Supreme Court: Profit-oriented Educational Institutions not entitled to tax emption under Section 10(23C) of the Income Tax Act, 1961

 86. The conclusions of this court are summarized as follows:

a. It is held that the requirement of the charitable institution, society or trust etc., to ‘solely’ engage itself in education or educational activities, and not engage in any activity of profit, means that such institutions cannot have objects which are unrelated to education. In other words, all objects of the society, trust etc., must relate to imparting education or be in relation to educational activities.

b. Where the objective of the institution appears to be profit-oriented, such institutions would not be entitled to approval under Section 10(23C) of the IT Act. At the same time, where surplus accrues in a given year or set of years per se, it is not a bar, provided such surplus is generated in the course of providing education or educational activities.

c. The seventh proviso to Section 10(23C), as well as Section 11(4A) refer to profits which may be ‘incidentally’ generated or earned by the charitable institution. In the present case, the same is applicable only to those institutions which impart education or are engaged in activities connected to education.

d. The reference to ‘business’ and ‘profits’ in the seventh proviso to Section 10(23C) and Section 11(4A) merely means that the profits of business which is ‘incidental’ to educational activity - as explained in the earlier part of the judgment i.e., relating to education such as sale of text books, providing school bus facilities, hostel facilities, etc.

e. The reasoning and conclusions in American Hotel (supra) and Queen's Education Society (supra) so far as they pertain to the interpretation of expression ‘solely’ are hereby disapproved. The judgments are accordingly overruled to that extent.

f. While considering applications for approval under Section 10(23C), the Commissioner or the concerned authority as the case may be under the second proviso is not bound to examine only the objects of the institution. To ascertain the genuineness of the institution and the manner of its functioning, the Commissioner or other authority is free to call for the audited accounts or other such documents for recording satisfaction where the society, trust or institution genuinely seeks to achieve the objects which it professes. The observations made in American Hotel (supra) suggest that the Commissioner could not call for the records and that the examination of such accounts would be at the stage of assessment. Whilst that reasoning undoubtedly applies to newly set up charities, trusts etc. the proviso under Section 10(23C) is not confined to newly set up trusts - it also applies to existing ones. The Commissioner or other authority is not in any manner constrained from examining accounts and other related documents to see the pattern of income and expenditure.

g. It is held that wherever registration of trust or charities is obligatory under state or local laws, the concerned trust, society, other institution etc. seeking approval under Section 10(23C) should also comply with provisions of such state laws. This would enable the Commissioner or concerned authority to ascertain the genuineness of the trust, society etc. This reasoning is reinforced by the recent insertion of another proviso of Section 10(23C) with effect from 01.04.2021.

In the Supreme Court of India

(Before Uday U. Lalit, C.J. and S. Ravindra Bhat and P.S. Narasimha, JJ.)

Civil Appeal No. 3795 of 2014

New Noble Educational Society Vs Chief Commissioner of Income Tax 1

Decided on October 19, 2022

2022 SCC OnLine SC 1458

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Important Judgments on Municipal Corporation(Part 3)

 1) Whether court can direct builder to demolish existing construction if there is subsequent changes in Environment clearance law?

Supreme Court

JUSTICE R. SUBHASH REDDY JUSTICE HRISHIKESH ROY

M/S. SAI BABA SALES PVT. LTD. Vs. UNION OF INDIA & ORS.

CIVIL APPEAL NO. 595 OF 2021

26th November 2021

Author: Hrishikesh Roy, J.

Citation: 2021 ALL SCR (ONLINE) 698

https://www.lawweb.in/2021/12/whether-court-can-direct-builder-to.html

2) Whether State or third party can permit change of user of Gouchar land contrary to its permissible use?

 It is trite to say that gouchar land can be

used only for purposes for which it is permitted

to be used. If there is a user contrary to the

permissible user, whether by the State or by any

third party, the same cannot go on.

IN THE SUPREME COURT OF INDIA

CRIMINAL APPELLATE JURISDICTION

CIVIL APPEAL NO. 5135 OF 2021

RAMESHBHAI VIRABHAI CHAUDHARI Vs THE STATE OF GUJARAT 

Citation: SEPTEMBER 06, 2021.

https://www.lawweb.in/2021/11/whether-state-or-third-party-can-permit.html

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Can a charitable trust claim exemption from paying property tax if it fails to prove that said building is used entirely for charitable purposes?

Above all these aspects, petitioner has produced not even a single document to establish before this Court that the building is used for any of the purposes mentioned under section 235 of Act, 1994. I would also like to observe that grant of exemption from the payment of property tax is not an empty formality; but on the other hand such an exemption can be granted only on the owner of the building establishing before the authority that the building is used completely for charitable or such other purposes in contemplation of law prescribed under the Act 1994. Therefore, I have no hesitation to say that even if any exemption was granted to the building, that will not detain the Corporation from cancelling the same if the truth otherwise is detected. To top up the other adverse factors, petitioner has also not produced any order to show that exemption was ever granted to the building. That being the situation, I do not think the petitioner is entitled to get the benefits of section 235 of Act, 1994. {Para 17}

In the High Court of Kerala at Ernakulam

(Before Shaji P. Chaly, J.)

Panayappilly Sree Narayana Guruswami Trust Vs Corporation of Kochi

WP(C) No. 10147 of 2014

Decided on July 29, 2022

Citation: 2022 SCC OnLine Ker 3918

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Whether the civil court has jurisdiction to entertain a challenge to property tax imposed on charitable trust?

This contention of the respondent/Public Trust can be certainly raised in an appeal under Section 406 of the said Act. The exemption claimed by it, is under Section 132(1)(b) of the said Act, which is a ground that can be agitated in the appeal. It is not as if the respondent/Public Trust is prohibited from raising such a ground in the appeal or that the "Judge" does not have the authority to deal with such a ground of challenge while exercising appellate power under Section 406 of the said Act. The said contention of the respondent/Public Trust is covered under the expression "appeals against rateable value or the capital value as the case may be or tax fixed or charged under this Act" used in Section 406 of the said Act. {Para 15}

16. A perusal of the other relevant provisions of the said Act show that under Section 410 thereof, if on hearing of an appeal a question of law or construction of a document arises, the Judge may draw a statement of the facts of the case and refer such questions with his own opinion on the point for a decision of the District Court. Under Section 411 of the said Act, an appeal shall lie to the District Court from any decision of the Judge in an appeal under Section 406 thereof, by which a rateable value or capital value as the case may be is fixed or upon a question of law or usage or the construction of a document. The question whether tax is to be fixed at the rate at which the Municipal Corporation claims or it has to be nil as claimed by the respondent based on Section 132(1)(b) of the Act, can also be a subject matter of such appeal under Section 411 of the Act. Further Section 413 of the said Act provides that the decision of the District Court in an appeal under Section 411 of the Act shall be final.

17. Thus, the provisions of the aforesaid Act provide a scheme wherein the grievance of the respondent/Public Trust can be fully taken care of and, therefore, the jurisdiction of the Civil Court is impliedly ousted. Applying the propositions culled out by the Constitution Bench judgment of the Hon'ble Supreme Court in the case of Dhulabhai (supra), it becomes evident that the aforesaid Act, with which we are concerned in the present case, is covered under proposition Nos. 2 and 6. In the present case, there is no question of a challenge to the vires of any provision of the aforesaid Act and the claim of the respondent/Public Trust that the notice and bills issued by the appellant/Municipal Corporation are illegal because the respondent is entitled for exemption from payment of property tax, is a question that can very well be decided in the mechanism provided as per the aforesaid provisions of the said Act.

18. In this context, the contents of the plaint of the respondent/Public Trust need to be appreciated. The entire grievance of the respondent is that it is undertaking educational activities in the building in question and that, therefore, under Section 132(1)(b) of the said Act, it is exempt from levy of tax. It is also claimed that tax is being claimed retrospectively by the appellant/Municipal Corporation, which cannot be done. In my opinion, all these are facets of "tax fixed or charged" or the rateable value applied by the appellant/Municipal Corporation, while raising bills against the respondent/Public Trust. If the contents of the plaint are appreciated in the proper perspective, it becomes evident that there is force in the contention raised on behalf of the appellant/Municipal Corporation that the respondent/Public Trust has filed the civil suit, instead of appeal under Section 406 of the said Act, only to avoid the mandatory deposit of disputed tax claimed by the appellant/Municipal Corporation, under Section 406(2)(e) of the Act, before the appeal can be heard or decided by the Judge. Although, this aspect may not be relevant to decide as to whether the jurisdiction of the Civil Court is ousted, it does demonstrate that in such cases, by clever drafting assessees may claim that civil suit is maintainable by contending that the very levy of the tax by the Municipal Corporation is "illegal" and that there is no remedy other than filing of suit before the Civil Court. It is for the assessees like the respondent/Public Trust to demonstrate as to why the grievance sought to be raised by them cannot be addressed under the scheme manifested by the above quoted provisions of the said Act.

19. In the present case, the learned Counsel for the respondent/Public Trust has heavily relied upon the judgment of this Court in the case of Balkrishna Vora v. Poona Municipal Corporation (cited supra). In the aforesaid case, the Court was concerned with the question that the tax levied or sought to be recovered was ultra vires the powers of the Corporation. In such a situation, it was held by this Court that the machinery provided under the aforesaid Act would not be sufficient for the assessee to air his grievance and thereupon, the Court held that the jurisdiction of the Civil Court could not be said to have been ousted and that the suit was maintainable. But, in the instant case, the nature of the grievance of the respondent/Public Trust is not such that it cannot be redressed under the machinery of the aforesaid Act. Therefore, the reliance placed on the said judgment of this Court is misplaced.

 IN THE HIGH COURT OF BOMBAY (NAGPUR BENCH)

Appeal Against Order (AO) No. 34 of 2017

Decided On: 14.02.2018

Akola Municipal Corporation Vs. Shri Akola Gujrati Samaj

Hon'ble Judges/Coram:

Manish Pitale, J.

Citation:  MANU/MH/0239/2018

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Whether Educational institution running on commercial lines are entitled to exemption from payment of general tax?

 Therefore, an element of public benefit or philanthropy has to be present. The reason why we stress on this aspect of the matter as if education is run on commercial lines, merely because it is a school, it does not mean it would be entitled to the exemption under Section 115(4) of the Act. {Para 66}

 If the gain derived by running the institution continues to be impressed with the trust which is a charitable trust, then it is immaterial whether the institution is run as a commercial institution or not, but if in the running of the institution profits are made and the profit goes to any private individual or if the institution is intended for any private gain, then undoubtedly the running of the institution could not be considered as being run for a charitable object."

73. In Addl. C.I.T. v. Surat Art Silk Cloth Assocn., 121 ITR 1 at 24 : (AIR 1980 SC 387 at p. 401), it is observed:

"Where an activity is carried on as a matter of advancement of the charitable purpose or for the purpose of carrying out the charitable purpose, it would not be incorrect to say as a matter of plain English grammar that the charitable purpose involves the carrying on of such activity, but the predominant object of such activity must be to subserve the charitable purpose and not to earn profit. The charitable purpose should not be submerged by the profit-making motive; the latter should not masquerade under the guize of the former."

74. In view of the above rulings it would be clear that where the predominant object is to subserve charitable purpose and not to earn profit it would be a charitable purpose. 

75. We have already seen that merely because education is imparted in the school, that by itself, cannot be regarded as a charitable object. Today, education has acquired a wider meaning. If education is imparted with a profit motive, to hold, in such a case, as charitable purpose, will not be correct. We are inclined to agree with Mr. B. Sen, learned Counsel for the Delhi Municipal Corporation in this regard. Therefore, it would necessarily involve public benefit.

76. The rulings arising out of Income-tax Act may not be of great help in the Income-tax Act "charitable purpose" includes the relief of the poor, education, medical relief and the advancement of any other object of general public utility. The advancement of any other object of general public utility is not found under the Delhi Municipal Cornoration Act. In other words, the definition is narrower in scope. This is our answer to question No. 1.

81. The word "contribution" used in the proviso must also be given its due meaning. It cannot be understood as donations. If that be so, a voluntary contribution cannot amount to a compulsive donation. If the donor, in order to gain an advantge or benefit, if he apprehends that but for the contribution some adverse consequence would follow, makes a donation certainly it ceases to be voluntary.

88. There is another way of looking at the matter. The school being a separate entity, premises occupied by the school will belong to it and not to the society. Therefore, the society cannot claim to be in exclusive occupation and use of the land and building in question. In fact, the proposal for assessment sets out these aspects clearly which are extracted below:

"The first step would be to determine whether the activity in which the society is engaged is charitable or not. The charitable purpose has not been defined in the Act, but it definitely means to include only such acts as relief of the poor, medical relief to the poor and education relief. In P. C. Rajaratnam Institutions v. MCD (Civil Writ Petition No. 1764 of 1979) Division Bench of the Delhi High Court has held that to be held as charitable institutions for the purpose of S. 115(4), the society must give education relief. It was further held by the Hon'ble Court that where fees are charged, exemption cannot be granted. The scrutiny of the Income and Expenditure account of the school shows that the activity which is being carried out by the society i.e. running of school, generates positive income from year to year. Positive income in the years 1977 to 1987 ranged between 32,000/- to Rs. 3 lacs per year. 1 do not know on what criteria this activity can be called as charitable activity. The institute is being run purely on commercial lines for the purposes of profits. Even the society for which receipts and payments accounts have not been filed are in receipt of income generated from this activity in the form of building fund and donations etc. which are forced on the students and their guardians.

The figures picked up from some of the final accounts of the society show that contributions from the school to the society was Rs. 1,56,895/ - in the year ending 31-3-79, and every year thereafter the amount of contribution from school to the society has been increasing. Since the institute is not only self-supporting but also is generating positive income, I hold that the activitiy carried out by the society is not a charitable activity. The second confusion that the institute/society should be supported wholly or in part by voluntary contribution is also not fulfilled. The element of voluntary contributions comes only if there is an excess of expenditure over the receipts of the society. Even otherwise the donations received by the society if any cannot be treated as voluntary in view of the fact that they are all forced on the students/parents. The very fact that the tax payer society has claimed depreciation in the income and expenditure account of the school shows that what they are preparing is not the income and expenditure account, but a Profit

and Loss Account as is done in commercial establishments. Depreciation is not an expenditure but is only a deduction @ certain percentage of the capital assets for arriving at profits and gains of the business. In view of the foregoing discussions 1 have no hesitation to decline exemption from payment of general tax in respect of the property known as Green Field School, A-2 Block, S.J.D.A., New Delhi. Accordingly, all property taxes are payable by the tax payer."

 90. We are in entire agreement with these findings.

SUPREME COURT

S. MOHAN AND G.N. RAY, JJ.

Municipal Corporation of Delhi Vs. Children Book Trust

Civil Appeal No. 2805 and Civil Appeal No. 228 1990 of 1980

21st April, 1992

Citation: 1992 ALLMR ONLINE 386 (S.C.),(1992)3SCC 390

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Whether charitable trust can claim exemption from payment of property tax if it is running educational institution on commercial lines?

Therefore, an element of public benefit or philanthropy has to be present. The reason why we stress on this aspect of the matter as if education is run on commercial lines, merely because it is a school, it does not mean it would be entitled to the exemption under Section 115(4) of the Act.{Para 66}

74. In view of the above rulings it would be clear that where the predominant object is to subserve charitable purpose and not to earn profit it would be a charitable purpose. However, the argument of the appellant is as per the Delhi School Education Act and the Rules framed thereunder, if the society cannot utilise the fund and the school cannot be run for private gain in the absence of any profit, it would be a charitable purpose.

75. We have already seen that merely because education is imparted in the school, that by itself, cannot be regarded as a charitable object. Today, education has acquired a wider meaning. If education is imparted with a profit motive, to hold, in such a case, as charitable purpose, will not be correct. We are inclined to agree with Mr. B. Sen, learned Counsel for the Delhi Municipal Corporation in this regard. Therefore, it would necessarily involve public benefit.

76. The rulings arising out of Income-tax Act may not be of great help in the Income-tax Act "charitable purpose" includes the relief of the poor, education, medical relief and the advancement of any other object of general public utility. The advancement of any other object of general public utility is not found under the Delhi Municipal Cornoration Act. In other words, the definition is narrower in scope. This is our answer to question No. 1.

80. It cannot be gainsaid that the municipal general tax is an annual tax. Therefore, normally speaking, the liability for taxation must be determined with reference to each year. In other words, the society claiming exemption will have to show that it fulfils the conditions for exemption each year.  We would consider the reasonable way of giving effect to the exemption, will be to take each case and assess for a period of five years and find out whether the society or body depends on voluntary contributions. Of course, at the end of each five year period the assessing authority could review the position. In other words, what we want to stress is, ,where a society or body is making systematic profit, even though that profit is utilised only for charitable purposes, yet it cannot be said that it could claim exemption. If, merely qualitative test is applied to societies, even schools which are run on commercial basis making profits would go out of the purview of taxation and could demand exemption. 

81. The word "contribution" used in the proviso must also be given its due meaning. It cannot be understood as donations. If that be so, a voluntary contribution cannot amount to a compulsive donation. If the donor, in order to gain an advantge or benefit, if he apprehends that but for the contribution some adverse consequence would follow, makes a donation certainly it ceases to be voluntary.

 Where, therefore, the funds are transferred, even calling the contributions from the school to the society, would be nothing more than transfer of oneself. In fact, we do not find under the Delhi School Education Act any provision by which the school is made a separate juristic entity.

88."Merely because the petitioner society is not distributing profits or is applying the profits earned from running of the school on construction of school building is not enough for it to claim exemption. It has to be shown that the petitioner society is supported wholly or in part by voluntary contributions. The learned Deputy Assessor and Collector has given weighty reasons to come to the conclusion that there were no voluntary contributions to the petitioner society and also to show that the case of the petitioner society was not covered by S. 115(4) of the Act. As has been noted above, in the present case it is the school which is generating income for the petitioner society and no amount whatsoever is being spent by the petitioner society on the school. The learned Deputy Assessor and Collector has further observed that the petitioner society is being run purely on commercial lines for the purpose of profits and it is in receipt of income generated from this activity in the form of building fund and donations etc., which are forced on the students and their guardians. Thus, there is no voluntary contribution."

90. We are in entire agreement with these findings.

SUPREME COURT

S. MOHAN AND G.N. RAY, JJ.

Municipal Corporation of Delhi Vs. Children Book Trust

Civil Appeal No. 2805 and Civil Appeal No. 228 1990 of 1980

21st April, 1992

Citation: 1992 ALLMR ONLINE 386 (S.C.),1991 SCALE (2)491

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Whether civil suit by Charitable trust challenging levy of property tax imposed by Municipal Corporation is maintainable?

Once it is found that the true nature of the grievance is such that it can certainly be raised in an appeal under section 406 of the said Act, it becomes clear that the jurisdiction of the civil Court is impliedly ousted and that the respondent/Public Trust is required to exhaust the remedy provided under the above quoted provisions of the said Act.

 21. If litigants like the respondent/Public Trust are permitted to raise grievance, that can certainly be addressed in the remedies provided under the aforesaid Act, by filing civil suits, on the basis of clever drafting, all such litigants would avoid mandatory requirements of the said Act and approach the civil Court, although a proper mechanism of grievance redressal is provided under the said Act. This aspect was not appreciated in the correct perspective by the Appellate Court while passing the impugned judgment and order.

(a) Maharashtra Municipal Corporations Act (59 of 1949), SS. 406 and 132(1)(b) — Municipal Tax — Levy of tax on Public Trust — Validity — Jurisdiction of Civil Court — Claim by Public Trust that it is undertaking educational activities in building in question and is exempt from levy of tax under section 132(1)(b) — Can be agitated in an appeal under section 406 — Jurisdiction of Civil Court is impliedly ousted.

The exemption claimed by respondent-Public Trust is under section 132(1)(b) of the Maharashtra Municipal Corporations Act, which is a ground that can be agitated in the appeal. It is not as if the respondent/Public Trust is prohibited from raising such a ground in the appeal or that the “Judge” does not have the authority to deal with such a ground of challenge while exercising appellate power under section 406 of the said Act. The said contention of the respondent/Public Trust is covered under the expression “appeals against rateable value or the capital value as the case may be or tax fixed or charged under this Act” used in section 406 of the said Act. The provisions of the Act provide a scheme wherein the grievance of the respondent/Public Trust can be fully taken care of and, therefore, the jurisdiction of the Civil Court is impliedly ousted. 1968 (3) SCR 662.

(Paras 15, 17, 20 and 22)

(b) Maharashtra Municipal Corporations Act (59 of 1949), SS. 406 and 132(1)(b) — Ouster of jurisdiction of Civil Court — Ouster of jurisdiction can take place by an express provision in statute or impliedly — Must be decided on examination of scheme of statute in question and its analysis.

 In the High Court of Bombay

(Nagpur)

(Before Manish Pitale, J.)

Akola Municipal Corporation Vs Akola Gujratisamaj and Others

Appeal against Order (AO) No. 34 of 2017

Decided on February 14, 2018

Citation: 2018 SCC OnLine Bom 201 : (2018) 5 Mah LJ 267 : (2018) 2 AIR Bom R 578 : (2018) 2 Bom CR 841

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Whether it is necessary to obtain leave for amending plaint in representative suit?

MAINTAINABILITY OF MANNATHUR CHURCH SUIT:

180. It was also submitted by Shri Mohan Parasaran, learned senior Counsel that the Mannathur Church matter suit was not maintainable. It was not of a representative character and in view of Order 1 Rule 8 Code of Civil Procedure, fresh leave was not sought when the reliefs were amended and enlarged. We are not satisfied with the submissions raised. The suit was clearly representative in character and has been contested in that manner. It was not necessary to adopt the procedure as suggested after amendment as the amended relief was traceable from the main relief. It was not at all necessary to obtain fresh leave.

 It was not necessary, after amendment of the plaint in Mannathur Church matter, to adopt the procedure once again of representative suit Under Order 1 Rule 8 Code of Civil Procedure. It remained a representative suit and proper procedure has been followed. It was not necessary to obtain fresh leave.

IN THE SUPREME COURT OF INDIA

Civil Appeal Nos. 3674, 3681, 3682, 3683, 8790, 8789 of 2015, 

Decided On: 03.07.2017

 K.S. Varghese and Ors. Vs. ST. Peter's and Paul's Syrian Orth. and Ors.

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Whether issues decided in representative suit will be binding on all persons or will operate as res judicata?

The 1995 judgment arising out of the representative suit is binding and operates as res judicata with respect to the matters it has decided, in the wake of provisions of Order 1 Rule 8 and Explanation 6 to Section 11 Code of Civil Procedure. The same binds not only the parties named in the suit but all those who have interest in the Malankara Church. Findings in earlier representative suit, i.e., Samudayam suit are also binding on Parish Churches/Parishioners to the extent issues have been decided.

IN THE SUPREME COURT OF INDIA

Civil Appeal Nos. 3674, 3681, 3682, 3683, 8790, 8789 of 2015, 
Decided On: 03.07.2017

 K.S. Varghese and Ors. Vs. ST. Peter's and Paul's Syrian Orth. and Ors.

Hon'ble Judges/Coram:
Arun Mishra and Amitava Roy, JJ.
Citation:(2017) 15 SCC 333

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Whether it is necessary to hear tenant of agricultural tenancy before granting exemption to charitable trust?

The main contention raised by the advocate for the petitioner is that the petitioner had not been given any notice when the order under Section 88B was passed. Reliance is placed on the judgements of this Court in the case of Keraba Dattu Borachata and Ors. v. Shri Sheshashai & Vishnu Trust MANU/MH/0710/1990 : 1990 Mh.L.J. 1183 and Dattu Hari Mali @ Dattu Rau Mali since deceased by his legal heirs and Ors. v. Peer Alli Darga Masjid (Powai Peer) through its Vahiwatdar MANU/MH/1101/2004 : 2005(2) Bom.C.R. 442 in support of his submission that the rules of natural justice must be observed before any order can be passed under Section 88B of the act since the tenants must be given notice as they would effectively be deprived of their valuable right to purchase the tenanted properties. It was further contended that the trust was registered only in 1960, much after the tillers day and therefore the petitioner could not be evicted as he had been denied the opportunity to exercise his right to purchase the property.

6. On the other hand, the learned advocate for the respondent pointed out that the possession of the land in question had been taken after due process on 28th may 1995 and therefore the petition has become infructuous. He submitted that the petitioner had been inducted in 1966-67 and therefore the question of the petitioner exercising his right to purchase the property did not arise since the petitioner was not in possession of the lands on the Tillers day.

7. It is true that before an order is passed under Section 88B of the act a tenant occupying the land's of the charitable trust must be given notice as his valuable right or purchase the lands occupied by him under Section 32 of the act would be seriously affected. In fact the judgement of the division bench of this Court relied by the learned advocate the petitioner takes this view. 

IN THE HIGH COURT OF BOMBAY

Writ Petition No. 5381 of 1994

Decided On: 07.07.2009

 Shri Murgappa Shivarudrappa

Vs.

 Shri Amarsihna Babasaheb Dafale

Hon'ble Judges/Coram:

N.N. Mhatre, J.
Citation: 2009(5) MHLJ 400

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Whether agricultural tenants are entitled to get protection from eviction from land of charitable trust?

 The Maharashtra Revenue Tribunal as well as
the   Sub   Divisional   Officer   have   taken   a   view   that   the
certificate of exemption is always prospective in operation
and if it is found that the legal heirs of the tenant are in
possession   of   the   exempted   land,   then   their   possession
cannot   be   held   to   be   illegal,   as   they   have   inherited   the
tenancy right of their predecessor before the certificate of
exemption was obtained.
4] The point is no longer res integra in view of the
decision of this Court delivered in Writ Petition No. 5383 of
2014 in case of Vidarbha Maharogi Seva Mandal, Tapovan,
Amaravati     vrs.     The   Member,   Maharashtra   Revenue
Tribunal, Nagpur, and others, on 23.02.2016.  In paragraph
Nos. 33 and 34 of the said decision, it is held as under;

33. In view of above, it follows that merely because the
tenant becomes statutory owner by virtue of sub­section
(1) of Section 46 or sub­section (1) of Section 49­A, that
by itself will not be sufficient to protect him from eviction
under Section 120 of the said Act, unless his title becomes
indefeasible   by   obtaining   certificate   of   purchase   under
sub­section (8) of Section 43 of the said Act.  In order to
get protection, the tenant or his successor­ in ­interest must
be armed with the weapon in the form of such certificate.
The undisputed factual position in this case is that till this
date, the tenant or his legal heirs have not obtained the
certificate of purchase under sub­section (8) of Section 43
of   the   said   Act,   to   perfect   the   title   or   to   make   it
indefeasible.   Hence, they are not entitled to protection
from eviction under Section 120 of the said Act.
34. The right of a tenant to purchase the land being
made heritable upon the death of the original tenant as
per Section 54 in Chapter III of the said Act, the heir or
the successor ­in­ interest of the original tenant also gets the
said right on the same terms and conditions on which the
original tenant was holding the land at the time of his
death.  Hence, the legal heir or the successor­ in ­interest of
the original tenant shall be bound to discharge all the
statutory obligations of the original tenant to retain the
title or to make his title over the land indefeasible."
It is not in dispute in the present case that till this date neither
the tenant nor his legal heir has obtained the certificate of
purchase under sub­section (8) of Section 43 of the said Act.
Hence,   he   is   not   entitled   to   protection   of   eviction   under
Section 120 of the said Act. 
5] In paragraph Nos. 41 and 42 of the aforesaid
judgment, it has been held as under;
41. The grant of exemption under Section 129(b)
of the said Act is the conclusive evidence of the fact that

the land in question is the property of the Public Trust
and the entire income therefrom is appropriated for the
purposes   of   such   Trust.     In   the   absence   of   such
certificate, the factum of existence of the Trust on or
before the tillers' day, i.e. 1­-4-­1961, and its utilisation
of income from the land for the purposes of the Trust,
will have to be established.  There conditions are   sine
qua non to claim exemption from the applicability of
Chapter III of the said Act.
42. Though the tenant satisfies the requirement of
sub­section   (1)   of   Section   46   or   sub­section   (1)   of
Section  49­A under  Chapter  III of  the said Act,  the
exemption under Section 129(b) of the said Act can be
claimed only after coming into force of the said Act.
Once it is held that the Trust is entitled to exemption
under   Section 129(b) of the said Act, the provisions of
Chapter III therein shall cease to apply to such land
with effect from the tillers' day, i.e. 1-­4­-1961, and the
tenant shall not be entitled to protection from eviction
under Section 120 of the said Act. 
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
NAGPUR BENCH, NAGPUR
WRIT PETITION NO. 4895 OF 2014 
Shri Digambar Jain Dharma and Samaj
Vikas Trust, Malkapur, 
V
 Sub Divisional Officer, 

CORAM: R. K. DESHPANDE, J.
DATE    :     23rd FEBRUARY,  2016 .
Citation:2016 (3) ALLMR 583

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When assessee is not entitled to get deduction in respect of donation made by him to charitable trust?

 Disallowance of donation to Aparna
Ashram:
Disallowance of donation made to
Aparna Ashram by the assessee was refused
by the Primary and First Appellate
Authority on the ground that the necessary
certificate showing that the donee (Aparna
Ashram) had complied with the conditions
subject to which registration was granted
to it under Section 35(2A) of the Act was
not produced by the assessee so as to
entitle it to the claim of deduction of
the donation made. The learned ITAT took
the view that the aforesaid conditions
were not material. The High Court on due
consideration found that the said
conditions were necessary preconditions to
the grant of statutory registration and
had to be satisfied. There is no dispute
on the fact that no such certificate had
been furnished by the assessee and also
that all Authorities have consistently
held that if and when such certificate is
produced the consequential benefit can be
afforded to the assessee. In the aforesaid
circumstances, we do not see how the view
taken by the High Court that the assessee
was not entitled to the benefit of
donation made to Aparna Ashram can be
faulted.
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO.1964 OF 2008
M/S GANAPATHY & CO.,
BANGALORE ...APPELLANT
VERSUS
THE COMMISSIONER, INCOME TAX
BANGALORE ...RESPONDENT
Citation; AIR 2016 SC 422

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When charitable trust are liable to pay property tax?

 It is argued that the plaintiffs recover rent from the occupants of the Sanatorium, and, therefore, a general tax must be levied under Section 132 of the Act. The actual words used in the section, therefore, fall to be considered. The section is as follows:

(1) The general tax shall be levied in respect of all buildings and lands in the City except-....

(b) buildings and lands or portions thereof solely occupied and used for public worship or for a public charitable purpose;...

(2)The following buildings and lands or portions thereof shall not be deemed to be solely occupied and used for public worship or for a public charitable purpose...namely:...

(b) buildings or lands or portions thereof in respect of which rent is derived, whether such rent is or is not applied solely to religious or charitable purposes The real dispute centres round Sub-clause (b) of Sub-section (2) and the question is whether the properties fall within the category of those for which "rent is derived, whether such rent is or is not applied solely to religious or charitable purposes." The intention of the Legislature is to distinguish between two kinds of properties even though it might appear that the properties are being applied to charitable purposes. Clause (b) of Sub-section (1) exempts buildings or lands which are solely occupied and used for the purpose, and an exception is created to that clause by Sub-clause (b) of Sub-section (2) in cases where rent is recovered but which, rent is used for the purposes of some charitable purpose, the difference being that in the first case the land or building is directly applied for a charitable purpose or for worship, while in the second case the property is indirectly applied for the worship or charitable purpose. This can be well illustrated by taking one or two concrete examples. In the case of a temple which is used for public worship and for housing the deity, the temple is clearly used directly for the public purposes. Supposing, however, that some shops are attached to the temple which are given to shop-keepers who pay rent and such rent is applied for the uses of the temple. The shops, in such a case, the income of which is used for the religious purpose, would fall within Clause (b) of Sub-section (2) and would be liable to tax. But if instead of the premises being shops, if they are Dharmashala rooms where visitors are given shelter without any charges, or such nominal charges as are necessary for the upkeep of the buildings, then they would fall within Clause (b) of Sub-section (1) and would not be liable to tax. To take another case, suppose an educational institution has got some property under its control which is being rented and the income derived from the rents is utilised for its purposes. In this case again, the property is not directly applied to the public purpose but only its income, that is, the property is indirectly applied for the public purpose, and, therefore, will fall within Clause (b) of Sub-section (2). The question, therefore, in each case that must be considered is whether the lands or the buildings are directly applied for worship or for charitable purpose. It is to this question, therefore, that we must address ourselves.

Bombay High Court

Balkrishna Dharamdas Vora vs The Poona Municipal Corporation on 29 August, 1962

Equivalent citations: (1963) 65 BOMLR 119,1963 MHLJ325

Bench: Patel, Palekar

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Whether charitable institution or trust are entitled to get exemption from payment of property tax?

The illustration as given by the Division Bench would make it clear that the premises which are to be taxed must fetch income to the trust. We have seen that the premises are not let out by defendant No.1 by defendant No. 2 or to any third party. The plaintiff cannot therefore be said to be deriving an income from the premises.

Bombay High Court

Sant Kanwarram Education & Social vs Municipal Corporation Of City on 15 October, 2008

Bench: C. L. Pangarkar

Citation; 2009(2) AIRBOMR384

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