TMI Blog2008 (1) TMI 605X X X X Extracts X X X X X X X X Extracts X X X X ..... - - Dated:- 21-1-2008 - KAPADIA S.H. AND SUDERSHAN REDDY B. JJ. Anoop G. Chaudhary, Senior Advocate, (Manoj Saxena, Rajnish Kr. Singh, Rahul Shukla, T.V. George, Devender Singh and Ms. Sushma Suri, Advocates with him) for the respondents and Sanjay Hegde, Advocate, for the Intervenor. D.A. Dave, Senior Advocate (S. N. Bhat, D.P. Chaturvedi, N.P.S. Panwar, Ms. Madhvi Diwan, A.V. Rangam and B.A. Ranganadhan, Advocates with him) for the appellant. -------------------------------------------------- The judgment of the court was delivered by B. SUDERSHAN REDDY J. This batch of appeals arises out of a common order passed by the Andhra Pradesh High Court whereby and whereunder the writ petitions filed by the appellants challenging the constitutional validity of the Explanation to the definition of the term "person" defined in clause (j) of section 2 of the Andhra Pradesh Tax on Professions, Trades, Callings and Employments Act, 1987 (Act No. 22 of 1987), for short, "the Act", as well as Explanation No. I of the First Schedule to the said Act as amended by Act No. 29 of 1996 have been dismissed. In order to consider as to whether the said provisions of the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eating the various branches of the appellant firm as a different person at the rate of Rs. 2,500 per annum. Each of the appellant's branch has been treated as a separate person for the purposes of levy and realisation of tax under the provisions of the Act. The writ petitions filed by each of the appellant challenging the constitutional validity of the provisions of the said Act referred to hereinabove came up before a Division Bench of the Andhra Pradesh High Court which has upheld the validity of the provisions. Relevant Constitutional provisions and Scheme of the Act Clause (1) of article 276 of the Constitution enables a State Legislature to enact a legislation imposing tax on professions, trades, callings and employments and further provides that such law made by a State Legislature shall not be declared invalid on the ground it relates to tax on income. Clause (2) of article 276 as it stood prior to the Constitution (Sixtieth Amendment) Act, 1988 commands that the total amount payable in respect of any one person to the State or to any local authority in the State by way of taxes on professions, trades, callings and employments shall not exceed Rs. 250 per annum. The Cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssion tax" as a tax leviable under the Act. Section 2(b) defines "assessee" as a person or employer by whom tax is payable under the Act. Section 4 of the Act is the charging section providing for levy and collection of tax on professions, trades, callings and employments for the benefit of State. Section 5 imposes liability on the employer to deduct and pay tax on behalf of its employees. Section 6 provides that every employer other than a State or Central Government who is liable to pay tax on behalf of his employee should register and obtain a certificate of registration within 30 days of his becoming liable to pay tax, from the assessing authority. Explanation No. I of the First Schedule to the Act reads: "Notwithstanding anything in the Schedule, every branch of any self-employed assessee enumerated in items 2 to 21 of the Schedule shall be deemed to be a separate assessee for the purpose of levy of profession tax specified in the schedule." It is not necessary for the purposes of disposal of this batch of appeals to notice the other provisions of the Act. Submissions: Shri D.A. Dave, learned Senior Counsel, submitted that the competency of the State Legislat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Shri Sanjay Hegde, learned counsel for the Intervenor broadly adopted the submissions made by the learned Senior Counsel for the State of Andhra Pradesh. The core issue: The core question that arises for our consideration in this batch of appeals is whether the Explanation to the definition of the term "person" defined under section 2(j) of the Act and Explanation No. I of the First Schedule to the Act is violative of the article 267(2) of the Constitution. The Rules that guide the constitutional courts in discharging their solemn duty to declare laws passed by a Legislature unconstitutional are well known. There is always a presumption in favour of constitutionality, and a law will not be declared unconstitutional unless the case is so clear as to be free from doubt; "to doubt the constitutionality of a law is to resolve it in favour of its validity." Where the validity of a statute is questioned and there are two interpretations, one of which would make the law valid and the other void, the former must be preferred and the validity of law upheld. In pronouncing on the constitutional validity of a statute, the court is not concerned with the wisdom or un-wisdom, the just ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itutional limitations: We shall bear in mind the well-settled principles and proceed to analyse article 276 of the Constitution of India and impugned provisions of the Act. Article 265 of the Constitution prohibits levy of collection of a tax except by an authority of law, which means only a valid law. The implied limitation is that the law providing for levy of tax should be one which is a valid law. The Privy Council, in R. v. Burah [1878] 5 I. A. 178 laid down a fundamental principle for the interpretation of a written Constitution. Lord Selborne in a classic passage observed: "The Indian Legislature has powers expressly limited by the Act of the Imperial Parliament which created it, and it can, of course, do nothing beyond the limits which circumscribe these powers. But, when acting within these limits, it is not in any sense an agent or delegate of the Imperial Parliament, but has, and was intended to have, plenary powers of legislation as large and of the same nature as those of Parliament itself. The established courts of justice, when a question arises whether the prescribed limits have been exceeded, must of necessity determine that question; and the only way in which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all not exceed Rs. 2,500 per annum. In Atiabari Tea Co. Ltd. v. State of Assam [1961] 1 SCR 809, this cout while considering the width and amplitude of article 301 observed: "On the other hand, the opening words of article 301 are very significant. The doctrine of the freedom of trade, commerce and inter- course enunciated by article 301 is not subject to the other provisions of the Constitution but is made subject only to the other provisions of Part XIII; that means that once the width and amplitude of the freedom enshrined in article 301 are determined they cannot be controlled by any provision outside Part XIII. This position incidentally brings out in bold relief the important part which the Constitution- makers wanted the doctrine of freedom of trade to play in the future of the country. It is obvious that whatever may be the content of the said freedom it is not intended to be an absolute freedom; absolute freedom in matters of trade, commerce and intercourse would lead to economic confusion, if not chaos and anarchy; and so the freedom guaranteed by article 301 is made subject to the exceptions provided by the other articles in Part XIII. The freedom guaranteed is limit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amount payable to Rs. 50 after 31st March, 1939. A saving was made, however, of preexisting laws subject to certain conditions with which we are not concerned. The provisions of this section have been substantially reproduced in article 276 of the Constitution with the modification that the upper limit of such tax payable per annum would be Rs. 250 instead of Rs. 50. A tax can be recovered only if it is 'payable' and it would be payable only after it is assessed. . . ." The purpose of article 276 is not to amend the State's power to tax profession founded on entry 60 but is to provide that such tax is not invalid on the ground that it relates to a tax on income. A plain reading of article 276 makes it abundantly clear that a State Legislature is precluded from making laws enabling the authorities to impose tax on professions, trades, callings, etc., in excess of the prescribed amount, such law if enacted by a Legislature would be in the teeth of article 276 of the Constitution. The total amount payable in respect of any one person to the State or to any one municipality or other local authority, etc., in the State by way of tax on profession, etc., shall not exceed Rs. 2,500 p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 13 STC 529 (SC)., this court approved Willis on Constitutional law to the effect: "A State does not have to tax everything in order to tax something. It is allowed to pick and choose districts, objects, persons, methods and even rates for taxation if it does so reasonably. . . ." (emphasis supplied) It is well-settled that the power to make a law with respect to a tax comprehends within its power to levy that tax and to determine the persons who are liable to pay such tax, the rate at which such tax is to be paid and the event which will attract liability in respect of such tax. This was generally by the charging sections of the particular tax law. Whether the State Legislature has exceeded its power in defining the term "person" and thereby transgressed the Constitutional limitations: The question which we therefore have to consider is whether in the exercise of its power to make a law relating to taxes on professions, trades, callings and employments within the State, the Legislature of that State has the legislative competence to define "person" engaged in any profession, trade, etc. The question requiring our decision is whether the Andhra Pradesh State Legislature i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cope of provisions of the General Clauses Act observed that the General Clauses Act is enacted in order to shorten the language used in Parliamentary legislation and to avoid repetition of the same words in the course of the same piece of legislation. "Such an Act is not meant to give a hide-bound meaning to terms and phrases generally occurring in legislation. That is the reason why definition section contains words like 'unless there is anything repugnant in the subject or context'. Words and phrases have either a very narrow significance or a very wide significance according as the context and subject of the legislation requires the one or the other meaning to be attached to those words or phrases". The court recognised that the Legislature is entitled in its wisdom to give a special definition of the terms already defined in the General Clauses Act and different from the one in the General Clauses Act. It is observed the definition of "good faith " in the General Clauses Act would have been applicable to the Limitation Act also but the Legislature in its wisdom has given a special definition of "good faith" different from the one in the General Clauses Act advisedly. In Has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l Clauses Act. "Person" under section 3(42) of the General Clauses Act shall include any company or association or body of individuals whether incorporated or not. Does it mean that the High Court is entitled to issue a writ or order or direction under article 226 of the Constitution against every "person" under section 3(42) of the General Clauses Act? It is well-settled that the remedy available under article 226 is a public law remedy and a writ and does not lie against a person not discharging public law duties. It is thus clear that the definition of "person" under section 3(42) of the General Clauses Act is not applicable automatically to interpret the provisions of the Constitution unless the context so requires and makes that definition applicable. Section 3 of the General Clauses Act, 1897 itself says that unless there is anything repugnant in the subject or context the term "person" shall include any company or association or body of individuals, whether incorporated or not. The word "includes" is often used in interpretation clauses in order to enlarge the meaning of the words or phrases occurring in the body of the "statute". "When it is so used, these words and phr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thereof. The impugned provisions are merely concerned with specifying different assessable units for purposes of assessment of profession tax and imposition of the levy. It is well-settled and cannot be disputed ". . . that the Legislature can select persons, properties, transactions and objects for the imposition of a levy and for that purpose classify as many different assessing units as it could reasonably think necessary . . ." (See: Wealth-tax Officer v. C.K. Mammed Kayi [1981] 3 SCC 23See [1981] 129 ITR 307 (SC).. Shri A.V. Rangam, learned counsel relying on the decision of this court in English Electric Company of India Ltd. v. Deputy Commercial Tax Officer [1976] 4 SCC 460 See [1976] 38 STC 475 (SC)., submitted that the branches of a company have no independent and separate existence. The company is one entity but its branches are not separate entities. The submission was that the definition of "person" has the effect of destroying the legal identity of the company. The definition of "person" creates an artificial entity unknown to law. We find no substance in the submission so made by the learned counsel for the appellant. The observations of this court in English E ..... X X X X Extracts X X X X X X X X Extracts X X X X
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