LexCOMMISSIONER, QUILON MUNICIPALITY, QUILON, AND ANOTHER versus M/S. HARRISONS & CROSFIELD LTD.
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,. "'- .. 1. ~- 581 A COMMISSIONER, QUILON MUNICIPALITY, QUILON, AND ANOTHER B c D E F G H v. M/S. HARRISONS & CROSFIELD LTD. October 5, 1964 (P. B. GAJENDRAGADKAR, C.J., K. N. WANCHOO, M. HIDAYATULLAH, RAGHUBAR DAYAL AND J. R. MuDHOLKAR JJ.) Kerala Profession Tax (Validation and Re-assessment) Act, 1958 (Ac• No. XIV of 1958), s. 2.-Whether violative of Art. 276 of the Constitution. Travancore District Municipalities Act 23 of 1116 M.E.-Section 325- Power to make and amend rules under the section whether includes power to give retrospective operation to rules. The Quilon Municipality levied, in the pre-Constitution period, a pro- fession tax under powers conferred by the Travancore District Municipali- ties Act (Act 23 of 1116 M.E., corresponding to 1940 A.D.). The tax was leviable on a half-yearly basis on companies and persons transacting bHsi- ness in the municipal area for not less than a certain period in a year. The rates were laid down in rule 16 of the Second Schedule to the aforesaid Act, and were on a graduated scale varying with the income of the asscssee. Under Rule 18(2), as it originally stood the income of an assessee tral.sact- ing business inside as well as outside the area of the Municipality was to be deemed to be a pres~ribed percentage of the turnover of the business inside the Municipality. A proviso was however added to Rule 18(2) in 1947 which laid down that in the case of the assessees who were assessed to income-tax under the Travancore Income-tax Act, the income for the purpose of levying the profession tax would be computed in the following manner i.e. the profits earned by the assessee in the whole State as disclosed by the assessment under the said Act would be divided in the proportion of the turnover of the business inside and outside the Municipality and the portion thus found attributable to the business in the tvlunicipal area v.·ould be subjected to profession tax. In 1950, after the promulgation of the Constitution, s. 3 of the Finance Act (Act 25 of 1950) repealed the Travancore Income-tax Act and re-placed it by the Indian Income-tax Act, 1922. Thereafter Municipalities in l'ravancore began to construe the re- ferences to the Travancore Income-tax Act in rule 18 as references to the Income-tax Act, but this procedure was held to be illegal by the Travancore- Cochin High Court by a judgment delivered in 1955. The appropriate authority, thereupon by Notification dated 15th February 1956, amended rule 18 to provide, inter alia, that, with effect from 1-4-50 references to the Travancore Income-tax Act in that rule would be read as references to the Indian Income~tax Act, and income under the proviso to sub~rule (2) V.'oti!U be computed with reference to the income in the whole of the lndi;1n Union instead of the income in the whole of Travancore State. The amended proviso was also struck down by the High Court, on the ground that it was retrospective in operation. Thereupon the Kernla Legislature passed the Kerala Profession Tax (Validation and Re-asse-;smcnt) Act, 1958 (Act 14 of 1958) which in s. 2 provided that the levv of the tox under the aforesaid amendment would remain valid and \\'Ould not he open to challenge on the ground that it had retrospective operation. The res- pondents who were taxed by the Quilon Municipality under the amended proviso challenged the Validating Act before the Kerala High Court con- tending that it was a post-Constitution law which in imposing a profession 582 SUPREME COURT REPORTS [1965] I S.C.R. tax of more than Rs. 250 per year on certain cl•S5~ of asscs.ccs cootra- vened the terms of An. 276(2) of the Constitution. This contention wu upbeld by the High Court. Aggrieved thereby, the Quilon Municipality appealed to the Supreme Court. It was contended on behalf of the appellants that what the impugned Act did was merely to adapt the machinery for the assessment and levy of the tax tO a situation arising out of the repeal of the Travancorc Income-tax Act and its replacement by the Indian Income-tax Act in 1950, and therefore there was no contravention of An. 276(2). Nor \Vas the Article contra- vened by the retrospectivity given to the provision in question. HELO: (1) The proviso lo rule 18(21 introduced in 1947 was not a mere machinery provision. Under rule 18(2) as it originally stood the iOcome of :di asscssecs transac1ing busincs.;; bo1h inside and outside the Muni
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