1. The questions referred to us under Rule 17 of the Taxation Rules of the Madras City Municipal Act of 1919 are three in number:
(1) Whether the payments made by the Government to the Prince of Arcot are in the nature of 'pension', and he is, therefore, a person in receipt of a 'pension' within the meaning of Explanation II to Section 111 of the City Municipal Act, 1919?
(2) Does the liability of any person to pay profession tax for any half-year arise immediately on the expiry of the sixty days mentioned in Section 113, or does it arise only upon his being assessed by the Commissioner for that half-year under Rule 8 of the Taxation Rules and served with notice of such assessment?
(3) Is the assessment to profession lax of the Prince of Arcot under Rule 8 of the Taxation Rules and Section 113 of the City Municipal Act made on the 15th of Septembar, 1926, invalid for the ten half-years commencing from the second half-year of 1920-21?
2. The first question is, whether the periodical payments made by the Government to the Prince of Arcot are equivalent to receipt by him of a 'pension' within the meaning of Explanation II to Section 111 of the Madras City Municipal Act. The material part of that section runs as follows:
Every person not liable for the companies' tax who, within the city and for the period prescribed in Section 113, exercises a profession, art, trade or calling or holds any appointment, public or private, bringing him within one or more of the classes of persons specified in the Taxation Rules in Schedule IV, shall pay by way of licence fee and in addition to any other licence fee that may be leviable under this Act, a tax as determined under the said rules.
3. The intention of the section seems clear enough. Any person engaged in the active pursuit of a profession, art, trade or calling or holding any appointment, is liable to pay profession tax, if the income he enjoys therefrom brings him within any of the clauses specified in the schedule. If and when he retires, he ceases to be liable. 8o far, however, as the holders of appointments are concerned, Explanation II provides that a person in receipt of a pension paid from any source shall be deemed to be a person holding an appointment within the meaning of the section. In other words, persons who have once held appointments are deemed to hold them for ever, while retired merchants, bankers, doctors and lawyers living on their invested funds seem to escape. Section 93 of the District Municipalities Act draws all classes in and makes, as it should, a distinction between holding an appointment and enjoying a pension. The learned Chief Judge has gone at length into the history of the negotiations between the Government and the Nawab of the Carnation, which culminated in the agreement of 1867, by which the allowance now in question was fixed, It is not necessary for us to do more than to refer to Ex, I), the final letter of the Chief Secretary to the Government of Madras, recording the agreement. The allowance is therein described as 'settled on the title,' 'for the support of the title,' 'attached to the title.' Mr. Rangachariar relies on these expressions as showing that the allowance is no more than an appendage to the title and is not a pension properly so called. Periodical payments made by' the State for the support of a title conferred by it certainly come within the definition of 'pension.' One of the definitions of the word in the Oxford Dictionary is 'a regular payment to persons of rank...to enable them to maintain their estate.' That definition covers the present case exactly. From another point of view, it is equally clear that the allowance is a pension, The consideration for it was the surrender by the Prince of certain rights. Webster's Dictionary gives, as one of the definitions of 'pension,' 'a stated allowance or stipend made in consideration...of the surrender of rights.' Several decisions have been cited before us, wherein it was held that certain allowances paid by Government were political pensions. We think it unnecessary to refer to them. It seems to us perfectly clear that the allowance in question is a political pension. Mr. Rangachariar contends that the word 'pension' in Explanation II should be limited to allowances drawn by retired holders of appointments in consideration of past services. The word is not defined in the Act, but we see no reason so to limit its application. It is used generally and without any qualification and must be held to cover political pensions, as well as pensions in the ordinary sense. The first question is answered in the affirmative.
4. The second and third questions referred may be disposed of together. They raise the question whether the assessment of the appellant made on 15th September, 1926, for ten half-years commencing from the second half-year of 1920-21 and purporting to be made under Rule 8 of the Taxation Rules and Section 113 of the City Municipal Act was valid.
5. The appellant was on 15th September, 1926, i. e., within the first half-year of 1926-27, assessed to profession tax for that half year and eleven previous half years or six years in all. The reference relates only to the first ten half-years of the above period apparently because the appellant did no question the opinion of the learned Chief Judge of the Small Cause Court who heard this matter that it was competent to the respondent to assess the appellant for the half-year in which the assessment took place and for one previous half-year or a period of a year in all. It is not disputed that the respondent was authorized, if the appellant was otherwise liable to profession tax, to assess him for the half-year in which the assessment was made. The dispute was about the eleven previous half-years and though the reference expressly relates to the first ten of those half years, if the opinion of this Court in the matter referred affects the assessment for the eleventh half-year which has been left out from the reference, it is competent to this Court under Rule 18 of the Taxation Rules to pass such order as it thinks fit.
6. The argument for the respondent Corporation is, firstly, that profession tax becomes due and owing, as soon as the minimum period of sixty days required by Section 113 has expired, even without anything done on the part of the Corporation to assess it and inform the assesses of the amount payable, and secondly, that even if the tax becomes due and owing only after assessment and intimation of the same to the assessee, it is open to the Corporation to assess a person to the tax at any future time within six years after the expiration of the half-year for which the assessment is made.
7. We think that these contentions cannot be upheld. In the first place, the profession tax becomes due and owing, not merely by the exercise of the profession, art, trade or calling, during the period required by Section 113, but by the assessment to the tax based upon such exercise. Reliance is placed on the words in that section that 'if the tax due in respect of the half-year is not paid, the Commissioner shall cause a notice to be served on such person'.
8. But this section must be read with other provisions of the Act. By Section 138, the rules and tables embodied in Schedule IV shall be read as part of Chap. V in which the sections relating to profession tax and other taxes occur. By Section 111, profession tax is imposed upon persons who fall 'within one or more of the classes of persons specified in the Taxation Rules in Schedule IV' and the amount payable is 'a tax determined under the said rules.'
9. Rule 8 of Schedule IV provides that persons shall be asessed by the Commissioner to the profession tax under one of nine classes therein specified on a scale to be determined within certain limits by the Corporation from time to time. By Rule 9, the Commissioner is authorized in the case of persons not drawing a fixed salary to determine the class in which a person falls on certain general considerations but without calling for accounts from the asseseee. Rule 12 gives an assessee to profession tax he is dissatisfied with the assessment by the Commissioner the right to apply to him for revision, provided the application is delivered to the Municipal Office within fifteen days from the date of the service of the notice under Section 113. This indicates clearly that the tax said to be 'due' ins. 113 is that to which the assessee has been first assessed under the powers conferred by Rule 8. It also shows that the notice under Section 113 is the initial and essential step in the process of final determination of the tax according to the provisions for revision of the assessment; for, until that notice is served and for fifteen days there-after, the right of claiming revision is preserved. That notice has another importance, because under Rule 22, the tax demanded may be distrained for, if it is unpaid for fifteen days and the omission & not satisfactorily explained. Rule 14 provides that if the assessee is dissatisfied with the orders of the Commissioner on an application for revision, the application must be heard and decided by the Standing Committee and that a copy of the Committee's decision should be sent to the applicant within two days thereof. Rule 15 then confers on the assessee a right of appeal to the Small Cause Court, provided notice of appeal is given to the Corporation in ten days, and the appeal itself is presented in fourteen days from the date of the decision of the Standing Committee and the applicant has paid in the case of a tax leviable by half-yearly instalments (profession tax is. such a tax) the half-yearly instalment due under the order appealed against. From the above provisions, it is clear that the tax is not due till the Commissioner has assessed the person liable, and that even then it is only provisionally fixed, for it is liable to revision in the manner mentioned above.
10. A reference to the corresponding provisions of the Acts I of 1884 and III of 1904 shows that the machinery of the assessment and revision which was provided for in those Acts in the body of the Act is in the present Act of 1919 relegated to Schedule IV. The comparison is instructive as showing that the classification of assessment by the Commissioner is as essential now as it was under the former Acts. A bird's-eye view of the comparative provisions of the two earlier Acts will be found in Veeraraghavulu v. President, Corporation of Madras 7 Ind. Cas. 743 : 34 M. 130 : (1910) M.W.N. 583 : 8 M.L.T. 305 : 30 M.L.J. 773 : 11 Cri.L.J. 521. Under Section 101 of the Act of 1884, corresponding to Section 118 of the Act of 1904, the President was required to keep lists of persons liable to pay profession tax and other taxes. In Sen. IV of the present Act, Rule 1 requires the Commissioner to prepare and maintain property tax registers. Section 103 of the Act of 1884 corresponding to Section 120 of the Act of 1904 made persons exercising a profession or holding an appointment in the City liable to pay profession tax. Section 111 of the present Act corresponds to this. Section 104 of the Act of 1884 corresponding to Section 121 of the Act of 1904 empowered the President to determine in which of the scheduled classes any person was to be placed and to revise such classification from time to time Now Rule 8 of Schedule IV empowers the Commissioner to assess persona to profession tax under one of the nine scheduled classes and Rule 14 empowers him to revise the classification. Section 106 of the Act of 1884 corresponding to Section 125 of the Act of 1904 empowered the President, in case the tax due on assessment or revision was unpaid, to send a notice that in case the tax was unpaid for fifteen days after service of the notice, the defaulter will be prosecuted, and those sections empowered such prosecution. Section 107 of the Act of 1884 corresponding to Section 420 of the Act of 1904 empowered the Magistrate to impose a penalty of twice the amount of the tax. In the present Act, prosecution for non-payment of profession tax has been done away with, but the notice mentioned in Section 113 corresponds to the notice mentioned above and the present notice has two objects. It enables the assessee if he so desires to apply in fifteen days to get the assessment revised and the Corporation, in case the tax remains unpaid for fifteen days without good cause, to distrain on the defauter's goods. It follows that, neither under the old Acts nor under the present, can the profession tax said to be 'due' till the proper authority has assessed the same by the name of the assessee being placed in the proper class. Under Section 370 (a) of the present Act, such act of classification or assessment should be evidenced by a writing signed by the Commissioner or by some Municipal Official delegated by him in writing under Section 16, and it is noteworthy that under this last section, the power of revision given to the Commissioner by Rule 14 cannot be delegated.
11. But it is urged that no time is fixed for the Commissioner to make the assessment and that it is, therefore, open to him to make assessments backward for a period of six years. This limit on. the alleged power of backward assessment is suggested on the ground that the period of limitation for bringing a suit under Section 396 for a tax after it has become due and owing, is six years. But if the power of backward assessment exists, the limit suggested for its exercise disappears. For the right to sue accrues only after the tax has become due and if it becomes due, as we have held it does, only on assessment by the Commissioner the period of limitation for any suit must begin from the date of the assessment. In other words, the contention for the Corporation leads logically to the result that, though once a tax is assessed and has become due, the Corporation has only six years to recover it by suit', yet the Commissioner is authorized to put off assessing persons to profession tax for an unlimited period and so put off indefinitely the due date of the tax and the liability of the assessee. The starting nature of this result is what compels the respondent to impose on himself a supposed limit, really illusory, of six years for the exercise of the power contended for. By itself, this would be a strong ground for insisting upon explicit and clear foundation in the provisions of the Act and the rules thereunder for the existence of such a power. It is admitted that there is no express provision in the Act and the rules, which confers any such authority. But it is said that there is also nothing which negatives it, and, in the absence of any such prohibition, the authority must, it is argued, be deemed to exist. Both on an examination of the scheme and purpose of the City Municipal Act and on general grounds of construction of similar enactments, we are unable to read, by implication into that Act, the power contended for.
12. The scheme of imposition, assessment and collection of taxes laid down in the Act would seem to show that, while the rate of taxation is fixed for each year beginning let April by the Council at the Budget meeting in the February previous (Section 156), the assessment of taxes payable by each individual is a contemporaneous operation within the period of taxation (year or half-year), in which, while the Commissioner is afforded facilities for obtaining all relevant information on which the assessment is to be based (see Sections 114 and 115, 368), the assessee is required within a very short time after the assessment to take all his objections to the assessment proposed (r. 12 of the Taxation Rules). It is hardly consistent with this scheme that the tax fixed by the Council, say for 1920-21, in February, 1920, should have to be assessed and realized from the individual tax-payers six years (as we have pointed out an unlimited number of years) later, when the Commissioner charged with the duty of assessment would find that all relevant information had ceased to be available and the assesses might long ago have ceased the profession and en joy the income or salary from which he might be expected to pay the tax. In the case of Companies' tax, to which similar provisions to those applicable to profession tax are applicable, the incongruity is still more marked. No big concern like a limited Company with obligations to its share-holders, which has to produce a balance sheet in each working year and on the result of that balance sheet to declare dividends to its share-holders, could be carried on if its Municipal assessment in that year is uncertain and is liable to be suddenly demanded for several years together at a perfectly unknown and indefinite date. The learned Chief Judge has referred to other aspects of the hardship to which assessees would be put if the power contended for by the Corporation were upheld. We think it unnecessary to refer to them.
13. In Rule (6), Schedule IV of the Act, it is expressly provided that when the Commissioner makes an amendment of the property tax register as he is empowered to do under Rule (3) by altering, adding or deleting items therein, such amendment shall be deemed to have taken effect from the earliest date in the current year on which the circumstances justifying the amendment existed. This rule is remarkable both for what it enacts and for what it forbids. In the case of property tax, if a property has escaped taxation for a period of years, the Commissioner may in any subsequent year by amending the register assess it to the tax. But the rule says that the tax is to be operative only from the earliest date in the current years in which the omission was rectified. Similarly, if a property has been taxed too low, the Commissioner may amend the register. But in that case also the enhanced tax due to the amendment takes effect only from the earliest date in the year current when the amendment was made on which the property was liable to the enhanced tax. The careful prohibition against retrospective assessment in the case of property tax beyond the beginning of the current year is to our mind a very strong indication that in the case of other taxes like the profession tax retrospective assessment to, a greater extent was not contemplated. Property tax is a yearly tax though payable half yearly. Profession tax is a half-yearly tax. With this difference, if the analogy of the property tax may be used, the inference would seem to be that the power of assessment conferred by Rule 8 of the Taxation Rules is to be properly exercised within the half-year to which the assessment relates.
14. Further, the Companies' tax imposed by Section 110 and the profession tax imposed by Section 111 are expressly by those sections levied 'by way of licence fee and in addition to any other licence fee that may be leviable under this Act.' The tax on carriages and animals imposed by Section 115 is another instance of a licence fee described as a tax. This is made clear by Section 121 which says that when the tax due on any carriage or animal is paid, the Commissioner shall grant the person a licence to keep such carriage or animal for the period to which the payment relates and by Section 360 which speaks of the licence under Section 121 in connexion with the prosecution of a defaulter. The other licence fees referred to are those leviable under Chap. XII of the Act and Schedule VI thereof read with Section 365 (2). The essence of a licence is that it is a permission which, must be usually obtained before the thing licensed is done (Wharton's Law Lexicon, page 428). The City Municipal Act in several sections (e g., Sections 287, 290 and 295) requires that the licence mentioned therein should be obtained in respect of existing undertakings within the first month of the year and in respect of new undertakings before they begin and it is an offence to carry on an undertaking which requires a licence without it. In the case of such licences, those who ought to get them are expected to apply for and obtain them on. payment of the fees fixed by the Council under Section 365(2). In default, they stand the risk of prosecution, and the Magistrate is required in case of conviction to recover, in addition to any fine that may be imposed, the licence fee and pay it over to the Corporation. But this coercive recovery of the fee does not entitle the convicted person to the licence which, if wanted, must be obtained by further payment (Section 365 (8) and (9). ) In the case of licence fees described as companies tax and profession tax, the amount of which depends on the rates fixed by the Council and on the classification of the particular individual in one of several classes, (and this is true to a certain extent in respect of the tax on vehicles and animate), the fact that the levy is still declared to be by way of licence fee strengthens the inference that, the assessment is intended to be made before or during the period to which it relates and could not have been intended to be made long afterwards retrospectively for several periods together.
15. When the words of an enactment are clear and imperative, considerations of inconvenience or hardship have no place in its application to circumstances falling within the words. But where there is no express indication in an enactment as to whether the powers given by it were meant to be used in particular circumstances, the fact that great hardship and inconvenience would result thereby is a reason for so construing the words as to meet all attempts to abuse the power either by exercising them in cases not intended by the Statute or by refusing to exercise them when the occasion for their exercise has arisen. (Maxwell on Interpretation of Statutes, 6th Edition, page 226.) Statutes which impose pecuniary burdens are subject to the rule of strict construction and in a case of reasonable doubt, the construction most beneficial to the subject is to be adopted (ibid., pages 503 and 504), though the principle of strict construction is less applicable where the powers are conferred on public representative bodies for essentially public purposes (ibid., page 530). The only inconvenience that may be urged to result from the Corporation not having the power contended for is that some persons who may have escaped taxation to profession tax in previous years cannot be assessed thereto in subsequent years. But that inconvenience, if such, it really is, already exists in respect to property tax, for the most important source of Municipal revenue. And, after all, if the Municipal executive is vigilant and efficient, such cases must be comparatively rare. On the other hand, a power to assess persons for many years retrospectively if granted is more likely to encourage slackness and inefficiency on the part of the Municipal executive and also will produce very great hardships on those who are suddenly called upon to pay in a lump sum the taxes which ought to be met out of current income. The present case in which the appellant was called upon to pay, in addition to the tax for the current half-year a sum of Rs. 4,600 and odd on account of 11 half-years' arrears is a good illustration. We can find no justification for this either in the express terms of the Act or in any reasonable construction of its intention. The decision in Gill v. Mellor (1924) 1 K.B. 97 : 93 L.J.K.B. 55 : 130 L.T. 811 : 87 J.P. 190 : 21 L.C.R. 787 : 68 S.J. 119 : 40 T.L.R. 30 is no authority in favour of the respondent as in. that case the necessary steps had been taken in previous years to make the rate an arrear and all that remained was its collection. The decision was merely that when a rate is duly made and published, it is the duty of the parties concerned to seek the Collector and pay it. Having regard to the difference between the procedure prescribed for making and publishing the rates according to the English Acts and that prescribed for the assessment of property tax under the City Municipal Act, the appellant not having been assessed at all in respect of the previous half-years before 15th September, 1926, there were no arrears before that date.
16. Our conclusion on the second and third questions referred is that liability to pay profession tax arises only after assessment under Rule 8 of the Taxation Rules, and that the appellant, the Prince of Arcot, not having been assessed in respect of the eleven half-years commencing from the second half-year of 1920 21 within the several half-years, the assessment of 15th September, 1926, was invalid in respect of those eleven half-years.