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PATNA HIGH COURT
V.Ramaswami and R.K.Choudhary JJ.
Calcutta Chemical Co.Ltd.
Versus
Bhagalpur Municipality
Miscellaneous Judicial Case No. 835 of 1960 ;
Decided On : FEBRUARY 15, 1962
{'KEYWORD': 'Professional Tax', 'SUBJECT': 'Validity of Professional Tax Imposed on Joint Stock Companies', 'ACT SECTION LIST': ['Sec.82 (1) (ff)', 'Sec.150a', 'Fourth Schedule', 'Article 226', 'Article 246', 'Article 276 (1)'], 'SUMMARY': 'The court upheld the constitutional validity of Sec.82 (1) (ff) and the Fourth Schedule of the Bihar and Orissa Municipal Act, which imposed a professional tax on Joint Stock Companies. The court held that the tax was not a tax on the share capital of the company but a tax on the trade of the company. The court also held that there was no conflict or repugnancy between the provisions of Sec.150a and the Fourth Schedule of the Act.'}
Fact of the Case:
The petitioner, a Joint Stock Company, challenged the imposition of professional tax on it under the provisions of Sec.82 (1) (ff), read with Sec.150a, of the Bihar and Orissa Municipal Act. The petitioner argued that the tax was unconstitutional as it fell within Entry No.86 of List I of the Seventh Schedule of the Constitution, which deals with taxes on the capital value of companies. The petitioner also argued that the Fourth Schedule of the Act was in conflict with the first proviso to Sec.150a of the Act and was, therefore, void and illegal.
Finding of the Court:
The court held that the tax imposed by Sec.82 (1) (ff) of the Act and the Fourth Schedule was a tax on the trade of the company and not a tax upon the share capital of the company. The court also held that there was no conflict or repugnancy between the provisions of Sec.150a and the Fourth Schedule of the Act.
Issues: 1. Whether the tax imposed by Sec.82 (1) (ff) of the Bihar and Orissa Municipal Act and the Fourth Schedule was a tax on the trade of the company or a tax upon the share capital of the company. 2. Whether there was any conflict or repugnancy between the provisions of Sec.150a and the Fourth Schedule of the Act.
Ratio Decidendi: The court held that the tax imposed by Sec.82 (1) (ff) of the Act and the Fourth Schedule was a tax on the trade of the company and not a tax upon the share capital of the company. The court also held that there was no conflict or repugnancy between the provisions of Sec.150a and the Fourth Schedule of the Act. The court relied on the principle that the pith and substance of the legislation must be considered in determining its validity, and that the legislation must not encroach upon the forbidden field under the guise of dealing with one matter.
Final Decision: The court dismissed the petitioner's application for a writ in the nature of certiorari under Article 226 of the Constitution.
1. In this case the petitioner has obtained a rule from the High Court calling upon the respondents to show cause why the order of the Bhagalpur Municipality, respondent No.1, imposing professional tax on the petitioner under the provision of Sec.150a, read with Sec.82 (1) (ff), of the Bihar and Orissa Municipal Act, should not be quashed by grant of a writ in the nature of certiorari under Article 226 of the Constitution. Cause has been shown by the learned Government Advocate on behalf of the State of Bihar to whom notice of the rule was ordered to be given. Cause has also been shown by learned counsel on behalf of respondents 1 and 2.
2. On the 6th May, 1958, the petitioner received a notice of demand of professional tax of Rs.750/- for the period from 1st April, 1956, to 31st March, 1959. On the 3rd September, 1959, another notice of demand of professional tax for a sum of Rs.125 /- was issued by respondent No.1 for the period from 1st October, 1954, to 31st March, 1955. Copies of these two notices are annexures A and B to the writ application. On the 3rd June, 1960, another demand notice for the payment of Rs.500/- as professional tax for the years 1959-60 and 1960-61 was issued by respondent No.2. This notice is annexure E to the writ application. The assessment of professional tax was made by respondents 1 and 2 by virtue of the provisions of Sec.82 (1) (ff) of the Bihar and Orissa Municipal Act, which states as follows :
"82. (1) The commissioners may, from time to time, at a meeting convened expressly for the purpose, of which due notice shall have been given, subject to the provisions of this Act and with the sanction of the State Government, impose within the limits of the Municipality the following taxes, and fees, or any of them : XXX (ff) a tax on the trades, professions, callings and employments specified in the fourth schedule at such rates not exceeding the rates specified therein as may from time to time be determined by the commissioners at a meeting : Provided that the rates determined by the commissioners at a meeting shall be subject to the approval of the State Government and subject to such modification in the rates of taxes and exemption of classes of professions, trades and callings to be taxed as the State Government may direct. "
The fourth schedule of the statute states as follows : "1. Every licence shall be granted under one or the other of the classes mentioned in the second column of the following table and there shall be paid half-yearly from 1st April to 30th September and 1st October to 31st March, for the same a tax not exceeding the amount mentioned in that behalf in the third column of the table :
2_465_AIR(PAT)0_1962.htm
Reference may also be made to Sec.150a of the Bihar and Orissa Municipal Act, which provides as follows : "150a. When it has been determined that a tax shall be imposed on professions, trades, callings and employments, every person who exercises within the municipality, either by himself or by an agent or representative, any of the professions, trades, callings or employments specified in the fourth schedule and who is liable to pay such tax, shall take out a half-yearly licence and pay the tax assessed on him in pursuance of Clause (ff) of Sub-section (1) of Sec.82 : Provided that such tax shall be imposed on the income accrued within the municipality during the year next preceding the year for which the tax is imposed; XX x
3 The main argument put forward on behalf of the petitioner is that Sec.82 (1) (ff) of the Bihar and Orissa Municipal Act is unconstitutional because the State Legislature had no authority to make a law with regard to a tax on the capital value of companies as such legislation falls within Entry No.86, of List I of the Seventh schedule of the Constitution. In this connection learned counsel made reference to the Fourth schedule of the Act which provides that the maximum rate of tax shall be fixed with reference to the paid-up capital of the
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