Corpn can't tax railway property: HC
Madurai: Article 285(1) of the Constitution indicates that the property of the Union shall be exempt from all taxes imposed by a state, even if it is put to commercial use, observed
Madras high court
.
The court set aside a single bench order dismissing a plea moved by Madurai Multi Functional Complex Private Limited challenging the demand notice issued by Madurai corporation seeking payment of property tax.
The land in Madurai belongs to railways. To develop vacant land parcels owned by railways, The Railways Act, 1989, was amended and Railway Land Development Authority (RLDA) was constituted. In 2013, RLDA and Ircon Infrastructure and Services Limited entered into an agreement for development of railway land throughout India.
Subsequently, Ircon entered into a sub-lease agreement for 30 years with Madurai Multi Functional Complex Private Limited concerning the property in Madurai.
The Multi Functional Complex was constructed by Ircon on a 2,700 sq metre plot within Madurai railway station premises. Madurai corporation assessed the building for property tax and issued a demand notice in 2018, calling upon Madurai Multi Functional Complex Private Limited to pay half-yearly tax of Rs 10,07,623.
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Though a petition was filed challenging the demand notice, it was dismissed by the single judge. Therefore, Madurai Multi Functional Complex Private Limited (appellant) preferred the present appeal in 2020.
A division bench of Justice G R Swaminathan and Justice M Jothiraman observed that the plain language of Article 285(1) of the Constitution indicates that the property of the Union shall be exempt from all taxes imposed by a state or by any authority within a state.
"Article 285(1) stands as an iron dome which cannot be breached. Property of the Union of all kinds and hues can take shelter within it," the judges observed.
The judges noted that RLDA is an alter-ego of the railways which cannot hold properties in its name. "Therefore, we hold that the petition mentioned building belongs to railways. The title over the building vests with the railways," they said. Hence, the judges held that the levy of property tax over the appellant-building would fall foul of Article 285(1) of the Constitution and set aside the order of the single bench.
However, the judges made it clear that since the appellant is enjoying certain facilities offered by the Madurai corporation, it is open to the corporation to enter into a special agreement with the appellant to enable the petitioner to continue to enjoy those facilities. Since the appellant-building forms a class by itself, it is open to the corporation to charge a higher drainage tax. The corporation will issue notice to the appellant and other occupiers of the building to come for negotiation and enter into an appropriate agreement in this regard, the judges observed.
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