JUDGMENT 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.
3. 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.....".
4. 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.
5. Coming to the merits, I must first point out that the existence of liability to pay circumstances and property tax raises one question and the quantum of the tax payable by the respondents, another question. Whether the respon-dents are liable to pay the tax is to be decided on the basis of certain provisions of law; if they are held to be liable the other question will arise--to what amount of lax they should be assessed ?--and will have to be decided on the basis of other provisions. There should be no confusion between, mixing up of, the provisions in regard to the liability and the provisions in regard to the quantum. Under Rule 3 (3) of the Rules regarding the limitations, restrictions, etc., every person residing or carrying on business within the limits of a town area is liable to pay the circumstances and property tax. This means that the liability arises either from residence, or from carrying on business, within the limits of a town area. Carrying on business includes carrying on any profession or calling or other practice or activity such as teaching other than service under the Government or a local body. The respondents are in service in colleges but the colleges are not maintained by the Govern-
ment or a local body and they are, therefore, not in service under the Government or a local body. On account of the service, they carry on business within the meaning of Rule 3 (1), but that is not enough. In order to be liable to be taxed they must curry on business within the limits of the town area. As their business consists of serving, the place of service is the place of their business. The place of service is admittedly outside the limits of the town area and, therefore, though they carry on business they do not cany it on within the limits of the town area and are not liable on this ground. They, however, reside within its limits and are, therefore, liable on this ground. The assessing authority has, therefore, jurisdiction to impose the tax upon them. It is for it to decide the quantum of the tax to be imposed upon them; it has the exclusive jurisdiction to assess them, i.e., to determine the quantum of the tax to be paid by them. When exercising the jurisdiction it is governed by the Town Areas Circumstances and Property TAX (Assessment and Collection) Rules. It must assess tax separately on the circumstances, and on the property, of every person liable to pay the tax.
6. The tax on the circumstances is on "all the activities. . . within the limits of the town area". The respondents admittedly do no income-yielding activity within the limits; all that they do within the limits is to reside and make journies to and from the colleges. This activity not yielding, or capable of yielding, any income has no assessment or money value at all. Residence within the limits makes them liable but makes them liable only if their circumstances have any monetary value or if they have any property situated within the limits. If they have no property and carry on no activity which may have any money value though they are liable as assessees the tax which may be imposed upon them is nil. They are no worse than other assessees whose total taxable income is less than Rs. 200 per annum.
7. The only property that they own within the limits of the town area is tenancy rights in the houses in which they reside. They do not own the houses. Now the portion of the tax referable to the property is payable in respect of "all..... immovable property owned by him." Rules 6 and 7 simply require the immovable property to be considered in determining the' amount of the tax to be paid for it; they do not lay down what amount or figure in respect of it should be considered in determining the amount of the tax. The amount of the tax must necessarily be determined on the basis of some other amount but what that other amount is, is nowhere expressly stated in the Rules. Since it is a tax on properly and the liability arises from owning the property evidently the value of, or the income (actual or probable) from, the property should be the basis of the amount of the tax; the amount of the tax cannot logically be based on any other amount or figure in respect of the property. Under Rule 3 (2) of the Rules regarding the limitations, restrictions, etc., the tax is to be imposed on a person whose total income is Rs. 200 or more; this suggests that the quantum of the tax de-
pends upon the income, i.e., the circumstances and the property of a person liable to pay the tax have to be converted into income. The respondents derive no income whatsoever from the tenancy rights; the only benefit that they derive is the right of residence in the houses on payment of rent. It is not known at all whether they had been taxed on this property, e.g., tenancy rights and if so how they have been valued and what they are supposed to yield by way of income. The assessment order has not been produced before us. No income is actually derived from this property; as regards income that might be derived from it, it is not known whether the tenancy rights are transferable. Nothing is known about the terms of the leases. Under section 108 of the Transfer of Property Act the respondents have a right to transfer the tenancy rights provided there is nothing in the contract of tenancy to the contrary. It their lessors have prohibited them from transferring the tenancy rights no income is likely from their possessing them. Even if there is no prohibition, if the houses are governed by the Rent Control and Eviction Act they cannot transfer the tenancy rights without the permission of the District Magistrate and their lessors. The only income possible from their possessing the rights is if they can transfer them. It seems that what is contemplated by "immovable pro-perty owned" is immovable property which yields or can yield income. Tangible immovable property can be deemed to yield income always and even intangible immovable property can be said to yield income provided it can be transferred.
8. Taxable income on which alone the tax can be based is income accruing within the limits of the town area; see Explanation I to Rule 3. No income actually accrues to the respondents from the tenancy rights and it is not known that they are transferable and income can accrue to them. As regards the teaching, it does yield income but it cannot be said to accrue to them within the limits of the town area. It accrues to them from the teaching and the teaching is done outside the limits. It can be said to accrue to them at the place of the teaching and not at any other place. The place of teaching is one place that can be taken into consideration and there are thousands of other places in which also they do one thing or another. It is logical to hold that the place of teaching is the place of accrual because the accrual is from the teaching itself but there is no justification for selecting the place of residence from the remaining places and saying that it is the place of accrual. As far as the teaching as the source of accrual is concerned it does not depend upon the place of residence and there is no warrant for saying that the place of residence is, and any other place is not, the place of accrual of the income from the teaching. In Iqbal Bahadur Singh v. Town Area Committee, (Spl. Appeal No. 490 of 1959, dated 27-10-1959 (All)), (infra) the facts were similar but the question whether income from teaching accrues at the residence or at the place of teaching was not raised before, or decided by, the learned Judges. What was contended before them was that the teacher was not liable to be taxed at all and not that he had no circumstances and no property on the basis of income from which any tax could be imposed upon him. The learned Judges simply decided that he was liable because he resided within the limits of the town area and did not go into the question whether he had any circumstances or property within the limits of the town area.
9. "Accrue" means, according to Murray's Dictionary "to arise or spring as a natural growth or result". According to I Words and Phrases p. 594 "Accrue" means "coming as a natural accession or result; arising in due course". Tax accrues when all events have occurred which fix the amount of tax and determine the taxpayer's liability to pay the tax; vide Art Metal Constr. Co. v. U. S., Ct. Cl., 17 F. (Supp), 854, referred to in 1 Words and Phrases "accrue", 594. It is stated at pp. 594, 596 and 601 that "accrue" means "due and payable", "the possession of a present enforceable right", "fixed" or "realised". The words "accruing or arising" occurring in Section 4 (1) of the Income-tax Act 1922 were interpreted by Marten, C. J. and Blackwell, J. in Commissioner of Income-tax v. Bansilal Motilal, AIR 1930 Bom 381, to indicate "some origin or source of growth for the income in question" as opposed to actual receipt. The question before the learned Judges was whether interest on a Promissory Note issued by the Government of India and ordinarily payable in India but made payable in Hyderabad which was outside British India by special endorsement accrued or arose in British India and was answered in the affirmative. They took into consideration the origin or source of the interest and stated that actual place of receipt was irrelevant. The same words came up for interpretation before Rajagopalan and Balakrishna Ayyar, JJ. in Ramaswami Naidu v. Commissioner of Income-tax, Madras, AIR 1959 Mad 126. They pointed out that 'accrues", "arises" and "is received" are three distinct terms, that the words "accrues" and "arises" "are used in contradistinction to the word 'receive' and indicate a right to receive" and represent "a state anterior to the point of time when the income becomes receivable and connote a character of the income which is more or less inchoate" (p. 129). They said at the same page:--
"The words 'arising or accruing' are general words descriptive of a right to receive profits.
..... income may, accrue to an assessee without the actual receipt of the same. It the assessee acquires a right to receive the income, the income can be said to have accrued to him though it may be received later on its being ascertained. The basic conception is that he must have acquired a right to receive the income. There must be a debt owed to him by somebody."
Accordingly the income from the teaching accrued to the respondents in the colleges and not at the place of their residence. The source or origin or the income was the teaching in the colleges; the place of residence had nothing whatsoever to do with it. The liability was upon the college authorities to pay them and that liability was incurred where the colleges are situated. They, as debtors, may be bound to seek the respondents as the creditors and pay them but they can be paid at any place and not only at the place of their residence. Their liability to pay them is not connected in any manner with the respondents, places of residence. The question that arose before Srivastava, Ag. J. C. and Ziaul Hasan, J. in D. B. C. Madge v. Municipal Board, Sitapur, AIR 1937 Oudh 468, was whether Madge, who was living within the municipal limits of Sitapur but worked in an office situated outside the limits, was liable to pay the municipal circumstances and property tax. The decision of the learned Judges that he was liable as an assesses supports the view that I have taken that the respondents were liable to pay the circumstances and property tax on account of their residence. Their decision that the income from the service was earned by, or arose to, Madge at his place of residence within the municipal limits is based upon an interpretation of a proviso to R. 3 of the Sitapur Municipal Board Assessment Rules. The proviso required earning, or arising of, the income within the limits and not accrual, as in the case before us. Madge was a Superintendent of Police of Sitapur district; though his office was situated outside the municipal limits his duties were not confined to working in the office and he could exercise all his powers and functions at any place within the municipal limits. He earned his salary not on account of the work that he did in his office but on account of his performing his duties and functions as a Superintendent of Police throughout the district. So he could be said to have earned the income arising from his salary at his place of residence but the same cannot be said of the respondents.
10. The respondents thus have neither income-yielding circumstances nor income-yielding immovable property within the limits of the town area and, therefore, the amount of tax to be imposed upon them is nil.
11. The respondents have not produced the assessment orders and it is not known to what amount each of them has been assessed on account of circumstances and to which amount on account of property. They have stated in their plaint only the total amount of the tax to which each of them has been assessed. They have not stated whether it is on account of their circumstances or on account of their property or partly on account of their circumstances and partly on account of their property.
12. The prescribed authority had the exclusive jurisdiction to determine the tax payable by the respondents on account of their circumstances and the tax payable by them on account of their property. Its decision fixing the amounts at particular figures cannot be called in question in any Court. It cannot be called in question on any ground. If it can be called in question it is on the footing that it is not a decision of the prescribed authority within the meaning of Section 18 (4), i.e., is not a decision against an assessment order passed under the provisions of the Act and the Rules. If a person resides or carries on business within the limits of a town area he is liable to pay the circumstances and property tax. If an assessing authority takes his circumstances and property into consideration and fixes the amounts of the tax payable by him on his circumstances and of the tax payable on his property, then regardless of what circumstances and property it finds to be of the assessee and of the monetary valuation which it attaches to them, it acts within the Act and the Rules and its order cannot be called in question in any Court. It does everything that is required by the Act and Rules and nothing that is not. It acts within its jurisdiction and cannot be said to act without jurisdiction or in excess of its jurisdiction even if it wrongly decides that certain circumstances or properly should be taken into consideration or assigns incorrect or improper valuations to them. Even if it decides that the assessee owns or possesses certain circumstances or property though in fact he does not, it acts within its jurisdiction and not without jurisdiction or in excess of it. Any erroneous finding given by it on the question whether a circumstance or property is owned or possessed by the assessee or about its monetary valuation does not divest it of the jurisdiction. The bar imposed by Section 18 (4) operates and the correctness of its decision in regard to these matters cannot be callec in question. In District Board of Farrukhabad v. Prag Dutt, AIR 1948 All 382, a Full Bench held that if a District Board imposes circumstances and property tax exceeding the limits fixed by the Professions Tax Limitation Act (20 of 1941) it is an illegal imposition and a civil Court has jurisdiction to interfere, notwithstanding Section 131 of the District Boards Act laying down that "no objection shall be taken to a valuation or assessment, nor shall the liability of a person to be assessed or taxed be questioned in any other manner or by any other authority than as provided in this Act or in the United Provinces Local Rates Act, 1914". Under the Professions Tax Limitation Act, Section 2, no District Board can impose tax exceeding Rs. 50 per annum on professions, trades, callings or employments. Malik, C. J. observed at p. 385:--
In the instant case we are not concerned with any want of jurisdiction of an assessing authority arising out of the Professions Tax Limitation Act and consequently the case is no authority for the proposition that if an assessing authority commits an error in taking into consideration certain circumstances or property or giving certain valuation to them it acts without jurisdiction. Bind Basni Prasad, J. stated at p. 389 that the circumstances and property tax under the District Boards Act is a composite tax consisting of the tax on professions, trades, callings and employments and tax on lands and buildings. The same is true of the circumstances and property tax imposed under the Town Areas Act. Malik, C. J. at p. 386 distinguished between circumstances and property tax and income-lax on the basis that the latter can be levied only if there is income while the former can be levied even without any income having been earned. What is meant is that actual earning of income is not essential for the liability; it is enough if the circumstances or the property can yield income. Rule 3 of the Rules regarding the limitations, restrictions, etc., makes it clear that the tax is imposed on "taxable income", i.e., income from the circumstances and property. Explanation 1 to the rule makes it clear that it is enough if income accrues. Special Appeal No. 490 of 1959, decided on 27-10-1959 (All) by Mootham, C. J. and Raghubar Dayal J. was very similar in facts to instant case. The learned Judges held that the teachers were liable to pay the circumstances and property tax on account of their residence; this supports the view that I take.
13. The appellant contended before the trial Court, but not before the appellate Court, that the suit was barred. It has repeated its contention before us and has a right to do so even though it did not urge it before the lower appellate Court. It raises a question of jurisdiction over the suit itself and being a question of law can be allowed to be raised even for the first time in second appeal. The appellant is not estopped from raising it by its mere failure to raise it before the lower appellate Court. Sec-tion 18 (4) is the only provision relied upon by the appellant in support of its contention that the suit was barred but what is barred is the calling in question of the decision of the appellate authority on an appeal against an assessment order. It is not understood why the legis-lature did not bar the calling in question of the order assessing or levying any tax. Did it contemplate that a suit is barred if an appeal is preferred from the assessment or levy and is maintainable if no appeal is preferred? There would be no logic or reason in barring the suit when there has been an appeal and permitting it when there has been no appeal or the order of the assessing authority and not of the appel-late authority, is called in question. If that were the law an assesses would generally file a suit instead of appealing to the prescribed authority. A question might arise whether even when an appeal has been filed and dismissed a suit will lie to call in question the assessment order passed by the assessing authority; it might be argued that by Section 18 (4) it is only the appellate authority's decision that cannot be called in question and not the assessment order by the assessing authority. I am of the opinion that if there has been an appeal not only the appellate authority's decision but also the assessing authority's order of assessment cannot be called in question in any Court. An appeal from an order passed in a proceeding is a continuation of the proceeding itself; the proceeding is deemed to be pending in the appellate Court. Consequently when an appeal is preferred from an assessment order the assessment proceeding is deemed to continue before the appellate authority and to be terminated by its decision. If the appellate authority's decision is same as that of the assessing authority the latter merges in the former and it is the former that is to be given effect to; if the former is contrary to the latter the latter is superseded by the former and loses all force. Whatever might be said when there has been no appeal, when there has been an appeal the appellate authority's decision in which merges the assessing authority's decision cannot be called in question in any Court. The suit instituted by the respondents completely ignores the fact that the respondents preferred appeals against the assessment orders and thai they were dismissed by the appellate authority. Their suit does not call in question the appellate authority's decision. They cannot, however, get over the bar imposed by Section 18 (4) simply by ignoring the appellate authority's decision. Another way of looking at the matter is that the assessment orders having merged in the decision of the appellate authority are no longer effective or operative and no useful purpose would be served by declaring them to be invalid. The respondents are now liable to pay the tax by virtue of the decision of the appellate authority and it is immaterial if the assessing authority's order are held to be invalid. Thus the suit of the respondents fails on the ground that it involves calling in question the decision of the appellate authority or that a declaration to the effect that the assessment orders passed against them are illegal would be of no avail because they have merged in the decision of the appellate authority which is not challenged in the suit.
Jurisdiction is either territorial, or pecuniary or in respect of the subject-matter, .... If.... me appropriate authority has been given jurisdiction to determine the nature of the transaction and proceed to levy a tax in accordance with its decision on the first issue, then the decision on the first issue cannot be said to be a decision on a collateral issue, and even if the said issue is erroneously determined by the appropriate authority, the tax levied by it in accordance with its decision cannot be said to be without jurisdiction (p. 622 of STC): (at p. 1947 of AIR).
.....
The appropriate authorities have been given power in express terms to examine the returns submitted by the dealers and to deal with the question as to whether the transactions entered into by the dealers are liable to be assessed.....all questions pertaining to the liability of the dealers to pay assessment in respect of their transactions are expressly left to be decided by the appropriate authorities under the Act as matters falling within their jurisdiction. Whether or not a return is correct; ..... what is the true and real extent of the transactions which are assessable; all these..... had to be determined by the appropriate authorities themselves..... The whole activity of assessment beginning with the filing of the return and ending with an order of assessment, falls within the jurisdiction of the appropriate authority and no part of it can be said to constitute a collateral activity not specifically and expressly included in the jurisdiction of the appropriate authority as such. (624 of STC): (at p. 1948 of AIR). ..... the question about the taxability of
a particular transaction falls within the jurisdiction of the appropriate authorities exercising their powers under the taxing Act, and their decision in respect of it cannot be treated as a decision on a collateral fact the finding on which determines the jurisdiction of the said authorities." (625 of STC): (at p. 1949 of AIR). The assessing authority had jurisdiction to decide what circumstances and what property of the respondents should be taken into consideration and what should be the taxable income from these sources. Its decision on these questions, having been given in the exercise of its jurisdiction, cannot be called in question in any court. In the cases of Prag Dutt, AIR 1948 All 382 (supra) and Devi Prasad v. Municipal Board, Kanauj, AIR 1949 All 741 it was held by this Court that a suit for a declaration that assessment of a tax in contravention of the provisions of the Professions Tax Limitation Act is invalid is not barred by Section 131 of the District Boards Act. In Municipal Board Mau Nath Bhanjan v. Raghunath Prasad, AIR 1954 All 121, Malik, C. J. and Chaturvedi, J. followed the above decisions. The bar imposed by the Professions Tax Limitation Act is not exactly similar to the bar on taxing a certain transaction; the former raises the question of jurisdiction but not the latter, Consequently the decision that a suit to contest an assessment of tax in contravention of the provisions of the Professions Tax Limitation Act is not barred does not involve the decision that a suit to contest an assessment of circumstances and property tax after taking into consideration circumstances or property not existing or after erroneously valuing the income derived, or likely to be derived, from them or wrongly basing the amount of the tax on some facts other than the income derived, or likely to be derived, relating to them, also is barred.
15. The appeal should be allowed and the respondents' suit should be dismissed with costs throughout.