The Delhi High Court quashed property tax demand on Advocate Office run in residence as Professional activity is not commercial activity under Delhi Municipal Corporation Act (DMC), 1957. The appellant in the present matter is South Delhi Municipal Corporation.
This appeal impugns the judgment of the Single Judge holding that services rendered by advocates are professional activities and cannot be classified/categorised or be subject to tax under the category of a business establishment or professional establishment.
The Standing Counsel for the Delhi Municipal Corporation (MCD) submitted that clause 15.8 of Master Plan for Delhi (MPD) 2021 apropos professional activity does not in any way circumscribe the powers of the Corporation under sections 115 and 115A of the Delhi Municipal Corporation Act, 1957.
The Counsel further submitted that the MCD has powers to levy property tax on all lands and buildings under its jurisdiction. Therefore, unless consciously excluded, there cannot be any building, property or activity which cannot be put to tax. The Corporation asserts that in terms of MPD clause 15.8 (ii) and (iii) user of professional activity would have to be in less than 50% of the sanctioned Floor Area Ratio (FAR), whichever is less.
In R.K. Mittal & Ors. vs. State of Uttar Pradesh & Ors, the Supreme Court of India it was held that under the DMC Act, there is no power to tax “professional activities” carried out from residential buildings. Professional activities are permitted under MPD 2010, under certain conditions. The Master Plan has the force of law.
As regards the professional activity and professional services rendered by advocates, a Division Bench of the Bombay High Court has in Sakharam Narayan Kherdekar v. City of Nagpur Corporation & Ors., has held that the discharge of professional activities by advocates would not be covered under the expression “business” nor would it be professional establishment because the word “establishment” would only refer to as „shops‟ as defined in the Bombay Shops and Establishment Act, 1948.
A Division Bench of the Delhi Court of Justices Najmi Waziri and Sudhir Kumar Jain observed that “Insofar as the statute has not included “professional activity” of lawyers as “commercial activity” the former cannot be put to tax. The aforesaid Bye-laws cannot seek to over-reach the statute itself. The assessment order issued by the MCD under section 123D of the DMC Act, 1957 along with any demand, was rightly quashed.”
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