Municipal property tax exemption for charitable hospitals must be proved before the authority; patient charges and 80G status are not enough.

A charitable hospital is not automatically exempt from municipal property tax under Section 123(e) merely because it charges patients or enjoys Income Tax Act Section 80G status; patient charges are not rent by themselves, but exemption still depends on satisfying the proviso and proving entitlement before the assessing authority. The demand notice could not be quashed outright without the hospital first placing supporting materials before the Corporation and obtaining a reasoned decision on exemption. The writ appeal set aside the single judge's order, while preserving the hospital's liberty to pursue exemption and requiring interim payment towards arrears pending that decision.

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Issues: (i) Whether a charitable hospital is entitled to automatic exemption from property tax under Section 123(e) of the municipal law merely because it receives patient charges and holds income-tax exemption under Section 80G of the Income Tax Act, 1961; (ii) Whether the demand for property tax could be quashed without the hospital first placing materials before the assessing authority and obtaining a decision on its entitlement to exemption.

Issue (i): Whether a charitable hospital is entitled to automatic exemption from property tax under Section 123(e) of the municipal law merely because it receives patient charges and holds income-tax exemption under Section 80G of the Income Tax Act, 1961.

Analysis: The exemption for charitable hospitals under Section 123(e) is controlled by the proviso, which makes it clear that buildings or lands for which rent is payable are not exempt. The receipt of charges from patients, by itself, is not rent, but that fact alone does not establish a complete right to exemption. The benefit under Section 80G of the Income Tax Act, 1961 relates to deduction in the hands of the donor and does not automatically confer immunity from municipal property tax. The statutory exemption must be shown to satisfy the conditions of the proviso and cannot be assumed as of right.

Conclusion: The exemption is not automatic, and Section 80G status does not by itself entitle the hospital to property tax exemption.

Issue (ii): Whether the demand for property tax could be quashed without the hospital first placing materials before the assessing authority and obtaining a decision on its entitlement to exemption.

Analysis: Since the proviso requires examination of the nature of receipts and the factual basis for exemption, the proper course is for the hospital to object or seek revision before the Corporation with supporting materials. The assessing authority must then decide the claim in accordance with law. In that setting, the demand notice could not be straightaway quashed merely on the assumption that patient receipts are not rent. The hospital was, however, entitled to approach the authority and to receive a reasoned decision on the claim.

Conclusion: The demand was not liable to be quashed outright, and the matter had to be considered first by the municipal authority.

Final Conclusion: The writ appeal succeeded in setting aside the single judge's order, but the hospital was given liberty to pursue exemption before the Corporation and was directed to make an interim payment towards arrears pending that decision.

Ratio Decidendi: Exemption from municipal property tax for a charitable hospital under the governing proviso is not automatic and must be established before the assessing authority; receipt of patient charges or income-tax exemption under Section 80G does not by itself confer the municipal exemption.

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