Union properties exempt from State taxes: HC

Article 285 (1) of the Constitution indicated that the properties of the Union should be exempt from all taxes imposed by a State or by any authority within a State. A property being put to commercial use would not make any difference, observed the Madurai Bench of the Madras High Court.

The court was hearing an appeal preferred by Madurai Multi Functional Complex against a Single Bench order. Madurai Corporation assessed the building for property tax and issued a demand notice in 2018 asking the petitioner to pay half-yearly tax to the tune of ₹10.07 lakh. Challenging it, a petition was filed. The Single Bench dismissed the petition. The appeal was preferred against the Single Bench order.

A Division Bench of Justices G.R. Swaminathan and M. Jothiraman observed that the land belonged to the railways. In order to develop the vacant lands owned by the railways, The Railways Act, 1989, was amended and The Railway Land Development Authority constituted. Section 4D(2)(ii) of the Act stated that development of the railway lands for commercial use was one of the functions of the authority.

The Ministry of Railways incorporated Ircon Infrastructure and Services as their wholly owned subsidiary under the Companies Act, 1956. In 2013, a lease agreement was signed for the development of railway lands across India.

Subsequently, Ircon Infrastructure and Services entered into a sub-lease agreement for 30 years with the petitioner in respect of the property. The Multi Functional Complex was constructed by Ircon Infrastructure on the plot of 2,700 sqm on the railway junction premises in Madurai. The building in its present shape was developed by the petitioner, the court observed.

Merely because the property had been put to commercial use, it would not make any difference. A careful reading of the terms of the lease agreement, the sub-lease agreement and other materials clearly led to one conclusion, ie., not only the land but the building also belonged to the railways. In these circumstances, the question of levying property tax by the local body did not arise, the court observed and set aside the demand notice.