Kerala Building Tax Act | Residential Building Rented Out For Residential Purpose Can't Be Treated As Commercial Building: High Court
The Kerala High Court on Friday ruled that a residential building which has been rented out for residential purposes cannot be treated as a commercial building under Kerala Building Tax Act, 1975.Justice Shaji P. Chaly examined the definition of a residential building under the Act before concluding that giving out a residential building for rent does not change its characteristics to that...
The Kerala High Court on Friday ruled that a residential building which has been rented out for residential purposes cannot be treated as a commercial building under Kerala Building Tax Act, 1975.
Justice Shaji P. Chaly examined the definition of a residential building under the Act before concluding that giving out a residential building for rent does not change its characteristics to that of a commercial building.
Suppose, a building is constructed as a residential building and the same is given on rent, that will not change the characteristics of the residential building as is provided under Section 2(l) of the Act, 1975.
The petitioner was the owner of a residential building for which he is only liable to pay building tax as per the prescription contained under the Act for a residential building.
However, the Tahsildar passed an assessment order treating the petitioner's building as a non-residential building, since the building is given on rent for residential purposes. Therefore, the Tahsildar assessed the building including its garage.
Aggrieved by this, the petitioner filed the appeal before the Revenue Divisional Officer, contending that the order passed by the Tahsildar is unsustainable since the building is a residential building under Section 2(I) of the Act. However, this appeal was dismissed.
Although a revision was filed before the District Collector after remitting 50% of the amount, the order passed by the Tahsildar and the appellate authority was confirmed.
Thus, challenging the legality and correctness of the orders passed by the statutory authorities, the petitioner approached the High Court.
Advocate Lal K. Joseph appearing for the petitioner contended that going by the definition, it is clear that a building which is principally used for residential purposes other than hotels, lodges and boarding places is a residential building.
Further, it was argued that merely because a residential building was let out for a residential purpose, it cannot be treated as a building not for residential purposes, since the activity in the building is only a residential activity. It was also submitted that the garage of the building cannot be used for the purpose of calculating the plinth area of a residential building as per the proviso to Section 5( 5).
Government Pleader Resmitha R. Chandran appeared for the respondents herein.
The Court noted that as per Section 2(l) of the Act, a residential building is a building or any other structure or part thereof built exclusively for residential purposes including out houses or garages appurtenant to the building for the more beneficial enjoyment of the main building. But what is excluded therefrom is hotels, boarding places, lodges and the like.
Justice Chaly observed that merely because a residential building is given for rent, that will not change the characteristics of the residential building as is provided under Section 2(l).
Therefore, it was found that the assessment done by the Tahsildar for building tax, treating the building as a commercial building since it was rented out for residential purposes was not a correct legal approach to the issue on hand.
As such, it was held that the findings of the Tahsildar, appellate authority and the revisional authority cannot be sustained under law, since they were against the statutory provisions under the Act.
That apart, the Court found that the assessment was done including the garage of the residential building and the total plinth area is calculated taking into account the garage also.
It was noted that as per the Kerala Finance Act, a proviso has been added to Section 5(5) of the Kerala Building Tax Act which states that "the plinth area of a garage or any other erection or structure appurtenant to a residential building used for the purpose of storage of firewood or for any nonresidential purpose shall not be added on the plinth area of that building."
Therefore, considering this aspect, it was found that the Tahsildar was not entitled under law to make an assessment by including the plinth area of the garage.
Consequently, the order of assessment and the orders in the appeal and revision were quashed by the High Court.
The Tahsildar was directed to reassess the building in accordance with the findings and the observations herein within one month, after providing the opportunity of participation to the petitioner.
There was also a direction to the Tahsildar to return the 50% of the amount already deposited by the petitioner within one month; or if the assessment is made within the said period, necessary adjustments should be made towards building tax and the balance amount shall be returned to the petitioner immediately.
The petition was accordingly allowed.
Case Title: P.K Shanmughan v. District Collector & Ors.
Citation: 2022 LiveLaw (Ker) 392