r.m.d.c (mysore) pvt. ltd v. state of mysore
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A CASE STUDY ON
“R.M.D.C (Mysore) private Ltd v. State of
Mysore”
1962 AIR SC 594
Submitted By:
RANDALL WILLIAMS
Contents
1. Abbreviations .............................................................................................. ii
2. Introduction ................................................................................................. 1
3. R.M.D.C (Mysore) pvt. Ltd. v. State of Mysore : A Case Study ............... 2
3.1. The powers of state as per taxation ..................................................... 3
3.2. Effect of Repugnancy .......................................................................... 6
4. The doctrine of colorable legislation: ......................................................... 8
4.1. Application of the doctrine of Colorable legislation to taxation: ........ 8
5. Conclusion ................................................................................................ 10
R.M.D.C (Mysore) pvt. Ltd v. State of Mysore Page ii
ABBREVIATIONS
& .................................................................................................................................................. and
A.P ........................................................................................................................... Andhra Pradesh
AC ................................................................................................................................ Appeal Cases
AIR ....................................................................................................................... All India Reporter
All ER ............................................................................................................. All England Reporter
Art .......................................................................................................................................... Article
CWN ............................................................................................................. Calcutta News Weekly
F.C.R .............................................................................................................. Federal Court Reports
F.R .................................................................................................................. Federal Court Reports
FB .................................................................................................................................... Full Bench
i.e .............................................................................................................................................. that is
Kant ................................................................................................................................... Karnataka
Ltd ......................................................................................................................................... Limited
p.................................................................................................................................................. page
para .................................................................................................................................... Paragraph
Pvt .......................................................................................................................................... Private
R.M.D.C ................................................................................................. R. M. D. Chamarbaugwala
SC .............................................................................................................................. Supreme Court
U.P ............................................................................................................................... Uttar Pradesh
R.M.D.C (Mysore) pvt. Ltd v. State of Mysore Page iii
u/a .................................................................................................................................. under article
UOI ............................................................................................................................ Union of India
v.............................................................................................................................................. Versus
Viz ....................................................................................................................................... Videlicet
Vol......................................................................................................................................... Volume
ARTICLE REFERRED
Article 249: Power of Parliament to legislate with respect to a matter in the State List in the
national interest
(1) Notwithstanding anything in the foregoing provisions of this Chapter, if the Council of States
has declared by resolution supported by not less than two thirds of the members present and
voting that it is necessary or expedient in national interest that Parliament should make laws with
respect to any matter enumerated in the State List specified in the resolution, it shall be lawful
for Parliament to make laws for the whole or any part of the territory of India with respect to that
matter while the resolution remains in force (2) A resolution passed under clause ( 1 ) shall
remain in force for such period not exceeding one year as may be specified therein: Provided
that, if and so often as a resolution approving the continuance in force of any such resolution is
passed in the manner provided in clause ( 1 ), such resolution shall continue in force for a further
period of one year from the date on which under this clause it would otherwise have ceased to be
in force (3) A law made by Parliament which Parliament would not but for the passing of a
resolution under clause ( 1 ) have been competent to make shall, to the extent of the
incompetency, cease to have effect on the expiration of a period of six months after the
resolution has ceased to be in force, except as respects things done or omitted to be done before
the expiration of the said period
Article 252: Power of Parliament to legislate for two or more States by consent and adoption of
such legislation by any other State
R.M.D.C (Mysore) pvt. Ltd v. State of Mysore Page iv
(1). if it appears to the Legislatures of two or more States to be desirable that any of the matters
with respect to which Parliament has no power to make laws for the States except as provided in
Articles 249 and 250 should be regulated in such States by Parliament by law, and if resolutions
to that effect are passed by all the House of the Legislatures of those States, it shall be lawful for
Parliament to pass an Act for regulating that matter accordingly, and any Act so passed shall
apply to such States and to any other State by which it is adopted afterwards by resolution passed
in that behalf by the House or, where there are two Houses, by each of the Houses of the
Legislature of that State (2). Any Act so passed by Parliament may be amended or repealed by an
Act of Parliament passed or adopted in like manner but shall not, as respects any State to which
it applies, be amended or repealed by an Act of the Legislature of that State
Article 254: Inconsistency between laws made by Parliament and laws made by the Legislatures
of States
(1) If any provision of a law made by the Legislature of a State is repugnant to any provision of a
law made by Parliament which Parliament is competent to enact, or to any provision of an
existing law with respect to one of the matters enumerated in the Concurrent List, then, subject to
the provisions of clause ( 2 ), the law made by Parliament, whether passed before or after the law
made by the Legislature of such State, or, as the case may be, the existing law, shall prevail and
the law made by the Legislature of the State shall, to the extent of the repugnancy, be void (2)
Where a law made by the Legislature of a State with respect to one of the matters enumerated in
the concurrent List contains any provision repugnant to the provisions of an earlier law made by
Parliament or an existing law with respect to that matter, then, the law so made by the
Legislature of such State shall, if it has been reserved for the consideration of the President and
has received his assent, prevail in that State: Provided that nothing in this clause shall prevent
Parliament from enacting at any time any law with respect to the same matter including a law
adding to, amending, varying or repealing the law so made by the Legislature of the State
Article 255: Requirements as to recommendations and previous sanctions to be regarded as
matters of procedure only No Act of Parliament or of the legislature of a State and no provision
in any such Act, shall be invalid by reason only that some recommendation or previous sanction
required by this Constitution was not given, if assent to that Act was given
R.M.D.C (Mysore) pvt. Ltd v. State of Mysore Page v
(a) where the recommendation required was that of the Governor, either by the Governor or
by the President; (b) where the recommendation required was that of the Rajpramukh,
either by the Rajpramukh or by the President; (c) where the recommendation or previous
sanction required was that of the President, by the President.
BOOKS REFERRED
1. D.D. Basu, Commentary on the Constitution of India, vol 8,lexisnexis butterworths
wadhwa nagpur, 2011
2. D.D.Basu, The Shorter Constitution Of India,13ed., Wadhwa and company law
publishers, 2004
CASES
Indian Cases
1. Birajananda das v. Competent Authority, AIR 1986 Cal 8
2. Deep Chand v. state of U.P, AIR 1959 SC 648
3. Gajapati v. State of Gujarat, AIR 2002 SC 1130.
4. Hoechst v. State of Bihar, AIR 1983 SC 1019
5. Jagannath baksh Singh v. state of U.p, AIR 1962 SC 1563
6. Krishna Sugar Mills v. Union of India, AIR 1959 SC 1124-
7. Kunnathat v. state of Kerela, AIR 1961 SC 552
8. Megh Raj v. Alla rakhia, (1942) 46 CWN (F.R) 61 (65).
9. R.M.D.C v. State of Mysore 1962 AIR 549
10. Ralla Ram v. Prov. Of East Punjab, (1948) FCR 207
11. Rangayya v. state, AIR 1978 AP 106 (FB)
12. Srikant Lal v. State Of Bihar, AIR 1958 SC 496
13. State of Bihar v. Kameshwar, AIR 1952 SC 252
14. T. Khande Rao v. state of karnataka, AIR 1979 Kant 71
15. Tumati Rangayya v. state of A.P. AIR 1978 AP 106
16. UOI v. Basavaiah, AIR 1972 SC 1415
R.M.D.C (Mysore) pvt. Ltd v. State of Mysore Page vi
Foreign Cases
1. A.G v. Antigua Times, (1975) 3 All ER 81 (PC).
2. Att. Gen. for Ontario v. Reciprocal Insurers, (1924) AC 328
Case Study
R.M.D.C (Mysore) pvt. Ltd v. State of Mysore Page 1
INTRODUCTION
In India there have been plethora of cases in which the Supreme Court has
adjudicated on the matter relating to taxation. In India the Constitution
distinguished taxing power from the general legislative power relating to a
subject.1 Taxation is considered as a distinct matter,2 for purposes of
legislative competence. R.M.D.C (Mysore) pvt. Ltd. v. State of Mysore is one
of the cases in which the Supreme Court has cogently discussed the extension
of taxing statute and its colorable use. The doctrine of colorable legislation as
explained by the supreme court in Krishna Sugar Mills v. Union of India3-
“..The whole doctrine of colorable legislation revolves itself into
the question of competency of a particular legislature to enact a
particular law.”
The general doctrine of colorable legislation is that neither the Federal nor a
Provincial or State Legislature can, in the exercise of its own powers, “carry
out an object which is beyond its powers and trespass on the exclusive powers
of the other,”4 that the same limitation should apply with respect to the taxing
powers of Federal and State Legislatures in a Federal system.
Therefore, question in this case is if the state accepts a parliament law u/a
2525, does it then surrender all its powers to the parliament ancillary to that
law.
1 A.G v. Antigua Times, (1975) 3 All ER 81 (PC). 2 Hoechst v. State of Bihar, AIR 1983 SC 1019 para.76 3 AIR 1959 SC 1124 4 Att. Gen. for Ontario v. Reciprocal Insurers, (1924) AC 328. 5 ARTICLE 252: Power of Parliament to legislate for two or more States by consent and
adoption of such legislation by any other State
(1) If it appears to the Legislatures of two or more States to be desirable that any of the
matters with respect to which Parliament has no power to make laws for the States except as
Case Study
R.M.D.C (Mysore) pvt. Ltd v. State of Mysore Page 2
R.M.D.C (Mysore) pvt. Ltd. v. State of Mysore: A Case Study
The applicants had been conducting “prize competitions” since the month
of august 1948, in the state of Mysore. An act called Mysore Lotteries &
Prize Competitions Control & Tax act, 1951 was passed on June 21st,
1951. A similar act called the Bombay Lotteries and Prize Competitions
Control and Tax Act, 1948, which was amended in November by the
Bombay Act, 1952. A petition was filled in the Bombay High Court under
article 226 of the Constitution of India, challenging the constitutionality
of the act. The High Court held that though prize competitions could be
controlled by states within their respective borders, their ramifications
beyond those borders could only be dealt with by action under Article
252(1) of the Constitution.
Therefore, the states of Andhra Pradesh, Bombay Madras, U.P,
Hyderabad, Madhya Bharat, Pepsu and Saurashtra passed resolutions u/a
252(1) authorizing parliament to legislate for the control and regulation of
prize competitions.
On February 24, 1956 the Mysore legislation also accepted the act. On
April 7, 1956 the appellants filled a petition u/a 32 in the Supreme Court
challenging the constitutional validity of the central act, which was
dismissed. Meanwhile, an appeal against the Bombay High Court -
Footnote no 5 conti..
provided in Articles 249 and 250 should be regulated in such States by Parliament by law,
and if resolutions to that effect are passed by all the House of the Legislatures of those States,
it shall be lawful for Parliament to pass an Act for regulating that matter accordingly, and any
Act so passed shall apply to such States and to any other State by which it is adopted
afterwards by resolution passed in that behalf by the House or, where there are two Houses,
by each of the Houses of the Legislature of that State
(2) Any Act so passed by Parliament may be amended or repealed by an Act of Parliament
passed or adopted in like manner but shall not, as respects any State to which it applies, be
amended or repealed by an Act of the Legislature of that State
Case Study
R.M.D.C (Mysore) pvt. Ltd v. State of Mysore Page 3
judgment was brought before the Supreme Court and was allowed. During
the pendency of the petition before the Supreme Court, the applicants
applied for stay of the operation of the Central Act on April 16, 1956,
which was granted. The Supreme Court gave its judgment on April 9.
1957 on the Bombay case.
On August 31st, 1957 the Mysore Lotteries & prize Competitions Control
& Tax (Amendment) ordinance was issued. A provision under section 15
was added of the Mysore Lotteries & Prize Competitions Control & Tax
Act, i.e. all prize competitions conducted from March 31st, 1956 to
August 31, 1957 were brought within the preview of the amendment act.
Because of the provision the business carried out by the appellants had
become taxable under the Mysore act. The Mysore act was challenged in
the High Court u/a 226, which was dismissed on November 20, 1958 and
against that judgment and order this appeal has been brought pursuant to a
certificate of the High Court under Article 132(1)6 of the constitution.
The Powers of State as Per Taxation:
In the present case the argued point was that if a resolution had been
passed under article 252(1) of the constitution of India then the state
legislature had further no power to amend any law.
The quest then here arises do the resolutions as passed and particularly the
words “control and regulation of prize puzzle competitions and all other
matters ancillary thereto” surrender the whole subject of prize
competitions to the central government, i.e. every matter connected to it
including the power to tax. The argument raised was that the language of
6 ARTICLE132: Appellate jurisdiction of Supreme Court in appeals from High Courts in
certain cases ( 1 ) An appeal shall lie to the Supreme Court from any judgment, decree or
final order of a High Court in the territory of India, whether in a civil, criminal or other
proceeding, if the High Court certifies under Article 134A that the case involves a substantial
question of law as t the interpretation of this Constitution
Case Study
R.M.D.C (Mysore) pvt. Ltd v. State of Mysore Page 4
the resolutions was wide enough to comprise the legislative power under
the entries 34 and 62 of List II of the Constitution of India.
Under entries 34 and 62 of List II- ‘betting and gambling’ are included;
the power to impose taxes on betting and gambling is included in Entry
62. They are two separate powers, so that by surrounding its power to
regulate prize competitions, under Art.252 (1), a State legislature does not
lose its power to impose a tax on such competitions.7 Hence, when
parliament passes a law under this article, it cannot be contended that it is
a colorable exercise of power.
The contention of the applicants was rejected on the ground that colorable
legislation was a cover for lack of legislative power. When the state
legislature has power to pass law under List II, it can also pass a
resolution, on the basis of which Parliament can pass a law on that topic.8
Conflict between Central Act passed under Article 252 and State Act
Through, Art. 255 may not be attracted, in terms, to a law made by
parliament under Art. 252, it has been held that the same principle should
apply, by reason of the words “and any such Acts passed shall apply to
such State”. In case of conflict between a law made by parliament under
Art. 252 and the Legislature of any state to which such Central act
applies, the latter shall prevail.9
Thus, by passing a resolution, the topic goes out of State list. Hence, the
court has held that any act of State Legislature will be subject to the rule
of repugnancy, even though in terms Art. 254 will not apply. Further, if
7 R.M.D.C v. State of Mysore 1962 AIR 549; D.D.Basu, The Shorter Constitution Of
India,13ed., Wadhwa and company law publishers, 2004,pg.3481. 8R.M.D.C v. State of Mysore 1962 AIR 549; D.D. Basu, Commentary on the Constitution of
India, vol 8,lexisnexis butterworths wadhwa nagpur, 2011,8689. 9 Rangayya v. state, AIR 1978 AP 106 (FB)
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any state, relating to the same manner occupying the same field, as the
law made by the parliament under cl. (1) of Art. 252 is found to be
repugnant, it will be rendered inoperative to the extent of repugnancy.10
But in case of ‘repugnancy’, the doctrine of severability shall apply and
not only shall that portion of the state law give way, which is repugnant.
A taxing statute is not protected if it is a colorable exercise of legislative
power or is a fraud on the constitution and is confiscatory.11
It has already been noticed that even as regards matters included in the
exclusive state list (II) , the constitution itself provides for national
legislation, if it appears that the federal legislation is necessary in order to
meet the national magnitude of the problem, by resorting to the procedure
under Art. 249, or, when the States or some of them voluntary consent to
legislation by the Union Legislature on that State subject, so far as the
consenting state legislates desire, in accordance with the procedure laid
down in Art. 252.12
INDIA- As pointed out by the Supreme Court13, the question is ultimately
one of legislative power. Thus, if a legislature is competent to regulate a
subject as well as to impose tax upon it, it is immaterial whether a tax is
imposed upon it for the purpose of regulation because motive of the
Legislature is irrelevant upon the question of its competency. If, on the
other hand, it has no power to regulate a subject, it cannot exercise its
taxing power to regulate that subject, because that would be exercise of
‘colorable legislation’.
10 Tumati Rangayya v. state of A.P. AIR 1978 AP 106; T. Khande Rao v. state of karnataka,
AIR 1979 Kant 71; Birajananda das v. Competent Authority, AIR 1986 Cal 8; R.M.D.C
(Mysore) Private Ltd. v. state of Mysore, AIR 1962 SC 594. 11 Jagannath baksh Singh v. state of U.p., AIR 1962 SC 1563; AIR 1962 SC 594. 12 UOI v. Basavaiah, AIR 1972 SC 1415; R.M.D.C (Mysore) Private Ltd. v. state of Mysore,
AIR 1962 SC 594. 13 R.M.D.C (Mysore) pvt. Ltd v. State of Mysore, AIR 1962 SC 594.
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Effect of Repugnancy
The Patna high court14 has interpreted the word ‘void’ in the sense of
inoperative. This interpretation rests on the view that Art. 254(1) does not
take away the power of the state legislature to legislate with respect to a
subject in the concurrent list, but simply invalidates the law insofar as it is
‘repugnant’ to a Central law relating to the same subject. Hence, when the
repugnancy arises, the state law remains in abeyance but if at any
subsequent time, the repugnancy is removed for any reason, the state law
is revived.
‘To the Extent of the repugnancy’-
when a state act is repugnant to central law within the meaning of this
clause, what becomes void is not the entire act but only insofar as it is
repugnant to the central act.15 Thus in case where they occupy the same
field, the identity of the field may relate to the pith and substance of the
subject-matter and also the period of its operation. When both coincide,
the repugnancy is complete and the whole Act becomes void.16 On the
other hand, the operation of the Union law may be entirely prospective
leaving the state law to be effective in regard ‘to things already done’.
Any existing state law relating to the subject matter of the resolution
becomes void to the extent of its repugnancy of the act of parliament
made in pursuance of the resolution.
But by passing such resolution a state legislature shall be deemed to
surrender its legislative power only with respect to the particular matter
which is the subject of the resolution. Thus, where the resolution enables
parliament to make a law for the “control and regulation of prize
14 Srikant Lal v. State Of Bihar, AIR 1958 SC 496. 15 Deep Chand v. state of U.P., AIR 1959 SC 648 16Infra
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R.M.D.C (Mysore) pvt. Ltd v. State of Mysore Page 7
competitions” the power that is surrendered is one under Entry 34 of list II
dealing with “betting and gambling”. It does not constitute a surrender of
a separate power, viz., to impose a tax on “betting and gambling” which is
included in a separate entry, i.e., Entry 62 of list II.
Thus, in R.M.D.C(Mysore) Pvt. Ltd v. State of Mysore, the court held that
the surrender by the state legislature of their power to legislate on betting
and gambling does not involve a surrender of right to levy a tax in respect
of it, since power to tax is a distinct and separate power.
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The Doctrine of Colorable Legislation:
The doctrine of colorable legislation has been applied under the
Government of India Act, 1935,17 as well as under the Constitution.18
This doctrine means that though a legislature is not fettered in the exercise
of its exclusive powers, by any consideration of the possible effects of the
exercise of such powers upon the powers allotted to some other
Legislature, it cannot-
“Under the guise, or the pretence; or in the form of an exercise of its own
powers, carry out an object which is beyond its powers and a trespass on
the exclusive powers of the other.”19
The doctrine of colorable legislation is based on the principle the no
legislation can violate constitutional prohibitions by employing an
impermissible method. In other words, a constitutional power cannot be
exercised to attain an unconstitutional goal. Legislation cannot be allowed
to do which it cannot do directly.20
Application of The Doctrine Of Colorable Legislation To Taxation:
The doctrine is equally applicable to taxing legislation as in the case of other
legislation. Thus, in Ralla Ram v. Prov. Of East Punjab,21our Federal Court
observed-
17 Megh Raj v. Alla rakhia, (1942) 46 CWN (F.R) 61 (65). 18 State of Bihar v. Kameshwar, AIR 1952 SC 252; Gajapati v. State of Gujarat, AIR 2002
SC 1130. 19 A.G.Alberta v. A.G. for Canada, AIR 1939 PC 53. 20 D.D. Basu, Commentary on the Constitution of India, vol 8,lexisnexis butterworths
wadhwa nagpur, 2011, p. 8683. 21 (1948) FCR 207.
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“it is true that we must look not to the mere form but to the substance of the
levy, and the tax must be hold to be invalid, if in the guise of a property tax is
really a tax on income.”22
Similarly, though the validity of a taxing statute cannot be challenged merely
on the ground that it imposes an unreasonable heavy burden,23 it can be
challenged on the ground that it constitutes a colorable exercise of or a fraud
upon, the legislative power, e.g., that it is a mere cloak to confiscate24 the
property of the citizen taxed,25 or to control and regulate and not to raise
revenue.26
Hence, the Supreme Court held that the Mysore Legislature had the power of
taxation, and it had not surrendered the same to the Parliament, and so it
cannot be said that the imposition of the tax is a piece of colorable legislation
and is on that ground unconstitutional.
22 Jagannath v. state of U.P., AIR 1962 SC 1563 23 D.D. Basu, Commentary on the Constitution of India, vol 8, LexisNexis butterworths
wadhwa Nagpur, 2011, p. 8689. 24 Jagannath v. state of U.P., AIR 1962 SC 1563 25 Kunnathat v. state of Kerela, AIR 1961 SC 552.. 26 R.M.D.C (Mysore) pvt. Ltd v. State of Mysore, AIR 1962 SC 594.
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CONCLUSION
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A Comprehensive reading of the articles 252 & 254 clearly states that the
languages of these two sections are of no two interpretations. When a state
surrenders its powers in particular to a legislation to the parliament, it is only
to be considered till the extent to where the resolution of such surrender was
brought.
The court in the present case held that the state legislature had the power to
impose tax and it was not surrendered to the parliament. The extent of the new
law made by the parliament was only to the extent of ‘betting and gambling’.
The Supreme Courts findings can be summed up as follows:
1. By passing the resolutions as to control and regulation the power to tax
had not been surrendered to parliament.
2. The amending Act was not a new method of controlling prize
competitions nor was it a piece of colorable legislation.
3. There was no amending of an act which stood repealed nor was the
retroactive operation of the Amending Act affected by article 254(1)
of the Constitution.
Thus, the Mysore legislature was fully competent to impose tax and it was not
a piece of colorable legislation.
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