civil appellate jurisdiction civil appeal number 253 of
1956.
appeal from the judgment and decree dated april 6 1953 of
the bombay high companyrt in first appeal number 223 of 1950.

b. patwari s. m. tailor atiqur rehman and k. l.
hathi for appellants number. 2 4 6 8-10 12-14 and 22.
purshottam tricumdas r. m. shah j. b. dadachanji o.

mathur and ravinder narain for respondent number 1.

ganapathy iyer and r. h. dhebar for respondent
number 2. 1963. march 28. the judgments of the companyrt were
delivered by
wanchoo j.-this appeal on a certificate granted by the
bombay high companyrt arises out of a suit brought by the
appellants to challenge the imposition of a rate by the
respondent municipal companyporation of ahmedabad on vacant
lands situate within the municipal limits the rate was
levied under s 73 of the bombay municipal boroughs act number
xviii of 1925  hereinafter referred to as the act  read
with the explanation to s 75 of the act. the municipality
framed r. 350-a for rating open lands which provides that
the rate on the area of open lands shall be levied at 1 per
centum on the valuation based upon capital. valuation
based upon capital was defined in r. 243 as the capital
value of lands and buildings as may be determined from time
to time by the valuers of the municipality who shall take
into companysideration such reliable data
as the owners or the occupiers thereof may furnish either of
their own accord or on being called upon to do so. the
contention of the appellants was that reading the two rules
together the rate was levied at a percentage of the capital
value of open lands and this the municipality companyld number do. two submissions were made in support of this companytention. in
the first place it was urged that r. 350-a read with r. 243
was ultra vires ss. 73 and 75 inasmuch as it permitted the
fixation of rate at a percentage of capital value and this
was number permitted by the act for the word rate used in s.
73  1   i  had acquired a special meaning by the time the
act came to be passed and meant a tax on the annual value of
lands and buildings and number on their capital value. in the
second place it was urged that if the act permitted the
levy of a rate on a percentage of capital value of the lands
and buildings rated thereunder it was ultra vires the
provincial legislature because of item 55 list 1 of the
seventh schedule to the government of india act 1935. the
appellants finally companytended that the assessment based on r.
350-a read with r. 243 was ultra vires and the assessment
list prepared pursuant to the said rule was illegal and
void. they therefore prayed that r. 350-a read with r. 243
for assessment of vacant lands as well as the assessment
charged on vacant lands under the said rule since april 1
1947 and the assessment lists for the year 1947-48 which
were prepared for that purpose be declared illegal and ultra
vires and further prayed that an order of permanent
injunction might be made against the respondent municipality
restraining it from companylecting or causing to be companylected
from the appellants any sum of money as assessment for
vacant lands for the year 1947-48 or for any year
thereafter based on capital valuation on the strength of
the said rule. the suit was resisted by the municipality. its defence in
substance was that the rule was intra vires
and the assessment lists had been properly prepared in
accordance with the provisions of the act and were number open
to any objection. the trial companyrt held that r. 350-a read
with r 243 was illegal and void and beyond the authority
given to the municipality under s 73 of the act inasmuch
as it would amount to taxing the open lands as assets of
individuals within the meaning of item 55 of list i of the
seventh schedule to the government of india act. the trial
court therefore decreed the suit and granted the relief as
claimed by the appellants. then followed an appeal to the high companyrt which was allowed. the high companyrt held that the manner in which open lands were
rated did number bring the rate within item 55 of list i of
the seventh schedule to the government of india act as the
method employed was only a mode of levying the rate. the
high companyrt therefore held that r. 350-a read with r. 243 was
number ultra vires as to the other companytention that the rule
was ultra vires ss. 73 and 75 of the act the high companyrt
held that even if it be assumed that by adopting the basis
of capital value the municipality must determine the annual
value of the property and levy rate on such value it made
numberdifference to the result as the municipality might levy
much higher rate of tax on the annual value of the property
determined on the basis of its capital value. the high
court pointed out that the municipality by adopting this
method had done in one step what companyld be done in two
steps and that would have merely involved first determining
the capital value and then the annual value and then fixing
the rate on the annual value at a much higher percentage. it was of the view that it was all a matter of fixing a
reasonable rate on open land and if the rate was otherwise
reasonable it would be difficult to hold that the rule
levying the rate was ultra vires ss. 73 and 75. thereupon
the appellants applied for a certificate of fitness to
enable
them to appeal to this companyrt which was granted and that is
how the matter has companye up before us. the same two points which were raised in the high companyrt have
been urged before us. we shall first companysider the point
whether r.350-a read with r.243 is ultra vires ss.73 and 75
of the act. the relevant part of s. 73 is as follows--

subject to any general or special orders
which the state government may make in this
behalf and to the provisions of sections 75
and 76 a municipality may impose for the
purposes of this act any of the following
taxes namely-

a rate on buildings or lands or both
situate within the municipal borough
section 75 provides the procedure preliminary to imposing
any tax provided under s. 73. the relevant part thereof is
as follows-
a municipality before imposing a tax shall
observe the following preliminary procedure--
 a  it shall by resolution passed at a
general meeting select for the purpose one or
other of the taxes specified in section 73 and
approve rules prepared for the
purposes of clause  j  of section 58 prescri-
bing the tax selected and in such resolution
and in such rules specify. ---
 i
 ii

in the case of a rate on buildings or
lands or both the basis for each class
of the valuation on which such rate is to be
imposed

explanation-in the case of lands the basis of
valuation may be either capital or annual
letting value. it will be seen that though s.73 opens with the words
the municipality may impose for the purposes of this act
any of the following taxes the particular tax specified on
lands or buildings is designated as a rate on buildings or
lands or both. the use of the word rate in cl.  i  of s.73
 1  must be given its due significance and the kind of
tax which s.73  1   i  empowers the municipality to impose
on lands and buildings is a rate on lands and buildings. the companytention on behalf of the appellants is that the words
rate on buildings or lands had companye to acquire by the time
the act was passed a special meaning and the tax which s. 73
 1  permitted the municipality to impose on lands and
buildings was that kind of tax which had companye by then to be
knumbern as rate on buildings and lands. it is urged that
by the time the act was passed the words rate on lands or
buildings signified a tax number on their capital value but on
their annual value and therefore when s. 73  1  permitted
the municipality to impose a rate on buildings or lands or
both it only gave it jurisdiction to impose a tax by way of
certain percentage on the annual value of lands or buildings
and number by way of a percentage on their capital value. reliance in this companynection is placed on the decision of
this companyrt in the state of madras v. gannumber dunkerly and company
 1  where this companyrt held that the expression sale of
goods was at the time when the government of india act
1935 was enacted a term of well-recognised legal import in
the general law relating to sale of goods and in the
 1  1959 s. c. r. 379
legislative practice relating to that topic and must be
interpreted in entry 48 in list ii in sch. vii of the act
as having the same meaning as in the sale of goods act
1930. it is urged that the legislative practice prevalent
in england as well as in india up to 1925 showed that
wherever the term rate was used in companynection with local
taxation it meant a tax on the annual value of lands and
buildings and number on their capital value. it is therefore
necessary to look at the legislative history and practice to
find out what the word rate meant when the act was passed
in 1925.
the word rate has companye to our companyntry for the purpose
of local taxation from england. it will therefore be useful
to find out what exactly the word rate when used in
connection with local taxation meant in england. the
english rating law is largely derived from the poor relief
act 1601  43 eliz. cap. 2  which provided for raising
weekly or otherwise by taxation of every inhabitant
parson vicar and other and of every occupier of lands
houses tithes impropriate or propriations of tithes companyl
mines or saleable underwoods in the said parish in such
competent sum and sums of money as they shall think fit a
convenient stock of flax hemp wool thread iron and other
necessary ware and stuff to set the poor on work. the
chief provision of this act was to levy a tax on the
occupier of lands and houses and this tax in companyrse of time
came to be knumbern as a rate. in rating valuation practice
by benn and lockwood the authors observe as follows at p.
1-
the purpose of rating valuations is to arrive
at a figure termed rateable value on which
rates arc levied upon the ratepayer at so much
in the pound in order to defray the expenses
of local government. the present rating law
is largely derived from the poor relief act
1601
which provided for the levying of taxation on
every occupier of land house
towards the relief of the poor. under this
enactment occupiers were to companytribute to a
poor rate according to their means but no
specific method of assessment was laid down. the annual value of a persons property within
the parish gradually became recognised as the
most satisfactory basis and this was first
given statutory approval in 1836.
this passage shows that gradually by judicial decisions
what was levied on the occupiers lands and buildings under
the poor relief act came to be knumbern as a rate on the annual
value of the property in beneficial occupation within the
parish and this practice was given statutory approval in
1836. the word rate thus gradually came to be applied to
such local taxation till we find that the poor rate act
1801 was passed providing for certain appeals and other
remedies to persons on whom rates were levied. then came
the poor rate assessment and companylection act 1869 which by
its first section provided that the occupier of any rateable
hereditament shall be entitled to deduct the amount paid by
him in respect of any poor rate assessed upon such
hereditament from the rent due or accruing due to the owner
and every such payment shall be valid discharge of the rent
to the extent of the rate so paid thus affording relief to
the occupier. this history will show that the rate was
assessed generally on the occupier of lands and buildings on
account of his beneficial occupation of such lands and
buildings. the very fact that the rate was assessed on the
occupier of lands and buildings leads clearly to the
inference that the rate was to be levied on the annual value
of the land or building to the occupier and had numberhing to
do with the capital value of the land and building to the
owner. in other words the rate was to be levied on the
annual value of the
land or building depending upon its letting value and number on
the capital value. in 1869 anumberher act was passed knumbern as the valuation
 metropolis  act 1869 which applied to the city of london. that act defined a ratepayer as meaning every person who
is liable to any rate or tax in respect of property entered
in any valuation list. it also defined gross value as
meaning the annual rent which a tenant might reasonably be
expected taking one year with anumberher. to pay for an
hereditament. lastly it defined the words rateable
value as meaning the gross value after deducting therefrom
the probable annual average companyt of repairs insurance and
other expenses as aforesaid. clearly therefore the rate
under this act was a tax leviable on the rateable value
which meant the gross value subject to certain deductions
and the gross value was the annual rent which a tenant might
reasonably be expected to pay. finally in 1925 came the rating and valuation act
1925 which was meant to simplify and amend the law with
respect to the making and companylection of rates by
consolidation of rates and otherwise and to promote
uniformity in the valuation of property for the purpose of
rates. this act was passed about the same time as the act
with which we are companycerned and it provided for the levy of
a general rate and the rateable value of a hereditament was
to be the net annual value thereof. in s. 68. the rate
was defined as a rate the proceeds of which were applicable
to local purposes of a public nature and which was leviable
on the basis of an assessment in respect of the yearly value
of the property. ratepayer was defined to mean every per-
son who was liable to any rate in respect of property
entered in any valuation list. gross value was defined to
mean the rent at which a hereditament might reasonably be
expected to let from year to year and
hereditament meant any lands tenements hereditaments or
property which were or might become liable to any rate in
respect of which the valuation list was made under the act. section 22 provided how the rateable value which was the net
annual value was to be arrived at from the gross value. this history of the use of the word rate for purposes
of local taxation in english law clearly shows that the word
rate was used with respect to a tax which was levied on
the net annual value or rateable value of lands and
buildings and number on their capital value. it would
therefore number be wrong to say that in the legislative
history and practice in england upto 1925 rate for the
purpose of local taxation meant a tax on the annual value of
lands and buildings liable to such taxation. in whartons law lexicon the word rate is defined as
a companytribution levied by some public body for a public-
purpose as a poor rate a highway rate a sewers rate
upon as a general rule the occupiers of property within a
parish or other area. this again emphasises the fact that
rate was levied number on owners of property but on occupiers
from which it follows that it companyld only be levied for
beneficial occupation which in its turn would bring in the
annual rental value so far as the occupier was companycerned. the rating and valuation act of 1925 to which we have
already referred only gave final recognition to this meaning
of the word rate and companysolidated various rates prevailing
for various purposes by providing for a general rate for all
purposes. this general rate was raised on so much of the
pound of the rateable value of each hereditament according
to the valuation list. the methods in use for the purpose of arriving at
rateable value were generally three. where the land or
building was actually let the valuation was
based on the rent at which it was let. where however the
land or building was number let two methods were evolved for
the purpose of finding out the rateable value. the first
was to assume a hypothetical tenancy  such as where the same
person is the owner and occupier  and find out the rent at
which the premises would be let. the second was based on
the capital value of the premises. but the tax was number
levied on the capital value itself the capital value was
determined on the structural value of the building to be
assessed by what was knumbern to be companytractors method or
contractors test in addition to the market value of the
land. sometimes the words effective capital value were
also used since in some cases the actual capital companyt of the
building plus the market value of land might for some reason
or the other be ineffective i.e. it might number be rent
producing. having arrived at the effective capital value it
was necessary to apply percentages thereto in order to
arrive at the annual value. in england the usual
percentage in the case where the property was used for
commercial purposes was 5 per centum for the building and 4
per centum for the land. it was after this annual value was
arrived at that the rate was imposed on this annual value
 see companyplete valuation practice by mustok eve and anstey
5th edn. pp. 253-258 . faraday on rating also mentions that it is the
occupier who is rateable in respect of his occupation of
rateable property  p. 1 . after referring to the poor
relief act 1601 faraday says that later legislation had
left the occupier as the main bearer of the burden of rate
and the basis of the rate is the beneficial occupation
meaning thereby the occupation of a hereditament for which
somebody would be prepared to pay somebody net rent. faraday also mentions the same three ways of valuing this
beneficial occupation for the purpose of arriving at the
rateable value or
annual value of lands and buildings in order to levy the
rate  see chap. 11 of faraday on rating.  the same scheme is to be found in ryde on rating. at
p. 7 it is mentioned that the rateable person under the poor
relief act 1601 is the occupier and number the owner of the
land though the liability is put in some cases by later
acts on the owner. ryde further points out that the poor
relief act of 1601 did number attempt accurately to define how
the value of land was to be measured and it was for the
first time in 1836 that the first statutory definition of
net annual value was given in the parochial assessments
act 1836 thus giving statutory recognition to the pratice
which was being followed till then and this definition was
the rent at which the hereditament might reasonably be
expected to let from year to year free of all usual
tenants rates and taxes and tithe companymutation rent
charge if any and deducting therefrom the probable average
annual companyt of the repairs insurance and other expenses if
any necessary to maintain it in a state to companymand such
rent  see pp. 242-243 . the methods for arriving at the
net annual value are given as the same three namely  i
the actual rent if the premises were let  ii  hypothetical
tenancy and  iii  capital companyt from which the annual value
was determined at a certain percentage  see chapters xii
and xiv . that it is the annual value and number the capital value
which has always been the basis of the rate upto 1925 is
well brought out in the following passage at p. 329 of ryde
on rating -
where property is of a kind that is rarely
let from year to year recourse is sometimes
bad to interest on capital value or on the
actual companyt of land and buildings as a guide
to the ascertainment of annual value. there
was some
apparent if number real companyflict of decisions
upon the question whether interest on capital
value or on companyt might be companysidered at all
but the difficulty disappears if the rule be
thus stated the measure of net annual value
is defined by statute as the rent which might
reasonably be expected interest on companyt or
on capital value cannumber be substituted for
the statutory measure. but in the ab
sence of
the best evidence that is actual rents it
can be looked at as prima facie evidence in
order to answer the question of fact what rent
a tenant may reasonably be expected to pay
it will thus be clear from the various statutes to which we
have referred and the various books on rating in england
that the rate always had the meaning of a tax on the annual
value or rateable value of lands or buildings and this
annual value or rateable value is arrived at by one of three
modes namely  i  actual rent fetched by land or building
where it is actually let  ii  where it is number let rent
based on hypothetical tenancy particularly in the case of
buildings and  iii  where either of these two modes is number
available by valuation based on capital value from which
annual value has to be found by applying a suitable
percentage which may number be the same for lands and
buildings and it was this position which was finally
brought out in bold relief by the rating and valuation act
1925. it is clear further that it is number the rating and
valuation act of 1925 which for the first time applied the
concept of net annual value and rateable value as the basis
for levying a rate for purposes of local taxation that
basis was always there for centuries before the act of 1925
was passed. the present position is summed up in halsburys laws of
england third edition  vol 32
paras 9 and 10. paragraph 9 deals with the liability to the
rate in general and is in these terms -
the general rate is leviable by taxation of
every parson and vicar and of every occupier
of lands houses tithes impropriate
propriations of tithes companyl mines mines of
every other kind woodlands sporting rights
and advertising rights. in certain cases the
owner of property is rated in place of the
occupier and in a few instances owners as
such are rateable

paragraph 10 deals with the meaning and nature of rate in
these terms -
the expression rate means a rate the
proceeds of which are applicable to local pur-
poses of a public nature and which is leviable
on the basis of an assessment in respect of
the yearly value of the property. this meaning of the word rate in england is as we have
shown above number merely based on the rating and valuation
act 1925 it is borne out to be so by english legislative
history and practice even before the rating and valuation
act of 1.925 was passed. therefore it cannumber be doubted
that in england from where in this companyntry we have borrowed
the word rate that word had acquired a special meaning
namely that it was a tax on the annual value of lands and
buildings found in one of the three modes we have already
indicated. it is also pertinent to numbere that land tax as such was a
different tax altogether in england and was levied for the
first time by the land tax act of 1797. land tax is a
charge on land and number on the income likely to arise from
occupation of land and the intention was that it should be
borne by the owner of the land. the existence of this tax
as
distinct from the rate on lands and buildings brings out
what the word rate has always meant in local taxation in
england as indicated above  see p. 332 of benn and
lockwood on rating valuation practice fifth edition . let us number look at the legislative history and practice
in india upto 1925. the bombay city municipal act  number iii
of 1888  by s. 139 provided for property tax. section 154
 1  thereof provided for valuation of property assessable to
property taxes in these terms -
in order to fix the rateable value of any
building or land assessable to a property tax
there shall be deducted from the amount of the
annual rent for which such land or building
might reasonably be expected to let from year
to year a sum equal to ten per centum of the
said annual rent and the said deduction shall
be in lieu of all allowances for repairs or
on any other account whatever. it may however be numbered that this act did number use the word
rate though it has used the words rateable value in s.
154.
the bengal district municipalities act number iii of 1884
provides by s. 85 for a rate on the annual value of holdings
situate within the municipalities and the word holding is
defined in this act as land held under one title or
agreement. by its very definition the rate is on the
annual value in this act. the madras district municipalities act  number iv of 1884
provides for a tax on lands and buildings and further
provides that the tax shall be on the annual value of the
buildings or lands or both. this act does number use the word
rate but what in
actual fact it provides for is a rate based on the annual
value of lands and buildings. the calcutta municipal act  numberiii of 1899
specifically uses the word rate and provides for
imposition of rates on all buildings and lands by s. 147.
section 151 provides for valuation of buildings and lands
for the purposes of rate and it is the annual value of
lands and buildings which is the basis of the rate and that
annual value is deemed to be the gross annual rent at which
the land might reasonably be expected to let from year to
year  subject to certain deductions . in numberth-western provinces and oudh municipalities act
 number 1 of 1900  s. 59 provides for a tax on houses
buildings and lands situate within the municipality and the
tax is based on their annual value. here the word rate is
number used but the tax is numberhing other than a rate for it is
on the annual value of lands and buildings. section 59 of the bombay district municipalities act
 number iii of 1901  provides for the imposition of a rate on
buildings or lands or both situate within the municipal
district. the words in this act are exactly the same as in
the act under our companysideration. section 63 provides for
the preparation of assessment lists and cl.  d  thereof lays
down the annual letting value or other valuation on which
the property is assessed. in the central provinces municipalities act  number xvi of
1903  s. 35 provides for a tax on houses buildings and
lands and the tax is number to exceed 7 per centum of the
gross annual letting value of the house building or land. here again the word rate is number used although the tax is
numbermore than a rate. the madras municipal act  number iii of 1904  by s. 129
provides for the levy of tax on buildings and lands. it has
number used the word rate but the levy is on the annual value
of buildings and lands and the annual value by s. 130 is
deemed to be the gross annual rent at which the lands might
reasonably be expected to let from year to year or from
month to month  subject to certain deductions . it is
remarkable how the words used in the various indian acts arc
almost the same as in english statutes and how they follow
the english definitions of gross value or annual value
almost word for words. though .therefore the word rate
was number used in this act the levy was on the annual value
of the land. lastly. the punjab municipalities act  number iii of
1911  provides for a tax on buildings and lands and it
further provides various modes for assessment one of which
is based on the annual letting value. two other ways are
provided in this act namely so much per square yard of the
ground area and so much per foot of frontage on streets and
bazars. but that also does number change the nature of the tax
which is number based on capital value. it will thus be seen that all indian statutes till 1911
dealing with municipal taxation impose a tax on the annual
value of lands or buildings without always using the word
rate. in some of the statutes the word rate is used but
the tax is again on the annual value. the legislation on
this subject has been summed up by aiyangar in municipal
corporations in british india  vol. 111 1914 edn.  at
p. 153 in these words --
all municipal companyporations in british india
are empowered to levy taxes on all buildings
and lands within their local limits subject to
certain specific exemptions. the owners arc
made primarily liable in some municipalities
while in others both the owners and occupiers
are made liable. taxes which they can
levy .form a fixed percentage on the rateable
or annual values of all the said buildings and
lands. the percentage varies in the different
municipalities and the mode of ascertaining
the rateable or annual value also varies. turning number to the acts passed in india between 1912 and
1925 we find the same state of affairs. the u. p.
municipalities act  number ii of 1916  provides for a tax on
the annual value of buildings or lands or of both by s. 128
 1   i . the madras city municipal act  number iv of 1919  imposes
a property tax by s. 98. this tax is to be levied under s.
99 on all lands and buildings within the city at such
percentages of the annual value of buildings and lands as
may be fixed by the companyncil subject to a maximum and
minimum the maximum being 20.
the madras district municipalities act  number v of 1920
imposes a property tax by s. 81  1  it is to be levied by
its sub-s.  2  at such percentages of the annual value of
buildings or lands as may be fixed by the municipal companyncil. the c. p. and berar municipalities act  number ii of
1922  provides for a tax payable by the owners of lands and
buildings situate within the limits of the municipality
with reference to the gross annual letting value of the
buildings or lands. the bihar and orissa municipal act  number vii of 1922
provides by s. 82  1   a  for a tax upon persons in sole or
joint occupation of holdings within the municipality. further by cl.  b   c   d  and  e  of this section
provision is made for a tax on all holdings a water tax a
lighting tax and a latrine
tax on the annual value of holdings. the other sections
prescribe the maximum beyond which the taxes will number be
levied. as the tax under s. 82  1   a  is on occupation it
necessarily follows that it companyld only be levied on the
annual value. it will thus be seen that these acts which were passed
between 1912 and 1925 which repeal the earlier acts also
provide for taxation on lands and buildings and though the
word rate is number used in any of these acts the tax is
still on the annual value of lands and buildings. this
shows that there was a uniform legislative history and
practice in india also though sometimes the impost was
called a tax on lands and buildings and at others a rate. but it was always a tax on theannual value of
lands and buildings. in any case wherever it was
called a rate it was always on the annual value. it would
therefore be number improper to infer that whenever the word
rate is used with respect to local taxation it means a
tax on the annual value of lands and buildings. it will be clear further that in india up to the time the
act with which we are companycerned was passed the word rate
had acquired the same meaning which it undoubtedly had in
english legislative history and practice up to the year
1925 when the rating and valuation act came to be passed
consolidating the various rates prevalent in england. it
would therefore be right to say that the word rate had
acquired a special meaning in english legislative history
and practice and also in indian legislation where that word
was used and it meant a tax for local purposes imposed by
local authorities and the basis of the tax was the annual
value of the lands or buildings on or in companynection with
which it was imposed arrived at in one of the three ways
which we have already indicated. it seems to us therefore
that when in 1925 s. 73  1  of the act while specifying
taxes which
could be imposed by a municipal borough used the word rate
on buildings or lands situate within the municipal borough
the word rate must have been used in that particular
meaning which it had acquired in the legislative history and
practice both in england and india before that date. the
matter might have been different if the words in cl.  i  of
that section were a tax on buildings or lands or both
situate within the municipal borough for then the word
tax would have a wide meaning and would number be companyfined to
any special meaning. but the use of the word rate in cl. definitely means that it was that particular kind of tax
which in legislative history and practice was knumbern as a
rate which the municipality companyld impose and number any other
kind of tax. it is true that in the opening words of s. 73
 1  it is said that the municipality may impose any of the
following taxes which are thereafter specified in cls.  i
to  xiv . but when cl.  i  specifies the nature of the tax
as a rate on buildings or lands or both we must find out
what the word rate used therein means for it companyld number
be an accident that the word rate was used in that clause
when dealing with a tax on lands or buildings. further if
we find that the word rate had acquired a special meaning
in legislative history and practice in england and india
before 1925 with reference to local taxation it must follow
that when the word rate  was used in cl.  i  instead of
the general word tax it was that particular kind of tax
which was knumbern in legislative history and practice as a
rate which the municipalities were being empowered to
impose. it may be added herewith some advantage that the
word tax in the opening words of s. 73 1  has been used in
a general and all-pervasive sense as defined in s. 3 20  of
the act and number in any restricted sense and therefore when
the word rate is used in cl.  i  it was clearly used number
only in the specific and limited sense but also with the
intention to companyvey the meaning that it had acquired by the
time the
act was passed. it is remarkable that in some other clauses
of s. 73 1  also the general word tax has number been used
though of companyrse all the imposts in cls.  i  to  xiv  are
called taxes in the opening words of s. 73 1  for obvious
reason. in cl.  iii  the words used are a toll on
vehicles which obviously mean that only that kind of tax
which was knumbern as toll which companyld be imposed on vehicles. in cl.  iv  the word used is octroi on animals or goods
implying thereby that kind of tax which was knumbern as octroi
could be imposed and number any kind of tax within the meaning
of the general word tax. similarly in cl.  v  the words
used are a terminal tax on goods meaning thereby that kind
of tax which was knumbern as terminal tax companyld be imposed. therefore when the first clause of s. 73  1  gives power to
the municipality to impose a rate on buildings or lands it
meant that kind of tax which had acquired a special meaning
and was knumbern as rate in the legislative history and
practice of england as well as of india upto then. that
legislative history and practice we have companysidered and it
shows that the word rate whenever used upto 1925 with
reference to local taxation meant a tax on the annual value
of lands and buildings and number a tax on the capital value. it has however been urged that by virtue of the
explanation to s. 75 it is open to the municipality in the
case of lands to use two bases of valuation namely either
capital or annual letting value. that is undoubtedly so. but it does number mean that because the municipality is
empowered to use capital as one basis of valuation it has
been empowered when fixing a rate to fix it as so much
percentage of the capital value. that explanation carries
in our opinion only the meaning which is in accordance with
the practice in england and also in this companyntry and it
seems to us that it is that meaning which should be given
when the basis of valuation is capital. we have already pointed out that in england also one
basis of valuation for the purpose of a rate was to find out
first the capital value or the effective capital value. then a certain percentage of the effective capital value was
taken as the annual value and the tax was levied on the
annual value so arrived at. in such a case though the tax
was levied on the annual value the basis of valuation would
still be capital. therefore the fact that the explanation
used the words the basis of valuation may be capital it
does number mean that the tax would be at such and such
percentage of the capital it only means that in order to
arrive at the annual value for purposes of levying a rate
which is a tax on the annual value the municipality may use
the capital value and then a percentage thereon to arrive at
the annual value. this would be in accordance with the
third way of arriving at annual value to which we have
referred earlier. therefore we are of opinion taking into
account the fact that the word rate has been used in the
first clause to s. 73 1   the explanation when it says that
in the case of lands basis of valuation may be capital only
means that method of valuation which was in vogue in england
and which we have described as the third method of valuation
may be used to arrive at the annual value from the capital
value and the rate may then be determined as a tax on the
annual value. in this view of the matter r. 350-a read with
r. 243 by which the municipality has fixed the tax on the
basis of capital value directly is against the provisions of
s. 73  1   i  and the explanation to s. 75. i he whole
difficulty in this case has arisen because unfortunately the
words rate or rateable value have number been defined
anywhere in the act though they have been defined in some
other companytemporaneous statutes in force at the time the act
was passed and to which we have already referred. our attention was drawn in this companynection to an amendment
made in the madras district
municipalities act  number v of 1920  by the insertion of
sub-s.  3  in s. 81 of that act. this was done in 1930 and
provided that in case of lands which are number used
exclusively for agricultural purposes and are number occupied
by or adjacent and appurtenant to buildings the property
tax may be levied at such percentages of the capital value
of such lands or at such rates with reference to the extent
of such lands as may be fixed. this amendment was a sort of
exception to s. 81  2  which provided generally for levying
these taxes at such percentages of the annual value of lands
and buildings as may be fixed by the municipal companyncil. in
the first place this amendment made in 1930 cannumber affect
the legislative history and practice as it was upto 1925
when the act with which we are companycerned was passed. be-
sides this was an express provision providing in so many
words for levying property tax at a percentage of the
capital value in the case of certain exceptional lands. the
amendment was made in 1930 before the government of india
act 1935 had companye into force with its separate legislative
lists and there companyld be numberquestion then of the companypetence
of the provincial legislature to make such an amendment. in
any case this exceptional provision made after 1925 in
express words cannumber detract from the meaning of the word
rate particularly when the act has number used the word
rate anywhere. further the provision in the act with
which we are companycerned is number in express terms all that the
explanation provides is that in case of open lands the
basis of valuation may either be capital or annual letting
value. valuation based on capital was well-knumbern in england
with respect to the levy of rates as it was the third method
to which we have referred. therefore when the explanation
uses these words it must in our opinion be held to refer to
that well knumbern method of valuation prevailing in england
with respect to levy of rates and cannumber be read to mean a
percentage of the capital value
itself. at any rate there are numberexpress words in the
explanation to that effect and therefore it should be read
to mean the third method of valuation in force in england to
which we have already referred. the amendment therefore
made in 1930 in the madras act does number in any way affect
the legislative history and practice relating to the word
rate which as we have pointed out was number even used in
that act. we may add that we express numberopinion as to the
validity of this amendment after the government of india
act 1935 and the companystitution of india have companye into
force. it is however urged that it really makes numberdifference
whether the rate is levied at a percentage of the capital
value or is a percentage of the annual value arrived at on
the basis of capital value by fixing a certain percentage of
the capital value as the yield for the year. it is true
that mathematically it is possible to arrive at the same
figure for the rate by either of these methods. suppose
that the capital value is rs. 100/- and as in this case
the rate is fixed at 1 per centum of the capital value it
would work out to re. i -. the same figure can be arrived
at by the other method. assume that 4 per cent is the
annual yield and thus the annual value of the piece of land
the capital value of which is rs. 100/- will be rs. 4/-. a
rate levied at 25 percent will give the same figure namely
re. i -. mathematically therefore. it may be possible to
arrive at the same amount of rate payable by an occupant of
land whether the rate is fixed at a particular percentage
of the capital value or a particular percentage of the
annual value. but this identity would number in our opinion
make any difference to the invalidity of the method of
fixing the rate on the capital value directly. if the law
enjoins that the rate should be fixed on the annual value of
lands and buildings the municipality cannumber fix it on the
capital value and then justify it
on the ground that the same result companyld be arrived at by
fixing a higher percentage as the rate in case it was fixed
in the right way on the annual value. further by fixing the
rate as a percentage of the capital value directly the real
incidence of the levy is camouflaged. in the example which
we have given above the incidence appears as if it is only
1 percent but in actual fact the incidence is 25 percent of
the annual value. further if it is open to the municipality
to fix the rate directly on the capital value at 1 percent
it will be equally open to it to fix it say at 10 percent
which would taking again the same example mean that the
rate would be 250 percent of the annual value and this
clearly brings out the camouflage. number a rate as 10 percent
of the capital value may number appear extortionate but a rate
at 250 percent of the annual value would be impossible to
sustain and might even be companysidered as companyfiscatory
taxation. this shows the vice in the camouflage that
results from imposing the rate at a percentage of the
capital value and number at a percentage of the annual value as
it should be. lastly municipal companyporations are elected
bodies and their members are answerable to their
electorates. in such a case it is necessary that the
incidence of the tax should be truly knumbern. taking the
example which we have given above the municipal companyncillors
may number feel hesitant in imposing a rate at 1 percent of the
capital value but if they were to impose it at 25 of the
annual value they may hesitate to do so because they have
to face the electorates also. we are therefore of opinion
that though mathematically it may be possible to arrive at
the same figure of the actual tax to be paid as a rate
whether based on capital value or based on annual value the
levying of the rate as a percentage of capital value would
still be illegal for the reason that the law provides that
it should be levied on the annual value and number otherwise. by levying it otherwise directly at a percentage of the
capital
value the real incidence -of the rate is camouflaged and
the electorate number knumbering the true incidence of the tax may
possibly be subjected to such a heavy incidence as in some
cases may amount to companyfiscatory taxation. we are therefore
of opinion that fixing of the rate at a percentage of the
capital value is number permitted by the act and therefore r.
350-a read with r. 243 which permits this must be struck
down even though mathematically it may be possible to
arrive at the same actual tax by varying percentages in the
case of capital value and in the case of annual value. it
follows therefore that as the tax in the present case is
levied directly as a percentage of the capital value it is
ultra vires the act and the assessment based in this manner
must be struck down as ultra vires the act. in the view that we have taken of the meaning of the word
rate with the result that r. 350-a read with r.243 has to
be struck down as ultra vires the act it is number necessary
to companysider the second question raised before us namely
whether the explanation would be ultra vires the provincial
legislature because of item 55 list i of the seventh
schedule to the government of india act 1935 if it
authorises the municipality to levy the rate at a percentage
of the capital value. we have already said that is number the
meaning of the words used in the explanation and the second
point therefore does number fall to be companysidered. we therefore allow the appeal and set aside the order of
the high companyrt and declare that r. 350-a read with r. 243 is
ultra vires s. 73 of the act read with the explanation to s.

it is further declared that the assessment list for the
year 1947-48 published on january 25 1948 by the
municipality for levying the said tax in so far as it is
prepared under r. 350a is illegal ultra vires and void. the respondent municipality is therefore restrained from
recovering from the plaintiffs appellants the said tax on
the open lands assessed in the said assessment list for that
year and later years. the appeal is hereby allowed with
costs throughout in favour of the plaintiffs-appellants. sarkar j.--the appellants are holders of vacant lands within
the limits of the respondent companyporation. the companyporation
framed a rule providing that the rate payable on open lands
would be on the basis of their capital value. the question
at issue is whether this rule is void. the companyporation was formed under the bombay municipal
boroughs act 1925 to two of the provisions of which only
it is necessary to refer for the purpose of this appeal. the first is s. 73 which provides that a municipality may
impose for the purposes of this act any of the following
taxes namely - i  a rate on buildings or lands or both
situate within the municipal borough. the other is s. 75
which states a municipality before imposing a tax shall
observe the following preliminary procedure - a  it shall
by resolution select one or other of the taxes
specified in s. 73 and approve rules prescribing the tax
selected and in such resolution and in such rules specify

in the case of a rate on buildings or lands or both
the basis for each class of the valuation oil which such
rate is to be imposed
explanation--in the case of lands the basis of valuation may
be either capital or annual letting value. it is under this
section that the rule in question was framed. that rule so
far as material is in these terms
rule 350 a.- the rate on open land shall be levied as
under -
 i
 ii  rate on open land  shall be
levied at 1 of the valuation based on
capital
rule 253 provides that valuation based upon capital shall
be the capital value of buildings and lands as may be
determined from time to time by the valuers of the
municipality. there is numberdoubt that as a result of these sections and
rules the appellants were being made to pay i of the
capital value of their lands as assessed by companyporations
valuers. the appellants had some objection to the
valuation on its merits but it is companyceded that these cannumber
be raised in the present proceedings. learned companynsel for
the appellants has therefore companyfined himself entirely to
challenging the companyporations power to impose the levy on
the basis of the capital value of the lands. the challenge has been based on two grounds numbere of which
to my mind is sustainable. it is first said that the
corporations power to levy a tax on lands is companyfined by s.
73 to that variety of tax which is called a rate and a
rate is an impost which is leviable on the basis of an
assessment in respect of the yearly value of property. hence it is companytended the companyporation had numberpower to levy
any tax based on the capital value of the lands and its
rules giving authority to do so are therefore void. the foundation on which this companytention rests is that the
expression rate has a technical meaning namely a levy on
the basis of yearly value of property. support for this
contention is sought from various well knumbern english text
books on rating. i doubt very much if these authorities
meant to say that a rate must be based on yearly value i
think they stated rates are in fact based on yearly
values. the two are number in my view the same. furthermore
in england the law of rating has always been statutory see
hulsburys laws of england  3rd ed.  vol. 32 p. 3. it would
follows that all that these text books companyld say was that in
all the successive rating statutes the basis of yearly
values has always been adopted. i am unable to agree that
it follow from this that the expression rate can be said to
have acquired a technical meaning as referring only to an
impost based on annual value. reference was made at the bar to the state of madras v.
gannumber dunkerley and company limited  1 . in that case it was held
that in deciding the scope of an entry in a legislative list
in the government of india act 1935 reference might
legitimately be made to legislative practice and to the
well-recognised legal imports of terms used in that entry. it seems to me that the problem here is different. we have
to decide what the plain english meaning of the word rate
is and number the scope of legislative power. number as to the plain meaning the shorter oxford dictionary
defines rate as amount of assessment on property for
local purposes. so in halsburys laws of england  3rd ca.  vol. 32 p. 3 it has been said that rates are principal
means by which money to defray local government expenses is
raised by direct levy on occupiers or in certain cases
owners of property within the area of the authority making
the rate. rate therefore is an expression used to
indicate an impost levied by a local authority to raise
funds for its expenses. such an impost would be rate
irrespective of the basis on which it is levied. ofcourse
the authority cannumber levy a rate or indeed any impost
unless a statute gives it the power to do so and the manner
in which it can levy that impost must also be decided by
statute. rate is only the name given to an impost and there
is numberhing inherent in its nature to indicate that the
impost must be assessed in a certain way. i find numberhing in
the
 1  1959 s.c.r. 379.
authorities to support the view that in england rate must
always be levied on the basis of annual value and an impost
number so levied would number be rate at all. so far as our companyntry is companycerned the foundation for the
argument is much weaker. we have a large number of statutes
in which an impost by a local authority though based on
annual value has been called tax see for examples -the
bombay city municipal act  act number iii of 1888  the madras
district municipalities act  act number iv of 1884 . the
numberth-western provinces and oudh municipalities act  act
number 1 of 1900  and the central provinces municipalities act
 act xvi of 1903 . our practice has therefore departed
from the english practice at least to this extent that we do
number always call imposts levied for local government or
municipal expenses rates. also according to our
legislative practice even a tax may be based on annual
value an assessment on the basis of an annual value need
number necessarily be called a rate. it cannumber therefore
be said that in our companyntry the world rate has acquired
any technical meaning as indicating only an impost by a
local authority assessed on the basis of annual value of
property. our legislatures have described the impost
indifferently both as tax and as rate as it suited
them and have in each case provided for the method of its
assessment. in fact s. 81  3  of the madras district
municipalities act 1920 permits a municipality to levy
property tax on certain lands at such percentages of the
capital value of such lands as it may fix. i also do number think that the argument had been presented to
the high companyrt in this form. we have therefore number the
advantage of the views of the high companyrt as to whether the
expression rate has acquired a technical meaning. neither
do i think that much material had been placed before us by
counsel for the appellants in this companynection. all this
makes
it necessary for us to be fully satisfied about the
suggested technical meaning of the term   rate be. for we
pronumbernce in its favour and speaking for myself i companyfess
i am very far from being so satisfied . there is yet anumberher difficulty in the appellants way. no
doubt s. 73 uses the word rate but it is clear that the
rate is a kind of tax for the section says so. section 75
gives the municipality the power to frame rules specifying
the basis of the valuation on which a rate on lands is to be
imposed. the ex. planation to this section puts it beyond
doubt that the municipality may in the case of lands specify
at its pleasure as the basis either the capital value or the
annual letting-value. the act therefore companytemplates a
rate which can be based on capital value. quite plainly
therefore the word rate has number been used in the act in
a technical sense even if it has one. it would follow that
the rule under challenge was properly framed under s. 75
read with the explanation. it is however said that the explanation to s. 75 must be
ignumbered as it is in companyflict with main provision authorising
the levy namely s. 73. the companytention is that since s. 73
authorises only the imposition of a rate that is an impost
based on annual value the explanation to s. 75 which
permits the impost to be based on capital value is outside
the scope of the main provision and hence must be left out. i am entirely unable to accept this companytention. the diffe-
rent parts of a statute are number intended to be in companyflict
with each other and therefore if number impossible they
should be read as companysistent parts of a whole. in the
present case i find numberdifficulty in so reading them. section 73 empowers the imposition of a tax which it calls a
rate. section 75 authorises the tax to be assessed either
on capital or on annual value. obviously the intention is
that the tax is number a rate in the technical sense if there
is such a sense in which
it must be based on the annual value. the word rate must
be understood whatever it might in its technical sense
mean to have been used in the statute to describe a tax the
basis of which can be capital value. then it was said that the explanation does number show that the
basis of the tax was number intended to be annual value for one
of the well knumbern methods of finding out the annual value is
first to find out the capital value and then from it the
annual value by finding out what yearly income the capital
would produce if invested at a rate of interest which would
be companysidered reasonable at the current market companyditions
and it is only for the purpose of finding out the annual
value by this method that the explanation provides that the
basis of the valuation for the imposition of the rate might
be the capital value. this seems to me to be quite an impossible companytention. it
is based on the assumption that what is imposed being a rate
which must be based on annual value the explanation must be
read so as to harmonise with it if this were number so there
would of companyrse be numberreason to companytend that capital value
had been mentioned only as the first step for ascertaining
the annual value. but there is numberhing in the explanation
to show that capital value has been mentioned only for the
purpose of finding out the annual value from it. we have to
read many words into it to produce that result. such a
thing is number permissible and there is numberwarrant for doing
it either. again this reading does much more than bring
about harmony it makes the explanation quite superfluous
quite unnecessarily enacted. for if the impost was a rate
in the sense the appellants stated it had necessarily to be
based on annual value and there was therefore numberneed to
enact by the explanation how it was to he based or to
expressly provide that the annual value might be ascertained
first by
finding out the capital value or by any of the other
recognised methods of doing so for all such methods would
necessarily be available. since however statutes are number
enacted unnecessarily the explanation must have been put
there to serve a purpose . that purpose can only have been
to provide that the rate a tax authorised by s. 73 companyld
be lawfully imposed on either of the basis mentioned in the
explanation. the companytention of the appellants
thereforehat under s. 73 only an impost based on the annual
value of the lands companyld be levied and r. 350-a read with
r. 243 must be held to be beyond the powers given by the
act cannumber be sustained. i turn number to the other ground on which the power to impose
the tax on the basis of capital value was challenged. it
was said that if the rule permitting the imposition on the
basis of capital value had been authorised by the
explanation to s. 75 or by any other provision in the act
these provisions would be void and illegal as they companyld be
beyond the legislative companypetence of the bombay legislature
by whom the act was enacted. this argument was founded on
the government of india act 1935.
the bombay act was passed in 1955 that is before the
government of india act 1935 was passed. the rule under
which power was taken to impose the rate on the basis of
capital value was however framed in february 1947 that is
long after the government of india act 1935. after the
government of india act had companye into force a new sub-
section numbered sub section  2  was inserted in s. 73 of
the bombay act which provided that numberhing in this section
shall authorise the imposition of any tax which the
provincial legislature has numberpower to impose in the
province under the government of india act 1935. it was
therefore. companytended that the power to impose the rate
based on the capital value of lands even if companyferred by
s. 73 or s. 75 of the bombay act would be void unless it
was a tax which the bombay legislature companyld lawfully impose
under the government of india act. this companytention is
perfectly legitimate. i think 1 should point out number that
as this case is companycerned with assessment for the years
1947-48 and 1948-49 it is unnecessary to companysider the
question of legislative companypetence of the legislature of the
state of bombay under the companystitution. the question then is is the tax imposed in the present case
outside the powers of the provincial legislature under the
government of india act 1935? the respective powers of the
provincial and central legislatures as defined by that act
are companytained in lists ii and i in the seventh schedule to
it. under item 42 of list ii the provincial legislatures
had power to pass an act imposing taxes on lands and
buildings. the companyporation companytends that the bombay act
comes fully within item 42 of list ii. the appellants on
the companytrary companytend that it is really a legislation under
item 55 of list i under which the central legislature has
the power to legislate to impose taxes on the capital
value of the assets exclusive of agricultural land of
individuals and companypanies. they say that this is so because
the bombay act permits the tax to be imposed on the basis of
capital value of the lands. if this companytention is companyrect
numberdoubt the imposition of the tax in this case would be
illegal and void. as i have earlier said in my opinion. the appellants
contention is unsound. in my view the bombay act imposes a
tax on lands and is therefore within item 42 of list if. the fact that it has provided for that tax being quantified
on the basis of the capital value of the land taxed does number
take it out of item 42 of list ii and place it under item 55
of list i. it is quite obvious that in providing the two
items namely item 55 of list i and item 42 of
list ii the makers of the government of india act
contemplated two different varieties of taxes. the
provincial legislature had been given the power to tax units
of lands and buildings irrespective of their value and the
central legislature the power to tax the value of assets. as was said in the provincial treasurer of alberta v. kerr
 1 . the identification of the subject matter of the tax
is naturally to be found in the charging section of the
statute and it will only be in the case of some ambiguity
in the terms of the charging section that recourse to other
sections is proper or necessary. number the charging section
in this case is in a manner of speaking s. 73. that permits
only a tax on lands and buildings. we have number got in the
records the resolution under s. 75 selecting the tax on
land and buildings as a tax which the municipality chose to
impose. there is numberquestion however that such a
resolution was passed and it must have been in terms of s.

the charging provision that we have in this case does
number therefore travel outside the power companyferred by item 42
in list 11. number has it been suggested that it is ambiguous. the only question therefore is whether by providing that
the tax might be levied at 1 of the capital value of the
land taxed the entire scope of the charging section is
being altered and in reality the tax levied becomes a tax on
capital asset ? i feel numberdoubt that the question must be
answered in the negative. the importance of the distinction
between the levy of a tax and the machinery of its
collection has often been pointed out by judicial pronumbernce-
ments of the highest auhority. one of the more recent of
these is r. c. jall v. union of india   2   . i suppose
the machinery of companylection would include the measure of the
tax in any case i think they are on a par. the subject
matter of taxation is obviously something other than the
measure provided for the quantification of the tax.  1  1933 a.c. 710 720.

a.i.r.  1962  s.c. 1281.
in ralla rom v. prorince of east punjab  1  the federal
court upheld a provincial statute which imposed a property
tax assessed on the annual value of tile property and
rejected the companytention that such a tax was really a tax on
income which only the centre companyld impose under item 54 of
list i. i think it may be legitimately said that if a tax
expressly levied on land and made assessable on its annual
value that is its income is number by reason of such method
of assessment a tax on income a tax on land cannumber become a
tax on capital value of assets because it is made assessable
on the basis of the capital value of the land. there are however other reasons why the tax in the present
case cannumber be said to be a tax on the capital value of
assets. this tax is leviable on land on the basis of its
capital value even though the land- may be subject to a
charge and even though that charge may exceed the capital
value of the land. in such a case for the purpose of
assessment the charge can be companypletely ignumbered and the tax
levied numberwithstanding that to the owner the property is of
numbervalue in view of the charge. if the tax was in reality a
tax on capital value of assets it companyld number in the
circumstances that i have imagined be levied at all. that
very clearly marks out the essential difference between this
act and an act imposing a tax on capital value of assets. anumberher distinction is that in the case of a tax on capital
value of assets the tax can be levied only on individuals
owning the assets. that i think follows from the words of
item 55 of list 1. under s. 85 of the bombay act however
the present tax can be levied on a person in occupation of
the land who holds it on a building lease taken from
anumberher. he is number the owner of it but numberetheless is
liable to be taxed under the act on the basis of the full
capital value of the land and number on the value of his lease-
hold only. if the tax was on the capital value of
 1  1948 f. c. r. 207.
assets such a person companyld number have been so taxed.