JUDGMENT

Dr. Arijit Pasayat, J. —

1. Leave granted.

2. Challenge in this appeal is to the judgment of a Division Bench of the Uttarakhand High Court dismissing the writ petition filed by the appellant.

3. Factual background in a nutshell is as follows:

Demand of tax was made by the Tax Assessing Officer, Zila Panchayat, Dehradun under Section 121 of The Uttar Pradesh and Uttaranchal (Kshetra Panchayat and Zila Panchayats) Adhiniyam, 1961 (hereinafter referred to as the ‘Act’), for the assessment years 1998-1999, 1999- 2000 and 2000-2001. The appellant took the stand that it has no liability to pay the tax. The appeal before the Commissioner, Garhwal Division, has been dismissed. A writ petition was filed challenging the orders. It was submitted that the School was not a commercial venture and in any event, the income level stipulated under Section 121 had not been crossed and, therefore, the demand of tax, as raised cannot be maintained.

The President of Zila Panchayat and its officials filed counter affidavit justifying the demand, inter alia, stating that the School is a commercial body and it had collected Rs.2,86,472/- and Rs.3,32,435/- as fees from the students in the year 1993-94 and 1994-95 respectively. Therefore, the demand was justified. The High Court on consideration of the counter affidavit filed, dismissed the writ petition.

3. Learned counsel for the appellant submitted that the true scope and ambit of Section 121 of the Act has not been kept in view.

4. There is no appearance on behalf of the respondents in spite of service of notice.

5. Section 121 deals with tax on “circumstances and property”. The relevant portion of Section 121 reads as follows:

“121 - Conditions and restrictions for tax on Circumstances and Property - The power of a Zila Panchayat to impose a tax on circumstances and property shall be subject to the following conditions and restrictions, namely-

a) 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 atleast six months in the year under assessment;

b) no tax shall be imposed on any person whose total taxable income is less than twelve thousand rupees per annum;

c) the rate of tax shall not exceed three Naye Paise in the rupee on the total taxable income; and

d) the total amount of tax imposed on any person shall not exceed such maximum, if any, as may be prescribed by rule.”

6. Rule 6 of the U.P. Zila Panchayat (Imposition, Assessment and collection of Circumstances and Property Tax) Rules, 1994 (for short ‘the Rules’) provides that tax shall be assessed and paid on the basis of the total taxable income of the assessee in the previous financial year. As provided in clause (e) of Rule 7 of the Rules, the total amount of tax imposed on any person shall not exceed rupees six thousand per annum. Different provisions of the Rules envisage the powers and duties of the taxing authority, basis and conditions of assessment of tax, assessment and collection of tax, notice to general public for inspection of the list and filing of objection against the tax so assessed.

7. A bare reading of the Act shows that the tax is leviable on the total income. “Taxable income” is a well known concept. In Pandit Ram Narain Vs. State of U.P. & Ors.2 (1956 SCR 664), it was noted as follows:

“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.”

8. In M/s. R.R. Engineering Co. Vs. Zila Parishad, Bareilly and Anr.2 (AIR 1980 SC 1088), it was, inter-alia observed as follows:

“But a person can be subjected to tax on circumstances and property in relation to his ‘Haisiat’, that is to say, the status he occupies by reason of the fact of the pursuit by him of a beneficial calling or possession by him of an interest in property. While determining th