REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 684 OF 2004
State of M.P. …. Appellant
Versus
Rakesh Kohli & Anr. ….Respondents
WITH
CIVIL APPEAL NO. 1270 OF 2004
JUDGMENT
R.M. Lodha, J.
The only point for consideration here is, whether or not the
Division Bench of the Madhya Pradesh High Court was justified in declaring
Clause (d), Article 45 of Schedule 1-A of the Indian Stamp Act, 1899 (for
short, ‘1899 Act’) which was brought in by the Indian Stamp (Madhya Pradesh
Amendment) Act, 2002 (for short, ‘M.P. 2002 Act’) as unconstitutional being
violative of Article 14 of the Constitution of India.
2. The above point arises in this way. Two writ petitions came to
be filed before the Madhya Pradesh High Court. In both writ petitions
initially it was prayed that Clauses (f) and (f-1), Article 48, Schedule 1-
A brought in the 1899 Act by Section 3 of the Indian Stamp (Madhya Pradesh
Amendment) Act, 1997 (for short, ‘M.P. 1997 Act’) be declared ultra vires.
During the pendency of these petitions, the 1899 Act as applicable to
Madhya Pradesh was further amended by the M.P. 2002 Act. The respondents,
referred to as writ petitioners, amended their writ petitions and prayed
that Clause (d), Article 45 of Schedule 1-A of the 1899 Act as substituted
by M.P. 2002 Act be declared ultra vires. The writ petitioners set up the
case that original Article 48 of the 1899 Act, Schedule 1-A prescribed
stamp duty payable at Rs. 10/- if attorney was appointed for a single
transaction. By M.P. 1997 Act, Article 48 Clause (f) was substituted by
Clauses (f) and (f-1). Clause (f-1) provided that where power of attorney
was executed without consideration in favour of person who is not his or
her spouse or children or mother or father and authorizes him to sell or
transfer any immovable property, the stamp duty would be leviable as if
the transaction is conveyance under Article 23. Explanation II inserted by
M.P. 1997 Act provided that where under Clauses (f) and (f-1), duty had
been paid on the power of attorney and a conveyance relating to that
property was executed in pursuance of power of attorney between the
executant of the power of attorney and the person in whose favour it was
executed, the duty on conveyance should be the duty calculated on the
market value of the property reduced by duty paid on the power of attorney.
By M.P. 2002 Act, stamp duty relating to power of attorney has been
prescribed in Article 45 of Schedule 1-A. Clause (d) thereof prescribes
stamp duty at two per cent on the market value of the property which is
subject matter of power of attorney when power of attorney is given without
consideration to a person other than father, mother, wife or husband, son
or daughter, brother or sister in relation to the executant and authorizing
such person to sell immovable property situated in Madhya Pradesh. The writ
petitioners pleaded, inter alia, that the distinction between an agent who
was a blood relation and who was an outsider carved out in Article 45,
Clause (d) was legally impermissible. The provision violates Article 14 of
the Constitution as it has sought to create unreasonable classification.
3. The State of Madhya Pradesh stoutly defended the challenge to
the above provisions and stated before the High Court that the matter of
rate of stamp duty was solely in the domain of State Legislature and none
of the provisions of the Constitution was offended by the above provisions.
4. The Division Bench of the High Court has accepted the
constitutional challenge to Clause (d), Article 45 of Schedule 1-A brought
in the 1899 Act by M.P. 2002 Act and held that the said provision was
violative of Article 14 of the Constitution of India. The Division Bench
gave the following reasoning:
“11. As far as clauses (d) is concerned, it lays a postulate that
postulate [sic] that when the power of authority is given without
consideration to a person other than the father, mother, wife or
husband, son or daughter, brother or sister in relation to the
executant and authorizing such person to sell immovable property, 2%
on the market value of the property is to be collected. Submission of
Mr. Agrawal is that this clause is absolutely unreasonable and smacks
of arbitrariness, as there is no rationale to include the category of
persons who have been included and to leave out to all other persons.
Mr. S.K. Yadav, learned Government Advocate submitted that near
relatives can constitute a class by itself and all others can fit into
a different category and, therefore, the said provision does not
offend the concept of classification, as there is intelligible
differentia. On a first blush the aforesaid submission of the learned
counsel for the State appears to be quite attractive, but on a deeper
probe it is not what it is. In the guise of the classification
something has been stated in the said provision. One can give certain
examples. One may not have kith or kin and intact [sic] even that case
to deprive him to execute the power of attorney for selling the
property, unless 2% is paid on the market value is arbitrary. The
provisions may pass the test of classification but it would not pass
the requirement of the second limb of Article 14 of the Constitution
which ostracises arbitrariness, unreasonable and irrationality. The
State may have a laudable purpose but the laudable purpose alone
cannot sustain the provision. The matter would been [sic] different
had it included a rider that it is executed in favour of any other for
consideration or some other purposes is not the situation. In view of
the same, we are of the considered opinion, the aforesaid provision is
defiant of Article 14 of the Constitution. Accordingly, we have no
hesitation to declare the same as violative of Article 14 of the
Constitution.”
5. Ms. Vibha Datta Makhija, learned counsel for the appellant —
State of Madhya Pradesh – submitted that the High Court was in error in
declaring Clause (d), Article 45, Schedule 1-A as violative of Article 14
of the Constitution of India. She would submit that the test of challenge
to a legislative provision was completely different from that of an
administrative action. A legislative provision cannot be struck down as
being arbitrary, irrational or unreasonable. She further submitted that the
classification made in Clause (d) of Article 45, Schedule 1-A had
intelligible differentia with a direct nexus to the object of the 1899 Act.
The object of the 1899 Act is to collect proper stamp duty on an instrument
or conveyance on which such duty is payable. This is to protect the State
revenue. The legislative wisdom took into consideration that genuine power
of attorney documents would be executed by the executants without
consideration mostly in favour of kith and kin to complete sale
transactions on behalf of the executants. The said category attracts
lower stamp duty than power of attorney executed in favour of third
parties/strangers since such power of attorney document would be for
extraneous reasons.
6. Learned counsel for the State of M.P. also submitted that the
wisdom of the Legislature in protecting the revenue and carving out genuine
classes from others had been well recognized. The court cannot sit in
judgment over their wisdom. She relied upon decisions of this Court in
Balaji v. Income Tax Officer, Special Investigation Circle, Akola and
others[1]; State of A.P. and others v. Mcdowell and Co. and others[2];
Ramesh Chand Bansal and Others v. District Magistrate/Collector Ghaziabad
and others[3]; Veena Hasmukh Jain and another v. State of Maharashtra and
others[4]; Hanuman Vitamin Foods Private Limited and others v. State of
Maharashtra and another[5]; Karnataka Bank Limited v. State of Andhra
Pradesh and others[6]; Government of Andhra Pradesh and others v. P. Laxmi
Devi (Smt.)[7]; Union of India v. R. Gandhi, President; Madras Bar
Association[8] and Suraj Lamp and Industries Private Limited v. State of
Haryana and another[9].
7. The respondents despite service have not chosen to appear.
8. The definition of ‘conveyance’ is contained in Section 2(10) of
the 1899 Act which reads as under:
“S.2. Definitions.—In this Act, unless there is something repugnant
in the subject or context,--
(10) "Conveyance" includes a conveyance on sale and every instrument
by which property, whether movable or immovable, is transferred inter
vivos and which is not otherwise specifically provided for by Schedule
I.
9. Section 2(21) defines ‘power of attorney’. It reads as follows
:
“S. 2(21) “Power-of-attorney” includes any instrument (not chargeable
with a fee under the law relating to court-fees for the time being in
force) empowering a specified person to act for and in the name of the
person executing it;”
10. The 1899 Act has been amended from time to time by the Madhya
Pradesh State Legislature insofar as its application to the State of
Madhya Pradesh is concerned. The stamp duty on power of attorney was
originally prescribed in Article 48, Schedule - 1-A of the 1899 Act.
Clause (f) in original Article 48, Schedule 1-A read as under:
“SCHEDULE-1A
Stamp Duty on Instruments
(See section 3)
Description of Instruments Proper Stamp Duty
1) (2)
48.Power of Attorney, as defined by
Section 2(21), not being a Proxy
[No. 52].
(f) when giving for consideration The same duty as
Conveyance
and authorizing the attorney to (No. 23) for a market
value
sell any immovable property; equal to the amount of
the
consideration.”
11. Section 3 of the M.P. 1997 Act brought in amendment in the 1899
Act, inter alia, as under :
“In Schedule 1-A of the Principal Act, in Article 48,--
i) For clause (f), the following clauses shall be substituted, namely:-
|(f) when given for consideration |The same duty as a conveyance |
|and authorizing the attorney to |under Article 23 on the market |
|sell or transfer any immovable |value of the property |
|property. | |
| | |
|(f-1) when given without |The same duty as a conveyance |
|consideration in favour of |under Article 23 on the market |
|persons who are not his or her |value of the property |
|spouse or Children, or mother or | |
|father and authorizing the | |
|attorney to sell or transfer any | |
|immovable property | |
ii) the existing explanation shall be renumbered as explanation I thereof
and after explanation I as so renumbered, the following explanation
shall be inserted, namely :-
“Explanation II:--Where under clause (f) and (f-1) duty has been paid on
the power of attorney and a conveyance relating to that property is
executed in pursuance of power of attorney between the executant of power
of attorney and the person in whose favour it is executed, the duty on
conveyance shall be the duty calculated on the market value of the property
reduced by duty paid on the power of attorney”.
The Objects and Reasons for the above amendment were to check the tendency
to execute power of attorney authorising the attorney to sell or transfer
immovable property in place of a conveyance deed and to increase the
revenue of the Government in the State of Madhya Pradesh.
12. Article 48 in the 1899 Act as amended by M.P. 1997 Act was
substituted by M.P. 2002 Act. The new provision, Article 45 in respect of
power of attorney in Schedule 1-A which was brought in by M.P. 2002 Act
reads as follows :
“SCHEDULE-1A
Stamp Duty on Instruments
(See section 3)
Description of Instrument Proper Stamp Duty
(1)
(2)
| | |
|45. Power of attorney [as defined by| |
|section 2(21)] not being a proxy:- | |
|when authorizing one person or more | Fifty rupees. |
|to act in single transaction, | |
|including a power of attorney | |
|executed for procuring the | |
|registration of one or more documents| |
|in relation to a single transaction | |
|or for admitting execution of one or | |
|more such documents; | |
|when authorizing one person to act in|One hundred rupees. |
|more than one transaction or | |
|generally; or not more than ten | |
|persons to act jointly or severally | |
|in more than one transaction or | |
|generally; | |
|when given for consideration and |The same duty as a conveyance (No. 22) on the market value of the property. |
|authorizing the agent to sell any | |
|immovable property. | |
|when given without consideration to a|Two percent on the market value of the property which is the subject matter of power of attorney. |
|person other than the father, mother,| |
|wife or husband, son or daughter, | |
|brother or sister in relation to the | |
|executant and authorizing such person| |
|to sell immovable property situated | |
|in Madhya Pradesh. | |
|In any other case; |Fifty rupees for each person authorized |
Explanation-I.—For the purpose of this article, more persons than one
when belonging to the same firm shall be deemed to be one person.
Explanation-II.—The term ‘registration’ includes every
operation incidental to registration under the Registration Act, 1908
(16 of 1908).”
13. In our opinion, the High Court was clearly in error in
declaring Clause (d), Article 45 of Schedule 1-A of the 1899 Act which as
brought in by the M.P. 2002 Act as violative of Article 14 of the
Constitution of India. It is very difficult to approve the reasoning of the
High Court that the provision may pass the test of classification but it
would not pass the requirement of the second limb of Article 14 of the
Constitution which ostracises arbitrariness, unreasonable and
irrationality. The High Court failed to keep in mind the well defined
limitations in consideration of the constitutional validity of a statute
enacted by Parliament or a State Legislature. The statute enacted by
Parliament or a State Legislature cannot be declared unconstitutional
lightly. The court must be able to hold beyond any iota of doubt that the
violation of the constitutional provisions was so glaring that the
legislative provision under challenge cannot stand. Sans flagrant violation
of the constitutional provisions, the law made by Parliament or a State
Legislature is not declared bad.
14. This Court has repeatedly stated that legislative enactment can
be struck down by Court only on two grounds, namely (i), that the
appropriate Legislature does not have competency to make the law and (ii),
that it does not take away or abridge any of the fundamental rights
enumerated in Part – III of the Constitution or any other constitutional
provisions.
15. In Mcdowell and Co.2 while dealing with the challenge to an
enactment based on Article 14, this Court stated in paragraph 43 (at pg.
737) of the Report as follows :
“……..A law made by Parliament or the legislature can be struck down by
courts on two grounds and two grounds alone, viz., (1) lack of
legislative competence and (2) violation of any of the fundamental
rights guaranteed in Part III of the Constitution or of any other
constitutional provision. There is no third ground……….
…….. if an enactment is challenged as violative of Article 14, it can
be struck down only if it is found that it is violative of the
equality clause/equal protection clause enshrined therein. Similarly,
if an enactment is challenged as violative of any of the fundamental
rights guaranteed by clauses (a) to (g) of Article 19(1), it can be
struck down only if it is found not saved by any of the clauses (2) to
(6) of Article 19 and so on. No enactment can be struck down by just
saying that it is arbitrary or unreasonable. Some or other
constitutional infirmity has to be found before invalidating an Act.
An enactment cannot be struck down on the ground that court thinks it
unjustified. Parliament and the legislatures, composed as they are of
the representatives of the people, are supposed to know and be aware
of the needs of the people and what is good and bad for them. The
court cannot sit in judgment over their wisdom…….”
(Emphasis supplied)
Then dealing with the decision of this Court in State of T.N. and others v.
Ananthi Ammal and others[10], a three-Judge Bench in Mcdowell and Co.2
observed in paragraphs 43 and 44 [at pg. 739) of the Report as under :
“……Now, coming to the decision in Ananthi Ammal, we are of the opinion
that it does not lay down a different proposition. It was an appeal
from the decision of the Madras High Court striking down the Tamil
Nadu Acquisition of Land for Harijan Welfare Schemes Act, 1978 as
violative of Articles 14, 19 and 300-A of the Constitution. On a
review of the provisions of the Act, this Court found that it provided
a procedure which was substantially unfair to the owners of the land
as compared to the procedure prescribed by the Land Acquisition Act,
1894, insofar as Section 11 of the Act provided for payment of
compensation in instalments if it exceeded rupees two thousand. After
noticing the several features of the Act including the one mentioned
above, this Court observed: (SCC p. 526, para 7)
“7. When a statute is impugned under Article 14 what the court has
to decide is whether the statute is so arbitrary or unreasonable
that it must be struck down. At best, a statute upon a similar
subject which derives its authority from another source can be
referred to, if its provisions have been held to be reasonable or
have stood the test of time, only for the purpose of indicating
what may be said to be reasonable in the context. We proceed to
examine the provisions of the said Act upon this basis.”
44. It is this paragraph which is strongly relied upon by Shri Nariman.
We are, however, of the opinion that the observations in the said
paragraph must be understood in the totality of the decision. The use
of the word ‘arbitrary’ in para 7 was used in the sense of being
discriminatory, as the reading of the very paragraph in its entirety
discloses. The provisions of the Tamil Nadu Act were contrasted with
the provisions of the Land Acquisition Act and ultimately it was found
that Section 11 insofar as it provided for payment of compensation in
instalments was invalid. The ground of invalidation is clearly one of
discrimination. It must be remembered that an Act which is
discriminatory is liable to be labelled as arbitrary. It is in this
sense that the expression ‘arbitrary’ was used in para 7.”
16. The High Court has not given any reason as to why the provision
contained in clause (d) was arbitrary, unreasonable or irrational. The
basis of such conclusion is not discernible from the judgment. The High
Court has not held that the provision was discriminatory. When the
provision enacted by the State Legislature has not been found to be
discriminatory, we are afraid that such enactment could not have been
struck down on the ground that it was arbitrary or irrational.
17. That stamp duty is a tax and hardship is not relevant in
interpreting fiscal statutes are well known principles. In Bengal Immunity
Co. Ltd. v. State of Bihar and others[11], a seven-Judge Bench speaking
through majority in paragraph 43 (at pg. 685) of the Report while dealing
with hardship in the statutes stated as follows :
“……….If there is any real hardship of the kind referred to, there is
Parliament which is expressly invested with the power of lifting the
ban under cl. (2) either wholly or to the extent it thinks fit to do.
Why should the Court be called upon to discard the cardinal rule of
interpretation for mitigating a hardship, which after all may be
entirely fanciful, when the Constitution itself has expressly provided
for another authority more competent to evaluate the correct position
to do the needful?”
18. In Commissioner of Income Tax, Madras v. R.SV. Sr. Arunachalam
Chettiar[12], a three-Judge Bench of this Court, inter alia, observed in
paragraph 13 (at pgs. 1220-21) of the Report, “equity is out of place in
tax law; a particular income is either exigible to tax under the taxing
statute or it is not.”
19. In the Income Tax Officer, Tuticorin v. T.S. Devinatha Nadar
etc.[13], this Court in paragraph 30 (at pg. 635) of the Report observed as
follows :
“30. From the foregoing decisions it is clear that the consideration
whether a levy is just or unjust, whether it is equitable or not, a
consideration which appears to have greatly weighed with the majority,
is wholly irrelevant in considering the validity of a levy. The courts
have repeatedly observed that there is no equity in a tax. The
observations of Lord Hatherley, L.C. in (1869) 4 Ch. A 735. “In fact
we must look to the general scope and purview of the statute, and at
the remedy sought to be applied, and consider what was the former
state of the law, and what it was that the legislature contemplated,”
were made while construing, a non-taxing statute. The said rule has
only a limited application in the interpretation of a taxing statute.
Further, as observed by that learned Judge in that very case the
question in each case is “whether the legislature had sufficiently
expressed its intention” on the point in issue.”
The court highlighted that the court could not concern itself with the
intention of the Legislature when the language expressing such intention
was plain and unambiguous.
20 . In P. Laxmi Devi (Smt.)7, a two-Judge Bench of this Court was
concerned with a judgment of the Andhra Pradesh High Court. The High Court
had declared Section 47-A of the 1899 Act as amended by A.P. Act 8 of 1998
that required a party to deposit 50% deficit stamp duty as a condition
precedent for a reference to a Collector under Section 47-A
unconstitutional. The Court said in P. Laxmi Devi (Smt.)7 as follows :
“19. It is well settled that stamp duty is a tax, and hardship is not
relevant in construing taxing statutes which are to be construed
strictly. As often said, there is no equity in a tax vide CIT v.
V.MR.P. Firm Muar. If the words used in a taxing statute are clear,
one cannot try to find out the intention and the object of the
statute. Hence the High Court fell in error in trying to go by the
supposed object and intendment of the Stamp Act, and by seeking to
find out the hardship which will be caused to a party by the impugned
amendment of 1998.
20. xxx xxx xxx
21. It has been held by a Constitution Bench of this Court in ITO v.
T.S. Devinatha Nadar (vide AIR paras 23 to 28) that where the language
of a taxing provision is plain, the court cannot concern itself with
the intention of the legislature. Hence, in our opinion the High Court
erred in its approach of trying to find out the intention of the
legislature in enacting the impugned amendment to the Stamp Act.”
While dealing with the aspect as to how and when the power of the court to
declare the statute unconstitutional can be exercised, this Court referred
to the earlier decision of this Court in Rt. Rev. Msgr. Mark Netto v. State
of Kerala and others[14] and held in para 46 (at pg. 740) of the Report as
under :
“46. In our opinion, there is one and only one ground for declaring an
Act of the legislature (or a provision in the Act) to be invalid, and
that is if it clearly violates some provision of the Constitution in
so evident a manner as to leave no manner of doubt. This violation
can, of course, be in different ways e.g. if a State Legislature makes
a law which only Parliament can make under List I to the Seventh
Schedule, in which case it will violate Article 246(1) of the
Constitution, or the law violates some specific provision of the
Constitution (other than the directive principles). But before
declaring the statute to be unconstitutional, the court must be
absolutely sure that there can be no manner of doubt that it violates
a provision of the Constitution. If two views are possible, one making
the statute constitutional and the other making it unconstitutional,
the former view must always be preferred. Also, the court must make
every effort to uphold the constitutional validity of a statute, even
if that requires giving a strained construction or narrowing down its
scope vide Rt. Rev. Msgr. Mark Netto v. State of Kerala SCC para 6 :
AIR para 6. Also, it is none of the concern of the court whether the
legislation in its opinion is wise or unwise.”
Then in paras 56 and 57 (at pg. 744), the Court stated as follows:
“56. In our opinion adjudication must be done within the system of
historically validated restraints and conscious minimisation of the
judges' personal preferences. The court must not invalidate a statute
lightly, for, as observed above, invalidation of a statute made by the
legislature elected by the people is a grave step. As observed by this
Court in State of Bihar v. Kameshwar Singh: (AIR p. 274, para 52)
“52. … The legislature is the best judge of what is good for the
community, by whose suffrage it comes into existence.…”
57. In our opinion, the court should, therefore, ordinarily defer to
the wisdom of the legislature unless it enacts a law about which there
can be no manner of doubt about its unconstitutionality.”
21. The Constitution Bench of this Court in Mohd. Hanif Quareshi
and others v. State of Bihar[15], while dealing with the meaning, scope and
effect of Article 14, reiterated what was already explained in earlier
decisions that to pass the test of permissible classification, two
conditions must be fulfilled, namely, (i) the classification must be
founded on an intelligible differentia which distinguishes persons or
things that are grouped together from others left out of the group and (ii)
such differentia must have rational relation to the object sought to be
achieved by the statute in question. The Court further stated that
classification might be founded on different basis, namely, geographical,
or according to objects or occupations or the like and what is necessary is
that there must be a nexus between the basis of classification and the
object of the Act under consideration.
22. In Mohd. Hanif Quareshi15, the Constitution Bench further
observed that there was always a presumption in favour of constitutionality
of an enactment and the burden is upon him, who attacks it, to show that
there has been a clear violation of the constitutional principles. It
stated in paragraph 15 (at pgs. 740-741) of the Report as under :
“……..The courts, it is accepted, must presume that the legislature
understands and correctly appreciates the needs of its own people,
that its laws are directed to problems made manifest by experience and
that its discriminations are based on adequate grounds. It must be
borne in mind that the legislature is free to recognise degrees of
harm and may confine its restrictions to those cases where the need is
deemed to be the clearest and finally that in order to sustain the
presumption of constitutionality the Court may take into consideration
matters of common knowledge, matters of common report, the history of
the times and may assume every state of facts which can be conceived
existing at the time of legislation………”
23. The above legal position has been reiterated by a Constitution
Bench of this Court in Mahant Moti Das v. S.P. Sahi[16].
24. In Hamdard Dawakhana and another v. The Union of India and
others[17], inter alia, while referring to the earlier two decisions,
namely, Bengal Immunity Company Ltd.11 and Mahant Moti Das16 , it was
observed in paragraph 8 (at pg. 559) of the Report as follows:
“8. Therefore, when the constitutionality of an enactment is
challenged on the ground of violation of any of the articles in Part
III of the Constitution, the ascertainment of its true nature and
character becomes necessary i.e. its subject-matter, the area in which
it is intended to operate, its purport and intent have to be
determined. In order to do so it is legitimate to take into
consideration all the factors such as history of the legislation, the
purpose thereof, the surrounding circumstances and conditions, the
mischief which it intended to suppress, the remedy for the disease
which the legislature resolved to cure and the true reason for the
remedy.”
25. In Hamdard Dawakhana17, the Court also followed the statement
of law in Mahant Moti Das16 and the two earlier decisions, namely,
Charanjit Lal Chowdhury v. Union of India and others[18] and The State of
Bombay and another v. F.N. Balsara[19] and reiterated the principle that
presumption was always in favour of constitutionality of an enactment.
26. In one of the recent cases in Karnataka Bank Limited6, while
referring to some of the above decisions, in para 19 (at pgs. 262-263) of
the Report, this Court held as under :
“19. The rules that guide the constitutional courts in discharging
their solemn duty to declare laws passed by a legislature
unconstitutional are well known. There is always a presumption in
favour of constitutionality, and a law will not be declared
unconstitutional unless the case is so clear as to be free from doubt;
“to doubt the constitutionality of a law is to resolve it in favour of
its validity”. Where the validity of a statute is questioned and there
are two interpretations, one of which would make the law valid and the
other void, the former must be preferred and the validity of law
upheld. In pronouncing on the constitutional validity of a statute,
the court is not concerned with the wisdom or unwisdom, the justice or
injustice of the law. If that which is passed into law is within the
scope of the power conferred on a legislature and violates no
restrictions on that power, the law must be upheld whatever a court
may think of it. (See State of Bombay v. F.N. Balsara.)”
27. A well-known principle that in the field of taxation, the
Legislature enjoys a greater latitude for classification, has been noted by
this Court in long line of cases. Some of these decisions are : M/s.
Steelworth Limited v. State of Assam[20]; Gopal Narain v. State of Uttar
Pradesh and another.[21]; Ganga Sugar Corporation Limited v. State of Uttar
Pradesh and others[22]; R.K. Garg v. Union of India and others[23] and
State of W.B. and another v. E.I.T.A. India Limited and others[24].
28. In R.K. Garg23, the Constitution Bench of this Court stated
that laws relating to economic activities should be viewed with greater
latitude than laws touching civil rights such as freedom of speech,
religion, etc.
29. While dealing with constitutional validity of a taxation law
enacted by Parliament or State Legislature, the court must have regard to
the following principles: (i), there is always presumption in favour of
constitutionality of a law made by Parliament or a State Legislature (ii),
no enactment can be struck down by just saying that it is arbitrary or
unreasonable or irrational but some constitutional infirmity has to be
found (iii), the court is not concerned with the wisdom or unwisdom, the
justice or injustice of the law as the Parliament and State Legislatures
are supposed to be alive to the needs of the people whom they represent and
they are the best judge of the community by whose suffrage they come into
existence (iv), hardship is not relevant in pronouncing on the
constitutional validity of a fiscal statute or economic law and (v), in
the field of taxation, the Legislature enjoys greater latitude for
classification.
30. Had the High Court kept in view the above well-known and
important principles in law, it would not have declared Clause (d), Article
45 of Schedule 1-A as violative of Article 14 of the Constitution being
arbitrary, unreasonable and irrational while holding that the provision may
pass test of classification. By creating two categories, namely, an agent
who is a blood relation, i.e. father, mother, wife or husband, son or
daughter, brother or sister and an agent other than the kith and kin,
without consideration, the Legislature has sought to curb inappropriate
mode of transfer of immovable properties. Ordinarily, where executant
himself is unable, for any reason, to execute the document, he would
appoint his kith and kin as his power of attorney to complete the
transaction on his behalf. If one does not have any kith or kin who he can
appoint as power of attorney, he may execute the conveyance himself. The
legislative idea behind Clause (d), Article 45 of Schedule 1-A is to curb
tendency of transferring immovable properties through power of attorney
and inappropriate documentation. By making a provision like this, the
State Government has sought to collect stamp duty on such indirect and
inappropriate mode of transfer by providing that power of attorney given to
a person other than kith or kin, without consideration, authorizing such
person to sell immovable property situated in Madhya Pradesh will attract
stamp duty at two per cent on the market value of the property which is
subject matter of power of attorney. In effect, by bringing in this law,
the Madhya Pradesh State Legislature has sought to levy stamp duty on such
ostensible document, the real intention of which is the transfer of
immovable property. The classification, thus, cannot be said to be without
any rationale. It has a direct nexus to the object of the 1899 Act. The
conclusion of the High Court, therefore, that the impugned provision is
arbitrary, unreasonable and irrational is unsustainable.
31. Consequently, these appeals are allowed and the judgment of the
Madhya Pradesh High Court passed on September 15, 2003 is set aside. Writ
petitions filed by the present respondents before the High Court stand
dismissed. No order as to costs.
…………………….J.
(R.M. Lodha)
…………………….J.
(H.L. Gokhale)
NEW DELHI.
MAY 11, 2012.
-----------------------
[1]
AIR 1962 SC 123
[2]
(1996) 3 SCC 709
[3]
(1999) 5 SCC 62
[4]
(1999) 5 SCC 725
[5]
(2000) 6 SCC 345
[6]
(2008) 2 SCC 254
[7]
(2008) 4 SCC 720
[8]
(2010) 11 SCC 1
[9]
(2012) 1 SCC 656
[10]
(1995) 1 SCC 519
[11]
AIR 1955 SC 661
[12]
AIR 1965 SC 1216
[13]
AIR 1968 SC 623
[14]
(1979) 1 SCC 23
[15]
AIR 1958 SC 731
[16]
AIR 1959 SC 942
[17]
AIR 1960 SC 554
[18]
AIR 1951 SC 41
[19]
AIR 1951 SC 318
[20]
1962 Supp (2) SCR 589
[21]
AIR 1964 SC 370
[22]
(1980) 1 SCC 223
[23]
(1981) 4 SCC 675
[24]
(2003) 5 SCC 239
