Judgment - Gajendragadkar, J.

1. This appeal arises from a dispute between 23 rate-payers at Ahmedabad and the Municipal Corporation of the City of Ahmedabad. The plaintiffs case is that Rule 350A which the Corporation has framed in 1947 in respect of the rate on open lands is ulrta vires and the assessment list prepared pursuant to the said rule is illegal and void. They have, therefore, claimed a declaration in that behalf and have asked for an injunction restraining the Corporation from recovering the rates iroin the respective plaintiffs according to the said assessment list. The defence, in substance, was that the rule is intra vires and the assessment list which has been properly made in accordance with the provisions of the Municipal Act is not open to any objection. The learned Judge has held that the rule is ultra vires; he has, therefore, granted the plaintiffs the declarations and injunction as claimed by them. It is this decree which is challenged before us by Mr. Pursholtam on behalf of the Municipal Corporation, and the principal point which he has argued before us is that the learned Judge was wrong in holding that Rule 350A was ultra vires. Some other issues were framed in the trial Court and they have been decided by the learned trial Judge. Those issues, however, have not been argued before us. That is how the short but important question which calls for our decision in this appeal is Whether Rule 350A framed by the Municipal Corporation of the City of Ahmedabad is intra vires or not.

2. All the plaintiffs own open plots within the jurisdiction of the Corporation and they have been called upon to pay the rate on their respective open lands according to the assessment list prepared on the basis of Rule 35GA. This rule first lays down the manner in which the rateable area of the open lands shall be determined, and then it provides that the rate on the area of open land thus determined shall be levied at one per cent, of the valuation based on capital and all such lands, subject to exemptions thereinafter provided, shall be liable to be charged the same. Prom the operation of this rule certain exemptions have been made. Lands for which the water rates are leviable under Rules 322 to 350 do not fall within the purview of Rule 350A. Besides, there are eleven categories of exemptions mentioned in the rule itself." Rule 243 deals with valuation based on capital. It lays down that valuation based upon capital shall be the capital value of buildings and lands as may be determined from time to time by the valuers of the Municipality who shall take into consideration such reliable data as the owners or the occupiers thereof may furnish either of their own accord or on being called upon to do so.

3. The plaintiffs case is that Rule 350A was made for the first time in 1947, that rates had never been levied by the Corporation on open plots on such a basis until then, and that the rate levied under this rule amounts to a capital levy on a part of the assets of the rate-payer and as such it is ultra vires. It is common ground that the Corporation derives its authority to impose taxes or rates under Section 73 of Bombay Act XVIII of 1925. Sub-Section (1) of Section 73 empowers a Municipality to impose for the purposes of the Act a rate on buildings or lands or both situate within the municipal borough. Sub-section (2) of Section 33, however, provides for a limitation; it says that nothing in this section shall authorise the imposition of any tax which the State Legislature has no power to impose in the State under the Government of India Act, 1935. In substance, the plaintiffs case is that the basis adopted by the Corporation in levying the rate on open lands has made the rate a capital levy and that a capital levy can be imposed only by the Government of India under Entry 55, List I, of Schedule VII to the Government of India Act, 1935. Entry 42 in List II of Schedule VII undoubtedly empowers the local Legislature to levy tax o

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