Petitioners, the Head Officers of State Bank of Mysore, Vijaya Bank, UCO Bank and State Bank of India situate at Bangalore, through their heads like Chief Manager, General Manager, Assistant Manager and Zonal Manager, are seeking for a writ of certiorari to quash the explanation to S.2(h) of the Karnataka Tax on Professions, Trades, Callings & Employment Act, 1976 and, to quash the amendment inserted during 2003 with effect from 1.4.2003 as violative of Art.276(2) r/w Art.367(1) of the Constitution and S.3(42) of the General Clauses Act in so far as petitioners are concerned.

By the amendment to S.2(h) of the Karnataka Tax on Professions, Trades, Callings & Employment Act, 1976 (‘1976 Act’ for short), the definition of ‘person’ was expanded which covers each branch of the company, as such interpreting, the respondent issued a proposition notice calling upon every Branch of the petitioners to pay professional tax. As such, petitioners have filed these petitions questioning the validity of the 2003 Amendment contending that respondents have no locus standi to levy tax without the authority of law.

In this regard, petitions were filed earlier before this Court for quashing of the proposition notices issued and this Court has quashed those notices. As against which, the explanation was inserted on 1.8.2008 with retrospective effect i.e., from 1.4.2003.

The main contention of the petitioners is, they are covered by the provisions of the Banking Regulation Act, 1949 falling within Entry 24 of the Schedule i.e., Banking Companies as defined in the Banking Regulations Act, 1949. Subsequent to the amendment, respondent authority demanded for payment of professional tax from each of the Branches and also proposed interest and penalty with effect from 2003.

According to the petitioners, under the Banking Regulation Act, 1949, ‘banking company’ has been defined under S.5(c) as any company which transacts the business of banking in India. ‘Company’ has been defined under S.5(d) as any company as per

S.3 of the Companies Act, 1956, and includes a foreign company as per S.591 of the Companies Act, 1956, S.5(n-d) defines a ‘subsidiary bank’. As per S.51 of the banking Regulation Act, subsidiary banks are partly subjected to provisions of this Act. Under the provisions of the Banking Regulation Act, ‘banking companies’ and ‘subsidiary banks’ are different entities. The definition of ‘banking company’ does not include any ‘subsidiary bank’ as held in the case of State Bank of Travancore Vs Khan – AIR 1981 SC 1744. It is also contended, except State Bank of India, all other banks are subsidiary banks under the State Bank of India and they cannot be treated as independent banking companies. The auditors appointed by the Reserve Bank of India, audits the books of account maintained and also petitioner banks have been paying income tax. Petitioners have various branches established all over India having their head office at Bangalore and Mumbai respectively. Based on the permission granted by the Reserve Bank of India, the branches have been opened by the petitioners, S.3 of the 1976 Act enables the levy and collection of tax on profession, trade, calling or employment which are conducted within the State of Karnataka. As per S.3(2), a person who exercise any profession or calling or is engaged in any trade or holds any appointment in any manner in the State, shall be liable to pay tax at the rate mentioned in the corresponding Entry in the third column of the Schedule. The Act came into force with effect from 1.4.1976. The word ‘person’ has been defined as per S.2(h) of the 1976 Act as –

S.2(h) – ‘Person’ means any person who is engaged in any profession, trade, calling or employment in the State of Karnataka and includes a Hindu Undivided Family, Firm, Company, Corporation or other Corporate Body, any Society, Club or Association, so engaged but does not include any person who earns wages on a casual basis.

An Explanation is inserte