Bank Ltd. Vs. State of A.P. & Ors.  Insc 61 (21 January 2008)
Kapadia & B. Sudershan Reddy
APPEAL NO. 1995 OF 2002 M/s. Ch. Yegnaiah
& Sons. Appellant Versus The Profession Tax Officer & Anr. Respondents
CIVIL APPEAL NO. 2400 OF 2002 M/S. Shaw Wallace & Company Ltd. Appellant Versus
The Deputy Commercial Tax Officer & Anr. Respondents 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 to the
First Schedule of 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
appellant in C.A.No.2400/02 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 A.P. 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 A.P. General Sales Tax Act. It is
aggrieved by the notice issued by the first respondent requiring the appellant
to pay profession tax at Rs.2500/- for each of its branches in A.P. for the
years 1996-97 and 1997-98. The respondent altogether demanded a sum of Rs.3,42,000/-
at the rate of Rs.2500/- per annum for each of the branches of the appellant
Company. The first respondent obviously relied on the Explanation No. I to the
First Schedule to the Act defining the expression person which we
shall notice little later. It is under those circumstances the appellant
invoked the jurisdiction of the High Court under Article 226 of the
Constitution of India and prayed for grant of appropriate reliefs.
appellant in C.A.No.1994/02 is a banking Company engaged in banking activities
having the network of over 300 branches spread throughout India. The appellant altogether at the
relevant time had branches in 17 places within the State of Andhra Pradesh. It had obtained the certificate of
enrolment from the first respondent at Hyderabad where it has its principal place of business.
appellant was paying Profession Tax in respect of principal branch at Hyderabad alone. The first respondent herein
issued similar notices requiring the appellant to pay Profession Tax of
Rs.2500/- to be paid by each of its branches in the State of Andhra Pradesh.
appellant in C.A.No.1995/02 is a partnership firm engaged in the business of
sale of petroleum products. It has its principal place of business at Secunderabad
in the State of Andhra
Pradesh. In addition
to its principal business premises, it has other petroleum outlets outside Hyderabad and Secunderabad. The first
respondent issued similar notices demanding Profession Tax by treating the
various branches of the appellant firm as a different person at the rate of
Rs.2500/- per annum. Each of the appellants branch has been treated as a
separate person for the purposes of levy and realization of tax under the
provisions of the Act.
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 A.P. High Court which has upheld the validity of
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 Constitution (Sixtieth Amendment) Act, 1988 enhanced the tax limit
prescribed under clause (2) of Article 276 and increased it to Rs.2500/-. 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 to 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
OF THE ACT:
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 employments. Prior to the enactment of the said Act profession tax
was being levied in the State as per the provisions of the Hyderabad Municipal
Corporation (Act No. II of 1956), the Andhra Pradesh Municipalities Act, 1965 (
Act No. 6 of 1965) and the Andhra Pradesh Gram Panchayats Act, 1964 ( Act No. 2
of 1964). Those Acts were being administered by the Local Authorities. The
State with a view to rationalize the levy and collections of profession tax and
also with a view to improve the collections of the profession tax enacted a
single comprehensive legislation for the levy and collection of profession tax.
Be it noted, the local authorities, after the commencement of Act, are
prevented from levying any tax on professions, trades, callings and
employments. The object of the Act is to levy tax on professions, trades etc.
Tax is levied on the person engaged in any profession, trade, calling etc.
Section 2 of the Act contains the definitions. Clause (j) defines person.
It reads as under :
person means any person who is engaged in any profession, trade,
calling of employment in the State of Andhra Pradesh and includes a Hindu Undivided Family, Firm, Company,
Corporation or other corporate body, any society, club or association, so
engaged but does not include any person who earns wages on a casual basis.
Explanation: Every branch of a firm, Company,
Corporation or other corporate body, any Society, Club or Association shall be
deemed to be a person.
(l) of Section 2 defines Profession Tax as a tax leviable under the
Act. Section 2(b) defines asssessee 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
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 to the First Schedule of the Act reads:
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.
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.2500/- per
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 provisions of the General
Clauses Act inasmuch as Article 367 of the Constitution provides the General
Clauses Act, 1897 to be made applicable for the interpretation of the
Constitution. Section 3(42) of the General Clauses Act defines person
as a Company or Association or body of individuals whether incorporated or not.
Relying on the said definition it was contended that branches of Company,
Association or body of individuals cannot be treated as a separate person. Shri
AV Rangam adopted the submissions made by the learned senior counsel.
Anoop G. Chaudhary, learned senior counsel appearing on behalf of the State of A.P. contended that the impugned provisions of the Act do
not suffer from any constitutional infirmity. The Legislature is competent to
define person and such artificial definitions are not unknown to law. It was
submitted that no doubt Article 367 provides that the General Clauses Act, 1897
applies for the interpretation of the provisions of the Constitution as it
applies for the interpretation of an Act of the Legislature of the Dominion of
India. But the General Clauses Act itself is a statute for interpretation of
other enactments, unless there is anything repugnant in the subject or context.
The very definition of person provided in Section 3(42) is an
inclusive one and it no way impairs the competence of the State Legislature to
make law relating to taxes for the benefit of the State in respect of
professions etc. and define person for the purposes of such law.
Sanjay Hegde, learned counsel for the Intervener broadly adopted the
submissions made by the learned senior counsel for the State of Andhra Pradesh.
core question that arises for our consideration in this batch of appeals is
that whether the Explanation to the definition of the term person
defined under Section 2(j) of the Act and Explanation No.I to the First
Schedule of 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 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
State of W.B. and another vs. E.I.T.A. India Ltd. and others ,this court
summarized 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 the vice
Kesavananda Bharati v. State of Kerala [ (1973) 4 SCC 225: AIR 1973 SC 1461 ] and also State of A.P. v. McDowell & Co. [(1996) 3 SCC 709 ]. A
challenge to any statutory provision on the ground of the classification being
discriminatory and violative of Article 14 of the Constitution , can be
successfully met on the principle of reasonable classification having nexus to
the object of the Act sought to be achieved (see: State of Bombay v. F.N. Balsara
[ AIR 1951 SC 318:1951 SCR 682:(1951)52 Cri LJ 1361 ] and Budhan Choudhry v.
State of Bihar [ AIR 1955 SC 191: (1951) 1 SCR 1045 : 1955 Cri LJ 374].
However, the legislature enjoys a greater latitude for classification in the
field of taxation (see: Steelworth Ltd. v. State of Assam [1962 Supp (2) SCR 589
: (1962) 13 STC 233, Gopal Narain v. State of U.P. [AIR 1964 SC 370] and Ganga Sugar Corpn. Ltd. v. State of U.P. [(1980)1 SCC 223:1980 SCC (Tax) 90:AIR 1980 SC 286].
No legislation can be declared to be illegal, much less unconstitutional on the
ground of being unreasonable or harsh on the anvil of Article 14 of the
Constitution, except, of course, when it fails to clear the test of
arbitrariness and discrimination which would render it violative of Article 14
of the Constitution.(See:Steelworth Ltd. and McDowell & Co.)
LAW MAKING POWER OF LEGISLATURE AND CONSTITUTIONAL LIMITATIONS:
shall bear in mind the well settled principles and proceed to analyze 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. fundamental
principle for the interpretation of a written Constitution. Lord Selborne in a
classic passage observed:
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.
when acting within those 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 of 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. correctness of the principle laid down in Burah (supra)
Bharat Kala Bhandar Ltd. vs. Municipal Committee, Dhamangaon ,this court held
that the provisions of Article 276 of the Constitution which precludes State
Legislature from making a law enabling a local authority to impose a tax on
profession etc. in excess of Rs.2500/- per annum and the said provision is to
be read in the Act or to be deemed by implication to be there as the
Constitution is a paramount law to which all other laws are subject. It is
further held moreover, we must bear in mind the provision of Article 265
of the Constitution which preclude the levy or collection of a tax except by
authority of law which means only a valid law.
The Bengal Immunity Company Limited vs. The State of Bihar and others ,this
court while recognizing that the Constitution makers by Article 246(3) read
with Entry 54 in List II of the Seventh Schedule to the Constitution conferred
power on the Legislatures to make law with respect to taxes on the sale or
purchase of goods other than newspapers held that the Constitution at the same
time by Article 286 clamped on the legislative power several fetters.
Likewise Article 276 imposes fetters on the law making power of a State
Legislature in the matter of making a law relating to taxes on professions,
trades, callings and employments. Those restrictions are found in Article 276
(2) which commands that the total amount payable in respect of any one person
to the State or to any one Municipality etc. or other local authority in the
State by way of taxes on professions etc. shall not exceed Rs. 2500/- per
Atiabari Tea Co. Ltd. vs. The State of Assam and others , this court while
considering the width and amplitude of Article 301 observed :
On the other hand, the opening words of Art. 301 are very significant. The
doctrine of the freedom of trade, commerce and intercourse enunciated by Art.
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 Art. 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 Art. 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.
is why it seems to us that Art.
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)
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
recognized. 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
traceable to Entry 60 of List II of the Seventh Schedule but that power of the
Legislature to make such a law to levy and collect the profession tax is made
subject to the restrictions as provided for under Article 276 (2) of the
Article 276 of the Constitution of India corresponds to Section 142A of the
Government of India Act, 1935. The legislative history upon which Section 142A
of the Government of India Act, 1935 was enacted and on which Article 276 of
the Constitution now rests was noticed by this court in Bharat Kala Kendra
(Supra). It is observed :
. . . . It is that the legislative spheres of the Provinces and the Centre came
to be clearly demarcated in regard to items falling within Lists I and II of
Schedule VII of the Govt. of India Act and now to those falling within the same
lists of Schedule VII of the Constitution. Taxes on professions, trades,
callings and employments are taxes on income and are thus outside the
provincial/ and now State lists and belong exclusively to Parliament and
before that to the Central Legislature. Yet under a large number of laws
enacted before the Govt. of India Act, 1935 came into force, power was
conferred on local Governments and local authorities to impose taxes on such
activities. This was obviously in conflict with S.100 of the Govt. of India
Act. When this was realized S.142-A was enacted by the British Parliament which
saved the power conferred by pre-existing laws but limited the amount payable
to Rs.50 after 31st March, 1939. A saving was made, however, of pre-existing
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 States 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.
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
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.2500/- per annum. Entry 60 of List II which
authorizes 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.
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
Parliaments 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
income. It is well settled that a tax on profession is not necessarily
connected with income.
on income can be imposed if a person carries on a profession, trade, calling
etc. Such a tax on profession is irrespective of the question of income. There
is no other restriction imposed upon a State Legislature in making law relating
to tax on profession, trade, calling and employment. There can be no doubt
whatsoever that a State Legislature cannot make any law to levy and collect
profession tax at the rate of more than Rs.2500/-per person, per annum, in view
of the restriction in Article 276(2) of the Constitution.
have noticed that Section 4 of the Act which deals with levy and charge of tax
mandates that there shall be levied and collected a tax on professions, trades,
callings and employments etc. for the benefit of the State and every person
engaged in any profession, trade, calling etc. in the State falling under any
one or other of the classes specified in Column (2) of the first Schedule shall
be liable to pay tax at the rate specified in the corresponding Entry in Column
(3) thereof. The maximum rate specified in the First Schedule at which
profession etc. is levied and liable to be paid by every person admittedly does
not exceed Rs 2500/- per annum. Article 276(2) does not prohibit such levy and
collection of tax from every one person not exceeding Rs. 2500/- per annum.
East India Tobacco Co. vs. State of Andhra Pradesh , this court approved Willis
: Constitutional law to the effect: A State does not have to tax every
thing 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)
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.
was generally by the charging Sections of the particular tax law.
THE STATE LEGISLATURE HAS EXCEEDED ITS POWER IN DEFINING THE 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 A.P. State Legislature is
competent to introduce the fiction in the Explanation to the definition to the
word person and also Explanation No.I to the First Schedule of the
Act? Whether introducing such fiction, Legislature has exceeded its legislative
power thereby transgressed the constitutional limitation?
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 restrict the power of State Legislature to define the term
person and adopt a meaning different from the definition in the
General Clauses Act. In our considered opinion, the definition of
person in General Clauses Act, would not restrict the power of the
State Legislature to define a person and adopt a meaning different
from or in excess of the ordinary acceptation of the word as is defined in the
General Clauses Act.
N. Subramania Iyer Versus Official Receiver Quilon & Anr. this Court while
considering the question whether it was necessary in annulment proceedings
under Section 53 of the Provincial Insolvency Act to prove that the transferor
who has been subsequently adjudged an insolvent should have been honest and
straightforward in the matter of transaction impeached held that even if the
transferor was wanting in bona fides the crucial question still remains to be
answered and unless it is found that the transferee was wanting in bona fides
in respect of the transaction in question, he cannot be affected by the
dishonest course of conduct of the transferor. The High Court in that case had
taken the view that the mortgagee had failed affirmatively to prove its bona fides
and the said conclusion was based upon the consideration that the General
Clauses Act defined good faith as nothing is said to be done or
believed in good faith which is done or believed without due care and
attention. It is in that context this Court while analyzing the scope of
provisions of the General Clauses Act observed that the General Clauses Act is
enacted in order to shorten language used in parliamentary legislation and to
avoid repetition of the same words in the course of the same piece of
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 recognized 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.
Hasmukhalal Dahyabhai & Ors. Versus State of Gujarat & Ors. 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.
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.
It is true that, but for the provisions of Section 6, sub-section (2) of the
Act, the term person, which includes individuals, as natural persons,
as well as groups or bodies of individuals, as artificial persons, such as a
family is, the entitlement to the ceiling area would be possessed by every
person, whether artificial or natural. In other words, if Section 6(2) of the
Act was not there, each individual member of a family would have been entitled
to hold land upto the ceiling limit if it was his or her legally separate
property. This follows from the obvious meaning of the term person as
well as the inclusive definitions given both in the Act under consideration and
in the General Clauses Act.
The expression person is employed in more than one Article of the
Constitution of India. We shall not refer to all those Articles where the
expression person has been used. It would be enough to notice Articles 20,
21, 22 and 226 of the Constitution of India where it has been used. The
provision of the General Clauses Act, 1897 which is applicable for the
interpretation of the Constitution as provided for under clause (1) of Article
367 itself restricts the applicability of the Act and makes such an application
subject to the context as otherwise may require. The trinity of Articles 20,
21, 22 broadly guarantee the personal liberties against the State to individual
person. They are not guaranteed to all those who are included in the definition
of person under section 3 (42) of the General 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
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 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 The Commissioner of Income-tax,
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
Hindu undivided family,
association of persons or a body of individuals, whether incorporated or not,
local authority and
artificial juridical person, not falling within any of the preceding
sub-clauses and the same is much wider than the term person as
defined in the General Clauses Act.
The definition of person in Section 3 (42) of the General Clauses Act
is undoubtedly illustrative and not exhaustive. The well known rule of
interpretation regarding such inclusive definitions has always been to treat
the other entities, who would not otherwise have come strictly within the
definition, to be a part thereof, because of illustrative enactment of such
definitions. The legislature is competent in its wisdom to define person
separately for the purposes of each of the enactment and different from the one
in the General Clauses Act and create an artificial unit. The definition of
person in the General Clauses Act would not operate as any fetter or
restriction upon the powers of the State Legislature to define person
and adopt a meaning different from as defined in the General Clauses Act.
our view, Entry 60 in List II gives the outline of the subject matter of
legislation and therefore, the words in the Entry are to be construed in their
widest amplitude. The field of legislation covered by the Entry is not to be
narrowed down in any way unless there is anything in the Entry itself which
defines the limits thereof.
The impugned provisions are merely concerned with specifying different
assessable units for purposes of assessment of profession tax and imposition of
well settled and cannot be disputed that the Legislature can select
persons, properties, transactions and objections for the imposition of levy and
for that purpose classify as many different assessing units as it could
reasonably think necessary [See - Wealth Tax Officer Versus C.K. Mammed Kayi
A.V. Rangam, learned counsel relying on the decision of this Court in English
Electric Company of India 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 Electric Company of India Ltd.
(supra) 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.
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 buyers
order to the principal factory of the company and instructs them to despatch
the goods direct to the buyer and the goods are sent to the buyer under those
instructions it would not be a sale between the factory and its branch. The
observations so made have no bearing whatsoever on the issue with which we are
concerned in the present case.
The appellant-company herein continues to be company within the meaning of
Section 3 of the Companies Act, 1956 which defines the company,
existing company, private company and public
company for the purposes of the Companies Act. Its status as one entity
continues to be the same. It is only for the purposes of the present Act viz.
Andhra Pradesh Tax on Professions, Trades, Callings and Employments Act, 1987
even its branches are treated as a person enabling the authorities to
levy and collect profession tax.
Before parting with the case we are required to state that a challenge to the
impugned provisions was mounted on the basis of Article 14 of the Constitution
of India in the High Court. It was contended that the Andhra Pradesh State
Legislature in enacting the definition to the word person and also
Explanation No. I to the First Schedule of the Act acted arbitrarily and
irrationally and thereby violated Article 14 of the Constitution of India.
contention was rejected by the High Court. The said contention is not urged
before us. Therefore, we express no opinion on the same.
For the aforesaid reasons, we hold the definition of the word person
in the impugned Explanation and also Explanation No. I to the First Schedule of
the Act is not intended to tax a person at a rate higher than Rs.2500/- per
annum, per person, but to treat even a branch of a firm, company, corporation
or other corporate body, any society, club or association as a separate person,
and therefore, a separate assessee within the meaning of Section 2 (b) of the
Act and the Andhra Pradesh State Legislature has undoubtedly the competency to
adopt such a devise of taxation. The Andhra Pradesh State Legislature did not
violate the mandate of Article 276(2) of the Constitution.
the result, the appeals are dismissed with no order as to costs.