The division bench of Justice Najmi Waziri and Justice Sudhir Kumar Jain stated that “professional activity” of lawyers cannot be termed as “commercial activity”, as office run by advocates from a residential building is not subject to property tax under the Delhi Municipal Corporation Act as a “business building”

In 2013, when the SDMC issued notice regarding the property tax to a lawyer who was running their office in a portion of his residential premises. The lawyer challenges such notice and the single bench observed that :-

a premise would not become business premise just because a lawyer read his office file or did some official work at his residence”.

During the arguments it was averted by the MCD Counsel that as municipal authority has a power levy property tax on all lands and buildings under its jurisdiction.Therefore, unless consciously excluded, there cannot be any building, property, or activity that cannot be taxed.

A lawyer’s services comes within the sphere of professional activity, and a part of a building that is used for professional activity comes under theambit of ‘business building’.Services render by advocates are commercial and non-domestic in nature. Therefore, advocates are liable to pay taxes.

The opposite party argued that “power to tax must be expressed; otherwise, there is no power to tax”. Under the DMC Act, there is no power to tax “professional activities” carried out in residential buildings.

Observation of the Court-

The divisional bench while upholding rule of single bench, held that services provided by lawyer doesnot comes under the category of “commercial establishment” or “business activity”.

Referring to the judgement of Bombay High Court in Sakharam Narayan Kherdekar v. City of Nagpur Corporation &Ors., AIR 1964 Bombay 200which held that the discharge of professional activities by advocates would not be covered under the expression “business” nor would it be professional establishment because the word “establishment” would only refer to as “shops‟ as defined in the Bombay Shops and Establishment Act, 1948.

Referring to  another judgment  made by Hon’ble  Supreme Court of India in V. Sasidharan v. M/s. Peter and Karunakar and others AIR 1984 SC 1700, which held that “professional activity” of lawyers does not fall within the category of “commercial establishment‟ or “business activity‟ and the firm of lawyers is not a “commercial establishment‟.