1991 (2) TMI 11 - HC - Indian Laws

Invalidation of Karnataka Tax Provision for Violating Constitution

The court held that item No. 20 in the Schedule to the Karnataka Tax on Professions Act violated Article 14 of the Constitution, declaring it invalid and ... Article 14 Of The Constitution, Partners, Profession Tax Issues Involved:1. Constitutionality of item No. 20 of the Schedule to the Karnataka Tax on Professions, Trades, Callings and Employments Act, 1976, as substituted by the Karnataka Amendment Act No. 15 of 1989.2. Violation of Article 14 of the Constitution of India.3. Violation of Article 276(2) of the Constitution of India.4. Violation of Article 304(b) of the Constitution of India.Issue-wise Detailed Analysis:1. Constitutionality of Item No. 20:The petitioners challenged item No. 20 of the Schedule to the Karnataka Tax on Professions, Trades, Callings and Employments Act, 1976, as substituted by the Karnataka Amendment Act No. 15 of 1989. The provision levies an annual tax of Rs. 500 on each partner of a firm registered under the Indian Partnership Act, engaged in any profession, trade, calling, or employment. The petitioners argued that this provision is unconstitutional.2. Violation of Article 14:The petitioners contended that the tax imposed under item No. 20 violates Article 14 of the Constitution of India, which guarantees equality before the law. The tax is imposed only on partners of registered firms, not on partners of unregistered firms, despite no qualitative difference between them. The court agreed, stating, 'By the application of these principles, we have no doubt that the law in question has picked up only one set of partners out of a large class of partners of firms for separate treatment and imposed on the partners of registered firms alone the tax, under entry No. 20, even though there is no qualitative difference between the partners of a registered firm and those of an unregistered firm.'3. Violation of Article 276(2):The petitioners argued that the tax levied under item No. 20 exceeds the limit prescribed by Article 276(2) of the Constitution, which states that the total amount payable as tax on profession, trade, calling, or employment by any one person cannot exceed Rs. 250 per annum. The court noted, 'We are not expressing any final opinion on this question,' but provided a prima facie view that the limitation under Article 276(2) cannot be applied by computing the total tax collected from all the partners of a firm as a levy on the firm as a 'person.'4. Violation of Article 304(b):The petitioners also contended that the levy under item No. 20 affects the freedom of trade and commerce, thus contravening Article 304(b) of the Constitution. However, the court did not find it necessary to examine this contention in detail due to its conclusion on the violation of Article 14.Conclusion:The court declared that item No. 20 in the Schedule to the Karnataka Act 35 of 1976, as introduced by the Karnataka Act 15 of 1989, violates Article 14 of the Constitution and is thus invalid and unenforceable. The court restrained the respondents from enforcing the said provision and ordered that any tax collected under the invalid provision be refunded to the respective petitioners unless it can be adjusted towards other liabilities under the Act. The writ petitions were allowed, and the rule was made absolute with no costs.