Hoardings erected by Railways on its premises can’t be Taxed by the Municipal Corporation: Bombay HC [Read Judgment]

A division bench of the Bombay High Court in Union of India represented through General Manager, Western Railway vs. Municipal Corporation of Greater Mumbai & Ors. held that the advertising hoardings erected by the Railways on its premises cannot be taxed by the Municipal Corporation.

The petitioners has approached the High Court for an order restraining the Respondent – Municipal Corporation of Greater Mumbai  and its authorities from applying the provisions of sections 328 and 328A of the Mumbai Municipal Corporation Act or any other provisions in respect of hoardings belonging to Union of India (Railways) in any manner whatsoever. By virtue of Section 328 & 328A, the Municipal Corporation of Mumbai has the power to regulate advertisings.

The main contentions of the Petitioner were that the power to make construction on Railways, including the erection of structures for displaying hoarding is exclusively with the Railways in view of Section 11 of the Railways Act 1989 and in view of Section 184 & 185 of the Railways Act, railway administration is not liable to pay any tax in aid of the funds of any local authority or in respect of any advertisement made on any part of the railway unless the Central Government, by notification, declares the railway administration to be liable to pay the tax specified in such notification. The Petitioners further argued as no services of whatsoever nature are being provided by the Corporation, there is not a remotest element of quid pro quo and so the charges sought to be recovered cannot be termed as a “fee”, in effect, it is a tax.

The respondents contented that immunity which is granted to the railways under Sections 184 and 185 of the Railways Act is only in so far as taxes are concerned and what is being charged by the Municipal Corporation of Greater Mumbai is not a “tax” but a “fee” for grant of permission under Section 328A. The Learned Counsel for the Respondents relied on the decision of a division bench of High Court of Bombay in Yog Advertising & Marketing Services and Ors. vs. Municipal Corporation of Greater Mumbai and Ors 2016(2) ABR 229. In that case the court held that there need not be any direct correlation between the services rendered and the fees levied. The Learned Counsel further contented that the fees are not charged on the railways but on the advertisers who are acting as the agents of Railways.

The Division Bench bench comprising of Justice B.R Gavai & Justice Sandeep K. Shinde observed that unless the Central Government issues a notification declaring the railway administration to be liable to pay tax, no advertisement tax could be levied by any local authority.

The bench rejected the other contention raised on behalf of the Corporation regarding the fees that are charged are from the advertisers/agents of the railways and not from the railways, relied on the case of Links Advertisers and Business Promoters vs. Commissioner, Corporation of the City of Bangalore AIR 1977 SC 1646 and reproduced the decision taken by the Apex Court that exigibility to tax is relatable not to the ownership of the hoarding but its situs. It further observed that, in view of the wide meaning given to the term “railway “in Clause (31) of Section 2 of the Railways Act, 1989 and which is further amplified by section 197 of the said Act, no hoardings situated on any land which comes within the definition of the term “railway”, would be exigible for advertisement tax & therefore the contention that since taxes are sought to be recovered from advertisers and not railways, such a levy would be permissible, deserves to be rejected.

Allowing the petitions, the court held that “Provisions of Sections 328 and 328A of the Mumbai Municipal Corporation Act would not be applicable to the hoardings erected by Railways on the railway as defined in Clause (31) of Section 2 read with section 197 of the Railways Act, 1989. It also held that railway administration or its agents would not be liable to pay any tax to the Corporation in respect of any advertisement made on any part of the Railways, unless a Notification to that effect is issued by the Central Government under Section 185 of the Railways Act, 1989”.

The bench taking into consideration of safety of citizens in Railway premises, further directed the railway authorities to formulate a policy, within six months, for regulating the hoardings on the railway properties along with the aid of Municipal Corporation of Greater Mumbai for regulating the hoardings within the area of the Municipal Corporation of Greater Mumbai.

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