30 Apr 2121

Exemption of a property from levy of general tax on sole occupation and utilization for a public charitable purpose - Bombay High Court

Case : Abhinav Manav Vikas Sanstha v. The State of Maharashtra and Anr. Writ Petition No. 8043 of 2020

Court : Bombay High Court

Bench : Justice N. J. Jamadar

Decided on : 30 Apr 2121

Relevant Statues

Sections 132(1) (b), 406 of the Maharashtra Municipal Corporations Act, 1949

Brief Facts & Procedure History

1. The relevant seminal facts are that the Petitioner is a Public Charitable Trust registered under the Maharashtra Public Trusts Act, 1950 which runs a school at property No. B- 3/366. Defendant, Municipal Corporation levied taxes on the property of the Trust and issued demand notice on 11.9.2017 for which Plaintiff lodged objection as the property was exempt from taxes under section 132(1) (b) of the Maharashtra Municipal Corporations, Act, 1949. Later, Defendant issued a fresh demand notice on 1.9.2018 followed by a final demand notice dated 8.5.2019, calling upon Plaintiff to pay the taxes within two days thereof, with the threat of coercive action in the event of default.

2. Plaintiff instituted the suit RCS No.301 of 2019 seeking a declaration that the notices dated 1.9.2018 and 8.5.2019 are illegal and perpetual injunction restraining Defendant from levying the tax on the property of the Plaintiff-Trust. In the suit, Plaintiff preferred an application for a temporary injunction seeking to restrain the defendant. The learned Civil Judge rejected the application for temporary injunction and on appeal to the District Court, the learned District Judge upheld the order passed by the Civil Judge.

3. The Writ Petition is to challenge the judgment and order passed by the learned District Judge dated 7.3.2020 in Misc. Civil Appeal No.108 of 2019, whereby he dismissed the appeal preferred by the Petitioner-Appellant and affirmed the order passed by the learned Civil Judge dated 4.11.2019 rejecting the application preferred by the petitioner seeking an injunction against the Respondent/ Defendant from taking coercive action for recovery of the tax levied upon the Petitioner/Plaintiff.

The Issues of the Case

Whether the Petitioner-Trust is entitled to seek an injunction against the Respondent-Municipal Corporation from taking coercive action for recovery of the tax levied upon the Petitioner/Plaintiff? 

The Observations of the Court

1. The Honourable Bombay High Court critically analyzed Section 132 of the Maharashtra Municipal Corporations Act, 1949 and observed that a property is exempted from levy of tax only when it is solely occupied and used for a public charitable purpose. The legislative intent of the said section to exempt the properties which are solely used for specified purposes has a nexus with the obligatory and discretionary duties of the Corporation.

2. The Honourable Bombay High Court noted in the context of the exemption for property solely occupied for educational purposes, Section 63(15) of the Maharashtra Municipal Corporations Act, 1949 casts an obligatory duty on the corporation to maintain aid and accommodate schools for primary education. Similarly under section 66(21) of the Maharashtra Municipal Corporations Act, 1949, the Corporation may provide for the furtherance of educational objects and make grants to educational institutions within or without the City.

3. The Honourable Bombay High Court took cognizance of the material record placed by the Petitioner i.e. a copy of the trust registration certificate and copies of audited balance sheets.

4. The Honourable Bombay High Court opined the petitioner could have been directed to place its constitution and/or bye-laws on record to ascertain the object of the trust and whether the activity is carried out for the advancement of charitable causes exclusively.

5. The Honourable Bombay High Court considered the remittance of the matter back to the Trial Court to decide the application for temporary injunction afresh based on its observations.

6. The Honourable Bombay High Court further opined the Petitioner to file copies of the constitution and/or bye-laws and the Respondent No. 2 to file an additional affidavit to deal with the material to be placed on record by the Plaintiff-Petitioner.

7. The Honourable Bombay High Court directed Respondent No. 2 not to take any coercive action in order to recover the tax amount till the decision of the application for temporary injunction.

8. Reliance was given upon several precedents such as Municipal Corporation of Delhi v. Children Book Trust, 1992(3) SCC 390; Balkrishna Vora v. Poona Municipal Corporation, 1963 Mh.L.J.325; etc.

The Decision held by the Court

1. The Honourable Bombay High Court set aside the impugned orders passed by the learned District Judge in Misc. Civil Appeal No.108 of 2019 and by the learned Civil Judge dated 4.11.2019 rejecting the application for temporary injunction. 

2. The Honourable Bombay High Court directed the Civil Court to decide the application for temporary injunction afresh and further directed Respondent No. 2 not to take any coercive action against the Petitioner to recover the tax amount until the decision of the aforesaid application.

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