The Karnataka High Court under Justice MGS Kamal in Union of India & others And State of Karnataka & others (Writ Petition No. 33252 of 2012) recently overturned the notifications in which the Mangalore Municipal Corporation issued demand notices to the Union of India regarding the payment of property taxes in relation to the building used as staff quarters. However, because the department had already given the firm the money, it instructed it to apply it to the payment of service tax for the services rendered.
In Mangalore City, the Union government has structures that serve as housing for its staff. For the building, the corporation sought payment of property taxes. Unintentionally, the department paid the corporation a total of Rs. 4,42,675 to satisfy demand notifications that were sent from 1994–1995 to March 31, 2008.
It is the further contention of the petitioners that it was subsequently noticed that demand made by the respondent No.-2 corporation with regard to payment of property tax was illegal and contrary to the provisions of Article 285 (1) of the Constitution of India. Therefore, a representation dated 25.02.2010 as per Annexure-A was made to the respondent No.2 seeking exemption of the building from the payment of property tax and also sought for refund of the amount already paid by it. The respondent No.4 without considering the representations given earlier, issued another demand notice dated 16.07.2011 demanding payment of arrears of property tax in respect of the building belonging to the petitioners on the premise of the provisions of the Section 110(j) of the KMC Act, 1976. 7 Being aggrieved by the aforesaid demand, petitioners are before this Court.
It is clear from reading of the clause (1) of Article 285 of the Constitution extracted hereinabove that if a building belonging to Union of India was in existence prior to coming into effect of the Constitution and said building unless Parliament may by law otherwise be exempt from levy of tax by the State or any other authorities. Relying on the judgement Union of India and others vs. City Municipal Council, Rani Bennur and another reported in AIR 2000 Karnataka 104, wherein dealing with identical situation, it was said “Provisions of Article 289 exempt the property of the State and that of Article 285, provide exemption to property of the Union are complementary to each other with a view not to levy the tax by State Legislature on the property of the Union and also by the Parliament on the property of the State. Article 285 refers to the property of the Union. If the property belongs to the Union, then, irrespective of its use, no tax could be levied by the State Legislature or by Municipal Authorities. The concept of use is 10 not provided under Article 285. The denial of exemption under the proviso to Section 94 of the Act on the ground that the property is used or intended to be used for residential or commercial purpose cannot be considered to be inconsonance with the spirit of Article 285 of the Constitution of India.”
Following the above findings the demand notices were quashed.
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JUDGEMENT REVIEWED BY VAISHNAVI SINGH