Whether the legal profession is a commercial activity or is it a trade or business?
Argument in affirmative:
When a lawyer has his office-cum-residence in particular premises the domestic rate is applicable. Where however only the chamber is functioning, clearly commercial activities are being carried out and therefore commercial rate was rightly applied. According to him, the two categories of consumers have to be classified as domestic consumers and non domestic consumers. Those who are not domestic consumers fall to the second category and merely because for the sake of convenience the description has been given as “commercial” it does not make a difference. When one is not a domestic consumer, as a natural consequence the rate applicable to the other category has to be charged.
The word ‘commerce’ is a derivative of the word ‘commercial’. The word ‘commercial’ originates from the word ‘commerce’ which has been defined in Black’s Law Dictionary- Sixth Edition as under:
Commerce.-The exchange of goods, productions, or property of any kind, the buying, selling, and exchanging of articles. Anderson v. Humble Oil and Refining Co.226 Ga.252, 174 S.E.2d 415.
The expression ‘commerce’ or ‘commercial’ necessarily has a concept of a trading activity. Trading activity may involve any kind of activity, be it a transport or supply of goods. Generic term for most all aspects is buying and selling. But in legal profession, there is no such kind of buying or selling nor any trading of any kind whatsoever. Therefore, to compare legal profession with that of trade and business is far from correct approach and it will totally be misplaced.
A ‘profession’ involves the idea of an occupation requiring either purely intellectual skill or any manual skill, as in painting and sculpture or surgery, skill controlled by the intellectual skill of the operator, as distinguished from an occupation which is substantially the production or sale or arrangements for the production of sale of commodities. C.I.T. v. Manmohan Das (1966) 59 ITR 699, 710 (SC) Income Tax Act, 1961. Sec.28.
An activity to be a profession must be one carried on by an individual by his personal skill, intelligence and an individual by his personal skill, intelligence and dependent on individual characteristics. Sakharam Narayan Kherdekar v. City of Nagpur Corporation, (AIR 1964 Bom 200, 210 (Bombay Shops and Establishment Act (79 of 1948, S. 2 (4)).
The multifarious functions call for the exercise of integrity; intelligence and personal skill by the Chartered Accountant in the service of his client and so the preamble of the Chartered Accountant Act, 1949 describes the avocation of a chartered accountant as a profession. N.E. Merchant v. State. (AIR 1968 Bom 283, 287. Bombay Shops and Commercial Establishment Act (76 of 1048)
A profession or occupation is carried on for the purpose of earning a livelihood and a profit motive does not underline such carrying of profession or occupation. L.M. Chitala vs. Commissioner of Labour. (AIR 1964 Mad.131, 133 (Constitution of India, Art. 19(6).
Profession as distinguished with ‘commercial’ means a person who enters into a profession. It involves certain amount of skill as against commercial activity where it is more of a matter of things or business activity. In profession, it is purely use of skill activity. Therefore, two are distinct concepts in commercial activity one works for gain or profit and as against this, in profession, one works for his livelihood.
This Court in V. Sasidharan v. M/s Peter and Karunakar (AIR 1984 SC 1700) held as under:
“………It does not require any strong argument to justify the conclusion that the office of a lawyer or a firm of lawyers is not a ‘shop’ within the meaning of Section 2(15). Whatever may be the popular conception or misconception regarding the role of today’s lawyers and the alleged narrowing of the gap between a profession on one hand and a trade or business on the other, it is trite that, traditionally, lawyers do not carry on a trade or business nor do they render services to ‘customers’. The context as well as the phraseology of the definition in Section 2(15) is inapposite in the case of a lawyer’s office or the office of a firm of lawyers.
In Harendra H. Mehta & Ors. v. Mukesh H. Mehta & Ors. (1999 (5) SCC 108) it was noted as follows:
“1. Of, engaged in, or concerned with, commerce. 2. Having profit as a primary aim rather than artistic etc. value; philistine”. (The Concise Oxford Dictionary). In the Black’s Law Dictionary, “commercial” is defined as: “Relates to or is connected with trade and traffic or commerce in general; is occupied with business and commerce. Anderson v. Humble Oil 7 Refining Co., (226 Ga 252: 174 SE 2d. 415), “A broad and not a restricted construction should be given to the word “commercial” appearing in Section 2 of the Foreign Awards Act. In R.M. Investment and Trading Co. (P) Ltd. (1994 (4) SCC 541), the terms of the agreement required the petitioner to play an active role in promoting the sale and to provide “commercial and managerial assistance and information” which may be helpful in the respondents sales efforts. It was held that the relationship between the appellant and the respondents was of a commercial nature. The Court said that the word “commercial” under Section 2 of the Foreign Awards Act should be liberally construed.”
A professional activity must be an activity carried on by an individual by his personal skill and intelligence. There is a fundamental distinction, therefore, between a professional activity and an activity of a commercial character. Considering a similar question in the background of Section 2(4) of the Bombay Shops and Establishments Act (79 of 1948), it was held by this Court in Dr. Devendra M. Surti v. The State of Gujarat (AIR 1969 Sc 63) that a doctor’s establishment is not covered by the expression “Commercial establishment”.
In the above background, we would have dismissed the appeal. But we notice that in New Delhi Municipal Council v. Sohan Lal Sachdev (2000(2) SCC 494) certain observations are made, with which we do not agree. In para 12 it was observed as follows:
“The two terms “domestic” and ‘commercial” are not defined in the Act or the Rules. Therefore, the expressions are to be given the common parlance meaning and must be understood in their natural, ordinary and popular sense. In interpreting the phrases the context in which they are used is also to be kept in mind. In Stroud’s Judicial Dictionary (5th Edn.) the term “commercial” is defined as “traffic, trade or merchandise in buying and selling of goods”. In the said dictionary the phrase “domestic purpose” is stated to mean use for personal residential purposes. In essence the question is, what the character of the purpose of user of the premises by the owner or landlord is and not the character of the place of user. For example, running a boarding house is a business, but persons in a boarding house may use water for “domestic” purposes. As noted earlier the classification made for the purpose of charging electricity duty by NDMC sets out the categories “domestic” user as contradistinguished from “commercial” user or to put it differently “non-domestic user”. The intent and purpose of the classifications as we see it, is to make a distinction between purely “private residential purpose” as against “commercial purpose”. In the case of a “guest house”, the building is used for providing accommodation to “guests” who may be travellers, passengers, or such persons who may use the premises temporarily for the purpose of their stay on payment of the charges. The use for which the building is put by the keeper of the guest house, in the context cannot be said to be for purely residential purpose. Then the question is, can the use of the premises be said to be for “commercial purpose”? Keeping in mind the context in which the phrases are used and the purpose for which the classification is made, it is our considered view that the question must be answered in the affirmative. It is the user of the premises by the owner (not necessarily absolute owner) which is relevant for determination of the question and not the purpose of which the guest or occupant of the guest house uses electric energy. In the broad classification as is made in the Rules, different types of user which can reasonably be grouped together for the purpose of understanding the two phrases “domestic” and “commercial” is to be made. To a certain degree there might be overlapping, but that has to be accepted in the context of things.”
Even if it is accepted that the user was not domestic, it may be non-domestic. But it does not automatically become “commercial”. The words “non-domestic” and “commercial” are not inter-changeable. The entry is “commercial”. It is not a residual entry, unless the user is commercial the rate applicable to be commercial user cannot be charged merely because it is not considered to be domestic user, as has been held in New Delhi Municipal Corporations’ case (supra).
The view expressed in the said case does not appear to be correct. We, therefore, refer the matter to a larger Bench. Place the records before the Hon’ble Chief Justice of India for necessary orders.