TMI Blog1948 (5) TMI 7X X X X Extracts X X X X X X X X Extracts X X X X ..... plaintiffs are brothers and are members of a joint Hindu family. The learned Munsif recorded a finding that the plaintiffs resided within the limits of the District Board and were, as such, liable to its jurisdiction for purposes of assessment. The learned Munsif held that the suit was barred by Rule 131, District Boards Act. As a result of the two findings mentioned above he dismissed the suit with costs. 4. The plaintiffs filed an appeal which came up for hearing before the learned District Judge of Farrukhabad. Before the learned District Judge it was again contended that the plaintiffs earned their income within the municipality and were, therefore, not liable to pay the circumstances and property tax imposed by the District Board. On behalf of the Board it was urged that so long as the plaintiffs were residents in the rural area they were liable to be assessed even though the income may have been earned within the municipal limits. 5. The learned Judge came to the conclusion that if the entire income of the plaintiffs was assessed to the circumstances and property tax by the Municipal Board of Kanauj, they were not liable to pay the same tax on the same income to the Dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e time being in force, any taxes payable in respect of any one person to a Province, or to any one municipality, district board, local board or other local authority in any Province, by way of tax on professions, trades, callings or employments, shall from and after the commencement of this Act cease to be levied to the extent to which such taxes exceed fifty rupees per annum. If the provisions of this section apply to the tax which has been imposed on the plaintiffs then there can be no doubt that the District Board had no right to impose a tax of a larger amount than ₹ 50 and any imposition in excess thereof must be deemed to be illegal. 10. The argument of Mr. Banerji is firstly that the tax on circumstances and property is not a tax on professions, trades, callings or employments and is, therefore, not governed by the Professions Tax Limitation Act. In the alternative he has argued that the question of illegality could be decided by the District Magistrate in an appeal under Section 128, U.P. District Boards Act (10 [x] of 1922). Section 128 reads as follows: (1) An appeal against an assessment, or any alteration of an assessment, of a tax on circumstances and pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is ultra vires and that objection is upheld it is difficult to accept the argument that the assessee has no remedy in a civil Court and the Board can be allowed to rely on the provisions of the Act, when they themselves have not followed the provisions thereof and have imposed the tax illegally. I have, therefore, no hesitation in holding that if the tax in question comes under the provisions of the Professions Tax Limitation Act, the District Board's jurisdiction was limited and any amount claimed beyond the sum of ₹ 50 was wholly illegal and unjustified and the civil Court can grant the relief asked for. 12. The next point for consideration is whether the circumstances and property tax is governed by the provisions of the Professions Tax Limitation Act. The U.P. District Board Act (x of 1922) was enacted by the Provincial Legislature with the previous sanction of the Governor-General under Sub-section (8) of Section 80A, Government of India Act, 1919. Sub-section (8) of Section 80A was as follows: The local legislature of any province may not, without the previous sanction of the Governor-General, make or take into consideration any law, (a) imposing or aut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect to which both the Legislatures had powers to make laws. The Provincial Legislature had no power to make laws with respect to matters entered in List 1 and similarly the Central Legislature had no power to make laws with respect to matters entered in List II. Section 143 of the Act, however, was enacted to save taxes, duties, cesses or fees which were in force before the first day of January, 1935. Sub-section (2) of the section provided: Any taxes which immediately before the commencement of Part III of this Act were being lawfully levied by any local authority for the purposes of the district under in force on the first day of January, 1935, may notwithstanding that that tux is mentioned in the Federal Legislative List, continue to be levied and to be applied to the same purposes until provision to the contrary is made by the Federal Legislature. In case it is held that the Professions Tax Limitation Act applies to the circumstances and property tax then it can be levied only to the extent permitted by that Act. To decide this matter, we have first to consider what exactly the circumstances and property tax is. As has been said by their Lordships of the Judicial Committe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; 18,000 made in trade was income-tax, was not raised in either of the Courts below and we have, therefore, not been called upon to decide the same. I may, however, mention that the fundamental difference between a tax on income and a tax on circumstances and property is that income tax can only be levied if there is income and if there is no income, no tax is payable but in the case of Circumstances and Property Tax, where a man's status has to be determined his total business turnover may be considered for purposes of taxation, though he may not have earned any taxable income. As has been pointed out in In re a Reference under Government of Ireland Act (1936) 1936 A.C. 352, the measure of the tax is not itself the test. In determining the nature of the tax consideration, may be given to the standrad on which the tax is levied, but that is not the determining factor; see Byramjee Jeejeebhoy v. Province of Bombay 27 A.I.R. 1940 Bom. 65. 16. A tax on professions, trades, callings or employments may not be a graduated tax according to the income earned from the profession, trade, calling or employment. In that case it would be more in the nature of a licensing fee. It may ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have made an assessment exceeding ₹ 50. 20. The limitation to tax up to ₹ 50 is said to be the result of the Professions Tax Limitation Act, 1941 (Act 20 XX. of 1941), which limits the tax on professions, trades, callings or employments by a District Board to ₹ 50. This Act will apply if it be held that the tax on circumstances and property is in reality a tax on professions, trades, callings or employments. 21. To determine this point it is necessary to scrutinze the nature of tax and not to go by the name given to it. Section 108(b), District Boards Act authorises a District Board to impose a tax on persons assessed according to their circumstances and property in accordance with Section 114 of the Act. Section 114 mentions certain conditions and restrictions on the imposition of this tax and makes it clear that the tax is to be imposed on total taxable income which has been defined in explanation to the section as estimated income not including income of certain kinds mentioned therein. 22. It appears from the assessment notice issued by the District Board to the plaintiffs, respondents that of the six heads of income mentioned therein the income of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Prasad, J. 27. This second appeal raises an important question of law, namely, the limits of the powers of the District Boards in this Province to levy what is known as tax on circumstances and property. The appeal came up originally before a learned Single Judge who, in view of the importance of the question involved, referred it to a Full Bench. The facts are as follows: 28. Clause (b) of Section 108, U.P. District Boards Act, 1922 (U.P. X of 1922) empowers Boards in this Province to impose, with the previous sanction of the Provincial Government, a tax on persons according to their circumstances and property in accordance with Section 114. Section 114 provides that the powers of a Board to impose the tax shall be subject inter alia to the condition that: the tax may be imposed on any person residing or carrying on business in the rural area, provided that such person has so resided or carried on business for a total period of at least six months in the year under assessment. The term rural area is defined in Sub-section (10) of Section 3 as the area of a district excluding every municipality as defined in the U.P. Municipalities Act, 1916, and every cantonment as d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the provisions of Section 2, Professions Tax Limitation Act, 1941, (Act 20 [xx] of 1941), no tax in excess of rupees fifty per annum could be levied upon them. Learned District Judge upheld the finding of the trial Court as regards the plaintiffs' residence, but found that, in view of the provisions of Section 2, Professions Tax Limitation Act, 1941, the plaintiffs were not liable for more than rupees fifty per annum for the tax. He accordingly allowed the appeal and granted the plaintiffs an injunction restraining the District Board from realizing more than rupees fifty per annum as tax on circumstances and property and from attaching the plaintiffs, property in execution of a process for the recovery of any sum in excess of that amount. As regards Section 131, District Boards Act, he held that it did not bar the plaintiffs from claiming in the civil Court the benefits of Section 2, Professions Tax Limitation Act, 1941. 33. The defendant District Board comes in second appeal against the above decree of the learned District Judge. The plaintiffs have accepted that decree and no more assert that in view of Section 114(a), District Boards Act, they are not liable to any ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 36. Section 2, Professions Tax Limitation Act runs as follows: Notwithstanding the provisions of any law for the time being in force, any taxes payable in respect of any one person to a Province, or to any one municipality, district board, local board or other local authority in any Province, by way of tax on professions, trades, tailings or employments, shall from and after the commencement of this Act cease to be levied to the extent to which such taxes exceed fifty rupees per annum. By Section 8 of that Act, the provisions of Section 2 were made inapplicable to any tax specified in the schedule thereto. The tax levied under Section 108, U.P. District Boards Act, 1922, does not appear in the schedule. The tax with which we are concerned is thus not one of the taxes exempted from the operation of Section 2, Professions Tax Limitation Act. The question at the threshold is whether the tax on circumstances and property is a tax dealt with by Section 2 of tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and ₹ 200 from property. The provisional assessment of the tax in the notice was at Bs.379-30. 38. Section 126(1), District Boards Act empowers a Board to call upon any person specified in Clause (a) of Section 114 to furnish such information as may be necessary in order to ascertain (a) whether such person is liable to pay a tax assessed on his circumstances and property; (b) at what amount he should be assessed, (c) the annual value of the building or land, which he occupies, and the name and address of the owner. 39. It appears that in previous years the appellant had issued notice to the respondents in pursuance of Section 126 calling upon them to send a true return of their total income. 40. Rule 2 of the model rules for the assessment and collection of the tax on circumstances and property printed at p. 181 of the District Board Manual provides that all the activities of an assessee shall be considered in calculating his total assessment. 41. It is clear from these facts that the tax on circumstances and property imposed under Section 108, U.P. District Boards Act, 1922, is a composite tax, consisting inter alia of the tax on professions, trades, callings ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r, to levy the tax from lands and buildings continues as before the commencement of Part 3, Government of India Act, 1935. In this connexion reference may be made to Byramjee Jeejeebhoy v. Province of Bombay 27 A.I.R. 1940 Bom. 65 in which the urban immovable property tax was held to be valid as falling under entry No. 42, Provincial Legislative List. 43. Entries Nos. 42 and 46, Provincial Legislative List are distinct and the argument that the tax falling under the former entry is included in the tax falling under the latter cannot be accepted. 44. Learned Counsel for the appellant has referred also to Clauses (ii), (iii) and (ix) of Section 128, U.P. Municipalities Act, 1916, which enumerates the taxes which a Municipal Board may impose. These clauses describe the taxes in the following words: (ii) a tax on trades and callings carried on within the municipal limits and deriving special advantages from, or imposing special burdens on, municipal services, (iii) a tax on trades, callings and vocations, including all employments remunerated by salary or fees; (ix) a tax on inhabitants assessed according to their circumstances and property. From the fact that in Sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed on the provisions of the Professions Tax Limitation Act in the trial Court, he is not entitled to raise it now. In support of this, reliance is placed upon Tarak Govinda v. Indu Jyoti ('29) 16 A.I.R. 1929 Cal. 452. That case is distinguish, able from the present one. In that case, the plea of illegality of the 'personal tax' was not raised in both the Courts below. It was raised for the first time before the High Court. In the present lease, the plea was raised before the lower appellate Court and it was decided by it. It is not being raised for the first time in this Court. 47. In the last mentioned case the term circumstances occurring in Section 85, Bengal Municipal Act, 1884, was also construed. It was held that the word circumstances in the section is not intended to restrict the term property , but to widen the scope of the section. And although it is not easy to define what circumstances are, still the amounts which pass through the limits of the Municipality and are available to the persons taxed at any moment, and the fact that the persons taxed are wealthy zamindars, cannot be altogether ignored while estimating the circumstances and property . A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have not been complied with, or the statutory tribunal has not acted in conformity with the fundamental principles of judicial procedure. It was also held in the above case: Where the statute creates a liability not existing at common law and gives also a particular remedy for enforcing it...with respect to that class it has always been held, that the patty must adopt the form of remedy given by the statute. 51. I proceed now to examine the above provisions of the District Boards Act in the light of the two principles mentioned above as -laid down by their Lordships of the Judicial Committee. 52. The first case to which I may refer is District Board, Dehra Dun v. Damodar Dutt 31 A.I.R. 1944 All. 223. In that case the District Board had brought a suit for the recovery of a certain sum of money on account of circumstances and property tax. The defendant contended that he did not reside within the rural area. The Board contended that having regard to Sections 128 and 131, U.P. District Boards Act it was not open to the defendant to raise the plea, once he has been assessed to the tax, that he was not a resident of the rural area. Their Lordships observed: The answer to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ider those cases. 56. IN Municipal Board, Benares v. Jokhun 26 A.I.R. 1939 All. 394, it was held that: the word assessment in Section 164, Municipalities Act, means assessment in accordance with the provisions of Sections 142, 143 and 144 of the Act. Upon general principle even if two interpretations are possible, the Court would reject that interpretation of the Act which would have the effect of depriving the citizen of his only remedy in respect of arbitrary and illegal acts, of the Municipality. 57. The flagrant disregard by a local authority of the provisions of the law was held as not a mere irregularity which might have the effect of taking away the jurisdiction of the civil Courts. In that case the plaintiff sued for a declaration that his house was not liable to be assessed for water tax and claimed to recover the water tax paid by him and also damages on account of illegal attachment of his property. It was found that the plaintiff's house was not within a radius of 600 feet from the nearest standpipe nor it had any water pipe connection and the Municipal Board supplied no water at all to the plaintiff. He, however, received a notice in which it was alleged ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aw. It was held that in view of the provisions of Sections 18(4) and 15(4), U.P. Town Areas Act, 1914, such a suit did not lie in the civil Court. This ruling was dissented from in Municipal Board, Benares v. Jokhun 26 A.I.R. 1939 All. 394. Municipal Board, Benares v. Krishna Co. 22 A.I.R. 1935 All. 760. In this case a suit was brought for the refund of octroi which had been assessed by the Municipal Board on goods imported on the ground-that the goods were not in fact assessable or that the amount of assessment was excessive. It was held that in view of the provisions of Section 164, U.P. Municipalities Act, such a suit did not lie-in the civil Court. This case is also distinguishable from the present one, as the Municipal Board had acted within the frame-work of the-Act in imposing the octroi. 61. After the enactment of the Professions Tax Limitation Act, 1941, the powers of the-Board to impose tax on circumstances and property was limited to ₹ 50 per annum. The District Boards Act must be read as modified by the Professions Tax Limitation Act. The moment a District Board sought to impose more than ₹ 50 per annum as tax on circumstances and property it went beyon ..... X X X X Extracts X X X X X X X X Extracts X X X X
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