Introduction: In a recent landmark order, the Supreme Court upheld the Delhi High Court’s judgment, establishing that the services provided by advocates are ‘professional services’ and not akin to ‘business establishments.’ Consequently, the Court ruled that such services rendered from residential premises should not be subject to Property Tax imposed by the Municipal Corporation of Delhi. This decision reflects a pivotal stance on the professional nature of legal services and the inapplicability of property taxation to advocate offices located in residential spaces.

Background and Legal Proceedings: The case originated from a notice issued by the South Delhi Municipal Council in 2013, demanding property tax from an independent legal practitioner operating from his residential premises. The advocate challenged this notice in the Delhi High Court, which ruled in his favor. The Municipal Council appealed the decision, leading to the Supreme Court’s intervention.

Contentions of the Municipal Council: The Municipal Council argued that legal services, whether provided by individual lawyers, law firms, or independent practitioners, should be categorized as ‘business buildings.’ They contended that residences where such professional activities occur should be deemed ‘commercial establishments’ subject to property taxation.

Court’s Clarifications and Legal Interpretations: The Delhi High Court rejected the Municipal Council’s contentions, emphasizing that engaging in legal work at home doesn’t transform a residential premise into a commercial one. The court maintained that the professional activities of lawyers are not considered commercial under the law, and the municipal council lacks the authority to levy taxes on residential premises or professional activities within them.

The Supreme Court referred to legal precedents, notably the case of State of West Bengal v. Kesoram Industries Ltd., highlighting that the power to tax must be expressly conferred by law. It underscored that professional activities, when conducted from residential premises and by the Master Plan for Delhi (MPD) 2010, are not subject to property taxation.

Consistent Legal Standpoint: The Supreme Court’s decision aligns with the Bombay High Court’s stance in Sakharam Narayan Kherdekar City of Nagpur Corporation & Ors., which ruled that advocates’ professional activities are not commercial business activities. The term ‘commercial establishment’ in relevant statutes refers to administrative services, and legal practices do not fall under this category.

Conclusion: The judgment serves as a significant legal precedent, safeguarding the interests of advocates and other professionals. It establishes a clear distinction between residential properties used for professional services and commercial establishments. The strict interpretation of taxation statutes and the adherence to legal provisions excluding taxation from residential establishments affirm the principle that taxation powers must be expressly granted. This decision has far-reaching implications, providing clarity on the taxability of advocates’ residential offices and setting a progressive precedent for other eligible professionals.