Judgment

BEG, C.J.I. :- The only question decided by the High Court of Punjab and Haryana in the cases now before us by special leave was whether S. 3 of the Punjab Professions, Trades, Callings and Employments Taxation Act, 1956 (hereinafter referred to as the Act) restricts taxation upon persons in Punjab to the income made within the State of Punjab. This section reads as follows:-

"3. Levy of tax- Every person who carried on trade either by himself or by an agent or representative, or who follows a profession or calling, or who is in employment, either wholly or in part, within the State of Punjab, shall be liable to pay for each financial year or a part thereof a tax in respect of such profession, trade, calling or employment:

Provided that the purpose of this section a person on leave shall be deemed to be a person in employment."

2. Section 4 of the Act provides for taxation in accordance with a schedule annexed to it. Section 5 lays down the manner of determination of the tax which is to be assessed on the total "gross income". The term "total gross income" is defined by S. 2 of the Act as "aggregate gross income derived from various professions, trades, callings and employment." The Legislature amended this provision by adding in 1962, "Whether such profession or calling is followed, trade is carried on or employment is, within or outside the State of Punjab" to the definition. The annexed schedule, conformably with the provisions of Art. 276 of the Constitution does not tax any person, under the scale laid down in the schedule, to an extent more than Rs. 250/- per annum. Nevertheless, it is clear, by reading the provisions of S. 5 and S. 2 together, that the determination in accordance with the scale laid down in this schedule of the aggregate gross income on which tax is assessed, will have to take into account the income of the individual concerned earned both inside and outside Punjab.

3. The result is that the only condition for making a person taxable under the Act is that he must also have some profession, trade, calling or occupation which is to be taxed, which he carries on within the State of Punjab. It does not matter whether that person is employed or carries on the same or some other profession, trade, or calling outside Punjab also. Section 3 is only meant to indicate that the person who is to be made liable has carried on some profession, calling, trade, or occupation within Punjab. It does nothing more. It has nothing to do with the calculation of the aggregate amount of the tax to be levied. That is dealt with by S. 5 read with S. 2 (b) of the Act as amended. And, in determining the amount of tax which an assessee has to pay or the grade in which he falls, the amount he makes outside must also be added to what he makes inside Punjab. His total gross income determines only his grade or amount of tax he has to pay. His subjection to a profession or calling tax depends only on the fact that he carries on some business or has some trade or calling "within the State of Punjab". The words qualifying the whole or a part of the calling which determines only the taxability of the person cannot possibly, on the language used, fix also the grade of taxation in which the individual falls.

4. We, however, find that the Punjab High Court, in accordance with a view it had been consistently taking even before the amendment of Section 2 (b) of the Act, has held that, in determining the aggregate gross income, only the income made within Punjab by the calling, occupation, trade, or profession carried on must be taken into account. We think that this view of the Punjab High Court is based on a very forced interpretation given to the clear words of S. 3 of the Act, probably because it thought it necessary to do so to make the effect of the section correspond to provisions of Art. 245 (1) of the Constitution. We think that the Punjab High Court has clearly erred in interpreting S. 3 in such a way as to make Sec. 2 (b), read wit