Lisie Hospital Not Providing Substantial Free Medical Relief To Poor Cannot Be Construed As 'Charitable' For Exemption From Building Tax: Kerala HC
While finding that the legislative provision in the instant case indicates that it is the highest extent of relief viz. “free medical relief” that is specified in the inclusive definition for the grant of a benefit of exemption from tax, the Kerala High Court held that a dilution of the prescription, as regards the extent of medical relief required for claiming exemption under the statute, would tantamount to widening the scope and ambit of the exemption contemplated under the statutory provision at the entry stage, where it is a strict interpretation that is to be adopted.
The High Court held so while observing that the building of the appellant was not principally used for providing free medical relief as required under the statutory provision for inclusion under the definition of charitable purpose.
Noticing that the appellant, Lisie Medical Institutions, had not rendered any of the other services that qualify as charitable purposes under Section 3 of the Kerala Building Tax Act, in the hospital building run by it, the Division Bench of Justice A.K Jayasankaran Nambiar and Justice Mohammed Nias C.P refused to grant exemption to the appellant’s building under Section 3 of the Act in respect of the medical relief provided in the building in question.
Lisie Medical Institutions Trust runs a hospital by the name of Lisie Hospital at Ernakulam.
While declining the relief of exemption, the Bench observed that “even if we were to treat the exemption under Section 3(1)(b) as available to a hospital that provides a substantial amount of free medical relief to the poor or the needy, the figures shown in the order of the government that was impugned in the writ petition, reveal that the hospital had expended only 4.23% and 4.56% of its total income for the years 2013-14 and 2014-15 towards free medical relief. This cannot be seen as substantial in any sense of the term and hence even a liberal and expansive interpretation of the term “charitable purpose” cannot come to the aid of the appellant in the instant case”.
Advocate Issac M. Perumpillil appeared for the Appellant, whereas Special Government Pleader Mahammed Rafiq appeared for the Respondent.
The brief facts of the case were that the appellant trust runs a hospital. In respect of a building that was constructed by it in 2013, wherein it was providing medical treatment at concessional rates, it was served with a notice demanding building tax under the Kerala Building Tax Act. On a reference made to the government at the instance of the appellant, the Government found that the building constructed by the appellant in 2013 would not qualify for the exemption contemplated under Section 3(1) of the Act since the appellant was not providing medical relief free of cost and hence it did not satisfy the definition of charitable purpose under the exemption provision. The Government also found that the appellant expended only a nominal amount for charitable purposes and that insofar as the appellant’s hospital was providing medical relief by collecting fees, it would not qualify for the exemption. Although the appellant challenged the said order of the Government, the Kerala High Court dismissed the same following the judgment of the Supreme Court in SH Medical Centre Hospital v. State of Kerala [(2014) 11 SCC 381]. Later, the matter was again restored before the present Court.
After considering the submission, the Bench pondered on the question that if the phrase ‘charitable purpose’ in Explanation 1 is to be given a wide meaning on account of the inclusive definition used therein when it comes to medical relief qualifying as a charitable purpose, can there be a lesser form of medical relief than “free” medical relief, that can be roped in through the inclusive phraseology used in the exemption provision.
The Bench further expounded that in the specific context of the provision of medical relief, a Full Bench of the Kerala High Court in 2010, had already taken the view that it is only free medical relief that will qualify as a charitable purpose for the exemption under the statutory provision.
“The said view was maintained by the Supreme Court in SH Medical Centre Hospital (supra) decided in 2014 and the said view held the field till its correctness was doubted in 2017, in Lisie Medical Institutions (supra) and the matter was referred to the three-judge bench, which remitted the matter to this Court in 2023”, added the Bench.
The High Court elucidated that when the question is whether a subject falls in the notification or the exemption clause then it being an exception is to be construed strictly and against the subject, but once ambiguity or doubt about the applicability is lifted and the subject falls within the exemption provision, then full play should be given to it and it calls for a wider and liberal construction.
The High Court therefore concluded that the appellant cannot claim exemption from building tax under the Act, based on the extent of medical relief that it has been providing in the building in question.
Cause Title: Lisie Medical Institutions v. State of Kerala and Ors.
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