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THE HONOURABLE DR. JUSTICE ANITA SUMANTH W.P.No.8326 of 2019& WMP.No.8871 of 2019 Pondicherry Institute of Medical Sciences, Represented by its Chairman: Dr.K.Jacob, Kalapet, Puducherry-605014          For Petitioner     : Mr.Abhishek Jenasenan                     For Respondents : Mr.J.Kumaran [R1]                                                     Additional Government Pleader                                                     Mr.T.P.Manoharan                                                     Senior Counsel for                                                                                    Mr.T.M.Naveen [R2]                                                     O R D E R                                                         … Petitioner Vs. 1.The Government of Puducherry. impugned order is set aside and the matter remanded to the file of the authority for denovo adjudication. The authority is directed to hear the petitioner and pass a speaking order in regard to the claim of exemption, bearing in mind the 1999 Regulations and subsequent amendments

by ·

IN THE HIGH COURT OF JUDICATURE AT MADRAS

DATED: 08.07.2022

CORAM

THE HONOURABLE DR. JUSTICE ANITA SUMANTH

W.P.No.8326 of 2019&

WMP.No.8871 of 2019

 

Pondicherry Institute of Medical Sciences,

Represented by its Chairman:

Dr.K.Jacob,

Kalapet,

Puducherry-605014                                                                    … Petitioner

 

Vs.

1.The Government of Puducherry,

Represented by its Secretary,

Local Administration Department,

Puducherry-605001

 

2.The Oulgaret Municipality,

Represented by its Revenue Officer,

Puducherry-605 005                                                             … Respondents

 

Prayer: Writ Petition filed under Article 226 of the Constitution of India, to issue a Writ of certiorarified mandamus, calling for the records of the 2nd respondent in order dated 15.02.2019 in Ref.No. 1651/OM/Revenue/Property tax/2019, quash the same and consequently direct the 2nd respondent to refund the amount of Rs.27,84,415/- paid by the petitioner towards property tax demand for the period from 2010-11 to 2016-17.

For Petitioner     : Mr.Abhishek Jenasenan

 

 

For Respondents : Mr.J.Kumaran [R1]

Additional Government Pleader

Mr.T.P.Manoharan

Senior Counsel for                                                                                    Mr.T.M.Naveen [R2]

 

O R D E R

The petitioner is the Pondicherry Institute of Medical Sciences constituted under the Madras Medical Mission, a society registered under the Tamil Nadu Societies Registration Act, 1975, that had established the petitioner Institute in the year 2000. The aims and objectives of the Institute are to establish and manage educational Institutions.

  1. The petitioner has been approved by the authorities concerned, for the conduct of MBBS and post-graduate courses and is affiliated to a hospital that caters to the general public. It is the case of the petitioner that, seeing as the hospital is a teaching hospital affiliated to the petitioner institution, there must be an exemption from the levy of property tax in terms of the Puducherry Municipality Act, 1973 (in short ‘Act’) and for this purpose reliance is placed on Section 124 of the Act providing for general exemptions.
  2. The petitioner was faced with notices demanding property tax from the year 2010-11 and has also paid the same in full. Thereafter, according to the petitioner, it had come to know that there was an exemption provided for the very activity that it was engaged in and the other similarly placed educational institutions have not been visited with the same demands. Hence, it sought information under Right to Information Act, 2005, that supported its stand that it had been singled out for the differential tax treatments.
  3. A writ petition came to be filed in W.P.No.30568 of 2018 challenging the demand notice issued for the period 2010-11 to 2016-17 dated 26.10.2018. The writ petition came to be disposed on 20.11.2018 directing R2, being the Oulgaret Municipality to consider and dispose representation dated 20.06.2018, wherein it sought tax exemption, on merits and in accordance with law. The demand under the impugned notice had been directed to be kept in abeyance for a period of four weeks within which time R2 was directed to dispose the representation.
  4. The impugned order has come to be passed on 15.02.2019 rejecting the representation made by the petitioner seeking exemption. A perusal of the application for exemption would indicate that it is premised on three points (i) other identically placed medical colleges are not being visited with property tax demand; (ii) the petitioner is a charitable institution and should thus be treated as exempt from the levy; and (iii) the request for exemption is premised on the basis of Section 124(e) of the Act, though the statutory provision does not find reference.
  5. In fine, the prayer of the petitioner is for an exemption both as an educational institution as well as a charitable institution, that is, both under clauses (c) and (e) of Section 124. The impugned order bifurcates the properties of the petitioner as follows:
Sl.No. Particulars Extent
1. Total Plot area of PIMS campus 1,34,312 sq.m.
2. Total extent of all buildings 98,378,11 sq.m.
3. Total extent of educational buildings, place of worship, etc in PIMS 42,481,84 sq.m.
4. Total extent of commercial buildings in PIMS 55,896,27 sq.m.
5. Extent of vacant land in PIMS 5248.14 sq.m.
6. Property tax leviedper annum (only for commercial buildings)

(w.e.f. 01.04.2017)

 Rs.12,28,230/-
  1. The officer concludes stating that property tax has been levied only in respect of those buildings that are not being deployed/utilized in the dissemination of education i.e. hospital building, doctor’s villa, guest house and canteen located in the campus. However, the specific case of the petitioner is that the relevant Regulations require an educational institution disseminating medical education to be attached to a hospital, where the students can obtain practical training and instructions.
  2. Before me, learned counsel for the petitioner reiterates the request made in the application for exemption, placing reliance upon the (i) Minimum Standard Requirement Regulations 1999 (1999 Regulations) issued by the Medical Council of India (ii) the National Medical Commission amendment Notification and (iii) decision of a Division Bench of this Court in the case of Sriram Educational Trust vs. The President, 89, Perumalpattu Panchayat Union, Thiruvallur Taluk and District [(2008) 1 L.W. 601].
  3. Heard both parties. The object of the 1999 Regulations is to prescribe the requirements intended for a medical college and medical institution approved for 150 admissions of MBBS students, annually, being a college and its associated teaching hospital, staff (teaching and technical both) and equipment in the college departments and the hospitals. This is as per Clause 2 of the Regulations.
  4. Thus the concept of a teaching college is one that forms part of the scheme of medical instruction. The regulations provide for the specific departments that are to be run, providing for the colleges and institutions to set up other departments, on need basis, to meet the teaching needs of the college and health care needs of the public. Provision is made for accommodating the teaching and technical staff and equipment required in each department inclusive of the needs of the college, institution, and associated teaching hospitals.
  5. Schedule I of the Regulations conceives of a unitary campus in which the medical college/institution shall be housed proximate to the teaching hospital, with the recommendation that the teaching hospital shall be within a radius of 5 Kms of the campus. Companies registered under the Companies Act may also be allowed to open medical colleges upon condition that the colleges are not commercialized. The Regulations have the recurring theme of a composite scheme of medical instruction involving both the medical college and a teaching hospital.
  6. On 28.10.2020 an amendment was brought to the 1999 Regulations by way of an amendment notification issued by the National Medical Commission. The ‘qualifying criteria’ in respect of colleges to be established from academic session 2021-22 onwards were amended to included additional prescriptions as follows:-

( 2A ) For Medical Colleges being established for Academic Session 2021-22 :

  1. Every medical college shall comprise of the Medical College , the attached Teaching hospital / ( s ) , and the residential area for the students with or without the residential area for faculty and other staff of college / hospital . It is desirable that the medical college , residential complex for students interns and the teaching hospital institution be in a unitary campus .
  2. However , in Category X and Y cities , Hilly areas , Northeastern states and notified tribal areas the campus could also be in 2 plots of land- one housing the teaching hospital and the other the medical college with hostels for students and interns . D
  3. If the campus is housed in more than I plot of land , the distance between each one of these plots should be less than 10 kms or less than of 30 mins travelling time , whichever is lesser .
  4. Provided that where the Government District Hospital is being considered for use as the teaching hospital of a medical college , all constituents of the District Hospital , even if they are on two plots of land , will be considered as the affiliated teaching hospital , provided that the main District hospital has at least 300 beds .
  5. The medical college shall provide adequate built – up space to accommodate various teaching areas (both in the college and the teaching hospital ) . Library, administrative areas , rooms for teaching and non – teaching staff , student amenities , etc as specified in various sections of this schedule .
  6. The building and other built up infrastructure must conform to building codes and local building bye – laws.
  7. The built up area of the teaching hospital must conform to national norms and local building bye – laws having considered the minimum beds , teaching facilities and other requirements prescribed for the various annual intakes of MBBS students in these regulations .
  8. Further, the parcel of land being used for establishing the medical college is not to be used for any other college institution (such as Nursing College, Dental College. Engineering College or any other College or Hostel or accommodation).
  9. In Clause 2 (5) under the heading ‘QUALIFYING CRITERIA’, after the last para the following new Para shall be added :

 ( 5A ) For Medical Colleges being established from Academic Session 2021-22 : That the person owns and manages a fully functional minimum 300 bedded Hospital with necessary infrastructural facilities capable of being developed into a teaching institution. Provided that in North – Eastern States and Hilly Areas, the bed strength required at the time of inception may be 250. An additional 30 beds for emergency care should be mandatory in all such Hospitals. Further the Hospital should be fully functional for a minimum period of two years .

  1. In Clause 8 under the heading “GRANT OF PERMISSION “after the existing clause 8 ( 3 ) ( 1 ) the following new Para shall be added :-

 8 ( 3 ) ( 1A ) For Medical Colleges being established from Academic Session 2021-22 : The permission to establish a Medical College and admit students may be granted initially for a period of one year and may be renewed on yearly basis subject to achievements of annual targets. Physical Verification of infrastructure, human resources and other facilities shall be carried out for first renewal, third renewal and until recognition of the MBBS qualification awarded by the Medical College is granted. It shall be the responsibility of the person to apply to the Medical Assessment and Rating Board of the National Medical Commission for the purpose of renewal in accordance with the prescribed time schedule. Further admissions shall not be made at any stage unless the requirements laid down in relevant Minimum Standard Requirement Regulations for Annual MBBS Admissions and Phase wise Requirements for grant of Permission under section 10A are fulfilled. Further, the proviso to Regulation 8 ( 3 ) ( 1 ) shall remain applicable to all Medical Colleges being established from academic session 2021-22 onwards.

 

Thus, the Regulatory authorities conceive of a comprehensive system of medical education where the Institute will provide the academic & scholarship content of the hospital, the practical experience & exposure. This is well taken.

  1. The Division Bench in the case of Sriram Educational Trust (supra) considered the claim of exemption from property tax by several educational institutions. The claim was preferred on the anvil of Rule 15(c) of the Tamil Nadu Village Panchayats (Assessment and Collection of Taxes) Rules 1999 read with Section 172 of the Tamil Nadu Panchayats Act, 1994, levy of property tax under. Both the provision and rule are extracted below:

“172. House tax.- The house tax shall be levied on all houses in every Panchayat Village on the basis on which such tax was levied in the local area concerned immediately before the commencement of this Act or on the basis of classified plinth area at the rates specified in Schedule I, as the Village Panchayat may adopt subject to the provisions of sub-section (3).

(2) The house tax shall, subject to the prior payment of the land revenue, if any, due to the Government in respect of the site of the house, be a first charge upon the house and upon the movable property, if any, found within or upon the same  and belonging to the person liable to such tax.

(3) The Government shall, by notification, determine in regard to any Panchayat Village or any class of Panchayat Villages whether the house tax shall be levied every half-year or year and in so doing have regard to the following matters, namely:-

     (a) the classification of the local areas under                      Section 4;     (b) the annual receipts of the Village Panchayat;

     (c) the population of the Panchayat Village and               the predominant occupation of such population;           and

     (d) such other matters as may be prescribed.

 

……

 

“Rule 15 – Exemption of specified classes of houses from house-tax.– The following buildings shall, if they fall within the meaning of house as defined in the Act, be exempt from the house-tax —

(a)….

(b)….

(c) buildings used for educational pur poses including hostels and libraries which are open to the public and public buildings used for charitable purpose of sheltering the destitutes or animals.

(d) to (k)….

Provided that nothing contained in clauses (a) and (c) shall be deemed to exempt from house-tax, if any building for which rent is payable by the person or per sons using the same for the purposes referred to in the said clauses:

Provided further that educational institution (nor commercial in nature) exempted from levy of house-tax, immediately before the commencement of the Act shall continue to be exempted under the said Act.

Explanation. — The exemption granted under this rule shall not extend to residential quarters attached to schools or colleges not being the hostels or residential quarters attached to hospitals, dispensaries and libraries.”

 

  1. The Bench considered the impact of the above and holds at paragraphs 7 and 20, as follows:

“7. A reading of the Rule 15 shows that apart from panchayat buildings and Government maintained buildings, the various Sub Rules list out buildings entitled to exemption subject to the qualification as to the character of use and purpose provided for therein. On a reading of the exemption provision, it is clear that wherever the Rule contemplated a qualification to any class of houses as a condition for availing the exemption, it is specific enough to say so. Take for instance Sub clause (a) relating to buildings set apart for public worship actually used so or used for no other purpose; clause (b) exempting choultries that are rent free and those that charge rent, used the same for charitable purposes; Clause (c) libraries which are open to public, and public buildings used for charitable purpose of sheltering the destitutes or animals are exempt from tax. So too, Charitable hospitals, dispensaries and other buildings exclusively used for charitable purposes (Sub Rule (e)). As for buildings used for educational purposes are concerned, the Sub Rule 15(c) stops by referring to the use of the building as for educational purposes including hostels. There are no other qualifying words to attend on to the phrase “buildings used for educational purposes including hostels”. There are two provisos which carve out the exceptions to the claim for the exemption – rented buildings used for purposes referred to under sub Rule (a) and (c) are not entitled to claim the benefit of exemption. Under the second proviso, educational institutions not commercial in nature exempted from house tax immediately before the commencement of the Act shall continue to be exempted under the said Act.

………

  1. There are sound principles which underlie the interpretative process on the exemption provision vide the decision reported in 32 ITR 466 (Commissioner Of Income-tax Vs Raja Benoy Kumar Sahas Roy (SC)) at 475, 177 ITR 431 (Commissioner Of Income-tax Vs Strawboard Mfg. Co. Ltd. (SC),) 170 ITR 137 (Central Board Of Direct Taxes Vs. Aditya V. Birla (SC)). These decisions give us the guiding principle on the understanding of an exemption provision to declare that exemption from tax is an exception to the general chargeability to tax under the provisions of the taxing enactment. Hence, those who claim an exception from liability must bring themselves within the terms of the exemption provision. Secondly, tax being the source by which the State gets its revenue, any claim of exemption from payment of tax must be clearly defined and founded on plain language. Where one is concerned with the interpretation of an exemption claim in a taxing statute, once the assessee proves that his case falls within the ambit of the proviso for exemption, then, that claim must, as far as possible, be liberally construed provided no violence is done to the language used.”
  2. In coming to the above conclusion, they note and rely upon judgments of the Hon’ble Supreme Court in The Sole Trustee Loka Shikshana Trust Vs. The Commissioner of Income Tax, Mysore, [ (1976) AIR SC 10] and Municipal Council Trichinopoly Vs. S.Venkatarama Aiyar, [(1931) AIR 55 Madras ]. The claim for exemption was upheld since the Bench was of the view that the petitioner therein satisfied the dominant purpose test, and existed solely for educational purposes only.
  3. Learned Senior Counsel appearing for the learned counsel on record for R2, points out that the impugned demand notice levying property tax provides for an appeal remedy in terms of Section 180 of the Act and the petitioner has not availed such remedy. Be that as it may, and notwithstanding his challenge to maintainability, the petitioner has admittedly remitted the demand not just for the periods in question, but for earlier years as well.
  4. Thus, while impressing upon the Court that it would be appropriate that the petitioner files an appeal in the present case, he would also urge that demands that have attained finality for the previous periods, cannot be reopened at the whims and fancies of the petitioner. That apart, learned Senior Counsel draws attention to a receipt of payment of property tax by one, Sri Lakshmi Narayana Medical College, Villianur, Puducherry, dated 20.06.2019, that, according to him, puts paid to the submission of the petitioner that all similarly placed medical institutions are enjoying tax exemption.
  5. Per contra, the argument advanced by the petitioner is that the appeal remedy carries an onerous condition of pre-deposit of 2/3rdof the disputed demand which the petitioner should not be called upon to pay, as in this case, it seeks a complete exemption from levy of tax in itself.
  6. The question of grant of exemption or otherwise has to depend on the manner in which the activities of the petitioner institution are being carried out. The provisions of Section 124 grant general exemption and clauses (c) and (e) thereof, that are relevant for a proper adjudication of this matter, read as follows:
  7. General exemption.- (1) The following buildings and lands shall be exempt from the property tax.

…..

(c) buildings used for educational purposes including hostels, public buildings and places used for the charitable purpose of sheltering the destitute or animals and libraries and play grounds which are open to the public or which are attached to any educational institution.

……

(e) charitable hospitals and dispensaries;

  1. As far as the provisions of Section 124(c) are concerned, any building used for educational purposes that is attached to an educational institution, must qualify for the exemption as per a plain reading of the provision. As expressed by the Division Bench in the case of Sriram Educational Trust (supra) there is no necessity to strain the language of the Act as the language is clear and does not admit of any ambiguity. The question is whether the hospital is in fact, being used ‘for educational purposes’. To determine this, the authority considering the claim of exemption, would have to look into the activities of the institute/hospital, bearing note of the use to which they are being put.
  2. As to the argument that a hospital ancillary to a Medical College assumes a special status as a teaching hospital, also and equally engaged in the dissemination of medical education, such an argument bears looking into, including specifically whether the hospital is being run along commercial lines, how the income earned is being utilized as well as other relevant factors in arriving at a considered decision in regard to the claim of the petitioner. The impugned order is entirely silent on all these aspects.
  3. As regard the claim under Section 124(e) as well, there is to be a detailed verification as to whether the petitioner satisfies the requirement of ‘charitable institution’. The mere fact that it has obtained an exemption under Section 12(A) and 11 of the Income tax Act, 1961 would not come to its rescue and the officer must undertake a detailed verification of its financials, including the deployment of its funds and record his satisfaction that receipts/income are being ploughed back into the charitable activity.
  4. For all the aforesaid reasons, the impugned order is set aside and the matter remanded to the file of the authority for denovo adjudication. The authority is directed to hear the petitioner and pass a speaking order in regard to the claim of exemption, bearing in mind the 1999 Regulations and subsequent amendments. This exercise shall be completed within a period of twelve weeks from date of receipt of copy of this order. It is made clear that the demands raised are not disturbed and the petitioner will continue to pay the taxes till such time the application is disposed, and subject to the same.
  5. This writ petition is disposed in the above terms. Connected miscellaneous petition is also closed. No costs.

08.07.2022

 

Index     : Yes

Speaking Order

Ska

 

 

To

 

1.The Government of Puducherry,

Represented by its Secretary,

Local Administration Department,

Puducherry-605001

 

2.The Oulgaret Municipality,

Represented by its Revenue Officer,

Puducherry-605 005.
DR.ANITA SUMANTH, J.

 

ska

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

W.P.No.8326 of 2019 &

WMP.No.8871 of 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

08.07.2022

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