IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE P.R.RAMACHANDRA MENON WEDNESDAY, THE 15TH SEPTEMBER 2010 / 24TH BHADRA 1932 WP(C).No. 6626 of 2007(L) ------------------------------------- PETITIONER: ------------------- ST.SEBASTIAN'S VISITATION HOSPITAL, VISITATION CHARITABLE & WELFARE SOCIETY, ARTHUNGAL, CHERTHALA, ALAPPUZHA DISTRICT, REPRESENTED BY ITS ADMINISTRATOR. BY ADV. SRI.BECHU KURIAN THOMAS. RESPONDENTS: ------------------------ 1. STATE OF KERALA, REPRESENTED BY PRINCIPAL SECRETARY, GOVERNMENT SECRETARIAT, THIRUVANANTHAPURAM. 2. THE ASSESSING AUTHORITY (BUILDING TAX), TAHSILDAR, TALUK OFFICE, CHERTHALA. 3. TAHSILDAR, REVENUE RECOVERY, CHERTHALA. R1 TO R3 BY GOVERNMENT PLEADER SRI. K.P. PRADEEP. THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 15/09/2010, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: W.P.(C). NO.6626/2007-L: APPENDIX PETITIONERS' EXHIBITS: EXT.P.1: COPY OF THE REGISTRATION CERTIFICATE GRANTED TO THE PETITIONER UNDER THE TRAVANCORE- COCHIN LITERARY, SCIENTIFIC AND CHARITABLE SOCIETIES REGISTRATION ACT, 1955 DTD. 07/02/96 AND NUMBERED AS A-102/96. EXT.P.2: COPY OF THE BYE-LAWS OF THE PETITIONER. EXT.P.3: COPY OF THE ASSESSMENT ORDER DTD. 16/01/2007 AND NUMBERED AS BT- 123/03/G2. EXT.P.4: COPY OF THE AUDITED INCOME AND EXPENDITURE FROM ITS INCEPTION. EXT.P.5: COPY OF THE GOVERNMENT ORDER DTD. 08/12/2006 AND NUMBERED AS G.O. (RT). NO.4847/06/RD. RESPONDENTS' EXHIBITS: NIL. //TRUE COPY// P.S. TO JUDGE. Prv. P.R. RAMACHANDRA MENON J. ~~~~~~~~~~~~~~~~~~~~~~~ W.P. (C) No. 6626 of 2007 ~~~~~~~~~~~~~~~~~~~~~~~ Dated, this the 15th day of September, 2010 JUDGMENT The issue involved in this case is, whether the rejection of the claim for exemption under Section 3 (1) (b) of the Kerala Building Tax, by the Government under Section 3 (2) of the Act, is correct or sustainable. 2. The case of the petitioner is that, the petitioner is a 'Hospital', which is registered as a charitable institution and the income derived therefrom is used only for the purpose of charity, maintenance and up keep of the hospital. The building of the petitioner was subjected to assessment by the 3rd respondent/assessing authority, who passed Ext.P3 assessment order, fixing the liability to the tune of Rs. 2,88,000/-. The petitioner put forth a claim for exemption under Section 3 (1) (b). The matter was referred to the Government for decision under Section 3 (2). After considering the merits, the claim for exemption was rejected as per Ext. P5, which in turn is under challenge in this Writ Petition. 3. The learned counsel for the petitioner submits that, the reasoning given by the Government for negating the claim for exemption preferred by the petitioner is not at all correct or sustainable W.P. (C) No. 6626 of 2007 : 2 : and that the same is contrary to the law declared by a Division Bench of this Court in State of Kerala Vs. St. Gregorious Medical Mission (1999 (2) KLT 230). The learned counsel further submits that, the very nature of the activities being pursued by the petitioner is discernible from Ext. P2 'bye law' and that the financial status of the petitioner is also revealed from its audited income and expenditure statement. Placing reliance on the said documents, the learned counsel for the petitioner submits that, the hospital is running on loss and no profit is generated, as a natural consequence of the charity being extended by the petitioner and that the Government ought to have relied on the decision cited supra, while considering the issue/claim for exemption. 4. The respondents 2 and 3 have filed counter affidavit rebutting the allegations and averments raised in the Writ Petition, with reference to the actual facts and figures, seeking to sustain the impugned order. Reliance is also sought to be placed on the decision rendered by this Court in Medical Trust Hospital Vs. State of Kerala (2004 (2) KLT 139). Referring to the materials on record, it is contended that the claim for exemption was considered and analyzed by the Government before passing Ext.P5 order and the same does not suffer from any infirmity, either on facts or in law, which hence is not assailable under any circumstances. W.P. (C) No. 6626 of 2007 : 3 : 5. With regard to the crucial issue raised in the Writ Petition as to whether the petitioner, who is stated as running a charitable institution, is entitled to have the benefit of exemption mainly based on the 'bye law' and that no 'profit' is being generated is the point which has to be considered first. True, the requirement under the statute has been discussed in detail, in a decision rendered by a Division Bench of this Court in State of Kerala Vs. St. Gregorious Medical Mission (1992 (1) KLT 230), wherein some observation has been made with reference to the 'profit' i.e. being generated. But, it has to be borne in mind that the issue projected in that case (challenging the judgment of the Single Judge) was that admittedly 'some income' was being generated by the concerned institution and this being the position, the building was not liable to be exempted under the 3 (1) (c). Referring to the factual position, it was observed by this Court that, the generating of some income by itself will not take the institution outside the purview of the charitable activities to deny the benefit of exemption. By virtue of the mandate under the provision, if the building is principally being used for charitable, religious or educational purpose, the party is entitled to get the benefit of exemption. It was in the above belonged that, the factual position was analyzed and appreciated by the Court declining the interference in the appeal preferred by the State. W.P. (C) No. 6626 of 2007 : 4 : 6. With regard to the factual position in the present case, which led to issuance of Ext P5 is that, considering the nature of the challenge raised by the petitioner, the Deputy Tahasildar was required by the Government to conduct an inspection and to file a report, since during the course of hearing, it was revealed that, 'separate wards' are being provided for poor patients and such other factual aspects brought to light from the part of the petitioner. After conducting the inspection, the Deputy Tahasildar submitted a report stating that, the total plinth area of the building was 3553.84 Sq. M; the building is a three-storied building consisting of the central block having a total plinth area of 1554.46 Sq. M which is being used for the office and the rest is used for hospital purposes. The ground floor of the south block is being used as 'Chapel', having a plinth area of 30.81 Sq. M. The first floor of the east block is 7 bedded portion, where it was displayed that, 'no rent for serious patients'. Referring to the above vital statics, it is observed in Ext. P5 that, even if the said 69.05 Sq. M. is left out, the remaining 3292.79 Sq. M. was being used as hospital, accepting fees from the patients. It was after considering the factual position as above, that the Government held that the building in question is not principally used for charitable purpose and hence is not eligible for exemption under Section 3 (1) (b) of the Act. W.P. (C) No. 6626 of 2007 : 5 : 7. There is absolutely no case for the the petitioner in the Writ Petition that the report submitted by the Deputy Tahasildar in the aforesaid terms is wrong or vitiated; nor is there any challenge with regard to the finding of the Government, as extracted in Ext. P5. The assertion made in the Writ Petition as well as during the course of hearing is that, the charging of fees from the patients, who can afford to pay, does not change the character of the charitable institution. But here, the question is whether exemption contemplated under the statute is to the 'institution' or the 'building'. The provision clearly stipulates that the benefit under Section 3 (1) (b) is only in respect of the 'building' and not to the institution. The extent of use, so as to have it construed as being principally used for the activities eligible for exemption, has also been explained by a Division Bench of this Court as per the decision reported in Thirurangadi Muslim Orphanage Vs. Government of Kerala (2007 (2) KLT 822). Similar observation are also there, in the decision rendered by a learned Single Judge reported in Jacob Vs. Tahasildar (1988 (2) KLT 854). With regard to the extent of the alleged charitable activities, to ascertain whether the building is principally used for the charitable activities, the building has to satisfy the requirements as made clear by this Court in the Medical Trust Hospital's Case reported in Medical Trust Hospital Vs. State of W.P. (C) No. 6626 of 2007 : 6 : Kerala (2004 (2) KLT 139). 8. Coming to the case in hand, the question remains, what is the charitable extent being pursued in the building. The extent of the income i.e being generated and also being used for such charitable activities could be ascertained from the documents or accounts in respect of the various activities as aforesaid. The only document which has been produced by the petitioner is Ext, P4, which is only a 'profit and loss account'. The entire emphasis is sought to be placed by the petitioner on the said document stating that the institution not generating any profit and it is being run loss. Loss or absence of profit is not a ground to hold that the building is principally used for charity, loss may be resulted due to various circumstances like spend-thrift nature of the Management; mismanagement, lack of sufficient technical/managerial skill or for such other reasons. As such, merely for the reason that there is no profit and the institution is running on loss is not sufficient to arrive at an inference in favour of the petitioner, with regard to the liability to pay tax. Even otherwise, in view of the specific reference made by the Government in Ext. P5 order, that a substantial portion of the building is being used for accommodating patients from whom the fees are collected, the contention of the petitioner that the running of the hospital itself is a proof as to its principally being used for W.P. (C) No. 6626 of 2007 : 7 : running a charitable institution, is not acceptable. In the absence of any concrete evidence to substantiate that the building is principally being used for charitable activities, the finding made by the Government on the factual points as given in Ext. P5, stands intact. In the said circumstances, this Court finds that, no interference is warranted. The Writ Petition fails and it is dismissed accordingly. P. R. RAMACHANDRA MENON, JUDGE kmd