M.G.L. Kamath vs State of Karnataka

B.B. Naik, M.-The appellant in this case has filed the appeal against the order of the first appellate authority, the Deputy Commissioner of Commercial Taxes, Mangalore Division, Mangalore passed under KPT/ AP. 9/80-81 dated 16-9-1980 for the year 1979-80 under the provisions of the Karnataka Tax on Professions, Trades, Callings and Employment Act, 1976.

The facts of the case are that the Assistant Profession Tax Officer, Mangalore had demanded the profession tax of Rs. 50/- for the year 1979-80 as per the demand notice in form No. 13 dated 25-3-1980 which was issued on the basis of the certificate of enrolment issued on 19-12-1977 after calling the information from the Asst. Commercial Tax Officer, Virajpet that his turnover for the year 1977-78 was Rs. 13,032-18. The appellant had filed the appeal before the first appellate authority, the Deputy Commissioner of Commercial Taxes, Mangalore Division, Mangalore but he was unsuccessful.

Sri S. Narayana the learned Chartered Accountant and Sri Boregowda, the learned State Representative were heard. Sri Narayana, the learned Chartered Accountant contended that the appellant is a dealer registered under the Karnataka Sales Tax Act, 1957. He comes under entry 9 of the Karnataka Tax on Professions, Trades, Callings and Employment Act, 1976 (hereinafter called as the Profession Tax Act) and the turnover of the appellant has not exceeded the limit of Rs. 50,000.00. Therefore the appellant is not at all liable to pay the profession tax. He further contended that the lower authorities went wrong in coming to the conclusion that the entry No. 11 is an alternative entry and the Explanation (1) is applicable. According to him the highest rate of tax specified under any of those entries was applicable. Entry No. 9 applies to the dealers registered under the Karnataka Sales Tax Act, 1957 and the appellant is a registered dealer under the Karnataka Sales Tax Act, 1957. Therefore entry No. 9 alone applies to the appellant. Entry No. 11 of the schedule applies to the employers of establishments other than the dealers covered by entry No. 9. Therefore entry No. 11 does not apply to the establishments of the dealers. Therefore he pleads that Explanation (1) of the Schedule is not applicable to the case on hand. Therefore the appellant should be exempted from profession tax. He further contended that the same Bench of this Tribunal has decided a similar case in the case of Sri Govinda Bhat, Hotel Keeper, Mysore, STA 971/79, for the year 1977-78 and in that case the appellant was fully exempted from profession tax as he fell under entry No. 9 of the schedule.

On going through the records, it is seen that the Assistant Profession Tax Officer; Mangalore has issued a certificate of enrolment on 19-1-1977 fixing the tax at the rate of Rs. 50/- per annum. He has obtained the particulars of assessment from Asst. Commercial Tax Officer, Virajpet for the year 1977-78 in which the turnover was fixed at Rs. 31,032-18 and it was presumed that the turnover for 1979-80 was also the same and hence he had demanded the profession tax at Rs. 50/-. But the Assistant Profession Tax Officer has not said anything as to which entry, whether entry No. 9 or 11, is applicable to the appellant. But the appellant has filed the application in form No. 11 for enrolment showing the turnover of Rs. 22,000-00 for the year 1979-80 (upto 31-12-1979) on the basis of the turnover of previous year at Rs. 30,000-00. He has claimed exemption as his turnover is below Rs. 50,000-00 under entry 9 of the schedule. But the Assistant Profession Tax Officer, after issuing notice to the appellant on 19-1-1980 and after calling for the information from the Assistant Commercial Tax Officer has fixed the profession tax at Rs. 50/- presumbly on the number of employees in the establishment at three coming under entry No. 11. The first appellate authority has also held that the appellant''s profession comes under entry No. 9 and No. 11 of the schedule but liable to tax under entry No. 11 in view of the explanation (1) of the schedule to the Act.

The point for consideration in this case is whether a registered dealer under Karnataka Sales Tax Act, 1957 conducting a hotel comes under entry No. 11 of the schedule to the Profession Tax Act?

The entry No. 9 of the schedule to the Profession Tax Act and entry No. 11 are reproduced below for the purpose of examination.

Entry No. 9: "Dealers registered under the Karnataka Sales Tax Act, 1957 (Karnataka Act No. 25 of 1957) whose total turnover in any year according to that Act and the rules made thereunder is:

(i) Rs. 50,000/- or more but not less than Rs. 75,000/- Rs. 50/- P.A,

(ii) (iii) xx xx xx

Entry No. 11: Employers of establishments as defined under the Karnataka Shops and Establishments Act, who are not dealers Covered by entry 9. Such employers of establishments (under lining is ours)

(i) Where there are no employees Nil

(ii) Where not more than 5 employees are employed Rs. 50/- P.A."

Explanation (1) reads as follows:

"Notwithstanding anything in this schedule where a person is covered by more than one entry in the schedule the highest rate of tax specified under any of these entries shall be applicable in this case."

There is no dispute that the appellant is a dealer registered under the Karnataka Sales Tax Act, 1957 and the turnover fails below the limit of Rs. 50,000.00 for the year 1979-80. Therefore the appellant is not liable to pay profession tax under entry No. 9 as his turnover falls below the limit of Rs. 50,000-00. The entry No. 11 applies to the employers of establishments other than the employers who are dealers under the Karnataka Sales Tax Act, 1957 as per entry No. 9. Entry No. 11 therefore applies to the employers of establishments who are not dealers but they may be earning wages, salaries etc. It cannot be said that it is an alternative entry to entry No. 9 as the dealers are specifically excluded under entry No. 11. If the phrase "who are not dealers covered by entry No. 9" was not there the lower authorities would be right in treating that it is an alternative entry and the explanation (1) would be applicable where the highest rate of tax would be levied. Therefore we hold that the entry No. 11 and Explanation (I) to the schedule are not applicable to this dealer who is registered under the Karnataka Sales Tax Act, 1957 to whom entry No. 9 alone is applicable. As the turnover falls below Rs. 50,000-00 the appellant is not at all liable to pay the profession tax. Therefore the order of the lower authorities are set aside and the appeal is allowed. Institution fee shall be refunded.