Profession tax on salary arrears fails where the statute taxes only monthly salary actually received

Arrears of salary were held outside the definition of "salary" in section 2(j) of the Karnataka Tax on Professions, Trades, Callings and Employments Act, 1976, because the charging scheme is confined to salary or wages received on a regular monthly basis. The article notes that enhanced remuneration paid later for an earlier period is not covered unless the statute expressly brings arrears within charge. It further states that profession tax on retrospective salary arrears cannot be sustained in the absence of clear charging words and an effective machinery provision, and any excess tax was treated as refundable or adjustable.

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Issues: (i) Whether arrears of salary are covered by the definition of "salary" under section 2(j) of the Karnataka Tax on Professions, Trades, Callings and Employments Act, 1976; (ii) Whether the levy of profession tax on arrears of salary paid with retrospective effect can be sustained.

Issue (i): Whether arrears of salary are covered by the definition of "salary" under section 2(j) of the Karnataka Tax on Professions, Trades, Callings and Employments Act, 1976.

Analysis: The charging scheme of the Act links profession tax to salary or wage received on a regular monthly basis. The expression "salary" in section 2(j), read with the Schedule, contemplates monthly salary actually paid and received, and not enhanced remuneration paid later for an earlier period. The comparison with the Income-tax Act, which specifically brings arrears of salary to charge and provides relief mechanisms, shows that the Legislature did not adopt the same approach in the profession tax enactment.

Conclusion: Arrears of salary are not included in the definition of "salary" under section 2(j) of the Act.

Issue (ii): Whether the levy of profession tax on arrears of salary paid with retrospective effect can be sustained.

Analysis: Since the Act contains no clear charging language covering arrears of salary and no effective machinery for bringing such arrears to tax after the original monthly levy, the additional demand cannot be supported. In a taxing statute, liability must arise from clear and unambiguous words, and the absence of an express provision cannot be supplied by interpretation.

Conclusion: The levy on arrears of salary cannot be sustained in law.

Final Conclusion: The assessment to the extent it fastened profession tax on the retrospective salary difference was invalid and liable to be set aside, and the excess tax was refundable or adjustable in future.

Ratio Decidendi: Where a taxing statute levies tax on salary received on a regular monthly basis, arrears of salary paid later for an earlier period cannot be brought within charge unless the statute expressly so provides.

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