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PETITIONER: MUNSHI RAM AND ORS.

       Vs.

RESPONDENT: MUNICIPAL COMMITTEE, CHHEHARTA

DATE OF JUDGMENT06/03/1979

BENCH: CHANDRACHUD, Y.V. ((CJ) BENCH: CHANDRACHUD, Y.V. ((CJ) DESAI, D.A. PATHAK, R.S.

CITATION:  1979 AIR 1160            1979 SCR  (3) 453  1979 SCC  (2) 242  CITATOR INFO :  R          1981 SC 446  (6)  F          1981 SC1754  (9)  E&R        1992 SC1952  (8,9,12,15)

ACT:      Punjab Municipal Act, 1911, Sections 84,86-Jurisdiction of the  Civil Court,  of levy  of profession tax on the firm and also  its partners-Punjab General Clauses Act Sec. 2(40) and Constitution Art. 276(2).      Punjab Municipal Act, 1911, Sections 84-86-Jurisdiction of the Civil Court, whether a bar to hear and determine suit relating to levy of profession tax under the Act.

HEADNOTE:      Under section  61(1)(b) of  the Punjab  Municipal  Act, 1911 the  respondent by  its Notification dated May 15, 1946 levied a profession tax of Rs. 15/- per annum on each of the partners of  a firm.  Bharat Industries  Chheharta i.e.  the appellants in  the appeal. By the Notification dated July 4, 1958 the tax was raised to Rs. 200/- per annum. The validity of the  demand made  by the  respondent at  the rate  of Rs. 200/- from  each of the partners of the firm was challenged, pleading that  the Municipal Committee in levying the tax on the individual  partners had  exceeded its  statutory powers under section  61(1)(b) of  the Municipal  Act in as much as the term  ’person’ occurring  in  section  61(1)(b)  of  the Punjab Municipal  Act, 1911,  construed in  the light of the definition given  in section  2(40) of  the  Punjab  General Clauses Act included a ’firm’ and since the trade carried on by the  firm is  one, the  tax could  be levied  only on the firm, and  not on the partners individually. The Trial Court dismissed the  suit.  First  appellate  court  reversed  the decree and  the High  Court in Second Appeal confirmed it. A Letters Patent  Appeal,  preferred  by  the  respondent  was allowed and  the Trial  Court’s decision dismissing the suit was restored.      Dismissing the appeal by special leave, the Court ^      HELD: 1.  It is  clear, from a plain reading of Section 61(1)(b) that a tax leviable under clause (b) is in terms, a tax on ’persons’, which expression includes natural persons.

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Its incidence  falls on  individuals, who  belong to a class practising any  profession or art, or carrying on a trade or calling in  the municipality.  To hold  that persons who are collectively carrying  on a trade in the municipality cannot be taxed  individually, would  be to  read into  the statute words which  are not there. There are no words in clause (b) or elsewhere  in the statute which expressly or by necessary implication, exclude  or exempt  persons carrying on a trade collectively  in   the  municipality  from  being  taxed  as individuals. To attract liability to a tax under this clause it is  sufficient that the person concerned is carrying on a trade in  the municipality,  irrespective  of  whether  such trade  is  being  carried  on  by  him  individually  or  in partnership with others. [467G, 468H, 469A-B]      2 ’Partnership’  as defined  in Section 4 of the Indian Partnership Act,  1932, is  the relation between persons who have agreed to share the profits of a business carried on by all or  any of  them for  the benefit  of  all.  A  firm  or partnership is not a legal entity separate and distinct from the partners. Firm 464 is only  a compendious  description of  the individuals  who compose the  firm. The  business being  carried on by all or any of  the partners,  all of them are jointly and severally responsible for  the liabilities  incurred in  the course of the business  as each  one is  considered as an agent of the other. Such  partners can  be taxed  as  persons,  in  their individual. [468 D-H]      3. In  order to be authorised a tax under clause (b) of Section 61(1)  must   satisfy two conditions: First, it must be a tax on persons. Second, such persons must be practising any profession or art or carrying on any trade or calling in the municipality.  Both the conditions necessary for levying a tax  under clause  (b) of sub-section (1) of Section 61 of the Municipal  Act existed  in this case. The appellants are ’persons’ and  they are  carrying on  a trade  in Chheharata Municipality. [467H, 468A-C]      4(i) Where  a Revenue  Statute provides  for  a  person aggrieved by  an assessment  thereunder, a particular remedy to be  sought in a particular forum, in a particular way, it must be  sought in  that forum  and in  that manner, and all other forums and modes of seeking it are excluded. [470D-E]      (ii) From  a conjoint reading of sections 84 and 86, it is plain  that  the  Municipal  Act,  gives  a  special  and particular remedy  for the person aggrieved by an assessment of tax under this Act, irrespective of whether the grievance relates to  the rate  or quantum  of tax or the principle of assessment. The  Act further provides a particular forum and a specific mode of having this remedy, which is analogous to that provided in Section 66(2) of the Indian Income-tax Act, 1922 Section  86 forbids in clear terms the person aggrieved by an  assessment from seeking his remedy in any other forum or in  any other  manner than that provided in the Municipal Act. Therefore,  Sections 84 and 86 of the Municipal Act bar by inevitable  implication, the  jurisdiction of  the  Civil Court where  the  grievance  of  the  party  relates  to  an assessment or  the principle  of assessment  under the  Act. [470B-D, E-F]      (iii) In the facts and circumstances of the case, it is clear (a) that in assessing the appellants individually, and not collectively  to the  tax  in  question,  the  Municipal Committee did  not abuse  its powers  under the  Act, (b) in levying the  profession tax  it did not travel beyond or act contrary to  the provisions of sections 61(1)(b) of the Act, and (c)  that the  Committee acted  under the Act. The Civil

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Courts jurisdiction,  therefor, to  entertain and decide the suit was barred. [471E-G]      Firm  Seth   Radhakishan  v.  Administrator,  Municipal Committee, Ludhiana AIR 1973 SC 1547; followed.

JUDGMENT:      CIVIL APPELLATE  JURISDICTION: Civil Appeal No. 1998 of 1969.      Appeal by  Special Leave  from the  Judgment and Decree dated 3-10-1968  of the  Punjab and  Haryana High  Court  in L.P.A. No. 348/64.      V. C.  Mahajan, Mrs.  Urmila  Kapoor  and  Mrs.  Shobha Dikshit for the Appellants.      Hardev Singh for the Respondent. 465      The Judgment of the Court was delivered by      SARKARIA, J.-This  appeal by  special leave is directed against a judgment, dated October 3, 1968, of the High Court of Punjab and Haryana.      The  facts   leading  to   this  appeal  are  that  the appellants  are  partners  of  a  firm,  Bharat  Industries, Chheharta.      By a  Notification, dated  May 15,  1946, the Chheharta Municipal Committee  levied a  profession tax  under Section 61(1)(b) of  the Punjab  Municipal Act, 1911. Initially, the tax was  Rs. 15/-  per annum  and  was  levied  on  all  the partners of the said firm.      By a  Notification, dated  July 4, 1958, the annual tax for trade,  profession or calling for the owner of a factory registered under the Indian Factories Act, was raised to Rs. 200/- per  annum and  each of  the six  partners of the said firm were  assessed to  annual  tax  of  Rs.  200/-  by  the Municipal Committee.      On October  30, 1960,  the appellants  filed a suit for permanent  injunction  restraining  the  defendant-Committee from realising the profession tax demanded by it per letters Nos. 15 to 20, dated May 31, 1960, amounting to Rs. 1,200/-.      The  appellants   challenged  the   validity   of   the assessment contending  that construed  in the  light of  the definition given  in section  2(40) of  the  Punjab  General Clauses Act,  the term "person" occurring in section 6(1)(b) of the  Punjab Municipal  Act, 1911,  includes a  ’firm’ and since the  trade carried  on by  the ’firm’  is one, the tax could be  levied only  on the  firm, and not on the partners individually. On  these premises,  it was  pleaded that  the Municipal Committee  in levying  the tax  on the  individual partners had  exceeded its  statutory powers  under  Section 61(1)(b) of the Municipal Act.      The trial  court dismissed  the suit.  On appeal by the plaintiffs,  the   Additional  District   Judge,   Amritsar, reversed the  judgment of  the trial  court and  decreed the suit.      The Municipal Committee carried a further appeal to the High Court.  The learned Single Judge, who heard the appeal, affirmed the  judgment and  decree of  the  first  appellate court, on the reasoning which may be summed up as under:      The term  "person" in Section 61(1)(b) of the Municipal Act, interpreted  in the  light of  the definition  given in Section 2(40)  of the Punjab General Clauses Act, includes a ’partnership’. Under  clause (b)  of Section  61(1)  of  the Municipal Act,  the basis  on which the liability to pay tax arises, is the trade, profession or business; and if the 466

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trade and  business is  one carried  on by  several  persons collectively in partnership, then the partnership alone, and not the individual partners, are liable to pay the tax; that the liability  on the  partners will fall twice which is not contemplated by  the scheme  and language  of the  Municipal Act, even  though all the partners are jointly and severally liable to any tax for the partnership business.      In support  of his conclusion that the tax was on trade and not  on persons,  the learned  Judge by  way of analogy, referred to  clauses (a),  (c), (d),  (e) and  (f)  of  sub- Section (1). He also referred to two Madras decisions in The Municipal Commissioners of Nagapatam v. Sadaya Pillay(1) and Davies v.  President of  the Madras Municipal Commission(2): and found  himself in entire agreement with the reasoning of the learned Judges in those cases.      Aggrieved, the  Municipal Committee preferred a Letters Patent Appeal.  The Appellate  Bench of  the High Court held that to  import the definition of the term "person" occuring in Section  2(40) of  the Punjab  General Clauses  Act  into Section 61(1) (b) of the Municipal Act, will be repugnant to the subject.  In the  opinion of the Bench, under the scheme of the  statute in  question, the  tax cannot be levied on a firm or  factory as  such, but only on the individual owners of the  factory or of the firm. On this reasoning, the Bench reached the  conclusion "that under Section 61(1) (b) of the Act, it  is the  individual who  is to  be assessed  and  is liable  to   pay  the  tax  mentioned  therein  and  so  the assessment as well as the demand of the tax from each of the plaintiffs does  not suffer  from any  legal infirmity." The Bench further  held that since the Committee in imposing the tax on  the appellants  herein, has  not acted  outside  the provisions of  the statute,  "it would,  on the basis of the judgment of  the Supreme  Court in  Firm Seth  Radha  Kishan (Deceased)  represented   by   Hari   Kishan   &   Ors.   v. Administrator Municipal  Committee, Ludhiana,(3)  which also dealt with  the provisions of the Municipal Act, follow that the impugned  assessment could  only be questioned under the provisions of  Sections 84  and  86  of  the  Act,  and  the jurisdiction of  the Civil Court in respect of tax levied or the assessment  made is excluded". In the result, the appeal was allowed  and the  trial court’s  decision dismissing the suit was restored.      Before us,  Mr. V.  K. Mahajan, learned counsel for the plaintiffs-appellants, has  adopted the reasons given by the learned Single  Judge of  the High  Court. In support of his contentions, he has relied upon the 467 aforesaid Madras  decisions. His  argument is  that  if  the interpretation placed  by the  Appellate Bench  of the  High Court is  allowed to  stand, it  will lead  to anamolous and unconstitutional results.  Mr.  Mahajan  concedes  that  the individual partners are also ’persons’ within the meaning of clause (b) of Section 61(1). He, however, maintains that the firm, also,  is a  ’person’ within the contemplation of this provision and  as such,  liable to  be  taxed;  that  if  in respect of  the one  trade, which is being carried on by the firm, apart  from each of the individual partners, the firm, also is separately assessed to Rs. 200/- per annum, not only the  incidence  of  the  tax  will  fall  twice,  the  total liability therefor  will far exceed the ceiling of Rs. 250/- per annum  fixed by  Article 276(2)  of the Constitution. In these premises,  it is  contended that  an interpretation of Section 61(1)  (b), which  may lead  to unconstitutional  on irrational results should be eschewed.      With regard  to the  question  of  jurisdiction  it  is

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contended that  since the  Municipal Committee  had  in  the exercise  of   its   powers   clearly   acted   beyond   its jurisdiction, the suit was maintainable in the Civil Court.      Section 61(1)(b)  of  the  Municipal  Act,  so  far  as material for this case, reads as under:           "Subject to  any general  or special  orders which      the State  Government may  make in this behalf, and the      rules, any  committee may,  from time  to time  for the      purposes of  this Act,  and in  the manner  directed by      this Act,  impose in  the whole  or  any  part  of  the      municipality any of the following taxes, namely:-           (1) (a).....................                (i) to (iii) .....................           (b) a  tax on persons practising any profession or      art  or  carrying  on  any  trade  or  calling  in  the      municipality.           Explanation.-A person  in the  service  or  person      holding an  office under  the State  Government or  the      Central Government or a local or other public authority      shall be  deemed to  be practising  a profession within      the meaning of this sub-section."           From a  plain reading  of the extracted provision, it is  clear that  a tax  leviable under  clause (b)  is, in terms,  a   tax  on   "persons".  The  expression  "persons" undoubtedly includes  natural persons.  The  class  of  such taxable persons  has been  indicated by the Legislature with reference to  their occupational activity. Thus, in order to be authorised,  a tax under clause (b) of Section 61(1) must satisfy two conditions: 468 First, it  must be  a tax  on "persons". Second such persons must be  practising any profession or art or carrying on any trade or calling in the municipality.      There  can  be  no  dispute  that  the  appellants  are "persons" and,  as such,  satisfy the  first condition. Even the learned counsel for the appellants has candidly conceded that the  individual partners  are also "persons" within the meaning of  the said  clause (b).  Controversy thus  becomes narrowed down  into the  issue; Whether persons collectively doing business  in partnership,  in the municipality, fulfil the second  condition ?  That is  to say,  do  such  persons "carry of  any trade  or calling in the municipality" within the contemplation of clause (b) ?      In our  opinion, for reasons that follow, the answer to this question must be in the affimative.      ’Partnership’ as  defined in  Section 4  of the  Indian Partnership Act,  1932, is  the relation between persons who have agreed to share the profits of a business carried on by all or  any of  them for  the benefit  of all.  The  Section further makes  it clear  that a firm or partnership is not a legal entity  separate and  distinct from the partners. Firm is only  a compendious  description of  the individuals  who compose the  firm. The  crucial words  in the  definition of ’partnership’ are those that have been underlined. They hold the key  to the  question posed  above. They  show that  the business is carried on by all or any of the partners. In the instant case,  admittedly, all  the plaintiff-appellants are carrying  on  the  business  in  partnership.  All  the  six partners  are  sharing  the  profits  and  losses.  All  the partners are  jointly  and  severally  responsible  for  the liabilities incurred  or obligations  incurred in the course of the  business. Each partner is considered an agent of the other. This  being the  position, it is not possible to hold that each  of the six partners is not carrying on a trade or calling within the purview of clause (b) of Section 61(1) of

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the Municipal  Act. At the most, it can be said that each of these six  persons is  severally  as  well  as  collectively carrying on a trade in the Municipality. There is nothing in the language  of Section  61 or  the scheme of the Municipal Act which  warrants the  construction that  persons who  are carrying on  a trade in association or partnership with each other cannot  be individually  taxed  under  clause  (b)  of Section 61(1).  On  the  contrary,  definite  indication  is available in  the language  and the  scheme of  this statute that  such  partners  can  be  taxed  as  persons  in  their individual capacity. As noticed already, clause (b) makes it clear in no uncertain terms that this is a tax on ’persons.’ Its incidence  falls on  individuals, who  belong to a class practising any  profession or art; or carrying on a trade or calling in the municipality. 469 To hold  that persons  who are  collectively carrying  on  a trade in  the municipality  cannot  be  taxed  individually, would be to read into the statute words which are not there. There are no words in clause (b) or elsewhere in the statute which, expressly  or by  necessary implication,  exclude  or exempt persons  carrying on  a  trade  collectively  in  the municipality from  being taxed  as individuals.  To  attract liability to  a tax under this clause, it is sufficient that the  person   concerned  is  carrying  on  a  trade  in  the municipality, irrespective  of whether  such trade  is being carried on  by  him  individually  or  in  partnership  with others. Thus,  both the  conditions necessary  for levying a tax under  clause (b) of subsection (1) of Section 61 of the Municipal Act  existed in  this  case.  The  appellants  are "persons" and  they are  carrying on  a trade  in Chheharata Municipality.      In the view we take, we do not think it necessary to go further  into   the  question,  whether  the  definition  of ’person’ given  in  Section  2(40)  of  the  Punjab  General Clauses  Act,   can  be  imported  into  the  statute  under consideration, so  as to  include a  contractual firm, also, within the  purview of  the  expression  ’persons’  used  in clause (b)  of Section  61(1). Indeed,  the entire effort to import the  definition of  ’person’  given  in  the  General Clauses Act,  into Section 61(1)(b) of the Municipal Act, is directed to  find a  foundation for  the argument,  that the construction adopted  by the High Court could lead to double taxation and  even  unconstitutional  results.  But  in  the instant case,  nothing of  this kind  has happened. The firm has not  been assessed.  No question  of double  taxation or exceeding the  Constitutional ceiling  of Rs. 250/- fixed by Article 276(2)  of the  Constitution, arises on the facts of the present  case. The  arguments advanced  on behalf of the appellants  on   this  aspect   of  the  matter  are  merely hypothetical, and speculative.      This takes us to the second question, whether the Civil Court had jurisdiction to hear and determine the suit.      Section 84(1) of the Punjab Municipal Act provides that "an appeal  against the  assessment or  levy of  any.... tax under this  Act, shall  lie to the Deputy Commissioner or to such  other  officer  as  may  be  empowered  by  the  State Government in this behalf". Then, there is a proviso to this sub-section which  says that when the Deputy Commissioner or such other  officer, as  aforesaid, is  or was, when the tax was imposed, a member of the Committee, the appeal shall lie to the  Commissioner of  the Division.  Sub-section  (2)  is important. It provides:           "84(2). If,  on the hearing of an appeal under the      section, any  question as  to the  liability to, or the

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    principle of  assessment of, a tax arises, on which the      officer hearing the appeal entertains reasonable dobut,      he may, either of his own 470      motion or  on the application of any person interested,      draw up  a statement  of the  facts of the case and the      point on  which doubt  is entertained,  and  refer  the      statement with  his own  opinion on  the point  for the      decision of the High Court."      Section 86  mandates that  "no objection shall be taken to any  valuation or  assessment, nor shall the liability of any person  to be  assessed or  taxed be  questioned, in any other manner  or by  any other authority than is provided in this Act."      From a  conjoint reading  of sections  84 and 86, it is plain that the Municipal Act, gives a special and particular remedy for  the person  aggrieved by  an assessment  of  tax under  this  Act,  irrespective  of  whether  the  grievance relates to  the rate  or quantum  of tax or the principle of assessment. The  Act further provides a particular forum and a specific  mode of  having this  remedy which  analogous to that provided  in Section  66 (2)  of the  Indian Income-tax Act, 1922.  Section 86  forbids in  clear terms  the  person aggrieved by  an assessment  from seeking  his remedy in any other forum or in any other manner than that provided in the Municipal Act.      It is  well recognised  that where  a  Revenue  Statute provides for a person aggrieved by an assessment thereunder, a particular remedy to be sought in a particular forum, in a particular way,  it must be sought in that forum and in that manner, and  all other  forums and  modes of  seeking it are excluded. Construed  in the  light of  this principle, it is clear that  sections 84  and 86 of the Municipal Act bar, by inevitable implication"  the jurisdiction of the Civil Court where the grievance of the party relates to an assessment or the principle of assessment under this Act.      In the  view we  take, we are fortified by the decision of this  Court in  Firm Seth  Radha Kishan v. Administrator, Municipal Committee,  Ludhiana, (supra)  wherein sections 84 and 86  of this  very Punjab Municipal Act, 1911 came up for consideration. Therein,  the Municipal  Committee, Ludhiana, imposed a  terminal tax  on Sambhar  salt and  assessed  the appellant, therein, to a sum of Rs. 5,893/- towards that tax at the  rate of  Rs. 10/-  per maund  under item  69 of  the Government  Notification  by  which  the  terminal  tax  was imposed. The  assessee filed  a suit  against the  Municipal Committee in  the Civil  Court, contending that Sambhar salt ought to  have been assessed at the rate of 3 pies per maund under item  68, that  he had  been illegally  assessed under item 69 at the higher rate, and claimed refund of the amount paid by  him, with  interest.  The  Committee,  inter  alia, contended that  Sambhar salt  was not  common salt,  and the Civil Court  had no  jurisdiction to entertain the suit. The trial court  held that  Sambhar salt  was common salt within the meaning of item 68 of the Schedule, that 471 the imposition  of tax  on it  under item 69 of the Schedule was  illegal,   and,  therefore,   the   Civil   Court   had jurisdiction to  hear and  determine the  suit by  virtue of section 9 of the Code of Civil Procedure.      On appeal, the High Court held that the Civil Court had no jurisdiction, and dismissed the suit.      The  assessee   came  in   appeal  to   this  Court  by certificate granted  by the  High Court,  and contended that since the impugned levy was not made under the Municipal Act

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but in  derogation thereof, the Civil Court had jurisdiction to entertain and determine the suit.      Delivering the judgment of the Court, Subba Rao, J. (as he then  was) repelled  this contention,  observing that the rate of  the tax to be levied depended upon the character of the  salt,   and  it   was  not  possible  to  say  that  in ascertaining this  fact the  authorities concerned travelled outside the  provisions of  the Municipal  Act, even if they wrongly applied item 69 of the schedule; that the mistake in applying the  wrong item of the Schedule to the tax could be corrected only  in the manner prescribed by the Act, and the aggrieved person  cannot file  a suit  in the Civil Court in that regard,  the Civil  Court’s  jurisdiction  having  been excluded by the provisions of Sections 84 and 86 of the Act.      The Court  distinguished that  class of cases where the Municipal Committee  in levying  a tax or committing an Act, clearly acts  outside or  in abuse  of its  powers under the Municipal Act,  and explained that it is only in such cases, the bar  to the  jurisdiction of  the Civil  Court would not apply. Can  the case  before us  be said  to belong  to that class of  cases where  the Municipal  Committee in levying a Tax acts  beyond or  in abuse  of its powers under the Act ? The answer  to this  question must be in the negative. By no stretch of  imagination, can  it be  said in  the facts  and circumstances of the case, that in assessing the appellants, individually, and  not collectively, to the tax in question, the Municipal  Committee abused its powers under the Act. We have already  discussed and  held that  in levying this tax, the  Municipal  Committee  did  not  travel  beyond  or  act contrary to  the provisions  of Section 61(1)(b) of the Act. In short,  the present  case  is  one  where  the  Municipal Committee acted "under the Act". It follows, therefore, that the Civil  Court’s jurisdiction  to entertain and decide the suit was  barred, even if the dispute raised therein related to the principle of assessment to be followed.      For the  foregoing reasons,  the appeal  fails  and  is dismissed with costs. V.D.K.                                     Appeal dismissed. 472