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B.COM. 2nd YEAR/ IV SEMESTER DATE: 24/04/2021

SUB: INCOME TAX- Law and Practice UNIT-I NOTE-04
TOPIC- DEFINITION OF TAX AND FEATURES OR CHARACTERISTICS OR
ELEMENTS OF A TAX

DEFINITION OF TAX
Tax is defined by different experts, highlighting its different aspects.

Prof. E.A.R. Seligman says: “A Tax is a compulsory contribution

from the person to the state to defray the expenses incurred in the
common interest of all without say reference to the special benefits
conferred.” This definition clearly brings out the basic features of tax.

According to Hugh Dalton, “A tax is a compulsory charge imposed

by a public authority, irrespective of the exact amount of service rendered
to the tax payer in return and not imposed as a penalty for any legal
offence.”

DeMarco’s definition of tax stresses on the productivity aspect. He

says “A tax is a share of the income of citizens which the State
appropriates in order to procure for itself the means necessary for the
production of general public services.”

FEATURES OR CHARACTERISTICS OR ELEMENTS OF A TAX

From the above definitions of tax, several features and
characteristics of Tax can be deduced. They are briefly explained below:

1. Tax is a legal collection: A tax has “statutory sanction”. It cannot

be imposed arbitrarily. Certain legal requirements are to be followed
in imposing a tax.

2. Tax is a personal obligation: A tax is a personal obligation and it

creates a personal responsibility on the tax payer. No citizen should
think of evading tax. Every citizen should pay his taxes.

3. Tax is a compulsory contribution: It is a compulsory contribution

to the State by citizens, which may be paid willingly. State has the
right to tax citizens. Nobody can refuse to pay taxes claiming that he
does not derive any benefit from payment of tax. Refusal to pay tax
is a punishable offence.

4. Element of sacrifice: In the payment of taxes, an element of

sacrifice is involved because they are paid for the general interest of
the community.

B. Com. 2nd Year/ IV Semester, Dept. Of Commerce, JNRM, Port Blair-744104

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5. Tax is imposed by Government alone: Govt. alone has the

authority to levy taxes. Even if the management of a Temple or Trust
makes it compulsory for every devotee or family to pay a specified
amount, it cannot be termed as tax.

6. Revenue collection: The power of taxation is used to raise sufficient

revenues for the State, apart from achieving other collateral
objectives.

7. Socio-economic objectives: Modern governments use tax as an

instrument to achieve structural changes and also realizing socio-
economic objectives.

8. Tax is a contribution for the common benefits of the society: It

is levied for the common good of the society without any regard to
benefit to particular individuals. Tax is intended to use the proceeds
for the benefits of the community, to render public services etc., and
not intended for benefiting any one or a group of individuals.

9. Benefits is not a condition for tax payment: The tax payer is not
promised any specific benefit. Taxes are paid because they are
compulsory and the proceeds used for common good. Benefit derived
by a tax payer may not be proportionate to the tax paid.

10. Tax is not imposed to realize cost of benefit: Tax is not a

realization of cost of service of benefit. A poor person may be
benefited most by way of public expenditure without payment of any
tax.

11. Taxes may be assessed on capital or Income but they are paid
out of income.

12. A tax may be imposed on a commodity or property or individual. But

tax is actually paid by individuals.

B. Com. 2nd Year/ IV Semester, Dept. Of Commerce, JNRM, Port Blair-744104