Delhi Municipal Corporation Act Does Not Include Professional Activity Of Lawyers As Commercial Activity, It Cannot Be Put To Tax: High Court
The Delhi High Court has held that Delhi Municipal Corporation Act, 1957 (DMC Act) does not include the ‘professional activity’ of lawyers as ‘commercial activity’ and hence the same cannot be put to tax.
A Division Bench of Justice Najmi Waziri and Justice Sudhir Kumar Jain noted, “The rule of strict interpretation of taxation statute has to be applied. There is no scope of reading any derivative meaning or of reading any intentment of the statute. Insofar as the statute has not included “professional activity” of lawyers as “commercial activity” the former cannot be put to tax. The aforesaid Bye-laws cannot seek to over-reach the statute itself. The assessment order issued by the MCD under section 123D of the DMC Act, 1957 alongwith any demand, were rightly quashed.”
The Bench refused to interfere with the judgment of a Single Judge challenged by the appellant i.e., South Delhi Municipal Corporation.
Standing Counsel Sanjeev Sabharwal appeared on behalf of the appellant while Advocate Neeraj Gulati appeared on behalf of the respondent.
In this case, an appeal was preferred by the appellant against the judgment passed by the Single Judge passed in 2015 holding that services rendered by Advocates are professional activities and cannot be classified/categorised or be subject to tax under the category of a business establishment or professional establishment.
The High Court after hearing the arguments of both parties observed, “The MCD‟s powers to levy property tax are embodied in Section 115 and 115-A of the DMC Act. The Bye-laws have been enacted under Sections 481 and 483 of the Act. Clause 9 of the Bye-laws, as noted hereinabove, defines the categories under which property tax can be levied. Rate of taxation is another issue but for taxation to extend to a class of activity, such activity must be specified, defined and included in that class/category.”
The Court further observed that neither the Act nor the bye-laws define “professional activity” carried out by advocates, architects, doctors, etc.
“… what needs to be seen is whether “professional activity” by lawyers would be classified under clause 9 (a) (b) (i) and (ii) of the Delhi Municipal Corporation (Property Taxes) Bye-laws, 2004. The DMC Act does not define “professional activity”, said the Court.
The Court also relied upon the judgment in the case of V. Sasidharan v. M/s. Peter and Karunakar and others AIR 1984 SC 1700 wherein the Apex Court held that ‘professional activity’ of lawyers does not fall within the category of ‘commercial establishment’ or ‘business activity’ and the firm of lawyers is not a ‘commercial establishment’.
Accordingly, the Court dismissed the appeal and upheld the judgment of the Single Judge.
Cause Title- South Delhi Municipal Corporation v. B N Magon (Neutral Citation: 2023:DHC:4316-DB)
