U. P. Kahetra Samitis & Zila Parishads Act 1961-Circumstances and Property 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. In 1958 the powers and functions of the District Boards were vested in or were transferred 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 the Zila Parishads to impose the "Circumstances 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 the Zila Parishads at the same rates and on the same conditions under which it was being levied under the 1922 Act. The tox which till then was doing 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 (1) that the tax on circumstances and property 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 fell under the residuary entry of List 1, namely, Entry 97 (any matter not enumerated in any other Entry in List I or in any of the Entries in List II and 111) 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 Ares Committee Act, 1914 as amended in 1950. The appellants' suit challenging the validity of the tax was allowed by the Munsif 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 levy it, it was not save and exercise the power to levy a tax on circumstances and property by an artificial understanding on that expression so as to acquire power to impose a tax on income by Article 277. The Civil Judge dismissed the appeal of the Committee, The High Court upheld the validity of the tax.

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 Legislature by adopting the subterfuge of imposing a consolidated tax by clubbing sp two or more entries in List II, and that the State Legislature could not exercise the power to levy a tax on circumstances and property by an artificial understanding on that expression so as to acquire power to impose a tax on income .