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 s. 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 s. 2(40) of
the Punjab General Clauses Act, the term " person " occurring in s.
61(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 s. 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 s. 61(1)(b) of the
Municipal Act, interpreted in the light of the definition given in s. 2(40) of
the Punjab General Clauses Act, includes a " partnership ". Under cl.
(b) of s. 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 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 cls. (a), (c),
(d), (e) and (f) of sub-s. (1). He also referred to two Madras decisions in
Municipal Commissioners of Nagapatnam v. Sadaya Pillay [1883] ILR 7 Mad 74 and
Davies v. President of the Madras Municipal Commission [1890] ILR 14 Mad 140 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 " occurring in s. 2(40) of the Punjab
General Clauses Act into s. 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 s. 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 v.
Administrator, Municipal Committee, Ludhiana [1963] 50 ITR 187; AIR 1963 SC 1547, which also dealt with the provisions of the
Municipal Act, follow that the impugned assessment could only be questioned
under the provisions of ss. 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. C. K. Mahajan, learned counsel for the
plaintiff-appellants, has adopted the reasons given by the learned single judge
of the High Court. In support of his contentions, he relied upon the 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 anomalous
and unconstitutional results. Mr. Mahajan concedes that the individual partners
are also " persons " within the meaning of cl. (b) of s. 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 art. 276(2)
of the Constitution. In these premises, it is contended that an interpretation
of s. 61(1)(b), which may lead to, unconstitutional or irrational results should
be eschewed.
With regard to the question of jurisdiction, it is
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 municipality any of the following taxes,
namely :-- .......
(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 cl. (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 cl. (b) of s. 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.
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 cl. (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 on any trade or
calling in the municipality " within the contemplation of cl. (b) ?
In our opinion, for reasons that follow, the answer to
this question must be in the affirmative.
" Partnership " as defined in s. 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 six 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 cl. (b)
of s. 61 (1) of 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 s. 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 cl. (b) of s. 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, cl. (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. 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 cl. (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 cl. (b) of sub-s. (1) of
s. 61 of the Municipal Act existed in this case. The appellants are "
persons " and they are carrying on a trade in Chheharta 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 s. 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 cl. (b) of s. 61(1).
Indeed, the entire effort to import the definition of " person " given
in the General Clauses Act, into s. 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 art. 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 principle of assessment of,
a tax arises, on which the officer hearing the appeal entertains reasonable
doubt, he may, either of his own 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 ss. 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 s. 66(2) of the Indian I.T. 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 ss. 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 [1963] 50 ITR 187; AIR 1963 SC
1547, wherein ss. 84 and 86 of this very Punjab Municipal Act, 1941, 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 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 s. 9 of
the Code of Civil Procedure.
On appeal, the High Court held that the Civil Court had no
jurisdic- tion 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 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 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 ss. 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 s. 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.
Appeal dismissed.
