IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HON'BLE THE CHIEF JUSTICE MR.H.L.DATTU & THE HONOURABLE MR. JUSTICE A.K. BASHEER WEDNESDAY, 23RD JULY, 2008/1ST SRAVANA, 1930 W.P.(C) No.25912 of 2006 PETITIONER :- THE ADMINISTRATOR, JOSEGIRI HOSPITAL, THALASERRY, KANNUR DISTRICT, PIN - 670 101, REPRESENTED BY PRESENT ADMINISTRATOR, SR. ROSILY. BY ADV. SRI. S. VIJAYAN NAIR. RESPONDENTS: 1. GOVERNMENT OF KERALA, REVENUE (SPECIAL CELL) DEPARTMENT, SECRETARIAT, THIRUVANANTHAPURAM, REPRESENTED BY ADDITIONAL SECRETARY. 2. THE TAHSILDAR, THALASSERY TALUK, THALASSERY. BY SR. GOVT. PLEADER SRI. MUHAMMED RAFIQ. THIS WRIT PETITION HAVING BEEN FINALLY HEARD ON 11/7/2008, THE COURT ON 23/07/2008 DELIVERED THE FOLLOWING:- APPENDIX PETITIONER'S EXHIBITS:- Ext.P1: Photocopy of sanction order dated 5.8.2000. Ext.P2: Phtocopy of Syllabus and Regulations for Diploma in General Nursing & Midwifery published by Indian Nursing Council. Ext.P3: Detailed statement dated 17.12.2003 to the 2nd respondent by the petitioner. Ext.P4: Photocopy of Government Order dated 25.3.2004. Ext.P5: Photocopy of Nursing Council Certificate No.18-16/2886-INC dated 201.2006. Ext.P6: Photocopy of Government Order dated 28.7.2006 bearing No. GO(Rt) - No.3485/2006/RD. (True copy) H.L. DATTU, C.J. & A.K. BASHEER, J. ------------------------------------- W.P. (C) No.25912 of 2006 ------------------------------------ Dated this, the 23rd day of July, 2008 JUDGMENT H.L. DATTU, C.J. The question for consideration is, whether the building owned by the petitioner is eligible for exemption from payment of tax under the provisions of Kerala Building Tax Act and the Rules framed thereunder. 2. Petitioner is running a Nursing School in the ground and first floor of a building. The second and third floors of the building are used as hostel. The Tahsildar, Thalassery Taluk, Thalassery had issued Notice No.C-4/23220/03 dated 26.11.2003, calling upon the petitioner to file details regarding the construction of new building for the purpose of fixing the Building Tax/Property Tax under the provisions of the Kerala Building Tax Act and the Rules framed thereunder. After receipt of the notice, the petitioner had filed a detailed reply dated 17.12.2003 and in that it was stated, apart from others, that the Nursing School building has four floors, the ground floor accommodates the Principal's and Vice Principal's Offices, visitors room, library, dining hall, kitchen etc; first floor is used as class rooms, staff room, laboratory hall etc; second and third floors are used for the stay of Nursing students. Hence the whole building is used fully for educational WPC No.25912/06 - 2 - purpose as Nursing School. In conclusion, it was claimed that the building is exempted under Section 3(1)(b) of the Act, and therefore, requested the Tahsildar who had initiated proceedings to assess the Building Tax under the Act, to refer the question of exemption to the State Government as envisaged under Section 3 (2) of the Act. On such reference, the State Government has passed Ext.P6 order dated 28.7.2006 and in that it has stated, that, since the petitioner is using second and third floors to accommodate nursing school students by collecting Rs.12,000/- from each student as annual fee and mess fee as per dividing system, it is not entitled for exemption under the Act to the second and third floor of the building. However, exemption was granted to the ground and first floor which are exclusively used for educational purpose. The operative portion of the order is as under: “In these circumstances, Government order that the ground and first floor of the building of BKJM School of Nursing owned by Josgiri Hospital, Thalassery are exempted from Building Tax under Section 3(1)(b) of the KBT Act, 1976. The second and third floors of the building which are used as the hostel for students will be assessed for building tax.”. 3. The petitioner, being aggrieved by Ext.P6 order passed by the State Government, has, called in question the correctness or otherwise of the WPC No.25912/06 - 3 - said order by filing this petition before this Court. The prayers in the writ petition are:- “(i) a writ of certiorari to quash that part of Ext.P6 order which reject the exemption in respect of IInd and IIIrd floors of the petitioners building while retaining that part of Ext.P6 which grants exemption for to ground and 1st floors; (ii) writ of mandamus to command respondent to grant exemption to the area of the building occupied by the Nursing Students Hostels and staff quarters and other areas in the building which is essential for the running of the nursing school; (iii) to award cost of this petition.” 4. The respondents have filed their counter affidavit justifying the impugned order in the same lines as is done by the State Government. 5. At the time of hearing of the petition, the petitioner's learned counsel has relied on the observations made by the learned Single Judge of this Court in the case of Sree Gokulam Educational and Medical Trust vs. Tahsildar, 2006 (4) KLT 108, wherein the learned Single Judge has taken the view, that, the building is to be treated as part of educational institution, if it is principally used for educational purposes and such building is liable to be exempted. Per contra, learned Government Pleader has relied on the decision of the Division Bench of this Court in the case of Mother Superior, WPC No.25912/06 - 4 - St.Mary's Carmalite Convent vs. Principal Secretary to Government (W.A. NO.2424 of 2005 dated 24th November, 2005). Since the learned Single Judge has found that there are conflicting views expressed by this Court, has referred the writ petition for consideration and decision by this court. That is how the matter is before us. 6. We have heard the learned counsel, Sri.S.Vijayan Nair. We will refer to his submissions during the course of consideration of merits of the case pleaded by the writ petitioner. 7. The object of the Act can be gathered by referring to the preamble to the Act. In the preamble, it is stated that the object of the Act is to provide for the levy of a tax on buildings and luxury tax on certain residential buildings. The Act is extended to the whole of State of Kerala and it is deemed to have come into force on the 1st day of April, 1973. In the dictionary clause of the Act, the meaning of the expressions like assessee, building etc. is defined. The 'assessee' for the purpose of the Act, means, a person by whom building tax or any other sum of money is payable under this Act and includes every person in respect of whom any proceedings under this Act has been taken for the assessment of the building tax payable by him. The expression 'building' means a house, out-house, garage, or any other structure, or part thereof, whether of masonry, bricks, wood, metal or other WPC No.25912/06 - 5 - material, but does not include any portable shelter, or any shed constructed principally of mud, bamboos, leaves, grass or thatch or a latrine which is not attached to the main structure. 8. Section 3 of the Act provides exemptions to certain buildings from the purview of the Act. Sub-section (1)(a) of Section 3 of the Act, provides exemption to the buildings owned by the Government of Kerala, or Government of India, or any local authority. Sub-section (1)(b) of Section 3 of the Act exempts from the purview of the Act, the buildings used principally for religious, charitable or educational purposes or as factories or workshops. The explanation appended to the Section, explains the meaning of the expression, 'charitable purpose' for the purpose of the Act. Apart from the meaning ascribed to the expression 'charitable purpose' by the courts, the legislature by adopting inclusive definition has also included the buildings used for the relief of the poor and free medical relief. 9. Section 3 A(2) of the Act gives discretion to the State Government to make exemption from payment of building tax either wholly or partly in respect of any building or buildings constructed utilising the grant of the Central Government or the State Government, where such grant is not less than twenty five percent of the total cost of construction of the building and such building is intended for such purposes as may be prescribed, subject to WPC No.25912/06 - 6 - the condition that the building tax, if any, already paid shall not be refunded or otherwise adjusted, may grant exemption from payment of building tax by issuing appropriate notifications. 10. Sub-section (2) of Section 3 of the Act mandates the assessing authority/the Tahsildar of the area having jurisdiction to quantify the tax liability, under the Act, to refer the question to the State Government, if any question arises as to whether a building falls under Sub-section (1) or under Section 3A of the Act and it is for the State Government to decide the aforesaid legal issue, after affording an opportunity of hearing to the interested persons. 11. Sub-section (3) of Section 3 of the Act provides for finality of the proceedings under the Act, by using the expressions like, that the decision of the State Government passed under sub-section (2) of Section 3 of the Act shall be final and shall not be called in question in any court of law. 12. To decide the legal issue canvassed in this petition, in our view, Section 3 of the Act requires to be noticed. The same 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 WPC No.25912/06 - 7 - (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-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.” 13. Section 3 of the Act exempts certain buildings from the purview of the Kerala Building Tax Act, 1973. The first category of the buildings are, the buildings owned by the Government of Kerala, the Government of India and the buildings owned by any local authority. The second category are, the buildings which are principally used for religious, charitable and educational purposes or as factories or workshops. In this writ petition, we are not concerned with the first category of buildings, but concerned only with the second category of buildings, namely, the buildings which are principally used for religious, charitable or educational purposes. WPC No.25912/06 - 8 - The claim of the assessee in these proceedings is that, it has a four floor structure and the ground floor is used for accommodating the Principal's and Vice Principal's offices, visitors room, library, dining hall, kitchen etc; first floor is used as class rooms, staff room, laboratory hall etc; second and third floors are used for the staying of Nursing Students. Therefore, it is stand of the petitioner's learned counsel that the entire building is used principally for educational purpose and, therefore, the same is exempted from payment of tax under the Act, in view of Section 3 (1) (b) of the Act. The learned counsel relies on the observations made by learned single Judge of this Court in the case of Sree Gokulam Educational and Medical Trust v. Tahsildar, 2006 (4) KLT 108. 14. To appreciate the claim of the petitioner, we need to understand the meaning of the expression 'educational purpose' to decide whether the building owned by the petitioner is exempted from payment of property tax under the provisions of Kerala Building Tax Act. In the Act, the expression, “educational purpose” is not defined. The expression is a combination of two words, viz., “education” and “purpose”. The word education comes from the Latin e-ducere, meaning thereby “to lead out”. In ancient Greece, Socrates argued that education was drawing out what was already within the student. The Webster's dictionary defines education as the WPC No.25912/06 - 9 - process of education or teaching. It is further defined as, to develop the knowledge, skill or character of it. In Advanced Law Lexicon by Sri. P.Ramanath Aiyar, 3rd edition, the expression 'education' is defined to mean, is the bringing up; the process of developing and training the powers and capabilities of human beings. In its broadest sense, the word comprehends, not merely the instruction received at school or college, but the whole course of training - moral, intellectual and physical. 15. In T.M.A. Pai Foundation v. State of Karnataka (2002) 8 SCC 481, the Supreme Court has stated that the expression 'education' occurring in various Articles of the Constitution of India means and includes education at all levels, from the primary school level up to Post Graduate level and professional education. 16. Thus, from these definitions, we might assume that the meaning of education is, to develop the knowledge, skill or character of the students. 17. The 'educational institution' means a school, seminary, college, university, professional academies, training institutes or other educational establishments, not necessarily a chartered institution and includes not only buildings, but also all grounds necessary for the accomplishment of the full scope of educational instruction, including those things essential to WPC No.25912/06 - 10 - mental, moral and physical development. 18. “Educational Purpose” can be understood as, activities that are integral, immediate and proximate to the education of students or in the case of libraries, integral, immediate and proximate to the provision of library services to library patrons, qualify as 'educational purposes'. Reference can be made to the decision of Chancery Division in the case of Masonic Building Association of Stamford, Conn. vs. Town of Stamford, 174 A 301, 303, 119, Conn. 53, wherein it is stated that, the statute exempting Corporations' property used exclusively for 'educational purpose' from taxation applies only for property serving such purposes in restricted sense of offering systematic instruction and training of young in preparation for life work. 19. The scheme of the Kerala Building Tax Act is to levy tax on buildings and luxury tax on certain buildings. All buildings including buildings used principally for charitable, religious, educational purposes are liable to building tax. The Legislature in order to exempt these buildings from the net of taxation has specifically provided a provision which would exclude these buildings from levy of building tax. To fall under this category the buildings, should be exclusively/principally used for charitable, religious or educational purposes. The word 'principally' used by the Legislature connotes that, the use of the building must be one which directly promotes the cause of WPC No.25912/06 - 11 - charity, religion, or education. The true effect of the phrase 'educational purpose' as used by the Legislature, it must be taken to mean, purposes conducive to the instruction of the mind or anything directly ancillary thereto and does not include boarding house, dormitory, hostel etc. The other interpretation could be, going by the language used by the Legislature, the property owned and used exclusively for educational, religious, or charitable purposes when such property is not owned or used for financial gain or profit. In the present case, the third and the fourth floor of the building is primarily used as dormitory and boarding houses for nursing students by collecting fees, since it is the use, not the ownership is the test, and therefore, it cannot be said that the third and fourth floor of the building is principally used for educational purposes and therefore is not exempt from taxation under the Act. 20. Of the authorities cited, only one seems to us to be of any value, because it is the only one which has laid down the principle which we can follow. That is the passage in the case of Mother Superior, St. Mary's Carmelite Convent. In this decision, the Court has stated, the Government as a final fact finding authority, has found that the building in question is given for boarding and lodging of students after collecting fees towards food, electricity and such other minimum charges and that it is not eligible for exemption from payment of tax. We are not inclined to take a different view WPC No.25912/06 - 12 - from that of the Government, since the Government, as fact finding authority, has rightly rejected the claim for tax exemption. Learned Single Judge has rightly disposed of the matter. 21. In our considered view, it is difficult to accept the reasoning of the learned single Judge in the case of Sree Gokulam Educational and Medical Trust's case. In our view, with greatest respect at our command, we say, placing reliance on certain decisions which had no bearing on the facts of the case and also the provisions which came up for interpretation has made a passing remark which would, in our view, violate the statutory provisions. Therefore, we do not approve the findings nor the conclusions reached by the learned single Judge. We will now elaborate why we do not wish to accept the reasoning of the learned Judge. 22. In Sree Gokulam Educational and Medical Trust's case, 2006 (4) KLT 108, the question that came up for consideration was whether the building used by the petitioner for the purpose of accommodating the students of a school, popularly known as students' hostel is entitled for exemption from payment of building tax under Section 3 (1)(b) of the Kerala Building Tax Act, 1975. The learned Single Judge has answered the legal issue in affirmative and in favour of the school, relying on the observations made in the case of Sr.Mariatta vs. State of Kerala, 1981 KLT 80, WPC No.25912/06 - 13 - M.Mathew vs. Executive Officer, 1984 KLT 310 and Chakravarthy Hostel vs. Municipal Commissioner 1995 (2) KLT 588. The finding and the reasoning of the learned Judge, without any discussion is that, “there is no dispute that if the building is used principally for educational purposes, such building is liable to be exempted. The contention of the petitioner is that the disputed building is exclusively used for the students of the school, if that be so, the building is to be treated as a part of the educational institution”. In our considered view, the aforesaid reasoning of the learned Single Judge is difficult to be accepted, in view of our discussion on the construction of Section 3(1)(b) of the Act. Therefore, we overrule the decision of the learned Single Judge. 23. Now, we come to the decisions on which reliance is placed by learned Single Judge, while arriving at the aforesaid conclusion. Firstly, the learned Judge has placed reliance on the decision of this Court in the case of M.Mathew vs. Executive Officer, 1984 KLT 310. The facts in that case was, that the owner of the building had questioned the demand notices issued by the Grama Panchayat in exercise of its powers under Section 72(1)(d) of the Kerala Panchayats Act, on the ground, that, the building is let out to a tenant and therefore, the building is not exempted from payment of tax under Kerala Panchayats Act, 1960. The court, keeping in view the language WPC No.25912/06 - 14 - employed in Section 72(1)(d) of the Act, came to the conclusion, that, the view taken by the respondent - Panchayat that, user by the owner of the building is alone exempted and not by the tenant, is not supported by the language of the statute and receipt of rent by the owner is not a relevant consideration and even hostels which normally charge rent is exempted under Section 72(1)(d) of the Act. 24. The learned Judge, secondly, has placed reliance on the observations made by this court in the case of Chakravarthy Hostel vs. Municipal Commissioner, 1995 (2) KLT 588. In this citation, the provision which came up for consideration is Section 101 (1) (cc) of the Kerala Municipalities Act, 1960. The said provision provided for exemption to certain building used for educational purposes, including hostels etc. The court while considering the unqualified terms used in the sub-section , viz. “including hostels” has concluded that the building used by a partnership firm and exclusively used as a hostel for college students is entitled to exemption under Kerala Municipalities Act, 1960. 25. The third decision on which reliance is placed by the learned Judge is the decision of this Court in the case of Sr.Mariatta vs. State of Kerala, 1981 KLT 80. The question before the court was, whether the building used as residence for students who undergo religious and college WPC No.25912/06 - 15 - studies is qualified for exemption under Section 72(1)(d) of the Kerala Panchayats Act. This court has answered the question in the affirmative. The reason for answering the issue in favour of the assessee, in our considered view, appears to be in view of the language employed in Section 72(1)(d) of the Act. At the relevant point of time, the sub-section read as, “buildings used for educational purposes including hostels, public buildings and places used for the charitable purposes of sheltering the destitutes or animals, and libraries and playgrounds which are open to the public. In our opinion, in view of the inclusive definition including hostels immediately after the words educational purposes, the only conclusion that could have been reached is the one which the learned Judge has taken. 26. In our considered view, the activities which are integral, immediate and proximate to the education of students would come within the meaning of the expression 'educational purpose' under Section 3 (1)(b) of the Act and does not include dormitory, boarding house and hostels. In the instant case, the petitioner is using the third and fourth floor primarily as hostel for nursing students by collecting fees from each student as annual fees and mess fee and therefore, it cannot be said that the entire building is used for educational purpose and therefore, the third and the fourth floor of the building is not exempt from taxation under the provisions of the Kerala WPC No.25912/06 - 16 - Building Tax Act, 1975. Accordingly, the writ petition is liable to be rejected and we do so. In the facts and circumstances of the case, the parties are directed to bear their own costs. Ordered accordingly. Sd/- H.L.DATTU, CHIEF JUSTICE. Sd/- A.K. BASHEER, JUDGE DK. (True copy)