Denying Property Tax Exemption to Unaided Schools Not Violative of Art. 14 of Indian Constitution: Kerala HC [Read Order]

The Kerala High Court ruled that denying property tax exemption to Unaided Schools is not violative of Article 14 of Indian Constitution.

The petitioners/assessee are unaided schools or the trust/organizations conducting unaided educational institutions, which are imparting education upto the standard twelve. The issue pertains to the amendment made to the provisions of the Kerala Panchayat Raj Act, 1994 and Kerala Municipality Act, 1994, which deal with the exemption from paying the property tax, to the buildings exclusively used for educational purposes or educational allied purposes under the ownership of such educational institutions.

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The exemption enjoyed by them until 31.03.2023 was taken away by the Government, as per the aforesaid amendment. This writ petition is submitted by the petitioners in such circumstances, challenging the Constitutional validity of such amendment, on the ground that the said amended provision is ultra vires of the Constitution, in view of the fact that the same creates an unreasonable classification and thus violative of the mandate contemplated under Art.14 of the Constitution of India.

The specific contention raised by the counsel for the petitioner is that the exclusion of unaided schools from the purview of exemption of tax, while retaining the exemption to the schools owned, managed and aided by the Government, is amounting to unreasonable classification and, thus, violates the principles of equality before law, as contemplated under Art.14 of the Constitution of India.

The specific case of the counsel for the petitioners is that, the Government did not provide any specific reasons, for excluding the unaided schools from the purview of exemption and there is no intelligible differentia in classifying the unaided schools on one part and the Government owned, managed and Government aided school on the other part.

On the other hand, the Special Government Pleader opposes the said contention by pointing out that, the reason for exempting the Government owned, managed and aided schools from payment of building tax is in view of the fact that, the infrastructure and the maintenance of such schools are provided at the expense of the State and, therefore, a further levy of tax upon such buildings would create an additional burden upon them. The said reason is sufficient to satisfy the requirement of intelligible differentia for the purpose of creating a classification between Government owned, managed and aided schools and the unaided schools.

It is well settled that, as far as a challenge raised against the constitutional validity of a statutory provision is concerned, the grounds on which such challenge could be raised are (i) the enactment was beyond the legislative competence of the Government and (ii) the provision under challenge violates any of the Articles in Part III of Constitution of India.

On carefully going through the contentions raised by the petitioners, one of the main grounds raised is that, the Government could not provide any justifiable reason to establish an intelligible differentia in the classification made as mentioned above. While considering the aforesaid aspect, the decisions relied on by the learned counsel for the petitioners, are to be referred to.

In Aashirwad Films’s case (supra), it was observed that the State undoubtedly enjoys a greater latitude in the matter of taxing statute. It may impose a tax on a class of people,whereas, it may not do so in respect of the other class. A taxing statute, however, as is well known, is not beyond the pale of challenge under Article 14 of the Constitution of India. A taxing statute, however, enjoys a greater latitude. An inference in regard to contravention of Article 14 would, however, ordinarily be drawn if it seeks to impose on the same class of persons or occupations similarly situated or an instance of taxation which leads to inequality.

Thus, it was observed in the said decision that the classification must be reasonable and the extent of reasonableness of any taxation statute lies in its efficiency to achieve the object sought to be achieved by the statute. Thus, the classification must bear a nexus with the object sought to be achieved.

The single bench observed that going by the statutory provision impugned, the exemption is contemplated, based on the purpose for which the building is used and also the ownership of such building. Even though the purpose for which such buildings are used is one and the same, irrespective of the persons/institutions owned, managed and aided such institutions, the fact that the manner in which the institution is rendering services makes out a crucial distinction.

While dismissing the petition,the court of Justice Ziyad Rahman A.A.held that Government owned, managed aided institutions are providing free education or education at very low cost, the unaided institutions are collecting fees from the students for rendering their services. This itself could be a basis for such classification which would in clear terms, would come within the purview of intelligible differentia.

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