2008 (1) TMI 996 - HC - Indian Laws

Summary

Issues Involved:
1. Demand for property tax on educational institutions under Section 172 of the Tamil Nadu Panchayats Act, 1994.
2. Exemption of buildings used for educational purposes from property tax under Rule 15(c) of the Tamil Nadu Village Panchayats (Assessment and Collection of Taxes) Rules, 1999.
3. Conflicting judicial decisions on the interpretation of Rule 15(c).
4. Charitable nature of educational institutions as a condition for tax exemption.
5. Interpretation of the term "public" in the context of educational institutions and hostels.

Issue-wise Detailed Analysis:

1. Demand for Property Tax on Educational Institutions:
The appellant/petitioners, educational institutions, challenged the demand for property tax under Section 172 of the Tamil Nadu Panchayats Act, 1994. They argued that buildings used for educational purposes are exempt from liability under Rule 15(c) of the Tamil Nadu Village Panchayats (Assessment and Collection of Taxes) Rules, 1999.

2. Exemption of Buildings Used for Educational Purposes:
Rule 15(c) states: "buildings used for educational purposes including hostels and libraries which are open to the public and public buildings used for charitable purpose of sheltering the destitutes or animals." The petitioners contended that the exemption applies to all buildings used for educational purposes, irrespective of whether they are aided or unaided, or run on a self-financing pattern.

3. Conflicting Judicial Decisions:
Two conflicting decisions were highlighted:
- Justice P. Jyothimani's Decision (2006): Held that buildings used for educational purposes, including hostels recognized by the State and other educational authorities, are entitled to exemption from house tax as per Rule 15(c). The charitable character of the institution was deemed irrelevant.
- Justice P.K. Misra's Decision (2003): Held that only charitable organizations running hostels or libraries are eligible for exemption. If rent was charged for the use of hostels or libraries, tax was leviable.

4. Charitable Nature of Educational Institutions:
The respondents argued that only charitable educational institutions qualify for exemption under Rule 15(c). However, the petitioners contended that the charitable character is not relevant for the application of the exemption provisions. The Division Bench concluded that the language of Rule 15(c) does not impose any condition that the institution must be charitable to qualify for exemption.

5. Interpretation of the Term "Public":
The term "public" was debated in the context of whether educational institutions charging fees could be considered open to the public. The Division Bench held that the phrase "open to public" applies only to libraries and not to educational institutions. Even if the term "public" was to be considered, educational institutions open to a section of the public would still qualify for exemption.

Conclusion:
The Division Bench allowed the writ appeals and writ petitions, holding that Rule 15(c) grants exemption to buildings used for educational purposes without any qualification related to the charitable nature of the institution. The dominant object or use of the building for educational purposes alone determines the claim for exemption. The judgment of Justice P.K. Misra was set aside, and the view of Justice P. Jyothimani was affirmed. The orders demanding property tax were quashed, and the educational institutions were held exempt from property tax under Rule 15(c).