Bombay High Court
JAI HIND SINDHU EDUCATION TRUST AND ORSversusTHE STATE OF MAHARASHTRA AND ORS
- Decided
- Disposal
- Dismissed
Holding
The Trust is not entitled to exemption from property tax under Section 132(1)(b) because it has not demonstrated that its premises are solely occupied and used for a public charitable purpose, having accepted fees and donations and lacking a year‑by‑year exemption application.
Summary
The Jai Hind Sindhu Education Trust, a public charitable trust that runs several schools and a college in Pune, sought a declaration that its premises are exempt from property tax under Section 132(1)(b) of the Maharashtra Municipal Corporations Act, 1949. The Pimpri‑Chinchwad Municipal Corporation had levied tax and issued demand notices despite a 1991 No‑Due Certificate. The Trust argued that its institutions are charitable, minority‑linguistic, and not run for profit, while the respondents contended that the Trust accepts fees and donations and has not demonstrated exclusive charitable use of the premises. The Court examined the statutory scheme, the definition of "charitable purpose" under the Maharashtra Public Trusts Act, and relevant Supreme Court and High Court precedents, concluding that education alone does not guarantee charitable status and that the Trust failed to prove exclusive charitable occupation of the buildings. Consequently, the tax demand was upheld, the writ petition dismissed, and the interim order vacated, though the Trust was permitted to apply for exemption in future years with proper material.
Issues considered
- The applicability of Section 132(1)(b) of the Maharashtra Municipal Corporations Act, 1949 to the Trust's premises.
- Whether education per se qualifies as a charitable purpose under the Maharashtra Public Trusts Act, 1950.
- Whether acceptance of fees and donations negates the Trust's claim of exclusive charitable use.
- The requirement of annual, case‑by‑case application for tax exemption.
- The existence of an alternative statutory remedy (appeal under Section 406) and its effect on writ jurisdiction.
Legislation cited
- Bombay Provincial Municipal Corporations Act, 1949 — s. 132(1)(b)
- Bombay Public Trusts Act, 1950 — s. 9
- Delhi Municipal Corporation Act, 1957 — s. 115(4), 115(5), 115(6)
- Income Tax Act, 1961 — s. 10(22), 2(15), 4(3)
- Maharashtra Employees of Private Schools (Conditions of Service) Regulation Act, 1977 — s. 3(2)
- Maharashtra Municipal Corporations Act, 1949 — s. 132(1)(b), 132(2)
Subjects
- property tax exemption
- public charitable trust
- Section 132
- education as charitable purpose
- municipal tax
- Bombay Public Trusts Act
- Maharashtra Municipal Corporations Act
- writ petition
- alternative statutory remedy
Judgment
1/46 WP-987-12.odt
Salgaonkar
MANDIRA MILIND
SALGAONKAR
Digitally signed by MANDIRA
MILIND SALGAONKAR
Date: 2026.10.03 16:23:26 +0530
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CIVIL APPELLATE JURISDICTION
WRIT PETITION NO.987 OF 2012
1. Jai Hind Sindhu Education Trust,
a public charitable trust under
the Bombay Public Trust Act, 1950,
having its office at Jai Hind High School,
Deluxe Cinema Road, Pimprigaon,
Pune 411 017 ..
2. Nalini Gera,
adult Indian inhabitant, residing at 7C
Koregaon Road, Pune 411001 .. Petitioners
Versus
1. The State of Maharashtra ..
Mantralaya, Mumbai 400 032
2. Pimpri Chinchwad Municipal
Corporation,
Pimpri, Pune -18
3. The Administrative Officer, (Taxes)
Pimpri Chinchwad Municipal Corporation,
Pimpri, Pune -18
4. Municipal Commissioner,
Pimpri Chinchwad Municipal Corporation,
Pimpri, Pune -18
5. Assistant Commissioner (Tax)
Pimpri Chinchwad Municipal Corporation,
Pimpri, Pune -18 .. Respondents
…
2/46 WP-987-12.odt
Mr.Dormaan J. Dalal with Ms.Shirley Mody for the Petitioners.
Dr.Milind Sathe, Advocate General with Mr.Kedar B. Dighe,
Addl.G.P. and Smt.Savita A. Prabhune, A.G.P. for the State/
Respondent No.1
Mr.Shrikrishna Ganbavale with Mr.Shantanu Patil for the
Respondent Nos.2 to 5.
CORAM: BHARATI DANGRE &
MANJUSHA DESHPANDE, JJ.
RESERVED ON : 28th JULY, 2026
PRONOUNCED ON : 29th SEPTEMBER, 2026
...
JUDGMENT (PER BHARATI DANGRE, J.)
1. The Petition having been admitted on 23/01/2013 is
taken up for final hearing by consent of the respective counsel.
2. Petitioner No.1, a Public Charitable Trust registered
under the Bombay Public Trusts Act, 1950, alleged to be
established with the primary object to promote, run, takeover
and manage the educational interests of the institutions in
Maharashtra, seek a declaration that its premise are exempt
from property tax and in turn, seek quashing and setting aside
of the order dated 10/01/2012 passed by the Assistant
Commissioner of Pimpri Chinchwad Municipal Corporation
(hereinafter referred to as, ‘PCMC’), imposing such levy.
A consequential relief is sought for withdrawing and
recalling all such demand notices and bills raised and a
restraint order is sought against the officials of the
Corporation from raising any demand of property tax in future
qua the premises of Petitioner No.1.
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The Petition was allowed to be amended, during its
pendency so as to raise a challenge to the further demand
notices seeking payment of property tax and also the
consequential notice of attachment issued to Petitioner No.1.
3. We have heard learned counsel Mr.Dormaan Dalal for the
Petitioners. The Respondent-State of Maharashtra is
represented by the learned Advocate General Dr.Milind Sathe,
whereas learned counsel Mr.Shrikrishna Ganbavale
represented Respondent Nos.2 to 5 i.e. PCMC and its officers.
The pleadings in the Petition, in support of the reliefs
sought therein, in specific is that Petitioner No.1 functions only
for educational purposes purely on no profit basis, its main
objective being to promote, run, takeover and manage the
educational interests. A specific pleading is contained in the
Petition to the effect that no property or funds of Petitioner
No.1 were ever applied for any purpose or object other than
the aforesaid object and the educational institutions managed
by Petitioner No.1 are linguistic minority institutions and of
the three institutions run by Petitioner No.1, two are
Government aided.
It is pleaded that Petitioner No.1 runs a primary school,
‘Jai Hind Primary School’, a High School and a Junior College,
‘Jai Hind High School and Junior College’ and a college styled
as ‘Manghanmal Udharam (M.U.)’, college of commerce, all
being located in a common campus situated opposite Jijamata
Hospital, Deluxe Cinema Road, Pimprigaon, Pune-17. The
pleading in the Petition, as regards the manner in which the
institutions are run, is to the following effect :-
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“It is pertinent to note that of the aforementioned, the High School,
Junior College and the college of commerce are mainly government
aided minority educational institutions under the provisions of
Article 30 of the Constitution of India. The said college of commerce
provides three courses viz. B.com, B.B.A. and B.C.A. Out of these,
B.com division (all three years) is the aided institution and the
B.B.A. and B.C.A. divisions are unaided. In the said Junior College
there are total 10 divisions each for standard 11 th and 12th. Out of
these, 6 divisions in each standard are aided and 4 are unaided.”
4. In raising a challenge to the impugned order issued by
Respondent No.4 as well as the subsequent demand notices
premised on the ground that Petitioner No.1 is not eligible for
property tax exemption as it accepts fees and donations and
not imparting free education, it is the case of Petitioner No.1,
that it is a Public Charitable Trust and all buildings in the
campus/premises are solely occupied and used for charitable
purpose and, therefore, it falls within the ambit of Section
132(1)(b) of the Bombay Provincial Municipal Corporations
Act, 1949/The Maharashtra Municipal Corporations Act, 1949
(for short, “Corporations Act of 1949”) and, hence, exempted
from payment of property tax. Reliance is placed upon a ‘No
Due Certificate’ dated 23/05/1991 issued in its favour thereby
declaring that the building is being used for educational
purposes and is exempted from property tax and there are no
dues of property tax pending from Petitioner No.1. The said
‘No Due Certificate’ is a part of the Petition.
Relying upon the aforesaid, it is the case of the
Petitioners that thereafter no demand for property tax made
till 1999, when a demand notice was served enlisting the
buildings subject to property tax falling within the jurisdiction
of PCMC and as per the said notice, the Trust was liable to pay
property tax w.e.f. 1982 amounting to Rs.6,49,950/- and the
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Trust was permitted to raise objection against the same on or
before the stipulated date. However, according to the
Petitioners, no justification was offered as to why the tax had
been levied retrospectively w.e.f. 1982.
The Trust responded to the said notice, in an attempt to
satisfy the Authority that it is a Public Charitable Trust and
running the Government recognised institutions and all those
educational institutions are run for advancement of object of
the Trust and no commercial or profit generating activity is
carried therefrom and a request was, therefore, made to
continue the exemption and not to levy any property tax on
the Trust.
The Trust was even directed to file an affidavit to the
effect that it does not and will not accept any donation for the
purpose of admission in its educational institutions, and
accordingly, such an affidavit was also tendered on
16/07/2002. However, nothing worked with the PCMC and the
demand of Rs.6,49,980/- towards property tax was confirmed.
Thereafter, the Petitioners entered into plethora of
correspondence and several attempts were made to convince
the Respondents Authorities that Petitioner No.1 was purely
charitable institution and, hence, its premises are exempt from
property tax and it does not carry out any commercial or
profit generating activity, however, the Trust remained
unsuccessful in satisfying the Authorities. As a result, a
demand was raised in the sum of Rs.95,78,936/- in form of
property tax, including arrears till the said date.
5. Upon the said notice being received, contemplating a levy
of penalty at the rate of 2% for every month, the Trust
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addressed a letter to the Authority and requested for
withdrawal of the illegal demand notice and the bills and a
hearing was scheduled before the Authorities, when some
precedents were relied upon by Petitioner No.1, still the
Petitioners were unable to persuade the Authorities to accept
their contention and on 10/01/2012, Respondent No.4, the
Assistant Commissioner (Tax Collection) passed an order to
the following effect :-
“1. In the matter of tax assessment of the property No.
07/05/00892 of the Trust M/s. Jaihind Sindhu Education Trust,
Pimpri after considering the Completion Certificate of building and
construction found in the site visit the Tax assessed on the building
of the Trust and date of Tax assessment mentioned in the Para No.
1 are correct and it is now confirmed. The property Tax bills issued
to Trust and demands of tax made to the Trust by demand notices
are correct. The all objections of the Trust are hereby rejected.
2. The Trust is not eligible for the exemption of the property tax
under the provisions of the BPMC Act 1949 S. 132(1)(b) hence
there is no substance in the points raised by the Trust for granting
exemption in the property tax therefore the demand of the Trust
for property tax exemption is rejected.”
6. The aforesaid order gave rise to filing of the Petition in
the month of January 2012. Upon the Petition being filed and
upon issuance of notice to the Respondents, on 19/04/2012,
ad-interim relief was granted in terms of prayer clause (d),
declaring that pending the hearing and final disposal of the
Petition, the Respondents are refrained from taking any
coercive action against the Trust.
Admittedly, the said interim order continued to remain
in force as it was not specifically vacated.
However, in the wake of subsequent demands and the
notices being served, the Petition came to be amended on
14/03/2023, raising a challenge to the subsequent demands.
7/46 WP-987-12.odt
7. The Petition is strongly contested by the PCMC and its
Assistant Commissioner filed an affidavit primarily raising an
objection that the Petitioners have an alternative remedy of
filing an appeal under Section 406 of the Maharashtra
Municipal Corporation Act. It is also pleaded by the
Respondents that the Petitioners never applied for exemption
of property tax, which resulted in issuance of tax demand
notices from time to time and this was so specifically pleaded
for the financial year 2022-2023, as according to the
Respondents, the Petitioners have to seek exemption on year-
to-year basis.
8. The learned counsel Mr.Dormaan Dalal, representing the
Petitioners, while pressing the reliefs in the Petition would
submit that Petitioner No.1 is a Trust registered under the
Bombay Public Trusts Act, the registration being granted on
06/10/1955 and according to him, it functions for educational
purposes only on no profit basis. According to him, the
Deputy Director of Education, Pune Division has recognised
the institutions run by the Petitioners as institutions run by
Sindhi Linguistic Group, and, hence is entitled to avail the
benefit under Section 3(2) of the Maharashtra Employees of
Private Schools (Conditions of Service) Regulation Act, 1977.
He would also place reliance upon the certificate issued by the
Circle Officer, PCMC on 23/05/1991, which has certified thus :-
Certificate
The Head mistress of Jai Hind Primary School is hereby given a
certificate by the PCMC Divisional office, Pimpri nagar, regarding No
Tax dues certificate since the School is an Educational Institution
and no taxes are levied on Educational Institutions. Hence No Tax
is due. Thus ‘No Objection Certificate’ is issued.
8/46 WP-987-12.odt
Circle Officer
Pimpri Chinchwad Municipal Corporation
Pimpri, Pune – 411 017
According to Mr.Dalal, the Petitioners have even tendered an
affidavit to the Municipal Authorities and made a categorcial
statement before this Court that Trust is not in receipt of any
donation for the purpose of education and he would draw
distinction by submitting that the donations given by the well
wishers are not for the purpose of admission to the institution.
He would place heavy reliance upon the audit reports of the
years 2008 to 2010, showing that no funds of the Trust were
applied for an object or purpose other than the object and
purpose of the Trust, viz., education.
According to the learned counsel, the impugned order
rejected the request of the Petitioners for exemption of the
property tax, particularly on the following grounds :-
(a) No provision of the Maharashtra Municipal
Corporations Act, 1949 grants such tax exemption;
(b) The Petitioner Trust accepts donations;
(c) The Petitioner Trust, though registered with the
Charity Commissioner, has not demonstrated that the
building of the Trust is used for public charitable purpose
under Section 132(1)(b).
9. Mr.Dalal, in support of the claim in the Petition, would
place heavy reliance upon the decision of the Hon’ble Supreme
Court in the case of Municipal Corporation of Delhi Vs.
Children Book Trust1 as well as the decision of the Bombay
High Court in Balkrishna Dharamdas Vora Vs. The Poona
1 (1992) 3 SCC 390
9/46 WP-987-12.odt
Municipal Corporation2. Reliance is also placed by him on the
decision of the Bombay High Court in Sindhu Educational
Trust Vs. State of Maharashtra & Ors. (Writ Petition No.2886
of 2013) and a further decision at Nagpur Bench in Shahbabu
Education Society, Patur, Distt. Akola Vs. State of Maharashtra
(Writ Petition No.927 of 2018)
He has also placed before us a compilation of various
orders passed by this Court, as heavy reliance is placed upon
the decision of the Apex Court in case of Children Book Trust
(supra).
According to Mr.Dalal, once the certificate is issued in
favour of Petitioner No.1, certifying that no taxes are/shall be
levied upon the Trust, being an educational institution, it had
legitimate expectation that it shall not be subjected to any tax.
In addition, Mr.Dalal would place reliance upon the
Constitution Bench Judgment in the case of T.M.A. Pai
Foundation & Ors. Vs. State of Karnataka & Ors. 3 as well as the
decision in the case of Isalamic Academy of Education & Anr.
Vs. State of Karnataka & Ors.4 to demonstrate his primary
submission as to whether education per se is charitable
purpose. He would also invoke the principle laid down by the
Hon’ble Apex Court in Modern Dental College and Research
Centre & Ors. Vs. State of Madhya Pradesh & Ors.5
Some significant decisions from the Hon’ble Apex Court,
dealing with ‘education’ under the Income Tax Act are also
relied upon by him and this include the following decisions :-
(a) The Sole Trustee Lok Shikshana Trust Vs. The
Commissioner of Income Tax, Mysore6;
2 1963 (65) Bom L.R. 119
3 (2002) 8 SCC 481
4 (2003) 6 SCC 697
5 (2016) 7 SCC 353
6 (1976) 1 SCC 254
10/46 WP-987-12.odt
(b) Assistant Commissioner of Income Tax (Exemptions)
Vs. Ahmedabad Urban Development Authority7
(c) New Noble Educational Society Vs. Chief Commissioner
of Income Tax 1 & Anr.8
10. The learned counsel Mr.Ganbavale, in response to the
submissions of Mr.Dalal, by relying upon the affidavit, would
raise a preliminary objection about the maintainability of the
Writ Petition in the wake of an alternative and efficacious
remedy in form of statutory appeal being available. He would
make a sincere request to the Court that the Petitioners, by
bypassing the statutory mechanism, have approached the
Court and this Court would refuse to exercise its writ
jurisdiction in the wake of an efficacious remedy being
available.
Apart from this, according to him, whether the
exemption can be granted in respect of a building or a land
under Section 132 of the Corporations Act of 1949 depends on
facts and circumstances of each case, as according to him the
exemption is not automatic, but has to be determined on the
basis of the actual user of the premises, nature of the property
and the material placed before the competent authority. It is
also his submission that under Section 132(2) the burden lies
on the person claiming exemption to show that the property
and its user meet the statutory criteria and mere assertion
that it is a ‘charitable educational institution’ with public
purpose is not sufficient to claim exemption in terms of the
language applied by the legislation. In any case, according to
Mr.Ganbavale, the issue of exemption is liable to be examined
7 (2023) 4 SCC 561
8 (2023) 6 SCC 649
11/46 WP-987-12.odt
with reference to the relevant assessment period and on the
basis of the facts pertaining to the concerned year and the
Corporation is entitled to consider such claim on year-to-year
and case-to-case basis depending upon the applicable statutory
provisions and the factual position emerging in the relevant
period. Since, the Petitioners have not invoked the statutory
process for claiming exemption for the relevant period,
according to him, the challenge to the demand of tax raised by
the Corporation and the claim for exemption without
exhausting the statutory remedy shall not be entertained by
this Court, and according to him, this Court will not exercise
its extra ordinary writ jurisdiction, when an alternative
remedy is available and also the Petition involves several
disputed facts and there cannot be a permanent exemption
granted in favour of the Petitioners as what is prayed.
Since the learned Advocate General was requested to
address on the said issue, Mr.Ganbavale submits that he would
like to adopt the said submissions.
11. We have also heard the learned Advocate General
representing the State of Maharashtra, who marked his
appearance on our request. He drew a distinction between the
educational institution, which carry out its functions for
charitable purpose, which finds mention in Section 9 of the
Maharashtra Public Trusts Act. Inviting our attention to the
description of ‘charitable purpose’, according to the learned
Advocate General, different clauses should be read ejusdem
generis and one of the purpose being ‘education’ must take its
colour from the other purposes covered under sub-section (1)
12/46 WP-987-12.odt
of Section 9; being relief of poverty or distress or medical
relief.
Dr.Sathe would submit that the real test to be applied is,
whether the educational activity is carried out as a profit
motive or it only carries a charitable purpose. He does not
dispute the position that the educational institutions which
has a profiteering motive, do not deserve the protection and its
status cannot be accepted to be the one of ‘charitable purpose’.
According to the learned Advocate General, the question,
therefore, has to be determined as to whether the income
gained from running of the educational institution is strictly
used for the purpose of charity or carrying out the very said
purpose, viz., imparting education and according to him, if it is
not being so done then definitely, even the institutions being
run by a public trust like Petitioner No.1, shall not be
considered to be a ‘charitable purpose’ and the benefit under
Section 132 of the Corporations Act of 1949 shall not be
conferred upon it.
12. We have given our thoughtful consideration to the factual
and legal aspect of the issue involved.
The issue that arises for consideration before us is,
whether the buildings and lands on which the Petitioner No.1
is running different educational institutions imparting
education at different levels are liable for being exempted from
general tax levied on buildings and lands under the
Corporations Act of 1949. The said provision is to be found in
Section 132 and it reads thus :-
13/46 WP-987-12.odt
“132. General tax on what premises to be levied.—
(1) The general tax shall be levied in respect of all buildings and
lands in the City except—
(a) buildings and lands solely used for purposes connected with
the disposal of the dead ;
(b) buildings and lands or portions thereof solely occupied and
used for public worship or for a public charitable purpose ;
(c) buildings and lands vesting in the Government used solely
for public purposes and not used or intended to be used for purposes
of trade or profit or vesting in the Corporation, in respect of which
the said tax, if levied, would under the provisions hereinafter
contained be primarily leviable from the Government or the
Corporation, respectively.
(2) The following buildings and lands or portions thereof shall not
be deemed to be solely occupied and used for public worship or for a
public charitable purpose within the meaning of clause (b) of
subsection (1), namely :—
(a) buildings or lands or portions thereof in which any trade or
business is carried on ; and
(b) buildings or lands or portions thereof in respect of which
rent is derived whether such rent is or is not applied solely to
religious or charitable purposes.
(3) Where any portion of any building or land is exempt from
the general tax by reason of its being solely occupied and used for
public worship or for a public charitable purpose such portion shall
be deemed to be a separate property for the purpose of municipal
taxation."
13. From the reading of the aforesaid, it is evidently clear
that certain types of lands and buildings are exempted from
levy of general tax and one of the categories thereof is of
“buildings and lands or portions thereof solely occupied and
used for a public charitable purpose”.
Sub-Section (2), however, has offered a clarification to
the effect that the buildings and lands or portions thereof shall
not be deemed to be solely occupied and used for public
charitable purpose within the meaning of clause (b) of sub-
section (1) of Section 132, if in such buildings or lands or
14/46 WP-987-12.odt
portions thereof, any trade or business is carried out and if in
respect of which rent is derived, whether it is or it is not
applied solely for charitable purposes.
14. The term ‘charitable purpose’ is not defined in the
Corporations Act of 1949 and for that purpose we have to turn
our attention to Section 9 of the Maharashtra Public Trusts
Act, 1950 which has categorised charitable purposes and we
deem it appropriate to reproduce the said provision :-
“9. Charitable Purposes.
[(1)] for the purposes of this Act, a charitable purpose includes -
(1) relief of poverty or distress;
(2) education;
(3) medical relief;
(3A) provision for facilities for recreation or other leisure time
occupation (including assistance for such provision), if the facilities
are provided in the interest of social welfare and public benefit,
and ]
(4) the advancement of any other object of general public
utility, but does not include a purpose which relates-
4
[***]
(b) exclusively to religious teaching or worship.”
Sub-section (2) of Section 9 is also very pertinent to note, as it
provides an indicator about the facilities being provided in the
interest of social welfare as contemplated under clause (3A) of
sub-section (1) of Section 9 and it reads thus :-
“[(2) The requirement of this section that the facilities are provided
in the interest of social welfare shall not be treated as satisfied,
unless-
(a) the facilities are provided with the object of improving the
conditions of life for the persons for whom the facilities are
primarily intended; and
(b) either-
(i) those persons have need of such facilities as
aforesaid by reason of their youth, age, infirmity or disablement,
poverty or social and economic circumstances, or
(ii) the facilities are to be available to the members of
the public at large.”
15/46 WP-987-12.odt
15. For the purpose of determination of the issue that has
arisen before us, it will be necessary for us to read the
provisions in the two different statutes conjointly, namely,
Section 132 of the Corporations Act of 1949 and Section 9 of
the Maharashtra Public Trusts Act.
The exemption of general tax to be levied on buildings
and lands or portions thereof must satisfy two specific criteria
as per clause (b) of sub-section (1) of Section 132 viz. (a)
solely occupied for charitable purpose; and (b) used for public
charitable purpose.
The said provision contemplates two factors, namely,
occupation of the buildings and lands or portions solely for
public charitable purpose and its use for public charitable
purpose. In case of buildings or lands or portions thereof
where any trade or business is carried out then as per sub-
section (2) such buildings or lands or portions thereof shall
not be deemed to be solely occupied and used for a public
charitable purpose. It is the pleaded case of the Petitioners
that the premises through which the educational institutions
are run by the Trust are solely occupied and used for
charitable purposes and, therefore, clause (b) of Section 132 of
the Corporations Act of 1949 clearly exempts it from payment
of property tax and this call for testing.
16. The Petitioners have placed heavy reliance upon the
Judgment of the Hon’ble Supreme Court in Children Book
Trust (supra) and we have perused the said pronouncement in
the backdrop of the provisions of the Delhi Municipal
Corporation Act, 1957 and in specific Section 115(4)(a) as
16/46 WP-987-12.odt
regards the imposition of general tax in respect of lands and
buildings. The said statute also exempted lands and buildings
occupied and used by a society for ‘charitable purpose’.
While determining the conditions of applicability of
exemption, the Hon’ble Apex Court emphasized that the
dominant object of a society must be charitable and not to earn
profit and secondly, the society must be ‘supported’ wholly or
in part by voluntary contribution.
In the facts of the case, it was noted that on scrutiny of
the income and expenditure account of the school, it is
reflected that the activity which was being carried out by the
society i.e. running of school generated positive income from
year-to-year and the fees charged and the donations received
by the society could not be treated as voluntary, as they were
all forced on students/parents and the school was contributing
various amount to the society. Observing that the mere fact
that the society was not distributing profit or was applying the
profits earned from running of a school on construction of
school building was not considered enough for claiming
exemption, but it was necessary to demonstrate that the
society was supported wholly or in part by voluntary
contributions and if the school was generating income for the
society and no amount was spent by the society on the school,
it was concluded that the society was being run on commercial
lines and, therefore, not entitled for exemption.
17. The pronouncement came in the backdrop that the
society, Children Book Trust, registered under the Societies
Act, was served with a notice by the respondent-Corporation
17/46 WP-987-12.odt
that the rateable value of the building should be revised and on
01/02/1973, the Deputy Assessor and Collector of the
Corporation revised the value of the property and enhanced it
to Rs.16,29,750/-. The Deputy Assessor and Collector held
that the Trust had not proved its charitable character and the
user of the property did not go to prove that it was used for
charitable purpose and, therefore, cannot receive tax
exemption.
Aggrieved by this order, a writ petition under Articles
226 and 227 of the Constitution was filed before the Delhi High
Court, wherein it was contended that the Trust was covered by
Section 115(4) proviso of the Delhi Municipal Corporation Act,
1957, which exempted the buildings from payment of general
tax, if exclusively occupied and used by a society for charitable
purpose.
The learned Single Judge allowed the writ petition and
held that it would be entitled to claim total exemption for the
payment of tax under Section 115(4) for all the portions
occupied by it except the one which is occupied by the press
i.e. the basement area for which a monthly rental value has
been assessed. Even from this rental value, the Trust was
entitled to claim exemption in the proportion of the income
accruing to it from publication of children books etc.
While setting aside the impugned order, matter was
remitted to be disposed of in accordance with the observations
made therein.
18. Aggrieved by the Judgment of the learned Single Judge,,
an LPA was preferred by the Corporation, when the Division
18/46 WP-987-12.odt
Bench held, ‘education’ cannot be understood in the limited
sense of teaching or delivery of lectures and rather acquisition
of information or knowledge from whatever source and in any
manner has to be regarded as education.
The Division Bench, therefore, held that because of the
mandatory provisions of sub-section (5) of Section 115, no
part of the premises in occupation of the press in the basement
and the area on the ground floor for which monthly rental
value was fixed could be exempted from tax. The appeal of the
Corporation was, therefore, partly allowed.
It is this finding of the Division Bench, which was
challenged by way of Special Leave to Appeal before the Apex
Court.
19. On behalf of the appellant-Public Trust, the argument
was canvassed focusing upon the provisions of the Delhi
School Education Act, 1973 and the rules made thereunder,
which contemplated the conditions of recognition to the effect
that the society must run the school and such school must
maintain its account. The question posed for consideration
was whether the society owned the building and the building
housed the school and whether it was exempt from tax.
Section 115(4) contemplated two principles, namely, the
society must be a charitable society and the use of the building
must be for charitable purpose. It was urged that if the object
is charitable that was enough and it was irrelevant as to how
the funds are utilised.
What was harped upon was the statutory setting in
which Section 115(4) was to be construed.
19/46 WP-987-12.odt
Emphasis was laid upon the Section 4 of the Delhi School
Eduction Act, 1973 which prescribed the conditions of
recognition and in the statutory scheme itself Section 17(3)
made it obligatory for the Manager to file with the Director a
full statement of the fees to be levied by the school and the
provision also contemplated that no fee shall be levied except
with the prior approval of the Director and no fee in excess of
the fee specified shall be levied. Apart from this, the Rules
were also relied upon, in order to advance the submission that
if there is no private gain; and if the society cannot utilise the
funds as the Rules under the Delhi School Act state that, as
long as there is no profit, it is charitable. It is emphasized that
the essential test of a charitable purpose is the destination of
the profits and if the profits continue to feed the charity, mere
occurrence of profits would not detract from the charitable
nature of the enterprise. The proviso under Section 115(4),
which prescribed three qualitative tests for identifying
charitable societies, was also invoked.
The submission received opposition from the
Corporation, by urging that Section 115(4) of the Delhi
Corporation Act is a peculiar provision which provides relief to
those societies or bodies carrying on charitable support either
fully or in part. The proviso was distinguished from other
enactments by urging that legislative intent was to narrow
down the clauses of exemption. It was urged on behalf of the
Corporation that as far as the respondent Book Trust was
concerned, it owned the building and part of the building was
let out, which received rental income. It was categorically
pointed out that the Children Book Trust had an Office,
20/46 WP-987-12.odt
Printing Press, Dolls Museum, Library and Singer Institution,
and hence urged that to claim the exemption, it must be shown
that the society is supported by the voluntary contribution
and where the activity of the society generates income to
support itself, the society do not depend upon the voluntary
contribution and definitely the exemption would be
unavailable. It was also urged that the finding that even if it
receives a small contribution irrespective of the fact that
whether it is able to support or not, is not the correct test and
this required a clarification
20. It is in the context of the aforesaid rival contentions, the
Apex Court proceeded to decide the issue, in the background of
the relevant statutory scheme of the Delhi Municipal
Corporation Act, 1957, which according to us, is distinct than
the one which is before us in form of Section 132 of the
Corporations Act of 1949. Section 115(4) of the Delhi
Municipal Corporation Act, 1957 reads thus :-
“(4) Save as otherwise provided in this Act, the general tax shall be
levied in respect of all lands and buildings in Delhi except—
(a)lands and buildings or portions of lands and buildings
exclusively occupied and used for public worship or by a
society or body for a charitable purpose:
Provided that such society or body is supported wholly or in
part by voluntary contributions, applies its profits, if any, or other
income in promoting its objects and does not pay any dividend or
bonus to its members.
Explanation— ‘Charitable purpose’ includes relief of the poor,
education and medical relief but does not include a purpose which
relates exclusively to religious teaching;
(b) to(c) * * *
(emphasis supplied)”
21/46 WP-987-12.odt
Sub-section (5) and (6) further read thus :-
“(5) Lands and buildings or portions thereof shall not be deemed to
be exclusively occupied and used for public worship or for a
charitable purpose within the meaning of clause (a) of sub-section
(4), if any trade or business is carried on in such lands and
buildings or portions thereof or if in respect of such lands and
buildings or portions thereof, any rent is derived.”
(6) Where any portion of any land or building is exempt from the
general tax by reason of its being exclusively occupied and used for
public worship or for a charitable purpose such portion shall be
deemed to be a separate property for the purpose of municipal
taxation.”
It can therefore be seen that after providing exemption
under sub-sections(4) and (5), Section 115 categorises cases,
which would not be entitled for exemption and sub-section (6)
clarify that a part of the building in the occupation of the
society may not entitle it for exemption though the other part
is clearly exempted.
21. In the wake of the aforesaid, the Apex Court observed
thus :-
“54. By a reading of the above, it is clear that sub-section (4) of
Section 115 provides that general tax shall be levied in respect of all
lands and buildings except those lands and buildings or part of
lands and buildings which are exclusively occupied and used ( i) for
public worship or (ii) by society or body for charitable purpose.
55. The conditions for claiming exemption under sub-section (4)
are:
(i) The lands and buildings or portions of lands and buildings, in
respect of which exemption is claimed shall be exclusively
occupied by a society or a body and used for a charitable
purpose.
(ii) Such society or body must be supported wholly or in part by
voluntary contributions.
(iii) It must apply its profit, if any, or other income for promoting
its objects.
(iv) It must not pay any dividend or bonus to its members.”
22/46 WP-987-12.odt
22. While considering the case of the appellant society, that
it is engaged in running the school, which is recognised as
private unaided school, which is being run from the building
owned by the society, ultimately the applicability of sub-
section (4) of Section 115 of the Delhi Education Act was to be
determined.
The Apex Court invoked various provisions of the said
Act in form of Section 17(3) as well as 18(3), which read thus :-
“17(3) The manager of every recognised school shall, before the
commencement of each academic session, file with the Director a
full statement of the fees to be levied by such school during the
ensuing academic session, and except with the prior approval of the
Director, no such school shall charge, during the academic session,
any fee in excess of the fee specified by its manager in the said
statement.”
“18(3) In every recognised unaided school, there shall be a fund, to
be called the ‘Recognised Unaided School Fund’, and there shall be
credited there to income accruing to the school by way of-
(a) fees,
(b) any charges and payments which may be realised by
the school for other specific purposes, and
(c) any other contributions, endowments, gifts and the
like.”
In addition, sub-section (4) of Section 18 was also invoked,
which clearly stipulated as under :-
“(4)(a) Income derived by unaided schools by way of fees shall be
utilised only for such educational purposes as may be prescribed;
and
(b) charges and payments realised and all other contributions,
endowments and gifts received by the school shall be utilised only
for the specific purpose for which they were realised or received.”
Rule 50 of the Rules framed under the Act was also invoked as
it stipulated the conditions for recognition, and reads thus :-
“61. Rule 50 of the rules framed under this Act stipulates the
conditions for recognition. The important conditions for our
purpose are—
23/46 WP-987-12.odt
“(i) the school is run by a society registered under the Societies
Registration Act, 1860 (21 of 1860), or a public trust constituted
under any law for the time being in force and is managed in
accordance with a scheme of management made under these rules;
(iv) the school is not run for profit to any individual, group or
association of individuals or any other persons; and
(ix) the school buildings or other structures of the grounds are
not used during the day or night for commercial or residential
purposes (except for the purpose of residence of any employee of
the school) or for communal, political or non-educational activity of
any kind whatsoever.”
In addition to this, there were specific Rules relating to
school fund in the form of Rule 172 and Rule 173, which clearly
specified as to how the funds would be collected, maintained
and expended.
Rule 172 clearly stipulated that no fee, contribution or
other charge shall be collected from any student by the Trust
or society running any recognised school, whether aided or not
and every fee, contribution or other charge collected from any
student by a recognised school, whether aided or not, shall be
collected by the school and a receipt shall be given for every
collection.
Rule 173 prescribed that every school fund shall be
deposited in a nationalised bank or a scheduled bank or any
post office in the name of the school and only such part of the
school fund, as may be approved by the Administrator may be
kept in the form of Government securities, whereas the
Administrator may allow such part of the fund to be kept as
cash in hand.
23. It is in this background, the Apex Court proceeded to
consider, “whether education per se is a charitable purpose
and its application to the appellant society.” By referring to
24/46 WP-987-12.odt
various authoritative pronouncements, the conclusion is
recorded in following words:-
“76. In view of the above rulings it would be clear that where
the predominant object is to subserve charitable purpose and not to
earn profit it would be a charitable purpose. However, the
argument of the appellant is as per the Delhi School Education Act
and the rules framed thereunder, if the society cannot utilise the
fund and the school cannot be run for private gain in the absence of
any profit, it would be a charitable purpose.
77. We have already seen that merely because education is
imparted in the school, that by itself, cannot be regarded as a
charitable object. Today, education has acquired a wider meaning. If
education is imparted with a profit motive, to hold, in such a case,
as charitable purpose, will not be correct. We are inclined to agree
with Mr B. Sen, learned counsel for the Delhi Municipal Corporation
in this regard. Therefore, it would necessarily involve public
benefit.”
24. Very pertinently, the Apex Court in paragraph 82
observed that the municipal general tax is an annual tax and
the liability for taxation must be determined with reference to
each year that the society is claiming exemption, as it will have
to show that it fulfills the conditions for exemption each year.
By way of an example, it was stated that if the school for its
support, depend on either wholly or in part voluntary
contributions in that particular year, it may be exempted but
when it do not depend upon voluntary contributions at all or
again if the society produces surplus income and excludes the
dependence on voluntary contributions, it may cease to
exempt. However, the Apex Court also derived a reasonable
way of giving effect to the exemption by contemplating that the
assessment shall be for a period of five years to ascertain
whether the society or body depends on voluntary
contributions and at the end of each five year period, the
assessing authority could review the position.
25/46 WP-987-12.odt
The conclusion of the Apex Court on this point was
clearly expressed in the following words :-
“82. ...In other words, what we want to stress is, where a
society or body is making systematic profit, even though that profit
is utilised only for charitable purposes, yet it cannot be said that it
could claim exemption. If, merely qualitative test is applied to
societies, even schools which are run on commercial basis making
profits would go out of the purview of taxation and could demand
exemption. Thus, the test, according to us, must be whether the
society could survive without receiving voluntary contributions,
even though it may have some income by the activities of the
society. The word “part” mean an appreciable amount and not an
insignificant one. The “part” in other words, must be substantial
part. What is substantial would depend upon the facts and
circumstances of each case.”
Thus it was concluded that the test to be applied is not merely
qualitative but quantitative as well.
25. One another aspect, which was touched by the Apex
Court, is the utilisation of the income in promoting its objects
and the financial position was analysed in context of the Delhi
School Education Act and the Rules and on factual aspect,
from perusal of the extract of income and expenditure
accounts of the school, it was noted that the contributions had
been made every year to the society, but the Rules nowhere
contemplated transfer of funds from the school to the society
and, therefore, such contributions could not amount to
voluntary contributions. It was, therefore, concluded that the
funds are transferred, even calling the contribution from the
school to the society, would be nothing more than a transfer to
itself since the transfer of funds was found to be in disregard of
the Rules and run counter to Rule 177 and, therefore, by no
process of reasoning, it could be held that they are voluntary
contributions received by the society. This was so observed in
the wake of the fact that there is no provision in the Delhi
26/46 WP-987-12.odt
School Education Act by which the school is made a separate
entity.
Answering the question as to whether the trade or
business is carried out within the meaning of sub-section (5),
reference was made to sub-section (6) of Section 115, which
covered the cases, where a part of the land or building is used
for trade or business or for getting rental income. Holding that
this part undoubtedly would be subject to tax, the Apex Court
noted that if there was another portion of the same lands or
buildings where trade or business was carried on and profits
are made and are applied to charitable purpose then that
portion shall, for the purposes of municipal taxation, shall be
deemed to be a separate property, but the other part will be
subject to tax. Therefore, it was succinctly observed that this
was the idea underlying making a part of the lands or
buildings a separate property so that the entire building does
not get the exemption and the trade portion shall be subjected
to tax and the charity portion receive exemption.
As far as the factual aspects are concerned, it was held
thus :-
“93. Trade or business can be present in both sub-sections (4)
and (5) of Section 115. But, if the profits or income of trade or
business is devoted to a charitable purpose and no part thereof is
distributed among the members as dividends or bonus, then that
trade or business is a means to an end. It is charity.
94. But, if there is a trade or business carried on in a land or
building and its profits are not applied to a charitable purpose, sub-
section (6) says that that part of the land or building where a trade
or business is carried on or from which rent is derived, will be
subject to tax.
95. Applying the above propositions, it would only, at best,
make the society running the school a charitable purpose, beyond
that it does not strengthen its case as it fails to answer the test that
it is supported wholly or in part by voluntary contributions.
27/46 WP-987-12.odt
96. We are unable to read down the proviso to utilisation of
income and non-payment of dividends to the members as submitted
by Mr G.B. Pai.”
As far as the civil appeal filed by the Corporation is
concerned, though Corporation did not dispute that the
Children Book Trust qualified for exemption, and the objection
was raised only qua the observations of the High Court to the
effect that because of the use of the words ‘in part’ in the
proviso, the society would be entitled to claim exemption
provided other conditions are satisfied, if it is able to show that
it has received even a small amount of voluntary contribution,
the Apex Court did not find any reason to interfere in the said
finding and as a result, both the appeals came to be dismissed.
26. On reading of the authoritative pronouncement by the
Hon’ble Apex Court in the case of Children Book Trust (supra),
what apparently distinguishes the finding is the statutory
scheme of the Delhi School Education Act, 1973 and in
particular, the one contemplating imposition of general tax on
lands and buildings. The surrounding provisions in form of
sub-sections (5) and (6) of Section 115, clarified that a part of
the building in occupation of the society may not be entitled for
exemption, whereas the other part may be, a distinction being
clearly drawn in regards lands and buildings on portion
thereof, which are used for charitable purpose if any trade or
business is carried out and those which are exclusively
occupied and used for charitable purpose which shall be
deemed to be separate property for the purpose of municipal
taxation. What is most relevant to note is that for claiming
exemption under sub-section (4), the Apex Court carved out
following four stipulations :-
28/46 WP-987-12.odt
“(i) The lands and buildings or portions of lands and buildings, in
respect of which exemption is claimed shall be exclusively occupied
by a society or a body and used for a charitable purpose.
(ii) Such society or body must be supported wholly or in part by
voluntary contributions.
(iii) It must apply its profit, if any, or other income for promoting its
objects.
(iv) It must not pay any dividend or bonus to its members.”
With reference to the explanation being offered as to what
would be a charitable purpose, it being stated in an inclusive
manner, namely, relief of the poor, education and medical
relief, the following questions formulated for consideration as
framed in paragraph 56, received answers in the law report :-
“(i) Whether the society or body is occupying and using the land
and building for a charitable purpose within the meaning of sub-
section (4)?
(ii) What is the meaning of the expression “supported wholly or in
part by voluntary contribution”?
(iii) Whether any trade or business is carried on in the premises
within the meaning of sub-section (5)?
27. In our view, the scheme contemplate that the statute
before us and in specific, Section 132 is distinct as it does not
provide for any further details in contrast to the Delhi School
Education Act, where the manner of collections of fees and its
utilisation is clearly contemplated. Not only this, under the
Rules framed under the Act, when the society or Public Trust
is granted registration, a clear stipulation existed that it is not
run for profit to any individual, group or association of
individuals or any other persons and the school buildings or
other structures on the ground are not used for commercial or
residential purposes (except for the purpose of residence of
29/46 WP-987-12.odt
any employee of the school) or for communal, political or non-
educational activity of any kind whatsoever.
Not only this, the Rules also clearly provided guidance
that the society shall not collect fees, contribution from any
student or any other recognised school run by the society,
whether aided or not and it also mandated as to how the school
fund shall be maintained. Rule 117 also specifically deal with
the utilisation of the fees by prescribing that the income
derived by an unaided recognised school shall be first utilised
for meeting the pay, allowances and other benefits admissible
to the employees of the school. By way of proviso, its
utilisation was permitted for the set out educational purposes,
namely, (a) award of scholarships to students; (b)
establishment of any other recognised school, or (c) assisting
any other school or educational institution under the
management of the same society or trust by which the first
mentioned school is run.
28. In our view, the statutory scheme under the Delhi School
Education Act, 1973 is completely distinct as the Act and
Rules together provide the manner in which the income
generated from a school run by a society, claiming to be a
public charitable trust, is to be utilised. The statutory
provisions and the Rules do not permit the school to profiteer
and while granting recognition itself, a condition is imposed
that the Trust or society shall not collect any fee, contribution
or other charge from any student and if it is so collected, a
receipt shall be passed so that, it becomes accounted. How the
fees collected from such recognised school is to be utilised was
also clearly carved out and this necessarily contemplate its
30/46 WP-987-12.odt
utilisation for meeting the pay, allowances and benefits
admissible to the employees of the school and then to be
expended towards only education purposes set out in Rule 177.
In this background, it had become easier for the Apex
Court to distinguish the two parts of the buildings, which was
used for charitable purpose and which was not, as sub-
sections (5) and (6) of Section 115 clearly made out distinct
cases for applicability of the property tax by the Corporation.
However, in the present case, it is conspicuously absent.
However, we find the reliance by Mr.Dalal on the said
authoritative pronouncement useful for our purpose, as the
Hon’ble Apex Court has also focused upon the aspect as to
what would amount to ‘Charity’, as it proceeded to determine
the question, whether education per se is a charitable purpose.
The dictum of Lord Macnaghten was specifically
reproduced in paragraph 65, which reads thus :-
"Charity' in its legal sense comprises four principal divisions: trusts
for the relief of poverty, trusts for the advancement of education,
trusts for the advancement of religion, and trusts for other
purposes beneficial to the community not falling under any of the
preceding heads. The trusts last referred to are not the less
charitable in the eye of the law because incidentally they benefit the
rich as well as the poor, as indeed every charity that deserves the
name must do, either directly or indirectly."
The Apex Court, therefore, observed that the emphasis
underlying the idea of charity involved an element of
philanthropy or something derived from pity of early times as
being the fundamental of the concept of charity. It is in this
context, the Apex Court observed thus :-
“68. Therefore, an element of public benefit or philanthropy has to
be present. The reason why we stress on this aspect of the matter is
if education is run on commercial lines, merely because it is a
school, it does not mean it would be entitled to the exemption under
Section 115(4) of the Act.”
31/46 WP-987-12.odt
It was thus clearly expressed that if education is being run on
commercial lines, merely because it is a school, that would not
entitle the society for exemption under Section 115(4).
29. The Apex Court also considered the term ‘charitable
purpose’ with reference to the Indian Income Tax Act and it
relied upon the decision in the case of All India Spinners'
Association and referred to the relevant enunciation of law to
that effect :-
“Section 4(3) of the Indian Income Tax Act gives a clear and
succinct definition of ‘charitable purposes’ which must be construed
according to its actual language and meaning. Lord Macnaghten’s
definition of charity and English decisions on the law of charities
have no binding authority on its construction and though they
sometimes afford help or guidance, cannot relieve the Indian Courts
from their responsibility of applying the language of the Act to the
particular circumstances that emerge under conditions of Indian
life. The difference in language, particularly the inclusion in the
Indian Act of the word ‘public’ is of importance.
The construction of Section 4(3) is obviously a question of law,
but so also is the question what is the real purpose of an
Association. The Court must make its decision on the latter point on
the basis of the facts found for it, but given the facts the question is
one of law. Where the principal fact is the constitution of the
Association the true construction of the constitution for finding out
its purpose is a question of law.
The words ‘general public utility’ in Section 4(3) are very wide
words. They would exclude the object of private gain, such as an
undertaking for commercial profit though all the same it would
subserve general public utility.”
Another decision relied upon was in the case of CIT Vs. Surat
Art Silk Cloth Association, when it was noted that where an
activity is carried on as a matter of advancement of the
charitable purpose or for the purpose of carrying out the
charitable purpose, it would not be incorrect to say as a matter
of plain English grammar that the charitable purpose involves
the carrying on of such activity, but the predominant object of
32/46 WP-987-12.odt
such activity must be to subserve the charitable purpose and
not to earn profit. The charitable purpose should not be
submerged by the profit making motive, as the latter should
not masquerade under the guise of the former.
It is in the light of this aforesaid clear pronouncement,
being conscious of the fact that education has now acquired a
wider meaning and because it is imparted in the school, the
Apex Court concluded that it cannot be regarded as a
charitable purpose and if it is so done with a profit motive,
then to accept that it is a case of charitable purpose would not
be correct.
30. Therefore, in our view, the ratio laid down by the Apex
Court in Children Book Trust (supra) will have to be construed
not as an absolute proposition permitting the benefit of
exemption to buildings which were used for educational
purposes, but as we find that a clear demarcation drawn
between the building used for educational purposes and the
buildings used for profit motive coupled with the provisions in
the statute and the rules framed thereunder governing the
collection of fees, its maintenance and its utilisation, Children
Book Trust (supra) is clearly distinguishable with reference to
the statutory scheme and Rules, as in the present case, we do
not have such benefit as the provision before us in Section 132
for levy of general tax is to be found in the statute pertaining
to Corporation, which has power to grant tax and it has
granted exemption from general tax in case of buildings which
are not only occupied for educational purpose, but are
exclusively used for the said purpose only.
33/46 WP-987-12.odt
31. A careful reading of the decision in the case of Children
Book Trust (supra) and the observations made therein would
reveal that the issue, whether education per se is a charitable
purpose, received in-depth consideration and it was concluded
that for it being so, it must involve an element of public benefit
or philanthropy and the Apex Court specifically noted that if
the education is run on commercial lines, merely because it is
a school, it definitely would not be entitled for availing the
benefit of exemption under Section 115(4) of the Delhi
Education Act, which exempted the lands and buildings in
Delhi from the payment of general tax except when they are
exclusively occupied and used for charitable purpose.
The definition of the term ‘charitable purpose’ in
explanation appended to sub-section (4) of Section 115 is
somehow identical to the one which is to be found in Section 9
of the Maharashtra Public Trusts Act, when it is set out that
the for the purposes of the Act a charitable purpose includes
relief of poverty or distress, education and medical relief. It
also include provision for facilities for recreation or other
leisure time occupation, if the facilities are provided in the
interest of social welfare and public benefit, and the
advancement of any other object of general public utility, but
does not include a purpose which relates exclusively to
religious teaching or worship.
Under the Maharashtra Public Trusts Act, sub-section
(2) of Section 9 offered a further clarification as regards
clauses (3A) and (4) by prescribing that the facilities are
provided in the interest of social welfare are not to be treated
as satisfied, unless (a) the facilities are provided with the
34/46 WP-987-12.odt
object of improving the conditions of life for the persons for
whom the facilities are primarily intended; and (b) either-(i)
those persons need such facilities as aforesaid by reason of
their youth, age, infirmity or disablement, poverty or social
and economic circumstances, or (ii) the facilities are to be
available to the members of the public at large.
32. ‘Charity’ as per Oxford Dictionary is indicative of an
organisation that collect money to help people who are poor
and sick etc. or to undertake the work that is useful to the
society; the money or gifts collected or given to people who are
sick etc. As per Cambridge Dictionary, ‘Charity’ is “an
organisation whose purpose is to give money, food or help to
those who need it, or to carry out activities such as medical
research that will help people in need and not to make profit.”
‘Charity’ is, therefore, indicative of help, especially in
form of money, offered free to people who are in need. The
Maharashtra Municipal Corporations Act, 1949 do not carry
the definition of ‘Charity’ or ‘Charitable Purpose’ and
necessarily we have to borrow the definition and phraseology
‘Charitable Purpose’ from the Maharashtra Public Trusts Act,
which has clearly set out the import of ‘Charitable Purpose’.
In Children Book Trust (supra), the Apex Court clarified
that as long as a Trust and its activity has the element of
public benefit or philanthropy, its purpose shall be accepted to
be “charitable purpose’, as assistance is given to those who are
in need, by either feeding them, providing them clothing,
lodging, education and it is only to those class of people, who
are unable to secure it on their own on account of poverty or
35/46 WP-987-12.odt
lack of resources. It is also held that merely because education
is imparted in the school that itself cannot be regarded as
charitable object and as early as in 1990s, the Apex Court
identified that education has acquired a wider meaning and if
education is imparted with profit motive, it cannot be accepted
that the society, which is running the school for imparting
education, achieves a charitable purpose.
33. Section 132 of the Corporations Act of 1949 with which
we are concerned is a provision of levy of general tax on all
buildings and lands in the city except the ‘building and lands
or portions thereof solely occupied and used for public worship
or for a public charitable purpose’. If in the buildings or lands
or portion thereof any trade or business is carried out or in
respect of which rent is derived, whether it is or is not applied
solely to religious or charitable purpose, the buildings or lands
or portions thereof shall not be deemed to be solely occupied
and used for public charitable purpose within the meaning of
clause (b) of sub-section (1) of Section 132.
34. The exposition of the principle governing the
fundamental right to set up an educational institution and as
to whether the private institutions imparting education (aided
and unaided) can be subjected to Government Regulations and
to what extent, received consideration from the Hon’ble Apex
Court on more than one occasion. Another facet of this right,
which fell for consideration, was the exercise of this right by a
religious or linguistic minority involving Article 30 of the
Constitution and the Constitution Bench Judgment in T.M.A.
36/46 WP-987-12.odt
Pai Foundation & Ors. (supra), examined this issue threadbare
qua the right guaranteed under Article 30(1), available to
minority institutions.
The said decision received a clarification from the Five
Judge Bench as various State Governments and educational
institutions understood the majority Judgment in different
perspectives, resulting into different statutes/regulations
being enacted framed by different State Governments and,
therefore, Five Judge Bench in Islamic Academy of Education
& Anr. Vs. State of Karnataka & Ors.9 offered certain
clarifications. However, it is in Modern Dental College and
Research Centre & Ors. (supra), the Five Judge Bench
juxtaposed the right to freedom of ‘occupation’ of private
unaided and aided minority institutions and this was
examined in the background fact that in the field of education,
the constitutional goal of imparting education remained
pivotal as education was not to be considered purely as an
economic activity, but was recognised as a welfare activity
aimed at achieving a more egalitarian and prosperous society
to bring about social transformation and upliftment of the
nation. The concept of welfare of the society was held to apply
more vigorously to the field of education as it is only through
education, a better society would come into existence creating
better human resources which would contribute to socio-
economic and political upliftment of the nation.
The right available to run such professional unaided
minority and non-minority educational institutions as a part of
Article 19(1)(g) was, however, held to be not an absolute right,
but subject to reasonable restrictions as in larger public
9 (2003) 6 SCC 697
37/46 WP-987-12.odt
interest of the student community as well as with an object to
promote merit, achieve excellence and curb malpractices,
certain reasonable restrictions were held to be permissible
which included admission by holding State held Common
Entrance Tests (CET) and by restructuring the fee structure,
so as to avoid the evil of unfair practice of granting admission
on available seats guided by the paying capacity of the
candidates. Though the argument that running of educational
activity could be classified as ‘profession’, received rejection in
Unni Krishnan, J.P. & Ors. Vs. State of A.P. & Ors. 10, the right of
the professional institutions to establish and manage
educational institutions was regarded as an ‘occupation’
befitting the recognition of the right as a fundamental right
under Articles 19(1)(g) in T.M.A. Pai Foundation & Ors.
(supra), as it received recognition as an activity that is carried
on resulting in imparting of knowledge to the students, which
must necessarily be regarded as an occupation even if there
was no element of profit generation.
35. The Five Judge Bench in Modern Dental College and
Research Centre & Ors. (supra), when recognised the
establishment and running of an educational institution as an
‘occupation’, it declared that it encompass the right to admit
students, right to set up a reasonable fee structure, right to
appoint staff and right to take action if there is dereliction of
duty. However, it was held that the activity definitely cannot
be treated as ‘business’ and it is not at par with other
professions, but it is category apart, as education is treated as
a noble ‘occupation’ on ‘no profit no loss’ basis. Thus, what the
10 AIR 1993 SC 2178
38/46 WP-987-12.odt
Apex Court expressed as in early 1990s in Children Book
Trust (supra) that education if imparted with a profit motive,
will lose its characteristic as a charitable purpose and
education though is a charity, it may not always remains so, is
found to be reflected through the subsequent pronouncements
from the Highest Court, when it is accepted that as long as the
occupation is not carried out with profit motive, it continue to
remain a charity.
36. The learned counsel for the Petitioners has placed
reliance upon various decisions with reference to the Income
Tax exemption/concession, with reference to the words “other
educational institution’ within Section 10(22) of the Income
Tax Act. In Section 10 of the Income Tax Act, which has
prescribed that in computing the total income of a previous
year of any person, any income falling within any of the classes
shall be excluded and this include clause 22, which reads
thus :-
“(22) any income of a university or other educational institution
existing solely for educational purposes and not for purposes of
profit.”
A series of decisions with the perspective of the Income
Tax Act have been relied upon, which include the decision in
the case of Aditanar Educational Institution Vs. Additional
Commissioner of Income Tax11 as well as the latest decision in
the case of Assistant Commissioner of Income Tax
(Exemptions) Vs. Ahmedabad Urban Development Authority12
The case of Ahmedabad Urban Development Authority
involved Section 2(15) and its proviso as it stood on
11 (1997) 3 SCC 346
12 (2023) 4 SCC 561
39/46 WP-987-12.odt
01/04/2016 and the question that fell for consideration as
regards the exemption being available vis-a-vis the charitable
purpose of advancement of any other object of general public
utility (GPU) and conditions for the entitlement of availing this
exemption received consideration.
With reference to the provisions existing prior to the
amendment and the amendment introduced by the Finance
Act, 2015, it was noted that the law on tax exemption on
grounds of charitable purpose had been completely
transformed by amending the provision in 2008, 2011 and
2015 and in light of the amendments, it was held that the test
of charity being driven by a predominant object is no longer a
good law and what is to be focused upon is the definition under
Section 2(15), though the proviso makes a departure from the
previous law and the amendment offered a clarification
admitting only such activities in the nature of trade,
commerce, business or service, which are in the course of
‘actual carrying on’ of the GPU object and also a limit being
imposed upon its total receipts. The amended provisions,
therefore, imposed an embargo to claim the benefit by
prescribing that if a ‘Charitable Trust’ is carrying on any
activities in the nature of business, trade or commerce, in the
actual course of fulfilling its objective, the income from such
business shall not exceed the limit defined in sub-clause (ii) of
the proviso. Worth it to note that the term charitable purpose
in the Income Tax Act in Section 2(15) reads thus :-
"2. (15) "charitable purpose" includes relief of the poor, education,
medical relief, [preservation of environment (including watersheds,
forests and wildlife) and preservation of monuments or places or
objects of artistic or historic interest. and the advancement of any
other object of general public utility:
40/46 WP-987-12.odt
Provided that the advancement of any other object of general
public utility shall not be a charitable purpose, if it involves the
carrying on of any activity in the nature of trade, commerce or
business, or any activity of rendering any service in relation to any
trade, commerce or business, for a cess or fee or any other
consideration, irrespective of the nature of use or application, or
retention, of the income from such activity:]
[Provided further that the first proviso shall not apply if the
aggregate value of the receipts from the activities referred to
therein is [ten lakh rupees] or less in the previous year;]"
37. A reading of the decisions relied upon with reference to
the Income Tax Act definitely are to be looked at with a
completely different perspective and definitely do not assist us,
as we have to read the definition of 'charitable purpose' as
defined in the Maharashtra Public Trusts Act and what is to be
ascertained is the predominant object of running such an
institution (school) by the society, which definitely do not
carry the profit making motive. As laid down by the Apex
Court in Queen's Educational Society Vs. CIT13, the following
test deserves an application in the case before us, it being laid
before us.
“11. Thus, the law common to Section 10 (23-C) (iii-ad) and (vi)
may be summed up as follows:
(1) Where an educational institution carries on the activity of
education primarily for educating persons, the fact that it makes a
surplus does not lead to the conclusion that it ceases to exist solely
for educational purposes and becomes an institution for the purpose
of making profit.
(2) The predominant object test must be applied - the purpose of
education should not be submerged by a profit-making motive.
(3) A distinction must be drawn between the making of a
surplus and an institution being carried on "for profit". No inference
arises that merely because imparting education results in making a
profit, it becomes an activity for profit.
13 (2015) 8 SCC 47
41/46 WP-987-12.odt
(4) If after meeting expenditure, a surplus arises incidentally
from the activity carried on by the educational institution, it will
not cease to be one existing solely for educational purposes.
(5) The ultimate test is whether on an overall view of the matter
in the assessment year concerned the object is to make profit as
opposed to educating persons.”
38. Petitioner No.1-Trust runs a school and it is the owner of
buildings and lands, but for the purposes of claiming
exemption from the levy of general tax, it is imperative for it to
establish that the buildings and lands or portions thereof are
solely occupied and used for a public charitable purpose.
Moreover, it is necessary to seek an exemption every financial
year and there can be no exemption claimed in a wholesale
manner.
Mr. Ganabavale has rightly urged that the Petitioners'
claim for exemption is governed by the statutory framework
under the Corporations Act of 1949 and the claim is not
automatic or of permanent nature, but the burden must be
discharged by the person claiming exemption that the
property and its user satisfied the statutory criteria. Merely
by asserting that the society is established with a charitable
purpose and it runs a school and therefrom impart education,
and it per se do not become a charitable purpose. The
Petitioners are duty bound to demonstrate by placing on
record appropriate material that the premises in question
qualify for exemption in terms of the statute, and definitely
upon such an exemption being claimed, the Corporation is duty
bound to consider such a claim on year-to-year basis and on a
case-to-case basis, dependent upon what material is placed
before it.
42/46 WP-987-12.odt
39. We do not agree with the blanket proposition set out by
the Petitioners that education per se is a charitable purpose.
The Division Bench of this Court in Sindhu Educational
Trust (supra) had an opportunity to deal with a somehow
similar issue when the petitioner claimed to be entitled to
exemption from payment of general tax under the provisions
of Section 132 and what was involved was Plot No. 84 at
Pimpri Colony, Pimpri, Pune and the building standing thereon,
where the petitioner society was running an unaided school
and the petitioner did not take any donation for grant of
admission, but claimed that by utilising the fees collected from
the students, the school was being run.
When a notice of demand was served on the petitioner
and property tax was demanded for the year 2012-13, the
petitioner sought exemption by invoking clause (b) of sub-
section (1) of Section 132.
The Division Bench appreciated the scheme of the
Corporation and in specific, Section 132 read with Section 128
of the Corporations Act of 1949, where the property tax
included water tax, water benefit tax, sewerage tax, sewerage
benefit tax, general tax, education cess, street tax etc.
40. The Bench noted that the Corporations Act of 1949 does
not define 'public charitable purpose ' and reference was made
to the decision in the case of Balkrishna Dharamdas Vora Vs.
The Poona Municipal Corporation14, when the issue that fell for
consideration was, whether the lands or buildings are directly
applied for charitable purpose and it was held that every case
must be decided on its own merits to ascertain whether the
lands or buildings are directly applied for charitable purpose.
14 (1963) 65 BomLR 119
43/46 WP-987-12.odt
The observations of the learned Single Judge in Sant
Kanwarram Education & Social Welfare Society & Ors. Vs.
Municipal Corporation of City of Amravati15 were reproduced,
which read thus :-
“13. In the case of Sant Kanwarram Education & Social
Welfare Society & Others v. Municipal Corporation of City of
Amravati, the learned Single Judge had an occasion to consider the
provisions of Section 132 of the said Act of 1949. In Paragraph 12,
the learned Single Judge held thus:
"12. Education per se is a charitable purpose. Therefore, even if
the school charges a fee, that would be irrelevant. The society
must satisfy the following conditions:
(i) That is support by voluntary contributions;
(ii) applies to its own income to promote its objects; and
(iii) it does not pay dividend to any other members.
Two classes or societies could be thought of:
(i) Where members receive full value for their contribution.
(ii) Society for private gain
14. The learned Single Judge negatived the argument that any
transfer of funds by the school to the Trust running the school can
be regarded as a voluntary contribution received by the Trust.”
The observations of the Division Bench are to be found in
paragraphs 19 and 20, which read thus :-
“19. In the case of Sant Kanwarram Education and Welfare
Society and Others, the learned Single Judge held that the
education per se is a charitable purpose. However, what binds this
Court is the law laid down by the Apex Court in the case of P.C. Raja
Ratnam Institution wherein it was held that merely because
education is imparted in the building, that by itself cannot be
regarded as a charitable object. The collection of fees from the
students enrolled in the school is not sufficient to come to a
conclusion that the building in which the school is run is not used
for the public charitable purposes. If a school which is not receiving
any grant or which is an unaided school collects reasonable amount
by way of fees from the students without collecting any donation or
any other amount only for the purposes of meeting the expenditure
of running the school, the collection of fees would not be a ground to
deny the exemption under Section 132 of the said Act of 1949. In a
15 2009(1)Bom.C.R.778
44/46 WP-987-12.odt
given case, a school may be collecting an amount by way of fees
which is more than what is necessary to meet the expenditure for
running the school. If such excess amount is used solely for
charitable objects, still benefit of exemption will be available.
20. A Trust which is an owner or a holder of a building where
a school is being run as a charitable activity may be conducting
several other activities on the other properties. Some of other
educational institutions run by the Trust may have an object of
earning profit. The Trust may have income from some other
properties. The Trust may be receiving donations for its other
activities. That is no ground to deny benefits under Section 132 of
the said Act of 1949 to the school building. To summarize, whether
the exemption can be granted in respect of the building or land
under Section 132 of the said Act of 1949 will depend on the facts
and circumstances of each case. Several factors will have to be
taken into consideration. The use of a land or building per se does
not amount to use of the land or building for a public charitable
purpose. Under Section 132 of the said Act of 1949, an exemption
can be granted only to that portion of the land or building which is
exclusively used for the public charitable purpose. Even if a part of
the building or land is being used for a public charitable purpose, by
virtue of Sub-section (3) of Section 132 of the said Act of 1949, it
shall be deemed to be a separate property for the purposes of
taxation.”
41. In the case before the Division Bench, the impugned
order recording that the petitioner was recovering fees, but it
according to the Division Bench, was not the sole ground for
rejecting the benefit as if it was established that the petitioner
is using the fees for the purposes of meeting the expenses of
running the school and it is not earning any profit then this
factor may not be used to the disadvantage of the Trust. Apart
from this, the question of part of the building being used for
running a canteen premises, which had been let down by the
school, by applying sub-section (3) of Section 132, it was held
that the portion of the building which is used exclusively for
public charitable activities would have been treated as a
separate property.
Recording that the petitioner is involved in several
activities and the test of applicability of sub-section (1) of
45/46 WP-987-12.odt
Section 132 was, 'whether the building or land was used for
public charitable purpose ' and mere existence of larger fixed
deposits in the name of the petitioner was held to be not a
ground to deny the benefit.
The impugned order was, therefore, set aside and the
matter was remanded back for fresh consideration of the
Assistant Commissioner as to whether the petitioner is
entitled for exemption in respect of the said property or a part
thereof for the year 2012-13.
42. Applying the aforesaid principle to the facts before us,
according to us, if Petitioner No.1-Trust intends to claim an
exemption under Section 132, it is imperative for it to make an
application seeking exemption for every financial year and it is
imperative for the Corporation to consider the said aspect by
examining, whether the building and land or portion thereof is
solely occupied and put to use for public charitable purpose,
but we do not accept the contention of the Petitioners that
merely because the Trust is running a linguistic minority
institution, that by itself would entitle it to be exempted
because education is one of the fields, which is considered as
charitable purpose.
In our view, the position that every educational
institution achieves the charitable purpose no longer is the
accepted norm, but it will be imperative for the society/the
school which imparts education to establish that its buildings
and lands or portions thereof are occupied and used for a
public charitable purpose, as mere owning of land/building is
not sufficient, but it must satisfy the other aspect, namely, that
it is solely used for charitable purpose. Any commercial
46/46 WP-987-12.odt
activity, being carried out in the said premises should
therefore not enjoy the exemption and even if the activity of
education is carried out with a profit earning motive, it would
then be denuded of the cover of 'charitable purpose' under
section 9 of the Maharashtra Public Trusts Act.
On reading of the Petition, we find that the Petitioners
have failed to make out such a case as it is observed that the
Trust is accepting fees and donations and not giving free
education and, therefore, exemption of tax cannot be given to
it. We do not find illegality in the demand raised on the Trust
and in absence of it staking its claim on year-to-year basis, the
impugned order does not call for any interference. While we
dismiss the Writ Petition, we vacate the interim order.
However, we permit the Petitioner No.1-Trust to claim
exemption for the years to come, by filing application to the
Corporation, with appropriate material to establish its case of
exemption.
Writ Petition is dismissed.
Rule is discharged.
(MANJUSHA DESHPANDE, J.) (BHARATI DANGRE, J.)
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