Desai, C.J. - (1.) THIS appeal has been referred by my brothers Bishambhar Dayal and Seth to a larger bench because they felt that a certain decision of this Court requires reconsideration. It arises out of a suit brought by the respondents against the appellant for a declaration and injunction.
(2.) THE allegations contained in the plaint were as follows: The respondents are permanent residents of places outside the limits of the Town Area of Sirsaganj and are employed as teachers in Intermediate Colleges of Sirsaganj. They temporarily reside within the limits of the Town Area in Sirsaganj in connection with their employment; they do not own any property yielding income or carry on any trade or profession or earn any income within the limits of the Town Area. The Town Area Committee levies Circumstances and Property Tax under Section 14 (1) (f) of the Town Areas Act. The two colleges are situated outside the limits of the Town Area. The respondents are not liable to be assessed to the Circumstances and Property Tax but the Committee has assessed tax on them for the assessment year 1954-55 (i.e. financial year 1954-55). The assessment of the tax is illegal and beyond the powers of the Committee; hence they seek the declaration that the assessment of the tax is illegal and beyond the Committee's powers and permanent injunc-tion restraining it from realising the tax from then. Under section 14 (1) (f) a town area committee may impose "a tax on persons assessed according to their circumstances and property.. subject to such limitations and restrictions as may be prescribed". The State Government in exercise of the powers conferred under Section 39 (1) and (2) (1) made "United Provinces Town Area Circumstances and Property Tax (Assessment and Collection) Rules" to regulate the imposition, assessment and collection of Circumstances and Property Tax imposed under the Act. Under Rule 6 "all the activities of an assessee within the limits of the town area. and all the immovable property owned by him and situate within the limits of the town area Snail be considered in calculating his total assessment". By Rule 7 the Committee is required to prepare a list of "all persons within the town area who are liable to pay the tax" and to consider separately "the circumstances and the property or every person entered in the list and.. determine the amount of the tax to which each such person shall be assessed separately for his circumstances and his property". An assessment list is to be prepared showing the name of every person assessed and the amount of tax to which he is assessed; objections are then invited and heard and decided. The list is then made final and submitted for confirmation to the prescribed authority or the District Magistrate. An appeal against the assessment or levy of any tax lies to the prescribed authority or the District Magistrate, vide Section 18. The decision of the appellate authority "shall be final and shall not be called in question in any Court" according to Sub- section (4) of Section 18. In exercise of the power conferred by Section 39 (2) (11) the State Government has made a different set of rules regarding the limitations, restrictions and rate subject to which the circumstances and property tax can be levied by a town area committee. Rule 3 (1) of these Rules provides that the tax: "may be imposed on any person residing or carrying on business within the limits of the town area: Provided that such person has so resided or carried on business for a total period of at least six months in the year of assessment.", that no tax is to be imposed on any person whose total taxable income is less than Rs. 200 per annum. "Taxable income" means, according to the Explanation attached to the rule, "gross income accruing within the limits of the town area" and the words "carrying on business" mean "carrying on of any trade, profession, calling or other practice or activity which yields income but do not include service under Government or a local body". The tax is imposed in two separate parts, (1) on his circumstances and (2) on the property if any owned by him, vide Rule 2. The aggregate of the sums so determined on both the counts constitutes the total amount payable as circumstances and property tax. The portion of the tax assessed on property may be imposed "on the owner of any land, building or other immovable property situate within the limits of the town area who has owned such property for a total period of not less than six months in the year of assessment at such flat rate.....; on the annual rental value of the property.....".
(3.) THE suit was contested by the Town Area Committee. It admitted that the respondents live in the town area in connection with their employment and that the Committee levies, and has assessed them to, circumstances and property tax. It pleaded that the respondents reside and earn income within its limits, that they have been rightly assessed to the tax, that they are not entitled to any relief and that their suit was barred by Section 18 (4) of the Town Areas Act. It added that they had objected to the assessment list, that the objection had been dismissed and that their appeal under Section 18 had been dismissed by the District Magistrate. In the examination under Order X of the Code of Civil Procedure its counsel admitted that the colleges in which the respondents are employed are situated beyond the limits of the town area, that they do not own any immovable property within the limits except that they reside within the limits and occupy immovable property as tenants and that the only activity that they do is serving as teachers. On behalf of the respondents it was admitted that their appeals against the assessments were rejected by the District Magistrate. The trial Court framed the following issues:-- "1. Whether the plaintiff earned any income within the limits of the defendant Town Area Committee, Sirsaganj? 2. Whether the plaintiff resided or carried on business within the limits of the defendant Committee? 3. Whether the plaintiffs are liable to be assessed? 4. Is the suit barred by Section 18 (4) of the Town Area Act? Has this Court no jurisdiction to try this suit? 5. Plaintiff's relief, if any?" It gave the following findings. The suit was not barred by Section 18 (4) and was within its jurisdiction. The colleges are situated outside the limits. The income from the teaching cannot be said to accrue to the respondents within the limits of the Town Area merely because they reside within the limits; hence, they are not liable to this tax. In the result it decreed the suit. An appeal from the decree was dismissed by a District Judge. He found that the respondents reside, but do not own any property, or carry on any trade, within the limits of the Town Area and that the income from the teaching accrue to them not at their residence but in the colleges situated outside the limits. The second appeal came up for hearing before our brother Pathak who referred it to a Division Bench because of importance of the question involved in it and the Division Bench has referred it to a Full Bench.;