Tax Concession Can't Be Denied Based On Vehicle Registered In The Name Of Trust And Not School: Madras High Court

The Bench consists of Justice G.K. Ilanthiraiyan observed that “the Regional Transport Officer, Chennai failed to see the objects of the assessee/petitioner Trust, it is an educational Trust. That apart, the Regional Transport Officer made demand with retrospective effect. The permits of the assessee/petitioner buses were already renewed under the caption of Educational Institution Bus.”

As per Section 2 (11) of The Motor Vehicles Act, 1988, the educational institution buses mean an omnibus, which is owned by a college, school or other educational institution and used solely for the purpose of transporting students or staff of the educational institution in connection with any of its activities.

Section 3 of Tamil Nadu Motor Vehicles Taxation Act, 1974 provides that Tax shall be levied on every motor vehicle used or kept for use in Tamil Nadu at the rate specified in the applicable schedule (First, Second, Third, or Fifth).

Tax Concession is a reduction made by the government in the amount of tax that a particular group of people or type of organization has to pay or a change in the tax system that benefits those people.

Item 8(a) of the first schedule of Tamil Nadu Motor Vehicles Taxation Act, 1974 provides concessional tax rates as per Section 3. For vehicles transporting students and staff of schools, the tax rate is ₹50 for every person (other than the driver). For vehicles transporting students and staff of colleges, the tax rate is ₹100 for every person (other than the driver).s

Facts of the case:

The assessee/petitioner Trust, established in 1976, operates the PSBB Group of Schools, a private unaided educational institution affiliated with the CBSE. The Trust's sole activity is managing these schools, and it applied for permits for its buses to transport students and staff. In order to provide concessional rates of tax as contemplated under Section 3 read with Item 8(a) of the first schedule of Tamil Nadu Motor Vehicles Taxation Act, 1974 the assessee applied for permits to avail concessional tax rates for two vehicles. The permits were issued after satisfying the definition of educational institution bus and concluded that the assessee is entitled for concessional rates of tax and on receipt of the same, the assessee was issued permit.

Later, the Regional Transport Officer, Chennai/first respondent demanded to pay taxes on the buses owned by the assessee. The assessee has filed the Writ Petition challenging the order passed by the Regional Transport Officer, Chennai, which directed the assessee to pay Rs. 500 per bus seat per quarter, totaling Rs. 9,51,300/-.

The assessee contended that the demand was issued on the ground that the buses were not registered in the name of Principal, Correspondent or Manager of the particular school so as to grant concessional rate of tax. The Regional Transport Officer, Chennai failed to see that where the functioning and operations of the trust or society are solely in relation to the educational institution, a vehicle does not cease to be an 'educational institution bus' under Section 2(11) of the M.V. Act. The Regional Transport Officer, Chennai already registered the buses of the assessee as educational institution bus and granted permit. All of a sudden, it cannot be said that the buses are not registered in the name of the Principal, Correspondent or Manager of the School and as such, it is not coming under educational institution bus.

The Department submitted that the vehicles are registered in the name of the assessee/petitioner Trust. Though the assessee is also running the schools, it also involved in other activities and as such the buses are used in connection with other activities. Therefore, the buses should be registered with the category of private service vehicle as defined in Section 2(33) of M.V. Act.

Observations of the High Court:

The bench observed that the buses belong to the assessee and registered in the name of the assessee. In order to carry out the educational institution, a Trust was formed for imparting primary, secondary and collegiate education. The buses were registered as educational institution bus. The permits were periodically renewed. It was valid from 06.10.2016 to 05.10.2021. Therefore, the assessee was given concessional rate in respect of road tax.

The bench concluded that the Regional Transport Officer, Chennai/first respondent failed to see the objects of the assessee/petitioner Trust, it is an educational Trust. That apart, the Regional Transport Officer made demand with retrospective effect. The permits of the assessee/petitioner buses were already renewed under the caption of Educational Institution Bus.

“The assessee was not served with any show cause notice and was not given an opportunity to explain whether the buses are used only for educational institution or other purposes. In order to apply for permit under Section 8(a) of M.V. Act, the Form PEV to be submitted for permit in respect of educational institution bus. In the said form, the assessee categorically mentioned the name of the educational institution which was duly accepted and granted permit to the buses owned by the assessee/petitioner Trust,” added the bench.

In view of the above, the bench allowed the writ petition.

Counsel for Petitioner/ Assessee: Sathish Parasran

Counsel for Respondent/ Department: J. Ravindran Additional Advocate General Assisted by V. Manoharan, Additional Government Pleader

Case Title: M/s. Bala Bhavan Educational Trust v. Regional Transport Officer

Citation: 2024 LiveLaw (Mad) 343

Case Number: W.P.No.7351 of 2017

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