2013 (11) TMI 1545 - HC - Indian Laws

Levy of Luxury Tax - clubbing of plinth area of all the premises to be allowed or not - Section 5A of the Kerala Building Tax Act - Held that - The very reference to more than one floor of a building would explicitly mean, if read along with the proviso that whether the building is a single unit so far as functional use is concerned, or separate units so far as functional utility of the building. If there is one building having more than one floor and they are interconnected with each other, in other words, if one floor is of no use without the existence of another floor, then it has to be considered as one building. Therefore, if there are 13 independent flats or apartments and if each of the building could be used on its own without reference to the other apartment, the question of taking the measurement of another building to calculate the plinth area would not arise. In that view of the matter, we are of the opinion, the reference to Explanation (2) to clause (e) is made in the proviso to Section 2(k) in the case of a building, the restricted meaning would be building consisting of different apartments or flats and nothing beyond that. Hence, the appeal deserves to be dismissed and accordingly dismissed. - Decided against the revenue.

Summary

Issues:
1. Interpretation of Section 5A of the Kerala Building Tax Act regarding the levy of luxury tax on residential buildings.
2. Definition of "plinth area" under subsection (k) of Section 2 and its application in determining luxury tax liability.
3. Clarification on whether the plinth area for luxury tax calculation should consider individual residential apartments within a building as separate units or as a single building based on ownership and construction cost.

Analysis:
1. The appeal before the Kerala High Court involved the interpretation of Section 5A of the Kerala Building Tax Act, which specifies the levy of luxury tax on residential buildings. The section mandates an annual luxury tax of Rs. 2000 on residential buildings with a plinth area of 278.7 square meters or more completed after April 1, 1999. The court examined the clear criteria for luxury tax applicability based on the completion date and plinth area of the building.

2. The court delved into the definition of "plinth area" as provided in subsection (k) of Section 2 of the Act. The definition includes the aggregate area of all floors for buildings with multiple levels. Additionally, the proviso to subsection (k) addresses specific types of residential buildings mentioned in Explanation (2) of clause (e). The court analyzed the technical aspects of plinth area calculation, emphasizing the need to consider all floors collectively for such buildings.

3. The judgment further clarified the application of plinth area calculation for luxury tax in cases of buildings with multiple independent apartments or flats. The court discussed the significance of ownership and joint construction cost in determining whether individual apartments should be treated as separate units or part of a single building. The ruling highlighted that if each apartment can function independently without reliance on others, they should be considered distinct units for plinth area calculation.

In conclusion, the High Court dismissed the appeal, affirming that the reference to Explanation (2) of clause (e) in the proviso to Section 2(k) pertains specifically to buildings consisting of different apartments or flats. The judgment provided a detailed analysis of the legal provisions and their application in determining luxury tax liability for residential buildings, emphasizing the importance of considering functional independence in assessing plinth area for taxation purposes.