2017 (9) TMI 282 - HC - Indian Laws

Grant of exemption from the levy of urban land tax - 90% of the petitioner-trust income has not been spent for the objects of the trust - Held that - The petitioner s specific case is that when they have fulfilled the condition imposed in the Government Order and the expenditure for the block period of three years is taken into consideration it would be evident that the petitioner complied with the condition laid down for being entitled to exemption. The various charitable activities mentioned by the petitioner has not been disputed, while passing the impugned order. It appears that the property owned by the petitioner wherein the hospital has been established has also been exempted from the levy of property tax by the authorities concerned. The respondents ought to have examined the plea of exemption in a proper manner and not mechanically as had been done in the instant case. Thus, the impugned order deserves to be set aside. Writ petition is allowed and the impugned order is quashed and the matter is remanded to the first respondent for fresh consideration who shall afford an opportunity of personal hearing to the authorized representatives of the petitioner, peruse all the documents and take a fresh decision on merits and in accordance with law, uninfluenced by any observations made in the earlier proceedings or order. It is submitted that the petitioner has deposited 50% of the demand as a condition precedent for grant of stay. The said deposit shall remain as such and it shall abide by the orders to be passed by the first respondent in terms of the above directions. Till fresh decision is taken, the respondent shall not raise any fresh demand on the petitioner.

Summary

Issues:
1. Exemption from urban land tax for a charitable trust.
2. Rejection of exemption claim based on expenditure criteria.
3. Impact of Income Tax Act exemptions on urban land tax exemption claim.

Issue 1: Exemption from urban land tax for a charitable trust

The petitioner, a public Charitable Trust established in 1979, purchased land for constructing a Children's Hospital. They applied for urban land tax assessment transfer in 1979 but faced delays. In 1996, they were assessed for urban land tax and sought exemption under Government Order G.O.Ms.No.1947. The exemption application was rejected in 2002, leading to multiple legal challenges.

Issue 2: Rejection of exemption claim based on expenditure criteria

The first respondent rejected the exemption claim citing that 90% of the trust's income was not spent on trust objectives. The petitioner argued that they met the expenditure criteria as per Income Tax records for a block period of three years. The Government Order required institutions to spend 90% of net income on objectives, which the petitioner claimed to have fulfilled. The rejection was deemed mechanical without considering the Income Tax Act exemptions granted to the trust.

Issue 3: Impact of Income Tax Act exemptions on urban land tax exemption claim

The second respondent contended that Income Tax Act exemptions did not automatically entitle the trust to urban land tax exemption. However, the petitioner argued that Income Tax Authorities had scrutinized and granted registrations under Section 12(A)(A) and Section 80(G) of the Act, indicating compliance with conditions. The court emphasized that the Income Tax Authorities' scrutiny should not be disregarded, and the trust's charitable activities were not disputed. The impugned order was set aside, and the matter was remanded for fresh consideration, emphasizing a proper examination of the exemption claim.

In conclusion, the High Court of Madras allowed the writ petition, quashed the impugned order, and remanded the matter for fresh consideration. The court directed the first respondent to afford a personal hearing to the petitioner's representatives, review all documents, and make a decision in accordance with the law. The court highlighted the importance of a thorough examination of the exemption claim and instructed the respondent not to raise any fresh demands until a new decision was made.