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.

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3 responses to “Use of residential premises for professional/business/office purposes”

  1. vmkulkarni says:

    sir request you opinion on the judgement of supreme court on conducting Tution Classes for 1st to 10th standard and making profit for self. Since all the trsnsactions are in cash, possibility of evading Govt.Taxes cannot be reuled out.

  2. BISHWAJEET RAKSHIT says:

    Can a person run a Grocery shop in a residential flat without any papers and what should be the legal way to stop the same.

  3. milind says:

    whether owners own school building up to 4th std comes under commercial building

  4. Dr.Srinivasan.S says:

    Is it permissible to use 20% space in my flat to offer ‘Astrology/Numerology’ consultancy? There would be a few clients visiting my house, but no visitors vehicles will be parked in the society compound. There will be no employees and this consultancy will be run single-handedly by me. Also, is this service exempt from shops and establishment licence, or do I need to apply for the licence?

  5. M.Visweswaraiah S/O M.Basaiah says:

    Sir,Iam an ex-serviceman senior citizen aged 74 years. Iam owning a flat in Ameerpet Hyderabad. The flat is let out on rent. I have paid Rs 4094 as property tax last year august 2014.I was almost all fainted to see the property tax bill for 2015-2016 at Rs,461488. Iam a heart patient with high BP on treatment.I have put up application to the GHMC DC. No action intimated to me till date even after more than two months. But as per the Inspector verbal telling that my tenant used the flat for commercial purpose ie tailoring and embroidery. But the tenant is living with family in the flat. The commercial penalty is put from the last 3 years.
    1. Can the GHMC treat the flat as commercial when a person is living with the family and children?
    2. Is it right to demand the owner of the property for an offense if committed by the tenant ?
    3. Is it right on the part of GHMC to bill from past 3 years where as the property tax already paid for those years,
    4.The GHMC is fully armed with for prevention of mis use of buildings and flats.They could immediately take action. Why they are waiting three years to bill back dated. That means they are not taking preventive actions, but allowing to commit violations and then charge.
    5. The GHMC is not giving any notice with details and examining the reply before takining action.
    6. What right the GHMC has, to bring pain and agony to any citizen particularly to senior citizens by giving inflated demand bills in several lacs.
    7. Who will be held responsible if some one like me collapses?
    8. My tenant say No commercial activity’s in the flat but GHMC billed for commercial.
    M.VISWESWEARAIAH.
    Pl.REPLY.

  6. suresh says:

    My father lives with me in my house which is registered in my name. He wants to start a company and wants to use our house address as the registered office address. He does not plan to do any commercial activity from our house.

    His CA has told him that for the purpose of registration of the company, I should do a rent agreement with my father as tenant of behalf of his company.

    I want to know that if I do such rent agreement in favor of my father/his company, what are the income tax or property tax implications on me.

  7. dr.jagadeesh says:

    i am a orthopaedic surgeon,practising in my own building in hyderabad, telangana state. i am staying in 3rd floor,4th floor for staff residence. ground floor for out patient & 1st & 2nd floor for inpatientpurpose. now hyderabad municipality(G.H.M.C) charging me ground ,1st& 2 nd floor as commercial & 3 rd & 4th floor as residential. is it correct , let me know. and for the same building is it compulsery to take trade licence. please give your valuable opinion

  8. dr.jagadeesh says:

    i am a orthopaedic surgeon,practising in my own building in hyderabad, telangana state. i am staying in 3rd floor,4th floor for staff residence. ground floor for out patient & 1st & 2nd floor for inpatientpurpose. now hyderabad municipality(G.H.M.C) charging me ground ,1st& 2 nd floor as commercial & 3 rd & 4th floor as residential. is it correct , let me know. and for the same building is it compulsery to take trade licence. please give your valuable opinio

  9. Gauresh says:

    Dear sir,
    please give me some case laws relating to can tuition run in residential flat?

  10. risheta says:

    we stay in an independent bungalow in hyderabad. the down portion of our bungalow is owned by my dad’s brothers who have sold it and now the new owners are running a full fleged irani hotel under the name of a take away is it possible to take any legal action ? there are cases regarding the partition of the bungalow in the city civil court,hyderabad which prohibited a third party from buying the building…but still they have sold it. this hotel is disrupting the peace of our family. kindly advise

  11. NISHIKANT says:

    In residential premises professional civil engineer consultant do their practice but corporation tax will be applicable as residential or as commercial,pl guide in this manner.
    Thanks 

  12. kala says:

    Regarding tuition classes is running in the Residential Co-operative housing society is legal or illegal.

    Regards

    Kala (9820830519)

  13. Ashani says:

    Can someone please get me the citiation of the Pantnagar judgment or any judgment which states the recent development on this point. Information regarding the taking of tuition classes etc.,  Any specific citation would be appreciated. 
    thank u 

  14. j v savla says:

    Would appreciate a reply for my query on , whether a rsidential flat can be used by an insurance agent for servicing his policy holders.

  15. ABHISHEK says:

    hello sir,
    Lakshman Sintre v. Balkrishna Shetye, BLR page 937 and B. R. Oswas v. Laxmibai, BLR page 214 case full details send plz

  16. R.B.POPAT says:

    IN THE HIGH COURT OF JUDICATURE AT BOMBAY
    CRIMINAL APPELLATE JURISDICTION
    CRIMINAL WRIT PETITION NO. 1232 OF 1995.

    1. M/s. A. F. Ferguson & Company,
    Chartered Accountants,
    A Partnership Firm registered under
    the Indian Partnership Act, 1932,
    Having its Head Office at
    Allahabad Bank Building, Bombay Samachar
    Marg, Bombay – 400 001.

    2. Mr. Rangaswamy Subramaniam,
    Senior Partner,
    M/s. A. F. Ferguson A Company
    Having his Office at
    Allahabad Building, Bombay Samachar
    Marg, Bombay – 400 001.

    3. Mr. Y. M. Kale, Partner,
    M/s. A. F. Ferguson & Company,
    having his office at Maker Towers,
    “E”, Cuffe Parade, Bombay 400 005.

    4. Mr. V. Swaminathan, Partner,
    M/s. A. F. Ferguson A Company
    Having his Office at
    Allahabad Building, Bombay Samachar
    Marg, Bombay – 400 001.

    5. Mr. B. P. Shroff, Partner,
    M/s. A. F. Ferguson & Company,
    having his office at Maker Towers,
    “E”, Cuffe Parade, Bombay 400 005.

    6. Mr. K. M. Powvala, Partner,
    M/s. A. F. Ferguson A Company
    Having his Office at
    Allahabad Building, Bombay Samachar
    Marg, Bombay – 400 001.

    7. Mr. F. M. Chinoy, Partner,
    M/s. A. F. Ferguson A Company
    Having his Office at
    Allahabad Building, Bombay Samachar Marg, Bombay – 400 001.

    versus.

    1. The State of Maharashtra.

    2. Mr. R. K. Prabhu, Senior
    Inspector, Shops & Establishments,
    Municipal Corporation of Greater
    Bombay, having his office at “A” ward Municipal Corporation of Greater Bombay.

    Shri. J. P. Cama, Senior Counsel with Shri. Ganesh
    S. Shetty i/b M/s. Crwford Bayloy & Company for the
    petitioners.

    Shri. A. A. Kumbhakoni, Associate Advocate General.
    Shri. D. S. Mhaispurkar, APP for the respondent no.1.
    Shri. R. T. Walawalkar i/b Ms. T. H. Puranik for the
    respondent no.2.

    CORAM: S.B.MHASE, &
    S.R.SATHE, JJ.
    DATE : May 5, 2006.

    Oral Judgment (Per S.B.Mhase,J.):

    1. The petitioners have invoked the jurisdiction of this Court under Article 226 of the
    Constitution of India challenging the provisions of Section 2(4) of the Bombay Shops and Establishments Act, 1948 and the Bombay Shops and Establishments Amendment Act, 1977 in so far as they seek to include the establishments of “Accountants” within
    the definition of “commercial establishment” and thereby prayed for declaration that the provision is unconstitutional. The petitioner has also prayed for a writ of certiorari, or writ in the nature of certiorari or order or direction calling for the records and proceedings of the Criminal Case No. 53/SEM/1995 registered before the Metropolitan
    Magistrate, Esplanade Court and after going into the legality, validity and propriety of the same to quash the criminal Case No. 53/SEM/95 registered against the petitioner Nos. 2 to 7.

    2. Initially the petition was filed as against the respondent nos. 1 & 2. However, by
    order dated 18th October, 1996 passed in Criminal Application No. 1556 of 1996, the Audit Employees Union, (a Trade Union registered under the provisions of the Trade Unions Act, 1926) was added as a respondent No.3. But by order dated 11.12.2004, in view of the by consent minutes of order between the petitioner and respondent no.3,
    the name of respondent no.3 was deleted. The said minutes of order were accepted by this Court by order dated 11.12.2004. Thus, it is clear that the respondent no.3 Audit Employees’ Union is not a party to this proceeding, though at one stage it wasjoined as a party – respondent.

    3. Petitioner no.1 is a partnership firm of the Chartered Accountants registered under the
    Indian Partnership Act, 1932 having its head office at Allahabad Bank Building, Bombay Samachar Marg, Mumbai and other offices in Mumbai situated at Express Towers, Nariman Point and Makers Towers, Cuffe Parade, Colaba. The petitioner nos. 2 to 7 are the partners of the petitioner No.1 firm and each of them is a Chartered Accountant recognised by the Institute of Chartered Accountants of India.

    4. The Criminal proceeding was instituted against the petitioners by 2nd respondent in the
    Court of the Metropolitan Magistrate, Esplanade bearing No. 53/SEM/95 for alleged contravension of the Bombay Shops and Establishments Act, 1948 to the following effect:

    (i) Failing to register under the Act as a ‘commercial establishment’,
    (ii) not maintaining a register of employment in the prescribed form, and
    (iii) Not maintaining the visit book for inspector to record his remarks.

    This criminal case is filed as against the petitioners in the following circumstances:
    .
    In the result, petition is allowed in the following terms.Provisions of the Amending Act, viz., Maharashtra Act 64 of 1977, in so far as that include establishment of Chartered Accountant / Accountants within the definition of “commercial establishment” in Section 2(4) of the Bombay Shops & Establishments Act, 1948 (Bombay Act No. LXXIX of 1948) are unconstitutional and they are struck down. The proceedings of Criminal Case No. 53/SCM/1995 registered before the Special Metropolitan Magistrate, Esplanade Court against the petitioners are hereby
    quashed.

    Rule made absolute.

    There shall be no order as to costs.

    (S.R.SATHE,J.) (S.B.MHASE,J

  17. r.b.popat says:

    Phillipos & Company And Others vs The State
    on 11 September, 1989
    Equivalent citations: 1990 67 Company Cases 154 Kar,
    ILR 1989 KAR 3135 Bench: K Navadgi
    JUDGMENT
    1. The question which arises for consideration in this petition filed under section 482 of the code of criminal procedure (the code for short) is : Whether a “firm of chartered accountants” is an “establishment” within the meaning of the expression in section 2(i) of the karnataka shops and commercial Establishments Act, 1961 (Act No. 8 of 1962) (hereinafter referred to as the Act of 1961).
    Read more at
    indiankanoon.org/doc/1185355/

  18. J Ahmed says:

    To a larger question. When an advocate A uses an office whose tenant is his own father B(also an advocate), then is A a tenant. If not then what is he?

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