Constructed Building Becomes Exigible For Tax Only When Occupancy Certificate Issued: Karnataka High Court Quashes BBMP Demand Notice

The Karnataka High Court has quashed a demand notice issued by the Bruhat Bengaluru Mahanagara Palike (BBMP) for payment of backdated property tax from 2008, on the ground that the building was completed even when the Occupancy Certificate came to be issued on 25.04.2011.

A single judge bench of Justice Suraj Govindaraj allowed the petition filed by M/s B M Habitat and quashed the order issued by the corporation dated 15.02.2018 and it directed the corporation to receive the property tax commencing from 25.04.2011.

The petitioner contended that he completed the construction in July 2010 on account of NOC to be issued by the Deputy Commissioner for running a multiplex and since the fire clearance had been delayed, the application for grant of occupancy certificate was made on 05.07.2010. Since the same was not considered, the petitioner contended to having submitted another application on 02.12.2010.

Thereafter, it was argued that an inspection was carried out and an occupancy certificate was issued on 25.04.2011.

Petitioner contended that this delay on the part of the respondents in considering the application cannot be the liability of the petitioner. It was argued that the petitioner had not made use of the building for his personal purpose or for renting out during that time.

It was argued that the building being used only after the occupancy certificate had been issued, the property tax was required to be calculated from the date of occupancy certificate and not prior thereto.

However, the corporation argued that the date of completion of the building had wrongly been mentioned by the petitioner since the building was deemed to have been completed on 17.01.2008 on account of the plan sanction being valid up to that date.

It was submitted that the building ought to have been constructed by 17.01.2008 and therefore, the property tax was liable to be paid from the date of the deemed construction being complete of the building.

The delay by the Deputy Commissioner in issuing NOC and/or fire services in issuing NOC is not to the account of the Corporation and their delay cannot deprive the Corporation of their valid and due tax, it was submitted.

The bench rejected the contention of the corporation holding that if such submissions were to be accepted, then it would mean that between 03.05.2007 and 17.01.2008 i.e within less than a period of 8 months, 2,20,860 sq. ft. construction has been put up over four floors.

It held that though the plan was valid up to 17.01.2008, the Corporation could not seek to bring deeming fiction to contend that since the plan expired on a particular date, the construction was deemed to have been completed by that date without verifying actual status and without necessary documentation being placed on record, that the building was constructed and was put to use.

Court noted that the NOC was only issued in 2010, and until such NOC was issued, the petitioner could also not have made use of the property for any of the purposes let alone as a multiplex or a mall.

It opined that after NOC was received on 01.02.2010 and after carrying out the finishing works, an application for issuance of Occupancy certificate was made on 05.07.2010 by the petitioner. 

This application did not yield any results inasmuch as the Corporation did not carry out the inspection of the property to ascertain whether the construction has been put up and whether the said construction is in accordance with the plan sanction requiring the petitioner to submit one more application on 02.12.2010 and it is only on 25.04.2011 that the occupancy certificate was issued. Thus, there is considerable delay on part of the Corporation also in inspecting the property and issuing an occupancy certificate. This delay also cannot be made use of by the Corporation to shift the date of completion of the construction and/or occupancy, it held. 

It further opined that there was no document placed on record to show that the petitioner had occupied or used the property before the occupancy certificate. The use of the property having commenced only post the occupancy certificate having been issued, the Court held that it is only then that the building would become exigible for tax since the application of the property tax was on the building once completed and until then, the incidence of property tax would only be on the vacant/open land and not on the constructed building.

Accordingly, in finding the actions of the corporation unjustified, the Court allowed the petition.

Appearance: Advocate S.Rajashekar for petitioner.

Advocate Pallava R for R1.

Citation No: 2023 LiveLaw (Kar) 481

Case Title: M/s B M Habitat AND The Commissioner And Competent Authority

Case No: Writ Petition No 28561 OF 2019

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