LexDIAMOND SUGAR MILLS LTD., AND ANOTHER versus THE STATE OF UTTAR PRADESH AND ANOTHER
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242
SUPREME COURT REPORTS
I
(1961]
Finance Act was not applicable in that pa.se. In the
The Income-ta:¥ second there was no profit in any preceding year and
Officer, Alwaye therefore the fiction failed because it postulates that
v.
there should be undistributed profits of one or more
lte Asok Te:¥tiles years immediately preceding the previous year. In
Ltd., Alwaye
the third case also the Finance Act was inapplicable
Kapu, 1.
because the additional tax was not properly laid upon
the total income and what was actually taxed was
never a part of the total income of the previous
year.
.rg6o
December I3.
In our opinion the order of the High Court was
erroneous. We therefore allow this appeal and set
aside the judgment and order of the High Court with
costs in this court and in the High Court.
Appeal allowed .
DIAMOND SUGAR MILLS LTD., AND
ANOTHER
v.
THE STATE OF UTTAR PRADESH AND
ANOTHER
(JAFER IMAM, J. L. KAPUR, K. C. DAs GUP'l'A,
RAG~AR DAYAL and N. RAJAGOPALA
AYYANGAR, JJ.)
Sugar Cane-Imposition of cess-Enactmtnt taxing entry of
cane into factory-Constitutionality of-"Local are((', Connotat$011
of-Constitution of India, Sch. VII, Lisl II, Entry 52-U. P.
Sugarcane Cess Acl, I956 (U. P. XXII of I956), s. 3·
Entry 52 of List II of the Seventh Schedule to the Consti-
tution empowered State Legislatures to make a Jaw relating to
''taxes on the entry of goods into a local area for consumptiOd,
use or sale therein". The U. P. Legislature passed the U. P.
Sugarcane Cess Act, 1956, which authorised the State Govern-
ment to impose a cess on the entry of cane into the premises of a
factory for use, consumption or sale therein. The appellant
contended that the premises of a factory was not a 'local area·.
within the meaning of Entry 52 and the Act was beyond the
competence of the legislature.
' .
3 S.C.R. SUPREME COURT REPORTS
243
Held, (per Imam, Kapur, Das Gupta and Raghubar Dayal;
JJ.) that the impugned Act was beyond the competence of the
legislature and was invalid. The premises of a factory was not
a "local area" within the meaning of Entry 52. The proper
meaning to be attached to the words "local area" in Entry 52 ·
was an area administered by a local body like a municipality, a
district board, a local board, a union board, a Panchayat or the
like.
In re: the Central Provinces & Berar Act No. XIV of I938,
[1939] F.C.R. 18, Navinchandra Mafatlal v. The Commissioner of
Income~tax, Bombay City, [1955] I S.C.R. 829, State of Madras v.
Gannon Dunkerley & Co., Ltd., [1959] S.C.R. 379 and South Caro-
lina v. United States, (1905) 199 U.S. 437, referred to.
Emperor v. Munnalal, I.L.R. 1942 All. 302, disapproved.
Per Ayyangar, J.-The Act was invalid only in so far as it
sought to levy a tax on cane entering a factory from within the
same local area in which the {actory was situate and was valid
in other cases. It was permissible to read the Act so as to confine
the tax to the limitations subject to which it could be constitutio~
nally levied an~ to strike down that portion which outstepped
the limitations.
In re Hindu Women's Rights to Property Act, I937, [1941]
F.C.R. 12 and Blackwood v. Queen, (1882) 8 A.C. 82, applied.
CIVIL APPELLATE JuRISDICTION: Civil Appeal No.
35 of 1959.
Appeal from the judgment and decree dated Octo-
ber 29, 1956, ofthe Allahabad High Court in Writ
Petition No. 327 of 1956.
H. N. Sanyal, Additional Solicitor-General of India,
J. B. Dadachanji, 8. N. Andley, Rameshwar Nath and
P. L. Vohra, for the appellants.
G. 0. Mathur and 0. P. Lal, for the respondents.
1960, December 13. The Judgment of Imam,
Kapur, Das Gupta and Dayal, JJ. was delivered by
Das Gupta, J. Ayyangar, J. delivered a separate judg-
ment.
DAs GUPTA, J.-. This appeal is against an order
of the High Court of Judicature at Allahabad reject-
ing the appellants, application under Art. 226 of the
Constitution. The first appellant is the Diamond
Sugar Mills Ltd., a. public limited company owning
and operating a sugar factory at Pipraich in the Dis-
trict Gorakhpur, for the manufacture of sugar from
Diamond Sugar
Mills Ltd.,
& Another
v.
The State of
Uttar P!'adesh
& Anothe!'
Das Gupta].
.". ,'
~SUPREME COURT REPORTS
i
[1961]
244 -
~ -,_:960 :
sugarcane. ' The second a'pp~lla~t'" is . the Director of
Dia~;:;;; suga~· the company. By this application _ the_ appellants ·
Mills Ltd..
challenged the imposition· of cess on the entry of
· c&- Another.
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