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Food Corporation of India v. Brihanmumbai Mahanagar Palika

Civil Appeal · 2020 INSC 318Decided 19 Mar 2020
Civil Appeal Nos. 9350-9351 of 2019
Justice Ashok Bhushan · Justice M.R. Shah

Background

Godowns used by the Food Corporation of India (FCI) for grain storage stood on land originally acquired by the government of Bombay for the Government of India, though ownership was never formally transferred to FCI by conveyance deed. The Mumbai Municipal Corporation demanded property tax on these godowns going back to 1969. FCI claimed exemption under Article 285 of the Constitution, which exempts Union government property from state/local taxation, but the Bombay High Court twice rejected FCI's challenge and dismissed its writ petition.

Decision Breakdown

The Supreme Court held that since legal ownership of the land and godowns had never actually passed from the Central Government to FCI, no conveyance deed was ever executed, the property remained "property of the Union" within the meaning of Article 285, making it exempt from municipal property tax regardless of FCI's occupation and use of it. However, the Court clarified that this constitutional exemption only covers taxes on the property itself; it does not exempt FCI from paying service charges for genuine services rendered by the municipal corporation (such as water supply or sewerage), since such charges are fees for services, not a tax on Union property. The appeals were allowed on the tax point, with liberty for the corporation to assess service charges separately.

Lesson Learnt

The constitutional immunity of Union government property from state and local taxes is real but narrow: it blocks taxes on the property itself, not charges for actual municipal services supplied to that property.

Official source (sci.gov.in)View Judgment (PDF)

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