IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HON'BLE THE CHIEF JUSTICE MR.J.CHELAMESWAR & THE HONOURABLE MR. JUSTICE ANTONY DOMINIC WEDNESDAY, THE 9TH MARCH 2011 / 18TH PHALGUNA 1932 WA.No. 3 of 2009() ------------------ AGAINST THE JUDGEMENT/ORDER IN WPC.34824/2005 Dated 31/10/2008 .................... APPELLANT(S): ------------------------ SR. (DR) MERCY, ADMINISTRATORS, SACRET HEART HOSPITAL, MANIMOOLY, VAZHIKADAVU, NILAMBUR TALUK, MALAPPURAM DISTRICT. BY ADV. SRI.S.VIJAYAN NAYAR RESPONDENT(S): -------------------------- 1. SECRETARY TO GOVERNMENT OF KERALA, REVENUE (SPECIAL CELL), DEPARTMENT, SECRETARIAT, THIRUVNANTHAPURAM. 2. TAHSILDAR, NILAMBUR TALUK, MALAPPURAM DIST. GOVT.PLEADER SRI.K.P.PRADEEP THIS WRIT APPEAL HAVING BEEN FINALLY HEARD ON 24/02/2011, THE COURT ON 09/03/2011 DELIVERED THE FOLLOWING: J. CHELAMESWAR, C.J & ANTONY DOMINIC, J. -------------------------------------------------------------------- W.A NO.3 OF 2009 --------------------------------------------------------------------- Dated this the 9th day of March, 2011 J U D G M E N T Antony Dominic, J This writ appeal arises from the judgment of the learned Single Judge dismissing W.P(c).No.34824/2005. The writ petition was filed by the appellant, seeking to quash Exts.P3,P5 and P7 orders and for directing the respondents to exempt from building tax a building constructed by them, having a plinth area of 4336.14 square meters, as provided under Section 3(1)(b) of the Kerala Building Tax Act, 1975.(here-in-after referred to as the Act). 2. Facts of the case are that the appellant is a Society registered under the Societies Registration Act,1860 and Ext.P1 is its Memorandum of Association. In pursuance to the objects set out in its Memorandum of Association, the appellant has established a hospital and for the purpose of the hospital, it has constructed the building in question. The 2nd respondent issued notice under the Act, proposing to levy building tax which was contested by the appellant on the ground that the building is W.A.No.3 /09 :2 : used principally for charitable purposes and therefore is entitled to be exempted from building tax as provided under Section 3(1) (b) of the Act. However, the 2nd respondent rejected the claim of the appellant and issued Ext.P3 assessment oder imposing building tax of Rs.3,76,200/-. 3. The assessment order was challenged before this court in O.P.NO.31807/2002. By Ext.P4 judgment, this court disposed of the original petition directing that the claim of the appellant shall be referred to the Government as provided under Section 3(2) of the Act. Accordingly, the matter was referred and by Ext.P5 order dated 4.8.2004, the Government rejected the appellant's request. By Ext.P6 representation the appellant sought reconsideration of its request for exemption. Accordingly, the appellant was heard and the Government passed Ext.P7 order dated 21.10.2005 again rejecting the claim of the appellant. 4. Paragraph 3 and 4 of Ext.P7 order being relevant, reads as under. “Government have re-examined the case in detail with reference to the supporting documents and court decisions, and come to the conclusion, that institutions which charge fees and at the same time spend some amounts for free treatment cannot be considered as charitable institutions for the purpose of claiming building W.A.No.3 /09 :3 : tax exemption. Exemption will be available under Section 3(1) of the Building Tax Act only if the building as such is principally used for charitable purposes. In the above circumstances the request of the Administrator, Sacred Heart Hospital, Manimooly, Vazhikkadavu, Nilambur Taluk, Malappuram District, to exempt their building having plinth area of 4336.14 square meters from the payment of building tax cannot be considered favourably. The same is rejected.” It is challenging the aforesaid proceedings the writ petition was filed. 5. Following the judgments in Medical Trust Hospital V. State of Kerala (2004(2)KLT 139), which was confirmed by a Division Bench of this Court in its judgment in ILR 2004(2) Kerala 408, the writ petition was dismissed by judgment dated 31st October, 2008. It is aggrieved by the judgment of the learned single Judge the appellant has preferred this appeal. 6. We have heard the counsel for the appellant and the learned Government Pleader and considered their submissions. 7. Section 3 of the Kerala Building Tax Act, 1975, reads as under; "3. Exemptions. - (1) Nothing in this Act shall apply to (a) buildings owned by the Government of Kerala or the Government of India or any local authority; and W.A.No.3 /09 :4 : (b) buildings used principally for religious, charitable or educational purposes or as factories or workshops. Explanation. - For the purposes of this sub-section, 'charitable purpose' includes relief of the poor and free medical relief. (2) If any question arises as to whether a building falls under sub-s.(1) or under S.3A it shall be referred to the Government, and the Government shall decide the question after giving the interested parties an opportunity to present their case. (3) A decision of the Government under sub-s.(2) shall be final and shall not be called in question in any court of law.” 8. The scope of Section 3 of the Act has been considered by this Court in the judgment in Medical Trust Hospital V. State of Kerala, ILR 2004(2) Kerala 408, the relevant portion of which reads as under; A reading of the aforesaid provision makes it clear that S.3 deals with exemption of buildings from the levy of building tax. It has two clauses (a) and (b). Clause (a) deals with buildings which are exempted on the basis of ownership. According to this clause, buildings which are owned by the Government of Kerala or by the Government of India or by any local authority are exempted. Under clause (b), exemption is granted not on the basis of ownership of the building but on the basis of its user. According to clause (b), buildings which are "used principally for religious, charitable or educational purposes" are exempt from building tax. The W.A.No.3 /09 :5 : explanation to the section tells us what charitable purpose includes. According to the explanation, charitable purpose includes relief of the poor and free medical relief. A reading of the explanation with clause (b), leaves no room for doubt that buildings which are "used principally" for giving relief to the poor and free medical relief would be deemed to be used principally for charitable purposes and would be exempt from tax, whatever be the objects of the institution owning them. A building which may be owned by a charitable institution but not "used principally" for giving relief to the poor and free medical relief would not be entitled to claim exemption. Similarly, a building may not be owned by a charitable institution but if it is used principally for religious, charitable or educational purposes or as a factory or workshop, it would be entitled to the exemption. It is, thus, clear that a building is not exempt from tax merely because it is owned by a charitable institution. Such a building would be entitled to exemption only if it is "used principally" for any of the purposes referred to in clause (b) of S.3(1) of the Act. As already observed, exemption on the basis of ownership is granted only under clause (a) and charitable institutions are not included therein. Buildings owned by them (charitable institutions) could claim exemption on the basis of their user in terms of clause (b). Again, in a broader sense, granting of medical relief could also be described as a charitable purpose but the kind of medical relief contemplated by the explanation is "free medical relief. In other words, if a building is used principally for providing free medical relief which would include relief to the poor, it would be covered by clause (b) of S.3(1) of the Act and could claim exemption thereunder but not otherwise. “ 9. We shall also refer to a Division Bench judgment in the case of State of Kerala V. St. Gregorious Medical Mission (1992(1) KLT 230). In that judgment, the Division Bench referred W.A.No.3 /09 :6 : to Good Shephered Hospital Society V. Executive Officer, Vayithiri Panchayat & Ors.( 1973 KLT 348) and Fr. Paul V. Executive Officer, Kalloorkad Panchayat (1974 KLT 289), where it was held that from the mere fact that some fee is collected from patients, a hospital which is otherwise charitable, will not cease to be charitable and that the only relevant question is whether the institution is run as a business with profit motive. 10. Following this principle, in the judgment in St. Gregorious Medical Mission Case (Supra) the Division Bench held that, “the fact that some amount is collected from patients, who were admitted in the hospital will not in any way afford as sufficient reason for holding that the building used for the purpose of running a hospital, which is primarily intended for relief of the sick without any motive for making any profit can be excluded from the beneficial provisions of Section 3 of the Act. The learned single Judge, as we said earlier,stated after an extensive survey of the various aspects of the matter, came to the definite conclusion that the predominant and principal purpose for which the building is used constitutes predominantly for a charitable purposes and we hold that the finding of the learned single Judge is amply supported by the documents produced in the case, particularly the balance sheets which manifest a reflection of the working of the hospital signifying that no profit is earned by the working of the hospital, but the expenses are much more than of the income derived from collecting some amounts from some of the patients admitted in the hospital. “ W.A.No.3 /09 :7 : 11. This judgment of the Division Bench was followed by this court in Medical Trust Hospital V. State of Kerala (2004(2) KLT 139), where also it was held that; “Here again the provision in the Act is very clear that in order to qualify the exemption, the principal use of the building should be for rendering free medical services and probably the incidental recovery of some charges from patients who can afford to pay may not disentitle the building for exemption.” It was this judgment which was confirmed by the Division Bench in ILR 2004(2) Kerala 408(supra). 12. From the principles laid down in the aforesaid judgments, it can be seen that though medical relief contemplated in Section 3 of the Act is free medical relief, the Act does not render a hospital building, which is principally used for charitable purposes, ineligible for exemption from building tax, for the reason that some charges are levied on patients who can afford to pay such charges. 13. While we are in complete agreement with the principles laid down in the judgments referred to above, we may also state that, the very concept of charity denotes altruistic thought and action. The object of charity must necessarily be to benefit W.A.No.3 /09 :8 : others who deserve it. In a truly charitable activity, any possible benefit to the person who does the charitable act is merely incidental or even accidental and immaterial. The action which flows from charitable thinking is not directed towards benefiting oneself and it is always directed at benefiting others. It is this direction of thought and effort and not the result of what is done in terms of the financially measurable gain, which determines the act as charitable and which qualifies for exemption under Section 3 of the Act. Therefore, charitable purpose contemplated in Section 3 of the Act does not necessarily exclude carrying on activities for which charges are levied on those who can pay and what is relevant is whether building is principally used for charitable purposes. 14. However, the judgment under appeal shows that, even though reference has been made to the judgments in the case of Medical Trust Hospital (supra) the contentions of the appellant were rejected on the ground that; “exemption is available for a hospital building only when medical relief is rendered to patient free of cost”. W.A.No.3 /09 :9 : This reasoning of the learned single Judge, in our view, is against, the principles laid down by this court. 15. A reading of Ext.P7 order issued by the Government, shows that the Government did not consider any of the relevant aspects to decide the question whether the hospital building is principally used for charitable purposes qualifying for exemption under the Act. On the other hand, Government rejected the claim of the appellant on the only reasoning that institutions which charge fee and spends only some amount for free treatment cannot be considered as charitable institutions. As we have already indicated, in order to determine whether the building is eligible for exemption under Section 3 of the Act, it is necessary for the Government to conduct an enquiry into the principal use of the building with reference to the Memorandum of Association of the Society, the activities that are carried on by the Society, the charges that are levied on the patients, the number of patients who are treated at the hospital and the number of patients who receive the charitable treatment, the audited accounts of the hospital and such other relevant materials that should be made available by a claimant for exemption. W.A.No.3 /09 :10 : Therefore, we are not satisfied that the Government considered the claim of the appellant for exemption in the manner it should have been done. 16. For the aforesaid reasons, the judgment of the learned single judge is set aside and Ext.P7 order dated 21st October, 2005 rejecting the claim of the appellant for exemption under Section 3 of the Act is quashed. We direct that the Government shall reconsider the request of the appellant for exemption under Section 3 of the Act with notice to them and pass fresh orders in the matter, affording them an opportunity of hearing. 17. It is clarified that it will be open to the appellant to file a supplementary representation and to produce further materials substantiating their claim for exemption. Writ Appeal is allowed as above. (J. CHELAMESWAR) CHIEF JUSTICE (ANTONY DOMINIC) JUDGE vi/