A H MEMORIAL EDUCATIONAL TRUST vs. THE STATE OF KARNATAKA

1 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 23RD DAY OF DECEMBER, 2021 BEFORE THE HON'BLE MR. JUSTICE M. NAGAPRASANNA WRIT PETITION No.16323 OF 2021 (LB-RES) C/W WRIT PETITION No.51640 OF 2017 (LB- TAX) WRIT PETITION No.19423 OF 2021 (LB- TAX) WRIT PETITION No.20385 OF 2021 (LB- RES) WRIT PETITION No.21130 OF 2021 (LB- TAX) IN WRIT PETITION No.16323 OF 2021 BETWEEN: 1. INDUS TRUST HAVING ITS REGISTERED OFFICE AT BILLAPURA CROSS, SARJAPURA, BENGALURU - 562 125 REPRESENTED BY ITS GROUP CHIEF FINANCIAL OFFICER MR V.S.KUMAR, S/O LATE RAMA RAO C., AGED ABOUT 59 YEARS. 2. INDUS INTERNATIONAL SCHOOL PRIVATE LIMITED (IISPL) HAVING ITS REGISTERED OFFICE AT BILLAPURA CROSS, SARJAPUR, BENGALURU - 562 125 REPRESENTED BY ITS GROUP CHIEF FINANCIAL OFFICER, MR V.S.KUMAR,

2 S/O LATE RAMA RAO C, AGED ABOUT 59 YEARS.

... PETITIONERS (BY SRI S.BASAVARAJ, SR. ADVOCATE FOR SRI GAUTAM A.R., ADVOCATE (PHYSICAL HEARING)) AND: 1. THE STATE OF KARNATAKA REP. BY ITS PRINCIPAL SECRETARY, DEPARTMENT OF URBAN DEVELOPMENT, M.S.BUILDING, DR AMBEDKAR ROAD, BENGALURU - 560 001. 2. THE GRAM PANCHAYAT HANDENAHALLI GRAM PANCHAYAT, SARJAPUR HOBLI, ANEKAL TALUK, BENGALURU - 562125 BY ITS PRESIDENT. ... RESPONDENTS (BY SMT.PRATHIMA HONNAPURA, AGA FOR R1(PHYSICAL HEARING); SRI M.S.DEVARAJU, ADVOCATE FOR R2 (PHYSICAL HEARING)) THIS WRIT PETITION IS FILED UNDER ARTICLE 226 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH THE DEMAND FOR PROPERTY TAX MADE ON THE PETITIONER BY THE R-2 BY ITS DEMAND NOTICE DTD. 26.03.2021 COPY PRODUCED AT ANNX-G AND ETC., IN WRIT PETITION No.51640 OF 2017 BETWEEN: SRI KRISHNADEVARAYA EDUCATIONAL TRUST NO.16, BELLARY ROAD, SADASHIVANAGAR, BENGALURU - 560 080

3 REPRESENTED BY ITS SECRETARY, MR.K.SYAMARAJU, S/O LATE K.RAMA RAJU, AGED ABOUT 71 YEARS.

... PETITIONER (BY SRI S.BASAVARAJ, SR.ADVOCATE FOR SRI GAUTHAM A.R., (PHYSICAL HEARING)) AND: 1. THE STATE OF KARNATAKA REP. BY ITS PRINCIPAL SECRETARY, DEPARTMENT OF RURAL DEVELOPMENT AND PANCHAYAT RAJ, M.S.BUILDING, DR.AMBEDKAR ROAD, BENGALURU - 560 001. 2. THE GRAM PANCHAYAT BETTAHALASURU, JALA HOBLI, BENGALURU NORTH TALUK, BENGALURU URBAN DISTRICT, BY ITS PANCHAYAT DEVELOPMENT OFFICER. ... RESPONDENTS (BY SMT.PRATHIMA HONNAPURA, AGA FOR R1 (PHYSICAL HEARING) SRI T.P.SRINIVASA, ADVOCATE FOR R2 (PHYSICAL HEARING)) THIS WRIT PETITION IS FILED UNDER ARTICLE 226 OF THE CONSTITUTION OF INDIA PRAYING TO i) QUASH THE DEMANDS FOR PROPERTY TAX MADE ON THE PETITIONER BY THE 2ND RESPONDENT BY ITS LETTER DATED 9.5.2017 AND 13.9.2017 AT ANNX-G AND ANNX-J RESPECTIVELY; ii) QUASH THE CIRCULAR DATED 19.11.2016 ISSUED BY THE FIRST RESPONDENT COPY PRODUCED AND MARKED ANNX-K IN SO FAR AS IT IMPOSES PROPERTY TAX ON THE EDUCATIONAL INSTITUTIONS FALLING WITHIN GRAM PANCHAYAT AREA.

4 IN WRIT PETITION No.19423 OF 2021 BETWEEN: 1. A.H.MEMORIAL EDUCATIONAL TRUST HAVING ITS REGISTERED OFFICE AT NO.29, ALBERT STREET, RICHMOND TOWN BENGALURU - 560 025 REPRESENTED BY ITS MANAGING TRUSTEE MR. NISAAR AHMED S/O LATE MEHMOOD AMED AGED ABOUT 65 YEARS. 2. PRESIDENCY UNIVERSITY DIBBALUR VILLAGE, SINGANAYAKANAHALLI REPRESENTED BY ITS MANAGING TRUSTEE MR.NISSAR AHMED S/O LATE MEHMOOD AMED AGED ABOUT 65 YEARS.

... PETITIONERS (BY SRI S.BASAVARAJ, SR.ADVOCATE FOR SRI GAUTHAM A.R., (PHYSICAL HEARING)) AND: 1. THE STATE OF KARNATAKA REP. BY ITS PRINCIPAL SECRETARY, DEPARTMENT OF URBAN DEVELOPMENT M.S.BUILDING, DR. AMBEDKAR ROAD BENGALURU - 560 001. 2. THE GRAM PANCHAYAT SINGANAYAKANAHALLI GRAM PANCHAYAT YELAHANKA HOBLI YELAHANKA TALUK BENGALURU - 560 064

5 BY ITS PRESIDENT. ... RESPONDENTS (BY SMT.PRATHIMA HONNAPURA, AGA FOR R1 (PHYSICAL HEARING) SRI M.S.DEVARAJU, ADVOCATE FOR R2 (PHYSICAL HEARING)) THIS WRIT PETITION IS FILED UNDER ARTICLE 226 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH THE DEMAND FOR PROPERTY TAX MADE ON THE PETITIONER BY THE R2 BY ITS DEMAND NOTICE DATED 29.9.2021 PRODUCED AT ANNEXURE-D AND ETC., IN WRIT PETITION No.20385 OF 2021 BETWEEN: 1. BANNERGHATTA FOUNDATION TRUST NO.3 AND 4 GIDDENS LAYOUT WHITEFIELD, BEHIND FOODWORLD BENGALURU - 560 066 REPRESENTED BY ITS TRUSTEE, MR.B.VENKATACHALAPATHI S/O B.RAJA REDDY AGED ABOUT 44 YEARS. 2. CHRYSALIS HIGH NO.37, GOLLAHALLI KALKERE OPPOSITE AMC COLLEGE BANNERGHATTA ROAD, BENGALURU - 560 083 REPRESENTED BY ITS TRUSTEE, MR.B.VENKATACHALAPATHI S/O B.RAJA REDDY AGED ABOUT 44 YEARS.

... PETITIONERS (BY SRI S.BASAVARAJ, SR.ADVOCATE FOR SRI GAUTHAM A.R., ADVOCATE (PHYSICAL HEARING))

6 AND: 1. THE STATE OF KARNATAKA REP. BY ITS PRINCIPAL SECRETARY, DEPARTMENT OF URBAN DEVELOPMENT M.S.BUILDING, DR. AMBEDKAR ROAD BENGALURU - 560 001. 2. THE GRAM PANCHAYAT GOLLAHALLI, KALKERE GRAM PANCHAYAT BENGALURU - 560 067 BY ITS PRESIDENT. ... RESPONDENTS (BY SMT.PRATHIMA HONNAPURA, AGA FOR R1 (PHYSICAL HEARING); SRI M.S.DEVARAJU, ADVOCATE FOR R2 (PHYSICAL HEARING)) THIS WRIT PETITION IS FILED UNDER ARTICLE 226 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH THE CIRCULAR DATED 19.11.2016 ISSUED BY THE R1 COPY PRODUCED AND MARKED ANNEXURE-D IN SO FAR AS IT IMPOSES PROPERTY TAX ON THE EDUCATIONAL INSTITUTION FALLING WITHIN GRAM PANCHAYAT AREA. IN WRIT PETITION No.21130 OF 2021 BETWEEN: NEW HORIZON EDUCATIONAL AND CULTURAL TRUST HAVING ITS REGISTERED OFFICE AT NEW HORIZON PUBLIC SCHOOL, 100 FEET ROAD, INDIRANAGAR, BENGALURU - 560 008, REPRESENTED BY ITS MANAGING TRUSTEE, MR.MOHAN MANGHNANI,

7 S/O.S.B. MANGHNANI, AGED ABOUT 60 YEARS.

... PETITIONER (BY SRI S.BASAVARAJ, SR.ADVOCATE FOR SRI GAUTHAM A.R., ADVOCATE (PHYSICAL HEARING)) AND: 1. THE STATE OF KARNATAKA REP. BY ITS PRINCIPAL SECRETARY, DEPARTMENT OF URBAN DEVELOPMENT, M.S.BUILDING, MR. AMBEDKAR ROAD, BENGALURU - 560 001. 2. THE GRAM PANCHAYAT SARJAPUR GRAM PANCHAYAT, SARJAPUR HOBLI, ANEKAL TALUK, BANGALORE-562125 BY ITS PRESIDENT. ... RESPONDENTS (BY SMT.PRATHIMA HONNAPURA, AGA FOR R1 (PHYSICAL HEARING); SRI M.S.DEVARAJU, ADVOCATE FOR R2 (PHYSICAL HEARING)) THIS WRIT PETITION IS FILED UNDER ARTICLE 226 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH THE DEMAND FOR PROPERTY TAX MADE ON THE PETITIONER BY THE R2 BY ITS DEMAND NOTICE DATED 27.09.2021 PRODUCED AS ANNEXURE-D AND ETC., THESE WRIT PETITIONS HAVING BEEN HEARD AND RESERVED FOR ORDERS ON 21.12.2021, COMING ON FOR PRONOUNCEMENT THIS DAY, THE COURT MADE THE FOLLOWING:-

8 ORDER

Petitioners, in the conglomeration of these cases, are all Educational Institutions calling in question imposition of property tax by the respective Panchayats under whose precincts the Institutions exist. The petitioners are different Trusts claiming to be charitable and running Educational Institutions. Since the issue is with regard to imposition of property tax the establishments of the Institutions in these cases are not gone into.

9 Educational Institutions run by the 1st petitioner/Trust. This is the identical claim in all the petitions which are Trusts running Educational Institutions. 3. The 2nd respondent/Panchayat in this writ petition issued a demand notice on 29-09-2021 demanding property tax from the hands of the petitioner in a sum of Rs.56,89,180/- on the strength of circular dated 19-11-2016 issued by Government directing demand of such tax which is claimed in furtherance of Section 199 of the Karnataka Gram Swaraj and Panchayat Raj Act, 1993 (‘the Act’ for short). Identical demand notices are issued by the respective Gram Panchayats under whose precincts the Institutions or the trusts exist, all again on the strength of the aforesaid circular issued by Government. It is this circular and the demand notices that are called in question by the petitioners in the cluster of these petitions.

10 Smt Prathima Honnapura, learned Additional Government Advocate for respondent No.1/State, Sri M.S.Devaraju and Sri T.P.Srinivasa, learned counsel appearing for respective Panchayats who have issued such demand notices.

11 which has no legal legs to stand would run counter to the Act and the Rules. 6. The learned Additional Government Advocate would vehemently refute the submissions of the learned Senior Counsel and submit that the circular is in furtherance of the Rules and is not contrary to the Rules. The circular cannot be held to be ultra vires the Act or the Rules, as it does not in any way direct anything contrary to the Rules and would further submit that the demand is made by the Panchayats and it is for the Panchayats to determine the property tax and raise a demand, if they have not done so. 7. The Panchayat in W.P.No.16323 of 2021 has also filed its statement of objections in W.P.No.16323 of 2021 and other Panchayats in other petitions would seek to adopt same objections in their cases also. The claim of the learned counsel appearing for the respective Panchayats is that the petitioners are not running any charitable Institutions as they are charging fees close to Rs.5/- lakhs to Rs.10/- lakhs per student, which

12 cannot be termed to be a charity. Charging such huge fees cannot in any way mean charity to claim exemption under the Rules. Therefore, no fault can be found with the demand of property tax made by the respondents/Panchayats is what is contended. 8. I have given my anxious consideration to the submissions made by the learned Senior Counsel and other respective learned counsel and have perused the material on record. 9. The facts, afore-narrated not being in dispute, are not reiterated. The question to be decided is, whether the petitioners /Trusts which run Educational Institutions can be assessed to property tax? 10. Section 199 of the Act reads as follows: “199. Levy of taxes, rates, etc., by Grama Panchayats.- (1) Every Grama Panchayat shall in such manner and subject to such exemptions as may be prescribed and not exceeding the maximum rate specified in Schedule IV levy tax upon buildings and lands based on capital value of the propertywhich are not subject to

13 agricultural assessment, within the limits of the panchayat area: Provided that where an owner of the building or land has left the Panchayat area or cannot otherwise be found, the occupier of such building or land shall be liable for the tax leviable on such owner. (2) A Grama Panchayat may levy water rate for supply of water for drinking and other purposes. (3) A Grama Panchayat may also levy all or any of the following taxes and fee at such rates as the Grama panchayat may by bye-laws determine but not exceeding the maximum specified in Schedule IV and in such manner and subject to such exemptions as may be prescribed, namely:- (a) tax on entertainment other than cinematograph shows; (b) tax on vehicles, other than motor vehicles; (c) deleted (d) pilgrim fee on person attending the jatras, festivals, etc., where necessary arrangements for water supply, health and sanitation are made by the Grama Panchayats; (e) market fee on persons who expose their goods for sale in any market place; (f) fee on the registration of cattle brought for sale in any market place; (g) fee on buses and taxies and auto-stands provided adequate facilities for the travellers by the Grama panchayat; and

14 (h) fee on grazing cattle in the grazing lands. (i) tax and fee shall be as specified in schedule IV. (j) such other fees as may be prescribed.” Section 199 of the Act controls levy of tax and rate of tax by the Gram Panchayat. Sub-section (1) of Section 199 depicts the manner in which the tax could be levied subject to exceptions. The State Government in exercise of powers conferred under Sections 199, 200 and 201 has framed the Rules. Rule 3 reads as follows:

"3. Procedure for levying taxes on Buildings and Lands.-(1) Every Grama Panchayat shall, before levying the taxes on buildings and lands under sub- section (1) of the Section 199.-

(a) Pass a resolution to levy the taxes;

(b) Publish a notice of such resolution by

affixing copies thereof on the notice board

of the office of the Gram Panchayat and at

other conspicuous places in the

Panchayat area, specifying therein the rate

of tax and the date not earlier than thirty

days from the date of such

publication with effect from which the said

taxes shall be levied and also announce

by beat of drum in the Panchayat area the

fact of such publication.

(2) The taxes under sub-rule (1) shall be levied for any year or part thereof and shall be paid for every quarter commencing from the 1st day of April, 1st day of July, 1st day of October and 1st day of January of the year." Chapter II of the said Rules depicts procedure for levy of tax on building or land. Sub-rule (1) of Rule 3 of the Rules directs that every Gram Panchayat shall, before levying tax on buildings, pass a resolution of such levy of tax, publish a notice of such resolution by affixing notice thereof on the notice board of the Gram Panchayat. Rule 6 deals with exemption from payment of property tax. Rule 6 reads as follows: “6. Exemption. – The following buildings and lands shall be exempted from the levy of tax under sub- Section (1) of Section 199 namely. – (a) Buildings and lands belonging to the Zilla Panchayats, Taluk Panchats and Gram Panchayats. (b) Buildings and lands belonging to Central Government or any State Government and used for the purposes of such Government

16 and not used for intended to be used for residential or commercial purposes. (c) Building and lands, used solely for charitable or public religious purposes and not let out for rent; and (d) Lands measuring less than one hundred square meter and buildings having an annual letting value of less than rupees twenty-fife.” The Rules exempt buildings and lands used only for charitable or public religious purposes and not let out for rent. Therefore, the tax will have to be demanded in terms of the Rules. 11. Identical Rules under the Karnataka Municipalities Act, 1964 had fallen for consideration, way back in the year 1985 before a Co-ordinate Bench of this Court in TOWN MUNICIPAL COUNCIL v. VIJAYA COLLEGE1 wherein this Court posed to itself the following question: “Whether the Town Municipal Council can levy tax on the buildings of Respondent-1, which is an educational institution? 1 ILR 1986 KAR 2895

17 The question that was posed was whether the Town Municipal Council therein could levy tax on the building of an Educational Institution. Answering the said question, the Co-ordinate Bench holds as follows: “6. It was held by this Court that the object of Section 101 of the Corporation Act (Act No. 69 of 1949) was to grant exemption from payment of property tax on certain buildings and lands and Sub-Clauses (e-1) and (e- 2) were added by amendment Act 3 of 1969. The said Sub-clauses are reproduced here in: “(e-1) buildings or lands exclusively used for student hostel which are not established or conducted for profit; (e-2) buildings or lands exclusively used for educational purposes by educational institutions receiving grant-in-aid from the Government;” Therefore, the discrimination made under the impugned provision, while granting exemption from payment of tax between grant-in-aid institutions and other private educational institutions, was held to be violative of Article 14 of the Constitution. Though no such provision is incorporated in the Town Municipality Act, it is contended oil behalf of the respondent that the legal position cannot be different and the levy of tax on its buildings by the Mulki Municipality should be struck down for the same reasons. 7. That education is a charitable purpose, is well settled by the several decisions of the Supreme Court starting from the case of Sidraj Bhai v. State of West

18 Bengal [AIR 1963 SC 540.] . The Supreme Court observed while interpreting Article 26 of the Constitution, in a larger sense an educational institution may be regarded as charitable. The Court was interpreting Article 26 vis-a- vis the right to interfere by a Government in the management of a private educational institution. Under Article 26, freedom to establish and maintain institutions for religious and charitable purposes is conferred on every religious denomination or any section thereof, while dealing with the scope of Article 26, the Supreme Court held, that imparting education may be regarded as charitable. 8. The next decision relied upon by Sri Shivashankar Bhat is the one reported in The Sole Trustee Lokashikshana Trust v. The Commissioner of Income Tax, Mysore [(1976) 1 SCC 254 : AIR 1976 SC 10.]. 9. The Supreme Court was dealing with the interpretation of ‘education’ occurring in Section 2(15) of the Income-Tax Act, 1961. Under that definition, ‘charitable purpose’ includes, relief to the poor, education, medical relief and the advancement of any other general public utility not involving the carrying of any activity. 10. Their Lordships held, that the term, ‘education’ as used in Section 2(15) of the Act has a wider and more comprehensive meaning than education through educational institutions, such as, universities, whose income is exempted from income tax, under Section 10 of the Act. The question that arose in that case was: whether the appellant-trust was entitled to exemption? The sole Trustee, the appellant' before the Supreme Court, had claimed that the publication of a newspaper cannot be treated as solely an activity for profit, but the publication of news and the dissemination of the information should be construde as

19 predominantly for educational purpose in its ordinary and usual sense. 11. While rejecting the contention of the appellants the Supreme Court held, that there is an element of charity in the first three purposes referred in Section 2(15) of the Act, but to qualify for the exemption under the last and the widest category of objects of public utility, inquiry is necessary to find out the nature of activities considered and whether they are truly charitable in nature. On the facts of that case the Court held, that the Trust was not entitled to seek shelter under the definition of charitable purpose in Section 2(15). The next decision of the Supreme Court referred by Sri Shivashankar Bhat is: Additional Commissioner of Income-tax, Gujarath v. Surat Arts Silk Manufacturers' Association, Surat [(1980) 2 SCC 31 : AIR 1980 SC 387 : 101 ITR 796.] . The Supreme Court was interpreting the last category of charitable purpose, viz., the advancement of any other object of general public utility not involving the carrying of any activity for profit. 12. Though, we are not directly concerned in this case about the interpretation of Section 2(15) of the Income-Tax Act, the enunciation of the Supreme Court while approving the decision of this Court in The Commissioner of Income-tax v. The Sole Trustee Lokashikshana Trust, Hubli [AIR 1970 Mysore 285.] is only relevant for our purpose. It was laid down by this Court by Justice Sri Govinda Bhat (as he then was) that the first three heads of charitable purposes, viz., relief of the poor, education and medical relief, the Court will

20 assume it to be for the benefit of the Community and charitable unless the contrary is shown. 13. Therefore, the important aspect with which we are concerned in this case is: Whether the buildings which are exclusively used by the Respondent-institution for education could be subjected to building tax under Section 94 of the Town Municipalities Act? 14. In the light of the above discussion and the enunciation of law, which is well settled, the levy of property tax by the Town Municipal Council, Mulki, on the buildings belonging to the Respondent-institution should be struck down. It is ordered accordingly and the Writ Petition is dismissed.”

(Emphasis supplied) The issue that is answered by the Court was after considering the building being used predominantly for educational purpose would be exempted from the levy of tax under Section 94 of the Karnataka Municipalities Act. 12. Yet again, this Court in the case of THE SAPTHAGIRI EDUCATIONAL AND CHARITABLE TRUST v. THE SAMANDUR

21 GRAMA PRANCHAYAT AND ANOTHER2 interpreting exemption under Rule 6(c) of the Rules has held as follows: “5. Indisputably, Sec. 199 of the Act controls the levy of taxes, rate etc., by Grama Panchayats. sub.Sec. (1) states that the manner and subject to such exemptions, as may be prescribed, the Grama Panchayat could levy taxes not exceeding the maximum rate specified in Schedule IV, upon buildings and lands not subject to agricultural assessment within the limits of the Panchayat area. Schedule IV to the Act at Sl.No. 1 states that tax on building shall be at the maximum rate of 10% of the annual value (per annum) and the explanation states that the word ‘annual letting value’ means the annual rent for which any building or land, exclusive of furniture or machinery contained or situated therein or thereon, might reasonably be expected to be let from year to year. 6. The State Govt. in exercise of the power conferred under Sees. 199, 200 and 201 framed ‘Taxation Rules’ which came into force in the year 1995. Rule 3 under Chapter II provides for procedure to levy tax on building and land. Sub-rule (1) states that every Grama Panchayat shall, before levying taxes on buildings and lands under sub-Sec. (1) of the Section 199, pass a resolution to levy the taxes; publish a notice of such resolution by affixing copies thereof on the notice board of the office of the Grama Panchayat and at other conspicuous places in the panchayat area, specifying therein, the rate of tax and the date not earlier than thirty days from the date of such publication, with effect from which, the said taxes shall be levied and also announce by beat of drum in the Panchayat area the fact of such publication. sub. Rule (2) provides that the taxes under sub. Rule (1) shall be levied for any year or part thereof and shall be paid for every quarter commencing from the 2 ILR 2009 KAR 3165

22 1st day of April, 1st day of July, 1st day of October, and 1st day of January of the year. Rule 5 provides for rate of tax to be levied on the building at 10% of the annual letting value of such building, per annum; while Rule 6 provides for exemptions. sub. Rule (c) of Rule 6 provides exemption for buildings and lands used solely for charitable or public religious purposes and not let out for rent, under sub.Sec. (1) of Sec.199. Rule 7 states that the Secretary of the Grama Panchayat shall, as soon as may be after the publication of the notice of resolution under Rule 3 but not later than the 1st day of December, next following, prepare an assessment list relating to the buildings and lands in the Panchayat area showing the— (a) serial number of each house or land; (b) name of the owner and occupier, if any; (c) annual letting value of the buildings; and (d) amount of tax assessed thereon. 7. Rule 8 extends an opportunity for filing objections to the assessment list, when completed and notice published by affixing it on the notice board of the office of the Grama Panchayat, and also by beat of drum in the Panchayat area, stating that list is open for inspection at the office of the Grama panchayat and that objections will be considered and decided by the Grama Panchayat on a date which shall not be earlier than 30 days from the date of publication of the aforesaid notice. Rule 9 provides for inspection of assessment list whereby every person whose name appears in the assessment list, every person claiming to be the owner or occupier of any building or land, and the agent of any such persons shall be at liberty to inspect the list and to make extracts therefrom without any charge. Rule 10(1) states that all objections to the assessment shall be considered and decided by the Grama Panchayat on the date specified in the notice published under Rule 8 or any later date and the decision of the Grama Panchayat shall be communicated to the person objecting to the assessment.

23 8. In the facts of this case, the specific allegation of the petitioner that the levy and demand of tax over the building belonging to it, by the 1st respondent-Panchayat, did not comply with the ‘Taxation Rules’, is well founded. This Court on 22.4.2009, directed the Grama Panchayat to place on record the documents relating to the compliance of Rules 3 to 10 of the ‘Taxation Rules’ in so far as it relates to the immoveable property belonging to the petitioner. Learned Counsel for the 1st respondent submits that despite reminders to his client, the records are not made available. The notices Annexures-A, C&D, much less the statement of objections of the 1st respondent to the writ petition do not disclose compliance of the aforesaid rules. Suffice it to state that the 1st contention of the Learned Counsel for the petitioner, deserves acceptance that the levy and demand of building tax pursuant to notice Annexure A and followed by notices Annexures — C&D, deserves acceptance, as they stultify the statute and hence illegal, arbitrary and not ‘Taxation Rules’ complaint. 9. Though, it is strenuously urged that the petitioner has put to use the building and land for a charitable purpose and not let out for rent, being a pure question of fact, must be established before the Grama Panchyath and not for a decision by this Court in exercise of writ jurisdiction under Art.226 of the Constitution of India. It is for the petitioner to lay relevant material as available in law, to establish that the building in question is put to charitable use, so as to fall under Rule 6(c) of the ‘Taxation Rules’, for exemption from levy of tax for the said building. If the petitioner places such material before the 1st respondent-Grama Panchayat, with an appropriate representation, seeking exemption from payment of building tax, within one month from today, there is no reason to believe that the Grama Panchayat would not consider the petitioner's request.

24 10. An examination of the order dated 29.3.2007 Annexure-B of the Executive Officer, Zilla Panchayath does not animate consideration of compliance of rule of law and hence, the reasons, findings and conclusions arrived at are illegal and arbitrary. In the result, this petition is allowed in part. The impugned demand notices Annexures-A, C and D and the order Annexure-B of the Appellate Authority are quashed. It is needless to state that it is open for the Grama Panchayat to comply with the provision of the ‘Taxation Rules’ to impose and collect from the petitioner the tax over the building in question, if the petitioner's building is not entitled to an exemption, under Rule 6(c) of the ‘Taxation Rules’. The petitioner, is directed to deposit Rs. 1,50,000/- within one month from today, with the 1st respondent- Grama Panchayat, to be adjusted as against tax dues, if any, for the period from 2003 to 2009. It is made clear that if the 1st respondent exempts the building and land, belonging to the petitioner from levy of tax, the said sum shall be refunded to the petitioner.”

(Emphasis supplied) The Co-ordinate Bench of this Court interprets exemption under Rule 6(c) of the Rules and holds that if the Educational Institution would supply such material before the Gram Panchayat with an appropriate representation seeking exemption from payment of building tax, the same should be considered. This direction was arrived at on the basis of the

25 reason that the notices issued did not disclose compliance with the Rules and holds that the notices being contrary to the Rules would be arbitrary. 13. Therefore, both the issues with regard to whether the Educational Institutions could be imposed with property tax are dealt with in the case of VIJAYA COLLEGE and the exemption under Rule 6(c) and its purport is dealt with by the Co-ordinate Bench in the case of THE SAPTHAGIRI EDUCATIONAL AND CHARITABLE TRUST (supra). 14. In the light of the Act, Rules and the judgments rendered by this Court noticed (supra), the demand of property tax by the respective Panchayats is admittedly on the basis of a circular. The Circular though refers to Section 199 of the Act and the Rules direct that all buildings will have to be imposed property tax excluding Government buildings and Government run Educational Institutions and all other buildings will have to be brought under the ambit of tax, the exemption that is

26 available under the Rules is not even considered in the said circular. Therefore, the State Government will have to suitably amend the circular to bring it in tune with the exemption clause under Rule 6, explicitly depicting as to the components of imposition of tax, failing which, imposition of tax can never be on any inference. If there is no provision for tax, there can be no tax. 15. If the Rules exempt payment of tax on a particular category, the circular cannot impose tax on such category. The circular which runs counter to the Rules, without determination to be made under the Rules, is rendered unsustainable only insofar as such determination is concerned. The circular need not in its entirety be ultra vires as is sought by the petitioners, as determination of tax and its exemption is under the Act and the Rules. Since demand notices impugned in these cases are not preceded by the procedure stipulated under the Rules and do not bear consideration of exemptions to charitable institutions under the Rules, they are rendered unsustainable.

27 Rendering of the demand notices, as unsustainable would not absolve the petitioners/Institutions from payment of property tax, if they are amenable to payment of such tax under the taxation laws, but that shall be only after consideration and determination of exemption of tax in terms of Rule 6(c) of the Rules. Those determinations will have to be made by the Gram Panchayats prior to issuance of demand notices. 16. Therefore, the petitioners, in all these cases, shall place such material before the respective Gram Panchayat, in justification of claim of exemption under Rule 6(c) of the Rules and the Gram Panchayats shall consider the same, determine that the Institutions, notwithstanding the exemptions, are amenable to payment of tax and then demand such tax.

28 (ii) The impugned circular dated 19.11.2016 is held to be unenforceable only with regard to absence of method of assessment under Rule 6(c) (supra). The State is at liberty to bring it in tune with the Rules. (iii) The impugned demand notices in all these cases stand quashed and the matters are remitted back to respective Panchayats for re-determination of payment of property tax on receipt of justification of claim for exemption under Rule 6(c) of the respective Educational Institutions, consider the same on the basis of the Rules and then pass appropriate orders, in accordance with law. (iv) The Educational Institutions are directed to submit their justification in terms of Rule 6(c) of the Rules to claim exemption from property tax within four weeks from the date of receipt of a copy of this order and the respective Panchayats shall consider the same, pass appropriate orders justifying such demand and then issue such demand notices within eight weeks thereafter. (v) Till such time no precipitate action shall be taken against the petitioners/Educational Institutions with regard to issue of payment of property tax. Sd/- JUDGE bkp CT:MJ