| CITATION | 2024 INSC 135 |
| CASE NUMBER | Civil appeal no. 2878 of 2024 |
| DATE OF JUDGMENT | 22nd, February, 2024 |
| COURT | Supreme Court of India |
| APPELLANT | Lukhnow Nagar Nigam |
| RESPONDENT | Kohli brothers colour lab pvt ltd |
| BENCH | Justice B.V. Nagarathna And Justice Ujjal Bhuyan |
INTRODUCTION-
This case is dealing with the issue related with enemy properties under Enemy Property Act, 1968 (hereinafter called as the Act) that whether enemy property is owned by government and as per Article 285 of the Constitution of India, whether enemy properties are exempted from payment of property or local taxes.
FACTS OF THE CASE;
1. That the property situated at Mahatma Gandhi Marg, Lucknow, which is involved in this case, was belonged to Raja of Mahmudabad who was migrated to Pakistan in 1947 and a portion of property is used by respondent no.1/assessee for its benefits. The Custodian/respondent no.2 was appointed for management of enemy property.
2. That in 1998-1999, it came in to the notice of the Municipal Corporation’s attention that the respondent no.1/assessee was operating a commercial establishment within the premises. Consequently, the appellant-Municipal Corporation conducted an assessment based on Capital Value and issued a notice to the assessee regarding the assessed Annual Value. Now as per certificate dated 03/10/2002 issued to the respondent no. 2, the Custodian was obligated to pay house tax and other local taxes on behalf of this property. However, the assessee/respondent no.1 contested that assessment notice before High Court and the same was dismissed with default as no one contested that case.
3. That till now Rs.1,621,987.00/- was due under the head of House Tax and municipal corporation initiated further proceedings and issued notice for attachment of property on 28.03.2005. Meanwhile the son of Raja of Mahmudabad, namely Raja Mohammed Amir Mohammad Khan, had actively approached the Hon’able High Court of Bombay on the ground that he is citizen of India and he is owner of property being legal heir so the demised enemy property no longer belongs to his father. Hence the enemy property may be released to him. Although the government had agreed to give 25% of the property but no action was taken. The Hon’able High Court of Bombay ruled in his favor and ordered the custodian to give possession of enemy property to Raja Mohammed Amir Mohammad Khan and also ordered the tenants to handover the vacated possession of enemy property to custodian. The aggrieved approached the Hon’able Supreme Court and the Hon’able Supreme Court also upheld the decision of High Court of Bombay.
4. That the aggrieved tenants again approached the Hon’able Supreme Court for clarification and the Supreme Court clarified its previous decision that only those tenant have to vacate the demised premises who got the possession after the appointment of custodian, those who had possession prior to the appointment of custodian as per their tenancy agreement, need not to vacate the disputed enemy property.
5. That the appellant no. 3 i.e. Lucknow Jal Sansthan, Zone 1 Executive Engineer issued notice dated 28.05.2011 to the assessee, demanding payment of Rs. 7,57,239.00/- and warned for proceedings of recovery by the way of attachment if the amount is not paid within 3 days. Hence the assessee filed a writ petition before High Court of Allahabad. The assessee raised this contention that appellants could not levy taxes on property, belonging to the Government of India or Union properties. The Hon’able High Court allowed the writ petition vide impugned order dated 29.03.2017 and quashed notice dated 28/05/2011 as the property is government property and the appellant cannot impose taxes on it . The High Court further directed respondent No.1 to make representations for the recovery of any amounts previously paid to the appellants.
6. That aggrieved party approached the Apex Court against the impugned order dated 29/03/2017, the present appeal was filed by the appellants.
MAIN ISSUES-
1. Whether the government is the owner of the property that is declared enemy property under Enemy Property Act, 1968?
2. Whether the enemy property is exempted from taxes under section 2 of Article 285 of Indian Constitution?
3. whether the respondent no.1/assessee is liable to pay taxes to the appellant?
CONTENTIONS OF APPELLANT-
1. That the appellants contended that it is admitted fact that the property in dispute is enemy property and enemy property is not the property of government, hence High Court erroneously held that the House Tax and Water Tax levied herein are not leviable on the assessee respondent.
2. The appellants also contended that the preamble of the Act shows that enemy property is merely under the custody of custodian for the continued vesting of Enemy Property. It is declared nowhere that the enemy property belongs to the government in the Act.
3. The appellant contended that the government specifically declared that the property belongs to government vide any notification or declaration and in this case, the government never acquire the disputed property in any manner. However, in this case, the Preamble, Section 2(c) and its proviso, Sections 15(1), 17(1)(c), and 18 read with Rule 5(1) and proviso 2, 5(2), 5(3) and 15(1) cumulatively establish that Custodian has certain obligations regarding Enemy Property and the government and custodian has no ownership over the property. Section 2(c), which defines enemy property reads that it “means any property for the time being belonging to or held or managed on behalf of an enemy…”. The expression “for the time being” clearly shows that it is conditional vesting of property, not permanent.
4. The appellant contended that to claim ownership on the property, the government has to opt proper procedure as per the provisions of the Constitution and law. It is pertinent to mention here that to acquire any property the government has to pay appropriate compensation to the party which is not the case here. The Section 8(2)(vi) of the Act permits the Custodian for Enemy Property to deposit Municipal Taxes vis-à-vis enemy property vested in him.
5. The appellant contented that this case does not attract article 285 (1) of Indian Constitution. Even the property of union which is given on lease to any third is also liable to pay taxes, the appellant referred the case titled as Electronics Corporation of India vs. Secretary, Revenue Department, Govt. of Andhra Pradesh, 1999.
6. The appellant also referred Union of India vs. State of Uttar Pradesh, (2007) 11 SCC 324 in which it was held that service charges are a fee and cannot be said to be hit by Article 285 of the Constitution.
7. The appellant also referred Rajkot Municipal Corporation vs. Union of India, Civil Appeal No.9458-63 of 2003 (“Rajkot Municipal Corporation”), in this case a clarification was issued that the Union of Indian is exempted to pay property taxes but the Union of India is liable to pay service tax, depending upon the utility.
8. The appellant contended that the interest of private person i.e. respondent no.1 is not exempted under article 285 of Constitution.
9. The appellant contended that the respondent no.2/custodian admits that he is liable to pay local taxes to local bodies as per certificate dated 03/10/2002.
CONTENTIONS OF RESPONDENT NO. 1-
1. The respondent no.1 contended that the respondent no.1 has possession of property in question as per tenancy which was incurred before the appointment of custodian as per the clarification given by the Apex Court in Amir Mohammad Khan.
2. The respondent no.1 contended that the disputed property belongs to government especially with the custodian, the assessee is merely a tenant of custodian, and so respondent no.1 is not liable to pay any tax. The respondent referred to case titles as NDMC vs. State of Punjab, (1997) 7 SCC 339 (“NDMC”) in which it is held that there is an absolute and emphatic ban on state taxation on the property of the Union and the use of such property is irrelevant.
CONTENTIONS OF RESPONDENT NO. 2 AND 3–
1. The respondent no. 2 and 3 contended that the respondent no.1/ tenant is private party who uses enemy property for its business which is not similar to government property. Hence the respondent no.1/tenant is liable to pay taxes to local authorities. So demand of taxes should levy on the tenant/respondent no. 1, not on custodian or state government.
FINDINGS OF THE SUPREME COURT-
The Apex Court held that the custodian is not the owner of the enemy property, he is merely appointed for management and administration of enemy property. Hence, the custodian acts as trustee of the property and not as owner. So the custodian is not liable to pay taxes.
The Apex Court held that the government has appointed custodian for the management and administration of the enemy property and there is no mode of transfer of ownership to government in any manner. Hence the government is also not an owner in this case so the government is also not liable to pay taxes to local authorities.
DECISION OF THE SUPREME COURT OF INDIA-
The Apex Court set asides the impugned order dated 29.03.2017 and held that the respondent no.1/assessee is liable to pay taxes to local bodies. The court also directed that if the demand notice of taxes is not issued before this date then it shall not be issued and the local authority/appellant shall be entitled to levy tax from this fiscal year only. The Apex Court also held that any amount paid to the local authority as tax shall not be refunded.
ANALYSIS –
In this case, the Act was already clear that if the property is declared enemy property, the status of property shall not be changed on the basis of change of circumstance even if after the death of the enemy, the legal heirs cannot claim the enemy property. The Apex Court analysis this question in detail that who has the ownership of the enemy property and whether it should be exempted from levy of taxes under Article 285 of Indian constitution as the respondent no.1 was contending that the government is the owner of the enemy property. The Apex Court very fairly gives its verdict that the tenant/assessee is liable to pay taxes to local bodies as neither the government nor the Custodian is the owner of the disputed enemy property.
CONCLUSION-
The Apex Court fairly justified this issue and directed the assessee to pay taxes to local authorities as local authorities are providing its services like of water, sewerage etc to the assessee so the assessee is liable to pay for it, hence the assessee is not exempted from any tax. Moreover, it is already cleared by the Apex Court that enemy property is not government property so it is not exempted from any tax.
But the Apex Court also directed to local authorities, not to levy tax for those years when no notice of payment of tax was issued. The Apex Court gave a very reasonable and generous decision after considering conditions of both the parties.
REFERENCES-
1. Website of Supreme Court of India-
https://webapi.sci.gov.in/supremecourt/2017/18248/18248_2017_12_1501_50594_Judgement_22-Feb-2024.pdf
2. Website of Indian Kanoon-
https://indiankanoon.org/doc/42694335
3. The Enemy Property Act, 1968
https://indiankanoon.org/doc/1510187
This article is written by Amanpreet Kaur, Advocate, graduated from Guru Nanak Dev University, Amritsar, Intern at LegalVidiya.
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