South Delhi Municipal Corporation v. B N Magon

3. He further submits that the MCD has powers to levy property tax on all lands and buildings under its jurisdiction. Therefore, unless consciously excluded, there cannot be any building, property or activity which cannot be put to tax. The Corporation asserts that in terms of MPD clause 15.[8]

(ii) and (iii) user of professional activity would have to be in less than

50% of the sanctioned FAR, whichever is less. The Court would note that this contention is regarding the extent of use of a residential building or dwelling unit for professional activity.

4. The said MPD clause reads as under: “15.[8] PROFESSIONAL ACTIVITY Subject to the general terms and conditions specified in para 15.4, professional activity is permissible in plotted development and group housing under the following specific conditions: xxx ii. In group housing, and plotted development with multiple dwelling units, professional activity shall be permitted on any floor subject to maximum of 50% of the permissible or sanctioned FAR, whichever is less, of each dwelling unit. iii. In the case of plotted development with single dwelling unit, professional activity shall be permissible on any one floor only, but restricted to less than 50% of the permissible or sanctioned FAR whichever is less on that plot. xxx”

5. It is clear that MPD, 2021 permits professional activity in residential buildings, subject to certain conditions. However, what is to be noted is that the said provision of MPD, does not empower the Corporation to levy tax for professional activity being carried out from residential buildings. Section 115 and 115A of the DMC Act, as quoted hereinabove, empowers the MCD to levy taxes but only in terms of and to the extent specified in the statute. Categories of buildings, user-wise, have been defined under clause 9 (a) and (b) (i) and (ii) of the DMC (Property Tax) Bye-laws, 2004, as under: “.... 9. Definitions of use-wise categories of buildings. -For the purposes of clause (f) of sub-section (1) of section 116 A, the usewise (a) "residential building" shall mean any building used for dwelling purposes by a family/families/individual but excludes any premises for commercial use including lodging, guest house, hotel or similar purposes: (b) "business building" shall mean any building or part thereof used for transaction of business or for keeping of accounts and records or for similar other purposes, and such buildings shall

(i) offices (other than offices of Central Government,

State Government and local bodies), banks, professional establishments, court houses, and libraries for the principal function of transaction of public business and keeping of books and records;

(ii) office buildings (premises) solely or principally used as office or for office purpose; and...”

6. The MCD contends that insofar as: i) a building or a part thereof is used for transaction of business or for keeping of books, accounts and records, it shall be considered as a “business building” and therefore subject to levy of property tax; ii) that a lawyer's services fall within the sphere of professional activity and, that part of a building which is used for professional activity, would fall within the definition of a 'business building' as per clause 9(b)(i) of the Bye-laws; iii) that clause 9(b)(ii) categorically includes office buildings premises solely or principally used as office or for office purposes; that the definition of 'business building' or 'mercantile building' contained in other statutes were extraneous to the determination of the annual value under the Unit Area System of Property Tax; iv) that the ambit of that 'business building' was wide as well as inclusive under the Delhi Municipal Corporation Act, 1957 and v) that activities being carried out by advocates/professionals are commercial and non-domestic in nature, therefore the same are subject to tax and simply because such activity is carried out from residential premises, as per permitted user under MPD 2021, the activity would not become residential.

7. The aforesaid contention is ex facie untenable because there is no such deeming provision in law, for taxation. As noted hereinabove taxation powers have to be specifically mentioned and categories of taxable activity have to be defined.

8. The learned counsel for the respondent refutes the MCD‟s contentions and states that each argument of the appellant has been specifically dealt with in the impugned order, that the appeal is without merit and it should be dismissed.

9. The impugned order has dealt with the aforesaid issues as under: “...7.In support of his submission, Mr. Magon relied upon the judgment of a Division Bench of the Bombay High Court in Sakharam Narayan Kherdekar v. City of Nagpur Corporation and others AIR 1964 Bombay 200 wherein it has been held that an office of an advocate is not covered under the expression „commercial establishment‟ under the Bombay Shops and Establishments Act, 1948. The relevant portion of the said judgment is reproduced hereinbelow:- “26. Thus, the very concept of any activity which can justly be called a commercial activity, must imply some investment of capital and the activity, must run the risk of profit or loss. Understood in this sense, therefore, we are inclined to hold that it is not every establishment in the sense of premises or buildings where business, trade or profession is carried on that is intended to be governed by the Act, but only those premises though carrying on one or other of these kinds of activities which are of a commercial nature……. There is no precise definition of what a profession is, but it is possible to gather what is meant by professional activities from other pronouncements......... xxx xxx xxxx

35. In our opinion, enough has been stated above to indicate how the profession of an Advocate is of a class apart, not only from other professions but also from any other commercial activity in which a person may be employed. It is possible to conceive of any commercial activities where services of a professional man like engineer, or architect or draftsman may be utilised, but we cannot conceive of commercial venture where services of a lawyer, not for his own benefit but as a means of providing advice and legal aid to others on behalf of a corporation or an organised body may be made available as part of their commercial activity. The relations between a counsel and his client are not analogous to those of a trader and his customer. The client is not his customer; there is a certain fiduciary relation between them, when the counsel accepts a brief. The obligations do not end with the disposal of the case; they continue so far as the lawyer is concerned. He has obligations not only to the client but also to the Court, and generally to the administration of justice, in which he performs a healthy and necessary function. We therefore do not think that the profession of a lawyer is possible to be carried on as a commercial venture in any sense of the term. There is also considerable force in the argument on behalf of the petitioner that the part a lawyer plays in the administration of justice partakes to some extent, of participation in discharging sovereign or regal functions of the State. We have already quoted above the pronouncements of their Lordships of the Supreme Court that administration of justice and exercise of judicial power are a part and parcel of sovereign powers or regal powers of the State. In this task the lawyer plays a vital and important role……..We therefore find it difficult to accept the contention of the respondents that a lawyer's profession is a kind of profession which can be said to be carried on as profession of commercial nature. It is inherently improbable in the nature of things that the profession of a lawyer could be viewed as a commercial venture. In. fact, the commercial character of business, which is an essential condition of a commercial activity is absent in the lawyer's profession. We fail to see how a lawyer, whether he works in his office or appears in Court, can be said to be carrying on his profession in any of these places where the activity can be said to be of a commercial nature. It is not a commercial activity and the very nature of the work is such that it is incapable of being of a commercial nature.

8. Mr. Magon also relied upon the reference order of a Two Judge Bench of the Supreme Court in M.P. Electricity Board and Others v. Shiv Narayan and Another (2005) 7 SCC 283, wherein it has been held under:- ―6. The word ―commercial‖ has been defined to mean: ―Commercial.—Relates to or is connected with trade and traffic or commerce in general; is occupied with business and commerce. Anderson v. Humble Oil & Refining Co. [226 Ga 252: 174 SE 2d 415, 417] Generic term for most all aspects of buying and selling. The expression ―commerce or ―commercial necessarily has a concept of a trading activity. Trading activity may involve any kind of activity, be it a transport or supply of goods. Generic term for almost all aspects is buying and selling. But in legal profession, there is no such kind of buying or selling nor any trading of any kind whatsoever. Therefore, to compare legal profession with that of trade and business is a far from correct approach and it will totally be misplaced.” (emphasis supplied)

10. The Supreme Court has held that the “power to tax must be express, else no power to tax”1. Under the DMC Act there is no power to tax “professional activities” carried out from residential buildings. Professional activities are permitted under MPD 2010, under certain conditions. The Master Plan has force of law[2]. The language of section 116 A (1) of the DMC Act, 1957 does not include tax on professional

1 State of West Bengal vs. Kesoram Industries Ltd. and others, (2004) 10 SCC 201 2 R.K. Mittal & Ors. vs. State of Uttar Pradesh & Ors. (2012) 2 SCC 232; Manushi Sangathan vs. Government of Delhi & Ors. 168 (2010) DLT 168 activities. Interestingly, clause 9 (b) (i) and (ii) of the Bye-laws refer only to „professional establishment‟ but does not define the expressions „professional‟ or „establishment‟.

11. The impugned order has observed as under:

35. Therefore, it can be simply stated that an “establishment” is a term which can have a wide meaning. It would be any place where business is conducted, or in other words, it would be any place of business.......”

43. Consequently, the expression „establishment‟ refers to those buildings which have a separate identifiable existence and where business is conducted. xxx

49. The Allahabad High Court in Satya Prakash Singh and Anr. vs. State of U.P. & Ors. Writ Petition No.16843/2011 dated 29th May, 2012 also set aside the assessment of the ground floor portion as commercial despite the fact that a Doctor was running a clinic therein. The Allahabad High Court held that the work of a Doctor, Chartered Accountant or a Lawyer or any Consultant, is a profession which is distinct from any trade or business. The Allahabad High Court further held that running a clinic/dispensary/laboratory from a residential area would not be covered by the expression „commercial establishment‟ or a „shop‟ within the meaning of Sub-section (4) and 16 of Section 2 of the Adhiniyam and its market value was not determinable as a commercial building as provided under Rule 2(d) of the Rules. xxx

51. In fact, in K. Kanagasabai vs. The Superintending Engineer, W.P.(C) 21731/2003 dated 23rd December, 2010, the Madras High Court made a distinction between the office of a lawyer in a residence and an office of a lawyer in a commercial place.

52. The distinction between „professional activity and „professional establishment‟ can be illustrated by the following example. A „professional‟s office‟ would be a „professional establishment‟ when the usage of the office space is in excess of the conditions stipulated in Clause 15.[8] of the MPD 2021 or if the said office is situated in a building designated as commercial or business in the MPD 2021 and Zonal Plan. In the opinion of this Court, a premise would not become business premise just because a lawyer read his office file or did some official work at his residence.

53. „Professional activity‟ as defined and permitted by the MPD 2021 has not been diluted or subject to tax by Bye-law 9(b). After all, the intent the authorities could not have been to take back the concession given by the MPD 2021 in Clause 15.[8] in the form of permissible activity by levying property tax!”

12. As regards the professional activity and professional services rendered by advocates, a Division Bench of the Bombay High Court has in Sakharam Narayan Kherdekar v. City of Nagpur Corporation & Ors., AIR 1964 Bombay 200, has held that the discharge of professional activities by advocates would not be covered under the expression “business” nor would it be professional establishment because the word “establishment” would only refer to as „shops‟ as defined in the Bombay Shops and Establishment Act, 1948.

13. The result of the aforesaid discussion is that no tax can be levied in the absence of a statutory empowerment. The MCD‟s powers to levy property tax are embodied in Section 115 and 115-A of the DMC Act. The Byelaws 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. Neither the Act nor the Byelaws define “professional activity” carried out by advocates, architects and doctors, etc.

14. A Constitution Bench of the Supreme Court in Commissioner of Customs and Others vs. Dilip Kumar and Company and others (2018) 9 SCC 1, has held that: i) when the language of the statute is plain and unambiguous, court has to seal and understand the plain language as such, and there is no scope of interpretation, ii) all cases of literal interpretation would involve strict rule of interpretation, but strict rule may not necessarily involve the former, especially in the area of taxation, thus, strict interpretation does not encompass strict literalism into its fold; iii) every taxing statute including charging, computation and exemption clause (at the threshold stage) should be interpreted strictly; iv) in a taxation statute there is no room for any intendment; v) in taxation statutes contextual or purposive interpretation cannot be applied, nor can any resort be made to look to other supporting material. Equity has no place in interpreting a tax statute.

15. That being the law regarding interpretation of taxing statutes, 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”. What it defines has been discussed hereinabove. Also in V. Sasidharan v. M/s. Peter and Karunakar and others AIR 1984 SC 1700 the Supreme Court has 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‟. Relevant portion of the said judgment is reproduced as under:

16. 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.

17. We see no reason to interfere with the impugned judgement. The appeal is without merit and is accordingly dismissed.

NAJMI WAZIRI, J SUDHIR KUMAR JAIN, J MARCH 23, 2023