ALUKKAS REGENCY PRIVATE LIMITED v. REVENUE DIVISIONAL OFFICER (R.D.O), THRISSUR; THAHASILDAR, THALAPPILLY TALUK; VILLAGE OFFICER, PERINGANDOOR; DISTRICT COLLECTOR, THRISSUR

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** ## **THE HONOURABLE MR. JUSTICE ALEXANDER THOMAS** ## **THURSDAY, THE 9TH DAY OF JANUARY 2020 / 19TH POUSHA, 1941** ## **WP(C).No.34341 OF 2019(P)** ## **PETITIONER:** **ALUKKAS REGENCY PRIVATE LIMITED, ALUKKAS JEWELLERY CORPORATE OFFICE, EARLIER OFFICE AT MARAR ROAD, THRISSUR VILLAGE, THRISSUR TALUK, THRISSUR DISTRICT-680001, AND NOW OFFICE AT FATHIMA NAGAR, EAST FORT P.O., THRISSUR-680005, REPRESENTED BY CHAIRMAN AND MANAGING DIRECTOR A.V.JOSE, S/O. ALUKKA VARGHESE, AGED 75 YEARS.** **BY ADV. SRI.P.M.ZIRAJ** ## **RESPONDENTS:** - **1 THE REVENUE DIVISIONAL OFFICER (R.D.O) THRISSUR, THRISSUR DISTRICT-680 001.** - **2 THE THAHASILDAR, THALAPPILLY TALUK, THRISSUR DISTRICT-680 022.** - **3 THE VILLAGE OFFICER, PERINGANDOOR VILLAGE, THRISSUR DISTRICT-680 581.** - **4 THE DISTRICT COLLECTOR, THRISSUR DISTRICT-680 001.** **SMT.THUSHARA JAMES, GOVT.PLEADER** **THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 09.01.2020, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** ALEXANDER THOMAS, J. ------------------------------------W.P.(C) No. 34341 of 2019 ------------------------------------Dated this the 9[th] day of January, 2020 ## J U D G M E N T The case projected in this Writ Petition (Civil) is as follows: The petitioner is a builder and constructed a residential apartment consisting 67 flats, with approved building permit and plan issued by the Municipality. After completion of building, occupancy certificate has been issued by the Municipality and the petitioner has submitted a return, as provided under the provisions of the Kerala Building Rules, before the 2[nd] respondent Tahsildar. Thereafter the 2[nd] respondent issued Ext.P-3 order dated 27.3.2019 thereby imposing a sum of Rs.11,86,800/towards tax under the provisions of the Kerala Building Tax Act and Rules, along with a demand notice dated 27.3.2019 thereby directing to pay a sum of Rs.12,000/- towards luxury tax and granted 4 instalments of Rs.2,96,700/- each. The petitioner challenged Ext.P-3 order by filing Ext.P-5 statutory appeal before the 1[st] respondent after remittance of first instalment of building tax as directed in Ext.P-3 order, contending that the residential W.P.(C) No. 34341 of 2019 ..3.. apartment was constructed by the petitioner by using the funds of various undivided share holders of the land. Out of the total 67 apartments, some flats have been sold and for some other flats agreements have been executed. The petitioner contends that no opportunity was granted to produce agreements and sale deeds before the 1[st] & 2[nd] respondents. The 2[nd] respondent ought to have calculated the tax of all flats separately in the name of said individuals. But instead, tax for entire apartment take together was ascertained. After the receipt of Ext.P-5 appeal, the 1[st] respondent passed Ext.P-6 order dated 13.8.2019 in which there was discussion about the 67 flats which are separate and independent, which were constructed by different persons through the petitioner. But instead of setting aside the order passed by the 2[nd] respondent, the 1[st] respondent directed the 2[nd] respondent to inspect the apartment and confirm the matter within one week and convince the petitioner regarding the same and thereafter proceed the subject matter. It is seen from Ext.P-6 order that though the Thahsildar was directed to inspect the property and refix the tax, but instead of the same, the Thahsildar fixed the same tax without making any further enquiry and assessment and thereby W.P.(C) No. 34341 of 2019 ..4.. proceeded against the petitioner and issued Ext.P-7 demand notice towards the second installment on the basis of Ext.P-3 order. Aggrieved by the above circumstances the petitioner has approached this Court and it is in the light of these averments and contentions that the petitioner has filed the instant Writ Petition (Civil) with the following prayers: - _“_ _1. Issue a writ of certiorari or any other appropriate writ, direction or order by calling for the records leading to the issuance of exhibit P3 order and P7 demand notice issued by the second respondent and set aside the same illegal._ _2. Issue a writ of mandamus or any other appropriate writ, order or direction to the first respondent to re-inspect the apartment and reassess the tax after giving an opportunity to the petitioner for personal hearing and by producing documents as directed in exhibit P6 order of first respondent._ _3. Declare that the building tax of separate flats in a residential apartment has to be assessed in the name of respective owners separately and not to the whole building together._ _4. Issue such other writ, ordres or directions, which this Honourable Court may deem fit and proper in the interest of justice and circumstances of the case.”_ 2. Heard Sri.P.M.Ziraj, learned counsel appearing for the petitioner and Smt.Thushara James, learned Government Pleader appearing for the respondents. 3. It is by now well settled by the rulings of the Apex Court as in _**State of Kerala and Others v. A.P.Mammikutty [(2015) 10 SCC 632]**_ paras 20 & 21, as well as decisions of this Court as in _**HI-LITE Realtors (India) LLP (M/s.) Calicut v.**_ W.P.(C) No. 34341 of 2019 ..5.. _**Revenue Divisional Officer, Kozhikode and Others [2018 (3) KLT 237]**_ paras 10 & 11 etc, that in a case involving assessment of building tax under the Kerala Building Tax Act, 1975, in respect of apartment complexes, then where the apartment complex has been sold and conveyed to separate persons before the assessement order is issued, then assessment is to be made in respect of each such inidividual owners and not on a composite basis of the entire complex,and that in a case where the apartments are not sold before the assessment order then the assessment authority will be at liberty to make assessment of the subject apartment complex on a composite basis. It is pertinent to refer to the decision of the Apex Court as in _**State of Kerala and Others v. A.P.Mammikutty [(2015) 10 SCC 632]**_ paras 20 & 21, which reads as follows: _“_ _**20.** In view of the above, the contention advanced by the learned counsel for the State is difficult to accept. The definitions have to be given a proper construction. There can be a case where the owner erects a multi-storeyed building consisting of 10 floors. He builds it at his own cost and thereafter he sells the apartments or flats to 10 persons and in that event he ceases to be the owner of the building. The 10 purchasers become the owners of flats and in such a situation it will lead to an absurdity because one single person who once owned the entire building or several apartments, though has ceased to be the owner in law yet is asked to pay the luxury tax solely on the ground that at the time of construction there was no contribution by the purchasers or to put it differently there had been no prior booking. This is not the intention. Explanation 2 to Section 2(e) has to be read harmoniously with the proviso to Section 2(k) and Section 5-A of the Act. The intention of the legislature as gatherable is_ W.P.(C) No. 34341 of 2019 ..6.. _that ownership of different flats and the cost of construction of building are met by all such persons. The meeting of the cost jointly is not to be narrowly construed to mean that there has to be an investment before the commencement of the construction of the building. The persons who purchase afterwards they really share the value of the construction cost apart from the profit margin due to the builder or the seller. Unless such an interpretation is placed, the original owner of flats when he ceases to be the owner of the building or the purchaser of a small apartment less then 278.7 sq m would still be liable to pay luxury tax. Such an interpretation would lead to absurdity._ _**21.** In our considered opinion, the principle of purposive interpretation of the provision has to be adopted and when such a construction is placed, it serves the legislative intent. To elaborate, a person may have a three-storeyed building and he owns it, then there has to be different computation as per the main part of Section 2(k) and for that it has to be calculated as is done by the Revenue Authority. Once he ceases to be the owner, he will not be liable to pay the luxury tax. But as long as he continues to be the owner, as per Section 5-A, he will be liable to pay the luxury tax for all floors/apartments subject to the cap provided under Section 5-A of the Act.”_ ## 4. This Court has held in the decisions as in _**HI-LITE Realtors (India) LLP (M/s.) Calicut v. Revenue Divisional Officer, Kozhikode and Others [2018 (3) KLT 237]**_ paras 10 & 11 , which reads as follows: _“10. Before dealing with the facts of this case, it is necessary to refer to the ground realities prevailing in the State in the field of construction of the buildings of the instant nature. Multi - storied buildings, both commercial and residential, are generally constructed by developers, either after purchasing land in their name or after entering into development agreements with the owners of the lands. It is common knowledge that a developer may not be able to sell all the units in the building before commencing the construction. The practice, therefore, is that the construction of the building would be started with the funds of the developer and in the course of construction, the developer would enter into either agreements with the prospective buyers for sale of the undivided right in the property as also for construction of their portion of the building and receive periodical payments depending on the progress of the work and on completion of the construction, sale_ W.P.(C) No. 34341 of 2019 ..7.. _deeds will be executed in favour of the buyers of the units._ _11. Now I shall come to the statutory provisions. The provisions contained in S.7 and S.9 of the Act indicate beyond doubt that taxable event is completion of the construction of the building and the liability to pay tax is on the owner of the building. S.2(e) of the Act defines 'building'. Explanation 2 to S. 2(e) of the Act clarifies that where a building consists of different apartments or flats owned by different persons and the cost of construction of the building was met by all such persons jointly, each such apartment or flat shall be deemed to be a separate building for the purpose of the Act. Explanation 2 referred to above reads thus:_ _"Explanation 2.-- Where a building consists of different apartments or flats owned by different persons and the cost of construction of the building was met by all such persons jointly, each such apartment or flat shall be deemed to be a separate building." If Explanation 2 to S.2(e) is understood in the light of S.7 and S.9 of the Act, it is clear that when a building consisting of different apartments or flats is constructed jointly by different persons, each contributing to the cost of construction of his / her respective units, each unit has to be assessed in the name of its owner. In other words, the object of Explanation 2 to S.2(e) of the Act is to ensure that the building is assessed only in the name of the person to whom it belongs. It is on account of the said reason that this Court passed Exhibit P6 judgment directing the assessing authority to consider whether the building is liable to be treated as a composite one or different individual units for the purpose of assessment under the Act. If one would apply the same reasoning, there is no difficulty in holding that if the building is one constructed by a developer for another, the same has to be assessed in the name of the person for whom the same was constructed. The owner may get right in the property before or after the completion of construction. The same is not decisive at all in the matter of deciding the issue whether the independent units in the buildings are to be treated as separate buildings for the purpose of assessment under the Act. Similar view is seen taken by this Court in Balu v. State of Kerala, 1994 KHC 293 : 1994 (2) KLT 42. Paragraph 3 of the said judgment reads thus:_ _"3. The sole question for decision is whether the assessment of the entire building consisting of twenty two flats as one unit is legal and valid. There is no dispute about the facts of the case. The building is an integral one consisting of twenty two flats. It is a multistoreyed one. The land belongs to the various flat owners in co - ownership, after the transfer effected to them of the undivided interest in the land, the transfer being effected after the construction of the flats was complete. What Explanation 2 lays down is that if a building consists of different apartments or flats owned by different persons, and the cost of construction of the building is met by such persons jointly, each apartment or flat shall be deemed to be a separate building. The ingredients of the Explanation are (a) the existence of a building, (b) that building must consist of different apartments or flats, (c) the apartments or_ W.P.(C) No. 34341 of 2019 ..8.. _flats must be owned by different persons and (d) the cost of construction of the building should be met by such persons jointly. If these ingredients concur, each of the apartments or flats will be deemed to be a separate building, though the building is one structurally and there is an integral connection between the various parts of the building. The Explanation in effect splits on otherwise integral unit or building into multiple buildings, liable to be assessed separately. It would have been otherwise going by the main part of the definition alone. Evidently this has been done to encourage construction of apartments and flats and to alleviate the burden that will otherwise fall heavily by assessing the entire building as one unit. The fact that the undivided interest in the land is transferred only subsequent to the construction of the flats is in my opinion, irrelevant in deciding on the applicability of Explanation 2. The building in this case therefore satisfies the conditions of Explanation 2 to S.2(e). The assessing authority has not given any reasons in Ext.P7 to deny the benefit of separate assessment to the flat owners in this case, or any justification for assessing the entire building as one unit on the developer. Such assessments without keeping in mind the basic philosophy underlying the Explanation will only act as a damper to such construction activity in the State." (underline supplied)_ _S.7 of the Act provides for furnishing of the return by the owner of the building for the purpose of assessment. S.8 of the Act provides that if a person has not furnished the return within the time stipulated, he may furnish the return at any time before the assessment is made. S.9 of the Act provides for assessment in cases where return is filed and also in cases where return is not filed. In other words, as far as multi - storied buildings consisting of independent units are concerned, it appears to me that the scheme of the Statute is that after completion of the construction, the owner has to obtain conveyance deed in respect of the unit from the developer and file the return. In case the return is not filed, the owner has time till the time of assessment for obtaining conveyance deed and for filing return. In other words, in cases where transfer of property is not effected before the assessment proceedings, as the obligation in terms of the Statute to pay tax for the building is on the owner of the building and as the agreement for sale does not confer any title on the agreement holder, such units cannot be assessed in the name of the persons with whom the developer has entered into the agreement for sale, for, the same cannot be treated as units owned by such persons. It is, therefore, to be clarified that conveyance deeds have to be obtained at any rate by the owners concerned before the assessment of the building. This is the only plausible view which can be taken in a matter like this since it is not certain that the developer would certainly convey ownership of the unit to persons with whom they have entered into agreements for sale after the assessment. If for some reason, the agreement holder does not make the payment in full, the developer may not convey ownership of the unit to him and the assessing authority is not expected to wait until appropriate conveyance deed is executed by_ W.P.(C) No. 34341 of 2019 ..9.. _the developer in respect of all the units constructed by them.”_ 5. The 2[nd] respondent Tahsildar (assessing authority) has made the impugned assessment order dated 27.3.2019 (referred to as paper No.1 in Ext.P-6 appellate order dated 13.8.2019) whereby the entire apartment complex has been assessed as a single unit and no effort has been made to ascertain whether all apartments have in fact been sold and conveyed to the separate owners concerned before the rendering of the said assessment order dated 27.3.2019. Pursuant to the said impugned assessment order dated 27.3.2019 the 2[nd] respondent have also issued Ext.P-3 demand dated 27.3.2019. Aggrieved by the said assessment order dated 27.3.2019 and the demand thereon, the petitioner has preferred statutory appeal dated 8.5.2019 (referred to as paper no.2 of Ext.P-6) in which the 1[st] respondent RDO (appellate authority) has now rendered Ext.P-6 order No.C1-7710/2019 dated 13.8.2019. The operative portion of Ext.P-6 order dated 13.8.2019 as contained in the last two paragraphs reads as follows: “ഫഫ്ലാറ്റുകൾ/അപഫ്ലാർട **ട** ട്മെന്റുകൾ എനന്നിവയന്നിൽ ഒനന്നിലധന്നികക ഉടട്മെസ്ഥരുള്ള പക്ഷവക, പരസ്പരക ബനന്നിക്കടപടന്നിട് **ട** ുണ്ടെങന്നിലക ടട്മെഫ്ലാതക വന്നിസട തതീർണക പന് **ന** ി ട ഏരന്നിയയഫ്ലായന്നി കണക്കഫ്ലാക്കഫ്ലാവനതഫ്ലാണട. കൂടഫ്ലാടത ഫഫ്ലാറ്റുകൾ/അപഫ്ലാർട **ട** ട്മെന്റുകളുടട കകട്മെഫ്ലാറ്റശശേഷക ടന്നി ടകടന്നിട സമുച്ചയങ്ങളുടട ആഡകബര നന്നികുതന്നി നന്നിശ്ശയന്നിക്കുശമഫ്ലാൾ ഓശരഫ്ലാ അപഫ്ലാർട **ട** ട്മെന്റുക സസ്വതന്ത്രട്മെഫ്ലായന്നി W.P.(C) No. 34341 of 2019 ..10.. ഉപശയഫ്ലാഗന്നിക്കുവഫ്ലാൻ കഴന്നിയുശട്മെഫ്ലാടയനട പരന്നിശശേഫ്ലാധന്നിചട അടസ് **സ** െ ന്നിങട അശതഫ്ലാറന്നിറ്റന്നി ഉറപ്പു വരുശതണ്ടെതഫ്ലാണട. ക ശട്മെൽകഫ്ലാരര്യങ്ങൾ ഒരഫ്ലാഴ്ചക് **ക** പരന്നിശശേഫ്ലാധന്നിചട ഉറപട വരുതന്നി അശപക്ഷകടന വന്നിവരക ധരന്നിപന്നിചട ടകടന്നിട നന്നികുതന്നി ഈടഫ്ലാക്കൽ നടപടന്നി തുടരുവഫ്ലാൻ തഹസന്നിൽദഫ്ലാർക്കട നന്നിർശദശേക നൽകന്നിടകഫ്ലാണ് **ട** െ അപതീൽ അശപക്ഷ തതീർപഫ്ലാക്കന്നി ഇതന് **ന** ി ഫ്ലാൽ ഉതരവഫ്ലാകുന. ” 6. A reading of Ext.P-6 order would make it clear that the appellate authority has not made any effective and proper efforts to ascertain to whether any of the apartments concerned have in fact been sold or conveyed prior to the assessment order dated 27.3.2019 or not. That effort could have been either made by the appellate authority on its own or it could have been remitted to the 2[nd] respondent Tahsildar by setting aside the impugned assessment order dated 27.3.2019 and then remitting the process of assessment to be re-done by the 2[nd] respondent Tahsildar afresh. With the remit that the 2[nd] respondent shall ascertain with reference to the registered sale documents as to whether all or any of the apartment complex in question have been in fact been sold and conveyed to the separate apartment owners concerned on or before 27.3.2019, and if any such apartments have been so sold, such apartments would have been assessed for building tax as separate units, and not as part of the single composite apartment W.P.(C) No. 34341 of 2019 ..11.. complex. Further, on the other hand it is found out that many of the apartments have not in fact been sold and conveyed as on 27.3.2019, then such unsold apartments could have been treated as a composite unit for the purpose of assessment for building tax under the Kerala Building Tax Act, 1975. 7. In the instant case the appellate authority has neither done the said task by itself, nor has appellate authority directed the remit of the matter after setting aside the assessment order dated 27.3.2019, so that atleast the 2[nd] respondent assessing authority could have been done that task. Ideally 1[st] respondent appellate authority should have remitted the matter to the 2[nd] respondent assessing authority so that the 2[nd] respondent could determine such factual issues by calling upon the petitioner and the other affected persons concerned to produce their registered sale deeds and so as to ascertain as to all or any of the apartments in the apartment complex in this case has in fact been sold prior to 27.3.2019 (date of the impugned assessment order). In the light of these aspects, the impugned proceedings are illegal and improper. In that view of the matter, the matter in appeal is directed to be remitted to the 1[st] respondent appellate authority for decision W.P.(C) No. 34341 of 2019 ..12.. afresh and after hearing the affected parties concerned and in the light of the observations and findings made by this Court herein above, and in accordance with the legal principles delineated herein above in the aforesaid judgments. 8. For effectuating such a remit, it is ordered that the impugned Ext.P-6 order dated 13.8.2019 will stand set aside and consequently as part of the remit it is ordered that the appeal dated 8.5.2019 (referred to as paper No.2 of Ext.P-6) filed by the petitioner will stand remitted to the 1[st] respondent appellate authority for consideration and decision afresh as aforestated. The petitioner will immediately inform the 1[st] respondent about the details of the sale deeds pertaining to the sale of each of the apartments in the apartment complex concerned and should also give names and addresses of such apartment owners, and should also specifically apprise the appellate authority as to how many such sale deeds practically been effected prior to 27.3.2019, and how many such sale deeds have actually been executed and registered on or after 27.3.2019. On the basis of such materials, the 1[st] respondent appellate authority will call upon the petitioner and other affected parties concerned to produce authenticated copies of W.P.(C) No. 34341 of 2019 ..13.. such sale deeds and such other documents to determine the specific issue. If the 1[st] respondent feels that the said task need not be determined by the 1[st] respondent, it is right and proper to entrust the task to the 2[nd] respondent assessing authority if he may do so. In that situation, the 1[st] respondent should ensure that the matter for assessment is remitted to the 2[nd] respondent and for that purpose the assessment order dated 27.3.2019 may be set aside, so that the assessment may be re-done by the 2[nd] respondent assessing authority as aforestated and in the abovesaid fact finding exercise the cut-off date as to whether the sale of apartments have been taken place or not should be with reference to the date 27.3.2019. Since the matter has been now set aside and remitted, it is only just and proper that the impugned demand in pursuance of Ext.P-3 demand notice may not have any legs to stand. 9. Accordingly it is ordered that further coercive steps pursuant to the impugned demand may be kept in abeyance in case the petitioner remits atleast 30% of the amount demanded in the impugned Ext.P-7 letter before the 2[nd] respondent and this may be done by the petitioner within a period of 6 weeks from the date of receipt of a certified copy of this judgment. The 1[st] respondent W.P.(C) No. 34341 of 2019 **==> picture [24 x 9] intentionally omitted <==** appellate authority will pass final orders in the appeal after the abovesaid remit, without much delay preferably and after affording reasonable opportunity of being heard to all the parties concerned including the petitioner as aforestated, without much delay preferably within a period of 2 to 3 months from the date of production of a certified copy of this judgment. With these observations and directions, the above Writ Petition (Civil) will stand finally disposed of. Sd/- ALEXANDER THOMAS, JUDGE MMG W.P.(C) No. 34341 of 2019 ..15.. ## **APPENDIX** ## **PETITIONER'S EXHIBITS:** **EXHIBIT P1 TRUE COPY OF THE OCCUPANCY CERTIFICATE DATED 26.9.2017 ISSUED BY THE WADAKKANCHERRY MUNICIPALITY** **EXHIBIT P2 TRUE COPY OF THE RETURN WITHOUT DATE SUBMITTED BY THE PETITIONER BEFORE THE SECOND RESPONDENT** **EXHIBIT P3 TRUE COPY OF THE ORDER DATED 27.3.2019 ALONG WITH DEMAND NOTICE DATED 27.3.2019 ISSUED BY THE SECOND RESPONDENT** **EXHIBIT P4 TRUE COPY OF THE RECEIPT DATED 4.5.2019 ISSUED BY THE SECOND RESPONDENT TOWARDS THE RECEIPT OF FIRST INSTALLMENT DUE IN EXHIBIT P3 ORDER** **EXHIBIT P5 TRUE COPY OF THE MEMORANDUM OF APPEAL DATED 7.5.2019 SUBMITTED BY THE PETITIONER BEFORE THE FIRST RESPONDENT** **EXHIBIT P6 TRUE COPY OF THE ORDER DATED 13.8.2019 PASSED BY THE FIRST RESPONDENT EXHIBIT P7 TRUE COPY OF THE DEMAND NOTICE DATED 25.9.2019 ISSUED BY THE SECOND RESPONDENT**