IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 16.2.2008 CORAM THE HONOURABLE MR.JUSTICE P.D.DINAKARAN AND THE HONOURABLE MR.JUSTICE R.REGUPATHI Writ Appeal No.612 of 2003 The Special Officer and Commissioner Tiruchirapalli Corporation Tiruchirapalli. .. Appellant Vs. Hindu Mission Hospital rep. by its Secretary Rtn.PP.A.M.Srinivasan 17, North Guzili Street Tiruchirapalli 620 008. .. Respondent ----- Appeal under Clause 15 of the Letters Patent against the order of the learned Single Judge dated 22.1.2001 in W.P.No.10472 of 1995. Presented under Article 226 of the Constitution of India to issue a writ of Certiorarified Mandamus, calling for the records of the respondent in A5/Na.Ka.No.5868/95, dated 16.5.1995, and quash the same and forbear the respondents from collecting any property tax in respect of the Hindu Mission Hospital, A.74, Anna Nagar Main Road, Thennur, Tiruchirapalli. ----- For Appellant : Mr.P.Srinivas For Respondent : Mr.Ravichandran For Mr.T.R.Rajaraman ----- J U D G M E N T (Delivered by P.D.DINAKARAN,J.) The appeal is directed against the order dated 22.1.2002 made in W.P.No.10472 of 1995 quashing the demand of property tax by the appellant Corporation by proceedings dated 16.5.1995 and forbearing them from collecting any property tax in receipt of the https://hcservices.ecourts.gov.in/hcservices/ Hindu Mission Hospital, A74, Anna Nagar Main Road, Thennur, Trichy. 2.1. The case of the respondent Hospital, in brief, is that the Hindu Mission is a registered Society under the Tamil Nadu Societies Registration Act bearing registration No.49/78. Therefore, the same is a public charitable and non profitable and non commercial institution, as recognised by the Income tax Department by granting exemption under Section 80G of the Income Tax Act. 2.2. According to the respondent Hospital, their object is to prevent, control, treat and relieve human diseases, by rendering free, subsidised and charitable service or aid to the poor, needy, distressed and disabled and also to establish research Centres for the study of the diseases of mankind. They are running and maintaining the hospital in an area of nearly 20,425 sq.ft. 2.3. The respondent Hospital states that they receive only nominal amount to meet the heavy cost and expenditure incurred while treating the patients. According to them, cost of the expenditure is partially received from the patient. Hence, they claim exemption under Section 86(e) of the Tamil Nadu District Municipalities Act and now under Section 123(e) of the Tiruchirappalli City Municipal Corporation Act, after the appellant Corporation become the Municipal Corporation. 2.4. However, the appellant Corporation, by proceedings dated 16.5.1995, raised a demand for Rs.17,409/- for half yearly, with effect from October 1993. Hence, the writ petition. 2.5. The writ petition was resisted by the appellant Corporation disputing the character and status of the respondent Hospital, as the respondent Hospital, in reality, was running on profit motive. Rent was collected from the patients who were admitted, fees were also received for rendering service in the hospital and no service was rendered free of charge to whomsoever. The plea that they were collecting only a nominal charge from the poor, distressed, disabled and needy persons, based on their income was not true and no evidence was produced to that effect. Further, the exemption granted under Section 80G of the Income Tax Act, would not, by itself, entitle the respondent Hospital to seek an exemption from the payment of property tax. 2.6. That apart, the respondent Hospital had also rented out a portion of the premises to a third party to run canteen and collecting parking fees for the vehicles parked in the premises https://hcservices.ecourts.gov.in/hcservices/ and therefore, they were not entitled to the exemption under Section 123(e) of the Act automatically, as contended. 2.7. The learned single Judge, after weighing the rival contentions and placing reliance on the decisions in S.N.R. Sons Charitable Trust, Coimbatore v. The Commissioner, Coimbatore City Municipal Corporation, Coimbatore [1993 (10) WLR 769] and PSG & Sons Charities v. City Municipal Corporation, Coimbatore [1997 (1) CTC 331] and relying on the exemption granted by the Income tax Department under Section 80G of the Act, allowed the writ petition. Hence, the present appeal by the Corporation. 3. The learned counsel for the appellant and the respondent reiterated the contentions made before the learned single Judge. 4.1. Before proceeding on the contentions of both sides, viz. on the right of the appellant Corporation to levy property tax and the corresponding duty or obligation or liability of the respondent Hospital to pay the property tax, it is apt to refer Section 86(e) of the Tamil Nadu District Municipalities Act, 1920. Section 86: General exemption:- The following buildings and lands shall be exempt from the property tax: (a) ... (b) ... (c) ... (d) ... (e) Charitable Hospitals and dispensaries but not including residential quarters attached thereto; Provided that nothing contained in clauses (a), (c) and (e) shall be deemed to exempt any building or land from property tax for which rent or service charges is payable by the person using the same for the purposes referred to in the said clauses. 4.2. After upgradation of the Tiruchirappalli Municipality as Tiruchirappalli Corporation by the Tamil Nadu Act 27 of 1994, the provisions of the Coimbatore Municipal Corporation Act has been made applicable to the Tiruchirappalli Corporation. Section 123 of the Coimbatore Municipal Corporation Act, which is applicable to Tiruchirappalli Corporation, reads as under: https://hcservices.ecourts.gov.in/hcservices/ Section 123: The following buildings and lands shall be exempt from property tax. (a) ... (b) ... (c) ... (d) ... (e) Charitable Hospitals and dispensaries but not including residential quarters attached thereto; Provided that nothing contained in clauses (a), (c) and (e) shall be deemed to exempt from property tax any building or land for which rent is payable by the person or persons using the same for the purposes referred to in the said clauses. 4.3. It is true, the scope of exemption from the payment of property tax with reference to the building owned as buildings and lands of charitable hospitals and dispensaries not including the residential quarters attached thereto mentioned under Section 123 (e) of the Act referred to above came up for consideration before a Division Bench in S.N.R. Sons Charitable Trust, Coimbatore v. The Commissioner, Coimbatore City Municipal Corporation, Coimbatore [1993 10 WLR 769], wherein a Division Bench, held that the amount 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 narrow sense, it is only intended under the provisions referred to above. Therefore, the benefit of exemption to the respondent Hospital conferred under Section 123(e) of the Act cannot be denied on that score alone. 4.4. In respect of their decision, the Division bench places reliance on the decision of the Apex Court in State of Punjab v. British India Corporation Ltd. [AIR 1963 SC 1459] as well as the decision of the Delhi High Court in New Delhi Holy Family Hospital Society v. Delhi Municipality [AIR 1984 Delhi 84], for the proposition that the amount received towards the service rendered by the hospital viz. free accommodation, bed and linen, nursing and para medical services and charges for electricity while the patient remain in hospital, can no means be regarded as rent within the meaning of section 123 (e) of the Act to disentitle the respondent Hospital from claiming the benefit of exemption. But the benefit provided under Section 123(e) of the Act, as read in the statute book, is subject to further qualification prescribed by the proviso to Section 123(e) of the Act. https://hcservices.ecourts.gov.in/hcservices/ 5.1. At this juncture, it would be befitting to refer the interpretation of word "shall". 5.2. Ordinarily, the word 'shall' used at several places in the provision must be given the same meaning at all places. However, this is not an invariable rule and even though the word 'shall' is ordinarily mandatory but in the context or if the intention is otherwise it may be construed to be merely directory. The construction ultimately depends on the provision itself keeping in view the intendment of the enactment and the context in which the word 'shall' has been used. 5.3. Though the word "shall" in its ordinary import is obligatory, it need not be given that connotation in each and every case and the provisions can be interpreted as directory instead of mandatory depending upon the purpose which the legislature intended to achieve as disclosed by the object, design, purpose and scope of the statute. While interpreting the concerned provisions, regard must be had to the context, subject- matter and object of the statute in question. 5.4. Doubtless, under certain circumstances, the expression "shall" is construed as "may". The term "shall" in its ordinary significance is mandatory and the court shall ordinarily give that interpretation to that term unless such an interpretation leads to some absurd or inconvenient consequence or be at variance with the intent of the legislature, to be collected from other parts of the Act. The construction of the said expression depends on the provisions of a particular Act, the setting in which the expression appears, the object for which the direction is given, the consequences that would flow from the infringement of the direction and such other considerations. 5.5. In view of the above, the proviso that nothing in Section 123(a), (c) and (e) of the Act shall be deemed to exempt from property tax any building or land for which rent is payable by a person or persons using the same for the purpose of Section referred to in the said clause, would make it clear that the exemption granted in the main provision, viz. 123(e) of the Act is not automatic. 6.1. Accordingly, as observed by the Division Bench, the property tax leviable on annual value is based on the gross annual rent on the basis of letting from month to month or year to year and therefore, the exemption is thus made available with reference to the levy of property tax on the basis of annual rent, either from month to month or year to year. But, even though the https://hcservices.ecourts.gov.in/hcservices/ Division Bench held that the receipt of payment made by the patients, would not, by itself, amount to rent, there is no ruling in the said decision whether the exemption is automatic or not. 6.2. In such case, proviso to Section 123(e) of the Act would become redundant on the statute book. To make the proviso effective and operative, on raising of the demand, if the respondent Hospital is entitled to any exemption, by virtue of Section 123(e) of the Act, the only mechanism available for them is to approach the appellant Corporation, satisfy them that they are entitled to exemption under section 123(e) of the Act, as the proviso made it very clear that such exemption is not automatic because nothing contained in clause (a) (c) and (e) shall be deemed to exempt from payment of property tax. 6.3. Therefore, when the appellant Corporation rely upon not only the receipt of amount from the patients, but also the rent received towards Canteen and fees collected for parking the vehicles and other sources, whether those receipts would attract rent or not, has to be decided only by the assessing authority, at the instance of objection or revision by the owner of the building, even if they are charitable hospital and dispensaries. Without that process being resorted to it may not be proper to quash the demand notice itself, assuming the receipt of the amount, by itself, would not amount to a rent. 6.4. That apart, in Municipal Corporation of Coimbatore v. Govindasamy Naidu Hospital [(2004) 2 CTC 155], where evidence established that many patients volunteered and paid sums of money in excess of fee charges by way of donation, a Division Bench of this Court has held that exemption granted under Income Tax Act, Customs Act could not be applied automatically in determining status under section 86(e) of the Tamil Nadu District Municipalities Act, 1920, when the hospital did not establish that it was a charitable hospital and the profit generated by it was used for charitable purpose. 6.5. We are, therefore, of the considered opinion that the reliance placed on the decision in S.N.R. Sons Charitable Trust, Coimbatore v. The Commissioner, Coimbatore City Municipal Corporation, Coimbatore [1993 10 WLR 769] is helpful only to the limited extent to decide that the receipt of payment by the respondent Hospital from the patients would not, by itself, amount to rent and the same cannot be a ground to quash the impugned demand. https://hcservices.ecourts.gov.in/hcservices/ 6.6. Our view is fortified with the decision of a Division Bench of this Court in Coimbatore Masonic Charity Trust rep. by its Trustee and Secretary, Coimbatore v. The Commissioner, Coimbatore Corporation, Coimbatore [W.A.Nos.1832 to 1834 of 2000 dated 1.12.2000] where a charitable hospital claimed exemption from the payment of property tax demanded by Coimbatore Corporation under Section 123(e) of the Act, the Division Bench directed the assessee to pay a portion of the property tax demanded and directed the Corporation to consider and pass orders on the representation of the assessee claiming exemption, based on the materials furnished by the assessee and in accordance with law. 7.1. The next reason that weighed the learned single Judge is that the respondent hospital, having obtained exemption under Section 80G of the Income Tax Act, are entitled to the exemption of property tax. Section 80G of the Income Tax Act only deals with the deduction in respect of the donation to certain funds, charitable institutions, etc., while computing the total income of an assessee who donates certain funds to the charitable institution. A very reading of the section makes it clear that it is only a benefit conferred on the donor/assessee which benefit would not confer on the respondent hospital to seek an exemption from the payment of property tax under Section 123 (e) of the Act referred to above, which is subject to the satisfaction of the qualification prescribed in the proviso to Section 123(e) of the Act which explicitly makes it clear that nothing contained in clauses (a), (c) and (e) shall be deemed to be exempted from the property tax any building or land for which rent is received from the person or persons using the same for the purposes referred to in the said clauses. 7.2. Accordingly, we are unable to appreciate the reason that weighed the learned single Judge that the exemption provided under Section 80G of the Income Tax Act for the donation of funds to the charitable institution while computing the total income given would entitle the respondent hospital to claim the benefit under Section 123(e) of the Act. 7.3. Under the facts and circumstances of the case discussed above, we are convinced that the benefit conferred under Section 123(e) of the Act is not automatic, in view of the proviso to Section 123(e) of the Act and the only course available for the respondent Hospital is that on receipt of the demand notice they are at liberty to either make an objection or file a revision enclosing the material to prove that they are entitled to exemption. https://hcservices.ecourts.gov.in/hcservices/ 7.4. Thus, in the interest of justice and striking a balance between the interest of appellant Corporation and the respondent Hospital, the order of the learned single Judge is set aside and the writ appeal is disposed of as under: (i) The respondent hospital is at liberty to make a representation to the appellant Corporation objecting to the demand of property tax, enclosing all the relevant materials, within a period of sixty days from the date of receipt of a copy of this order; (ii) on receipt of such representation, the appellant Corporation shall pass appropriate orders, considering the materials furnished by the respondent Hospital and also taking note of the receipts by them, which may vary depending upon the nature and period and in accordance with law; and (iii) considering the huge arrears by the respondent hospital for the period since October 1993, the respondent hospital is directed to make a payment of 1/3rd of the arrears of the impugned demand, which shall be, of course, subject to the final order to be passed by the appellant Corporation in this regard, as directed above. In the result, writ appeal is disposed of accordingly. No costs. kpl Sd/- Asst. Registrar. /true copy/ Sub Asst. Registrar. To The Special Officer and Commissioner, Tiruchirapalli Corporation, Tiruchirapalli-620 001 1 cc to Mr.T.R.Rajaraman, Advocate, SR.8509 1 cc to Mr.P.Srinivas, Advocate, SR.8638 ksk (co) dv/27.3. W.A.No.612 of 2003. https://hcservices.ecourts.gov.in/hcservices/