Notification levying Institution and Building tax in Punjab quashed being unconstitutional

Punjab & Haryana High Court in KRBL Limited vs State of Punjab CWP No. 12965 of 2012 decided on 25th January, 2013 has quashed the notification u/s 3 of Punjab(Institutional and other Buildings) Tax Act, 2011 and the consequential notices issued persuant thereto, levying tax @ Rs. 1 per sq, foot on the basis of floor area on Institutions and Buildings situated outside the municipal areas within Punjab. However the Hon'ble court upheld the constitutional validity of section 3 of the said Act.  

In this case Constitutional validity of Section 3 of Punjab (Institutional and Other Buildings) Tax Act, 2011  was challenged as being ultra-vires Articles 13, 14 and 265 of the Constitution of India read with Entry No.49 contained in Schedule VII of its List-II in so far as the charging of tax on 'institutions' and 'buildings' on the basis of a fixed floorage area irrespective of other considerations like construction, location or the purpose for which it is used etc. is concerned. 

The petitioners also seek quashing of the Notification dated 2.2.2011 published on 3.2.2011, issued in purported exercise of the powers exercisable under the afore-said Act, as discriminatory and violative of Article 14 of the Constitution. In addition, the petitioners also seek to strike down the public notice dated 10.6.2011 followed by individual notices like the one dated 12.7.2011 directing them to inform the 'covered area' of their respective establishments.

High Court after considering various Judgements held as follows:

"We, therefore, hold that so long as the delegate, namely, the State Government exercises its power under Section 3 (1) in consonance with the legislative policy of 2011 Act and determines the rate of tax leviable on different 'buildings' or 'institutions' on the basis of an intelligible criteria studded with the principle of reasonable classification and which brings no inequality due to lack of classification, Section 3 of 2011 Act cannot be held to be offensive to Article 14 of the Constitution. The second ground of attack, therefore, too has no strength to sustain. Section 3 of the 2011 Act is accordingly held to be constitutionally valid."

"Having held that, we now proceed to consider the validity of the notification dated 2.2.2011 whereby in exercise of its delegated powers under Section 3 (1), the State Government has specified “rate of tax at Re.1/- per square feet of the covered area of the institution or building, as the case may be”.  

"There can indeed be no doubt that irrespective of (i) the location of the building; (ii) nature of its user; (iii) its proximity to the nearby urban area(s); (iv) the commercial potentiality of the building(s); (v) the estimated rental value of the building(s); (vi) the cost of construction incurred on such building(s), and (vii) the value of the land where such buildings or institutions have been setup etc., the State Government has chosen to fix a uniform rate of tax @ Re.1/- per square feet of the 'covered area'. It simply means that the evil which the Legislature successfully prevented from entering into and hurting the doctrine of equality embodied in Section 3 (1) of the 2011 Act, has been injected through backdoor entry by the Executive in exercise of its delegated powers. The notification also suffers from the disability of unreasonable classification as it sweeps everyone with same broom. Conversely, it treats unequals as equals in total disregard to the principles laid down by the Supreme Court in Kerala’s case. The notification dated 2.2.2011 thus neither satisfies the test of 'equality' nor is it consistent with Section 3 (1) of the 2011 Act. The notification is full of the sin of discrimination and it must take toll for its sins.

Consequently, we hold that the notification dated 2.2.2011 cannot sustain in law and is hereby quashed. As a necessary corollary thereto, the public notice dated 10.6.2011 calling upon the owners/occupiers of the buildings/institutions to deposit the building tax pursuant to the aforesaid notification or the individual notices served upon the petitioners, are also liable to be met with the same fact. They are accordingly quashed.

For the reasons afore-stated, while Section 3 and/or other provisions of the Punjab (Institutions and Other Buildings) Tax Act, 2011 are upheld as they are intra-vires and do not violate any provision of the Constitution of India, the notification dated 2.2.2011 and the consequential notices issued pursuant thereto are hereby quashed. The writ petitions are allowed in part in the above terms."

After this judgement now, the State Government cannot collect institution tax and, in fact, will have to refund the amount already collected under the notification quashed.
Full Judgement can be downloaded herebelow:


Share |


Post a Comment