R. R. ENGINEERING CO. versus ZILA PARISHAD, BAREILLY & ANR.

Citation: [1980] 3 S.C.R. 1 · Decided: 10-03-1980 · Supreme Court of India · Bench: Y.V. CHANDRACHUD · Disposal: Dismissed

Cited by 3 judgment(s) · see the full citation network in Lexace

Judgment (excerpt)

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1 
R. R. ENGINEERING CO. 
v. 
ZILA PARISHAD, BAREILLY & ANR . 
March 10, 1980 
:{Y. V. CHANDRACHUD, C. J., V. R. KRISHNA IYER, N. L. UNTWALIA, 
P. N. SHINGHAL AND A. D. KoSHAL, JJ.] 
U. P. KJhetra Samitis & Zila Parishads Act 1961-Circumstances and Pro-
_perty Tax-Nature of tax-If a tax on income or profession. 
State Legislature, if competent to impose tax. 
Acting under the power conferred by section 108 of the District Boards 
Act, 1922 the District Board, Bareilly imposed "Circumstances_ and Property 
Tax" on persons according to their circumstances and property, 
Jn 1958 the 
.powers and functions of the District Boards were vested in or were transfer-
-red to the Antarim Zila Parishads and later they were transferred to the Zila 
'Parishads constituted under the U.P. Kshetra Samitis and Zila Parishads Act 
1961. 
The 1961-Act empowered lhe Zila Parishads to impose the "Clrcum-
·stances and Property Tax." It also provided that where before the appointed 
·date there was in force "Circumstances and Property Tax" under the 1922 
Act such tax may continue to be levied by th~ Zila Parishads at the same 
rates and on the same condition$ under which it V.'as. being levied under the 
1922 Act. 
The tax which till then was being levied by the District Boards 
was henceforth levied by the Zila Parishads. 
Dismissing the appellants' writ petition impugning the· constitutional validity 
·of the Act the High Court held (I) that the tax on circumstances and pro-
perty was a single tax possessing altogether a separate and distinct identity 
from other taXes and could neither be equated with a tax on professions, 
trades, callings or employments nor with a tax on property and (2) that 
the tax feli under the residuary entry of List I, namely, Entry 97 (any matter 
not enumeraied in any other Entry in List I or in any of the Entries in list 
II and lll) and that it could be continued to be levied by virtue of Article 
277 of the Constitution. 
· 
In CA 564 of 1973 the appellants were assessed to the tax by the Town 
Area Committee under the U.P. Town Areas Committee Act, 1914 as amended 
in 1950. The appellants' suit challenging the validity of the tax was allowed 
by the Munsiff on the ground that the tax on circumstances and property 
was in truth and substance a tax on income and since prior to the Constitution 
it was not lawful for the Town Area Committee to Jevy it, it was not saved 
~y Article 277. The Civil Judge dismissed the appeal of the Committee, The 
High Court upheld the validity of the tax. 
A 
B 
c 
D 
E 
F 
G 
In appeal to this Court it was contended that the limitation contained in 
Article 276(2) of the Constitution cannot be transgressed by the State Legis-
B 
Jature by adopting the subterfuge of impooing a consolidated tax by clubbing 
l1p two or more entries in List II, and that the State Legislaturo could not 
2 
SUPREME COURT REPORTS 
[1980] 3 S.C.R. 
A 
exercise the power to levy a tax on circumstances and property by an artificial 
understanding on that expression so as to acqnire power to impose a laxc 
\.
B 
c 
D 
E 
F 
G 
H 
on income. 
Dismissing the appeal, 
HEID : 1. (a) There is a basic distinction between a tax on income and 
a tax on circumstances and property. 
While income tax can only be levied 
on income, tax on circumstances and property can be on the total turnover of the 
assessee from his trade or calling or the fact of his having an interest in 
property. For the levy of tax on circumstances and property it is not necessary 
that there should be income in the f¥mds of the assessee, in the sense of 
the Income Tax Act A person can be subjected to tax on circumstances and 
property in relation to the status which he occupies by reason of the pnrsuit~ 
by him of a beneficial calling or the possession by him of an interest in pro-
perty. 
While determining the status of an individual for the purpose of the 
tax on circumstances, the total turnover of his business or avocation may, 
therefore, be legitimately taken into consideration. [8 G-H; 9 C.DJ 
(b) The fact that the tax on circumstances and property is levied on the 
basis of income which an assessee receives from bis profession, trade, calling 
or property is not conclusive of the naiture of the tax. It is only as a matter 
of convenience that income is adopted as a yardstick or measure for assessing 
the tax. The measure of the tax is not a true test of the nature of the tax 
and, therefore, while determining the nature

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