@JUDGMENTTAG-ORDER
K. Chandru, J.@mdashBoth the writ petitions have been filed by the Govel Trust running Aravind Eye Hospital at Avanashi Road situated in
Kalapatti Town Panchayat, Coimbatore District. The challenge in both the writ petitions is to the assessment and demand of property tax made by
the second and third respondents in respect of an Eye Hospital run by the petitioner Trust.
2. In the first writ petition, viz., W.P. No. 14414 of 1999, the proceedings dated 29.9.1998 and the consequential proceedings dated 24.11.1998
are under challenge. The petitioner wants to set aside this demand notice on the ground that the collection of property tax in respect of the hospital
building owned by the petitioner Trust in Survey Nos. 448/3, 448/4, 458/part and 459/2 in Kalapatti Town Panchayat.
3. In W.P. No. 14415 of 1999, the petitioner seeks to challenge the resolution passed by the third respondent town panchayat dated 24.5.1999.
By the aforesaid resolution, the town panchayat held that the exemption sought from the application of property tax by the petitioner cannot be
granted by the panchayat.
4. By the notice dated 29.9.1998, the panchayat sought to levy the house tax on the hospital. When the petitioner management wrote to the town
panchayat that since the petitioner had not got any exemption from the Government for levying property tax, the panchayat shall continue to levy
property tax on them.
5. Both the writ petitions were admitted by this Court on 17.9.1999. Pending the writ petitions, an interim stay was granted. Subsequently, when
the matter came up on 30.12.2002, the interim stay was made absolute on the condition that the petitioner Trust pays 50% of the amount
demanded by the third respondent town panchayat within a period of eight weeks. As against the said interim order, the petitioner trust preferred
two writ appeals being W.A.Nos.1465 and 1466 of 2003. The imposition of the condition for availing the interim order was initially stayed by the
Division Bench. However, the Division Bench dismissed both the writ appeals on 27.7.2007. Thereafter, the petitioner Trust preferred two Special
Leave Petitions before the Supreme Court being SLP No. 18476 and 18477 of 2007. Both the SLPs were dismissed by the Supreme Court on
14.9.2007.
6. After the dismissal of the SLPs, the second respondent directed the petitioner Trust to pay a sum of Rs. 1,01,29,324/- being the tax payable
from 1996-1997 to 2007-2008 first half. After the dismissal of the SLPs, since the respondents were insisting on complying with the interim order,
the petitioner Trust sent a sum of Rs. 12,00,000/- towards the first instalment of the conditional payment with covering letter dated 15.11.2007.
Once again another sum of Rs. 12,00,000/- was paid with a covering letter dated 17.12.2007. A further payment of Rs. 26,64,663/- was also
made subsequently, thereby complying with the interim order passed by this Court.
7. The petitioner Trust also took out two miscellaneous petitions being W.P.M.P.Nos.736 of 2008 and 261 of 2008 seeking for extending the
time for making the payment. However, since the petitioners have complied with the earlier order by making payment of the said amount and that
the delay was due to pursuing their remedies before appellate forums and the respondents having received the amounts without any protest, these
two miscellaneous applications have become virtually infructuous and accordingly they are dismissed.
8. Thereafter when the matter came up for final disposal, the respondents were directed to file counter affidavit justifying the demand of property
tax. Several adjournments were made to enable the filing of a counter affidavit. On 19.9.2008, this Court observed that if no counter is filed, the
matter will be disposed of on the basis of available records.
9. Mr. R. Thiagarajan, learned senior counsel for the petitioner submitted that the petitioner Trust is a Public Charitable Trust and doing yeoman''s
service in the matter of eye ailment. The petitioner Trust initially established an Hospital at Madurai. When property tax was sought to be
recovered by the Madurai City Municipal Corporation, the action was challenged by the petitioner Trust before this Court by way of a writ
proceeding in W.P. No. 3235 of 1985. This Court allowed the writ petition by an order dated 10.5.1994.
10. The contention raised by the Municipal Corporation was that the petitioner Trust in their hospitals are collecting rents from the patients and,
therefore, it is commercial in nature and hence the exemption provided under the MCMC Act will not enure to their benefit. The learned Judge
who disposed of the writ petition, placed reliance upon the earlier judgment of this Court reported in 1993 Writ L.R. 769 in a case relating to
S.N.R. Sons Charitable Trust, Coimbatore v. The Commissioner, Coimbatore City Municipal Corporation, Coimbatore. In that case, the Division
Bench was dealing with the provisions of the Coimbatore City Municipal Corporation Act. In para 6 (at page 774), the Division Bench held as
follows:
...In view of the aforesaid decision of the Supreme Court, on a consideration of the relevant provisions of the Act referred to earlier, we are clearly
of the view that the payments made by the patients to the hospital by way of hospital charges, or stoppages or even service charges, cannot be
equated to ''rent'' as contemplated under the provisions of the Act, and the denial of the benefit of exemption to the appellant, on that score cannot
be sustained....
11. Therefore, in the light of the above Division Bench judgment, the learned Judge held that since the exemption available u/s 123 of the
Coimbatore City Municipal Corporation Act is similar to the exemption available u/s 121(e) of the Madurai City Municipal Corporation Act, the
hospital run by the petitioner Trust at Madurai was eligible for an exemption from paying the property tax. In paragraphs 21 and 22 of the said
judgment, K. Venkatasami, J. (as he then was) had observed as follows:
21. ...In the narration of facts, it has been clearly brought out that what was collected by the petitioner was towards medical services, room
upkeep, upkeep of beds, besides utilities like changing the linen, maintenance, telephone, security, para-medical attendance, etc. The collection of
charges towards those services cannot, in the light of the Division Bench judgment (referred to above), by any stretch of imagination, be treated as
''rent'' within the meaning of proviso to Section 122(d) of the Madurai City Municipal Corporation Act.
22. It is unfortunate that the first respondent should take such a stand that payments towards services mentioned above would amount to ''rent''
even after the Division Bench explaining the term ''rent'' occurring in an identically worded section in the Coimbatore City Municipal Corporation
Act, to deny the exemption u/s 122(d) of the Madurai Municipal Corporation Act. It is again unfortunate that the first respondent should have
stated in the rejoinder that the writ petitioner has been collecting rents from the inmates under a different name, i.e. medical services including
''ROOM UPKEEP'', totally ignoring the magnitude of the service rendered by the petitioner Trust to the society at large.
12. In that view of the matter, the writ petition was allowed as stated already and the order has become final in so far as the hospital at Madurai is
concerned. When that is the legal position, it is not clear as to how the second and third respondents have come up with the demand and levy of
property tax from the petitioner Trust, which is also running a similar hospital at Coimbatore.
13. The learned senior counsel also brought to the notice of this Court that when the Tirunelveli Municipality levied property tax, the same was
challenged before this Court in W.P. No. 898 of 1990. This Court based upon the earlier judgment referred to above, allowed the writ petition by
an order dated 05.11.1998.
14. In spite of several opportunities, the respondents have not come forward to justify the levy of property tax though more than 10 years have
elapsed. Therefore, it has to be taken that the averments made in the affidavit, more particularly, what is found in paragraphs 2 to 8 stand
uncontroverted. It must be stated that the petitioner Trust is entitled to exemption u/s 86(e) of the Tamil Nadu District Municipalities Act, 1920.
Section 86(e) of the Tamil Nadu District Municipalities Act reads as follows:
86. General exemption. - The following buildings and lands shall be exempt from the property tax.-
(a) to (d) ... omitted
(e) charitable hospitals and dispensaries but not including residential quarters attached -thereto.
15. Apart from the fact that in respect of the very same Trust running hospitals at Madurai and Tirunelveli, this Court had categorically held that
they are not liable to pay property tax as it had been statutorily exempted from such payments. It is also brought to the notice of this Court that in
more or less under similar circumstances in respect of a private educational institution, similar questions came up for consideration before this
Court. The learned Judge, in respect of the decision relating to Kamaraj College of Engineering and Technology, Managing Board rep.by its
Secretary, Virudhunagar v. President, K. Vellakulam Panchayat, (Madurai Bench) reported in 2007-2-LW 170 held that Rule 15(c) of the Tamil
Nadu Panchayats (Assessment and Collection of Taxes) Rules 1999 exempts buildings used for educational purposes including hostels. Merely
because for the hostel rents were collected from students, they are not deprived from enjoying such concessions. Paragraphs 19 to 22 of the said
decision are relevant and may be usefully reproduced below :
Para 19. Therefore, on the face of it, the petitioner institution is not covered under the proviso. Even otherwise what is contemplated in the proviso
is that those institutions which were run in a commercial manner which were exempted from the property tax before the Tamil Nadu Panchayats
Act came into existence, alone are not entitled for exemption under the Rule 15(c) of the said Rules. These may include the tutorial colleges and
like private institutions. As I have stated, the petitioner institution is not covered under the said proviso at all by any stretch of imagination.
Therefore, there is absolutely no difficulty to come to the conclusion that as far as the petitioner institution is concerned it is not covered under the
proviso and therefore, on the face of it, the petitioner institution is entitled for exemption under Rule 15(c) of the said Rules.
Para 20. Now, the contention of the learned Counsel for the respondent that the educational institutions which are commercial in nature are not
exempted from the property tax deserves to be considered to some extent. There is no question of any educational institutions which are in
commercial basis at all when such educational institutions are recognised by the Government and recognised by the All India Council for Technical
Education or Medical Council, etc. affiliated to the universities are all deemed to be educational institutions irrespective of the fact whether they are
aided by the Government or not. However, there may be certain laws which are applicable to the aided schools and aided colleges but as far as
the general term of the educational institution is concerned whether they are aided or unaided institutions they are nevertheless educational
institutions as long as they are recognised by the competent authority namely the Government or the All India Council for Technical Education or
Medical Council and other authorities which are competent to approve or the universities which affiliate. These institutions are different from other
private tutorial colleges, training schools etc. which are not recognised by the Government or any other authority, but run purely on private basis.
Para 21. Therefore, in my considered view, when once the approval is given by the competent authority or affiliation given by the universities then
such educational institutions whether they are aided or not are deemed to be the educational institutions in the general terms. This is relevant
because after the law relating to prohibition of caption fees has been introduced by way of legislation, there is no question of any commercial
attitude educational institutions at all which are recognised.
Para 22. In view of the same, I am of the considered view that apart from the fact that under the second proviso Rule 15 of the Tamil Nadu
Panchayats (Assessment and Collection of Taxes) Rules, 1999, the petitioner institution is not covered, even on the general term the house building
used for the educational purpose include the educational institutions which are either aided or unaided or run on self financing pattern and are
entitled for exemption from payment of house tax.
16. Since the said ruling was doubted and there were also writ appeals and writ petitions pending, those matters came to be dealt with by a
Division Bench. The said decision in Sriram Educational Trust Vs. The President, 89, Perumalpattu Panchayat Union, . The Division Bench
approved the reasoning of the learned Judge. The Division Bench in fact held that the question of affiliation alone cannot be a decisive factor and
the exemption is available to all educational institutions. The passage found in paragraph 23 of the Division Bench judgment may be usefully
reproduced below:
Para 23. We have already seen Rule 15 on exemption on specified classes of houses for house tax. We are concerned with Clause (c) of Rule 15
and the proviso to Section 15. A reading of the Rule indicates the plain language as to the intention that the exemption on buildings used for
educational purposes including hostels rests on the user aspect of the building simpliciter. There are no conditions annexed to the user or the
dominant purpose to exempt from tax. So long as the provision is plain and makes the reference to usage as ''''for educational purposes'''' as
without any qualification to suggest that the exemption as conditioned as in other instances to say that it is available only to those charitable
institutions or those which are imparting free education, we do not find any ground to go for any interpretative process to strain the language of the
Rule to accept the submission of the respondents as suggested by the learned Advocate General or by the counsel appearing for the respondents.
The scope of the exemption contemplated has to be understood by the plain language of the Rule rather than by what is believed as its implied
meaning or the supposed intention. The language in the Rule carries no uncertainty to search for an implied meaning. The generality of the purpose
stated as ''''for the purpose of education'''' clearly supports the case of the petitioner that irrespective of the character of the institution as aided or
unaided, free or restricted, recognised or otherwise, the purpose for which the building is used alone qualifies the claim for exemption. In
understanding the provision it is totally unnecessary for us to get into the proviso. As had been held in many a decision, normally a proviso is
enacted to carve out something special out of the general or to qualify what is in the enactment. Comparing this provision with the one that existed
in 1988, it is seen that under the old provision, originally, buildings used for educational purposes including hostels and libraries open to public were
exempted from house tax. The old provision also contained 2nd proviso. It read that even if the educational institutions charged rent for the
occupation of the buildings used for educational purpose and hostels from the occupants, the buildings are exempt from property tax. Reading
these provisions, the respondents pointed out that the intention on grant of exemption remaining the same, institutions which charged fee are outside
the scope of Rule 15. We do not agree with this submission. The scope of the provision has to be understood as they appear at the point of time
relevant to the year under consideration and not by process of comparison with the old provision. Considering the marked difference in the
language of the provision, in the face of the clear language, we do not find any support to the respondents getting into the old enactment to
understand the scope of the present provisions.
17. Further in paragraph 36, a reference to learned Judge''s order is found, which may also be extracted:
Para 36. As far as the decision of Jyothimani, J. in the decision in Kamaraj College of Engineering and Technology, Managing Board, rep. by its
Secretary, Virudhunagar v. President, K. Vellakulam Panchayat, Madurai Disatrict (supra) is concerned, while we agree with the conclusion of the
learned Judge in paragraph 15 of the judgment, we however, do not share the view of the learned Judge that the benefit of exemption goes for
affiliated institutions only. Recognition or affiliation of an institution has nothing to do with tax exemption under Rule 15(c). The claim for exemption
to educational institutions is not to be decided by inference or support drawn from requirements of the statutes which are regulatory in character.
Unless the exemption provision contemplates such a condition or makes a reference to those enactments, we do not find any reasons to read such
restrictions into the Rule.
18. Even on the question whether the amounts collected from the students for staying in hostels run by the educational institutions whether any
landlord/tenant relationship exists created was also considered. In this context, the stand of the State was rejected in paragraph 37 and it may be
usefully extracted below:
Para 37. ... Mr. R. Viduthalai, learned Advocate General however, submitted that the rent aspect is an in-built one in the fee structure. Hence, the
institutions which collect fee are to be treated as collecting rent for the stay in the hostel. It is not denied by the respondents that the facilities of the
hostel given to the students are an incidence of the schooling in the particular educational institutions. As Mr. G.Masilamani rightly submitted, in the
students availing of the facility therein for continuing their education in the institutions, there does not arise a relationship of landlord and tenant to
bring the case under the proviso. The overall fee charged for the facilities offered as part of undergoing the schooling therein does not make a
student a tenant as in the normal meaning of the term. In the circumstances, it is not possible for us to accept the plea of the respondents that the
charges for the stay in the hostel availing a facility therein must be treated as rent. The submission made to bring the case under the first proviso
which carves out an exception to the main Rule only needs to be noted for rejection, in the light of the provisions contained in the main part of the
Rules....
19. Therefore, in the light of the above, the writ petitions will stand allowed and the impugned demand notice as well as the resolution of the third
respondent Town Panchayat in Ref. No. 76/99 dated 24.5.1999 will also stand set aside. However, there will be no order as to costs.
20. In the light of the petitioner Trust having succeeded in these two writ petitions and as it has also been held that they are not liable to pay
property tax, the third respondent Town Panchayat is directed to refund the amounts collected from the petitioner Trust by virtue of the interim
direction given by this Court dated 30.12.2002 within a period of twelve weeks from the date of receipt of a copy of this order.
