Janki Nath Wazir, C.J:— This is a writ petition by Syed Mubarak Shah Naqash bandi under Section 103 of the Jammu and Kashmir Constitution read with Article 32(2-A) of the Constitution of India praying that the Jammu and Kashmir Urban Immovable Property Tax Act, 1962 being ultra vires the Constitution be struck down and the order passed by respondent No. 2 be quashed and he be directed not to take further proceedings under the said Act.

2. The facts which gave rise to this petition, briefly stated, are these:— Respondent No. 2 called upon the petitioner by his communication No. PT/34 dated 5-5-1964 to file return of his immovable property to which the petitioner replied on 12-5-1964 that the Act under which respondent No. 2 sought to proceed in the matter was ultra vires the Constitution and was not enforceable in law. The petitioner was heard by respondent No. 2 and was informed that his contention was overruled and the petitioner should file the return in regard to his immovable property. The petitioner moved the Excise and Taxation Com missioner in revision against the order of the Assessing Authority, respondent No. 2, and reiterated his contention in regard to the vires of the Act. The revision application was held not to be properly stamped and was, therefore, dismissed in limine. The petitioner did not hear anything from the Excise and Taxation Commissioner and respondent No. 2 took ex parte proceedings against the petitioner and proceeded to assess him ex parte. The petitioner was asked to deposit Rs. 440 as a tax on his immovable property situate at Rajbagh under the provisions of the Act. The petitioner, therefore, Page: 106filed the present petition challenging the vires of the Act.

3. It is further mentioned in the petition that the Jammu and Kashmir Urban Immovable Property Tax Act offends against the constitutional guarantees contained in Articles 14, 19 and 31 of the Constitution of India. According to the petitioner there were to be two notifications published in the Government Gazette (1) specifying the particular buildings and lands in the rating area on which annual tax is to be levied and (2) which is to specify the percentage of the annual value of such buildings as the basis for the tax. In the absence of these notifications, it is alleged, no proceedings under the Act, so far as the petitioner was concerned, could be taken and any proceedings taken without such notifications having been published in the Government Gazette would be a nullity. The petitioner submitted that the impugned Act is ultra vires the State Legislature in view of Entry 82 of the Union List of the Seventh Schedule to the Constitution of India. The word ‘income’ as occurring in Entry 82 of the List I, has not been defined either in the Constitution of India or in the General Clauses Act and according to the petitioner it must be so interpreted as to carry the meaning that it carries in common parlance. The word ‘income’ as occurring therein must include both actual and notional income and that for that reason a tax on incomes both actual and notional can be levied only by the Union Parliament and not by the State Legislature.

4. It is stated that after the coming into force of the Constitution of India the Income Tax Act, 1961 had been promulgated and Section 22 of the Income Tax Act 1961 and Section 23 thereof contained provisions both with respect to the manner in which income from house property under the Income Tax had to be assessed and computed, that under Section 23 thereof the annual value of such property had to be deemed a sum for which the property might reasonably be expected to be let from year to year and that having regard to this provision the annual value of such property was to be determined not only with reference to the actual income derived or derivable from such property under the Income Tax Act but also with reference to the notional income thereof, the income from year to year and not of the income which it was actually yielding. It is averred that the impugned Act by a strange coincidence not only provides for the annual value of the buildings and lands to be made the basis of the tax which it was competent to do but also under Section 5 of the impugned Act the annual value of any land or building was to be ascertained with reference to the gross annual rate at which such building might reasonably be expected to be let from year to year. This Section 5 of the impugned Act was in this particular regard identical with the provisions of Section 23 of the Income Tax Act which had made the notional income of the property to be the basis of the annual value of the property and not necessarily the actual income derived or derivable from such property.

5. It is further averred that the pith and substance of the impugned Act was that it proceeded to levy a tax both on actual and notional income of a person (which is what the Income Tax Act alone could do) though in a different garb, the garb being that it professedly provided for the levy of a tax on urban immovable property which was manifest from the preamble of the Act. Entry 49 of the State List in the Seventh Schedule to the Constitution of India provided for a levy of a tax on lands and buildings, and though this entry was not specifically applicable to the State of Jammu and Kashmir, because the State List did not apply to it, the State Legislature had plenary residuary powers in terms of Section 5 of the Constitution of Jammu and Kashmir to impose a tax on lands and buildings. But in an enactment which had as its sole object the levying of a tax on urban immovable property, the State Legislature could only impose a tax on urban immovable property and its residuary plenary powers of legislation could not be invoked for the purpose of conferring validity on the provisions contained in the impugned Act which in the garb of levying tax on property imposed tax on the income accruing therefrom. The impugned Act according to the petitioner was a colourable exercise of legislative authority on the part of the State Legislature.

6. Respondent No. 2 has filed objections which were adopted by respondent No. 1.

7. In the objections respondent No. 2 admitted that notice of demand for Rs. 441 dated 13-11-1965 was issued to the petitioner which he failed to deposit. Consequently notice No. 20.PTA dated 8-10-1966 was issued calling upon him to show cause why penalty should not be imposed on him for the non-payment of Rs. 441. In reply to the said notice the petitioner requested that since he had invoked the revisional jurisdiction of the Commissioner and the question was eventually one for the High Court to decide, the recovery of the tax be stayed until the pronouncement was available on the subject from the highest Court in the State. The petitioner's communication was replied intimating that there being no provision in the impugned Act for staying the recovery proceedings, the recovery of the tax could not be stayed. He was accordingly advised to remit the aforesaid amount of the tax which could be refunded to him in the event of a decision in his favour by the revisional authority or Court of law. The petitioner's contentions according to the respondent were based upon misconception of true constitutional position and had no substance whatsoever.

8. It was contended that the powers of the State Legislature to impose the tax on urban Page: 107immovable property were absolute and unqualified and the Jammu and Kashmir Urban Immovable Property Tax Act was intra vires the State Legislature and did not offend any of the constitutional guarantees enshrined in the Constitution of India. It was submitted that the requisite notifications, copies of which are marked ‘E’ and ‘F’ had been published in the Government Gazettes dated 25-10-1962 and 29-3-1963 respectively and the contention of the petitioner in respect of their non-publication was not correct. It was reiterated that the unit of taxation as would be apparent from the perusal of the provisions of the Jammu and Kashmir Urban Immovable Property Tax Act is ‘the buildings and the lands’ and not the income derived therefrom. The rent at which the said unit, i.e, lands and buildings together with its appurtenances may be let out is only a means of ascertaining of arriving at the annual value of the property Lastly, it is averred that the basis of levy and charge of property tax is the annual value of the property and not gains and profits derived therefrom. The true nature and character of the impost is a tax on buildings and lands, their annual value is but a measure or standard adopted to ensure the justness and reasonableness of the levy. The contention, therefore, that the charge is unconstitutional is devoid of all force. It is submitted that the writ petition is misconceived and merits dismissal.

9. The petitioner was not represented and argued the petition himself.

10. The petitioner is the owner of a building situate at Rajbagh and the Assessing Authority, respondent No. 2 had called upon him to file return under the Jammu and Kashmir Urban Immovable Property Tax Act. Having failed to file the return he was required to pay Rs. 441 as property tax in respect of the building. The contention of the petitioner is that the Act which levied property tax was ultra vires the Jammu and Kashmir State Legislature. In order to appreciate the ground on which the vires of Jammu and Kashmir Urban Immovable Property Tax Act is called into question a brief reference to some of the provisions of the Constitution of India seems necessary. Article 246 of the Constitution of India reads as under:—

“246(1) Notwithstanding anything in Clauses (2) and (3), Parliament has exclusive power to make laws with respect to any of the matters enumerated in List I in the Seventh Schedule (in this Constitution referred to as the “Union List”).

(2) Notwithstanding anything in Cl. (3), Parliament, and subject to Clause (1), the Legislature of any State also, have power to make laws with respect to any of the matters enumerated in List 3 in the Seventh Schedule (in this Constitution referred to as the “Concurrent List”).

(3) Subject to Clauses (1) and (2), the Legislature of any State has exclusive power to make laws for such State or any part thereof with respect to any of the matters enumerated in List II in the Seventh Schedule (in this Constitution referred to as the “State List”).

(4) Parliament has power to make laws with respect to any matter for any part of the territory of India not included in a State notwithstanding that such matter is a matter enumerated in the State List”.

11. Union Parliament has power to make laws in respect of matters enumerated in List I in the Seventh Schedule to the Constitution and Entry 82 is included in that list. In other words, the matter contained in Entry 82 of List I Taxes on income other than agricultural income is within the legislative authority of the Indian Parliament. The charging Section 3 of the Urban Immovable Property Tax Act is not covered by Entry 82 of List I and clearly falls within the residuary field of the State, and the State Legislature was fully competent to enact the Act as would be evident even from Entry 49 of the State List in the Seventh Schedule to the Constitution. Entry 49 at the State List in the Seventh Schedule to the Constitution is in the following terms:—

“49. Taxes on lands and buildings.”

12. Though this entry is not applicable to our State yet our State has plenary residuary powers to legislate on matters which are not allotted to Union Parliament. It must also be conceded that if the subject-matter of tax falls within Entry 82 of the Union List and also Entry 49 of the State List the power of Union Parliament must prevail to the exclusion of the power of the State Legislature. Section 3 of the Jammu and Kashmir Urban Immovable Property Tax Act reads as under:—

“3. Levy of tax — (1) There shall be charged, levied and paid an annual tax on such buildings and lands situated in the rating area shown in the Schedule to this Act as may be specified by the Government by notification in the Government Gazette, at such rate not exceeding ten per centum of the annual value of such building and lands, as the Government may determine in respect of each such rating area:—

Provided that where the tax calculated on the annual value exceeds the difference between the said annual value and exemption limit, as referred to in Clause (c) of sub-section (1) or as fixed by the Government under sub-section (2) of Section 4 the tax leviable shall be equal to the said difference.

(2) The Government may, by notification in the Government Gazette from time to time add to, omit or vary any of the entries contained in the Schedule to this Act.

(3) The tax shall be paid by the owner of the buildings and lands in respect of Page: 108which it has been levied and in the case of transfer of property whether by sale, gift, exchange, mortgage, inheritance or otherwise the transferee of the said property shall be liable for the payment of any unpaid amount of tax outstanding on the date of transfer due in respect of the said property, but the transferee shall be liable only to the extent of the property acquired by him”. Section 5 of the impugned Act provides for ascertaining the annual value and reads as follows:—

“5. Ascertainment of annual value — The annual value of any land or building shall be ascertained by estimating the gross annual rent at which such land or building together with its appurtenances and any furniture that may be let for use or enjoyment with such building might reasonably be expected to be let from year to year, less

(a) any allowance not exceeding twenty per centum of the gross annual rent as the assessing authority in each particular case may consider reasonable rent for the furniture let with any such building:

(b) an allowance of ten per centum for the cost of repairs and for all other expenses necessary to maintain such building in a state to command such gross annual rent. Such deduction shall be calculated on the balance of the gross annual rent after the deduction, if any, under Clause (a);

(c) any land revenue actually paid in respect of such building or land; and

(d) any premium actually paid to insure against risk or damage to the property.

Provided that in calculating the annual value of any building or land under this section the value of any machinery in such building or on such land shall be excluded.”

13. The charging Section 3 purports to levy tax on buildings and lands and it clearly falls within Entry 49 of List II and if on examination it is found that the taxation on building does not fall under Entry No. 82 of List 1, then it will clearly come under the legislative competence of the State it is well settled that when there is an apparent conflict between the Central and State Lists the Court must try to ascertain the pith and substance or true nature and character of the conflicting provisions, and that, before the Act is declared ultra vires there should be an attempt to reconcile the two conflicting jurisdictions and only if such reconciliation proves impossible the impugn ed Act should be declared invalid. The petitioner contends that the tax does not properly fall within the residuary powers of the State and challenges the Act imposing the tax on the ground that it is a tax on income, though it is levied on buildings. This contention is that under Sec. 5 referred to above the tax is ascertained by finding the annual value of the property and that annual value is ascertained by estimating the gross annual rent at which such land or building together with its appurtenances and any furniture that may be let for use or enjoyment with such building, might reasonably be expected to be let from year to year. According to the petitioner the rent which accrues to the proprietor becomes income in his hands and, therefore, falls within the ambit of Entry 82 of List I in regard to which Union Parliament alone could legislate and not the State Legislature. The argument, in our opinion, is not forceful. There are many taxes on lands and buildings which do not involve a tax on income, such as, tax on area, on floor space or frontage or occupation and to say that these taxes would be taxes on income would be to disregard altogether the plain intention of the Legislature as is clear from the wordings of the statute itself. The main question for consideration is whether the impugned tax is a tax on income within the meaning of Entry 82 of List I or tax on building under Entry 49 of List II. The Privy Council and the Federal Court have laid down that in considering a question of this character the Court must have regard to the pith and substance of the tax which is attacked and not merely the form in which it may have been imposed. The argument of the petitioner is that the impugned tax in substance is a tax on income. In support of his argument he has tried to compare the means by which the tax is assessed. According to him on a perusal of Sections 3 and 5 of the Jammu and Kashmir Urban Immovable Property Tax Act it would appear that the basis of the tax is the annual value of the building and since the same basis is used under the Income Tax Act for determining the income, the tax levied by the impugned Act is in substance a tax on income. There appears to be some fallacy in this argument. Under the Income Tax Act, tax is levied on income whereas the impugned Act provides that there shall be an annual tax on buildings and lands situated in the rating area at such rate not exceeding ten per centum of the annual value of such buildings and lands. In many cases the annual value may be approximate to actual income but in quite a number of cases it might not. There may be great divergence between the annual value of property and the actual profits derived or received by the owner from it. It is possible to conceive of cases in which the property to be taxed does not actually yield any profit whatsoever, though every property must have some notional annual value. Lord Atkin in Gallahagher v. Lynn, 1937 AC 863 at p. 870 has observed:—

“It is well established that you are to look at the true nature and character of the legislation, Russell v. The Queen, (1882) 7 AC 829, the pith and substance of the legislation. If on the view of the statute as a whole, you find that the substance of the legislation is within the express powers, then it is not invalidated if incidentally it affects matters which are outside the authorised Page: 109field. The legislation must not under the guise of dealing with one matter in fact encroach upon the forbidden field. Nor are you to look only at the object of the legislator. An Act may have a perfectly lawful object, e.g, to promote the health of the inhabitants, but may seek to achieve that object by invalid methods, e.g, direct prohibition of any trade with a foreign country. In other words, you may certainly consider the clauses of an Act to see whether they are passed “in respect of” the forbidden subject”.

14. In re Section 3 of the Finance Act (Northern Ireland), 1934, 1936 AC 352, the question which arose was whether the provisions of Section 2 of the Finance Act (Northern Ireland), 1934 were beyond the powers of the Parliament of Northern Ireland. Section 3 of the Act of 1934 imposed a tax on the council of every county and county borough, and the tax was computed on the basis of the rateable value of the county council or county borough. There was no dispute in that case that the “rateable value” corresponded to the “annual value” as understood in the Income Tax Act, but it was held that the mere fact that the basis of the tax was rateable or annual value was not enough to make it a tax on income. Lord Thankerton, who delivered the judgment in that case, pointed out that

“it is essential character of the particular tax charged that is to be regarded, and the nature of the machinery, often complicated, by which the tax is to be assessed is not of assistance except in so far as it may throw light on the general character of the tax”.

15. The annual value used in Section 5 of the impugned Act is after all a mere expression and what we are concerned with is not the mere expression but with its meaning and scope in relation to actual income. The charging section in clear terms levies not tax on income, but a tax on buildings and lands. We must look not to the mere form but to the substance of the levy. There is, however, nothing in the impugned Act to show that there was any intention on the part of the Legislature to tax the income of the owner from the building. It is true that the annual value was used as the basis but it was very different from the annual value which may be used for getting at true profits or income.

16. In 1901 AC 26, the question arose whether tax paid on the rents and profits of land under Schedule A was properly speaking income-tax. In dealing with this question Lord Macnaghten observed:

“Income-tax, it I may be pardoned for saying so, is a tax on income. It is not meant to be a tax on anything else. It is one tax, not a collection of taxes essentially distinct. There is no difference in kind between the duties of income-tax assessed under Schedule D and those assessed under Sch. A of any of the other Schedules of charge. One man has fixed property, another lives by his wits; each contributes to the tax if his income is above the prescribed limit. The standard of assessment varies according to the nature of the source from which taxable income is derived”.

17. It may be mentioned here that the mode of assessment does not determine the character of a tax. The annual value may be the basis of assessment of income-tax, it may be the basis of assessment of rate, such as, ordinary municipal rates which are neither taxes on income nor tax on property of a person but a charge on the occupier. It is impossible therefore to say that the employment of the annual value as the measure of the impugned tax has any indication that it is a tax on income. It is clear therefore that the mode or the machinery employed for ascertaining the tax does not determine the character of a tax. It is the essential nature of the tax which has to be looked at, and it is unnecessary to travel beyond the taxing statute for the purpose of construing the nature of the tax. The charging section in the present case in clear terms levies not a tax on income but a tax on buildings and lands.

18. The petitioner tried to argue that Article 14 of the Constitution of India was contravened by levying tax on the building but he has not been able to show that the tax purports to impose on the same class of properties similarly situated an incidence of taxation which leads to obvious inequality.

19. Great stress was laid on the fact that the notifications were not issued and published in the Government Gazette as required under Section 3 of the impugned Act. The counsel appearing for the respondent has drawn our attention to these notifications SRO 314 dated 25th October, 1962 and SRO 140 dated 29th March, 1963. These have been published in the Government Gazettes dated 25-10-1962 and 29-3-1963 respectively.

20. The points raised this petition by the petitioner are covered in principle by some authorities of the Indian High Courts. Reference may be made to AIR 1963 Andh Pra 379, AIR 1962 Ker 110, AIR 1960 All 136 (FB) and AIR 1962 SC 1563. Therefore in our opinion the petition cannot succeed. But before parting with this case we must record our appreciation of the ability and ingenuity with which the case was put before us by the petitioner.

21. For the reasons given above we are of the view that the Jammu and Kashmir Urban Immovable Property Tax Act is not ultra vires the State Legislature and is legally valid. This petition is, therefore dismissed Page: 110but in the circumstances we make no order as to costs.

22. J.N Bhat, J.:— I agree.

AKJ/D.V.C

23. Petition dismissed.