Holding

Clause (b) of Section 132 does not apply to taxes calculated under Section 141AA, and the classification under Rule 8B(4)(i) is a reasonable classification that does not violate Article 14.

Summary

The Supreme Court considered appeals by Parivar Seva Sanstha and Bai Gulab Hargovandas Trust seeking exemption from municipal property tax on the ground that their hospitals and clinics are run by charitable trusts. The issue was whether clause (b) of Section 132 of the Gujarat Provincial Municipal Corporations Act, which exempts buildings used for public worship or charitable purposes, applies when the corporation levies tax under the carpet‑area method prescribed in Section 141AA. The Court held that the exemption under Section 132 is tied to tax calculated on annual rateable value (Section 129) and does not extend to tax levied under Section 141AA. The Court also examined the constitutionality of Rule 8B(4)(i) of the Taxation (Amendment) Rules 2001, which classifies hospitals, clinics, etc., for a higher tax multiplier, and found the classification reasonable and not violative of Article 14. Consequently, the appeals were dismissed.

Issues considered

Whether clause (b) of Section 132 of the Gujarat Provincial Municipal Corporations Act, 1949 applies to property tax levied under the carpet‑area method of Section 141AA.
Whether Rule 8B(4)(i) of the Taxation (Amendment) Rules, 2001, which imposes a higher tax multiplier on buildings used as hospitals, clinics, etc., is unconstitutional, illegal or arbitrary in violation of Article 14 of the Constitution.

Legislation cited

Gujarat Provincial Municipal Corporations Act, 1949s. 127, s. 129, s. 132, s. 140, s. 141A, s. 141AA, s. 141B, s. 141F
Taxation (Amendment) Rules, 2001s. Rule 8B(4)(i), s. Rule 8B sub‑rule 2, s. Rule 8B sub‑rule 3, s. Rule 8B sub‑rule 4, s. Rule 8B sub‑rule 5

Subjects

property taxexemptioncarpet area methodmunicipal corporationArticle 14reasonable classificationGujarat Provincial Municipal Corporations ActTaxation Rulesuse factor

Judgment

648 [2022]REPORTS
SUPREME COURT 18 S.C.R. 648 [2022] 18 S.C.R.

A PARIVAR SEVA SANSTHA
v.
AHMEDABAD MUNICIPAL CORPORATION
(Civil Appeal No. 2773 of 2012)
B NOVEMBER 24, 2022
[SANJIV KHANNA AND J. K. MAHESHWARI, JJ.]
Gujarat Provincial Municipal Corporations Act, 1949: s. 129,
141AA, 132(1)(b) – Imposition of property tax – Power of Municipal
Corporation – Appellants, charitable trusts, running clinics/hospitals
C
seeking exemption from levy of general tax in terms of clause (b) to
sub-section (1) of s. 132, in cases where the Corporation has
exercised the option to levy property tax on carpet area method
u/s.141AA; and challenging r. 8B(4)(i) on the ground that it is
unconstitutional, illegal and arbitrary as it violates the principle of
D equality enshrined u/Art. 14 – Held: ss. 129 to 141A are grouped
together and are applicable when property tax is payable on annual
letting value/annual rateable value, whereas provisions from ss.
141AA to 141F apply when property tax is payable on the basis of
carpet area method – Exemption under clause (b) to sub-section (1)
of s.132 only applies when general tax is payable under sub- section
E
(1) to s.132 rw s. 129 - Clause (b) to sub-section (1) of s.132 per se
and ex facie does not apply to taxes payable in terms of s. 141AA on
the basis of the carpet area method – Thus, it cannot be held that
clause (b) to sub-section (1) of s. 132, which grants exemption to
buildings and lands or portions thereof solely occupied and used
F for public worship or for public charitable purposes, would apply
when property tax is calculated and is payable on the basis of the
carpet area method, which is to be computed and calculated in
accordance with the provisions of s. 141AA to s. 141F – Furthermore,
the ‘use factor’ enlisted clause (b) to sub-rule (4) of r. 8B is a separate
category; the category being grantable schools run by public
G
charitable trusts, boarding- lodging-hostels run by public charitable
trusts, and religious institutions, dharma-shala, ashram, and library
– Appellant No.2 Trust cannot claim any parity with the said ‘use
factors’, even though the hospital/clinic run by them are run by
public charitable trusts – Sub-clause (i) to clause (a) to sub-rule
H
648
PARIVAR SEVA SANSTHA v. AHMEDABAD MUNICIPAL 649
CORPORATION

(4) of Rule 8B enlists all buildings used as hospitals, dispensaries, A
clinics, maternity homes, etc – All hospitals, dispensaries, clinics,
maternity homes etc., have been classified under one head, and
thereby the levy of taxation in such cases simplifies and is uniform
– Classification made vide sub-clause (i) to clause (a) to sub-rule
(4) of Rule 8B is not discriminatory and violative of Art.14 – Object
B
and purpose is to avoid litigation and complexities which may arise
in case there is a distinct and separate taxation of hospitals, clinics,
maternity homes, etc., stated and claimed to be run for charitable
purpose – Sub-clause (iv) to clause (a) to sub-rule (4) of Rule 8B
applies to educational and social institutions run by public
charitable trusts for the welfare of women, old people, deaf, dumb, C
blind, physically handicapped or mentally retarded people – These
are separate categories and cannot be confused and treated similarly
and at par with hospitals, clinics, maternity homes, etc, as elucidated
in sub-clause (i) to clause (a) to sub-rule (4) of Rule 8B –
Furthermore, there can be crudities or inequities in complicated
D
experimental economic legislation but on that account alone it
cannot be struck down as invalid – Taxation (Amendment) Rules
20019 – r. 8B(4)(i).
Dismissing the appeals, the Court
HELD: 1.1 It is crystal clear that ss. 129 to 141A of the E
GPMC Act are grouped together and are applicable when property
tax is payable on annual letting value/annual rateable value,
whereas provisions from Sections 141AA to 141F of the GPMC
Act apply when property tax is payable on the basis of carpet
area method. There are no good ground and reason to hold that
clause (b) to sub-section (1) of Section 132 of the GPMC Act, F
which grants exemption to buildings and lands or portions thereof
solely occupied and used for public worship or for public charitable
purposes, would apply when property tax is calculated and is
payable on the basis of the carpet area method, which is to be
computed and calculated in accordance with the provisions G
of Section 141AA to Section 141F of the GPMC Act. [Para 2][656-
D-F]
1.2 Chapter XI of the GPMC Act deals with municipal
taxation and sub-section (1) to Section 127 states and gives an
option to the Corporation to impose property tax either H
650 SUPREME COURT REPORTS [2022] 18 S.C.R.

A under Section 129, or under Section 141AA of the GPMC
Act. Section 129 states that the property tax shall comprise of
the taxes, which shall, subject to the exceptions, limitations and
conditions thereinafter provided, be levied on buildings and lands
in the city. Section 132 of the GPMC Act states that general tax
shall be levied in respect of all buildings and lands in the city, the
B
rateable value of which exceeds Rs.600/-, save when a case is
covered by exceptions enumerated and listed in clauses (a), (b)
and (c) of sub-section (1) to Section 132 of the GPMC Act. Clause
(b) to sub-section (1) of Section 132 states that buildings and lands,
or portions thereof, solely occupied and used for public worship
C or for public charitable purposes are exempt from payment of
general tax leviable under Section 132 of the GPMC Act. In other
words, exemption under clause (b) only applies when general tax
is payable under sub- section (1) to Section 132 read with Section
129 of the GPMC Act. Clause (b) to sub-section (1) of Section
132 per se and ex facie does not apply to taxes payable in terms
D
of Section 141AA on the basis of the carpet area method. [Para
3][657-B-D; 658-A]
1.3 Section 141AA, which is an alternative mode of taxation
and an option available to the Corporation to impose tax on the
basis of the carpet area method, states that the property taxes
E shall comprise of the taxes which shall, subject to exceptions,
limitations and conditions thereinafter provided, be levied on
buildings and lands in the city. Clause (c) to Section 141AA states
that a general tax may be levied in accordance with the provisions
of Section 141B, if the Corporation so determines, on a graduated
F scale. Sub-section (1) to Section 141B states that for the purpose
of clause (c) to Section 141AA of the GPMC Act, general tax,
subject to such exceptions, limitations and conditions thereinafter
provided (and not thereinbefore provided), shall be levied annually
on the buildings and lands in the city at such rate per square
meter of the carpet areas of the buildings and of the areas of
G land, which thereinafter in the enactment has been referred to as
‘the rate of tax’, as the Corporation may determine. Sub-section
(2) to Section 141B states that for the purpose of levy of tax on
buildings in the city under sub- section (1) to Section 141B, the
buildings may be classified into ‘residential’ and ‘buildings other
H than residential’ and the Corporation may determine one rate of
PARIVAR SEVA SANSTHA v. AHMEDABAD MUNICIPAL 651
CORPORATION

tax for residential buildings and the other rate of tax for buildings A
other than residential. The proviso states that it shall be lawful
for the Corporation to determine for residential buildings, the
carpet area of which does not exceed 40 square meters, such
rate of tax as is lower than the rate of tax determined for
residential buildings. Sub-section (3) to Section 141B states that
B
the rate of tax determined under sub-section (1) read with sub-
section (2) to Section 141B shall not, in respect of the residential
buildings, be less than Rs.10/- per square meter of carpet area
and more than Rs.40/- per square meter of carpet area. In respect
of buildings other than residential, it shall not be less than Rs.20/
- per square meter of carpet area and not more than Rs.80/- per C
square meter of carpet area. Sub-section (4) to Section
141B states that the Corporation, subject to the Taxation Rules,
may increase or decrease or neither increase nor decrease the
rate of tax determined under sub-section (1) read with sub-section
(2) and sub-section (3) to Section 141B in the case of residential
D
buildings having regard to factors, like, market value of the land
where the building is situated, the year of construction of the
building, type of the building, the duration of existence of the
building, the type of building, and whether the building is self-
occupied or tenanted. Similarly, in the case of buildings other
than residential, the following factors, namely, market value of E
the land in the area in which the building is situated, the duration
of existence of the building, the purpose for which the building is
used, and whether the building is self-occupied or tenanted are
to be taken into consideration. [Para 4][658-B-H; 659-A-B]
1.4 There is hardly any scope to urge and argue that clause F
(b) to sub-section (1) of Section 132 of the GPMC Act, which
relates to and grants exemption from payment of general tax when
rateable value is computable under Section 129 read with Section
132 of the GPMC Act, would apply in cases where property tax is
payable by the carpet area method. General tax in terms of clause
(c) to Section 141AA has to be computed subject to such G
exceptions, limitations and conditions provided in Sections
141B or thereinafter. It would be, therefore, correct to hold that
provisions from Section 141AA to Section 141F form a complete
code when tax has to be computed and paid on the carpet area
H
652 SUPREME COURT REPORTS [2022] 18 S.C.R.

A method, and for such computation, reference cannot be made to
the provisions of Sections 129 to 133 which relate to property
tax payable on annual rateable value. This position is also made
clear by Section 141F, which states that provisions of Section
140 and 141A shall apply in relation to property taxes levied
under Section 141AA, subject to modifications specified in
B
Appendix I-A. Therefore, only provisions of Section 140
and Section 141A have been made applicable when property tax
is levied and is payable in terms of Section 141AA of the GPMC
Act. Clause (b) to sub-section (1) of Section 132 of the GPMC
Act is not attracted and cannot be relied upon when property tax
C is payable under Section 141AA of the GPMC Act. [Para 5][659-
B-F]
1.5 Rule 8B of the Taxation Rules, which relates to the
increase and decrease of rate of property tax determined for
‘buildings other than residential’, refers to several factors which
D result in an increase or decrease, or neither increase nor
decrease, in the rate of tax applicable to the carpet area. Sub-
rule (1) to Rule 8B states that for the purpose of determining the
rate of tax for buildings other than residential, the increase and
decrease, or neither increase nor decrease, shall be in terms of
sub-rules (2), (3), (4) and (5) to Rule 8B. Sub-rule (2) to Rule 8B
E relates to the ‘location factor’, sub-rule (3) to Rule 8B relates to
the ‘age factor’, sub-rule (4) to Rule 8B deals with the ‘use factor’,
and sub-rule (5) to Rule 8B deals with the ‘occupancy factor’.
The said sub-rules (2) to (5) to Rule 8B specify the rate by the
multipliers specified therein. In some cases, as in clause (b) to
F sub-rule (4) of Rule 8B relating to the ‘use factor’, it is stated
that the designated rate shall be neither increased nor decreased,
in respect of buildings used as specified therein, and in clause (c)
to sub-rule (4) to Rule 8B, it is stipulated that the designated
rate shall be decreased by a multiplier of 0.0 in respect of buildings
used as specified therein. There are illustrations in sub-rule (7)
G to Rule 8B of the Taxation Rules, which elucidate the manner in
which the computation is to be made under Rule 8B of the
Taxation Rules. Sub-rule (2) to Rule 8D states that for the purpose
of sub-rule (2) to Rule 8B, the Commissioner shall classify the
area of the city in which the buildings other than residential
H buildings are situated into four classes, namely, I, II, III, and IV,
PARIVAR SEVA SANSTHA v. AHMEDABAD MUNICIPAL 653
CORPORATION

having regard to the market value of the lands in the area. The A
classification so made shall be revised once every four years.
Sub-rule (5) to Rule 8D states that for the purpose of sub-rule (4)
to Rule 8B, the Commissioner shall have the power to decide
which property would fall in the category mentioned in sub-rule
(4)(a)(i)(ii)(iii) and (iv) and sub-rule (4)(b) and (c) of Rule 8B of
B
the Taxation Rules. Rule 8C of the Taxation Rules deals with
property tax for commercial and industrial units and states that
the property tax shall be levied at the rates stipulated therein.
[Para 6][659-G-H; 660-A-E]
1.6 Appellant No. 2 Trust was using portions of the property/
building as a hospital or a clinic. In view thereof, sub-clause (i) to C
clause (a) to sub-rule (4) of Rule 8B of the Taxation Rules would
be applicable and thereby, the designated rate has to be increased
by applying the multiplier of 7.0. The contention of Appellant No.
2 Trust is that their clinic/hospital is being used for charitable
purposes as the fee demanded from the patients and users is not D
the actual market fee. Reference in this regard is made to sub-
clause (iv) to clause (a) to sub-rule (4) of Rule 8B of the Taxation
Rules, whereby a multiplier of 2.0 is to be applied in respect of
social institutes run by a public charitable trust for the welfare of
women, old people, deaf, dumb and blind, physically handicapped
and mentally retarded people. Clause (b) to sub-rule 4 of Rule E
8B of the Taxation Rules, states that the designated rate shall
neither be increased nor decreased when the building is used as
grantable schools run by public charitable trusts, boarding-
lodging- hostels run by public charitable trusts, and religious
institutions, dharma-shala, ashram, and library. As far as clause F
(b) to sub-rule (4) of Rule 8B of the Taxation Rules is concerned,
the same is clearly distinguishable, and the ‘use factor’ enlisted
thereunder is a separate category; the category being grantable
schools run by public charitable trusts, boarding- lodging-hostels
run by public charitable trusts, and religious institutions, dharma-
shala, ashram, and library. Appellant No.2 Trust cannot claim any G
parity with the aforesaid ‘use factors’, even though the hospital/
clinic run by them are run by public charitable trusts. Sub-clause
(i) to clause (a) to sub-rule (4) of Rule 8B of the Taxation Rules
enlists all buildings used as hospitals, dispensaries, clinics,
maternity homes, etc. They have all been classified under one H
654 SUPREME COURT REPORTS [2022] 18 S.C.R.

A head. No distinction is made whether they are run by public
charitable trusts or not. The legislature is entitled to club and
treat the buildings as per the ‘use factor’ alike without falling
foul of the right to equality, as enshrined under Article 14 of the
Constitution of India. [Paras 9-11][661-C-H; 662-A-B]
B Manish Kumar v. Union of India and Others (2021) 5
SCC 1; State of Gujarat and Another v. Shri Ambica
Mills Ltd., Ahmedabad and Another (1974) 4 SCC 656
: [1974] 3 SCR 760; State of Jammu and Kashmir v.
Shri Triloki Nath Kosa and Others (1974) 1 SCC 19 :
[1974] 1 SCR 771; Municipal Corporation of Delhi
C v.Children Book Trust (1992) 3 SCC 390 : [1992] 2
SCR 535; State of Bihar and Others v. Sachchidanand
Kishore Prasad Sinha and Others (1995) 3 SCC 86 :
[1995] 1 SCR 256; Twyford Tea Co. Ltd. and Another
v. The State of Kerala and Another (1970) 1 SCC 189 :
D [1970] 3 SCR 383; R. K. Garg v. Union of India and
Others (1981) 4 SCC 675 : [1982] 1 SCR 947; State of
Kerala v. Haji K. Haji K. Kutty Naha and Others Etc.
[1969] 1 SCR 645; Deputy Commissioner of Income
Tax and Another v. Pepsi Foods Limited (2021) 7 SCC
413 : [1969] 1 SCR 645; State of Uttar Pradesh and
E Others v. Deepak Fertilizers & Petrochemical
Corporation Ltd. (2007) 10 SCC 342 : [2007] 6 SCR
525; Union of India and Others v. N.S. Rathnam and
Sons (2015) 10 SCC 681 : [2015] 8 SCR 751; Ganga
Sugar Corporation Ltd. v. State of Uttar Pradesh and
F Others (1980) 1 SCC 223 : [1980] 1 SCR 769 –
referred to.
Case Law Reference
[1974] 3 SCR 760 referred to Para 12

G [1974] 1 SCR 771 referred to Para 12
[1992] 2 SCR 535 referred to Para 13
[1995] 1 SCR 256 referred to Para 16
[1970] 3 SCR 383 referred to Para 16
H
PARIVAR SEVA SANSTHA v. AHMEDABAD MUNICIPAL 655
CORPORATION

[1982] 1 SCR 947 referred to Para 16 A
[1969] 1 SCR 645 referred to Para 18
[1969] 1 SCR 645 referred to Para 18
[2007] 6 SCR 525 referred to Para 18
[2015] 8 SCR 751 referred to Para 18 B
[1980] 1 SCR 769 referred to Para 19
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 2773
of 2012.
From the Judgment and Order dated 04.02.2011 of the High Court C
of Gujarat at Ahmedabad in Special Civil Application No. 2133 of 2010.
With
Civil Appeal No. 10694 of 2016.
Nikhil Nayyar, Preetesh Kapur, Sr. Advs., Ms. Anushree Prashit D
Kapadia, Divayank Dutt Dwivedi, Ravi C, Divuanshu Rai, Ms. Sugandha
Batra, Mayank Kumar, Shambhu Chaturvedi, Krishna Kumar Singh,
Hemantika Wahi, Ms. Jesal Wahi, Ms. Hemantika Wahi, Ms. Deepanwita
Priyanka, Advs. for the appearing parties.
The Judgment of the Court was delivered by E
SANJIV KHANNA, J.
Section 1271 of the Gujarat Provincial Municipal Corporations Act,
1949 (Bombay Act No. LIX of 1949)2, as applicable to the State of Gujarat,
post the Gujarat Act No. 2 of 20073, empowers a Municipal Corporation4
to impose property tax either under Section 1295 based on the rateable F
1
“127. (1) For the purposes of this Act, the Corporation shall impose the following
taxes, namely :— (a)Property taxes either under section 129 or under section 141 AA;
[* * * * * ]”
2
For short, ‘GPMC Act’. Originally, the Bombay Provincial Municipal Corporations
Act, 1949.
3
The Bombay Provincial Municipal Corporations (Gujarat Amendment and Validation)
G
Act, 2007
4
Hereinafter referred as the’Corporation’.
5
“129. For the purposes of sub-section (1) of section 127 property taxes shall comprise
the following taxes which shall, subject to the exceptions, limitations and conditions
hereinafter provided, be levied on buildings and lands in the City:—
[* * * * * ] H
656 SUPREME COURT REPORTS [2022] 18 S.C.R.

A value of buildings and lands, or under Section 141AA6 based on the
carpet area of the buildings and lands. The common question of law
which arises in the aforementioned appeals is whether the appellants,
namely, Parivar Seva Sanstha7 and Bai Gulab Hargovandas Jagjivandasni
Dikarina Dikarina Will Trust8, are entitled to exemption from levy of
general tax in terms of clause (b) to sub-section (1) of Section 132 in
B
cases where the Corporation has exercised the option to levy property
tax on carpet area method under Section 141AA of the GPMC Act. An
additional issue which arises for consideration in the appeal preferred by
Appellant No. 2 Trust relates to the challenge to Rule 8B(4)(i) of the
Taxation (Amendment) Rules 20019, as applicable to the Ahmedabad
C Municipal Corporation, on the ground that it is unconstitutional, illegal
and arbitrary as it violates the principle of equality enshrined under Article
14 of the Constitution of India.
2. The first issue should not hold us for long as when we assort
and pigeonhole sub-sections under Chapter XI of the GPMC Act, it is
D crystal clear that Sections 129 to 141A of the GPMC Act are grouped
together and are applicable when property tax is payable on annual letting
value/annual rateable value, whereas provisions from Sections 141AA to
141F of the GPMC Act apply when property tax is payable on the basis
of carpet area method. We do not find any good ground and reason to
hold that clause (b) to sub-section (1) of Section 132 of the GPMC Act,
E which grants exemption to buildings and lands or portions thereof solely
occupied and used for public worship or for public charitable purposes,
would apply when property tax is calculated and is payable on the basis
of the carpet area method, which is to be computed and calculated in
accordance with the provisions of Section 141AA to Section 141F of the
F (c) a general tax of not less than twelve per cent. 2 but not more than thirty per
cent of their rateable value, which may be levied, if the Corporation so determines
on a graduated scale;
[* * * * * ]”
6
“141AA. For the purposes of sub-section (1) of section127, property taxes shall
comprise the following taxes which shall, subject to exceptions, limitations and
conditions hereinafter provided, be levied on buildings and lands in the City:
G [* * * * * ]
(c) a general tax which may be levied in accordance with the provisions of
section 141B, if the Corporation so determines on a graduated scale;
[* * * * * ]”
7
Hereinafter referred to as ‘Appellant No.1 Trust’.
8
Hereinafter referred to as ‘Appellant No. 2 Trust’.
9
H Schedule-A, Chapter VIII of the GPMC Act. For short, ‘Taxation Rules’.
PARIVAR SEVA SANSTHA v. AHMEDABAD MUNICIPAL 657
CORPORATION [SANJIV KHANNA, J.]

GPMC Act. This aspect has been examined threadbare in the two A
impugned judgments passed by the Gujarat High Court, with which we
agree. However, for the sake of clarity and convenience, we would briefly
record our reasons.
3. As noticed above, Chapter XI of the GPMC Act deals with
municipal taxation and sub-section (1) to Section 127 states and gives an B
option to the Corporation to impose property tax either under Section
129, or under Section 141AA of the GPMC Act. Section 129 states that
the property tax shall comprise of the taxes, which shall, subject to the
exceptions, limitations and conditions thereinafter provided, be levied on
buildings and lands in the city. Section 13210 of the GPMC Act states that
general tax shall be levied in respect of all buildings and lands in the city, C
the rateable value of which exceeds Rs.600/-, save when a case is
covered by exceptions enumerated and listed in clauses (a), (b) and (c)
of sub-section (1) to Section 132 of the GPMC Act. Clause (b) to sub-
section (1) of Section 132 states that buildings and lands, or portions
thereof, solely occupied and used for public worship or for public charitable D
purposes are exempt from payment of general tax leviable under Section
132 of the GPMC Act. In other words, exemption under clause (b) only

10
“132. (1) The general tax shall be levied in respect of all buildings and lands in the City,
the rateable value of which exceeds six hundred rupees except:
(a) buildings and lands solely used for purposes connected with the disposal of E
the dead;
(b) buildings and lands or portions thereof solely occupied and used for public
worship or for a public charitable purposes;
(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 by primarily leviable from the F
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 sub- section (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
G
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.” H
658 SUPREME COURT REPORTS [2022] 18 S.C.R.

A applies when general tax is payable under sub- section (1) to Section
132 read with Section 129 of the GPMC Act. Clause (b) to sub-section
(1) of Section 132 per se and ex facie does not apply to taxes payable
in terms of Section 141AA on the basis of the carpet area method.
4. Section 141AA, which is an alternative mode of taxation and
B an option available to the Corporation to impose tax on the basis of the
carpet area method, states that the property taxes shall comprise of the
taxes which shall, subject to exceptions, limitations and conditions
thereinafter provided, be levied on buildings and lands in the city. Clause
(c) to Section 141AA states that a general tax may be levied in
accordance with the provisions of Section 141B, if the Corporation so
C determines, on a graduated scale. Sub-section (1) to Section 141B states
that for the purpose of clause (c) to Section 141AA of the GPMC Act,
general tax, subject to such exceptions, limitations and conditions
thereinafter provided (and not thereinbefore provided), shall be levied
annually on the buildings and lands in the city at such rate per square
D meter of the carpet areas of the buildings and of the areas of land, which
thereinafter in the enactment has been referred to as ‘the rate of tax’,
as the Corporation may determine. Sub-section (2) to Section 141B states
that for the purpose of levy of tax on buildings in the city under sub-
section (1) to Section 141B, the buildings may be classified into
‘residential’ and ‘buildings other than residential’ and the Corporation
E may determine one rate of tax for residential buildings and the other rate
of tax for buildings other than residential. The proviso states that it shall
be lawful for the Corporation to determine for residential buildings, the
carpet area of which does not exceed 40 square meters, such rate of tax
as is lower than the rate of tax determined for residential buildings. Sub-
F section (3) to Section 141B states that the rate of tax determined under
sub-section (1) read with sub-section (2) to Section 141B shall not, in
respect of the residential buildings, be less than Rs.10/- per square meter
of carpet area and more than Rs.40/- per square meter of carpet area. In
respect of buildings other than residential, it shall not be less than Rs.20/
- per square meter of carpet area and not more than Rs.80/- per square
G meter of carpet area. Sub-section (4) to Section 141B states that the
Corporation, subject to the Taxation Rules, may increase or decrease or
neither increase nor decrease the rate of tax determined under sub-
section (1) read with sub-section (2) and sub-section (3) to Section 141B
in the case of residential buildings having regard to factors, like, market
H value of the land where the building is situated, the year of construction
PARIVAR SEVA SANSTHA v. AHMEDABAD MUNICIPAL 659
CORPORATION [SANJIV KHANNA, J.]

of the building, type of the building, the duration of existence of the building, A
the type of building, and whether the building is self-occupied or tenanted.
Similarly, in the case of buildings other than residential, the following
factors, namely, market value of the land in the area in which the building
is situated, the duration of existence of the building, the purpose for
which the building is used, and whether the building is self-occupied or
B
tenanted are to be taken into consideration.
5. Keeping in view the aforesaid legislative scheme, there is hardly
any scope to urge and argue that clause (b) to sub-section (1) of Section
132 of the GPMC Act, which relates to and grants exemption from
payment of general tax when rateable value is computable under Section
129 read with Section 132 of the GPMC Act, would apply in cases where C
property tax is payable by the carpet area method. General tax in terms
of clause (c) to Section 141AA has to be computed subject to such
exceptions, limitations and conditions provided in Sections 141B or
thereinafter. It would be, therefore, correct to hold that provisions from
Section 141AA to Section 141F form a complete code when tax has to D
be computed and paid on the carpet area method, and for such
computation, reference cannot be made to the provisions of Sections
129 to 133 which relate to property tax payable on annual rateable value.
This position is also made clear by Section 141F, which states that
provisions of Section 140 and 141A shall apply in relation to property
taxes levied under Section 141AA, subject to modifications specified in E
Appendix I-A. Therefore, only provisions of Section 140 and Section
141A have been made applicable when property tax is levied and is payable
in terms of Section 141AA of the GPMC Act. Clause (b) to sub-section
(1) of Section 132 of the GPMC Act is not attracted and cannot be relied
upon when property tax is payable under Section 141AA of the GPMC F
Act.
6. The second aspect has to be also answered against the Appellant
No. 2 Trust. Rule 8B of the Taxation Rules, which relates to the increase
and decrease of rate of property tax determined for ‘buildings other than
residential’, refers to several factors which result in an increase or G
decrease, or neither increase nor decrease, in the rate of tax applicable
to the carpet area. Sub-rule (1) to Rule 8B states that for the purpose of
determining the rate of tax for buildings other than residential, the increase
and decrease, or neither increase nor decrease, shall be in terms of sub-
rules (2), (3), (4) and (5) to Rule 8B. Sub-rule (2) to Rule 8B relates to
H
660 SUPREME COURT REPORTS [2022] 18 S.C.R.

A the ‘location factor’, sub-rule (3) to Rule 8B relates to the ‘age factor’,
sub-rule (4) to Rule 8B deals with the ‘use factor’, and sub-rule (5) to
Rule 8B deals with the ‘occupancy factor’. The said sub-rules (2) to (5)
to Rule 8B specify the rate by the multipliers specified therein. In some
cases, as in clause (b) to sub-rule (4) of Rule 8B relating to the ‘use
factor’, it is stated that the designated rate shall be neither increased nor
B
decreased, in respect of buildings used as specified therein, and in clause
(c) to sub-rule (4) to Rule 8B, it is stipulated that the designated rate
shall be decreased by a multiplier of 0.0 in respect of buildings used as
specified therein. There are illustrations in sub-rule (7) to Rule 8B of the
Taxation Rules, which elucidate the manner in which the computation is
C to be made under Rule 8B of the Taxation Rules. Sub-rule (2) to Rule 8D
states that for the purpose of sub-rule (2) to Rule 8B, the Commissioner
shall classify the area of the city in which the buildings other than residential
buildings are situated into four classes, namely, I, II, III, and IV, having
regard to the market value of the lands in the area. The classification so
made shall be revised once every four years. Sub-rule (5) to Rule 8D
D
states that for the purpose of sub-rule (4) to Rule 8B, the Commissioner
shall have the power to decide which property would fall in the category
mentioned in sub-rule (4)(a)(i)(ii)(iii) and (iv) and sub-rule (4)(b) and (c)
of Rule 8B of the Taxation Rules. Rule 8C of the Taxation Rules deals
with property tax for commercial and industrial units and states that the
E property tax shall be levied at the rates stipulated therein.
7. Clause (a)(i) to sub-rule (4) of Rule 8B, which relates to
commercial properties, reads as under:
“(a) The designated rate shall be increased by multiplying it –

F (i) by 7.0 in respect of the buildings used as under:
Bank, Dispensary, Hospital, Clinic, Maternity home, Laboratory,
Central Government office, Post office, Commercial and/or
industrial office, Oil companies office, Offices of Corporations,
Tuition classes, Typing institutes, godowns and warehouses of the
G properties falling in the above categories and those buildings which
do not fall within any other sub-clause of this clause.
xx xx xx”
8. It may be also relevant to refer to clause (a)(iv) to sub-rule (4)
of Rule 8B, which specifically relates to educational and specified social
H institutions, and reads as under:
PARIVAR SEVA SANSTHA v. AHMEDABAD MUNICIPAL 661
CORPORATION [SANJIV KHANNA, J.]

“ (a) A
xx xx xx
(iv) By 2.0 in respect of the buildings used as under:
Private Nursery (Bal-Mandir), Private and Govt. Schools, Private
and Govt. Colleges, University Campus, Museum, Community halls, B
Social institutes run by public charitable trust (for the welfare of
women, old people, deaf, dumb and blind, physically handicapped,
mentally retarded people) and non grantable schools.
xx xx xx”
9. It is an undisputed position that Appellant No. 2 Trust was using C
portions of the property/building as a hospital or a clinic. In view of the
aforesaid position, sub-clause (i) to clause (a) to sub-rule (4) of Rule 8B
of the Taxation Rules would be applicable and thereby, the designated
rate has to be increased by applying the multiplier of 7.0.
10. The contention of Appellant No. 2 Trust is that their clinic/ D
hospital is being used for charitable purposes as the fee demanded from
the patients and users is not the actual market fee. Reference in this
regard is made to sub-clause (iv) to clause (a) to sub-rule (4) of Rule 8B
of the Taxation Rules, whereby a multiplier of 2.0 is to be applied in
respect of social institutes run by a public charitable trust for the welfare
E
of women, old people, deaf, dumb and blind, physically handicapped and
mentally retarded people. Our attention has also been drawn to clause
(b) to sub-rule 4 of Rule 8B of the Taxation Rules, which states that the
designated rate shall neither be increased nor decreased when the building
is used as grantable schools run by public charitable trusts, boarding-
lodging- hostels run by public charitable trusts, and religious institutions, F
dharma-shala, ashram, and library.
11. As far as clause (b) to sub-rule (4) of Rule 8B of the Taxation
Rules is concerned, the same is clearly distinguishable, and the ‘use
factor’ enlisted thereunder is a separate category; the category being
grantable schools run by public charitable trusts, boarding- lodging-hostels G
run by public charitable trusts, and religious institutions, dharma-shala,
ashram, and library. Appellant No.2 Trust cannot claim any parity with
the aforesaid ‘use factors’, even though the hospital/clinic run by them
are run by public charitable trusts. Sub-clause (i) to clause (a) to sub-
rule (4) of Rule 8B of the Taxation Rules enlists all buildings used as
H
662 SUPREME COURT REPORTS [2022] 18 S.C.R.

A hospitals, dispensaries, clinics, maternity homes, etc. They have all been
classified under one head. No distinction is made whether they are run
by public charitable trusts or not. The legislature is entitled to club and
treat the buildings as per the ‘use factor’ alike without falling foul of the
right to equality, as enshrined under Article 14 of the Constitution of
India.
B
12. Recently, this Court in Manish Kumar v. Union of India
and Others11, has exhaustively referred to the case law on the subject
of reasonable classification under Article 14 of the Constitution of India
vide paragraphs 210 to 230 to observe that Article 14 frowns upon what
constitutes hostile discrimination but does not bar classification which is
C reasonable. To answer whether a classification is reasonable, one must
look beyond the classification to the purpose of law. A reasonable
classification is one which includes all persons who are similarly situated
with respect to the purpose of law. The purpose of law may be either
elimination of public mischief or achievement of some positive public
D good. Reference in this regard was made to the decision in State of
Gujarat and Another v. Shri Ambica Mills Ltd., Ahmedabad and
Another12, which elucidates and explains the distinction between under-
inclusive and over-inclusive classification. A classification is under-
inclusive when the State benefits or burdens persons in a manner that
furthers a legitimate purpose but does not confer the same benefit or
E place the same burden on others who are similarly situated. An over-
inclusive classification is one, where it imposes a burden on a wider
range of individuals who are included in that class of those attended with
mischief at which the law aims. Piecemeal approach to the general problem
is permitted in under- inclusive classification on the ground that legislative
F dealing with problems of classification is usually an experimental matter.
It is impossible to tell how successful a particular approach may be,
what dislocations might occur, what evasions might develop, and what
new evils might be generated in the attempt. Administrative expedients
must be forged and tested. This decision also propounds that laws
regulating economic activity should be viewed differently from the laws
G which touch or concern freedom of speech or religion, voting, procreation,
rights with respect to criminal procedure, etc. Judicial deference should
be given to legislature in the field of economic regulation viz. the
constitutional requirement and need to vigorously enforce equal protection
11
(2021) 5 SCC 1.
H 12
(1974) 4 SCC 656.
PARIVAR SEVA SANSTHA v. AHMEDABAD MUNICIPAL 663
CORPORATION [SANJIV KHANNA, J.]

clause to strike down legislative action in the area of fundamental human A
rights. Equally, this Court in State of Jammu and Kashmir v. Shri Triloki
Nath Kosa and Others13, has held that there is always a presumption in
favour of the constitutionality of an enactment and the burden is upon
the person who attacks it to show that there has been a clear transgression
of constitutional principles. A provision cannot be struck down as
B
discriminatory on any a priori reasoning. The question of classification
is primarily for legislative judgment. Power to classify being extremely
broad and based upon consideration of executive pragmatism, the
judicature cannot rush in where the legislature varily treads. Generally,
the two-fold test applied by the courts is (i) the classification must be
founded on an intelligible differentia, and (ii) the differentia must have C
a rational relation with the object sought to be achieved by the legislature
in question. If the object itself is not discriminatory, it should be held that
there is a reasonable classification because it has a rational relation to
the object sought to be achieved.
13. This Court in the case of Municipal Corporation of Delhi D
v. Children Book Trust14, had the occasion to examine the provisions of
Section 115(4) of the Delhi Municipal Corporation Act, 1957, a provision
which had granted exemption to land and buildings or portions thereof
used for charitable purpose from payment of municipal general tax by
charitable institutions. In the context of the legislation, a distinction was
drawn between charitable purpose under Section 115(4), and as then E
defined under the Income Tax Act, 1961, to observe that the test under
the municipal act is both qualitative and quantitative. In other words,
voluntary contributions or support as a mean of sustenance or
maintenance should be satisfied before the assessee was granted
exemption on the ground that the building was being used for charitable F
purposes. In other words, where an assessee is making systematic profits,
even though that profit is utilised for charitable purposes, the assessee
cannot claim exemption. Thus, where the assessee could survive without
receiving voluntary contributions, it would be liable to pay general property
tax. The term ‘contribution’, for the purpose of the statute, was interpreted
as something that cannot amount to compulsive donation. The underlying G
reasoning behind the said judgment is to ensure that such institutions
take the burden and provide for municipal revenue, which is necessary
and required for local needs. In a democratic set-up, a municipality requires
13
(1974) 1 SCC 19.
14
(1992) 3 SCC 390. H
664 SUPREME COURT REPORTS [2022] 18 S.C.R.

A the proceeds from the taxes for their own administration and therefore,
there is a need to leave to these municipalities the power to impose and
collect taxes.
14. The Statement of Objects and Reasons for Amendment Act
No. 3 of 1999, while enacting the option to levy property tax by applying
B the carpet area method, records that the levy of property tax did not
provide sufficient revenue to the Corporation to meet the escalating cost
concerns, particularly in view of rapid urbanisation in the cities. It is in
this background it was necessary to provide alternative tax on buildings
and lands based upon the carpet area method. However, at the same
time, the legislation has provided the minimum and maximum rate of tax.
C The power is given to the Corporation to increase or decrease the tax
for residential and non- residential properties according to factors like
location, age and type of buildings.
15. Another aspect which we cannot ignore is the need to have
clarity and uniformity in the rate of tax. Discretion or variation of the rate
D of tax based upon ascertainment of details etc., always leads to litigation.
16. This Court in State of Bihar and Others v. Sachchidanand
Kishore Prasad Sinha and Others15, had set aside the judgment of the
Patna High Court striking down the assessment rules as being violative
of Article 14 of the Constitution of India by relying upon the earlier
E decision in Twyford Tea Co. Ltd. and Another v. The State of Kerala
and Another16, wherein the Constitutional Bench by majority had held
that the legislature must have a wide range of selection and freedom in
appraisal not only in the objects of taxation, and the manner of taxation,
but also in the determination of the rate or rates applicable. A person, to
F succeed on the ground of discrimination, must show hostile unequal
treatment. This is more so when uniform taxes are levied. In this
connection it was stressed:
“15….This indicates a wide range of selection and freedom in
appraisal not only in the objects of taxation and the manner of
G taxation but also in the determination of the rate or rates applicable.
16.…The burden of proving discrimination is always heavy and
heavier still when a taxing statute is under attack. … The burden
is on a person complaining of discrimination. The burden is proving
15
(1995) 3 SCC 86.
16
H (1970) 1 SCC 189.
PARIVAR SEVA SANSTHA v. AHMEDABAD MUNICIPAL 665
CORPORATION [SANJIV KHANNA, J.]

not possible ‘inequality’ but hostile ‘unequal’ treatment. This is A
more so when uniform taxes are levied.”
This judgment in Sachchidanand Kishore Prasad Sinha (supra)
also refers to the earlier decision in R.K. Garg v. Union of India and
Others17, that the laws relating to economic activities should be viewed
with greater latitude than laws touching civil rights. The economic B
mechanism is highly sensitive and complex, laws are not abstract
propositions, do not relate to abstract units, are not to be measured by
abstract symmetry and exact wisdom and nice adaption of remedy are
not always possible. Every legislation, especially in economic matters, is
essentially empiric, and it is based on experimentation or what one may
call the trial and error method. It may not provide for all possible situations C
or anticipate all possible abuses. There can be crudities or inequities in
complicated experimental economic legislation but on that account alone
it cannot be struck down as invalid. In the context of the impugned
legislation, it was observed that the simplistic approach of classification
adopted in the said case cannot be rejected on the ground that it is possible D
to evolve a classification to cater to several distinctions. More importantly,
and for the present context, it was observed in Sachchidanand Kishore
Prasad Sinha (supra) that even if it is so evolved, not only would it be
too complex and elaborate, it would leave too much discretion to the
assessing authorities and thereby eliminate one of the main objectives of
the rules therein. One of the objects of the rules was to withdraw discretion E
which can result in harassment and constant threats of revision. These
observations are of relevance because, in the present case, all hospitals,
dispensaries, clinics, maternity homes etc., have been classified under
one head, and thereby the levy of taxation in such cases simplifies and is
uniform. Discretion is eliminated. Examination of facts, etc. is not required. F
We do not, therefore, think that the classification made vide sub-clause
(i) to clause (a) to sub-rule (4) of Rule 8B of the Taxation Rules is
discriminatory and violative of Article 14 of the Constitution of India.
The object and purpose of this classification is to avoid litigation and
complexities which may arise in case there is a distinct and separate
taxation of hospitals, clinics, maternity homes, etc., stated and claimed to G
be run for charitable purpose.
17. Sub-clause (iv) to clause (a) to sub-rule (4) of Rule 8B of the
Taxation Rules applies to educational and social institutions run by public
17
(1981) 4 SCC 675. H
666 SUPREME COURT REPORTS [2022] 18 S.C.R.

A charitable trusts for the welfare of women, old people, deaf, dumb, blind,
physically handicapped or mentally retarded people. These are separate
categories and cannot be confused and treated similarly and at par with
hospitals, clinics, maternity homes, etc, as elucidated in sub-clause (i) to
clause (a) to sub-rule (4) of Rule 8B of the Taxation Rules.
B 18. At this stage, we may refer to the case law relied upon by the
counsel for the appellant and distinguish the same. In State of Kerala v.
Haji K. Haji K. Kutty Naha and Others Etc.18, a uniform rate of
general/property tax was sought to be imposed based entirely on the
total floor area regardless of the age, the location and the use of the
building. Different tax slabs were provided where the total floor area
C would be 1000-2000 sq. ft., 2000-4000 sq. ft. and so on. It is in this
background that the classification was struck down as being arbitrary as
it had imposed a uniform tax slab regardless of the class to which the
building belongs, the nature of construction, the purpose for which it is
used, capacity for profitable use, and relevant circumstances which have
D a bearing on the matters of taxation. The decision in Deputy
Commissioner of Income Tax and Another v. Pepsi Foods Limited19,
had upheld the striking down of the third proviso to Section 254(2-A) of
the Income Tax Act, 1961 on the ground that it was arbitrary and offended
Article 14 of the Constitution of India as assessees who were not even
responsible for the delay in the decision before the tribunal were clubbed
E with those assessees responsible for delaying the proceedings. In this
context, it was observed that Article 14 of the Constitution of India applies
to tax legislation, albeit greater freedom in the joints must be allowed by
the courts in adjudging the constitutional validity of the same. However,
where tax is imposed deliberately with the object of differentiating
F between persons similarly situated, such tax is liable to be struck down.
Similarly, in State of Uttar Pradesh and Others v. Deepak Fertilizers
& Petrochemical Corporation Ltd. 20, a retrospective notification
withdrawing exemption in respect of NPK 23:23:0 fertilizer, while granting
it to other NPK fertilizers, was struck down as without there being any
rational basis. The judgment specifically records that the State was not
G able to satisfy that there was a good reason for introducing a fresh set of
notifications for one period and another set of notifications for another
period, either by amending the notification or introducing a new notification
18
1969 1 SCR 645.
19
(2021) 7 SCC 413.
H 20
(2007) 10 SCC 342.
PARIVAR SEVA SANSTHA v. AHMEDABAD MUNICIPAL 667
CORPORATION [SANJIV KHANNA, J.]

to withdraw the benefit given earlier. In Union of India and Others v. A
N.S. Rathnam and Sons21, noticing that the exemption was denied to
those who had paid customs duty under an alternative provision, albeit
at a lower rate, this Court, to ensure parity, had directed that the assessees
would be entitled to the benefit of the exemption subject to the condition
that they shall pay the differential amount of their duty.
B
19. We may, in the end, refer to another decision of a Constitutional
Bench of this Court which supports our reasoning. In the case of Ganga
Sugar Corporation Ltd. v. State of Uttar Pradesh and Others22, the
levy, which was uniform on all sugarcane purchases, was attacked as
ultra vires on the ground that the sucrose content of various consignments
could vary from place to place, the variation being of the order of 8% to C
10%, and yet a uniform levy by weight was sanctioned by the impugned
Act therein. Rejecting the contention, it was observed by this Court that
practical considerations of the administration, traditional practices in the
trade, other economic pros and cons enter the verdict, but after a judicial
generosity is extended to the legislative wisdom, if there is writ on the D
statute perversity, ‘madness’ in the method or gross disparity, judicial
credulity may snap, and the measure may meet with its funeral. Otherwise,
the benefit of uniformity in the classification of taxation should not be
struck down on the application of Article 14 of the Constitution of India.
It must be viewed liberally and not meticulously. Thus, in the said case,
the contention that the price of the sugarcane should be the permissible E
criteria for purchase tax was rejected. It was observed that marginal
difference of the sucrose content being too inconsequential would not
build a case for discrimination. We have referred to this decision in the
context that we have also taken into account the total quantum of tax
being paid in terms of the method of calculation as prescribed by sub- F
clause (iv) to clause (a) to sub-rule (4) of Rule 8B of the Taxation Rules.
The bills raised are not substantial so as to warrant any interference.23
20. However, we are also conscious that in some cases it is possible
that small organisations performing purely charitable work, which meets
both qualitative and quantitative criteria, may have to curtail the charitable G
work in case the municipal taxes increase or are enhanced. We would,
in this context, like to reproduce the observations of this Court in the
case of Sachchidanand Kishore Prasad Sinha (supra), which are as
under:
21
(2015) 10 SCC 681.
22
(1980) 1 SCC 223. H
668 SUPREME COURT REPORTS [2022] 18 S.C.R.

A “14. It is one thing to suggest that the rule-making authority may
consider making a further distinction on the lines suggested and
an altogether different thing to strike down the rule itself on the
ground of inadequate classification...”
The aforesaid observation has been reproduced of abundant caution
B and, we clarify, does not have any application in the factual background
of the present case.
21. Recording the aforesaid, we do not find any merit in the present
appeals and the same are dismissed. However, in light of the facts of the
case, there will be no order as to costs.
C
Nidhi Jain Appeals dismissed.
(Assisted by : Bodhi Ramteke, LCRA)

D

E

F

G

H