The Kerala High Court while directing the Secretary of Kothamangalam Municipality, to reconsider the issue held that the Secretary Kothamangalam Municipality failed to take into account objections by Taxpayers in case of levy of Profession Tax.
The petitioners, Central Finance and Investments are conducting money lending and chitty business and they are members of All Kerala Private Bankers Association, an organisation registered under the provisions of the Travancore Cochin Literary, Scientific & Charitable Societies Registration Act, 1955 with registration No.K 114/1974. The business of money lenders in the State of Kerala is regulated and controlled by stringent provisions under the Kerala Money Lenders Act, 1958. As per section 3 of the Act, every person has to obtain a licence on payment of the prescribed fee to carry on the business as a money lender.
The grievance highlighted by the petitioners is that the Secretary of the Municipality has assessed the profession tax of the petitioners without properly having recourse to section 245 of the Kerala Municipality Act, 1995 and the Kerala Municipality (Profession Tax) Rules, 2005. According to the petitioners, under rule 3(1), a schedule is incorporated prescribing the levy of half yearly tax payable under the different slabs of income. It is submitted that a person derives income less than Rs.12,000/- is not liable to pay any tax and further that a person can be subjected to tax only under the class appropriate to his income. Under sub-rule (2) of rule 3, the half yearly tax payable by the persons classified in sub-clauses (1) to (11) is fixed at Rs.1250/-. However, Explanation to rule 3(2) categorically stipulates that the rate of tax given in sub-rule (2) is the maximum tax that can be levied and if the income of a person is low justifying a lower rate of tax, the assessee can satisfy the local authority regarding the low income and seek a reduction of the tax correspondingly.
The Single Judge Bench of Justice Saji P. Chali ruled that the levy and demand of profession tax is guided by section 245 of Act, 1994 and Rules, 2005. When there are clear prescriptions contained under the Act, 1994 and the Rules, 2005 in regard to the levy of profession tax, and when a demand is made, which is objected to by the aggrieved persons, the Secretary had a duty to take into account the objections raised and apply the law applicable to the situation since the Secretary has to make the assessment in accordance with the rules applicable and the documents produced by the petitioners.
“From the impugned notices, I do not find any such exercise undertaken by the Secretary. Even though the Division Bench judgment of this Court is referred to, the Secretary has not specified in the demand notices as to why it is departing from the proposition of law laid down by the Division Bench judgment of this Court,” the court said.
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