Satish Chandra, J. - (1.) The Municipal Board, Kannauj, imposed Circumstances and Property Tax upon persons residing of carrying on trader within the limits of the Municipality. The Rules provided for a maximum assessment on an individual of Rs. 1,000/ - per year. Under the Rules, the word 'person' was defined to include a firm, company etc. The assessing authorities imposed the tax upon the Appellants in their individual capacity. The assessment included a sum of Rs. 12,000/ - upon each of the Appellants, on the footing that it was the amount received by them as their share of the profits earned by a firm Mohammad Yaqub and Sons. The Appellants objected. According to them, since a firm is a taxable entity within meaning of the Rules, the firm alone was liable to tax in regard to profits earned by it. The separate profits were not taxable in the hands of the partners after they were transferred to them, by she firm. This view was accepted by the District Magistrate, Farrukhabad, on the basis of which he allowed the review applications. Aggrieved the Municipal Board filed a writ petition. A learned Single Judge held that in determining the amount of Circumstances and Property Tax to be levied upon an individual, the income received by him from a partnership business could well be included. On this view, the writ petition, was allowed and the order of the District Magistrate was quashed.
(2.) The Circumstances and Property Tax is leviable upon persons according to their status. One of the items, which attract the tax, is the earning of income within the Municipal limits. If a taxable entity earns income, it is liable to be taxed upon it. Under the Rules, a firm is a taxable entity. It is hence liable to be taxed on its circumstances and property, which include income earned by it during the course of an assessment year. In that view, the entity which earns income is primarily liable to be taxed; and an entity like a firm may say that the profits earned by it should be taxed in its hands and that they should not be taxed in the hands of its partners after they have been transferred to them.
(3.) It is well settled that an income cannot be taxed twice over. It should be taxed in the hands of the person who earns it, unless there is a statutory authority to chose the person who receives the income after it has been earned by another entity. The Rules do not leave any discretion in the hands of the assessing authority to exempt the primary earner of income from being taxed and to levy the tax upon another person, to whom the same may, be transferred after having been earned; In our opinion, the firm itself was liable to be assessed in relation to the profits learned by it and these profits could not be validly taxed in the hands of the partners in respect of the amount of their share. The District Magistrate, in our opinion, took a correct view of the legal position. The Appellants are undoubtedly liable to be taxed upon their individual income. The findings' given by us above relate to the income received by the Appellants as their share of the partnership profits.;