LexUNION OF INDIA OWNER OF THE EASTERN RAILWAY versus THE COMMISSIONER OF SAHIBGANJ MUNICIPALITY
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541
A
UNION OF INDIA OWNER OF THE EASTERN RAILWAY
B
c
D
E
F
G
H
v.
THE COMMISSIONER OF SAHIBGANJ MUNICIPALITY
February 22, 1973
(S. M. SIKRI, C.J., A. N. RAY, 0. G. PALEKAR, S. N. 0WIVEDI
AND A. K. MUKHERJEA, JJ.]
The Railways (Local Authorities Taxation) Act, 1941. Ss. 3 and
4--Scope of-Liabii!ity ·of Railway Administrc.:tion to pa,v nuuzicipa/ tox
with respect to their buildings under s. 154, Goi•enunent o/ India :Act,
1935, and Art. 285 of the Constitution.
Pursu-anl to s. 135 of the Indian Railways Act, 1890, the G,ovcrnor
General in Council issued '3. notification dated 24 August, 1911. declar-
ing that the administration of the East India!O' Rail"'!ay shall be liable
to pay in aid of the funds of the local authorities
s-et
out
in
the
Schedule thereto the taxes spec'ifie9, therein.
Jn one of the local -aatho4
fities so set out, the railway administration constructed 32 blocks of
buildings, sorne after 31 March 1937 and some after 25 Januarv 1950.
The~e buildings were assessed to municipal tax by the responden~ with
effect from the fourth quarter of 1965-66. The appellant con'.ended
that there \Vas no liability to pay the municipal tax because of s. 154
of the Government of India Act, 1935, and Art. 285 of the Con-;titu-
tion.
The High Court held that
the
notification
issued
by
the
Government in 1911 continued by virtue of s. 4 of the Railways (Lo::-al
Aut~orities Taxation) Act, 1941, that t~ 1941-Act was a feder;il law,
that the 1911 notification was not in respect of a.ny particular property,
and that. therefore, the railway properties whether in existence before
1st J\pril, 1937, dr coming into existence thereafter, were
liabl~
to
pay the tr.xcs.
Allowing the appeal to this Court,
HELD : The High Court was ln error in construing that the noti-
fication iS&ued in 1911 under the 1890-Act confinued by virtue
of
s. 4 of the 1941-Act. r544G-HJ
Under s. 154 of the 1935-Act all property vested in His
Majesty
for purposes of the Federation shall save in so fa'r as any Federat law
may otherwise provide, be exempt from all taxes imposed by. or by
oany authority within, a Province or a State.
The
proviso
to
the
section states that until any Federal law other\vise provides ainy proper-
ty so vested, which was immediately before
the
commencement
of
Part Ill of the 1935-Act liable to any such tax sha11, so long U:i that
tax continues, continue to be liable.
Article 285 of the
Consiitution
also provides that the property of the Union shall, save in s0 far a$
Par1iameiat may by law otherWise provide. be exempt from
all
taxes
imposed by a State or by any authority within a State, and, cl. (2)
of
t!Jat Article states that nothing in cl. (1) shall, until Parliament by law
er other\Vlse provides, prevent any authority in a State from
levying
any tax on any property of the Unio.n to which such
property
was
1n1mcc.iiatelv before "the commencement of the Constitution liable,
so
Jong as that tax continues to be levied in that State. (543B-FJ
The 32 blocks of buildings were not in existence before 1 Aj*il,
1937, llil!d hence were not ves~ in His Maje.ty for purposes of the
Federation. and were not liable to pay the municipal tax before that
SUPREME COURT REPORTS
[1973] 3 S.C.R.
daflt. They were, theretore, exempt from all taxes imposed
by
any
.+-
authority within a Provine;, until a Fed"{al law otherwise provided; and
could be made liable only if Parliament, by law, provided to ,that effect.
Section 4 of the 1941-Act did not provide for payment Of
taxes
in
respect of Railway property. Sectiqn 3 of the Act, however
staks
that a j'a'ilway administration shall be , liable to pay any tax in aid of
the funds of any local authority if t~.e C~ntral government by notifica·
tfon in the official gazctkc declares it to be so liable. But
no
such
B
notification declaring railway properties to be liable to pay any tax in
aid of the funds of any local authority under s. 3 of the 1941-Act bas
been issued. f544C-FJ
Corporation of Calcutta v. Governors of St. Thomas School, Cal-
cuttG:. [1949] F.C.R. 368, applied.
CIVIL APPELIATE ~u&1smcnoN : Civil Appeals Nos. 2304 c
and 2042 of 1968.
Appeals by certificate from the judgments and orders dated
22nd September 1965 and 2nd July 1968 of the Patna High Court
at Patna in C.W.J.C. Nos. 431 of 1962 and 344 of 1968.
F. S. Nariman,
Addl. Solicitor-General of India, B. D.
Sharma and S. P. Nayar, foExcerpt shown. Read the full judgment & AI analysis in Lexace.