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2015 (7) TMI 374 - SUPREME COURT

2015 (7) TMI 374 - SUPREME COURT - [2015] 82 VST 418 (SC) - Demand of luxury tax imposed on a building that consists of 13 residential apartments - clubbing of plinth area of more than one residential unit of single owner - Kerala Building Tax Act, 1975 - Held that:- The learned Single Judge, as we have reproduced a paragraph hereinbefore, has opined that when the plinth area of any residential apartment is above 278.7 sq. mts., then the authority can demand luxury tax for such apartment or flat .....

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area in respect of the flats or apartments that is retained by him subject to the cap as envisaged under Section 5A of the Act. If he sells away the entire building then it has to be flat/apartment-wise calculation/computation, for every apartment owner is different than the others. Thus, the plinth area would be different. To clarify further, if a singular person purchases three flats, he will be liable on the basis of aggregate plinth area subject to the cap envisaged under Section 5A of the A .....

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partments. The Tahasildar who is the competent statutory authority under the Kerala Building Tax Act, 1975 (for brevity "the Act") imposed luxury tax on the building on the base of Section 5A of the Act vide order dated 1.10.2003 in Ref B4-6435/03 whereby he had measured the plinth area of all the residential apartments and computed the tax treating the same as a singular building. 2. The learned Single Judge opined that the levy of luxury tax of the entire building on the owner was no .....

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x for such apartments could be demanded, the writ petition was disposed of with the direction that Tahsildar would verify the plinth area of each residential apartment and levy luxury tax only for such of the residential apartment plinth area of which was in excess of the limit provided under Section 5A of the Act. The relevant part of the opinion expressed by the learned Single Judge is reproduced below:- "Even though petitioner is the owner of the entire building, luxury tax is leviable o .....

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n there is no scope for levying luxury tax. However, if Tahsildar on inspection finds that the plinth area of any residential apartment is above 278.7 sq. metres, then he can demand luxury tax for such of the apartment or apartments." 3. Being aggrieved by the aforesaid judgment and order passed by the learned Single Judge dated 12.06.2008 the State of Kerala and its functionaries preferred writ appeal No. 2150 of 2008. The Division Bench referred to Section 5A of the Act, dictionary clause .....

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nce to the other apartment, the question of taking the measurement of another building to calculate the plinth area would not arise. The conclusion recorded by the Division Bench reads as follows:- "For the purpose of calculating the plinth area, if the intention of the legislature was to adopt the entire Explanation (2) to clause (e) even with reference to proviso to 2(k) there was no need to mention the aggregate area where a building has more than one floor. The very reference to more th .....

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apartments and if each of the building could be used on its own without reference to the other apartment, the question of taking the measurement of another building to calculate the plinth area would not arise." 4. The singular question that emanates for consideration is whether under the provisions of the Act, the revenue authorities are entitled to levy the demand of luxury tax from the respondent by clubbing the plinth area of the apartments which are 13 in number or the plinth area of .....

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s jointly, are satisfied. The submission of the learned counsel for the appellants is that the ownership of all the 13 apartments rests with the respondent himself and the cost of construction having been singularly borne by him, the twin conditions enshrined under the Explanation II are not satisfied, and, therefore, it is impermissible to treat the individual apartments of the building as different buildings. Learned counsel would emphasise that the situation envisaged under Explanation II to .....

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the learned counsel for the respondent is that the Explanation II to Section 2(e) has no application for the levy of luxury tax, for it is only applicable for the purpose of levy of building tax. It is argued by him that levy of luxury tax is only for a residential building and the reference to building in Explanation II in Section 2(e) does not apply to a residential building. Learned counsel has drawn distinction between "residential building" and a "building" by drawing o .....

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of imposition of luxury tax. 7. To appreciate the rival submissions, it is necessary to extract the relevant part of Section 2(e), which defines "building". It is as under:- " "Building" means a house, out-house, garage or any other structure, or part thereof, whether of masonry, bricks, wood, metal or other material but does not include any portable shelter or any shed constructed principally of mud, bamboos, leaves, grass, thatch or a latrine which is not attached to .....

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e than one floor the aggregate area included in all the floors together: [Emphasis supplied] Provided that in case of a building referred to in the Explanation (2) to clause (e), the plinth area shall be calculated separately." 9. Section 2(l) of the Act that defines "residential building", is as follows:- " residential building' means a building or any other structure or part thereof built exclusively for residential purpose including out-houses or garages appurtenant to .....

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78.7 square metres or more and completed on or after the 1st day of April, 1999. 11. As is evident, the aforesaid provision commences with a non-obstante clause, and, therefore, has to be given primacy over the other provisions of the Act. It clearly provides that luxury tax of ₹ 2,000/- is payable by the owners of all residential buildings constructed on or after 1.4.1999 having plinth area of 278.7 sq.mts. or more. In the instant case, there is no cavil over the fact that the building in .....

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less than 278.7 sq.mts., but when the entire plinth area of 13 apartments is taken by applying the method of clubbing or when the plinth area is aggregated, it exceeds 278.7 sq.mts. It is the admitted position that the building has been constructed after 1.4.1999, that is, the date provided in Section 5A of the Act. 12. Section 2(k) of the Act defines the term "plinth area" and Section 2(l) of the Act defines the term "residential building". We have already quoted the afores .....

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linth area of an entire building can be separated. It is postulated therein that in case of a building when Explanation II to Section 2(e) is attracted, the plinth area should be calculated separately. The issue which requires examination and apposite answer is whether the Explanation II to Section 2 (e) as an ameliorative and beneficial provision, restricts and debars calculation and computations of plinth area of each independent apartment by different owners in a multi-storied building. 13. H .....

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ture. Explanation II is the fulcrum that would determine the question that has emanated for consideration in this case. The said Explanation lays the stipulation that when a building consists of different apartments or flats owned by different persons and cost of the building has to be met by all such persons, each apartment or flat is deemed to be a separate building. On a dissection of the said provision, it appears that said Explanation would apply when there is a building; that the building .....

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n II to Section 2(e) takes care of a situation where the building is constructed and there are different owners who have paid the purchase price for their respective apartments. The Explanation should not be read as a negative provision, detrimental and fatal to cases where there are separate owners of the apartments, for that is not the basic object and purpose behind the Explanation II to Section 2(e) of the Act. It is a benevolent and beneficial provision which has not been enacted to curtail .....

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reference to the term "building" and Explanation II to Section 2(e) of the Act. Therefore, each residential building owned by single owner would be subjected to luxury tax, if it has the plinth area which exceeds 278.7 sq.mts. It makes no difference whether the residential building consists of one floor or it is two-storied or three-storied or consists of multiple flats or apartments. The entire plinth area in the residential building owned by a singular owner is required to be aggreg .....

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that "plinth area" means the area included in the floor of the building and where building has more than one floor aggregate area included in all the floors are taken together. The proviso to the said definition lays down that in case of a building referred to in the Explanation II to clause (e), the "plinth area" shall be calculated separately. Thus, Section 2(k) has an insegragable nexus with the definition of "building". Explanation II to Section 2(e) which defin .....

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rs to a building. Section 2(k) defines "plinth area" of the building. Section 5A also includes "plinth area". Though the term "aggregate" is not mentioned but the words therein are buildings having plinth area and in that context one is required to scan and analyse the meaning of the term "building" and the "plinth area" as defined under Section 2(e) and 2(k) respectively. "Plinth area" as defined clearly provides that when one building .....

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lculated separately. The Explanation II refers to different apartments or flats owned by different persons. It also states that the cost of the construction of the building is to be met by all such persons jointly. This Explanation, as noted before, is required to be appositely understood. The learned counsel for the state would submit that if there is initial booking and the persons have contributed for the construction definitely there shall be separate computation. The Explanation II has to b .....

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g 10 floors. He builds it at his own cost and thereafter he sells the apartments or flats to 10 persons and in that event he ceases to be the owner of the building. The 10 purchasers become the owners of flats and in such a situation it will lead to an absurdity because one single person who once owned the entire building or several apartments, though has ceased to be the owner in law yet is asked to pay the luxury tax solely on the ground that at the time of construction there was no contributi .....

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mencement of the construction of the building. The persons who purchase afterwards they really share the value of the construction cost apart from the profit margin due to the builder or the seller. Unless such an interpretation is placed, the original owner of flats when he ceases to be the owner of the building or the purchaser of a small apartment less then 278.7 square meters would still be liable to pay luxury tax. Such an interpretation would lead to absurdity. 15. In our considered opinio .....

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r, as per Section 5A, he will be liable to pay the luxury tax for all floors/apartments subject to the cap provided under Section 5A of the Act. In this context we may refer to the decision in State of T.N. v. Kodaikanal Motor Union (P) Ltd.(1989) 3 SCC 91 wherein this Court, after referring to K.P. Varghese b. ITO (1981) 4 SCC 172 : 1981 SCC (Tax) 293 and Luke v. IRC (1964) 54 ITR 692 : 1963 AC 557 (HL) , observed thus:- "The courts must always seek to find out the intention of the legisla .....

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hip. We need not always cling to literalness and should seek to endeavour to avoid an unjust or absurd result. We should not make a mockery of legislation. To make sense out of an unhappily worded provision, where the purpose is apparent to the judicial eye some' violence to language is permissible." 16. In Keshavji Ravji and Co. v. CIT (1990) 2 SCC 231 it has been held by this court that when in a taxation statute where literal interpretation leads to a result that does not sub-serve t .....

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