BROOME, J. :- The following question has been referred to this Bench for decision :

"Whether clause (f) of sub-section (1) of section 14, U. P. Town Areas Act, 1914 is valid."

2. S. 14 of the said Act enumerates the various taxes that may be imposed by a Town Area Committee; and clause (f) of this section relates specifically to the levy of circumstances and property tax. This provision was introduced in the U. P. Town Areas Act by an amending Act (U. P. Act XXIII of 1950), which came into force in July 1950. Such a tax was not being levied by Town Areas before the commencement of the Constitution and consequently cannot be saved by Art. 277. The question therefore arises whether the amendment conferring the power on Town Area Committees to levy this tax was within the legislative competence of the State Legislature. The argument advanced by learned counsel for the appellant in this connection is twofold. Firstly, it is contended that circumstances and property tax is essentially a form of income tax, which is a subject exclusively within the jurisdiction of Parliament, being covered by item no. 82 of List I of the Seventh Schedule of the Constitution. And secondly it is urged that in any case it does not fall under any of the heads enumerated in Lists II or III of the Seventh Schedule and consequently must be deemed to be a matter exclusively within the jurisdiction of Parliament by virtue of item no. 97 of the Union List.

3. Cases are not lacking where circumstances and property tax has been held to be a tax on income, vide the Single Judge decision in Raghubir Singh v. Town Area Committee, 1961 All LJ 743 and the Division Bench decisions in Tata Oil Mills Co. Ltd. v. District Board of Allahabad, 1955 All LJ 630 and Western U. P. Electric Power and Supply Co. Ltd. Etawah v. Town Area Jaswant Nagar, AIR 1957 All 433. But a Full Bench of this Court in District Board of Farrukhabad v. Prag Dutt, AIR 1948 All 382 (FB) has underlined the essential distinction between the two kinds of tax in the following words :

"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 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 standard on which the tax is levied, but that is not the determining factor."

And further light is shed on the nature of circumstances and property tax by the remarks of the Supreme Court in Ram Narain v. State of U. P., AIR 1957 SC 18, in which it was observed :

"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."

Circumstances and property tax, therefore, is essentially a tax on status or financial position combined with a tax on property and is fundamentally distinct from income tax. It is true that in the majority of cases the assessment of this tax depends on the amount of income earned by the assessee from various sources (e. g. his profession, business or property); but that will not make it an income tax. It is not essential that there should be income before such a tax can be levied; and it is purely as a matter of convenience that income is adopted as the yardstick for the assessment of the tax. We are not prepared, therefore, to equate circumstances and property tax with income tax and we have no hesitation in repelling the contention of learned counsel for the appellant that circumstances and property tax is covered by item no. 82 of List I of the Seventh Schedule of the Constitution.

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