TaxTMI 
TaxTMI 
2018 (3) TMI 1289
X X X X Extracts X X X X
X X X X Extracts X X X X
...., alloted an extent of 2542 sq.mts of land in Anna Nagar, Chennai, for the purpose of setting up of a hospital. Condition was imposed that the hospital should provide free treatment to 30% of the outpatients and 15% of the inpatients belonging to the poor families and 15% of the total beds in the hospitals should be reserved for poor inpatients. 3. The petitioner claims that they have established the hospital and have been running the hospital in accordance with the terms of the conditions imposed by the Government. While so, the first respondent corporation sought to levy property tax on the building with effect from first half year 1992-93, immediately the petitioner addressed a letter to the first respondent on 14.12.1994, pointing out that it is a charitable hospital and therefore, exempted from the levy of property tax in accordance with Section 101(e) of the Chennai City Municipal Corporation Act, 1919 (herein after referred to as the Act). Ultimately, the Corporation appears to have not acceded to the petitioner's request and they were assessed to tax and a demand was issued on 28.03.2002 and another demand on 02.07.2005. 4. The petitioner challenged the proceedings, w....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rst respondent, namely, the Commissioner of the Corporation would be exercising the power under the Act. While so, on 14.07.2015, an inspection was carried out by the officials of the first respondent and sample bills of the inpatients, details of the total area and area of the inpatients room etc., was called for and which were furnished by the petitioner on 22.07.2015 and 03.08.2015. It is thereafter, the second respondent by order dated 17.12.2015, rejected the claim for exemption, for the reason that only 15% of the patients get free treatment and therefore, the petitioner is not a charitable hospital within the meaning of Section 101(e) of the Act. This order is impugned in this Writ Petition. 6. Mr.Srinath Sridevan, learned counsel for the petitioner after referring to the relevant documents filed in the typed set of papers to substantiate the factual averments, submitted that the petitioner established the hospital in accordance with the conditions imposed by the Government and have been administering the hospital strictly as per the conditions and till date, they have not been questioned by the Government. In this regard, reference was made to clause (3) and (4)(ii)&(iii) ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....emand for enhanced property tax and not otherwise. Therefore, the petitioner has approached this Court by way of this Writ Petition. It is submitted that in the light of the above factual position, it is evidently clear that the respondent Corporation has not considered the petitioner's application for exemption as required to be considered and has been repeatedly rejecting the same by cryptic orders and therefore, prayed that positive directions to be issued to the respondent Corporation to grant exemption from payment of property tax. 8. Further it is submitted that when the fact remains thus without even a, assessment, a demand has been served on the petitioner demanding a sum of more than Rs. 34 lakhs, as property tax which is not sustainable in law. To support such contention, reliance was placed on the decision of this Court in the case of G.P.Venkatesa Mudaliar Vs. The Commissioner, Corporation of Chennai reported in (2009) 2 MLJ 702. With regard to how an application for exemption is required to be dealt with, reliance was placed on decision of Hon'ble Division Bench of this Court in the case of S.N.R. Sons Charitable Trust vs. The Commissioner, Coimbatore City Mun....
X X X X Extracts X X X X
X X X X Extracts X X X X
....poration and referred to the various charitable activities carried on by the petitioner hospital and merely because, the respondent Corporation has not exempted any hospital in Chennai city from the levy of property tax, it cannot be a ground to deny exemption to the petitioner's property. It is further submitted that until 2007, the petitioner has paid a sum of Rs. 32,43,755/- as property tax and the matter pertaining to exemption has been under consideration since 2007 and therefore, no further amounts were paid as property tax. Therefore, it is submitted that the petitioner is entitled to grant of exemption from levy of property tax. 12. Heard the learned counsels appearing for the parties and perused the materials placed on record including the note file maintained by the third respondent. 13. Before I go into the factual aspects, it may be necessary for this Court to examine the power granted to the respondent Corporation under the Act to exempt properties from the levy of property tax. Section 101 of the Act deals with ''General Exemptions', it states that the buildings and lands which are listed out under the said provisions are exempt from the property tax....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... has taken any action against the petitioner for not adhering to the above referred conditions and not exercised their power under para 4 (9) of the said Government order, which empowers the Government that in the event the petitioner is not complying with any of the conditions of allotment, the Government shall, after giving an opportunity to the petitioner to be heard in the matter, cancel the allotment and the land shall re-vest to the Government free from all encumbrances and no compensation shall be payable in respect of the any building or superstructure constructed on such land in the case of the land re-vesting to the Government under the said clause. As stated, the Government has not alleged that the petitioner has violated the terms and conditions of the Government Order, as there appears to have been no action initiated in that regard. Thus, for all purpose, it should be taken that the petitioner has been complying with the conditions of allotment. This interpretation alone would be proper, because, it will be the Government, which has to take action in the event of violation of conditions imposed in the Government order. 16. Having steered clear of the statutory and fa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....patients and therefore cannot be permitted to take advantage of Section 123(e) of the Coimbatore City Municipal Corporation Act (in para materia with section 101(e) of the CMCC Act). The Writ Petition was dismissed, against which the appeal was preferred. The Hon'ble Division Bench, while allowing the appeal pointed out that from the manner in which, the charges have been collected under different heads, it is difficult to hold that such charges have been paid by way of rent by the patients visiting the hospital for the purposes of treatment. That the amounts paid by the patient cannot be equated or treated as 'rent', but represent charges paid for all the services rendered under different heads and these payments cannot on the facts and circumstances of the case be regarded as payment of rent by the patients. Further noting that the word 'rent' has not been defined in the said Act, the intention of the legislature was that question should be decided on consideration of facts of each case when a controversy over it arose. Therefore, it was held that the meaning of the word rent has to be gathered from Section 117 of the said Act, which falls in chapter V relatin....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ses, strictly conform to the requirements of what is understood as 'charity' and a 'charitable' act. Therefore, while considering the question whether a hospital or a dispensary is a charitable hospital/dispensary or not, what is required to be considered is as to what is the object of establishing such a hospital/dispensary and as to how it is being run and what is the purpose of its continued existence whether it is meant to relieve the hardship and extends medical facilities to the poor and the needy or it is meant to oblige the rich and the affluent who do not require any financial assistance in the form of free medical treatment or it is being run as a commercial venture; and whether such hospital/dispensary has been established and is being continued to support the needs of any particular caste or a religious faith. In my view, three conditions, which are required to be satisfied to get the benefit of exemption under Section 110(e) of the Act are, (1) the doors of such hospitals/dispensaries should be always kept open to all persons irrespective of any caste, creed, religious faith or sects; (2) such persons should be poor, needy and deserving persons who, on ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ling patients who require medical treatment and that too, with the high degree of competency and proficiency and infrastructure developed with all the modern facilities established. For this, one of the modes of raising funds could be by making available some portion of the facilities available in the hospital to affluent and the rich patients and charging them for the services and the treatment given to them. Therefore, if the object of establishing and running a hospital and its continued existence, is to give medical aid to the poor and the deserving either totally free or to a large extent subsidised, if such a hospital collects substantial charges from the affluent and rich patients put of some portion of the facilities available in the hospital extended to them, in my view, as observed earlier, such hospitals and dispensaries cannot be considered as not charitable hospitals and dispensaries. 20. In Municipal Corporation of Hyderabad Vs. Hyderabad Race Club, reported in AIR 1987 92, the Hon'ble Supreme Court laid down what would be the proper test to find out whether the income from the Race Club was used for a charitable purpose. It was held that the test to apply is to ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....il Nadu Slum Clearance Board on a nominal rent of Rs. 100 per annum and put up a construction for running a hospital to the public of the area who were slum dwellers. This property was subjected to assessment of property tax, which came to be challenged. The Court after taking note of Section 110 (e) of the Act and the nature of the activity done by the petitioner Lions Club, held that there can be no doubt that the petitioner organization is a charitable organization carrying on charitable activity in the said building, which has been certified by the officials themselves, vide G.O.Ms.No.88, which would be binding on the Government and accordingly allowed the Writ Petition. 22. As pointed out earlier, the Chennai Municipal Corporation Act does not provide for a mechanism as to how a property has to be considered whether being eligible for exemption under Section 110 (e) of the Act. Therefore necessarily the Court has to look into the other provisions as was done by the High Court of Karnataka, in the case of Society of Jesus (supra). Section 12A of the Income Tax Act states that the provisions of Sections 11 and 12 of the Act shall not apply in relation to the income of any Trust....
X X X X Extracts X X X X
X X X X Extracts X X X X
....team of persons to consider as to whether the activities of the petitioner, are charitable to qualify for exemptions under Section 101 (e). Collection of statistics or sample bills from a few patients or perusal of certain records during the course of inspection by the subordinates of the second respondent is not the manner in which the claim for exemption should be considered. 26. It has to be pointed out that the second respondent or that matter the officials of Corporation of Chennai have failed to understand the purport and scope of the directions issued by this Court in the earlier Writ Petitions. To examine as to whether there were any proper examination of the facts by the respondent, this Court called for the note file and perused the same. To say the least, there is nothing there in the file to indicate that a procedure was adopted or a process was followed to conclude that the petitioner is not entitled for exemption. Though at the first blush, it appears as if, the impugned order is a speaking order, closure scrutiny shows that it is devoid of any application of mind. The officer has extracted whatever has occurred earlier, the orders passed by this Court referred to th....