2021 (10) TMI 1356 - HC - Indian Laws

Demand of property tax in respect of two buildings owned by the petitioner - CHAD building - College building - eligibility for exemption in terms of Coimbatore City Municipal Corporation Act, 1981 - hospital comes within the description of a 'charitable hospital' or not - HELD THAT - Reports for the periods 2018-2019 and 2019-2020 have been circulated along with statement of costs and statements indicating the break-up between the charitable work and the revenue generating work that the institution is engaged in. Orders of assessment as well as Certificate under Section 80 G of the Income Tax Act, 1961 have also been placed on record - Suffice it to say that the argument advanced by the respondents, that only an institution which has no revenue at all can be a charitable institution, is untenable as it ignores ground realities. Assuming that an institution was bereft of all revenue sources, such institution would itself be in a need of charity, and cannot hope to do charity. Though the grant of exemption is one that should be considered by the original authority and not a question in which the Court would be inclined to intervene under Article 226, in this case, it is believed that such intervention is justified. It is not in dispute that the hospital has been granted the benefit of exemption continuously from 1933. It is also not in dispute that the CHAD is part of the hospital and is engaged in charity and medical relief, both in the hospital and, as an extension to the neighbouring committees as well - there are no justification whatsoever to exclude the CHAD from the ambit of exemption from property tax and quash that portion of the impugned order denying such relief. Claim of exemption qua the buildings comprised in the educational institution - HELD THAT - The amendment does overlook the charitable nature of the activity undertaken by a teaching college. It perhaps was intended to address prosperous educational institutions run on profit motive. A teaching institution, by definition, focuses on the dispensation of education in the arena of medicine, both subjects constituting public duty. The fee structure in the college is stated to a sum of Rs. 3000/- per annum only and no other charges are collected - The expenditure is wholly met from out of the fee collection from the hospital, which also treats a section of the society gratuitously. Thus, a distinction must be made between a teaching hospital which is service oriented and other Educational institutions where the dominant object is profit. Thus, it stands now, the petitioner is not entitled to exemption from property tax in regard to the college buildings. The impugned order is upheld to this extent - petition allowed in part.

Summary

Issues Involved:
1. Exemption from property tax for CHAD building and College building.
2. The applicability of the Government Order (G.O.) from 1933.
3. The procedure followed in the disposal of the representation.
4. The classification of the petitioner as a charitable institution.
5. The relevance of the amendment to the Coimbatore City Municipal Corporation Act, 1981.

Detailed Analysis:

1. Exemption from Property Tax for CHAD Building and College Building:
The petitioner, a registered society managing the Christian Medical College and Hospital, challenged the property tax demand for CHAD and College buildings. The petitioner argued that these buildings should be exempt under Section 123(e) of the Coimbatore City Municipal Corporation Act, 1981, which exempts "charitable hospitals and dispensaries but not including residential quarters attached thereto."

2. Applicability of the Government Order (G.O.) from 1933:
The petitioner cited G.O. No. Ms.2270 L & M from 1933, which recognized the institution as a charitable hospital and granted property tax exemption. The G.O. acknowledged that the hospital provided free treatment to the poor and collected fees from those who could pay, which did not negate its charitable status. The court noted that this historical context was relevant but pointed out that the statutory provisions and amendments must be considered for current applicability.

3. Procedure Followed in the Disposal of the Representation:
The petitioner objected to the group discussion format used to address their representation for exemption, arguing that it was inappropriate for such matters. The court found no inherent issue with group discussions if officials could handle submissions precisely and in detail. However, the court emphasized that personalized hearings would be more suitable for claims of exemption.

4. Classification of the Petitioner as a Charitable Institution:
The court examined whether the petitioner qualified as a "charitable institution" under Section 123(e). It was noted that the institution provided free treatment to a significant portion of patients and charged fees from those who could afford it, which was necessary to sustain its charitable activities. The court referenced previous judgments affirming that earning profits incidentally to charitable activities does not disqualify an institution from being considered charitable, provided the profits are used to further its objectives.

5. Relevance of the Amendment to the Coimbatore City Municipal Corporation Act, 1981:
The respondents argued that the 1994 amendment to the Act, which required educational institutions to remit property taxes, applied to the petitioner's college buildings. The court agreed that the statutory amendment excluded educational buildings from exemption, regardless of their charitable nature. Consequently, the court upheld the tax demand for the college buildings but quashed the demand for the CHAD building, recognizing it as part of the charitable hospital activities.

Conclusion:
The court partially allowed the writ petition, granting exemption from property tax for the CHAD building but upholding the tax demand for the college buildings. The court emphasized the need for a nuanced approach to exemptions, recognizing the charitable work of the institution while adhering to statutory provisions. The decision underscored the importance of sustaining charitable activities through permissible revenue generation and called for legislative clarity to support genuine charitable institutions.