( 1 ) THE petitioners in the above petitions axe the managements of Baldwin girls' High School; Baldwin Boys' High School, and Cluny Convent High school, who are running certain educational institutions in Bangalore city. They have questioned in these petitions the, constitutional validity of the levy of property tax on the buildings and lands used by them for educational purposes by the Corporation of the City pf Bangalore (hereinafter referred to as the Corporation) under the, City of Bangalore Municipal corporation Act, 1949 (hereinfter referred to as the Act ). It would appear that the said buildings and lands were exempt from taxation till the Act wap amended by Kar. Act III of 1969, with retrospective effect from April 1, 1966. Under S. 97 of the Act the Corporation is authorised to levy taxes on properties situated within the limits of the Corporation. S. 98 sets out the powers of control of the State Govt. in the matter of imposition of taxes by the Corporation. Sec. 99 provides that the property tax shall be levied on all lands and buidlings within the Corporation area subject to the limitations mentioned therein. S. 100 prescribes the method of assessment of property tax. S. 101 refers to certain lands and buildings which are generally exempt from the levy of property tax. Subject to, certain conditions mentioned in that section places of Public Worship, Choultries, places used for sheltering destitutes or animals, Orphanages, homes and schools for the Deaf and Dumb, ancient monuments, charitable hospitals. etc, are entitled to such exemption We are concerned in these cages with clauses (e1) and (e2) of S 101 which exempt the following buildings or lands from the property tax : "101 General Exemptions-fhe following buildings and lands shall be exempt from the property tax- ****** (el) buildings or lands exclusively used for student hostels which are not established or conducted for profit; (e2) buildings or lands exclusively used for educational institutions receiving grant in aid from the Government. " ( 2 ) THE buildings and lands used by the petitioners for student hostels are exempt from property tax under Clause (e1) as they are not run with any profit motive, But the buildings and lands used for educational purposes by the petitioners are, not exempt from property tax as they are not in receipt of grant-in-aid from the Government. ( 3 ) THE case of the petit ioners in these petitions is that since the petitioners have also been exclusively using the said buildings and lands for educational purposes and they have been lunning the institutions without any profit motive, there is no justification for denying exemption m respect of the said buildings and lands also It is contended that by confining the exemption to only those educational institutions which are in receipt of grant-in-aid from the Stale Govt. the Legislature has made a hostile discrimination against ihe petitioners, as the basis of classification of educational institutions into those which are in receipt of grant-in-aid and those which are not in receipt of the same is an irrationaj and unreasonable one which bears no just relation to the object sought to be achieved by the Act. It is argued that the object of granting exemption under S. 101 of the Act is to fulfil the obligation of the State to, render assistance to religious, charitable, educational, cultural and literary bodies engaged in work by which the public are generally benefited, the Legislature shoud have exempted from payment of property tax the buildings and lands exclusively used for educational purposes by all educational institutions, which are being run withqut any profit motive irrespective of the fact whe- their they aie in receipt of grant-in-aid from the State Govt. or hot. Such sub-classification within the class of educational institutions is, according to the petitioners, not sanctionedby Art. 14 of the Constitution. It is also contended that the levy of tax with retrospective effect i. e. from 1-4-1966 is also unreasonable. ( 4 ) THE petitioners have, therefore, prayed that the words "receiving grant-in-aid from the Government" appearing in Clause (e2) of S. 101 of the, Act should bo struck down as unconstitutional and that the Corporation should be directed to forbear from levying and collecting property tax in respect of the buildings and lands exclusively used by the petitioners for educational purposes. ( 5 ) THE petitions are resisted by the respondents-the State Govt. and the corporation. On behalf of the respondents it is urged that the petitioners have not established that there has been any hostile discrimination made against the petitioners and that the classification of educational institutions on the basis whether they are in receipt of grant-in-aid from the State govt. and the corporation. On behalf of the respondents it is urged that the petitioners have not established that there has been any hostile discrimination made against the petitioners and that the classification of educational institutions on the basis whether they are in receipt of grant-in-aid from the State govt. of not is a just and reasonable classification having regard to the nature of the tax and the object sought to be achieved by the law. It is contended that even though the law may not have been unconstitutional if exemption had been granted in the ca. ae of the buildings' and lands of all educational institutions, the fact that the exemption is confined by the impugned provision to those belonging to institutions receiving grant-in-aid does not make the law unconstitutional. It is urged that the Legislature has the, power to decide upon the persons or things who should be taxed or exempted from taxation having regard to the social purpose the taxing statute seeks to fulfil and the financial requirements of the State and the local authorities. It is further pleaded that those educational institutions which are in receipt of grant-in-aid are subject to greater control of the govt. and certain obligations such as observance of restrictions in the matter of. collection cf fees from the pupils which are not applicable to non- aided institutions The respondents seek to sustain the impugned provision on the, basis of Art 45 of the Constitution which imposes the duty of imparting free education to children on the State Government. and certain obligations such as observance of restrictions in the matter of. collection cf fees from the pupils which are not applicable to non- aided institutions The respondents seek to sustain the impugned provision on the, basis of Art 45 of the Constitution which imposes the duty of imparting free education to children on the State Government. ( 6 ) THE first contention urged on behalf of the petitioners is that the Act in so far as it grants exemption from payment of property tax in respect of properties which are used for educational purposes by educational institutions which are in receipt of gram -in-aid from the Govt is discriminatory and that there is no justification for denying the exemption in respept of properties used for educational purposes by educational institutions not receiving any grant-in-aid from the Govt It was urged on the basis of the several items of property set out in Sec. 101 of the Act which , enjoy the privilege of exemption from the levy of property tax that all properties belonging to religious, charitable, benevolent, scientific, literary and educational institutions which are being run without profit motive and not in a commercial way are entitled to exemption from property tax. Sri V. Krishna Murthy, learned Counsel for the petitioners, further submitted that the basis for granting exemption from tax being the purpose or use, to which the property in question was put there was hardly any justification for making a further sub-division amongst the educational institutions into those which were in receipt of grant-in-aid and those which did not receive such grants in order to deny the exeniption as it was an irrational classification. The petitioners contend that that there is no reasonable nexus between the classification of educational institutions as mentioned above and the object to be achieved by such classification. Emphasis was placed on the fact that it was the duty of a welfare State to assist all institutions which were engaged in the activity of spreading education and in particular institutions like those belonging to the petitioners which had no profit motive and which relied mainly on charitable endowments for their maintenance and upkeep. It was strenuously argued on behalf of the petitioners that the impugned provision violated Article 14 of the Constitution of India. It was strenuously argued on behalf of the petitioners that the impugned provision violated Article 14 of the Constitution of India. ( 7 ) IT is well settled that laws which provide for levy, assessment and collection of taxes should also conform to the provisions of Part III of the constitution of India and any such law which abridges any of the fundamental rights, is void. Art. 14 no doubt forbids class legislation but does not forbid classification. Often times, as observed by the Supreme Court in moopil Nair v. State of Kerla, AIR. 1961 SC. 552 absence of classification may itself lea,d tp inequity. In the said decision the Supreme Court observed in the context of a taxing statute that although a taxing statute was not wholly immune 'from attack on the ground that it infringed the equality clause in Art. 14, the Courts would not be concerned with the policy underlying a taxing statute, or whether a, particular tax could not have been imposed in a different way that the Court might think more lust and equitable. In Khandige sham Bhat v. Agricultural ITO, AIR. 1963 SC. 591 the Supreme Court has explained 'the manner in wnich the question of constitutionality of a taxing statute attacked on the ground that it was violative of Art. 14 should be considered by the Courts : "taxation law is not an exception to this doctrine, vide Purshottam govindji v. Desai ( 1955 (2) SCR 887 : AIR 1956 SC. 20 ) and Moopil nair v. State of Kerala ( 1961 (3) SCR. 77 : AIR 1961 SC. 552 ). But in the application of the principles the Courts in view of the complexity of fiscal adjustment of diverge elements, permit a larger discretion to the Legislature in the matter of classification so long it adheres to the fundamental principles underlying the said doctrine. The power of legislature to classify is of ' wide range and flexibility' so that it can adjust its system of taxation in fill proper and reasonable ways. " the above view is reiterated by the Supreme Court in several decisions rendered by it subsequently. ( 8 ) IN East India Tobacco Co. v. State of AP. , AIR. 1962 SC. " the above view is reiterated by the Supreme Court in several decisions rendered by it subsequently. ( 8 ) IN East India Tobacco Co. v. State of AP. , AIR. 1962 SC. 1733 the validity of a provision in the Madras General Sales Tax Art which exempted payment of sales tax on the turnover of country tobacco came up for consideration in the following circumstances: In the undivided State of Madras by a Govt. "notification dt. March 31, 1953, sale of unmanufactured tobacco was exempted from sales tax. After the Andhra State came into existence the act was amended by limiting the exemption to country tobacco (nattu tobacco) only. The result was that the sale of Virginia tobacco which enjoyed the exemption till then became liable to payment of sales tax. When the; validity of the Andhra amendment was challenged as being discriminatory by dealers in Virginia tobacco, the Supreme Court after taking note of the difference between the country tobacco (nattu tobacco) and Virginia tobacco in their taste, colour and texture in the process of growing, curing and grading the two types of tobacco, in the market facilities-both inland and foreign, they enjoyed, the variety of uses they were put to and also the class of customers that consumed them, upheld the classification of tobacco, into two classes and the exemption granted in the case of country tobacco. While doing so, the Supreme Court quoted with approval the following statement of the law in Willis on Constitutional Law: " A State does not have to tax every thing in order to tax some thing. It is allowed to pick and choose districts, objects, persons, methods and even ra,tes of taxation if it does so reasonably. . . . . The supreme Court has been practical and has permitted a very wide latitude in classification for taxation. " ( 9 ) THE Supreme Court also relied upon the enunciation made, by the. Supreme Co-urt of United States in Madden v. Kentucky, (1940) 308 US. 83=84 LEd. 590 that" in taxation even mote than in other fields Legislatures possess the- greatest freedom in classification. The burden is on the one attacking the legislative arrangement to negative every conceivable basis which might support it. " ( 10 ) IN Orient Weaving Mills v Union of India, AIR. 1963 SC. 83=84 LEd. 590 that" in taxation even mote than in other fields Legislatures possess the- greatest freedom in classification. The burden is on the one attacking the legislative arrangement to negative every conceivable basis which might support it. " ( 10 ) IN Orient Weaving Mills v Union of India, AIR. 1963 SC. 98 the Supreme Court upheld the exemption from payment of excise duty granted in respect of cotton fabrics produced on powerlooms owned by any Co-operative Society or owned by nor alloted to the members of the Society subject to the conditions viz: (1) that every member whp had been a manufacturer of cotton fabrics cm power looms hart been exempt from excise duty for three years immediately preceding the date of joining the Society; (2) that the total number of cotton power looms owned by the Co-operative Society or owned by or allotted to its members was not more than four times the number of members of the Society, and (3) that each member produced a certificate from the State Govt. that he had been a bona fide member of the Society The Supreme Court relird upon Art 43 of the Constitution of india which prescribed that the State should endeavour to promote cottage industries which were run on individual or co-operative basis in rural areas in upholding the said exemption and observed that the State had made, a valid classification between the goods produced in big establishments and similar" goods produced by small power loom weavers in the moffusil who were usually ignorant, illiterate and poor and suffered from handicaps to which the owners of big establishments were not subject. Venkataraman v State of Madras, AIR 1970 SC. 508 was a case in which the classification of jaggery into cane jaggerv and palm jaggery in order to give exemption from pavment of sales tax to palm jaggery was upheld having regard to the difference in the methods of their production, the class of consumers who used them and the prices which they fetched In Venugopala ravivarma Rajah v Union of India, AIR 1969 SC. 1094 and Jaipur Hosiery Mills v. State of Rajasthan, AIR 1971 9c. 1094 and Jaipur Hosiery Mills v. State of Rajasthan, AIR 1971 9c. 1330, the Supreme Court rpcognised that the Legislature had a larger discretion in the matter of classification in the case of taxing statutes sri V Krishna Murthy, however, relied upon the fallowing passage in Rottschaeffer on Constitutional Law at p 674 which reads as follows : "the establishment of tax exemptions is an important form of classification The classifications involved in creating tax exemptions must be reasonable to comply with the requirements not only of the equal protection clause of the Fourteenth Amendment but also with state constitutional provisions requiring uniformity of taxation," in order to understand clearly what the learned author meant by the above passage it has to be read along with another passage in the same book appearing at pages 669-669 which reads as follows : "the general principles governing the power of a State to classify for tax purposes have been applied in connection with practically every known form of tax The federal Supreme Court has seldom held in valid any classification made in connection with the levying of property taxes. It has sustained the levy of a heavier burden of taxation upon motor vehicles using the public highways than that levied upon other forms of property, and the imposition of a heavier tax upon oil, than upon other properly. The equal protection clause does- not prohibit the levy of a tax on ores which is not imposed upon similar- interests in quarries, forests and other forms of wasting. asset, nor even the imposition of a tax upon anthracite that is not levied upon bituminous coal. A statute providing for the assessment of one type of intangible at its actual value while other intangibles are assessed at their face value does not deny equal protection-even when both are subject to the same rate of tax. The decisions of the Supreme Court in this field have permitted a State Legislature to exercise an extremely wide discretion in classifying property for tax purposes so long as it refrained from clear and hostile discrimination against particular persons or classes. " ( 11 ) THE underlying principles of public policy govering exemptions from taxation are set out in American Jurisprudence (Vol. " ( 11 ) THE underlying principles of public policy govering exemptions from taxation are set out in American Jurisprudence (Vol. 51, page 509) as follows : "exemptions from taxation, when properly, ma1de must be determined in legislative discretion, which must not however be arbitrary; there must underlie its exercise spine principle of public policy that can support a presumption that the public interest will be subserved by the exemptions allowed. The grant of an exemption from taxation rests upon the theory that such exemption will benefit the body off the people and no,t upon any idea of lessening the burden of the individual ownors of property. " ( 12 ) IN Roberts and S. Co. v. Emmerson, 271 US. 50=70 L. Ed. 827 it was held that a person who challenged the validity of State taxation on the, ground that it violated the equal protection clause of the Federal Constitution could not rely on the oretical insqualities but should show that he himself was affected unfavourable by the discrimination of which he complained and that to meet the constitutional requirement of equality it was enough that a classification for purposes of taxation was reasonably founded upon or related to some permissible policy of taxation. ( 13 ) IN the above background let me examine the constitutionality of the impugned provision. In order to survive an attack b'ased on Art. 14 of the constitution a statute which makes a classification of persona or things must satisfy two conditions, namely, that the classification must be foundded on an-intelligible differentia which distinguishes persons or things that are grouped together from others left qut of the group and the differentia must have a rational relation tc the object sought to be achieved by the statute in question. In order to sustain the constitutionality of a statute the Courts may take into account matters, of common knowledge and the history of the limes. ( 14 ) IT is well known that the population of- India consists predominantly of persons who, are illiterate and that notwithstanding the efforts of successive governments for over a century nearly seventy per cent of Indians are illiterate even today. The large size of the population and the prevailing economic conditions have made it difficult to reach the goal of making all citizens literates. The large size of the population and the prevailing economic conditions have made it difficult to reach the goal of making all citizens literates. When the Governments-Central and Provincial found that it was not possible for them alone to tackle the problem of illiteracy, they sought the, assistance of other private institutions. At the same time many social reformers, religious missions, charitable institutions and local bodies like Gram Panchayats, Municipalities and Corporations, also started their own educational institutions on their own initiative. In Provinces like Bombay the system of grant-in-aid is in vogue for well over a, century. Under the; said system the State Governments have been giving financial assistance on a, large scale, to various privately qwned and managed educational institutions which are running schools and colleges. The Constitution also recognises that such a system of grant-in-aid has been in vogue fqr a long time by enacting Arts. 28 (3), 29 (2), 30 (2), and 337 of the, Constitution of India. Hence it is clear that the classification of the educational institutions into, aided and non-aidad insitutions is based on an intelligible differentia. ( 15 ) THE next question is whether the classification of the educational institutions as mentioned above made for the purpose of granting exemption from property tax under S. 101 of the Act bears a reasonable relation to the qbject to be achieved by the Act or the legislative, policy behind it. Arts. 45 and 12 of the Constitution which lay down the directive principles of State policy lead : ****** as observed by the Supreme Court in In re Kerala Education Bill 1957, AIR. 1958 SC. 956, one of the ways in which the State, can discharge its solemn obligation imposed on it by Art. 45 of the Constitution is by rendering ajd to educational institutions which are prepared to co-operate with the State govt. in its endeavour. The State Govt. has for the said purpose published grant-in-Aid Code incorporating the objects of the grants, the procerdure to be followed for obtaining grants, the conditions subject to which grants will be given and the quantum of the grants. The objects of the grants are maintenance of educational institutions and hostels, provision of school buildings, equipments etc. Under the Code which is now in force, grants are given only to those institutions which have been recognised by the State Govt. The objects of the grants are maintenance of educational institutions and hostels, provision of school buildings, equipments etc. Under the Code which is now in force, grants are given only to those institutions which have been recognised by the State Govt. The Code provides that no fees of any type shall be charged tp pupils in primary and secondary schools receiving grant-in-aid except in the, case, of repeaters. Even in the case of repeaters the fee structure is as follows: "77 (a ). Tuition shall be free in aide4 Secondary Schools upto and inclusive of Standard X provided hqwever failed students who are readmitted shall pay tuition fees at the rates prescribed below : standard VIII Rs. 4 p. m. for 10 months, standard IX Rs. 5 p. m. for 10 months, standard X Rs. 5-50 p. m. for 10 months, (b) In Standard XI a tuition fee of Rs. 6 p. m.-for ten months payable in monthly instalments from June to March shall be charged. " in some cases a grant equal to the loss in its fee income of an aided educational institution on account of award of fee concessions, scholarships carrying free-ships or half free-ships would also be paid to it by the State government. On the other hand non-aided institutions like the institutions of the petitioners are not bound by the above restrictions. The petitioners in WPs. 157 and 158 of 1972 have been charging fees for pupils at the following rates: 1966-67 Junior I to Std. III Rs. 21 p. m. , Stds. IV to VII Rs. 22 p. m. and stds. VIII to, XI Rs. 25 p m. 1968-70 All classes Rs. 25 p. m. 1971 All classes Rs. 30 p. m. 1972-73 All classes Rs. 35 p. m. The petitioner in Writ Petition No. 212 of 1972 has been charging- 1967-69 Std. I to IV Rs. 14 p. m. . . Std. V to X Rs. 18 p. m. 1969-70 Std. I to IV Rs. 15 p. m. . . Std. V to X Rs. 20 p. m. 1971-73 Std. I to IV Rs. 18 p. m. . . Std. V to X Rs. 22 p. m. 1973-74 Std. I to IV Rs. 20 p. m. . . Std. V to X Rs. 18 p. m. 1969-70 Std. I to IV Rs. 15 p. m. . . Std. V to X Rs. 20 p. m. 1971-73 Std. I to IV Rs. 18 p. m. . . Std. V to X Rs. 22 p. m. 1973-74 Std. I to IV Rs. 20 p. m. . . Std. V to X Rs. 25 p. m. It may be that the petitioners may not be making any profit inspite of the fees being charged at the rates mentioned above and that they are imparting high standard of education. But the rates of fees charged by them are certainly beyond reach of at least ninety per cent of the population of india. ( 16 ) THE object of giving grant-in-aid is to see that the financial burden of educational institutions which are, imparting education either free or at a cheaper rate, is lessened, and the, exemption from payment of property tax in the case of aided institutions is one of the ways in which their burden may be lessened. Dealing with the question of grant of exemption from taxation Willis in Constitutional Law observes: uof course, there is no reason fox the Govt. to tape its own property or agencies or the property or agencies of any of the branches of govt. , and private agencies of any of the branches of Govt. , and private agencies which are relieving the Govt. of some of its burdens probably ought to be relieved by exemptions from the burdens of taxation". ( 17 ) THE obligation to levy fees at lower rates is not the only condition to which aided institutions are subject. Under Art. 29 (2) no citizen shall be denied admission into any educational institution receiving aid out of state funds on ground only of religion, race, caste, language or any of them. Under Art. 337 an institution maintained for the benefit of Anglo indian Community and receiving aid from the State funds should make available a,t least forty per cent of the annual admissions to members of communities other than the Anglo Indian Community. As stated earlier if the Legislature had granted exemption from payment of property tax in respect of the properties of all educational institutions, such exemption may not have been unconstitutional. As stated earlier if the Legislature had granted exemption from payment of property tax in respect of the properties of all educational institutions, such exemption may not have been unconstitutional. But owing to the limited financial resources at the disposaj of the State, the Legislature has confined the exemption only to aided institutions by the impugned provision. By doing so the State Legislature has not transgressed article 14 of the Constitution of India. ( 18 ) IT is clear from the foregoing paragraphs that there is a reasonable relationship between the classification of educational institutions into aided and non-aided institutions and the legislative policy behind the granting of exemption from payment of property tax in respect of the buildings and lands exclusively used for educational purposes by the aided institutions which are providing educational facilities either free or at cheaper cost. It may also be mentioned here that,as the learned Advocate General contended, if no exemption is granted in favour of aided institutions, the state Govt. may have to increase the quantum of grant-in-aid payable to them which would ultimately turn out to be a futile exercise in accountancy. Clause (e2) of S. 101 of the Act satisfies the, tests laid down by the judicial decisions regarding valid classifications. It cannot, therefore, be declared as violative of Art. 14 ot the Constitution of India. The next question for consideration is whether by levying property tax with retrospective effect i. e. from 1-4-1966 the State Legislature has violated any of the provisions of the Constitution. It is not shown. by the petitioners that the tax is confiscatoiy in nature. By the amendment the legislature has given retrospective effect to the impugned provision only to the extent of about four years. The competence of the Legislature to levy tax with retrospective effect is recognised by the Supreme Court in rai Ramakrishna v. State of Biharkishan11. In that case the Supreme Court observed that when the Legislature was entitled to levy a particular tax, the fact that retrospective effect was given to it would not alter the character of the tax. It was also observed that the test of length of time covered by the retrospective operation cannot by itself necessarily be a, decisive test. In that case the Supreme Court observed that when the Legislature was entitled to levy a particular tax, the fact that retrospective effect was given to it would not alter the character of the tax. It was also observed that the test of length of time covered by the retrospective operation cannot by itself necessarily be a, decisive test. In the instant case no other ground which would make the tax unreasonable as established I. therefore, hold thaat There, is no substance in the second contention urged on behalf of the petitioners. Before concluding I record the undertaking given by Sri S. V. Subramanyam, learned Counsel for the Corporation, that the Corporation would waive the penalty of five per cent levied under S. 104 of the Act on the petitioners if the petitioners pay the arrears of taxes within one month from the date of this order. In the result, these petitions fail and they are dismissed. There shall however be no order as to costs. --- *** --- .