Property tax classification upheld as provincial levy on lands and buildings, with collection challenge barred under constitutional revenue restrictions.

The Urban Immovable Property Tax under Part VI of the Bombay Finance Act, 1932, as amended in 1939, was held to be a valid provincial levy because its essential character was a tax on lands and buildings within the provincial field; annual letting value was only the measure of assessment and did not convert it into a tax on income or on the capital value of assets. The challenge to the collection machinery was also held barred by section 226 of the Government of India Act, 1935, once the levy itself was upheld, since the objection then went only to the mode of collection. The tax was therefore sustained as intra vires.

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Issues: (i) whether the Urban Immovable Property Tax imposed by Part VI of the Bombay Finance Act, 1932, as amended in 1939, was within the legislative competence of the Provincial Legislature and fell within the provincial entry relating to taxes on lands and buildings, or whether it was in substance a tax on income or on the capital value of assets falling within the federal field; (ii) whether the challenge to the machinery for collection of the tax was barred by section 226 of the Government of India Act, 1935.

Issue (i): whether the Urban Immovable Property Tax imposed by Part VI of the Bombay Finance Act, 1932, as amended in 1939, was within the legislative competence of the Provincial Legislature and fell within the provincial entry relating to taxes on lands and buildings, or whether it was in substance a tax on income or on the capital value of assets falling within the federal field.

Analysis: The charging provision imposed the tax on lands and buildings, with annual letting value used only as the measure of assessment. The Court applied the pith and substance doctrine and held that the essential character of the impost was a property tax on lands and buildings, not a tax on income. The fact that annual letting value was adopted, and that limited concessions and remissions were provided, did not convert the impost into a tax on income. Nor was the levy a tax on the capital value of assets, since it was not directed to the total capital value of a person's assets or to a capital levy.

Conclusion: The tax was held to be intra vires the Provincial Legislature and valid.

Issue (ii): whether the challenge to the machinery for collection of the tax was barred by section 226 of the Government of India Act, 1935.

Analysis: Section 226 was held inapplicable where the very validity of the impost was in question, because an invalid levy would not be a matter concerning revenue. Once the tax was upheld as valid, the objection directed only to the manner of collection fell within the bar, and no separate relief could be granted on that aspect.

Conclusion: The collection-related challenge was held to be barred by section 226 of the Government of India Act, 1935.

Final Conclusion: The suit failed in its entirety, and the impugned tax was upheld as a valid provincial levy on lands and buildings.

Ratio Decidendi: A levy whose essential character is a tax on lands and buildings remains within the provincial field even if annual letting value is used as the measure of assessment, and it does not become a tax on income or capital merely because its incidence or machinery resembles income-tax assessment.

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