Legal profession is not a commercial activity. Rather, it is regarded as a professional activity, which is distinct from business, trade or commerce.
There are several judgments of the Supreme Court and High Courts which explain this distinction. Since the service of an advocate is based on specialized knowledge, skills and experience, which are very person-specific, it is treated as a 'professional service'.
In Sasidharan v Peter and Karunakar AIR 1984 SC 1700, the Supreme Court had held that a lawyer's office is not a 'commercial establishment' which requires registration under the Shops and 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 Division Bench Jjudgment of Madhya Pradesh High Court in Shiv Narayan and another vs. M.P. Electricity Board and others AIR 1999 MP 246 held that classification of Advocate under the heading "Commercial" for payment of consumption of electricity energy at commercial rate is arbitrary and irrational and ultra vires of Article 14 of Constitution of India.
"...in a case of professional activity, an individual has to apply his professional skill as against commercial or business activity where the transaction is done with the active cooperation of employer and his employees for sale of certain goods or with the profit motive. In case of profession, one works for livelihood and not only for a profit motive", observed the MP High Court, explaining the distinction between profession and commerce.
This was appealed before the Supreme Court. The Electricity Board relied on the judgment rendered in New Delhi Municipal Council vs. Sohan Lal Sachdev (dead) rep. By Mrs. Hirinder Sachdev (2002) 2 SCC 494 . That decision had held that a building used as a guest house is a commercial establishment, observing that if the use is not domestic, it is commercial
The Division Bench of Justices Arijit Pasayat and H K Sema expressed approval of the conclusions of the MP High Court in relation to applicability of domestic electricity tariff to advocates' office.
"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", it observed.
However, the Division Bench expressed reservations about the observations in Hirinder Sachdev that all non-domestic activities are to be treated as commercial, and the matter was referred to a larger bench for consideration.
The larger bench of the Supreme Court in the decision made in Civil Appeal No.1065 of 2000, dated 27.10.2005 observed that the issue whether an advocate was running a commercial activity was not related to the decision in Hirinder Sachdev. It held Hirinder Sachdev to be a correct decision, as the distinction there was based on statutory definition. The larger bench also clarified that it did not go into the question as to whether or not an advocate can be said to be carrying on commercial activity.
So, the conclusions of MP HC that an advocate's work is not a commercial activity can be taken as settled by the SC.
A Division Bench of the Rajasthan High Court, Jaipur Bench, held in J.V.V.N. Limited and others vs. Smt. Parinitoo Jain and another AIR 2009 Rajasthan 110 that an advocate running his office from his residence cannot be charged the additional tariff on commercial basis. However, if the office is run in an independent commercial place, then the advocate cannot be exempted from commercial tariff. A distinction has been made between the office in a residence and office in a commercial place. This was followed by the Madras High Court in K.Kanagasabai v The Superintending Engineer.
No property tax on advocates' office as 'business building'
The Delhi High Court held in B N Magon v South Delhi Municipal Corporation that a residential premise used by an advocate to run office will not become a 'business building' for the purposes of property tax. This was held by the Court after noticing that the Master Plan of Delhi 2021 permitted use of residential premises for professional activities of lawyers, doctors, chartered accountants, architects etc, on condition that professional space should not exceed 50% of the permissible FAR for the area.
In District Bar Association Panchkula v State of Haryana AIR 2015 P& H 13, the Punjab and Haryana Division Bench quashed the regulations of Haryana Urban Development Authority, which had prescribed a fees for using residential premises allotted by it for use as advocates' office. The Authority had taken the stand it amounted to change of residential use to commercial. The HUDA regulation had permitted use of 25% of the built up area for such professional activities. However, the Authority charged a fees for giving permission for use of residential premises for professional use, which was quashed by the High Court.
"We put a query to learned senior counsel for HUDA that if a well known author makes a study which he utilizes for writing a book and that is his source of earning, can it be called a non - residential use? There is really no satisfactory answer to this because the activity of an individual profession of a lawyer is also based on a study of the books and papers for which he maintains the space. It is a noble profession and in that context it has been held not to be commerce or business", the bench headed by Justice Sanjay Kishan Kaul observed.
Keeping in mind the nature of the legal profession of an individual lawyer, the use of a limited space as prescribed in the HUDA Regulations cannot change the character or the activity to commercial, added the Bench.
When the High Court of Kerala was petitioned to take action against allottees of the Kerala State Housing Board who were using their residential premises for commercial activities, it refused to pass orders against advocates' offices, though directions were issued against several others who were using their space for commercial activities. The court held that an advocate carrying out his office in his residence provided under the scheme, cannot be termed as a commercial activity.
"...residence of the professional along with his office in an apartment cannot be termed as a commercial one", the Court said.
Restrictions in local laws
Several local laws in relation to building occupancy impose a restriction on the space which can be used for professional activity in a residential premise. The Delhi Master Plan referred in the Magon B case permitted professional activity within 50% of the FAR of the residential space.
In case of HUDA Regulation, it was 25% of the built up space. The Kerala Municipal Building Rules state that small professional spaces for advocates, doctors, architects etc not exceeding 50 square meter floor area and used as part of the principal residential occupancy are included in the group of 'residential buildings'. These regulations may vary based on local laws.
In the context of Delhi, the Supreme Court ordered in Delhi Pradesh Citizen Council v Union of India (2006) 6 SCC 305 that professional activities even by architects, chartered accountants, doctors and lawyers cannot not be carried on in excess of 50% permissible coverage in residential premises and by anyone who is not a resident in such premises.
In conclusion, advocates' office can be operated from a residential place, since it is not regarded as a commercial activity. However, this is subject to the space restrictions imposed by the local laws.