UNION OF INDIA versus THE LONAVLA BOROUGH MUNICIPALITY OF LONAVLA, DISTRICT POONA, BY ITS CHIEF OFFICER, AND ANOTHER

Citation: [1970] 3 S.C.R. 920 · Decided: 09-03-1970 · Supreme Court of India · Bench: S.M. SIKRI · Disposal: Dismissed

cites 1 · see the full citation network in Lexace

Judgment (excerpt)

UNION OF INDIA 
v. 
THE LONAVLA BOROUGH MUNICIPALITY OF LONA VLA, 
DISTRICT POONA, BY ITS CHIEF OFFICER, AND· 
ANOTHER 
March 9, 1970. 
[S. M. SIKRI AND V. BHAR.GAVA, JI.] 
Bombay District Municipal Act 3 of 1901-S. 59 Bomoay Municipal 
Boroughs Act 18 of 1905-S. 13-Scope of-Collection of taxes from 
railway as consolidated tax under cl. (c) second proviso instead of sepa-
rate tnxes under the other provisions of the two SiCtiOnl -V alid.f.'' 
The respondent Municipality, which at the time vfu governed by the 
Bombay District Municipal Act 3 of 1901 levied a tax on lands and 
buildings situated within its municipal limits at 4 per cent of the annual 
rental value. 
However, no such tax was levied on the buildings and 
lands of the G.l.P. Railway situated within its limits in view of s. 135 of 
the Indian Railways Act. 9 of 1890. In 1914, the Government of India 
issued a notification under s. 135 persuant to which the G.I.P. Railway 
admmistration was required to pay house tax to the respondent. 
Upto 
19! ~ ~he respondent municipality used to draw water from the Railway's 
res.::rvoft' but constructed its own reservoir during that year. 
Both prior 
to 1:1d after this date, no water rate was charged by the 
respondent 
municipality from. the railway. 
On 4th May, 1916 the res:iondent promulgated new rules for tau-
tion and instead of charging separate house tax under s. 59(1)(i) or a 
general water rate under s. 59(1 )(viii) of the Act ·of 1901, it decided 
to charge a consolidated tax assessed as a rate on buildings and lands in 
accordance with clause (c) of the proviso to s. 59(i). Although the 
respondent demanded this consolidated tax from the railway in respect 
of its lands and buildings, the railway resisted payment contending that 
under the notification of 1914, house tax only was payable by it. 
On 
26th July, 1917, the Government of India issued a fresh notification 
under s. 135 of the Railways Act whereby the railway administration was 
rendered liable to pay what was described as "tax on lands and buildings". 
Thereafter the respondent charged the railway the consolidated tllx until 
some time in 1927 when the G.I.P. railway was taken over by the Govern-
ment. In the rules p<omulgated on 4th May, 1916, the consolidated tax 
was not chargeable on Government property. 
Relying on this provision, 
an objection was ntised that the charge of tax was illegal when the rail-
way had become Government property. The respondent Municipality 
amended its rules and promulgated fresh rules on 6th October, 1931 under 
the provisions of the Bombay Municipal Boroughs Act 18 of 1925 under 
which enactment the resj>ondent Municipality had by that time been consi· 
tituted into a Borough. 
Under these rules the exemption in respect of 
Government propeny was deleted. 
In pursuance of these amended rules 
the respondent started collecting from the railway the consolidated tax 
assessed as a rate on its buildiniz:s and lands which was by then being 
levied under the provisions of s.73 of the Act of 1925 that were similar 
to those of s.59 of the Act of 1901. 
In 1940 the railway administration preferred an appeal under s. 110 
of the Act of 1925 against one of the demand n"tices. Although the 
A 
B 
c 
D 
E 
F 
G 
• 
A 
B 
c 
D 
E 
F 
G 
H 
• 
·UNION v. LONAVLA MUNICIPALITY 
92I 
First Court- "Set aside the demand notice, a_u"-;ppe~l --~-; eventually dis-
missed by the High Court with the remark that the proper 'remedy to be 
sought was by means of a suit. The Union of India which -had become 
the owner of the railway,field a suit·in November 1954 for refund of the 
entire_ amount which was collected by the respondent from the railway 
in pursuance of the rules of 1931. 
The Trial Court granted a decree 
holding that the levy of· this tax was void inasmuch as, under the notifi-
cation issued on the 26th July, 1917, only the rate on lands and buildings 
was payable by the Railway Administration. 
On appeal, the High. 
Court disagreed with the trial court and set aside the decree. 011 appeal to 
_ this Court by a certificate under Art. 133 of the Constitution. 
HELD : Dismissin!!. the appeal, 
On the prc:iper-- interpretation of the language used in two Acts, ihe 
Ru!es, the notification, and taking into account the circumstances under 
which the notification of 1917-was issued, the only conclusion that could 
be arrived ~t was that the Railway was made liable tQ the consolidated 
tax. 
· 
It is true that all taxes 3re not r

Excerpt shown. Read the full judgment & AI analysis in Lexace.