Cantonment Board vs Principal, St. John'S School And ...
2014 Latest Caselaw 1227 ALL

HIGH COURT OF JUDICATURE AT ALLAHABAD
 
 

AFR
 
Court No. - 34
 
Case :- WRIT TAX No. - 177 of 2013
 

 
Petitioner :- Cantonment Board
 
Respondent :- Principal, St. John'S School And Others
 
Counsel for Petitioner :- Mohd. Isa Khan
 
Counsel for Respondent :- Rajesh Mishra
 

 
Hon'ble Sudhir Agarwal,J.

1. Heard Mohd. Isa khan, learned counsel for petitioner and perused the record. Sri M.D. Singh Shekhar, learned Senior Advocate, has appeared on behalf of respondents.

2. For considering exigibility of property tax on property in question, wherein, admittedly, an educational institution, namely, St. John's School, is being run, matter was remanded to Assessment Committee by Apex Court vide order dated 6.8.2008 passed in Bunch of Civil Appeals and, thereafter, matter was considered by Assessment Committee and it construed Section 99 (2) of Cantonment Board Act, 1924 (hereinafter referred to as "Act, 1924") that it must satisfy both the requirements, i.e., (1) user by public; and (2) there is no income derived therefrom, and, having said so, it held that property in question was exigible to tax under Section 99 (2) (b) of Act, 1924. On appeal preferred by respondents 1 and 2, appellate authority, i.e., Additional District Judge, Court No 3, Meerut in Tax Appeal No. 6 of 2009 has taken the view that Section 99 (2) (b) of Act, 1924 excludes all properties wherever educational institutions are being run without imposing any further condition that it should be such educational institution which is earning no income and not otherwise. It, thus, held that since appellant is an educational institution, as per language of Section 99 (2) (b) of Act, 1924, it is exempted from property tax and having said so, it has reversed the view taken by Assessing Authority, but looking into the fact that besides that part of the building, which is being used by institution, there was some other part also, in respect whereto the exemption provision may not be applicable, it allowed the appeal partly directing the Assessing Authority to determine liability of tax in respect of play ground and residential part of the accommodation, excluding the part where the building is being used as School imparting education. It is this order, which is under challenge.

3. The only question raised before this Court is whether the view taken by Lower Appellate Court that educational institution per se, is exempted from tax under Section 99 (2) (b) of Act, 1924, without satisfying further requirement that it should be such an educational institution which is not earning income, is correct.

4. The above question, obviously required Close examination of Section 99 (2) (b) of Act, 1924.

5. The Act, 1924 was enacted to municipalize the governance of those cantonments which contains substantial civil population having no essential connection with or dependence upon military administration. The cantonment committees were replaced by Cantonment Board municipal in character, to be essentially a Local Self Government body. Under Section 60 of the Act, the Board may, with previous sanction of Central Government impose in any cantonment any tax which under any enactment for the time being in force, may be imposed in any municipality in the State wherein such cantonment is situated to take effect from the date of its notification in the Official Gazette. Sections 61 and 62 provide for framing of preliminary proposal to impose tax and to invite objections and their disposal under Section 62 after which the Central Government may authorise Board to impose tax under Section 63 of the Act. "Annual Value" is defined under Section 64 and Section 65 provides for incidence of taxation which is primarily upon the actual occupier of the property. Sections 67 and 72 provide for assessment list, its revision and amendment. Section 99 and 99A, which are relevant for this case, provide for exemption in case of buildings and is quoted as below :

"99. Exemption in the case of buildings.- (1) When, in pursuance of Section 98, a Board has fixed a special rate for the cleansing of any factory, hotel, club or group of buildings, or lands, such premises shall be exempted from the payment of any conservancy or scavenging tax imposed in the cantonment.

(2) The following buildings and lands shall be exempt from any tax on property other than a tax imposed to cover the cost of specific services rendered by the Board, namely:

(a) places set apart for public worship and either actually so used or used for no other purpose;

(b) buildings used for educational purposes and public libraries, playgrounds and dharmasalas which are open to the public and from which no income is derived;

(c) hospitals and dispensaries maintained wholly by charitable contributions;

(d) burning and burial-grounds not being the property of the Government or a Board, which are controlled under the provisions of this Act;

(e) buildings or lands vested in a Board; and

(f) any buildings or lands, or portion of such buildings or lands, which are the property of the Government.

99A. General power of exemption.- The Central Government may, by notification in the Official Gazette, exempt, either wholly or in part from the payment of any tax imposed under this Act, any person or class of persons or any property or goods or class of property or goods."

6. Section 99 (2) (b) of Act, 1924 exempts buildings used for educational purposes and public libraries, playgrounds and dharamasalas which are open to the public and from which no income is derived. Each of the categories of building exempt has a condition attached to it. Buildings and land set apart for public worship are qualified by the words that they are actually so used, or used for no other purposes. In case of hospitals and dispensaries the condition is that they must be maintained wholly by charitable contribution. Burning and Burial-grounds not being property of the Government or a Board, are exempt only if they are controlled under the provisions of the Act and that buildings or land vested in a Board and buildings or land or a portion of such buildings or land, which are the property of the Government. The question to be decided in this case is whether buildings or lands open to public purposes and from which no income is derived is applicable to the buildings used for educational purposes and public libraries.

7. In Collector of Central Excise, Bombay-I and Anr. Vs. M/s Parle Exports (P.) Ltd., (1989) 1 SCC 345, Apex Court held that the expression in the schedule and in notification for exemption should be understood by the language employed therein bearing in mind the context in which the expression occurs. The words used in the provision, imposing taxes or granting exemption should be understood in the same way in which these are understood in ordinary parlance in the area in which the law is in force or by those people who ordinarily deal with it. The notification must be read as a whole in the context of the other relevant provisions. When two views of a notification are possible, it should be construed in favour of the subject as notification is part of a fiscal enactment. Though in a taxing Statute provision enacting an exemption to the general rule of taxation has to be construed strictly against those who invoke its benefit, but while interpreting an exemption clause, liberal interpretation should be imparted to the language thereof, provided no violence is done to the language employed. It is only, however, in the event of there being a real difficulty in ascertaining the meaning of a particular enactment that the question of strictness or of liberality of construction arises. However, absurd results of construction should be avoided. In Hindustan Aluminium Corporation Ltd. v. State of Uttar Pradesh AIR 1981 SC 1649, Apex Court emphasized that the notification should not only be confined to its grammatical or ordinary parlance but it should also be construed in the light of the context.

8. In M/s Novopan India Ltd., Hyderabad v, Collector of Central Excise and Customs, Hyderabad JT 1994 (6) SC 80, while interpreting Notification No. 55 of 1979 under Rule 8 (1) of Central Excise Rules, 1944 exempting plywood and boards, the Court while holding that the words unveneered particle boards, cannot and do not take any melamine faced particle board and emphasised the principle that in case of ambiguity, a taxing statute should be construed in favour of a assessee does not apply to the construction of an exception or an exempting provision and that these are to be construed strictly. A person invoking an exception or an exemption provision to relieve him of the tax liability must establish clearly that he is covered by the said provision. In case of doubt or ambiguity benefit of it must go to the State.

9. In Union of India and Ors. Vs. Wood Papers Ltd. and Anr., (1990) 4 SCC 256, while interpreting exemption Notification No. 163 of 1965 issued under Rule 8 (1) of the Central Excise Rules, 1944 exempting paper, Supreme Court held that the notification has to be read in its entirety and construed as a whole. A close reading of both the parts together makes it clear that it was intended to be exhaustive granting exemption to all factories producing, packing and wrapping paper. It held that an exemption provision is like any exemption and on normal principle of construction or interpretation of statute it is construed strictly either because of legislative intention or on economic justification of inequitable burden of progressive approach of fiscal provisions intended to augment revenue. But strict or liberal construction of an exemption provision are to be invoked at different stages of interpreting it. When the question is whether a subject falls in the notification or in the exemption clause then it being in nature of exception if applicability is lifted and the subject falls in the notification then full play should be given to it and it calls for a wider and liberal construction.

10. Section 99(2)(b) exempts buildings used for educational purposes and public libraries, playgrounds and dharmasalas. The exemption clause is as such applicable to buildings used for educational purposes. A plain grammatical construction of Sub-clause (b) goes to show that this clause divides two categories of building by a comma. The buildings used for educational purposes and public library have been put in one category, whereas, the playgrounds and dharamasalas have been put in a different category with a comma intervening these two class of buildings. The question to be considered is whether the words from which no income is derived is applicable to both categories of buildings, or is qualified only to the later category playgrounds and dharamasalas which are open to the public.

11. In Municipal Council, Trichinopoly Vs. S. Venkatarama Aiyer AIR 1931 Mad. 55, same expression occurring in Clause (a) of Section 83 of the Act came up for interpretation. The said clause is quoted as below:

"Coming now to the propriety of the collection of the tax of Rs. 58-14-2 under Act 5 of 1920, we have to construe Clause (a). Section 83, of that Act which says that the following buildings and lands shall be exempt from property tax:

"Places set apart for public worship and either actually so used or used for no other purposes choulties, buildings, used for educational purposes, and libraries and playgrounds which are open to the public and from which no income is derived."

12. Justice Madhavan Nair did not agree to construe the clause by applying the words "which are open to public and from which no income is derived" to the buildings used for educational purposes and library. He found that there can be no justification for the use of the word "and" between 'purposes' and 'libraries' and held that if the Legislature wanted the said interpretation, then the first "and" between 'purposes and libraries' would have been dropped retaining only the word "and" between 'libraries' and 'playgrounds'. But that has not been done, and so he found that the words which are open to the public, and from which no income is derived, are referable according to the natural construction of the words only to 'libraries and playgrounds' and not to buildings used for educational purposes.

13. In Mohd. Shabbir Vs. State of Maharashtra AIR 1979 SC 564, Section 27 of the Drugs and Cosmetics Act, 1940 came for interpretation. Paragraphs 3 and 4 are relevant and are quoted as below :

"3. Section 27 is the penal section under which the offence is punishable and this section runs thus :

"Whoever himself or by any other person on his behalf manufactures for sale, sells, stocks or exhibits for sale or distributes :

(a) any drug :

(i) deemed to be misbranded under Clause (a), Clause (b), Clause (c), Clause (d), Clause (f) or Clause (g) off Section 17 or adulterated under Section 17B ; or

(ii) without a valid licence as required under Clause (c) of Section 18.

shall be punishable with imprisonment for a term which, shall not be less than one year but which may extend to ten years and shall also be liable to fine :

Provided that the Court may, for any special reasons to be recorded tn writing, impose a sentence of imprisonment of less than one year."

4. It was contended by Mr. Singh that in order to fall within the ambit of this section the accused must manufacture the drugs for sale or stock or exhibit for sale or distribute the same. There is no evidence in this case to show that the appellant had any shop or that he was a distributing agent. All that has been shown is that the tablets concerned were recovered from his possession. It was urged that possession simpliciter of the tablets of any quantity whatsoever would not fall within the mischief of Section 27 of the Act. On an interpretation of Section 27, it seems to us that the argument of Mr. Singh is well founded and must prevail. The words used in Section 27, namely, "manufacture for sale, sells." have a comma after the clause "stocks or exhibits for sale". Thus the section postulates three separate categories of cases and no other, (1) manufacture for sale; (2) actual sale; (3) stocking or exhibiting for sale or distribution of any drugs. The absence of any comma after the word "stocks" clearly indicates that the clause "stocks or exhibits for sale" is one individual whole and it contemplates not merely stocking the drugs but stocking the drugs for the purpose of sale and unless all the ingredients of this category are satisfied, Section 27 of the Act would not be attracted. In the present case there is no evidence to show that the appellant had either got these tablets for sale or was selling them or had stocked them for sale. Mr. Khanna appearing for the State, however, contended that the word stock used in section is wide enough to include the possession of a person with the tablets and where such a person is in the possession of tablets of a very huge quantity, a presumption should be drawn that they were meant for sale or for distribution. In our opinion, the contention is wholly untenable and must be rejected. The interpretation sought to be placed by Shri Khanna does not flow from a true and proper interpretation of Section 27. We, therefore, hold that before a person can be liable for prosecution or conviction under Section 27(a)(i)(ii) read with Section 18(c) of the Act, it must be proved by the prosecution affirmatively that he was manufacturing the drugs for sale or was selling the same or had stocked them or exhibited the articles for sale. The possession simpliclter of the articles does not appear to be punishable under any of the provisions of the Act. If, therefore, the essential ingredients of Section 27 are not satisfied the plea of guilty cannot lead the Court to convict the appellant."

14. In Samaalana Abdulla Vs. State of Gujarat, 1996 (1) SCC 427, Section 3(1)(c) and 3(2) of the Official Secrets Act, 1923 came for interpretation on which Supreme Court held in paras 7 and 8 as follows :

"7. It was next contended that the High Court has misinterpreted Section 3(1)(c) and erroneously held that the sketch, plan, model, article or note or other document or Information need not be secret for establtshing an offence under that section. In order to appreciate this contention, it is necessary to refer to Section 3 which reads as follows:

"3. Penalties for spying, - (1) If any person for any purpose prejudicial to the safety or interests of the State :

(a) approaches, inspects, passes over or is in the vicinity of. or enters, any prohibited places; or

(b) makes any sketch, plan model or note which is calculated to be or might be or is extended to be, directly or indirectly, useful to an enemy; or

(c) obtains, collects, records or publishes or communicates to any other person any secret official code or password, or any sketch, plan, model, article or note or other document or information which is calculated to be or might be or is intended to be directly or indirectly, useful to an enemy or which relates to a matter the disclosure of which is likely to affect the sovereignty and integrity of India, the security of the State or friendly relations with foreign States."

The High Court held that the word 'secret' in Clause (c) qualifies only the words "official code or password" and not "any sketch, plan, model, article or note or other document or information". The reason given by the High Court is that after the phrase "any secret official code or password", there is a comma and what follows is thus not intended to be qualified by the word 'secret'. The Calcutta High Court in Sunil Ranjan v. State 77, Calcutta Weekly Note P.106 has also taken the same view. It has held that the word 'secret' in the said section qualifies official code or password and not any sketch, plan, model, article or note or other document or information. This is clear from the comma and the word 'or' which comes after the word 'password'.

8. In our opinion, the view taken by the Gujarat High Court in this case and by the Calcutta High Court in the case of Sunil Ranjan Das is correct. We find that the said interpretation also receives support from Sub-section (2) of Section 3. While providing for a presumption to be raised in prosecution for the offence punishable under that section the phraseology used by the Legislature is "if any sketch, plan, model, article, note, document or information relating to or used in any prohibited place, or relating to anything in such a place, or any secret official code or password is made, obtained, collected, recorded, published or communicated". From the way the said sub-section is worded it becomes apparent that the qualifying word 'secret' has been used only with respect to or in relation to official code or password and the Legislature did not intend that the sketch, plan, model, article, note, document or information should also be secret. As we do not find any substance in the second contention raised on behalf of the appellant it is also rejected. In the result the appeal fails and is dismissed."

15. Plain grammatical interpretation, in the light of the decisions cited above as such supports the interpretation given by appellate court. Section 99(2) divides two categories of building by use of comma between buildings used for educational purposes and public libraries in one category and for playgrounds and dharamshalas which are open to public and that the qualifying words, 'from which no income is derived' are applicable only to the later categories of properties.

16. The aforesaid interpretation is further supported by the reasons that ordinarily buildings, used for educational purposes and public libraries are not used for deriving income whereas playgrounds and dharamsalas can be put to both kind of user, namely, for purposes which may derive income or may not derive any income. In the year 1924 when the Act was enacted the buildings used for educational purposes and public libraries could not be conceived to be erected for the purpose of income and profit and public libraries are not known to derive any income other than membership fee for their subscriptions and maintenance. Secondly, the averment made in the petition that the school building, which is fifteen years old and was never subjected to the property tax and further that this was the first assessment, has not been denied. There is no assertion on behalf of petitioner that the building or any portion thereof was let out for hire, or that any rental income was derived. By notice issued to the school, the Executive Officer demanded production of documents relating to details and particulars of the students as well as books relating to the income of the school. The Board did not have any material either from any inspection report or otherwise that any part of the building was let out for hire, and further there was nothing on record to show that Municipalities in the State levy property tax on the buildings used for educational purposes, to give the Board's jurisdiction to impose tax under Section 60 of the Act, which provides that the Board may, with the previous sanction of Central Government, impose in any cantonment, any tax, which under any enactment, for the time being in force, may be imposed in any municipality in the State wherein such cantonment is situated.

17. In the context of discussion made above, I find no infirmity so as to take a view different to what has been taken by the Tribunal and in my view, the impugned judgment warrant no interference.

18. The writ petition is dismissed with cost of Rs. 5,000./-

Dt. 25.04.2014

PS