Vivekanand School TB.
Headmaster Vs. President of Zila Panchayat & Ors.  INSC 1954 (14
IN THE SUPREME COURT
OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO. OF 2008 (Arising out of
S.L.P. (C) No.10810 of 2007) Vivekanand School Through Headmaster ...Appellant
President of Zila Panchayat and Ors. ...Respondents
Dr. ARIJIT PASAYAT,
in this appeal is to the judgment of a Division Bench of the Uttarakhand High
Court dismissing the writ petition filed by the appellant.
background in a nutshell is as follows:
1 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.
is no appearance on behalf of the respondents in spite of service of notice.
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;
3 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 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.
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.
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 4 "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."
Anr. (AIR 1980 SC
1088), it was, inter-alia observed as follows:
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
While determining the
status of an individual for the purposes of tax on circumstances, the total
turnover of his business or avocation may therefore be legitimately taken into
speaking, R.R. Engineering case (supra) did not deal with the question as to
what is taxable income. The said expression can be considered in the background
of what has been stated in the Income Tax Act, 1961 (in short `the Income Tax
to our directions, the Balance Sheets as on 31.3.1994 and 31.3.1995 and the
Income-Expenditure Statement for the financial years 1993-94 and 1994-95 were
produced. Receipt from the students was Rs.2,86,472/- for the first period,
while for the subsequent period, it was Rs.3,32,425/-. Apparently, the
respondents were not justified in treating the said amounts to be the taxable
appears from the financial statements that apart from the students' fees,
donation was received from Indian School Society amounting to Rs.3,15,000/- for
the first year and Rs.2,84,000/- for the subsequent year. After deduction of
the expenses, the surplus, i.e. income over expenditure which was transferred
to the school fund account was Rs.28,449.15 for the first year and Rs.26,647.80
for the subsequent year. The question may arise as to whether donation could be
treated as a part of the receipts for computing the taxable income. We need not
express any opinion in that regard because the authorities have proceeded on
erroneous premises. The High Court also fell into error by considering the
students' fees as taxable income.
the circumstances, we set aside the impugned order of the High Court and direct
the authorities to compute the taxable income and then decide as to whether any
tax is leviable.
aspect which has been submitted by learned counsel for the appellant is that
even if it is conceded for the sake of arguments that while computing the
surplus i.e. income over expenditure donations can be taken into account, yet,
the tax payable cannot exceed three naya paisa on a rupee on the total taxable
income. The relevance of this question can only arise after the authorities
decide as to whether there is any taxable income or not.
appeal is allowed to the aforesaid extent. No costs.
(Dr. ARIJIT PASAYAT)