Madras High Court
Southern India Education Trust, Rep. By ... vs The Government Of Tamil Nadu, By Its ... on 22 November, 1999
Equivalent citations: 1999(3)CTC711
Author: K.G. Balakrishnan
Bench: K.G. Balakrishnan
ORDER Judgment pronounced by K.P. Sivasubramaniam, J.
1. The following facts would be sufficient for the disposal of the above writ appeal. The appellant is an educational trust which is registered under the Societies Registration Act, owning an extent of 253 grounds and 1162 sq, ft. with land and buildings. The object of the society are interalia, to promote education of all types and grades, to take steps to disseminate knowledge, scientific, technical, religious and cultural, to secure the welfare of minority muslims, to establish and maintain schools and colleges and the other educational, charitable and religious institutions etc. In the year 1981, the society was assessed to urban land tax and a sum of Rs.1,02,396 was levied for each fasli commencing from 1971. On appeal filed by the society, the commissioner of Land Reforms, by his order dated 26.9.1981, set aside the order of the Assistant Commissioner and directed fresh assessment after excluding portions of the land and buildings occupied for educational purposes. Fresh assessment was made after excluding purposes. Fresh assessment was made after excluding 239 grounds and 599 sq.ft.
Under section 29(h) of he Tamil Nadu Urban Land Tax Act, 1966, (herein after referred to as 'the Act'). The said extent was excluded on the ground that the same was being used for the purpose of education. Tax was levied on the remaining extent of 14 grounds and 563 sq.ft. as the assessing authority found that the extent was not utilised for the purpose of education and in fact was used for commercial purposes. The assistant Commissioner, Urban Land Tax by his order dated 14.8.1992 sought to levy tax on the appellant. Subsequently the order was revised on 10.2.1983 adopting a reduced market rate.
2. Thereafter the society appears to have approached the Government by its representation dated 12.1.1983, seeking exemption under section 27(1) of the Act. Its request was rejected by order dated 7.4.1988 on two grounds viz., (1) the society was not registered as a charitable institution under section 12 of the Income Tax Act and that (2) the society had not shown that it had spent atleast 90% of its net income towards its charitable objectives and purposes. It may be immediately mentioned here that the said two grounds of rejection were based on the Government Order (miscellaneous) No.1834. Revenue Department, dated 29-10-1983, wherein certain guidelines were issued for the purposes of granting exemption under Section 27 of the Act. The said order dated 7-4-1988 was questioned by the appellant in W.P.No.11284 of 1988. P. Sathasivam, J while rejection the writ petition held that the impugned order was in consonance with the guidelines and justified in the circumstances of the case. Hence the present appeal.
3. Mr.Ibrahim Kalifulla, learned counsel for the appellant contends that there being no dispute that the institution was an educational Institution, it would fail aquarely under section 29(h) of the Act and hence entitled to be completely exempted from the purview of the Act. It is further represented that the learned counsel judge had wrongly assumed that G.OMs.No.1834, dated 29.10.1983 therein after referred to as, G.O), would apply to exemption under section 29(h) of the Act and thus erroneously upheld the grounds on which the claim of the appellant was rejected.
4. It is true that the G.O. had been issued only in the context of exemption contemplated under section 27 of the Act and not for the exemption under section 29 of the Act. Nonetheless, the ultimate conclusions arrived at by the learned judge are justified for the following reasons to appreciate the issue which arises for consideration in this appeal, it is relevant to notice that two types for exemptions contemplated under the Act. A reading of both the provisions would disclose that while section 29 deals with a total and mandatory exemption, section 27 of the Act contemplates discretionary exemption which the Government is entitled to grant subject to the assessee satisfying the required criteria. In other words, the exemption under section 29 of the Act is automatic, mandatory and total and there is no discretion left with the Government to refuse the grant of exemption, if the assessee fails within any one of the categories enumerated thereunder. When once an institution is either notified or is shown to be covered under section 29, the exemption is complete and unconditional and the Revenue has no discretion to ignore or to refuse the exemption or to pass any order of assessment: The provisions of the Act themselves are held inapplicable. Section 29(h) of the Act reads as follows:-
Exemption:- Nothing in this Act shall apply to-
(h) any urban land used schools, colleges or universities for purposes directly connected with education, but not including any urban land owned by such educational institutions and-
(i) which is vacant, or
(ii) in which buildings from which income is derived have been constructed.
Explanation I, for the purposes of this clause, schools or colleges shall mean only such schools or colleges which are educational institutions recognised either by the Government or by any university, as the case may be.
Explanation II - for the removal of doubts, it is hereby declared that the urban land on which schools, colleges or universities or staff quarters or hostels or other buildings used for the welfare of the students, have been constructed, or used as play grounds attached to such schools, colleges or universities, shall be deemed to be urban land used for the purpose directly connected with education;) In contrast under, section 27 of the Act the exemption is discretionary subject to the qualification as may be prescribed by the Government. The exemption could be granted fully or partially subject to conditions or be even modified or cancelled subsequently. Section 27 of the Act reads as follows:-
27. Power of Government to exempt or reduce urban land tax.--
(1) The Government, if satisfied that the payment of urban land tax in respect of any clause of any clause of urban lands or by any class of persons will cause undue hardships, they may, subject to such rules as may be made in this behalf, by order,-
(a) exempt such lands or persons from the payment of the urban land tax, or
(b) reduce the amount of such urban land tax whether prospectively or retrospectively.
(2) The Government may at anytime cancel or modify any other issue under sub-section (1) and upon such cancellation or modification, the entire amount of urban land tax due under the modified order, as the case may be, shall be payable in respect of the land concerned with effect from the fasli year in which such cancellation or modification is made:
Provided that no such cancellation or modification shall be made unless the party likely to be affected by such cancellation nor modification has had a reasonable opportunity of making his representations.
5. It is only in the context of Section 27, the Government had issued certain guidelines under G.O.Ms.No.1834, dated 29.10.1983 prescribing conditions for the entitlement of exemption under Section 27 of the Act.
6. Now turning to the facts of the present case, exemption was granted under section 29 of the Act with reference to 239 grounds and only an extent of 14 grounds were assessed to tax since the authorities found that the said extent was not utilised for educational purposes. According to the learned counsel for the appellant, since the entire income of the trust was utilised only for educational and charitable purposes, the exemption ought to have been granted under section 29(h) of the Act itself. We are unable to uphold the said contention. Explanation n to section 29 (h) of the Act is pertinent in this context. It is only such of those properties and buildings which are directly concerned with the educational purposes, such as play grounds, hostels, buildings used for colleges; schools, staff quarters etc., which are qualified to be exempted and not properties which are unconnected with the educational purposes. The entitlement for exemption under section 29(h) of the Act does not depend only upon the nomenclature or the avowed objectives of the institution. But the actual purpose for which the properties are utilised or put to use, has to prevail. It is not disputed that the properties assessed for tax are properties let out for commercial purposes, totally unconnected with educational purposes. The said properties were therefore rightly excluded from the applicability of section 29(h) of the Act and infact the appellant himself had applied for exemption only under section 27 of the Act as could be seen from the impugned order. It is true that there can be no estoppel against the statute and the assessee would be entitled to exemption under section 29 of the Act if the properties would fall under that provision. But there being no dispute over the fact that the portion of the property which was assessed for tax has nothing to do with educational purposes, it follows that the exemption sought for would fall only under section 27 and not under section 29(h) of the Act.
7. Therefore, the guidelines prescribed under the G.O. were rightly invoked. The two grounds stated in the impugned order for rejecting the request for exemption are not factually disputed, viz., that the institution was not registered as a charitable institution under Income Tax Act and it was not shown that atleast 90% of the net income had been spent for the charitable and educational objects and purposes. Hence, the refusal to grant exemption under section 27 of the Act is justified.
8. In the result, the writ appeal is dismissed. CMP. is also dismissed. No costs.