The main legal point established in the judgment is that the assessment of haisiyat-tax should consider the tax-paying capacity of individuals based on their circumstances, social position, and family size. It also emphasized the need for a nuanced and case-specific approach in allowing deductions for items like Income Tax, insurance premia, and house-rent.

Kotval, A J C—Mr. Mahomed Hamid, Tahsildar, was assessed by the Municipal Committee of Drug to haisiyat-tax for the year 1926-27 on Rs. 3,300, his gross salary for that year. He appealed to the Deputy Commissioner claiming that the amounts paid by him as Income Tax, house-rent and life insurance premia should have been deducted from his gross salary and the tax levied on the balance, Rs. 2,469-12-0 ''which he is capable of spending at Drug proper.'' The Deputy Commissioner was of the opinion that deduction on account of Income Tax should be allowed, but not on account of house-rent. He was doubtful whether provident fund payments and insurance premia should be deducted, though he was inclined to think that they should to the extent permitted by Income Tax rules. He has referred the case to this Court, under Section 83(2), Central Provinces Municipalities Act, 1922 as he considered that a question of liability to and the principle of assessment of the tax was involved.

2. The points referred are whether in assessing the appellant to the haisiyat-tax the Municipal Committee should have made allowance for house rent, Income Tax and insurance premia paid by him and for the contributions made by him to the provident fund. No question as to contributions to the provident fund arises in this case for the record discloses no claim made by the appellant in respect of them. He alleged that he paid Rs. 86-4-0 for incoma-tax, Rs. 240 for house-rent and Rs. 504 for life insurance, and claimed a deduction in respect of these items only. The reference in respect of provident fund contributions is made apparently because in answer to the notice issued to the Municipal Committee, it was alleged that in respect of Government servants the gross annual salary was the basis of assessment, no deduction being allowed on account of house rent, Income Tax, provident fund and insurance premia. As the point as to provident fund contributions did not arise in the appeal, it must be excluded from the reference which, in my opinion, arise in the particular case in which it is made. In this Court the Municipal Committee has been represented by an advocate, but no appearance has been made by or on behalf of the appellant. In my opinion, no question of liability to the tax within the meaning of Section 83(2) arises in this case, for that is admitted. The question of liability mentioned in Section 83(2) is not the question of the amount fixed in respect of the liability, but of a person's liability to pay the tax at all. Mr. Hamid's liability to pay the tax is not denied. He only contests the amount which the Municipal Committee requires him to pay.

3. As regards the question of the principles of assessment the Municipal Committee has overlooked the rules framed by it and sanctioned by Government by Notification No. 190-617-S-18, dated 31st July 1919. Rule 5(b) of these rules lays down the principles of assessment applicable to the present case. According to that rule the relative tax paying capacity i.e., the circumstances, social position and the size of the family of each person liable to be taxed must be considered. The measure of the tax-paying capacity of a Government servant, who, we assume, like Mr. Hamid, has no other income or property in the Municipality, does not depend solely upon the amount fixed as his salary. The tax is intended to be elastic and contemplates a greater nicety of adjustment to the means of the payer than is usually possible in. the matter of taxation. The possibility of Government servants earning the same salary and having no other income or property paying different amounts as haisiyat-tax is within the contemplation of the rule. The difference in the amount may be due to difference in the circumstances, social position or the size of the family.

4. It is not possible to define what is included in the terms ''circumstances'' and ''social position,'' but for the purposes of this case it may be said that the outgoings under