IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE S.SIRI JAGAN WEDNESDAY, THE 20TH JULY 2011 / 29TH ASHADHA 1933 WP(C).No. 6085 of 2007(Y) ------------------------- PETITIONER ----------------- THE ADMINISTRATOR, CHRISTURAJ HOSPITAL,THOKKILANGADI, NIRMALAGIRI P.O.,TALASSERY TALUK REPRESENTED BY ITS PRESENT ADMINISTRATOR, SR.MARY JAMES. BY ADV. SRI.S.VIJAYAN NAYAR RESPONDENT(S): -------------------------- 1. GOVERNMENT OF KERLA REPRESENTED BY ADDITIONAL SECRETARY TO THE GOVERNMENT, REVENUE (SPECIAL CELL) DEPARTMENT, SECRETARIAT, THIRUVANANTHAPURAM. 2. TAHSILDAR,THALASSERY TALUK, THALASSERY. R1 & 2 BY GOVERNMENT PLEADER SRI.SHAMSUDHEEN V.K. THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 18/07/2011, THE COURT ON 20/07/2011 DELIVERED THE FOLLOWING: WP(C).No. 6085 of 2007(Y) ------------------------------------ APPENDIX ----------------- PETITINER'S EXHIBITS --------------------------------- EXT.P1. COPY OF CERTIFICATE DATED 6.10.1980 ISSUED BY THE 2ND RESPONDENT EXT.P2. COPY OF DEED DATED 17.9.1982 UNDER REGN. NO.76/82 OF TELLICHERRY SRO EXT.P3. COPY OF CERTIFICATE OF EXEMPTION FROM KUTHUPARAMBA PANCHAYAT OFFICE EXT.P3(A).COPY OF LETTER NO.C10(22A)/DR/13/90-91 DATED 24.12.93. EXT.P4. COPY OF RETURN IN FORM II DATED 14.3.85. EXT.P4(A). COPY OF LETTER DATED 14.3.85 TO THE 2ND RESPONDENT. EXT.P5. COPY OF HEARING LETTER DATED 7.11.1991 T THE PETITIONER. EXT.P6. COPY OF LETTER NO.C4-24611/97 DATED 1.2.2000 OF THE 2ND RESPNDENT. EXT.P7. COPY OF RETURN OF COMPLETION OF NEW BUILDING U/S 7 OR 8 OF THE KBT ORDINANCE, 1974 DATED 25.2.2000. EXT.P8. COPY OF RETURN OF COMPLETION OF NEW BUILDING U/S 7 OR 8 OF THE KBT ORDINANCE, 1974 DATED 25.2.2000 OF Rs.15 LAKHS. EXT.P9. COPY OF RETURN OF COMPLETION OF NEW BUILDING U/S 7 OR 8 OF THE KBT ORDINANCE, 1974 DATED 25.2.2000 OF Rs.10 LAKHS. EXT.P10. COPY OF ARGUMET NOTES DATED 9.1.2006. EXT.P11. COPY OF GOVT. ORDER DT. 15.6.2006 BEARING NO.G(RT) 3142/06/RD OF THE 1ST RESPONDENT. EXT.P12(A). COPY OF NOTICE IN FORM NO.V ISSUED BY THE 2ND RESPONDENT FOR Rs.10,78,200/- EXT.P12(B). COPY OF NOTICE IN FORM NO.V ISSUED BY THE 2ND RESPONDENT FOR Rs.21,600/-. RESPONDENT'S EXHIBITS : NIL --------------------------------------- / TRUE CPY / P.A. TO JUDGE VK S. SIRI JAGAN, J. - - - - - - - - - - - - - - - - - - - - - - - W.P.(C)No.6085 of 2007 - - - - - - - - - - - - - - - - - - - - - - - Dated this the 20th day of July, 2011 J U D G M E N T The petitioner in this writ petition is a hospital. They are aggrieved by Ext.P11 order of the Government, whereby the Government rejected their claim for exemption in respect of the buildings used for as hospital under Section 3 (1) (b) of the Kerala Building Tax Act, 1975. According to them, the hospital is run by a Trust which is a wholly charitable Trust established by a Trust Deed, a copy of which is Ext.P2. They would submit that, the Trust has been created only for the purpose of establishing hospitals for relief of the poor irrespective of caste, creed and community or financial capacity. They are running the hospital without any profit motive. They would submit that although they charge some fees from patients who can afford to pay, the entire collection is solely used for running the hospital as a charitable hospital and no part of their income is being used for any other purpose, than the W.P.(C)No.6085 of 2007 -2- running of the hospital. They submit that the buildings of the hospital have been exempted from payment of property tax under the Kerala Panchayat Raj Act and the hospital is exempt from the provisions of the Income Tax Act by virtue of orders passed under Section 10 (22A) of the Income Tax Act. In the above circumstances, the building in question squarely falls within the purview of Section 3 (1) (b) of the Kerala Building Tax Act is their contention. But on a reference to the Government under Section 3 (2) of the Kerala Building Tax Act, the Government has passed Ext.P11 order holding that though the total collection of the hospital is huge the amount spent for charity is very meagre and therefore the buildings are not exempt. The petitioner therefore seeks the following reliefs: 1. To issue a writ of certiorari to quash Ext.P11 order passed by the 1st respondent. 2. To issue a writ of certiorari to quash Exhibit P-12 (a), P12 (b), P-12 (c) orders passed pursuant to Exhibit P-11 order passed by the Government. 3. To issue a writ of mandamus to the Government, 1st respondent, to pass appropriate order Order Section 3 (1) (b) read with sub-section (2) of Section-3 to command the respondent to grant exemption to the petitioner's W.P.(C)No.6085 of 2007 -3- building. 4. To issue a writ of mandamus to the respondents not club together the building completed in 1983, prior to 1992 when plinth area method came into effect and the building completed after 1992. 5. to issue a direction to the first respondent to consider petition for exemption filed prior to 1991 and the petition filed on 11.6.2000 and to exclude the area considered in 1991 from the area considered on the basis of application dated 11.6.2000. 6. to direct the 2nd respondent to pass a speaking order in place of Exhibit P-12 (a), P-12 (b) and P-12 (c) orders and to direct the 2nd respondent to pass fresh orders on the basis of the provision of law stood in 1983 for buildings completed then and on the basis of law stood after 10.2.1992 for those building completed after that date. The 2nd respondent be directed not to club all the building together.” 2. A counter affidavit has been filed by the 2nd respondent taking the stand that the petitioner is not entitled to exemption in respect of the building in question since out of the total collection of the hospital, the amount spent for free medical aid is comparatively very meagre. They would contend that as held in Ext.P11, a building cannot be exempted from payment of building tax solely for the reason that it belongs to a charitable institution or that the income derived by letting out the same is used for charitable purpose and what is relevant to decide the claim W.P.(C)No.6085 of 2007 -4- for exemption is only the purpose for which the building is put to use. According to them, the building in question is not used for any charitable purpose and therefore the same cannot be exempt from building tax. 3. I have considered the rival contentions in detail 4. Section 3 of the Kerala Building Tax Act, 1975 reads thus: “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 (b) buildings used principally for religious, charitable or educational purposes or as factories or workshops. Explanation.- Fore 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-section (1) or under Section 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-section (2) shall be final and shall not be called in question in any Court of law.” From the explanation to Section 3 (1) (b), it is clear that charitable purpose includes relief of the poor and free medical relief. The Government is quite correct in holding W.P.(C)No.6085 of 2007 -5- that for the purpose of the Act what is relevant is not who runs the institution but for what purpose the building is put to use. But unfortunately in Ext.P11 the Government does not categorically say as to for what purpose this particular building is put to use by the petitioner. It sounds strange that the Government after specifically stating that the only relevant fact in deciding the claim for exemption is the purpose for which the building is used, they have not even adverted to what is the purpose for which the building in question has been put to use. Nobody has any case that the building in question has been used by the petitioner for any purposes other than for treatment of patients in the hospital and nobody has also any case that any income or collection in the hospital is used for any other purpose than running of the hospital. 5. Ext.P1 is a certificate issued by the Tahsildar, Tellicherry which reads as follows: “Certified that the Institution S.H. Convent, Thokkilangady P.O., Nirmalagiri which is constructing a Hospital building in Thokkilangady in Ambilad Desom of Kuthuparamba Village of Tellicherry Taluk is a charitable institution. W.P.(C)No.6085 of 2007 -6- It is further certified that it is a non profit making institution.” 6. Ext.P2 is the Trust Deed under which the hospital has been established. In Clause 5 of Ext.P2 it is stated thus: “AND WHEREAS, it is felt better to have a common management, under specific written rules and regulations for the governing and development of the Hospital institutions in the best interest of the public, to render the philanthropic service in a more systematic efficient and fruitful manner.” The objects for which the trust is established is stated as follows: “4. Objects- The objects for which the trust is established are as follows: MATH OBJECTS:- a. The relief of the sick irrespective of caste, creed and community an irrespective of the financial capacity of the sick in the true spirit of the teaching of Lord Jesus Christ. b. Auxiliary Objects - Any other relief of the poor irrespective of caste, creed and community.” Clause 9 of Ext.P2 specifically states as follows: “9. SAVING CLAUSE:- It is expressly declared that no part of the Trust property or its income shall be applied for any purpose which is not public charitable or religious in law.” From the said Clauses, it is clear that, the trust is authorized to run hospitals for treating patients irrespective W.P.(C)No.6085 of 2007 -7- of the financial capacity of the sick in the true spirit of the teachings of Lord Jesus Christ. By Ext.P3, the Koothuparambu Panchayat has exempted the buildings of the hospital from levy of property tax under the Kerala Panchayat Raj Act on the ground that the buildings are used for charitable purposes. By Ext.P3 (a), the Income Tax Department has certified that the hospital is an institution falling under Section 10 (22A) of the Income Tax Act, by virtue of which, the hospital is entitled to exemption from the provisions of the Income Tax Act. Ext.P4 is the Return of Completion of the building submitted by the petitioner. That is in a form prescribed by the Rules. Item 14 of the Form relates to whether house tax is levied by the local authority wherein the petitioner has stated that exemption has been granted. That goes to show that, the question as to whether there is exemption from property tax by the local authority is a relevant factor for considering the question as to whether the building is eligible to exemption from payment of building tax under the Kerala Building Tax Act. W.P.(C)No.6085 of 2007 -8- 7. The question as to whether simply because a hospital charges some fees from patients who can afford to pay, the hospital buildings are exigible to building tax notwithstanding the exemption granted in Section 3 has been a subject matter of several decisions of this court which are Medical Trust Hospital v. State of Kerala [ILR 2004 (2) Kerala 408], State of Kerala v. St. Gregorious Medical Mission [1992 (1) KLT 230], Mercy (Sr.) (Dr.) v. Secretary to Govt. of Kerala and another [2011 (1) KHC 769 (DB). In St. Gregorious Medical Mission case (supra) the Division Bench held thus: “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 W.P.(C)No.6085 of 2007 -9- 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” In the decision of the Medical Trust Hospital (supra) this court held as follows: “A reading of the aforesaid provision makes it clear that Section 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 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 an 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 W.P.(C)No.6085 of 2007 -10- “used principally” for any of the purposes referred to in clause (b) of Section 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 Section 3 (1) of the Act and could claim exemption thereunder but not otherwise” In Sr. Mercy's case (supra) a Division Bench of this court has in paragraphs 12 & 13 it is stated as follows: “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 though and action. The object of charity must necessarily be to benefit 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 W.P.(C)No.6085 of 2007 -11- relevant is whether the building is principally used for charitable purposes.” 8. The matter has to be considered in the light of those decisions. From the above decisions, it is abundantly clear that, the fact that a hospital charges fees from its patients who can afford to pay does not ipso facto take the hospital out of the purview of Section 3 of the Act. As rightly pointed out by the Government in their order and in the counter affidavit, what is relevant for the purpose of Section 3 is the purpose for which the building is put to use. If a charitable hospital constructs a building and uses it for renting out on commercial basis certainly that building is not entitled to exemption under Section 3 (1) (b). So also if the building is used as pay ward charging rent from patients, then also it is not exempt from building tax. In this case, the entire hospital building is only used for the purpose of giving medical relief to the sick. Although hospital does charge the patients who can afford to pay, admittedly they give free medical relief to the poor also. In W.P.(C)No.6085 of 2007 -12- view of the decisions of this court, the fact that the hospital charges patients who can afford to pay does not ipso facto take the hospital out of the purview of Section 3. The respondents have no case that any part of the fees charged from patients who can afford to pay or any income of the hospital is used for any other purpose than running the hospital. Even a hospital which gives free medical aid has to find some source for running the hospital. Only if the hospital is there, the hospital can give free medical aid to the poor. Admittedly, the hospital is giving free medical aid to the poor. The contention of the Government is that, compared to the total collection of the hospital, the amount spent for free medical aid is very meagre. When no part of the collection or the income of the hospital is used for any other purpose than for treating patients and the hospital is admittedly giving free medical aid to the poor, the comparison of the total collection and the amount spent for free medical aid does not stand to reason. As I have already stated, for giving free medical aid there has to be first a W.P.(C)No.6085 of 2007 -13- hospital. The hospital must have infrastructure, it must have Doctors, it must have Nurses, it must have Attenders, it must have Watchmen, it must have medical equipments, it must purchase medicines. For all these, money will have to be spent. Compared to the free medical aid given, the establishment charges may be more. That doesn't mean that the hospital building is not used for free medical relief. When the whole hospital is intended for the purpose of giving free medical relief and when the fact that the hospital collects some fees from patients who can afford to pay ipso facto does not take the hospital building out of the purview of Section 3, especially when no part of the collection or income is used for any other purpose than running the hospital, I have no hesitation to hold that the building in question is used for giving free medical relief in so far as the building is used for the purpose of treating patients, which is not denied before me. In that view, the building in question is clearly within the purview of Section 3 (1) (b) of the Kerala Building Tax Act. The contrary W.P.(C)No.6085 of 2007 -14- finding in Ext.P11 is clearly perverse and unsustainable. Accordingly Ext.P11 is quashed. It is declared that the petitioner is entitled to exemption from payment of building tax for the building in question under Section 3 (1) (b) of the Kerala Building Tax Act. Consequentially any demand for building tax on that building is unsustainable. Therefore Exts.P12 (a), P12 (b) & P12 (c) assessment orders and demands in respect of the buildings used as hospital building is quashed. However it would be open to the respondents to collect building tax in respect of the building used as quarters of the doctors. Any excess amount paid as building tax by the petitioner shall be refunded to the petitioner within two months from the date of receipt of a copy of this judgment. The writ petition is allowed as above. S. SIRI JAGAN JUDGE shg/