1992 (8) TMI 306 - HC - Income Tax

Summary

Issues Involved:
1. Exemption from property tax u/s 123(e) of the Coimbatore City Municipal Corporation Act.
2. Definition and interpretation of the term "rent" in the context of property tax exemption.

Summary:

Exemption from Property Tax u/s 123(e) of the Act:
The appellant, S.N.R. Sons Charitable Trust, Coimbatore, sought exemption from property tax for Sri Ramakrishna Hospital, which was initially granted by the Coimbatore Municipality u/s 83(1)(e) of the Tamil Nadu District Municipalities Act, 1920, and later u/s 123(e) of the Coimbatore City Municipal Corporation Act. The exemption was valid until 31.3.1982. However, the respondent refused to renew the exemption from 1.4.1982 and demanded arrears of property tax for three half years commencing from 1.4.1982. The appellant contended that the hospital was charitable and provided free services to a significant portion of patients, justifying the exemption.

Definition and Interpretation of "Rent":
The primary contention revolved around whether the charges collected from patients for services such as bed, linen, nursing, and para-medical services could be classified as "rent" under the proviso to Section 123(3) of the Act. The learned Judge initially dismissed the writ petition, interpreting "rent" in a broad sense to include any charges collected from persons using the property.

Upon appeal, the High Court scrutinized the bills issued by the hospital, which itemized charges for various services, and concluded that these charges could not be equated to "rent." The Court referred to the Supreme Court's decision in State of Punjab v. British India Corporation Ltd. [1964] 2 SCR 114, which distinguished between rent in its narrower sense (payment by tenant to landlord) and broader sense (any payment for use of land or buildings). The Court held that the charges collected by the hospital were for services rendered and not for the demise of property, thus not constituting "rent."

Conclusion:
The High Court allowed the writ appeal, setting aside the dismissal of W.P. No. 9701 of 1983. It ruled that the payments made by patients were not "rent" as contemplated under the Act, and the appellant was entitled to the exemption from property tax u/s 123(e). The Court also noted the lack of justification for denying the exemption from 1.4.1982 when it had been granted until 31.3.1982. The writ petition was allowed as prayed for by the appellant, with costs awarded.