Liability To Pay Property Tax Arises From Date Of Acquisition Of Ownership: SC Dismisses Rajkot Municipal Corporation's Appeal Against HC Direction To Refund
The Supreme Court upheld the Gujarat High Court judgment directing refund a portion of property tax collected by the Rajkot Municipal Corporation from a Company while observing that the liability to pay outstanding property tax dues arises from the date of acquisition of ownership of the property.
The Court dismissed Rajkot Municipal Corporation’s (Corporation) challenge against the direction of the Gujarat High Court directing the Corporation to refund a portion of the property tax it collected from Avenue Supermarts Limited (respondent). The High Court had directed the Corporation to refund part of the property tax collected from the respondent since the respondent was not liable for arrears incurred before acquiring the property.
A Bench of Justice Abhay S. Oka and Justice Augustine George Masih observed, “Therefore, till 03.09.2015, the “person primarily liable to make payment” from a co-joint reading of Sections 139 and 140 of the GPMC Act 1949 was the lessor of the said property, that is, Respondent Nos. 04 and 05. The liability prior to 03.09.2015, thus, cannot be foisted upon Respondent No. 02. The High Court was thus correct in observing that Respondent No. 02 was liable to pay property tax from the date of acquisition of ownership.”
Sr. Advocate Harin P Raval appeared for the appellant, while Sr. Advocate Jay Savla represented the respondents.
The corporation argued that the Impugned Order directing the refund of property tax was contrary to the provisions of Sections 139 and 140 of the Gujarat Provincial Municipal Corporation Act, 1949 (GPMC Act). It was submitted that a Commissioner was empowered to recover outstanding property tax dues from an occupier under Section (1) of Section 140 of the GPMC Act.
On the other hand, the respondent argued that the commercial property in question was acquired via Deed of Conveyance from its predecessor-in-interest. Therefore, the respondent would be liable for the payment of property tax from the date of acquisition of ownership and not before that.
The stance taken by the respondent was accepted by the High Court which directed the corporation to refund a portion of the property tax on the ground that the respondent cannot be made liable for the payment of arrears of property tax which arose prior to the acquisition of ownership.
Aggrieved by the direction to make the refund of the accrued amount of property tax dues, the Corporation assailed the impugned order before the Supreme Court.
The Supreme Court noted that the issue arose from the demand notice dated issued by the Corporation to the respondent seeking not only the payment of property tax for the AY 2015-16 but also the outstanding dues when the respondent had not even acquired the property.
The Court further noted that the notice warned of sealing the respondent’s property if payment was not made. Since the payment was not made, the property owned by the respondent was sealed. The Court also observed that a final notice was issued by the Corporation for the attachment of the property and the issuance of a sale warrant due to unpaid arrears. In response, the respondent deposited the outstanding dues and challenged the Corporation's actions before the High Court on the aforementioned grounds.
“Thence, to obviate such double payment in favour of the Appellant Corporation and causing disruption in the pending litigation against the demands accrued prior to 03.09.2015, we are of the opinion that the order directing refund by the High Court stands justified considering the peculiarity of the aforesaid facts and circumstances,” the Bench remarked.
Consequently, the Court held, “In light of the aforesaid discussion, we do not find any ground to interfere with the Impugned Order dated 07.07.2016 passed by the High Court.”
Accordingly, the Supreme Court dismissed the appeal.
Cause Title: Rajkot Municipal Corporation v. State Of Gujarat And Ors. (Neutral Citation: 2024 INSC 596)
Appearance:
Appellant: Sr. Advocate Harin P Raval; AOR Anirudh Sharma; Advocate Ritvik Bhanot
Respondents: Sr. Advocate Jay Savla; AOR Deepanwita Priyanka, Rahul Gupta and Rameshwar Prasad Goyal; Advocates Shashank Shah, Prabhat Kumar, Jasdeep Singh Dhillon, Anirudh Jamwal and Priyank Adhyaru