Supreme Court Upholds Mysore Prize Competitions Tax, Distinguishes Power to Tax from Regulatory Control

Large Bench Rules State Legislature Retains Power to Tax Prize Competitions Despite Adoption of Central Legislation under Article 252 of Constitution

In a landmark judgment delivered on August 22, 1961, a five-judge bench of the Supreme Court of India dismissed the appeal filed by M/s. R.M.D.C. (Mysore) Private Ltd., upholding the validity of the Mysore Lotteries and Prize Competitions Control and Tax Act (as amended in 1957). The appellants had challenged the constitutional validity of the Mysore Act’s taxation provisions, contending that by adopting the Central Prize Competitions Act, 1955, under Article 252(1) of the Constitution, the Mysore Legislature had surrendered all legislative powers related to prize competitions, including taxation, to Parliament.

The Supreme Court, however, clarified the constitutional demarcation between the “control and regulation” of prize competitions and the “power of taxation” thereof. The Court emphasized that the resolution passed by the Mysore Legislature (and other States) under Article 252(1) authorized Parliament to legislate on “control and regulation” of prize competitions but did not include surrender of the separate and distinct power to tax under Entry 62 (Taxes on luxuries including betting and gambling) of the State List (List II). The Court held that Entry 34 (Betting and Gambling) relating to control and Entry 62 relating to taxation are separate legislative subjects, and the power to tax betting and gambling had not been surrendered to Parliament.

Rejecting the appellants’ reliance on foreign precedents and arguments of colourable legislation, the Court reaffirmed the principle that motive or purpose of legislation is irrelevant in constitutional interpretation; the key question is the competence of the legislature to enact the law. As Mysore Legislature possessed independent taxation power, the imposition of tax under the Mysore Act was held to be a valid exercise of legislative authority and not a disguised penalty or regulation.

The Court also addressed the issue of repugnancy between the Mysore Act and the Central Act. It held that while certain licensing provisions in the Mysore Act became void due to repugnancy under Article 254(1) of the Constitution, the taxation provisions remained valid after retrospective amendment omitting the repugnant words. The doctrine of eclipse was invoked to explain that a valid law rendered invalid by supervening constitutional inconsistency can revive upon amendment removing repugnancy.

Furthermore, the Court dismissed procedural objections regarding the assessment and recovery of tax, holding that the assessment made on the basis of returns filed by appellants was final and the tax demand was valid. The appellants’ arguments regarding provisional assessment, necessity of fresh notification, and time for payment were all rejected as without substance.

This decision clarifies the constitutional boundaries between State and Central legislative powers in the context of prize competitions and betting and gambling, underscoring that adoption of Central legislation under Article 252(1) does not ipso facto exclude the States’ power to levy taxes on the same subject if it falls under a different legislative entry.

Statutory provisions

Constitution of India, Article 252, Article 254(1), Article 226, Article 132(1), Article 32, Article 301; Mysore Lotteries and Prize Competitions Control and Tax Act, 1951 (and Amendment Act 26 of 1957); Prise Competitions Act, 1955 (Central Act); Revenue Recovery Act, 1890

R.M.D.C. (Mysore) Private, Ltd., M/s. v. State of Mysore, (SC) : Law Finder Doc Id # 111437