Point of Law: Rate of tax provided in rule 3(2) of the Rules is the maximum permissible, which can be levied as professional tax

JUDGMENT :

Petitioners are conducting money lending and chitty business and they are members of All Kerala Private Bankers Association, an organisation registered under the provisions of the Travancore Cochin Literary, Scientific & Charitable Societies Registration Act, 1955 with registration No.K 114/1974. The business of money lenders in the State of Kerala is regulated and controlled by stringent provisions under the Kerala Money Lenders Act, 1958. As per section 3 of the Act, every person has to obtain a licence on payment of the prescribed fee to carry on the business as a money lender.

2. The grievance highlighted by the petitioners is that the Secretary of the Municipality has assessed the profession tax of the petitioners without properly having recourse to section 245 of the Kerala Municipality Act, 1995, hereinafter called, “Act, 1994” and the Kerala Municipality (Profession Tax) Rules, 2005, hereinafter called, “Rules, 2005”. According to the petitioners, under rule 3(1), a schedule is incorporated prescribing the levy of half yearly tax payable under the different slabs of income. It is submitted that a person derives income less than Rs.12,000/- is not liable to pay any tax and further that a person can be subjected to tax only under the class appropriate to his income. Under sub-rule (2) of rule 3, the half yearly tax payable by the persons classified in sub-clauses (1) to (11) is fixed at Rs.1250/-. However, Explanation to rule 3(2) categorically stipulates that the rate of tax given in sub-rule (2) is the maximum tax that can be levied and if the income of a person is low justifying a lower rate of tax, the assessee can satisfy the local authority regarding the low income and seek a reduction of the tax correspondingly.

3. The case projected by the petitioners is that petitioners were served with demand notices viz., Exhibits P3 and P4 dated 2.2.2010 and 30.1.2010, respectively, fixing the tax at the whims and fancies of the Secretary of the Municipality and in a most arbitrary manner, liable to be interfered with by this Court. According to the petitioners, they are paying income tax and when demand notices were received, they filed objections along with supporting documents before the Secretary in order to assess the tax in accordance with the schedule prescribed under the Rules. It is also the case of the petitioners that the Audited Profit & Loss Account and Balance Sheet of the petitioners were produced before the Secretary, which are marked as Exhibits P5, P5(a) and P5(b) respectively. The objection filed by the 1st petitioner is produced as Exhibit P6 and it is also submitted that a typical objection was filed by the 2nd petitioner also.

4. Anyhow on the basis of the objections submitted, a hearing was convened on 21.5.2010, evident from Exhibit P7 notice and petitioners appeared before the Secretary and submitted Exhibits P8 & P9 objections. However, according to the petitioners, the 1st respondent without following the statutory stipulations contained under the Act, 1994 and Rules, 2005, has fixed the half yearly tax arbitrarily at the rate of Rs.600/-and Rs.750/-, respectively, and has issued Exhibits P10 and P11 demand notices directing the petitioners to remit the tax. These are the basic background facts projected by the petitioners to contend that the action of the Secretary can never be sustained under law.

5. A counter affidavit is filed by the Secretary and the Municipality jointly, refuting the claims and demands raised by the petitioners and also submitting that the profession tax is leviable on the aggregate income of the petitioners and even going by the documents produced by the petitioners, it can be seen that the levy of half yearly tax of Rs.600/-and Rs.750/-, respectively, on the petitioners are reasonable and further that the original proposal was reduced after hearing the objections