The Caritas Ayurvedic Hospital Trust 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 TUESDAY, THE 20[TH] DAY OF FEBRUARY 2024 / 1ST PHALGUNA, 1945 WA NO. 243 OF 2024** **AGAINST THE JUDGMENT WP(C) 32676/2022 OF HIGH COURT OF** **KERALA** ## **APPELLANT/PETITIONER IN WP(C):** THE CARITAS AYURVEDIC HOSPITAL TRUST, THELLAKOM AGED 45 YEARS REPRESENTED BY ITS DIRECTOR, FR.REJI MATHEW KOCHUPARAMBIL, AGED 45 YEARS, S/O MATHAI, THE CARITAS AYURVEDIC HOSPITAL TRUST, THELLAKOM, KOTTAYAM, PIN - 686630 BY ADV PRABHA JOSE ## **RESPONDENTS/RESPONDENTS IN WP(C):** 1 THE STATE OF KERALA, REPRESENTED BY SECRETARY, DEPARTMENT OF REVENUE, MAHATMA GANDHI ROAD, STATUE, PALAYAM, THIRUVANANTHAPURAM, PIN - 695001 2 THE DISTRICT COLLECTOR, KOTTAYAM KOTTAYAM - KUMILY ROAD, COLLECTORATE, KOTTAYAM, KERALA, PIN - 686002 3 THE REVENUE DIVISIONAL OFFICER, KOTTAYAM MINI CIVIL STATION, KOTTAYAM, PIN – 686001 W.A.No.243/2024 -:2:- 4 THE TAHASILDAR, KOTTAYAM TALUK OFFICE 1ST FLOOR, MINI CIVIL STATION, KOTTAYAM, PIN - 686001 5 THE VILLAGE OFFICER, PEROOR VILLAGE ETTUMANOOR PEROOR ROAD, KOTTAYAM, PIN - 686637 ## **OTHER PRESENT:** SR.GP-V.K.SHAMSUDHEEN. THIS WRIT APPEAL HAVING COME UP FOR ADMISSION ON 20.02.2024, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: W.A.No.243/2024 ## -:3:- ## **J U D G M E N T** ## Dr. Kauser Edappagath, J. The appellant is an Ayurvedic Hospital established in the year 1998. The appellant claims to be a charitable trust providing medical service to the public for charitable and philanthropic purpose. The issue involved in this writ appeal 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 appellant was not granted with tax exemption as specified under Section 3(1)(b) of the Kerala Building Tax Act, 1975 and was assessed with a one time building tax for an amount of `13,42,800/-. The appeal and revision filed by the appellant against this were rejected by the 3[rd] and 2[nd] respondent respectively. This was challenged by the appellant in W.P. (C).No.32676/2022. The learned Single Judge by judgment dated W.A.No.243/2024 -:4:- 15/1/2024 dismissed the writ petition holding that the impugned order does not suffer from any illegality or it violates any of the legal or constitutional right of the appellant. Aggrieved by the said judgment, this writ appeal has been filed by the appellant. 3. We have heard Adv. Prabha Jose, the learned Counsel for the appellant and Sri.V.K.Shamsudheen, the learned Senior Government Pleader. 4. It is not in dispute that the building in question is functioning as a hospital. According to the appellant, 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 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 W.A.No.243/2024 ## -:5:- 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 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] W.A.No.243/2024 ## -:6:- 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 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. W.A.No.243/2024 ## -:7:- 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 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 W.A.No.243/2024 ## -:8:- of medical relief, for it is only in relation to the said activity that the legislature stipulates that the relief provided must be free. The said decision was followed by this Court recently in WP(C) No.34154/2023 dated 11/12/2023 ( Dr.P.Madhavankutty Varier v. State of Kerala and Others ). 5. Coming to the merits of the case, as stated already, the building in question was constructed by the trust to run an Ayurvedic Hospital. The building is now used as an Ayurvedic Hospital promoting ayurvedic treatments, cure and natural health programmes. The appellant has an ayurvedic medicine manufacturing unit also. Even the appellant does not have a case that the building is principally used for providing free medical relief. The Revenue (Special Cell) Department, audited the accounts of the appellant which shows that the hospital is charging huge amount towards the medical services/treatment provided and people are not provided with medical service free of charge. The Government vide order dated 10/5/2017 rejected the request of the petitioner for exemption from payment of building tax under Section 3(1)(b) of the Act. The reasons for rejecting the W.A.No.243/2024 ## -:9:- appellant’s claim had been set out in the order dated 10/05/2017. It would suggest that for the financial years 2013-14, 2014-15 and 2015-16, the hospital collected huge amounts towards various medical charges. Thus, the hospital was not doing any charitable work and therefore is not entitled for exemption. Further, two authorities have concurrently held that the plinth area of the building is 3882.17 m.sq. In short, the appellant 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 appellant 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 appellant 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 appellant 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 W.A.No.243/2024 -:10:- fact cannot be upset except on the grounds of lack of materials or gross insufficiency, which would result in groundless reasoning. The appellant has failed to convince us also as to how the building in question would qualify for the exemption under Section 3 of the Act in respect of the medical relief provided in the building in question. The writ appeal, therefore, fails, and it is accordingly dismissed. Sd/- **DR. A.K.JAYASANKARAN NAMBIAR JUDGE** Sd/- **DR. KAUSER EDAPPAGATH JUDGE** Rp