Case Note & Summary
The litigation arose from a civil suit filed by a registered public trust, the appellant, which owned a building used for maintaining cows within the limits of the Akola Municipal Corporation. The Corporation assessed the building for general tax under Section 132 of the Maharashtra Municipal Corporations Act, 1949, and issued a demand notice dated 4 January 2011. The trust claimed exemption under Section 132(1)(b) of the Act and sought a declaration of exemption and a perpetual injunction against the demand. The Corporation contended that the suit was not maintainable for want of a prior statutory notice under Section 487 of the Act and that the building was not exempt. The trial court recorded a finding that the trust was a charitable trust entitled to exemption under Section 132(1)(b) and that the demand notice was illegal, but dismissed the suit on the ground that notice under Section 487 had not been issued. The first appellate court affirmed the findings on exemption and illegality but upheld the dismissal for want of notice. In the second appeal before the High Court, the substantial question of law was whether the suit was liable to be dismissed for failure to give notice under Section 487, despite concurrent findings that the trust was exempt and the demand notice illegal. The appellant argued that since the exemption negated the very basis of the demand, the impugned action was not in pursuance or execution of the Act, and thus Section 487 notice was not required, relying on several precedents including Poona City Municipal Corporation v. Dattatraya Nagesh Deodhar and Pune Municipal Corporation v. Mohan Shrikrishna Assava. The Corporation submitted that the notice was an act authorized under the Act and therefore suit was barred without statutory notice, citing Akash Impex v. Municipal Corporation of Greater Mumbai. The court, after examining the provisions, held that the demand notice could not be regarded as an act done in pursuance or execution of the Act because the trust was exempt from tax under Section 132(1)(b). Since the notice was per se illegal, the requirement of prior notice under Section 487 did not arise. The court distinguished the respondent's cited case and answered the substantial question in favor of the appellant. The second appeal was allowed; the judgments of the lower courts were set aside, and the suit was decreed in terms of the prayers for declaration and injunction, with a clarification that the Corporation is at liberty to take future steps permissible in law.
Headnote
A) Municipal Law - Taxation - Maintainability of Suit - Exemption from Tax - Maharashtra Municipal Corporations Act, 1949, Sections 132(1)(b), 487 - Where a charitable trust is exempt from payment of general tax under Section 132(1)(b) of the Act, a demand notice issued for such tax is illegal and cannot be considered an act done in pursuance or execution of the Act; therefore, a suit challenging the demand without issuing statutory notice under Section 487 is maintainable. The court held that since both lower courts had found the trust exempt and the demand notice illegal, the suit was wrongly dismissed for want of Section 487 notice. Held, the view that notice under Section 487 was mandatory in such circumstances is erroneous. (Paras 6-7)
Issue of Consideration
Both the Courts having held that the plaintiff Trust was entitled for exemption from payment of general tax in view of provisions of Section 132(1)(b) of the Maharashtra Municipal Corporations Act, 1949 and the notice dated 04/01/2011 demanding general tax also having been held to be illegal, whether the suit was liable to be dismissed on the ground that notice under Section 487 of the Maharashtra Municipal Corporations Act, 1949 was not issued before filing the suit?
Final Decision
The Second Appeal was allowed. The judgments in R.C.S. No.165/2011 dated 19/09/2014 and R.C.A. No.878/2014 dated 29/11/2016 were set aside. The suit was decreed in terms of prayer clauses (a) and (b) of the plaint, with the clarification that the Municipal Corporation is free to take such steps as are permissible in law in future.
Law Points
- If a person is statutorily exempt from tax
- a demand notice issued nonetheless is illegal and cannot be treated as an act done in pursuance or execution of the Act
- therefore
- the requirement of statutory notice under Section 487 does not apply
- and the suit is maintainable without such notice.
