Coimbatore Masonic Charity Trust vs The Corporation of Coimbatore

T.S. Sivagnanam, J.—The prayer in the writ petition is for issuance of a writ of certiorarified mandamus to quash the proceedings of the

respondent in Ref. Roc. No. 009294/99/EA7 dated 09.12.2002.

The petitioner is the Coimbatore Masonic Charity Trust, which was established as a Public Charitable Trust on 06.10.1978. The petitioner

purchased the subject property, by sale deed dated 28.02.1979, for the purpose of activities of the trust and the Income Tax Department has

granted exemption u/s 80G of the Income Tax Act, in favour of the petitioner''s trust. In the land purchased by the petitioner''s trust, initially it

established an Outpatient Medical Center during 1982, and subsequently with the aid of the donation received, put up additional buildings and as

on date, it is fully fledged hospital. According to the petitioner, the buildings belongs to the trust, and being used for hospital and dispensaries, are

exempted from the payment of property tax in terms of Section 123(e) of the Coimbatore City Municipal Corporation Act. The petitioner had

challenged the notice issued by the respondent Corporation, demanding property tax, by filing writ petitions before this Court and the writ petitions

were dismissed and the petitioner filed Writ Appeal Nos. 1832 to 1834 of 2000 dated 01.12.2000 and the Division Bench of this Court, directed

the Competent Authority to consider the representation made by the petitioner and the petitioner was directed to pay a sum of Rs. 3,65,380/-. The

petitioner is stated to complied with the direction issued by the Honourable Division Bench. Thereafter, the respondent by letter dated 03.03.2001,

stated that though the petitioner had forwarded various documents such as deed of trust, exemption certificate u/s 80G of the Income Tax Act,

Abstract of Statement of Income and Expenditure for the financial year 31.12.2000, copy of the building plan, etc, the materials are not sufficient

to consider the petitioner''s claim for exemption and requested to furnish further documents in the form of Property Tax details at the time of

purchase of the property, plan, area of the building, contribution made by the life members of the trust from its inspection and details about the

members of the building committee and their contribution to the Coimbatore Masonic Charity Trust and the details about the Ex-officio members

of the Coimbatore lodges and relationship to the petitioner, inspection report of the company etc. According to the petitioner, the particulars

sought for, are irrelevant and the petitioner sent a reply on 19.04.2001, giving details to the extent possible. Thereafter, the respondent again by

communication, dated 28.02.2002, called for various others particulars to which the petitioner submitted a detailed reply on 19.08.2002, stating

that the petitioner''s trust is a Charitable Institution registered u/s 12A of the Income Tax Act and also exempted u/s 80G of the Act. In spite of

such reply, the respondent by order dated 09.12.2002, rejected the request for exemption. Aggrieved by such order, the petitioner is before this

Court by way of the present writ petition.

The learned Counsel for the petitioner would contend that the respondent corporation has overstepped its authority and the exemption

contemplated is a statutory exemption in respect of property and the petitioner satisfied the requirement of various sub-clauses of Section 123 and

the only issue to be considered by the respondent is whether the hospitals/dispensaries run by the petitioner is charitable one or not so as to qualify

for statutory exemption. It is further contended that the exemption granted under the provision of the Income Tax Act is a valuable evidence to

show that the petitioner is a true and bonafide charitable institution. Further, it is submitted that the respondent did not considered any of the

documents submitted by the petitioner, therefore, the impugned order is liable to be set aside.

The learned standing counsel appearing for the respondent by relying upon the counter affidavit filed would submit that it is false to state that the

petitioner''s hospital is providing medical aid to poor and needy, as per the object of the trust, and therefore the claim for exemption u/s 123(e) of

the Act was rightly rejected. It is further contended that the income and expenditure statement for the years 1998, 1999 and 2000 which were

forwarded by the petitioner along with their representation, dated 07.02.2001, will prove that the hospital received substantial income from the

patients. Further, these documents are not audited by the Chartered Accountant. The learned Counsel also relied on the Income and Expenditure

account produced by the petitioner, which had been filed in the typed set of papers filed by the respondent and submitted that the rejection of the

claim for exemption is fully justified. It is further contended that the exemption granted u/s 80G of the Income Tax Act, may not by itself prove the

charitable nature of the petitioner''s trust and in spite of repeated opportunity, the petitioner failed to produce the relevant documents. On these

grounds, the learned standing counsel prayed for dismissal of the writ petition.

The learned Counsel for the petitioner relied on the reply affidavit filed by the petitioner to the counter affidavit and submitted that the name of

the petitioner itself discloses that it has been created for the laudable object of treating the poor children and the down trodden and that the

exemption granted under the Income Tax Act cannot be brushed aside by the respondent. Further in the reply affidavit in Paragraph 8, the

petitioner has pointed out that in respect of two other charitable trust, which have been running hospitals have been granted exemption and the

petitioner alone has been singled down. The learned Counsel relied on the decision of the Honourable Division Bench of this Court reported in

S.N.R. Sons Charitable Trust Vs. The Commissioner, Coimbatore City Municipal Corporation, in support of her contention.

Heard submission on either side and perused the materials available on record. Section 123 of the Coimbatore City Municipal Corporation Act,

1981, (hereinafter referred as to Act) deals with the general exemption from property tax and in terms of Clause ''e'' of Section 123, Charitable

Hospitals and dispensaries not including residential quarters attached thereto are entitled for exemption. Therefore, for a person or an organisation

to avail exemption u/s 123(e), it has to be established that it is a charitable hospital and dispensaries and even in respect of such buildings the

residential quarters will not be included. Thus essentially the decision has to be arrived at by the respondent by appreciating the facts available on

records.

According to the petitioner, they have submitted all the relevant documents to establish that they are a charitable hospital entitled for full

exemption. As per the impugned order, the respondent corporation, by their communication, dated 02.08.2002 had called for certain details and

the petitioner had sent a reply on 09.08.2002, stating that the payment made by the corporation is vague and indefinite and it is not necessary for

the corporation to demand such details. Such stand taken by the petitioner may not be appropriate since the respondent corporation has to arrive

at a decision based on the material placed before it. If the material called for, are not available with petitioner, it would be the another matter. As

already observed the question of exemption has to be decided on the facts available.

In the instant case, apart from arriving at decision based on records, the respondent is also required to conduct the inspection of the premises,

since what claim is exemption from levy of property tax on building. Therefore, unlike in orders of exemption granted under the Income Tax Act or

the Sales Tax Act, the respondent cannot proceed only based upon the documents available on record. In my view, the exemption granted under

the Income Tax Act cannot brushed aside by the respondent, while considering the claim for exemption for property tax. As long as the exemption

granted under 80G of the Income Tax Act exempting the Income Tax on the donations received by the petitioner''s trust remains valid it is

substantial piece of evidence to prove about the activities of the petitioner trust. In the provision of the Income Tax Act, detailed procedure has

been contemplated prior to the grant of such exemption. Therefore, the respondent Corporation is bound to take note of exemption granted by the

Income Tax Department. It is seen that though initially, order of interim stay was granted by this Court, by subsequent order dated 10.09.2003,

the interim stay has been vacated and the learned Counsel for the petitioner submits that already the petitioner has paid a sum of Rs. 6,00,000/-

towards the property tax. The learned Counsel for the petitioner placed reliance on the decision of the Honourable Division Bench of this Court in

S.N.R. Sons Charitable Trust v. The Commissioner, Coimbatore City Municipal Corporation 1993 (2) Law Weekly 100. The Honourable

Division Bench considered the effect of the payment made by the patients to the hospital, whether it could be equated to rent and held as follows:

In this case, the amounts paid by the patients, who use the hospital as well as the range of services provided by it, cannot be regarded as ''rent''

paid by them in the narrower sense in which it is intended under the provisions referred to earlier.

On perusal of the entire material available on record and after going through the counter affidavit and the reply affidavit, in my view, this is a fit

case, where the entire issue has to be reconsidered by the respondent and the petitioner is also bound to produce all documents in support of their

claim as well as such those documents called for by the respondent. Further, if such records are not available to the petitioner or if they claim

privilege to such documents, it is always open to them to take such a stand, but the essential documents to prove their charitable activity is required

to be produced. Further, the respondent is also required to conduct an inspection of the premises to satisfy themselves as regards of nature of

activity carried on in the premises.

In the result, the writ petition is allowed, the impugned order is set aside and the matter is remanded to the respondent for fresh consideration.

The petitioner is granted liberty to file a comprehensive fresh representation including documents in support of their claim for exemption within a

period of three weeks from the date of receipt of a copy of this order. On receipt of such representation, the respondent corporation shall fix a

date for inspection of the premises and after inspection, afford an opportunity of personal hearing to the petitioner and then decide the matter on

merits and in accordance with law within a period of six weeks from the date of which the personal hearing is afforded to the petitioner. The

respondent while deciding the matter will also take note of the law laid down by this Court in the Judgment reported in S.N.R. Sons Charitable

Trust Vs. The Commissioner, Coimbatore City Municipal Corporation, referred supra.

The writ petition is allowed accordingly. No costs. Consequently, connected miscellaneous petitions are closed.