LI Network
Published on: 26 January , 2024 at 09:48 IST
In a recent development, the Supreme Court has declined to intervene in the Delhi High Court’s decision, affirming that an advocate’s office operated from a residential property is not liable for property tax under the Delhi Municipal Corporation Act as it does not qualify as a “business building.”
A bench comprising Justices BV Nagarathna and Augustine George Masih emphasized that the professional activities conducted by lawyers do not fall under the purview of “commercial establishment” or “business activity,” and therefore, law firms are not considered “commercial establishments.”
The Supreme Court dismissed the Special Leave Petition (SLP) filed by the South Delhi Municipal Corporation, citing the Delhi High Court’s judgment and observations made regarding the nature of lawyers’ professional activities.
The dispute arose in 2013 when the South Delhi Municipal Corporation issued a notice demanding property tax from a lawyer using a portion of his residential premises for office purposes. The lawyer contested this action, arguing that conducting professional activities in a residential setting does not transform the premise into a business establishment.
The Division Bench of the Delhi High Court, comprising Justices Najmi Waziri and Sudhir Kumar Jain, upheld the single judge’s decision, emphasizing that the Delhi Municipal Corporation Act does not provide for taxation on professional activities carried out in residential buildings.
Referring to the language of section 116 A (1) of the Delhi Municipal Corporation Act, the High Court ruled out taxation on professional activities, citing precedent from the Bombay High Court case of Sakharam Narayan Kherdekar v. City of Nagpur Corporation & Ors.
The Bombay High Court had previously clarified that advocates’ professional activities do not fall within the ambit of “business” or “professional establishment.”
Consequently, the High Court emphasized the principle of strict interpretation of taxation statutes, emphasizing that no additional meaning or interpretation could be inferred beyond the explicit language of the statute.