SUBAIDA v. TAHSILDAR

On the other hand, Ms.Reshmita Ramachandran, learned Government Pleader, submits that all the buildings are situated in one compound adjacent to each other with common entrance and exit and the petitioner is the owner of all the four buildings and therefore, all the four buildings are to be treated as one unit for the purpose of determining the plinth area to levy building tax and luxury tax. She further submits that the petitioner's contention that each building is a separate unit is against the provisions of the Act and several decisions of this Court as well as the Supreme Court. In support of her contentions, she has placed reliance on the decisions of the Hon'ble Supreme Court in State of Kerala and Others v. WP(C) NO. 30149 OF 2021 5 A.P.Mammikutty [2015(3) KHC 794] and a Full Bench decision of this Court in District Collector, Civil Station, Kakkanad and Others v. V.K.Sreekumari Kunjamma [2011 (1) KHC 133].

4. Section 2(e) of the Act defines a 'building' as under: “2. Definitions.- In this Act, unless the context otherwise requires,- (e) “building” means a house, out-house, garage, or any other structure, or part thereof, whether of masonry, bricks, wood, metal or other material, but does not include any portable shelter or any shed constructed principally of mud, bamboos, leaves, grass or thatch or a latrine which is not attached to the main structure. Explanation 1.―In the case of buildings constructed for providing housing accommodation for workers and their families residing in plantations, in pursuance of section 15 of the Plantations Labour Act, 1951 (Central Act 69 of 1951) or buildings constructed under the Government of India Subsidised Housing Scheme for industrial workers, each part of a building providing or intended to provide accommodation for a worker or a worker and his family shall be deemed to be a separate building. Explanation 2.―Where a building consists of different apartments or flats owned by different persons, and the cost of construction WP(C) NO. 30149 OF 2021 6 of the building was met by all such persons jointly, each such apartment or flat shall be deemed to be a separate building;” Explanation-2 to Section 2(e) of the Act makes it abundantly clear that a building may be a single unit or it may consist of different apartments or flats. However, if a building consists of different apartments or flats is owned by a single owner, all the units or apartments are to be assessed at the hands of the owner for the purposes of levying building tax and luxury tax under the provisions of the Act.

5. In the decision in Lalitha (supra), it was held by this Court that the taxable event for the purpose of the Act is completion of the construction of the building and there is no provision in the Act for clubbing together various buildings constructed by the same owner either in the same financial year or otherwise, considering the facts of the said case, inasmuch as the buildings, which were clubbed, were structurally separate buildings separated from each other by a WP(C) NO. 30149 OF 2021 7 road and those buildings were owned by different firms. Each building exists without the other. There was no common entrance and exit. Therefore, in those facts, it was held that the plinth area of those buildings could not be clubbed for the purposes of levying building tax and luxury tax. Therefore, in may view, the said judgment has no application to the facts of the present case.

6. Insofar as the judgment of the Full Bench in the case of V.K.Sreekumari Kunjamma (supra) is concerned, the question came up for consideration before the Full Bench was “Whether a building with two residential apartments owned by the same person should be assessed as a single building in his name as the owner or should be assessed as two buildings treating each residential apartment as a separate building in the name of the same owner?”. The Full Bench, after considering the provisions of Sections 2(e), 5, 7 and 9 of the Act, in paragraph Nos.3 and 4 held as under: “3. The question above referred has to be answered with reference to the definitions of 'building' and 'plinth area' which is the basis WP(C) NO. 30149 OF 2021 8 of charge under the charging section. 'Building' as defined under the main clause (e) of Section 2 covers all buildings in the literal sense and besides it, it includes every structure or part of a building. The plinth area which is the basis of assessment under Section 2(k), takes in the floor area of the building and where the building has more than one floor, the aggregate area included in all the floors have to be taken together. In other words, if a building owned by the person consists of several floors, the same has to be assessed as a single unit and the assessment has to be on the total plinth area of the building. Going by the definition of 'building' contained in Section 2(e) read with definition of 'plinth area' under Section 2(k) and the charging section, Section 5, a multi-storied building or a building with different residential or commercial apartments has to be assessed as a single unit on the total plinth area which include the plinth area of all the floors of the building. However, the assessment has to be necessarily in the name of the owner or owners of the building, if it is jointly owned by several persons. Two exceptions are provided in the Act against single assessment of multi-flat apartment, whether residential or commercial. Explanation (1) of Section 2(e) deals with assessment of buildings constructed for providing accommodation to workers and their families residing in plantations and also buildings constructed under the Government of India Subsidised Housing Scheme for industrial WP(C) NO. 30149 OF 2021 9 workers. In the case of these buildings, each part of the building providing or intended to provide accommodation for a worker or family of a worker shall be deemed to be a separate building. In other words, but for this exception, even though a building with several residential units providing accommodation to different workers or families of different workers is assessable as a single building under the main clause Section 2(e), the fiction available under Explanation 1 of Section 2(e) provides for treatment of each such residential unit within a building as a separate building for assessment. In other words, but for this exception even apartment buildings, whether line buildings or multi-storied buildings providing accommodation to employees in plantations or industries, would have been assessed as a single building in the name of the owner-employer. The second exception providing for separate assessment of different flats or apartments in the same building are those buildings constructed by several persons sharing the cost of construction and owning the building as flats or apartments among themselves. Here again, the exception provides for separate assessment of each flat or apartment of a multi-flat or multi-apartment building in the name of each owner of the flat or apartment. It is very common that several persons pool their resources and construct buildings for commercial or residential purposes and share the building each one taking separate flat or apartment. By virtue of the WP(C) NO. 30149 OF 2021 10 provision contained in Explanation 2, each and every apartment or flats comprised in the single building constructed by sharing the cost of construction by the several owners jointly shall be deemed to be separate buildings for assessment. If the Explanation was not there in the statute, the building consisting of different apartments or flats owned by several persons and constructed by sharing the cost would have been assessed as a single building under the main clause (e) in the joint names of all of them.

4. What is clear from the above provision is that a building irrespective of the number of flats or apartments contained therein, should be assessed as a single unit and the exceptions are only those stated in Explanations 1 and 2 stated above. A Division Bench of this court in SHENOY REAL ESTATES (P) LTD. VS. TAHSILDAR reported in 2004 KHC 22 : 2004(1) KLT 133 : AIR 2004 (NOC) Ker.263 held that sale of flats by a builder after completion of construction of apartment building to different owners will not justify separate assessment of each flat under Explanation (2) to Section 2(e) of the Act. What is to be noted from this judgment is that unless apartment building is constructed by the joint owners by sharing the cost, each and every apartment cannot be assessed as a separate building, no matter the building after construction was sold by the owner to different persons. In this case different ownership for the building happens after completion of WP(C) NO. 30149 OF 2021 11 construction of the building and, the sale made thereafter to different owners is immaterial for the purpose of assessment. In fact, the incidence of tax is on completion of construction of the building and it is immaterial as to whether the owner retains the building or transfers the same in full or in part or in pieces after completion of construction. Separate assessment of each and every flat is called for only in respect of the constructions covered by Explanations (1) and (2) of Section 2(e).” It has been held that if a building has more than one floor, the aggregate area included in all the floors have to be taken together for the purpose of determining the plinth area of the building under the provisions of the Act. While interpreting Explanations to Section 2(e) of the Act, it has been held that irrespective of the number of flats or apartments contained in a structure, a building should be assessed as a single unit and the only exceptions are as provided in Explanations 1 and 2.

7. The petitioner's case does not fall within the Explanation 1 or Explanation 2 to Section 2(e) of the Act. In my view, the Full WP(C) NO. 30149 OF 2021 12 Bench judgment in V.K.Sreekumari Kunjamma (supra) does not support the case of the petitioner.

8. The next decision cited by the learned counsel for the petitioner is in Anil E.K. (supra). However, the said decision did not taken note of by the Supreme Court in A.P.Mammikutty (supra). Therefore, I am not persuaded myself to place reliance on the judgment in Anil E.K. (supra) cited by the learned counsel for the petitioner.

9. The Hon'ble Supreme Court in paragraph Nos.13 and 14 in A.P.Mammikutty (supra) held as under: “13. Having dealt with the concept of plinth area and its applicability in the backdrop of the provision, we are required to scan the definition of “building”. As noted earlier, “building” has been defined in Section 2(e) of the Act to mean a house, out- house, garage or any other structure, or part thereof. The construction can be masonry, bricks, wood, metal or other material. It does not include portable shelter or sheds including a latrine which is not attached to the main structure. Explanation II is the fulcrum that would determine the question that has emanated for consideration in this case. WP(C) NO. 30149 OF 2021 13 The said Explanation lays the stipulation that when a building consists of different apartments or flats owned by different persons and cost of the building has to be met by all such persons, each apartment or flat is deemed to be a separate building. On a dissection of the said provision, it appears that said Explanation would apply when there is a building; that the building must consist of different flats or apartments; that each apartment or flat must be owned by different persons and cost of construction of the building must have been met jointly, and in such cases plinth area cannot be clubbed. Learned counsel for the appellant-State has submitted that as there has been no contribution of funds at the time of construction. The Explanation II to Section 2(e) would not be applicable and the respondent has to be treated as the sole owner. As we perceive, Explanation II to Section 2(e) takes care of a situation where the building is constructed and there are different owners who have paid the purchase price for their respective apartments. The Explanation should not be read as a negative provision, detrimental and fatal to cases where there are separate owners of the apartments, for that is not the basic object and purpose behind the Explanation II to Section 2(e) of the Act. It is a benevolent and beneficial provision which has not been enacted to curtail and nullify what is logical and apparent to reason. WP(C) NO. 30149 OF 2021 14

14. In this context, it is imperative to analyse what is meant by “residential building”. The definition in clause 2(l), means a building or any other structure or part thereof used for residential purpose and house or out-house or garage appurtenant to a building for more beneficial enjoyment. It excludes hotels, boarding places, lodges and the like. Thus, the expression “residential building” cannot be interpreted without reference to the term “building” and Explanation II to Section 2(e) of the Act. Therefore, each residential building owned by single owner would be subjected to luxury tax, if it has the plinth area which exceeds 278.7 sq.mts. It makes no difference whether the residential building consists of one floor or it is two-storied or three-storied or consists of multiple flats or apartments. The entire plinth area in the residential building owned by a singular owner is required to be aggregated. It is noticeable that Section 5A does not refer to aggregate plinth area of all the floors. The intention of the legislature is apparent that if a person is the owner of the plinth area of 278.7 sq.mts or more in one building, even if it consists of separate or distinct apartments, he would be liable to pay the luxury tax under Section 5A of the Act. It also becomes further clear when the definition of “plinth area” in Section 2(k) is properly appreciated. It clearly postulates that “plinth area” means the area included in the floor of the building and where building has WP(C) NO. 30149 OF 2021 15 more than one floor aggregate area included in all the floors are taken together. The proviso to the said definition lays down that in case of a building referred to in the Explanation II to clause (e), the “plinth area” shall be calculated separately. Thus, Section 2(k) has an insegragable nexus with the definition of “building”. Explanation II to Section 2(e) which defines “residential building” only conveys about the building meant for residential purpose and what it includes. Section 5A is the charging Section and as has been stated earlier, it commences with a non- obstante clause. It determines the annual luxury tax on all residential buildings having a plinth area of 278.7 sq. mts. or more. It provides a date for completion that is 1st April 1999. Though, it does not provide for aggregate it refers to residential building definition of which refers to a building. Section 2(k) defines “plinth area” of the building. Section 5A also includes “plinth area”. Though the term “aggregate” is not mentioned but the words therein are buildings having plinth area and in that context one is required to scan and analyse the meaning of the term “building” and the “plinth area” as defined under Section 2(e) and 2(k) respectively. “Plinth area” as defined clearly provides that when one building has more than one floor, the aggregate area includes all the floors. To give an example, a building consisting of four storeys belongs to a single owner, the aggregate of all the floors are to WP(C) NO. 30149 OF 2021 16 be included for calculation of the plinth area and thereby the computation of the luxury tax has to be determined as provided under Section 5A. Be it noted, the proviso to Section 2(k) clearly stipulates that if a building as referred falls under Explanation II to Section 2(e), the plinth area shall be calculated separately. The Explanation II refers to different apartments or flats owned by different persons. It also states that the cost of the construction of the building is to be met by all such persons jointly. This Explanation, as noted before, is required to be appositely understood. The learned counsel for the state would submit that if there is initial booking and the persons have contributed for the construction definitely there shall be separate computation. The Explanation II has to be read with Section 5A which starts with a non-obstante clause. Section 5A as has been mentioned before refers to “residential building” having plinth area

278.7 sq. mts. or more and, therefore, the said provision also takes note of this definition. In view of the above, the contention advanced by the learned counsel for the State is difficult to accept. The definitions have to be given a proper construction. There can be a case where the owner erects a multi-storied building consisting 10 floors. He builds it at his own cost and thereafter he sells the apartments or flats to 10 persons and in that event he ceases to be the owner of the building. The 10 WP(C) NO. 30149 OF 2021 17 purchasers become the owners of flats and in such a situation it will lead to an absurdity because one single person who once owned the entire building or several apartments, though has ceased to be the owner in law yet is asked to pay the luxury tax solely on the ground that at the time of construction there was no contribution by the purchasers or to put it differently there had been no prior booking. This is not the intention. The Explanation II to Section 2(e) has to be read harmoniously with proviso to Section 2(k) and Section 5A of the Act. The intention of the Legislature as gatherable is that ownership of different flats and the cost of construction of building are met by all such persons. The meeting of the cost jointly is not to be narrowly construed to mean that there has to be an investment before the commencement of the construction of the building. The persons who purchase afterwards they really share the value of the construction cost apart from the profit margin due to the builder or the seller. Unless such an interpretation is placed, the original owner of flats when he ceases to be the owner of the building or the purchaser of a small apartment less then 278.7 square meters would still be liable to pay luxury tax. Such an interpretation would lead to absurdity.”

10. In this case, it is admitted that the four buildings owned by the petitioner have been WP(C) NO. 30149 OF 2021 18 constructed in the year 2019. Since the ownership of the four buildings is common with the petitioner with common boundary wall and common entrance and exit, all the four buildings are to be treated as a single unit for the purpose of determination of building tax and luxury tax, as the case may be. I, therefore, find no error in the impugned demand notices in Exts.P9 and P11. The writ petition fails and is hereby dismissed. Pending interlocutory application, if any, in the present writ petition stands dismissed. Sd/- DINESH KUMAR SINGH JUDGE WP(C) NO. 30149 OF 2021 19 APPENDIX OF WP(C) 30149/2021 PETITIONER EXHIBITS Exhibit P1 TRUE COPY OF THE SITE PLAN TOGETHER WITH THE FLOOR PLAN SUBMITTED BY THE PETITIONER TO THE THIRD RESPONDENT Exhibit P2 TRUE COPY OF THE BUILDING DATED 1.12.2016ISSUED BY THE THIRD RESPONDENT TO THE PETITIONER Exhibit P3 TRUE COPY OF THE OWNERSHIP CERTIFICATE ISSUED IN RESPECT OF BUILDING NUMBER 194/A Exhibit P4 TRUE COPY OF THE OWNERSHIP CERTIFICATE ISSUED IN RESPECT OF BUILDING NUMBER 194/B Exhibit P5 TRUE COPY OF THE OWNERSHIP CERTIFICATE ISSUED IN RESPECT OF BUILDING NUMBER 194 /C Exhibit P6 TRUE COPY OF THE OWNERSHIP CERTIFICATE ISSUED IN RESPECT OF BUILDING NUMBER 194/D Exhibit P7 TRUE COPY OF THE NOTICE DATED 10.7.2020 ISSUED BY THE FIRST RESPONDENT TO THE PETITIONER Exhibit P8 TRUE COPY OF THE OBJECTION DATED 24.8.2020 SUBMITTED BY THE PETITIONER TO THE THIRD RESPONDENT Exhibit P9 TRUE COPY OF THE NOTICE DATED 20.4.2021 (DATED IS WRONGLY SHOWN AS 20.4.2020) Exhibit P10 TRUE COPY OF THE REPLY DATED 6.5.2021 SUBMITTED BY THE PETITIONER TO THE FIRST RESPONDENT Exhibit P11 TRUE COPY OF THE DEMAND NOTICE DATED 13.12.2021 (LEGIBLE TYPE WRITTEN COPY) ISSUED BY THE SECOND RESPONDENT UNDER THE REVENUE RECOVERY ACT RESPONDENT EXHIBITS WP(C) NO. 30149 OF 2021 20 Exhibit R1(A) TRUE COPY OF THE NOTICE DATED 5/12/14 ISSUED BY THE VILLAGE OFFICER VAZHIKADAVU UPON THE PETITIONER. Exhibit R1(B) TRUE COPY OF THE NOTICE IN FORM-III U/S.7(3) R/W/ RULE 6 OF THE KERALA BUILDING TAX ACT, ISSUED BY THE VILLAGE OFFICER VAZHIKADAVU UPON THE PETITIONER DATED 5/12/2014. Exhibit R1(C) TRUE COPY OF THE SUBMISSIONS MADE BY THE PETITIONER TO THE 1ST RESPONDENT DATED 20/12/2014. Exhibit R1(D) TRUE COPY OF THE INSPECTION REPORT OF THE CHARGE OFFICER CUM DEPUTY TAHSILDAR DATED 18/2/2015. Exhibit R1(E) TRUE COPY OF THE LATTER OF THE VILLAGE OFFICER VAZHIKADAVU DATED 14/2/2020. Exhibit R1(F) TRUE COPY OF THE REPORT OF THE CHARGE OFFICER DATED 14/2/2020. Exhibit R1(G) TRUE COPY OF THE DIRECTION ISSUED BY THE 1ST RESPONDENT UPON THE VILLAGE OFFICER, VAZHIKADAVU DATED 25/2/2020. Exhibit R1(H) TRUE COPY OF THE VILLAGE OFFICERS REPORT DATED 7/3/2020. Exhibit R1(I) TRUE COPY OF THE ASSESSMENT ORDER OF BUILDING TAX DATED 10/7/2020 ISSUED BY THE 1ST RESPONDENT UPON THE PETITIONER. Exhibit R1(J) TRUE COPY OF THE LUXURY TAX DATED 10/7/2020 ISSUED BY THE 1ST RESPONDENT UPON THE PETITIONER. Exhibit R1(K) TRUE COPY OF THE HOUSING PROJECT CESS DATED 10/7/2020 ISSUED BY THE 1 ST RESPONDENT UPON THE WP(C) NO. 30149 OF 2021 21 PETITIONER. Exhibit R1(L) TRUE COPY OF THE ACKNOWLEDGEMENT OF THE DEMAND NOTICES DATED 20/8/2020 AND CLEAR TYPED COPY. Exhibit R1(M) TRUE COPY OF THE ACKNOWLEDGEMENT OF THE DEMAND NOTICES DATED 20/8/2020 AND CLEAR TYPED COPY. Exhibit R1 (N) TRUE COPY OF THE REPLY ISSUED BY THE RESPONDENT TO THE PETITIONER ON 17/09/2020. Exhibit R1(O) TRUE COPY OF THE DESPATCH REGISTER TO SHOW THAT THE SAID LETTER WAS ISSUED TO THE PETITIONER. Exhibit R1(P) TRUE COPY OF THE BUILDING PERMIT Exhibit R1(Q) TRUE COPY OF THE LSGD APPROVED SKETCH.