IN THE HIGH COURT OF KERALA AT ERNAKULAM
WP(C).No. 6626 of 2007(L)
1. ST.SEBASTIAN'S VISITATION HOSPITAL,
... Petitioner
Vs
1. STATE OF KERALA, REPRESENTED BY
... Respondent
2. THE ASSESSING AUTHORITY (BUILDING TAX),
3. TAHSILDAR,
For Petitioner :SRI.BECHU KURIAN THOMAS
For Respondent :GOVERNMENT PLEADER
The Hon'ble MR. Justice P.R.RAMACHANDRA MENON
Dated :15/09/2010
O R D E R
P.R. RAMACHANDRA MENON J.
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W.P. (C) No. 6626 of 2007
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Dated, this the 15th day of September, 2010
JUDGMENT
The issue involved in this case is, whether the rejection of the
claim for exemption under Section 3 (1) (b) of the Kerala Building Tax,
by the Government under Section 3 (2) of the Act, is correct or
sustainable.
2. The case of the petitioner is that, the petitioner is a ‘Hospital’,
which is registered as a charitable institution and the income derived
therefrom is used only for the purpose of charity, maintenance and up
keep of the hospital. The building of the petitioner was subjected to
assessment by the 3rd respondent/assessing authority, who passed
Ext.P3 assessment order, fixing the liability to the tune of Rs.
2,88,000/-. The petitioner put forth a claim for exemption under
Section 3 (1) (b). The matter was referred to the Government for
decision under Section 3 (2). After considering the merits, the claim for
exemption was rejected as per Ext. P5, which in turn is under challenge
in this Writ Petition.
3. The learned counsel for the petitioner submits that, the
reasoning given by the Government for negating the claim for
exemption preferred by the petitioner is not at all correct or sustainable
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and that the same is contrary to the law declared by a Division Bench of
this Court in State of Kerala Vs. St. Gregorious Medical Mission
(1999 (2) KLT 230). The learned counsel further submits that, the very
nature of the activities being pursued by the petitioner is discernible
from Ext. P2 ‘bye law’ and that the financial status of the petitioner is
also revealed from its audited income and expenditure statement.
Placing reliance on the said documents, the learned counsel for the
petitioner submits that, the hospital is running on loss and no profit is
generated, as a natural consequence of the charity being extended by
the petitioner and that the Government ought to have relied on the
decision cited supra, while considering the issue/claim for exemption.
4. The respondents 2 and 3 have filed counter affidavit rebutting
the allegations and averments raised in the Writ Petition, with reference
to the actual facts and figures, seeking to sustain the impugned order.
Reliance is also sought to be placed on the decision rendered by this
Court in Medical Trust Hospital Vs. State of Kerala (2004 (2) KLT
139). Referring to the materials on record, it is contended that the claim
for exemption was considered and analyzed by the Government before
passing Ext.P5 order and the same does not suffer from any infirmity,
either on facts or in law, which hence is not assailable under any
circumstances.
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5. With regard to the crucial issue raised in the Writ Petition as to
whether the petitioner, who is stated as running a charitable institution,
is entitled to have the benefit of exemption mainly based on the ‘bye
law’ and that no ‘profit’ is being generated is the point which has to be
considered first. True, the requirement under the statute has been
discussed in detail, in a decision rendered by a Division Bench of this
Court in State of Kerala Vs. St. Gregorious Medical Mission (1992
(1) KLT 230), wherein some observation has been made with
reference to the ‘profit’ i.e. being generated. But, it has to be borne in
mind that the issue projected in that case (challenging the judgment of
the Single Judge) was that admittedly ‘some income’ was being
generated by the concerned institution and this being the position, the
building was not liable to be exempted under the 3 (1) (c). Referring to
the factual position, it was observed by this Court that, the generating of
some income by itself will not take the institution outside the purview of
the charitable activities to deny the benefit of exemption. By virtue of
the mandate under the provision, if the building is principally being used
for charitable, religious or educational purpose, the party is entitled to
get the benefit of exemption. It was in the above belonged that, the
factual position was analyzed and appreciated by the Court declining
the interference in the appeal preferred by the State.
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6. With regard to the factual position in the present case, which
led to issuance of Ext P5 is that, considering the nature of the challenge
raised by the petitioner, the Deputy Tahasildar was required by the
Government to conduct an inspection and to file a report, since during
the course of hearing, it was revealed that, ‘separate wards’ are being
provided for poor patients and such other factual aspects brought to
light from the part of the petitioner. After conducting the inspection, the
Deputy Tahasildar submitted a report stating that, the total plinth area
of the building was 3553.84 Sq. M; the building is a three-storied
building consisting of the central block having a total plinth area of
1554.46 Sq. M which is being used for the office and the rest is used for
hospital purposes. The ground floor of the south block is being used
as ‘Chapel’, having a plinth area of 30.81 Sq. M. The first floor of the
east block is 7 bedded portion, where it was displayed that, ‘no rent for
serious patients’. Referring to the above vital statics, it is observed in
Ext. P5 that, even if the said 69.05 Sq. M. is left out, the remaining
3292.79 Sq. M. was being used as hospital, accepting fees from the
patients. It was after considering the factual position as above, that the
Government held that the building in question is not principally used for
charitable purpose and hence is not eligible for exemption under
Section 3 (1) (b) of the Act.
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7. There is absolutely no case for the the petitioner in the Writ
Petition that the report submitted by the Deputy Tahasildar in the
aforesaid terms is wrong or vitiated; nor is there any challenge with
regard to the finding of the Government, as extracted in Ext. P5. The
assertion made in the Writ Petition as well as during the course of
hearing is that, the charging of fees from the patients, who can afford to
pay, does not change the character of the charitable institution. But
here, the question is whether exemption contemplated under the statute
is to the ‘institution’ or the ‘building’. The provision clearly stipulates that
the benefit under Section 3 (1) (b) is only in respect of the ‘building’ and
not to the institution. The extent of use, so as to have it construed as
being principally used for the activities eligible for exemption, has also
been explained by a Division Bench of this Court as per the decision
reported in Thirurangadi Muslim Orphanage Vs. Government of
Kerala (2007 (2) KLT 822). Similar observation are also there, in the
decision rendered by a learned Single Judge reported in Jacob Vs.
Tahasildar (1988 (2) KLT 854). With regard to the extent of the
alleged charitable activities, to ascertain whether the building is
principally used for the charitable activities, the building has to satisfy
the requirements as made clear by this Court in the Medical Trust
Hospital’s Case reported in Medical Trust Hospital Vs. State of
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Kerala (2004 (2) KLT 139).
8. Coming to the case in hand, the question remains, what is the
charitable extent being pursued in the building. The extent of the
income i.e being generated and also being used for such charitable
activities could be ascertained from the documents or accounts in
respect of the various activities as aforesaid. The only document which
has been produced by the petitioner is Ext, P4, which is only a ‘profit
and loss account’. The entire emphasis is sought to be placed by the
petitioner on the said document stating that the institution not
generating any profit and it is being run loss. Loss or absence of profit
is not a ground to hold that the building is principally used for charity,
loss may be resulted due to various circumstances like spend-thrift
nature of the Management; mismanagement, lack of sufficient
technical/managerial skill or for such other reasons. As such, merely
for the reason that there is no profit and the institution is running on loss
is not sufficient to arrive at an inference in favour of the petitioner, with
regard to the liability to pay tax. Even otherwise, in view of the specific
reference made by the Government in Ext. P5 order, that a substantial
portion of the building is being used for accommodating patients from
whom the fees are collected, the contention of the petitioner that the
running of the hospital itself is a proof as to its principally being used for
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running a charitable institution, is not acceptable. In the absence of
any concrete evidence to substantiate that the building is principally
being used for charitable activities, the finding made by the Government
on the factual points as given in Ext. P5, stands intact.
In the said circumstances, this Court finds that, no interference is
warranted. The Writ Petition fails and it is dismissed accordingly.
P. R. RAMACHANDRA MENON, JUDGE
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