1964 Supreme(SC) 48

SUPREME COURT OF INDIA
P.B.Gajendragadkar, C.J.I., J.C.Shah, K.N.Wanchoo, N.Rajagopala Ayyangar, S.M.Sikri, JJ.
State Of M.P.
Versus
Bhopal Sugar Industries Limited
Case No. : 491 of 1963
Date of Decision : 2/19/64
Advocates Appeared: Dadachanji J.B. : Desai S.T. : Narain Ravindra : Sen B. : Shroff I.M.

Headnote:Constitution of India - Art. 14 - levy of Agricultural Income-tax in former Part C State -incorporation of Part C State into a bigger State and under Reorganisation Act continuance of Agricultural Income-tax low in former regions of Part C State - no such law in the other regions of bigger State - if violates equal protection clause - temporary legislation and equality – principles - taxation law - classification for reasonableness –principles - States Reorganisation Act - S. 119 - Agricultural Income-tax Act, 1953 (Bhopal State).

       A company incorporated tin the Part C State of Bhopal, was assessed to tax on its agricultural income under the Bhopal Agricultural Income-tax Act (IX of 1953). The territory of Bhopal was incorporated into the newly States of Madhya Pradesh by the State Reorganisation Act (LXVI of 1956) from 1st November, 1956. By the Madhya Pradesh Adaptation of Laws (State and Concurrent Subjects) Order, 1956, the Bhopal Act (IX of 1 53) continued to remain in force in the former territories of Part C State of Bhopal only, in the State of Madhya Pradesh. It was common ground that in the remaining territories of the State of Madhya Pradesh there was no law providing for levy of tax on agricultural income. The company filed a petition under Articles 226 of the Constitution seeking to restrain the State of Madhya Pradesh from enforcing the Bhopal Act (IX of 1954) as it violated Article 14 of the Constitution. The High Court issued a writ and the State of Madhya Pradesh appealed.

       Held: A plea of differential treatment is by itself not sufficient to make out a case of denial of the equal protection of laws under Article 14 of the Constitution. An applicant pleading that equal protection of laws has been denied to him must make out that only he had been treated differently from others but he has been so treated from persons similarly circumstanced without reasonable basis and such differential treatment is unjustifiably made.

       The Legislature has always the power to make special laws to attain particular objects and for that purpose has authority to select or classify persons, objects, or transactions upon which the law is intended to operate. Differential treatment becomes unlawful only when it is arbitrary or not supported by a rational relation with the objects of the statute. Where application of unegual laws is reasonably justified for historical reasons, a geographical classification founded on those historical reasons would be upheld.

       In adjudging the reasonableness of classification for the purpose of taxation, the Courts recognize greater "freedom in the Legislature and if the statute discloses a permissible policy of taxation the Courts will uphold it. The courts undoubtedly lean more readily in favour of the presumption of constitutionality of a taxing statute, but that is not to say that they will not strike down a statute unless it appears that the tax was imposed deliberately with the object of differentiating between persons similarly circumstanced.

       Section 119 of Act (LXVII of 1956) was intended to serve a temporary purpose. Continuance of the laws of the old region after the reorganisation under the section was by itself no discriminatory even though it resulted in differential treatment of persons, objects or transactions in the new State, because it was intended to serve a dual purpose, facilitating the early formation of homogeneous units in the larger interest of the Indian Union and maintaining, even while merging, its political identity in the new unit, the distinctive character of each region, till uniformity of laws was secured in those branches in which it was expedient after full enquiry to do so. The laws of the region merged in the new units had therefore to be continued on grounds of necessity and expediency.

       But a purely temporary provision which because of compelling forces justified differential treatment when the Reorgamsation Act was enacted cannot obviously be permitted to assume permanency so as to perpetuate, that treatment without a rational basis to support it after the initial expediency and necessity have disappeared.

       It would be impossible to lay down any definite time• limit within which the State had to make necessary adjustments so as to effectuate the equality clause of the Constitution.

       The assumption made by the company that by allowing the Bhopal Act to operate without any modification the State had violated Article 14 and the assumption made by the State that if the Act in operation in a region incorporated in the new State was not discriminatory at the date of the reorganisation, if can never become discriminatory thereafter are both erroneous.

       An enquiry, by the High C0urt would be necessary, into the structure of tax burden imposed directly or indirectly on or in respect of agricultural land or income from it in the different regions constituting the State. If for instance, on account of disparity in the impost of land revenue and related taxes on land and Income from land in other regions, the ultimate burden on persons in the Bhopal region who were subjected to agricultural income-tax and agricultural land owners in the rest of the State did not disclose a pattern of wide variations, the mere existence of agricultural income impost in one region, and the absence of such impost in another region may not necessarily justify an inference of unlawful discrimination 1961 JLJ 690 reserved.