P L D 1962 (W (PLP)

ORTCHESON, J.

The facts of this case are as under:-- On the 1st of October 1929 a Notification, No. 30243, was issued by the then Punjab Government In the Depart ment of Local Self-Government, intimating that in pursuance of the provisions of subsection (7) of section 31 of the Punjab District Boards Act, 1883, the District Board, Mianwali, had, with the sanction of the Governor-General-in-Council, imposed a haisiyat tax within the area subject to its authority, to come into force on the 1st of January 1930. The tax was to be imposed on all persons subject to the authority of the said District Board and was to be levied at the rates shown in the attached Schedule in accordance with rules made by the Local Government with reference to the income of the person from whom it was leviable. The notification contained three provisos, only one of which is relevant for the purposes of this case, namely, the third, which exempted Government servants resident in the area from payment of the tax.

2. It may here be mentioned that by a clarical error the District Board was referred to in paragraph 1 of the notification as Sialkot Instead of Mianwali, the error being, however, subsequently corrected by a separate Notification No. 37133, dated the 19th of November 1929.

3. Later, the Mianwali District Board, envious of the Income derived from the tax imposed on Government servants in neighbouring and richer districts, such as Shahpur, passed a Resolution No. 29-F (i) dated the 23rd of April 1937, to the effect that the rules be amended in the District Board meeting so as to remove the "defect" of the exemption of Government servants from the imposition of haisiyat tax. Objections to the proposal were Invited, but none was received and the resolution was approved. It appears that the District Board considered that the appropriate procedure for dealing with the matter was to take action under section 30 of the District Boards Act, and a letter, Exh. D. 5, was sent by the Chairman to the Deputy Commissioner, Mianwall, asking him to move the Punjab Government to accord sanction under the above section to the proposal. The Punjab Government, however, was of a different opinion, and issued a notification, Exh. P. 9, bearing number 3507-L. G-37/38170, dated the 8th of November 1937, which runs:- "In exercise of the powers conferred by section 74 of the Punjab District Boards Act, 1883, the Governor of the Punjab is pleased to cancel proviso (3) to paragraph 2 of the specification of the tax notified with- Punjab Government Notification No. 30243 (L. S.-G-Bds.), dated 1st October, 1929, as amended by Punjab Government Notification No. 37133, dated the 19th November, 1929, exempting Government servants from the payment of haisiyat tax Imposed by the District Board of Mianwali."

4. On the 23rd of November 1954 more than one thousand employees of the North Western Railway posted at Mari Indus and Kundian Stations within the district of Mianwali filed a suit (No. 292 of 1954) in the Court of the Senior Civil Judge, Mianwali, against the District Board for the Issue of a permanent injunction restraining It from realising the tax in dispute, the imposition of which was challenged on the following grounds :- (1) That no resolution has been passed by the defendant nor any notification issued as required by section 31 of the District Boards Act. (2) That as the tax had not been imposed at a fiat rate, it was In the nature of a tax on income. (3) That the plaintiffs, as Government servants, were exempt from the imposition of the tax. (4) That the haisiyat tax Officer appointed by the defendant to snake the assessment did not possess the necessary qualifications. (5) That the tax was otherwise also invalid and imposed without authority.

5. The learned trial Court repelled the above contentions and held that the tax was validly imposed and the exemption in favour of Government servants validly withdrawn by the Provincial Government under section 74 of the District Boards Act.

6. Against the above order of the trial Court, dated the 31st of August 1955, the plaintiffs filed an appeal in the Court of the District Judge, Mianwali, who accepted it by order dated the 17th of December 1955. In his opinion the cancellation of the exemption in favour of Government servants amounted to a fresh imposition of the tax. With regard to the power of exemption under section 74 of the District Boards Act, he remarks. "It is nobody's case that a tax in the nature of an Income-tax can be imposed by the Provincial Legislature and, therefore, the tax of the nature in question cannot now be Imposed by the District Board even with the sanction of the Governor-General. What it can do is to retain a tax already lawfully imposed and levied. Under section 74, the Provincial Government has the authority to remit or to reduce any rate or tax which has been Imposed under the Act which is in force, because before the word `Act' the word `this' occurs. Similarly, it can exempt any person or class of persons or any description of property, wholly or in part, from liability to pay any such tax or rate, and similarly it can cancel any such remission, reduction or exemption. The exemption in question had not been allowed under this Act, but it had been allowed by the Governor-General under the previous Act. If the Provincial Government cannot impose a new tax of this kind, it certainly cannot cancel the exemption, because ultimately it will have the effect of the imposition of a tax. I am, therefore, quite clear in my mind that section 74 has no application whatsoever in the present particular instance." The judgment and decree of the trial Court were accordingly set aside and the suit decreed with costs throughout.

7. Against the above order of the learned District Judge the defendant filed a further second appeal in this Court. It came up for hearing before our learned brother Sajjad Ahmad Jan who, by his order dated the 30th of May 1961, referred it to a Division Bench on the ground that some important constitutional and legal questions were involved, which required a more authoritative decision. He also issued notice to the Advocate-General as the case was one involving the interpretation of section 142-A of the Government of India Act, 1935. The specific points referred to us by the learned Judge are- (1) Whether the imposition of haisiyat tax on the Government servants of Mianwali made by the Governor of the former Punjab by notification (Exh. P. 9) is by way of a Provincial law and is saved by section 142-A of the Government of India Act, 1935 and how far is the tax in the case of each individual assessee valid beyond the amount of Rs. 50 permitted by subsection (2) of the above section ? (2) Whether the action of the District Board, Mianwall, and the Provincial Government in subjecting the respondents to haisiyat tax amounted to the imposition of a fresh tax or was only withdrawal of the exemption originally made in their favour In the year 1929 ? (3) If the case be taken to be one of withdrawal of an exemption under section 74 of the Punjab District Boards Act, was it competently done ? In this connection the learned Judge remarks "As already stated, the haisiyat tax in Mianwali was imposed in 1929 by the District Board with the concurrence of the Governor-General under the old section 30 of the Punjab District Boards Act before its modification and adaptation by the Adaptation of Laws Order, 1937. The exemption made in favour of the respondents had also been made the concurrence of the Governor-General. Could the exemption, therefore, which was made by the District Board with the concurrence of the Governor-General, be withdrawn by the Provincial Government without such concurrence under section 74 of the Punjab District Boards Act ? It is well settled that an authority can undo an Act if it has the power to do it. In my view, section 74 of the Punjab District Boards Act was not validly invoked in this case, and where this section may be considered to give powers to the Provincial Government to cancel exemptions not made by itself, but by some higher authority, as in this case, by the Governor-General, the vires of the section to that extent is a matter for serious argument."

8. For a correct understanding of the legal position with regard to the first of the points referred to us, it is necessary to cite the relevant provisions of law. Section 30 of the Punjab District Boards Act (XX of 1883), which deals with the power of District Boards to impose taxes, as it stood in 1929 ran- "A District Board may impose- (1) with the previous sanction of the Local Government any tax scheduled as exempted from the provisions of clause (a) of subsection (3) of section 80-A of the Government of India Act by rules under the said Act or a tax on the holder of any office under the Government of India, the Local Government or a local authority; Provided that the Local Government may empower any District Board to impose without such sanction one or more of such taxes subject to such limitation as it may prescribe ; (2) With the previous sanction of the Governor-General-in Council any other tax: Provided that no tax imposed under this section shall be Imposed in respect of any property subject to the local rate." It is common ground between the parties that haisiyat tax is not one scheduled as exempted from the provisions of clause (a) of subsection (3) of section 80-A of the Government of India Act. The previous sanction of the Governor-General-in-Council was, therefore, necessary for its Imposition, and was duly obtained. In this connection it is particularly to be noted that with the previous sanction of the Governor-General any tax could be imposed, even a tax on income, and though it was held in District Board, Sialkot v. Sultan Muhammad Khan (A I R 1928 Lah. 53) that a tax which is In essence a second income-tax cannot be imposed without the sanction of the Governor-General-in-Council, it is implied that when that sanction has been obtained no objection to the validity of the tax can be raised.

9. A very important change in the legislative powers of the Local (later the Provincial) Government was introduced by the Government of India Act of 1935. Section 100 of the said Act defined the respective spheres of the Federal and Provincial Legislatures by reference to three lists in the Seventh Schedule, of which Lists I and II gave exclusive power to the Federal and Provincial Legislatures respectively In respect of the matters enumerated therein, while with respect to matters enumerated In List III both Legislatures were given concurrent powers. The power to promulgate a tax on income (other than agricultural income) vested exclusively in the Federal Legislature, and it would appear that the necessity of rules to clarify the position with respect, Inter alia, to taxes on professions, trades, callings or employments was felt. The result was the passing of the India and Burma (Miscellaneous Amendments) Act, 1940, of which section 2 is relevant to this case. The section in question introduced a new section, 142-A, into the Government of India Act, 1935, which runs- "142-A.-(1) Notwithstanding anything in section one hundred of this Act, no Provincial law relating to taxes for the benefit of a Province or of a municipality, district board, local board or other local authority therein in respect of professions, trades callings or employments shall be invalid on the ground that it relates to a tax on income. (2) the total amount payable in respect of any one person to the Province or to any one municipality, district board, local board, or other local authority in the Province by way of taxes on professions, trades, callings and employments shall not, after the thirty-first day of March nineteen hundred and thirty nine, exceed fifty rupees per annum: Provided that, if the financial year ending with that date there was in force in the case of any Province or any such municipality, board or authority a tax on professions, trades, callings or employments the rate, or the maximum rate, of which exceeded fifty rupees per annum, the preceding provisions of this subsection shall, unless for the time being provision to the contrary is made by a law of the Federal Legislature, have effect in relation to that Province, municipality, board or authority as if for the reference to fifty rupees per annum there were substituted a reference to that rate or maximum rate, or such lower rate, if any, (being a rate greater than fifty rupees per annum) as may for the time being be fixed by a law of the Federal Legislature and any law of the Federal Legislature made for any of the purposes of this proviso may be made either generally or in relation to any specified Provinces, municipalities, boards or authorities. (3) The fact that the Provincial Legislature has power to make v laws as aforesaid with respect to taxes on professions, trades, callings and employments shall not be construed as limiting, in relation to professions, trades, callings and employments, the generality of the entry in the Federal Legislative List relating to taxes on income." It is thus clear that even if a haisiyat tax was levied on the income of the persons assessed, the tax was not thereby rendered invalid, while in the case of such a tax imposed before the passing of the Government of India Act the new limit of rupees fifty would not apply. It may, however, be added that the Professions Tax Limitation Act (XX of 1941) made the fifty rupees limit applicable even to such taxes.

10. Our answer to the first question referred to us by our learned brother, therefore, is that with the consent of the Governor-General the District Board, Mianwali was fully competent to impose the tax in dispute, and that subsection (i) of section 142-A of the Government of India Act, 1935, introduced by the India and Burma (Miscellaneous Amendments) Act, 1940, specifically saved any tax in respect of professions, trades, callings A or employments from attack on the ground that it relates to a taxi on income, but that by the operation of the Professions Tax Limitation Act, 1941, the tax is Invalid beyond the amount oil Rs.

50. We may add that according to Mr. Anwar the latter point is only of academic interest, since none of the plaintiffs earns an income exceeding Ra. 5,000 per annum, the tax on which is Rs. 35.

11. On the second point, whether the action of the District Board, Mianwali, and the Provincial Government in subjecting the respondents to haisiyat tax amounts to the imposition of afresh tax or was only a withdrawal of the exemption originally made in their favour in the year 1929, our answer is that it was the latter. Section 74 of the District Boards Act, as it stood at the material time, runs- "The Local Government may, by notification, remit or reduce any rate or tax imposed under this Act or exempt any person or class of persons, or any description of property, wholly or in any part from liability to any such rate or tax, and cancel any such remission, reduction or exemption." The notification, Exh. P. 9, by which proviso (3) to paragraph 2 of the notification Exh. P. 5 was cancelled has been cited in paragraph 3 above, and the wording clearly shows that the action was, or purported to be, taken under section 74 of the District Boards Act.

12. The third question referred to us by our learned brother, namely, whether the withdrawal of the exemption was valid, is clearly based on the underlying assumption that the Governor-General sanctioned not only the imposition of the tax but also the exemption of Government servants from its scope, but with great respect, we do not consider such an assumption to be justified. In this connection ft will be of advantage to examine the steps leading up to the imposition of the tax in dispute by the Mianwali District Board.

13. On the Ist of September 1928 a letter No. 25292 (L. S. G-Bds) Exh. D. 2 was issued by the Secretary to Government, Punjab, Transferred Departments, to all Deputy Commissioners in the Punjab, informing them that the Government of India had intimated their readiness to sanction the imposition of haisiyat taxes by district boards at the rates shown in the schedule to the enclosed specification. It was further stated: I am, therefore, to request you to suggest to the district board of your district the desirability of submitting, after complying with the procedure laid down in section 31 of the Punjab District Boards Act, 1883, proposals for the imposition of a tax in accordance with the specification. It will be open to the district board to propose to exclude other sources of income besides those referred to in paragraph 2 of the specification; but in other respects its proposals should be in strict conformity with the specification." It is important to note that in the specification no provision was made for the exemption of Government servants, only the present provisos (1) and (2) in Exh. P. 5 being included.

14. In reply to the above letter the Deputy Commissioner, Mianwali, addressed letter No. 33-D.B. Mianwali, dated the 31st of March 1929, to the Commissioner, Rawalpindi Division, forwarding a copy of resolution No. 19 passed by the District Board, Mianwali, at its meeting held on the 27th of September 1928, proposing to impose a haisiyat tax in the form suggested by Government. After stating in paragraph 2 that the formality required by section 31 of the District Boards Act had been complied with, the Commissioner was informed vide para graph 3: "The District Board has resolved to exempt Government servants resident in the area subject to its authority from the payment of the proposed tax."

15. It will be seen from the above that the proposal to exempt Government servants from the operation of the tax was not an integral part of the Provincial Government's scheme, but was a feature introduced by the Mianwali District Board on its own initiative. It is also evident that the example set by this particular District Board was not followed by others. Exh. D. 4, a copy of resolution No. 29-F (i) passed by the District Board, Mianwali, at its meeting held on the 23rd of April 1937, runs- "Government servants residing within the D. B. area have been exempted from the imposition of haisiyat tax under the existing rules. It is a fact that no such exemption exists in Shahpur, a much richer district, and other adjoining districts. It Is proposed that the rules may be amended in the D. B. meeting so as to remove this defect. Additional revenue of at least Rs. 10,000 Is expected from this source without enhancing expenditure." The importance of the words italicised is that they show that the Governor-General must have sanctioned the imposition of the tax in Shahpur and other districts, although in their case Government servants were not exempted from its operation. This being so, it is, in our opinion, difficult to argue that if the proposal submitted on behalf of the District Board, Mianwali, had not contained the said exemption, the Governor-General would not have sanctioned the imposition of the tax.

16. In paragraph 11 above we have reproduced section 74 of the District Boards Act as it stood at the material time, and a perusal of it shows that even before the passing of the Government of India Act, 1935, the exemption of any person or class of persons from the operation of the haisiyat tax did not require the previous sanction of the Governor-General. The Provincial Government was therefore fully competent to cancel any such exemption without reference to the Governor-General or any other authority. Our learned brother was of the view that the exemption in favour of the Government servants respondents had been given with the concurrence of the Governor-General and could, therefore, only be withdrawn by the Provincial Government with such concurrence but, as we have tried to show, It is not established that the Governor-General specifically concurred In the exemption of Government servants, and the mere fact that proviso (3) to Exh. P. 5 was included in the proposal made does not mean that the attention of the Governor-General was ever directed to this aspect of the case. Moreover, there is an Initial presumption that official acts are correctly performed, and the onus of showing that the withdrawal of the exemption by the Provincial Government was invalid lay heavily on the respondents, who have failed to discharge it.

17. Dr. Abdur Rahim half-heartedly argued that the notification, Exh. P. 9, is Invalid on the ground that the matter is riot shown to have received the personal attention of the Governor, but he was unable to satisfy us that under the Rules of Business drawn up by the then Punjab Government cases of this kind had to be placed before the Governor himself, and the opening words of subsection (1) of section 49 of the Government of India Act, 1935, are- "The executive authority of a Province shall be exercised by the Governor, either directly or through officers subordinate to him."

18. Dr. Abdur Rahim's further argument that the matter in dispute was one for the consideration of the Legislature and not of the Executive is also without force. Apart from the fact that section 74 of the District Boards Act delegated to the Provincial Government the power of exemption, subsection (2) of section 49 a of the Government of India Act laid down that subject to the provisions of the Act, the executive authority of each Province extended to the matters with respect to which the legislature of the Province had power to make laws.

19. Dr. Abdur Rahim further argued that section 142-A of the Government of India Act had no retrospective operation, but this contention is based on a mis-conception. As already stated, section 142-A was introduced Into the Government of India Act by the India and Burma (Miscellaneous Amendments) Act, 1940, section 17 (1) of which runs- "The amendments made by this Act in the principal At and the Government of Burma Act, 1935 (whether by way of substitution, addition or omission) shall, save where it is specifically provided that they shall come into operation an, or on some date subsequent to, the passing of this Act, be 6emed to have been made in those Acts immediately before the gassing thereof." Section 142-A was, therefore, to be deemed to have formed an integral part of the Government of India Act from before the date on which the Act came into force, and Dr. Abdur Rahim's argument is without substance.

20. Our answer to this question is, therefore, in the affirmative.

21. For the reasons given above the order of the learned District Judge cannot be upheld. We accordingly accept the appeal, set aside the judgment and decree of the learned District Judge and restore those of the trial Court with costs throughout. K. B. A. Appeal accepted.