• Dec
  • 12
  • 2009

Use of residential premises for professional/business/office purposes

Article ID 16983 | Posted In Finance | 15 Comments » Print Friendly and PDF

Can residential premises be used for professional or business office purposes?

It is generally believed that only a part of the flat can be used for professional purposes and that no part of the flat can be used for business office purposes. However the decided case laws on the subject speak otherwise.

The crux of the judgments on user of residential flats is that even if the entire flat is used by a professional person for the practice of his profession, there is no change of user to a commercial one and there cannot be a prohibition for the same. If the flat is partly used for business office, then also if the dominant user is residential, there is no violation of the provisions relating to the change of user.

Distinction between business and profession:

The Constitution of India, while ensuring under Article 19(1)(g) to all citizens the right to practise any trade, business or profession, has maintained a clear distinction between carrying on a trade or business as against practising a profession. The reason underlying the distinction is that unlike in a trade or business, a profession is practised without any underlying profit motive. What a practising professional renders to his clients is his services essentially based on his qualification, personal skill and intellectual capacity. Earning of fees is considered only an incidental part.

The Supreme Court also has in several judgments maintained the above-cited distinction between trade and business on one hand and the practice of profession on the other.

The legality of user of premises is governed by the local laws applicable in various states in respect of Shops and Establishments; for example in Mumbai, the same is governed by the Bombay Shops and Establishments Act, 1948.

Case law on firm of lawyers :

In V. Sasidharan v. Peter and Karunakar, (1984) 65 FJR 374 (SC), the question for decision before the Supreme Court was whether the office of a lawyer or of a firm of lawyers is or is not a commercial establishment within the meaning of the Kerala Shops and Commercial Establishments Act. The SC held that 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’.

The Supreme Court has also, in several judgements, reiterated this fundamental distinction. In National Union of Commercial Employees v. Industrial Tribunal, (1962) 22 FJR 25, the Court held that the services rendered by a firm of solicitors were only in the individual capacity of the partners and very dependent on their professional equipment, knowledge and efficiency.

Case law on private dispensary: In yet another case of Dr. Devendra M. Surbi, (AIR 1969 SC 63 6T), the Supreme Court had occasion to examine the definition of ‘Commercial Establishment’ in S. 2(4) of the Bombay Shops and  establishments  Act, 1948. Construing the word ‘Profession’ appearing in association with the words ‘Business and Trade’ in the said subsection, it held that a private dispensary of a medical practitioner did not come within the definition of ‘Commercial Establishment’.

In Dev Brat Sharma v. Dr. Jagjit Mehta, C.A. No. 4216 of 1988, the Supreme Court held that the user of residential premises under tenancy for the purpose of a doctor’s clinic did not tantamount to change of user.

West Bengal Govt. tried amendment of Shops and Establishments Act : The same conclusion was reached in the case of Dilip Kumar v. Chief Inspector, (Shops and Establishments), (1986) 69 FJR 100 (Cal.). In this case, the question for consideration was whether the inclusion of the office of a legal practitioner in the definition of ‘Commercial Establishment’ by an amendment in 1981 of the West Bengal Shops and Establishments Act was in order. The Court held that the legal profession could not be equated or placed at par with a shop or an establishment and that the inclusion amounted to an unreasonable restriction violative of Article 19(1)(g) of the Constitution.

Yoga classes : In the case of Pant Nagar Anandlok CHS Ltd., at Ghatkopar, Mumbai, (Appeal No. 550 of 1985 decided on 24-11-1986 decided by the MSC Appellate Court) it was decided that carrying out activities like conducting yoga classes in a residential flat does not constitute breach of bye-laws of a Co-op Housing Society.

The cases were filed by the society against one of its members and his wife, seeking a declaration that the yoga activities of the member were violative of the bye-laws and were illegal. It was stated in the complaint that the society received complaints from its members that because of the yoga classes, there was a lot of harassment to the neighbors, the members of the society and to the public at large. The sandals, chappals and shoes in the passage caused obstruction for use thereof by the members of the society.

The ailing persons, who could benefit from yoga were some-times referred to her by doctors. On an average, in a day 30 to 40 persons used to attend the yoga classes which she taught between 7.30 a.m. to 7.30 p.m.

The judge said, “The professional activity of teaching certain arts would not in itself become commercial even though some charges are levied in giving some performance.”

Drawing analogy from earlier verdicts, the Judge, in the case in question, decided that there was no breach of bye-laws or regulations of the society. The Court also directed the Respondent Society to pay Rs.100/- as costs of the appeal to the appellant.

Office of a Chartered Accountant : Phillipose & Co. v. the State of Karnataka, C.C. No. 21496 of 1987: Case under Karnataka Shops and Commercial Establishments Act, 1961 — office of the partnership firm of Chartered Accountants is not a commercial establishment as C.As. Carry on profession like lawyers or doctors and do not carry on trade or business.

The judge observed: “A profession is a vocation or occupation requiring special usually advanced education and skill. The work and skill involved in a profession is predominantly mental or intellectual rather than physical or manual.”

Business purposes : In the cases of Lakshman Sintre v. Balkrishna Shetye, BLR page 937 and B. R. Oswas v. Laxmibai, BLR page 214 it was decided that when residential premises are used for dwelling as well as for business office purposes so however that the dominant user still remains residential, it would not be in breach of the bye-laws and regulations of the society as there is no change of user involved.