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2019 (12) TMI 100

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..... ind the role played by them in discharging the sovereign obligation of the State to provide education, despite the economic limitations faced by them. It is trite that Government and Government Aided Educational institutions are subjected to a different system of control when compared to Unaided Educational institutions that do not function under the restrictions imposed on the former category in respect of collection of fees and payment of salaries/wages to teaching and non-teaching staff. The classification brought about is between unequals, and when viewed against the objective of the provision granting exemption, which is to provide relief from the financial burden imposed through taxation, it cannot be said that the classification effected has no nexus with the object sought to be achieved by the legislature through the exemption provision. The challenge to the assessment orders, demand notices and revenue recovery notices would also have to be dismissed, there could be cases where assessees want to prefer statutory appeals against the quantification of their tax liability - the assessment orders, demand notices and revenue recovery notices impugned in these writ petitions are .....

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..... ing exclusively used for educational purposes or allied purposes under the ownership of educational institutions owned by the Government, aided or functioning with the financial assistance of the Government and the hostel buildings wherein the students of the said institutions reside; 3. It is the case of the petitioners that inasmuch as their educational institutions are not housed in buildings owned by the Government or aided or functioning under the financial assistance from the Government, they are denied the benefit of the exemption granted under the Acts. They therefore impugn the exemption provision as discriminatory inasmuch as it discriminates between Government/aided educational institutions on the one hand, and unaided educational institutions on the other. It is pointed out that unaided educational institutions were not liable to pay tax under the Act till 7.10.2009, when the exemption provision was amended to exclude the said institutions from the ambit of the exemption. It is also pointed out that some of the educational institutions were established at a time when the buildings were exempted from the levy of property tax under the Acts. 4. Through their counter affid .....

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..... n from the payment of property tax cannot be held to be invalid. 10. It is submitted that it can be said that buildings and hostel constructed and maintained by using public money are exempted from payment of property tax and the people as a whole are the beneficiary of this exemption. If property tax is imposed on buildings and hostels owned by the Government, that amount also will be met from the public fund. More importantly, exemption given to the institutions, functioning under the administrative control of the Government are subject to Government auditing of funds and expenditure and it is a statutory process in Government institutions unlike in the case of self-financing institutions. 11. As property tax is one of the main sources of revenue of Local Self Government Institutions, more exemption of property tax for unaided or private educational institutions and for those educational institutions including professional colleges in the higher education sector may lead to huge financial loss to Local Self Government Institutions and ultimately to the public as the very functioning of any institution depends on a proper and accountable inflow and outflow of money. Education incl .....

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..... ellip; The principle enunciated above has been consistently adopted and applied in subsequent cases. The decisions of this Court further establish - (a) that a law may be constitutional even though it relates to a single individual if, on account of some special circumstances or reasons applicable to him and not applicable to others, that single individual may be treated as a class by himself; (b) that there is always a presumption in favour of the constitutionality of an enactment and the burden is upon him who attacks it to show that there has been a clear transgression of the constitutional principles; (c) that it must be presumed that the legislature understands and correctly appreciates the need of its own people, that its laws are directed to problems made manifest by experience and that its discriminations are based on adequate grounds; (d) that the legislature is free to recognise degrees of harm and may confine its restrictions to those cases where the need is deemed to be the clearest; (e) that in order to sustain the presumption of constitutionality the court may take into consideration matters of common knowledge, matters of common report, the history of the times and m .....

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..... the matter of classification, so long it adheres to the fundamental principles underlying the said doctrine. The power of the Legislature to classify is of "wide range and flexibility" so that it can adjust its system of taxation in all proper and reasonable ways. (8) ….............................. …........................... …............................ (9) ….............................. …........................... …............................ (10) But it is said that the mode of ascertaining the average annual income for the purpose of finding the rate is arbitrary and unreasonable and that discrimination is inherent in such a law adopting such arbitrary process. This argument is elaborated thus: The major income of the petitioner's family is from arecanut, pepper and coconut; the said crops are gathered between the months of November and March; the season for harvesting arecanut in Kasaragod Taluk is from November to March; the whole year's pepper and coconut are gathered between the months of January and March; therefore, the income from arecanut, pepper and coconut accrued to the petitioner between November, 1 1 .....

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..... re not. The question then is: what does the phrase similarly situated mean? The answer to the question is that we must look beyond the classification to the purpose of the law. A reasonable classification is one which includes all persons who are similarly situated with respect to the purpose of the law. The purpose of a law may be either the elimination of a public mischief or the achievement of some positive public good. 55. A classification is under-inclusive when all who are included in the class are tainted with the mischief but there are others also tainted whom the classification does not include. In other words, a classification is bad as under-inclusive when a State benefits or burdens persons in a manner that furthers a legitimate purpose but does not confer the same benefit or place the same burden on others who are similarly situated. A classification is over-inclusive when it includes not only those who are similarly situated with respect to the purpose but others who are not so situated as well. In other words, this type of classification imposes a burden upon a wider range of individuals than are included in the class of those attended with mischief at which the law .....

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..... tion cases, there are good reasons for judicial self-restraint if not judicial deference to legislative judgment. The legislature after all has the affirmative responsibility. The Courts have only the power to destroy, not to reconstruct. When these are added to the complexity of economic regulation, the uncertainty, the liability to error, the bewildering conflict of the experts, and the number of times the judges have been overruled by events - self-limitation can be seen to be the path to judicial wisdom and institutional prestige and stability. [See General Theory of Law and State , p. 161] xxx xxx xxx 71. The Court must be aware of its own remoteness and lack of familiarity with local problems. Classification is dependent on the peculiar needs and specific difficulties of the community. The needs and difficulties of the community are constituted out of facts and opinions beyond the easy ken of the Court [ See General Theory of Law and State , p. 161] . It depends to a great extent upon an assessment of the local condition of these concerns which the legislature alone was competent to make. 8. In V.C.Shukla v. State (Delhi Administration) [1980 (Suppl.) SCC 249], the Supreme Co .....

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..... ructure, it is well-nigh impossible to make laws suitable in their application to all the persons alike. So, a reasonable classification is not only permitted but is necessary if society should progress. 9. In Venkateshwara Theatre v. State of A.P. [(1993) 3 SCC 677], where the legislature concerned had prescribed different rates of tax by classifying theatres into different classes, namely, air-conditioned, air-cooled, ordinary (other than airconditioned and air-cooled), permanent and semi-permanent and touring and temporary, it was contended that the classification effected was not perfect, in that, there could not be a further classification amongst theatres falling in the same class on the basis of the location of the theatre in each local area. Rejecting the said contention, the Supreme Court found as follows at paragraphs 20 and 23: 20. Article 14 enjoins the State not to deny to any person equality before the law or the equal protection of the laws. The phrase equality before the law contains the declaration of equality of the civil rights of all persons within the territories of India. It is a basic principle of republicanism. The phrase equal protection of laws is adopted .....

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..... ility of particular Notification can be tested on the touchstone of Article 14 of the Constitution. Article 14, which is treated as basic feature of the Constitution, ensures equality before the law or equal protection of laws. Equal protection means the right to equal treatment in similar circumstances, both in the privileges conferred and in the liabilities imposed. Therefore, if the two persons or two sets of persons are similarly situated/placed, they have to be treated equally. At the same time, the principle of equality does not mean that every law must have universal application for all persons who are not by nature, attainment or circumstances in the same position. It would mean that the State has the power to classify persons for legitimate purposes. The legislature is competent to exercise its discretion and make classification. Thus, every classification is in some degree likely to produce some inequality but mere production of inequality is not enough. Article 14 would be treated as violated only when equal protection is denied even when the two persons belong to same class/category. Therefore, the person challenging the act of the State as violative of Article 14 has t .....

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..... estate developers, the developer who is the supplier of the flat/apartment is the debtor inasmuch as the home buyer/allottee funds his own apartment by paying amounts in advance to the developer for construction of the building in which his apartment is to be found. Another vital difference between operational debts and allottees of real estate projects is that an operational creditor has no interest in or stake in the corporate debtor, unlike the case of an allottee of a real estate project, who is vitally concerned with the financial health of the corporate debtor, for otherwise, the real estate project may not be brought to fruition. Also, in such event, no compensation, nor refund together with interest, which is the other option, will be recoverable from the corporate debtor. One other important distinction is that in an operational debt, there is no consideration for the time value of money - the consideration of the debt is the goods or services that are either sold or availed of from the operational creditor. Payments made in advance for goods and services are not made to fund manufacture of such goods or provision of such services. Examples given of advance payments being .....

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..... e other. Tax concessions have been granted to the former category, keeping in mind the role played by them in discharging the sovereign obligation of the State to provide education, despite the economic limitations faced by them. It is trite that Government and Government Aided Educational institutions are subjected to a different system of control when compared to Unaided Educational institutions that do not function under the restrictions imposed on the former category in respect of collection of fees and payment of salaries/wages to teaching and non-teaching staff. In that sense therefore, this is not a case where there is an under-inclusion in a classification that is effected for the purposes of extension of the benefit of exemption. It is simply a case of exemption granted to persons in an identified class, with those left out forming a distinct and separately identifiable class. In other words, the classification brought about is between unequals, and when viewed against the objective of the provision granting exemption, which is to provide relief from the financial burden imposed through taxation, it cannot be said that the classification effected has no nexus with the obje .....

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..... es of a Government College. Though, it is regulated and controlled by the above referred Statute, it is much higher than that of Government Colleges, wherein a nominal fee alone is collected from the students and certain rooms are reserved for students from socially and economically backward classes, in the hostels owned by the Government. In my view, this classification on the aforesaid basis is a rational one and there is an intelligible differentia in this classification. Self-financing Educational Institutions form a separate class, different from the Educational Institutions owned and financed or aided by the Government and the discrimination made under Section 207(b) of the Panchayat Raj Act is marked by intelligible differentia. 10. Thirdly, it is the case of the petitioner that the petitioner's institution is also governed and regulated by the Kerala Professional Colleges or Institutions (Prohibition of Capitation Fees, Regulation of Admission, Fixation of Non-exploitative fee and other measures to ensure equity and excellence in professional Education) Act, 2006. The preamble of the above Act says that it is an Act to provide for prohibition of capitation fee, regulati .....

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