Happy New Year

Wish You and Your family a Happy and Prosperous New Year
all best wishes
with regards
Yours
Advocatemmmohan

(i) Whether Section 10A of the Act is beyond the purview of the computation mechanism of total income as defined under the Act. Consequently, is the income of a Section 10A unit required to be excluded before arriving at the gross total income of the assessee? (ii) Whether the phrase “total income” in Section 10A of the Act is akin and pari materia with the said expression as appearing in Section 2(45) of the Act? (iii) Whether even after the amendment made with effect from 1.04.2001, Section 10A of the Act continues to remain an exemption section and not a deduction section? (iv) Whether losses of other 10A Units or non 10A Units can be set off against the profits of 10A Units before deductions under Section 10A are effected? (v) Whether brought forward business losses and unabsorbed depreciation of 10A Units or non 10A Units can be set off against the profits of another 10A Units of the assessee.

                                                                  REPORTABLE

                        IN THE SUPREME COURT OF INDIA
                        CIVIL APPELLATE JURISDICTION
                       CIVIL APPEAL  NO. 8498 OF 2013



C.I.T. & ANR.                                      APPELLANT(s)


                                   VERSUS

M/S YOKOGAWA INDIA LTD.                        RESPONDENT(s)



                                    WITH

CIVIL APPEAL Nos. 8496/2013,  8497/2013,  8502/2013,  8508/2013,  8511/2013,
8512/2013,   8514/2013,   8516/2013,   8517/2013,   8520/2013,    8925/2013,
8926/2013,   8928/2013,   8788/2012,   8790/2012,   8534/2013,    8563/2013,
8564/2013,   8923/2013,   8924/2013,   8930/2013,   8931/2013,    8232/2015,
9253/2015,  CIVIL  APPEAL  No.12253/2016  (arising  out  of  S.L.P.(C)   No.
36441/2013), CIVIL  APPEAL  No.12252/2016  (arising  out  of  S.L.P.(C)  No.
36442/2013), CIVIL  APPEAL  No.12205/2016  (arising  out  of  S.L.P.(C)  No.
977/2014),  CIVIL  APPEAL  No.12207/2016  (arising  out  of  S.L.P.(C)   No.
2328/2014),  CIVIL  APPEAL  No.12250/2016  (arising  out  of  S.L.P.(C)  No.
10261/2014), CIVIL  APPEAL  No.12254/2016  (arising  out  of  S.L.P.(C)  No.
8391/2015), CIVIL  APPEAL  No.12206/2016   (arising  out  of  S.L.P.(C)  No.
13840/2015), CIVIL  APPEAL  No.12251/2016  (arising  out  of  S.L.P.(C)  No.
18157/2015),  CIVIL APPEAL No.12208/2016   (arising  out  of  S.L.P.(C)  No.
26484/2015), CIVIL APPEAL  No.12203/2016   (arising  out  of  S.L.P.(C)  No.
1652/2013), CIVIL  APPEAL  No.12204/2016   (arising  out  of  S.L.P.(C)  No.
13861/2016) and CIVIL APPEAL No.12255/2016 (arising out of  S.L.P.  (C)  No.
33728/2016).


                               J U D G M E N T



RANJAN GOGOI, J.

      Leave granted in all the special leave petitions.

2.    The true and correct meaning and effect of the provisions  of  Section
10A of the Income Tax Act, 1961 (hereinafter referred to as  “the  Act”)  is
the principal issue arising for determination of the Court. At  the  outset,
it must be made clear that the decision of this Court  with  regard  to  the
provisions of Section 10A of the Act would equally be  applicable  to  cases
governed by the provisions  of  Section  10B  in  view  of  the  said  later
provision being pari materia with Section 10A of the Act though governing  a
different situation.

3.    The broad question indicated above may be conveniently dissected  into
the following specific questions arising in the cases under consideration.
(i)   Whether  Section  10A  of  the  Act  is  beyond  the  purview  of  the
computation  mechanism  of  total  income  as   defined   under   the   Act.
Consequently, is the income of a Section 10A unit required  to  be  excluded
before arriving at the gross total income of the assessee?
(ii)  Whether the phrase “total income” in Section 10A of the  Act  is  akin
and pari materia with the said expression as appearing in Section  2(45)  of
the Act?
(iii) Whether even after the amendment  made  with  effect  from  1.04.2001,
Section 10A of the Act continues to remain an exemption section  and  not  a
deduction section?
(iv)  Whether losses of other 10A Units or non 10A  Units  can  be  set  off
against the profits of 10A Units before deductions  under  Section  10A  are
effected?
(v)   Whether brought forward business losses  and  unabsorbed  depreciation
of 10A Units or non 10A Units can be set off against the profits of  another
10A Units of the assessee.
4.    At the very outset, Section 10A of the Act as it existed prior to  its
amendment by the Finance Act of 2000 with effect from 1.04.2001;  subsequent
to the aforesaid amendment and the provisions of Section 10A of the Act,  as
further amended by the Finance Act,  2003  with  retrospective  effect  from
1.04.2001 may be conveniently set out below.

5.    Section 10A of the Act, as it stood prior to  the  amendment  made  by
the Finance Act, 2000, (amendment effective from 1.4.2001) was as follows:
“10A. (1) Subject to the provisions of this section, any profits  and  gains
derived by an assessee from an industrial undertaking to which this  section
applies shall not be included in the total income of the assessee.

(2) This section applies to any industrial  undertaking  which  fulfils  all
the following conditions, namely:—

...
(ia)  in relation to an undertaking which begins to manufacture  or  produce
any article or thing on or after the 1st day of April, 1995, its exports  of
such articles or things are not less  than  seventy-five  per  cent  of  the
total sales thereof during the previous year;
…
Provided …
…

(3)    The profits and gains referred to in sub-section  (1)  shall  not  be
included in the  total  income  of  the  assessee  in  respect  of  any  ten
consecutive assessment years,  beginning with the assessment  year  relevant
to  the  previous  year  in  which  the  industrial  undertaking  begins  to
manufacture or produce articles or things.

(4)  Notwithstanding anything contained in any other provision of this  Act,
in computing the total income of the assessee of the previous year  relevant
to the assessment year immediately  succeeding  the  last  of  the  relevant
assessment years, or of  any  previous  year,  relevant  to  any  subsequent
assessment year,—

section 32, section 32A, section 33, section 35  and  clause  (ix)  of  sub-
section (1) of section 36 shall apply as if  every  allowance  or  deduction
referred to therein and relating to or allowable for  any  of  the  relevant
assessment  years,  in  relation  to  any  building,  machinery,  plant   or
furniture  used  for  the  purposes  of  the  business  of  the   industrial
undertaking in the previous year relevant to such  assessment  year  or  any
expenditure incurred for the purposes of  such  business  in  such  previous
year had been given full effect to  for  that  assessment  year  itself  and
accordingly sub-section (2) of section 32, clause (ii)  of  sub-section  (3)
of section 32A, clause (ii) of sub-section (2) of  section  33,  sub-section
(4) of section 35 or the second proviso to clause (ix)  of  sub-section  (1)
of section 36, as the case may be, shall not apply in relation to  any  such
allowance or deduction;

no loss referred to in sub-section (1) of section 72 or sub-section  (1)  or
sub-section (3) of section 74 and no deficiency referred to  in  sub-section
(3) of section 80J, in so far as such loss  or  deficiency  relates  to  the
business of the industrial undertaking, shall be carried forward or set  off
where such loss, or, as the case may be, deficiency relates to  any  of  the
relevant assessment years;

no deduction shall be  allowed  under  section  80HH  or  section  80HHA  or
section 80-I or section 80-IA or section 80-IB or section  80J  in  relation
to the profits and gains of the industrial undertaking; and

in computing the depreciation allowance under section 32, the  written  down
value of any asset used for the purposes of the business of  the  industrial
undertaking shall be computed as  if  the  assessee  had  claimed  and  been
actually allowed the deduction in respect of depreciation for  each  of  the
relevant assessment years.

(5)   …

(6)   The provisions of sub-section (8) and sub-section (9) of section  80-I
shall, so far as may be, apply in relation  to  the  industrial  undertaking
referred to  in  this  section  as  they  apply  for  the  purposes  of  the
industrial undertaking referred to in section 80-I.

(7)   …

(8)   …

6.    Section 10A was substituted by the Finance Act, 2000 with effect  from
1.4.2001 in the following terms:
“10A. (1) Subject to the provisions of this section,  a  deduction  of  such
profits and gains as are derived  by  an  undertaking  from  the  export  of
articles or things or computer software for  a  period  of  ten  consecutive
assessment  years  beginning  with  the  assessment  year  relevant  to  the
previous year in which the undertaking  begins  to  manufacture  or  produce
such articles or things or computer software, as the case may be,  shall  be
allowed from the total income of the assessee:

Provided that where in computing the total income  of  the  undertaking  for
any assessment year,  its  profits  and  gains  had  not  been  included  by
application of the provisions  of  this  section  as  it  stood  immediately
before its substitution by the Finance Act, 2000, the undertaking  shall  be
entitled  to  deduction  referred  to  in  this  sub-section  only  for  the
unexpired period of the aforesaid ten consecutive assessment years:

Provided further that where an undertaking initially  located  in  any  free
trade zone or export processing zone is subsequently located  in  a  special
economic zone by reason of conversion of such  free  trade  zone  or  export
processing zone into a special economic zone, the period of ten  consecutive
assessment years referred to in this sub-section shall be reckoned from  the
assessment year relevant to the previous year in which the  undertaking  was
first set up in such free trade zone or export processing zone:

Provided also that the profits and gains derived from  such  domestic  sales
of articles or things or computer software as do not exceed twenty-five  per
cent of total sales shall be deemed to be  the  profits  and  gains  derived
from the export of articles or things or computer software.

Provided also that no deduction under this section shall be allowed  to  any
undertaking for the assessment year beginning  on  the  1st  day  of  April,
2010 and subsequent years.

(2)   This  section  applies  to  any  undertaking  which  fulfils  all  the
following conditions, namely :—

(i)   …

(a)   …

(b)   …

(c)   …

(ii)   …

(3)   …

(4)   For the purposes of sub-section (1), the profits derived  from  export
of articles or things or computer software shall be the amount  which  bears
to the profits of the business, the same proportion as the  export  turnover
in respect of such articles or things or  computer  software  bears  to  the
total turnover of the business carried on by the assessee.

(5)   …

(6)   Notwithstanding anything contained in  any  other  provision  of  this
Act, in computing the total income of the  assessee  of  the  previous  year
relevant to the assessment year  immediately  succeeding  the  last  of  the
relevant assessment  years,  or  of  any  previous  year,  relevant  to  any
subsequent assessment year,—

(i)   Section 32, section 32A, section 33, section 35  and  clause  (ix)  of
sub-section (1)  of  section  36  shall  apply  as  if  every  allowance  or
deduction referred to therein and relating to or allowable for  any  of  the
relevant assessment years, in relation to any building, machinery, plant  or
furniture used for the purposes of the business of the  undertaking  in  the
previous year relevant to such assessment year or any  expenditure  incurred
for the purposes of such business in such previous year had been given  full
effect to for that assessment year itself and  accordingly  sub-section  (2)
of section 32, clause (ii) of sub-section (3) of section  32A,  clause  (ii)
of sub-section (2) of section 33, sub-section  (4)  of  section  35  or  the
second proviso to clause (ix) of sub-section (1) of section 36, as the  case
may be, shall not apply in relation to any such allowance or deduction;

(ii)  no loss referred to in sub-section (1) of section  72  or  sub-section
(1) or sub-section (3) of section 74 in so far as such loss relates  to  the
business of the undertaking, shall be carried forward or set off where  such
loss relates to any of the relevant assessment years;

(iii) no deduction shall be allowed under section 80HH or section  80HHA  or
section 80-I or section 80-IA or section 80-IB in relation  to  the  profits
and gains of the undertaking; and

(iv) in computing the depreciation allowance under section 32,  the  written
down value of any asset used  for  the  purposes  of  the  business  of  the
undertaking shall be computed as  if  the  assessee  had  claimed  and  been
actually allowed the deduction in respect of depreciation for  each  of  the
relevant assessment year.

(7)   The provisions of sub-section (8) and sub-section (10) of section  80-
IA shall, so far as may be, apply in relation to  the  undertaking  referred
to in this section as  they  apply  for  the  purposes  of  the  undertaking
referred to in section 80-IA.”



7.    Section 10A  was further amended by  the  Finance  Act  of  2003  with
retrospective effect from 1.04.2001. For the purposes of the  present  case,
the amendments introducing Section  (1A);  making  the  provisions  of  sub-
section (4) subject to the provisions of Sections (1) and  (1A)  and  making
the benefit of the provisions of Sections 32, 32A, 33, 35  and  clause  (ix)
of Section 36(1) and also Sections 72(1) and 74(1) and  (3)  operative  from
the assessment year 2001-2002 alone would be significant.

8.    The cardinal principles of interpretation of taxing  statutes  centers
around the opinion of Rowlatt, J.  in  Cape  Brandy  Syndicate  vs.   Inland
Revenue Commissioner[1] which has virtually become the  locus  classicus[2].
The above would dispense with the necessity of any  further  elaboration  of
the subject notwithstanding the numerous precedents  available  inasmuch  as
the evolution of all such principles are within  the  four  corners  of  the
following opinion of Rowlatt, J.
“…in a taxing Act one has to look merely at what is clearly said.  There  is
no room for any intendment. There is no equity about  a  tax.  There  is  no
presumption as to a tax. Nothing  is  to  be  read  in,  nothing  is  to  be
implied. One can only look fairly at the language used.”

9.    The amendment of Section 10A of the Act,  by  the  Finance  Act,  2000
with effect  from  1.4.2001,  specifically  uses  the  words  ‘deduction  of
profits and gains derived by an eligible unit …… from the  total  income  of
the assessee’.  There are other  provisions  of  Section  10A,  as  amended,
which could be suggestive of the fact that by the amendment made by  Finance
Act, 2000, Section 10A had  changed  its  colour  from  being  an  exemption
section to a provision providing for deduction.  Yet, Section 10A  continued
to remain in Chapter III of the Act which Chapter deals with  incomes  which
do not form part of the total income.   There  are  several  Circulars  that
have been placed before us by the contesting parties to explain the  purpose
and object of the amendment.  Having  looked  at  the  aforesaid  Circulars,
issued from time to time, what  we  find  is  a  fair  amount  of  ambiguity
therein as to the true nature and effect of  the  amendment.   Specifically,
we may refer to Circular No. 7 dated 16.07.2013  as  well  as  Circular  No.
01/2013 dated 17.01.2013 which appear to be  conflicting  and  contradictory
to each other; in the former Circular the provision, i.e.,  Section  10A  is
referred to as providing for deductions whereas the later Circular uses  the
expression “exemption” while referring to the  provisions  of  Sections  10A
and 10B of the Act.  Even the Income Tax Return Forms i.e. Form No. 1  dated
17.08.2001 and Form No. 6  for  the  assessment  year  2012-13  are  equally
contradictory.  The appellant  Revenue  would,  however   contend  that,  ex
facie, from the language appearing in Section 10A it is crystal  clear  that
the aforesaid provision  of  the  Act,  as  amended  by  Finance  Act,  2000
provides for deductions from the gross  total  income,  notwithstanding  the
use of the words ‘total income’ in Section  10A.   Exemptions  provided  for
under the old  Section  10A  have  been  discontinued  by  the  Legislature.
According to the Revenue, where the purport and effect  of  the  statute  is
clear from the language used there is no scope to turn to Chapter  notes  or
the marginal notes so as to  understand  Section  10A  to  be  an  exemption
section on the basis that the said provision is still  included  in  Chapter
III of the Act.  Reliance in this regard has been placed on the decision  of
this Court in Tata Power Co. Ltd.  vs.  Reliance Energy Ltd.[3]  wherein  at
page 687, it is held that:
“89. Chapter headings and the marginal notes are parts of the statute.  They
have also been enacted by Parliament. There cannot, thus, be any doubt  that
it can be used in aid of the construction.  It  is,  however,  well  settled
that if the wordings of the statutory provision are clear  and  unambiguous,
construction of the statute with the aid of “chapter heading” and  “marginal
note” may not arise. It may be that heading and marginal note, however,  are
of a very limited use in interpretation because  of  its  necessarily  brief
and inaccurate nature. They are, however,  not  irrelevant.  They  certainly
cannot be taken into consideration if they differ  from  the  material  they
describe.”

10.   The Revenue further contends that by virtue of the amendment  made  by
Finance Act, 2000, deductions under Section 10A are required to be made  and
allowed at the stage of computation of total income under Chapter VI of  the
Act notwithstanding the absence of any specific provision in Chapter  VI  to
the said effect.  In fact, the Revenue contends that in view  of  the  clear
language of Section 10A, as brought about by the amendment,  a  parallel  or
consequential amendment in Chapter VI of the Act was wholly unnecessary.

11.   On the other hand, on behalf of the assessees, it  is  contended  that
though there may be some features of deduction brought in by  the  amendment
to Section 10A, as  for  example,  disallowance  of  profits  in  regard  to
domestic sales, the legislative intent in retaining Section 10A  in  Chapter
III of the Act would  clearly  demonstrate  the  true  nature  of  the  said
provision of the Act even after amendment thereof  by  the  Finance  Act  of
2000. Deductions from the total income which is nowhere envisaged under  the
Act and the reference to the total income of the  undertaking,  referred  to
in several sub- sections of Section  10A,  would  indicate  that  the  total
income referred to in Section 2(45) has no application  to  the  computation
under Section 10A and the reference therein is only to the total  income  of
the eligible unit/undertaking. The provisions of Section 10A(6), as  amended
by Finance Act of 2003 retrospectively with effect from 1.4.2001,  has  also
been stressed upon to contend that with  effect  from  the  assessment  year
2001-02 losses and  unabsorbed  depreciation  of  eligible  units  would  be
allowable for set off immediately  on  the  expiry  of  the  period  of  tax
holiday i.e. 10 years.  The provisions of Sections 32, 32A, 33, 35 and  part
of 36 do not separately apply to an eligible unit during the period  of  tax
holiday.  During the said period the deduction under the aforesaid  sections
of the  Act  are  deemed  to  have  been  made.   Similarly,  under  Section
10A(6)(ii)  losses referred to in Section 72(1) or 74(1) and 74(3) are  also
eligible to be carried forward to the assessment year following the  end  of
the holiday period commencing from the assessment year 2001-02.  All  these,
according to the learned counsels for the assessees,  suggest  that,  though
heterogeneous elements exist in Section 10A,  the  provision  is  really  an
exemption provision. Alternatively, according to the learned counsels,  even
if Section 10A is understood to be providing for deductions,  the  stage  of
such deductions would be immediately after computation of profits and  gains
of business and before the aggregate of incomes  under  different  heads  of
other loss making eligible units or non-eligible units of the  assessee  are
taken into account. In other words, it is immediately after the  computation
of profits and gains of business  of  the  undertaking  that  the  deduction
under Section 10A is required to be made.  There  is  no  question  of  such
deductions being computed at the  stage  of  application  of  provisions  of
Chapter VI of the Act.

12.   We have considered the submissions  advanced  and  the  provisions  of
Section 10A as it stood prior to the amendment made  by  Finance  Act,  2000
with effect from 1.4.2001; the amended Section 10A thereafter and  also  the
amendment  made  by  Finance  Act,  2003  with  retrospective  effect   from
1.4.2001.

13.   The retention of Section 10A in Chapter  III  of  the  Act  after  the
amendment made by the Finance Act, 2000 would be merely suggestive  and  not
determinative of what is provided by the Section as amended, in contrast  to
what was provided by the un-amended Section.  The true and  correct  purport
and effect of the amended  Section  will  have  to  be  construed  from  the
language used and not merely from the fact that  it  has  been  retained  in
Chapter III.  The introduction of the word ‘deduction’  in  Section  10A  by
the amendment, in the absence of any contrary material, and in view  of  the
scope of the deductions contemplated by Section 10A  as  already  discussed,
it has to be understood that the Section embodies  a  clear  enunciation  of
the legislative  decision  to  alter  its  nature  from  one  providing  for
exemption to one providing for deductions.

14.    The  difference  between  the   two   expressions   ‘exemption’   and
‘deduction’, though broadly may appear to be the  same  i.e.  immunity  from
taxation,  the  practical  effect  of  it  in  the  light  of  the  specific
provisions  contained  in  different  parts  of  the  Act  would  be  wholly
different.  The above implications cannot be  more  obvious  than  from  the
case of Civil Appeal Nos. 8563/2013, 8564/2013 and civil appeal arising  out
of SLP(C) No. 18157/2015, which have been  filed  by  loss  making  eligible
units and/or by non-eligible assessees seeking the benefit of adjustment  of
losses against profits made by eligible units.

15.   Sub-section 4 of Section 10A which provides for  pro  rata  exemption,
necessarily involving deduction of  the  profits  arising  out  of  domestic
sales, is one instance of deduction provided by the amendment.   Profits  of
an eligible unit pertaining to domestic sales would have to enter  into  the
computation under the head “profits and gains from business” in  Chapter  IV
and denied the benefit of deduction.  The provisions  of  Sub-section  6  of
Section 10A, as amended by the Finance Act of 2003, granting the benefit  of
adjustment of losses and unabsorbed depreciation etc.  commencing  from  the
year 2001-02 on completion of the  period  of  tax  holiday  also  virtually
works as a deduction which has to be worked out at a future point  of  time,
namely, after the expiry of period of  tax  holiday.   The  absence  of  any
reference to deduction under Section 10A in Chapter VI of  the  Act  can  be
understand by acknowledging that any such reference or  mention  would  have
been a repetition of what has already been provided  in  Section  10A.   The
provisions of Sections 80HHC and 80HHE of the  Act  providing  for  somewhat
similar deductions would be wholly irrelevant and  redundant  if  deductions
under Section 10A were to be made at the stage of operation  of  Chapter  VI
of the Act. The retention of the said provisions of  the  Act  i.e.  Section
80HHC and 80HHE,  despite  the  amendment  of  Section  10A,  in  our  view,
indicates that some additional benefits to eligible Section 10A  units,  not
contemplated by Sections 80HHC and 80HHE, was intended by  the  legislature.
Such  a  benefit  can  only  be  understood  by  a  legislative  mandate  to
understand that the stages for working out the deductions under Section  10A
and 80HHC and 80HHE are substantially different.  This is  the  next  aspect
of the case which we would now like to turn to.

16.   From a reading of the relevant provisions of Section 10A  it  is  more
than clear to us  that  the  deductions  contemplated  therein  is  qua  the
eligible undertaking  of  an  assessee  standing  on  its  own  and  without
reference to the other eligible or non-eligible  units  or  undertakings  of
the assessee.  The  benefit  of  deduction  is  given  by  the  Act  to  the
individual undertaking and resultantly flows to the assessee.  This is  also
more than clear from the contemporaneous Circular  No.  794  dated  9.8.2000
which states in paragraph 15.6 that,
“The export turnover and the total turnover for  the  purposes  of  sections
10A and 10B shall be of the undertaking located in specified zones  or  100%
Export Oriented Undertakings, as the case may be, and this  shall  not  have
any material relationship with the other business of  the  assessee  outside
these zones or units for the purposes of this provision.”

17.   If the specific provisions  of  the  Act  provide  [first  proviso  to
Sections 10A(1); 10A (1A) and 10A (4)] that the unit  that  is  contemplated
for grant of benefit of deduction is the eligible undertaking  and  that  is
also how the  contemporaneous  Circular  of  the  department  (No.794  dated
09.08.2000) understood the situation, it is only logical  and  natural  that
the stage of deduction of the profits  and  gains  of  the  business  of  an
eligible  undertaking  has  to  be  made   independently   and,   therefore,
immediately after the stage of determination of its profits and  gains.   At
that  stage  the  aggregate  of  the  incomes  under  other  heads  and  the
provisions for set off and carry forward contained in Sections  70,  72  and
74 of the Act would be premature  for  application.   The  deductions  under
Section 10A therefore would be prior to the commencement of the exercise  to
be undertaken under Chapter VI of the Act for arriving at the  total  income
of the assessee from the gross total income.  The  somewhat  discordant  use
of the expression “total income of the assessee” in Section 10A has  already
been dealt with  earlier  and  in  the  overall  scenario  unfolded  by  the
provisions of Section  10A  the  aforesaid  discord  can  be  reconciled  by
understanding the expression “total income of the assessee” in  Section  10A
as ‘total income of the undertaking’.

18.   For the aforesaid reasons we answer  the  appeals  and  the  questions
arising therein, as formulated at the outset of this order, by holding  that
though Section 10A, as amended, is a provision for deduction, the  stage  of
deduction would be while computing the gross total income  of  the  eligible
undertaking under Chapter IV of the Act and not at the stage of  computation
of the total income under Chapter VI.  All the appeals shall stand  disposed
of accordingly.



                                              ……………….....................,J.
(RANJAN GOGOI)



                                              ……………….....................,J.
                                                          (PRAFULLA C. PANT)

NEW DELHI
DECEMBER 16, 2016.


                                                     -----------------------
[1]    [2] (1921) 1 KB 64

[3]    [4] A classical passage : a standard passage Important for the
elucidation of a word or subject [See : Webster’s Third New International
Dictionary Vol. II Pg. 1329]

[5]    [6] (2009) 16 SCC 659

levy of property tax on “mobile towers =The first are the appeals arising from the judgment and order dated 24/25.04.2013 passed by the Gujarat High Court declaring Section 145A of the Gujarat Provincial Municipal Corporations Act, 1949 (hereinafter referred to as “the Gujarat Act”) as ultra vires the Constitution and on that basis interdicting the levy of property tax on “mobile towers”. The High Court, by the impugned judgment, however, took the view that the Cabin in a mobile tower in which BTS system, details of which are noticed below, is located, would be a building and, therefore, exigible to tax under the Gujarat Act. The State Government and the different Municipal Corporations have challenged the first part of the order of the High Court whereas the Cellular operators have challenged the later part.=Though several other decisions of this Court and also of different High Courts have been placed before us we do not consider it necessary to refer to or to enter into any discussion of the propositions laid down in the said decisions as the views expressed in all the aforesaid cases pertain to the meaning of the expressions ‘land’ and ‘building’ as appearing in the definition clause of the statutes in question. We, therefore, set aside the judgment passed by the Gujarat High Court and answer the appeals arising from the order of the Bombay High Court; transferred cases and the writ petitions accordingly. However, we leave it open, so far as the cellular operators in the Bombay cases are concerned, to agitate the issue with regard to the retrospective operation of the assessment/demand of tax and the quantum thereof before the appropriate forum, if so advised. Consequently, and in the light of the above all the appeals, writ petitions and the transferred cases are disposed of.

                                                                  REPORTABLE

                        IN THE SUPREME COURT OF INDIA
                        CIVIL APPELLATE JURISDICTION
                     CIVIL APPEAL  NOS.5360-5363 OF 2013

AHMEDABAD MUNICIPAL CORPORATION        APPELLANT(s)


                                   VERSUS

GTL INFRASTRUCTURE LTD. & ORS. ETC.     RESPONDENT(s)



                                    WITH

C.A. No. 5364/2013, C.A. No. 5365/2013, C.A. Nos. 6385-6387/2013, C.A.  Nos.
6737-6738/2013, C.A. No. 6739/2013,  C.A.  Nos.  6836-6926/2013,  C.A.  Nos.
7865-7894/2013, C.A. No. 8114/2013, C.A. No. 8115/2013, C.A. No.  8116/2013,
C.A. No. 8117/2013,              C.A. No.12209/2016 @ SLP(C)  No.  362/2014,
C.A. Nos. 2854-2855/2014,  C.A. No.12211/2016 (arising out  of   SLP(C)  No.
12567/2014),      C.A.   No.12212/2016   (arising   out   of    SLP(C)   No.
21521/2014), C.A. No.12213/2016 (arising out  of   SLP(C)  No.  22653/2014),
C.A. Nos.          12214-12215/2016 (arising  out  of   SLP(C)  Nos.  29803-
29804/2014), C.A. No. 12216/2016 (arising out of   SLP(C)  No.  29765/2014),
C.A.  No.  12217/2016  (arising  out  of   SLP(C)  No.   31442/2014),   C.A.
No.12218/2016   (arising   out   of     SLP(C)   No.   31986/2014),     C.A.
No.12220/2016 (arising out of SLP(C)  No.  24053/2014),  C.A.  No.12219/2016
(arising out of   SLP(C) No. 3550/2015),  C.A.  No.12221/2016  (arising  out
of  SLP(C) No. 6149/2015),     C.A. No. 12222/2016 (arising  out  of  SLP(C)
No. 8705/2015), C.A. No.12223/2016 (arising out of   SLP(C) No.  9004/2015),
C.A.  No.12224/2016  (arising  out  of   SLP(C)  No.  9104/2015),       C.A.
No.12225/2016  (arising  out  of  SLP(C)  No.37142/2016   arising   out   of
SLP.(C)...CC No. 4938/2015),                C.A. No.12226/2016 (arising  out
of   SLP(C)  No.9233/2015),  C.A.  No.12227/2016  (arising  out  of   SLP(C)
No.8698/2015),         C.A.   No.12228/2016   (arising   out    of    SLP(C)
No.9620/2015),        C.A.   No.   12229/2016   (arising   out   of   SLP(C)
No.10288/2015),      C.A.  No.  12230/2016  (arising  out  of   SLP(C)   No.
9827/2015), C.A.  No.12231/2016  (arising  out  of  SLP(C)  No.  9994/2015),
C.A.  No.12232/2016  (arising  out  of   SLP(C)  No.11479/2015),        C.A.
No.12233/2016 (arising out of SLP(C)  No.  15175/2015),  C.A.  No.12234/2016
(arising out of SLP(C) No. 28473/2015),        C.A.  No.12235/2016  (arising
out of SLP(C) No. 1457/2016),       C.A.  No.  12236/2016  (arising  out  of
SLP(C) No. 12563/2016),    C.A. No. 5348/2015, W.P.(C) No.216/2015,  W.P.(C)
No.611/2015,  W.P.(C)  No.577/2015,   T.C.(C)   No.108/2015,   T.C.(C)   No.
128/2015, T.C.(C)  No.  129/2015,  T.C.(C)  No.  130/2015  and  T.C.(C)  No.
131/2015




                               J U D G M E N T



RANJAN GOGOI, J.

      Delay condoned. Leave granted in all the special leave petitions.

2.    This group of cases may be conveniently  arranged  in  four  different
categories. The first are the appeals arising from the  judgment  and  order
dated 24/25.04.2013 passed by the Gujarat High Court declaring Section  145A
of the Gujarat Provincial  Municipal  Corporations  Act,  1949  (hereinafter
referred to as “the Gujarat Act”) as ultra vires  the  Constitution  and  on
that basis interdicting the levy of property tax  on  “mobile  towers”.  The
High Court, by the impugned judgment, however, took the view that the  Cabin
in a mobile tower in which BTS system, details of which are  noticed  below,
is located, would be a building and, therefore, exigible to  tax  under  the
Gujarat Act. The State Government and the different  Municipal  Corporations
have challenged the first part of the order of the High  Court  whereas  the
Cellular operators have challenged the later part.

3.    The Bombay High Court which  was  in  seisin  of  a  somewhat  similar
challenge, by the order under challenge, has taken the view  that  the  writ
petitions challenging the levy of property tax on mobile towers  should  not
be  entertained  and  the  aggrieved  writ  petitioners  therein   (cellular
operators) should be left  with  the  option  of  exhausting  the  alternate
remedies provided by the Act. This would be the third category of cases.  In
this regard, it must be noticed that  in  the  Bombay  Provincial  Municipal
Corporations  Act,  1949,  the  charging  section  does   not   specifically
contemplate levy of taxes on mobile  towers  as  in  the  Gujarat  Act.  The
impugned levy, nevertheless,  was  imposed  on  the  reasoning  that  mobile
towers are buildings as defined in the Act.  At this stage, it must also  be
noticed that the Bombay Provincial  Municipal  Corporations  Act,  1949  was
applicable to the State of Gujarat also until the  year  2011  when  by  the
Gujarat Short Titles (Amendment) Act,  2011  the  word  ‘Gujarat’  has  been
inserted in place of the word ‘Bombay’.

4.    The fourth and fifth categories of cases would be the  writ  petitions
raising identical issues which have been transferred from  the  Bombay  High
Court to this Court and the writ petitions filed before this  Court  by  the
cellular operators under Article 32 of the Constitution  raising  a  similar
challenge as in the writ petitions filed before the High Court.

5.    As the elaborate arguments advanced in the  course  of  the  prolonged
hearing have centered around the provisions of the Gujarat Act,  it  may  be
convenient to take up the Gujarat cases in the first  instance.  The  answer
to the issues arising therein would, in  any  way,  effectively  decide  the
issues arising in the Bombay cases also as well as in the transferred  cases
and the writ petitions filed under Article 32 of the Constitution.

6.    The relevant provisions of the Gujarat Act  defining  the  expressions
“building”, “land” and “mobile tower” are as follows:

“Section 2(5) “building”  includes a house,  out-house,  stable,  shed,  hut
and other enclosure or structure whether  of  masonry,  bricks,  wood,  mud,
metal or any other material whatever whether used as  a  human  dwelling  or
otherwise,  and  also  includes   verandahs,   fixed   platforms,   plinths,
doorsteps, walls including compound walls and fencing and the like.

                         xxx   xxx   xxx  xxx   xxx



Section 2(30) “land” includes land which is being built  upon  or  is  built
upon or covered with water, benefits to arise out of land,  things  attached
to the earth or permanently fastened to anything attached to the  earth  and
rights created by legislative enactment over any street.

                         xxx   xxx   xxx  xxx   xxx

Section 2(34AA) “Mobile tower” means a  temporary  or  permanent  structure,
equipment or instrument erected or installed on land or  upon  any  part  of
the building or premises for providing telecommunication services.”



7.    Section 127(1) of the Gujarat Act, the charging  section,  is  in  the
following terms:

“127. Taxes to be imposed under this Act.-

(1) For  the  purposes  of  this  Act,  the  Corporation  shall  impose  the
following taxes, namely:-

(a)   Property taxes either under section 129 or under section 141AA.

(b)   a tax on vehicles, boats and animals.

(c)   a tax on mobile towers:

Provided that xxx  xxx  xxx  xxx  xxx  xxx  xxx



8.    Section 129 of the Gujarat Act deals with different components of  the
property tax which can be  levied  under  the  Act.  Briefly  put  the  said
components are water tax; conservancy and sewerage tax;  general tax of  not
less than 12% but not exceeding 30% of the rateable value etc.

9.    Section 141AA deals with the rate at which water tax, conservancy  tax
and sewerage tax are  to  be  imposed.  Section  141B  of  the  Gujarat  Act
provides for the rate at which the general tax is leviable.

10.     Section  145A  (inserted  by  the  Gujarat  Local  Authorities  Laws
(Amendment) Act, 2011) provides for  tax  on  mobile  towers  at  rates  not
exceeding those prescribed by order in  writing  by  the  State  Government.
Such tax which is levied on mobile towers is to be  collected  from  persons
engaged in providing  telecommunication  services  through  service  towers.
Section 145A is in the following terms.

“145A Tax on mobile towers.-

 (1) A tax at the rates not exceeding those prescribed by order  in  writing
by the State Government in this behalf from time to time shall be levied  on
mobile  towers  from  the  person  engaged  in  providing  telecommunication
services through such mobile towers.

(2) The Corporation shall from year to year, in accordance with Section  99,
determine the rates at which the tax shall be levied."





11.   By the aforesaid Gujarat Local Authorities Laws (Amendment) Act,  2011
similar provisions for levy of tax on mobile towers have  been  inserted  in
the Gujarat Municipalities Act, 1963 and also the  Gujarat  Panchayats  Act,
1993.

12.   The short contention of the cellular  operators  advanced  before  the
High Court is that Section 127(1)(c) read with Section 145A of  the  Gujarat
Act are legislatively incompetent as mobile towers are beyond the  scope  of
Entry 49 of List II of the Seventh Schedule to the Constitution which is  in
the following terms.

 “49.  Taxes on lands and buildings.”

13.   The High Court thought it proper to accept the said contention and  on
that basis to hold that levy of tax on mobile towers under the  Gujarat  Act
is ultra vires the Constitution except insofar as the Cabin that houses  the
BTS system is concerned.

14.   Two significant aspects connected to the issues arising may  be  taken
note of at the outset. The meaning of any Legislative Entry e.g.  “Taxes  on
lands and buildings” (Entry 49 of List  II)  should  not  be  understood  by
reference to the definition of the very  same  expressions  appearing  in  a
statute traceable to the particular Legislative Entry. In the present  case,
though the Gujarat Act defines the expressions  “land”  and  “building”,  as
rightly held by the High Court, it would be  self  defeating  to  understand
the meaning and scope of Entry 49 of List II by reference to the  definition
clauses in the Gujarat Act. Definitions contained  in  the  statute  may  at
times be broad and expansive; beyond the natural meaning  of  the  words  or
may even contain deeming provisions. Though the wide  meaning  that  may  be
ascribed to a particular expression by the  definition  in  a  statute  will
have to be given effect to, if the statute is otherwise found to  be  valid,
it will, indeed, be a contradiction in terms to test  the  validity  of  the
statute on the touchstone of it being within the  Legislative  Entry,  by  a
reference to the definition contained in the statute.

15.   The second aspect, mentioned above, is one concerning the  permissible
operation of two different statutes relatable to two  different  Entries  in
List I  or  II  or  even  in  List  III  of  the  Seventh  Schedule  to  the
Constitution. This has been acknowledged by the High Court, in the  impugned
Order, by accepting that even if a mobile tower is a part of  the  apparatus
pertaining to “telegraphs” covered by Entry 31 of List I,  yet, the  Gujarat
Act could still co-exist as a statute levying a tax on lands  and  buildings
so long and if only mobile towers can come within the  scope  and  ambit  of
the aforesaid expressions “land and building” in Entry 49 of  List  II.  The
endeavour, therefore,  must  be  to  trace  out  the  true  meaning  of  the
expressions “land and building” appearing against Entry 49 of List II  by  a
correct  application  of  the  parameters  and  principles   governing   the
interpretation of a Constitutional provision specially an Entry  in  any  of
the legislative fields under the Seventh Schedule to the Constitution.

16.    Certain   accepted   and   settled   principles   of   Constitutional
interpretation may now be taken note of. It will not be necessary  to  enter
into any detailed deliberations and debate in this regard  in  view  of  the
undisturbed precedents on which such principles have come to rest.   Broadly
and illustratively some of the principles which have been  culled  out  from
the decisions of this Court are enumerated hereinbelow.

(i)   In interpreting the provisions of the Constitution,  particularly  the
Legislative Entry, a broad, liberal and expansive interpretation  is  to  be
preferred as the meaning of an Entry is always  inclusive.  [Synthetics  and
Chemicals Ltd. vs. State of Uttar Pradesh[1]]

(ii)  Principles  of  interpretation  of  a  statute  are  not  foreign  and
altogether irrelevant for the  purposes  of  interpreting  a  constitutional
provision and/or a specific Legislative Entry. [Good Year  India  Ltd.   vs.
State of Haryana & Anr.[2]]

(iii) A Constitution is an organic document that must  grow  and  live  with
the times. [State of West Bengal  vs.  Kesoram Industries Ltd.[3]]

(iv)  The spirit of the Constitution,  the  constitutional  goals;  and  the
constitutional philosophy must guide the broad  and  liberal  interpretation
of a Legislative Entry. [State  of  West  Bengal   vs.   Kesoram  Industries
Ltd.[4]]

(v)   The dictionary meaning and  the  common  parlance  test  can  also  be
adopted. [Trutuf Safety Glass Industries vs.   Commissioner  of  Sales  Tax,
U.P.[5]]

(vi)  Words and expressions in a  constitutional  provision  or  Legislative
Entry should not be given an unnatural meaning. [India Cement  vs. State  of
Tamil Nadu[6]]

(vii) If a general word is used  in  a  constitutional  Entry,  it  must  be
construed as to extend all ancillary and  subsidiary  matters  that  can  be
reasonably included. [Jagannath Baksh Singh  vs.  State  of  U.P.[7];   Elel
Hotels & Investments Ltd.  & Ors.  vs. U.O.I.[8].]

The abovesaid principles  which  are  firmly  entrenched  as  principles  of
Constitutional  interpretation  must  be  borne  in  mind  while  proceeding
further in the case.



17.   In re. The Bill to amend Section 20 of the Sea Customs Act,  1878  and
Section 3 of the Central Excise and Salt Act, 1944[9]  ,  a  Bench  of  nine
Judges of this Court has observed that,

“Neither the Union nor the States can claim unlimited rights as regards  the
area of taxation.  The  right  has  been  hedged  in  by  considerations  of
respective powers and responsibilities of  the  Union  in  relation  to  the
States, and those of the States in relation  to  citizens  inter  se  or  in
relation to the Union. Part XII of the  Constitution  relates  to  Finances.
At the very outset Article 265 lays down that “No tax  shall  be  levied  or
collected except by authority of law.”  That authority has to  be  found  in
the three Lists in the Seventh Schedule subject to the  provisions  of  Part
XI  which  deals  with  relations  between  the  Union   and   the   States,
particularly  Chapter  I  thereof  relating  to  legislative  relations  and
distribution of legislative powers with special reference to Article 246.”



18.   Article 246 is in the following terms:

(1) Notwithstanding  anything  in  clauses  (2)  and  (3),  Parliament   has
exclusive power to make laws with respect to any of the  matters  enumerated
in List I in the Seventh Schedule (in this Constitution referred to  as  the
“Union List”).

(2) Notwithstanding anything in clause  (3),  Parliament,  and,  subject  to
clause (1), the Legislature of any State also, have power to make laws  with
respect to any of  the  matters  enumerated  in  List  III  in  the  Seventh
Schedule (in this Constitution referred to as the “Concurrent List”).

(3) Subject to clauses (1)  and  (2),  the  Legislature  of  any  State  has
exclusive power to make laws  for  such  State  or  any  part  thereof  with
respect to any of the matters enumerated in List II in the Seventh  Schedule
(in this Constitution referred to as the “State List”).

(4) Parliament has power to make laws with respect to  any  matter  for  any
part of the territory of India not included  (in  a  State)  notwithstanding
that such matter is a matter enumerated in the State List”



19.   Though Article 246 has often been understood to  be  laying  down  the
principle of  Parliamentary  supremacy,  it  must  be  qualified  that  such
supremacy, if any, is extremely limited and very  subtle.  This  has  to  be
said when the federal structure of the Indian Union has been  recognised  as
a basic feature of  the  Constitution.  Both,  the  Central  and  the  State
legislatures,  are  competent  to  enact  laws  in  any  matters  in   their
respective Lists i.e. List I and List II.  Conflict  or  encroachments  must
be ironed out by the Courts and only on a failure to do  so  the  provisions
of Article 246 will apply.  Insofar as the common  List  i.e.  List  III  is
concerned, any repugnancy in law making by the Union and State  Legislatures
is dealt with by Article 254 which gives primacy to  the  Parliamentary  law
over the State law subject to the provisions of clause (2)  of  Article  254
of the Constitution which again is subject to a proviso which  may  indicate
some amount of Parliamentary supremacy.

20.   The fields of  taxation  on  which  the  Union  Parliament  and  State
legislatures are competent to enact legislations to meet the  constitutional
mandate under Article 265 of the Constitution are clearly indicated  in  the
respective Lists. While there can be  no  encroachment  either  way,  it  is
possible that in a given situation  though  there  may  be  some  similarity
between the taxes levied by a Central and a State enactment,  both  can  co-
exist having regard to the subject of the levy.  A  tax  on  income  derived
from land and a tax on  the  land  itself  wherein  the  income  or  earning
therefrom forms the basis of the rates of  the  levy  of  tax  is  one  such
example. The above  has  been  illustrated  only  to  answer  the  arguments
advanced before us on view expressed, in the order under challenge,  by  the
High Court that even if it is assumed that the cellular operators are  right
in contending that mobile towers  are  covered  by  the  field  “telegraphs”
(Entry 31 of List I), it cannot be said  that  if  mobile  towers  can  come
within the fold of Entry  49  of  List  II,  such  a  legislation  would  be
legislatively incompetent.

21.   The Constitutional scheme with respect to financial relations  between
the Union and the State is dealt with by Part XII of the  Constitution.  The
scheme  discernible  contemplates  an  equitable  distribution  of  revenues
between the Centre and the  States.   Though  the  Union  and  each  of  the
federating units have their respective  consolidated  funds,  the  financial
arrangements  and  adjustments  that  are  to  be  found  in  the  different
provisions of Part XII of the Constitution  would  indicate  an  attempt  at
equitable distribution of revenues between  the  Union  and  the  federating
units even though such revenue may be derived from taxes and duties  imposed
by the Union and collected by it or through the agencies of  the  States.  A
perusal of the legislative  entries  relating  to  taxes  imposable  by  the
Central and the State legislatures do indicate that the larger share of  the
revenue goes to the Union because of the very nature of the  taxes  leviable
by the Union Parliament which would stand credited to the consolidated  fund
of the Union. The allocation of revenue heads/taxation power in  the  States
certainly shows a disequilibrium which, however, is sought  to  be  balanced
by the constitutional scheme aforementioned, namely, equitable  distribution
of revenues between the Union and the States even though such  revenues  may
be derived from taxes and duties imposed by the Union and collected  by  it.
This aspect of the Constitutional scheme which has been echoed  in  para  50
of the decision in  State  of  West  Bengal  vs.  Kesoram  Industries  Ltd.,
(supra) has to be kept in mind as the discussions unfold.

22.   We may now see what a Mobile Tower is and consists  of.  In  technical
terms a Mobile Tower is called a “Base Transceiver  Station.”   It  involves
the making of structure consisting of the following:

a.    A pre-fabricated shelter made  of  insulating  PUF  material  made  of
fibres.

b.    Electronic Panel.

c.    Base Transceiver  Station  (BTS)  and  other  radio  transmission  and
reception equipment.

d.    A diesel generator set.

e.    Six poles  of  6  to  9  meters  length  each  made  of  hollow  steel
galvanized pipes.

A mobile tower is constructed either on vacant land or  on  the  terrace  of
existing buildings on the basis  of  agreements  with  the  owners  of  such
properties.

23.   To answer the question as to  whether  such  mobile  towers  can  come
within the fold of ‘land and building’ appearing in Entry 49 List II of  the
Seventh Schedule it will be useful to take notice of  the  meanings  of  the
two  expressions  as  appearing  in  the  leading   judicial   and   English
dictionaries.  A comprehensive list of the different meanings  expressed  in
different works so far as the two  expressions  ‘land’  and  ‘building’  are
concerned are set out below.

                                    LAND

Stroud’s  Judicial  Dictionary  (Fifth  Edition)  defines  that  ‘land’,  or
‘lands’, not only means the surface  of  the  ground,  but  also  everything
(except gold or silver mines) on or over or under it, for  Cujus  est  solum
ejus est usque ad coelum et ad inferos (Co. Litt. 4  a;  Touch.  91;  2  Bl.
Com. 18; Lord Coke calls the earth “the suburbs of heaven”).

Black’s Law Dictionary  (Seventh  Edition)  defines  that  ‘land’  means  an
immovable and indestructible three-dimensional area consisting of a  portion
of the  earth’s  surface,  the  space  above  and  below  the  surface,  and
everything growing on  or  permanently  affixed  to  it.  The  lexicographer
further observes, “In its legal significance, ‘land’ is  not  restricted  to
the earth’s surface, but extends below and above  the  surface.  Nor  is  it
confined to solids, but may encompass  within  its  bounds  such  things  as
gases and liquids. A definition of ‘land’ along the  lines  of  ‘a  mass  of
physical matter occupying space’ also is not sufficient,  for  an  owner  of
land may remove part or all of that physical matter, as nevertheless  retain
as part of his ‘land’ the space that  remains.  Ultimately,  as  a  juristic
concept, ‘land’ is simply an area of three-dimensional space,  its  position
being identified by natural or imaginary points located by reference to  the
earth’s surface. ‘Land’ is not the fixed contents of that  space,  although,
as we shall see, the owner of that space may well own those fixed  contents.
Land is immovable, as distinct from chattels,  which  are  moveable,  it  is
also, in its legal significance, indestructible. The contents of  the  space
may be physically severed, destroyed or consumed, but the space itself,  and
so the ‘land’, remains immutable.” Peter Butt,  Land  Law  9  (2nd  Edition,
1988).

P. Ramanatha Aiyar’s Law Lexicon (Second Edition)  observes  that  the  word
‘land’  is  a  comprehensive  term,  including  standing  trees,  buildings,
fences, stones, and waters, as well as  the  earth  we  stand  on.  Standing
trees must be regarded as part and parcel of the  land  in  which  they  are
rooted and from which they draw their  support.  The  word  ‘land’,  in  the
ordinary legal sense,  comprehends  everything  of  a  fixed  and  permanent
nature and therefore embraces growing trees. 48 All 498 95 IC 150 =  24  ALJ
583 = 1926 All 689.



                                  BUILDING

Stroud’s Judicial  Dictionary  (Fifth  Edition)  observes  that  what  is  a
‘building’ must always be  a  question  of  degree  and  circumstances:  its
“ordinary and usual meaning is, a block of brick or stone work,  covered  in
by a roof” (per Esher M.R.,  Moir  v.  Williams  [1892]  1  Q.B.  264).  The
ordinary and natural meaning of the word ‘building’ includes the fabric  and
the ground on which it stands (Victoria City v. Bishop of  Vancouver  Island
[1921] A.C. 384, at p. 390).

Black’s Law  Dictionary  (Fifth  Edition)  observes  that  ‘building’  is  a
structure designed for habitation,  shelter,  storage,  trade,  manufacture,
religion,  business,  education  and  the  like.  A  ‘building’  is  also  a
structure or edifice enclosing a space within its  walls  and  usually,  but
not necessarily, covered with a roof.

P. Ramanatha Aiyar’s Law Lexicon (Second Edition) observes  that  ‘building’
is a house, out-house,  garage  or  any  other  structure  which  cannot  be
erected without  the  ground  on  which  it  is  to  stand;  the  expression
‘building’ includes, the fabric of which it is  composed,  the  ground  upon
which its walls stand and the ground within those walls. (per D.G.  Gouse  &
Co. v. State of Kerala, AIR 1980 SC 271 [Kerala Building Tax Act  (1975)  S.
2(3)])

DICTIONARY MEANING OF LAND AND BUILDING

‘Building’ is something with a roof and walls, such as a house  or  factory.
(Collins Dictionary of the English Language, First Edition, 1979)

‘Land’ refers to the solid part of the surface of  the  earth,  as  distinct
from seas, lakes, etc. (Collins Dictionary of the  English  Language,  First
Edition, 1979)

All other English dictionaries  convey  a  more  or  less  similar  meaning,
namely, as understood in common parlance – an enclosed space used for  human
use and dwelling.

24.   A cardinal principle of interpretation of a Legislative Entry  in  any
of the Lists of the Seventh Schedule is to treat the words  and  expressions
therein as inclusive in meaning and give the same all  possible  flexibility
instead of restricting such meaning to the perceptions contemporaneous  with
the times when the Constitution was framed.  The  Constitution,  an  organic
document, has  to  be  allowed  a  natural  growth  by  such  a  process  of
interpretation.  Interpretation of a Legislative Entry has to grow and  keep
up with the pace of times.

25.   We may now see how judicial opinion has dealt with the question.

In Anant Mills Co. Ltd. Vs. State of Gujarat and Others[10] this  Court  had
occasion to consider the scope and ambit  of  the  provisions  contained  in
Entry 49 List II in the context of the provisions of the very same  Act  (as
applicable to Bombay).  Sufficient illumination and elucidation  flows  from
such consideration which is available in para 44 of the report which may  be
very conveniently extracted below.

“44. Mr. Tarkunde on behalf of the petitioner Company has urged  that  under
Entry 49 of the State List in the Seventh Schedule to the Constitution,  the
State Legislature is empowered to enact a law relating  to  taxes  on  lands
and buildings. It is submitted that the State Legislature has no  competence
under the above entry to enact a law for levying tax in respect of the  area
occupied by the underground supply lines. The word “land”, according to  the
learned counsel, denotes the surface of the land  and  not  the  underground
strata. We are unable to accede to the above submission. Entry  49  of  List
II contemplates a levy of tax on lands and buildings or both as units.  Such
tax is directly  imposed  on  lands  and  buildings  and  bears  a  definite
relation to it. Section 129 makes provision for the levy of property tax  on
buildings and lands. Section 139 merely specifies the persons who  would  be
primarily responsible for the payment of that tax. The word “land”  includes
not only the face of the earth, but everything under or over it, and has  in
its legal signification an indefinite extent  upward  and  downward,  giving
rise to the maxim, Cujus est solum ejus est usque ad coelum (see p. 163,  73
Corpus Juris Secondum). According to Broom’s Legal  Maxims,  10th  Edn.,  p.
259, not only has land in  its  legal  signification  an  indefinite  extent
upwards, but in law it extends also downwards, so  that  whatever  is  in  a
direct line between the surface and the centre of the earth  by  the  common
law belongs to the owner of the surface (not merely  the  surface,  but  all
the land down to the centre of the earth and up to the  heavens)  and  hence
the word “land” which is nomen generalissimum, includes, not only  the  face
of the earth, but everything under it or over it.”

26.   In Goodricke Group Ltd. and Others  vs. State of W.B.  and  Others[11]
cess imposed on green tea (leaves) by weight was held to be a  tax  on  land
and not on the produce.  In an earlier  decision  in  Ajoy  Kumar  Mukherjee
vs. Local Board of Barpeta[12]  a levy on holding a market was  held  to  be
essentially a levy on land and, therefore, authorized by Entry  49  List  II
though the levy was imposed only on the  days  when  the  market  was  held.
This Court, in Ajoy Kumar Mukherjee  (supra) had inter alia held that,
“It follows therefore, that the use to which the land is put  can  be  taken
into account in imposing a tax on it within the meaning of entry 49 of  List
II, for the annual value of land which can certainly be taken  into  account
in imposing a tax for the purpose of this  entry  would  necessarily  depend
upon the use to which the land is put.  It is in the light of  this  settled
proposition that we have to examine the scheme of S. 62 of  the  Act,  which
imposes the tax under challenge.”

27.   In  Municipal Corporation of Greater Bombay[13]   the  definitions  of
‘land’ and ‘building’ in Sections 3(r) and 3(s)  of  the  Bombay  Provincial
Municipal Corporations Act,  1949 were dealt with  and  considered  by  this
Court and a broad and wide meaning of the  said  expressions  was  favoured.
However,  we may skip over the said part of the report in view of  what  has
been earlier indicated by  us,  namely,  that  to  test  the  vires  of  the
provisions of the statute in question the scope and  expanse  of  the  words
‘land’ and ‘building’ has to be understood in the context of the  provisions
of the Legislative Entry (Entry 49 List II) and not  the  Statute  relatable
to the Entry.  However, what would  be  of  significance  is  to  take  into
account the principles of interpretation which were followed by  this  Court
in coming to its conclusions with regard to the true meaning  and  scope  of
the expressions ‘land’ and ‘building’ contained in the statute.  As  already
observed by us principles of interpretation of the ordinary statute are  not
foreign  to  the  principles  of  interpretation   of   the   constitutional
provisions.  Paragraph 18 of the report in Municipal Corporation of  Greater
Bombay  (supra) may now be noticed.
18. In S.P. Gupta v. Union of India[14]  interpreting  Section  123  of  the
Indian Evidence Act, this Court held that the section  was  enacted  in  the
second half of the last century, but its meaning and content  cannot  remain
static. The interpretation of every statutory provision must keep pace  with
changing concepts and the values and it must, to the  extent  to  which  its
language permits or rather does not  prohibit,  suffer  adjustments  through
judicial interpretation so as to accord with the requirements  of  the  fast
changing  society  which   is   undergoing   rapid   social   and   economic
transformation. The language of  a  statutory  provision  is  not  a  static
vehicle of ideas and concepts and as ideas and concepts change, as they  are
bound to do in any country like ours with the establishment of a  democratic
structure  based  on  egalitarian  values   and   aggressive   developmental
strategies, so must the meaning  and  content  of  the  statutory  provision
undergo a change. It is elementary that law does not operate  in  a  vacuum.
It is not an antique to be taken down, dusted, admired and put back  on  the
shelf, but rather it is a powerful instrument fashioned by society  for  the
purpose of adjusting conflicts and tensions which arise by reason  of  clash
between conflicting interests. It is, therefore, intended to serve a  social
purpose and it  cannot  be  interpreted  without  taking  into  account  the
social, economic and political setting in which it is intended  to  operate.
It is here that a judge is called upon to perform a  creative  function.  He
has to  inject  flesh  and  blood  in  the  dry  skeleton  provided  by  the
legislature and by a process of dynamic interpretation,  invest  it  with  a
meaning which will harmonise  the  law  with  the  prevailing  concepts  and
values and make it an effective instrument for delivering justice.

      The discussions that had preceded on the financial  relations  between
the Union and the States would suggest a constitutional scheme  wherein  the
federating  States  of  the  Indian  Union  are  not  destined   to   remain
financially weak despite a situation where the  Union  undoubtedly  has  the
upper hand by an allocation of  the  more  lucrative  subjects  of  taxation
under the Seventh Schedule.  Constitutionality of the Gujarat  Act,  in  the
above light, must be answered in favour of the State.

28.   Coming specifically to the expression “building”  appearing  in  Entry
49 List II of the Seventh Schedule in view of the  settled  principles  that
would be applicable to find out the true and correct  meaning  of  the  said
expression it will be difficult to confine the  meaning  of  the  expression
“building” to a residential building as commonly understood or  a  structure
raised for the purpose of habitation.  In Government of Andhra  Pradesh  and
Others vs. Hindustan Machine Tools Ltd.[15]a tax on  a  building  housing  a
factory has been understood to be a tax on building and not on  the  factory
or its plant  and  machinery.   A  general  word  like  ‘building’  must  be
construed to reasonably extend to all ancillary and subsidiary  matters  and
the common parlance test adopted by the High Court to hold  the  meaning  of
levy of tax on building and machinery does not appear to  be  right  keeping
in mind the established and  accepted  principles  of  interpretation  of  a
constitutional provision or a Legislative Entry.  A dynamic, rather  than  a
pedantic view has to be preferred if the constitutional document is to  meet
the challenges  of  a  fast  developing  world  throwing  new  frontiers  of
challenge and an ever changing social order.

29.    The  regulatory  power  of  the  Corporations,   Municipalities   and
Panchyats in the matter of installation, location and operation  of  ‘Mobile
Towers’ even before the specific  incorporation  of  Mobile  Towers  in  the
Gujarat Act by the 2011 Amendment and such control under the Bombay  Act  at
all points of time would also be a valuable input  to  accord  a  reasonable
extension of such power and control by understanding the power  of  taxation
on ‘Mobile Towers’ to be vested in the State Legislature under Entry  49  of
List II of the Seventh Schedule.

30.   The measure of the levy,  though  may  not  be  determinative  of  the
nature of the tax, cannot also be altogether ignored in  the  light  of  the
views expressed by this Court in Goodricke  (supra).  Under  both  the  Acts
read with the relevant Rules, tax on Mobile Towers is levied  on  the  yield
from the land and building calculated in terms of the rateable value of  the
land and building.  Also the incidence of the tax is not on the use  of  the
plant and machinery in the Mobile Tower; rather it is  on  the  use  of  the
land or building, as may be, for purpose of the mobile tower.  That the  tax
is imposed on the “person engaged in  providing  telecommunication  services
through such mobile  towers”  (Section  145A  of  the  Gujarat  Act)  merely
indicates that it is the occupier  and  not   the  owner  of  the  land  and
building who is liable to pay the tax.  Such a liability to pay the  tax  by
the occupier instead of the owner is an accepted facet of  the  tax  payable
on land and building under Entry 49 List II of the Seventh Schedule.

31.   Viewed in the light of the above  discussion,  if  the  definition  of
“land” and “building” contained in the Gujarat Act is to be  understood,  we
do not find any reason as to why, though in common parlance and in  everyday
life, a mobile tower is certainly not a building, it would also cease to  be
a building for the purposes of Entry 49 List II so  as  to  deny  the  State
Legislature the power to levy a tax thereon.   Such  a  law  can  trace  its
source to the provisions Entry 49 List II of the  Seventh  Schedule  to  the
Constitution.

32.   Though several other decisions of this Court  and  also  of  different
High Courts have been placed before us we do not consider  it  necessary  to
refer to or to enter into any discussion of the propositions  laid  down  in
the said decisions as  the  views  expressed  in  all  the  aforesaid  cases
pertain  to  the  meaning  of  the  expressions  ‘land’  and  ‘building’  as
appearing in the definition clause of the statutes in question.
33.   We, therefore, set aside the  judgment  passed  by  the  Gujarat  High
Court and answer the appeals arising from  the  order  of  the  Bombay  High
Court; transferred cases and the writ petitions  accordingly.   However,  we
leave it open, so far as the cellular operators  in  the  Bombay  cases  are
concerned, to agitate the issue with regard to the  retrospective  operation
of  the  assessment/demand  of  tax  and  the  quantum  thereof  before  the
appropriate forum, if so advised.  Consequently, and in  the  light  of  the
above all  the  appeals,  writ  petitions  and  the  transferred  cases  are
disposed of.


                                              ……………….....................,J.
(RANJAN GOGOI)



                                              ……………….....................,J.
                                                          (PRAFULLA C. PANT)

NEW DELHI
DECEMBER 16, 2016.

-----------------------
[1]     (1990) 1 SCC 109 Para 67

[2]    AIR 1990 SC 781 Para 17
[3]    (2004) 10 SCC 201 Para 50
[4]    (2004) 10 SCC 201 Para 31
[5]    (2007) 7 SCC 242 Para 13
[6]    (1990) 1 SCC 12 Para 18
[7]   AIR 1962 SC 1563 Para 10
[8]    (1989) 3 SCC 698 Para 14
[9]    1964 (3) SCR 787
[10]   (1975) 2 SCC 175
[11]   (1995) 1 Supp SCC 707
[12]   AIR1965 SC 1561
[13]   AIR 1991 SC 686
[14]   1981 Supp SCC 87
[15]   AIR 1975 SC 2037 = (1975) 2 SCC 274

Whether the limit on withdrawal of cash from the funds deposited in bank accounts has no basis in law and violates Articles 14,19 and 21; Whether the implementation of the impugned notification(s) suffers from procedural and/or substantive unreasonableness and thereby violates Articles 14 and 19 and, if so, to what effect?

                                                                  REPORTABLE

                        IN THE SUPREME COURT OF INDIA

               CIVIL/CRIMINAL ORIGINAL/APPELLATE JURISDICTION

                      WRIT PETITION (CIVIL) No.906/2016

Vivek Narayan Sharma                               …Petitioner(s)

            Vs.

Union of India                                           Respondent(s)

                                    WITH
                   W.P.(C) Nos.908/2016,913/2016,916/2016,
        WP© D.No.37946/2016, W.P.(C) No.929/2016, W.P.(C)No.930/2016,
                  943/2016,W.P.(Crl.) No.162/2016, W.P.(C)
  No.951/2016,952/2016,953/2016,954/2016,958/2016,957/2016,T.P.(C)No.2018-
 2022/2016,W.P.(C)No.971/2016,972/2016, SLP© No.35356/2016,  T.P.(C)No.2030-
 2038/2016, W.P.(C)No.978/2016, W.P.(C)D.No.40114/2016,W.P.(C) No.944/2016,
               SLP©No.35805/2016,W.P.(C)No.996/2016,997/2016,
T.P.(C)No.1958-1967/2016   &    T.P.(C)No.1982-1996/2016,    W.P.(C)    Nos.
1006/2016,  1008/2016,  1009/2016,  1010/2016,  1011/2016  and  SLP(C)   No.
36757/2016

                                  O R D E R

      Writ Petitions are admitted.

      Issue notice on the Writ Petitions, special leave petitions and  other
applications. The respondents may file reply  affidavit  within  six  weeks.
Rejoinder, if any, within three weeks thereafter.

We have heard the learned counsel for the parties at  some  length.  In  our
opinion, the following important questions fall  for  our  consideration  in
this batch of petitions:

Whether the notification dated 8th November  2016  is  ultra  vires  Section
26(2) and Sections 7,17,23,24,29 and 42 of the Reserve Bank  of  India  Act,
1934;

Does the notification contravene the provisions of  Article  300(A)  of  the
Constitution;

Assuming that the notification has been validly  issued  under  the  Reserve
Bank of India Act, 1934 whether it is ultra vires Articles 14 and 19 of  the
Constitution;

Whether the limit on withdrawal of cash from the  funds  deposited  in  bank
accounts has no basis in law and violates Articles 14,19 and 21;

Whether the implementation of  the  impugned  notification(s)  suffers  from
procedural  and/or  substantive  unreasonableness   and   thereby   violates
Articles 14 and 19 and, if so, to what effect?

In the event that Section 26(2) is held to permit  demonetization,  does  it
suffer from excessive delegation of legislative power thereby  rendering  it
ultra vires the Constitution;

What is the scope of judicial review  in  matters  relating  to  fiscal  and
economic policy of the Government;

Whether  a  petition  by  a  political  party  on  the  issues   raised   is
maintainable under Article 32; and

Whether District Co-operative  Banks  have  been  discriminated  against  by
excluding them from accepting deposits and exchanging demonetized notes.



Keeping  in  view  the  general  public  importance  and  the  far  reaching
implications which the answers to the questions may  have,  we  consider  it
proper to direct that the matters be placed before the larger Bench of  five
Judges  for  an  authoritative  pronouncement.          The  Registry  shall
accordingly  place  the  papers  before  Hon’ble  the  Chief   Justice   for
constituting an appropriate Bench.

      We may now advert to the issues which are of  immediate  concern.  The
first issue is about the restriction  placed  on  the  District  Cooperative
Banks to accept deposits or exchange of  demonetized  currency  of  Rs.500/-
and Rs.1000/-. Two broad aspects have been presented before  us.  The  first
is about the complete exclusion  of  the  District  Cooperative  Banks  from
accepting deposits or exchanging demonetized notes. The second is about  the
avoidable financial stress on the  District  Cooperative  Banks  because  of
freezing  the  deposited  demonetized  notes  received   by   the   District
Cooperative Banks between 11th and 14th November 2016, which  is  stated  to
be    around    Rs.8000/-Crore    (Rupees     Eight     Thousand     Crore).


The first point  whether  the  decision  of  the  Authority  to  forbid  the
District  Cooperative  Banks  from   accepting   deposits   and   exchanging
demonetized notes, may require detailed hearing. It is only upon  acceptance
of challenge  to  that  decision,  that  the  bar  placed  on  the  District
Cooperative Banks can be lifted. We are not inclined to suspend that bar  as
an interim measure.  This is especially when the decision is the outcome  of
financial policy which the respondents claim to have adopted  on  the  basis
of experience.  In particular, an apprehension has been expressed about  the
possibility of  demonetized  notes  being  converted  or  exchanged  without
proper audit, control or supervision.  The District  Cooperative  Banks,  it
has been urged, are not directly under the control of the  Reserve  Bank  of
India but within the purview of NABARD. The dispensation provided by  NABARD
is, according to the Attorney General, not in  conformity  with  the  strict
regime provided under the provisions of Banking  Regulation  Act,  1949  and
the Reserve Bank of India Act, 1934.

      Reverting to the second aspect, of District  Cooperative  Banks  being
precluded from utilizing the demonetized notes deposited with  them  between
11th to 14th November 2016 (when it was so permitted by the Reserve bank  of
India), the learned Attorney  General  has  invited  our  attention  to  the
written instructions received  by  him  from  the  Under  Secretary  to  the
Government of India dated 14th December 2016.  The relevant extract  of  the
said letter reads thus:

    “In this regard, it is  to  inform  that  as  regards  the  deposits  of
Specified Bank Notes (SBNs) collected by  DCCBs,  the  RBI  has  recommended
that the SBNs collected by the DCCBs between 10th  and  14th  November  2016
may be exchanged with their linked currency chests after  a  100%  audit  of
the veracity of the KYC documents of the SBN depositing  customers  of  DCCB
is conducted by NABARD, the supervisor and to the extent  of  such  verified
SBNs only.  For SBNs deposited  by  Primary  Agricultural  Credit  Societies
(PACS) also, similar 100% audit of the KYC documents of the members  of  the
PACS should be conducted by NABARD and to the extent of such  verified  SBNs
only, exchange value will be given by the linked currency chest.  In  either
case, the linked currency chest will subject those  SBNs  to  usual  checks,
especially relating to finding out FICN.”

For that purpose, suitable Notification  can  be  issued  by  the  Competent
Authority within two days. We commend to the Competent Authority to  do  so.


Learned counsel for the District Cooperative Banks, however, submitted  that
the Reserve Bank of India must assure that the entire amount offered by  the
District Cooperative Banks for exchange after due verification in  the  form
of demonetized notes, will be duly replaced by commensurate amount of  legal
tender  notes   contemporaneously.   The   learned   Attorney   General   on
instructions submitted that the policy of replacement of legal tender  notes
as applicable to Public Sector Banks and other Banks will  be  applied  even
in the case of  District  Cooperative  Banks  for  exchange  of  demonetized
currency with the legal tender currency. We accept the  assurance  given  by
the learned Attorney General in this behalf.

      The  other  broad  point  was  about  extending  the  time  limit  for
exemption for use of demonetized currency notes of  Rs.500/-  and  Rs.1000/-
at specified counters as per  the  relevant  Notifications  issued  in  that
behalf by the Reserve Bank of India. It was  contended  that  the  exemption
period provided in the concerned notification is expiring.  Hence,  it  will
not be possible to deposit  the  demonetized  notes  at  specified  counters
thereafter, even  in  case  of  emergency  situation  like  hospitalization,
travel by Railway or Air etc. In our opinion, whether the  exemption  period
should be extended or  not  must  be  best  left  to  the  judgment  of  the
Government of the day with a hope that the  Government  will  be  responsive
and sensitive to the problems encountered by the  common  man.  Accordingly,
we decline to issue any interim direction to the Government  in  the  matter
of extending the period of exemption and leave it open to the Government  to
take appropriate decision in that behalf, as may be advised.

      The other serious grievance made  by  the  petitioners  is  about  the
denial of right to withdraw the prescribed amount of  Rs.24,000/-  per  week
per account holder, in spite of Notification issued by the Reserve  Bank  of
India permitting such withdrawal. It was submitted that  if  the  Government
has issued such Notification after  due  consideration,  it  is  obliged  to
ensure that its commitment made under the said Notification  is  implemented
without  any  exception.  The  ground  reality,  however,  contends  learned
counsel, is that the Banks are refusing to pay full  amount  of  Rs.24,000/-
per account holder per week on the  ground  of  non-availability  of  enough
volume of legal tender currency. According to the learned Attorney  General,
the Government has already made it amply clear that it would take around  50
days time to streamline the cash flow. That period is still  not  exhausted.
He submits that as of now the Reserve Bank of India has been able to  infuse
around Rs.5,00,000/-Crore (Five Lakh Crore) of the new  legal  tender  notes
in the form of Rs.500/- and Rs.2,000/-. That  is  almost  over  40%  of  the
amount of demonetized notes already deposited with the Banks.  Further,  the
Authorities are working to the best of their ability to  defuse  the  crisis
of cash flow situation by printing new notes. It is further  submitted  that
for the nature of decision taken by the Government -  to unearth  the  black
money or unaccounted money and to dry up the  terror  fund  and  defeat  the
attempt of circulation of large  scale  counterfeit   currency,  maintaining
complete secrecy of such a decision was imperative.  For  that  reason,  new
currency notes could not be printed well in advance.  He  submits  that  the
old demonetized notes will be replaced by new  legal  tender  notes  in  the
form of Rs.500/- and Rs.2000/- progressively in right  earnest.  Considering
the stand taken by the learned Attorney  General,  we  may  commend  to  the
Authorities to  fulfill  their  commitment  made  in  terms  of  the  stated
Notification permitting withdrawal of Rs.24,000/- per account holder of  the
Bank per week to the extent possible and review that  decision  periodically
and take necessary corrective measures in that behalf.

      In our opinion, besides  the  observations  made  hitherto,  no  other
direction can be given at this stage by way of an interim relief.

      That takes us to the Transfer Petitions filed by the  Union  of  India
for withdrawing all Writ Petitions/proceedings pending in the  various  High
Courts across the country and to  hear  those  cases  along  with  the  Writ
Petitions pending in this Court. In  our  opinion,  it  would  be  just  and
proper to withdraw all the Writ Petitions/proceedings pending  in  different
High Courts across the country and to be heard by this Court along with  the
Writ Petitions which are already pending  in  this  Court  raising  same  or
similar issues, to avoid multiplicity of hearing and  conflicting  decisions
on the same subject matter. Accordingly, we issue notice in  the  respective
Transfer Petitions and  by  way  of  interim  direction,  stay  the  further
proceedings of the Writ Petitions/proceedings in the concerned  High  Court.
                                             We further direct that  if  any
other Writ Petitions/proceedings are pending  in  any  High  Court,  further
hearing of those matters shall also remain stayed in terms  of  this  order.
                 We further direct that  no  other  Court  shall  entertain,
hear or decide any Writ Petition/proceedings on the issue or in relation  to
or arising from the decision of the Government of India  to  demonetize  the
old notes of Rs.500/-  and  Rs.1000/-,  as  the  entire  issue  in  relation
thereto  is  pending  consideration  before  this  Court  in   the   present
proceedings.

      We make it clear that petitioners before  the  High  Court(s)  or  any
other Court in India in respect of proceedings  already  instituted  on  the
subject matter under consideration  before  this  Court,  will  be  free  to
intervene in the Writ Petitions pending consideration before this  Court  on
the subject matter of demonetization of old currency notes of  Rs.500/-  and
Rs.1000/-, if so advised.

The Registry shall place the matter before the  Chief  Justice  for  further
orders.

                                  …………………………….CJI.


                                  ………………………………..J.
                                  (A.M.Khanwilkar)


                                  …………………………………J.
                                  (Dr.D.Y.Chandrachud)
      New Delhi,
        Dated: 16th December, 2016