The court sets aside the government’s refusal of tax exemption, directing a fresh review of the Regional Sports Centre’s claim under the Kerala Building Tax Act.
In a significant ruling, the Kerala High Court has directed the State Government to reassess the tax exemption claims of the Regional Sports Centre, Cochin. The petitioner, a registered society under the Travancore Cochin Literary, Scientific and Charitable Societies Registration Act, 1955, had its plea for tax exemption under the Kerala Building Tax Act, 1975, previously denied by the government.
The petitioner operates a sports complex that provides training across 33 sports disciplines, claiming the buildings are used primarily for charitable or educational purposes. However, the government’s April 2023 order rejected this claim, prompting the society to challenge the decision in court.
Justice Harisankar V. Menon, presiding over the case, emphasized that the principal use of the buildings should be the determining factor for tax exemption under Section 3(1)(b) of the Kerala Building Tax Act. The court noted that while the petitioner was granted exemptions under the Income Tax Act for charitable activities, the same consideration was not extended for the building tax exemption.
The government argued that the petitioner charges high membership fees, daily user fees, and coaching fees, with free training extended to only a few individuals. However, the court observed that the government’s assessment failed to consider detailed evidence, including a list of free training beneficiaries, which contradicted the claim of limited charitable activity.
Citing precedents from the Supreme Court, including the cases of Sole Trustee, Loka Shikshana Trust v. Commissioner of Income Tax and Government of Kerala v. Mother Superior, the High Court highlighted that the concept of "education" in statutory terms does not broadly encompass all knowledge-acquiring activities. Furthermore, the court pointed out that the principal use of the buildings for charitable purposes, as evidenced by the petitioner’s activities, merits a thorough re-evaluation.
The High Court has set aside the government’s previous order and mandated a fresh examination of the petitioner’s exemption claim, taking into account the detailed submissions and evidence presented. The government must issue new orders within six months after providing the petitioner an opportunity to be heard. Until a new decision is made, any coercive actions against the Regional Sports Centre regarding the building tax will remain suspended.
This ruling underscores the importance of a detailed and evidence-based approach in assessing tax exemption claims, particularly for entities engaged in activities of public utility and welfare.
Bottom Line :
Exemption under Kerala Building Tax Act, 1975 - Buildings used principally for charitable or educational purposes - The principal use of the building should determine eligibility for exemption under Section 3(1)(b) of the Act.
Statutory provision(s): Kerala Building Tax Act, 1975, Section 3(1)(b), Section 12A and 80G of the Income Tax Act, 1961
Regional Sports Centre v. State of Kerala, (Kerala) : Law Finder Doc id # 2967870
