TMI Blog2021 (3) TMI 93X X X X Extracts X X X X X X X X Extracts X X X X ..... ding for a commercial purpose would lose any rational connection with religious activity. The indirect connection with religious activity being the profits which are ploughed back into religious activity would obviously not suffice to exempt such a building. But if on the other hand, nuns are living in a neighbouring building to a convent only so that they may receive religious instruction there, or if students are living in a hostel close to the school or college in which they are imparted instruction, it is obvious that the purpose of such residence is not to earn profit but residence that is integrally connected with religious or educational activity. A reading of the other provisions of the Act strengthens the aforesaid conclusion. Residential building is defined separately from building in Section 2(l). A residential building means a building or any other structure or part thereof built exclusively for residential purpose. It is important to note that residential building is not the subject matter of exemption under Section 3 of the Act. Quite the contrary is to be found in Section 5A of the Act, which starts with a non-obstante clause, and which states that a luxur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Counsel for parties : Mr. C. K. Sasi, AOR Mr. M. P. Vinod, AORMs. Liz Mathew, AOR Mr. Jishnu M.L., Adv. Mrs. Priyanka Prakash, Adv. Mrs. Beena Prakash, Adv. Mr. G. Prakash, AOR Mr. P.A. Noor Muhamed, Adv. Ms. Giffara S., Adv. Mr. Bilal Niamathulla, Adv. Ms. Ruxana P.N., Adv. Mr. Rameshwar Prasad Goyal, AOR Mr. A. Venayagam Balan, AOR Mr. Sajith. P, AOR Mr. T. G. Narayanan Nair, AOR Mr. P. A. Noor Muhamed, AORMs. Giffara S., Adv. Mr. Bilal Niamathulla, Adv. Ms. Ruxana P.N., Adv. Mr. Jose Abraham, AOR Mr. Pawanshree Agrawal, AOR JUDGMENT R. F. Nariman, J. 1. Leave granted. 2. All these appeals pertain to an exemption provision contained in the Kerala Building Tax Act, 1975. Under Section 3(1)(b) buildings that are used principally for religious, charitable or educational purposes or as factories or workshops are exempted from building tax under the Act. All of the appeals, except one, are by the State of Kerala against a judgment dated 22.11.2007 passed by a Division Bench of the Kerala High Court in Government of Kerala Anr v. Mother Superior Adoration Convent (Civil Appeal No.202 of 2012) and a Full Bench judgment in State of Kerala Ors v. Unity Hospital ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or sisters, where their services are most needed. It means, we the present sisters attached to this convent at present are not permanent members here. We have come from different places, and each one of us will be individually transferred to other places, as our Superior s Council decides. 9. So much so, the convent is a permanent set up here to render the religious and charitable needs of the locality, whereas the members are individually deputed to render the services for a period found proper. xxx xxx xxx 11. The convent was established by the Council decision of the St. Mary s Province of the Congregation of the Sisters of Adoration of the Blessed Sacrament. 12. The building is also intended for accommodating the junior sisters who are undergoing their college education in the nearby Newman College - Thodupuzha. Thus, at present 8 students-sisters also are residing here. 13. The Building is two storeyed and measures approximately 5000sq.ft. The ground floor contains a prayer hall, kitchen, refectory, study hall and small rooms for sisters. The upper floor contains 5 rooms for sisters, a dormitory and study hall. 14. The building is not at all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that, there may be a room for the Chaplain for taking rest etc. Can that room be segregated and said that it is not used for religious purposes. We feel that the answer should be in the negative. If the buildings of convents are generally used for religious purposes and one of the buildings is used for residence of an inmate there, it shall also be treated as one, used for religious purposes. Any interpretation to the contrary will be irrational. So, we are of the view that the buildings, used for the residence of the nuns in a convent, is principally used for religious purposes and therefore, should also qualify for exemption. We are in respectful agreement with the views expressed by C.N. Ramachandran Nair, J., in Writ Petition (C) No.27250/06. The judgment in W.A.2424/05 deals with the case of a boarding and lodging house for students run by a convent where rooms are let out collecting a fee. If the convent is running a commercial or industrial unit, the building housing that establishment will not qualify for exemption. That principle cannot be applied in the case of the building used for accommodating nuns in the convent. The decision of the Apex Court relied on by the learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Nursing Council of India, which make it mandatory that in order to get approval for a medical college or a nursing college, hospital for patients and hostel facilities for students are mandatory. The State also does not controvert this position and in fact all the medical colleges and nursing colleges run in the State including those run by the Government have hospitals of their own or attached hospitals, and have hostels providing accommodation to all students. Except probably few students who hail from the areas very close to the colleges, all the nursing and medical students reside in the hostels attached to their colleges. The students of both medical and nursing colleges require clinical training in hospitals, and students in senior classes are deployed on a turn basis in hospitals. Unless accommodation is provided to the students in the college campus or nearby, it would not be possible for them, particularly for girls, to reach the hospitals attached to the medical and nursing colleges for duty at odd hours in the night. Therefore, the Medical Council of India and Nursing Council of India have made it mandatory for every medical college and nursing college to have hostel fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd so much so, in our view, the decision cannot be applied while deciding the claim of exemption made by the appellants in these cases. Even though Section 235 of the Kerala Municipalities Act specifically provides for property tax exemption for hostel buildings owned by the very same educational institutions, there is no specific exemption for hostel buildings in Section 3 (1)(b) of the Kerala Building Tax Act. Therefore, we have to examine whether educational purposes referred to in Section 3(1)(b) has only restricted meaning or it has a wider meaning covering all buildings directly or indirectly catering to the needs of student community. In this context, we have to necessarily consider the general pattern of hostel facility provided by education institutions in the State. In the recent past, large number of educational institutions, particularly engineering colleges are established all over Kerala including remote areas and hill stations, where the students admitted are not from local area and they have to necessarily depend on hostel facility to be provided by the educational institution. In fact admissions to medical and engineering colleges are given on central allotment b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which do not have hostel facility, to rent out to students in such educational institutions. Letting out of buildings by private agencies is a commercial activity whether tenants are students or not. In other words, only hostel buildings owned by educational institutions for accommodating it's own students in such hostels will qualify for exemption under clause (b) of Section 3(1) the Act. 8. Shri Jaideep Gupta, learned senior advocate appearing on behalf of the State of Kerala, assailed the correctness of these judgments. According to him, an exemption provision contained in a fiscal statute must be construed strictly and in the case of doubt or ambiguity must be construed in favour of the State. For this proposition, he cited a number of judgments. He then analysed Section 3(1)(b) of the Act and argued that a building used principally for religious or educational purposes can only be a building that is used for religious/educational activity and not for activity which has no direct connection with religious/educational activity, such as residential quarters for nuns, priests or hostel accommodation for students. He argued that even assuming that there is ambiguity in S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - (1) Nothing in this Act shall apply to- (a) buildings owned by the Government of Kerala or the Government of India or any local authority; and (b) buildings used principally for religious, charitable or educational purposes or as factories or workshops. Explanation. - For the purposes of this sub-section, charitable purpose includes relief of the poor and free medical relief. 5. Charge of building tax - (1) Subject to the other provisions contained in this Act, there shall be charged a tax (hereinafter referred to as building tax ) based on the plinth area at the rate specified in the Schedule on every building the construction of which is completed on or after the appointed day. 5A. Charge of luxury tax - [1) Notwithstanding anything contained in this Act, there shall be charged a luxury tax based on the plinth area at the rate specified in Schedule II, annually on all residential buildings having a plinth area of 278.7 square metres completed on or after the 1st day of April, 1999. 11. Before coming to the case law that has been cited before us, it is important to first analyse Section 3(1)(b) with which we are directly concerned. First an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hand, nuns are living in a neighbouring building to a convent only so that they may receive religious instruction there, or if students are living in a hostel close to the school or college in which they are imparted instruction, it is obvious that the purpose of such residence is not to earn profit but residence that is integrally connected with religious or educational activity. 13. A reading of the other provisions of the Act strengthens the aforesaid conclusion. Residential building is defined separately from building in Section 2(l). A residential building means a building or any other structure or part thereof built exclusively for residential purpose. It is important to note that residential building is not the subject matter of exemption under Section 3 of the Act. Quite the contrary is to be found in Section 5A of the Act, which starts with a non-obstante clause, and which states that a luxury tax is to be charged on all residential buildings having a plinth area of 278.7 square meters and which have been completed on or after 1.4.1999. If we were to accept the contention of the State, buildings in which nuns are housed and students are accommodated in hostels ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he factory as it existed prior to 1964 is covered in the notification. 15. This statement of the law was followed in a number of judgments. Suffice it to say that in Star Industries v. Commr. of Customs (Imports) (2016) 2 SCC 362, a large number of judgments are referred to for the same proposition (see paragraphs 32 to 34). 16. However, there is another line of authority which states that even in tax statutes, an exemption provision should be liberally construed in accordance with the object sought to be achieved if such provision is to grant incentive for promoting economic growth or otherwise has some beneficial reason behind it. In such cases, the rationale of the judgments following Wood Papers (supra) does not apply. In fact, the legislative intent is not to burden the subject with tax so that some specific public interest is furthered. Thus, in CST v. Industrial Coal Enterprises (1999) 2 SCC 607, this Court held: 11. In CIT v. Straw Board Mfg. Co. Ltd. 1989 Supp (2) SCC 523 this Court held that in taxing statutes, provision for concessional rate of tax should be liberally construed. So also in Bajaj Tempo Ltd. v. CIT (1992) 3 SCC 78 it was held that provision g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax liability. Therefore, every such exemption notification has to be read strictly. However, when an assessee is promised with a tax exemption for setting up an industry in the backward area as a term of the industrial policy, we have to read the implementing notifications in the context of the industrial policy. In such a case, the exemption notifications have to be read liberally keeping in mind the objects envisaged by the industrial policy and not in a strict sense as in the case of exemptions from tax liability under the taxing statute. 18. Similarly, in Pondicherry State Coop. Consumer Federation Ltd. v. Union Territory of Pondicherry (2008) 1 SCC 206 this Court held: 5. Learned Senior Counsel Shri Venkatraman appearing for the appellant assessee submitted that this question was no more res integra and was covered by the judgment of this Court in Vadilal Chemicals Ltd. v. State of A.P. (2005) 6 SCC 292. It was pointed out that in that case an identical question fell for consideration under the similar circumstances. There also, the question was as to whether the small-scale industry which was engaged in bottling of anhydrous ammonia could be said to be entitled to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... found to have been erroneously issued and was very much in vogue when the showcause notices came to be served on the assessee. The G.O. providing exemption clearly suggested that such exemption was given in the public interest. Therefore, it is obvious that the decision in Vadilal Chemicals case (2005) 6 SCC 292 would be equally applicable as even in that case what the industry did was to bottle the ammonia gas purchased in bulk. In the present case it is palmolive oil which is purchased in bulk and is repacked so as to facilitate its sale in the retail market. 7. Shri T.L.V. Iyer, Senior Advocate appearing on behalf of the Union Territory of Pondicherry, however, tried to suggest that the exemption from payment of tax granted on 19-5-1989 was granted by the Director of Industries and it was clear from that exemption that it was only on the basis of GOMs No. 15/74 dated 25-6-1974. Our attention was invited to the last lines of the aforementioned G.O. dated 19-5-1989. The last portion is as under: The unit is exempted from payment of sales tax for five years vide GOMs No. 15/74/FIN(CT) dated 25-6-1974. On this the learned Senior Counsel argued that, therefore, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iew of GOMs No. 15/74 dated 25-6- 1974 would have to be taken. We accordingly allow the appeal, set aside the order passed by the High Court and restore that of the Tribunal but without any order as to costs. 19. While construing an exemption in a sales tax statute, this Court in CST v. Amara Raja Batteries Ltd (2009) 8 SCC 209 held: 21. An exemption notification should be given a literary (sic literal) meaning. Recourse to other principles or canons of interpretation of statute should be resorted to only in the event the same give rise to anomaly or absurdity. The exemption notification must be construed having regard to the purpose and object it seeks to achieve. The Government sought for increase in industrial development in the State. Such a benevolent act on the part of the State, unless there exists any statutory interdict, should be given full effect. (See Vadilal Chemicals Ltd. v. State of A.P. (2005) 6 SCC 292) 20. Likewise, even under the Customs Act, this Court in Commr. of Customs (Preventive) v. M. Ambalal Co. (2011) 2 SCC 74 made a clear distinction between exemptions which are to be strictly interpreted as opposed to beneficial exemptions having as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct/assessee and it must be interpreted in favour of the Revenue. 66.3. The ratio in Sun Export case [Sun Export Corpn. v. Collector of Customs, (1997) 6 SCC 564] is not correct and all the decisions which took similar view as in Sun Export case stand overruled. 23. It may be noticed that the 5-Judge Bench judgment did not refer to the line of authority which made a distinction between exemption provisions generally and exemption provisions which have a beneficial purpose. We cannot agree with Shri Gupta s contention that sub-silentio the line of judgments qua beneficial exemptions has been done away with by this 5-Judge Bench. It is well settled that a decision is only an authority for what it decides and not what may logically follow from it (see Quinn v. Leathem [1901] AC 495 as followed in State of Orissa v. Sudhansu Sekhar Misra (1968) 2 SCR 154 at 162,163) 24. This being the case, it is obvious that the beneficial purpose of the exemption contained in Section 3(1)(b) must be given full effect to, the line of authority being applicable to the facts of these cases being the line of authority which deals with beneficial exemptions as opposed to exemptions generally ..... X X X X Extracts X X X X X X X X Extracts X X X X
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