1. The question referred for our decision is Does the word 'capital' used in Schedule V of the Municipal Act III of 1904 mean exclusively nominal capital or does it also include paid-up capital and, if so, should it be taken to mean paid-up capital exclusively?
2. The law (Section 176, Madras City Municipal Act, 1904) hardly contemplates a reference in such general and abstract terms. It only empowers the Magistrates to state a case on any appeal before them and refer the same for the decision of the High Court, that is, to state all the matters necessary for the decision of the particular case before them on appeal and to refer the case so stated for decision. The facts are, however, fully stated in the reference, and we proceed to deal with them.
3. The case arises out of a dispute between the Madras Municipality and the Mylapore Hindu Permanent Fund, Limited, as to the basis on which the fund should be charged with professional tax. The Municipality claims to tax the fund under Clause I(a) of Schedule V on its nominal capital. The Fund contends that it should be taxed under Clause I(b) of the Schedule on its paid-up capital.
4. Under Clause I(a) joint stock companies and other companies carrying on any trade or business having gain for its object, or as benefit societies, and the capital of which exceeds 20 lakhs of rupees are liable to a tax of Rs. 500. Under Clause I(b) the companies are liable to a tax of Rs. 350 if their capital exceeds 18 lakhs but does not exceed 20 lakhs of rupees.
5. The fund is registered under the Indian Companies Act and has a declared nominal capital of Rs. 29,99,976 divided into 357,168 shares of Rs. 84 of each.
6. These shares cannot be acquired at once by a lump payment but are subscribed for by payment of one rupee per mensem extending over a period of 7 years which payments cannot be demanded in advance. It is admitted for the purpose of the present reference that the amount actually subscribed or the paid-up capital, is about 12 lakhs of rupees.
7. It will be observed that in Schedule V the word 'capital' is used without any qualification. No definition of the word is given in the Act. For the Municipality it is contended that the meaning of the word will vary according to the nature of the Company which is Being taxed.
8. It is pointed out that the Fund is a Company limited by shares such as is contemplated by Sections 8 and 45 of the Indian Companies Act VI of 1882 and that in those sections capital is used in the sense of nominal capital. It is, therefore, argued that the word capital in Schedule V used in regard to Companies such as the fund must mean nominal capital. The Indian Companies Act cannot, however, be properly resorted to to determine the meaning of words in the Municipal Act, for the two acts are not in part materia. (Maxwell: Interpretation of Statutes, 4th edition, page 56). The word 'capital' used by itself may signify many different things. In the absence of a definition in the Municipal Act the presumption is that the word is used in that Act in its ordinary and popular meaning - Maxwell: Interpretation of Statutes, 4th edition on page 2, and Venkatram Chetty v. The Emperor I.L.R. (1904) M. 17. The ordinary and popular meaning of the word is undoubtedly money actually contributed for employment in business. It is defined in Wharton's Law Lexicon as the sum of money which a merchant, banker, or trader adventures in any undertaking or which he contributes to the common stock of a partnership, and also as the fund of a trading company or Corporation. The ordinary and popular meaning seems to express the real intention of the Legislature. When Schedule V is read as a whole the underlying principle seems to be that taxation should be roughly proportionate to the professional incomes of individuals and the profits of companies. Section 123 of the Act which lays down that a person who exercises more than one profession shall be chargeable under the class appropriate to his aggregate income, supports this view; other things being equal the profits of a company will ordinarily vary with the amount of money actually employed in its business; and this amount will be limited by the amount actually contributed for employment in the business; in other words, by the paid-up capital. Schedule V of the present Municipal Act is in everything material to our present purpose, the same as Schedule A of the Madras City Municipal Act I of 1884. The case in Madras Equitable Assurance Co. v. The President, Municipal Commission, Madras I.L.R. (1887) M. 238 and Jennings v. The President, Municipal Commission, Madras I.L.R. (1887) M. 253 are cases under the latter Act. In the former case it was laid down that, in the case of Benefit Societies the aggregate of the sums contributed would constitute the capital of the society, the word 'capital' in the Act being used in its general sense. In the other case, it was remarked that the Clauses (a) to (d) of Clause I of Schedule A were framed to provide a sliding scale of taxes with reference to the amount of the capital employed in the business carried on by the companies described in Clause I(a). The fact that neither of the companies dealt with in the above cases had a declared nominal capital can make no difference in principle. Finally, the subject is not to be taxed unless the language of the statute clearly imposes the obligation, and in case of reasonable doubt the construction most beneficial to the subject is to be adopted - Maxwell: Interpretation of Statutes, 4th edition, page 431. Our decision, therefore, is that, with reference to the Mylapore Hindu Permanent Fund, Limited, the word 'Capital' in Schedule V of the Madras Municipal Act [III of 1904] means paid-up capital.