WP/7432/2001 of Gram Panchayat, Kondapally Vs The Deputy Commercial Tax Officer, on 27 December 2005

THE HON'BLE SRI JUSTICE BILAL NAZKI

AND

THE HON’BLE SRI JUSTICE C.V.RAMULU

WRIT PETITION NO.7432 of 2001

O R D E R (Per the Hon’ble Sri Bilal Nazki, J):

Heard learned counsel for the parties.

Basically this writ petition raised a dispute between two Gram Panchayats forsharing the taxes collected by the State under Andhra Pradesh Tax on Professions,Trades, Callings and Employments Act, 1987 (hereinafter referred to as ‘the Act’).

The petitioner-Gram Panchayat claims that some of the offices and theresidential quarters belonging to respondent No.2 are located in its area whereassome of the units of respondent No.2 are located in third respondent-GramPanchayat.Although respondents’ contention is that some residential quarters arelocated in the petitioner-Gram Panchayat whereas all offices are located in thirdrespondent-Gram Panchayat.

It appears that before the Act came into force in 1987, the Gram Panchayatswere empowered to levy profession tax in the areas of operation. But after cominginto operation of 1987 Act, this power was taken away from the Gram Panchayats interms of Section 32 of the Act.

Section 32 of the Act reads as under:-

“Section 32:Local authorities not to levyprofession tax :- the constitution of establishment of a local authority, no localauthority shall, on or after the commencement of this Act, levyany tax on professions, trades, callings or employments.”

Under Section 35 of the Act, it is envisaged that out of the revenue collectedunder the Act, grants could be made to the local authorities as they would suffer lossof revenue.

Section 35 of the Act lays down:-

“Section 35: Grant to local authorities for loss ofrevenue:- Out of the proceeds of the tax, penalties, interest orother amounts recovered under this Act, there shall be paidannually to such local authorities as were levying a tax onprofessions, trades, callings and employments, immediatelybefore the commencement of this Act, such amounts on thebasis of the highest collections of such taxes, penalties andinterest made by them in any year during the period of threeyears immediately preceding such commencement as maybe determined by the Government in this behalf.”

After perusing the various provisions of the Act and the Rules madethereunder and after hearing learned counsel appearing for the parties, it is clearthat the Act envisages levy and collection of professional tax by the State and thewhole revenue collected under the Act is the revenue collected by the State and it isfor the State as to how such revenue shall be distributed, although Section 35 of theAct lays down that the revenue could be made available to the local authorities.Therefore in terms of the Act or the Rules made thereunder, no Gram Panchayat isentitled to any share in the revenue collected under the Act, not even those GramPanchayats, where the offices are located, where the assessees are working, whopaid tax under the Act, are entitled to any revenue from such tax. HoweverGovernment is empowered to make available some of the revenue collected by it tothe local bodies under the Act. It appears that the Government was conscious thatthe local bodies have suffered on account of Section 32 of the Act, therefore it The G.O. reads as under:

“Profession Tax is being levied and collected from thepersons engaged in Profession, Trade, Callings andEmployment in the State and it is being distributed to the LocalBodies on yearly basis. The Andhra Pradesh PanchayatSarpanches Association has been brought to the notice of theGovernment that the Local Bodies are unable to take up thedevelopmental works in time as they are not getting timelyreleases of funds relating to Profession Tax Collections.Therefore, they have requested the Government thatcollection of Profession Tax may be released on quarterlybasis as being done in the case of Entertainment Tax.

The Government, after careful consideration of thematter, have decided to release 95% collection of theProfession Tax to the Local Bodies on quarterly basis withimmediate effect, after deducting 5% of the Profession Taxtowards administrative charges.

The Commissioner of Commercial Taxes is, therefore,requested to take necessary action accordingly.

This Order issued with the concurrence of Financeand Planning U.O.11509/EDS/Per/ 99. Dt.13-4-1999.”

Although this G.O. authorizes release of 95% collection of the profession taxto the local bodies, the G.O. itself is vague to the extent that it does not specify as tohow the collection of 95% of the profession tax is to be distributed amongst variouslocal bodies if an establishment is established in two Gram Panchayats and tax iscollected in both the Gram Panchayats. Would both the Gram Panchayats beentitled to grant or only one of them would be entitled to such a grant. If both wouldbe entitled, what would be the method of sharing the amount of grant. Without goinginto the merits and respective claims of the two Gram Panchayats as to whetheroffices of the respondent No.2 are located solely in one Gram Panchayat or they arein two Gram Panchayats, we feel it necessary to direct the Government to look intothe matter and come out with a suitable order by which the grey areas pointed out byus can be removed.

With these directions, the writ petition is being disposed of.

We expect that the matter will receive the attention of the Government and itshall be decided within two months. We are also told that in different areas indifferent districts now different methodologies are being adopted by the authoritiesconcerned to distribute the grant made available to those authorities in terms ofG.O.Ms.No.544. Therefore, if the Government takes a fresh look, uniform methodcould be ensured for whole of the State. No order as to costs.

(BILAL NAZKI, J)

_____________________

27[th] December, 2005

___________________

(C.V.RAMULU, J)

ghn

THE HON'BLE SRI JUSTICE BILAL NAZKI

AND

THE HON’BLE SRI JUSTICE C.V.RAMULU

WRIT PETITION NO.7432 OF 2001

Date: 27-12-2005

Between:

Gram Panchayat, Kondapally. …Petitioner

And

The Deputy Commercial Tax Officer,

Kanchakacharla, and two others.

…Respondents