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2008 (1) TMI 605 - SC - VAT and Sales TaxWhether the Explanation to the definition of the term person defined under section 2(j) of the Act and Explanation No. I of the First Schedule to the Act is violative of the article 267(2) of the Constitution? Held that - Appeal dismissed. The definition of the word person in the impugned Explanation and also Explanation No. I of the First Schedule to the Act is not intended to tax a person at a rate higher than Rs. 2,500 per annum, per person, but to treat even a branch of a firm, company, corporation or other corporate body, any society, club or association as a separate person, and therefore, a separate assessee within the meaning of section 2(b) of the Act and the Andhra Pradesh State Legislature has undoubtedly the competency to adopt such a devise of taxation. The Andhra Pradesh State Legislature did not violate the mandate of article 276(2) of the Constitution.
Issues Involved:
1. Constitutional validity of the Explanation to the definition of "person" under Section 2(j) of the Andhra Pradesh Tax on Professions, Trades, Callings and Employments Act, 1987. 2. Constitutional validity of Explanation No. I of the First Schedule to the Andhra Pradesh Tax on Professions, Trades, Callings and Employments Act, 1987. 3. Legislative competence of the Andhra Pradesh State Legislature to define "person" and treat branches of firms or companies as separate persons for tax purposes. 4. Compliance with Article 276(2) of the Constitution of India. Issue-wise Detailed Analysis: 1. Constitutional Validity of the Explanation to the Definition of "Person" under Section 2(j) of the Act: The appellants challenged the constitutional validity of the Explanation to the definition of "person" in Section 2(j) of the Andhra Pradesh Tax on Professions, Trades, Callings and Employments Act, 1987. The core contention was that the State Legislature lacked the competence to define "person" in a manner that treats each branch of a company or firm as a separate person for tax purposes. The court held that the Legislature has the competence to define "person" and such artificial definitions are not unknown to law. The definition in the General Clauses Act does not restrict the State Legislature from adopting a different definition for "person" in the Act. The court concluded that the definition of "person" in the Act, which includes every branch of a firm, company, corporation, or other corporate body, is constitutionally valid. 2. Constitutional Validity of Explanation No. I of the First Schedule to the Act: Explanation No. I of the First Schedule to the Act deems every branch of a self-employed assessee as a separate assessee for the purpose of levying profession tax. The appellants argued that this provision violates Article 276(2) of the Constitution, which limits the total amount payable by any one person to Rs. 2,500 per annum. The court held that the impugned provisions do not intend to tax a person at a rate higher than Rs. 2,500 per annum but aim to treat each branch as a separate person for tax purposes. Therefore, the provisions are constitutionally valid and do not violate Article 276(2). 3. Legislative Competence of the Andhra Pradesh State Legislature: The court examined whether the Andhra Pradesh State Legislature had the legislative competence to define "person" and treat branches of firms or companies as separate persons for tax purposes. It was argued that the branches of a company do not have an independent and separate existence. However, the court held that the Legislature is competent to define "person" differently from the General Clauses Act and create an artificial unit by fiction. The court concluded that the State Legislature did not exceed its legislative power in defining "person" and treating branches as separate persons for tax purposes. 4. Compliance with Article 276(2) of the Constitution of India: Article 276(2) of the Constitution limits the total amount payable by any one person to the State or any local authority by way of taxes on professions, trades, callings, and employments to Rs. 2,500 per annum. The court held that the impugned provisions do not violate this constitutional mandate as they do not intend to tax a person at a rate higher than Rs. 2,500 per annum. The provisions merely treat each branch as a separate person for tax purposes, which is within the legislative competence of the State Legislature. Conclusion: The court upheld the constitutional validity of the Explanation to the definition of "person" under Section 2(j) and Explanation No. I of the First Schedule to the Andhra Pradesh Tax on Professions, Trades, Callings and Employments Act, 1987. The Andhra Pradesh State Legislature has the competence to define "person" and treat branches of firms or companies as separate persons for tax purposes. The impugned provisions do not violate Article 276(2) of the Constitution. The appeals were dismissed with no order as to costs.
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