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Government of Kerala & Anr. v. Mother Superior Adoration Convent

Civil Appeal · 2021 INSC 129Decided 1 Mar 2021
Civil Appeal No. 202 of 2012
Justice Rohinton Fali Nariman · Justice B.R. Gavai

Background

Under Section 3(1)(b) of the Kerala Building Tax Act, 1975, buildings used "principally" for religious, charitable or educational purposes are exempt from building tax. The State of Kerala levied building tax on a convent building used to house nuns undergoing religious training, and separately on hostel buildings attached to various educational institutions, arguing that pure residential accommodation, even for nuns or students, was not itself a "religious" or "educational" use. The Kerala High Court (in a Division Bench judgment and a later Full Bench judgment) held in favour of the convent and the educational institutions, exempting these buildings from tax, and the State appealed a batch of such cases to the Supreme Court; one lone appeal was also filed by an assessee (a hospital) against a decision that had gone the State's way.

Decision Breakdown

The Supreme Court held that an exemption for buildings used "principally" (not "exclusively") for religious, charitable or educational purposes must be read to cover not just the core activity but purposes directly and integrally connected to it: such as housing nuns next to a convent so they can receive religious instruction, or housing students in hostels attached to their school or college. It distinguished this from, say, renting out a neighbouring building purely for profit even if the rent is used for religious purposes, which would not qualify. The Court also noted that treating such residential buildings as taxable "residential buildings" would create an absurd result by exposing them to a separate luxury tax meant for exclusively residential premises. Applying the principle that beneficial exemption provisions should be construed liberally in line with their object, the Court dismissed all of the State's appeals (upholding the exemptions) and allowed the one appeal filed by the assessee-hospital, setting aside the ruling against it.

Lesson Learnt

A tax exemption for buildings used "principally" for a stated purpose (religious, charitable, educational) extends to supporting activities that are integrally connected to that purpose, such as housing for the people carrying it out, and courts will interpret such beneficial exemptions liberally rather than in the narrow, strict manner normally applied to ordinary tax exemptions.

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

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