S. Mohan, O. C. J. - (1.) THE Writ appeals are directed against the judgment of Sathiadev, J. , in W. P. Nos. 3371 of 1978 and 3276 of 1979.
(2.) SINCE the points taken are identical in both the appeals, we shall deal with the facts in W. A. No. 171 of 1982 which arises out of the order in W. P. No. 3371 of 1978. The appellant company was incorporated in the year, 1964 under the Companies Act with its registered office in Madras . Under Sec. 110 of the City Municipal corporation Act (Tamil Nadu Act IV of 1919) if the council by resolution determines that a tax on companies is to be levied, every company which transacts business within the City shall pay a half yearly tax assessed in accordance with the rules in Schedule IV of the Act. As per the said section, the Municipal Corporation has been levying a Company tax of Rs. 25 on the appellant company. A demand notice was served on the appellant demanding a sum of Rs. 1,000 as half yearly tax for the period April to September, 1978. Being aggrieved with this, the writ petition was filed. It was argued before the learned single Judge that the state Government has no power to levy Company Tax: if that be so, the levy is illegal in view of Art. 265 of the Constitution of India. The City Municipal Corporation Act was first enacted in 1919. The relevant section and Schedule IV of the Act were amended in the year 1936 by Tamil Nadu Act X of 1936. But still the company's tax was not saved by Art. 277 of the Constitution of India since the necessary charge for the levy of tax arises only after the passing of the resolution of the council and the resolution was passed only after the commencement of the constitution even though the power to levy company's tax upto a maximum of Rs. 1,000 was given by the statute even in 1936 when the section was amended. Every change in the rate of tax would constitute a levy of new tax and hence the present levy cannot be considered as a tax which was already being lawfully levied immediately before the commencement of the Constitution. If the tax on Companies is construed as a tax on any profession, trade calling or employment, the maximum levy under Art. 276 (2)could be only Rs. 250 per annum; therefore, the levy looked at from that point of view is bad. Even under the Government of India Act, 1935, there was no power to levy tax on Companies transacting business within the city.
(3.) THOSE contentions were repelled by the learned judge. He held that the amendment to Sec. 110 of the City Municipal Corporation Act had taken place as early as in 1936 raising the tax to a maximum of Rs. 1,000 that, therefore, the mere implementation of the same after the constitution would not matter and that such a law would be saved by Art. 277. Thus, he dismissed the writ petitions. Hence the present appeals. The learned counsel for the appellants reiterates the same contentions before us. We have carefully considered the matter. We are of the view that this is a case to which Art. 277 of the Constitution would apply. The said Article is as follows: ". . . Any taxes, duties, ceases or fees which, immediately before the commencement of this Constitution, were being lawfully levied by the Government of any State or by any municipality or other local authority or body for the purposes of the state, municipality, district or other local area may, notwithstanding that those taxes, duties, cesses or fees are mentioned in the Union List, continue to be levied and to be applied to the same purposes until provision to the contrary is made by Parliament by law. " By a reading of the above, it is clear that all taxes, duties, cesses or fees which were lawfully levied by the Government of any state or by any municipality could continue to be levied and could be applied to the same purposes notwithstanding the fact that those taxes, duties, cesses or fees are mentioned in the Union List. Company tax was levied and collected prior to the commencement of the Constitution under Sec. 110 of the City Municipal corporation Act. That states that if the council by resolution determines that tax on a company shall be levied, then such a tax would become payable. The Act was passed in 1919. It was at that time a resolution was passed on 7. 10. 1919 to the following effect: '. . . . . . . . . . . . . . COMPANIES TAX The Hon'ble Dewan Bahadur P. Tyagaraya Chetti Garu: we next come to the tax on companies under section 110. Rs. 1000 is the maximum. If we charge minimum rate, what income will it fetch" The President- There is a maximum of Rs. 1,000. As I have said in my note, The Companies tax depends on the number of lakhs which constitute the paid up capital of a Company. It goes down from Rs. 1,000 to rs. 30 that is to say companies with a paid up capital of more than 20 lakhs pay rs. 1,000, and Companies with a capital of less than Rs. 1 lakh pay Rs. 30. As a matter of fact, with regard to this tax, you have no choice at all. The question before you is merely whether you will levy the companies tax or not. The Hon'ble Dewan Bahadur P. Tyagaraya Chetti garu.-I propose that the tax on companies be imposed according to the schedule given in the Act. M. R. Ry. Sall a Guruswami Chetti Garu seconded the proposition, which was put to the meeting and carried. ;