1991 (8) TMI 26 - HC - Income Tax

Summary

Issues Involved:
1. Validity of Entry 20C of the Schedule to the Karnataka Tax on Professions, Trades, Callings and Employments Act, 1976.
2. Constitutionality of Entry 20C under Article 14 of the Constitution.

Detailed Analysis:

Issue I: Validity of Entry 20C of the Schedule to the Karnataka Tax on Professions, Trades, Callings and Employments Act, 1976

The petitioners challenged the validity of Entry 20C, arguing that it refers to "nursing homes" as the taxable entity, which is an impersonal thing incapable of paying tax. They contended that under Section 3(2) of the Act, the liability to pay tax is on the "person" who exercises any profession or calling or is engaged in any trade. The court, however, held that the legislative intention is clear that the subject of the tax is the profession, trade, calling, employment, etc., and the tax is payable by the person engaged in these activities. The court emphasized the importance of reading the statute as a whole to ascertain its true meaning and content. It was concluded that Entry 20C(a) should be understood as referring to the person who runs the nursing home or hospital, and thus, the contention of the petitioner was rejected.

Issue II: Constitutionality of Entry 20C under Article 14 of the Constitution

The petitioners argued that Entry 20C is unconstitutional as it offends Article 14 of the Constitution. They elaborated that the activity in a nursing home is no different from that of a medical practitioner, and thus, taxing the same activity differently based on the place is arbitrary. Additionally, they argued that the classification of nursing homes without considering factors such as income, capacity, and location is irrational.

The court rejected these arguments, stating that a nursing home is an organized establishment with various facilities and is more akin to an organized business, unlike a medical practitioner's clinic. The court noted that the unit of taxation is the particular trade, profession, or calling, and treating these as single units without further classification is not discriminatory. The court cited previous judgments to support the principle that in the sphere of taxation, the legislature has wide discretion to choose the subject of taxation, and microscopic classification is not necessary. The court concluded that the petitioners failed to establish any de facto discrimination or that the tax burden was so significant as to annihilate their business, thus the alleged discrimination could not be termed "hostile."

Conclusion:

The court dismissed the petition, upholding the validity and constitutionality of Entry 20C. The rule was discharged with no costs.