The Special Officer and CommissionerTiruchirapalli Corporation v. Hindu Mission Hospital

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 16.2.2008 CORAMTHE HONOURABLE MR.JUSTICE P.D.DINAKARAN ANDTHE HONOURABLE MR.JUSTICE R.REGUPATHIWrit Appeal No.612 of 2003The Special Officer and CommissionerTiruchirapalli CorporationTiruchirapalli... AppellantVs.Hindu Mission Hospitalrep. by its SecretaryRtn.PP.A.M.Srinivasan17, North Guzili StreetTiruchirapalli 620 008... Respondent-----Appeal under Clause 15 of the Letters Patent against theorder of the learned Single Judge dated 22.1.2001 in W.P.No.10472of 1995. Presented under Article 226 of the Constitution of Indiato issue a writ of Certiorarified Mandamus, calling for therecords of the respondent in A5/Na.Ka.No.5868/95, dated 16.5.1995,and quash the same and forbear the respondents from collecting anyproperty tax in respect of the Hindu Mission Hospital, A.74, AnnaNagar Main Road, Thennur, Tiruchirapalli.-----For Appellant : Mr.P.SrinivasFor Respondent : Mr.Ravichandran For Mr.T.R.Rajaraman-----J U D G M E N T(Delivered by P.D.DINAKARAN,J.)The appeal is directed against the order dated 22.1.2002made in W.P.No.10472 of 1995 quashing the demand of property taxby the appellant Corporation by proceedings dated 16.5.1995 andforbearing them from collecting any property tax in receipt of the https://hcservices.ecourts.gov.in/hcservices/ Hindu Mission Hospital, A74, Anna Nagar Main Road, Thennur,Trichy.2.1. The case of the respondent Hospital, in brief, is thatthe Hindu Mission is a registered Society under the Tamil NaduSocieties Registration Act bearing registration No.49/78.Therefore, the same is a public charitable and non profitable andnon commercial institution, as recognised by the Income taxDepartment by granting exemption under Section 80G of the IncomeTax Act. 2.2. According to the respondent Hospital, their object is toprevent, control, treat and relieve human diseases, by renderingfree, subsidised and charitable service or aid to the poor, needy,distressed and disabled and also to establish research Centres forthe study of the diseases of mankind. They are running andmaintaining the hospital in an area of nearly 20,425 sq.ft. 2.3. The respondent Hospital states that they receive onlynominal amount to meet the heavy cost and expenditure incurredwhile treating the patients. According to them, cost of theexpenditure is partially received from the patient. Hence, theyclaim exemption under Section 86(e) of the Tamil Nadu DistrictMunicipalities Act and now under Section 123(e) of theTiruchirappalli City Municipal Corporation Act, after theappellant Corporation become the Municipal Corporation. 2.4. However, the appellant Corporation, by proceedings dated16.5.1995, raised a demand for Rs.17,409/- for half yearly, witheffect from October 1993. Hence, the writ petition.2.5. The writ petition was resisted by the appellantCorporation disputing the character and status of the respondentHospital, as the respondent Hospital, in reality, was running onprofit motive. Rent was collected from the patients who wereadmitted, fees were also received for rendering service in thehospital and no service was rendered free of charge to whomsoever.The plea that they were collecting only a nominal charge from thepoor, distressed, disabled and needy persons, based on theirincome was not true and no evidence was produced to that effect.Further, the exemption granted under Section 80G of the Income TaxAct, would not, by itself, entitle the respondent Hospital to seekan exemption from the payment of property tax. 2.6. That apart, the respondent Hospital had also rented outa portion of the premises to a third party to run canteen andcollecting parking fees for the vehicles parked in the premises https://hcservices.ecourts.gov.in/hcservices/ and therefore, they were not entitled to the exemption underSection 123(e) of the Act automatically, as contended.2.7. The learned single Judge, after weighing the rivalcontentions and placing reliance on the decisions in S.N.R. SonsCharitable Trust, Coimbatore v. The Commissioner, Coimbatore CityMunicipal Corporation, Coimbatore [1993 (10) WLR 769] and PSG &Sons Charities v. City Municipal Corporation, Coimbatore [1997 (1)CTC 331] and relying on the exemption granted by the Income taxDepartment under Section 80G of the Act, allowed the writpetition. Hence, the present appeal by the Corporation.3. The learned counsel for the appellant and the respondentreiterated the contentions made before the learned single Judge.4.1. Before proceeding on the contentions of both sides, viz.on the right of the appellant Corporation to levy property tax andthe corresponding duty or obligation or liability of therespondent Hospital to pay the property tax, it is apt to referSection 86(e) of the Tamil Nadu District Municipalities Act, 1920.Section 86: General exemption:- The followingbuildings and lands shall be exempt from the propertytax:(a) ...(b) ...(c) ...(d) ...(e) Charitable Hospitals and dispensaries butnot including residential quarters attached thereto;Provided that nothing contained in clauses (a),(c) and (e) shall be deemed to exempt any building orland from property tax for which rent or servicecharges is payable by the person using the same forthe purposes referred to in the said clauses.4.2. After upgradation of the Tiruchirappalli Municipality asTiruchirappalli Corporation by the Tamil Nadu Act 27 of 1994, theprovisions of the Coimbatore Municipal Corporation Act has beenmade applicable to the Tiruchirappalli Corporation. Section 123 ofthe Coimbatore Municipal Corporation Act, which is applicable toTiruchirappalli Corporation, reads as under: https://hcservices.ecourts.gov.in/hcservices/ Section 123: The following buildings and lands shallbe exempt from property tax.(a) ...(b) ...(c) ...(d) ...(e) Charitable Hospitals and dispensaries butnot including residential quarters attached thereto;Provided that nothing contained in clauses (a),(c) and (e) shall be deemed to exempt from propertytax any building or land for which rent is payable bythe person or persons using the same for the purposesreferred to in the said clauses.4.3. It is true, the scope of exemption from the payment ofproperty tax with reference to the building owned as buildings andlands of charitable hospitals and dispensaries not including theresidential quarters attached thereto mentioned under Section 123(e) of the Act referred to above came up for consideration beforea Division Bench in S.N.R. Sons Charitable Trust, Coimbatore v.The Commissioner, Coimbatore City Municipal Corporation,Coimbatore [1993 10 WLR 769], wherein a Division Bench, held thatthe amount paid by the patients, who use the hospital as well asthe range of services provided by it cannot be regarded as rentpaid by them. In the narrow sense, it is only intended under theprovisions referred to above. Therefore, the benefit of exemptionto the respondent Hospital conferred under Section 123(e) of theAct cannot be denied on that score alone. 4.4. In respect of their decision, the Division bench placesreliance on the decision of the Apex Court in State of Punjab v.British India Corporation Ltd. [AIR 1963 SC 1459] as well as thedecision of the Delhi High Court in New Delhi Holy Family HospitalSociety v. Delhi Municipality [AIR 1984 Delhi 84], for theproposition that the amount received towards the service renderedby the hospital viz. free accommodation, bed and linen, nursingand para medical services and charges for electricity while thepatient remain in hospital, can no means be regarded as rentwithin the meaning of section 123 (e) of the Act to disentitle therespondent Hospital from claiming the benefit of exemption. Butthe benefit provided under Section 123(e) of the Act, as read inthe statute book, is subject to further qualification prescribedby the proviso to Section 123(e) of the Act. https://hcservices.ecourts.gov.in/hcservices/

5.1. At this juncture, it would be befitting to refer theinterpretation of word "shall".5.2. Ordinarily, the word 'shall' used at several places inthe provision must be given the same meaning at all places.However, this is not an invariable rule and even though the word'shall' is ordinarily mandatory but in the context or if theintention is otherwise it may be construed to be merely directory.The construction ultimately depends on the provision itselfkeeping in view the intendment of the enactment and the context inwhich the word 'shall' has been used. 5.3. Though the word "shall" in its ordinary import isobligatory, it need not be given that connotation in each andevery case and the provisions can be interpreted as directoryinstead of mandatory depending upon the purpose which thelegislature intended to achieve as disclosed by the object,design, purpose and scope of the statute. While interpreting theconcerned provisions, regard must be had to the context, subject-matter and object of the statute in question. 5.4. Doubtless, under certain circumstances, the expression"shall" is construed as "may". The term "shall" in its ordinarysignificance is mandatory and the court shall ordinarily give thatinterpretation to that term unless such an interpretation leads tosome absurd or inconvenient consequence or be at variance with theintent of the legislature, to be collected from other parts of theAct. The construction of the said expression depends on theprovisions of a particular Act, the setting in which theexpression appears, the object for which the direction is given,the consequences that would flow from the infringement of thedirection and such other considerations.5.5. In view of the above, the proviso that nothing inSection 123(a), (c) and (e) of the Act shall be deemed to exemptfrom property tax any building or land for which rent is payableby a person or persons using the same for the purpose of Sectionreferred to in the said clause, would make it clear that theexemption granted in the main provision, viz. 123(e) of the Act isnot automatic. 6.1. Accordingly, as observed by the Division Bench, theproperty tax leviable on annual value is based on the gross annualrent on the basis of letting from month to month or year to yearand therefore, the exemption is thus made available with referenceto the levy of property tax on the basis of annual rent,either from month to month or year to year. But, even though the https://hcservices.ecourts.gov.in/hcservices/ Division Bench held that the receipt of payment made by thepatients, would not, by itself, amount to rent, there is noruling in the said decision whether the exemption is automatic ornot. 6.2. In such case, proviso to Section 123(e) of the Act wouldbecome redundant on the statute book. To make the provisoeffective and operative, on raising of the demand, if therespondent Hospital is entitled to any exemption, by virtue ofSection 123(e) of the Act, the only mechanism available for themis to approach the appellant Corporation, satisfy them that theyare entitled to exemption under section 123(e) of the Act, as theproviso made it very clear that such exemption is not automaticbecause nothing contained in clause (a) (c) and (e) shall bedeemed to exempt from payment of property tax. 6.3. Therefore, when the appellant Corporation rely upon notonly the receipt of amount from the patients, but also the rentreceived towards Canteen and fees collected for parking thevehicles and other sources, whether those receipts would attractrent or not, has to be decided only by the assessing authority, atthe instance of objection or revision by the owner of thebuilding, even if they are charitable hospital and dispensaries.Without that process being resorted to it may not be proper toquash the demand notice itself, assuming the receipt of theamount, by itself, would not amount to a rent. 6.4. That apart, in Municipal Corporation of Coimbatore v.Govindasamy Naidu Hospital [(2004) 2 CTC 155], where evidenceestablished that many patients volunteered and paid sums of moneyin excess of fee charges by way of donation, a Division Bench ofthis Court has held that exemption granted under Income Tax Act,Customs Act could not be applied automatically in determiningstatus under section 86(e) of the Tamil Nadu DistrictMunicipalities Act, 1920, when the hospital did not establish thatit was a charitable hospital and the profit generated by it wasused for charitable purpose.6.5. We are, therefore, of the considered opinion that thereliance placed on the decision in S.N.R. Sons Charitable Trust,Coimbatore v. The Commissioner, Coimbatore City MunicipalCorporation, Coimbatore [1993 10 WLR 769] is helpful only to thelimited extent to decide that the receipt of payment by therespondent Hospital from the patients would not, by itself, amountto rent and the same cannot be a ground to quash the impugneddemand. https://hcservices.ecourts.gov.in/hcservices/

6.6. Our view is fortified with the decision of a DivisionBench of this Court in Coimbatore Masonic Charity Trust rep. byits Trustee and Secretary, Coimbatore v. The Commissioner,Coimbatore Corporation, Coimbatore [W.A.Nos.1832 to 1834 of 2000dated 1.12.2000] where a charitable hospital claimed exemptionfrom the payment of property tax demanded by CoimbatoreCorporation under Section 123(e) of the Act, the Division Benchdirected the assessee to pay a portion of the property taxdemanded and directed the Corporation to consider and pass orderson the representation of the assessee claiming exemption, based onthe materials furnished by the assessee and in accordance withlaw.7.1. The next reason that weighed the learned single Judge isthat the respondent hospital, having obtained exemption underSection 80G of the Income Tax Act, are entitled to the exemptionof property tax. Section 80G of the Income Tax Act only dealswith the deduction in respect of the donation to certain funds,charitable institutions, etc., while computing the total incomeof an assessee who donates certain funds to the charitableinstitution. A very reading of the section makes it clear that itis only a benefit conferred on the donor/assessee which benefitwould not confer on the respondent hospital to seek an exemptionfrom the payment of property tax under Section 123 (e) of the Actreferred to above, which is subject to the satisfaction of thequalification prescribed in the proviso to Section 123(e) of theAct which explicitly makes it clear that nothing contained inclauses (a), (c) and (e) shall be deemed to be exempted from theproperty tax any building or land for which rent is received fromthe person or persons using the same for the purposes referred toin the said clauses.7.2. Accordingly, we are unable to appreciate the reason thatweighed the learned single Judge that the exemption provided underSection 80G of the Income Tax Act for the donation of funds to thecharitable institution while computing the total income givenwould entitle the respondent hospital to claim the benefit underSection 123(e) of the Act.7.3. Under the facts and circumstances of the case discussedabove, we are convinced that the benefit conferred under Section123(e) of the Act is not automatic, in view of the proviso toSection 123(e) of the Act and the only course available for therespondent Hospital is that on receipt of the demand notice theyare at liberty to either make an objection or file a revisionenclosing the material to prove that they are entitled toexemption. https://hcservices.ecourts.gov.in/hcservices/

7.4. Thus, in the interest of justice and striking a balancebetween the interest of appellant Corporation and the respondentHospital, the order of the learned single Judge is set aside andthe writ appeal is disposed of as under:(i) The respondent hospital is at liberty tomake a representation to the appellant Corporationobjecting to the demand of property tax, enclosingall the relevant materials, within a period of sixtydays from the date of receipt of a copy of thisorder; (ii) on receipt of such representation, theappellant Corporation shall pass appropriate orders,considering the materials furnished by the respondentHospital and also taking note of the receipts bythem, which may vary depending upon the nature andperiod and in accordance with law; and(iii) considering the huge arrears by therespondent hospital for the period since October1993, the respondent hospital is directed to make apayment of 1/3rd of the arrears of the impugneddemand, which shall be, of course, subject to thefinal order to be passed by the appellant Corporationin this regard, as directed above. In the result, writ appeal is disposed of accordingly. Nocosts.kplSd/-Asst. Registrar./true copy/Sub Asst. Registrar.ToThe Special Officer and Commissioner,Tiruchirapalli Corporation, Tiruchirapalli-620 0011 cc to Mr.T.R.Rajaraman, Advocate, SR.85091 cc to Mr.P.Srinivas, Advocate, SR.8638ksk (co)dv/27.3.W.A.No.612 of 2003.