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Issues:
1. Whether arrears of salary are covered by the definition of 'Salary' under the Karnataka Tax on Professions, Trades, Callings and Employments Act, 1976. 2. Whether the levy of profession tax on the arrears of salary for each month from September 1978 to October 1979 can be sustained in law. Analysis: The judgment by the High Court of Karnataka involved a dispute between a bank, registered under the Karnataka Tax on Professions, Trades, Callings and Employments Act, 1976, and its employee regarding the levy of profession tax on arrears of salary. The bank deducted profession tax from its employees' salaries monthly, including the arrears paid in a lump sum due to a settlement. The Profession Tax Officer proposed to levy tax on the arrears of salary, which the bank contested, arguing that the Act only permits tax on salary paid on a regular basis and does not include arrears of salary. The court considered the definitions of 'salary' and 'arrears' under the Act and compared them with the Income-tax Act. It noted that the Act did not explicitly provide for taxing arrears of salary and lacked machinery for such taxation. The court emphasized that the Legislature could have amended the Act to include arrears of salary but had not done so. The Government Pleader's inability to suggest an amendment supported the petitioners' argument against taxing arrears of salary. Ultimately, the court ruled in favor of the petitioners, quashing the assessment of profession tax on the arrears of salary. The judgment allowed for a refund of excess tax collected and declared that arrears of salary do not constitute part of the salary paid to employees. This decision applied to all employees of the bank and was enforceable against both the bank and the Profession Tax Officer.
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