Full Judgment Text
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PETITIONER:
MUNSHI RAM AND ORS.
Vs.
RESPONDENT:
MUNICIPAL COMMITTEE, CHHEHARTA
DATE OF JUDGMENT06/03/1979
BENCH:
CHANDRACHUD, Y.V. ((CJ)
BENCH:
CHANDRACHUD, Y.V. ((CJ)
DESAI, D.A.
PATHAK, R.S.
CITATION:
1979 AIR 1160 1979 SCR (3) 453
1979 SCC (2) 242
CITATOR INFO :
R 1981 SC 446 (6)
F 1981 SC1754 (9)
E&R 1992 SC1952 (8,9,12,15)
ACT:
Punjab Municipal Act, 1911, Sections 84,86-Jurisdiction
of the Civil Court, of levy of profession tax on the firm
and also its partners-Punjab General Clauses Act Sec. 2(40)
and Constitution Art. 276(2).
Punjab Municipal Act, 1911, Sections 84-86-Jurisdiction
of the Civil Court, whether a bar to hear and determine suit
relating to levy of profession tax under the Act.
HEADNOTE:
Under section 61(1)(b) of the Punjab Municipal Act,
1911 the respondent by its Notification dated May 15, 1946
levied a profession tax of Rs. 15/- per annum on each of the
partners of a firm. Bharat Industries Chheharta i.e. the
appellants in the appeal. By the Notification dated July 4,
1958 the tax was raised to Rs. 200/- per annum. The validity
of the demand made by the respondent at the rate of Rs.
200/- from each of the partners of the firm was challenged,
pleading that the Municipal Committee in levying the tax on
the individual partners had exceeded its statutory powers
under section 61(1)(b) of the Municipal Act in as much as
the term ’person’ occurring in section 61(1)(b) of the
Punjab Municipal Act, 1911, construed in the light of the
definition given in section 2(40) of the Punjab General
Clauses Act included a ’firm’ and since the trade carried on
by the firm is one, the tax could be levied only on the
firm, and not on the partners individually. The Trial Court
dismissed the suit. First appellate court reversed the
decree and the High Court in Second Appeal confirmed it. A
Letters Patent Appeal, preferred by the respondent was
allowed and the Trial Court’s decision dismissing the suit
was restored.
Dismissing the appeal by special leave, the Court
^
HELD: 1. It is clear, from a plain reading of Section
61(1)(b) that a tax leviable under clause (b) is in terms, a
tax on ’persons’, which expression includes natural persons.
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Its incidence falls on individuals, who belong to a class
practising any profession or art, or carrying on a trade or
calling in the municipality. To hold that persons who are
collectively carrying on a trade in the municipality cannot
be taxed individually, would be to read into the statute
words which are not there. There are no words in clause (b)
or elsewhere in the statute which expressly or by necessary
implication, exclude or exempt persons carrying on a trade
collectively in the municipality from being taxed as
individuals. To attract liability to a tax under this clause
it is sufficient that the person concerned is carrying on a
trade in the municipality, irrespective of whether such
trade is being carried on by him individually or in
partnership with others. [467G, 468H, 469A-B]
2 ’Partnership’ as defined in Section 4 of the Indian
Partnership Act, 1932, is the relation between persons who
have agreed to share the profits of a business carried on by
all or any of them for the benefit of all. A firm or
partnership is not a legal entity separate and distinct from
the partners. Firm
464
is only a compendious description of the individuals who
compose the firm. The business being carried on by all or
any of the partners, all of them are jointly and severally
responsible for the liabilities incurred in the course of
the business as each one is considered as an agent of the
other. Such partners can be taxed as persons, in their
individual. [468 D-H]
3. In order to be authorised a tax under clause (b) of
Section 61(1) must satisfy two conditions: First, it must
be a tax on persons. Second, such persons must be practising
any profession or art or carrying on any trade or calling in
the municipality. Both the conditions necessary for levying
a tax under clause (b) of sub-section (1) of Section 61 of
the Municipal Act existed in this case. The appellants are
’persons’ and they are carrying on a trade in Chheharata
Municipality. [467H, 468A-C]
4(i) Where a Revenue Statute provides for a person
aggrieved by an assessment thereunder, a particular remedy
to be sought in a particular forum, in a particular way, it
must be sought in that forum and in that manner, and all
other forums and modes of seeking it are excluded. [470D-E]
(ii) From a conjoint reading of sections 84 and 86, it
is plain that the Municipal Act, gives a special and
particular remedy for the person aggrieved by an assessment
of tax under this Act, irrespective of whether the grievance
relates to the rate or quantum of tax or the principle of
assessment. The Act further provides a particular forum and
a specific mode of having this remedy, which is analogous to
that provided in Section 66(2) of the Indian Income-tax Act,
1922 Section 86 forbids in clear terms the person aggrieved
by an assessment from seeking his remedy in any other forum
or in any other manner than that provided in the Municipal
Act. Therefore, Sections 84 and 86 of the Municipal Act bar
by inevitable implication, the jurisdiction of the Civil
Court where the grievance of the party relates to an
assessment or the principle of assessment under the Act.
[470B-D, E-F]
(iii) In the facts and circumstances of the case, it is
clear (a) that in assessing the appellants individually, and
not collectively to the tax in question, the Municipal
Committee did not abuse its powers under the Act, (b) in
levying the profession tax it did not travel beyond or act
contrary to the provisions of sections 61(1)(b) of the Act,
and (c) that the Committee acted under the Act. The Civil
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Courts jurisdiction, therefor, to entertain and decide the
suit was barred. [471E-G]
Firm Seth Radhakishan v. Administrator, Municipal
Committee, Ludhiana AIR 1973 SC 1547; followed.
JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1998 of
1969.
Appeal by Special Leave from the Judgment and Decree
dated 3-10-1968 of the Punjab and Haryana High Court in
L.P.A. No. 348/64.
V. C. Mahajan, Mrs. Urmila Kapoor and Mrs. Shobha
Dikshit for the Appellants.
Hardev Singh for the Respondent.
465
The Judgment of the Court was delivered by
SARKARIA, J.-This appeal by special leave is directed
against a judgment, dated October 3, 1968, of the High Court
of Punjab and Haryana.
The facts leading to this appeal are that the
appellants are partners of a firm, Bharat Industries,
Chheharta.
By a Notification, dated May 15, 1946, the Chheharta
Municipal Committee levied a profession tax under Section
61(1)(b) of the Punjab Municipal Act, 1911. Initially, the
tax was Rs. 15/- per annum and was levied on all the
partners of the said firm.
By a Notification, dated July 4, 1958, the annual tax
for trade, profession or calling for the owner of a factory
registered under the Indian Factories Act, was raised to Rs.
200/- per annum and each of the six partners of the said
firm were assessed to annual tax of Rs. 200/- by the
Municipal Committee.
On October 30, 1960, the appellants filed a suit for
permanent injunction restraining the defendant-Committee
from realising the profession tax demanded by it per letters
Nos. 15 to 20, dated May 31, 1960, amounting to Rs. 1,200/-.
The appellants challenged the validity of the
assessment contending that construed in the light of the
definition given in section 2(40) of the Punjab General
Clauses Act, the term "person" occurring in section 6(1)(b)
of the Punjab Municipal Act, 1911, includes a ’firm’ and
since the trade carried on by the ’firm’ is one, the tax
could be levied only on the firm, and not on the partners
individually. On these premises, it was pleaded that the
Municipal Committee in levying the tax on the individual
partners had exceeded its statutory powers under Section
61(1)(b) of the Municipal Act.
The trial court dismissed the suit. On appeal by the
plaintiffs, the Additional District Judge, Amritsar,
reversed the judgment of the trial court and decreed the
suit.
The Municipal Committee carried a further appeal to the
High Court. The learned Single Judge, who heard the appeal,
affirmed the judgment and decree of the first appellate
court, on the reasoning which may be summed up as under:
The term "person" in Section 61(1)(b) of the Municipal
Act, interpreted in the light of the definition given in
Section 2(40) of the Punjab General Clauses Act, includes a
’partnership’. Under clause (b) of Section 61(1) of the
Municipal Act, the basis on which the liability to pay tax
arises, is the trade, profession or business; and if the
466
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trade and business is one carried on by several persons
collectively in partnership, then the partnership alone, and
not the individual partners, are liable to pay the tax; that
the liability on the partners will fall twice which is not
contemplated by the scheme and language of the Municipal
Act, even though all the partners are jointly and severally
liable to any tax for the partnership business.
In support of his conclusion that the tax was on trade
and not on persons, the learned Judge by way of analogy,
referred to clauses (a), (c), (d), (e) and (f) of sub-
Section (1). He also referred to two Madras decisions in The
Municipal Commissioners of Nagapatam v. Sadaya Pillay(1) and
Davies v. President of the Madras Municipal Commission(2):
and found himself in entire agreement with the reasoning of
the learned Judges in those cases.
Aggrieved, the Municipal Committee preferred a Letters
Patent Appeal. The Appellate Bench of the High Court held
that to import the definition of the term "person" occuring
in Section 2(40) of the Punjab General Clauses Act into
Section 61(1) (b) of the Municipal Act, will be repugnant to
the subject. In the opinion of the Bench, under the scheme
of the statute in question, the tax cannot be levied on a
firm or factory as such, but only on the individual owners
of the factory or of the firm. On this reasoning, the Bench
reached the conclusion "that under Section 61(1) (b) of the
Act, it is the individual who is to be assessed and is
liable to pay the tax mentioned therein and so the
assessment as well as the demand of the tax from each of the
plaintiffs does not suffer from any legal infirmity." The
Bench further held that since the Committee in imposing the
tax on the appellants herein, has not acted outside the
provisions of the statute, "it would, on the basis of the
judgment of the Supreme Court in Firm Seth Radha Kishan
(Deceased) represented by Hari Kishan & Ors. v.
Administrator Municipal Committee, Ludhiana,(3) which also
dealt with the provisions of the Municipal Act, follow that
the impugned assessment could only be questioned under the
provisions of Sections 84 and 86 of the Act, and the
jurisdiction of the Civil Court in respect of tax levied or
the assessment made is excluded". In the result, the appeal
was allowed and the trial court’s decision dismissing the
suit was restored.
Before us, Mr. V. K. Mahajan, learned counsel for the
plaintiffs-appellants, has adopted the reasons given by the
learned Single Judge of the High Court. In support of his
contentions, he has relied upon the
467
aforesaid Madras decisions. His argument is that if the
interpretation placed by the Appellate Bench of the High
Court is allowed to stand, it will lead to anamolous and
unconstitutional results. Mr. Mahajan concedes that the
individual partners are also ’persons’ within the meaning of
clause (b) of Section 61(1). He, however, maintains that the
firm, also, is a ’person’ within the contemplation of this
provision and as such, liable to be taxed; that if in
respect of the one trade, which is being carried on by the
firm, apart from each of the individual partners, the firm,
also is separately assessed to Rs. 200/- per annum, not only
the incidence of the tax will fall twice, the total
liability therefor will far exceed the ceiling of Rs. 250/-
per annum fixed by Article 276(2) of the Constitution. In
these premises, it is contended that an interpretation of
Section 61(1) (b), which may lead to unconstitutional on
irrational results should be eschewed.
With regard to the question of jurisdiction it is
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contended that since the Municipal Committee had in the
exercise of its powers clearly acted beyond its
jurisdiction, the suit was maintainable in the Civil Court.
Section 61(1)(b) of the Municipal Act, so far as
material for this case, reads as under:
"Subject to any general or special orders which
the State Government may make in this behalf, and the
rules, any committee may, from time to time for the
purposes of this Act, and in the manner directed by
this Act, impose in the whole or any part of the
municipality any of the following taxes, namely:-
(1) (a).....................
(i) to (iii) .....................
(b) a tax on persons practising any profession or
art or carrying on any trade or calling in the
municipality.
Explanation.-A person in the service or person
holding an office under the State Government or the
Central Government or a local or other public authority
shall be deemed to be practising a profession within
the meaning of this sub-section."
From a plain reading of the extracted provision,
it is clear that a tax leviable under clause (b) is, in
terms, a tax on "persons". The expression "persons"
undoubtedly includes natural persons. The class of such
taxable persons has been indicated by the Legislature with
reference to their occupational activity. Thus, in order to
be authorised, a tax under clause (b) of Section 61(1) must
satisfy two conditions:
468
First, it must be a tax on "persons". Second such persons
must be practising any profession or art or carrying on any
trade or calling in the municipality.
There can be no dispute that the appellants are
"persons" and, as such, satisfy the first condition. Even
the learned counsel for the appellants has candidly conceded
that the individual partners are also "persons" within the
meaning of the said clause (b). Controversy thus becomes
narrowed down into the issue; Whether persons collectively
doing business in partnership, in the municipality, fulfil
the second condition ? That is to say, do such persons
"carry of any trade or calling in the municipality" within
the contemplation of clause (b) ?
In our opinion, for reasons that follow, the answer to
this question must be in the affimative.
’Partnership’ as defined in Section 4 of the Indian
Partnership Act, 1932, is the relation between persons who
have agreed to share the profits of a business carried on by
all or any of them for the benefit of all. The Section
further makes it clear that a firm or partnership is not a
legal entity separate and distinct from the partners. Firm
is only a compendious description of the individuals who
compose the firm. The crucial words in the definition of
’partnership’ are those that have been underlined. They hold
the key to the question posed above. They show that the
business is carried on by all or any of the partners. In the
instant case, admittedly, all the plaintiff-appellants are
carrying on the business in partnership. All the six
partners are sharing the profits and losses. All the
partners are jointly and severally responsible for the
liabilities incurred or obligations incurred in the course
of the business. Each partner is considered an agent of the
other. This being the position, it is not possible to hold
that each of the six partners is not carrying on a trade or
calling within the purview of clause (b) of Section 61(1) of
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the Municipal Act. At the most, it can be said that each of
these six persons is severally as well as collectively
carrying on a trade in the Municipality. There is nothing in
the language of Section 61 or the scheme of the Municipal
Act which warrants the construction that persons who are
carrying on a trade in association or partnership with each
other cannot be individually taxed under clause (b) of
Section 61(1). On the contrary, definite indication is
available in the language and the scheme of this statute
that such partners can be taxed as persons in their
individual capacity. As noticed already, clause (b) makes it
clear in no uncertain terms that this is a tax on ’persons.’
Its incidence falls on individuals, who belong to a class
practising any profession or art; or carrying on a trade or
calling in the municipality.
469
To hold that persons who are collectively carrying on a
trade in the municipality cannot be taxed individually,
would be to read into the statute words which are not there.
There are no words in clause (b) or elsewhere in the statute
which, expressly or by necessary implication, exclude or
exempt persons carrying on a trade collectively in the
municipality from being taxed as individuals. To attract
liability to a tax under this clause, it is sufficient that
the person concerned is carrying on a trade in the
municipality, irrespective of whether such trade is being
carried on by him individually or in partnership with
others. Thus, both the conditions necessary for levying a
tax under clause (b) of subsection (1) of Section 61 of the
Municipal Act existed in this case. The appellants are
"persons" and they are carrying on a trade in Chheharata
Municipality.
In the view we take, we do not think it necessary to go
further into the question, whether the definition of
’person’ given in Section 2(40) of the Punjab General
Clauses Act, can be imported into the statute under
consideration, so as to include a contractual firm, also,
within the purview of the expression ’persons’ used in
clause (b) of Section 61(1). Indeed, the entire effort to
import the definition of ’person’ given in the General
Clauses Act, into Section 61(1)(b) of the Municipal Act, is
directed to find a foundation for the argument, that the
construction adopted by the High Court could lead to double
taxation and even unconstitutional results. But in the
instant case, nothing of this kind has happened. The firm
has not been assessed. No question of double taxation or
exceeding the Constitutional ceiling of Rs. 250/- fixed by
Article 276(2) of the Constitution, arises on the facts of
the present case. The arguments advanced on behalf of the
appellants on this aspect of the matter are merely
hypothetical, and speculative.
This takes us to the second question, whether the Civil
Court had jurisdiction to hear and determine the suit.
Section 84(1) of the Punjab Municipal Act provides that
"an appeal against the assessment or levy of any.... tax
under this Act, shall lie to the Deputy Commissioner or to
such other officer as may be empowered by the State
Government in this behalf". Then, there is a proviso to this
sub-section which says that when the Deputy Commissioner or
such other officer, as aforesaid, is or was, when the tax
was imposed, a member of the Committee, the appeal shall lie
to the Commissioner of the Division. Sub-section (2) is
important. It provides:
"84(2). If, on the hearing of an appeal under the
section, any question as to the liability to, or the
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principle of assessment of, a tax arises, on which the
officer hearing the appeal entertains reasonable dobut,
he may, either of his own
470
motion or on the application of any person interested,
draw up a statement of the facts of the case and the
point on which doubt is entertained, and refer the
statement with his own opinion on the point for the
decision of the High Court."
Section 86 mandates that "no objection shall be taken
to any valuation or assessment, nor shall the liability of
any person to be assessed or taxed be questioned, in any
other manner or by any other authority than is provided in
this Act."
From a conjoint reading of sections 84 and 86, it is
plain that the Municipal Act, gives a special and particular
remedy for the person aggrieved by an assessment of tax
under this Act, irrespective of whether the grievance
relates to the rate or quantum of tax or the principle of
assessment. The Act further provides a particular forum and
a specific mode of having this remedy which analogous to
that provided in Section 66 (2) of the Indian Income-tax
Act, 1922. Section 86 forbids in clear terms the person
aggrieved by an assessment from seeking his remedy in any
other forum or in any other manner than that provided in the
Municipal Act.
It is well recognised that where a Revenue Statute
provides for a person aggrieved by an assessment thereunder,
a particular remedy to be sought in a particular forum, in a
particular way, it must be sought in that forum and in that
manner, and all other forums and modes of seeking it are
excluded. Construed in the light of this principle, it is
clear that sections 84 and 86 of the Municipal Act bar, by
inevitable implication" the jurisdiction of the Civil Court
where the grievance of the party relates to an assessment or
the principle of assessment under this Act.
In the view we take, we are fortified by the decision
of this Court in Firm Seth Radha Kishan v. Administrator,
Municipal Committee, Ludhiana, (supra) wherein sections 84
and 86 of this very Punjab Municipal Act, 1911 came up for
consideration. Therein, the Municipal Committee, Ludhiana,
imposed a terminal tax on Sambhar salt and assessed the
appellant, therein, to a sum of Rs. 5,893/- towards that tax
at the rate of Rs. 10/- per maund under item 69 of the
Government Notification by which the terminal tax was
imposed. The assessee filed a suit against the Municipal
Committee in the Civil Court, contending that Sambhar salt
ought to have been assessed at the rate of 3 pies per maund
under item 68, that he had been illegally assessed under
item 69 at the higher rate, and claimed refund of the amount
paid by him, with interest. The Committee, inter alia,
contended that Sambhar salt was not common salt, and the
Civil Court had no jurisdiction to entertain the suit. The
trial court held that Sambhar salt was common salt within
the meaning of item 68 of the Schedule, that
471
the imposition of tax on it under item 69 of the Schedule
was illegal, and, therefore, the Civil Court had
jurisdiction to hear and determine the suit by virtue of
section 9 of the Code of Civil Procedure.
On appeal, the High Court held that the Civil Court had
no jurisdiction, and dismissed the suit.
The assessee came in appeal to this Court by
certificate granted by the High Court, and contended that
since the impugned levy was not made under the Municipal Act
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but in derogation thereof, the Civil Court had jurisdiction
to entertain and determine the suit.
Delivering the judgment of the Court, Subba Rao, J. (as
he then was) repelled this contention, observing that the
rate of the tax to be levied depended upon the character of
the salt, and it was not possible to say that in
ascertaining this fact the authorities concerned travelled
outside the provisions of the Municipal Act, even if they
wrongly applied item 69 of the schedule; that the mistake in
applying the wrong item of the Schedule to the tax could be
corrected only in the manner prescribed by the Act, and the
aggrieved person cannot file a suit in the Civil Court in
that regard, the Civil Court’s jurisdiction having been
excluded by the provisions of Sections 84 and 86 of the Act.
The Court distinguished that class of cases where the
Municipal Committee in levying a tax or committing an Act,
clearly acts outside or in abuse of its powers under the
Municipal Act, and explained that it is only in such cases,
the bar to the jurisdiction of the Civil Court would not
apply. Can the case before us be said to belong to that
class of cases where the Municipal Committee in levying a
Tax acts beyond or in abuse of its powers under the Act ?
The answer to this question must be in the negative. By no
stretch of imagination, can it be said in the facts and
circumstances of the case, that in assessing the appellants,
individually, and not collectively, to the tax in question,
the Municipal Committee abused its powers under the Act. We
have already discussed and held that in levying this tax,
the Municipal Committee did not travel beyond or act
contrary to the provisions of Section 61(1)(b) of the Act.
In short, the present case is one where the Municipal
Committee acted "under the Act". It follows, therefore, that
the Civil Court’s jurisdiction to entertain and decide the
suit was barred, even if the dispute raised therein related
to the principle of assessment to be followed.
For the foregoing reasons, the appeal fails and is
dismissed with costs.
V.D.K. Appeal dismissed.
472