2025 (2) TMI 736 - HC - Indian Laws

Exemption from Property Tax to educational institutions operated by registered charitable trusts and registered u/s 12A - Investigation of objections by Commissioner u/s 148 of Municipal Corporation Act 1956 - as submitted clear statutory provision u/s 136 (c) of Municipal Corporation Act 1956 has exempted all the educational institutions run and operated by charitable trusts educational institutions which are registered u/s 12A of the Income Tax Act 1961 and the said institution is wholly exempted for the payment of property tax and other educational institutions may be given a rebate of up to fifty per cent of the property tax - as submitted there is a efficacious alternative remedy available to the petitioner in terms of Section 184 of Municipal Corporation Act 1956 which provides appeal against any notice of demand issued under subsection (1) of section 174 without availing such efficacious alternative remedy there is no reasonable justification to the petitioner to directly approach the High Court. HELD THAT - Petitioner No. 3/educational institution continuously raised the objection the said institution is under the exempted category under Section under Section 136 (c) of Municipal Corporation Act 1956 and there is a specific procedure if any such objection has been raised about the valuation of the property tax that the Commissioner shall give a notice in writing to the objector of the time and place at which his objection will be investigated and after giving the opportunity of personal hearing to the objector any such objection has been determined when a query has been put to the learned Senior Counsel from the record it is explicit that no such procedure has been followed though the legislature in clear terms mandated to fix the time and place to hear the objection. This Court finds appropriate to direct the competent authority/Respondent No. 1/ Commissioner Municipal Corporation Bhilai to decide the objection raised by the petitioner No. 3/educational institution in terms of procedure stipulated under Section 148 of Municipal Corporation Act 1956 (hereinafter referred to as 1956 Act ) and it is further expected from the said authority that if any document is required from the authority of the income tax reasonable time of at least eight weeks must be given to the petitioner No. 3/educational institution to obtain any such certificate from the competent authority. This Court makes a serious note that though the objection has been raised for more than a decade but no proper speaking order has been passed and the matter has not been finally determined. So it is expected from the authority to decide the issue in an expeditious manner and pass a fresh speaking order preferably within an outer limit of 06 months. Till such adjudication no coercive steps shall be taken for the earlier notices and the same shall be kept in abeyance.

Summary

ISSUES PRESENTED and CONSIDERED

The primary legal issues considered in this judgment are:

1. Whether the educational institution, petitioner No. 3, is exempt from property tax under Section 136(c) of the Municipal Corporation Act, 1956, due to its operation under a registered charitable trust exempt under Section 12A of the Income Tax Act, 1961.

2. Whether the High Court should entertain the writ petition under Article 226 of the Constitution despite the availability of an alternative remedy of appeal under Section 184 of the Municipal Corporation Act, 1956.

3. Whether the procedural requirements under Section 148 of the Municipal Corporation Act, 1956, regarding the investigation of objections, were followed by the Municipal Corporation.

ISSUE-WISE DETAILED ANALYSIS

Issue 1: Exemption from Property Tax

Relevant Legal Framework and Precedents:

Section 136(c) of the Municipal Corporation Act, 1956, provides that educational institutions operated by registered charitable trusts and registered under Section 12A of the Income Tax Act, 1961, are exempt from property tax.

Court's Interpretation and Reasoning:

The Court considered whether petitioner No. 3 qualifies for exemption as it operates under petitioner No. 1, a registered charitable trust. The petitioner argued that the institution should be wholly exempted from property tax.

Key Evidence and Findings:

The petitioners contended that the educational institution filed returns under the same PAN as petitioner No. 1, which is accepted by the Income Tax Authority, indicating its exempt status.

Application of Law to Facts:

The Court noted that the petitioners continuously raised objections regarding their exempt status under Section 136(c), but the Municipal Corporation did not follow the required procedure to address these objections.

Treatment of Competing Arguments:

The respondent argued that the petitioners had not provided adequate documentation from the income tax authority to prove their exempt status, and thus, the demand for property tax was justified.

Conclusions:

The Court directed the Municipal Corporation to properly investigate the objections raised by the petitioners as per the procedure outlined in Section 148 of the Municipal Corporation Act, 1956.

Issue 2: Availability of Alternative Remedy

Relevant Legal Framework and Precedents:

Section 184 of the Municipal Corporation Act, 1956, provides for an appeal against any notice of demand. The Court considered precedents which emphasize exhausting alternative remedies before approaching the High Court under Article 226.

Court's Interpretation and Reasoning:

The Court acknowledged the general rule that alternative remedies should be exhausted before invoking Article 226 but noted exceptions where the High Court may still entertain a writ petition.

Key Evidence and Findings:

The Court observed that the petitioners had not availed the alternative remedy due to the mandatory pre-deposit requirement, which they sought to avoid.

Application of Law to Facts:

The Court found that the case involved a purely legal question regarding the exemption status and procedural lapses, justifying the High Court's intervention despite the alternative remedy.

Treatment of Competing Arguments:

The respondent emphasized the availability of an alternative remedy and the necessity of pre-deposit, arguing that the petitioners were circumventing the statutory process.

Conclusions:

The Court decided to exercise its discretion to hear the matter, given the procedural lapses and the long-standing nature of the dispute.

Issue 3: Procedural Requirements under Section 148

Relevant Legal Framework and Precedents:

Section 148 of the Municipal Corporation Act, 1956, mandates that objections to property tax assessments be investigated by giving notice to the objector and providing a hearing.

Court's Interpretation and Reasoning:

The Court emphasized the importance of following the statutory procedure to ensure fair treatment of objections.

Key Evidence and Findings:

The Court found no evidence that the Municipal Corporation had followed the procedure outlined in Section 148, as no notice or hearing was provided to the petitioners.

Application of Law to Facts:

The Court concluded that the failure to follow procedure invalidated the demand notices issued to the petitioners.

Treatment of Competing Arguments:

The respondent did not provide sufficient justification for bypassing the procedural requirements.

Conclusions:

The Court directed the Municipal Corporation to comply with Section 148 and resolve the objections in a timely manner.

SIGNIFICANT HOLDINGS

The Court held that the Municipal Corporation must follow the statutory procedure under Section 148 when addressing objections to property tax assessments. It emphasized that procedural fairness is essential in tax matters, particularly when exemptions are claimed.

The Court directed the Municipal Corporation to issue a speaking order after properly investigating the objections and to refrain from coercive measures until the matter is resolved.

In summary, the Court underscored the necessity of adhering to procedural requirements and recognized the High Court's discretion to intervene when procedural lapses occur, even when alternative remedies exist.