Karnataka High Court
Union Of India And Others vs City Municipal Council, Ranebennur, ... on 19 July, 1999
Equivalent citations: AIR2000KANT104, 2000(1)KARLJ31
ORDER
By this petition validity of Section 94 of the Karnataka Municipalities Act, 1964 has been assailed. The petitioners are the owners of the departmental staff quarters. By circular dated 10-1-1995 direction was given to levy tax on property belonging to Central Government if the same is used for residential purposes. Section 94 of the Act authorises the Municipal Council to levy the tax in respect of land or building situated within its area. The proviso which is challenged is as under:
"Provided that.-
(a) no tax imposed as aforesaid other than water-rate shall, without the express approval of the Government, be leviable in respect of.-
(i) any building or part of any building belonging to the Central Government or any State Government and used for purposes of Government and not used or intended to be used for residential or commercial purposes;
(ii) any land belonging to the Government not used for commercial purposes;
(iii) any vehicle, or other property belonging to the Central Government or any State Government and used for purposes of Government and not used for commercial purposes;
(iv) any building or part of a building used as a place of public worship or used for charitable purpose".
2. Article 285 of the Constitution provides that the property of the Union shall save insofar as Parliament may by law otherwise provide, be exempt from all taxes imposed by a State or by any authority within a State.
3. Learned Counsel for the petitioner submitted that the Government of India is making payment of service charges to the local bodies in respect of Central Government properties as is clear from the letter dated 29-3-1967 wherein the procedure for calculating the service charges has been laid down and the expenses incurred by the local authorities are reimbursed by the Government of India. Reliance is placed on the judgment given in the case of Turf Properties Limited v Corporation of Calcutta and Others.
4. The submission of the learned Counsel for the respondent is that the power to levy tax is to be distinguished from the power of exemption and since there is a power to levy the tax, the exemption clause has to be construed strictly. It is further submitted that the respondents are not collecting the tax but it is only a reimbursement of the expenses incurred in maintaining and providing various other amenities provided in the colony where these buildings are situated.
5. I have considered over the matter.
It is not in dispute that the property belongs to Government of India. Problem has arisen because the said properties are being used for residential purposes and under the proviso to Section 94 of the Act, if the use of the property is for commercial or residential purpose, then tax could be levied thereon. It is on the basis of this proviso that a circular has been issued. So far as the first contention raised by the learned Counsel for the respondent is concerned, it may be observed that there is a power for levy of tax and the provisions of exemption comes only after the power to legislate the tax. Article 285 of the Constitution of India provides the circumstances under which the tax could be levied. It is the power which the Parliament may confer on the State Government to levy the tax then only the power of legislation for levy of tax could be exercised. Unless there is enactment by the Parliament, conferring such a power on the State Government or the Municipal Authority, the power to levy the tax cannot be exercised. Since no such enactment has been made, the provisions of Article 285 have to be interpreted in the manner that there is a prohibition to levy the tax. The word 'exempt' used is to be considered as a prohibition on the right of the State Government or Municipality to levy the tax. [The contention raised by the learned Counsel for the petitioner therefore has no substance]. The other contention which is raised is that it is not a tax but only a reimbursement of the expenses. It may be observed that the proviso to Section 94 refers to levy of tax and not for reimbursement of expenses and therefore to that extent the proviso is ultra vires the provisions of Article 285 of the Constitution of India. The reimbursement of the expenses is under mutual agreement or understanding, without there being any enactment. If the respondents are not getting that amount they will be free to realise the said amount in accordance with Annexure-E or any other further notification which has subsequently been issued.
6. In re Sea Customs Act, 1878, Section 20(2), Special Reference No. 1 of 1962, AIR 1963 SC 1760, the provisions of Government of India Act, 1935 were taken into consideration and it was observed that reading Article 289 and its complementary Article 285 together, the intention of the Constitution makers was that Article 285 would exempt all property of the Union from all taxes on property levied by a State or by any authority within the State, while Article 289 contemplates that all property of the States would be exempt from all taxes on property which may be leviable by the Union. Both the Articles are concerned with taxes directly either on income or on property and not with taxes which may indirectly affect income or property. The contention therefore that these two articles should be read in the restricted sense of exempting the property or income of a State in one case and the property of the Union in the other from taxes directly either on property or on income as the case may be, is correct.
7. Provisions of Article 289 exempt the property of the State and that of Article 285, provide exemption to property of the Union are complementary to each other with a view not to levy the tax by State Legislature on the property of the Union and also by the Parliament on the property of the State. Article 285 refers to the property of the Union. If the property belongs to the Union, then, irrespective of its use, no tax could be levied by the State Legislature or by Municipal Authorities. The concept of use is not provided under Article 285. The denial of exemption under the proviso to Section 94 of the Act on the ground that the property is used or intended to be used for residential or commercial purpose cannot be considered to be inconsonance with the spirit of Article 285 of the Constitution of India. No property belonging to the Union of India irrespective of its use could be subjected to tax and therefore the proviso of Section 94 of the Karnataka Municipalities Act to that extent is ultra vires of Article 285 of the Constitution of India.
8. Petition stands allowed.