Madras High Court Upholds State's Decision To Increase Property Tax In Chennai, Coimbatore Municipal Areas

The Madras High Court recently upheld the validity of the Government Order issued by Tamil Nadu's Municipal Administration and Water Supply Department and the consequential resolutions of Greater Chennai Corporation and Coimbatore Corporation by which the property taxes in Chennai and Coimbatore were revised and increased.

The court however emphasised that this revision in tax rates could not be implemented retrospectively and rejected a revision notice to such extent.

Justice Anita Sumanth passed the decision on petitions challenging the Government Order revising property tax in Chennai and Coimbatore. Along with it, a challenge was also made to Property tax General Revision Notices for the period 2022-23 which made 1st April 2022 the effective date for the implementation of the new tax rates.

The Government Order was a result of recommendations proposed by a Committee constituted by the State Government for looking into the present rates of property tax and to determine whether they were commensurate with the need of the State. The committee had proposed for augmenting the rate of tax as well as the Basic Street Rates (BSR). The committee had also proposed the adoption of a slab system.

The petitioners essentially challenged the power of the State to issue the GO and contended that the same constituted unlawful intervention as the levy of property tax by Corporations is governed by specific enactments which do not give any authority to the State.

The petitioners also challenged the methodology adopted for the determination of the property tax. The petitioners also challenged the slab system by submitting that the same was discriminatory to owners of larger properties.

Highlighting the right of the State to impose tax on property, the court said:

A welfare State has necessarily to balance augmenting of its revenues so as to provide for sources of funds for welfare measures and other expenses of the State on the one hand, and mitigating the hardship of taxes as far as possible to its citizens, on the other.

The court further noted that the GO uses the word "advise" and not "direct" which goes on to show that the impugned GO is merely an advisory and not a direction. The court thus noted that the ultimate decision was taken by the authorities of the Corporation and there was no irregularity. 

However, rejecting the Revision Notices which fixed 1st April as the effective date, the court observed that as the GO was approved only in May 2022, the amendment in the first half year could not be implemented as the last date for payment would have lapsed by then. 

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., by15th 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.

The court further added that as per the settled position of law, an increase in property tax could not be implemented retrospectively as it would adversely affect the substantive right of the parties.

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 court also directed the corporations of Chennai and Coimbatore to ensure that their websites are kept robust and that grievance mechanisms are put in place to enable all property tax assesses to seek clarification in regard to any property tax assessment.

Case Title: K.Balasubramaniam v. The Commissioner, Greater Chennai Corporation and others (batch cases)

Citation: 2022 LiveLaw (Mad) 523

Case No: WP No.18534 of 2022 (batch cases)