Taxable base under Punjab professions tax includes income earned outside the State when assessment uses aggregate gross income.

Section 3 of the Punjab Professions, Trades, Callings and Employments Taxation Act, 1956 was held to govern only liability, requiring the person to carry on the relevant activity within Punjab, while the tax base was determined by the assessment provisions in sections 2(b), 4 and 5. The Court held that computation must be made on aggregate gross income and therefore includes income earned both inside and outside Punjab. The High Court's narrower reading was rejected as inconsistent with the statutory text and as depriving the amended definition in section 2(b) of effect. The constitutional validity of the amendment was left open.

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Issues: Whether section 3 of the Punjab Professions, Trades, Callings and Employments Taxation Act, 1956 restricts liability to income earned only within the State of Punjab, or whether income earned outside Punjab is also relevant in computing the tax under the Act.

Analysis: Section 3 was held to govern only the incidence of liability, namely, that a person must carry on a profession, trade, calling or employment within Punjab to be taxable. The computation of tax was held to be controlled by sections 2(b), 4 and 5 of the Act, which require assessment on the aggregate gross income and therefore take into account income earned both inside and outside Punjab. The reading adopted by the High Court was rejected as an impermissible rewriting of clear statutory language and as rendering the amended definition in section 2(b) ineffective. The question of the constitutional validity of the amendment was not decided and was left open.

Conclusion: Section 3 does not confine the tax base to income earned only within Punjab; income from outside the State is also to be included in computing the tax. The issue was decided against the assessee.

Ratio Decidendi: Where the charging provision creates liability by reference to carrying on an activity within the State, but the assessment provisions require computation on aggregate gross income, the taxable base cannot be restricted to income earned only within the State by narrowing the charging provision.

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