State Bank of Hyderabad Vs. Dy. Commercial Tax Officer - Court Judgment

B. Prakash Rao, J.

1. The petitioner which is a bank, through its branch, files this writ petition under Article 226 of the Constitution of India, inter alia, seeking writ of mandamus declaring that Section 2(j) of Andhra Pradesh Tax on Profession, Trades, Callings and Employments Act, 1987 (for short the 'Act') as amended in the year 1996 and explanation 1 of the first schedule to the Act, as ultra vires Article 276(2) of the Constitution of India, and further to declare the action of the respondent in collecting the profession tax for the years 1995-96 to 2005-2006 from the petitioner, and demanding the interest of Rs. 36,818/-, the alleged arrears of profession tax due for the said years 1995-96 to 2005-2006, by notice Rc. No. PTO/D/613/2005-06, dated 13.2.2006 and the payment of profession tax alleged to be due for the current financial year 2006-2007 for the main branch/extension counters/ATMs by a notice Rc. No. F5/PT/StSy/2006-07, dated 30.10.2006 as unconstitutional, illegal and without jurisdiction, and consequently to direct the respondent to refund the amount of Rs. 1,12,500/-, paid by the petitioner towards the profession tax as per the said demand vide banker's Cheque No. 724416, dated 31.10.2006 for Rs. 1,12,500/-.

2. The case of the petitioner, in brief, is to the effect that the petitioner is a body corporate, established under the Hyderabad State Bank Act XIX of 1350 Fasli and constituted under the State Bank of Hyderabad Act, 79 of 1956 and the State Bank of India (Subsidiary Banks) Act No. 38 of 1959, and it has got large number of branches spread throughout the country and the petitioner is one of its branches. While so, the respondent by notice dated 14.12.2005 called upon the petitioner to pay a sum of Rs. 1,12,500/- towards profession tax arrears under the provisions of the Act in respect of every branch including ATMs and Extension Counters as separate assessees for the purpose of levy of profession tax, and as per Entry 18 of the I Schedule to the Act, Banking Companies, as defined under Banking Regulation Act, 1949, have to pay Rs. 2,500/- per annum as individual and separate entities, and therefore every ATM and Extension Counter has to pay the said amount per annum. However, it was stated, even though the branch was paying profession tax of the employees regularly every year, profession tax of the bank/ATM/Extension counter was not being paid. In the first instance, by bona fide mistake of the liability to pay the said tax in respect of ATMs and Extension Counters, the petitioner complied the same by paying the amounts vide banker's cheque. Later by a show-cause notice dated 13.2.2006, the respondent sought to levy penal interest for the delayed payment of profession tax under Section 11 of the Act, read with Rule 24 of the Rules framed thereunder for the years 1995-96 to 2005-06 as mentioned above and called for the objections to be filed within 7 days therefrom. Accordingly, the petitioner sent a reply on 8.3.2006 denying the liability towards the interest and also the payment of any profession tax in respect of the Extension Counters and ATMs as they are part of the branch, and therefore they are not separate entities, and thus the question of any liability, separately, does not arise and sought for refund of the amount, which was paid earlier. This was also reiterated through a legal notice issued on behalf of the petitioner through Counsel on 19.10.2006. However, the respondent herein issued another notice on 30.10.2006 calling upon the petitioner to file the details of Extension Counters/ATMs attached to the petitioner and copies of permission obtained under Section 23 of the Banking Regulation Act, 1949 to open the same, and further calling upon the petitioner to pay the profession tax for the current years.

3. The petitioner sought to assail the said demand on the ground that the provisions of the said Act have no application to make an Extension Counter or ATM to fall in line with any individual person so as to make liable for paying the profession tax, and therefore the demand and levy of profession tax on such Extension Counters and ATMs is violative of Article 276(2) of the Constitution of India.

4. In the affidavit a reference was also made to a batch of writ petitions filed by Shaw Wallace and Company Limited and the Karnataka Bank Ltd. in W.P. No. 1304 of 1998 and W.P. No. 17683 of 1997, respectively, which have been dismissed by a Division Bench of this Court on 11.7.2001 holding that the branches would fall well within the parameters of Section 2(j) of the said Act, and against which Civil Appeal Nos. 1994/2002 and 2400/2002 were being filed in the Supreme Court of India where a stay of collection was granted, pending disposal thereof. Therefore, the case of the petitioner, in brief, is to the effect that the Extension Counters or even the ATMs would not come outside the definition of the branch and since they are part of the branch, they cannot be treated as independent. That apart it was also contended that administratively the Extension Counters or ATMs do not hold any such independent authority nor can fall within the definition of the person. Hence, the writ petition.

5. On behalf of the respondents, at the time when the matter came up for hearing, it was contended that having regard to the principles laid down by the Supreme Court in Karnataka Bank Ltd. v. State of A.P (SC) (2008) 12 VST 459 (SC), in respect of the very same matter as referred to, the Supreme Court has upheld the validity of the said provisions and definition including holding that every branch or any outlet would fall well within the definition of the 'person' and therefore the questions raised by the petitioner is squarely covered by the aforesaid decision and the writ petition is liable to dismissed.

6. Heard Sri K.V. Subrahmanya Narusu, learned Counsel for the petitioner and Sri K. Raji Reddy, learned Special Government Pleader for Commercial Taxes.

7. Having heard the Counsel on either side and also on a perusal of the material, the question which arise for consideration in this writ petition is as to whether on the facts and circumstances apart from the branch of the petitioner's bank the Extension Counters and the ATMs of the said branch would fall within the definition of the 'person' as contemplated under Section 2(j) of the Act, and therefore independently liable for payment of the profession tax.

8. There is no dispute in regard to the factual backdrop in respect of which the present case arises. The petitioner is a branch of bank which has been constituted as stated earlier under the provisions of the then the Hyderabad State Bank Act XIX of 1350 Fasli and constituted under the State Bank of Hyderabad Act, 79 of 1956 and the State Bank of India (Subsidiary Banks) Act No. 38 of 1959. Admittedly, apart from that, similar to the petitioner, there are several branches of the bank spread over throughout the country and each one such branch is also having its own Extension Counters and also ATMs through which the business of the bank run. Though the main attempt on the part of the petitioner herein as a branch in the writ petition as has been filed and framed initially was a comprehensive attack and challenge as to the inclusion of the branch along with its Extension Counters and ATMs sought to be roped in for the purpose of levying profession tax separately, however, in the aforesaid decision as relied upon on behalf of the respondents in Karnataka Bank Ltd's case (supra), the Apex Court considering the very same questions including as to the validity, competency and also the challenge as to inclusion of branch falling well within the definition clause of 'person' as contemplated under Section 20 of the said Act, has held that the State legislation is a constitutional validity by taking into consideration definition of Section 2(j) of the said Act which define 'person' who is engaged in any profession, trade, calling or employment in the State of Andhra Pradesh and includes a Hindu undivided family, firm, company, corporation or other corporate body, any society, club or association, so engaged but does not include any person who earns wages on a casual basis and explanation thereunder contemplated with every branch of a firm, company, corporation or other corporate body, any society, club or association will be deemed to be a person. By taking into consideration aforesaid definitions of the 'assessee' under Section 2(b) vis-a-vis 'person' under Section 2(j) thereof, it was held:

In our considered opinion, the Legislature is not denuded of its competency to define the term 'person' differently from the definition of that term in the General Clauses Act, 1897. There are many illustrations showing that the same words have been used in different senses in different context. It is not uncommon practice for the Parliament or State Legislature to define 'person' in the Act and create an artificial unit by fiction. For instance, Section 2(31) of the Income-tax Act, 1961 defines 'person' including (a) an individual, (b) a Hindu undivided family, (c) a company, (d) a firm, (e) an association of persons or a body of individuals, whether incorporated or not, (f) a local authority and (g) every artificial juridical person, not falling within any of the proceeding sub-clauses and the same is much wider than the term 'person' as defined in the General Clauses Act.

The definition of 'person' in Section 3(42) of the General Clauses Act is undoubtedly illustrative and not exhaustive. The well-known rule of interpretation regarding such inclusive definitions has always been to treat the other entities, who would not otherwise have come strictly within the definition, to be a part thereof, because of illustrative enactment of such definitions. The Legislature is competent in its wisdom to define 'person' separately for the purposes of each of the enactment and different from the one in the General Clauses Act and create an artificial unit. The definition of 'person' in the General Clauses Act would not operate as any fetter or restriction upon the powers of the State Legislature to define 'person' and adopt a meaning different from that defined in the General Clauses Act.

9. From the above, it follows that the 'person' as defined under the aforesaid legislation is an inclusive one which takes him almost every other wing of the corporate body irrespective of the person where it is a legal entity in the format as normally one understood, and it need not necessarily to mean a person as contemplated under the General Clauses Act, and therefore, the said definition is held to be very wide enough to rope in every activity and thus necessarily it follows that even apart from the branch as held to be already falling within the definition of the person, even it should take in the Extension Counters and ATMs. This necessarily as to follow since the petitioner's branch is in the same format as it runs business vis-avis through its branch and also on its own independently though with limited structure through the Extension Counters and ATMs with the advanced technological facilities. Therefore, for the purpose of the aforesaid Act, the contention urged on behalf of the petitioner that even the Extension Counters and the ATMs would not come within its ambit, does not have any merit and the same is liable to be rejected. In support of the petitioner's contention though reliance was sought to be placed on the decisions in Nalinakhya Bysack v. Shyam Sunder Haldar and Ors. : [1953]4SCR533 , Commissioner of Sales-tax, U.P. v. Modi Sugar Mills Limited : [1961]2SCR189 , Union of India and Anr. v. Deoki Nandan Aggarwal AIR 1992 SC 96, Oswal Agro Mills Limited Etc. Etc., v. Collector of Central Excise and Ors. Etc. Etc. : 1993(66)ELT37(SC) , Commissioner of Wealth-tax, Gujarat-III, Ahmedabad v. Ellis Bridge Gymkhana, etc. AIR 1998 SC 120, Federation of A.P.C.C. and Industry v. State of A.P. : (2001)165CTR(SC)672 and Sanjay Kumar Manjul v. Chairman, UPSC and Ors. : AIR2007SC254 , all these decisions deal totally in a different context in regard to the principles while interpreting statutes to say that it is not competent to any Court to proceed upon any assumption that the Legislature has made a mistake or no equitable consideration or entirely out of place in interpreting taxing statute, and the Court cannot legislate on its own while interpreting any provision of statute, and further there is no rule for applying any presumption in case of ambiguity in the. statute and also that in a physical statute charging section should be construed strictly and for interpreting a statute external aid from the dictionary meaning can be sought. However, having regard to the principles as laid down in the recent decision in Karnataka Bank Ltd. 's case (supra), it is not necessary to delve in such general context

10. Hence, we are not referring to all these individual decisions cited across the Bar on behalf of the petitioner. The learned Counsel for the petitioner tried to distinguish the above decision, since it does not take in the Extension Counters and ATMs. However, the question is no longer res Integra as to whether a branch would fall within the purview of the definition of a 'Person'. However, the present controversy turns around the Extension Counters and ATMs, which is run by a branch. A branch is nothing but is only an extended active limb of the main body, which tries to organize, function and does all the activities at all levels in the process of its business of banking. The same activity is being extended further by opening Extension Counters and ATMs, which are virtually doing the same activity as that of the branch. Therefore, there is no distinction in regard to the activities of the Extension Counters or the ATMs from that of the branch or main headquarters. In fact, the main body extends its activity through branches and the branches get branches of its activities through Extension Counters and ATMs. Therefore, there being no such distinction either in regard to the activities, necessarily, it follows that the Extension Counters and the ATMs are once again nothing but branches of a branch, and thus, we do not find any difficulty in holding that the Extension Counters and ATMs would fall well within the purview of the definition of 'Person' and attract the provisions of the Act for levy of the tax. Hence there are no merits in the writ petition.

11. The writ petition accordingly fails and it is dismissed. No costs.