Urban Development Office Memo Limits Dues to Service Charges Alone, Not Property Tax: Delhi HC Orders to Enter agreement for Timely Payment [Read Order]
The Court directed the Northern Railways and Municipal Corporation of Delhi to enter into an agreement as per the Ministry of Urban Development’s Office Memorandum and limited dues to service charges rather than full property tax.
office - memo - Taxscan
office - memo - Taxscan
The Delhi High Court has directed the Northern Railways, Delhi Division, and the Municipal Corporation of Delhi (MCD) to enter into an agreement in terms of the Office Memorandum dated 15th/17th December 2009 issued by the Ministry of Urban Development, Government of India, for payment of service charges instead of property tax.
The Union of India, through the Northern Railways, Delhi Division (petitioner), filed a writ petition challenging the Distress Warrant dated 2nd July 2025 issued by the MCD’s Assessment and Collection Department, attaching a sum of Rs. 14,84,61,840/- for non-payment of service charges for Assessment Years 2023-2024 and 2024-2025.
The petitioner also challenged the Demand Notice dated 12th March 2025 and argued it violated Article 285 of the Constitution of India. The petitioner relied on the Supreme Court judgment in Rajkot Municipal Corporation & Ors. Versus Union of India.
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The Supreme Court held that the Union of India and its departments are liable only for service charges for municipal services provided, not property tax.
Reference was also made to the Office Memorandum, which stipulates service charges at 75%, 50%, or 33 1/3% of the property tax levied, based on the extent of services utilized.
The petitioner submitted that no property tax is payable by the Union of India, and an agreement should be executed with the MCD for timely processing of service charges. The Northern Railways expressed readiness to enter into such an agreement and nominated the Senior Divisional Engineer-III to meet MCD officials for this purpose.
The respondents informed the Court that the full demanded amount of Rs. 14,84,61,840/- had already been recovered through attachment. The Respondents defended the actions as lawful and emphasized the petitioner’s obligation to pay service charges.
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A bench comprising Justice Mini Pushkarna observed the petitioner’s willingness to execute the agreement and issued directions for the Senior Divisional Engineer-III to visit the Joint Assessor and Collector, Assessment and Collection Department (GRP) Cell, MCD, at Dr. SPM Civic Centre, New Delhi, within two weeks to facilitate the agreement.
The Court noted a letter dated 28th March 2025 from the Northern Railways requesting review of the demand and resolution through mutual consent or a 3-member mediation committee as per the Office Memorandum, while urging avoidance of coercive measures.
The Court directed the Parties to enter into agreement in terms of Office Memorandum. The Northern Railways is directed to submit documents as required by the Municipal Corporation of Delhi. The writ petition was disposed of with these directions.
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