M/S. LISIE MEDICAL INSTITUTIONS versus THE STATE OF KERALA AND ORS. on 9 February 2023

1. The present reference to a three Judge Bench has beenoccasioned in a referring judgment of a two Judge bench in Lisie MedicalInstitutions Vs State of Kerala[1]. The two judge Bench has doubted thecorrectness of certain observations contained in an earlier decision oftwo Judges in SH Medical Centre Hospital vs State of Kerala[2].

2. We have heard Mr R Basant, senior counsel appearing onbehalf of the appellant and Mr V Giri, senior counsel appearing on behalfof the respondents.

3. The issue turns on the interpretation of the provision forexemptions contained in Section 3(1) of the Kerala Building Tax Act,1975, which is extracted below:

“3. Exemptions – (1) Nothing in this Act shall apply to (a) buildings owned by the Government of Kerala or theGovernment of India or any local authority; and (b) buildings used principally for religious charitable or educationalpurposes or as factories or workshops.

Explanation.– For the purpose of this sub-section, “Charitablepurpose” includes relief of the poor and free medical relief.”

4. Clause (b) of sub-Section (1) of Section 3 of the Kerala BuildingTax Act 1975 stipulates that nothing in the enactment shall apply to 1 (2017) 14 SCC 533

2 (2014) 11 SCC 381

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Abuildings used “principally for ... Charitable ... purposes”. The Explanation[now Explanation (1)] indicates that for the purpose of the sub-section‘charitable purpose’ includes“relief of the poor and free medical relief”.Clearly, therefore, the Explanation indicates that the meaning of theexpression ‘charitable purpose’ is not confined to relief of the poor andfree medical relief as is evidenced by the use of the expression ‘includes’.BWhen a statute uses the expression ‘includes’, it is a well settled principleof interpretation that the elucidation is not intended to be exhaustive.

5. However, while construing the provisions of Section 3(1)(b) ofthe Kerala Building Tax Act 1975, the two Judge Bench in SH MedicalCentre Hospital (supra), has incorporated the following observations inCParagraph 17 of the Judgment:

“The High Court has correctly interpreted the “Explanation” clauseto Section 3(1) of the Act to hold that “charitable purpose”means“reliefofthepoorandfreemedicalrelief”.

(Emphasis Supplied)

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6. The observation which is extracted above suggests that the two-Judge Bench construed the Explanation to Section 3(1) to meanthat a‘charitable purpose’ is confined only to relief of the poor and free medicalrelief. This observation of the two-Judge Bench in SH Medical CentreEHospital (supra) does not accord with the plain meaning of theExplanation to Section 3(1). It was this aspect which was noted in thereferring judgment by A K Sikri, J in the following observations:

“16. … With due respect to the Bench which rendered the judgmentin S.H. Medical Centre Hospital Vs State of Kerala, (2014) 11FSCC 381, it appears that an error in interpreting Explanation I toClause 1 of Section 3 of the Act has occurred in not noticing thatit contains the word “includes” and not “means”. This error led toholding that “charitable purpose” meant only “relief of the poorand free medical relief”. Relief to the poor and free medical reliefis only one of the facets to charitable purpose and ExplanationGsimply clarifies that too to be a charitable purpose. However, theinclusive definition points out that relief to poor and free medicalrelief is not exhaustive as to what charitable purpose would mean.Thus, in order to find out the true scope of charitable purpose, onewill have to look into the judgments of this Court, even if this veryexpression is examined in the context of the Income Tax Act.”

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7. The two judge bench in SH Medical Centre Hospital (supra)conflated the use of the word ‘include’ with ‘means’. The Explanationto Section 3(1)(a) uses the expression ‘includes’. The plain intendmentis that relief of the poor and free medical relief are not exhaustive of thecontent of charitable purpose.

8. At this stage, it would be material to note the submission ofthe respondents, urged by Mr V Giri, senior counsel, to the effect thatapart from the interpretational issue which is addressed in the decision ofthe two-Judge Bench in SH Medical Centre Hospital (supra), the Courthas dwelt on other aspects of Section 3(1). Mr. Giri adverted to theexpression “buildings used principally for … charitable … purposes” inSection 3(1)(b) and urges that the interpretation of that phrase in thedecision in SH Medical Centre Hospital is correct.

9. Undoubtedly, Section 3(1)(b) provides that nothing in the Actshall apply to buildings which are used ‘principally’ for specific purposes,including among them, ‘charitable purposes’. The expression “principally”conveys the meaning of that which is the dominant purpose. Theinterpretation placed by the two-Judge Bench on the expression“principally used for charitable purposes” does not call for interferencein view of the statutory language used in Section 3(1). Principal userefers to the dominant substantive use as distinguished from an ancillaryuse.

10. The Explanation goes to indicate that ‘charitable purposes’includes and is, therefore, not confined to the relief of the poor and freemedical relief. Consequently, the decision in SH Medical CentreHospital (supra) to the extent of the interpretation which is placed onthe Explanation to Section 3(1)(b) of the Kerala Building Tax Act 1975does not correctly reflect the position in law which is clarified above.The decision in SH Medical Centre Hospital is, therefore, overruled tothe above extent.

11. In the present case, the Division Bench of the Kerala HighCourt, while disposing of the Writ Appeal, has relied only on the decisionof the two Judge Bench of this Court in SH Medical Centre Hospital(supra). The impugned judgment of the Division Bench is extracted below:

“The issue raised in this writ appeal concerning the claim of theappellant for exemption from Building Tax levied under the KeralaBuilding Tax Act, 1975 is fully covered against it by the judgment A

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358SUPREME COURT REPORTS

Aof the Apex Court in S.H.Medical Centre Hospital v. State ofKerala [2014 (1) KHC 222]. This being the factual position, wedo not see any merit in this appeal.

Appeal fails and it is dismissed accordingly.”

12. Since the position in regard to the interpretation of the provisionsBof the Explanation to Section 3(1) of the Kerala Building Tax Act 1975has been clarified above, we are of the considered view that the impugnedjudgment of the High Court dated 18 July 2016 should be set aside andthe Writ Appeal be restored to the file of the High Court for a decisionafter keeping open the factual analysis based on the interpretation ofCSection 3(1).

13. Writ Appeal No 1386 of 2016 in Writ Petition (Civil) No 20448of 2016 is accordingly restored to the file of the Kerala High Court fordisposal in view of the above interpretation.

14. The reference is answered in the above terms.DThe appeal is accordingly disposed of.

15. Pending applications, if any, stand disposed of.

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Ankit Gyan

Reference answered.

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