Arya Vaidya Sala, Kottakkal v State of Kerala and others

W.P.(C) No. 22882/2014 : 1: : IN THE HIGH COURT OF KERALA AT ERNAKULAM ## PRESENT THE HONOURABLE MR. JUSTICE SHAJI P.CHALY FRIDAY, THE 18[TH] DAY OF NOVEMBER 2022 / 27TH KARTHIKA, 1944 ## WP(C) NO. 22882 OF 2014 ## PETITIONER/S: SRI.P.K.WARRIER MANAGING TRUSTEE, ARYA VAIDYA SALA, KOTTAKAL. BY ADV SRI.R.RAMADAS ## RESPONDENT/S: - 1 STATE OF KERALA REPRESENTED BY THE CHIEF SECRETARY TO GOVERNMENT, SECRETARIAT, THIRUVANANTHAPURAM, PIN: 695 001. - 2 THE SECRETARY TO GOVERNMENT REVENUE (SPECIAL CELL) DEPARTMENT, THIRUVANANTHAPURAM, PIN: 695 001. - 3 REVENUE DIVISIONAL OFFICER FORT KOCHI, ERNAKULAM DISTRICT, PIN: 682 001. - 4 TAHSILDAR KANAYANNOOR TALUK, ERNAKULAM, PIN: 682 011. BY ADV GOVERNMENT PLEADER ## SMT. JASMINE M.M., GOVERNMENT PLEADER THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 18.11.2022, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: : W.P.(C) No. 22882/2014 : 2: ## **‘C.R.’** ## **SHAJI P. CHALY, J.** --------------------------------------------------------W.P.(C). No. 22882 of 2014 --------------------------------------------------------Dated this the 18[th] day of November, 2022. ## **JUDGMENT** The writ petition is filed by the Managing Trustee of Arya Vaidya Sala, Kottakkal, challenging Exhibit P9 order of assessment and demand notice dated 02.07.2014 issued by the Tahsildar, Kanayannur Taluk — the 4[th] respondent, assessing the building tax in respect of a building within the limits of the Thrikkakara Municipality, Ernakulam District, for an amount of Rs.8,11,800/- as per the provisions of the Kerala Building Tax Act, 1975 ("Act, 1975' for short) and the Rules thereto. 2. The paramount contention advanced is that Arya Vaidya Sala is a public trust for charitable purposes established under the Will dated 30.10.1939 (In Exhibit P1 Will, date is not mentioned) executed by the founder of the institution and therefore, he is entitled to get exemption under Section 3(1) of the Act, 1975. 3. The case put forth to support the said contention is that the business of manufacturing and marketing medicines by the Trust itself is part of the Charitable activity; and that the entire : W.P.(C) No. 22882/2014 : 3: income generated by whatever activities of the Trust has to be spent purely for charitable purpose stipulated in the Will. Therefore, according to the Managing Trustee, it would be evident from various judicial pronouncements of the Hon’ble Apex Court as well as this Court with respect to the interpretation of the Will executed by the foundation of the institution. It is further pointed out that when Arya Vaidya Sala constructed a nursing home at Kottakkal, the question as to whether the building was entitled to get exemption under the provisions of the Act, 1975, was examined by the Government, which by Exhibit P3 order, held that the said building was not liable to be taxed under the provisions of the Act, 1975. 4. It is further stated that similarly, the Kottakkal Panchayat, Malappuram District, had assessed the building of the petitioner at Kottakkal to tax under Section 66 of of the Kerala Panchayat Raj Act, 1994 and the same was confirmed by the Government in the revision preferred. However, the said orders were interfered with by Exhibit P10 judgment dated 24.11.1989 in O.P. No. 1505 of 1984, which was affirmed by Exhibit P11 judgment dated 15.02.1990 in W.A. No. 511 of 1989, which in turn was affirmed by the Apex Court as per Exhibit P12 order dated 06.05.1996 in SLP (Civil) No. 12603 of 1990. : W.P.(C) No. 22882/2014 : 4: 5. The further case of the petitioner is that the trust constructed a building at Thrikkakara for the purpose of starting an ayurvedic hospital and research center. On completion of the said building in the year 2008, the petitioner, while filing the statutory return of completion, had submitted Exhibit P5 representation before the Tahsildar, Kanayannoor Taluk, Ernakulam, respondent No.4, requesting to exempt the building from the provisions of the Act, 1975. However, the same was dismissed as per Exhibit P6 order. It seems, the said order was challenged in W.P.(C) No. 10929 of 2014. But, during the pendency of the said writ petition, the assessment was made and Exhibit P9 demand was raised. It is, thus, challenging the legality and correctness of Exhibit P9, the writ petition is filed. 6. Heard learned Senior Counsel Sri. Krishnanunni assisted by Sri. Ashwin Sathyanath for the petitioner and the learned Government Pleader Smt. M.M . Jasmine, and perused the pleadings and material on record. 7. The learned Senior Counsel for the petitioner submitted that after issuing Exhibit P6 order of assessment dated 16.01.2014 by the second respondent rejecting the exemption claimed by the petitioner, the Tahsildar ought to have issued a pre-assessment notice and an opportunity should have been given to the petitioner : W.P.(C) No. 22882/2014 : 5: to file objections and for personal hearing before finalising and completing the assessment proceedings. Therefore, it is contended that the order of assessment is violative of the principles of natural justice and the same is arbitrary and illegal. 8. That apart, it is submitted that there is no basis for assessing the petitioner’s building to such a huge amount and the quantum of amount assessed and the plinth area quantified by the assessing authority is not correct. It is further pointed out that since the claim for exemption under Section 3(1) of the Act, 1975 has not been properly considered in accordance with law, Exhibit P9 is illegal and unreasonable. Other contentions are also raised. 9. On the other hand, the learned Government Pleader submitted that even according to the case put forth by the petitioner, the building is not used principally for charitable purposes. But, on the other hand, the case projected is that the income received from the hospital building is utilized for charitable purposes. 10. I have evaluated the rival submissions made across the Bar. Section 3 of the Act, 1975 deals with ‘exemptions’. Clause (b) of sub-Section (1) of Section 3 deals with the buildings used principally for religious, charitable or educational purposes or as factories or workshops or cattle/pig/poultry farms or poly houses. Explanation : W.P.(C) No. 22882/2014 : 6: (1) thereto makes it clear that for the purposes of the said sub-section, “charitable purpose” includes relief of the poor and free medical relief. 11. This is a case where the Managing Trustee had claimed for exemption before the statutory authority and the same was declined and thereafter, it was taken before the State Government probably in contemplation of sub-Section (2) of Section (3), which requisites that if any question arises as to whether a building falls under sub-section (1) of Section 3, it shall be referred to the Government and the Government shall decide the question after giving the interested parties an opportunity to present their case, which is a final order as per sub-Section (3) of Section 3 of the Act, 1975. 12. On a close reading of Section 3(1)(b) of the Act, 1975, it is evident that what is exempted is the buildings used principally for religious, charitable purposes etc. Therefore, the Act envisions the building to be used for charitable purposes. This is a case where the Managing Trustee itself has projected a case that the income generated from the hospital building is utilized for charitable purposes. Therefore, it is an admitted fact that the building is not utilised principally for charitable purposes. 13. The said question was considered in various judgments of this Court. In _**St. Mary’s Church v. Tahsildar**_ 2005(2) KLT 43, a : W.P.(C) No. 22882/2014 : 7: learned single Judge of this Court held that exemption from building tax will be available to a building only when it is ‘principally’ used for the purposes mentioned in Section 3(1)(b) of the Act, 1975. It was further held therein that if the principal object of the building constructed is commercial exploitation, that is to say for earning income, the building cannot be said to be used principally for the exempted category. 14. The same view was adopted by a Division Bench of this Court in _**St. George Orthodox Church v. State of Kerala**_ [2009(4) KLT 702] and held that when the religious institutions or charitable institutions let out buildings on rent, the same is assessable for building tax as the use is for commercial purpose, and no matter, the income generated therefrom is used for religious or charitable purposes. 15. Still later, a Division Bench of this Court in _**Sacred Heart**_ _**Hospital v. Secretary to Government**_ [2011(2) KLT 250] held that the charitable purpose contemplated in Section 3 of Act, 1975 does not necessarily exclude carrying on the activities for which charges are levied on those who can pay, and what is relevant is whether the building is principally used for charitable purpose. 16. Recently, the Apex Court in _**Government of Kerala v. Mother Superior Adoration Convent**_ [2021 (2) KLT 270 (SC) had occasion to consider the very same question and held that what is : W.P.(C) No. 22882/2014 : 8: important is the expression ‘principally’ showing thereby that the legislature decided to grant exemption qua buildings which are “principally” and not exclusively used for the purposes mentioned therein and held as follows at paragraphs 11 and 12 : “11. Before coming to the case law that has been cited before us, it is important to first analyse S.3(1)(b) with which we are directly concerned. First and foremost, the subject matter is “buildings” which as defined, would include a house or other structure. Secondly, the exemption is based upon user and not ownership. Third, what is important is the expression “principally”, showing thereby that the legislature decided to grant this exemption qua buildings which are “principally” and not exclusively used for the purposes mentioned therein. Dominant object therefore is the test to be applied to see whether such building is or is not exempt. Fourthly, religious, charitable or educational purposes are earmarked by the legislature as qualifying for the exemption as they do not pertain to business or commercial activity. Fifthly, what is important is that even factories or workshops which produce goods and provide services are also exempt, despite profit motive, as the Legislature obviously wishes to boost production in factories and services in workshops. What is important to note is that the expression “used principally for” is wider than the expression “as” which precedes the words “factories or workshops”. 12. A reading of the provision would show that the object for exempting buildings which are used principally for religious, charitable or educational purposes would be for core religious, charitable or educational activity as well as purposes directly : W.P.(C) No. 22882/2014 : 9: connected with religious activity. One example will suffice to show the difference between a purpose that is directly connected with religious or educational activity and a purpose which is only indirectly connected with such activity. Take a case where, unlike the facts in Civil Appeal No.202 of 2012, nuns are not residing in a building next to a convent so that they may walk over to the convent for religious instruction. Take a case where the neighbouring building to the convent is let out on rent to any member of the public, and the rent is then utilised only for core religious activity. Can it be said that the letting out at market rent would be connected with religious activity because the rental that is received is ploughed back only into religious activity? Letting out a building for a commercial purpose would lose any rational connection with religious activity. The indirect connection with religious activity being the profits which are ploughed back into religious activity would obviously not suffice to exempt such a building. But if on the other hand, nuns are living in a neighbouring building to a convent only so that they may receive religious instruction there, or if students are living in a hostel close to the school or college in which they are imparted instruction, it is obvious that the purpose of such residence is not to earn profit but residence that is integrally connected with religious or educational activity.” 17. Now, coming to the facts of the case, as I have pointed out above, there is no case at all for the Managing Trustee that the building is used principally for charitable purposes. But, on the contrary, the case projected is that the income generated from the hospital building as per the Will is utilised for charitable purposes. W.P.(C) No. 22882/2014 : 10: : 18. Having regard to the facts and circumstances and the law discussed above, I am of the considered opinion that the petitioner is not entitled to get any relief as are sought for in the writ petition. Needless to say, writ petition fails and accordingly, it is dismissed. sd/- **SHAJI P. CHALY, JUDGE.** Rv : W.P.(C) No. 22882/2014 : 11: ## APPENDIX OF WP(C) 22882/2014 ## PETITIONER’S EXHIBITS: |P1|P1: A TRUE COPY OF THE ENGLISH TRANSLATION OF| |---|---| ||THE WILL EXECUTED BY THE TESTATOR| |P2|P2: A TRUE COPY OF THE ORDER DATED 20/8/1983| ||PASSED BY THE GOVDERNMENT OF INDIA.| |P3|P3: A TRUE COPY OF F.O. RT 85/84/RD DATED| ||16/1/1884.| |P4|P4: A COPY OF THE JUDGMENT DATED 21/7/1986 IN| ||C.M.A NOS. 112, 113 AND 114 OF 1985.| |P5|P5: TRUE COPY OF THE REPRESENTATION DATED| ||10/10/2008 BEFORE THE 4TH RESPONDENT| |P6|P6:TRUE COPY OF THE ORDER DATED 16/1/2014| ||ISSUED BY THE 2ND RESPONDENT.| |P7|P7: TRUE COPY OF THE REPRESENTATION DATED| ||7/3/2014 BEFORE THE 4TH RESPONDENT.| |P8|P8: TRUE COPY OF THE ORDER DATED 11/04/2014 IN| ||WPC NO.10926/2014.| |P9|P9: TRUE COPY OF THE ASSESSMENT ORDER DATED| ||2/7/2014 ISSUED BY THE 4TH RESPONDENT| ||TOGETHER WITH THE NOTICE OF DEMAND.| |P10|P10: TRUE COPY OF THE JUDGMENT DATED| ||24/11/1989 IN OP NO.1505/84 G.| |P11|P11: THE TRUE COPY OF THE JUDGMENT DATED| ||15/2/1990 IN W.A NO.511/1989 PREFERRED BY THE| ||PANCHAYATH| |P12|P12: TRUE COPY OF THE ORDER DATED 6/5/1996 IN| ||THE SPECIAL LEAVE PETITION FILED BY THE| ||KOTTAKKAL PANCHAYATH PASSED BY THE HON'BLE| ||SUPREME COURT OF INDIA.| ## RESPONDENTS’ EXHIBITS: NIL True Copy PS To Judge. rv