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TMI Blog2008 (1) TMI 605X X X X Extracts X X X X X X X X Extracts X X X X ..... on" 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 Act suffer from any vice of unconstitutionality, we shall briefly refer to the facts. Brief facts: The appellant in C.A. No. 2400 of 2002 is M/s. Shaw Wallace and Company Limited, a company registered under the Companies Act, 1956. It has its principal place of business at Secunderabad in Andhra Pradesh State. In addition to its principal place of business at Secunderabad the appellant has branches and stock points where it transacts its business and stores its goods. At the material time, the appellant had about 74 stock points, every stock point has been duly recorded with the registering authority under the Andhra Pradesh General Sales Tax Act, 1957. It is aggrieved by the notice issued by the first respondent requiring the appellant to pay profession tax at Rs. 2,500 for each of its branches in A.P. for the years 1996-97 and 1997- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 Constitution (Sixtieth Amendment) Act, 1988 enhanced the tax-limit prescribed under clause (2) of article 276 and increased it to Rs. 2,500. The relevant entry empowering the State Legislature to enact the law imposing taxes on professions, trades, etc., is founded on entry 60 of List II to the Seventh Schedule. The purpose of article 276 is not to amend that power of State Legislature but to merely provide that such tax is not invalid on the ground that it relates to a tax on income. Before we proceed to consider the validity of the impugned provisions of the said Act, it would be appropriate to notice the broad scheme and relevant provisions thereof. Scheme of the Act: The Andhra Pradesh Tax on Professions, Trades, Callings and Employments Act, 1987 is an Act to provide for the levy and collection of tax on professions, trades, callings and em ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Legislature to make a law relating to taxes for the benefit of the State or other local authorities therein in respect of professions, trades, callings or employments is structured by article 276 of the Constitution and any such law made by the State Legislature is to be within the four corners of that article. The submission was that the total amount payable in respect of any one person to the State by way of taxes on professions, etc., shall not exceed Rs. 2,500 per annum. The State Legislature is not competent to treat every branch of a company or firm or club, etc., as a separate person for the purposes of levy and collection of profession tax. The branches of a company have no independent and separate existence. It was submitted that though there is no definition of "person" in the Constitution, the meaning of the expression "person" is to be ascertained from the provis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idity 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 justice or injustice of the law. If that which is passed into law is within the scope of the power conferred on a Legislature and violates no restrictions on that power, the law must be upheld, whatever a court may think of it. (See State of Bombay v. Balsara (F. N.) [1951] SCR 682). In State of West Bengal v. E.I.T.A. India Ltd. [2003] 5 SCC 239 See [2003] 131 STC 111 (SC). this court summarised the well-settled principles to determine the constitutional validity of the provisions of any statute and held: "4. In examining the constitutional validity of the impugned provisions of a statute, it will be useful to bear in mind the following well-settled propositions. If a legislation is found to lack in legislative competence or is found to be in contravention of any provision of Part III or any other provision of the Constitution, the impugned legislation cannot escape th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iament, 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 they can properly do so, is by looking to the terms of the instrument by which, affirmatively, the legislative powers were created, and by which, negatively, they are restricted. If what has been done is legislation, within the general scope of the affirmative words which give the power, and if it violates no express condition or restriction by which that power is limited (in which category would, of course, be included any Act of the Imperial Parliament at variance with it), it is not for any court of justice to inquire further or to enlarge constructively those conditions and restrictions." In Kesavananda Bharathi Sripadagalvaru v. State of Kerala [1973] Supp. SCR 1, this court reaffirmed the correctness of the principle laid down in Burah [1878] 5 Ind. App. 178. In Bharat Kala Bhandar Ltd. v. Municipal Committee, Dhamangaon [1965] 3 SCR 499 See [1966] 59 ITR 73 (SC)., t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 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 limited in the manner specified by the said articles but it is not limited by any other provisions of the Constitution outside Part XIII. That is why it seems to us that article 301, read in its proper context and subject to the limitations prescribed by the other relevant articles in Part XIII, must be regarded as imposing a constitutional limitation on the legislative power of Parliament and the Legislatures of the States." (emphasis supplied) It is unnecessary to burden this judgment with various authoritative pronouncements of this court wherein constitutional limitations on the legislative power of Parliament and the Legislatures of the States have been recognised. The State Legislature undoubtedly is competent to make a law relating to taxes for the benefit of the State or other local authorities therein in respect of professions, trades, callings or employments. It is traceab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, 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 per annum. Entry 60 of List II which authorises the State Legislature to make a law relating to tax on profession is to be read along with article 276 of the Constitution. Article 276 is also declaratory in its nature inasmuch as it declares that notwithstanding anything contained in article 246, no law of the Legislature of a State relating to taxes for the benefit of State, etc., in respect of profession, trades, etc., shall be invalid on the ground that it relates to tax on income. Likewise, it also declares the power of the Legislature of a State to make such laws with respect to taxes on professions, etc., shall not be construed as limiting in any way the Parliament's power to make laws with respect to taxes on income accruing from or arising out of profession, trade, etc. For the purposes of this case, it is not necessary to notice the distinction between tax and profession and inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 is competent to introduce the fiction in the Explanation to the definition to the word "person" and also Explanation No. I of the First Schedule to the Act. Whether in introducing such fiction, Legislature has exceeded its legislative power thereby transgressing the constitutional limitation. We do not find any merit in the contention that the Legislature lacks legislative competence to define "person" who is liable to pay profession tax, etc., which includes every branch of a firm, company, corporation or other corporate body, any society, club or association. The term "person" is not defined in the Constitution. But article 367 of our Constitution provides that the definitions contained in the General Clauses Act apply for the interpretation of the Constitution. Therefore, we are required to consider whether the definition of "person" in section 3(42) of the General Clauses Act restricts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l 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 Hasmukhalal Dahyabhai v. State of Gujarat [1976] 4 SCC 100; AIR 1976 SC 2316 interpretation of articles 31A and 31B of the Constitution of India in relation to the Gujarat Agricultural Land Ceiling Act, 1961 came up for consideration. The Gujarat Agricultural Land Ceiling Act, 1961 conceives of each "person" holding land in the single unit whose holding must not exceed the ceiling limit. Section 2, sub-section (21) says: "person" "includes a joint family". This has been done apparently to make it clear that, in addition to individuals, as natural persons, families, as conceived of by other provisions, can also be and are persons. It was argued that the concept of the term "person" having been fixed by the General Clauses Act, this concept and no other must be used for interpreting the second proviso to article 31A of the Constitution of India. This court held: "10. It is true that, but for the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll 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 phrases must be construed as comprehending not only such things as they signify according to their nature and import but also those things which the interpretation clause declares that they shall include". (See: Commissioner of Income-tax, Andhra Pradesh v. Taj Mahal Hotel, Secunderabad [1971] 3 SCC 550; AIR 1972 SC 168 See [1971] 82 ITR 44 (SC)..) In our considered opinion, the Legislature is not denuded of its competency to define the term "person" differently from the definition of that term in the General Clauses Act, 1897. There are many illustrations showing that the same words have been used in different senses in different context. It is not uncommon practice for the Parliament or State Legislature to define "person" in the Act and create an artificial unit by fiction. For instance, section 2(31) of the Income-tax Act, 1961 defines "person" including (a) an individual, (b) a Hindu undivided f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... son" 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 Electric Company of India Ltd. [1976] 4 SCC 460 See [1976] 38 STC 475 (SC). that the appellant-company therein was "one entity and it carries on business at different branches. Branches have no independent and separate entity. Branches are different agencies" is to be understood in the proper context. The appellant-company therein had branches at different places. The buyer at Bombay ascertained quotations for goods from the Bombay branch. The Bombay branch referred the enquiry to its Madras factory and on receiving reply quoted the prices and the Bombay buyer placed orders for the goods with the Bombay branch but the goods were despatched from Madras though in the name of Bombay branch at the risk of the Bombay buyer. It is under those circumstances this court observed that when a branch of a company forwards a buyer's order to the principal factory of the company and instructs them to despatch the goods di ..... X X X X Extracts X X X X X X X X Extracts X X X X
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