Dr. P. Madhavankutty Varier v. State of Kerala and Others

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT** **THE HONOURABLE DR. JUSTICE A.K.JAYASANKARAN NAMBIAR** **&** **THE HONOURABLE DR. JUSTICE KAUSER EDAPPAGATH MONDAY, THE 11[TH] DAY OF DECEMBER 2023 / 20TH AGRAHAYANA, 1945 WP(C) NO. 34154 OF 2023** ## **PETITIONER:** DR. P. MADHAVANKUTTY VARIER, AGED 76 YEARS S/O LATE C. RAMA VARIER, PRESENT MANAGING TRUSTEE, ARYA VAIDYA SALA, KOTTAKKAL, MALAPPURAM DISTRICT, PIN - 676503 BY ADVS. M.R.MINI VINOD RAVINDRANATH MEENA.A. K.C.KIRAN THAREEQ ANVER K. ANISH ANTONY ANATHAZHATH M.DEVESH NIVEDHITHA PREM.V ## **RESPONDENTS:** 1 THE STATE OF KERALA REPRESENTED BY THE CHIEF SECRETARY TO GOVERNMENT, SECRETARIAT, THIRUVANANTHAPURAM, PIN - 695001 2 THE SECRETARY TO GOVERNMENT REVENUE (SPECIAL CELL) DEPARTMENT, THIRUVANANTHAPURAM, PIN – 695001 WP(C)No.34154/2023 -:2:- 3 THE REVENUE DIVISIONAL OFFICER FORT KOCHI, ERNAKULAM DISTRICT, PIN - 682001 4 THE TAHSILDAR KANAYANNOOR TALUK, ERNAKULAM, PIN - 682011 BY SR.GOVT.PLEADER SRI.V.K.SHAMSUDHEEN THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 11.12.2023, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: WP(C)No.34154/2023 ## -:3:- ## **J U D G M E N T** ## Dr. Kauser Edappagath, J. The petitioner is the Managing Trustee of Arya Vaidya Sala Kottakkal, which is a public trust for charitable purposes established under the Will dated 20/10/1939 executed by the founder of the Institution. The issue involved in this writ petition pertains to claims for exemption under Section 3 of the Kerala Building Tax Act, 1975 (for short, 'the Act') in respect of a hospital building owned by the trust. 2. The trust constructed a building at Thrikkakkara, Vazhakkala Village, Ernakulam, for the purpose of starting an Ayurvedic Hospital and Research Centre. On completion of the said building in the year 2008, the petitioner, while filing statutory return of completion, submitted Ext.P5 representation before the 4[th] respondent requesting to exempt the building from the provisions of the Act on the ground that the building was WP(C)No.34154/2023 -:4:- principally used for charitable purpose as envisaged under Section 3(1)(b) of the Act. The 4[th] respondent forwarded Ext.P5 to the Government for a decision. The 2[nd] respondent, after hearing both sides and considering the documentary evidence produced by the petitioner, rejected the request for exemption as per Ext.P11 order. The said order is under challenge in this writ petition. 3. We have heard Sri.Krishnanunni, the learned Senior Counsel for the petitioner and Sri.V.K.Shamsudheen, the learned Senior Government Pleader. 4. It is not in dispute that the building in question was constructed for the purpose of starting an Ayurvedic Hospital and Research Centre. According to the petitioner, the building is constructed by using trust funds for carrying out its objectives; it is principally used for charitable purposes as envisaged under Section 3(1)(b) of the Act and, therefore, is entitled to exemption from the payment of building tax. The Government is the authority to decide on any question as to whether a building is eligible for exemption from building tax. Sub-section (3) of WP(C)No.34154/2023 -:5:- Section 3 of the Act provides that a decision of the Government to that effect shall be final and shall not be called into question in any Court of law. Section 3(1)(b) of the Act provides, among other things, that nothing in the Act shall apply to buildings used principally for charitable purposes. Explanation 1 under that provision provides that the term “charitable purpose” in that subsection includes “relief of the poor and free medical relief”. The question relating to the interpretation of the terms “charitable” and “charitable purpose” in Section 3(1)(b) of the Act in the context of the provision of medical relief came up for consideration before the two-Judge Bench of the Apex Court in S.H. Medical Centre Hospital v. State of Kerala (2014 (1) KLT 316). The Apex Court conclusively held that only building utilised for providing free medical aid can be said to be used principally for charitable purposes 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 charitable basis. A Full Bench of this WP(C)No.34154/2023 -:6:- Court, thereafter, in St.Alphonsa Hospital and Others v. State of Kerala and Others (2015 (1) KHC 542) followed the said decision. Thereafter, another two-Judge Bench of the Apex Court in Lisie Medical Institutions v. State of Kerala [(2017) 14 SCC 533] doubted the correctness of certain observations contained in S.H.Medical Centre Hospital (supra) and the matter was placed before the three Judge Bench. The two Judge Bench in Lisie Medical Institutions (supra) found that the earlier two-Judge Bench decision in S.H.Medical Centre Hospital (supra) had taken the statutory provision under the Explanation to Section 3(1) as reading “charitable purpose” means “relief of the poor and free medical relief” where the statutory provision actually read “charitable purpose includes relief of the poor and free medical relief”. It was observed that the Explanation simply clarifies that relief to the poor and free medical relief is one of the facets of charitable purpose, and the use of the word “includes” indicated that there could be other facets of charitable purpose as well. The three-Judge Bench on reference ( Lisie Medical Institutions v. State of Kerala and Others , 2023 (3) KLT 585) found that in order WP(C)No.34154/2023 -:7:- to qualify for exemption contemplated under Section 3(1) of the Act, the building had to be “principally” used for charitable purpose, by which term was meant that the dominant substantive use to which the building was put to was for charitable purpose. Interpreting Explanation 1 to Section 3(1) of the Act, the Bench held that “the Explanation goes to indicate that 'charitable purposes' includes and is, therefore, confined to the relief of the poor and free medical relief” and that S.H. Medical Centre Hospital (supra), having not noticed the use of the phraseology “includes” in the Explanation, had to be overruled to the said extent. Having clarified this, the three-Judge Bench remanded the matter to the Division Bench of this Court for a fresh decision after keeping open the factual analysis based on the interpretation of Section 3(1). After remand, the Division Bench of this Court ( Lisie Medical Institutions v. State of Kerala 2023 (4) KLT 432) held that even if the phrase “charitable purpose” in Explanation 1 is to be given a broad meaning on account of the inclusive definition used therein, when it comes to medical relief rendered in a hospital qualifying as a charitable purpose, the WP(C)No.34154/2023 -:8:- hospital building will get exemption under the head “charity” only if medical service is rendered free in such hospital buildings. It was clarified that the said view applies only in those cases where the charitable purpose sought to be established is the provision of medical relief, for it is only in relation to the said activity that the legislature stipulates that the relief provided must be free. Coming to the merits of the case, as stated already, the building in question was constructed by the trust to house an Ayurvedic Hospital and Research Centre. The building is now used as an Ayurvedic Hospital and Research Centre. Even the petitioner does not have a case that the building is principally used for providing free medical relief. The recital in the Will dated 20/10/1939 executed by the founder of the trust states that one of the objects of the trust is to take in at least 12 poor patients at any time as inpatients and give them free treatment and medicines as well as boarding and lodging. Yet another object of the trust is to give free treatment to poor outpatients. The enquiry conducted by the Government revealed that even though the hospital does not charge consultation fees from poor WP(C)No.34154/2023 -:9:- outpatients, they collect charges for the medicines. The enquiry further revealed that the hospital only gives free treatment to a small section of poor patients. In short, the petitioner failed to establish that the building was principally used for providing free medical relief as required under the statutory provision for inclusion under the definition of ‘charitable purpose’. The petitioner also does not have a case that any other service that qualifies as a charitable purpose under Section 3 of the Act is rendered in the said building. The petitioner failed to produce any documentary evidence before the Government to show that the hospital spent a substantial amount of its total income towards the free medical relief. The Government, on the available materials, found that the petitioner cannot claim exemption from the building tax based on the extent of medical relief that they have been providing in the building in question. Such a finding of fact cannot be upset except on the grounds of lack of materials or gross insufficiency, which would result in groundless reasoning. The petitioner has failed to convince us also as to how the building in question would qualify for the exemption under WP(C)No.34154/2023 -:10:- Section 3 of the Act in respect of the medical relief provided in the building in question. The writ petition, therefore, fails, and it is accordingly dismissed. Sd/- **DR. A.K.JAYASANKARAN NAMBIAR JUDGE** Sd/- **DR. KAUSER EDAPPAGATH JUDGE** Rp WP(C)No.34154/2023 ## -:11:- ## **APPENDIX OF WP(C) 34154/2023** PETITIONER EXHIBITS Exhibit P1 TRUE COPY OF THE ENGLISH TRANSLATION OF WILL DATED 20.10.1939 Exhibit P2 TRUE COPY OF THE ORDER DATED 20-8-1983 PASSED BY THE GOVERNMENT OF INDIA Exhibit P3 TRUE COPY G.O. RT 85/84/RD DATED 16.1.1984 Exhibit P4 TRUE COPY OF THE JUDGMENT DATED 21.7.1986 IN C.M.A. NOS. 112, 113 AND 114 OF 1985 Exhibit P5 TRUE COPY OF REPRESENTATION DATED 10.10.2008 BEFORE THE 4TH RESPONDENT Exhibit P6 TRUE COPY OF THE ORDER DATED 16.01.2014 ISSUED BY THE 2ND RESPONDENT Exhibit P7 TRUE COPYOF THE JUDGMENT DATED 24.11.1988 IN OP NO.1505/84 Exhibit P8 TRUE COPY OF THE JUDGMENT DATED 15.02.1990 IN W.A. NO.511/1989 Exhibit P9 TRUE COPY OF THE ORDER DATED 06.05.1996 IN SLP FILED BY KOTTAKKAL PANCHAYATH Exhibit P10 TRUE COPY OF THE JUDGMENT OF THIS HON'BLE COURT IN WPC NO.10929/14 DATED 11.12.2014 ## WP(C)No.34154/2023 ## -:12:- Exhibit P11 TRUE COPY OF THE ORDER DATED 23.09.2023 PASSED BY THE GOVERNMENT