PARIVAR SEVA SANSTHA versus AHMEDABAD MUNICIPAL CORPORATION on 24 November 2022

SUPREME COURT REPORTS

[2022] 18 S.C.R.

PARIVAR SEVA SANSTHA

A

v.

AHMEDABAD MUNICIPAL CORPORATION

(Civil Appeal No. 2773 of 2012)

BNOVEMBER 24, 2022

[SANJIV KHANNA AND J. K. MAHESHWARI, JJ.]

Gujarat Provincial Municipal Corporations Act, 1949: s. 129,141AA, 132(1)(b) – Imposition of property tax – Power of MunicipalCorporation – Appellants, charitable trusts, running clinics/hospitalsCseeking exemption from levy of general tax in terms of clause (b) tosub-section (1) of s. 132, in cases where the Corporation hasexercised the option to levy property tax on carpet area methodu/s.141AA; and challenging r. 8B(4)(i) on the ground that it isunconstitutional, illegal and arbitrary as it violates the principle ofDequality enshrined u/Art. 14 – Held: ss. 129 to 141A are groupedtogether and are applicable when property tax is payable on annualletting value/annual rateable value, whereas provisions from ss.141AA to 141F apply when property tax is payable on the basis ofcarpet area method – Exemption under clause (b) to sub-section (1)of s.132 only applies when general tax is payable under sub- sectionE(1) to s.132 rw s. 129 - Clause (b) to sub-section (1) of s.132 per seand ex facie does not apply to taxes payable in terms of s. 141AA onthe basis of the carpet area method – Thus, it cannot be held thatclause (b) to sub-section (1) of s. 132, which grants exemption tobuildings and lands or portions thereof solely occupied and usedFfor public worship or for public charitable purposes, would applywhen property tax is calculated and is payable on the basis of thecarpet area method, which is to be computed and calculated inaccordance with the provisions of s. 141AA to s. 141F – Furthermore,the ‘use factor’ enlisted clause (b) to sub-rule (4) of r. 8B is a separatecategory; the category being grantable schools run by publicGcharitable trusts, boarding- lodging-hostels run by public charitabletrusts, and religious institutions, dharma-shala, ashram, and library– Appellant No.2 Trust cannot claim any parity with the said ‘usefactors’, even though the hospital/clinic run by them are run bypublic charitable trusts – Sub-clause (i) to clause (a) to sub-ruleH

(4) of Rule 8B enlists all buildings used as hospitals, dispensaries,clinics, maternity homes, etc – All hospitals, dispensaries, clinics,maternity homes etc., have been classified under one head, andthereby the levy of taxation in such cases simplifies and is uniform– Classification made vide sub-clause (i) to clause (a) to sub-rule(4) of Rule 8B is not discriminatory and violative of Art.14 – Objectand purpose is to avoid litigation and complexities which may arisein case there is a distinct and separate taxation of hospitals, clinics,maternity homes, etc., stated and claimed to be run for charitablepurpose – Sub-clause (iv) to clause (a) to sub-rule (4) of Rule 8Bapplies to educational and social institutions run by publiccharitable trusts for the welfare of women, old people, deaf, dumb,blind, physically handicapped or mentally retarded people – Theseare separate categories and cannot be confused and treated similarlyand at par with hospitals, clinics, maternity homes, etc, as elucidatedin sub-clause (i) to clause (a) to sub-rule (4) of Rule 8B –Furthermore, there can be crudities or inequities in complicatedexperimental economic legislation but on that account alone itcannot be struck down as invalid – Taxation (Amendment) Rules20019 – r. 8B(4)(i).

Dismissing the appeals, the Court

Conclusion

Dismissing the appeals, the Court

HELD: 1.1 It is crystal clear that ss. 129 to 141A of theGPMC Act are grouped together and are applicable when propertytax is payable on annual letting value/annual rateable value,whereas provisions from Sections 141AA to 141F of the GPMCAct apply when property tax is payable on the basis of carpetarea method. There are no good ground and reason to hold thatclause (b) to sub-section (1) of Section 132 of the GPMC Act,which grants exemption to buildings and lands or portions thereofsolely occupied and used for public worship or for public charitablepurposes, would apply when property tax is calculated and ispayable on the basis of the carpet area method, which is to becomputed and calculated in accordance with the provisionsof Section 141AA to Section 141F of the GPMC Act. [Para 2][656-D-F]

1.2 Chapter XI of the GPMC Act deals with municipaltaxation and sub-section (1) to Section 127 states and gives anoption to the Corporation to impose property tax either A

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F

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Aunder Section 129, or under Section 141AA of the GPMCAct. Section 129 states that the property tax shall comprise ofthe taxes, which shall, subject to the exceptions, limitations andconditions thereinafter provided, be levied on buildings and landsin the city. Section 132 of the GPMC Act states that general taxshall be levied in respect of all buildings and lands in the city, theBrateable value of which exceeds Rs.600/-, save when a case iscovered by exceptions enumerated and listed in clauses (a), (b)and (c) of sub-section (1) to Section 132 of the GPMC Act. Clause(b) to sub-section (1) of Section 132 states that buildings and lands, or portions thereof, solely occupied and used for public worshipCor for public charitable purposes are exempt from payment ofgeneral tax leviable under Section 132 of the GPMC Act. In otherwords, exemption under clause (b) only applies when general taxis payable under sub- section (1) to Section 132 read with Section129 of the GPMC Act. Clause (b) to sub-section (1) of Section132 per se and ex facie does not apply to taxes payable in termsDof Section 141AA on the basis of the carpet area method. [Para3][657-B-D; 658-A]

1.3 Section 141AA, which is an alternative mode of taxationand an option available to the Corporation to impose tax on thebasis of the carpet area method, states that the property taxesEshall comprise of the taxes which shall, subject to exceptions,limitations and conditions thereinafter provided, be levied onbuildings and lands in the city. Clause (c) to Section 141AA statesthat a general tax may be levied in accordance with the provisionsof Section 141B, if the Corporation so determines, on a graduatedFscale. Sub-section (1) to Section 141B states that for the purposeof clause (c) to Section 141AA of the GPMC Act, general tax,subject to such exceptions, limitations and conditions thereinafterprovided (and not thereinbefore provided), shall be levied annuallyon the buildings and lands in the city at such rate per square meter of the carpet areas of the buildings and of the areas ofGland, which thereinafter in the enactment has been referred to as‘the rate of tax’, as the Corporation may determine. Sub-section(2) to Section 141B states that for the purpose of levy of tax onbuildings in the city under sub- section (1) to Section 141B, thebuildings may be classified into ‘residential’ and ‘buildings otherHthan residential’ and the Corporation may determine one rate of

tax for residential buildings and the other rate of tax for buildingsother than residential. The proviso states that it shall be lawfulfor the Corporation to determine for residential buildings, thecarpet area of which does not exceed 40 square meters, suchrate of tax as is lower than the rate of tax determined forresidential buildings. Sub-section (3) to Section 141B states thatthe rate of tax determined under sub-section (1) read with sub-section (2) to Section 141B shall not, in respect of the residentialbuildings, be less than Rs.10/- per square meter of carpet areaand more than Rs.40/- per square meter of carpet area. In respectof buildings other than residential, it shall not be less than Rs.20/- per square meter of carpet area and not more than Rs.80/- persquare meter of carpet area. Sub-section (4) to Section141B states that the Corporation, subject to the Taxation Rules,may increase or decrease or neither increase nor decrease therate of tax determined under sub-section (1) read with sub-section(2) and sub-section (3) to Section 141B in the case of residentialbuildings having regard to factors, like, market value of the landwhere the building is situated, the year of construction of thebuilding, type of the building, the duration of existence of thebuilding, the type of building, and whether the building is self-occupied or tenanted. Similarly, in the case of buildings otherthan residential, the following factors, namely, market value ofthe land in the area in which the building is situated, the durationof existence of the building, the purpose for which the building isused, and whether the building is self-occupied or tenanted areto be taken into consideration. [Para 4][658-B-H; 659-A-B]

1.4 There is hardly any scope to urge and argue that clause(b) to sub-section (1) of Section 132 of the GPMC Act, whichrelates to and grants exemption from payment of general tax whenrateable value is computable under Section 129 read with Section132 of the GPMC Act, would apply in cases where property tax ispayable by the carpet area method. General tax in terms of clause(c) to Section 141AA has to be computed subject to suchexceptions, limitations and conditions provided in Sections141B or thereinafter. It would be, therefore, correct to hold thatprovisions from Section 141AA to Section 141F form a completecode when tax has to be computed and paid on the carpet area A

B

C

D

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Amethod, and for such computation, reference cannot be made tothe provisions of Sections 129 to 133 which relate to propertytax payable on annual rateable value. This position is also madeclear by Section 141F, which states that provisions of Section140 and 141A shall apply in relation to property taxes leviedunder Section 141AA, subject to modifications specified inBAppendix I-A. Therefore, only provisions of Section 140and Section 141A have been made applicable when property taxis levied and is payable in terms of Section 141AA of the GPMCAct. Clause (b) to sub-section (1) of Section 132 of the GPMCAct is not attracted and cannot be relied upon when property taxCis payable under Section 141AA of the GPMC Act. [Para 5][659-B-F]

1.5 Rule 8B of the Taxation Rules, which relates to theincrease and decrease of rate of property tax determined for‘buildings other than residential’, refers to several factors whichDresult in an increase or decrease, or neither increase nordecrease, in the rate of tax applicable to the carpet area. Sub-rule (1) to Rule 8B states that for the purpose of determining therate of tax for buildings other than residential, the increase anddecrease, or neither increase nor decrease, shall be in terms ofsub-rules (2), (3), (4) and (5) to Rule 8B. Sub-rule (2) to Rule 8BErelates to the ‘location factor’, sub-rule (3) to Rule 8B relates tothe ‘age factor’, sub-rule (4) to Rule 8B deals with the ‘use factor’,and sub-rule (5) to Rule 8B deals with the ‘occupancy factor’.The said sub-rules (2) to (5) to Rule 8B specify the rate by themultipliers specified therein. In some cases, as in clause (b) toFsub-rule (4) of Rule 8B relating to the ‘use factor’, it is statedthat the designated rate shall be neither increased nor decreased,in respect of buildings used as specified therein, and in clause (c)to sub-rule (4) to Rule 8B, it is stipulated that the designatedrate shall be decreased by a multiplier of 0.0 in respect of buildings used as specified therein. There are illustrations in sub-rule (7)Gto Rule 8B of the Taxation Rules, which elucidate the manner inwhich the computation is to be made under Rule 8B of theTaxation Rules. Sub-rule (2) to Rule 8D states that for the purposeof sub-rule (2) to Rule 8B, the Commissioner shall classify thearea of the city in which the buildings other than residentialHbuildings are situated into four classes, namely, I, II, III, and IV, having regard to the market value of the lands in the area. Theclassification so made shall be revised once every four years.Sub-rule (5) to Rule 8D states that for the purpose of sub-rule (4)to Rule 8B, the Commissioner shall have the power to decidewhich property would fall in the category mentioned in sub-rule(4)(a)(i)(ii)(iii) and (iv) and sub-rule (4)(b) and (c) of Rule 8B ofthe Taxation Rules. Rule 8C of the Taxation Rules deals withproperty tax for commercial and industrial units and states thatthe property tax shall be levied at the rates stipulated therein.[Para 6][659-G-H; 660-A-E]

1.6 Appellant No. 2 Trust was using portions of the property/building as a hospital or a clinic. In view thereof, sub-clause (i) toclause (a) to sub-rule (4) of Rule 8B of the Taxation Rules wouldbe applicable and thereby, the designated rate has to be increasedby applying the multiplier of 7.0. The contention of Appellant No.2 Trust is that their clinic/hospital is being used for charitablepurposes as the fee demanded from the patients and users is notthe actual market fee. Reference in this regard is made to sub-clause (iv) to clause (a) to sub-rule (4) of Rule 8B of the TaxationRules, whereby a multiplier of 2.0 is to be applied in respect ofsocial institutes run by a public charitable trust for the welfare ofwomen, old people, deaf, dumb and blind, physically handicappedand mentally retarded people. Clause (b) to sub-rule 4 of Rule8B of the Taxation Rules, states that the designated rate shallneither be increased nor decreased when the building is used asgrantable schools run by public charitable trusts, boarding-lodging- hostels run by public charitable trusts, and religiousinstitutions, dharma-shala, ashram, and library. As far as clause(b) to sub-rule (4) of Rule 8B of the Taxation Rules is concerned,the same is clearly distinguishable, and the ‘use factor’ enlistedthereunder is a separate category; the category being grantableschools run by public charitable trusts, boarding- lodging-hostelsrun by public charitable trusts, and religious institutions, dharma-shala, ashram, and library. Appellant No.2 Trust cannot claim anyparity with the aforesaid ‘use factors’, even though the hospital/clinic run by them are run by public charitable trusts. Sub-clause(i) to clause (a) to sub-rule (4) of Rule 8B of the Taxation Rulesenlists all buildings used as hospitals, dispensaries, clinics,maternity homes, etc. They have all been classified under one AB

CD

E

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Ahead. No distinction is made whether they are run by publiccharitable trusts or not. The legislature is entitled to club andtreat the buildings as per the ‘use factor’ alike without fallingfoul of the right to equality, as enshrined under Article 14 of theConstitution of India. [Paras 9-11][661-C-H; 662-A-B]

BManish Kumar v. Union of India and Others (2021) 5SCC 1; State of Gujarat and Another v. Shri AmbicaMills Ltd., Ahmedabad and Another (1974) 4 SCC 656: [1974] 3 SCR 760; State of Jammu and Kashmir v.Shri Triloki Nath Kosa and Others (1974) 1 SCC 19 :[1974] 1 SCR 771; Municipal Corporation of DelhiCv.Children Book Trust (1992) 3 SCC 390 : [1992] 2SCR 535; State of Bihar and Others v. SachchidanandKishore Prasad Sinha and Others (1995) 3 SCC 86 :[1995] 1 SCR 256; Twyford Tea Co. Ltd. and Anotherv. The State of Kerala and Another (1970) 1 SCC 189 :D[1970] 3 SCR 383; R. K. Garg v. Union of India andOthers (1981) 4 SCC 675 : [1982] 1 SCR 947; State ofKerala v. Haji K. Haji K. Kutty Naha and Others Etc.[1969] 1 SCR 645; Deputy Commissioner of IncomeTax and Another v. Pepsi Foods Limited (2021) 7 SCC413 : [1969] 1 SCR 645; State of Uttar Pradesh andEOthers v. Deepak Fertilizers & PetrochemicalCorporation Ltd. (2007) 10 SCC 342 : [2007] 6 SCR525; Union of India and Others v. N.S. Rathnam andSons (2015) 10 SCC 681 : [2015] 8 SCR 751; GangaSugar Corporation Ltd. v. State of Uttar Pradesh andFOthers (1980) 1 SCC 223 : [1980] 1 SCR 769 –referred to.

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 2773of 2012.

From the Judgment and Order dated 04.02.2011 of the High Courtof Gujarat at Ahmedabad in Special Civil Application No. 2133 of 2010.

C

With

Civil Appeal No. 10694 of 2016.

Nikhil Nayyar, Preetesh Kapur, Sr. Advs., Ms. Anushree PrashitKapadia, Divayank Dutt Dwivedi, Ravi C, Divuanshu Rai, Ms. SugandhaBatra, Mayank Kumar, Shambhu Chaturvedi, Krishna Kumar Singh,Hemantika Wahi, Ms. Jesal Wahi, Ms. Hemantika Wahi, Ms. DeepanwitaPriyanka, Advs. for the appearing parties.

D

The Judgment of the Court was delivered by E

SANJIV KHANNA, J.

Section 127[1] of the Gujarat Provincial Municipal Corporations Act,1949 (Bombay Act No. LIX of 1949)[2], as applicable to the State of Gujarat,post the Gujarat Act No. 2 of 20073, empowers a Municipal Corporation[4]to impose property tax either under Section 129[5] based on the rateable F

1 “127. (1) For the purposes of this Act, the Corporation shall impose the followingtaxes, namely :— (a)Property taxes either under section 129 or under section 141 AA;[* * * * * ]”

2 For short, ‘GPMC Act’. Originally, the Bombay Provincial Municipal CorporationsAct, 1949.

3 The Bombay Provincial Municipal Corporations (Gujarat Amendment and Validation)Act, 2007

4 Hereinafter referred as the’Corporation’.

5 “129. For the purposes of sub-section (1) of section 127 property taxes shall comprisethe following taxes which shall, subject to the exceptions, limitations and conditionshereinafter provided, be levied on buildings and lands in the City:—[* * * * * ]

G

H

Avalue of buildings and lands, or under Section 141AA[6] based on thecarpet area of the buildings and lands. The common question of lawwhich arises in the aforementioned appeals is whether the appellants,namely, Parivar Seva Sanstha[7] and Bai Gulab Hargovandas JagjivandasniDikarina Dikarina Will Trust[8], are entitled to exemption from levy ofgeneral tax in terms of clause (b) to sub-section (1) of Section 132 inBcases where the Corporation has exercised the option to levy propertytax on carpet area method under Section 141AA of the GPMC Act. Anadditional issue which arises for consideration in the appeal preferred byAppellant No. 2 Trust relates to the challenge to Rule 8B(4)(i) of theTaxation (Amendment) Rules 2001[9], as applicable to the AhmedabadCMunicipal Corporation, on the ground that it is unconstitutional, illegaland arbitrary as it violates the principle of equality enshrined under Article14 of the Constitution of India.

2. The first issue should not hold us for long as when we assortand pigeonhole sub-sections under Chapter XI of the GPMC Act, it isDcrystal clear that Sections 129 to 141A of the GPMC Act are groupedtogether and are applicable when property tax is payable on annual lettingvalue/annual rateable value, whereas provisions from Sections 141AA to141F of the GPMC Act apply when property tax is payable on the basisof carpet area method. We do not find any good ground and reason tohold that clause (b) to sub-section (1) of Section 132 of the GPMC Act,Ewhich grants exemption to buildings and lands or portions thereof solelyoccupied and used for public worship or for public charitable purposes,would apply when property tax is calculated and is payable on the basisof the carpet area method, which is to be computed and calculated inaccordance with the provisions of Section 141AA to Section 141F of theF(c) a general tax of not less than twelve per cent. 2 but not more than thirty percent of their rateable value, which may be levied, if the Corporation so determineson a graduated scale; [* * * * * ]”

6 “141AA. For the purposes of sub-section (1) of section127, property taxes shallcomprise the following taxes which shall, subject to exceptions, limitations andconditions hereinafter provided, be levied on buildings and lands in the City:G

[* * * * * ]

(c) a general tax which may be levied in accordance with the provisions ofsection 141B, if the Corporation so determines on a graduated scale;[* * * * * ]”

7 Hereinafter referred to as ‘Appellant No.1 Trust’.

8 Hereinafter referred to as ‘Appellant No. 2 Trust’.

H9 Schedule-A, Chapter VIII of the GPMC Act. For short, ‘Taxation Rules’.

GPMC Act. This aspect has been examined threadbare in the twoimpugned judgments passed by the Gujarat High Court, with which weagree. However, for the sake of clarity and convenience, we would brieflyrecord our reasons.

3. As noticed above, Chapter XI of the GPMC Act deals withmunicipal taxation and sub-section (1) to Section 127 states and gives anoption to the Corporation to impose property tax either under Section129, or under Section 141AA of the GPMC Act. Section 129 states thatthe property tax shall comprise of the taxes, which shall, subject to theexceptions, limitations and conditions thereinafter provided, be levied onbuildings and lands in the city. Section 132[10] of the GPMC Act states thatgeneral tax shall be levied in respect of all buildings and lands in the city, the rateable value of which exceeds Rs.600/-, save when a case iscovered by exceptions enumerated and listed in clauses (a), (b) and (c)of sub-section (1) to Section 132 of the GPMC Act. Clause (b) to sub-section (1) of Section 132 states that buildings and lands, or portionsthereof, solely occupied and used for public worship or for public charitablepurposes are exempt from payment of general tax leviable under Section132 of the GPMC Act. In other words, exemption under clause (b) only 10 “132. (1) The general tax shall be levied in respect of all buildings and lands in the City,the rateable value of which exceeds six hundred rupees except:

(a) buildings and lands solely used for purposes connected with the disposal ofthe dead; (b) buildings and lands or portions thereof solely occupied and used for publicworship or for a public charitable purposes;

(c) buildings and lands vesting in the Government used solely for public purposesand not used or intended to be used for purposes of trade or profit orvesting in the Corporation, in respect of which the said tax, if levied, wouldunder the provisions hereinafter contained by primarily leviable from theGovernment or the Corporation, respectively.

(2) The following buildings and lands or portions thereof shall not be deemed to besolely occupied and used for public worship or for a public charitable purpose withinthe meaning of clause (b) of sub- section (1), namely:–

(a) buildings or lands or portions thereof in which any trade or business iscarried on; and (b) buildings or lands or portions thereof in respect of which rent is derivedwhether such rent is or is not applied solely to religious or charitablepurposes.

(3) Where any portion of any building or land is exempt from the general tax by reasonof its being solely occupied and used for public worship or for a public charitablepurpose, such portion shall be deemed to be a separate property for the purpose ofmunicipal taxation.”

A

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Aapplies when general tax is payable under sub- section (1) to Section132 read with Section 129 of the GPMC Act. Clause (b) to sub-section(1) of Section 132 per se and ex facie does not apply to taxes payablein terms of Section 141AA on the basis of the carpet area method.

4. Section 141AA, which is an alternative mode of taxation andBan option available to the Corporation to impose tax on the basis of thecarpet area method, states that the property taxes shall comprise of thetaxes which shall, subject to exceptions, limitations and conditionsthereinafter provided, be levied on buildings and lands in the city. Clause(c) to Section 141AA states that a general tax may be levied inaccordance with the provisions of Section 141B, if the Corporation soCdetermines, on a graduated scale. Sub-section (1) to Section 141B statesthat for the purpose of clause (c) to Section 141AA of the GPMC Act,general tax, subject to such exceptions, limitations and conditionsthereinafter provided (and not thereinbefore provided), shall be leviedannually on the buildings and lands in the city at such rate per squareDmeter of the carpet areas of the buildings and of the areas of land, whichthereinafter in the enactment has been referred to as ‘the rate of tax’,as the Corporation may determine. Sub-section (2) to Section 141B statesthat for the purpose of levy of tax on buildings in the city under sub-section (1) to Section 141B, the buildings may be classified into‘residential’ and ‘buildings other than residential’ and the CorporationEmay determine one rate of tax for residential buildings and the other rateof tax for buildings other than residential. The proviso states that it shallbe lawful for the Corporation to determine for residential buildings, thecarpet area of which does not exceed 40 square meters, such rate of taxas is lower than the rate of tax determined for residential buildings. Sub-Fsection (3) to Section 141B states that the rate of tax determined undersub-section (1) read with sub-section (2) to Section 141B shall not, inrespect of the residential buildings, be less than Rs.10/- per square meterof carpet area and more than Rs.40/- per square meter of carpet area. Inrespect of buildings other than residential, it shall not be less than Rs.20/

- per square meter of carpet area and not more than Rs.80/- per squareGmeter of carpet area. Sub-section (4) to Section 141B states that theCorporation, subject to the Taxation Rules, may increase or decrease orneither increase nor decrease the rate of tax determined under sub-section (1) read with sub-section (2) and sub-section (3) to Section 141Bin the case of residential buildings having regard to factors, like, marketHvalue of the land where the building is situated, the year of construction of the building, type of the building, the duration of existence of the building,the type of building, and whether the building is self-occupied or tenanted.Similarly, in the case of buildings other than residential, the followingfactors, namely, market value of the land in the area in which the buildingis situated, the duration of existence of the building, the purpose forwhich the building is used, and whether the building is self-occupied ortenanted are to be taken into consideration.

5. Keeping in view the aforesaid legislative scheme, there is hardlyany scope to urge and argue that clause (b) to sub-section (1) of Section132 of the GPMC Act, which relates to and grants exemption frompayment of general tax when rateable value is computable under Section129 read with Section 132 of the GPMC Act, would apply in cases whereproperty tax is payable by the carpet area method. General tax in termsof clause (c) to Section 141AA has to be computed subject to suchexceptions, limitations and conditions provided in Sections 141B orthereinafter. It would be, therefore, correct to hold that provisions fromSection 141AA to Section 141F form a complete code when tax has tobe computed and paid on the carpet area method, and for suchcomputation, reference cannot be made to the provisions of Sections129 to 133 which relate to property tax payable on annual rateable value.This position is also made clear by Section 141F, which states thatprovisions of Section 140 and 141A shall apply in relation to propertytaxes levied under Section 141AA, subject to modifications specified inAppendix I-A. Therefore, only provisions of Section 140 and Section141A have been made applicable when property tax is levied and is payablein terms of Section 141AA of the GPMC Act. Clause (b) to sub-section(1) of Section 132 of the GPMC Act is not attracted and cannot be reliedupon when property tax is payable under Section 141AA of the GPMCAct.

6. The second aspect has to be also answered against the AppellantNo. 2 Trust. Rule 8B of the Taxation Rules, which relates to the increaseand decrease of rate of property tax determined for ‘buildings other thanresidential’, refers to several factors which result in an increase ordecrease, or neither increase nor decrease, in the rate of tax applicableto the carpet area. Sub-rule (1) to Rule 8B states that for the purpose ofdetermining the rate of tax for buildings other than residential, the increaseand decrease, or neither increase nor decrease, shall be in terms of sub-rules (2), (3), (4) and (5) to Rule 8B. Sub-rule (2) to Rule 8B relates to A

B

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A

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Athe ‘location factor’, sub-rule (3) to Rule 8B relates to the ‘age factor’,sub-rule (4) to Rule 8B deals with the ‘use factor’, and sub-rule (5) toRule 8B deals with the ‘occupancy factor’. The said sub-rules (2) to (5)to Rule 8B specify the rate by the multipliers specified therein. In somecases, as in clause (b) to sub-rule (4) of Rule 8B relating to the ‘usefactor’, it is stated that the designated rate shall be neither increased norBdecreased, in respect of buildings used as specified therein, and in clause(c) to sub-rule (4) to Rule 8B, it is stipulated that the designated rateshall be decreased by a multiplier of 0.0 in respect of buildings used asspecified therein. There are illustrations in sub-rule (7) to Rule 8B of theTaxation Rules, which elucidate the manner in which the computation isCto be made under Rule 8B of the Taxation Rules. Sub-rule (2) to Rule 8Dstates that for the purpose of sub-rule (2) to Rule 8B, the Commissionershall classify the area of the city in which the buildings other than residentialbuildings are situated into four classes, namely, I, II, III, and IV, havingregard to the market value of the lands in the area. The classification somade shall be revised once every four years. Sub-rule (5) to Rule 8DDstates that for the purpose of sub-rule (4) to Rule 8B, the Commissionershall have the power to decide which property would fall in the categorymentioned in sub-rule (4)(a)(i)(ii)(iii) and (iv) and sub-rule (4)(b) and (c)of Rule 8B of the Taxation Rules. Rule 8C of the Taxation Rules dealswith property tax for commercial and industrial units and states that theEproperty tax shall be levied at the rates stipulated therein.7. Clause (a)(i) to sub-rule (4) of Rule 8B, which relates tocommercial properties, reads as under:

“(a) The designated rate shall be increased by multiplying it –

F(i) by 7.0 in respect of the buildings used as under:Bank, Dispensary, Hospital, Clinic, Maternity home, Laboratory,Central Government office, Post office, Commercial and/orindustrial office, Oil companies office, Offices of Corporations,Tuition classes, Typing institutes, godowns and warehouses of theGproperties falling in the above categories and those buildings whichdo not fall within any other sub-clause of this clause.

xxxxxx”

8. It may be also relevant to refer to clause (a)(iv) to sub-rule (4)of Rule 8B, which specifically relates to educational and specified socialHinstitutions, and reads as under:

“ (a)

xxxxxx

(iv) By 2.0 in respect of the buildings used as under:

Private Nursery (Bal-Mandir), Private and Govt. Schools, Privateand Govt. Colleges, University Campus, Museum, Community halls,Social institutes run by public charitable trust (for the welfare ofwomen, old people, deaf, dumb and blind, physically handicapped,mentally retarded people) and non grantable schools.

xx

xx

xx”

9. It is an undisputed position that Appellant No. 2 Trust was usingportions of the property/building as a hospital or a clinic. In view of theaforesaid position, sub-clause (i) to clause (a) to sub-rule (4) of Rule 8Bof the Taxation Rules would be applicable and thereby, the designatedrate has to be increased by applying the multiplier of 7.0.

10. The contention of Appellant No. 2 Trust is that their clinic/hospital is being used for charitable purposes as the fee demanded fromthe patients and users is not the actual market fee. Reference in thisregard is made to sub-clause (iv) to clause (a) to sub-rule (4) of Rule 8Bof the Taxation Rules, whereby a multiplier of 2.0 is to be applied inrespect of social institutes run by a public charitable trust for the welfareof women, old people, deaf, dumb and blind, physically handicapped andmentally retarded people. Our attention has also been drawn to clause(b) to sub-rule 4 of Rule 8B of the Taxation Rules, which states that thedesignated rate shall neither be increased nor decreased when the buildingis used as grantable schools run by public charitable trusts, boarding-lodging- hostels run by public charitable trusts, and religious institutions,dharma-shala, ashram, and library.

11. As far as clause (b) to sub-rule (4) of Rule 8B of the TaxationRules is concerned, the same is clearly distinguishable, and the ‘usefactor’ enlisted thereunder is a separate category; the category beinggrantable schools run by public charitable trusts, boarding- lodging-hostelsrun by public charitable trusts, and religious institutions, dharma-shala,ashram, and library. Appellant No.2 Trust cannot claim any parity withthe aforesaid ‘use factors’, even though the hospital/clinic run by themare run by public charitable trusts. Sub-clause (i) to clause (a) to sub-rule (4) of Rule 8B of the Taxation Rules enlists all buildings used as A

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Ahospitals, dispensaries, clinics, maternity homes, etc. They have all beenclassified under one head. No distinction is made whether they are runby public charitable trusts or not. The legislature is entitled to club andtreat the buildings as per the ‘use factor’ alike without falling foul of theright to equality, as enshrined under Article 14 of the Constitution ofIndia.B

12. Recently, this Court in Manish Kumar v. Union of Indiaand Others[11], has exhaustively referred to the case law on the subjectof reasonable classification under Article 14 of the Constitution of Indiavide paragraphs 210 to 230 to observe that Article 14 frowns upon whatconstitutes hostile discrimination but does not bar classification which isCreasonable. To answer whether a classification is reasonable, one mustlook beyond the classification to the purpose of law. A reasonableclassification is one which includes all persons who are similarly situatedwith respect to the purpose of law. The purpose of law may be eitherelimination of public mischief or achievement of some positive publicDgood. Reference in this regard was made to the decision in State ofGujarat and Another v. Shri Ambica Mills Ltd., Ahmedabad andAnother[12], which elucidates and explains the distinction between under-inclusive and over-inclusive classification. A classification is under-inclusive when the State benefits or burdens persons in a manner thatfurthers a legitimate purpose but does not confer the same benefit orEplace the same burden on others who are similarly situated. An over-inclusive classification is one, where it imposes a burden on a widerrange of individuals who are included in that class of those attended withmischief at which the law aims. Piecemeal approach to the general problemis permitted in under- inclusive classification on the ground that legislativeFdealing with problems of classification is usually an experimental matter.It is impossible to tell how successful a particular approach may be,what dislocations might occur, what evasions might develop, and whatnew evils might be generated in the attempt. Administrative expedientsmust be forged and tested. This decision also propounds that laws regulating economic activity should be viewed differently from the lawsGwhich touch or concern freedom of speech or religion, voting, procreation,rights with respect to criminal procedure, etc. Judicial deference shouldbe given to legislature in the field of economic regulation viz. theconstitutional requirement and need to vigorously enforce equal protection11 (2021) 5 SCC 1.H12 (1974) 4 SCC 656.

clause to strike down legislative action in the area of fundamental humanrights. Equally, this Court in State of Jammu and Kashmir v. Shri TrilokiNath Kosa and Others[13], has held that there is always a presumption infavour of the constitutionality of an enactment and the burden is uponthe person who attacks it to show that there has been a clear transgressionof constitutional principles. A provision cannot be struck down asdiscriminatory on any a priori reasoning. The question of classificationis primarily for legislative judgment. Power to classify being extremelybroad and based upon consideration of executive pragmatism, thejudicature cannot rush in where the legislature varily treads. Generally,the two-fold test applied by the courts is (i) the classification must befounded on an intelligible differentia, and (ii) the differentia must havea rational relation with the object sought to be achieved by the legislaturein question. If the object itself is not discriminatory, it should be held thatthere is a reasonable classification because it has a rational relation tothe object sought to be achieved.

13. This Court in the case of Municipal Corporation of Delhiv. Children Book Trust[14], had the occasion to examine the provisions ofSection 115(4) of the Delhi Municipal Corporation Act, 1957, a provisionwhich had granted exemption to land and buildings or portions thereofused for charitable purpose from payment of municipal general tax bycharitable institutions. In the context of the legislation, a distinction wasdrawn between charitable purpose under Section 115(4), and as thendefined under the Income Tax Act, 1961, to observe that the test underthe municipal act is both qualitative and quantitative. In other words,voluntary contributions or support as a mean of sustenance ormaintenance should be satisfied before the assessee was grantedexemption on the ground that the building was being used for charitablepurposes. In other words, where an assessee is making systematic profits,even though that profit is utilised for charitable purposes, the assesseecannot claim exemption. Thus, where the assessee could survive withoutreceiving voluntary contributions, it would be liable to pay general propertytax. The term ‘contribution’, for the purpose of the statute, was interpretedas something that cannot amount to compulsive donation. The underlyingreasoning behind the said judgment is to ensure that such institutionstake the burden and provide for municipal revenue, which is necessaryand required for local needs. In a democratic set-up, a municipality requires 13 (1974) 1 SCC 19.

14 (1992) 3 SCC 390.

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Athe proceeds from the taxes for their own administration and therefore,there is a need to leave to these municipalities the power to impose andcollect taxes.

14. The Statement of Objects and Reasons for Amendment ActNo. 3 of 1999, while enacting the option to levy property tax by applyingBthe carpet area method, records that the levy of property tax did notprovide sufficient revenue to the Corporation to meet the escalating costconcerns, particularly in view of rapid urbanisation in the cities. It is inthis background it was necessary to provide alternative tax on buildingsand lands based upon the carpet area method. However, at the sametime, the legislation has provided the minimum and maximum rate of tax.CThe power is given to the Corporation to increase or decrease the taxfor residential and non- residential properties according to factors likelocation, age and type of buildings.

15. Another aspect which we cannot ignore is the need to haveclarity and uniformity in the rate of tax. Discretion or variation of the rateDof tax based upon ascertainment of details etc., always leads to litigation.

16. This Court in State of Bihar and Others v. SachchidanandKishore Prasad Sinha and Others[15], had set aside the judgment of thePatna High Court striking down the assessment rules as being violativeof Article 14 of the Constitution of India by relying upon the earlierEdecision in Twyford Tea Co. Ltd. and Another v. The State of Keralaand Another[16], wherein the Constitutional Bench by majority had heldthat the legislature must have a wide range of selection and freedom inappraisal not only in the objects of taxation, and the manner of taxation,but also in the determination of the rate or rates applicable. A person, toFsucceed on the ground of discrimination, must show hostile unequaltreatment. This is more so when uniform taxes are levied. In thisconnection it was stressed:

“15….This indicates a wide range of selection and freedom inappraisal not only in the objects of taxation and the manner ofGtaxation but also in the determination of the rate or rates applicable.

16. …The burden of proving discrimination is always heavy andheavier still when a taxing statute is under attack. … The burdenis on a person complaining of discrimination. The burden is proving 15 (1995) 3 SCC 86.H16 (1970) 1 SCC 189.

not possible ‘inequality’ but hostile ‘unequal’ treatment. This ismore so when uniform taxes are levied.”

This judgment in Sachchidanand Kishore Prasad Sinha (supra)also refers to the earlier decision in R.K. Garg v. Union of India andOthers[17], that the laws relating to economic activities should be viewedwith greater latitude than laws touching civil rights. The economicmechanism is highly sensitive and complex, laws are not abstractpropositions, do not relate to abstract units, are not to be measured byabstract symmetry and exact wisdom and nice adaption of remedy arenot always possible. Every legislation, especially in economic matters, isessentially empiric, and it is based on experimentation or what one maycall the trial and error method. It may not provide for all possible situationsor anticipate all possible abuses. There can be crudities or inequities incomplicated experimental economic legislation but on that account aloneit cannot be struck down as invalid. In the context of the impugnedlegislation, it was observed that the simplistic approach of classificationadopted in the said case cannot be rejected on the ground that it is possibleto evolve a classification to cater to several distinctions. More importantly,and for the present context, it was observed in Sachchidanand KishorePrasad Sinha (supra) that even if it is so evolved, not only would it betoo complex and elaborate, it would leave too much discretion to theassessing authorities and thereby eliminate one of the main objectives ofthe rules therein. One of the objects of the rules was to withdraw discretionwhich can result in harassment and constant threats of revision. Theseobservations are of relevance because, in the present case, all hospitals,dispensaries, clinics, maternity homes etc., have been classified underone head, and thereby the levy of taxation in such cases simplifies and isuniform. Discretion is eliminated. Examination of facts, etc. is not required.We do not, therefore, think that the classification made vide sub-clause(i) to clause (a) to sub-rule (4) of Rule 8B of the Taxation Rules isdiscriminatory and violative of Article 14 of the Constitution of India.The object and purpose of this classification is to avoid litigation andcomplexities which may arise in case there is a distinct and separatetaxation of hospitals, clinics, maternity homes, etc., stated and claimed tobe run for charitable purpose.

17. Sub-clause (iv) to clause (a) to sub-rule (4) of Rule 8B of theTaxation Rules applies to educational and social institutions run by public17 (1981) 4 SCC 675.

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Acharitable trusts for the welfare of women, old people, deaf, dumb, blind,physically handicapped or mentally retarded people. These are separatecategories and cannot be confused and treated similarly and at par withhospitals, clinics, maternity homes, etc, as elucidated in sub-clause (i) toclause (a) to sub-rule (4) of Rule 8B of the Taxation Rules.B18. At this stage, we may refer to the case law relied upon by thecounsel for the appellant and distinguish the same. In State of Kerala v.Haji K. Haji K. Kutty Naha and Others Etc.[18], a uniform rate ofgeneral/property tax was sought to be imposed based entirely on thetotal floor area regardless of the age, the location and the use of thebuilding. Different tax slabs were provided where the total floor areaCwould be 1000-2000 sq. ft., 2000-4000 sq. ft. and so on. It is in thisbackground that the classification was struck down as being arbitrary asit had imposed a uniform tax slab regardless of the class to which thebuilding belongs, the nature of construction, the purpose for which it isused, capacity for profitable use, and relevant circumstances which haveDa bearing on the matters of taxation. The decision in DeputyCommissioner of Income Tax and Another v. Pepsi Foods Limited[19],had upheld the striking down of the third proviso to Section 254(2-A) ofthe Income Tax Act, 1961 on the ground that it was arbitrary and offendedArticle 14 of the Constitution of India as assessees who were not evenresponsible for the delay in the decision before the tribunal were clubbedEwith those assessees responsible for delaying the proceedings. In thiscontext, it was observed that Article 14 of the Constitution of India appliesto tax legislation, albeit greater freedom in the joints must be allowed bythe courts in adjudging the constitutional validity of the same. However,where tax is imposed deliberately with the object of differentiatingFbetween persons similarly situated, such tax is liable to be struck down.Similarly, in State of Uttar Pradesh and Others v. Deepak Fertilizers& Petrochemical Corporation Ltd.[20], a retrospective notificationwithdrawing exemption in respect of NPK 23:23:0 fertilizer, while grantingit to other NPK fertilizers, was struck down as without there being any rational basis. The judgment specifically records that the State was notGable to satisfy that there was a good reason for introducing a fresh set ofnotifications for one period and another set of notifications for anotherperiod, either by amending the notification or introducing a new notification 18 1969 1 SCR 645.19 (2021) 7 SCC 413.H20 (2007) 10 SCC 342.

to withdraw the benefit given earlier. In Union of India and Others v.N.S. Rathnam and Sons[21], noticing that the exemption was denied tothose who had paid customs duty under an alternative provision, albeitat a lower rate, this Court, to ensure parity, had directed that the assesseeswould be entitled to the benefit of the exemption subject to the conditionthat they shall pay the differential amount of their duty.

19. We may, in the end, refer to another decision of a ConstitutionalBench of this Court which supports our reasoning. In the case of GangaSugar Corporation Ltd. v. State of Uttar Pradesh and Others[22], thelevy, which was uniform on all sugarcane purchases, was attacked asultra vires on the ground that the sucrose content of various consignmentscould vary from place to place, the variation being of the order of 8% to10%, and yet a uniform levy by weight was sanctioned by the impugnedAct therein. Rejecting the contention, it was observed by this Court thatpractical considerations of the administration, traditional practices in thetrade, other economic pros and cons enter the verdict, but after a judicialgenerosity is extended to the legislative wisdom, if there is writ on thestatute perversity, ‘madness’ in the method or gross disparity, judicialcredulity may snap, and the measure may meet with its funeral. Otherwise,the benefit of uniformity in the classification of taxation should not bestruck down on the application of Article 14 of the Constitution of India.It must be viewed liberally and not meticulously. Thus, in the said case,the contention that the price of the sugarcane should be the permissiblecriteria for purchase tax was rejected. It was observed that marginaldifference of the sucrose content being too inconsequential would notbuild a case for discrimination. We have referred to this decision in thecontext that we have also taken into account the total quantum of taxbeing paid in terms of the method of calculation as prescribed by sub-clause (iv) to clause (a) to sub-rule (4) of Rule 8B of the Taxation Rules.The bills raised are not substantial so as to warrant any interference.23

20. However, we are also conscious that in some cases it is possiblethat small organisations performing purely charitable work, which meetsboth qualitative and quantitative criteria, may have to curtail the charitablework in case the municipal taxes increase or are enhanced. We would,in this context, like to reproduce the observations of this Court in thecase of Sachchidanand Kishore Prasad Sinha (supra), which are asunder:

21 (2015) 10 SCC 681.

22 (1980) 1 SCC 223.

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A“14. It is one thing to suggest that the rule-making authority mayconsider making a further distinction on the lines suggested andan altogether different thing to strike down the rule itself on theground of inadequate classification...”

The aforesaid observation has been reproduced of abundant cautionBand, we clarify, does not have any application in the factual backgroundof the present case.

21. Recording the aforesaid, we do not find any merit in the presentappeals and the same are dismissed. However, in light of the facts of thecase, there will be no order as to costs.

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Nidhi Jain

Appeals dismissed.

(Assisted by : Bodhi Ramteke, LCRA)

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