2008 (2) TMI 953 - HC - Income Tax

Summary

Issues Involved:
1. Exemption from property tax for charitable hospitals u/s 123(e) of the Tiruchirappalli City Municipal Corporation Act.
2. Validity of the demand notice for property tax issued by the appellant Corporation.
3. Relevance of exemption granted u/s 80G of the Income Tax Act in claiming property tax exemption.

Summary:

Issue 1: Exemption from property tax for charitable hospitals u/s 123(e) of the Tiruchirappalli City Municipal Corporation Act
The respondent Hospital claimed exemption from property tax u/s 123(e) of the Tiruchirappalli City Municipal Corporation Act, asserting that it is a public charitable institution recognized by the Income Tax Department. The appellant Corporation contested this, arguing that the hospital operates with a profit motive, collects rent and fees, and thus does not qualify for the exemption.

Issue 2: Validity of the demand notice for property tax issued by the appellant Corporation
The appellant Corporation issued a demand notice for property tax, which was challenged by the respondent Hospital. The single Judge quashed the demand notice, relying on precedents and the exemption granted u/s 80G of the Income Tax Act. However, the Division Bench clarified that the exemption u/s 123(e) is not automatic and must be substantiated with evidence to the assessing authority.

Issue 3: Relevance of exemption granted u/s 80G of the Income Tax Act in claiming property tax exemption
The Court held that the exemption u/s 80G of the Income Tax Act, which pertains to donations, does not automatically entitle the respondent Hospital to property tax exemption u/s 123(e) of the Act. The hospital must demonstrate that it meets the criteria for exemption as specified in the proviso to Section 123(e).

Conclusion:
The Court set aside the single Judge's order and directed the respondent Hospital to submit a representation to the appellant Corporation within sixty days, providing relevant materials to support their claim for exemption. The appellant Corporation must then pass appropriate orders based on the materials and in accordance with the law. The respondent Hospital was also directed to pay one-third of the arrears of the impugned demand, subject to the final order by the appellant Corporation. The writ appeal was disposed of accordingly, with no costs.