Thiruvalla Municipality v. Dewan Bahadur V. Verghese Hospital Trust

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT:** ## **THE HONOURABLE MR.JUSTICE C.K.ABDUL REHIM** **TUESDAY, THE 21ST DAY OF MAY 2013/131ST VAISAKHA 1935** **WP(C).No. 23835 of 2008 (K) ----------------------------** **PETITIONER(S):** **--------------** ## **1. THIRUVALLA MUNICIPALITY, OFFICE OF THE** **THIRUVALLA MUNICIPALITY REPRESENTED BY ITS SECRETARY.** **2. SECRETARY, THIRUVALLA MUNICIPALITY, THIRUVALLA.** **3. STANDING COMMITTEE FOR FINANCE, THIRUVALLA MUNICIPAL TAX APPEAL COMMITTEE, THIRUVALLA, REPRESENTED BY ITS CHAIRMAN.** **BY ADV. SRI.S.SUBHASH CHAND** **RESPONDENT(S):** **--------------** **DEWAN BAHADUR V.VERGHESE HOSPITAL TRUST, THIRUVALLA MEDICAL MISSION HOSPITAL THIRUVALLA REPRESENTED BY ITS ADMINISTRATOR SAM ABRAHAM PARAYIL.** **BY ADVS. SRI.JOSEPH KODIANTHARA SRI.TERRY V.JAMES** **THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 21-05-2013, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** **WP(C).No. 23835 of 2008 (K)** ## **APPENDIX** ## **PETITIONERS' EXHIBITS** **EXT. P1 COPY OF THE ORDER BEARING RP NO. 449 DATED 12.06.1995 PASSED BY PETITIONER NO.2** **EXT. P2 COPY OF THE ORDER DATED 26.6.2006 PASSED BY PETITIONER NO.3** **EXT. P3 COPY OF THE ORDER DATED 31.3.2008 PASSED BY THE COURT OF THE TRIBUNAL FOR LOCAL SELF GOVERNMENT INSTITUTIONS, THIRUVANANTHAPURAM IN REVISION PETITION NO.68/06** **EXT. P4 COPY OF THE GOVERNMENT ORDER BEARING GO(RT) NO.112/86/LAD DATED 10.01.1986** ## **RESPONDENTS' EXHIBITS : NIL** **/TRUE COPY/** **P. A. TO JUDGE** **Pn** **“CR”** ## **C.K. ABDUL REHIM, J.** ------------------------------------------------- ## **W.P.(c) No. 23835 OF 2008** ------------------------------------------------DATED THIS THE 21[st] DAY OF MAY, 2013 ## **J U D G M E N T** Thiruvalla Municipality and its officials are the petitioners. Challenge is against Ext.P3 order passed by the Tribunal for Local Self Government Institutions, Thiruvananthapuram, in a revision petition filed by the respondent trust, challenging Ext.P1 order passed by the Secretary of the Municipality, which is confirmed in appeal through Ext.P2 order of the Standing Committee (appellate authority). 2. The respondent is a charitable trust running a Hospital within the limits of erstwhile Kuttapuzha Grama Panchayat. The Kuttapuzha Grama Panchayat got merged with the petitioner Municipality, with effect from 01-081987. The Hospital buildings was enjoying exemption from payment of property tax, except for buildings rented out to a Bank and to a contractor for running a canteen. This exemption was granted by virtue of Ext.P4 Government W.P.(c) No.23835/2008 -2- order, dated 10-01-1986. When the panchayat got merged with the Municipality, property tax was sought to be levied, despite exemption enjoyed on the basis of Ext.P4 Government order. This was objected by 1[st] respondent. In Exhibit P1 proceedings the Secretary of the Municipality had declined the claim raised under Section 101 (1) (d) of the Kerala Municipalities Act, 1960. Aggrieved by Ext.P1 the respondent trust filed appeal before the Standing Committee. In Ext.P2 proceedings the appeal was dismissed confirming Ext.P1, subject to modification granted in the rate of tax. The respondent took up the matter in revision before the Tribunal. In Ext.P3 impugned order the Tribunal found that the respondent trust was not liable for payment of property tax, under Section 101 (1) (d) of the Kerala Municipalities Act, 1960, till 30-05-1994, i.e: upto the date on which the 1960 Act was substituted by the Kerala Municipality Act, 1994. It is aggrieved by the said finding, this writ petition is filed. 3. There is no dispute that till the panchayat got merged with the petitioner Municipality on 01-08-1997, the W.P.(c) No.23835/2008 -3- 1[st] respondent was entitled for exemption by virtue of Ext.P4. From 01-08-1997 till 30-05-1994, provision which governed the field was Section 101 (1) (d) of the Kerala Municipalities Act, 1960. Under Section 101 (1) (d), lands and buildings exclusively occupied and used by any society or body for charitable purpose was exempted. In the explanation to Section 101 (1) (d) it is provided that, 'charitable purpose' includes; “relief of the poor, education and medical relief”. Proviso to Section 101 (1) (d) insist that the society or body which claims such exemption should be supported wholly or in part by voluntary contributions and should apply its profits or income if any, in promoting its objectives and does not pay dividend or bonus to its members. 4. Findings in Ext.P1 order of the Secretary is that, going by the statement of accounts produced it appears that the Hospital is maintained and developmental activities are undertaken by utilizing income generated from the Hospital itself. Contributions or donations received are so meager to be considered. Therefore the Hospital does not satisfy W.P.(c) No.23835/2008 -4- conditions stipulated in the proviso. Further finding is that a great majority of patients approaching the Hospital are charged for the services rendered and a negligible percentage of patients only are given free treatment. Therefore it cannot be said that the Hospital is running for charitable purpose. The Standing committee in Ext.P2 order had reiterated the above findings, observing that the materials produced are not sufficient to arrive at any conclusion that there were voluntary contributions at the relevant time. It was observed that the mere fact that no profit or share or dividend is distributed among the members alone is not sufficient to hold that the Hospital is entitled to get exemption. Merely because the hospital is registered as a charitable society it is not entitled for exemption. It was found that no portion of the Hospital is set apart for using as charitable institution. The appellate authority had arrived at a conclusion that, income generated from the hospital by charging the patients is not at all used for charitable purposes. Findings are to the effect that, 'Balance Sheet' revealed generation of income W.P.(c) No.23835/2008 -5- from the patients which is sufficient to meet the expenditure in running the hospital and the Hospital was not supported by any voluntary contributions. 5. Liability for payment of property tax under the Kerala Municipality Act, 1994, from 30-05-1994 onwards, is not in dispute, because there is no provision exempting the Hospitals run for charitable purpose in the 1994 Act. Hence the dispute is limited to the period during when the Kerala Municipalities Act, 1960, was in force. The explanation contained in Section 101 (1) (d) of the 1960 Act provides that, “charitable purpose” includes “relief of the poor, education and medical relief”. Findings of the Tribunal is that any building exclusively occupied and used by any Society for medical relief is exempted from payment of property tax. The proviso insist that that the society should be supported wholly or in part by voluntary contributions and should apply its profits or income in promoting its objectives, and should not pay any dividend or bonus to its members. Tribunal found that, mere fact that the building is used for providing medical relief is indicative of the usage is W.P.(c) No.23835/2008 -6- for charitable purpose. It is further found that, from the 'Deed of declaration of the Trust' and 'Deed of appointment of Trustees' it is evident that the property of the Trust was acquired through voluntary contributions. Finding that the petitioner Municipality has no case that any dividend or bonus is paid to any of the trustees and there is no case that the income is utilized for any purpose other than promoting the objectives of the trust, it is held that, the respondent trust is entitled for exemption. It is also found that, the findings arrived by the Government in Ext.P4 to the extent that the Hospital is a charitable institution is binding on the petitioner Municipality. 6. Contention of the petitioner is that, mere fact that the trust is formed and the Hospital is established with an objective of charitable purpose will not be sufficient. The wordings, “relief of the poor, education and medical relief” contained in the explanation to Section 101 (1) (d) should be construed as, providing medical relief to the poor. According to counsel for petitioner, intention of the legislature is clear that the charitable purpose should W.P.(c) No.23835/2008 -7- include relief to the poor by way of education and medical relief. Per contra, it is contended by counsel for respondent that, wordings in the explanation are only inclusive in nature. The different activities mentioned therein are only disjunctive. Any one of the activity like, relief to the poor or education or medical relief will be sufficient to bring it within the ambit of 'charitable purpose'. 7. This court is of the considered opinion that, the word 'charitable purpose' must be construed in their legal or technical sense as explained in the statute, which may be different from its popular meaning. The literal meaning of the statute does not indicate that, for construing any activity as charitable, there should be education or medical relief given as relief to the poor. The wording, “relief of the poor” will takes in any relief granted to poor, even if it is other than by way of medical relief or by way of education. Therefore it can only be interpreted that, all the three activities, (i) relief to the poor (ii) education and (iii) medical relief, are distinct and disjunctive and any one of such activity will be sufficient to bring it within the ambit of W.P.(c) No.23835/2008 -8- 'charitable purpose', as contained in explanation to Section 101 (1) (d) of 1960 Act. 8. In this regard it is pertinent to note that this court had occasion to consider the question regarding eligibility for exemption under Section 101(1)(d) in the decision in **Nedumchalil Charitable Turst V. Municipal Commissioner (1991 KHC 371).** Interpreting the word, “medical relief” contained in the explanation to Sub Section 1(d) this court observed that, medical relief does not mean free treatment or treatment less than the ordinary price for all patients. The hospital may be established for charitable purpose. But in order to provide itself with revenue, apart from voluntary contributions, it may run special wards for patients who pay the full price. It is not necessary for charitable purpose that it should provide something for nothing or for less than its cost or less than its ordinary price. The eleemosynary element is not essential. The mere fact that the fees being charged will not lead to a conclusion that the Hospital is not a charitable institution. The word 'charity' and 'charitable purpose' must be W.P.(c) No.23835/2008 -9- construed in their legal or technical sense which is different from their popular meaning. Poverty is not a necessary element in a charitable trust. A valid charitable trust may exist notwithstanding the fact that in its administration the benefit is not confined by the turn up to the poor in exclusion of the rich. Therefore the fact that the rich persons are also benefited is not a ground to deny the benefit. It is observed in the said decision that whether the body is supported wholly or in part by voluntary contributions and apply its profits or other income in promoting its objectives and does not pay any dividend or bonus to its members will have to be considered. 9. The question came up again for consideration in a later decision in **Father Thomas Panjikkaran v. Chalakudy Municipality and another (AIR 1999 Kerala 41)** . A learned Judge of this court observed that the mere fact that the institution is also providing service to well-todo people and they are being charged cannot be taken as a ground for rejecting the claim for the exemption provided, if it is able to establish that the hospital is intended for W.P.(c) No.23835/2008 -10- providing medical relief to the poor and the needy, though not exclusively. It is held that the purpose for which the income has been spent will have to be ascertained and the accounts for all the relevant years have to be considered in detail. 10. But question remains as to whether the conditions stipulated in the proviso of sub section (1) (d) are satisfied in the case at hand. The eligibility for exemption will be available only if the society is supported wholly or partly by voluntary contributions and only if it applies its profits exclusively for promoting its objectives and only if it does not pay any dividend or profit to its members. The findings in Exts.P1 and P2 are to the effect that expenses for running the Hospital is met out from amounts collected as fee from patients and it is not supported by any voluntary contributions. In Exhibit P1 the Secretary found that the Hospital is maintained and developmental activities are undertaken by the income generated from the Hospital itself and the contributions and donations received are so meager. The tribunal observed that the Hospital was W.P.(c) No.23835/2008 -11- established only through voluntary contributions. Since the petitioner Municipality has no case that the society had paid any dividend or bonus to any of its trustees and not utilized the profits for any purpose other than promoting its objectives, the usage of the building was held to be for charitable purpose. Learned counsel for the petitioner Municipality contended that, these aspects can be decided only after evaluation of the 'statement of accounts' and other documents relating to the relevant period. I am of the view that the tribunal had not considered these aspects based on any relevant datas or figures or materials. The tribunal went wrong in holding that findings in Exhibit P4 Government Order is binding on the petitioner Municipality, because the said order was issued under provisions of the Kerala Panchayat Act, 1960, and the provisions in the Kerala Municipalities Act 1960 are not identical. The trust will be entitled for exemption only if it is established that it satisfies all the requirements stipulated in Section 101 (1)(d). It is for the tribunal to consider such matters based on materials available, which will substantiate the W.P.(c) No.23835/2008 -12- objectives of the trust as well as the objectives in running the Hospital and in the generation and utilization of its funds. Therefore, I am of the opinion that a remand of the matter for a fresh disposal by the tribunal for deciding the question of eligibility for exemption for the limited period from 01.08.1987 to 30.05.1994, would suffice to meet the ends of justice. 11. It is further pointed out that by virtue of Exhibit P3 the tribunal had set aside the reduction given by the appellate authority with respect to the rate of tax. It is pertinent to note that, the tribunal was disposing only a Revision Petition filed by the respondent trust. The petitioner Municipality has not challenged the decision of the standing committee, to the extent it granted reduction in the rate of tax. The tribunal went highly erred in setting aside the said decision without there being any challenge. The observations made to the effect that the decision of the appeal committee does not show any basis or reason with respect to the modification granted was totally unwarranted for deciding the issue agitated. Learned counsel for the W.P.(c) No.23835/2008 -13- respondent trust pointed out that the appeal committee had allowed reduction after arriving at a conclusion that the rate of tax fixed is exorbitant. It is observed by the tribunal that the appeal committee had accepted the decision procured from an Advocate. But learned counsel for the petitioner Municipality had pointed out that it is only a legal opinion sought for by the Municipality with respect to the question regarding eligibility for exemption. However as observed above, since there was no challenge against the reduction, it was totally inappropriate for the tribunal to set aside the decision. Hence I am inclined to uphold the decision of the appeal committee in Exhibit P3 to the extent it granted reduction in the rate of tax. 12. In the result the writ petition is allowed and Ext.P3 order of the Tribunal is hereby set aside, in part. Findings to the effect that the respondent trust is liable for payment of property tax from 01.06.1994 onwards, is upheld. It is also held that the rate of tax applicable for the said period from 01-08-1987 to 30-05-1994 will be the rate as fixed by the appeal committee in Exhibit P3. The Revision W.P.(c) No.23835/2008 -14- Petition is remanded for fresh decision of the Tribunal for Local Self Government Institutions, Thiruvananthapuram on the question regarding eligibility for exemption for the period from 01.08.1987 to 30.05.1994, taking note of the observations contained hereinabove. Needless to observe that the parties should be afforded with opportunity to adduce fresh materials by way of evidence before the Tribunal. The Tribunal will take all earnest efforts to dispose of the Revision Petition at the earliest possible, at any rate within a period of four months from the date of receipt of a copy of this judgment. 13. It is made clear that, realisation of tax due for the period from 01.08.1987 to 30.05.1994 will depend upon outcome of the fresh decision which will be taken by the Tribunal. However petitioner Municipality will be at liberty to demand and realise tax due for the subsequent periods from 01.06.1996 onwards. Sd/- ## **C.K. ABDUL REHIM, JUDGE.** ## **AMG/Pn** True copy P.A to Judge