BANASHANKARI LEASING COMPANY LIMITED Vs. STATE OF KARNATAKA

JUDGEMENT

(1.) THE appeals arise out of the judgment of our learned brother, Justice Rajendra Babu, rendered in two Writ Petitions Nos. 17042 and 17043 of 1989 (see [1990] 182 ITR 8), wherein, though the petitioners were different in that the appellant in W. A. No. 2147 of 1989 was a leasing company, while the appellant, namely, in W. A. No. 2148 of 1989 was an automobile company, they challenged the constitutional validity of entry 19 of the Karnataka Tax on Professions, Trades, Callings and Employments Act, 1976 (hereinafter referred to as "the Act"), in so far as it purports to levy a flat rate of tax of Rs. 2,500 per annum on every company. THE charging section under that Act is section 3. That says in sub-section (2) that any person exercising any profession or calling or engaged in trade-public or private-shall be liable to pay tax at the rate mentioned in the corresponding entry in the third column of the Schedule. It is under the Schedule that entry 19 provides a flat rate of taxation at the rate of Rs. 250 per annum on every company registered under the Companies Act, 1956, and engaged in any profession, trade or calling. though originally it was Rs. 250 per annum, it was increased to Rs. 2,500 by the Karnataka Act 15 of 1989.

(2.) THIS was challenged on the ground that a flat rate is impermissible in law, in disregard of the paying capacity of the company. It was further urged that the Legislature ought to have made a distinction between the nature of profession, trade or calling carried on by the company. In other words, a distinction ought to be made depending on the nature of the profession, trade or calling. In support of this, reliance was placed on a few decisions of the Supreme Court, but the learned judge negatived these contentions. Hence, they have come up in appeal.

(3.) IN meeting this contention, learned Government Advocate, Mr. H. L. Dattu, would urge that there is a clear distinction between individuals as opposed to companies. the appellants which are companies cannot compare themselves with individuals and try to make out a classification and contend that the same treatment as accorded to individuals is not accorded to companies. IN matters of taxation, the Legislature has got the widest latitude and flexibility to tax, depending upon the nature of the tax. Here is a case where, under the Act in question, what is sought to be taxed are professions, trades or callings. IN so far as companies are concerned, the Legislature thought that irrespective of the nature of its profession, trade or calling, a company registered under the Companies Act is liable to tax, and a flat rate can be levied. IN support of this submission, Murthy Match Works v. Asst. Collector of Central Excise, , is cited. Again, a Division Bench of this court has upheld a flat rate of entertainment tax on video parlours, on the ground that once a clear distinction could be maintained between video parlours on the one hand and cinema theatres on the other, a further distinction as to video parlours will not render the levy of taxation invalid. State of Karnataka v. Ganesha Krishna Bhat [1990] ILR (2) Kar 1045, is an authority for this proposition.