UNION OF INDIA versus CITY MUNICIPAL COUNCIL, BELLARY

Citation: [1979] 1 S.C.R. 573 · Decided: 08-09-1978 · Supreme Court of India · Bench: Y.V. CHANDRACHUD · Disposal: Appeal(s) allowed

Cited by 2 judgment(s) · cites 1 · see the full citation network in Lexace

Judgment (excerpt)

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UNION OF INDIA 
v. 
CITY MUNICIPAL COUNCIL, BELLARY 
September 8, 1978 
573 
[Y. V. CHANDRACHUD, C.J., 
R. S. SARKARIA, N. L. UNTWALIA, 
0. CHINNAPPA REDDY AND A. P. SEN, JJ.] 
Constitution of India, 1950--Article 285~cope of "that StaLe" and 'that 
tax' meaning of-Bellary Municipal Council levied tax on railway property-
Railway then owned by a private company--On nationaliJotion railway proptrty 
became government property--Bcllary District which was formerly in the State 
.Qf A-fadras tran~ferred to }.{ysol'l: in 1953-MunLcipal Council, if could continue. 
A 
B 
· to levy tax on government owned property under Art. 285(1)-No law pa1sed 
C 
by Partiament similar to the R•ilways (Locat Authorities Taxation.) A.ct, 1941 
affecting exemption Of property of Union from all 
taxe~ imposed by local 
authoriteis in a State-1941-Act if repugnant to A.rt. 285. 
By virtue of a notification dated 14th February, 1929 issued under s. 135 
of the Indian Railways Act, 1890, the Bellary Municipal Council levied and 
realised municipal Illes in reopect of railway property owned by the former 
D 
;Madras & Southern Mahratta Railway Co., which was a 
non.government 
company. The Municipal Council was realising taxes from the railway in 
accordance with tho Madras District Municipalities Act, 1920, when the rail-
ways came to be owned by tho Government of India, it was found that there 
was no provision under the Government of India Act, 1935, creating liability 
of the government railway to pay any municipal taxes and that therefore no 
tax could be realised by the municipal councils. In 1941, the Railways (Local 
E 
Authorities Taxation) Act, 1941, was passed. 
By a notification issued under 
s. 4 of the 1941 Act, the Government Of India revoked the notification dated 
14th February, 1929 and issued in its place a fresh notification dated 18th 
June, 1946 declaring that the administration of the Madras &: Southern Mah-
ratta Railway shall be liable to pay taxes to the Bellary Municipal Council. 
The Railway continued to pay the tax until 1953. 
The Bellary district, which was formerly a part of the Madras State wu 
F 
added to the State of Mysore under s. 4 of the Andhra State Act, 1953. 
Even after Bcllary became a part of the State of Mysore, the Madras District 
Municipalities Act, 1920 continued to be applicable to tho Bellary area till 
October, 1955 when the Mysore Laws (Extension to Bellary and .Aroendment) 
Act, 1955 extended the operation of the Mysore State Municipalities Act, 
1933 to the District. of Bellary. 
Upto October, 1955, the Southern Railway 
G 
which was the successor-in-interest of the Government owned 
Madras 
& 
Southern Mahratta Railway did not dispute its liability to pay mwiicipal taxes. 
The Government then raised a contention that the Government owned railway 
property was not liable to tax by any local authority in view of Article 285 
of the Constitution and stopped payment. 
The Municipal Council thereupon filed a suit claiming from the railway a 
large Odllount as arrear. of tax. The High Court, under Article 228 of the 
Constitution. withdrew the suit from the Bellary Court and pa!Sed a decree 
against the Uuion. 
H 
574 
SUPREME COURT REPORTS 
[1979] l S.C.R. 
A 
In appeal to this Court it was contended for the Municipality that (1) the 
B 
levy of tax was saved by clause (2) of Article 285 and (2) clause (I) of 
Article 285 was not a bar in the way of imposing the tax in question, because 
the 1941 Act was saved under Article 372 of the Constitution. 
Allowing the appeal. 
HELD: 1. The pr0perty of the Railway is exempt from all taxes claimed 
by the Bellary- Municipal Council under clause (1) of Article 285 unless the 
claim can be supported and sustained under clause (2) [580 A] 
The property of the Union is exempt from all ta·xes imposed by a State 
or by any authority within a State. 
But the Parliament may by law provide 
otherwise and then any tax on the property of the Union can be imposed 
in accordance with the said law. 
The exception carved out by clause (2) 
C 
is not meant for levying any tax on such property by any State but is merely 
fOr the benefit of any authority including the local authority like the Municipal 
Council in question. 
Clause ( 1) cannot prevent such authority from levying 
any tax on any property of the Unio\l if such property was eXigible to such 
tax immediately before the commencement of the Constitution. The local 
authority can reap advaa

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