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Lachhman Singh And Others v. The State Of Punjab And Others
Judgment Summary — Mahajan, J.
Factual and Procedural Background
This is a writ petition under Article 226 of the Constitution challenging a resolution of the Gram Panchayat of village Machhiwara (Ludhiana district) that imposed a tax on commission agents at 5% of their income from commission. The Panchayat had obtained the permission of the Punjab Government under section 82 of the Punjab Gram Panchayat Act, 1952. It was not disputed that a profession/trade tax may be imposed by a Panchayat, but Article 276 of the Constitution limits the total amount payable by any one person by way of taxes on professions, trades, callings and employments to Rs. 250 per annum.
The resolution did not specify a maximum rupee limit; it specified a percentage (5%), which, when applied to the commission incomes shown in a chart filed by the petitioner, would result in amounts far exceeding Rs. 250 per annum for named individuals (Des Raj Hukam Chand, Saghru Mal Karam Chand and Ram Parkash Bhushan Lal, each with commission income exceeding Rs. 10,000). The central procedural step was the petition under Article 226 seeking quashing of the Panchayat resolution on constitutional grounds.
Legal Issues Presented
- Whether a Panchayat resolution that imposes a percentage-based tax on commission agents, without specifying a maximum rupee limit, is consistent with Article 276(2) of the Constitution (which caps profession/trade taxes at Rs. 250 per person per annum).
- Whether, in the absence of an express maximum limit in the resolution, the resolution should be read in conjunction with Article 276 to imply the Rs. 250 maximum, or whether the resolution must be struck down for failing to lay down the maximum limit mandated by Article 276.
Arguments of the Parties
The opinion does not contain a detailed account of the parties' legal arguments.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Shrikrishna v. Ujjain Municipality, A.I.R. 1953 M.B. 145 | Legislation or notifications imposing taxes for municipal purposes must contain something in language, circumstances or manner of imposition to make clear that the liability of one person to pay taxes to any one municipality shall not exceed Rs. 250 per annum; absence of such restriction renders the imposition invalid. | The court endorsed the principle and applied it to the present resolution: because the Panchayat's resolution did not prescribe a rupee maximum, it could operate to impose sums exceeding Rs. 250 and was therefore invalid under Article 276. |
| Romesh Thappar v. State of Madras, A.I.R. 1950 S.C. 124 | Where a law authorises action both within and beyond constitutional limits in language wide enough to cover both, it cannot be upheld even partially; if it can be applied for unconstitutional purposes, it must be held wholly void (principle of non-severability in that context). | The court relied on this principle to reject the argument that the resolution should be upheld to the extent it conforms with the Constitution; because the resolution could be applied so as to impose taxes beyond the constitutional limit, it could not be sustained in part and had to be struck down entirely. |
Court's Reasoning and Analysis
The court proceeded by identifying the statutory and constitutional framework: the Panchayat had obtained permission under section 82 of the Punjab Gram Panchayat Act, and Article 276(2) caps profession/trade taxes payable by any one person to a State or one municipality/local authority at Rs. 250 per annum.
The pivotal factual-legal finding was that the Panchayat resolution fixed a percentage rate (5%) without specifying the maximum rupee amount that any one person would be liable to pay. Applying that percentage to the documented commission incomes shown in a chart produced by the petitioner would result in liabilities exceeding the Rs. 250 limit established by Article 276.
Faced with the choice whether to interpret the resolution as implicitly limited by Article 276 or to invalidate it for non-compliance, the court followed established precedent. It relied on Shrikrishna v. Ujjain Municipality for the proposition that a taxing provision must make it clear that the per-person liability will not exceed Rs. 250; absent such clarity, the provision is open to constitutional objection. The court further relied on Romesh Thappar for the rule that legislation drafted in language that allows unconstitutional applications cannot be sustained even in part because the possibility that it may be applied beyond constitutional limits prevents severance.
Applying these authorities to the facts before it, the court concluded that the resolution could operate so as to impose taxes exceeding the constitutional ceiling and therefore could not be upheld or read down by implication; the resolution was invalid in its present form.
Holding and Implications
Petition allowed; the Panchayat resolution imposing a 5% commission-agent tax without specifying a rupee maximum is quashed as being opposed to Article 276 of the Constitution.
Implications and immediate consequences:
- The Panchayat resolution in question is quashed; the affected taxation measure is invalidated.
- The Panchayat is permitted to pass a fresh resolution, but only in conformity with Article 276 and relevant State legislation — specifically ensuring that the aggregate profession/trade tax payable by any one person does not exceed Rs. 250 per annum.
- The court did not decide other contentions raised by counsel, as resolution of the Article 276 issue was dispositive.
- There will be no order as to costs in this Court.
- The opinion does not purport to lay down a new constitutional doctrine beyond its application of the cited precedents; it enforces the existing rule that tax measures must expressly or otherwise make clear compliance with Article 276's per-person ceiling.
Petition allowed.
Mahajan, J.:— This is a writ petition under Article 226 of the Constitution directed against the imposition of a tax on commission agents at 5 per cent on their income derived from their business as commission agents. It is not disputed that the permission of the Punjab Government under section 82 of the Punjab Gram Panchayat Act, 1952 (IV of 1953) had been obtained by the Gram Pannchayat of village Machhiwara in the Ludhiana district and that such a tax can be imposed up to a limit of Rs. 250/- per annum. In this connection, reference may be made to Article 276 of the Constitution which is in these terms:—
“276. (1) Notwithstanding anything in article 246, no law of the Legislature of a State relating to taxes for the benefit of the State or of a municipality, district board, local board or other local authority therein in respect of professions, trades, callings or employments shall be invalid on the ground that it relates to a tax on income.
(2) The total amount payable in respect of any one person to the State or to any one municipality, district board, local board or other local authority in the State by way of taxes on professions, trades, callings and employments shall not exceed two hundred and fifty rupees per annum:
Provided that if in the financial year immediately preceding the commencement of this Constitution there was in force in the case of any State or any such municipality, board or authority a tax on professions, trades, callings or employments the rate, or the maximum rate, of which exceeded two hundred and fifty rupees per annum, such tax may continue to be levied until provision to the contrary is made by Parliament by law, and any law so made by Parliament may be made either generally or in relation to any specified States, municipalities, boards or authorities.
(3) The power of the Legislature of a State to make laws as aforesaid with respect to taxes on professions, trades, callings and employments shall not be construed as limiting in any way the power of Parliament to make laws with respect to taxes on income accruing from or arising out of professions, trades, callings and Employments.”
In the present case, the Panchayat has not fixed the maximum limit up to which the tax can be levied. On the basis of percentage fixed the amount of tax may be far in excess of Rs. 250/-, the maximum limit prescribed by Article 276. In a chart filed by the petitioner (which is at page 29 of the paper book) the income from commission of Des Raj Hukam Chand, Saghru Mal Karam Chand and Ram Parkash Bhushan Lal, exceeds Rs. 10,000/- in each case, and on the basis of the resolution of the Panchayat their liability to pay tax goes beyond the permissible limit of Rs. 250/-. In this situation the question that has to be decided is whether the resolution should be read in conjunction with Article 276 so as to imply that the maximum limit is Rs. 250/- or whether the resolution should be struck down on the ground that it does not lay down the maximum limit in accordance with Article 276. A similar question came up for consideration before the Madhva Bharat High Court in a case reported as Shrikrishna v. Ujjain Municipality . A.I.R 1953 M.B 145.. The learned Chief Justice observed as under:—
“It is clear, therefore, that though Article 276 lays down a tax imposed by a State for the purpose of a Municipality on a calling shall not be invalid on the ground that it relates to a tax on income, every Legislation relating to such a tax cannot ignore the provisions of clause (2) of the said Article. There must be something either in the language or such Legislation or in the circumstances or manner of the imposition of the tax which makes it clear that the liability of one person to pay taxes on professions, trades and callings to any one Municipality shall not exceed the sum of rupees two hundred and fifty per annum. It was frankly conceded by the learned Advocate General who appeared for the Ujjain Municipality that the imposition of the said performance tax under consideration was open to this criticism. In the absence of any such restriction as is contemplated by Article 276, clause (2), the Notification under which the tax in question has been imposed makes a person liable to pay sums far exceeding Rs. 250/- per annum. To take a concrete illustration, if any one of the applicants before us displays in his cinema house one or more shows for one hundred days in a year he will be liable to pay Rs. 500/- under the said Notification. That the tax in question was open to this criticism was further admitted in the return filed on behalf of the Ujjain Municipality, I hold therefore that the Notification by which the performance tax in question was imposed invalid.”
I am in entire agreement with this decision. A taxing provision has to be strictly in accordance with the law. The argument that a law, which may in certain circumstances be in accordance with the Constitution and in others may not be in accordance with the Constitution, should be held valid so far as it is in accordance with the Constitution, was negatived by their Lordships of the Supreme Court in Romesh Thappar v. State Of Madras . A.I.R 1950 S.C 124.. At page 129 Fazal Ali J. observed as under:—
“Where a law purports to authorise the imposition of restrictions on a fundamental right in language wide enough to cover restrictions both within and without the limits of constitutionally permissible legislative action affecting such right it is not possible to uphold it even so far as it may be applied within the constitutional limits, as it is not severable. So long as the possibility of its being applied for purpose not sanctioned by the Constitution cannot be ruled out, it must be held to be wholly unconstitutional and void.”
These observations fully apply to the facts of the present case.
2. For the reasons given above, I allow this petition and quash the resolution passed by the Panchayat as being opposed to. Article 276 of the Constitution. It will be open to the Panchayat to pass a proper resolution keeping in view the provisions of Article 276 of the Constitution and other State legislative enactments where under profession tax is imposed within the State inasmuch as the aggregate of profession tax cannot exceed the sum of Rs. 250/- per annum. In this view of the matter it is not necessary to decide the other contentions raised by the learned counsel. There will be no order as to costs in this Court.
Petition allowed.
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