Holding

The definition of "person" that treats each branch of a firm, company or association as a separate assessee is constitutionally valid and does not breach Article 276(2).

Summary

The appellants, including Karnataka Bank Ltd., Shaw Wallace & Co., and a partnership firm, challenged notices requiring each of their branches in Andhra Pradesh to pay profession tax of Rs.2500 per annum, arguing that the explanation to the definition of "person" in the Andhra Pradesh Tax on Professions, Trades, Callings and Employments Act, 1987 (which treats each branch as a separate person) violated Article 276(2) of the Constitution. The Supreme Court examined the State Legislature's power under Entry 60 of List II and the constitutional limits of Article 276, as well as the applicability of the General Clauses Act’s definition of "person". It held that the legislature may define "person" differently for the purpose of the Act, that treating branches as separate assessable units does not exceed the Rs.2500 ceiling, and that the provision does not infringe Article 276(2). Consequently, the Court dismissed the appeals, upholding the validity of the tax provisions.

Issues considered

The explanation to the definition of "person" in the Andhra Pradesh Profession Tax Act, treating each branch as a separate assessee, violates Article 276(2) of the Constitution.
Whether the State Legislature can define "person" differently from the definition in the General Clauses Act, 1897.
Whether the tax imposed on each branch exceeds the constitutional ceiling of Rs.2500 per person per annum.
Whether the definition of "person" under the Act contravenes Article 14 of the Constitution.

Legislation cited

Companies Act, 1956s. Section 3
Constitution of Indias. Article 20, s. Article 21, s. Article 22, s. Article 226, s. Article 246, s. Article 265, s. Article 276(2), s. Article 367, s. Entry 60 of List II, Seventh Schedule
General Clauses Act, 1897s. 3(42)

Subjects

Profession taxDefinition of personArticle 276State legislative competenceTax on professionsInclusive definitionGeneral Clauses ActConstitutional validityBranch as separate assessee

Judgment

[2008] 1 S.C.R. 986

KARNATAKA BANK LTD. A
V.
STATE OF A.P. & ORS.
(Civil Appeal No. 1994 of 2002 etc.)
JANUARY 21, 2008
B
[S.H. KAPADIA AND B. SUDERSHAN REDDY, JJ.]
-~
Andhra Pradesh Tax on Professions, trades, Callings and
~
Employments Act, 1987 - s. 2 (b} Explanation and First
Schedule Explanation No. 1 - Levy of profession tax - On the
branches of a company - Treating them as a 'person' - c
Constitutional validity of - Held: Inclusion of the branches in
the definition of person does not violate Article 276 (2) of the
Constitution - State legislature is competent to make law in
respect of profession tax by virtue of Entry 60 of List II of
Seventh Schedule - The power to make law on the tax also D
includes power to .determine the persons who are liable to pay
~ such tax - Definition of 'person' under General Clauses Act,
as adopted for interpretation of Constitution, being illustrative
and not exhaustive, does not restrict the power of State
Legislature to define 'person' differently- Constitution of India, E
1950 -Articles 246, 276 (2) and 367; Seventh Schedule List
II Entry 60- General Clauses Act, 1897 - s. 3 (42).
Interpretation of statutes - Inclusive definitions -
Interpretation of
~ F
Taxation - Tax on profession and tax on income -
Difference between.
Appellant-companies were having various branches
within the State of Andhra Pradesh. The authority
concerned issued notices requiring them to pay G
-.· profession tax of Rs. 2500/- by each of their branches
"..,
within the State. Appellants filed writ petitions challenging
the constitutional validity of explanation to the definition
of the term 'person' defined in clause (j) to s. 2 of Andhra
986 H
987 SUPREME COURT REPORTS [2008] 1 S.C.R.

A Pradesh Tax on Professions, trades, Callings and .....
Employments Act, 1987 as well as Explanation I to the First
Schedule of the Act. High Court upheld the validity of the
provisions.
In appeal to this court, the question for consideration
B was whether the Explanation to the terms 'person' defined
u/s 2 (j) of the Act and Explanation I to the Fist Schedule
of the Act, was violative of Article 276 (2) of the Constitution 1
of India, 1950. ~

c Dismissing the appeals, the Court
HELD: 1.1 The definition of the word "person" in the
impugned Explanation and also Explanation No. I to the
First Schedule of Andhra Pradesh Tax on Professions,
trades, Callings and Employments Act, 1987 is not
D intended to tax a person at a rate higher than Rs.2500/-
per annum, per person, but to treat even a branch of a ~
firm, company, corporation or other corporate body, any h

society, club or association as a separate person, and
therefore, a separate assessee within the meaning of
E Section 2 (b) of the Act and the Andhra Pradesh State
Legislature has undoubtedly the competency to adopt
such a devise of taxation. The Andhra Pradesh State
Legislature did not violate the mandate of Article 276(2) of
the Constitution. [Para 45] [1011-E-G]
F 1.2. The State Legislature undoubtedly is competent
to make a law relating to taxes for the benefit of the State
or other local authorities therein in respect of professions,
trades, callings or employments. It is traceable to Entry
60 of List II of the Seventh Schedule but that power of the
G Legislature to make such a law to levy and collect the
profession tax is made subject to the restrictions as r
provided for under Article 276 (2) of the Constitution. ·
[Para 25] [1002-8-C]
Kesavananda Bharati vs. State of Kera/a 1973 (suppl)
H
;·;i
KARNATA~ BANK LTD. v. STATE OF AP. & ORS. 988

_.._ SCR 1; Bharat Kala Bhandar Ltd. vs. Municipal Committee, A
Ohamangaon 1965 (3) SCR 499; The Bengal Immunity
Company Limited vs. The State of Bihar and Ors. 1955 (2)
SCR 603; Atiabari Tea Co. Ltd. vs. The State of Assam and
Ors. 1961 (1) SCR 809 - referred to.
R. vs. Burah 1878 (5) I.A. 178 - referred to. B

1.3 Enfry 60 of List II of Seventh Schedule of the
Constitution, which authorizes the State Legislature to .
make a law relating to tax on profession is to be read along
with Article 276 of the Constitution. Article 276 is also C
declaratory, in its nature inasmuch as it declares that
notwithsta~ing anything contained in Article 246, no law .
of the Legig•ature of a State relating to taxes for the benefit
of State etlSt in respect of profession, trades etc. shall be
invalid on the ground that it relates to tax on income.
Likewise, it'ialso declares the power of the Legislature of D
a State to·~fuake such laws with respect to taxes on
profession/etc. shall not be construed as limiting in any
way the Pcidtament's power to make laws with respect to
taxes on ~come accruing from or arising out of
1

professioifi; trade etc. A tax on profession is not E
necessarily7.Connected with income. A tax on income can
be impose<i if a person carries on a profession, trade,
calling etc~uch a tax on profession is irrespective of the
question offocome. There is no other restriction imposed
-
..... upon a Stattl Legislature in making law relating to tax on F
profession, trade, calling and employment. There can be
no doubt whatsoever that a State Legislature cannot make
any law to Jevy and collect profession tax at the rate of
more than t{&.2500/-per
.~
person, per annum, in view of the
restriction ip Article 276(2) of the Constitution. (Para 28) G
(1003-E-H; 1004-A-B]
1.4 Entry 60 in.. List II gives the outline of the subject
matter of legislation and therefore, the words in the Entry
are to be construed in their widest amplitude. The field of
legislation ~overed by the Entry is not to be narrowed H
.•;.r
989 SUPREME COURT REPORTS [2008] 1 S.C.R.

A down in any way unless there is anything in the Entry
itself which defines the limits thereof. The impugned
provisions are merely concerned with specifying different
assessable units for purposes of assessment of
profession tax and imposition of the levy. [Paras 40 and
B 41] [1009-F-G]
Wealth Tax Officer vs. C. K. Mam med Kayi 1981 (3) SCC
23 - relied on. t
1.5 The power to make a law with respect to a tax
•
c comprehends within its power to levy that tax and to
determine the persons who are liable to pay such tax, the
rate at which such tax is to be paid and the event which
will attract liability in respect of such tax. This was
generally by the charging Sections of the particular tax
law. [Para 31] [1004-G-H; 1005-A]
D
)<
East India Tobacco Co. vs. State of Andhra Pradesh 1963 a
(1) SCR 404 - referred to.
1.6 The term "person" is not defined in the
Constitution. But Article 367 of the Constitution provides
E that the definitions contained in the General Clauses Act
apply for the interpretation of the Constitution. The
definition of "person" in Section 3 (42) of General Clauses
Act, would not restrict the power of the State Legislature
to define a "person" and adopt a meaning different from
F or in excess of the ordinary acceptation of the word as is ..
.,._

defined in the General Clauses Act. [Para 33] [1005-E-G]
N. Subramania Iyer vs. Official Receiver Qui/on and Anr.
AIR 1958 SCR 257; Hasmukha/al Dahyabhai and Ors. vs.
State of Gujarat and Ors. 1976 (4) sec 100 - relied on.
G
1.7 "Person" under Section 3 (42) of the General
Clauses Act shall include any company or association or
body of individuals whether incorporated or not. The
definition of "person" under Section 3(42) of the General
H Clauses Act is not applicable automatically to interpret the
KARNATAKA BANK LTD. v. STATE OF AP. & ORS. 990

provisions of the Constitution unless the context so A
requires and makes that definition applicable. [Para 36]
[1008-8-D]
1.8 Section 3 of the General Clauses Act, 1897 itself
says that unless there is anything repugnant in the
8
subject or context the term "person" shall include any
company or association or body of individuals, whether
incorporated or not. The word "includes" is often used in
interpretation clauses in order to enlarge the meaning of
the words or phrases occurring in the body of the
"statute". [Para 37} [1008-E-F] C
The Commissioner of Income-tax, Andhra Pradesh vs.
Mis Taj Mahal Hotel, Secudnerabad 1971 (3) SCC 550 -
referred to.
1.9 The definition of "person" in Section 3 (42) of the D
General Clauses Act is undoubtedly illustrative and not
exhaustive. The well known rule of interpretation
regarding such inclusive definitions has always been to
treat the other entities, who would not otherwise have
come strictly within the definition, to be a part thereof, E
because of illustrative enactment of such definitions. The
legislature is competent in its wisdom to define "person"
separately for the purposes of each of the enactment and
different from the one in the General Clauses Act and
create an artificial unit. The definition of "person" in the F
General Clauses Act would not operate as any fetter or
restriction upon the powers of the State Legislature to
define "person" and adopt a meaning different from as
defined in the General Clauses Act. [Para 39} [1009-C-E]
1.10 The Legislature is not denuded of its G
competency to define the term "person" differently from
the definition of that term in the General Clauses Act, 1897.
It is not uncommon practice for the Parliament or State
Legislature to define "person" in the Act and create an
artificial unit by fiction. [Para 38] [1008-G-H; 1009-A] H
991 SUPREME COURT REPORTS [2008] 1 S.C.R.

~.

A 1.11 It is not correct to say that the cl~finition of
"person" has the effect of destroying the legal identity of
the company and creates an artificial entity unknown to
law.The appellant-company continues to bt company
within the meaning of Section 3 of the Colllfanies Act,
B 1956 which defines the "company", "existing s;ompany",
"private company" and "public compai:fry" for the
purposes of the Companies Act. Its status at one entity
+-
continues to be the same. It is only for the purposes of
<C
the present Act even its branches are treated as a "person"
c enabling the authorities to levy and collect profession tax.
[Paras 42 and 43] [1010-8, C, G, H; 1011-A-B]:
English Electric Company of India Ltd. vs.. The Deputy
Commercial Tax Officer 1976 (4) SCC 460 - di~tinguished.
2. There is always a presumption in favour of
D
constitutionality, and a law will not be declared
unconstitutional unless the case is so clear as to be free ).

....
from doubt; "to doubt the constitutionality of a law is to
resolve it in favour of its validity." Where the .validity of a
statute is questioned and there are two int~fpretations,
E one of which would make the law valid and the other void,
the former must be preferred and the validity of law upheld.
In pronouncing on the constitutional validity of a statute,
the Court is not concerned with the wisdom or un-
wisdom, the justice or injustice of the law. If t~at which is
F passed into law is within the scope of the power conferred .)
on a Legislature and violates no restrictions on that power,
the law must be upheld whatever a Court may think of it.
[Para 17] [997-G-H; 998-A-B]
Fram N. Balsara vs. Bombay 1951 SCR WJ2; State of
G
WB. and Anr. vs. E.I. TA. India Ltd. and Ors. 2qo3 (5) sec
239 - relied on. ,'r
CIVILAPPELLATE JURISDICTION: Civil Appeal No.1994
of 2002.
H
<:t-
KARNATAKA BANK LTD. v. STATE OF A.P & ORS. 992
[B. SUDERSHAN REDDY, J.]

-t- From the final Judgment I Order dated 11.7.2001 of the A
High Court of Judicature, Andhra Pradesh at Hyderabad in W.P.
No. 17683/1997.
WITH

CIVIL APPEAL Nos. 1995 and 2400 of 2002. B
D.A. Dave, S.N. Bhat, D.P. Chaturvedi, N.P.S. Panwar,
+
. Madhvi Diwan, A.V. Rangam and B.A. Ranganadhan for the
Appellant.
Anoop G. Chaudhary, Manoj Saxena, Rajnish Kr. Singh, c
Rahul Shukla, T.v. George, Devender Singh and Sushma Suri
for the Respondents and Sanjay Hegde for Intervenor.

The Judgment of the Court was delivered by
8. SUDERSHAN REDDY, J. 1. This batch of appeals D
,( arises out of a common order passed by the Andhra Pradesh
·" High Court whereby and whereunder the Writ Petitions filed by
the appellants challenging the constitutional validity of the
• explanation to the definition of the term "person" defined in clause
I 0) of Section 2 of the Andhra Pradesh Tax on Professions,
E
Trades, Callings and Employments Act, 1987 (Act No.22 of
·f
~
1987),for short 'the Act', as well as Explanation No. I to the First
Schedule of the said Act as amended by Act No.29 of 1996
have been dismissed. In order to consider as to whether the

-
.-... said provisions of the Act suffer from any vice of
unconstitutionality we shall briefly refer to the facts. F

BRIEF FACTS:
2. The appellant in C.A.No.2400/02 is M/s. Shaw Wallace
and Company Limited, a Company registered under the

- ._,
:-c:.'
Companies Act, 1956. It has its principal place of business at G
Secunderabad in A.P. State. In addition to its principal place of
business at Secunderabad the appellant has branches and stock
points where it transacts its business and stores its goods. At
the material time, the appellant had about 74 stock points, every
stock point has been duly recorded with the registering authority H
993 SUPREME COURT REPORTS [2008] 1 S.C.R.

A undertheA.P. General Sales Tax Act. It is aggrieved by the notice
issued by the first respondent requiring the appellant to pay
..
profession tax at Rs.2500/- for each of its branches in AP. for
the years 1996-97 and 1997-98. The respondent altogether
demanded a sum of Rs.3,42,000/- at the rate of Rs.2500/- per
B annum for each of the branches of the appellant Company. The
first respondent obviously relied on the Explanation No. I to the
First Schedule to the Act defining the expression "person" which f
we shall notice little later. It is under those circumstances the
appellant invoked the jurisdiction of the High Court under Article
.
c 226 of the Constitution of India and prayed for grant of
appropriate reliefs.
3. The appellant in C.A.No.1994/02 is a banking Company
engaged in banking activities having the network of over 300
branches spread throughout India. The appellant altogether at
D the relevant time had branches in 17 places within the State of
Andhra Pradesh. It had obtained the certificate of enrolment ~
....
from the first respondent at Hyderabad where it has its principal
place of business. The appellant was paying Profession Tax in
respect of principal branch at Hyderabad alone. The first
(
E respondent herein issued similar notices requiring the appellant
to pay Profession Tax of Rs.2500/- to be paid by each of its
branches in the State of Andhra Pradesh.
4. The appellant in C.A.No.1995/02 is a partnership firm
engaged in the business of sale of petroleum products. It has
F its principal place of business at Secunderabad in the State of _j-
Andhra Pradesh. In addition to its principal business premises,
it has other petroleum outlets outside Hyderabad and
Secunderabad. The first respondent issued similar notices
demanding Profession Tax by treating the various branches of
G the appellant firm as a different person at the rate of Rs.2500/-
per annum. Each of the appellant's branch has been treated as
a separate person for the purposes of levy and realization of
tax under the provisions of the Act.
<~ -
5. The Writ Petitions filed by each of the appellant
H
KARNATAKA BANK LTD. v. STATE OF A.P. & ORS. 994
[B. SUDERSHAN REDDY, J.]

challenging the constitutional validity of the provisions of the said A
+- Act referred to hereinabove came up before a Division Bench
of the A.P. High Court which has upheld the validity of the
provisions.
RELEVANT CONSTITUTIONAL PROVISIONS AND
SCHEME OF THE ACT B

6. Clause (1) of Article 276 of the Constitution enables a
+ State Legislature to enact a Legislation imposing tax on
>.
professions, trades, callings and employments and further
provides that such law made by a State Legislature shall not be c
declared invalid on the ground it relates to tax on income. Clause
(2) of Article 276 as it stood prior to the Constitution (Sixtieth
Amendment) Act, 1988 commands that the total amount payable
in respect of any one person to the State or to any local authority
in the State by way of taxes on professions, trades, callings and
D
employments shall not exceed Rs.250/- per annum. The
.~
Constitution (Sixtieth Amendment) Act, 1988 enhanced the tax
·"
~ limit prescribed under clause (2) of Article 276 and increased it
~
I to Rs.2500/-. The relevant Entry empowering the State
i Legislature to enact the law imposing taxes on professions,
trades etc. is founded on Entry 60 of List II to the Seventh E
Schedule. The purpose of Article 276 is not to amend that power
of State Legislature but to merely to provide that such tax is not
invalid on the ground that it relates to a tax on income.
7. Before we proceed to consider the validity of the F
~ -t. impugned provisions of the said Act, it would be appropriate to
' notice the broad scheme and relevant provisions thereof.
SCHEME OF THE ACJ:
8. The Andhra Pradesh Tax on Professions, Trades, G
Callings and Employments Act, 1987 is an Act to provide for
~
'1 the levy and collection of tax on professions, trades, callings
and employments. Prior to the enactment of the said Act
profession tax was being levied in the State as per the provisions
of the Hyderabad Municipal Corporation (Act No. II of 1956),
H
995 SUPREME COURT REPORTS [2008] 1 S.C.R.

A the Andhra Pradesh Municipalities Act, 1965 (Act No. 6of1965) ~
and the Andhra Pradesh Gram Panchayats Act, 1964 (Act No.
2 of 1964). Those Acts were being administered by the Local
Authorities. The State with a view to rationalize the levy and
collections of profession tax and also with a view to improve the
B collections of the profession tax enacted a single comprehensive
legislation for the levy and collection of profession tax. Be it noted,
the local authorities, after the commencement of Act, are t-
prevented from levying any tax on professions, trades, callings ~

and employments. The object of the Act is to levy tax on
c professions, trades etc. Tax is levied on the person engaged in
.any profession, trade, calling etc.
9. Section 2 of the Act contains the definitions. Clause U)
defines "person". It reads as under:
"U) "person" means any person who is engaged in any
D
profession, trade, calling of employment in the State of
>
Andhra Pradesh and includes a Hindu Undivided Family,
Firm, Company, Corporation or other corporate body, any
society, club or association, so engaged but does not
include any person who earns wages on a casual basis.
E
Explanation: Every branch of a firm, Company, Corporation
or other corporate body, any Society, Club or Association
shall be deemed to be a person."
10. Clause (I) of Section 2 defines 'Profession Tax' as a
F tax leviable under the Act. Section 2(b) defines 'asssessee' as )-
a person or employer by whom tax is payable under the Act.
11. Section 4 of the Act is the charging Section providing
for levy and collection of tax on professions, trades, callings and
employments for the benefit of State. Section 5 imposes liability
G
on the employer to deduct and pay tax on behalf of its
,r
employees. Section 6 provides that every employer other than
a State or Central Government who is liable to pay tax on behalf
of his employee should register and obtain a certificate of
registration within 30 days of his becoming liable to pay tax
H
KARNATAKA BANK LTD. v. STATE OF A.P. & ORS. 996
[B. SUDERSHAN REDDY, J.]

from the assessing authority. A
+-
12. Explanation No. I to the First Schedule of the Act reads:
"Notwithstanding anything in the schedule, every branch
of ariy self-employed assessee enumerated in items 2 to
21 of the schedule shall be deemed to be a separate B
assessee for the purpose of levy of profession tax
specified in the schedule."
~
~ It is not necessary for the purposes of disposal of this batch
of appeals to notice the other provisions of the Act.
c
SUBMISSIONS:
13. Shri D.A. Dave, learned senior counsel submitted that
the competency of the State Legislature to make a law relating
to taxes for the benefit of the State or other local authorities·
therein in respect of professions, trades, callings or D
A, employments is structured by Article 276 of the Constitution and
,..;
any such law made by the State Legislature is to be within the
four corners of that Article. The submission was that the total
amount payable in respect of any one person to the State by
way of taxes on professions etc. shall not exceed Rs.2500/- per E
annum. The state Legislature is not competent to treat every
branch of a Company or firm or club etc. as a separate person
for the purposes of levy and collection of Profession Tax. The
branches of a Company have no independent and separate
... existence. It was submitted that though there is no definition of F
"person" in the Constitution, the meaning of the expression
"person" is to be ascertained from the provisions of the General
Clauses Act inasmuch as Article 367 of the Constitution provides
the General Clauses Act, 1897 to be made applicable for the
interpretation of the Constitution. Section 3(42) of the General G
Clauses Act defines "person" as a Company or Association or
~
,..,, body of individuals whether incorporated or not. Relying on the
said definition it was contended that branches of Company,
Association or body of individuals cannot be treated as a
separate person. Shri AV Rangam adopted the submissions
H
997 SUPREME COURT REPORTS [2008] 1 S.C.R.

A made by the learned senior counsel.
t-
14. Shri Anoop G. Chaudhary, learned senior counsel
appearing on behalf of the State of A.P. contended that the
impugned provisions of the Act do not suffer from any
constitutional infirmity. The Legislature is competent to define
B person and such artificial definitions are not unknown to law. It
was submitted that no doubt Article 367 provides that the General
Clauses Act, 1897 applies for the interpretation of the provisions f-
of the Constitution as it applies for the interpretation of an Act of .. '
the Legislature of the Dominion of India. But the General Clauses
c Act itself is a statute for interpretation of other enactments, unless
there is anything repugnant in the subject or context. The very
definition of "person" provided in Section 3(42) is an inclusive
one and it no way impairs the competence of the State
Legislature to make law relating to taxes for the benefit of the
D State in respect of professions etc. and -define "person" for the
purposes of such law.
>
15. Shri Sanjay Hegde, learned counsel forthe Intervener "'
broadly adopted the submissions made by the learned senior
counsel for the State of Andhra Pradesh.
E
THE CORE ISSUE:
16. The core question that arises for our consideration in
this batch of appeals is that whether the Explanation to the
definition of the term "person" defined under Section 20) of the
F Act and Explanation No.I to the First Schedule of the Act is )-
violative of the Article 276 (2) of the Constitution.
17. The rules that guide the constitutional courts in
discharging their solemn duty to declare laws passed by a
G legislature unconstitutional are well known. There is always a
presumption in favour of constitutionality, and a law will not be
declared unconstitutional unless the case is so clear as to be ~
-6

free from doubt; "to doubt the constitutionality of a law is to resolve
it in favour of its validity." Where the validity of a statute is
questioned and there are two interpretations, one of which would
H
KARNATAKA BANK LTD. v. STATE OF A.P. & ORS. 998
[B. SUDERSHAN REDDY, J.]

... -r- make the law valid and the other void, the former must be A
preferred and the validity of law upheld. In pronouncing on the
constitutional validity of a statute, the Court is not concerned
with the wisdom or un-wisdom, the justice or injustice of the law.
If that which is passed into law is within the scope of the power
conferred on a Legislature and violates no restrictions on that B
power, the law must be upheld whatever a Court may think of it.
[ See - Fram N. Balsara Vs. Bombay 1 ].
..
1
18. In StateofWB. andanothervs. E.l.T.A. lndiaLtd. and
others2 ,this court summarized the well settled principles to
determine the constitutional validity of the provisions of any c
statute and held :
"4. In examining the constitutional validity of the impugned
provisions of a statute, it will be useful to bear in mind the
following well-settled propositions. If a legislation is found
D
to lack in legislative competence or is found to be in
-~,....f
contravention of any provision of Part Ill or any other
provision of the Constitution, the impugned legislation
cannot escape the vice of unconstitutionality (see :
Kesavananda Bharati v. State of Kerala [(1973) 4 SCC
225: AIR 1973 SC 1461] and also State of AP. v. McDowell E
& Co. [(1996) 3 SCC 709). A challenge to any statutory
provision on the ground of the classification being
discriminatory and violative of Article 14 of the Constitution
, can be successfully met on the principle of reasonable
{. F
classification having nexus to the object of the Act sought
to be achieved (see: State of Bombay v. F.N. Balsara [AIR
1951 SC 318:1951 SCR 682:(1951)52 Cri LJ 1361] and
Budhan Choudhry v. State of Bihar [AIR 1955 SC 191:
(1951) 1 SCR 1045 : 1955 Cri LJ 374]. However, the
legislature enjoys a greater latitude for classification in G
•..j
the field of taxation (see: Steelworth Ltd. v. State of Assam
"" [1962 Supp (2) SCR 589 : (1962) 13 STC 233, Gopal

1
(1951)SCR682.
2
(2003) 5 sec 239 H
999 SUPREME COURT REPORTS [2008] 1 S.C.R.

Narain v. State of U.P. [AIR 196~ SC '370] and Ganga
A
Sugar Corpn. Ltd. v. State pf U.P. [(~980)1SCC223:1980
~
...
SCC (Tax) 90:AIR 1980 SC 286l No legislation can be
declared to be illegal, mL)ch less unconstitutipnal on the
ground of being unreasona:ble or harsh on the anvil of
B Article 14 of the Constitution, except, of course, when it
fails to clear the test of arbitrariness and discrimination
which would render· it violative of Article 14 of the f-
Constitution.(See:Steelworth Ltd. and McDowell & Co.) ~

THE LAW MAKING POWER OF LEGISLATURE AND
c CONSTITUTIONAL LIMITATIONS:
19. We shall bear in mind the well settled principles and
proceed to analyze Article 276 of the Constitution of India and
impugned provisions of the Act.
D 20. Article 265 of the Constitution prohibits levy of collection
of a tax except by an authority of law, which means only a valid >
law. The implied limitation is that the law providing for levy of tax
should be one which is a valid law.
21. The Privy Council, in R. Vs. Burah 3 laid down a
E fundamental principle for the interpretation of a written
Constitution. Lord Selborne in a classic passage observed:
'The Indian Legislature has powers expressly limited by
the Act of the Imperial Parliament which created it, and it
F can, of course, do nothing beyond the limits which )-
circumscribe these powers. But, when acting within those
limits, it is not in any sense an agent or delegate of the
Imperial Parliament, but has, and was intended to have,
plenary powers of legislation, as large and of the same
nature, as those of Parliament itself. The established of
G
courts of Justice, when a question arises whether the
prescribed limits have been exceeded, must of necessity ?
determine that question; and the only way in which they

3
H (1878) 5 IA 178
KARNATAKA BANK LTD. v. STATE OF A.P. & ORS. 1000
[B. SUDERSHAN REDDY, J.]

can properly do so, is by looking to the terms of the A
-r- instrument by which, affirmatively, the legisl§!tive powers
were created, and by which, negatively, they are restricted.
If what has been done is legislation, within the general
scope of the.affirm.ative words which give the power, and
if it violates no express condition or restriction by which B
.is
that power limited (in wt\ich category wo_uld, of course,
be included anyACtofthelmperialParliainenhtt variance
-~
with it) it is not for any Court of Justice to inquire further;.
• or to enlarge constructively those conditions and
restrictions." c
4
In Kesavananda Vs. Kerala this Court reaffirmed the
correctness of the principle laid down in Burah (supra)
22. In Bharat Kala Bhandar Ltd. vs. Municipal Committee,
Dhamangaon 5 ,this court held that the provisions of Article 276
D
of the Constitution which precludes State Legislature from
~ making a law enabling a local authority to impose a tax on
.~
profession etc. in excess of Rs.2500/- per annum and the said
provision is to be read in the Act or "to be deemed by implication
to be there as the Constitution is a paramount law to which all
other laws are subject." It is further held "moreover, we must E
bear in mi rid the provision of Article 265 of the Constitution which
preclude the levy or collection of a tax except by authority of law
which means only a valid law."

23. In The Bengal Immunity Company Limited vs. The F
·i.. State of Bihar and others 6 ,this court while recognizing that the
Constitution makers by Article 246(3) read with Entry 54 in List
II of the Seventh Schedule to the Constitution conferred power
on the Legislatures to make law with respect to taxes on the
sale or purchase of goods other than newspapers held that the
G
Constitution at the same time by Article 286 "clamped on the
...., legislative power several fetters". Likewise Article 276 imposes
4
(1973 (supp.) SCR 1)
5 (1965) 3 SCR 499
6 (1955) 2 SCR 603
H
1001 SUPREME COURT REPORTS (2008) 1 S.C.R.

A fetters on the law making power of a State Legislature in the ~

matter of making a law relating to taxes on professions, trades,
callings and employments. Those restrictions are found in Article
276 (2) which commands that the total amount payable in
respect of any one person to the State or to any one Municipality
B etc. or other local authority in the State by way of taxes on
professions etc. shall not exceed Rs. 2500/- per annum.
24. In Atiabari Tea Co. Ltd. vs. The State of Assam and t-
others 7 , this court while considering the width and amplitude of ..
Article 301 observed :
c
"On the other hand, the opening words of Art. 301 are
very significant. The doctrine of the freedom of trade,
commerce and intercourse enunciated by Art. 301 is not
subject to the other provisions of the Constitution but is
made subject only to the other provisions of Part XIII;
D
that means that once the width and amplitude of the
freedom enshrined in Art. 301 are determined they
,•
cannot be controlled by any provision outside Part XIII.
This position incidentally brings out in bold relief the
important part which the Constitution-makers wanted the
E doctrine of freedom of trade to play in the future of the
country. It is obvious that whatever may be the content of
the said freedom it is not intended to be an absolute
freedom; absolute freedom in matters of trade, commerce
and intercourse would lead to economic confusion, if not
F chaos and anarchy; and so the freedom guaranteed by )
Art. 301 is made subject to the exceptions provided by
the other Articles in Part XIII. The freedom guaranteed is
limited in the manner specified by the said Articles but
it is not limited by any other provisions of the Constitution
G outside Part XIII. That is why it seems to us that Art. 301,
read in its proper context and subject to the limitations
prescribed by the other relevant Articles in Part XIII, must
be regarded as imposing a constitutional /imitation on

7
H (1961)1SCR809
KARNATAKA BANK LTD. v. STATE OF A.P. & ORS. 1002
[B. SUDERSHAN REDDY, J.]

the legislative power of Parliament and the Legislatures A
t of the States."
(Emphasis supplied)
25. It is unnecessary to burden this judgment with various
authoritative pronouncements of this court wherein constitutional
limitations on the legislative power of Parliament and the .B
Legislatures of the States have been recognized. The State
-• Legislature undoubtedly is competent to make a law relating to
• taxes for the benefit of the State or other local authorities therein
· in respect of professions, trades, callings or employments. It is
traceable to Entry 60 of List 11 of the Seventh Schedule but that C
power of the Legislature to make such a law to levy and collect
the profession tax is made subject to the restrictions as provided
for under Article 276 (2) of the Constitution.

26. Article 276 of the Constitution of India corresponds to D
Section 142A of the Government of India Act, 1935. The
legislative history upon which Section 142A pf the Government
of India Act, 1935 was enacted and on which Article 276 of the
Constitution now rests was noticed by this court in Bharat Kala
Kendra (Supra). It is observed:
E
"..... It is that the legislative spheres of the Provinces and
the Centre came to be clearly demarcated in regard to
items falling within Lists I and II of Schedule VII of the Govt.
of India Act and now to those falling within the same lists
of Schedule VII of the Constitution. Taxes on professions, F
trades, callings and employments are taxes on income
and are thus outside the provincial/ and now State - lists
and belong exclusively to Parliament and before that to
the Central Legislature. Y~t under a large number of laws
enacted before the Govt. of India Act, 1935 came into G
force, power was conferred on local Governments and
local authorities to impose taxes on such activities. This
was obviously in conflict with S.100 of the Govt. of India
Act. When this was realized S.142-A was enacted by the
British Parliament which saved the power conferred by H
1003 SUPREME COURT REPORTS [2008] 1 S.C.R.

A pre-existing laws but limited the amount payable to Rs.SO
after 31 51 March, 1939. A saving was made, however, of
pre-existing laws subject to certain conditions with w.hich
we are not concerned. The provisions of this section have
been substantially reproduced in Article 276 of the
B Constitution with the modification that the upper limit of
such tax payable per annum would be Rs.2SO instead of
Rs.SO. A tax can be recov~red only if it is 'payable' and it
would be payable only after it is assessed.
•
27. The purpose of Article 276 is not to amend the State's
C power to tax profession founded on Entry 60 but is to provide
that such tax is not invalid on the ground that it relates to a tax on
income.
28. A plain reading of Article 276 makes it abundantly clear
that a State Legislature is precluded from making laws enabling
0
the authorities to impose tax on professions, trades, callings
etc. in excess of the prescribed amount, such law if enacted by
a Legislature would be in the teeth of Article 276 of the
Constitution. The total amount payable in respect of any one
person to the State or to any one municipality or other local
E authority etc. in the State by way of tax on profession etc. shall
not exceed Rs.2SOO/- per annum. Entry 60 of List II which
authorizes the State Legislature to make a law relating to tax on
profession is to be read along with Article 276 of the Constitution.
Article 276 is also declaratory in its nature inasmuch as it
F declares that notwithstanding anything contained in Article 246,
no law of the Legislature of a State relating to taxes for the benefit
of State etc. in respect of profession, trades etc. Shall be invalid
on the ground that it relates to tax on income. Likewise, it also
declares the power of the Legislature of a State to make such
G laws with respect to taxes on professions etc. shall not be
construed as limiting in any way the Parliament's power to make
laws with respect to taxes on income accruing from or arising
out of profession, trade etc. For the purposes of this case, it is
not necessary to notice the distinction between tax and
H profession and income. It is well settled that a tax on profession
KARNATAKA BANK LTD. v. STATE OF AP. & ORS. 1004
[B. SUDERSHAN REDDY, J.]

is not necessarily connected with income. A tax on income can A
be imposed if a person .carries ori a profession, trade, calling·
etc. Such a tax on profession.is irrespective of the que~tion of
income. There is· no other restriction· imposed ·u..pon .a State
Legislature in :making law relating to .tax on profession: trade, ·
calling and. employment. There can be no doubt whatsoever that B
a State Legislalure cannot make any law. to levy and collect
profession tax at the rate of more than Rs.2500/-per person,
per annum, in view of the restriction in Articte 276(2) of the
Constitution.
29. We have noticed that Section 4 of the Act which deals c
with levy and charge of tax mandates that there shall be levied
and collected a tax on professions, trades, callings and
employments etc. for the benefit of the State and every person ·
engaged in any profession, trade, calling etc. in the State falling
under any one or other of the classes specified in Column (2) of D
-· ~,,_' the first Sch~dule shall be liable to pay tax at the rate specified
in the corresponding Entry in Column (3) thereof. The maximum ·
rate specified in the First Schedule at which profession etc. is
levied and liable to be paid by every person admittedly does
not exceed Rs 2500/- per annum. Article 276(2) does not prohibit E
such levy and collection of tax from every one person not
exceeding Rs. 2500/- per annum.

30. In East India Tobacco Co. vs. State of Andhra
Pradesh 8 , this court approved Willis : Constitutional law to the
--( F
effect: "A State does not have to tax every thing in order to tax
something. It is allowed to pick and choose districts, objects,
persons, methods and even rates for taxation if it does so
reasonably"
(Emphasis supplied)
G
31. It is well settled that the power to make a law with
respect to a tax comprehends within its power to levy that tax
and to determine the persons who are liable to pay such tax, ·
the rate at which such tax is to be paid and the event which will
8
19631SCR404 H
'\
..,
1005 SUPREME COURT REPORTS [2008] 1 S.C.R.

A attract liability in respect of such tax. This was generally by the
charging Sections of the particular tax law.
WHETHER THE STATE LEGISLATURE HAS
EXCEEDED ITS POWER IN DEFINING THE "PERSON"
AND THEREBY TRANSGRESSED THE CONSTITU-
B TIONAL LIMITATIONS:
32. The question which we therefore have to consider is
whether in the exercise of its power to make a law relating to ,.
taxes on professions, trades, callings and employments within
c the State, the Legislature of that State has the legislative
competence to define "person" engaged in any profession, trade
etc.? The question requiring our decision is whether the A.P.
State Legislature is competent to introduce the fiction in the
Explanation to the definition to the word "person" and also
Explanation No.I to the First Schedule of the Act? Whether
0
introducing such fiction, Legislature has exceeded its legislative
power thereby transgressed the constitutional limitation?
33. We do not find any merit in the contention that the
Legislature lacks legislative competence to define "person" who
E is liable to pay profession tax etc. which includes every branch
of a firm, Company, Corporation or other corporate.body, any
Society, Club or Association. The term "person" is not defined
in the Constitution. But Article 367 of our Constitution provides
that the definitions contained in the General Clauses Act apply
F for the interpretation of the Constitution. Therefore, we are
required to consider whether the definition of"person" in Section
3 (42) of the General Clauses Act restrict the power of State
Legislature to define the term "person" and adopt a meaning
different from the definition in the General Clauses Act. In our
G considered opinion, the definition of"person" in General Clauses
Act, would not restrict the power of the State Legislature to define
a "person" and adopt a meaning different from or in excess of
the ordinary acceptation of the word as is defined in the General
Clauses Act.
H 34. In N. Subramania /yerVersus Official Receiver Qui/on
KARNATAKA BANK LTD. v. STATE OF A.P. & ORS. 1006
[B. SUDERSHAN REDDY, J.]

.... +- & Anr. 9 this Court while considering the question whether it was A
necessary in annulment proceedings under Section 53 of the
Provincial Insolvency Act to prove that the transferor who has
been subsequently adjudged an insolvent should have been
honest and straightforward in the matter of transaction
impeached held that even if the transferor was wanting in bona B
tides the crucial question still remains to be answered and unless
it is found that the transferee was wanting in bona fides in respect
1 of the transaction in question, he cannot be affected by the
;(
dishonest course of conduct of the transferor. The High Court in
that case had taken the view that the mortgagee had failed c
affirmatively to prove its bona tides and the said conclusion was
based upon the consideration that the General Clauses Act
defined "good faith" as "nothing is said to be done or believed
in good faith which is done or believed without due care and
attention." It is in that context this Court while analyzing the scope
D
of provisions of the General Clauses Act observed that the
~ General Clauses Act is enacted in order to shorten language
,...'
used in parliamentary legislation and to avoid repetition of the
same words in the course of the same piece of legislation. "Such
an Act is not meant to give a hide-bound meaning to terms and
phrases generally occurring in legislation. That is the reason E
why definition section contains words like 'unless there is
anything repugnant in the subject or context.' Words and phrases
have either a very narrow significance or a very wide significance
according as the context and subject of the legislation requires
-~ the one or the other meaning to be attached to those words or F
phrases." The Court recognized that the legislature is entitled in
its wisdom to give a special definition of the terms already
defined in the General Clauses Act and different from the one in
the General Clauses Act. It is observed the definition of "good
faith" in the General Clauses Act would have been applicable to G
the Limitation Act also but the legislature in its wisdom has given
1
a special definition of "good faith" different from the one in the
' General Clauses Act advisedly."

9
[AIR 1958 SC 1]= [ 1958 SCR 257] H
1007 SUPREME COURT REPORTS [2008] 1 S.C.R.

A 35. In Hasmukhalal Dahyabhai & Ors. Versus State of
Gujarat & Ors. 10 interpretation of Articles 31 A and 318 of the -+
Constitution of India in relation to the Gujarat Agricultural Land
Ceiling Act, 1961 came up for consideration. The Gujarat
Agricultural Land Ceiling Act, 1961 conceives of each "person"
8 holding land in the single unit whose holding must not exceed
the ceiling limit. Section 2, sub-section (21) says: "person"
"includes a joint family". This has been done apparently to make
it clear that, in addition to individuals, as natural persons,
t-
)'
families, as conceived of by other provisions, can also be and
c are persons. It was argued that the concept of the term "person"
having been fixed by the General Clauses Act, this concept and
no other must be used for interpreting the second proviso to
Article 31A of the Constitution of India. This Court held:
"10. It is true that, but for the provisions of Section 6, sub-
D section (2) of the Act, the term "person'', which includes
individuals, as natural persons, as well as groups or bodies
of individuals, as artificial persons, such as a family is, the
entitlement to the ceiling area would be possessed by
"
""
every person, whether artificial or natural. In other words,
E if Section 6(2) of the Act was not there, each individual
member of a family would have been entitled to hold land
upto the ceiling limit if it was his or her legally separate,
property. This follows from the obvious meaning of the
term "person" as well as the inclusive definitions given
F both in the Act under consideration and in the General
Clauses Act."
36. The expression "person" is employed in more than one
Article of the Constitution of India. We shall not referto all those
Articles where the expression "person has been used. It would
G be enough to notice Articles 20, 21, 22 and 226 of the
Constitution of India where it has been used. The provision of ~
f''
the Generpl Clauses Act, 1897 which is applicable for the
interpretation of the Constitution as provided for under clause

10 [AIR 1976 SC 2316]=[(1976)4 SCC100]
H
KARNATAKA BANK LTD. v. STATE OF A.P. & ORS. 1008
[B. SUDERSHAN REDDY, J.]

(1) of Article 367 itself restricts the applicability of the Act and A
-+
makes such an application subject to the context as otherwise
may require. The trinity of Articles 20, 21, 22 broadly guarantee
the personal liberties against the State to individual person. They
are not guaranteed to all those who are included in the definition
of "person" under section 3 (42) of the General Clauses Act. B
"Person" under Section 3 (42) of the General Clauses Act shall
include any company or association or body of individuals
-+
whether incorporated or not. Does it mean that the High Court
• is entitled to issue a writ or order or direction under Article 226
of the Constitution against every "person" under Section 3 (42) c
of the General Clauses Act';'· It is well settled that the remedy
available under Article 226 is a public law remedy and a writ
and does not lie against a person not discharging public law
duties. It is thus clear that the definition of "person" under Section
3 (42) of the General Clauses Act is not applicable automatically
D
to interpret the provisions of the Constitution unless the context
-~ so requires and makes that definition applicable.
".
37. Section 3 of the General Clauses Act, 1897 itself says
that unless there is anything repugnant in the subject or context
the term "person" shall include any company or association or E
body of individuals, whether incorporated or not. The word
"includes" is often used in interpretation clauses in order to
enlarge the meaning of the words or phrases occurring in the
body of the "statute". "When it is so used, these words and
phrases must be construed as comprehending not only such F
-... things as they signify according to their nature and import but
also those things which the interpretation clause declares that
they shall include." [See - The Commissioner of Income-tax,
Andhra Pradesh Vs. Mis Taj Mahal Hotel, Secudnerabad 11
38. In our considered opinion, the Legislature is not G
_. denuded of its competency to define the term "person" differently
'"'I
from the definition of that term in the General Clauses Act, 1897.
There are many illustrations showing that the same words have
11
(AIR 1972SC168 = (1971) 3 sec 550) H
1009 SUPREME COURT REPORTS [2008] 1 S.C.R.

A been used in different senses in different context. It is not
i-
uncommon practice for the Parliament or State Legislature to
define "person" in the Act and create an artificial unit by fiction ..
For instance, Section 2 (31) of the Income-Tax Act, 1961 defines
"person" including (a) an individual, (b) a Hindu undivided family,
B (c) a Company, (d) a firm, (e) an association of persons or a
body of individuals, whether incorporated or not, (f) a local
authority and (g) every artificial juridical person, not falling within
any of the preceding sub-clauses and the same is much wider +-
)
than the term "person" as defined in the General Clauses Act.
c 39. The definition of "person" in Section 3 (42) of the
General Clauses Act is undoubtedly illustrative and not
exhaustive. The well known rule of interpretation regarding such
inclusive definitions has always been to treat the other entities,
who would not otherwise have come strictly within the definition,
D to be a part thereof, because of illustrative enactment of such
definitions. The legislature is competent in its wisdom to define ;..
"person" separately for the purposes of each of the enactment ....
and different from the one in the General Clauses Act and create
an artificial unit. The definition of "person" in the General Clauses
E Act would not operate as any fetter or restriction upon the powers
of the State Legislature to define "person" and adopt a meaning
different from as defined in the General Clauses Act.
40. In our view, Entry 60 in List II gives the outline of the
subject matter of legislation and therefore, the words in the Entry
F are to be construed in their widest amplitude. The field of
~
legislation covered by the Entry is not to be narrowed down in
any way unless there is anything in the Entry itself which defines
the limits thereof.
41. The impugned provisions are merely concerned with
G
specifying different assessable units for purposes of
)-
assessment of profession tax and imposition of the levy. It is ('
well settled and cannot be disputed "that the Legislature can
select persons, properties, transactions and objections for the
imposition of levy and for that purpose classify as many different
H
KARNATAKA BANK LTD. v. STATE OF A.P. & ORS. 1010
[B. SUDERSHAN REDDY, J.]

assessing units as it could reasonably think necessary ......... " A
-r- [See - Wealth Tax Officer Versus C.K. Mammed Kayi 12
42. Shri A.V. Rangam, learned counsel relying on the
decision of this Court in English Electric Company of India
Ltd. Vs. The Deputy Commercial Tax Officer13 submitted that
the branches of a company have no independent and separate B
existence. The company is one entity but its branches are not
separate entities. The submission was that the definition of
"person" has the effect of destroying the legal identity of the
company. The definition of "person" creates an artificial entity
unknown to law. We find no substance in the submission so C
made by the learned counsel for the appellant. The obseNations
of this Court in English Electric Company of India Ltd.
(supra) that the appellant company therein was "one entity and
it carries on business at different branches. Branches. have no
independent and separate entity. Branches are different D
agencies" is to be understood in the proper context. The
appellant company therein had branches at different places. The
buyer at Bombay ascertained quotations for goods from the
Bombay branch. The Bombay branch referred the enquiry to its
Madras factory and on receiving reply quoted the prices and E
the Bombay buyer placed orders for the goods with the Bombay
Branch but the goods were despatched from Madras though in
the name of Bombay Branch at the risk of the Bombay buyer. It
is under those circumstances this Court obseNed that when a
branch of a company forwards a buyer's order to the principal F
factory of the company and instructs them to despatch the goods
direct to the buyer and the goods are sent to the buyer under
those instructions it would not be a sale between the factory
and its branch. The obseNations so made have no bearing
1 whatsoever on the issue with which we are concerned in the G
present case.
43. The appellant-company herein continues to be

12
(1981) 3 sec 23
13
( 1976) 4 sec 460
1011 SUPREME COURT REPORTS [2008] 1 S.C.R.

A company within the meaning of Section 3 of the Companies
Act, 1956 which defines the "company", "existing company", -t·
"private company" and "public company" for the purposes of
the Companies Act. Its status as one entity continues to be the
same. It is only for the purposes of the present Act viz. Andhra
B Pradesh Tax on Professions, Trades, Callings and Employments
Act, 1987 even its branches are treated as a "person" enabling
the authorities to levy and collect profession tax.

44. Before parting with the case we are required to state
that a challenge to the impugned provisions was mounted on
C the basis of Article 14 of the Constitution of India in the High
Court. It was contended that the Andhra Pradesh State
Legislature in enacting the definition to the word "person" and
also Exp.lanation No. I to the First Schedule of the Act acted
arbitrarily and irrationally and thereby violated Article 14 of the
D Constitution of India. That contention was rejected by the High
Court. The said contention is not urged before us. Therefore,
we express no opinion on the same.
CONCLUSION:
E 45. For the aforesaid reasons, we hold the definition of
the word "person" in the impugned Explanation and also
Explanation No. I to the First Schedule of the Act is not intended
to tax a person at a rate higher than Rs.2500/- per annum, per
person, but to treat even a branch of a firm, company,
F corporation or other corporate body, any society, club or
association as a separate person, and therefore, a separate
assessee within the meaning of Section 2 (b) of the Act and the
Andhra Pradesh State Legislature has undoubtedly the
competency to adopt such a devise of taxation. The Andhra
G Pradesh State Legislature did not violate the mandate of Article
276(2) of the Constitution.
46. In the result, the appeals are dismissed with no order
as to costs.

H K.K.T. Appeals dismissed.