Madras High Court Upholds TN Govt's Decision To Hike Property Tax But Strikes Down Its Retrospective Effect
|The Madras High Court while dealing with a bunch of 150 writ petitions challenging mainly the Government Order (G.O.), Chennai civic body's Council Resolution (C.R.), Property Tax General Revision Notices, and the new tax rates structured on a slab basis upheld the Tamil Nadu Government's decision.
The Court upheld the decision of an increase in the rate of property tax but stuck down the retrospective application of stating that the new tax slabs will be operative only from April 1, 2023.
A Single Bench of Justice Anita Sumanth on December 23 in its judgment said –
"Straight away, I may state that reference to the first half of 2022-23 is not merely erroneous but absurd, seeing as the remittance of property tax for every half year is the 15th of the first month comprised in that half-year, i.e., by 15th of April and by 15th of October, of the year concerned. Seeing as the CRs approving the enhancement of rates were passed only on 30.05.2022 and 26.05.2022, the amendment for the first half year for which the last date for payment had already expired by then, has necessarily to be set aside. Furthermore, increase in tax rates cannot be retrospective as settled by Courts over the years, seeing as any enhancement in tax rates and tax burden would affect adversely, the substantive civil rights of the parties. Thus, even at the threshold, this Court makes it clear that the reference to the first half of 2022-23 in the impugned G.O, Gazette and CRs, is erroneous and illegal."
The Bench further said that the right of the State to impose a tax on the property is well-founded and it is not the petitioners' case that no such right exists and that the submissions made on behalf of the petitioners are against the procedure followed.
The Court also observed, "It pains the Court to state that the objections have been disposed frivolously without accordance of any weightage to the queries raised. All the queries pertain to issues that have been agitated in these Writ Petitions, being the basis of enhancement and the procedure to be followed in the levy and collection of taxes. It is incumbent upon the authorities to have provided due explanation to these queries and this Court deprecates the casual, careless manner and mechanical fashion in which the objections have been disposed."
Senior Advocate T.V. Ramanujan appeared for the petitioners while Senior Advocate P.S. Raman appeared for the respondents.
Facts –
The writ petitions were related to the challenge to the G.O. and CR. The move to enhance rates of property tax stood triggered by a need for augmented funds as well as the mandate cast by the 15th Central Finance Commission for availing grants and entry-level conditions for receiving funds under various schemes of the Government of India (GOI). The State Government thus constituted a Committee to look into the present rates of property tax, and determine whether they are commensurate with the need of the State and in line with measures taken elsewhere in the Country for the levy and collection of property tax. The Committee had made certain recommendations proposing augmenting of rates of the taxes as well as the Basic Street Rates (BSR). There was also a proposal for the adoption of a slab system.
The Committee's report got accepted by the State in passing the G.O. The G.O. was gazetted and a Notification was issued for implementation of a general revision of property tax within the limits of Greater Chennai and Coimbatore Corporations, with effect from the current year, i.e., with effect from the first half of 2022-23. The Notification had been published in Coimbatore in both English and vernacular newspapers and there was a call for objections, to be addressed to the Principal Secretary/Commissioner, of the Corporations, within 30 days from the date of its publication. The Notification stated that upon expiry of the 30-day period, objections shall be considered Thereafter, the Resolution was passed after having taken note of 30 objections that were received from a taxpayer base of 13 lakhs (approx.) assessees in Chennai. In almost all the cases, the objections were answered simply by relying upon the G.O. and the Notification that preceded the CR.
The High Court after taking note of all the contentions made by the counsels of both parties, opined, "Property taxes are a major source of revenue to the State and the report of the Committee as well as the analysis of data supplied by the respondents reveal more than adequately, that this source of revenue was not being deployed effectively. Non-deployment of revenue sources only leads to the denial of proper infrastructure and facilities to the citizens and the enhancement in property tax rates is only a move forward in that direction. I am of the considered view that the present impugned enhancement is not vitiated simply by virtue of the recommendations made by the Finance Commission. At best, it is an exercise in collaboration by the Union and State in the best interests of the Country. This argument is answered accordingly."
The Court further observed that the G.O. cannot be considered a diktat and it does precede the CRs indicating that changes are strongly urged in the property tax regime.
The Court further noted, "The trajectory of events are, in my view, acceptable and indicate application of mind by the Corporations. Undoubtedly, the events have been spearheaded by the Union, specifically the Central Finance Commission and consequently the State. However, the ultimate decision has been taken by the authorities of the Corporations. … In my view, the procedure followed by the Corporations has been by the book and there has been strict compliance with the letter of the law. However, the spirit of the law is quite another matter and there has been a total lack of transparency in calling for objections. Moreover, the manner in which the objections have been dealt with is farcical."
It was also stated by the Court that once the annual value is determined by the application of a proper and appropriate method, the process of computation begins, based on the ARV determined.
The Court therefore concluded, "The submissions of the petitioners to the effect that it is only rental value as computed under the Rent Control Act that can form the basis of determination of ALV is, in my view, unacceptable. The 1919 Act only requires the determination of annual value to be based on ALV and there is no dispute that this is the procedure that is perpetrated now. Admittedly, there is no restriction on the methodology as to how ALV is to be determined and thus there is substantial play in the joints that has been afforded to the respondents in this regard"
The Court also directed the corporations to ensure their official websites are kept robust and adequate grievance mechanisms be put in place to enable all property tax assesses to seek clarifications.
Accordingly, the Court disposed of the petitions stating that the GOs and General Revision Notices stood confirmed and the challenges to the same got dismissed.
Cause Title - K.Balasubramaniam v. The Commissioner & Ors.
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