PETITIONER:
MUNICIPAL CORPORATION OF HYDERABAD
Vs.
RESPONDENT:
HYDERABAD RACE CLUB
DATE OF JUDGMENT11/11/1986
BENCH:
THAKKAR, M.P. (J)
BENCH:
THAKKAR, M.P. (J)
RAY, B.C. (J)
CITATION:
1987 AIR 92 1987 SCR (1) 195
1986 SCC (4) 696 JT 1986 815
1986 SCALE (2)771
ACT:
Hyderabad Municipal Corporation Act 1955--Section 202(1)
(b)--'Charitable purpose'--Meaning of--User of premises for
Race Course Club--Whether exemption to general tax avail-
able.
HEADNOTE:
The appellant--Corporation sought to assess the land and
buildings of the respondent club to genera1 tax under s. 202
of the Hyderabad Municipal Corporation Act, 1955. The re-
spondent claimed exemption on the ground that occupation and
user of the property for running horse races and training
the horses etc. constituted occupation and user of the
property for a 'charitable purpose' within the meaning of s.
202(1)(b), which was refused. The respondent approached the
High Court and succeeded.
Partly allowing the appeal by the Corporation,
HELD: 1. For determining whether exemption under s.
202(1) (b) of the Hyderabad Municipal Corporation Act, 1955,
was available, the test to apply is to seek answer to the
question: to what use is the property put or for what pur-
pose is the property pat and to ascertain whether such
occupation or user is for 'charitable purpose'. [197F]
2. The expression 'charitable' in the context of s.
202(1)(b) means a benevolent activity calculated to benefit
the poor or, the deprived. Horse racing is surely not such a
benevolent activity, however charitable a view is taken. It
must be the very activity which is carried on the property
which must be charitable and not the application of the
income of such activity. [197H- 198A]
3. The High Court has completely failed to realize that
the 'occupation' of the land and buildings or the 'user'
must be for 'charitable purpose' and that it is altogether
irrelevant as to the manner in which the income of the club
is utilised. Section 202(1)(b) makes no reference to the
question as regards the employment of the income of the club
or the purpose for which the income is so employed. Exemp-
tion is granted
196
only in respect of buildings which are 'solely' and exclu-
sively used for charitable purpose. [198B]
4. In the instant case, the user of the premises for the
Race Course Club will not constitute occupation or user for
a 'charitable purpose' within the meaning of s. 202(1)(b)
and of Race Course Club will not be entitled to claim exemp-
tion from levy of the general tax. [198F]
5. The High Court has rightly taken a view adverse to
the appellant as regards the levy for the assessment year
1966-67, on an appreciation of evidence and there is no
warrant to disturb the said finding. There is also no reason
to interfere with the valuation of the property as made by
the Small Causes Court and confirmed by the High Court.
[198G-H]
6. The order passed by the High Court in so far as it is
held that the property is exempt from levy of general tax
under s. 202(1)(b) is set aside. The appellant would be
entitled to levy general tax from 1967-68 onwards in accord-
ance with law. [199B]
JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 395 and
1346 (N) of 1973
From the Judgment and Order dated 13.12.1971 of the
Andhra Pradesh High Court in A.A.O. No. 279 and 2 16 of
1970.
Vepa P. Sarthy, B. Parthasarthi and G.N. Rao for the
Appellant.
V.S. Desai, Naunit Lal and Kailash Vasdev for the Respond-
ent.
The Judgment of the Court was delivered by
THAKKAR, J. Believe it or not, the most incongruous
arguments can sometimes find a suiter. Were it not so, the
High Court of Andhra Pradesh could not have taken the view
that occupation or user of lands and buildings for the
purpose of running horse races, and for training the horses
etc. constitutes occupation or user of the property for a
‘charitable’ purpose.
The High Court has taken the said view, an impossible
view in our opinion, in the context of the exemption from
levy of municipal taxes claimed by the Race Course Club
(respondent herein) in respect of 127 acres, 14 goonthas and
95 sq. yards of land alongwith structures
197
standing thereon, which were sought to be assessed to gener-
al tax under Section 202 of the Hyderabad Municipal Corpora-
tion Act (Act in short). The respondent boldly contended,
and strangely enough succeeded in convincing the High Court,
that Section 202(1)(b) of the Act was attracted as occupa-
tion and user of the property for running horse races and
training of horses etc. constituted occupation and user of
the property for a ‘charitable purpose’ within the meaning
of the said provision.
Now, Section 202(1)(b) of the Act is in these terms:
“202(1) The general tax shall be levied
in respect of all buildings and lands in the
city except–
(a) xxxx
(b) buildings and lands or portions thereof
solely occupied and used for public worship or
for a charitable or educational purpose;
(c) xxxx
(d) xxxx”
The High Court launched upon an exercise to ascertain
whether the income of the Race Club was used for a charita-
ble purpose. And on perceiving that some of the purposes for
which the income was to be employed were charitable purposes
concluded that the exemption under Section 202(1)(b) was
available. The test to apply is to seek an answer to the
question: to what use is the property put or for what pur-
pose is the property put. And to ascertain whether such
occupation or user is for a ‘charitable’ purpose. In the
present case the occupation and user is to conduct horse
races and to train horses for racing. Unless it can be
posited that conducting of horse races is a charitable
purpose, it cannot be concluded that the exemption envi-
sioned by Section 202(1)(b) is attracted. And even if one
were to take the most ‘charitable’ view as regards the
meaning and content of the expression ‘charitable’ conduct-
ing of horse races or training of horses for the races
cannot be said to be a charitable activity. The expression
charitable in the context of Section 202(1)(b) means a
benevolent activity calculated to benefit the poor or the
deprived. Surely horse racing is not such a benevolent
activity, however charitable a view one takes. It has also
to be emphasized that it must be the very activity which is
carried on on
198
the property which must be charitable and not the applica-
tion of the income of such activity.
What the High Court has completely failed to realize is
that the ‘occupation’ of the land and buildings or the
‘user’ of the land and buildings must be for a ‘charitable
purpose’ and that it is altogether irrelevant as to the
manner in which the income of the club is utilised. Section
202(1)(b) makes no reference to the question as regards the
employment of the income of the club or the purpose for
which the income is so employed. Exemption is granted only
in respect of buildings which are ‘solely’ used, meaning
thereby exclusively used, for charitable purpose. For in-
stance, if the premises are occupied for the purposes of
benevolent activities such as the running of a free dispen-
sary or :clinic or for running of a free school for the
children, such user of the building would constitute a user
for a charitable purpose and entitle the owner of the build-
ing to claim exemption. It is impossible to subscribe to the
view that occupation or user for ‘any’ purpose would consti-
tute a user for a charitable purpose provided the income is
used for a charitable purpose. Clutching at the tail of this
reasoning, one would be induced to the conclusion that user
of a building for running a common gaming house (or for any
immoral or illegal purpose) would be user for a ‘charitable’
purpose provided the income of the common gaming house is
utilised for a charitable purpose. The argument deserves no
further scrutiny and must be rejected outright. No further
exercise need be undertaken in order to find out whether or
not Section 202(1)(b) is attracted in the facts of the
present matter. The judgment of the High Court in so far as
the High Court holds that Section 202(1)(b) is attracted
must therefore be reversed and set aside. We are of the
opinion that the user of the premises for the Race Course
Club will not constitute occupation or user for a charitable
purpose within the meaning of Section 202(1)(b) and the Race
Course Club will not be entitled to claim exemption from
levy of general tax.
Two other questions have been agitated by the Appellant
Municipal Corporation. First, whether the general tax could
have been lawfully levied for the assessment year 1966-67.
The High Court has rightly taken a view adverse to the
appellant on an appreciation of evidence. We do not see any
fallacy in the reasoning of the High Court. We therefore do
not propose to disturb the finding recorded by the High
Court in so far as this question is concerned. Secondly, as
regards the valuation of the property. The learned Judge of
the Small Causes Court has valued the property at Rs.4
lakhs. The valuation made by the Small Causes Court has been
confirmed by the High
199
Court. We see no reason to interfere with the valuation as
made by the Small Causes Court and confirmed by the High
Court. Accordingly, in so far as these two points are con-
cerned, the decision rendered by the High Court must be
confirmed.
The appeals are therefore partly allowed to the afore
said extent. The order passed by the High Court in so far as
it is held that the property is exempt from levy of general
tax under Section 202(1)(b) is’ set aside. The appellant
would be entitled to levy general tax from 1967-68 onwards
in accordance with law. The appeals are partly allowed to
this extent. There will be no order as to costs.
A.P.J. Appeals
allowed.
200