Red Cross Society Vs. New
Committee & Ors  Insc 254 (28 April 2003)
Pal & B.N. Srikrishna. Ruma Pal, J.
appellant-Society is a charitable organisation. In 1930, it was granted a
permanent lease of premises No. 1, Red Cross Road, New
1975-77 the appellant constructed a building on the premises. The building
consists of a basement, ground floor and five floors above the ground floor. A
portion of the building is used by the appellant for the purposes of its
Headquarters and its various offices which include a Blood Bank, St. John's Ambulance Brigade, Maternity and
Child Welfare Bureau and also the Hindkusht Nivaran Sangh. The balance portion
of the building is rented out by the appellant. It is the appellant's case that
the rent is utilised wholly for charitable purposes. The appellant has claimed
exemption from payment of house tax in respect of the building for the years
1977-78 to the present day.
to 1994, house tax in respect of properties in Delhi was imposed under the Punjab Municipal Act, 1911. The
Punjab Act was repealed by the New Delhi Municipal Council Act, 1994 (briefly
the NDMC Act) as far as New Delhi is concerned with effect from the day that
the respondent No. 1 Council was established under Section 3 read with Section
416(1) of the latter Act. According to the appellant, it had, till that time,
paid some amounts of money towards the demands raised by the respondent No.1 on
account of property tax and had also applied to the respondents for grant of
to the appellants, there was no response to the appellant's representation. The
appellant filed a Writ Petition before the High Court at Delhi specifically
impugning two bills raised by the Municipal Corporation dated 20.7.90 and
31.5.91 which were for the sums of Rs.69,14,792.71 and Rs.6,13,492
respectively. Interim protection was given to the appellant No.1 by the High
Court and the demands were stayed. The appellant then filed eight more writ
petitions before the High Court questioning the subsequent demands on account
of property tax raised by the respondent No. 1 in respect of the appellant's
building. The writ petitions were heard and disposed of by the High Court by
directing the appellant to make a fresh representation to the Director (Tax) of
the respondent No.1 who was required to consider and dispose of the same. Liberty was also granted to the appellant
to re-agitate the grounds on which the writ petitions were filed in the event
the decision of the Director (Tax) went against the appellant.
appellant made a representation pursuant to the order of the High Court. This
was disposed of on 26.2.2001 by the Assistant Secretary (Tax). The Assistant
Secretary noted that he was examining the claim for exemption only for the
period 1991-92 to 2000-2001. The position under the Punjab Municipal Act, 1911
was examined and it was found that the appellant had filed an application
claiming exemption under that Act only in respect of the self-occupied portion
of the building.
Municipal Committee which was the competent authority under Section 70 of the
Punjab Act had resolved to grant exemption from payment of property tax under
the Punjab Act in respect of the self-occupied portion of the building. The
resolution of the Committee was approved by the State Government. The exemption
was granted upto the year 1990- 91. The order also stated that there was no
application for exemption by the appellant for 1991-92 to 1993-94 as such no
resolutions had been taken by the Committee.
Assistant Secretary then considered Sections 60, 61 and 62 of the NDMC Act,
1994 and noted that exemption could be granted, if at all, under the provisions
of the NDMC Act in respect of that portion of the building occupied by the
appellant and used for charitable purposes. Although the Assistant Secretary
was of the view that even the portion occupied by the appellant did not qualify
for exemption as the premises were not used exclusively for charitable
purposes, nevertheless as the Committee under the Punjab Act had given
exemption to the self-occupied portion treating the same as used for charitable
purposes, "the same intention is allowed to continue".
respect to the appellant's claim for exemption in respect of the rented portion
of the premises, the Assistant Secretary was of the view that it was not
permissible under Section 62(2) of the NDMC Act. It was said that "the
user of the income from the building is wholly irrelevant for the purposes of
grant to a building". The claim of the society was rejected because it was
said that to accede to the claim would have far reaching consequences. It was
said that "although the income may get exemption in income tax but in the
Municipal Act, there is no such concept of granting exemption to the property
just because that income is being utilised for charitable purposes".
of the Delhi High Court and of this Court were considered in coming to the
conclusion that no exemption for the portion in occupation of the tenants is
available as the portions were not used for charitable purposes. An
apprehension was expressed that if the interpretation sought to be placed by
the appellant-society were accepted, then any society could claim exemption on
the ground that rental income would be used for charitable purposes. This,
according to the Assistant Secretary, was not the intention of the legislature.
it was held that no exemption could be granted under Section 62(1)(a) read with
Section 62(2) in respect of the portion of the building which had been rented
out by the appellant. However, exemption was to be allowed for the self-
occupied portion if the appellant continued to be supported through voluntary
contributions and did not generate surpluses year after year. On the basis of
the statements made to this effect by the appellant, the Assistant Secretary
granted exemption for the self-occupied portions for the period 1991-92 to
2000-2001. It was also stated that the society would have to claim exemption
every year and satisfy the conditions required for exemption every year.
appellant then filed an application for reviving the writ petitions which had
been disposed of earlier by the High Court.
this application was allowed by the High Court, the writ petitions were dismissed
with the observation that the appellant was at liberty to discharge its
liability to the respondent No.1 by instalments. The appellant has preferred
this appeal by way of a Special Leave Petition.
appellant relied on the decision of this Court in Municipal Corporation of
Delhi v. Children Book Trust 1992 (3) SCC 390 to contend that since it is a
charitable organisation and the entire building is used for charitable
purposes, it is not liable to pay property tax under Section 62 of the NDMC
Act, 1994 in respect of the entire building including the rented portion at
all. In the alternative it has been submitted that if the appellant is liable
to pay property tax, the power to grant exemption had not been properly
exercised by the respondent No.1 under the provisions of Section 124 read with
section 72 (e) of the NDMC Act.
counsel appearing for the respondents contended that Section 62 of the NDMC Act
explicitly made buildings which were not self-occupied by a charitable organisation,
subject to house tax. It was further submitted that the decision relied upon by
the appellant was not applicable to the appellant's case. As far as the
alternative submission of the appellant is concerned, it is the respondents'
contention that there was no power under the NDMC Act to grant exemption in an
individual case. Exemption could only be granted to a class of similarly
situated bodies or persons.
appellant has in the meanwhile cleared all the outstanding demands of the
respondent No. 1 and continued to apply for exemption from payment of property
tax in respect of the entire building. Two of the applications dated 17th May 2001 and 20th August 2001 have been brought on record. An order passed by the Advisor
(Revenue) of the NDMC dated 22nd March 2002
limited to the question of fixation of the rateable value of the rented portion
for the purposes of house tax has also been brought on record. The order
records that the self-occupied portion of the building has been exempted from
payment of property tax. However, it is clear from the body of the order that
it was not passed in response to the appellant's application for grant of
exemption to the appellant under the provisions either of the Punjab Act or the
the Punjab Act, the tax on all property was imposed under Section 61. The
statute itself did not allow for any specific exemption in respect of any class
of property and left it to the discretion of the Committee or the State
Government to grant exemption in the circumstances prescribed. The
"Committee" has been defined in Section 3(4) as the Municipal Council
or a Nagar Panchayat, as the case may be, constituted under Section 12 of the
Act. Section 70 of the Punjab Act provided for the 'Power of the Committee in
regard to taxes'. Sub-section (2) of Section 70 provided:
Committee, by a resolution passed at a special meeting and confirmed by the
State Government, may
that all or any persons may be allowed to compound for taxes imposed under
sub-clauses (c), (d) and (e) of clause (1) and under clauses (2) and (3) of
suspend or reduce in amount any tax imposed under the foregoing sections; or
in whole or in part from the payment of any such tax, any person or class of
persons or any property or description of property." Apart from the power
of the Committee under the aforesaid provisions, the State Government was given
power under Section 71 by order to:
in whole or in part from the payment of any such tax any person or class of persons
or any property description of property.
any time it appears to the State Government on complaint made or otherwise,
that any tax imposed under the foregoing sections is unfair in its incidence or
that the levy thereof or of any part thereof is injurious to the interests of
the general public, it may require the committee to take within a specified
period measures to remove the objection: and, if within that period the
requirement is not complied with to the satisfaction of the State Government the
State Government may by notification suspend the levy of the tax or of such
part thereof until the objection has been removed." As far as the NDMC Act
is concerned, property tax is leviable on lands and buildings in New Delhi under Section 60(1)(a) read with
Section 61(1). Section 62 which has been construed in the impugned order by the
Assistant Secretary, is quoted:
Save as otherwise provided in this Act, the property tax shall be levied in
respect of all lands and buildings in New Delhi except : -
and buildings or portions of lands and buildings exclusively occupied and used
for public worship or by a society or body for a charitable purpose:
that such society or body is supported wholly or in part by voluntary
contributions, applies its profits, if any, or other income in promoting its
objects and does not pay any dividend or bonus to its members.
'Charitable purpose' includes relief of the poor, education and medical relief
but does not include a purpose which relates exclusively to the religious
and buildings vested in the Council, in respect of which the said tax, if
levied, would under the provisions of this Act be leviable primarily on the
lands and buildings (other than dwelling houses).
Lands and buildings or portion thereof shall not be deemed to be exclusively
occupied and used for public worship or for a charitable purpose within the
meaning of clause (a) of sub-section (1) if any trade or business is carried on
in such lands and buildings or portion thereof or if in respect of such lands
and buildings or portions thereof, any rent is derived.
Where any portion of any land or building is exempt from the property tax by
reason of its being exclusively occupied and used for public worship or for a
charitable purpose such portion shall be deemed to be a separate property for
the purpose of municipal taxation." If one analyses the relevant clauses
of Section 62(1), lands and buildings or portions of lands and buildings are
exempt from property tax if they are:
occupied by a society or body for a charitable purpose;
society or body is supported wholly or in part by voluntary contributions;
the said society applies its profits, if any or other income in promoting its
objects and does not pay any dividend or bonus to its members, It is clear that
under Section 62(1) of the NDMC Act, if the appellant-society fulfils these
three conditions it is entitled as a matter of right to be exempted from
payment of property tax. Where the Assistant Secretary erred, was in treating
the right to exemption in respect of the self-occupied portions of the
appellant's building as a matter of discretion. It is not. It is a matter of
right provided of course of the conditions laid down in Section 62(1) are
fulfilled by the society.
(2) of Section 62, however, carves out two exceptions to this exemption, namely
if (a) any trade is carried out in such lands and buildings, or (b) in respect
of any portion of such land or building or portion thereof any rent is derived.
In such a case, under sub-section (3), the portion of the land or building
exclusively occupied and used for charitable purposes under Section 62(1) and
the portion, which is excepted under sub-section (2) are deemed to be separate
properties for the purpose of municipal taxation.
the statutory exemption under Section 62(1) is not available to the society if
the building is not self-occupied but is rented out. The section does not make
any allowance even if the rental income is used for charitable purposes. The
phrase 'for a charitable purpose' only qualifies self occupation under Section
62(1)(a). The appellant's claim for the benefit of such statutory exemption under
Section 62 of the Act in respect of the rented portion of the building is,
therefore, untenable and the Assistant Secretary had rightly rejected it.
appellant's reliance on the decision of this Court in Municipal Corporation of
Delhi V. Children Book Trust and Anr. ( supra) is misplaced although in that
decision, this Court had construed Section 115(4) (5) and (6) of the Delhi
Municipal Corporation Act, 1957 which are verbatim the same as Sections 62(1),
(2) and (3) of the NDMC Act. There the Court had disposed of two appeals. The
first appeal was filed by the Corporation against the Children Book Trust and
the second was by the Safdarjung Enclave Education Society against the
Corporation. As far as the appeal filed by the Children Book Trust was concerned,
a portion of the premises occupied by the Trust was rented out to a Press. The
Municipal Corporation had sought to levy property tax under the Delhi Municipal
Corporation Act, 1957 in respect of the entire premises. The Trust filed a writ
petition claiming total exemption from payment of property tax under Section
115 (4) of the 1957 Act before the High Court at Delhi. The writ petition was
allowed by the learned Single Judge who held that the Trust was entitled to
claim total exemption from payment of tax under Section 115(4) of the 1957 Act
except in respect of that portion which was rented out. However, the learned
Judge held that even from the rental value, the Trust was entitled to claim
exemption in the proportion of the income accruing to it from the publication
of children's book which was held to be a charitable purpose. The Division
Bench partly allowed the Municipal Corporation's appeal holding that in view of
the mandatory provisions of Section 115(4) of the New Delhi Corporation Act, exemption
from the payment of property tax could not be allowed in respect of the area
which was rented out or not occupied by the Trust itself for charitable
purposes within the meaning of the 1957 Act. The further appeal of the
Municipal Corporation before this Court was dismissed. It is to be noted that
the Court was only considering the Municipal Corporation's appeal in respect of
the portion of the premises which had not been rented out by the Trust. As far
as the rented portion was concerned, the Court noted "Admittedly, no
exemption could be claimed concerning this portion. It is the other portions
which are otherwise relevant for the purpose of this case".
appeal of the Education Society, the Education Society claimed an exemption in
respect of premises owned by it where a school was being run. The Society had
filed a writ petition challenging an assessment order of the Municipal
Corporation. The writ petition was dismissed by the High Court.
Education Society then preferred an appeal before this Court. The contention
which was raised before this Court was that the Society was running the school
which was in occupation of the premises and that the giving of education was a
charitable purpose and, therefore, the society was entitled to exemption under
the provisions of Section 115(4) of the Act.
Court held that the Society could not be said to be occupying the building.
"The School being a separate entity, premises occupied by the school will
belong to it and not to the society. Therefore, the society cannot claim to be
in exclusive occupation and use of the land and building in question." It
was also held that although the imparting of education may be a charitable
purpose, the Society would have to further show that education was the primary
objective and not the making of profit. It was also held that unless the
society was supported wholly or substantially by voluntary contributions, in
view of the proviso to Section 115(4)(a), [Section 62(1)(a) of the NDMC Act]
exemption from payment of property tax could not be claimed. None of these
findings are relevant for our present purpose. There is no dispute that the
appellant-Society before us exclusively occupies a portion of the premises for
a charitable purpose and otherwise fulfils the conditions required for
exemption from property tax in respect of such portion. We are, in this appeal,
unlike in the appeals in the Children Book Trust, only concerned with the
balance portion of the building which has been rented out by the appellant. It is
true that this Court in Children Book Trust made an observation that:
the profits or income of trade or business is devoted to a charitable purpose
and no part thereof is distributed among the members as dividends or bonus,
then that trade or business is a means to an end. It is charity.
if there is a trade or business carried on in a land or building and its
profits are not applied to a charitable purpose, sub-section (6) says that that
part of the land or building where a trade or business is carried on or from
which rent is derived, will be subject to tax."
these observations were made in the context of Section 115(4) [Section 62(1) of
the NDMC Act)] which envisages societies occupying the subject premises, making
profit or deriving income. The proviso to sub-Section 4, clause (a) requires
such profits or income to be utilised in promoting the objects of the society
and not to be paid by way of dividend or bonus to the members of the society.
It was in that connection that the Court made the observation quoted above.
observation would not be relevant to a situation where property is not in
occupation of the Society at all but is rented out.
to the alternative case of the appellant viz., the grant of exemption in
respect of the tax leviable on the rented portions, although, the Assistant
Secretary did not have any other option but to consider the appellant's claim
for exemption in view of the direction of the High Court, no discretion is
conferred under Section 62 of the NDMC Act on the Assistant Secretary for
granting any exemption to the assessee from any portion of the taxes leviable
except to the extent the statute itself provides.
72(1)(e) on which the appellant has relied provides:
The chairperson may, at any time, amend the assessment list (e) by making or cancelling
any entry exempting any land or building from liability to property tax; "
This section also does not confer any discretion on the Chairperson to exempt
any property from payment of tax.
that it does is to empower the Chairperson to give effect to any exemption
otherwise granted, by amending the Assessment List. The power and discretion to
grant exemption under the NDMC Act has been conferred on the Council under
Council may, by resolution passed in this behalf, exempt either wholly or in
part from the payment of any tax levied under this Act, any class of persons or
any class of property or goods." The respondents are correct in their
submission that under Section 124, as far as the present controversy is
concerned, the Council's power must be exercised, if at all, in favour of a
class of persons or a class of property. This power may be contrasted with the
Punjab Municipal Act where exemption may have been allowed, even in respect of
an individual by the Committee under Section 70(2)(c) and the State Government
under Section 71.
while dismissing the appellant's appeal in so far as it has claimed statutory
exemption under Section 62 in respect of the rented portion of the building, we
grant the liberty to the appellant-Society to apply to the Council for
exemption from payment of taxes leviable in respect of the rented portion. It
would be open to the Council to resolve under the provisions of Section 124 to
exempt all persons who are similarly situated as the appellant-society on the
application of the appellant. The Council will dispose of the appellant's
representation after giving the appellants an opportunity of being heard.
will be no order as to costs.