Kerala Building Tax Act, 1975 – s.3(1)(b) – Exemption from building tax – The State claims that no exemption from building tax should be granted to residential accommodation for nuns, priests or hostel accommodation for students, as these have no direct connection with religious/educational activity – It was contended that assuming there is ambiguity in s.3(1)(b), in that a purpose connected with the religious/educational activity may be included, yet the ambiguity has to be resolved in favour of the State – Held: A reading of s.3(1)(b) would show that the object for exempting buildings which are used principally for religious, charitable or educational purposes would be for core religious, charitable or educational activity as well as purposes directly connected with religious activity – Nuns living in a neighbouring building to a convent only so that they may receive religious instruction there, or if students are living in a hostel close to the school or college in which they are imparted instruction, it is obvious that the purpose of such residence is not to earn profit but residence that is integrally connected with religious or educational activity – An exemption provision should be liberally construed in accordance with the object sought to be achieved if such provision is to grant incentive for promoting economic growth or otherwise has some beneficial reason behind it – One must first ask what is the object sought to be achieved by the provision, and construe the statute in accord with such object – And on the assumption that any ambiguity arises in such construction, such ambiguity must be in favour of that which is exempted – Therefore, the buildings in question exempted from building tax.
Disposing the appeals, the Court
HELD: 1. A reading of the provision would show that the object for exempting buildings which are used principally for religious, charitable or educational purposes would be for core religious, charitable or educational activity as well as purposes directly connected with religious activity. One example will suffice to show the difference between a purpose that is directly connected with religious or educational activity and a purpose which is only indirectly connected with such activity. Take a case where, unlike the facts in Civil Appeal No. 202 of 2012, nuns are not residing in a building next to a convent so that they may walk over to the convent for religious instruction. Take a case where the neighbouring building to the convent is let out on rent to any member of the public, and the rent is then utilised only for core religious activity. Can it be said that the letting out at market rent would be connected with religious activity because the rental that is received is ploughed back only into religious activity? Letting out a building for a commercial purpose would lose any rational connection with religious activity. The indirect connection with religious activity being the profits which are ploughed back into religious activity would obviously not suffice to exempt such a building. But if on the other hand, nuns are living in a neighbouring building to a convent only so that they may receive religious instruction there, or if students are living in a hostel close to the school or college in which they are imparted instruction, it is obvious that the purpose of such residence is not to earn profit but residence that is integrally connected with religious or educational activity. [Para 12][40-E-H; 41-A-B]
2. A reading of the other provisions of the Act strengthens the aforesaid conclusion. “Residential building” is defined separately from “building” in Section 2(l). A “residential building” means a building or any other structure or part thereof built exclusively for residential purpose. It is important to note that “residential building” is not the subject matter of exemption under Section 3 of the Act. Quite the contrary is to be found in Section 5A of the Act, which starts with a non-obstante clause, and which states that a luxury tax is to be charged on all residential buildings having a plinth area of 278.7 square meters and which have been completed on or after 1.4.1999. If the contention of the State is accepted, buildings in which nuns are housed and students are accommodated in hostels which have been completed after 1.4.1999 and which have a plinth area of 278.7 square meters would be liable to pay luxury tax as these buildings would now no longer be buildings used principally for religious or educational purposes, but would be residential buildings used exclusively for residential purposes. This would turn the object sought to be achieved in exempting such buildings on its head. For this reason also, this Court cannot countenance a plea by the State that buildings which are used for purposes integrally connected with religious or educational activity are yet outside the scope of the exemption contained in Section 3(1)(b) of the Act. [Para 13][41-C-F]
3. This being the case, it is obvious that the beneficial purpose of the exemption contained in Section 3(1)(b) must be given full effect to, the line of authority being applicable to the facts of these cases being the line of authority which deals with beneficial exemptions as opposed to exemptions generally in tax statutes. This being the case, a literal formalistic interpretation of the statute at hand is to be eschewed. One must first ask what is the object sought to be achieved by the provision, and construe the statute in accord with such object. And on the assumption that any ambiguity arises in such construction, such ambiguity must be in favour of that which is exempted. Consequently, this Court agrees with the conclusions reached by the impugned judgments of the Division Bench and the Full Bench that the buildings in question should be exempted from building tax. [Para 24][48-H; 49-A-C]
Union of India v. Wood Papers Ltd (1990) 4 SCC 256 : [1990]
2 SCR 659; CST v. Amara Raja Batteries Ltd (2009) 8 SCC
209 : [2009] 11 SCR 953; Commr. of Customs (Preventive) v. M. Ambalal & Co. (2011) 2 SCC 74 : [2010] 15 SCR 937; CST v. Industrial Coal Enterprises (1999) 2 SCC 607 : [1999]
1 SCR 871; State of Jharkhand v. Tata Cummins Ltd (2006)
4 SCC 57 : [2006] 3 SCR 443; Pondicherry State Coop. Consumer Federation Ltd. v. Union Territory of Pondicherry (2008) 1 SCC 206 : [2007] 11 SCR 1118 – relied on. Star Industries v. Commr. of Customs (Imports) (2016) 2 SCC
362 : [2015] 11 SCR 570; CCE v. Favourite Industries (2012)
7 SCC 153; Commr. of Customs v. Dilip Kumar & Co. (2018)
9 SCC 1 : [2018] 7 SCR 1191; Sun Export Corporation v. Collector of Customs 1997 (6) SCC 564 : [1997] 1 Suppl. SCR 434; Quinn v. Leathem (1901) AC 495; State of Orissa v. Sudhansu Sekhar Misra [1968] 2 SCR 154; State of Gujarat v. Zinabhai Ranchhodji Darji (1972) 1 SCC 233 : [1972] 2 SCR 686; Bishamber Dass Kohli v. Satya Bhalla (1993) 1 SCC 566 : [1993] 1 SCR 171; Duroflex Coir Industries Ltd. v. CST (1993) Supp 1 SCC 568; State of Karnataka v. G. Seenappa (1993) Supp 1 SCC 648; Bonam Satyavathi v. Addala Raghavulu (1994) Supp 2 SCC 556 – referred to.
As published in the Supreme Court Reports, Supreme Court of India. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
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