Bharat Sanchar Nigam Limited v. State of Kerala and Thrissur Corporation

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT:** ## **THE HONOURABLE MR. JUSTICE ANIL K.NARENDRAN** ## **THURSDAY, THE 1ST DAY OF JUNE 2017/11TH JYAISHTA, 1939** ## **WP(C).No. 10972 of 2007 (F)** **----------------------------** ## **PETITIONER(S):** **----------------------** **THE BHARAT SANCHAR NIGAM LTD. REPRESENTED BY ITS ASSISTANT GENERAL MANAGER, PLANNING, THRISSUR.** ## **BY ADV. SRI.K.RAMAKUMAR, SC, BSNL** **RESPONDENT(S):** **--------------------------** **1. STATE OF KERALA, REPRESENTED BY THE SECRETARY TO GOVERNMENT, LOCAL SELF GOVERNMENT, GOVERNMENT OF KERALA, THIRUVANANTHAPURAM.** **2. THE SECRETARY, THRISSUR CORPORATION, THRISSUR.** **R1 BY SRI. PAUL VARGHESE M, GOVERNMENT PLEADER R2 BY ADV. SRI. SANTHOSH P.PODUVAL, SC FOR R2 SRI.K.B.MOHANDAS,SC FOR R2 SRI.K.B.MOHANDAS,SC FOR R2** **THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 01-06-2017, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** **WP(C).No. 10972 of 2007 (F)** **---------------------------------------** ## **APPENDIX** ## **PETITIONER'S EXHIBITS:** - **P1: TRUE COPY OF THE NOTICE DTD 9.9.2006 RECEIVED FROM R2** - **P2: TRUE COPY OF THE NOTICE DTD 22.9.2006 RECEIVED FROM R2** - **P3: TRUE COPY OF THE REPRESENTATION DTD 14.10.2006 SUBMITTED BY THE PETITIONER BEFORE R2.** **RESPONDENT'S EXHIBITS: NIL** **//TRUE COPY//** **//PA TO JUDGE//** **sab** **“CR”** ## **ANIL K. NARENDRAN, J. ----------------------------------------W.P.(C) No.10972 of 2007 ----------------------------------------Dated this the 1[st ] day of June, 2017** ## **JUDGMENT** The Bharat Sanchar Nigam Limited, the petitioner herein, is a company incorporated under the Companies Act, 1956 on 15.9.2000, which is wholly owned by the Government of India. The petitioner company took over the business of providing telecom services and network management from the erstwhile Central Government Departments of Telecom Services and Telecom Operations, with effect from 1.10.2000 on 'going concern' basis. Even prior to that, the Telephone Exchange (E10B) at Thrissur has been functioning in a building belonging to the Government of India, situated in Chembukkavu. 2. The petitioner company was issued with Ext.P1 demand notice dated 9.9.2006 of the Secretary, Thrissur Corporation, the 2[nd] respondent herein, demanding a sum of Rs.3,86,268/- towards property tax for the period 2000-01 to 2006-07, in respect of the Telephone Exchange at Thrissur and Ext.P2 demand notice dated 22.9.2006 demanding a further sum of Rs.9,03,174/- towards property tax for the period 2000-01 to 2006-07, in respect of its staff quarters at Poothole. On receipt of Exts.P1 and P2 demand notices, the petitioner company submitted Ext.P3 representation dated 14.10.2006, contending that the ownership and title of the **W.P.(C) No.10972 of 2007** **2** said buildings are still with the Department of Telecom, Government of India and as such, the said buildings are exempted from taxation under Article 285 of the Constitution of India. Thereafter, the petitioner company has approached this Court in this writ petition seeking a writ of certiorari to quash Exts.P1 and P2 demand notices and a writ of mandamus forbearing the 2[nd] respondent from enforcing payment of the amount demanded in Exts.P1 and P2, as the said buildings which belong to Government of India are exempted from taxation. 3. On 29.3.2007, this Court admitted the writ petition on file and granted an interim order to keep in abeyance Exts.P1 and P2 till 9.4.2007. The said interim order, which was extended from time to time, was extended until further orders on 25.7.2008. 4. A counter affidavit has been filed by the 2[nd] respondent contending that, once the the assets of the erstwhile Telecom Department have become vested in the petitioner company, which is a company incorporated under the Companies Act, no claim for exemption under Article 285 of the Constitution of India is legally permissible. The 2[nd] respondent would also rely on Circular No.43657/B4/2004 dated 9.12.2004 issued by the Government of Kerala, Local Self Government Department, by which all Local Self Government Institutions were directed to levy property tax in respect of all buildings/properties belonging to the erstwhile **W.P.(C) No.10972 of 2007** **3** Telecom Department, Government of India, with effect from the date of incorporation of the petitioner company. 5. Heard learned counsel for the petitioner, learned Government Pleader for the 1[st] respondent State and also learned Standing Counsel for the 3[rd] respondent Municipality. 6. The sole issue that arises for consideration in this writ petition is as to whether the property of Bharat Sanchar Nigam Limited, which is a company registered under the Companies Act, and wholly owned by the Central Government, can be treated as the property of the Union or property vested in the Central Government, in order to claim exemption from the levy of property tax, as contemplated under Article 285 of the Constitution of India. 7. Article 285 of the Constitution of India deals with exemption of property of the Union from State taxation. Clause (1) of Article 285 provides that, the property of the Union shall, save in so far as Parliament may by law otherwise provide, be exempt from all taxes imposed by a State or by any authority within a State. Clause (2) of Article 285 provides further that, nothing in clause (1) shall, until Parliament by law otherwise provides, prevent any authority within a State from levying any tax on any property of the Union to which such property was immediately before the commencement of the Constitution liable or treated as liable, so long as that tax continues to be levied in that State. Article 285 of **W.P.(C) No.10972 of 2007** **4** the Constitution of India therefore imposes a ban on levy of tax by a State or any authority within a State on the property of the Union. 8. In the instant case, Bharat Sanchar Nigam Limited is a company incorporated under the Companies Act, which took over the business of providing telecom services and network management from the erstwhile Central Government Departments of Telecom Services and Telecom Operations, on 'going concern' basis, with effect from 1.10.2000. A company incorporated under the provisions of the Companies Act like the petitioner Company is a separate legal entity distinct from its individual shareholders. It is a juristic person and has an existence independent from that of the shareholders and it is the company which owns its assets and not the shareholders. 9. In **Electronics Corporation of India Ltd. v. Secretary, Revenue Department, Govt. of A.P. (1999 (4) SCC** **458)** a Constitution Bench of the Apex Court held that, a clear distinction must be drawn between a company and its shareholder, even though that shareholder may be only one, i.e., either the Central or a State Government. In the eye of the law, a company registered under the Companies Act is a distinct legal entity other than the legal entity or entities that hold its shares. 10. In Electronics Corporation's case (supra) it was contended before the Apex Court that, the property of Electronics **W.P.(C) No.10972 of 2007** **5** Corporation of India Ltd. was the property of the Union of India, inasmuch as, the said company was a Government company, its shares being wholly owned by the Union of India and that being so, the State Legislature was barred from imposing any tax on its property. After repelling the said contention, the Apex Court held that, the State Government was entitled to levy tax upon the lands held by Electronics Corporation of India Ltd. 11. In Electronics Corporation's case (supra) reference was also made to the judgment in **Western Coalfields Ltd. v. Special Area Development Authority (1982 (1) SCC 125)** wherein the Apex Court reviewed its earlier judgments on the point and held that, even though the entire share capital of Western Coalfields Ltd. had been subscribed by the Government of India, it could not be predicated that the said company itself was owned by the Government of India. The Apex Court held further that, the companies which are incorporated under the Companies Act have a corporate personality of their own, distinct from that of the Government of India. The lands and buildings in question in that matter were therefore vested in and owned by the said company and the Government of India only owned the share capital. 12. In **Food Corporation of India v. Municipal Committee, Jalalabad (1999 (6) SCC 74)** it was contended before the Apex Court that, for all intents and purposes, Food ## **W.P.(C) No.10972 of 2007** **6** Corporation of India was nothing but an extended arm of the Central Government and it was thus exempted from taxation under Article 285 of the Constitution of India. After referring to the Constitution Bench decision in Electronics Corporation's case (supra) the Apex Court held that Food Corporation of India cannot claim exemption from taxation under Article 285 of the Constitution of India, inasmuch as, a Government company is distinct from the Central Government and cannot claim exemption from taxation under Article 285 of the Constitution. The case of the Food Corporation of India cannot have any difference, since the Act under which it is constituted specifically makes the said corporation a body corporate having the attributes of a company. 13. The ratio of the decisions of the Apex Court referred to supra squarely applies to the instant case. Bharat Sanchar Nigam Limited, which is a company incorporated under the Companies Act, is a legal entity distinct and separate from the Central Government. It has a corporate personality of its own, distinct from the Central Government. In that view of the matter, the property/building in respect of which property tax has been levied by the 2[nd] respondent under the Kerala Municipality Act, 1994 are owned by the said company and not by the Government of India. The petitioner company, therefore, cannot claim exemption from taxation under Article 285 of the Constitution of India in respect of its properties. **7** ## **W.P.(C) No.10972 of 2007** In that view of the matter, the demand of property tax made by the 2[nd] respondent in Exts.P1 and P2 demand notices is perfectly legal, which warrants no interference in this writ petition. In the result, the challenge made by the petitioner company against Exts.P1 and P2 demand notices issued by the 2[nd] respondent fails. The writ petition is accordingly dismissed. No order as to costs. Sd/- **ANIL K. NARENDRAN, JUDGE** sab