged in entry 54 of List II, and clearly outside the legislative competence of the Union Parliament;
(b) that even if the 'Act' is held to impose a tax which is "sui-generis" or a "non-discript", tax with respect to which the Union Parliament is competent to make a law under Article 248 and Entry 97 of List I, then, at all events, the 'Act' is violative of Article 14 in as much as the differentium on which the Hotels are classified is arbitrary and unintelligible has no rational-nexus with the taxing-policy under the 'Act'.
(c) that the 'Act' is violative of Petitioners' fundamental-right under Article 19(1)(g) as it imposes unreasonable onerous restrictions on their freedom of business.
6. Re.' Contention (a):
Sri Palkhivala, learned Senior Counsel for the petitioners, contended that the appellation of 'Expenditure Tax' given to the impost is a misnomer as the concept of "Expenditure-Tax" as known to law and recognised by the theorists of public finance is not a tax on a few stray items of expenditure but is a term of Art which has acquired a technical import as 'nomen-juris' and that the import envisaged by the Act, in its true nature and character, is no more and no less than a tax on Luxuries under Entry 62 list II within the State's exclusive power. Learned Counsel urged that the delicate balance in the demarcation in 933 a federal polity of legislative powers between the Union and the States would impose on the Union, the repository of the residuary power, the sensitive task of recognising both the line of demarcation as well as the constitutional mandate--and a disciplined reluctance--not to cross it. The contention as to lack of legislative-competence emphasises two aspects--one with a negative implication and the other of a positive import. Negatively, it is urged that the impost is not, and does not satisfy the concept of an "Expenditure tax" which has a technical connotation both in law and in public finance. A tax on certain stray items of expenditure is not, it is contended, a general "expenditure tax". The nomenclature of the levy is really a mere iIIfitting legal mask for what is really a tax under Entry 62 list I. The nomenclature of the tax, it is urged, is irrelevant in deciding its true nature and character. It belongs to the rudiments of the subject, says the learned counsel, that a constitutional-grantee of a power cannot enlarge its own by choosing for the legislation enacted in exertion of that power, a nomenclature that corresponds to and semantically subsumes with the grant. Shri Palkhivala submitted that the true nature and concept of "expenditure tax", as known to the theories of public finance has a specific, well accepted legal connotation and is a tax levied on income or capital spent or "consumed" in distinguishment of income or capital "saved". It is this concept of 'expenditure tax', as a fiscal tool, which has certain social and economic objectives informing its policy. The present impost and its incidents, it is urged, have no rational connection with the concept of "expenditure tax" known to and accepted by the principles of public finance and recognised by established Legislative practice.
7. Referring to the economists' concept of "expenditure tax", learned counsel referred us to the report of the Study Group "On taxation of Expenditure" (Government of India, Ministry of Finance, April 1987) "An expenditure tax is generally taken to mean a direct tax on personal consumption, i.e., the total annual consumption (minus an exemption, if any) of an individual tax payer or family. This implies that the tax will be payable in the year in which consumption takes place. One can conceive of the tax base being computed by adding up all items of expenditure, which are by law defined as consumption expenditure................ or, alternatively, by summing up all the receipts and substracting there from expenses of earning 934 income as well as outflows in the form of savings (going into different types of investments, including repayment of past loans). In practice, the latter method would be preferable." (Emphasis Supplied) "India has the distinction, shared with Sri Lanka, of having actually experimented with a direct tax on consumption expenditure though the idea itself had caught the imagination of many tax theorists in developed countries, some of whom had developed practical systems for implementation. In both India and Sri Lanka, the tax was introduced on the basis of the recommendations of Prof. Nicholas Kaldor.
Prof. Kaldor had been invited to come to India by the Indian Statistical Institute to make an investigation of the Indian tax system in the light of the revenue requirements of the Second Five Year Plan. In his report, he recommended the introduction of a direct tax on personal consumption expenditure as a limb of a comprehensive and self checking system comprising the income tax, (which was already in operation in India), a tax on capital gains (which had been tried for two years in the post-war period and then withdrawn), an annual tax on net wealth, a general gift tax and a tax on personal expenditure. He envisaged that these five levies would be assessed simultaneously on the basis of a single comprehensive return, ..... " (Emphasis Supplied) "Under the scheme of expenditure taxation suggested by Prof. Kaldor, a taxpayer would not be required to give any detailed account of his outlays on consumption but only a statement of his total outlay as part of a comprehensive tax return showing all his receipts, investments, etc., and all the items for which he claimed exemption .... " "In India too, although the expenditure tax was tried twice and was given up, there has been a revival of interest in making expenditure the base for personal taxation. In particular, it has been maintained that India should seriously consider moving towards a progressive expenditure tax for three important reasons:
935 (a) it will promote savings;
(b) it would be, on the whole, more equitable than the present or any practicable form of income tax; and
(c) it will significantly reduce the inducement for direct tax evasion."
In Musgrave on 'Public Finance', referring to the concept of Personal Expenditure Tax, it is stated:
" .... In analogy to the income tax, the taxpayer would determine his total consumption for the year, subtract whatever personal exemptions or deductions were allowed, and apply a progressive rate schedule to the remaining amount of taxable consumption".
(Emphasis Supplied) Sri Palkhivala also referred to certain passages of Nicholas Kaldor "On Expenditure Tax" and the same eminent economists report on "Indian Tax Reform", to reinforce the submission that the conceptualisation of 'Expenditure-Tax', as a fiscal tool for economic regulation, has a specific and definite connotation and the "Tax" so conceptualised by experts on public finance is an entirely different idea from the one--built into the present legislation. The very concept of 'Expenditure Tax' envisaged in the impunged legislation, it is urged, is unknown to accepted principles of public finance and is the result of a grave misconception as to the essential nature and incidents of what in law and legislative practice is recognised as 'Expenditure Tax'. The whole exercise, learned counsel said, is a draft on credibility and that the Finance Minister's speech on the Bill leaves no doubt that what the Government wanted from the law was really a tax on "Luxuries". The impost, it is urged, is not susceptible of any other legitimate understanding than that it is in substance and effect, a tax on "Luxuries" within the States' power. Sri Palkhivala emphasised the relevance of what was implicit in the observations of this court in Azam Jha Bahadur v. Expenditure Tax Officer, [1972] 1 SCR 470 made while upholding the legislative competence of the Union Parliament to enact the Expenditure Tax Act 1957, as referable to the residuary Entry 97 of List I. The implication of the observations of this Court at page 479 of the report, according to learned counsel, is that what distinguished 936 an "expenditure-tax" from a levy under Entry 62 of List II, was that the scheme of taxation took into account the totality of expenditure over a unit of time, as distinct from sums laid out on stray purchases of luxuries.
8. Shri Palkhivala, then, submitted that the notion of expenditure tax, as recognised by legislative-practice is a relevant factor. In Croft v. Dunphy, [1933] AC 156 Lord Mc Millan held that when power is conferred on the legislature on a particular topic it is important, in determining the scope of the power, to have regard to what, in legislative practice, is ordinarily treated as embraced within the topic and particularly in legislative practice of the State which has conferred the power. In Wallace Brothers & Co. Ltd. v. CIT, Bombay City, [1948] L.R. 75, IA 86 Lord Uthwatt referred to the permissibility and, indeed, the importance to refer to the legislative-practice as to what is ordinarily treated as within the topic of legislation in understanding the scope of a legislative-power. The notion of expenditure-tax in the scheme of the Expenditure Tax Act, 1957, would, it is urged, detract from such legislative-practice.
9. The second limb of the argument is that the impost is clearly of the nature of a tax on luxuries within Entry 62 of List I. The simple test, according to the argument, is whether, if a State legislature had enacted a similar law it would not have been held to be within its competence under Entry 62 of List II? The answer would, according to the submission, be in emphatic affirmation, Referring to the concept of a luxury tax, learned counsel referred to the New Encyclopaedia Britanica Vol. 7 which referring to "luxurytax" says:
"Luxury tax, excise levy on goods or services considered to be luxuries rather than necessities. Modern examples are taxes on jewellery and perfume. Luxury taxes may be levied with the intent of taxing the rich, as in the case of the late 18th-and early 19thcentury British taxes on carriages and manservants; or they may be imposed in a deliberate effort to alter consumption patterns, either for moral reasons or because of some national emergency. In modern times, the revenue production of luxury taxes has probably overshadowed the moral argument for them.
Furthermore, the progressive nature of the early taxes began to be lost as more lower--income people's "luxuries" were taxed in the interest of generating additional revenue; an example is the amusement tax." 937 On the analogy of the wealth-tax envisaged by Entry 86 of List I it was urged that even as the concept of "wealth" for the imposition of a tax thereon is not the individual components of the assets of the assessee but a totality of all assets which the assessee owns, so is the concept of "expenditure" which does not consist of a few stray items of expenditure but a systematised reckoning of expenditure for and during a particular unit of time.
10. It was then urged that recourse to the residuary power under Article 248 read with Entry 97 of List I should be the very last refuge and would be available if, and only if, the other entries in the State and concurrent lists do not cover the topic.
Reliance was also placed on the observations of the Federal Court in Subrahmanyan Chettiar v. Muttuswami Goundan, AIR 1941 FC 47 where it was held:
"But resort to that residual power should be the very last refuge. It is only when all the categories in the three Lists are absolutely exhausted that one can think of falling back upon a nondescript." Shri Palkhivala recalled the following words of caution sounded by Chinnappa Reddy, J. in International Tourist Corporation v. State of Haryana, [1981] 2 SCR 364:
" ..... Before exclusive legislative competence can be claimed for Parliament by resort to the residuary power, the legislative incompetence of the State legislature must be clearly established. Entry 97 itself is specific that a matter can be brought under that entry only if it is not enumerated in List II or List III and in the case of a tax if it is not mentioned in either of those lists. In a Federal Constitution like ours where there is a division of legislative subjects but the residuary power is vested in Parliament, such residuary power cannot be so expansively interpreted as to whittle down the power of the State legislature. That might affect and jeopardise the very federal principle. The federal nature of the constitution demands that an interpretation which would allow the exercise of legislative power by Parliament pursuant to the residuary powers vested in it to trench upon State legislation and which would thereby destroy or belittle state autonomy must be rejected ......" 938 Sri Palkhivala also sought to demonstrate how, looked at from another angle, the levy presents an anomalous situation by splitting-up a transaction which would otherwise be one of sale of goods and isolating the price of the goods for separate treatment as a distinct subject-matter for levy of expenditure-tax, thus robbing the State-power of its substance.
Learned Advocate General for the State of Kerala who intervened made submissions which while being substantially on the lines of the petitioners' contentions, however, sought to qualify that legislative-competence to the extent of operation of the 'Act' in the Union territories could be sustained.
11. Learned Attorney General on the contrary, submitted that the law, in pith and substance, is not one "with respect to" Luxuries under Entry 62 List I and the tax on expenditure, as the legislature has chosen to conceive it, is referrable to residuary power. Learned Attorney General said that the economists' concept of such a expenditure tax is at best an idea of the manner of effectuation of fiscal programme and is no limitation on the legislative power.
Indeed, if a topic is not shown to fall within the fields of legislation in Lists II or III, no further inquiry is necessary in order to support the legislative competence of the Union to legislate on the topic. The purpose of incorporating a separate List for the Union, as observed in Union of India v. H.S. Dhillon, [1972] 2 SCR 33 at 671 is:
".......... there is some merit and legal effect in having included specific items of List I for when there are three lists it is easier to construe List II in the light of Lists I and II. If there had been no List 1, many items in List 11 would perhaps have been given much wider interpretation than can be given under the present scheme. Be that as it may, we have the three lists and a residuary power and therefore it seems to us that in this context ira Central Act is challenged as being beyond the legislative competence of Parliament, it is enough to enquire if it is a law with respect to matters or taxes enumerated in List II. If it is not, no further question arises." (Emphasis Supplied) Learned Attorney General characterised the petitioners' contention that the impugned impost is really a tax on luxuries or that one 939 aspect of the taxable event in the sale of goods had impermissibly been isolated for the creation of an artificial idea 'expenditure', suffers from certain basic fallacies.
The legislative-powers, it is urged, recognise the demarcation of distinct aspects of the same matter as distinct topics of legislation and that the present challenge to legislative competence overlooks the dichotomy of distinct aspects of the same matter constituting distinct fields of legislation, the line of demarcation, though sometimes thin and subtle, being real. Learned Attorney-General further contended that the measure adopted for the levy of the tax does not necessarily determine its essential character and that the object on which the expenditure is laid-out might be an item of luxury or it might not be one; or the "expenditure" might constitute the price of the goods but, what is taxed is the "expenditure" aspect which, in itself, is susceptible of recognition, as a distinct topic of legislation.
12. We have bestowed our careful consideration to these rival contentions. The principal question is whether the tax envisaged by the impugned law is within the legislative competence of the Union Parliament. In that sense, the constitutionality of the law becomes essentially a question of power which in a federal constitution, unlike a legally omnipotent legislature like the British Parliament, turns upon the construction of the entries in the legislative lists. If a legislature with limited or qualified jurisdiction transgresses its powers, such transgression may be open, direct and overt, or disguised, indirect and covert.
The latter kind of trespass is figuratively referred to as "colourable legislation", connoting that although apparently the legislature purports to act within the limits of its own powers yet, in substance and in reality. it encroaches upon a field prohibited to it, requiring an examination, with some strictness, the substance of the legislation for the purpose of determining what is that the legislature was really doing. Wherever legislative powers are distributed between the Union and the States, situations may arise where the two legislative fields might apparently overlap. It is the duty of the Courts, however difficult it may be, to ascertain to what degree and to what extent, the authority to deal with matters falling within these classes of subjects exists in each legislature and to define, in the particular case before them, the limits of the respective powers. It could not have been the intention that a conflict should exist; and, in order to prevent such a result the two provisions must be read together, and the language of one interpreted, and, where necessary modified by that of the other.
The Judicial Committee in Prafulla Kumar Mukherjee and Ors. v. Bank of Commerce, [1945] FCR 179 referred to with approval the 940 following observations of Sir Maurice Gwyer CJ. in Subrahmanyan Chettiar's case:
"It must inevitably happen from time to time that legislation, though purporting to deal with a subject in one list, touches also on a subject in another list, and the different provisions of the enactment may be so closely intertwined that blind observance to a strictly verbal interpretation would result in a large number of statutes being declared invalid because the legislature enacting them may appear to have legislated in a forbidden sphere. Hence the rule which has been evolved by the Judicial Committee, whereby the impugned statute is examined to ascertain its 'pith and substance', or its 'true nature and character,' for the purpose of determining whether it is legislation with respect to matters in this list or in that." This necessitates as an "essential of federal Government the role of an impartial body, independent of general and regional Governments", to decide upon the meaning of decision of powers. The Court is this body.
13. The position in the present case assumes a slightly different complexion. It is not any part of the petitioners' case that 'expenditure-tax' is one of the taxes within the States' power or that it is a forbidden field for the Union Parliament. On the contrary, it is not disputed that a law imposing 'expenditure-tax' is well within the legislative competence of Union Parliament under Article 248 read with Entry 97 of List I. But the specific contention is that the particular impost under the impugned law, having regard to its nature and incidents, is really not an 'expenditure tax at all as it does not accord with the economists' notion of such a tax. That is one limb of the argument. The other is that the law is, in pith and substance, really one imposing a tax on luxuries or on the price paid for the sale of goods. The crucial questions, therefore, are whether the economists' concept of such a tax qualifies and conditions the legislative-power and, more importantly, whether "expenditure" laid-out on what may be assumed to be "luxuries" or on the purchase of goods admits of being isolated and identified as a distinct aspect susceptible of recognition as a distinct field of tax-legislation.
14. In Lefroy's 'Canada's Federal System' the learned author referring to the "aspects of legislation" under Sections 91 and 92 of the 941 Canadian Constitution i.e., British North America Act 1867 observed that "one of the most interesting and important principles which have been evolved by judicial decisions in connection with the distribution of Legislative Power is that subjects which in one aspect and for one purpose fall within the power of a particular legislature may in another aspect and for another purpose fall within another legislative power. Learned author says:
"..... that by 'aspect' must be understood the aspect or point of view of the legislator in legislating the object, purpose, and scope of the legislation that the word is used subjectively of the legislator, rather than objectively of the matter legislated upon." In Union Colliery Co. of British Columbia v. Bryden, See. 1899 AC 580 at 587, Lord Haldane said:
"It is remarkable the way this Board has reconciled the provisions of section 91 and section 92, by recognizing that the subjects which fall within section 91 in one aspect, may, under another aspect, fall under section 92." Indeed, the law 'with respect to' a subject might incidentally 'affect' another subject in some way; but that is not the same thing as the law being on the latter subject.
There might be overlapping; but the overlapping must be in law. The same transaction may involve two or more taxable events in its different aspectsBut the fact that there is an overlapping does not detract from the distinctiveness of the aspects. Lord Simonds in Governor General in Council v.
Province of Madras, [1945] FCR 179 P.C. at 193 in the context of concepts of Duties of Excise and Tax on Sale of Goods said:
" ..... The two taxes the one levied on a manufacturer in respect of his goods, the other on a vendor in respect of his sales, may, as is there pointed out, in one sense overlap. But in law there is no overlapping.
The taxes are separate and distinct imposts.
If in fact they overlap, that may be because the taxing authority, imposing a duty of excise, finds it convenient to impose that duty at the moment when the excisable article leaves the factory or workshop for the first time on the occasion of its sale ...... "
15. Referring to the "aspect" doctrine Laskin's "Canadian Constitutional Law" states:
942 "The 'aspect' doctrine bears some resemblance to those lust noted but, unlike them, deals not with what the 'matter' is but with what it 'comes within' .....
" (p. 115) " ..... it applies where some of the constitutive elements about whose combination the statute is concerned (that is, they are its 'matter'), are a kind most often met with in connection with one class of subjects and others are of a kind mostly dealt with in connection with another. As in the case of a pocket gadget compactly assembling knife blade, screwdriver, fishscaler, nailfile, etc., a description of it must mention everything but in characterizing it the particular use proposed to be made of it determines what it is." (p.1 16) " ..... I pause to comment on certain correlations of operative incompatibility and the 'aspect' doctrine. Both grapple with the issues arising from the composite nature of a statute, one as regards the preclusory impact of federal law on provincial measures bearing on constituents of federally regulated conduct, the other to identify what parts of the whole making up a 'matter' bring it within a class of subjects ..... " (p. 117) The distinction between what is "ancillariness" and what "incidentally affecting" the treatise says:
" .... There is one big difference though it is little mentioned. Ancillariness is usually associated with an explicit 'statutory provision of a peripheral nature; talk about 'incidentally affecting' crops up in connection with the potential of a non-differentiating statute to affect indiscriminately m its application matters assertedly immune from control and others. But it seems immaterial really whether it is its words or its works which draw the flotsam within the statute's wake." .lmo (p.115) 16, Referring to the flexibility in the modes of effectuating a tax in view of innate complexities in the fiscal adjustment of diverse 943 economic factors inherent in the formulation of a policy of taxation and the variety of policy-options open to the State, J Rauls in "Modern Trends in Analytical and Normative Jurisprudence" (Introduction to Jurisprudence by Lord Lloyd of Hampstead & Freeman, 5th Edn.) observed:
" ..... In practice, we must usually choose between several unjust, or second best, arrangements; and then we look to nonideal theory to find the least unjust scheme. Sometimes this scheme will include measures and policies that a perfectly just system would reject. Two wrongs can make a right in the sense that the best available arrangement may contain a balance of imperfections, an adjustment of compensating injustices." Adverting to "Expenditure-dampening" policies and the choice of measures designed to reduce the aggregate demand for goods and services, the "Dictionary of Economic Terms" by Allan Gilpin says:
"Expenditure-dampening Policies: Government measures designed to reduce the aggregate demand for goods and services in the community. The measures may consist of raising taxes (q.v.) lowering government expenditure or curtailing hire-purchase or other credit facilities.
EXPENDITURE-SWITCHING POLICIES.
Expenditure-switching Policies: Government measures designed to influence the pattern of expenditure by the community. For example, the taxing of imported goods may effect a switch of expenditure from imported to homeproduced goods; devaluation of the nation's currency may have the same effect as imports become more expensive. See EXPENDITURE-DSAMPENING POLICIES." Learned Attorney General also referred to the following observations in The British Tax System (by J.A. Kay M.A. King) to indicate that a tax on expenditure need not necessarily be an expenditure-tax in the economists' reckoning of things:
"An annual expenditure tax, which seeks to measure an individual's spending in each separate year of assessment, poses very serious administrative problems, because 944 it requires that his assets be assessed annually ...... " " ..... But there is a much easier way of reaching a more accurate answer. You simply measure how much foreign currency you took with you, add the amount of currency you bought while abroad, and substract what was left when you got back. You measure, not the expenditure itself, but the sources of the expenditure, and can thus achieve a simple and reliable measure on the basis of a small number of recorded (and readily verifiable) transactions." It is trite that the true nature and character of the legislation must be determined with reference to a question of the power of the legislature. The consequences and effect of the legislation are not the same thing as the legislative subject matter. It is the true nature and character of the legislation and not its ultimate economic results that matters.
Indeed, as an instance of different aspects of the same matter, being the topic of legislation under different legislative powers, reference may be made to the annualletting value of a property in the occupation of a person for his own residence being, in one aspect, the measure for levy of property-tax under State-law and in another aspect constitute the notional or presumed income for purpose of income-tax.
16. Petitioners' reference to legislative-practice as determining the scope of the present legislation does not assist them. There are two infirmities in the contention.
The first is that the question of legislative-practice as to what a particular legislative-entry could be held to embrace is inapposite while dealing with a tax which is sui-generis or non-descript imposed in exercise of the residuary powers so long as such tax is not specifically enumerated in Lists II & III. Secondly, there is no conclusive material indicating that the appropriate legislature had limited the notion of a tax of this kind within any confines. It is relevant to recall the words of Lord Uthwatt in Walace Brothers case in 1959 SCR 379 at 402;
"The point of the reference is emphatically not to seek a pattern to which a due exercise of the power must conform. The object is to ascertain the general conception involved in the words in the enabling Act." But as observed in Navinchandra Mafatlal v. CIT, Bombay City, 945 [1955] 1 SCR 829 the meaning the word "income" is given in the Income-tax Act is not determinative of its content as an entry in a legislative list. Das J. observed:
" ..... It is, therefore, clear that none of the authorities relied
