2022 (9) TMI 938 - HC - Indian Laws

Exemption from the levy of property tax - Puducherry Municipality Act, 1973 - Applicability of Section 124 of the Act providing for general exemptions - demand notice issued for the period 2010-11 to 2016-17 dated 26.10.2018 - educational or medical institutions - HELD THAT - As far as the provisions of Section 124(c) are concerned, any building used for educational purposes that is attached to an educational institution, must qualify for the exemption as per a plain reading of the provision. As expressed by the Division Bench in the case of SRIRAM EDUCATIONAL TRUST VERSUS THE PRESIDENT 2008 (1) TMI 996 - MADRAS HIGH COURT there is no necessity to strain the language of the Act as the language is clear and does not admit of any ambiguity. The question is whether the hospital is in fact, being used 'for educational purposes'. To determine this, the authority considering the claim of exemption, would have to look into the activities of the institute/hospital, bearing note of the use to which they are being put. As to the argument that a hospital ancillary to a Medical College assumes a special status as a teaching hospital, also and equally engaged in the dissemination of medical education, such an argument bears looking into, including specifically whether the hospital is being run along commercial lines, how the income earned is being utilized as well as other relevant factors in arriving at a considered decision in regard to the claim of the petitioner. The impugned order is entirely silent on all these aspects. Claim under Section 124(e) - HELD THAT - There is to be a detailed verification as to whether the petitioner satisfies the requirement of 'charitable institution'. The mere fact that it has obtained an exemption under Section 12(A) and 11 of the Income tax Act, 1961 would not come to its rescue and the officer must undertake a detailed verification of its financials, including the deployment of its funds and record his satisfaction that receipts/income are being ploughed back into the charitable activity. The matter remanded to the file of the authority for denovo adjudication - Petition allowed by way of remand.

Summary

Issues Involved:
1. Exemption from property tax under Section 124 of the Puducherry Municipality Act, 1973.
2. Differential tax treatment compared to other educational institutions.
3. Applicability of the Minimum Standard Requirement Regulations, 1999, and subsequent amendments.
4. Requirement and process for detailed verification of the institution's charitable status.

Detailed Analysis:

1. Exemption from Property Tax under Section 124 of the Puducherry Municipality Act, 1973:
The petitioner, a medical institute, sought exemption from property tax under Section 124 of the Puducherry Municipality Act, 1973, arguing that as a teaching hospital affiliated with an educational institution, it should be exempt. The court noted that Section 124(c) provides exemption for "buildings used for educational purposes including hostels," and Section 124(e) for "charitable hospitals and dispensaries." The court emphasized the need for a detailed examination of whether the hospital is used for educational purposes and if it qualifies as a charitable institution.

2. Differential Tax Treatment Compared to Other Educational Institutions:
The petitioner argued that other similarly placed educational institutions were not subjected to property tax, indicating discriminatory treatment. The court acknowledged this claim and directed the authority to consider whether the petitioner was indeed being singled out unfairly.

3. Applicability of the Minimum Standard Requirement Regulations, 1999, and Subsequent Amendments:
The petitioner relied on the Minimum Standard Requirement Regulations, 1999, and subsequent amendments, which mandate that medical colleges must have an associated teaching hospital for practical training. The court recognized the regulatory framework's intent to integrate medical education with practical hospital experience, supporting the petitioner's claim that the hospital is integral to the educational institution.

4. Requirement and Process for Detailed Verification of the Institution's Charitable Status:
The court highlighted the necessity of a thorough verification process to determine the petitioner's charitable status. It instructed the authority to examine the financials, deployment of funds, and whether the income is reinvested into charitable activities. The mere exemption under Sections 12(A) and 11 of the Income Tax Act, 1961, was deemed insufficient without detailed scrutiny.

Conclusion:
The court set aside the impugned order rejecting the petitioner's exemption claim and remanded the matter for a fresh adjudication. The authority was directed to pass a speaking order after hearing the petitioner, considering the 1999 Regulations and subsequent amendments. The petitioner was instructed to continue paying taxes until the application is disposed of. The writ petition was disposed of in these terms, with no costs awarded.