Building tax exemption depends on principal charitable use of the building itself, not merely charitable application of its income.

For exemption from building tax under the Kerala Building Tax Act, the decisive factor is the actual use of the building, not merely the application of income earned from it to charitable objects. A building qualifies as used principally for charitable purpose only if the material shows that the building itself is predominantly devoted to such use. Free medical aid is a charitable purpose, but where medical services are partly chargeable and the evidence does not show that free aid is extended to the bulk of patients, only the portion actually used for free medical relief can qualify for exemption. The claim for exemption for the entire hospital building therefore failed, and exemption was confined to the qualifying portion.

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Issues: (i) Whether application of income derived from a building for charitable purposes is sufficient to treat the building as used principally for charitable purpose under Section 3(1)(b) of the Kerala Building Tax Act, 1975. (ii) Whether charitable purpose under the Explanation to Section 3(1) means only relief of the poor and free medical aid.

Issue (i): Whether application of income derived from a building for charitable purposes is sufficient to treat the building as used principally for charitable purpose under Section 3(1)(b) of the Kerala Building Tax Act, 1975.

Analysis: The decisive factor is the user of the building, not merely the ultimate application of income generated from it. A building can be treated as principally used for charitable purpose only if the material shows that the building itself is predominantly devoted to charitable use. The records did not establish that the entire taxed area was used for free medical aid, and the charging of patients who could afford to pay showed that the claim rested on overall charitable objects rather than principal charitable user of the building.

Conclusion: The answer is in the negative. Application of income to charity by itself is not sufficient to secure exemption under Section 3(1)(b).

Issue (ii): Whether charitable purpose under the Explanation to Section 3(1) means only relief of the poor and free medical aid.

Analysis: The Explanation was construed in the context of building tax exemption and the Court accepted the narrower reading adopted by the High Court. Free medical aid is a recognized charitable purpose, but where medical services are partly rendered on a chargeable basis and the evidence does not show that free aid is extended to the bulk of patients, the building cannot be treated as used principally for charitable purpose. On the material produced, only the portion used for free medical aid could qualify for exemption.

Conclusion: The answer is in the affirmative. The High Court correctly construed the Explanation to Section 3(1) as covering relief of the poor and free medical relief.

Final Conclusion: The claim to exemption for the entire hospital building failed, while exemption was confined only to the portion used for free medical aid. The appeal was therefore rejected on merits.

Ratio Decidendi: For exemption from building tax, the building itself must be shown to be principally used for charitable purpose, and the mere application of income to charitable activities does not suffice; only the portion actually used for free medical aid qualifies for exemption.

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