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TMI Blog1989 (6) TMI 36X X X X Extracts X X X X X X X X Extracts X X X X ..... a larger heart which liberally donated for the very many cultural artistic and other activities in the State). He fought and got partial success in D. H. Namboodiripad v. Executive Authority, Thekkumkara Panchayat [1970] KLT 1039. In the present case, individually the impact of profession tax is inconsequential. Collectively, the deprivation of the tax can be crucially crippling for the local authority. A threshold thrashing : The protest comes from seven petitioners. The first petitioner is "The Legal Aid Committee for Profession Tax Payers, VSSC." The second petitioner, secretary of the first petitioner-society, seeks to figure as the representative of the other petitioners. Petitioners Nos. 3 to 7 are trade unions of engineers and of employees, There is a serious hurdle even at the threshold for the petitioners. The unions as such are not aggrieved by any action of the local authority. The second petitioner does not present any facts in relation to his personal professional income and of any unjustified levy of profession tax on him. This court declared in Mathew v. Edathua Panchayat [1988] 2 KLT 329 that similar attacks and by similar organisations cannot be accepted as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... caress its coast. About a mile and a half away runs a rail line. These physical features turned out to be advantageous. Preliminary experiments conducted prompted a preference for Thumba. The nucleus of VSSC was then formed. Attipra Panchayat was thus launched into a spectacular space of science and research. The rest is history. The basic facts and the nostalgia which takes in earlier sufferings and sacrifices of the scientists are contained in an attractive publication of "20 Years of Rocketry in Thumba-1963-1983." The growth of manpower was somewhat fantastic : 6 in 1964 and near 6,000 by about 1984. (The authentic chart gives the figure for 1983 as 4,862, a scientific and technical staff of 3,408 and administrative staff of 1,454.) Many thousands practise their profession in the Attipra Panchayat area. And those who practise a profession are liable to pay profession tax. In later years, a comfortable environment, unavailable earlier to many, was their justly deserving privilege. Understandably enough, scientific talents and skilled workmanship carry with them high emoluments. The profession tax can be correspondingly high. The Panchayat was annoyed when payment was defaulte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trade unions of employees approached this court in proceedings under article 226 of the Constitution. (The first petitioner-society in the present case was not born then),. The issues were discussed elaborately, decided duly, by a judgment, exhibit P-1, dated November 12, 1984. Balakrishna Menon J. summarised the various rules connected with the levy, assessment and collection of profession tax as contained in the Kerala Panchayats (Profession Tax) Rules, 1963. The effect of the provisions was summarised as follows "These provisions of the Act and the Rules contemplate an assessment calling for return, and after giving the assessee an opportunity to prove his return and in cases where the returns are not accepted or no returns are submitted, to make assessment after giving the assessee an opportunity as contemplated by sub-rule (3) of rule 10. A demand is permissible only after an assessment." Later, it was laid down: "There cannot be recovery proceedings unless there had been an assessment and, demand in accordance with the rules. Shri K. Sudhakaran and Shri Pirappancode V. Sreedharan Nair, counsel appearing on behalf of respondents Nos. 4 and 5, submit that the panchayats a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n on August 24, 1988, directing that the defaulters in relation to payment of profession tax, shall comply with the demand within an extended time as indicated therein. That too was sought to be questioned by a further communication from the first petitioner, exhibit P-6, dated September 9, 1988. Promptly came the reply of the panchayat, exhibit P-7, dated September 17, 1988. The last sentence is sufficiently indicative of the mood and mind of the local authority: "As a matter of fact, you have raised no sustainable objection with reference to your assessment of tax. The vague objections contained in your letter cited are hereby rejected." The panchayat took steps in tune with rule 15 of the Profession Tax Rules, to obtain information relating to the professional income and other particulars of the employees from the employer, the VSSC. The panchayat ultimately obtained the same. (I do not intend to comment upon the intermediate events, in view of the pendency of a case, Criminal Miscellaneous Civil No. 786 of 1988 before this court. Those at a very responsible and high level, should, however, take due note of the tone and tenor of publications in responsible newspapers evidenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. The employees were directed to collect the assessment notices before February 8, 1989. The first petitioner, Legal Aid Committee-the name need not be confused with the organisation engaged in general legal aid activities ; the committee exclusively cater to the interests of the employees of the VS-SC-then sent exhibit P-17 in a printed form. The panchayat received the objection and the letters dated March 7, 1989, and March 17, 1989 on March 14, 1989, and March 20, 1989, respectively. According to the panchayat, there was not even a whisper about any possible error or mistake in the fixation of the income as furnished by the employer. The objections were, accordingly, rejected by the panchayat. The panchayat asserts that even in the original petition, the employees had not pointed out any specific incidents of erroneous assessments. On March 13, 1989, a requisition was made by the panchayat to the employer, the VSSC, for deducting from the salary the profession tax and paying it over to the panchayat. Demand notice of the type of exhibit P-19 were also sent to the individual employees. The finalisation of the assessment was indicated in that communication. The facility for fil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e require any employer . . ., (a) to furnish ... a list in writing of the names of all persons employed by such employer ... After obtaining information under rule 15 the Panchayat is entitled to, demand profession tax from the concerned employee by issuing notice under section 13 of the Profession Tax Rules, 1963 ... It is not necessary that there should be an individual assessment in respect of the employees working in a firm or a company," (emphasis supplied) (See Criminal Appeals Nos. 578, 586 and 587 of 1986) This view was followed by Padmanabhan J. in Executive Officer v. Mohammed [1989] 1 KLT 360. The learned judge observed: "'All these are cases involving employees of different offices. Notices were issued under rule 15(2) to all the heads of the offices and statements were obtained from them. Assessments were only on the basis of those statements. Therefore, on-compliance of rule 10 cannot be taken as defect in the prosecution." (The word "on-compliance", is patently a printer's error for "non-compliance".) An easy escape route, but ... If the decisions are to be followed, the writ petition is liable to be dismissed. Counsel for the petitioners submitted that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... concept in a section. The report of the Taxation Enquiry Commission 1953-54, Vol. 1, contains a useful discussion on the topic. Among other things, it noted that the proportionate cost of collection of tax was high when the area is small. The report approved of the recommendations of the Local Finance Enquiry Committee that local bodies should not be empowered to call for the accounts of the assessees and that they should only call for a return of income from persons who appear to be liable to the tax. The Debates on article 256 of the Draft Bill as available in the Constituent Assembly Debates, Vol. 9, will pay a perusal. The conferment of power on the local bodies for levy of profession tax is noticeable in the Devolution Rules under the Government of India Act, 1915. It enumerated the taxes which could be levied for the purpose of local bodies. Item No. 9 was "a tax on trades, professions and callings." This corresponded to entry 46 in the Government of India Act, 1935, and entry 60 in List II of the VIIth Schedule to the Constitution. The history of profession tax from the year 1915 has been traced by the Supreme Court, though in a different context, in Bangalore Woollen, Cot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld belong to the local bodies. As it is, they are getting some funds by way of mercy from the local Government which in turn gets something from the Central Government. I do not think this is right this process should be reversed. Everything should belong to the villagers. The provincial Government should get contributions from the local bodies and the Central Government should get contribution from the provincial Governments." Chaudhari Ranbir Singh from Punjab did not find any justification for imposing a limitation of profession tax to an amount of Rs. 250 a year. R. K. Sidhva from C. P. and Berar drew upon his experience as to how the State Governments used to deal with local bodies. He stated: "From my own experience, I may say that they should not be treated in this way because the provincial Governments are always stingy in the matter of granting funds for these bodies and unless we in this Constitution make better provision for them, the lot of people living in those areas will not improve." Prof. Shibanlal Saksena particularly emphasised "...local boards are starved for very small sums. They are the bodies who really want the money so that they can give proper atte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction entered into by the assessee (such as sale, gift and the like) or involuntary actions such as acquisition of land by the State, or sale of the property in pursuance of a decree of court or a revenue recovery certificate. Even then the original assessee is in the know of the facts. He can, therefore, know the tax liability and pay it accordingly, explaining, if necessary, the variation of the tax. Detailed procedural formalities or prolonged correspondence would be a redundant requirement to conform to the principles of natural justice in that context. The cost and consequences of such protracted correspondence may also be examined in the very same context. If prior intimation of a proposal for taxation or any important step therein posits the issue of an appropriate notice, it would be ordinarily prudent, and even necessary, that such a notice is sent by a method which ensures effective service by an official of the authority on whose behalf the notice is issued. Sending it by registered post could be an alternate method. In either case, the cost can be much in excess of the tax that is received. In such circumstances, an assessee who knows the original extent of the land ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... major area "in which income-tax works relatively well", is "the area of income from employment". In support of the observations, they state : "The reason the tax works well is that there is for each employee single transaction at the end of each week or month and it is that transaction which yields the tax base. There is little problem of definition ; and since every payslip has a name and an amount on it there is no problem of identification or of measurement. The tax works in a straightforward manner because its base is cash flow."' (See Article on " Tax Avoidance" by J. Feldman and J. A. Kay in " The Economic Approach to Law", Paul Burrows-Cento G, Veljanovski, pages 331, 332.) Even as regards profession tax itself, this absence of complication has been indicated by the Supreme Court in Ram Bachan Lal v. State of Bihar, AIR 1967 SC 1404,1408. The court observed: "The subject-matter of profession tax is not very complicated..." Conclusions in the present case and the reasons In the present case which concerns the half year ending September 30, 1988, the petitioners were in fact issued notices under rule 10. They were specifically intimated about the Information obta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom this court. On the facts of the case, there is no case whatever for invalidating the assessments or interfering, with the demand for tax. It is unfortunate that there has been a meaningless fight between the local authority and the employees working in an institution within its area. It is equally unfortunate that there has been some misunderstanding even between the panchayat and the VSSC. It is profitless to apportion the blame. The, parties must be in a position to treat bygones as bygones, at least when their respective stands have been anxiously examined and judicially adjudicated. The local authority appears to have a genuine grievance that its attempts at collecting what is its legitimate dues have so far been a labour of Sisyphus. Its anguish at the dues becoming barred by efflux of time is visible in many places and on many occasions. The Legislature had at one time taken note of some such problems and reacted by enacting section 69A. That it may turn out to be inadequate appears to be the apprehension. The Legislature is not helpless in the matter. If the State is so inclined, reclamation of eroded revenue may be possible by exercises such as enlargement of time o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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