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PETITIONER: PANDIT RAM NARAIN

       Vs.

RESPONDENT: THE STATE OF UTTAR PRADESH ANDOTHERS.

DATE OF JUDGMENT: 20/09/1956

BENCH: DAS, S.K. BENCH: DAS, S.K. BHAGWATI, NATWARLAL H. IMAM, SYED JAFFER MENON, P. GOVINDA

CITATION:  1957 AIR   18            1956 SCR  664

ACT: Tax on circumstances and property--U.P. Town Areas Act, 1914 (U.P.   Act II of 1914)-S  14(1)(f)-Nexus-Whether  residence within  Town Area necessary condition for imposition of  tax -Tax  imposed  under clause (f) of s. 14(1) whether  can  be justified under clause (d)-Rule 3 whether invalid.

HEADNOTE: The appellant was carrying on business, but was not residing within  the  Town Area of Karhal.  The Town  Area  Committee imposed a tax of Rs. 25 on him under clause (f) of a.  14(1) of   the  U.P.  Town  Areas  Act,  1914,  being  a  tax   on ’circumstances  and property’.  The appellant filed  a  writ application in the High Court on the ground that there could be no assessment under clause (f) because he resided outside the jurisdiction of the Town Are& Committee.  The High Court dismissed  the  application  taking the  view  that  it  was unnecessary  to  consider whether the tax could  be  legally imposed under clause (f) as the tax imposed could clearly be justified under clause (d) of s. 14(1) which authorised  the imposition of a tax on trades, callings or professions. Held,  that  residence  was  not a  sine  qua  non  for  the imposition of the tax under clause (f), that the carrying on of ’business within the Town Area was a sufficient nexus for the  imposition  of the tax under clause (f)  and  that  the assessment of the tax on the appellant under clause (f)  was legally valid. The legality of the tax imposed must be considered with ref- erence to the clause under which the assessment was actually made and a different clause under which the assessment might have fallen cannot be called in aid of the assessment. Rule 3 of the ’Rules regarding the Limitations, Restrictions and Rate subject to which the Circumstances and Property Tax shall be levied by the Town Area Committees’ framed under s. 39(2)  of the Act does not go beyond s. 14(1)(f) and is  not invalid.

JUDGMENT:

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CIVIL APPELLATE JURISDICTION: Civil Appeal No. 224 of 1955. 665 Appeal  by special leave from the judgment and  order  dated the  7th  May  1954 of the Allahabad  High  Court  in  Civil Miscellaneous Writ No. 133 of 1952. Naunit Lal for the appellant. G.   C. Mathur and C. P. Lal for respondents Nos.  I & 2. 1956.   September  20.   The  Judgment  of  the  Court   was delivered by S.   K.  DAS J.-This is an appeal by special leave from  the judgment  and  order  of the High  Court  of  Judicature  at Allahabad dated the 7th of May 1954 by which the High  Court dismissed an application of the appellant for the issue of a writ  of certiorari under the provisions of article  226  of the  Constitution.   The appeal raises the question  of  the validity of the assessment of a tax on the appellant for the year 1950-51 by the Town Area Committee of Karbal under  the provisions of clause (f) of sub-section (1) of section 14 of the  United Provinces Town Areas Act, 1914 (U. P. Act II  of 1914), hereinafter referred to as the Act. The appellant resides in the town of Mainpuri and carries on the business of plying a motor bus on hire.  The appellant’s bus plies on. alternate days between Etawah and.   Mainpuri, and the town of Karhal falls on the route between Etawah and Mainpuri.   .  It  is  not  now  disputed  that   passengers travelling in the appellant’s bus used to get down or get in at a bus stand within the town area of Karhal; the appellant had  a  booking  office situate within  the  Town  Area  and tickets  were  issued to passengers and an  account  of  the business  was  maintained in the said booking  office.   The Town Area Committee of Karhal imposed a tax of Rs. 25 on the appellant  for  the  year 1950-51 under  the  provisions  of clause  (f)  of sub-section (1) of section 14  of  the  Act, being  a tax on ’circumstances and property’  and  assessing the income of the appellant from his business within the 86 666 Town  Area of Karhal at a sum of Rs. 800 for the year.   The appellant preferred an appeal against the assessment of  the tax  under section 18 of the Act, and the grounds  taken  by the  appellant  were (1) that he did not reside  within  the limits of the Town Area and (2) that he did not carry on any trade or business within that Area.  By his order dated  the 20th  October  1951’  the  Appeal  Officer  held  that   the appellant carried on his trade or business within the limits of  the Town Area and was therefore rightly assessed to  tax under  clause  (f) of sub-section (1) of section 14  of  the Act.  He accordingly dismissed the appeal.  It may be stated here  that the appellant was asked to submit an  account  of his  income,  but  no such account  was  submitted  and  the assessing officer worked out the income of the appellant  at about  Rs.  67 a month, that is, about Rs. 800 a  year.   No question about the amount of the tax has been raised  before us,  and  it is not necessary to say anything  further  with regard to the quantum of assessment. The  appellant  then filed a writ application  in  the  High Court of Judicature at Allahabad and the ground taken by him was  that there could be no assessment under clause  (f)  of sub-section (1) of section 14 of the Act, because he resided outside  the  jurisdiction of the Town  Area.   The  learned Judge,  who  dealt with the. application of  the  appellant, took  the view that the tax imposed on the  appellant  could clearly  be imposed under clause (d) of sub-section  (1)  of section  14  of  the Act; therefore it  was  unnecessary  to consider  whether  the tax could be  legally  imposed  under

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clause  (f) of sub-section (1) of section 14.   The  learned Judge also expressed the view that residence within the Town Area was not a pre-requisite condition for the imposition of the tax under clause (d), and it was enough if the appellant carried  on  a trade or business within the Town  Area.   On these   views,   the  learned  Judge  dismissed   the   writ application. The main point which has been urged before us by  667 learned   counsel  for the appellant is that the  assessment of   a tax under clause (f) of sub-section (1) of section   14 on  the appellant was. not valid, because  residence  within the  Town Area was a necessary condition for the  assessment of  a  tax under clause (f).  Learned  counsel  also  argued before  us that the. assessing authority having  assessed  a tax  on the appellant under clause (f), it was not  open  to the High Court to say that the tax was legally valid under a ’different  clause, namely clause (d) of sub-section (1)  of section 14.  With regard to his second point, learned counsel has  drawn our  attention  to  sections 15 to 17 of the  Act.   He  has pointed  out  that  under section 15 of the Act  a  list  of persons  liable to pay the tax imposed under section 14  and of the amounts to be paid respectively by such persons,  has to  be  prepared; the list may be revised  by  the  District Magistrate and has to be submitted to him for  confirmation. When so confirmed., the list can only be altered under  sub- section  (2) of section 15 by the District Magistrate or  in pursuance of an order passed in appeal under the  provisions of  section 18.  We think that learned counsel  has  rightly submitted   that,  so  far  as  the  present  appellant   is concerned,  the  list prepared under section  15  must  have shown  him  as  assessed to a certain amount  of  tax  under clause  (f)  of  sub-section  (1)  of  section  14  and  the assessment  must  have been confirmed on that basis  by  the District  Magistrate.   Therefore, the legality of  the  tax imposed  on the appellant must be considered with  reference to the clause under which the assessment was actually  made, and a different clause under which the assessment might have fallen cannot be called in aid of the assessment. We  proceed  therefore to consider the legality of  the  tax imposed on the appellant with reference to clause (f)  of sub-section  (1) of section 14 of the Act.  The short  point for  consideration  in  that context  is  whether  residence within  the  Town  Area is a  necessary  condition  for  the imposition of the tax under clause 668 (f). It is necessary -to read here section 14 of the Act  so far as it is relevant to the point in question. "14  (1) Subject to any general rules or special  orders  of the  State  Government  in this behalf, the  taxes  which  a Committee may impose are the following: (d)  A tax on trades, callings or professions not  exceeding such rates as may be prescribed. (f)  A   tax   on  persons  assessed  according   to   their circumstances  and  property  not exceeding  such  rate  and subject  to  such  limitations and restrictions  as  may  be prescribed: , Provided  that such a person is not already  assessed  under clauses (a) to (e) above". It will be noticed that the power of the Town Area Committee to impose a tax under clause (f) is subject to,’ first, ’any general  rules or special orders of the State Government  in this  behalf’  and,  secondly,  to  (such  limitations   and restrictions as may be prescribed’.  These restrictions  and

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limitations  are to be found in the Rules made by the  State Government under section 39(2) of the Act, which are  called Rules regarding the Limitations, Restrictions and Rate  sub- ject  to which the Circumstances and Property Tax  shall  be levied  by  the  Town  Area  Committee.   These  rules  were notified by Notification No. 681-T/IX-79T-50 dated July  20, 1950.  Two of the rules are important for our purpose, viz., rules 2 and 3. They are in these terms: "2. The tax shall be assessed on every person on whom it  is imposed,   in  two  separate  parts,  namely  (1)   on   his circumstances and (2) on the property, if any, owned by him, and  the  aggregate of the sums so determined  on  both  the counts  shall constitute the total composite amount  payable by him as circumstances and property tax: Provided that nothing shall render it irregular 669 to  assess  a  person  on  only  one’  of  the  two  ’counts aforementioned  if  he does not fulfil  the  conditions  for liability  in  respect  of that count on  which  he  is  not assessed. 3.   (1)  The  tax  assessed  on  the  circumstances  of  an assessee  may be imposed on any person residing or  carrying on business within the limits of the town area: Provided  that  such  person has so resided  or  carried  on business  for a total period of at least six months  in  the year of assessment. (2)  No  tax  shall  be imposed on any  person  whose  total taxable income is less than Rs. 200 per annum. (3)  The  rate of the tax shall not exceed one  anna  in  a. rupee on total taxable income. (4)  The  total amount of tax assessed on any  person  shall not, in any year, exceed a sum of s. 250. Explanation.-(1) For purposes of this rule ’taxable  income’ means  gross income accruing within the limits of  the  town area. (ii) The  words ’carrying on business’ mean the carrying  on of  any  trade,  profession, calling or  other  practice  or activity  which yields or is capable of yielding income  but do not include service under Government or a local body". The important point which emerges out of these Rules is that under  Rule  3 the tax assessed on the circumstances  of  an assessee  may be imposed on any person residing or  carrying on  business  within the limits of the town area;  in  other words,  two, conditions in the alternative are laid down  in Rule  3, either the person must reside within the limits  of the town area or he must be carrying on business within  the limits  of the said area.  There is a third  condition  that the residence or carrying on of business must be for a total period of at least six months in the year of assessment.  No question  regarding the third condition has been  raised  in this case and it is not necessary to consider that condition here.  Therefore, it is 670 clear  that if Rule 3 is valid, then the imposition  of  the tax on the appellant under clause (f) is also valid, because on the finding not now in dispute the appellant carried on a trade  or  business within the limits of the  Town  Area  of Karhal.  It has been argued before us that Rule 3 is invalid because, under clause (f) of sub-section (1) of section  14, residence  within  the Town Area of the person to  be  taxed under  that clause is a necessary condition.  We are  unable to  accept this argument.  Clause (f) of sub-section (1)  of section  14  does not say in express  terms  that  residence within  the  Town  Area is a  necessary  condition  for  the imposition  of the tax.  The Rules make it quite clear  that

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for  each  of the clauses of sub-section (1) of  section  14 there  is a ’nexus’ between the territorial jurisdiction  of the  Town Area Committee and the imposition of the tax.   So far  as  clause (d) is concerned, the ’nexus’  is  that  the trade,  calling or profession must be carried on within  the limits of the Town Area.  So far as clause (f) is concerned, Rule 3 makes it quite clear that the ’nexus’ is either resi- dence  within  the limits of the Town Area  or  carrying  on business  within  the same limits.  It is to  be  remembered that  clause (f) was inserted -by an Amending  Act,  namely, the Uttar Pradesh Town Areas (Validation and Amendment) Act, 1950.   Section 1(2) of the Amending Act gave  retrospective effect  to the amendments.  The proviso to clause (f)  makes it  quite clear that a person who is already assessed  under clauses  (a)  to (e) cannot be assessed again  under  clause (f).   The proviso is intended to avoid  multiple  taxation, but  it  is  manifest from the proviso that  ,there  may  be overlapping  of the different clauses in sub-section (1)  of section 14; for example, a person may come under clause  (d) as  well as clause (f) if he carries on a trade  within  the limits  of  the  Town  Area.   Therefore,  the  proviso  was necessary  to prevent the same person being taxed more  than once  under  the  different clauses of  sub-section  (1)  of section 14.  If residence within the limits of the Town Area were a 671 sine  qua non for the imposition of a tax under clause  (f), no question of overlapping between clauses (d) and (f) would arise  unless  the  person to be taxed resided  as  well  as carried  on a trade within the limits of the Town Area.   If the  argument  of  learned  counsel  for  the  appellant  is correct, then the proviso to clause (f) is meaningless in so far  as it envisages an overlapping between clause  (d)  and clause  (f)  in other cases.  On a  proper  construction  of clause  (f),  read  with the  limitations  and  restrictions embodied  in the Rules made under section 39 of the Act,  it cannot be held that residence within the Town Area of Karbal was  a necessary condition for the imposition of the tax  on the appellant. A reference, was made to sub.;section (4) of section 15-A of the  Act.  Section 15-A provides for  preliminary  proposals for the imposition of taxes under section 14, publication of such  proposals  and the submission of  draft  rules.   Sub- section (4) states: "(4) Any, inhabitant of the Town Area may, in the prescribed manner,  file an objection in writing on such proposals  and the  committee shall take into consideration the  objections so filed and finally settle its proposals." Under  sub-section (4) any inhabitant of the Town  Area  may file  an  objection  to the preliminary  proposals  for  the imposition  of taxes under section 14.  The argument  before us  was  that if an inhabitant of the Town  Area  alone  was entitled  to file an objection to preliminary proposals  for taxation,  then  in all the, clauses of sub-section  (1)  of section 14 residence within the Town Area must be read as  a necessary  condition for the imposition of the  taxes  under section  14.  This contention appears to us to  be  unsound. Firstly,  the  objection as, to  preliminary  proposals  for taxation   is  not  the  same  thing  as  objection  to   an assessment, and it may well be that the legislature in their wisdom  thought fit to confine the filing of  objections  to preliminary proposals for taxation to the inhabitants of the Town Area.  Secondly, there are several other 672 sections  of  the Act, such as section 20  and  section  21,

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which  show  that  the imposition of a tax  on  persons  not resident  within the Town Area. but having some other  nexus within that Area, was permissible.  Thirdly, the question of the  validity  of sub-section (4) of section 15-A  does  not arise in this case.  The appellant was assessed to a tax and he  had a right to file an appeal which right he  exercised. No  grievance was made of the failure to exercise the  right under  subsection (4) of section 15-A.  It is therefore  un- necessary for us to make any pronounce ment on the  validity or otherwise of sub-section (4) of section 15-A All that  is necessary  for us to state is that by reason of  sub-section (4) of section 15-A, it cannot be held that residence within the Town Area is a necessary condition for the imposition of a tax in all the clauses of sub-section (1) of section 14 of -the Act.  Learned  counsel  for  the appellant  referred  us  to  two decisions  of  ’the Allahabad High  Court:  District  Board, Farrukhabad v. Prag Dutt(1) and District Board, Dehra Dun v. Damodar Dutt(2).  The second decision, which was earlier  in point  of  time,  arose  out  of  a  suit  for  recovery  of ’circumstances  and  property tax under the U.  P.  District Boards  Act (Local Act X of 1922).  The question  there  was whether  the District Board of Dehra Dun could impose a  tax on the defendants who were not residents within the area  of the District Board.  It is worthy of note that under section 114 of the U. P. District - Boards Act, the power of a Board to impose a tax on circumstances and ’property is subject to the  condition  that the tax may be imposed  on  any  person residing  or carrying on business in the rural  area  within the  District  Board.  The only question in  that  Allahabad case  was  whether the defendants resided within  the  rural area  of  the District Board so as to make them  liable  for the.  tax.  The finding Was that they did not reside  within the rural area and therefore the imposition of (1)  A.I.R. 1948 All. 382. (2)  I.L.R. [1944] All. 611. 673 the  tax was illegal, and section 131 of the U. P.  District Boards  Act  did not bar the suit.  This decision  does  not help the appellant.  If it shows anything, it shows that  it was open to the District Board to impose a circumstances and property’ tax on any person residing or carrying on business in the rural area. In  the  1948  Allahabad decision,  the  main  question  was whether  the  provisions  of  section  2,  Professions   Tax Limitation  Act (20 of 1941) affected the  powers  conferred upon the District Board by section 108 of the U.P.  District Boards Act to levy a tax on circumstances and property’.   A subsidiary question was also raised, whether section 131  of the U. P. District Boards Act barred the suit.  With  regard to the main question, it was pointed out that the name given to  a tax did not matter; what had to be considered was  the pith  and  substance of it.  It was held that  in  pith  and substance the tax was one which attracted the provisions  of section  2, Professions Tax Limitation Act (20 of 1941).   A tax  on ’circumstances and property’ is a composite tax  and the word ’circumstances’. means a man’s financial  position, his status as a whole depending, among other things, on  his income from trade or business.  From militating against  the principle that in considering the circumstances of a  person his  income from trade or business within the Town Area  may be  taken into consideration, the decision approves  of  the principle.  In the course of his judgment, Bind Basni Prasad J.  referred to section 128, U.P. Municipalities Act,  1916, where ’taxes on circumstances and property’ appear as a head

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distinct  from the ’taxes on trades, callings and  vocations and  employments’ and the argument was that the taxes  being under  different heads should be treated as  being  entirely different,  one  from the other It was rightly  pointed  out that  it is no sound principle of construction to  interpret expressions used in one Act with reference to their- use  in another Act.  The meanings of words and expressions used  in an Act must take their colour from the context in which 87 674 they  appear.   It  is  true  that  in  the  Act  under  our consideration  the taxes which the Town Area  Committee  may impose  appear under different heads in Sub-section  (1)  of section 14.  We have already stated that though the  clauses are different, the words used in the section show that there may  be  overlapping between the different clauses,  and  to prevent   the  same  person  being  subjected  to   multiple taxation,  a  ’proviso was incorporated in clause  (f).   In view of the words and expressions used in section 14 of  the Act, we cannot accept the argument that clause (f) should be read  as  entirely independent of and unconnected  with  the other  clauses and a different condition,  namely  residence within  the-Town Area, must be read as a necessary  part  of clause  (f).  To do so will be to read in clause  (f)  words which   do  not  occur  there.   The  limitations  for   the imposition of a tax under clause (f) are given in Rule 3 and ’residence’is only one of the alternative conditions for the imposition of the tax-not a line qua non as is contended  by learned counsel for the appellant. In the result, we hold that the assessment of the tax on the appellant  under clause (f) of subjection (1) of section  14 of  the  Act  was legally valid.  The appeal  fails  and  is dismissed with costs. 675