## **IN THE HIGH COURT OF KERALA AT ERNAKULAM**
## **PRESENT**
**THE HONOURABLE MR.JUSTICE N.NAGARESH**
**TUESDAY, THE 10TH DAY OF MARCH 2020 / 20TH PHALGUNA, 1941**
## **WP(C).No.34829 OF 2010(C)**
## **PETITIONER:**
**THE MULLOOR RURAL CO-OPERATIVE SOCIETY LTD.NO.T.1499, MULLOOR P.O., THIRUVANANTHAPURAM, REPRESENTED BY ITS SECRETARY.**
**BY ADV. SRI.K.B.PRADEEP**
## **RESPONDENT:**
**THIRUPURAM GRAMA PANCHAYAT, THIRUPURAM P.O., PIN-695 133, THIRUVANANTHAUPRAM DISTRICT, REPRESENTED BY ITS SECRETARY.**
## **BY ADV. SRI.R.T.PRADEEP**
**THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 10.03.2020, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:**
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## **JUDGMENT**
The petitioner – the Mulloor Rural Co-operative Society Ltd. is challenging Exts.P6 and P7 letters of the respondent Grama Panchayat demanding Profession Tax and penalty.
2. The petitioner is a Rural Co-operative Society registered under the Kerala Co-operative Societies Act, 1969. The petitioner contends that the petitioner extends loans to its members on gold ornaments and also provides agricultural loans. The petitioner Society has a Collection Centre at Pazhayakada, which falls within the territorial limits of the respondent – Panchayat. On 13.02.2008, the respondent demanded `2,500/- as profession tax as per Ext.P1 order, which was followed by Ext.P2 demand. To Exts.P1 and P2, the petitioner submitted Exts.P3 and P4 replies. The petitioner disputed its liability to pay tax. The petitioner also pointed out that the amount has not been assessed in accordance with provisions contained in the Kerala Panchayat Raj (Profession Tax) Rules, 1996. Inspite
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of Exts.P3 and P4 replies submitted by the petitioner, the Panchayat issued further reminders and demands, as per Exts.P5, P6 and P7.
3. The petitioner submits that the Government has issued Ext.P8 Government Order dated 27.05.2008, by which certain classes of people are included within the ambit of Profession Tax Rules. Entry No. 11 in Ext.P8 shows that Self Financing Institutions have been included and brought under the coverage of the Rules. The petitioner Society cannot be treated as Self Financing Institution, it been one registered under the Kerala Co-operative Societies Act. Therefore, the demand is illegal, contended the petitioner.
4. I have heard the learned counsel for the petitioner and the learned Standing Counsel appearing for the respondent – Panchayat.
5. The learned counsel for the Panchayat submitted that the petitioner – Society has a branch/collection centre within the territorial of the respondent panchayat. The
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employees working in the said branch/collection centre are liable to pay profession tax to the panchayat. The petitionerSociety is also exigible to profession tax. Inspite of the repeated request made by the panchayat, the Society which is making profits from the Centre functioning within the panchayat, has not agreed to pay profession tax. The learned counsel for the respondent – Panchayat submits that, though the panchayat has resorted to revenue recovery proceedings against the petitioner, no amount has been realised.
6. Section 204 of the Kerala Panchayat Raj Act, 1994 provides for levy of profession tax. Section 204 eads as follows:
“Profession tax – (1) The profession tax shall, subject to such rules as may be prescribed be levied every half year in every Village Panchayat area on,-
(i) every company which transacts business in such Panchayat area for not less than sixty days in the aggregate in that half year and
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(ii) every person who, in that half year-
(a) exercise a profession, art or calling, or transacts business or holds any appointment, public or private-
(i) within such Panchayat area for not less than sixty days in the aggregate, or
(ii) outside such Panchayat area but who resides in it for not less than sixty days in the aggregate, or
(b) resides in such Panchayat area for not less than sixty days in the aggregate and is inr eceipt of any income from investments.
(2) The profession tax shall be levied at such rates as may be fixed by the Village Panchayat not exceeding the maximum rates prescribed.
(3) A person shall be chargeable under the class appropriate to his aggregate income from all the sources specified in sub-section (1) as being liable to the tax.
(4) If a company or person proves that it or he has paid the sum due on account of the profession tax levied under this Act, or profession tax levied under any law for the time being in force governing Municipalities in the State or any tax of the nature of a profession tax imposed under the Cantonments Act, 1924, for the same half year to any Panchayat or Nagar Panchayat or Municipal Council or Municipal Corporation or Cantonment authority in the State, such company or person
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shall not be liable, by reason merely of change of place of business, exercise of profession, art or calling appointment or residence, to pay to any other Panchayat, Nagar Panchayat, Municipal Council or Municipal Corporation or Cantonment authority in the State more than the difference between such sum and the amount to which it or he is otherwise liable for the profession or companies tax for the half year under this Act or the law governing Municipalities or Cantonment.
(5) Nothing contained in this section shall be deemed to render a person who resides within the local limits of one local authority and exercises his profession, art or calling or transacts business or holds any appointment within the limits of any other local authority or authorities liable to higher profession tax for more than the higher of the amount of tax leviable by any of the local authorities. In such cases the tax shall be levied by the local authority which levied the higher rate of tax and shall be appointed among local authorities in such proportion as may be prescribed.
Provided that where one of the local authorities concerned is a Cantonment authority or the Port authority of a major port, the decision fo the local authorities shall be subject to the concurrence of the central Government obtained in such manner as may be prescribed.
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(6) The profession tax leviable from a firm or association, may be levied from the agent of the firm or association as the case may be.
(7) (a) If a company or person employs a servant or agent to represent it or him for the purpose of transacting business in any local area of a Village Panchayat, such company or person shall be deemed to transact business in that local area, and such servant or agent shall be liable for the profession tax in respect of the business of such company or person whether or not such servant or agent has power to make binding contracts on behalf of such company or person.
(b) Where one company or person is the agent of another company or person, the former company or person shall not be liable separately to the profession tax on the same income as that of the principal.”
The levy is to be made in accordance with the Rules prescribed for the same.
8. The Kerala Panchayat Raj (Profession Tax) Rules, 1996 has been made in exercise powers conferred under Section 204 of the Act. The Rules contemplates service of notice on the prospective assessees before a
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## demand is made. Rule 10 of the Kerala Panchayat Raj (Profession Tax) Rules, 1996 reads as follows:
“10. Service of notice and the levy of profession tax- (1) If, in the opinion of the [Secretary] profession tax is or will be due from any company or person for a half year, it shall serve a notice in form No. VI on such company or person in the succeeding half year requiring the company or person to furnish a return within 15 (fifteen) days showing the income on the basis of which, according to such company or person, it or he is liable to be assessed to profession tax for the half year in question. Thereupon such company or person may submit a return showing the income derived by it or him during the half year for which profession tax is claimed or for the corresponding half year of the previous year and produce any evidence on which the company or person may rely in support of the return made.
(2) If the [Secretary] is satisfied that the return is made as required under sub-rule (1) and that it is correct and complete, it shall levy the profession tax on such company or person on the basis of such return.”
The Rule also provides a form (Form No.VI) for service of notice.
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9. Rule 10 and 18 of the Rules make it clear that any demand for profession tax under Rule 19 shall precede service of notice by the Secretary of the panchayat in form No.VI. It is after information provided by the assessee in response to notice under Rule 10, that the Secretary can make a demand under Rule 18. Going through the pleadings in the writ petition, it appears that respondent has not follow the demand procedure prescribed by the Rules, 1996.
10. The learned counsel for the petitioner submitted that the Society being neither a Company incorporated nor a person as prescribed under Section 204, the Society cannot be levied with profession tax. The learned counsel for the respondent objected to the said proposition made by the petitioner relying on the judgment of this Court reported in **Knanaya Medical Mission v. State of Kerala and others** [1972 KLT 102]. The Division Bench of this Court in the said judgment held that societies utilising profit for other objects
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of the Society which might be charitable according to the Articles of Association, will still be liable to pay profession tax. I do not propose to go into the issue in these proceedings since the demand itself made by the respondent – Panchayat was not preceded by notice under Section 10 of the Rules and hence unsustainable.
In the circumstances, the writ petition is disposed of directing the respondent – Panchayat to proceed against the petitioner for levy of profession tax only after issuing a notice as contemplated under Rule 10 of the Rules, 1996. Till the respondent issues such notice and take a decision afresh in the matter, the Exts. P5 to P7 demands shall be kept in abeyance.
Sd/- **N. NAGARESH JUDGE**
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