- (1.) The only point which arises for decision before us in this group of five appeals from a common judgment delivered by the High Court of Kerala in six writ petitions, five of which were preferred by the respondents and one by M/s. Brooke Bond (India) Ltd., is whether S. 2 of the Kerala Profession Tax (Validation and Reassessment) Act, 1958 (Act No. XIV of 1958) is invalid on the ground that it violates the provisions of Art. 276 of the Constitution.
(2.) The relevant part of Art. 276 of the Constitution runs thus : "276(1) Notwithstanding anything in Article 246 no law of the Legislature of a State relating to taxes for the benefit of the State or of a municipality, district board, local board or other local authority therein in respect of professions, trades, callings, or employments shall be invalid on the ground that it relates to a tax on income. Provided that if in the financial year immediately preceding the commencement of this Constitution there was in force in the case of any State or any such municipality, board or authority a tax on professions, trades, callings or employments the rate, or the maximum rate, or which exceeded two hundred and fifty rupees per annum, such tax may continue to be levied until provision to the contrary is made by Parliament by law, and any law so made by Parliament may be made either generally of in relation to any specified States, municipalities boards or authorities." It is common ground that before the Constitution came into force the Quilon Municipality had, in exercise of the power conferred by Section 91 of the Travancore District Municipalities Act, 23 of 1116 M. E. corresponding to the year 1940 (hereafter referred to as the Act) imposed a profession tax upon every company and every person who, among other things, transacts business within the limits of the municipality for not less than a certain period during a year. Sub-section (1) of S. 91 further provides that a company or person liable to pay the tax shall pay a half yearly tax assessed in accordance with the rules mentioned in Schedule II. The Schedule contains, amongst other things, Rules, and Rules 16 and 18 are the only rules relevant for consideration in these appeals. Rule 16 sets out slabs of half years income for the purpose of assessment of companies and persons to the tax. In this rule the assessees are divided into 12 classes. In the first class come assesses whose half yearly income exceeds Rs. 21,000/ - who have to pay a tax of Rs. 275/ per half year. Next below it is cl.(2) which provides that those whose half yearly income exceeds Rs.18,000/- but does not exceed Rs. 21,000/ - shall pay a tax of Rs. 225/- every half year. The liability of assessees whose incomes are below Rs. 18,000/ - goes on diminishing in each lower slab. Then there is a proviso to sub-rule (1) which runs thus : "Provided that a company whose half-yearly income is more than twenty-one thousand rupees shall notwithstanding anything contained in this or any other rule, pay in addition to the maximum half-yearly tax of rupees two hundred and seventy-five and additional half-yearly tax on such excess calculated at the rate of one rupee per one hundred rupees or part thereof." With respect to assessees falling within the first slab the proviso thus imposes an additional tax over and above Rs. 275/ - every half-year. We are not concerned with the remaining sub-rules of R. 16. Rule 18 contains three sub-rules but we are concerned only with sub-rr. (1) and (2) and they are as follows : "1. Where a company of person transacts business in any half-year exclusively in the area of a single municipality, the income of such company or person from the transaction of such business shall, for the purpose of levying profession-tax under this Act during the half-year, be deemed to be (a) where income-tax is assessed on such company or person under the Travancore Income- tax Act for the year, comprising the half-year one-half of the amount at which the profits and gains of such business are computed under Section 8 of the Travancore Income-tax Act for the purpose of assessing the income-tax; and (b) where the amount of the said profit and gains is not ascertainable or where such company or person is not assessed to income tax, such percentages as our Government may prescribe, of the turnover of the business transacted in the area of the municipality during the half-year or where this is also unascertainable during the corresponding half-year of the previous year. 2. Where a company or person transacts business partly in the area of a municipality and partly outside such area, the income of such company or person from the transaction of business in the area of the municipality shall, for the purpose of levying profession-tax under this Act, be deemed to be the percentage prescribed under clause (b) of sub-rule (1) of the turnover of the business transacted in such area during the half-year or the corresponding half-year of the previous year, as the case may be." By a notification of August 28, 1947 the appropriate authority empowered by S. 325 of the Act to frame rules added the following proviso to sub-rule (2) : "Provided that in the case of a company or person assessable to income-tax, the total profits; earned by the company or person as disclosed by the Income-tax assessment for the whole State for the year comprising the halfyear for which the profession tax is to be levied, shall be divided in the proposition of the turnover of the business of the company or person in the Municipality and outside for purposes of assessment to profession tax."
(3.) By the operation of S. 3 of the Indian Finance Act, 25 of 1950 the Travancore Income-tax Act stood repealed and the municipal authorities construed the reference to the Travancore Income-tax Act in sub-rule (1) of R. 18 as reference to the Indian Income-tax Act. They also construed the reference to the Travancore Income-tax Act in the proviso to sub-rule (2) in the same way. In Harrisons and Crosfield Ltd. v. Commr. of Quilon Municipality, ILR (1955) Trav-Co. 1003 : ((S) AIR 1956 Trav-Co. 174) the Travancore-Cochin High Court held that the proviso had only provided for the adoption of certain figures representing the total profits as disclosed by the Income-tax assessment for a particular year in which the emphasis was upon the assessable area which, after the coming into force of the Indian Income-tax Act in the State of Travancore became impossible of ascertainment and that, therefore, the entire proviso was rendered obsolete. Thereafter, the appropriate authority amended sub-rr. (1) and (2) of R. 18 by notification dated February 15, 1956 as follows : "(1) In clause (a) of sub-rule (1) of R. 18 - (a) for the words "Travancore Income-tax Act" wherever they occur, the words and figures "Indian Income-tax Act, 1922" shall be substituted- (b) for the word and figure 'Section 8' the word and figure 'Section 10' shall be substituted. (2) In the proviso to sub-rule (2) of R. 18 for the words 'whole State' the words 'whole of the Indian Union' shall be substituted. These amendments shall be deemed to have come into effect from 1st April 1950." The validity of the amendments was challenged before the High Court in Highland Produce Co. Ltd. v. Commr. Alleppey Municipal Council O. P. Nos. 196 to 202 of 1955, D/- 26-10-1956 (Trav-Co.) on the ground that the power conferred by S. 325 of the Act to frame rules could not be exercised so as to give retrospective operation to any rule. The High Court accepted the contention and thereupon Act 14 of 1958, the validity of S. 2 of which is challenged before us, was enacted by the Kerala legislature. That provision reads thus : "Validation of the levy or collection of profession tax under the Travancore District Municipalities Act, 1116 : Notwithstanding any judgment, decree or order of any court, the amendments to the Taxation and Finance Rules contained in Schedule II to the Travancore District Municipalities Act, 1116 (XXIII of 1116) made by notification No. LS. 11-13975/ 55/ DD dated 15th February, 1956 of the Government of the former State of Travancore Cochin, shall be deemed to have come into force with effect from the first day of April, 1950 and the validity of the levy or collection of profession tax made under the said Act and Rules shall not be called in question, on the ground that the amendments made by the notification aforesaid cannot have any retrospective operation, and any professsion tax so levied but not collected may be collected as if the said amendment had been validly made with effect from the first day of April, 1950." It will be clear from the language of this provision that the legislature purported to validate the levy and collection of the tax under the amended proviso by validating the amendment of the proviso. The High Court struck down this section and now the Quilon Municipality and its Commissioner have come up before us in appeal.;