Govel Trust running AravindEye Hospital at Avanashi Road,Kalapatti Town Panchayat,Coimbatore v. The Government of Tamil Nadu

IN THE HIGH COURT OF JUDICATURE AT MADRASDATED : 23.1.2009C O R A M :THE HONOURABLE MR. JUSTICE K. CHANDRUW.P.Nos.14414 and 14415 of 1999andW.P.M.P.Nos.261 and 736 of 2008Govel Trust running AravindEye Hospital at Avanashi Road,Kalapatti Town Panchayat,Coimbatore, rep.by itsSecretary G.Srinivasan.. Petitioner in both the writ petitions-vs-1. The Government of Tamil Nadu, rep.by its Secretary, Municipal Administration and Water Supply Department, Secretariat, Fort St.George, Chennai-9.2. The Executive Officer, Kalapatti Town Panchayat, Kalapatti, Coimbatore.3. The Kalapatti Town Panchayat, rep.by its President, Kalapatti, Coimbatore. .. Respondents in both the writ petitionsPRAYER in WP.14414 of 1999 : Petition filed under Article 226 ofthe Constitution of India praying for the issuance of a writ ofcertiorarified mandamus calling for the entire records of therespondents relating to the order of Assessment and demand ofproperty tax made by the second respondent in his proceedings dated29.9.1998 and the consequent proceedings in Na.Ka.NO.5/98-99 dated24.11.1998 of the second respondent and quash the same and forbearthe respondents from in any manner levying, assessing orcollecting property tax in respect of the hospital buildings ownedby the petitioner trust in S.Nos.448/3-4-458/part and S.No.459/2 on https://hcservices.ecourts.gov.in/hcservices/ which the Aravind Eye Hospital is located at Kalapatti TownPanchayat, Avanashi Road, Coimbatore. PRAYER in WP.14415 of 1999 : Petition filed under Article 226 ofthe Constitution of India praying for the issuance of a writ ofcertiorarified mandamus calling for the records of the thirdrespondent in Resolution No.76/99 dated 24.5.1999, quash the sameand forbear the respondents form in any manner assessing ordemanding property tax in respect of the hospital building of thepetitioner in Survey Nos.448/3-4-458/part and S.No.459/2, AvanashiRoad, Kalapatti Town Panchayat, Coimbatore.For petitioner: Mr.R.Thiagarajan, SC for Mr.P.Srinivas For respondents: Mr.A.Arumugam (Spl.G.P)(R1) Mr.M.Devaraj (R2)O R D E R Both the writ petitions have been filed by the Govel Trustrunning Aravind Eye Hospital at Avanashi Road situated in KalapattiTown Panchayat, Coimbatore District. The challenge in both the writpetitions is to the assessment and demand of property tax made bythe second and third respondents in respect of an Eye Hospital runby the petitioner Trust.2. In the first writ petition, viz., W.P.No.14414 of 1999, theproceedings dated 29.9.1998 and the consequential proceedings dated24.11.1998 are under challenge. The petitioner wants to set asidethis demand notice on the ground that the collection of propertytax in respect of the hospital building owned by the petitionerTrust in Survey Nos.448/3, 448/4, 458/part and 459/2 in KalapattiTown Panchayat.3. In W.P.No.14415 of 1999, the petitioner seeks to challengethe resolution passed by the third respondent town panchayat dated24.5.1999. By the aforesaid resolution, the town panchayat heldthat the exemption sought from the application of property tax bythe petitioner cannot be granted by the panchayat.4. By the notice dated 29.9.1998, the panchayat sought to levythe house tax on the hospital. When the petitioner management wroteto the town panchayat that since the petitioner had not got anyexemption from the Government for levying property tax, thepanchayat shall continue to levy property tax on them.5. Both the writ petitions were admitted by this court on17.9.1999. Pending the writ petitions, an interim stay was granted. https://hcservices.ecourts.gov.in/hcservices/ Subsequently, when the matter came up on 30.12.2002, the interimstay was made absolute on the condition that the petitioner Trustpays 50% of the amount demanded by the third respondent townpanchayat within a period of eight weeks. As against the saidinterim order, the petitioner trust preferred two writ appealsbeing W.A.Nos.1465 and 1466 of 2003. The imposition of thecondition for availing the interim order was initially stayed bythe Division Bench. However, the Division Bench dismissed both thewrit appeals on 27.7.2007. Thereafter, the petitioner Trustpreferred two Special Leave Petitions before the Supreme Courtbeing S.L.P.No.18476 and 18477 of 2007. Both the SLPs weredismissed by the Supreme Court on 14.9.2007.6. After the dismissal of the SLPs, the second respondentdirected the petitioner Trust to pay a sum of Rs.1,01,29,324/-being the tax payable from 1996-1997 to 2007-2008 first half. Afterthe dismissal of the SLPs, since the respondents were insisting oncomplying with the interim order, the petitioner Trust sent a sumof Rs.12,00,000/- towards the first instalment of the conditionalpayment with covering letter dated 15.11.2007. Once again anothersum of Rs.12,00,000/- was paid with a covering letter dated17.12.2007. A further payment of Rs.26,64,663/- was also madesubsequently, thereby complying with the interim order passed bythis Court.7. The petitioner Trust also took out two miscellaneouspetitions being W.P.M.P.Nos.736 of 2008 and 261 of 2008 seekingfor extending the time for making the payment. However, since thepetitioners have complied with the earlier order by making paymentof the said amount and that the delay was due to pursuing theirremedies before appellate forums and the respondents havingreceived the amounts without any protest, these two miscellaneousapplications have become virtually infructuous and accordingly theyare dismissed.8. Thereafter when the matter came up for final disposal, therespondents were directed to file counter affidavit justifying thedemand of property tax. Several adjournments were made to enablethe filing of a counter affidavit. On 19.9.2008, this Courtobserved that if no counter is filed, the matter will be disposedof on the basis of available records.9. Mr.R.Thiagarajan, learned senior counsel for the petitionersubmitted that the petitioner Trust is a Public Charitable Trustand doing yeoman's service in the matter of eye ailment. Thepetitioner Trust initially established an Hospital at Madurai. Whenproperty tax was sought to be recovered by the Madurai CityMunicipal Corporation, the action was challenged by the petitionerTrust before this Court by way of a writ proceeding in W.P.No.3235 https://hcservices.ecourts.gov.in/hcservices/ of 1985. This Court allowed the writ petition by an order dated10.5.1994.10. The contention raised by the Municipal Corporation wasthat the petitioner Trust in their hospitals are collecting rentsfrom the patients and, therefore, it is commercial in nature andhence the exemption provided under the MCMC Act will not enure totheir benefit. The learned Judge who disposed of the writ petition,placed reliance upon the earlier judgment of this Court reported in1993 Writ L.R. 769 in a case relating to S.N.R.Sons CharitableTrust, Coimbatore -vs- The Commissioner, Coimbatore City MunicipalCorporation, Coimbatore. In that case, the Division Bench wasdealing with the provisions of the Coimbatore City MunicipalCorporation Act. In para 6 (at page 774), the Division Bench heldas follows:-''.... In view of the aforesaid decision of the SupremeCourt, on a consideration of the relevant provisions ofthe Act referred to earlier, we are clearly of the viewthat the payments made by the patients to the hospital byway of hospital charges, or stoppages or even servicecharges, cannot be equated to 'rent' as contemplated underthe provisions of the Act, and the denial of the benefitof exemption to the appellant, on that score cannot besustained....."11. Therefore, in the light of the above Division Benchjudgment, the learned Judge held that since the exemption availableunder section 123 of the Coimbatore City Municipal Corporation Actis similar to the exemption available under section 121(e) of theMadurai City Municipal Corporation Act, the hospital run by thepetitioner Trust at Madurai was eligible for an exemption frompaying the property tax. In paragraphs 21 and 22 of the saidjudgment, K.Venkatasami,J. (as he then was) had observed asfollows:-''21. .... ... In the narration of facts, it has beenclearly brought out that what was collected by thepetitioner was towards medical services, room upkeep,upkeep of beds, besides utilities like changing the linen,maintenance, telephone, security, para-medical attendance,etc. The collection of charges towards those servicescannot, in the light of the Division Bench judgment(referred to above), by any stretch of imagination, betreated as 'rent' within the meaning of proviso to section122(d) of the Madurai City Municipal Corporation Act.22. It is unfortunate that the first respondentshould take such a stand that payments towards servicesmentioned above would amount to 'rent' even after the https://hcservices.ecourts.gov.in/hcservices/ Division Bench explaining the term 'rent' occurring in anidentically worded section in the Coimbatore CityMunicipal Corporation Act, to deny the exemption undersection 122(d) of the Madurai Municipal Corporation Act.It is again unfortunate that the first respondent shouldhave stated in the rejoinder that the writ petitioner hasbeen collecting rents from the inmates under a differentname, i.e. medical services including 'ROOM UPKEEP',totally ignoring the magnitude of the service rendered bythe petitioner Trust to the society at large."(Emphasis Added)12. In that view of the matter, the writ petition was allowedas stated already and the order has become final in so far as thehospital at Madurai is concerned. When that is the legal position,it is not clear as to how the second and third respondents havecome up with the demand and levy of property tax from thepetitioner Trust, which is also running a similar hospital atCoimbatore.13. The learned senior counsel also brought to the notice ofthis Court that when the Tirunelveli Municipality levied propertytax, the same was challenged before this Court in W.P.No.898 of1990. This Court based upon the earlier judgment referred toabove, allowed the writ petition by an order dated 05.11.1998. 14. In spite of several opportunities, the respondents havenot come forward to justify the levy of property tax though morethan 10 years have elapsed. Therefore, it has to be taken that theaverments made in the affidavit, more particularly, what is foundin paragraphs 2 to 8 stand uncontroverted. It must be stated thatthe petitioner Trust is entitled to exemption under section 86(e)of the Tamil Nadu District Municipalities Act, 1920. Section 86(e)of the Tamil Nadu District Municipalities Act reads as follows:-''86. General exemption. - The following buildings andlands shall be exempt from the property tax.-(a)to (d) ... omitted(e) charitable hospitals and dispensaries but notincluding residential quarters attached thereto."15. Apart from the fact that in respect of the very same Trustrunning hospitals at Madurai and Tirunelveli, this Court hadcategorically held that they are not liable to pay property tax asit had been statutorily exempted from such payments. It is alsobrought to the notice of this Court that in more or less undersimilar circumstances in respect of a private educationalinstitution, similar questions came up for consideration before https://hcservices.ecourts.gov.in/hcservices/ this Court. The learned Judge, in respect of the decision relatingto Kamaraj College of Engineering and Technology, Managing Boardrep.by its Secretary, Virudhunagar -vs- President, K.VellakulamPanchayat, (Madurai Bench) reported in 2007-2-LW 170 held that Rule15(c) of the Tamil Nadu Panchayats (Assessment and Collection ofTaxes) Rules 1999 exempts buildings used for educational purposesincluding hostels. Merely because for the hostel rents werecollected from students, they are not deprived from enjoying suchconcessions. Paragraphs 19 to 22 of the said decision are relevantand may be usefully reproduced below :-''Para 19. Therefore, on the face of it, the petitionerinstitution is not covered under the proviso. Evenotherwise what is contemplated in the proviso is thatthose institutions which were run in a commercial mannerwhich were exempted from the property tax before the TamilNadu Panchayats Act came into existence, alone are notentitled for exemption under the Rule 15(c) of the saidRules. These may include the tutorial colleges and likeprivate institutions. As I have stated, the petitionerinstitution is not covered under the said proviso at allby any stretch of imagination. Therefore, there isabsolutely no difficulty to come to the conclusion that asfar as the petitioner institution is concerned it is notcovered under the proviso and therefore, on the face ofit, the petitioner institution is entitled for exemptionunder Rule 15(c) of the said Rules.Para 20. Now, the contention of the learned counsel forthe respondent that the educational institutions which arecommercial in nature are not exempted from the propertytax deserves to be considered to some extent. There is noquestion of any educational institutions which are incommercial basis at all when such educational institutionsare recognised by the Government and recognised by the AllIndia Council for Technical Education or Medical Council,etc. affiliated to the universities are all deemed to beeducational institutions irrespective of the fact whetherthey are aided by the Government or not. However, theremay be certain laws which are applicable to the aidedschools and aided colleges but as far as the general termof the educational institution is concerned whether theyare aided or unaided institutions they are neverthelesseducational institutions as long as they are recognised bythe competent authority namely the Government or the AllIndia Council for Technical Education or Medical Counciland other authorities which are competent to approve orthe universities which affiliate. These institutions aredifferent from other private tutorial colleges, trainingschools etc. which are not recognised by the Government or https://hcservices.ecourts.gov.in/hcservices/ any other authority, but run purely on private basis."Para 21. Therefore, in my considered view, when once theapproval is given by the competent authority oraffiliation given by the universities then sucheducational institutions whether they are aided or not aredeemed to be the educational institutions in the generalterms. This is relevant because after the law relating toprohibition of caption fees has been introduced by way oflegislation, there is no question of any commercialattitude educational institutions at all which arerecognised.Para 22. In view of the same, I am of the considered viewthat apart from the fact that under the second provisoRule 15 of the Tamil Nadu Panchayats (Assessment andCollection of Taxes) Rules,1999, the petitionerinstitution is not covered, even on the general term thehouse building used for the educational purpose includethe educational institutions which are either aided orunaided or run on self financing pattern and are entitledfor exemption from payment of house tax."16. Since the said ruling was doubted and there were also writappeals and writ petitions pending, those matters came to be dealtwith by a Division Bench. The said decision in Sriram EducationalTrust -vs- President, Thiruvallur Taluk is reported in (2008) 3 MLJ351. The Division Bench approved the reasoning of the learnedJudge. The Division Bench in fact held that the question ofaffiliation alone cannot be a decisive factor and the exemption isavailable to all educational institutions. The passage found inparagraph 23 of the Division Bench judgment may be usefullyreproduced below:-''Para 23. We have already seen Rule 15 on exemption onspecified classes of houses for house tax. We areconcerned with Clause (c) of Rule 15 and the proviso toSection 15. A reading of the Rule indicates the plainlanguage as to the intention that the exemption onbuildings used for educational purposes including hostelsrests on the user aspect of the building simpliciter.There are no conditions annexed to the user or thedominant purpose to exempt from tax. So long as theprovision is plain and makes the reference to usage as''for educational purposes'' as without any qualificationto suggest that the exemption as conditioned as in otherinstances to say that it is available only to thosecharitable institutions or those which are imparting freeeducation, we do not find any ground to go for anyinterpretative process to strain the language of the Ruleto accept the submission of the respondents as suggested https://hcservices.ecourts.gov.in/hcservices/ by the learned Advocate General or by the counselappearing for the respondents. The scope of the exemptioncontemplated has to be understood by the plain languageof the Rule rather than by what is believed as itsimplied meaning or the supposed intention. The languagein the Rule carries no uncertainty to search for animplied meaning. The generality of the purpose stated as''for the purpose of education'' clearly supports thecase of the petitioner that irrespective of the characterof the institution as aided or unaided, free orrestricted, recognised or otherwise, the purpose forwhich the building is used alone qualifies the claim forexemption. In understanding the provision it is totallyunnecessary for us to get into the proviso. As had beenheld in many a decision, normally a proviso is enacted tocarve out something special out of the general or toqualify what is in the enactment. Comparing thisprovision with the one that existed in 1988, it is seenthat under the old provision, originally, buildings usedfor educational purposes including hostels and librariesopen to public were exempted from house tax. The oldprovision also contained 2nd proviso. It read that even ifthe educational institutions charged rent for theoccupation of the buildings used for educational purposeand hostels from the occupants, the buildings are exemptfrom property tax. Reading these provisions, therespondents pointed out that the intention on grant ofexemption remaining the same, institutions which chargedfee are outside the scope of Rule 15. We do not agreewith this submission. The scope of the provision has tobe understood as they appear at the point of timerelevant to the year under consideration and not byprocess of comparison with the old provision. Consideringthe marked difference in the language of the provision,in the face of the clear language, we do not find anysupport to the respondents getting into the old enactmentto understand the scope of the present provisions".17. Further in paragraph 36, a reference to learned Judge'sorder is found, which may also be extracted:-''Para 36. As far as the decision of Jyothimani, J. inthe decision in Kamaraj College of Engineering andTechnology, Managing Board, rep. by its Secretary,Virudhunagar -vs- President, K.Vellakulam Panchayat,Madurai Disatrict (supra) is concerned, while we agreewith the conclusion of the learned Judge in paragraph 15of the judgment, we however, do not share the view of thelearned Judge that the benefit of exemption goes for https://hcservices.ecourts.gov.in/hcservices/ affiliated institutions only. Recognition or affiliationof an institution has nothing to do with tax exemptionunder Rule 15(c). The claim for exemption to educationalinstitutions is not to be decided by inference or supportdrawn from requirements of the statutes which areregulatory in character. Unless the exemption provisioncontemplates such a condition or makes a reference tothose enactments, we do not find any reasons to read suchrestrictions into the Rule".18. Even on the question whether the amounts collected fromthe students for staying in hostels run by the educationalinstitutions whether any landlord/tenant relationship existscreated was also considered. In this context, the stand of theState was rejected in paragraph 37 and it may be usefully extractedbelow:-''Para 37. ... Mr.R.Viduthalai, learned Advocate Generalhowever, submitted that the rent aspect is an in-builtone in the fee structure. Hence, the institutions whichcollect fee are to be treated as collecting rent for thestay in the hostel. It is not denied by the respondentsthat the facilities of the hostel given to the studentsare an incidence of the schooling in the particulareducational institutions. As Mr.G.Masilamani rightlysubmitted, in the students availing of the facilitytherein for continuing their education in theinstitutions, there does not arise a relationship oflandlord and tenant to bring the case under the proviso.The overall fee charged for the facilities offered aspart of undergoing the schooling therein does not make astudent a tenant as in the normal meaning of the term. Inthe circumstances, it is not possible for us to acceptthe plea of the respondents that the charges for the stayin the hostel availing a facility therein must be treatedas rent. The submission made to bring the case under thefirst proviso which carves out an exception to the mainRule only needs to be noted for rejection, in the lightof the provisions contained in the main part of theRules.... ".19. Therefore, in the light of the above, the writ petitionswill stand allowed and the impugned demand notice as well as theresolution of the third respondent Town Panchayat in Ref.No.76/99dated 24.5.1999 will also stand set aside. However, there will beno order as to costs.20. In the light of the petitioner Trust having succeeded inthese two writ petitions and as it has also been held that they are https://hcservices.ecourts.gov.in/hcservices/ not liable to pay property tax, the third respondent Town Panchayatis directed to refund the amounts collected from the petitionerTrust by virtue of the interim direction given by this Court dated30.12.2002 within a period of twelve weeks from the date of receiptof a copy of this order.Sd/-Asst. Registrar./true copy/Sub Asst. Registrar.jsTo1. The Secretary to Government, Municipal Administration and Water Supply Department, Secretariat, Fort St.George, Chennai-9.2. The Executive Officer, Kalapatti Town Panchayat, Kalapatti, Coimbatore.3. The President, Kalapatti Town Panchayat, Kalapatti, Coimbatore.1 cc to Mr.M. Devaraj, Advocate, SR. 34881 cc to Government Pleader, SR. 34551 cc to Mr.P. Srinivas, Advocate, Sr. 3132 W.P.Nos. 14414 and 14415 of 1999 andW.P.M.P.Nos.261 and736 of 2008TEJ (CO)kk 3/2