Madhya Pradesh High Court Allows Educational Trust To Present Its Case Once Again In Property Tax Dispute

The Madhya Pradesh High Court has provided relief to the South Indian Cultural Association Educational Trust (SICA) in its legal battle against the imposition of property tax. The court overturned the order issued by a Single Judge, thereby granting the appellant the opportunity to present comprehensive objections before the competent authority.

The case revolves around a plot which was allotted to SICA by the Indore Development Authority through a lease, and the trust obtained building permission to construct a multi-storey building for educational purposes in 2009. Under Section 136 of the M.P. Municipal Corporation Act, 1956, SICA had been exempt from paying property tax. Nevertheless, the respondents issued a notice demanding property tax and other taxes on the land and building.

Thereafter, SICA filed a writ petition, which was disposed of with a direction to the respondents to provide an appropriate opportunity for a hearing and disclose the correct position regarding the petitioner's liability to pay the tax. However, the respondents issued a notice demanding arrears of property tax amounting to Rs. 85,76,376. Despite the appellant submitting a detailed representation against this demand, it was rejected by the Deputy Commissioner (Revenue), Municipal Corporation Indore who upheld the tax demand.

SICA then filed another writ petition challenging the demand for property tax imposed by the Deputy Commissioner, whereby the Single Judge dismissed the writ petition, citing a technical objection and refusing to examine the validity of the said order, with liberty to the appellant to avail the remedy of appeal under Section 184 of the Municipal Corporation Act, 1956.

Subsequently, in a bid to seek redress, SICA filed an appeal under Section 2(1) of the M.P. Uchcha Nyayalaya (Khand Nyaya Peeth Ko Appeal) Adhiniyam, 2005.

SICA's counsel argued that, as a lessee and a charitable trust, the trust is entitled to exemption from property tax payment under Section 136 of the Act. It was contended that the demand made by the authority was therefore illegal. The counsel further pointed out that the authority failed to properly consider the provisions of Section 132 and 136 of the Act in this regard.

In its verdict, the division bench comprising Justices Vijay Kumar Shukla and Anil Verma upon reviewing the order imposing property tax on SICA, observed that the authority had failed to address the various contentions raised by the trust regarding the property's ownership and the lessee's status concerning the payment of property tax under the provisions of Section 132 and 136 of the Act.

Consequently, while setting aside the impugned order, the bench directed. “comprehensive representation/objection raising all objections before the competent authority within a period of 15 days from today along with receipt of deposit of Rs.10 Lakhs and if the said representation is submitted within the aforesaid period, the same shall be decided afresh by the competent authority in accordance with law by adverting to the contentions raised by the appellant/petitioner by passing a reasoned and speaking order affording opportunity of hearing to the appellant, within one month from the date of filing of representation/objection and till then in pursuance to the impugned notice, no recovery shall be made from the appellant/petitioner. The appellant shall not seek any adjournment in the matter”

Furthermore, the bench directed that if the representation/objection is not submitted within 15 days from the judgment, along with the deposit of Rs. 10 lakhs, the respondents are free to recover the amount from SICA as per the impugned order and notice.

The bench concluded by stating that if SICA remains dissatisfied with the order passed by the competent authority, they are free to seek remedy in accordance with the law.

Case Title: South Indian Cultural Association Educational Trust (SICA) Vs. Indore Municipal Corporation Indore Writ Appeal No. 537 Of 2023

Case Citation: 2023 LiveLaw (MP) 74

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