IN THE HIGH COURT OF DELHI AT NEW DELHI
SOUTH DELHI MUNICIPAL CORPORATION ….. Appellant
B N MAGON ….. Respondent
In this case a legal dispute arose in 2013 when the South Delhi Municipal Corporation (SDMC) issued a demand notice of property to a lawyer who operated his office within a part of his residential premises in Greater Kailash 2, New Delhi.
The lawyer challenged the purported assessment order of the property tax levied by SDMC before the single judge of the Hon’ble Delhi High Court.
The single judge of the Delhi High Court held that mere presence of a lawyer’s office or the performance of official work at a residential address does not contribute towards the premises to be considered a business establishment.
Aggrieved of the order passed by the single judge above, SDMC filed an appeal before the Division Bench of the Hon’ble Delhi High Court.
The major contention of SDMC before the Division Bench was that it had powers to levy property tax on all lands and buildings under its jurisdiction. Therefore, unless explicitly excluded, there cannot be any building, property or activity that cannot be subjected to tax.
It was further contended that a building or a part of it used for transaction of business or for keeping of books, accounts and records shall be considered as a “business building” and therefore subject to levy of property tax.
Thus a lawyer’s services fall within the category of professional activity and, that part of the building used for a professional activity would fall within the definition of a “business building” as per bye-laws which categorically includes office buildings premises solely or principally used as office or for office purposes.
SDMC submitted that activities carried out by advocates/professionals are commercial and non-domestic in nature, and, therefore, subject to tax and simply because such activity is carried out from residential premises, as per permitted use under Master Plan of Delhi 2021, the activity would not become residential.
The respondent lawyer denied all the contentions of the SDMC on the basis that each and every contention of SDMC was dealt by the single judge in its judgement while quashing the assessment order of SDMC being untenable.
It was contended by the respondent lawyer that the power to tax must be explicitly stated in the relevant legislation. The DMC Act, according to the respondent lawyer, did not grant the SDMC the authority to tax professional activities carried out within residential buildings.
The Hon’ble Division Bench of the High Court affirmed the finding of the single judge after considering the taxation statute.
It was opined by the Division Bench that the rule of strict interpretation of taxation statute has to be applied. There is no scope of reading any derivative meaning or of reading any intent of the statute. Insofar as the statute has not included ‘professional activity’ of lawyers as ‘commercial activity’ the former cannot be put to tax.
The Bench also referred to precedence in law which held that practice of law does not qualify as “business” or “professional establishment” under relevant legislation. Lawyers’ professional activities are not considered commercial establishments.
Accordingly the Division Bench of the High Court seeing no reason to interfere with the Single judge’s judgment dismissed the appeal for having no merits.