Panchayat:Repo18/Law Manual Page0523

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3[4A. Liability to pay tax in certain cases.- (1) If a company or person has an agent or office in the village Panchayat for the purpose of transacting business, whether or not such office or agent has power to make binding contracts on behalf of the company or person, that company or person shall be deemed to transact business within the Panchayat area and the person holding the charge of such office or the agent or firm, as the case may be, shall be liable for the tax payable by the company or person

(2) The liability of a company or person otherwise liable to pay profession tax under sections 204 and 205 shall not cease to pay such tax solely on the reason that the place from which its or his business is controlled situates outside the Panchayat area or only on the reason that its or his transactions were stopped outside the Panchayat area.]


Every taxation should be supported by a valid legislation, in view of the mandate in Article 265 of the Constitution of India. In the face of that provision, no tax can So, the order cannot be pressed into service to collect presumptive tax from the petitioners or other persons liable to pay profession tax. They are already in the profession tax-net under Section 204 read with the Kerala Panchayat Raj (Profession Tax) Rules, 1996. So, the Panchayats can continue to levy, demand and collect tax from them under the provisions of the said Section and the Rules mentioned above. Of course, the Government can give statutory backing for presumptive tax by amending the statutory provisions appropriately. Till such time, tax can be levied and collected only as per the provisions of the aforementioned Rules. Ext. P2 being a policy declaration made by the Government concerning collection of presumptive tax, it is not necessary to quash Ext. P2. But, it is declared that on the strength of Ext. P2, no tax can be collected from the petitioners, until corresponding amendments are carried out to the statutory provisions. (Para 5) - All Kerala Private Bankers Association, Kottayam v. State of Kerala and Another - 2009 (4) KHC 907 (DB).

5. Determination of tax when the business is confined exclusively to a single Village Panchayat area.

- Where a company or person transacts business in a half year exclusively in the area of a single Village Panchayat, the income of such company or person from the transaction of such business shall, for the purpose of levying profession tax under the Act during that half year be deemed to be

(a) Where income tax or agricultural income tax or both is/are assessed on such company or person under the Income Tax Act, 1961 (Central Act, 43 of 1961), or the Agricultural Income Tax Act, 1991, for the year, comprising the half year, one half of the amount at which the profits and gains of such business are computed under Section 5 of the Agricultural Income Tax Act, 1991 for the purpose of assessing the income tax or agricultural income tax or the sum of both such amounts and

(b) Where the amount of the said profit and gains of such company or person is not ascertainable or where such company or person is not assessed to income tax or agricultural income tax, such percentage or percentages calculated with reference to Rule 6 of the turn over of the business transacted in the area of the Village Panchayat during the half year or where this is also unascertainable the profit and gains during the corresponding half year of the previous year shall be considered as the income. for

6. Percentage of turnover.-

For the purpose of calculating the income for levying profession tax, the percentage of turnover or business under Clause (b) of Rule 5 and Rule 7 shall be as specified in the following table:

Provided that if in any case, the income so calculated is less than the minimum sum specified in column (3) of the said table, the percentage shall be enhanced to such a rate as would yield such minimum sum: