PUBLIC CHARITABLE TRUSTS AND PTEC IN MAHARASHTRA
– CA Anilkumar Shah, caanilshah@gmail.com

Recently there are cases approaching for opinion on the issue – whether the profession tax (PT) registration as a commercial establishment is applicable to the public charitable trusts, especially by the educational trusts which are having public transport vehicles such as buses. Reason is the Regional Transport Office Authorities (RTO) are asking for payment of profession tax (PTEC) by such institutions. The question is not about regular PT deduction from employees, as it is normally done regularly. The question is whether the trust is paying PT as carrying out any commercial establishment and paying PT for itself.
The same is not applicable to the trusts which are carrying on public charitable activities only and do not have any commercial activity for the following reasons.

1. The Maharashtra State Tax on Professions, Trades, Callings and Employments Act, 1975, governs the field in the state. (PT Act) The charging Section 3 reads as under-

3. Levy and charge of tax ––

(1) Subject to the provisions of article 276 of the Constitution of India and of this Act, there shall be levied and collected a tax on professions, trades, callings and employments for the benefit of the State.

(2) Every person including limited liability partnership, registered under the Limited Liability Partnership Act, 2008(6 of 2009) but excluding firms (whether registered under the Indian Partnership Act, 1932 (9 of 1932), or not) and Hindu undivided family engaged actively or otherwise in any profession, trade, calling or employment and falling under one or the other of the classes mentioned in the second column of Schedule I shall be liable to pay to the State Government the tax at the rate mentioned against the classes of such person in the third column of the said Schedule:……..

The relevant entry 10 of Schedule-I reads as under –

(1) (A) Employers of establishments as defined in the Bombay Shops and Establishments Act, 1948 (Bom. LXXIX of 1948), (now The Maharashtra Shops and Establishments Act, 2013) where their establishments are situated within an area to which the aforesaid Act applies, and who are not covered by entry 8. Such employers of establishments, —

(B) Employers of establishments as defined in the Bombay Shops and Establishments Act, 1948 (Bom. LXXIX of 1948), where their establishments are not situated within an area to which the aforesaid Act applies and who are not covered by entry 8. Such employers of establishment, —

This takes us to Entry-8 which reads as under –

8. Dealers registered under the Maharashtra Value Added Tax Act, 2002 (Mah IX of 2005), or Dealers Registered only under the Central Sales Tax Act, 1956 (74 of 1956), whose annual turnover of sales or purchases

The first condition to be satisfied is that the establishment must be covered under The Maharashtra Shops and Establishments Act, 2013, (MSE Act) under which the “establishment” is defined as under-

4) “establishment” means an establishment which carries on, any business, trade, manufacture or any journalistic or printing work, or business of banking, insurance, stocks and shares, brokerage or produce exchange or profession or any work in connection with, or incidental or ancillary to, any business, trade or profession or manufacture; and includes establishment of any medical practitioner (including hospital, dispensary, clinic, polyclinic, maternity home and such others), architect, engineer, accountant, tax consultant or any other technical or professional consultant; and also includes a society registered under the Societies Registration Act, 1860 and a charitable or other trust, whether registered or not, which carries on, whether for purposes of gain or not, any business, trade or profession or work in connection with or incidental or ancillary thereto; and includes shop, residential hotel, restaurant, eating house, theatre or other place of public amusement or entertainment; to whom the provisions of the Factories Act, 1948 does not apply; and includes such other establishment as the State Government may, by notification in the Official Gazette, declare to be an establishment for the purposes of this Act;

From the collective reading of the PT Act and MSE Act, the condition precedent is that, there must a business, trade or profession or anything incidental or ancillary carried out to make the trust liable to pay the PT.

2. Normally, the public charitable trusts, especially the educational trusts, do not carry out any business etc. but have buses and vehicles which need to be registered and get requisite licences and/or permissions from the RTO and which insist on them to pay the PT.

3. Under the PT Act, under section 12A, the Commissioner has the power of determination of disputed questions (popularly known as DDQs) which reads as under-
12-A. Determination of certain disputed questions – (1) If any question arises, otherwise than in proceedings before a Court or before the prescribed authority has commenced assessment of an employer under section 7, about the interpretation or the scope of any expression defined in section 2 or of any entry in Schedule I, the Commissioner shall make an order determining such question.

Explanation – For the purposes of this sub-section, the prescribed authority shall be deemed to have commenced assessment of an employer under section 7, when the employer is served with a notice under that section.

(2) The Commissioner may direct that the determination shall not affect the liability of any person under this Act, as respects the period prior to the determination.

(3) If any such question arises from any order already passed under this Act, no such question shall be entertained for determination under this section; but such question may be raised in appeal against or by way of revision of such order.

Thus, the questions determined are orders.

4. With this background, there are many DDQs which have decided the issue in favour of the trusts and have held that the PT is not applicable to such trusts, which do not carry out any business or trade etc. Few of them are as under-

1) The Bombay City Ambulance Corporation-PTQ-1177/ADM-5/9/B-1, 02/09/1977.
2) M/s Jivan Vikas Kendra – PTQ-1177/ADM-5/40/B-8, 05/09/1977.
3) M/s Peace Charitable Trust -PTQ-1177/ADM-5/8/B-8, 09/09/1979.
4) M/s Shanti Dev Seva Samiti – PTQ-1177/ADM-5//32/B-9, 22/–/1977.
5) Sangli Bank Employees Coop. Society Ltd. – PTQ-1177/ADM-5/1/B-9, 12/06/1978.
6) Ayurvidya Prasarak Mandal, Sion Mumbi -PTQ-1177/ADM-5/8/B-7, 06/06/1978.

In all these cases it is held that- It appears form the data that the trust is not engaged in any profession, business or trading activity and therefore it cannot come within the scope of term “Commercial Establishment” as defined in clause (4) of section 2 of the Bombay Shops and Establishment Act, 1948.

The last DDQ mentioned at no. (6) above in case of Ayurvidya Prasarak Mandal is attached for ready reference.

5. Conclusion – it is decided under the PT act clearly that the trusts which do not carry out any business or trade etc. are not liable to pay the profession tax (PTEC) and cannot be forced, as the PT Act itself is not applicable to them. Hence, the force or pressure by any RTO to pay PT upon the trusts carrying out only public charitable activity is misplaced and illegal.

In case any trust has obtained a PTEC registration under such pressure or force is totally out of lack of knowledge of the correct law and can be cancelled on the basis of the DDQs.

Posted on: August 16th, 2025