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2004 DIGILAW 211 (KER)

Sudhakaran v. State of Kerala

2004-05-27

K.K.DENESAN, N.K.SODHI

body2004
Judgment :- N.K. Sodhi, C.J. Whether the provisions of Section 5A of the Kerala Building Tax Act, 1975 (hereinafter referred to as ‘the Act’) levying a luxury tax of two thousand rupees annually on all residential buildings having a plinth area of 278.7 square meters or more and completed on or after April 01, 1999 are unconstitutional? This is the short question, which arises for consideration in this writ appeal directed against the judgment dated February 18, 2003 delivered by a learned Single Judge whereby the provision has been held to be constitutionally valid. 2. Since the issued involved is purely legal, it is not necessary to refer to the facts of the case. The learned counsel for the appellants has reiterated all the submissions made before the learned Single Judge but has laid more emphasis on three contentions. It is urged that the assessment of luxury tax on the basis of plinth area is illegal and that the cut off date of April 01, 1999 as fixed is arbitrary and that the classification of luxury buildings and non-luxury buildings is also arbitrary because there is no slab system and the same rate of tax is charged for all luxury buildings howsoever big they may be. 3. Section 5A of the Act which is under challenge is reproduced hereunder for facility of reference: “5A. Charge of luxury tax:- (1) Notwithstanding anything contained in this Act, there shall be charged a luxury tax of two thousand rupees annually on all residential buildings having a plinth area of 278.7 Square Meters or more and completed on or after the 1st day of April, 1999. (2) The luxury tax assessed under this Act shall be paid in advance on or before the 31st day of March every year.” According to the learned counsel for the appellant, the Legislature was not justified in levying luxury tax on residential buildings under the Act when it has enacted another legislation for the levy and collection of tax on luxuries namely- the Kerala Tax on Luxuries Act, 1976 (for short the 1976 Act). The argument is that luxury tax on residential buildings is levied under the Act whereas that tax on other luxuries is levied and collected under the 1976 Act, which is not permissible. The argument is that luxury tax on residential buildings is levied under the Act whereas that tax on other luxuries is levied and collected under the 1976 Act, which is not permissible. It is urged that tax on all luxuries should have been levied under one comprehensive legislation and that such a tax could not be levied on different items under different enactments. 4. The argument is devoid of merit and cannot be accepted. It is not in dispute that the State Legislature has the power to levy tax on luxuries under Entry 62 of List-II of the Seventh Schedule to the Constitution which reads as under: “62. Taxes on luxuries including taxes on entertainments, amusements, betting and gambling.” Under this Entry, the Legislature can levy taxes on luxuries. It does not restrict the Legislature to levy such a tax under one Statute only. Different luxuries can be brought to tax under one and the same Statute or under different enactments. So long as the Legislature has the power to levy such a tax under Entry 62, it may exercise that power by levying the tax under the same Statute or under different Statutes. The argument that the Legislature is bound to levy luxury tax on all luxuries under one comprehensive legislation cannot be accepted. The Act was enacted in the year 1975 with a view to levy a non-recurring tax on buildings. This tax was levied under Entry 49 of List-II of the Seventh Schedule, which gives power to the State Legislature to levy taxes on lands and buildings. The Legislature in its wisdom inserted Section 5A in the Act by Act 23 of 1999 with effect from 1-4-1999 and levied luxury tax of two thousand rupees annually on all residential buildings having a plinth area of 278.7 square metres or more and completed on or after April 01, 1999. There is nothing wrong in the Legislature levying luxury tax under Entry 62 and building tax under Entry 49 by the same enactment namely the Act because it has the power to levy both the taxes. Further, there is nothing wrong with the Legislature levying luxury tax on buildings by inserting Section 5A in the Act and levying tax on other luxuries by enacting the 1976 Act. Further, there is nothing wrong with the Legislature levying luxury tax on buildings by inserting Section 5A in the Act and levying tax on other luxuries by enacting the 1976 Act. The reason why luxury tax on residential buildings has been levied by inserting Section 5A in the Act and has not been clubbed with such a tax on other items under the 1976 Act is simple to comprehend. The Act was enacted to provide for the levy of one time building tax on every building and the revenue authorities had been entrusted with the duty to enforce the provisions thereof. When the Legislature decided to levy a luxury tax on residential buildings, it decided to insert Section 5A in the Act so that the revenue authorities which are already familiar with the enforcement of building tax would be able to enforce the luxury tax as well. The 1976 Act, on the other hand, is enforced by the officers of the commercial taxes department who are stationed in trade centers and towns and may not be familiar with residential buildings. It is for this reason that the Legislature in its wisdom inserted Section 5A in the Act and levied luxury tax on residential buildings. No fault can be found with the action of the Legislature in this regard. We have, therefore, no hesitation in rejecting the contention of the learned counsel for the appellant. 5. It was then contended that the levy of luxury tax on the basis of plinth area is illegal. It was strenuously urged that the word ‘luxury’ has not been defined in the Act and, therefore, the levy of luxury tax on the residential buildings having a plinth area of 278.7 square metres or more is clearly arbitrary and violative of Article 14 of the Constitution. It is true that the term ‘luxury’ has not been defined in the Act but that does not, in our opinion, invalidate the legislation. Whenever the Legislature enacts a Statute, it normally defines certain terms used therein assigning to them a specific meaning in the definition clause but it is not necessary that every word used in the statute has to be given a specific meaning. Whenever the Legislature enacts a Statute, it normally defines certain terms used therein assigning to them a specific meaning in the definition clause but it is not necessary that every word used in the statute has to be given a specific meaning. It is well settled rule of law that a word used in a statute if not defined therein has to be given its ordinary meaning as understood in common parlance or defined in the English dictionary. For the purpose of levying luxury tax on residential buildings, the Legislature in its wisdom did not think it necessary to define what ‘luxury’ means. The Legislature has classified all the residential buildings into two categories-(i) those with less than 278.7 square metres as plenth area and (ii) others having a plinth area of 278.7 square metres or more. The Legislature further treats the buildings with a plinth area of 278.7 square metres or more as ‘luxury buildings’ and has made them exigible to luxury tax. On the other hand, a building having a plinth area of less than 278.7 square metres is regarded as a necessity and the Legislature in its wisdom has kept such buildings out of the purview of luxury tax. When such is the scheme of the Act, there was hardly any need to define what luxury means for the purpose of levying luxury tax on residential buildings. The object of the Legislature appears to tax the luxury buildings and leave out those, which are a necessity for the common man. The word ‘luxury’ is a relative term and what may be a luxury for a poor man may be a necessity for another. The Legislature is the best Judge of the needs of the people and if it thinks that the buildings with a plinth area of less than 278.7 square metres is a necessity for the common man, the classification is reasonable and cannot be described as irrational or arbitrary so as to warrant interference by this Court. The total estimated collection of revenue from the levy of luxury tax in the year of introduction was twenty lakhs as stated in the annual budget. The rate of tax is rupees two thousand per building. The total estimated collection of revenue from the levy of luxury tax in the year of introduction was twenty lakhs as stated in the annual budget. The rate of tax is rupees two thousand per building. It, therefore, follows that the total number of buildings with a plinth area of 278.7 square metres or more expected to be completed in the year 1999 was only one thousand in the entire State. This clearly shows that the buildings with such a large area are very limited in the State. In the background of these statistics, the classification of the residential buildings on the basis of plinth area of less than 278.7 square metres and those with plinth area of 278.7 square metres or more is wholly justified. 6. It was emphatically contended that the assessment of luxury tax on the basis of plinth area is illegal. We are unable to agree with this contention. May be, there are other methods of levying the tax as well but it is not for the Court to decide which method is to be adopted as the basis for the levy. It is the Legislature which has to choose the method and if the same is reasonable, and not irrational, the Court cannot interfere. We have already observed that the assessment of luxury tax on the basis of plinth area is reasonable. In this view of the matter, no fault can be found with the method of levying luxury tax on the residential buildings. The judgment of the Supreme Court in State of Kerala v. Haji Kutty Naha, and others 1968 KLT 649 is totally on different facts and the decision was given in a different context where building tax was levied in proportion to the plinth area. The learned Single Judge has rightly observed that this judgment does not advance the case of the appellant and that there is no varying luxury tax based on the plinth area. As already observed, the plinth area of 278.7 square metres or more is the basis for classifying the residential building as luxury buildings and the buildings having a plinth area of less than 278.7 square metres are necessarily required for the common man as a shelter and, therefore, this is a reasonable classification for the purpose of levying luxury tax which cannot be faulted with. 7. 7. The next argument of the learned counsel for the appellant is that the Legislature having levied a building tax under Section 5 of the Act could not levy another tax on the same building describing it as a luxury tax. This argument too, is without merit and cannot be accepted. The building tax is levied under Entry 49 of the State List in the Seventh Schedule whereas luxury tax is levied under Item 62 of that List. Under Entry 62 of the State List, tax can bed levied on luxuries. To have a residential building with a plinth area of 278.7 square metres or more is also a luxury and it is open to the Legislature to levy a tax thereon. As already observed, the Legislature has the power to levy the luxury tax which it has done by inserting Section 5A in the Act. Entry 62 of the State List is wide enough to permit the Legislature to levy luxury tax on buildings, even though such buildings may be exigible to building tax under Entry 49. 8. The next contention of the learned counsel for the appellant is that the Act is not capable of being implemented as it does not mention as to who is liable to tax and whether the tax is on residence. It is argued that a building becomes luxury only for the person who occupies it and there may be cases where owners do not reside in the building and let out the same in which event the tax should be levied on the tenant and not on the owner. We are not impressed with this argument either. A reading of Section 5A of the Act makes it clear that luxury tax is levied on all the residential buildings. It is a tax on a building the plinth area of which is 278.7 square metres or more. The owner has to pay the tax and it is open to him to pass on the liability to the occupier or the tenant. In case the same is not paid, the authorities would be justified in recovering the same from the owner because it is the building, which is brought to tax. There would, thus, be no difficulty in enforcing the levy of luxury tax under Section 5A of the Act. 9. The next ground of attack is discrimination. In case the same is not paid, the authorities would be justified in recovering the same from the owner because it is the building, which is brought to tax. There would, thus, be no difficulty in enforcing the levy of luxury tax under Section 5A of the Act. 9. The next ground of attack is discrimination. It is argued that only residential buildings have been subjected to luxury tax and not the commercial buildings and, therefore, the levy is discriminatory and violative of Article 14 of the Constitution. This argument is also without merit and has to be rejected. The residential buildings and the commercial buildings are distinct and separate in every respect and they do not constitute one class of buildings. Levy of luxury tax on the residential buildings cannot, therefore, attract the violation of Article 14 merely because the commercial buildings have been let out. It was open to the Legislature to tax the commercial buildings as well but if it has chosen not to do so, the levy on the residential buildings cannot be said to be discriminatory. When the legislature chooses to tax an item, it is not necessary that it should levy a tax on each and every class of such an item. It is open to the Legislature to classify them. So long as the classification can rest upon differentia distinguishing the things grouped from those left out and where such differentia has reasonable relation to the object sought to be achieved, the Court will not strike it down as arbitrary. In the instant case, the Legislature chose to levy a luxury tax on the residential buildings and left out the commercial buildings. As already observed, two classes of buildings are different and distinct from each other and, therefore, the classification cannot be said to be arbitrary. 10. Another ground on which the levy of luxury tax on the residential buildings is sought to be challenged is the cut off date fixed in Section 5A of the Act. It may be recalled that luxury tax of two thousand of rupees annually is charged on all the residential buildings completed on or after the first day of April, 1999. It is argued that the residential buildings constructed prior to 1-4-1999 have been left out and, therefore, the levy is discriminatory. It may be recalled that luxury tax of two thousand of rupees annually is charged on all the residential buildings completed on or after the first day of April, 1999. It is argued that the residential buildings constructed prior to 1-4-1999 have been left out and, therefore, the levy is discriminatory. It is true that the Legislature has not levied luxury tax on the buildings which were completed before April 01, 1999 but this by itself is no ground to quash the levy. It was open to the Legislature to tax every such building irrespective of the date on which its construction was completed. However, it chose to levy luxury tax only on the new buildings, which were completed on or after 1-4-1999. This is a good classification, which does not violate Article 14 of the Constitution. 11. No other point was raised. 12. For the reasons recorded above, we hold that the provisions of Section 5A of the Act are constitutionally valid and do not violate Article 14. In the result, the writ appeal fails and the same stands dismissed.