TMI Blog1980 (9) TMI 14X X X X Extracts X X X X X X X X Extracts X X X X ..... ncerned in these appeals, all the petitioners are practising advocates enrolled under the Advocates Act, 1961, and entitled to practice in this court as well as in the Supreme Court. The definition of person has been given in s. 2(f) in the following terms: " A person means any person who is engaged in any profession, trade, calling or employment in West Bengal and includes ..........." Section 3 of the Act is the section for the levy and charge of the tax. It specifically provides that subject to the provisions of art. 276 of the Constitution of India, there shall be levied and collected a tax on professions, trades, etc., in accordance with the provisions of the Act. Section 3(2) provides that every person engaged in any profession, calling, etc., under one or the other of the classes mentioned in the second column of the Schedule shall be liable to pay to the State Government tax at the rate mentioned against the class of such persons in the third column of the said Schedule. So far as the petitioners are concerned they fall under item 2 of the Schedule to the Act. Under s. 5(2) of the Act every person, as in these cases, the advocates engaged in the profession liable to pay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed under the Insurance Act, 1938 (4 of 1938), where the standing in the profession of any of the persons mentioned above is (i) less than two years Rs. 50 per annum. (ii) two years or more but less than five years Rs. 100 per annum. (iii) five years or more Rs. 150 per annum: Provided that in case of a person of the above category who is liable to pay income-tax the rate of tax under this Act shall be Rs. 200 per annum." For the purpose of appeal, revision and rectification of mistakes the procedure has been provided for in Chap. VII, rr. 19 to 24 and the notification appointing the different authorities mentioned therein, have been produced before us. Mr. Arun Kumar Dutt, on behalf of the appellants contended that though the Legislature has invoked the powers given under art. 276(2) of the Constitution of India and in the preamble, it has been accordingly stated that it is a tax on profession, trade and calling, still, in the same breath by the preamble, the Legislature has sought to bring in incidental and ancillary matters in regard to the same. Mr. Dutt argued that the incidental and ancillary matters cannot be included in the statute, inasmuch as, it is beyon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the realisation and recovery of tax in the statute can be implied within the scope of Item No. 60 of List II itself, otherwise the power given to the Legislature to impose tax becomes otiose as otherwise there will be no provision for the realisation of tax. In the case of Sundaramier Co. v. State of A. P., AIR 1958 SC 468 ; [1958] 9 STC 298 (SC), it has been specifically stated that entries in legislative list should be construed liberally. The express power to tax on profession, etc., has been given in Item No. 60 of List II. The other power which has been made for the purpose of collection of tax is a power implied or ancillary to the powers already given under Item No. 60 of List II of the 7th Schedule. We are, therefore, of the opinion, that Mr. Dutt, is not right when he stated that in view of the preamble which shows that the Act is to provide for the levy and collection of taxes on profession, trade and commerce, etc., and for matters connected therewith or incidental thereto, the Act cannot be a valid piece of legislation under Item No. 60 of List II. In our opinion, this argument is misconceived and is not supported by the judgments referred to by Mr. Dutt. The case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 88). " The abstinence of the Dominion Parliament from legislating to the full limit of its powers, could not have the effect of transferring to any provincial legislature the legislative power which had been assigned to the Dominion by section 91 of the Act of 1867." In our opinion, this case has no relevance in respect of the facts of the present case. In the present case, there is no question of Parliament legislating as the State Legislature has the power under Item No. 60 of List II to legislate on the matter on its own and, therefore, there is no question of an assignment of the legislative power to the provincial legislature by Parliament. Mr. Dutt relied upon the other case of A. G. of Alberta v. A. G. of Canada, AIR 1939 PC 53 and contended that it was not competent either for the Dominion or a province under the guise or the pretence or in the form of an exercise of its own power to carry out an object which was beyond its power to trespass on the exclusive powers of the others. There cannot be any doubt about the above legal proposition but as we have already said, the State legislature has enacted the impugned legislation which comes within the four corners of its ow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... C 481 and contended that the special mode of recovery of tax under s. 16 of the Act is an unreasonable restriction and, therefore, a violation of art. 19(l)(g). In our opinion, the case cited does not support Mr. Dutt and we are of the opinion that the special mode of recovery of tax does not violate art. 19(1)(g) at all. Mr. R. C. Deb, appearing for the Bar Council of West Bengal, argued firstly that by imposing a professional tax at the rate of Rs. 200, on those lawyers who were paying income-tax, the legislature is trying to extend their power to a tax on profession, on the basis of other sources of income of the professional people. It was argued by Mr. Deb that an advocate may not earn anything from the profession, but because of his other sources of income for which he is liable to pay income-tax, he is also being taxed purportedly on profession. In reply to this argument of Mr. Deb, Mr. Bajoria contended that the tax on advocates having more than five years practice is Rs. 150, but the proviso provides that if the advocate coming under Item No. 2 of the Schedule pays income-tax he is to pay at the rate of Rs. 200 per year. It is, according to Mr. Bajoria, a yardstick or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... collection of tax. On the basis of this judgment, Mr. Deb contended that the penalty is an additional tax and being more than Rs. 250 per annum is without jurisdiction and ultra vires. According to Mr. Bajoria, however, the penalty or interest is never a tax, it is argued that art. 366(28) of the Constitution of India defines tax and the tax imposed on the taxing event, that is, under s. 3 of the present Act. In our opinion, the case on which Mr. Deb relied, does not help Mr. Deb. The taxing event is s. 3 of the Act. If, however, any person of his own volition does not pay tax, then all the provisions the of Act to enforce the payment of tax are to be applied. The tax may be realised as land revenue and the person not paying the tax may have to pay a penalty for the same. In the facts of the present case, in our opinion, it can never be said that the tax as contained in the Act or the penalty as provided for, or the collection, etc., of the tax is a taxing event. According to us, the penalty cannot be said to be an additional tax. In the decision in Somasundarams (P.) Ltd. v. CIT [1979] 116 ITR 620 (Kar), it has been held that penalty and interest cannot be equated with " tax " a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lty has been held to be additional tax. But one of the principal objects in enacting section 28 is to provide a deterrent against recurrence of default on the part of the assessee. The section is penal in the sense that its consequences are intended to be an effective deterrent which will put a stop to practices which the legislature considers to be against the public interest. It is significant that in C.A. Abraham's case, this court was not called upon to determine whether penalty proceedings were penal or of quasi-penal nature and the observations made with regard to penalty being an additional tax were made in a different context and for a different purpose. It appears to have been taken as settled by now in the sales tax law that an order imposing penalty is the result of quasi-criminal proceedings." In the case of Hindustan Steel Ltd. v. State of Orissa [1972] 83 ITR 26, the Supreme Court held, inter alia, in so far as the penalty is concerned, that an order imposing penalty for failure to carry out a statutory obligation is the result of a quasi-criminal proceeding, and penalty will not ordinarily be imposed unless the party obliged either acted deliberately in defiance of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e present case, in our opinion, there is no doubt that the legislature is competent to legislate under Entry No. 60 of List II and as such the State Legislature has a power to enact the Legislation and, therefore, not ultra vires of art. 19(1)(g). In that view of the matter, all the arguments of Mr. Deb must fail. Mr. P.K. Sengupta appearing for some of the appellants contended,that the definition given in s. 2(f) of the Act is an inclusive definition. The definition of " person " means any person who is engaged in any profession and includes an HUF and it is argued that there is no machinery in the Act as to how this engagement is to be found out. Though s. 14 provides for an appeal etc., yet the said persons who are not serious about the profession may not get any relief by preferring an appeal and as such the right to appeal, becomes illusory. It was also argued by Mr. Sen Gupta that as the Calcutta Municipal Act and the Bengal Municipal Act have already been enacted in exercise of the power to tax on the profession, trade or calling, the State Government cannot now enact the legislation under Item No. 60 of List II. This argument has no substance in so far as we are concerned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax as mentioned in the Schedule is to be paid. It is argued by Mr. Sengupta that the Act is bad in law in not providing for any machinery for assessment. In our opinion, Mr. Sengupta is not correct in his submission. From the different provisions of the Act, earlier referred to, it will appear that every person liable to pay tax under the Act (other than a person earning salary or wages in respect of whom the tax is payable by his employer) shall obtain a certificate of enrolment from the prescribed authority in the prescribed manner. In so far as the professional people are concerned they are more or less self assessees. He must apply for enrolment and the prescribed authority shall consider the application and grant the certificate, if he is otherwise satisfied. It appears that under s. 8 of the Act, the date of payment is also fixed. In that view Of the matter, in our opinion, the above contention of Mr. Sengupta cannot be correct. An argument has been, made about the burden of the taxation on the junior members of the Bar who have just entered the profession. From the facts brought to our notice, it is clear that the State Govt. has already exempted a person who has just ent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Moopil Nair v. State of Kerala, AIR 1961 SC 552 State of A.P. v. Nalla Raja Reddy, AIR 1967 SC 1458, Devi Das Gopal Krishnan v. State of Punjab, AIR 1967 SC 1895, State of Kerala v. Haji K. Haji K. Kutty, AIR 1969 SC 378 and Avinder Singh v. State of Punjab, AIR 1979 SC 321, which support Dr. Pal's proposition that unequals should not be treated equally, but, this cannot be applied to the facts we are concerned with. Earning capacity can never be the very criterion as the basis of tax. The payment of tax is regulated by law. The imposition of tax is for a public purpose and the levy of tax is for the general revenue. The capacity may be a consideration for the levy of tax to be legally imposed. In our opinion, when a person is taxed, only the incident of taxation in the particular Act is important. When a person is engaged in a profession and his standing is for more than five years in the profession, he is to pay a particular amount as professional tax. It is quite possible that he may not have earned from the profession but that does not make any difference because, in our opinion, the payment of income-tax of a person engaged in the profession is the yardstick by which a tax is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s about the vires of the section being in violation of art. 14 of the Constitution of India. Dr. Pal and Mr. Bhunia argued that unequals are treated as equals and, therefore, the Schedule to the Act is ultra vires being discriminatory. Dr. Pal relied upon the decisions in Kunnathat Thathunni Moopil Nair v. State of. Kerala, AIR 1961 SC 552, State of A. P. v. Nalla Raja Reddy, AIR 1967 SC 1458, Devi Das Gopal Krishnan. v. State of Punjab, AIR 1967 SC 1895, State of Kerala v. Haji K. Haji K. Kutty, AIR 1969 SC 378, and Avinder Singh v. State of Punjab, AIR 1979 SC 321. Mr. Bajoria contended that the broad question that unequals cannot be treated as equals, cannot be disputed. But, it is argued that different items in the Schedule cannot be equated to a common item or, in other words, the salaried man and professional man cannot be on the same footing, therefore, the whole contention of Dr. Pal and that of Mr. Bhunia cannot be accepted to be correct. It is quite apparent from the Schedule that different persons are of different classes. The wage-earners, companies, co-operative societies, professional men and others as in the Schedule cannot constitute the same class of persons and, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ite legislation, partly falling under entries 77-78 of List I and partly under Entry 26 of List III. In this view, the right of appeal to the Supreme Court under s. 38 of the said Act, creates a jurisdiction and power in relation to a matter falling under entries 77-78 of the Union List, and the Act would, therefore, fall under art. 138(1) and not cl. (2) of art. 138. It cannot be said that s. 38 falls under art. 138(2) and is invalid on account of its having been enacted without a special agreement with the State Govt. Mr. Bhunia further argued that to tax in relation to Item No. 60 of List II is within the legislative competence of the State Govt. but when the lawyers are concerned this must be read along with Item Nos. 77-78 of List I and Entry No. 26 of List III. In our view, this argument has no substance. We have already held that this Act comes under Entry No. 60 of List II of the Schedule VII and, therefore, the State Legislature is competent to legislate and it does not fall either under entries 77-78 of List I or Entry 26 of List III. Mr. Bhunia further argued that the basic structure of the Constitution has been violated by enacting the provision of the Act. In our opini ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... advocates argued that every person who is engaged in profession whether they earn anything from the profession or not have to pay professional tax. Argument was advanced about the hazards of new entrants into the arena to make out the existence in the profession. But in regard to the capacity to pay tax, unless it becomes confiscatory, it is not possible for the court to interfere with the legislative intent. It appears to us that it is not possible to say that the tax fixed on the different entities is so heavy that it becomes unreasonable. There cannot be any doubt that whether the petitioner has the capacity to pay must have been considered by the legislature, inasmuch as the person having less years of practice has been given burden to a little extent and when practice is growing the burden is increased and when a person pays income-tax, that is taken to be the yardstick for the purpose of assessment of tax on his being engaged in the profession. Whether he earns from the profession or not it is not necessary for us to consider the same, inasmuch as his income is not being taxed. Being an income-tax payee, his status is considered and his engagement in the profession has made ..... X X X X Extracts X X X X X X X X Extracts X X X X
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