2010 (12) TMI 1303 - HC - Indian Laws

Exemption from building tax u/s 3(1)(b) of the Kerala Building Tax Act - hostel building of an educational institution - entitled for exemption from building tax under Section 3(1)(b) of the Kerala Building Tax Act, 1975, which provides for building tax exemption for buildings used for educational purposes or not? Whether educational purposes referred to in the above Section has only a restricted meaning covering buildings, where students are imparted education; or whether it has a wider meaning covering hostel buildings owned by educational institutions to provide accommodation to students in the premises of the educational institutions? - HELD THAT - Wherever hostel is compulsory for approval of a course study or an educational institution by the regulatory body as in the case of medical and nursing colleges, hostel building is an integral part of the educational institution, and so much so, accommodation to students provided in the hostel building is for educational purpose and therefore the hostel building qualifies for exemption from building tax. In view of the above finding, we are unable to agree with the denial of exemption to hostel building attached to the nursing school. Whether hostel facility to students provided by other educational institutions, which are not compulsorily required under the educational regulations to provide accommodation to students, is an educational purpose qualifying the hostel buildings for tax exemption? - HELD THAT - The hostel buildings are constructed by educational institutions to attract students to their institutions. Many educational institutions provide only basic facilities like building, electricity and water connections for hostels and in fact, students are running mess on sharing basis. So much so, the State's contention that hostels attached to educational institutions are commercial ventures intended to make profit, in our view, is unacceptable. In order to consider whether hostel provided by an educational institution is for educational purpose or not, we have to consider the consequences if such educational institution does not have hostel facility to provide accommodation to its students. Obviously, such educational institutions have to source students locally, which may be possible only in the case of Schools. In fact, thousands of schools and colleges in the State do not have hostel facility because they depend on students from the local area only - In fact, without hostel facility, many educational institutions will not have required number of students to run it. We, therefore, feel accommodation is a necessary facility, which an educational institution is required to provide to it's students; and so long as the purpose of stay of students in the hostel is to study in the educational institution, the purpose of such building, which is used for accommodation of students, qualifies as educational purpose. The buildings owned by educational institutions for providing hostel accommodation to students qualify for building tax exemption under clause (b) of Section 3(1) of the Act. However all buildings accommodating students do not qualify for building tax exemption because there are so many lodge buildings constructed by various people around educational institutions which do not have hostel facility, to rent out to students in such educational institutions. Letting out of buildings by private agencies is a commercial activity whether tenants are students or not. In other words, only hostel buildings owned by educational institutions for accommodating it's own students in such hostels will qualify for exemption under clause (b) of Section 3(1) the Act. Appeal disposed off.

Summary

Issues Involved:
1. Whether hostel buildings of educational institutions qualify for exemption from building tax under Section 3(1)(b) of the Kerala Building Tax Act, 1975.
2. Interpretation of "educational purposes" within the context of the Kerala Building Tax Act.
3. Applicability of the Kerala Municipalities Act and other legal precedents.
4. Consideration of fees charged by educational institutions for hostel facilities.
5. Scope of exemption for buildings used for educational purposes.

Issue-wise Detailed Analysis:

1. Exemption of Hostel Buildings from Building Tax:
The core issue addressed is whether hostel buildings of educational institutions are entitled to exemption from building tax under Section 3(1)(b) of the Kerala Building Tax Act, 1975. The court analyzed whether the term "educational purposes" includes hostel buildings that provide accommodation to students. The judgment concluded that hostel buildings, particularly those attached to nursing schools and medical educational institutions, qualify for exemption as they are integral to the educational institutions' functioning and mandatory for their approval by regulatory bodies.

2. Interpretation of "Educational Purposes":
The court examined whether "educational purposes" should be narrowly interpreted to include only buildings where education is imparted or broadly to include hostel buildings. The court referenced the educational regulations of the Medical Council of India and Nursing Council of India, which mandate hostel facilities for the approval of medical and nursing colleges. The judgment held that the term "educational purposes" has a broader meaning, encompassing hostel buildings that provide necessary accommodation to students, thereby qualifying for tax exemption.

3. Applicability of Kerala Municipalities Act and Legal Precedents:
The appellants relied on Section 235 of the Kerala Municipalities Act, which provides for property tax exemption for hostel buildings owned by educational institutions. The court distinguished this from the provisions of the Kerala Building Tax Act. The court also considered the Supreme Court's decision in Municipal Corporation of Delhi v. Children Book Trust but found it inapplicable due to differences in statutory provisions. The judgment emphasized that the Kerala Building Tax Act's exemption clause should be interpreted in light of the general pattern of hostel facilities provided by educational institutions in the state.

4. Consideration of Fees Charged for Hostel Facilities:
The government argued that charging fees for hostel accommodation rendered the purpose commercial, disqualifying the buildings from tax exemption. The court rejected this argument, stating that the collection of reasonable fees does not negate the educational purpose of the hostel buildings. The judgment clarified that while charitable purposes require free services, educational purposes under Section 3(1)(b) do not necessitate free education or accommodation.

5. Scope of Exemption for Buildings Used for Educational Purposes:
The judgment concluded that buildings owned by educational institutions for providing hostel accommodation to their students qualify for building tax exemption. However, it distinguished between hostels owned by educational institutions and private lodges rented out to students, the latter being commercial ventures not eligible for exemption. The court emphasized that the principal use of the building should be for educational purposes to qualify for exemption.

Conclusion:
The court allowed the writ appeals, vacating the judgments of the learned Single Judge and the assessments that declined exemption and demanded building tax for the hostel buildings. The judgment clarified that the principal use of the building should be for educational purposes, and minor accommodations for teachers or staff do not disqualify the building from exemption.