Northern India Masonic ... vs South Municipal Corporation ...
2019 Latest Caselaw 2228 Del

       IN THE HIGH COURT OF DELHI AT NEW DELHI

                            Judgment reserved on: March 29, 2019
                            Judgment delivered on: April 29, 2019

+     W.P.(C) 6530/2013, CM No. 14201/2013

      NORTHERN INDIA MASONIC CHARITABLE
      SOCIETY                                      ..... Petitioner
                   Through: Ms. Vibha Mahajan Seth, Adv.

                     versus

      SOUTH MUNICIPAL CORPORATION OF
      DELHI                                   ..... Respondent
                   Through: Mr. Gaurang Kanth, Adv. for SDMC
                            with Ms.Biji Rajesh and
                            Ms. Eshita Baruah, Advs. for SDMC

      CORAM:
      HON'BLE MR. JUSTICE V. KAMESWAR RAO

                               JUDGMENT

V. KAMESWAR RAO, J

1. The challenge in this petition is to an order dated May 30,

2013 passed by the Municipal Taxation Tribunal („MTT‟ in

short) dismissing the challenge of the petitioner to the assessment

order dated August 12, 2005.

2. Some of the relevant facts are that, on May 28, 1997, the

rateable value of the land belonging to the petitioner society /

school was fixed at Rs.30,00,000/- with effect from April 01,

1997. The said order was subject matter of a writ petition filed

by the petitioner being CWP 4368/1997. The same was decided

by this Court on October 27, 1997 remanding the matter back to

the assessing authority to hear and decide the case afresh. It is

averred in the writ petition that the rateable value of the land of

the petitioner, vide order dated November 5, 2001 was fixed as

under:-

"The Rateable Value of the land was fixed as hereunder:- Rs.8,34,620/ w.e.f 01.04.1997 Rs.10,03,410/- w.e.f 01.04.1998 Rs.12,78,410/- w.e.f 01.04.1999"

3. It appears that the order also became a subject matter of a

writ petition before this court in W.P.(C) 5067/2005 wherein,

according to the petitioner this Court directed the respondents to

decide the issue of exemption of the petitioner society / school

from paying property tax under Section 115 (4) of the DMC Act.

On August 12, 2005, the claim of the petitioner for grant of

general exemption from paying the property tax was rejected.

This order of August 12, 2005 was challenged by the petitioner

initially before this Court in W.P.(C) 20507/2005. The said writ

petition was disposed of by this Court vide order dated April 21,

2009 whereby the Court had relegated the petitioner to the MTT,

by continuing the interim order dated October 26, 2005 passed in

favour of the petitioner till the decision in the appeal by the MTT.

Accordingly, the petitioner filed an appeal before the MTT,

wherein the impugned order has been passed.

4. At the outset, I may state here, the learned counsel for the

petitioner has submitted that the petitioner society is not

challenging the denial of exemption to the petitioner from paying

the property tax under Section 115(4) of the DMC Act. Her plea

is, primarily with regard to the fixation of the cost of the land.

According to her the fixation on the basis of byelaw 2(1)(b)(iii) is

incorrect, as the case of the petitioner shall fall in byelaw

2(1)(b)(iv) "in any other category". She submitted that the

respondent do not deny that the subject property is being run only

for charitable purpose of imparting education i.e. a school is

being run upto secondary level from the said premises and the

surplus generated in running the same is also being used for the

purpose of education only and not for distribution to its Members.

Hence, the same cannot be equated with any other commercial

concern and therefore, cannot fall under sub-clause (iii). She also

stated, as per the conditions of the allotment letter dated May 28,

1985, there are restrictions imposed on the Society for use of the

subject land only for the purpose of running a school failing

which the land along with the structures raised thereon will be

resumed by the Government. Hence, by no means the property

can be equated with any commercial property falling under sub-

clause (iii). She stated that as per sub-clause (iv), the "cost of

premises" shall be the aggregate of the cost paid for the land and

cost of construction of the building or part thereof and other

additions and improvements in the premises. The cost paid to the

DDA for acquisition of the land in the present case is only

Rs.6,00,000/-. Even if, exemption has not been granted to the

petitioner under Section 115(4) from paying General Tax, still it

cannot be stated that the petitioner is not carrying any charitable

activity to determine the use of property for "any other purpose".

She placed reliance on the judgment of the Coordinate Bench of

this Court in the case reported as 102 (2003) DLT 409 Municipal

Corporation of Delhi v. Delhi Catholic Archdiocese. She also

relied upon the judgment of the Supreme Court in the case of P.c.

Raja Ratnam Institution v. Municipal Corporation of Delhi AIR

1990 SC 816 to contend that the education per-se is a charitable

cause.

5. On the other hand, Mr. Gaurang Kanth, learned counsel

appearing for the respondent, at the outset submitted that the

present petition is an abuse of process of law, inasmuch as the

fixation of cost of land on which basis rateable value was fixed

was never challenged by the petitioner. He submitted that the

rateable value was initially fixed in the year 1997 on the basis of

market price of the land at Rs.80,00,000/-, which became a

subject matter of a writ petition being W.P.(C) 4368/1997.

According to him, pursuant to orders in W.P.(C) 4368/1997, the

rateable value was again fixed on November 05, 2001, the details

of which have already been reflected above. Pursuant thereto, the

writ petition was filed by the petitioner being W.P.(C)

5067/2005, which was with regard to a plea that the petitioner is

entitled to exemption from paying property tax under Section

115(4) of the DMC Act. He submitted that the petitioner having

not challenged the rateable value and only sought exemption

from paying property tax under Section 115 (4) of the DMC Act,

which plea was also rejected by the Joint Assessor and Collector

on August 12, 2005, the rateable value as fixed on November 05,

2001 had attained finality. He submitted that it was this order

dated August 12, 2005, which was challenged by the petitioner

initially before this court in W.P.(C) 20507/2005 and later before

the MTT, as is clear from the impugned order at page 18 of the

paper book. He submitted that unfortunately, the Tribunal even

though rejected the plea of exemption has still gone ahead and

decide the issue of rateable value, which was impermissible. He

also stated that even the fixing of rateable value having been

upheld by the MTT, there was no occasion for the respondent

Corporation to challenge the impugned order of the MTT in a

separate proceedings. Even on merit, he has drawn my attention

to para 8 onwards of the impugned order to contend that there is a

finding of fact of the MTT that there was surplus fund available

with the society which take away the character of the society /

school as charitable concern. According to him, the Tribunal has

rightly relied upon the judgment of the Supreme Court in MCD v.

Children Book Trust AIR 1992 SC 1456.

7. Having heard the learned counsel for the parties, at the

outset, I may state here that the Tribunal in the impugned order

has considered two aspects (i) the plea of grant of exemption to

the petitioner under Section 115 (4) of the DMC Act, 1957 (ii)

the issue of cost of the land based on which the rateable value

was fixed. On the first aspect, the Tribunal has rejected the plea

of the petitioner. In fact, the learned counsel for the petitioner

has fairly stated that she is not challenging the finding of the

Tribunal with regard to denial of exemption under Section 115 of

the DMC Act. If that be so, the finding of the Tribunal to that

extent must be upheld. In so far as the plea of cost of the land /

ratable value is concerned, Mr. Gaurang Kanth, learned counsel

for the respondent submitted that the petitioner could not have

challenged the fixation of cost of land / ratable value fixed vide

order dated November 5, 2001, inasmuch as the petitioner‟s case

in earlier round of litigation, i.e., W.P.(C) 20507/2005 was only

with regard to exemption under Section 115 (4) of the DMC Act

is appealing, on a first blush but on a deeper consideration, I find

the Tribunal did examine the issue of cost of the land / ratable

value and upheld the same. If that be so, I proceed to examine

the said aspect as well. The plea of the petitioner before the

Tribunal was that the respondent had fell in grave error in taking

the market value of the land for the purpose of determining the

cost of the land. According to the petitioner, as per the Clause

2(1)(b)(iii) of the bye-laws the "cost of the premises" in the case

of non-residential purpose shall comprise of the market price of

the land, while as per Clause 2(1)(b)(iv), the same shall comprise

of the cost paid for the land. In other words, since the cost paid

for the land was Rs.6 Lacs and not Rs.80 Lacs, (which was the

market price of the land on the date of commencement of

construction in 1995), it should be Rs.6 Lacs as per clause

2(1)(b)(iv) (in any other case) which should be the basis for

computing the ratable value. For this purpose, it is necessary to

reproduce sub-clause (iii) and (iv) of Clause 2 including

explanation of the Delhi Municipal Corporation (Determination

of Ratable Value) bye-laws, 1994; and the same reads as under:

"2. Definition - (1) In these bye-laws: a. xxxxxx b. „cost of premises‟ means

(i) xxxxxxxx

(ii) xxxxxxxx

(iii) where the premises are used or to be used for non-residential purposes and are not covered by clauses (i) and (ii) above the cost of the premises shall be the aggregate of the market price of land comprised in the premises on the date of the commencement of construction and the cost of construction of the premises and the cost of additions and improvements in the premises whether made by the owner or occupier.

(iv) in any other case, aggregate of the cost paid for the land and cost of construction of the building or part thereof and the cost of additions and improvements whether made by the owner or by the occupier.

Explanation. - For the purpose of this clause:

(1) Where the premises have been purchased from the Government or the Delhi Development Authority (for short "D.D.A.") or acquired as a

member of a Group House building Co-operative Society the amount paid or payable to the Government or the D.D.A or as the case may be, the Group Housing Building Co-operative Society for the premises shall be the cost of the premises. Where the premises have been acquired from any other person, the cost paid or payable for the premises shall normally be accepted except where the Commissioner has reason to believe that the amount paid or payable has been under-stated and in such a case the Commissioner may estimate the cost of the premises or have it valued under Section 135 of the Act.

(2) Market price of land shall be the price for which the land was bought or the land rates notified by the D.D.A. or the Land and Development Officer (for short "L&D.O." or any other agency controlling the price of land for the year of commencement of construction or the year in which there is change in user of the premises, which, ever is higher.

(3) The cost of construction shall be the actual amount spent on construction or the cost determined as per the scheduled rates of the Central Public Works Department (for short "C.P.W.D") for the cost of construction for similar constructions for the year in which the premises was constructed, whichever is higher. Where the difference between the cost disclosed and the cost as per C.P.W.D rates is upto twenty per cent of the cost disclosed the cost of construction disclosed shall be accepted. Cost of additions and improvements shall be determined in the same manner.

(4) Where the land has been taken from D.D.A & D.O. local body or any other approved developer of lands the cost paid for the land means the amount paid for such land. Where the land has been taken from any other person, the cost of land shall be the

amount paid for the land or the amount arrived at the rates notified by the D.D.A / L.&D.O. for the year in which the land is taken whichever is higher. Where construction has been made after purpose of the terrace rights the cost paid or payable for the terrace rights shall be taken as the cost of the land.

(5) Premises exclusively used and occupied for charitable purpose within the meaning of clause (a) of sub-section (4) of Section 115 of the Act. shall not be deemed to be used for non-residential purposes."

8. In support of her contention, learned counsel appearing

for the petitioner had relied upon the Judgment of this court in the

case of MCD v. Delhi Catholic Archdiocese (supra), wherein

this Court in Paras 9 to 15 has held as under:

"9. I have considered the submissions advanced by learned counsel for the parties. I am in agreement with the submissions of learned counsel for the respondent that relevant clause of the Bye-laws applicable to the case of the respondent would be Section 2(1)(b)(iv) and not 2(1)(b)(iii).

10. The, Supreme Court in Municipal Corporation of Delhi v. Children Book Trust‟s case (supra), held that in order for education to qualify as a charitable purpose an element of trade and business can be present in running a school on commercial lines and merely because of that it does not mean that it may not be entitled to exemption under Section 115 (4) of the Act.

11. The Supreme Court was further of the view that if it is shown that for its support the society has to depend on voluntary contributions either wholly or in part then it would be entitled to exemption in the relevant year. The matter has to be considered with reference to each year. The

reasonable way devised by the Supreme Court is that a period of 5 years can be taken into consideration to find out whether the society or body depends on the voluntary contributions. It is also held that trade or business could be present in Section 115 (4) of the Act, but if the profit of income was devoted to charitable purpose and not distributed amongst its members, it was charity.

12. In the present case it has not been made out that there is distribution of profits amongst its members. That being the position it cannot be said that there is no charitable purpose though it may not qualify for exemption under Section 115 (4). Thus a society like the petitioner society may not be entitled to the exemption, but may still be running a school for charitable purpose.

13. This aspect has also to be considered in view of the forceful submission advanced on behalf of the respondent as to the object and interpretation of Clause 2(1)(b)(iv) read with explanation 5. There can be no doubt that in case exemption of payment of general tax is granted under Section 115 (4) of the Act, there would be no issue of liability to pay tax. There may, however, be cases where such an exemption is not granted and the property is subject to tax but yet there is an element of charity and in such a case the property is used neither for residential use nor for non-residential purposes. It is such cases which are sought to be covered by Clause 2(1)(b)(iv) in defining „any other cases‟.

14. In view of the aforesaid, I find no infirmity with the finding of the Appellate Authority that premises exclusively used and occupied for charitable purpose cannot be said to be used for non-residential purpose and would thus be covered by Section 2(1)(b)(iv) even though it will not be entitled to exemption under Section 115 (4) of the Act.

15. In such a situation it is the aggregate cost paid for land which has to be taken into consideration and not the market value of the land as was sought to be taken by the Assessing Authority which was set aside by the impugned order of the Appellate Authority."

9. From the reading of the Judgment it is clear, though a

society may not qualify for exemption under Section 115 (4) of

the DMC Act from paying general tax, but it can if still running

the school for charitable purpose, then it is using the property

neither for "residential purpose" nor for "non-residential

purpose", but for "any other purpose". This is in view of clause

of 2 (i)(b)(iv) read with explanation 5 of the bye-laws reproduced

above. In such an eventuality, the cost of premises shall be the

aggregate of the cost paid for the land and cost for construction of

the building or part thereof and the cost of additions and

improvements, whether made by the owner or by the occupier.

10. In the case in hand, the Tribunal has taken the cost of the

premises to mean the market price of the land in the year of the

commencement of construction, which according to the Tribunal

was in the year 1995 and as such taken the cost as Rs.80 Lacs.

The said cost can be basis, if the premises is used for "non-

residential purposes" but the presence of explanation 5 is for a

purpose and should be given effect to. So, it has to be seen

whether the petitioner society, even if not entitled to exemption

under Section 115 (4) of the Act from paying general tax, is

running the school for charitable purpose, to be covered in "any

other case". The charitable purpose shall be, if the society is

supported by voluntary contributions; if the society is applying its

profits in promoting its object; or pay any dividend or bonus to its

members.

11. In the impugned judgment, there is a finding of the

Tribunal that Society is collecting donation from the students

under the threat of possible striking out their names from the rolls

of School or not promoting them to next class. So, it is clear that

there is a finding of the Tribunal that the donations are not

voluntary. But on the other two aspects, whether the Society

apply its income in promoting its object or whether it pays or not

any dividend or bonus to its members, there is no finding. The

finding on these aspects shall be relevant to come to a conclusion

that the Society is running the School for charitable purposes. If

the answer is in the affirmative, then it follows that the cost of the

premises shall be covered under clause 2(i)(b)(iv) of the bye-

laws. Such a finding would depend upon the reading of the

documents as were filed before the Tribunal. So, appropriate

shall be to remand the matter back to the Municipal Tax Tribunal

for giving a finding on the aforesaid two aspects and to determine

whether the cost of the premises has to be computed on the basis

of clause 2(i)(b)(iii) or 2(i)(b)(iv), keeping in view the position of

law and laid down by this Court in MCD (supra).

12. I accordingly, set aside the impugned order and remand

the matter back to the Tribunal for reconsideration of the issue(s)

in the manner held by this court above. Liberty is with the

Tribunal to call for such information / documents from the parties

as deem fit. The Tribunal shall consider the issue(s) in the

manner stated by this court above and the same must be

determined by the Tribunal within a period of four months

effective from May 13, 2019, the date on which the parties shall

appear before the Tribunal. The writ petition is disposed of on

the above terms.

13. Let a copy of this order be sent to the Presiding Officer,

Municipal Tax Tribunal for holding further proceedings. Liberty

is with the parties to place this order on the record of the MTT for

listing of the appeal before the Tribunal on the date fixed.

No costs.

CM No. 14201/2013 Dismissed as infructuous.

V. KAMESWAR RAO, J APRIL 29, 2019/jg