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Attorney(S)
  • For the Appellant: M. Ratna Singh K. Prabhakaran M. Ramachandran C. J. Balakrishnan U. K. Ramakrishnan K. Shahul Hameed P. K. Shamsuddin K. A. Abdul Salam K. Mohammed Naha N. K. Job P. Mohammed M. A. Manhu Government Pleader
Judges
  • P. Govindan Nair, C.J
  • M.U Isaac, J.
Acts
  • Madras Hindu Religious and Charitable Endowments Act, 1959 by Section 92 of the Orissa Hindu Religious Endowments Act, 1951 by Section 63(4)
  • Sections 3 (g) and 46 of the Wakf Act, 1954 (for short the Act)
  • ARTICLE 14 CONSTITUTION OF INDIA
  • Wakf (Amendment) Act, 1969
  • Act. Though Section 3 (g)
  • Valuation Act, 1925.17.
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Citation Codes
Equivalent Citations
citation codes
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Attorney(S)
  • For the Appellant: M. Ratna Singh K. Prabhakaran M. Ramachandran C. J. Balakrishnan U. K. Ramakrishnan K. Shahul Hameed P. K. Shamsuddin K. A. Abdul Salam K. Mohammed Naha N. K. Job P. Mohammed M. A. Manhu Government Pleader
Judges
  • P. Govindan Nair, C.J
  • M.U Isaac, J.
Acts
  • Madras Hindu Religious and Charitable Endowments Act, 1959 by Section 92 of the Orissa Hindu Religious Endowments Act, 1951 by Section 63(4)
  • Sections 3 (g) and 46 of the Wakf Act, 1954 (for short the Act)
  • ARTICLE 14 CONSTITUTION OF INDIA
  • Wakf (Amendment) Act, 1969
  • Act. Though Section 3 (g)
  • Valuation Act, 1925.17.
See more information ...
Smart Summary

Structured Summary of the Opinion delivered by Govindan Nair, C.J.

Factual and Procedural Background

These appeals arise from a common judgment of P. Subramonian Poti, J. in multiple original petitions (listed by number in the opinion). The learned Judge had declared Sections 3(g) and 46 of the Wakf Act, 1954, as amended by the Wakf (Amendment) Act, 1969, to be violative of Article 14 of the Constitution.

For purposes of adjudication, the petitioners agreed to treat Original Petition No. 2412/71 as typical. In that petition two petitioners claimed interest in the "B schedule" properties under the will of Abdul Sathar Hajee Moosa Sait; the will had created a wakf (the Abdul Sathar Hajee Moosa Sait Dharmasthapanam) with A-schedule properties set apart for charitable and religious purposes and B-schedule properties (the dispute concerned the B schedule).

Before the learned Judge three principal contentions were raised: (1) that Section 46 infringed the right guaranteed by Article 26 of the Constitution; (2) that the obligation under Section 46 was in substance a tax rather than a fee; and (3) that Sections 3(g) and 46 (as amended) violated Article 14. The learned Judge rejected the first two contentions and the maintainability objection but accepted the Article 14 challenge, striking down Sections 3(g) and 46 as amended. The Kerala Wakf Board (first respondent below) appealed; the Central Government was the second respondent in the original petitions.

Legal Issues Presented

  1. Whether Section 46 of the Wakf Act (as amended) infringes the right guaranteed by Article 26 of the Constitution.
  2. Whether the obligation imposed by Section 46 (the contribution/fee) is in truth a tax rather than a fee.
  3. Whether Sections 3(g) and 46 of the Wakf Act, as amended by the Wakf (Amendment) Act, 1969, violate Article 14 of the Constitution by creating an unequal or discriminatory levy on wakfs.
  4. Whether the petitions were maintainable — i.e., whether the petitioners could be treated as aggrieved persons.

Arguments of the Parties

Petitioners' Arguments (as represented before the learned Judge)

  • Sections 3(g) and 46 as amended were violative of Article 14 because the amended definition of income and the method of computing the contribution made the levy fall unevenly and inequitably on wakfs in different situations (e.g., wakfs that cultivate agricultural land themselves versus those that lease it out; wakfs owning buildings with relatively low expenses versus agricultural wakfs with high cultivation costs).
  • Section 46 infringed Article 26 of the Constitution (religious freedom and management), a contention later rejected by the learned Judge.
  • The obligation called a "fee" under Section 46 was, in reality, a tax — another contention rejected by the learned Judge.
  • A procedural/contention: the petitioners alleged they were aggrieved persons; this challenge to maintainability was rejected by the learned Judge.

Appellants' / Respondent (Kerala Wakf Board / Advocate General) Arguments

  • The Advocate General for the appellants argued before the appellate Bench that Sections 3(g) and 46 as amended are not violative of Article 14 of the Constitution.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court in this Opinion
Ibrahim Hassam Sait v. Kerala Wakf Board (AIR 1964 Ker 310; 1964 Ker LT 367) Consideration of meaning of "total income" under Section 3(g) before amendment. The Court noted this earlier Kerala decision and its reliance on Navinchandra Mafatlal to interpret "income" as profit or gain actually received, and used that historical interpretation to explain how the 1969 amendment changed the definitional scheme.
Navinchandra Mafatlal v. Commissioner of Income Tax, Bombay City (AIR 1955 SC 58) "Income" in ordinary meaning embraces any profit or gain actually received; cultivation expenses deductible when computing income. The opinion relied on this Supreme Court formulation (via Ibrahim Hassam Sait) to show that prior to amendment "net income" meant profit/gain after deducting cultivation expenses, so the amendment's shift to a gross-based measure produced a materially different tax base.
Kunnathat Thathunni Moopil Nair v. State of Kerala (AIR 1961 SC 552) Authority cited by the learned Judge for principles about equality in tax/levy contexts. The learned Judge relied on this decision to support his conclusion of inequality; the appellate Bench noted the Judge's reliance but did not accept the resultant conclusion, distinguishing the present case on its facts and on subsequent authority.
East India Tobacco Co. v. State of Andhra Pradesh (AIR 1962 SC 1733) Decision referenced by the learned Judge in support of his view on discriminatory incidence. The appellate Bench observed the learned Judge relied on this case but treated it as fact-specific and not decisive here, preferring later authority.
State of Andhra Pradesh v. Nalla Raja Reddy (AIR 1967 SC 1458) Authority dealing with taxation/rating principles; noted to be peculiar to its facts. The Bench said this case is "peculiar to itself" and could not be invoked to invalidate the present levy because in the present Act there is a reasonable attempt to equalise burden.
New Manek Chowk Spg. and Wvg. Mills Co. Ltd. v. Municipal Corporation of Ahmedabad (AIR 1967 SC 1801) Principles concerning rating and that simple measures (e.g., floor area) may be arbitrary when rental values vary. The appellate Bench noted that such cases were decided on different principles pertaining to rating of buildings and could not be simply analogised to the present levy on wakf gross income.
Sugra Bibi v. Hazi Kummu Mia (AIR 1969 SC 884) Cited among authorities addressing equality or rating/tax principles. Referred to as one of the authorities relied upon by the learned Judge; the appellate Bench did not treat it as decisive and distinguished the contexts.
Commr., Hindu Religious Endowments, Madras v. Sri Lakshmindra Thirtha Swamiar of Sri Shirur Mutt (AIR 1954 SC 282) Observation that fees are ordinarily uniform and no account is taken of varying abilities of recipients to pay. The Bench relied on this principle to support the proposition that a uniform fee, without adjusting for differing abilities, is not necessarily a bad levy.
Khandige Sham Bhat & K. Krishna Bhatta v. Agricultural Income-tax Officer (AIR 1963 SC 591) Principle that equality and uniformity within each group prevent condemnation as discriminatory even if some within the group gain incidental advantage. Quoted by the Court to support the position that uniform treatment within a class is constitutionally acceptable even if fortuitous advantages arise for some members.
Twyford Tea Co. Ltd. v. The State of Kerala ((1970) 1 SCC 189 : AIR 1970 SC 1133) Majority held that law did not single out plantations for hostile treatment; differences in yield did not establish discrimination where uniform rate applied. The Court placed principal reliance on this decision as demonstrating that uniform levies may be constitutionally sustainable even where natural or incidental differences exist among taxpayers.
Patel Gordhandas Hargovindas v. The Municipal Commr., Ahmedabad (AIR 1963 SC 1742) On rating: tax on land/building assessed with reference to actual or potential productivity; annual/rateable value principles. The Court cited this decision when discussing the principles of rating and valuation but distinguished those rating concerns from the present gross-income based levy on wakfs.
State of Kerala v. Haji K. Haji K. Kutty Nahar (AIR 1969 SC 378) Authority dealing with rating/taxation principles in building valuation. Cited to show that rating cases are decided on specific considerations; the Court distinguished such principles from the impugned contribution provision.
Ratilal Panachand Gandhi v. State of Bombay (AIR 1954 SC 388) Illustrates that a contribution/levy may be related to gross receipts; example of prior acceptance of gross-base measure. Invoked to show on principle there is no objection to an impost related to gross income; used by the Bench to support validity of gross-based contribution.
D. Ramaraju v. State of A.P. ((1972) 1 SCC 421 : AIR 1972 SC 828) Upheld a uniform flat cess per acre where the levy had rational nexus with objects of the statute; flat uniform rate not necessarily violative of Article 14. The Court cited this decision to support that a uniform levy with a rational nexus to legislative purpose may be constitutionally valid despite differences in productive capacity.
M. Match Works v. Asst. Collector C.E. ((1974) 4 SCC 428 : AIR 1974 SC 497) Affirmed that "Bare equality of treatment regardless of the inequality of realities is neither justice nor homage to the constitutional principle"; discussed classification and judicial review limits. The trial Court quoted the headnote and used the decision to explain modern principles of classification and the narrow scope of judicial review; the Bench relied on this to justify upholding a uniform scheme where legislative policy and reasonable nexus exist.

Court's Reasoning and Analysis

The Court's analysis proceeded in distinct steps drawn from the text of the opinion:

  1. Textual change introduced by the 1969 amendment: The Bench began by identifying the substantive shift in the statutory vocabulary: prior to amendment Section 3(g) defined "net income" (interpreted in earlier cases to mean profit/gain actually received after deducting cultivation expenses); the amendment replaced that concept with "net annual income" defined effectively as gross income from all sources less only land revenue, cess, rates and taxes and excluding corpus donations (with income from such donations included). The Court emphasized that this was a material change in the fiscal base.
  2. Learned Judge's particular basis for invalidation: The opinion summarized the learned Judge's view that the levy under Section 46, being attached to gross receipts (as redefined), operated unevenly: wakfs that cultivated land themselves would report higher gross receipts but larger cultivation expenses (so their true "net" profit was lower), while wakfs that leased out land would have gross receipts more closely approximating net profit; similarly, building rent may involve little expense so gross ~ net. The Judge held this produced an arbitrary and uneven incidence, violating Article 14.
  3. Countervailing legal principles on classification and taxation/fee: The appellate Bench reviewed controlling principles from precedent:
    • Legislative classification for taxation/levies receives wide latitude; a State may pick and choose classifications reasonably (passage from Willis on Constitutional Law noted in the opinion).
    • Uniform fees are commonly imposed without accounting for varying abilities to pay; such uniformity is not per se unconstitutional (authority in Madras HRE v. Sri Lakshmindra Thirtha).
    • The burden of proving discrimination lies on the challenger; it is not enough to prove incidental inequality — one must show clear, hostile, or arbitrary discrimination (cited authorities and treatise passages reproduced in the opinion).
    • The Court distinguished rating cases (where valuation methods can be arbitrary because they ignore important value-determining criteria) from the present statutory design, holding those rating precedents were not strictly analogous.
  4. Application of precedent: The Bench placed primary reliance on the reasoning in Twyford Tea Co. (majority), D. Ramaraju and M. Match Works — decisions that sustain the constitutional validity of uniform levies where there is a rational nexus to the object of the statute and no proof of hostile discrimination. The Court treated the cases relied upon by the learned Judge as either fact-specific or governed by different principles (e.g., rating/valuation), and therefore not controlling in the present context.
  5. Conclusion of analysis: On the combined approach of the textual change, the nature and object of the Wakf Act (to raise funds for the Board's functions), and the jurisprudence permitting a wide legislative discretion in classification for levies/fees, the Court found no clear hostile discrimination or singling out of any wakf or class of wakfs. Any unequal incidence resulting from differences in how wakfs enjoy or manage their properties (and hence differences between gross receipts and net profits) was characterized as fortuitous rather than the product of invidious classification. The Court also noted that some control over inclusion/exclusion may lie with the wakf itself, which militates against a finding of unconstitutional discrimination.

Holding and Implications

Core Ruling: The judgment under appeal is set aside and the original petitions are dismissed.

Consequences and implications expressly stated in the opinion:

  • The appellate Court reversed the learned Judge's declaration that Sections 3(g) and 46 (as amended by the Wakf (Amendment) Act, 1969) were violative of Article 14; effectively the Court upheld the amended provisions against the challenge raised in the petitions.
  • The Court directed that the parties bear their respective costs.
  • The opinion explains that no broader or novel constitutional principle was announced beyond applying established authorities permitting a wide legislative discretion in classification for taxation/fees and requiring proof of hostile or arbitrary discrimination to invalidate a uniform levy; the decision views the alleged inequalities as fortuitous and thus not sufficient to strike down the provisions. The opinion does not purport to lay down a new general principle beyond that analytical framework of cases cited.

Note: This summary is strictly confined to the material and reasoning contained in the provided opinion. No facts, arguments or outcomes have been invented or inferred beyond the text of the judgment excerpt supplied.

Show full summary ...

    The Kerala Wakf Board v. The Union Of India And Others

    The Judgment of the Court was delivered by

    Govindan Nair, C.J:— These appeals arise from a common judgment of P. Subramonian Poti, J. in original petitions Nos. 2412/71, 4915/74, 3440/73, 5053/71, 4102, 4716, 3746, 5972, 4075, 4070, 1694, 4705 and 4129 of 1971, 1629/72 and 4420 of 1971 by which Sections 3 (g) and 46 of the Wakf Act, 1954 (for short the Act) as amended by the Wakf (Amendment) Act, 1969 have been declared to be violative of Article 14 of the Constitution of India.

    2. For the purpose of considering the questions raised, the petitioners before the learned Judge agreed to treat original petition No. 2412/71 as typical of the petitions and rested their arguments on the basis of the facts stated in the affidavits and the petition, in that case. There were two petitioners in that petition who were interested in the B schedule properties in the will executed by late Abdul Sathar Hajee Moosa Sait on 25-2-1099 (sic). Those properties formed the properties of the Dharmasthapanam described as the Abdul Sathar Hajee Moosa Sait Dharmasthapanam. The wakf created for charitable and religious purposes by the same testament had A schedule properties set apart for those purposes.

    3. Three main contentions were raised before the learned Judge two of which the learned Judge did not accept; and they were that Section 46 of the Act is an infringement of the right guaranteed by Article 26 of the Constituion, and that the obligation imposed by Section 46 called a fee was really a tax. An additional argument that the petitions were not maintainable as the petitioners could not be said to be aggrieved persons was also rejected by the learned Judge. But on the third main question whether Section 3 (g) and Section 46 of the Act as amended were violative of Article 14 of the Constitution, the contentions of the petitioners were accepted and the sections were struck down.

    4. These appeals are taken by the Kerala Wakf Board which was the first respondent in the original petitions. The second respondent in the petitions was the Central Government. The contention raised on behalf of the appellants before us by the Advocate General was that Section 3 (g) and Section 46 of the Act as amended by the amending Act are not violative of Article 14 of the Constitution.

    5. We shall extract Sections 3 (g) and 46 as they stood before the Act was amended by the Wakf (Amendment) Act, 1969 and as they are now after the Amendment.

    Before the Amendment After the Amendment “3. In this Act, unless the context otherwise requires.— “3. In this Act, unless the context otherwise requires.— (g) “net income” means the total income less any revenue, cess, rates and taxes payable to the Government or any local authority. (g) “Net annual income” in relation to a Wakf, means the gross income thereof from all sources in a year excluding only— (i) land revenue, cess, rates and taxes payable to the Government or any local authority; and

    (ii) donations given or offerings made with a specific direction that they shall form part of the corpus of the wakf; Provided that the interest or income, if any, accruing from such donations or offerings shall be taken into account in calculating the gross annual income;” “46. (1) The mutawalli of every wakf shall pay annually to the Board such contribution not exceeding six per cent of the net annual income of such of its property as is situate in the State as the Board may, subject to the sanction of the State Government from time to time determine: “46. (1) The mutawalli of every wakf shall pay annually to the Board such contribution not exceeding six per cent of the net annual income accruing in the State to the wakf as the Board may, subject to the sanction of the State Government, from time to time, determine: Provided that no such contribution shall be payable by the mutawalli of a wakf of which the net annual income does not exceed one hundred rupees. Provided that no such contribution shall be payable by the mutawalli of a wakf of which the net annual income does not exceed one hundred rupees. (2) The Board may in the case of any particular wakf reduce or remit such contribution for such time as it thinks fit. (2) The Board may in the case of any particular wakf reduce or remit such contribution for such time as it thinks fit. (3) The mutawalli of a wakf may realise the contributions payable by him under sub-section (1) from the various persons entitled to receive any pecuniary or other material benefits from the wakf, but the sum realisable from any one of such persons shall not exceed such amount as shall bear to the total contribution payable the same proportion as the value of the benefits receivable by such person bears to the entire net annual income of the wakf: (3) The mutawalli of a wakf may realise the contributions payable by him under sub-section (1) from the various persons entitled to receive any pecuniary or other material benefits from the wakf, but the sum realisable from any one of such persons shall not exceed such amount as shall bear to the total contribution payable the same proportion as the value of the benefits receivable by such person bears to the entire net annual income of the wakf: Provided that if there is any income of the wakf available in excess of the amount payable as dues under this Act, other than as the contribution under sub-section (1), and in excess of the amount payable under the wakf deed, the contribution shall be paid out of such income. Provided that if there is any income of the wakf available in excess of the amount payable as dues under this Act, other than as the contribution under subsection (1), and in excess of the amount payable under the wakf deed, the contribution shall be paid out of such income. (4) The contribution payable under subsection (1) in respect of a wakf shall, subject to the prior payment of any dues to the Government or any local authority or of any other statutory first charge on the wakf property or the income thereof, be a first charge on the income of the wakf and shall be recoverable, on a certificate issued by the Board after giving the mutawalli concerned an opportunity of being heard, as an arrear of land revenue. (4) The contribution payable under subsection (1) in respect of a wakf shall, subject to the prior payment of any dues to the Government or any local authority or of any other statutory first charge on the wakf property or the income thereof, be a first charge on the income of the wakf and shall be recoverable, on a certificate issued by the Board after giving the mutawalli concerned an opportunity of being heard, as an arrear of land revenue. (5) If a mutawalli realises the income of the wakf and refuses to pay or does not pay such contribution, he shall also be personally liable for such contribution which may be realised from his person or property in the manner aforesaid.” (5) If a mutawalli releases the income of the wakf and refuses to pay or does not pay such contribution, he shall also be personally liable for such contribution which may be realised from his person or property in the manner aforesaid.”

    6. This Court had to consider the meaning of the expression “the total income” in Section 3 (g) of the Act before it was amended in Ibrahim Hassam Sait v. Kerala Wakf Board, 1964 Ker LT 367 : (AIR 1964 Ker 310). The answer given was what was stated by the Supreme Court in Navinchandra Mafatlal, Bombay v. Commissioner of Income tax, Bombay City, AIR 1955 SC 58 that the word “income” in its ordinary, natural and grammatical meaning “embraces any profit or gain which is actually received.” It was therefore held by this court that cultivation expenses will have to be deducted in arriving at the “total income.” The amendments effected to Sections 3 (g) and 46 were clearly for the purpose of giving a different content to the definition of “net income” for the purpose of the Act. Though Section 3 (g) as amended defines “net annual income” and before the amendment, the definition was of “net income”, this change does not materially alter the situation. But the amended definition speaks of “gross income from all sources in an year' excluding only: (i) land revenue, cess, rates and taxes payable to the Government or any local authority; and (ii) donations given or offerings made with a specific direction that they shall form part of the corpus of the wakf; Provided that the interest or income, if any, accruing from such donations or offerings shall be taken into account in calculating the gross annual income;”. There can be little doubt that by the amendment, the “net annual income” has come to mean something entirely different from the “net income” as defined before the amendment. The ground on which the levy has been held to be violative of Article 14 by the learned Judge is that the impost fell unevenly and inequitably on the different wakfs. It was noticed that wakfs owning agricultural properties may either cultivate such properties themselves or give those properties on lease. In the former case the gross income of the wakfs concerned will be very much higher, than the rental income of wakfs that have leased out the properties and such rental income will also be the gross income and practically the “net income” in the sense of profits and gains. In the former case the fee under Section 46 is related to the gross income and in the latter to ‘net income’ understood as “profits and gains” and this is discriminatory. It was also suggested that in the cases of wakfs owning buildings and receiving rent income, the gross income will be the rent income and in such cases there will be little or no expenses for earning rent income and the gross income may practically be the ‘net income’ meaning “profits and gains.” But in the case of agricultural property cultivated by the wakfs a large amount will have to be expended for cultivation expenses and the gross income will not be anything like the ‘net income’ as understood above and it was suggested that this resulted in a levy which fell unevenly on wakfs dissimilarly situated which have been uniformly subjected to the same obligation. The learned Judge expressed himself thus:

    Therefore to take the gross receipts as deducted only by taxes and cess and the like as the basis for the levy of contribution would be to fix an arbitrary levy having differing incidence on different wakfs. In other words so long as what is taxed is not what ultimately comes into the hands of the owner as net income and the levy is not a percentage of such net income, the incidence of the levy varies from person to person.”

    7. Reliance has been placed by the learned Judge on the well known decisions in Kunnathat Thathunni Moopil Nair etc. v. State of Kerala, AIR 1961 SC 552; East India Tobacco Co. etc. v. State of Andhra Pradesh, AIR 1962 SC 1733. The State of Andhra Pradesh v. Nalla Raja Reddy, AIR 1967 SC 1458. New Manek Chowk Spy. and Wvg. Mills Co Ltd. etc. v. Municipal Corporation of the City of Ahmedabad, AIR 1967 SC 1801, and Sugra Bibi v. Hazi Kummu Mia, AIR 1969 SC 884.

    8. With great respect we are unable to agree with the view taken by the learned Judge. It is a well known principle that a uniform fee without taking into account the varying abilities of different recipients to pay, is not a bad levy. In the Commr., Hindu Religious Endowments, Madras v. Sri Lakshmindra Thirtha Swamiar of Sri Shirur Mutt, AIR 1954 SC 282, it was observed thus in paragraph 44 of the judgment.

    “Ordinarily, the fees are uniform and no account is taken of the varying abilities of different recipient to pay, vide Lutz on “Public Finance” P. 215.”

    9. In the matter of imposing tax a very wide latitude is permitted to the legislature and a flexibility in the matter of classification for the purpose of the imposition of tax which would not be countenanced in other matters; is also conceded. A well known passage from Willis on Constitutional Law, page 587, has been oft quoted by the Supreme Court in regard to the power of a State to tax. The passage reads thus:

    “A State does not have to tax everything in order to tax something. It is allowed to pick and choose districts, objects, persons, methods and even rates for taxation if it does so reasonably ………… The Supreme Court has been practical and has permitted a very wide latitude in classification for taxation.”

    10. Though a fee had to be reasonably related to the services rendered, subject to that the same principles are generally applicable in the matter of imposition of fee as well.

    11. No doubt that an impost by way of tax or fee is subject to Article 14 of the Constitution had been held in more than one case by the Supreme Court. We may refer to AIR 1961 SC 552. The inequality can arise, either due to lack of classification or due to classification which is not related to the objects sought to be achieved by the statute. In this case it is alleged that the inequality arises from lack of classification. The imposition of fee by Section 46 of the Act, it is contended, fell unevenly and inequitably on wakfs governed by the Act. Further, the wakfs were dissimilar in that their profits and gains varied but the impost was on the gross income which affected them differently. It it therefore argued that this is violative of Article 14 of the Constitution. In considering the validity of this argument one aspect that has to be borne in mind is that:

    “If there is equality and uniformity within each group, the law will not be condemned as discriminative, though due to some fortuitous circumstance arising out of a peculiar situation some included in a class get an Advantage over others, so long as they are not singled out for special treatment.”

    12. (See Khandige Sham Bhat and K. Krishna Bhatta v. Agricultural Income-tax Officer, Kasaragod, AIR 1963 SC 591).

    13. Another well accepted principle is that the burden of proving inequality is on the person contending that there has been discrimination and it is not merely inequality that has to be proved but clear and hostile discrimination. Rottschaefer said in his Constitutional Law at p. 668:

    “The decisions of the Supreme Court in this field have permitted a State Legislature to excise ‘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. The burden is on a person complaining of discrimination. The burden is proving not possible ‘inequality’ but hostile ‘unequal’ treatment. This is more so when uniform taxes are levied.”

    14. The above passage has been quoted with approval in the Twyford Tea Co. Ltd. v. The State of Kerala, (1970) 1 SCC 189 : AIR 1970 SC 1133.

    15. The decisions of the Supreme Court in AIR 1961 SC 552 and in Patel Gordhandas Hargovindas v. The Municipal Commr., Ahmedabad, AIR 1963 SC 1742 at p. 1747 related to the imposition of land tax and a rate imposed by the Municipal Corporation of Ahmedabad on vacant lands situate within the municipal limits respectively. In the earlier case it was observed:

    “Ordinarily a tax on land or land revenue is assessed on the actual or the potential productivity of the land sought to be taxed. In other words, the tax has reference to the income actually made, or which could have been made, with due diligence, and, therefore, is levied with due regard to the incidence of the taxation.”

    16. To the same effect is the statement in the latter case AIR 1963 SC 1742 at p. 1747:

    “It will thus be clear from the various statutes to which we have referred and the various books on rating in England that the rate always had the meaning of a tax on the annual value or rateable value of lands or buildings and this annual value or rateable value is arrived at by one of three modes, namely (i) actual rent fetched by land or building where it is actually let, (ii) where it is not let rent based on hypothetical tenancy, particularly in the case of buildings, and (iii) where either of these two modes is not available, by valuation based on capital value from which annual value has to be found by applying a suitable percentage which may not be the same for lands and buildings, and it was this position which was finally brought out in bold relief by the Rating and Valuation Act, 1925.”

    17. The decision in AIR 1961 SC 552 relied on by the learned Judge in the judgment under appeal and also that in AIR 1967 SC 1458 have been noticed by the Supreme Court in (1970) 1 SCC 189 : AIR 1970 SC 1133 and it was observed that the cases were peculiar to themselves and it was said with particular reference to Nallaraja Reddy's case, AIR 1967 SC 1458.

    “That case is peculiar to itself and cannot be called in aid since in this case there is a reasonable attempt to make the burden equal.”

    18. Referring to the decisions in AIR 1967 SC 1801 and the State of Kerala v. Haji K. Haji K. Kutty Nahar, AIR 1969 SC 378, their Lordships observed that the question was one of rating and that those cases were decided on different principles:

    The proposition laid down was that taking only the floor area of a building as the basis for determination of the tax was an arbitrary method when buildings must have different rental values depending upon the nature of the construction, the kind of building and the purpose for which they can be used. These were held vital considerations in the rating of buildings and could not be ignored. These cases were decided on different principles and no analogy can be found merely because equal tax was imposed in diverse conditions.”

    19. No decision has been cited before us which has laid down that a tax or a fee cannot be imposed on the gross income of a person or any other taxable entity. The enactments; The Madras Hindu Religious and Charitable Endowments Act, 1959 by Section 92 of the Orissa Hindu Religious Endowments Act, 1951 by Section 63(4) have imposed the fee on the basis of the gross income of the Religious and Charitable Trusts. On principle there can be no objection to an impost which is related to the gross income. In the decision in Ratilal Panachand Gandhi v. State of Bombay, AIR 1954 SC 388 the concerned Act had related the contribution to gross receipt.

    20. In (1970) 1 SCC 189 : AIR 1970 SC 1133 the majority judgment written by Hidayatullah, C.J concluded by stating:

    “19. Taking these principles into consideration we are satisfied that the law does not single out any particular plantation for hostile or unequal treatment. In fact it is nowhere proved in this case that tea has been discriminated against deliberately. As between different tea gardens, it is not possible to say that the difference in the yield is entirely due to natural circumstances and no other cause. It is, therefore, not possible to say that there is discrimination notwithstanding the uniform rate for each plantation based on the actual crop yielding area.”

    21. Shelat, J. who wrote the dissenting judgment took a different view on the facts and held: “The differences in the yield must, therefore, be attributed to the differences in the soil, situation, water supply, rainfall etc.” thus holding that the differences were due to natural circumstances, a view which was not accepted by the majority.

    22. The inequalities alleged because of some wakfs having to pay more out of their net income (meaning profits and gains) proportionately, than others, it appears to us, arise from circumstances which are fortuitous. Alleged inequalities arising from the nature of enjoyment of properties or even the nature of the properties owned by a wakf cannot be made a ground for supporting the contention that an impost such as a fee at a uniform rate on the gross income of wakfs taking into account the services rendered to each wakf is violative of Article 14 of the Constitution as we are not able to discern any clear hostile discrimination or the singling out of any wakf or any class of wakfs for special or peculiar treatment. The discrimination if any, as stated already, seems to arise put of fortuitous circumstances. The following passage is apposite:

    “The principle appears to be deducible from the decisions that discriminations due to fortuitous circumstances arising out of the peculiar situation in which one or some particular taxpayers find themselves are generally not invalid under requirements as to equality and uniformity in taxation, where it appears that such taxpayer or taxpayers are not singled out for special treatment and not taxed by a method which is not uniformly applied to other taxpayers of the same class………… (American Jurisprudence Vol. 51. S. 180, page 240).”

    23. It cannot also be said that the wakfs that are said to be adversely affected have no manner of control over its inclusion or exclusion from the alleged heavier levy:

    “Another principle relating to classification for tax purposes which has authority in its support is that where a classification is such that the individual taxpayer has some control over his inclusion or exclusion therefrom, it cannot be considered unconstitutionally discriminatory. Thus, a statute imposing corporate franchise taxes which, because of the method employed in valuing as per value stock, worked a difference in the amount of the tax as between corporations having the same amount of assets has been upheld on the theory that a corporation may choose for itself whether to bring itself within the operation of the asserted discrimination by deciding not to issue no-par shares………”

    (American Jurisprudence Vol. 51. S. 180, p. 241).

    24. The object of the Act is to collect funds for the work that the Board has to undertake in view of the statutory obligations cast on the Board by the Act and for those purposes fee can be levied and it is not contended that the fee levied is unreasonable. The contention that it amounts to a tax has been rejected by the learned Judge and the conclusion is not questioned before us. Apart from the decision in (1970) 1 SCC 189 : AIR 1970 SC 1133 a number of other decisions have taken the view which would support what we have stated above.

    25. Thus in D. Ramaraju v. State of A.P, (1972) 1 SCC 421 : AIR 1972 SC 828 it was observed:

    “Dr. Singhvi on behalf of the appellants has referred to the fact that there is flat and uniform rate of cess for each acre in respect of all lands in a division irrespective of the quality and productive capacity of the land. It is urged that a flat and uniform rate for all lands in a division results in inequality and is violative of Article 14. In this connection, we find that the material on record, to which reference has been made earlier, shows that the rate of cess prescribed for each division has a rational nexus with the object of the Act and is based on intelligible differentia. The object of the Act is to raise funds for the implementation of schemes to secure protection of the lands in the deltaic area from ravages of the floods. As the Act is designed to benefit the land in the divisions of the deltaic area, the levy of cess at uniform rate for each acre of the land in a division cannot be considered to offend the principle of equality. The floods strike equally all lands in the area and make no discrimination so far as the quality and productive capacity of those lands are concerned. In the circumstances it appears to be just and reasonable that each acre in a division should bear equal burden of the amount which is sought to be raised to fight the danger of floods and provide for an efficient system of drainage.”

    26. In a recent decision of the Supreme Court in M. Match Works v. Asst. Collector C.E, (1974) 4 SCC 428 : AIR 1974 SC 497 the question of classification has been discussed and the first headnote in the AIR correctly depicts the dicta laid down by the decisions in this regard. We shall extract it:

    “Bare equality of treatment regardless of the inequality of realities is neither justice nor homage to the constitutional principle.

    27. Another proposition which is equally settled is that merely because there is room for classification it does not follow that legislation without classification is always unconstitutional. The Court cannot strike down a law because it has not made the classification which commends to the Court as proper. Nor can the legislative power be said to have been unconstitutionally exercised because within the class a sub-classification was reasonable but has not been made. The modern State, in exercising its sovereign power of taxation, has to deal with complex factors relating to the objects to be taxed, the quantum to be levied, the conditions subject to which the levy has to be made, the social and economic policies which the tax is designed to subserve, and what not. From the judicial inspection tower the Court may only search for arbitrary and irrational classification and its obverse namely, capricious uniformity of treatment where a crying dissimilarity exists in reality. Unconstitutionality and not unwisdom of a legislation is the narrow area of judicial review.”

    28. We consider that the Act, the provisions therein the purposes for which the Board had been created, the functions that the Board will have to discharge and the purposes for which the fee has been levied and the manner in which it has been levied by gearing it to the gross income of the wakf have all to be viewed not on the basis of the principles laid down by the Supreme Court in AIR 1961 SC 552. AIR 1968 SC 1458 : AIR 1967 SC 1801 and AIR 1969 SC 378 relied on by the learned Judge in dealing with the original petitions, but in the light of the pronouncement of the Supreme Court in (1970) 1 SCC 189 : AIR 1970 SC 1133 : (1972) 1 SCC 421 : AIR 1972 SC 828 and in (1974) 4 SCC 428 : AIR 1974 SC 497 we are unable to discern any hostile discrimination in imposing a uniform rate on the gross income of the wakfs coming under the Act. With great respect we are unable to agree with the view taken in the judgment under appeal. We set aside the judgment under appeal and dismiss the original petitions. We direct the parties to bear their respective costs.

    29. Order accordingly.

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    The Kerala Wakf Board v. The Union Of India And Others
    (Jul 25, 1974)