Karnataka High Court
Asian Paints Limited vs The Commissioner on 14 July, 2022
Author: Krishna S.Dixit
Bench: Krishna S.Dixit
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IN THE HIGH COURT OF KARNATAKA, BENGALURU
DATED THIS THE 14TH DAY OF JULY, 2022
BEFORE
THE HON'BLE MR JUSTICE KRISHNA S.DIXIT
W.P. No.14241/2013 (LB-TAX)
BETWEEN:
ASIAN PAINTS LIMITED,
A COMPANY REGISTERED UNDER THE
PROVISIONS OF COMPANIES ACT, 1956,
HAVING ITS REGISTERED OFFICE AT
6A, SHANTHINAGAR, SANTA CRUZ (EAST),
MUMBAI-400 055,
REP. BY ITS GPA HOLDER,
DINDU SOMAN SON OF J SOMAN,
AGED ABOUT 30 YEARS,
RESIDING AT B-105, TEMPLE TREE APTS,
KANAKAPURA ROAD, BENGALURU.
... PETITIONER
(BY SHRI SHRIDHAR PRABHU, ADVOCATE)
AND:
1. THE COMMISSIONER,
BHRUHATH BENGALURU MAHANAGARA PALIKE,
CORPORATION CIRCLE,
BENGLAURU-560 002.
2. ASSISTANT REVENUE OFFICER,
(WARD NO.39, 41),
PEENYA INDUSTRIAL
CENTRE, SUB DIVISION,
BHRUHATH BENALURU MAHANAGARA PALIKE,
DHASARAHALLI DIVISION,
BENGALURU-560 057.
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3. STATE OF KARNATAKA,
DEPARTMENT OF URBAN DEVELOPMENT,
VIKASA SOUDHA,
DR. AMBEDKAR VEEDHI,
BENGALURU-560 001,
REP. BY ITS PRINCIPAL SECRETARY.
... RESPONDENTS
(BY SHRI PAWAN KUMAR, ADVOCATE FOR
SHRI H.DEVENDRAPPA, ADVOCATE FOR R1 & R2;
SHRI K.R. NITYANANDA, AGA FOR R3)
THIS WRIT PETITION IS FILED UNDER ARTICLES 226 &
227 OF THE CONSTITUTION OF INDIA, PRAYING TO DECLARE
THAT 2ND RESPONDENT DOES NOT HAVE THE JURISDICTION,
AUTHORITY OR POWER UNDER LAW TO ISSUE THE SHOW
CAUSE NOTICE DATED 23RD FEBRUARY 2013, ISSUED BY THE
2ND RESPONDENT VIDE ANNEXURES-A AND CONJUNCTLY
QUASH THE SHOW CAUSE NOTICE DATED 23RD FEBRUARY
2013 ISSUED BY THE 2ND RESPONDENT VIDE ANNEXURE-A.
THIS WRIT PETITION HAVING BEEN HEARD AND
RESERVED FOR ORDERS ON 19.04.2022, COMING ON FOR
PRONOUNCEMENT THIS DAY, THE COURT MADE THE
FOLLOWING:
ORDER
Petitioner, company is knocking at the doors of Writ Court grieving against the Demand Notice dated 24.12.2011 for the recovery of differential of tax amount concerning the Assessment Years 2008-09, 2009-10, 2010-11 & 2011-12. This demand is raised by the 2nd Respondent-Assistant Revenue Officer (hereinafter 'ARO'). After service of notice, the Respondent Nos.1 & 2 3 have entered appearance through their learned panel counsel. The 3rd respondent-State is represented by the learned Additional Government Advocate. Both the Panel Counsel and the AGA resist the Writ petition making submission in justification of the impugned demand of tax for the subject assessment years mentioned above.
II. FACTS IN BRIEF:
(a) Petitioner is a public limited company incorporated under the provisions of erstwhile Indian Companies Act, 1913 and now governed under the provisions of Companies Act, 2013. It is engaged in the business of manufacturing selling & distributing of paints, lacquers & varnishes; for the purposes of carrying out its business it operates through a series of sales depots or godowns. On 24.12.2011, 2nd Respondent
- ARO issued a Demand Notice under section 147 read with section 108 - A(3) & (11) of Karnataka Municipal Corporations Act, 1976 (hereinafter '1976 Act').
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(b) Petitioner sent two request letters dated 11.04.2012 & 10.05.2012 to the 2nd Respondent - ARO requesting for the extension of time for replying to the demand notice. Subsequently, a Show Cause Notice came to be issued on 05.08.2012 under section 147 read with Rule 21, Schedule III of the Taxation Rules promulgated under the 1976 Act, demanding differential amount of property tax along with fine in all amounting to Rs.31,01,937/-
(c) On 20.09.2012 a reply to the Show Cause Notice was sent by the Petitioner inter alia contending that the 1976 Act did not empower the 2nd Respondent to enhance the property tax. Subsequently, another Show Cause Notice came to be issued by the 2nd Respondent - ARO on 23.02.2013 demanding a sum of Rs. 20,84,635/- which excluded the penalty & 2% interest per mensum. Aggrieved thereby petitioner has approached the Writ Court.
III. CONTENTION OF PARTIES:
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(a) Petitioner inter alia contends that property tax for the Assessment Years 2008 - 2012 having already been paid, the demand for differential of the tax is due to wrong categorization of properties; the deferential demand is by an officer not authorized to levy tax and that there is no consultation with the Karnataka Property Tax Board, which has been made mandatory by the provisions of Karnataka Municipal Corporations and Certain Other Law (Amendment) Act, 2011 (hereinafter '2011 Amendment Act'). In support of his contentions learned counsel for the petitioner banks upon S.N. SRINIVASA MURTHY vs. THE COPORATION OF THE CITY OF BANGALORE1
(b) Respondents, per contra contend that Petitioner's properties having been assessed under a wrong category differential tax is now sought to be levied & recovered under Section 108-A of the 1976 Act; the demand by the 2nd Respondent is competent. So contending, they seek dismissal of the Writ Petition.
1 ILR 1998 KAR 101 6 IV. Having heard the learned counsel for the parties and having perused the petition papers, this Court is inclined to grant indulgence in the matter for the following reasons:
(a) Indisputably, local self governments are pivotal in ensuring democratic decentralisation in the country in order to usher in genuine grass roots democracy as envisaged by our constitutional framework. What the SECOND ADMINISTRATIVE REFORMS COMMISSION in its SIXTH REPORT on Local Governance dated October 2007 said illuminates the point:
"Our Constitution provides a clear mandate for democratic decentralisation not only through the Directive Principles of State Policy which exhorts the State to promote Panchayati Raj Institutions but more specifically now through the 73rd and 74th Amendments of the Constitution which seek to create an institutional framework for ushering in grass roots democracy through the medium of genuinely self-governing local bodies in both urban and rural areas of the country..."
As a facet of decentralisation the empowerment of the 'third-tier of government' entails strengthening fiscal responsibility & stability with regard to local 7 bodies both in urban and rural areas. It would be pertinent to note that 2011 Amendment Act has been made pursuant to recommendations of the 13th Finance Commission 2010 - 2015 (December 2009) which reads as under:
"For achieving a greener and more inclusive growth path we need a fiscally strong Centre, fiscally strong states and fiscally strong local bodies, or the third tier of government... The intent is to ensure that the states and local bodies have the fiscal potential to provide comparable levels of public services, at reasonably comparable levels of taxation...Only some states have significantly empowered local bodies by transferring expenditure obligations, taxation powers and staff resources to them. It has been contended that decentralization is not fiscally neutral as it will generate increased demands in the scope, scale and quality of services provided by the local bodies. Thus, more funds devolved to local bodies would encourage State Governments to accelerate their decentralization efforts. Transfer of functions and functionaries may then follow transfer of funds"
(b) Chapter IX - A to the 1976 Act came to be inserted vide 2011 Amendment Act w.e.f 07.04.2011. The Statement of Objects and Reasons of this Amendment Act reads as under:
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"One of the mandatory reforms to be undertaken by the State Government under the Jawaharlal Nehru National Urban Renewal Mission is to enact a law providing for community participation in the Municipal Corporations having a population exceeding three lakhs. It requires the establishment of a three tier structure of governance at the level of Municipal Council, ward committee and area Sabha. The 13th Finance Commission of India recommended that State Governments to establish Property Tax Board to assist urban local bodies, in determining and collection of Property Tax and to make a provision relating to audit report to place before the State Legislature. Therefore, it is considered necessary to amend the Karnataka Municipal Corporations Act, 1976 (Karnataka Act 14 of 1977) and Karnataka Municipalities Act, 1964 (Karnataka Act 22 of 1964) to provide for the following. Hence the Bill..."
Accordingly, the Board came to be established with a view to increase the tax base, collection of tax, assistance by the local bodies in determining the property tax and placing of Audit Reports before the State Legislature.
(c) Section 102-B of the 1976 Act, which enacts a Henry the VIII Clause, reads as under:
"102B. Act to override other laws.-
Notwithstanding anything contained in any law 9 for the time being in force, no municipality or corporation shall determine the rate of any zone, area or any nature or class of building for taxation without consultation of the Board." A bare perusal of the 2011 Amendment Act shows that this new chapter, i.e., Chapter IX-A added to the 1976 Act is a complete code in & of itself and that Section 102-B of the 1976 Act, which is reproduced above gives overriding effect qua any law for the time being in force and makes consultation with the Board a sine qua non for determining the rate of any zone, area, nature or class of building for the purpose of taxation. Thus, the reliance of the learned panel counsel appearing for Respondent No. 1 & 2 on the provisions of Section 108-A of the 1976 Act does not come to their rescue, given the exclusionary provision, i.e., section 102-B. Re-determination of tax sans mandatory consultation with the Property Tax Board falls short of the principle intent of Chapter IX - A. This view gains support from the Apex Court 10 decision in A.V. FERNANDEZ vs. THE STATE OF KERALA2 wherein it was observed:
"... If, on the other hand, the case is not covered within the four corners of the provisions of the taxing statute, no tax can be imposed by inference or by analogy or by trying to probe into the intentions of the legislature and by considering what was the substance of the matter..."
(d) Learned counsel appearing for the petitioner, Mr. Shridhar Prabhu, is more than justified in submitting that the Division Bench decision of the Bombay High Court in W.P. No.2592/2013 between PROPERTY OWNERS' ASSOCIATION vs. STATE OF MAHARASHTRA disposed off on 24.04.2019 relied upon by the Respondents does not come to their aid inasmuch as section 129(2)(A) of the Maharashtra Municipal Corporation Act, 1949 contains a transitory provision whereby, the competent authorities are empowered to determine and levy property tax pending formation of the Property Tax Board. However, such a transitory provision is 2 AIR 1957 SC 657 11 conspicuously absent in the 1976 Act as amended. As to why no such transitory provision is enacted, is a matter of legislative wisdom, and Courts have to show due deference to Co-ordinate branches of Government. It has been well settled that where a statute provides for a thing to be done in a particular manner, it has to be done in that particular manner, and in no other manner vide CHANDRA KISHORE JHA VS. MAHAVIR PRASAD3. Therefore, the contention of the Respondents that such an interpretation would result into loss to the Exchequer does not come to rescue of respondents, the right not to be taxed otherwise than by law being a constitutional guarantee under Article 265.
(e) There is also a lot of force in the contention of learned counsel appearing for the petitioner, that in view of the 2011 Amendment Act, the power to re- determine the property tax also withers away 3 AIR 1999 SC 3558 12 inasmuch as that very power sans consultation with the Board is rendered nonexistent, consultation of the Board being a sine qua non to the re- determination. Added, the power to re-determine tax arguably is an offshoot of the original power to levy tax. What emanates from the text & context of Chapter IX - A is that any re-determination of tax is nothing but a kind of 'periodical review' of the taxability, stopping short of re-determination of quantum. In view of principle intent & policy content of the 2011 Amendment Act, it cannot be gainsaid that re-determination is a facet to 'periodic review' of taxability. As already mentioned above, once the original power to tax is taken away, logically the power to re-determine also. In light of this reasoning, the impugned demand notices for the subject assessment years preceding the Amendment Act too cannot be sustained.
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In the above circumstances, this petition is allowed. A Writ of Certiorari issues quashing the impugned Demand Notices dated 24.12.2011 & 23.02.2013. Costs made easy.
Sd/-
JUDGE Snb/