ADMINISTRATOR, BI. ALPHONSA HOSPITAL, ANNAKKARA VILLAGE, UDUMBANCHOLA TALUK, IDUKKI DIST. v. STATE OF KERALA, THE ASSESSING AUTHORITY (BUILDING TAX), THAHASILDAR, UDUMBANCHOLA; THAHASILDAR, REVENUE RECOVERY, IDUKKI

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT:** ## **THE HONOURABLE MR. JUSTICE A.K.JAYASANKARAN NAMBIAR** **FRIDAY, THE 20TH DAY OF MAY 2016/30TH VAISAKHA, 1938** ## **WP(C).No. 6514 of 2007 (A)** **---------------------------** **PETITIONER(S):** **-------------** **ADMINISTRATOR, BI. ALPHONSA HOSPITAL, ANNAKKARA VILLAGE, UDUMBANCHOLA TALUK, IDUKKI DIST.** ## **BY ADV. SRI.BECHU KURIAN THOMAS** ## **RESPONDENT(S):** **--------------** **1. STATE OF KERALA, REPRESENTED BY PRINCIPAL SECRETARY, GOVERNMENT SECRETARIAT, THIRUVANANTHAPURAM.** ## **2. THE ASSESSING AUTHORITY (BUILDING TAX), THAHASILDAR, UDUMBANCHOLA.** ## **3. THAHASILDAR,** **REVENUE RECOVERY, IDUKKI.** **R,R1 TO 3 BY GOVERNMENT PLEADER SRI.SUDHEESH KUMAR** **THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 20-05-2016, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** ## **W.P.(C).NO.6514/2007** ## **APPENDIX** ## **PETITIONER'S EXHIBITS:** **EXT.P1: COPY OF THE REGISTRATION CERTIFICATE GRANTED TO ALPHONSO INTEGRATED DEVELOPMENT ACTION UNDER THE TRAVANCORE - COCHIN LITERARY, SCIENTIFIC AND CHARITABLE SOCIETIES REGISTRATION ACT, 1955, DATED 2.1.91 AND NUMBERED AS 1/1/1991.** **EXT.P2: COPY OF THE CERTIFICATE BEARING NUMBER EI. 59641/92 ISSUED BY THE DISTRICT COLLECTOR OF IDUKKI DATED 30.12.92 CERTIFYING THAT THE PETITIONER HAD OBTAINED REGISTRATION AS CHARITABLE INSTITUTE.** ## **EXT.P3: COPY OF THE MEMORANDUM OF ASSOCIATION OF THE PETITIONER.** **EXT.P4: COPY OF THE LETTER ADDRESSED BY THE SECRETARY OF THE CHAKKUPALLAM PANCHAYAT DATED 17.1.03 WAIVING THE BUILDING TAX IN FAVOUR OF THE PETITIONER.** **EXT.P5: COPY OF THE INCOME AND EXPENDITURE STATEMENT FOR THE YEAR 2004-05.** **EXT.P5(A): COPY OF THE INCOME AND EXPENDITURE STATEMENTFOR THE YEAR 2005-06.** **EXT.P6: COPY OF THE ORDER DATED 20.12.2006 AND NUMBERED AS G.O.(RT) NO.4463/06/RD REJECTING THE PETITIONERS APPLICATION OF EXEMPTION FROM PAYMENT OF BUILDING TAX.** **EXT.P7: COPY OF THE NOTICE OF DEMAND NUMBERED AS BT 231/06-07 AND DATED 15.1.07.** ## **RESPONDENTS EXHIBITS: NIL.** **//TRUE COPY//** ## **P.S. TO JUDGE** ## **A.K.JAYASANKARAN NAMBIAR, J. -------------------------------** ## **W.P.(C).NO.6514 OF 2007 (A) ----------------------------------Dated this the 20[th] day of May, 2016** ## **J U D G M E N T** The petitioner is a hospital owned by a charitable institution by name Alphonso Integrated Development Action, which is registered under the Travancore - Cochin Literary, Scientific and Charitable Societies Registration Act, 1955, and run by the Congregation of Francistor Claris. The petitioner's hospital had claimed exemption from payment of building tax under the Kerala Building Tax Act, 1975, on the ground that it was engaged in rendering charitable services for the purposes of Section 3(1)(b) of the Kerala Building Tax Act. Essentially it was the contention of the petitioner that the hospital building was used principally for charitable purposes, and hence, qualified for an exemption as contemplated under the said provision. The claim for exemption of the petitioner was referred to the Government for adjudication. By Ext.P6 order of the Government dated 20.12.2006, the Government found that the building owned by the petitioner was not eligible for exemption from building tax and hence the request for exemption was rejected. In the writ petition, **W.P.(C).No.6514/2007** **2** the petitioner impugns Ext.P6 order of the Government and Ext.P7 consequential demand notice inter alia on the ground that the said order does not advert to the activities rendered by the petitioner in the hospital building and does not consider the legal issue in the proper perspective. 2. A counter affidavit has been filed on behalf of the respondents, wherein, Ext.P6 order of the Government is sought to be justified for the reasons contained therein. In particular, it is stated that a perusal of the income and expenditure statement of the petitioner clearly reveals that the hospital was not rendering substantial free medical service to all patients, and that free service is provided only to a limited extent, which is minimal. It is stated that on account of the activities of the petitioner and the fees collected from the patients, the principal use of the building in question cannot be considered to be charitable in nature. 3. I have heard the learned counsel for the petitioner as also the learned Government Pleader for the respondents. **W.P.(C).No.6514/2007** **3** 4. On a consideration of the facts and circumstances of the case as also the submissions made across the bar, I find that the test that should be applied for the purpose of ascertaining whether a hospital building can be considered to be one that is principally used for charitable purposes for the purposes of exemption under the Kerala Building Tax Act has engaged the attention of the Supreme Court in the decision reported in **S.H. Medical Centre Hospital v. State of Kerala - [2014 (1) KLT 316 (SC)]** . The Supreme Court, while considering the issue of what 'charitable purpose' meant for the purposes of the Kerala Building Tax Act, held as follows at paragraphs 18 and 19: “ **18.** Now we will examine the question of what 'charitable purpose' means. The Oxford English Dictionary defines 'charitable' as “of or relating to the assistance of those in need”. In the present case, it can be argued that all medical services relate to the assistance of those in need. This is a valid interpretation but cannot be accepted for the purposes of tax. If these medical services in the present case were being offered free to a majority of the patients rather than a minority of patients, then the conclusion could have been reached that the buildings are principally used for charitable purposes. Further, an amount of approximately Rs.28,00,000/- of the expenses are towards 'social work and charities' as per the income and Expenditure Accounts provided, whereas 'free medical aid' is around Rs.60,00,000/- for the years 2004-05. It is not clearly mentioned what 'social work and charities' is. Furthermore, an exemption is provided for that area in which free medical **W.P.(C).No.6514/2007** **4** aid is provided by the appellant-hospital. The appellant has not produced cogent material evidence before the competent authority or the State Government or before the High Court to show that the entire building has been used for charitable purpose by rendering free medical aid to the needy, poor people of society. The fact is that the details furnished in the documents produced would go to show that the appellant hospital is earning money by charging from patients and therefore the claim of the appellant that the entire area taxed is used for charitable purpose is not reflected in the documents produced. Hence, we are not inclined to interfere with the impugned orders. The High Court has correctly interpreted the 'Explanation' clause to Section 3(1) of the Act to hold that 'charitable purpose' means 'relief of the poor and free medical relief'. **19.** The tax herein is on the 'building'. The society already has income tax exemption and the question here is whether the building is used principally for 'charitable purpose'. Only the building utilized for providing free medical aid can be said to be used principally for charitable purpose and it will go against the letter of the law to grant building tax exemption for all the buildings of the hospital irrespective of what it is used for simply on the ground that the overall object of the hospital is charity although it is being predominantly run on a chargeable basis. In this case, the building used for providing free medical aid must be exempted from paying building tax.” 5. It will be apparent from a reading of the above quoted paragraphs in the Supreme Court judgment that unless the hospital building was utilised for providing free medical aid at least to a substantial extent, it could not be said that the building in question was used principally for a charitable purpose. In the instant case, a **W.P.(C).No.6514/2007** **5** perusal of Ext.P6 order that is impugned in the writ petition would clearly indicate that the case of the petitioner all along has been that the income that is derived from the activities in the hospital were used by the petitioner for charitable purposes. Ext.P6 order clearly states that it was never the case of the petitioner that the building itself was used for religious, charitable or educational purposes or as workshop. The only case of the petitioner before the Government while claiming exemption was that the charitable objects of the petitioner were carried out by utilising the income obtained from the building, and under those circumstances, it was entitled for the exemption of building tax under Section 3(1)(b) of the Kerala Building Tax Act, 1975. As already noted, the decision of the Supreme Court clearly mandates that a mere application of income obtained from the hospital for charitable purposes will not confer the building itself with the status of a 'building' that is principally used for charitable purposes. Applying the test laid down by the Supreme Court, the building would qualify for exemption under Section 3(1)(b) of the Kerala Building Tax Act only if the building is used for providing free treatment to the patients. The income and expenditure statement produced by the petitioner itself indicates that the free treatment that **W.P.(C).No.6514/2007** **6** is provided is only minimal, and at any rate, cannot be said to be substantial for the purposes of qualifying the petitioner's building for an exemption under the Kerala Building Tax Act. Under the said circumstances, I am of the view that Ext.P6 order of the Government does not require to be interfered with in these proceedings under Article 226 of the Constitution of India. Resultantly, the writ petition fails, and is accordingly dismissed. It is submitted by counsel for the petitioner that during the pendency of the writ petition, 50% of the amount due by way of building tax has already been remitted to the respondents. Accordingly, taking note of the said submission, there will be a direction to the respondents to take note of the said payments effected by the petitioner while demanding the differential tax amounts from the petitioner. ## **A.K.JAYASANKARAN NAMBIAR JUDGE** prp/20/5/16