Madras High Court
The Tamil Nadu Government Officials ... vs The Chief Secretary To The Government Of ... on 25 March, 1986
Equivalent citations: (1987)1MLJ1
JUDGMENT M.N. Chandurkar, C.J.
1. All these appeals arise out of a common order delivered by Mohan, 3, in a batch of writ petitions in which the learned Judge held that the appellants' challenge to the levy of profession tax by the Madras City Municipal Corporation as well as by the Madurai and Coimbatore Municipal Corporations and other District Municipalities was futile, since the levy did not suffer from any infirmity.
2. The batch of appeals with which we are now dealing relate only to the levy of profession tax of the Madras City Municipal Corporation hereinafter referred to as the Corporation. The Assistant Revenue Officer of the Corporation of Madras issued a requisition under Section 115-A of the Madras City Municipal (Corporation) Act, 1919, requiring certain public authorities to recover profession tax for the second half-year of the financial year 1985-86 from the salaries/wages of all persons employed for not less than 60 days during the period 1st April to 30th September/1st October to 31st March and all persons whose half yearly income 'exceeds Rs. 1,800/-, at the rates furnished therein, For the purpose of convenience, we shall deal only with the facts in W.A. No. 37 of 1986, which arose out of W.P. No. 10083 of 1985 which was filed by the Tamil Nadu Government Officials Union, represented by its President. The respondents to this writ petition, were the Chief Secretary to the -Government of Tamil Nadu, Madras City Municipal Corporation and the different Pay and Accounts Officers in the City of Madras as well as the Director Treasuries and Accounts, Nandanam, Madras. Similar writ petitions were also filed by the Employees' Associations of several employees of public Corporations, Banks and the Postal Department. It is not in dispute that when such requisition was sent by the Corporation of Madras to several employers, an amount in the nature of profession tax was deducted out of the salary of persons whose half yearly income was more than Rs. 1,800/-. When such deductions were being made, several writ petitions came to be filed in this Court challenging these deductions substantially on two grounds: The first ground was that the persons from out, of whose salaries these deductions were being made, were persons in public employment, either employees of the State Government or the Central Government or Public Corporations and that the Corporation was not entitled to recover any amount by way of tax on profession from such persons, since such a tax would become a tax on employment. The case was that the Corporation could recover only profession tax. An employment, much Jess public employment, did not amount to practising a profession. The second ground was that assuming that there is a power in the Corporation to levy a tax on persons who are employed in public employment, the profession tax has not been assessed in accordance with the provisions of the Madras City Municipal (Corporation) Act, 1919 hereinafter referred to as the Act, inasmuch as the provisions in Schedule IV which provides for assessment to profession tax has not been complied with.
3. The case of the Corporation before the learned single Judge was that a tax on employment was really in the nature of a tax on profession and secondly in view of the provisions of Section 115-A of the Act, which are introduced by Tamil Nadu Act 23 of 1976, the Corporation could straightaway proceed to take recourse to Section 115-A of the Act. The positive case of the Corporation in the return is that in so far as persons in public employment are concerned, it is not necessary for the Corporation to make individual assessment of tax after obtaining the particulars from the employers and Heads of Offices to enable them to deduct the profession tax from the salaries or wages of their employees and pay it to the Corporation. The further case of the Corporation' is as under:
Rule 8 and other rules, found under Schedule IV of the Act, which were framed long before the introduction of Section 115-A will come into play only and the case of individual assessment of persons who are not employed in an establishment.
These rules, according to the Corporation, do not apply in the case of salaried employees. It is reiterated in the return that in so far as the persons in employment of the Government and other offices and institutions are concerned, the profession tax is deducted at source in accordance with the prescribed rates on the basis of the wages or the payments received by them and in all these cases, there will be no necessity for the tax payer to invoke Rules 8, 12, 15 and 17 of the Schedule IV for the simple reason that the employer or the Head of the Office is bound to deduct the tax from the salaries or wages paid to the employees only as per the rates prescribed for each income group. The Corporation has high-lighted in its counter affidavit the difficulties in contacting each and every individual to make an assessment individually. The justification for not doing so is stated as follows:
...the volume of work and the cost involved to adopt such a procedure are huge and it may even exceed the amount of profession tax exigible and the object of such recovery will be defeated and rendered nugatory.
According to the Corporation, it is to avoid all these 'pit-falls' and to ensure prompt collection by proper assessment, Section 115-A of the Act has been brought in with effect from 1.10.1976. Therefore, the positive case of the Corporation is that in so far as the persons in employment are concerned, it is enough compliance with the provisions of the law if the employer is straightaway directed to deduct the appropriate amount of tax for a half-year in accordance with Schedule IV which is intimated to the employer in the requisition itself.
4. The learned single Judge negatived the contention that the levy of profession tax is not permissible under the Act and the learned single Judge held that an employment is a profession because 'employment' was a word of wide import and in the context of Entry 60 in List II of Schedule VII to the Constitution of India, the object of including the word 'employment' in. that entry was to bring within the scope of this entry every activity or t occupation in which a person engages in order to earn a livelihood, whether it be trade, business, profession or service. The learned Judge then proceeded to ascertain the meaning of the word 'assessment' and took the view that under Section 115-A of the Act, it became a statutory liability of the employer to dedifct the amount of tax as per the requisition by the Corporation. The learned Judge referred to the fact that there was no controversy about; (1) that the appellants are employees under an employer, (2) they are carrying on a profession in the comprehensive sense of the term; (3) the salary drawn by each of the employees for which the return filed for the purpose of income-tax shall be final and (4) the rates of tax are catelogued under Rule 8 of Schedule IV of the Taxation Rules. Thus, when all these are definite, according to the learned Judge, "a mere arithmetical calculation alone would be enough to bring it within the scope of assessment". The learned Judge took the view that the liability is statutorily imposed on the employer and he was of the view that the statutory liability of the employer under Section 115-A of the Act arises only when the Commissioner is satisfied under Rule 9 about the particulars given under Section 115 of the Act. The learned Judge however further took the view that it was not correct to say that there was no quantification of liability. He took the view that "the sections read with the rules clearly quantify or determine the liability to pay profession tax". Sub-section (6) of Section 115-A, according to the learned Judge, contained in-built safeguards and therefore, there was no question of appeal or revision because the Commissioner proceeds entirely upon the particulars furnished in compliance with the requisition under Section 115 of the Act. He, therefore, rejected the argument that the liability to pay profession tax does not become due without an actual assessment. The learned Judge referred to a resolution of the Corporation of Madras No. 168 of 1958 dated 27th February, 1958 to the following effect:
Commissioner's proposal to levy profession tax at the maximum rates is recommended, with the modification that in the case of the last class an half-yearly tax of Rs. 2/- be levied.
Thus, according to the learned Judge, after the adoption of the Schedule, it was a matter of calculation and there, was no question of any turnover being submitted on which an enquiry became necessary to assess the taxable turnover or to exempt a portion of that turnover and to actually determine the liability to pay tax. The learned Judge construed Section 115-A as only an additional mode of recovery of the tax throwing the liability on the employer to pay the tax statutorily. Having taken this view, the learned Judge dismissed the writ petitions.
5. In these appeals the argument on behalf of the appellants was advanced by Mr. R. Muthukumaraswami, in W.A. No. 37 of 1986, Mr. Somayajee in W.A. No. 72 of 1986 and Mr. Krishnaswami in W.A. No. 139 of 1986. Substantially, the argument in the appeals consists of two propositions. The first contention is that there is no law authorising the Corporation to levy tax on persons who are in Government employment and even assuming that Section 111 is construed as an independent charging provision, then there are no rules in Schedule IV for the purpose of assessment of the different taxes referred to in Section 111 of the Act because Rule 8 is to be found in a part which is titled 'Assessment for Profession Tax'. Thus, according to Mr. Muthukumaraswami, there is no machinery for assessment made and consequently, there is no liability to pay profession tax.
6. We shall take up the first contention presently. It is necessary at the outset to refer to certain provisions of the Act. Part III in the Act is headed 'Taxation and Finance' and the marginal heading of Section 98 is 'Enumeration of taxes'. The material part of Section 98 reads as follows:
98. ENUMERATION OF TAXES AND DUTIES:
The (Council) may levy:
(a) a property tax
(b) a tax on companies
(c) a profession tax
(d) a tax on carriages and animals
(e) a tax on carts
(f) a tax on timber brought into the city,....
Sections 99 to 109 of the Act deal with the property tax. Detailed provisions are made with regard to the description and class of property tax (Section 99):
Method of assessment of property tax (Section 100) General exemptions (Section 101) Special exemptions and alternative basis of property tax (Section 102) Property Tax, a first charge on property and movables (Section 103) Property tax when payable (Section 104) Vacancy remission (Section 105) and so on.
Section 110 then deals with taxation of companies. We are concerned with Section 111 which deals with tax on professions. The substantial part of Section 111 reads as follows:
Tax on professions, arts, callings business and appointments:
(1) If the council by a resolution determines that a profession tax shall be levied, every person not liable to the tax on companies, who, after the date specified in the notice published under Sub-section (2) of Section 98-A in any half year-
(a)exercises a profession, art or calling or transacts business or holds any appointment, public or private-
(i) within the city for not less than sixty days in the aggregate, or
(ii) outside the city but who resides in the city for not less than sixty days in the aggregate; or
(b)resides in the city for not less than sixty days in the aggregate and is in receipt of any pension or income, from investments, shall pay, in addition to any licence fee that may be leviable under this Act a half-yearly tax, assessed in accordance with the rules in Schedule IV, but in no case exceeding rupees five hundred.
We are not concerned with the four explanations or Sub-sections 2, 3 and 4. Sections 113 to 115-A form a group of sections which are put together under the heading 'Provisions common to Companies and Profession Tax'. We may refer to the provisions of Section 113(6) which provides as follows:
If the company's or profession tax due from any company or person in respect of any half-year is not paid, the Commissioner shall cause a notice to be served on such company or person the Commissioner shall cause a notice to be served on such company or person to pay such tax within fifteen days of the date of such service.
Section 113-A provides that all statements made, returns furnished or accounts or documents produced in connection with the assessment of companies' or profession tax by any company or person shall be treated as confidential and copies thereof shall not be granted to the public. Sections 114 and 115 deal with the requisition which under Section 114 can be issued to an owner or occupier to furnish a list of persons liable to tax and which under Section 115 required any employer or the head or secretary or manager of any public or private office, hotel, boarding house or club, or of a firm or company to furnish a list of persons liable to tax. Section 114 reads as follows:
Requisition on owner or occupier to furnish list of persons liable to tax:
The Commissioner may be notice require the owner or occupier of any building or land and every secretary or manager of a hotel, boarding or lodging house, club or residential chambers to furnish within a specified time a list in writing containing the names and residential addresses of all persons occupying such building, land, hotel, boarding or lodging house,, club or residential chambers and specifying the profession, art, trade or calling or appointment of every such person and the rent, if any, paid by him and the period of such occupation.
Then Section 115 reads as follows:
Requisition on employers or their representatives liable to tax:
The Commissioner may by notice require any employer or the head or secretary or manager of any public or private office, hotel, boarding-house or club, or of a firm or company-
(a) to furnish within a specified time a list in writing of the names and residential addresses of all persons employed by such employer or by such office, hotel, boarding house or club, firm or company as officers, servants, dubashes, agents, suppliers or contractors with a statement of the salary or income of each of such employed persons; and
(b) to furnish particulars in regard to any company of which such employer, head, secretary, or manager, as the case may be is the agent.
Then comes Section 15-A, the marginal heading of which is 'Deduction of profession tax from salary or wages or other sum'. Section 115-A reads as follows:
Every employer shall, on receipt of a requisition from the Commissioner, deduct from the salary or wages of any person employed by tee employer as an officer or a servant or from any sum payable by the employer to any person employed by the employer as dubash, agent, supplier or contractor, such amount of profession tax, as may be specified in such requisition, as being due from such employed person.
Sub-section (2) of Section 115A of the Act enables the person responsible for making any deduction under Sub-section (1) at the time of making the deduction, to increase or reduce, the amount to be deducted under Sub-section (1) for the purpose of adjusting any excess or deficiency arising out of any previous deduction or failure to deduct during the half year.
7. Sub-section (3) of Section 115-A of the Act provides that any deduction made in accordance with the provisions of Sub-section (1) and (2) and paid to the Corporation shall be treated as payment of profession tax on behalf of the person from whose salary or wages the deduction was made or on behalf of the person to whom the sum from which the deduction was made is payable, and credit shall be given to him for the amount so deducted on the production of the certificate furnished under Sub-section (5) in respect of the profession tax, if any due from that person for the relevant half year under this is Act.
8. Sub-section (5) of Section 115-A of the Act makes it obligatory on the person making the deduction under Sub-section (1) or Sub-section (2) to give a certificate to the effect that profession tax has been deducted and the amount so deducted is to be specified in such a certificate. The further provisions in Sections 116 to 123 deal with tax and carriages and animals. Sections 124 to 128 of the Act deal with tax on cart and Section 129 of the Act deals with tax on timber and Section 129-A deals with tax on advertisements. The scheme of Part III, which deals with taxation and finance, as is clear from the several provisions, which are referred to, is that Section 98 contains only an enumeration of taxes which can be levied by the Corporation and the provisions are then made in the subsequent sections with regard to each of the taxes referred to in Section 98 of the Act. It is in this context that Section 111 of the Act is to be construed. Undoubtedly Section 98(C) of the Act refers only to a profession tax. However, the Legislature in Section 111 of the Act has expressly permitted the Corporation to levy a tax on profession, arts, callings business and appointments. There are two ways of looking at the tax which is contemplated by Section 111 of the Act. One way is to construe Section 111 as indicating that the Legislature itself has contemplated that a tax on arts, callings, business and appointments is also a tax on profession and the other way is that Section 111 is an express power given by the Legislature to the Council of the Corporation to levy a tax on profession, arts, callings, business or a person holding an appointment, public or private. In so far as the first aspect is concerned, the learned Judge, in our view, was right when he took the view that an employment is also a profession, profession being a generic term. The material meaning from the Oxford English Dictionary given to the word 'profession' is in a wider sense, 'any calling or occupation by which a person habitually earns his living'. In Webster's Dictionary the meaning of the word 'profession' is given as "the occupation, if not mechanical, agricultural or the like, to which one devotes himself, the business which one professes to understand and to follow for subsistence; calling; vocation and employment". The meaning of the word 'calling' includes position, estate or status in life. In the case of a public servant his employment must necessarily be considered as calling and in any case, in our view, having regard to the wide scope of the meaning of the word 'profession1, employment, either public or private, must necessarily be included within that term. Even otherwise, as we indicated earlier, we are inclined to construe Section 111 of the Act as an express power given by the Legislature to the Council to determine that a profession tax shall be levied on the persons described in Section 111 of the Act. We are, therefore, unable to accept the first contention that profession tax cannot be levied on persons in employment a necessary corollary of this finding Mr. Muthukumaraswamy's second argument that Schedule IV does not refer to assessment of taxes which are to be levied on persons exercising arts, calling or holding any appointment public or private must also be rejected. What is contended by him is that Section 111 in its concluding portion requires the half-yearly tax to be assessed in accordance with rules in Schedule IV. The argument is that the material part of Section 111 of the Act must be read as follows:
If the council by a resolution determines that a possession tax shall be levied every person...(a) exercises a profession...holds any appointment, public or private...shall pay in addition to any licence fee that may be leviable under this Act, a half-yearly tax, assessed in accordance with the rules in Schedule IV, but in no case exceeding rupees five hundred". If we look at Schedule IV to the Act, it would appear that it is a Schedule which contains taxation rules. In Section 138 of the Act, it is expressly provided that rules and tables embodied in Schedule IV shall be read as part of Chapter V, which deals with taxation and Finance. Since it will be necessary to refer to these rules when dealing with the argument advanced by Mr. Somayajee, it would be proper to refer to these rules in detail at this stage. These taxation rules are now statutorily treated as a part of the Act. Rules 1, 1-A and 1-B are put together under the heading 'Provisions common to taxes in general'. Therefore, Rules 1, 1-A and 1-B will be applicable in the case of all the taxes referred to in Section 98 of the Act and which the Council has decided to levy. Rule 1 makes it obligatory on the Commissioner to prepare and keep assessment books in such form and in such parts and sections as he thinks fit showing the persons and property liable to taxation under this Act. Sub-rule (2) of Rule 1 reads as follows:
The assessment books and where detailed particulars relating to any assessment are kept in separate records, the portion thereof containing such particulars shall be open at all reasonable times and without charge to inspection by any person who pays any tax to the corporation or his authorised agent and such person or agent shall be entitled to take extracts, free of charge from the said books and records.
Rule 1-A of the Rules reads as follows:
The Commissioner shall, save as otherwise provided in this Act, determine the tax to which each property or person is liable; provided that in the case of tax payable by the Commissioner the original assessment shall be made by the Mayor.
Rule 1-B makes it obligatory on the Commissioner to give to every person making payment of a tax a receipt therefor signed by him or some person duly authorized by him in that behalf.
9. Then Rules 1-C to 6-B deal with the assessment of the property tax. Rule 7 deals with assessment of companies. Rules 8 and 9 deal with 'Assessment for profession tax'.
10. Rule 8 reads as follows:
Persons shall be assessed by the Commissioner to the profession tax under the following classes on a scale to be determined by the council from time to time:
Provided that such scale shall be subject to the maximum specified against each class;
Provided also that the proportion which the tax on any class bears to the minimum income of that class shall in no case be smaller than the proportion which the tax on any lower class bears to the minimum income of such lower class....
Rule 9(1) reads as follows:
If, in the opinion of the Commissioner, profession-tax is or will be due for any half-year from any person other than a person in respect of whom the Commissioner obtains to his satisfaction particulars of income under Section 175, he shall serve a notice on such person either in that half-year or in the succeeding half-year requiring him to furnish within such period, not being less than thirty days as may be specified in the notice a return showing the income on the basis of which, according to such person, he is liable to be assessed to profession-tax for the half-year in question. Thereupon, it shall be open to such person to submit a return showing the income derived by him during the half-year for which profession tax is claimed or during the previous half-year and produce any evidence on which the person may rely in support of the return made.
11. Now, the argument of Mr. Muthukumaraswami, is that when Section 111 expressly refers to the liability to pay tax assessed in accordance with the rules in Schedule IV, Schedule IV refers only to assessment to profession tax and Schedule IV must be read as not containing the provision for assessment in respect of persons exercising arts, callings or holding any public or private, appointment. This, in our view, is not the correct reading of Schedule IV. We have already held that the tax which is levied on persons who are exercising arts, callings or holding any appointment public or private, is also a profession tax because that is the express object of Section 111, of the Act. Then the provision in Rules 8 and 9 providing for assessment for profession tax is clearly intended for carrying out the scheme of - Section 111 of the Act. It would not be permissible to restrict the operation of Rules 8 and 9 Schedule IV only to a person practising a profession, but that the schedule will be attracted in case of those persons on whom a tax is liable to be levied in accordance with the provisisons of Section 111 of the Act. Accordingly, the contention that Schedule IV does not provide for assessment of a tax on persons holding public or private employment has to be rejected.
12. We then come to the more substantial contention as to whether, having regard to the enactment of Section 115-A of the Act, the provisions of Rule 8 are not attracted in case of persons holding employment and mere sending to the employers a requisition by the Corporation is sufficient compliance with the provisions of Section 115-A of the Act. We have repeatedly questioned Mr. N. Raghavachari, who appeared on behalf of the Corporation, as to which is the provision under which the Commissioner must be deemed to have made an assessment of the profession tax and the Learned Counsel frankly stated before us that it is not possible to pin-point any particular provision and that Section 115 and 115-A and Rule 9(2) have to be read together, to understand the meaning of assessment in the context of the profession tax which is sought to be recovered by directing the employer to deduct the half yearly tax from out of the salaries or wages of persons in employment. As a matter of fact, the Learned Counsel went to the extent of contending that the operation of Rule 9 must be restricted only to the cases like those of doctors, lawyers and engineers and Rule 8 would not be attracted at all, in case of persons; in employment. The argument was that the Corporation has prescribed the schedule of an half-yearly tax, that the employer deducts it from the salary which is to be paid by the employer to the employee and he would, therefore, be able to ascertain the exact amount of tax, which would be deductible from such an employee. Therefore, according to the Learned Counsel there is no question of expecting the Corporation to make any assessment order. In any other view the tax collections will become impossible and it will become so costly a process that the levy or recovery of profession tax will become uneconomical. Indeed, that is also the stand that has been taken in the return filed by the Corporation. The Learned Counsel for the Corporation, therefore, justified the issue of the requisition under Section 115-A of the Act as sufficient compliance with the statutory provisions in the Act for the purpose of levy and recovery of profession tax.
13. Article 265 of the Constitution of India expressly provided that no tax shall be levied or collected except by authority of law. The bar under Article 265 "of the Constitution is, therefore, not only to the levy of a tax except by authority of law, but also to the collection of a tax except by authority of law. If the appellants are able to show that in the case of persons holding public or private employment a tax cannot be collected unless it is assessed and that such assessment is obligatory under the statute or the rules, then the appellants would be clearly entitled to invoke the provisions of Article 265 of the Constitution of India. The crucial question, therefore, which arises in the instant case is whether by virtue of enactment under Section 115-A, the Corporation or the Commissioner is absolved of the obligation to assess a particular person to profession tax. It has not been disputed before us that such assessment is necessary in the case of persons who are not in employment. Indeed it does not seem to be in dispute that in the case of persons practicing a profession like doctors, lawyers and engineers, the liability to pay profession tax would arise only if such persons are assessed to profession tax. Therefore, unless it is possible to find that Section 115-A has the effect of doing away with this obligation on the part of the Commissioner of the Corporation in the case of persons in employment, it would be difficult to hold that merely by virtue of being in employment the persons in employment should be treated differently for the purpose of their liability to pay the profession tax. In fairness to the Learned Counsel for the Corporation, it must be stated that even according to him Section 115-A is a provision for recovery of taxes. That Section 115-A is a provision for recovery of taxes is also the stand taken in the counter affidavit filed by the Corporation. The learned single Judge has also taken the same view on the scope of Section 115-A of the Act. It has, therefore, to be examined as to whether by merely making a separate provision in the case of persons in employment to facilitate the recovery of the profession tax, the pre-condition of assessment or levy of a tax is permitted to be dispensed with. This calls for consideration of the true nature and the scope of the provisions of Section 115 and Section 115-A of the Act and Rule 8 of the Rules.
14. The charging section is Section 111 of the Act. But it is important to bear in mind that the true nature of the provisions of Section 111 of the Act is that though the power is given to the Corporation to levy a tax on profession, arts, callings, business and appointments, there is no automatic levy of the profession tax. The pre-condition for such a levy is that the Council has to pass a resolution that a profession tax should be levied. Section 111 is really in two parts. The first part deals with the power to levy a profession tax and that power can be exercised by passing a resolution by the Council. The second part which is dependent upon passing of such a resolution, that is, after the Corporation decides to levy a profession tax, refers to the liability of a person to pay a half-yearly tax assessed in accordance with the rules in Schedule IV. Section 111 of the Act is a provision of general application. It applies equally to persons, who are in employment as well as persons who are not in employment. In respect of both these classes of persons, Section 111 statutorily provides that the obligation is to pay a tax assessed in accordance with the rules in Schedule IV. In other words, a mere levy of a tax by passing of a resolution even though that resolution may prescribe the schedule of the tax, does not automatically result in a liability to pay the said tax. The liability to pay is conditional upon the assessment in accordance with the rules in Schedule IV. Mt is on this aspect that emphasis has been laid by Mr. Somayajee what when Section 111 itself refers to assessment in accordance with the rules in Schedule IV, it is' no answer for the Corporation to say that on the enactment of Section 115-A the Corporation is absolved of its obligation to comply with the procedure prescribed in Schedule IV. It is significant to note that the reference to Schedule IV is to be found in all the material provisions relating to taxation following the provisions of Section 98 of the Act. Section 110 of the Act which refers to tax on companies, refers to payment of a half-yearly tax "assessed in accordance with the rules in Schedule IV. We have also referred to the provisions of Rule 1 in Schedule IV, which requires the Commissioner to prepare and keep assessment books in such form and in such parts and Sections as he thinks fit, but this assessment book must show the persons and property liable to taxation under this Act. The object of Rule 1 is very clear. The object is that at any point of time the record must be available with the Corporation as to the persons or the properties which are liable to taxation under the Act. Rule 1-A which is also of a general character applicable to all taxes expressly provided that the Commissioner shall save as otherwise provided in this Act, determine the tax to which each property or person is liable. The determination referred to only in respect of properties or persons is nothing but assessment to tax, because it is this assessment which has to be entered into in the register which is kept under Rule 1. When we go to Rule 8 "which we have already reproduced, it mandatory requires that persons shall be assessed by the Commissioner to the profession tax under the classes specified on a scale determined by the Council from time to time. When Section 111, therefore, refers to assessment in the manner contemplated by Schedule IV, the reference obviously is to Rule 1-A as well as Rule 8, which requires the Commissioner to assess every person to profession tax. We are not able to find any provision anywhere in the Act which relieves the Commissioner of this obligation provided for in Rule 1-A and Rule 8 of Schedule IV. It is necessary to point out that the provisions in Sections 111 and 115 of the Act are merely intended to assist the Commissioner to collect a list of persons who are to be assessed under Rule 8 of the Act. We have reproduced earlier Section 114 of the Act. That enables the Commissioner to require the owner or occupier of any building or land and every secretary or manager of the establishment stated therein to give a list in writing containing the names and residential addresses of ail persons occupying the stated land, hotel, boarding, lodging House, club or residential chambers and specifying the profession, art, trade or calling or appointment of every such person and the rent, if any, c paid by him and the period of such occupation. A bare reading of this provision will show that this provision is only intended to assist the Commissioner to collect information in order to ascertain whether there are persons who are liable to assessment to profession tax. It cannot be - contended that the Corporation is entitled to straightaway require the employer to inform the persons in respect of whom the list is called that profession tax has to be recovered from them. Section 115 is an analogous provision to Section 114 of the Act and the whole object of Section 115 is that the Commissioner has been provided with an easy method of collecting information in order to assess such persons to profession tax. Even the marginal heading of Section 115 is "requisition on employers to their representatives to furnish list of persons liable to tax". The liability referred to in Section 115 is not determined merely ,by getting the list by the Commissioner. That liability is not determined by the person who supplied the list, merely by furnishing the list. Assuming for a moment that a person's name is included in the list given under Section 115 of the Act as a person who according to the employer is liable to pay profession tax, that person cannot automatically become liable to pay the profession tax because the authority to assess the profession tax under the Act and the Rules is only in the Commissioner. We must remember that we are dealing with a taxing legislation. A taxing legislation has to be construed strictly and has to be strictly complied with. Unless compliance with a particular provision in a taxing statute is expressly dispensed with or the taxing provision has the effect of an automatic levy of assessment, it would be difficult to fasten a liability to tax without the procedure for assessment being normally resorted to and more so when an assessment is expressly required to be made by Section 111 read with Rule 1-A and Rule 8 of Schedule IV.
15. As already pointed out, Section 115 enables the Commissioner to require a list of persons, who, according to the employer, are liable to tax and on receipt of such list, the Commissioner has to follow the further procedure under Rule 8 of Schedule IV. What happens in the case of a person who is not included in the list, furnished under Section 115 but who in the opinion of the Commissioner is liable to pay profession tax is specified in Rule 9 of Schedule IV. Rule 9(1) provides that in the case of a person other than a person in respect of whom the Commissioner obtains to his satisfaction particulars of income under Section 115, if from such a person in the opinion of the Commissioner profession tax will be due for any half-year, the Commissioner has to serve a notice on such person either in that half-year or in the succeeding half-year requiring him to furnish within such period not* being less than 30 days as may be specified in the notice, a return showing the income on the basis of which according to such person he is liable to be assessed to profession tax for the half-year in question. On such notice being issued, it is open to such person to submit a return showing the income derived by him during the half-year for which the profession tax is claimed or during the previous half-year and produce any evidence which the person wants to rely in support of the return made Rule 2 then deals with both these categories of persons, namely, a person in respect of whom the list is obtained under Section 115 of the Act and a person who is not covered by Section 115 of the Act, but to whom a notice has been issued by the Commissioner and he has submitted a return. Rule 9(2) then reads as follows:
If a return as required under sub-rule (1) or a list with the statement as required by Section 115 is furnished and the Commissioner is satisfied that it is correct and complete, he shall levy the profession tax from 'the' person liable to be assessed on the basis of such return or statement.
Rule 9(2) in our view, in unambiguous. Rule 9(2) makes it obligatory on the- Commissioner to levy the profession tax from the persons liable to be assessed either on the basis of the return referred to in Rule 9(1) or on the basis of the statement called for under Section 115 of the Act. Apart from the absence of any provision dispensing with the compliance with Rules 8 and 9, it appears to us that Rule 9(2) clinches the matter inasmuch as it has expressly referred to the persons whose names are included in the statement and the Commissioner is obliged, if he is satisfied that the names are correct and complete, to levy the profession tax-It is obvious that the word 'levy' used in Rule 9(2) is used in the sense of assessment, as will be clear from Rule 8 read with Rule 1-A read with Section 111 of the Act. There is no provision in the Act which enables the Commissioner, to dispense with his statutory function under Rule 9(2) of the Rules. Sub-rule (3) of Rule 9 takes care of a case where either the rectum as required by Rule 9(1) is not furnished or the return furnished is incorrect or incomplete and under Rule 9(3) the Commissioner has the power to make an estimate of his income and put him in the proper class. Some reference was made before us by Mr. N.C. Raghavachari when Rule 9(2) uses the words 'levy the profession tax', they have to be read in the sense that the liability of the person concerned to pay tax is finally determined as in the case of an assessment.
16. In Assistant Collector of Central Excise, Calcutta v. National Tobacco Co. of India Ltd. A.I.R. 1972 S.C. 2563, the Supreme Court in paragraph 20 observed as follows:
The term "levy" appears to us to be wider in its import than the term "assessment". It may include both "imposition" of a' tax as well as assessment. The term "imposition" is generally used for the levy of a tax or duty by legislative provisions indicating the subject-matter of the tax and the rates at which it has to be taxed. The term "assessment" on the other hand, is generally used in this Country for the actual procedure adopted in fixing the liability to pay a tax on account of particular goods or property or whatever may be the object of the tax in a particular case and determining its amount.... We think that, although, the connotation of the term "levy" seems "wider than that of "assessment", which it includes, yet it does not seem to us to extend to "collection". Article 265 of the Constitution makes a distinction between "levy" and "collection".
The above observations will, therefore, show that sometimes the word 'levy' also includes imposition of the tax as well as assessment. It appears to us that the word 'levy' was advisedly used in Rule 9(2). The function of the Commissioner under Sub-rule (2) of Rule 9 also consists of determining into which class a person falls for the purposes of the profession tax. The determining of the tax payable by a particular person is dependent upon the class in "which he is to be put and the scale applicable to him. Since both these factors have to be decided, it appears to us that the Legislature has advisedly used the word 'levy' in Rule 9(2). We must also refer to the fact that Schedule' IV also contains independent provisions for collection of taxes. Rule 20 says that where any tax, not being a tax in respect of which a notice has to be served under Section 115 or Section 120-A is due from any person the Commissioner shall cause to be served upon or sent to such person a bill for the sum due before proceeding to enforce the provisions of Rule 21. Rule 21 provides that if the amount due on account of any tax is not paid within fifteen days from the service of the notice or bill referred to in Sec 113 or Section 120-A or Rule 20 and if the person from whom the tax is due has not shown cause to the satisfaction of the Commissioner why it should not be paid, the Commissioner may recover by distraint under his warrant and sale of the movable property of the defaulter or if the defaulter is the occupier of any building or land in respect of which a tax is due, by distress and sale of any movable property which may be found in or on such building or land, the amount due on account of the tax together with the warrant fee and distraint fee and with such further sums as will satisfy the probable charges that will be incurred in connection with the detention and sale of the property so distrained. The statute therefore, provides for an independent machinery for recovery of the tax. Basically, the provision for recovery is made in Section 113(6) of the Act, which provides that if the companies' or profession tax due from any company or person in respect of any half-year is not paid, the Commissioner shall cause a notice to be served on such company or person to pay such tax within fifteen days of the date of such service. It is true that Section 113 of the Act is placed prior to Section 115, Section 115-A or to Section 114, but notwithstanding such placement, Section 113(6) comes into operation only after the tax is assessed under Rules 8 and 9(2) of the Rules relating to the profession tax. What happens, if in spite of a notice under Section 113(6) a tax is not paid, is provided for in Rule 21. The tax can be recovered by distraint proceedings.
17. We have referred to these provisions to highlight the fact that the avowed object of introduction of Section 115-A is that it provided for an expeditious machinery for collection of tax which would have been otherwise required to be resorted to in case tax is not paid. All that Section 115-A has done is that the recovery of that tax can now be made expeditiously from what Section 115-A describes as 'such employed person'. As already pointed out, a tax cannot become due unless a tax is levied and assessed. On the plain terms of Section 115-A, it cannot take in the process of assessment under Rule 9(2) as well as recovery function in respect of the said tax. The tax becoming due is a pre-condition for including the provision of Section 115-A of the Act and tax becomes due only on assessment. In our view, it is impossible to construe Section 115-A as providing for any automatic assessment of the tax itself because its avowed object and purpose is restricted to being substitute method of recovery which is to be normally done under Section 113 of the Act and the Rules.
18. Though on a bare grammatical construction of the words of Section 111 and Rules 8 and 9 we do not think that any other view is possible, we might refer to a decision of this Court in Sir Gulam Muhammad Ali Sahib Bahadur v. Corporation of Madras (1922) 42 M.L.J. 536. it is true that in that case the question was whether a receipt of payment of pension would invite the liability to pay the profession tax and we are not concerned with that controversy. There are, however, clear observations of the Division Bench in that decision which indicate that unless there is an assessment the profession tax does not become due. Referring to Rules 8 and 9 and Section 113, the Division Bench observed that neither under the old Act nor under the present Act can the profession tax be said to be due till the proper authority has assessed the same by the name of the assessee being placed in the proper class. Referring to the provisions of Sections 114 and 115 of the Act, the Division Bench observed as follows:
The scheme of imposition, assessment and collection of taxes laid down in the Act would seem to show that while the rate of taxation is fixed for each-year beginning with 1st April by the Council at the Budget meeting in the February previous (Section 156) the assessment of taxes payable by each individual is a contemporaneous operation within the period of taxation (year or half-year) in which while the Commissioner is afforded facilities for obtaining all relevant information on which the assessment is to be based (see Sections 114, 115 and 368) the assessee is required within a very short time after the assessment to take all his objections to the assessment proposed.
To the same effect is the decision of the Supreme Court in Rajagopalachari v. Corporation of Madras (1964) 2 M.L.J. (S.C.) 59 : (1964) 2 An W.R. (S.C) 59 : 53 I.T.R. 454 : (1964) 2 S.C.J. 234 : (1964) 2 I.T.J. 344 : A.I.R. 1964 S.C. 1172. The question in that case was whether at the relevant time after the amendment, of Section 111, a profession tax could be levied on pensioners and the Supreme Court held that under 'Section 111(1) as amended the tax could be levied only in accordance with the Rules in Schedule' IV and as those rules did not make a provision for, the levy of a tax on pensioners it would follow that the tax was not being lawfully levied on them. Referring to the provisions of Section 111 the Supreme Court pointed out that the liability to pay the tax could arise only after the Council determines by resolution that the profession tax shall be levied and it is only that which brought the charge into operation. We are referring to this to show that what happens when a resolution is passed under Section 111 is that a charge comes into operation, but until the tax is levied, in the sense that the liability is assessed by way of assessment, the question of recovery of the tax does not arise at all.
19. An argument has been advanced by the Learned Counsel for the Corporation that having regard to the large number of employees in different establishments in the City, it would become impossible to make orders of individual assessment and that the cost which would have to be incurred for the purposes of individual assessment of these employees would be wholly disproportionate to the revenue brought in by way of profession tax. It is difficult to see how this argument has any relevance to the question of constitutional validity of the recovery of tax made by the Corporation by sending a requisition to the employees under Section 115-A of the Act. Whether levy of a particular tax is economical or uneconomical having regard to the costs of earning the revenue by way of that tax is a totally irrelevant consideration. When a question of constitutionality of a compulsory exaction by a public authority in the nature of compulsory the salary is raised, as long as Section 111 and Rules 8 and 9 as well as Rules 1 and 1-A stand, the Corporation and the Commissioner are bound to comply with it. It is no answer to a challenge made to the recovery of a tax, which obviously is otherwise than by authority of law, to say that the Corporation would be put to heavy expenditure if the individuals have to be assessed. Whether a particular tax should be levied or not having regard to the costs involved is exclusively for the Corporation to decide, but a consideration of costs cannot relieve the Corporation of what is its statutory obligation under the law.
20. Some argument was advanced before us by the Learned Counsel for the employees that by the procedure adopted by the Corporation they were deprived of their remedies under the Rules to challenge the assessment. The argument was that the provisions relating to the revision of assessment in Part V of Schedule IV contemplate an appeal to the Taxation Appeals Committee; then from the decision of the Taxation Appeals Committee there is an appeal to the Small Causes Court and there is a provision for the Small Causes Court to refer the case to the High Court if a question of law is involved. The argument was that the tax payers have been deprived of this opportunity because there is no assessment and therefore there cannot be an appeal to the Taxation Appeals Committee or a further appeal to the Small Causes Court. The Learned Counsel for the Corporation however contended that there is no occasion for any grievance in respect of the amount of tax because the employer knows the salary drawn by the employee; the Rules prescribe the schedule by which the tax is to be recovered and the employer can be depended upon co place an employee in the correct class, Since everything is known, according to the Learned Counsel, no controversy can ever arise with regard to the income of the employees. According to the Learned Counsel, the dispute normally in the case of assessment is only with reference to the income to determine as to in which class an employee would fall, but when the employer has all the data with him which cannot be disputed by the employee, no dispute can arise with regard to the income of the employee. We have already pointed out that the requisition issued under Section 115-A was clearly in violation of the provisions of the Act. It is clear that a person assessed to profession tax has been given a right to certain remedies under the Act and the Rules. Those remedies are clearly made unavailable, where a deduction is straightaway by the employer without an assessment. Whether in a given case the remedy will yield any result in favour of the person who has been assessed to tax is not relevant when we consider whether the action of the Corporation is supported by law or not. On the construct of the relevant provisions, we have found that there was no warrant for dispensing with the procedure for assessment, though it also appears to us that the grievance that the appellants have been deprived of a right of appeal has some substance.
21. Some reference was made before us to an analogous provision under the Income-tax Act in Section 192(1) of the Income tax Act, 1961, which according to the Learned Counsel corresponds to Section 115-A of the Madras City Municipal (Corporation) Act, 1919. When a controversy with regard to the constitutionality of recovery of a tax arises, such a controversy cannot be decided on the basis of an analogous provision in any other Act. The scheme of the Income-tax Act is basically different from the Madras City Municipal (Corporation) Act. We are, therefore, reluctant to draw an analogy with the provisions of the Income-tax Act.
22. After giving our anxious consideration to the contentions raised, we are unable to agree with the conclusion of the learned Judge that there is an automatic quantification of tax or determination by law of the liability to pay the profession tax as a result of the statutory provisions. We must, therefore, take the view that the requisition issued by the Corporation requiring the employers to deduct the amount of profession tax straightaway from the salaries of the members of the appellants' association without taking recourse to the process contemplated by Section 111 read with Rules 8 and 9(2) of Schedule IV is without authority of law and illegal.
23. The order of the learned Judge in so far as he dismissed the writ petitions is, therefore, set aside. The appellants will be entitled to a writ of mandamus restraining the respondents, from collecting the profession tax by directing the employer to deduct the amount of profession tax without taking recourse to the assessment as contemplated by Schedule IV of the Act.
24. It was argued by Mr. Krishnaswami, appearing in W.A. No. 139 of 1986, that the Constitution does not provide for any tax being collected half-yearly and that since the Constitution did not refer to any tax which can be levied or collected half-yearly, the profession tax as contemplated by the Madras City Municipal (Corporation) Act, must be treated as non-existent. The basis of this argument appears to be Article 265 of the Constitution which provides that no tax shall be levied or collected except by authority of law. Now, all that Article 265 of the Constitution requires is that for the levy and collection of a tax there should be an authority of law. What is the nature of the tax and for what period the tax has to be levied is a matter which is not regulated by Article 265. If the Legislature has thought it fit to levy a tax on half-yearly basis; unless there is an express violation of Article 265 of the Constitution of India, it is difficult to see how that tax can be invalid on the ground that it is levied half-yearly. There is no warrant for the proposition that tax can be collected only once in a year. The nature of the tax will depend on the legislation which governs it and we are, therefore, not impressed with the submission that in law the tax must be treated as non-existent.
25. Having regard to the view which we have taken, all these appeals are allowed and the dismissal of the writ petitions which are the subject matter of these appeals is set aside. The Corporation is restrained from issuing a requisition under Section 115-A of the Act directing a deduction of an amount purporting to be profession tax otherwise than in compliance with the provisions of Section 111 read with Rules 8 and 9 of the Rules in Schedule IV. The Corporation will pay the costs of these appeals. Each appellant will get Rs. 1,000/-.
26. The learned Government Pleader has now orally applied for leave to appeal to the Supreme Court. Since we have already held that no other view appears to be possible, we do not think that this is a fit case where leave to appeal to the Supreme Court should be granted. Hence, the leave to appeal to the Supreme Court is rejected.