Malik Deenar Charitable Hospital, Kasaragod v. State of Kerala

## IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR. JUSTICE DINESH KUMAR SINGH TUESDAY, THE 26[TH] DAY OF SEPTEMBER 2023 / 4TH ASWINA, 1945 ## WP(C) NO. 26309 OF 2016 ## PETITIONER/S: MALIK DEENAR CHARITABLE HOSPITAL THALANGARA P.O., KASARAGOD-671 122, REPRESENTED BY ITS CHAIRMAN-MR.T.A.MOHAMMED HABEEBULLAH. BY ADVS.SRI.M.GOPIKRISHNAN NAMBIAR SRI.P.BENNY THOMAS; SRI.K.JOHN MATHAI SRI.JOSON MANAVALAN; SRI.KURYAN THOMAS SRI.RAJA KANNAN ## RESPONDENT/S: - 1 THE STATE OF KERALA REPRESENTED BY THE SECRETARY TO GOVERNMENT, REVENUE DEPARTMENT, SECRETARIAT, THIRUVANANTHAPURAM-695 001. - 2 THE TAHSILDAR TALUK OFFICE BUILDING, TRAFFIC JUNCTION, KASARAGOD-611 121. JASMINE M.M.-GP THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 26.09.2023, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: **W.P.(C) No.26309/2016** **-2-** ## J U D G M E N T Heard Mr Kuryan Thomas learned Counsel for the petitioner, and Ms Jasmin M M learned Government Pleader for the respondents. 2. The present writ petition under Article 226 of the Constitution of India has been filed by the petitioner impugning the decision of the State Government, Department of Revenue, dated 27.01.2016 (Ext.P3) passed under the Kerala Building Tax Act 1975 (for short, ‘Act 1975’) whereby the petitioner’s building having plinth area of 7626.48 sq mtr where the hospital is being run and the canteen having a plinth area of 145.08 sq mtr have been held to be liable to tax under the provisions of Act 1975. The Government has found that the building having a plinth area of 5480.28 sq mtr used for educational purposes is exempt from levying the building tax under the provisions of the Act 1975. However, with ## **W.P.(C) No.26309/2016** **-3-** respect to the hostel having a plinth area of 4657.05 sq mtr, it has been observed that the tax on the said area would be subject to the final order passed by the Supreme Court in Civil Appeal No.207/2012. 2.1 With the aforesaid observation, the matter has been remanded back to the Tahsildar to levy the building tax in respect of 145.08 sq mtr used as a canteen and in respect of 7626.48 sq mtr used for a hospital. On remand, the Tahsildar has passed a fresh assessment order in Ext.P5 levying building tax on the canteen and hospital building. The building tax has been assessed at a pre-revised rate of Rs.13,71,600/-. 3. The learned Counsel for the petitioner submits that the Government Order (Ext.P3) is unsustainable in respect of levying the building tax on the whole of the plinth area of the building on which the hospital is being run. The petitioner has created facilities of extra beds in the said hospital for teaching nursing students, and therefore, to that extent, the hospital ## **W.P.(C) No.26309/2016** **-4-** building is not liable to be taxed under the provisions of the Act 1975. 3.1 The learned Counsel for the petitioner further submits that the Supreme Court has finally settled the issue in respect of the building tax on hostel facilities in an educational institution in its judgment reported in _Government of Kerala v. Mother Superior Adoration Convent_[1] . The Supreme Court has held that the buildings which are connected with the dominant purpose of imparting instructions in an educational institution could be exempted from the levy of building tax under the provisions of the Act 1975. He therefore submits that the matter may be remanded back to the Government to take a decision in respect of the levy of building tax on the hospital and canteen. 4. The Assessing Authority, as well as the Government, have concurrently held that the petitioner hospital is not a > 1 (2021) 5 SCC 602 ## **W.P.(C) No.26309/2016** **-5-** charitable hospital. The petitioner charged fee from outdoor patients and also indoor patients. The said conclusion has been drawn after examining the relevant record and evidence, and therefore, this Court, which is exercising the writ jurisdiction, will not record a finding of fact contrary to what has been recorded by the two authorities regarding the nature of the activity of the petitioner hospital not being charitable inasmuch as the petitioner does not provide free treatment to its patient but collects charges from the outdoor and indoor patients. The Tahsildar, after inspecting the building physically, recorded the finding that the hospital was not functioning as a charitable hospital, but they charge fee from the majority of the patients, and therefore the hospital building has been held to be liable to pay the building tax. 5. Whether the petitioner has made some extra beds or not will not change the nature of the hospital. Once it has been held that the hospital is not a charitable hospital, by ## **W.P.(C) No.26309/2016** **-6-** creating extra beds, its nature would not get changed for it being a charitable hospital. Therefore, I do not find any substance in the submission of the learned Counsel for the petitioner that, as the petitioner has allegedly created some extra beds for imparting education to nursing students, the hospital is liable to be exempted from levying building tax. 5.1 The Supreme Court, in its judgment in the case of _Mother Superior Adoration Convent_ (supra), while considering the provisions of Section 3(1)(b) of Act 1975, has held that the building where hostel facilities are provided to the students by educational institutions is exempted from payment of the building tax. Paragraphs 14 to 16 of the said judgment, which are relevant, are extracted hereunder: “14. Before coming to the case law that has been cited before us, it is important to first analyse Section 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 **W.P.(C) No.26309/2016** **-7-** 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”. 15. 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 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 **W.P.(C) No.26309/2016** **-8-** 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. 16. A reading of the other provisions of the Act strengthens the aforesaid conclusion. “Residential building” is defined separately from “building” in Section 2(l). A “residential building” means a building or any other structure or part thereof built exclusively for residential purposes. It is important to note that “residential building” is not the subject matter of exemption under Section 3 of the Act. Quite **W.P.(C) No.26309/2016** **-9-** the contrary is to be found in Section 5A of the Act, which starts with a non-obstante clause, and which states that a luxury tax is to be charged on all residential buildings having a plinth area of 278.7 square meters and which have been completed on or after 11.4.1999. If we were to accept the contention of the State, buildings in which nuns are housed and students are accommodated in hostels which have been completed after 1.4.1999 and which have a plinth area of 278.7 square meters would be liable to pay luxury tax as these buildings would now no longer be buildings used principally for religious or educational purposes, but would be residential buildings used exclusively for residential purposes. This would turn the object sought to be achieved in exempting such buildings on its head. For this reason also, we cannot countenance a plea by the State that buildings which are used for purposes integrally connected with religious or educational activity are yet outside the scope of the exemption contained in Section 3(1)(b) of the Act. ….” 6. So far as the question of exemption of hospital building of an educational institution is covered by the aforesaid judgment passed by the Supreme Court. In respect of the canteen facility, it is for the authority to examine whether it is part of the hospital or it is part of the hostel. If it ## **W.P.(C) No.26309/2016** **-10-** is part of the hostel, it would be liable to be exempted from payment of the building tax. However, if it is part of the hospital, it cannot be entitled to an exemption. 7. Thus, the present case is remanded back so far as the question of levying the building tax on hostel and canteen building is concerned. Let the Government pass fresh orders considering the judgment of the Supreme Court in the case of _Mother Superior Adoration Convent_ (supra) and the observations as made hereinabove. With the aforesaid directions, the present writ petition stands partly allowed. Sd/- DINESH KUMAR SINGH JUDGE jjj **W.P.(C) No.26309/2016** **-11-** ## APPENDIX OF WP(C) 26309/2016 PETITIONER EXHIBITS - EXHIBIT P1. TRUE COPY OF THE CERTIFICATE OF THE REGISTRATION DATED 22/11/1972 ISSUED UNDER THE SOCIETIES REGISTRATION ACT, XXI OF 1860. - EXHIBIT P2. TRUE COPY OF THE JUDGMENT DATED 1/2/2013 PASSED BY THE HONOURABLE HIGH COURT IN WPC NO.3064/2013. - EXHIBIT P3. TRUE COPY OF THE G.O.(ORDINARY) NO.586/16 DATED 27/1/2016 ISSUED FROM THE OFFICE OF THE 1ST RESPONDENT - EXHIBIT P4. TRUE COPY OF THE ASSESSMENT ORDER DATED 27/12/2012 COMPLETED U/S. 143(3) OF THE INCOME TAX ACT FOR THE ASSESSMENT YEAR 2010-11 - EXHIBIT P5. TRUE COPY OF THE ASSESSMENT ORDER DATED 19/2/2016 ISSUED BY THE 2ND RESPONDENT - Exhibit P6 TRUE COPY OF THE GUIDELINES AND MINIMUM REQUIREMENTS TO ESTABLISH B.SC (N) COLLEGE OF NURSING ISSUED BY THE INC. - Exhibit P6A TRUE COPY OF THE GOVERNMENT ORDER OF THE HEALTH AND FAMILY WELFARE DEPARTMENT OF THE GOVERNMENT OF KERALA BEARING NO.G.O.(P) NO.64/2012/H & FWD DATED 17.02.2012. - Exhibit P7 TRUE COPY OF THE LETTER ISSUED BY INC TO THE PETITIONER DATED 25.11.2013 - Exhibit P8 TRUE COPY OF THE CERTIFICATE DATED 22.09.2016 ISSUED BY THE KASARGOD MUNICIPALITY. - Exhibit P9 TRUE COPY OF THE NOTICE DATED 13.10.2017 ISSUED BY THE 2ND RESPONDENT. ## **W.P.(C) No.26309/2016** **-12-** English Translation of English Translation of Ext. P3 Ext.P3 English Translation of Ext. English Translation of Ext. P8 P8 English Translation of Ext. English Translation of Ext. P9 P9 English Translation of Ext. P3