Trichy Ariya Vaisya Ibandram ... vs The Municipal Corporation Of

[Cites 17, Cited by 0]

Madras High Court

Trichy Ariya Vaisya Ibandram ... vs The Municipal Corporation Of

2.The plaintiff filed O.S.No.1204 of 1990 before the Principal District Munsif Court, Thiruchirapalli for declaration that the suit property is exempted from assessment of property tax and for a declaration that the assessment already made is illegal, arbitrary, baseless, ultravires and void and further prayed for consequential injunction restraining the defendant from collecting assessment at the enhanced rate. The suit was decreed by the trial Court partly to the effect that the procedure adopted by the defendant in levying the property tax is not in consonance by the provisions of Trichy City Municipal Corporation Act and hence, a declaration was granted to the effect that the assessment is illegal and consequential injunction was 2/27 https://www.mhc.tn.gov.in/judis S.A.No.646 of 2003 granted. However, the prayer for declaration that the suit property is exempted from assessment was rejected by the trial Court. As against the disallowed portion, the plaintiff filed A.S.63 of 2001 before the Principal District Court, Thiruchirappalli. The learned District Judge after consideration of the submissions on either side and the judgement referred by the plaintiff, dismissed the appeal and confirmed the judgement and decree of the trial Court. As against the same, the present second appeal has been filed by the plaintiff.

3.The Plaintiff had contended that the suit schedule property belongs to Ariya vaisya community and the property belongs to Shri.Kannikaparameswari temple which has been declared as a denominational temple. The Plaintiff further contended that a Choultry is located within the premises of the temple which is exclusively used for charitable purpose right from the year 1951 onwards. The said Choultry is used as a Kalyana Mandapam by the plaintiff's community alone without receiving any rent for the functions conducted therein. 3/27 https://www.mhc.tn.gov.in/judis S.A.No.646 of 2003 The Plaintiff further contended that the electricity, cleaning and vessel charges are collected as service charges from the community people and the said amount is exclusively used for the temple and for the maintenance for the Choultry.

4.The Plaintiff further contended that suddenly on 29.9.1987, the defendant corporation has issued a special notice to the plaintiff assessing the property tax for suit schedule properties with effect 1.10.1987. Though the plaintiff lodged an objection, the defendant corporation rejected the said request without assigning any reason. The plaintiff also filed an appeal before the commissioner which was also rejected without giving him any opportunity. Hence, the plaintiff contended that the suit property is exempted under section 83(1)(b) of the Tamil Nadu District Municipalities Act and hence, the assessment of the suit property by the defendant corporation is illegal and without jurisdiction. The Plaintiff had further contended that before assessing the property tax, the 4/27 https://www.mhc.tn.gov.in/judis S.A.No.646 of 2003 defendant corporation has not followed the procedure as contemplated under section 82 of the District Municipalities Act and the assessment has been made without issuing any notice of its inspection in writing and not collecting any particulars from the plaintiff. Hence, the plaintiff prayed for decreeing the suit. Pending suit, the Trichy Municipality was upgraded to Municipal Corporation and came to be covered under the provisions of Trichy City Municipal Corporation Act, 1994.

5.The defendant filed a written statement contending that though the suit property was originally used as Choultry, now it has been converted into a pucca Kalyana Mandapam and the plaintiff is collecting rent for conducting marriages and other ceremonies. Hence, the plaintiff is not entitled to claim exemption from assessment of property tax. The defendant further contended that they have scrupulously followed section 82 of Tamilnadu District Municipalities Act before issuing special notice. The defendant further contended 5/27 https://www.mhc.tn.gov.in/judis S.A.No.646 of 2003 that since the assessment has been made under the provisions of Tamilnadu District Municipalities Act, a suit is not maintainable.

6.The trial Court after considering the oral and documentary evidence, came to the conclusion that though the plaintiff has pleaded that the income from the suit schedule property is exclusively used for charitable purpose, the plaintiff has not produced any document to the said effect. The trial Court also found that PW1 has admitted in his evidence that the plaintiff committee is maintaining accounts for administration of the Choultry. The said account books have not been produced to establish the fact that the rental income from the suit schedule property is exclusively used for charitable purpose. The trial Court also found that just because exemption has been granted under Income Tax Act under Exhibit A4, it will not automatically come to the rescue of the plaintiff's committee to claim exemption from the payment of property tax. However, the trial Court found that the 6/27 https://www.mhc.tn.gov.in/judis S.A.No.646 of 2003 defendant Corporation has not followed the procedure as contemplated under Section 82 of the Tamil Nadu District Municipalities Act in issuing a special notice claiming payment of property tax. Hence, the trial Court decreed the suit partly and granted a decree for declaration that the assessment order is illegal and void and granted consequential injunction restraining the defendant from enforcing the said order of assessment. However, the trial Court dismissed the suit with regard to the prayer for declaration that the plaintiff committee is entitled to seek complete exemption from the property tax with regard to the suit schedule property.

7.The First Appellate Court concurred with the findings of the trial Court that the burden is upon the assessee to prove that the entire income from and out of the rent collected from the community people is being used for charitable purpose exclusively. In the present case, the plaintiff has not chosen to produce any documentary evidence to establish the fact that the 7/27 https://www.mhc.tn.gov.in/judis S.A.No.646 of 2003 income from the suit schedule properties are exclusively used for charitable purpose of the plaintiff's temple or the maintenance of the Choultry. The First Appellate Court also considered the judgments cited by the plaintiff and arrived at a finding that those judgments are not applicable to the case of the plaintiff on the ground that in the present case,the plaintiff has miserably failed to establish the usage of the income from and out of the Choultry is being used for charitable purpose. As against the same, the present second appeal has been filed by the plaintiff.

8.The second appeal has been admitted on the following substantial question of law:

“Whether the judgments and decrees of the Courts below are sustainable in law as the Courts below have not appreciated the entire evidence available on record and the relevant provisions of law applicable to the facts of the case”

9.The learned counsel for the appellant contended that the suit schedule property namely Kalyana Mandapam 8/27 https://www.mhc.tn.gov.in/judis S.A.No.646 of 2003 is located with the premises of the temple. The temple has been declared to be denomination of temple by the appropriate authority. He further contended that only service charges are being collected from the users of the Kalyana Mandapam like electricity, cleaning and and vessels charges. The income is being used for maintenance of Kalyana Mandapam. He further contended that the said Mandapam is being exclusively given to the people belonging to the plaintiff's community. He further contended that the marriages and others functions are conducted inside the temple and for the connected functions, the Choultry/Mandapam is being used by the devotees after paying nominal charges for upkeeping and maintenance of the Choultry. He further contended that the Choultry/Mandapam being part of the temple premises is completely exempted from the purview of assessment of the property tax. He further contended that mere charge for upkeeping and maintaining of Choultry will not amount to income from the Choultry and hence, the contentions of the defendant Corporation that the charging of rent will take away the exemption 9/27 https://www.mhc.tn.gov.in/judis S.A.No.646 of 2003 granted under the Act is not correct. The learned counsel for the appellant also relied upon a judgment of our High Court reported in CDJ 1998 MHC 1389 to drive home the point that if the temple is only doing service to the pilgrim and letting out is not a business or incidental to the main business, there is no scope for levying tax under Tamil Nadu Taxes on Luxuries in Hotels and Lodging Houses Act, 1981. The learned counsel for the appellant further relied upon the judgment of the Hon'ble Supreme Court reported in (1974) 1 SCC 683 to impress upon the Court that when minimal service charges levied for the rooms in Choultry cannot be treated as a rent. In the said case, the Hon'ble Supreme Court found that the entire income whatever source from the Choultry is not even sufficient for maintenance of the Choultry. The Hon'ble Supreme Court has also found that the entire income including even the nominal rent is used exclusively for the purpose of Choultry which is indeed a charitable purpose and proceeded to hold that the property is entitled for exemption under Section 83(1)(b) of the 10/27 https://www.mhc.tn.gov.in/judis S.A.No.646 of 2003 Tamil Nadu Municipality Act from the payment of property tax.

10.Per contra, Mr.R.Baskaran, the learned Additional Advocate General appearing for the respondent Corporation contended that the judgment cited by the learned counsel for the appellant reported in (1974) 1 SCC 683 is in favour of the Corporation. He pointed out that there is a specific finding by the Hon'ble Supreme Court that only the nominal charges are being levied by the Choultry and the Choultry was not even having sufficient income to maintain itself out of the said charges. In the said judgment, the Hon'ble Supreme Court has also given a specific finding that the entire income from the rental charges of the Choultry are being utilized for charitable purposes. But, in the present case, the plaintiff Committee has just pleaded that the income from the Choultry is being used for charitable purpose without producing any documentary evidence to the said effect. He further contended that PW1 has categorically admitted in his 11/27 https://www.mhc.tn.gov.in/judis S.A.No.646 of 2003 deposition that though accounts are being maintained by the society for the rental income from the Choultry, the same has not been produced. He further contended that the non-production of the account book will attract adverse inference as against the plaintiff's association. He further contended that though it is claimed that the suit schedule property is a Choultry, now it has been completely renewed and converted into a pucca Kalayana Mandapam and after inspection of the suit schedule properties, a special notice has been issued. He further contended that the plaintiff's association is not entitled for claiming exemption from the assessment of the property tax with regard to Kalyana Mandapam. He further pointed out that the temple premise has not been assessed to the property tax and it clearly falls within the temple under Section 123(a) of the Corporation Act. He further contended that there are many shops that have been let out by the plaintiff's association and they are also assessed to property tax and no objection has been raised by the plaintiff's association. Hence, he 12/27 https://www.mhc.tn.gov.in/judis S.A.No.646 of 2003 contended that the plaintiff's association cannot take exception for assessment of the property tax to the Kalyana Mandapam from which the rental income is being derived by the plaintiff's association. Hence, he prayed for dismissal of the second appeal.

11.I have considered the submissions on either side.

12.It is the specific case of the plaintiff that the Choultry is located within the premises of the temple and it is being let out to the people of the plaintiff's community alone. The plaintiff has also contended that nominal charges are being collected for rendering service like electricity, cleaning and vessel charges. Even the said amount is being used only for the purpose of upkeeping and maintenance of the Choultry. Any income from the Choultry is exclusively used only for charitable purposes. Hence, they are entitled to seek exemption under Section 123(a) of the Corporation Act. Originally the Trichy was a 13/27 https://www.mhc.tn.gov.in/judis S.A.No.646 of 2003 Municipality and governed by Tamil Nadu District Municipalities Act, 1920. Under the said Act, the mode of assessment of property is being described under Section 82 of the District Municipalities Act and general exemption from the property tax are enumerated under Section 83 of the Act. The Trichy Municipality got upgraded to Municipal Corporation in the year 1994 and it was governed by the Trichy City Municipal Corporation Act 27 of 1994 with effect from 01.06.1994. As per Section 8 of the Act 27 of 1994, all the provisions of Coimbatore City Municipal Corporation Act, 1981 will be applicable to the Trichy Corporation in relation to levy and collection of tax. Hence, we have to look into Coimbatore City Municipal Corporation Act 25 of 1981 to understand the levy and assessment of the property tax and general exemption from the property tax. The method of assessment of property tax under Act 25 of 1981 is expressed under Section 122 of the said Act. The general exemption from the property tax are enumerated under Section 123 of the Act which extract as follows:

14/27

https://www.mhc.tn.gov.in/judis S.A.No.646 of 2003 “123. General exemption from property tax .— The following buildings and lands shall be exempt from the property tax —

(a) places set apart for public worship and either actually so used or used for no other purposes ;

(b) choultries for the occupation of which no rent is charged and choultries the rent charged for the occupation of which is used exclusively for charitable purposes;

(c) [Buildings used for educational purpose including hostels attached thereto and places used for the charitable purpose] of sheltering the destitute or animals, and orphanages, homes and schools for he deaf and dumb, asylum for the aged and fallen women and such similar institutions run purely on philanthropic lines as are approved by the council ;

(d) such ancient monuments protected under the Ancient Monuments Preservation Act, 1904 (Central Act VII of (1904) and such ancient and historical monuments declared by or under the Ancient Monuments and Archaeological Sites and Remains Act, 1958 (Central Act XXIV of 1958) to be of national importance and also such ancient 15/27 https://www.mhc.tn.gov.in/judis S.A.No.646 of 2003 monuments and archaeological sites and remains protected under the Tamil Nadu Ancient and Historical Monuments and Archeological Sites and Remains Act, 1966 (Tamil Nadu Act 26 of 1966) or parts thereof as are not used as residential quarters or public office ;

(e) charitable hospitals and dispensaries but not including residential quarters attached thereto ;

(f) such hospitals and dispensaries maintained by railway administration as may from time to time be notified by the Government, but not including residential quarters thereto ;

(g) burial and burning grounds included in the book kept in he municipal office under section 404 ;

(h) any building or land the annual value of which is less than one hundred and nineteen rupees provided that the owner thereof is not liable to profession tax or income-tax and provided further that no other building or land is owned by him or the aggregate annual value of all the buildings and lands owned by him is less than one hundred and nineteen rupees ;

(i) the bed of any river or canal or any river or canal belonging to Government and which do not provide any income to the Government or 16/27 https://www.mhc.tn.gov.in/judis S.A.No.646 of 2003 any Government land set apart for recreation purposes of any other Government property being neither building nor land from which in the opinion of the Government any income could not be derived, as may from time to time be notified by the Government ;

                                    (j)     any      building    or    land    owned     by     the
                           Central Government”

13.Under Section 123(a) places of public worship are completely exempted from the purview of property tax. Under Section 123(b), choultries for the occupation of which no rent is charged and even if the rent is charged, if the said rent is exclusively used for charitable purpose, the choultry is exempted from the purview of property tax. In the present case, the contention of the plaintiff is that the plaintiff is levying only nominal service charges and even the said amount is used for cleaning and maintaining of the Choultry and for other charitable purpose connected with the temple. When a party claims exemption from payment of property tax, the entire burden is upon him 17/27 https://www.mhc.tn.gov.in/judis S.A.No.646 of 2003 to establish that it falls within the conditions enumerated in the said exemption clause. In the present case, we have to consider whether the plaintiff has established that the entire rental income/service charges collected from the devotees is exclusively used for cleaning and maintaining of the Choultry and for other charitable purposes or not. In Paragraph No.3 of the plaint, the plaintiff has pleaded that the entire income is exclusively used for temple and also for maintenance of the suit schedule properties. The said facts has not been specifically denied by the defendant in the written statement. However, the plaintiff has not produced any account book or other documents to establish that the income from the Choultry is exclusively used for charitable purpose or upkeep and maintenance of the Choultry.

14.The plaintiff has solely relied upon Exhibit A4 income Tax exemption to drive home the point that the institution is a charitable one and hence, automatically it is exempted from the purview of property tax. The learned Single Judge of this Court in 18/27 https://www.mhc.tn.gov.in/judis S.A.No.646 of 2003 a judgment reported in 2010 8 MLJ 643 in Paragraph No.8 has held as follows:

“8.In the instant case, apart from arriving at decision based on records, the respondent is also required to conduct the inspection of the premises, since what claim is exemption from levy of property tax on building. Therefore, unlike in orders of exemption granted under the Income Tax Act or the Sales Tax Act, the respondent cannot proceed only based upon the documents available on record. In my view, the exemption granted under the Income Tax Act cannot brushed aside by the respondent, while considering the claim for exemption for property tax. As long as the exemption granted under 80 G of the Income Tax Act exempting the income tax on the donations received by the petitioner's trust remains valid it is substantial piece of evidence to prove about the activities of the petitioner trust. In the provision of the Income Tax Act, detailed procedure has been contemplated prior to the grant of such exemption. Therefore, the respondent Corporation is bound to take note of exemption granted by the Income Tax Department. It is seen that though initially, order of interim stay was 19/27 https://www.mhc.tn.gov.in/judis S.A.No.646 of 2003 granted by this Court, by subsequent order dated 10.09.2003, the interim stay has been vacated and the learned counsel for the petitioner submits that already the petitioner has paid a sum of Rs.6,00,000/- towards the property tax.

The learned counsel for the petitioner placed reliance on the decision of the Hon'ble Division Bench of this Court in S.N.R.Sons Charitable Trust V.Commissioner, Coimbatore City Municipal Corporation (supra). The Honourable Division Bench considered the effect of the payment made by the patients to the hospital, whether it could be equated to rent and held as follows:

“ In this case, the amounts paid by the patients, who use the hospital as well as the range of services provided by it, cannot be regarded as 'rent' paid by them in the narrower sense in which it is intended under the provisions referred to earlier”

15.In view of the said judgment, the contention of the learned Additional Advocate General that a mere exemption under Section 80(G) of the Income Tax will not automatically result in granting exemption from the payment of property tax is not legally sustainable. The exemption granted under Section 80(G) has to be taken 20/27 https://www.mhc.tn.gov.in/judis S.A.No.646 of 2003 into account by the defendant authority before levying property tax.

16.The learned Additional Advocate General further contended that admittedly the rent is being collected from the use of Choultry and hence, the plaintiff is not entitled to claim exemption from the property tax for the suit schedule property. Even a bare reading of Section 123(b) of the Act will clearly show that mere charging of income, is not a disqualification to claim exemption from the property tax, if the parties are enable to prove that the said nominal income is exclusively used for charitable purpose. The Hon'ble Division Bench of our High Court in a judgment reported in 1993 2 LW 100 in Paragraph No.7 has held as follows:

“7...... In view of the aforesaid decision of the Supreme Court, on a consideration of the relevant provisions of the Act referred to earlier, we are clearly of the view that the payments made by the patients to the hospital by way of hospital charges, or stoppages or even service charges, cannot be equated to “rent” as 21/27 https://www.mhc.tn.gov.in/judis S.A.No.646 of 2003 contemplated under the provisions of the Act and the denial of the benefit of exemption to the appellant; on that score cannot be sustained....”

17.Hence, the contention of the learned Additional Advocate General that mere charging of rent from the users of the Choultry will disqualify the plaintiff's association from claiming exemption from the property tax is also not legally sustainable. The plaintiff has to place all the accounts books and the records before the defendant authority to prove that what is being charged from the users of the Choultry is only a service charge and the entire income is being utilized for cleaning and maintenance of the Choultry and for other charitable purpose associated with the temple.

18.In the present case, the plaintiff has not approached the authority with the said documents. The defendant authority cannot brush aside the exemption granted to the plaintiff's association under Section 80(G) of the Income Tax Act. The defendant authority 22/27 https://www.mhc.tn.gov.in/judis S.A.No.646 of 2003 cannot reject the request for exemption from the property tax merely because the rent is charged from the users of the said property, in view of the Judgment of the Hon'ble Division Bench of this Court reported in 1993 2 LW 100. In fact, in a recent judgment of our High Court reported in 2020 5 LW 373 in Paragraph No.35 ,it has been held as follows:

“35.Prosperity is not the preserve of a commercial institution alone. It is probable, possible and indeed necessary that even charitable organisations including hospitals should be prosperous as increased prosperity will only lead to greater levels of charity and service. The deployment of the profits must however, be a pre-condition to the grant of the exemption. The argument to the effect that the mere existence of profit would debar an institution from claiming exemption, thus, stands rejected. What is necessary is for the respondents to have an appropriate mechanism to test and ensure that such profit if and when earned, is, in fact, utilized to subserve the charitable objectives of that institution” 23/27 https://www.mhc.tn.gov.in/judis S.A.No.646 of 2003

19.In view of the above said discussion, this Court comes to a conclusion that the plaintiff should be given an opportunity to establish that the income from the Choultry is being exclusively used for charitable purpose by approaching the defendant authority with all relevant account books and documents. The judgment and decree passed by the Courts below with regard to rejection of exemption from the payment of property tax is set aside. The plaintiff is at liberty to approach the defendant authority with all necessary documents for claiming exemption as applicable under Section 123(b) of the Coimbatore City Municipal Corporation Act (as applicable to Trichy Corporation). The defendant authorities are directed to consider the said documents after affording due opportunity to the plaintiff in the light of the judgments cited above and pass orders accordingly.

Since the issue of exemption is being remitted to the authorities for fresh consideration, this Court does not express any opinion about the plea of complete 24/27 https://www.mhc.tn.gov.in/judis S.A.No.646 of 2003 exemption from payment of property tax claimed by the plaintiff's association.

20.The substantial question of law is answered as follows:

(i) the Courts below have not properly appreciated the entire evidence and the relevant provisions of law relating to exemption of property tax.

21.In view of the above discussion, the second appeal is allowed. The plaintiff is directed to approach the defendant authority for seeking exemption from the payment of property tax. The authorities are directed to dispose of the same in the light of the judgments referred above. No costs.




                                                                               01.02.2022

                     Index    :             Yes / No
                     Internet :             Yes / No
                     msa




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https://www.mhc.tn.gov.in/judis
                                                                S.A.No.646 of 2003



                     Note :
                     In view of the present lock down owing

to COVID-19 pandemic, a web copy of the order may be utilized for official purposes, but, ensuring that the copy of the order that is presented is the correct copy, shall be the responsibility of the advocate / litigant concerned.

1.The Principal District Judge Trichirappalli

2.The District Munsif, Trichirappalli.

3.The Section Officer V.R.Section Madurai Bench of Madras High Court Madurai 26/27 https://www.mhc.tn.gov.in/judis S.A.No.646 of 2003 R.VIJAYAKUMAR,J.

msa Pre-delivery Judgment made in S.A.No.646 of 2003 01.02.2022 27/27 https://www.mhc.tn.gov.in/judis

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