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 Notification No. 22/2023 CENTRAL BOARD OF DIRECT TAXES

Tax laws can't be challenged for levy of different rates for different people: HC
December, 06th 2006

The Legislature is competent to classify persons or properties into different categories and tax them differently. The taxing statute cannot be challenged merely because different rates of taxation are prescribed for different categories of persons or objects, the Madras High Court has ruled.

The petitioner - Association of Managements of Nursery, Primary and Matriculation Schools - established by Catholic Church, contended that revision of tax from Rs 500 per quarter to Rs 150 per seat per quarter, was unconstitutional, discriminatory, arbitrary and violative of Articles 14 and 21-A of the Constitution, besides being inconsistent with scheme of TN Motor Vehicles Taxation Act, 1974. Vehicles of educational institutions were in no way generating any income or profit. They were not involved in any trade or commerce.

On behalf of the State, it was submitted that levy was in the nature of compensatory tax. Expenditure incurred on maintenance and construction of roads and bridges was very much higher than total tax collected on motor vehicles. But educational institutions were charging heavy fees from students as transport charges. Poor and weaker sections used free bus passes issued by Government.

There was no violation of Articles 14 or 21-A of the Constitution.

The Bench noted that during 2005-06 total expenditure incurred for maintenance of roads and also for new ones amounted to Rs 2,202 crore whereas return from vehicle tax was only Rs 910 crore.

It was clear that tax imposed was part of regulatory measure and was to reimburse/recompensate service/facility provided.

Many schools and colleges, the Bench said, charged heavy fees towards transportation charges. It was not unreasonable to ask managements of such institutions to contribute towards cost of maintenance of roads, etc.

While dismissing petitions, the Bench said that the petitioners were at liberty to represent to the State for remission of tax since 2003 as they had not collected tax from students in view of the court's stay. Since students had passed out and gone, recovery of past dues would be difficult. If representations were made within four weeks, Government might consider the same sympathetically.

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