CALCUTTA CHEMICAL CO LTD Vs. BHAGALPUR MUNICIPALITY

JUDGEMENT

(1.) In this case the petitioner has obtained a rule from the High Court calling upon the respondents to show cause why the order of the Bhagalpur Municipality, respondent No. 1, imposing professional tax on the petitioner under the provision of Section 150A, read with Section 82(1) (ff), of the Bihar and Orissa Municipal Act, should not be quashed by grant of a writ in the nature of certiorari under Article 226 of the Constitution. Cause has been shown by the learned Government Advocate on behalf of the State of Bihar to whom notice of the rule was ordered to be given. Cause has also been shown by learned counsel on behalf of respondents 1 and 2.

(2.) On the 6th May, 1958, the petitioner received a notice of demand of professional tax of Rs. 750/- for the period from 1st April, 1956, to 31st March, 1959. On the 3rd September, 1959, another notice of demand of professional tax for a sum of Rs. 125 /- was issued by respondent No. 1 for the period from 1st October, 1954, to 31st March, 1955. Copies of these two notices are annexures A and B to the writ application. On the 3rd June, 1960, another demand notice for the payment of Rs. 500/- as professional tax for the years 1959-60 and 1960-61 was issued by respondent No. 2. This notice is annexure E to the writ application. The assessment of professional tax was made by respondents 1 and 2 by virtue of the provisions of Section 82 (1) (ff) of the Bihar and Orissa Municipal Act, which states as follows :

(3.) The main argument put forward on behalf of the petitioner is that Section 82 (1) (ff) of the Bihar and Orissa Municipal Act is unconstitutional because the State Legislature had no authority to make a law with regard to a tax on the capital value of companies as such legislation falls within Entry No. 86, of List I of the Seventh schedule of the Constitution. In this connection learned counsel made reference to the Fourth schedule of the Act which provides that the maximum rate of tax shall be fixed with reference to the paid-up capital of the Joint Stock Company transacting business within the Municipality for profit. It was submitted by learned counsel for the petitioner that Section 82 (1) (ff) of the Act must be read along with Section 150A and also with the Fourth Schedule of the Act, and if these statutory provisions are so read it was clear that the real effect of the legislation was to tax the share capital of the Joint stock Company. We are unable to accept the argument of learned counsel for the petitioner as correct. In our opinion the legislation contained in Section 82 (1) (ff) and the Fourth Schedule of the Bihar and Orissa Municipal Act falls within item 60 of List II of the Seventh Schedule of the Constitution, under which the State Legislature has authority to make a law for imposing taxes on professions, trades, callings and employments. Having regard to the language of Section 82 (1) (ff) of the statute and the Fourth Schedule, and having also regard to the context and scheme of the Bihar and Orissa Municipal Act, we are of opinion that in reality and in pith and substance the impugned legislative provisions fall within item 60 of the State List and not under item 86 of the Union List. The principle applicable to a case of this description has been laid down by the Judicial Committee in Gallagher v. Lynn, 1937 AC 863 at p. 870 as follows :