In a relief for lawyers practising in the city, Delhi High Court has held that an advocate’s office located in a residential building should not be subject to property tax as a “business building”.
It further noted that the professional activity of lawyers can’t be considered a commercial activity as the Delhi Municipal Corporation Act does not authorise the imposition of taxes on such activities conducted from residential premises.
“In the opinion of this court, a premises would not become business premises just because a lawyer read his office file or did some official work at his residence,” the court observed.
It pointed out that so far the statute has not included “professional activity” of lawyers as “commercial activity” and concluded that the former cannot be taxed. “The aforesaid bylaws cannot seek to overreach the statute itself, “ HC said.
It referred to the Master Plan for Delhi 2021, which allows professional activities in residential buildings under specific conditions. However, it clarified that this provision does not empower the corporation to levy taxes on these activities.
The case stemmed from the South Delhi Municipal Corporation’s demand of property tax from a lawyer who operated his office from a portion of his residential premises.
A single judge bench’s decision, which held advocates’ services as professional activities exempt from business establishment taxes, was upheld by the division bench of justices Najmi Waziri and Sudhir Kumar Jain.
The bench emphasised that taxation powers must be explicitly mentioned in the statute and cannot be inferred or presumed. It concluded that the taxation laws and bylaws cannot extend their scope to include professional activities that are not explicitly classified as commercial activities in the applicable statutes.
It also cited previous judgments from the Bombay high court and the Supreme Court, which held that the discharge of professional activities by lawyers should not be considered business or commercial establishments. HC opined that taxation powers must be specifically mentioned in the law, rejecting the argument that a lawyer’s office should be deemed a business establishment. In light of these findings, the court dismissed the appeal filed by the SDMC, highlighting that the professional activities of lawyers should not be subject to taxation under the Delhi Municipal Corporation Act or the property tax bylaws.
