Kerala High Court Orders | Review Tax on Residential Buildings

The Kerala High Court has directed the Gram Panchayat to consider objections against levying property tax on residential buildings equal to commercial buildings rates.

The bench of Justice Gopinath P. has directed the Secretary of the Grama Panchayat to consider the objections raised by the petitioner against the levy of property tax at the rates applicable to commercial buildings in respect of the residential building of the petitioner. The amounts paid by the petitioner will be treated as ‘paid under protest’ and if it is ultimately found that tax has to be levied only at rates applicable to residential buildings, any amount paid in excess by the petitioner shall be adjusted against future demands.

The petitioner has challenged the tax at rates applicable to commercial buildings has been levied on a residential building belonging to the petitioner.

The respondent Panchayat contended that the grievance of the petitioner can be considered by the competent authority of the Panchayat. If it is found that any tax has been collected in excess from the petitioner, the same can be adjusted against future demands. It is submitted that the amount now demanded has already been remitted by the petitioner.

The court while disposing of the petition held that if it is ultimately found that tax has to be levied only at rates applicable to residential buildings, any amount paid in excess by the petitioner shall be adjusted against future demands. The Secretary of the Panchayat to take a decision in the matter after affording an opportunity of hearing to the petitioner, within a period of six weeks.

Read More: https://jurishour.in/karnataka-high-court-dismisses-tax-appeals/

What is Property Tax?

Property tax is a major source of revenue of the Corporations and Municipalities in Kerala and constitutes about 60 per cent of their own revenue. Section 230 to 233 of the Kerala Municipality Act, 1994 as amended by Act 14 of 1999 empowered the Municipal Corporations to levy property tax on all buildings and land situated within the jurisdictional area of the Corporations. Section 234(4) of the Act provides that the Government may make rules regarding the person by whom and the intervals at which the annual value of buildings, the deductions or additions in the tax to be made etc. is to be determined and the procedure for realisation of the tax amount. Rules in this regard have not been framed by the Government. A review on the assessment and collection of Property tax in Corporation of Cochin, which is the largest Municipal Corporation, was conducted by audit.

Under the Act, every building shall be assessed in the prescribed manner on the basis of annual value of the buildings together with site and other adjacent premises occupied as an appurtenance thereto, the importance of area where the building is situated, type of the building construction, method of use, plinth area, reasonable maintenance cost etc. and the tax shall be determined at the rate fixed by the Council. Section 238 of the Act provides that subject to the rules made by the Government the property tax shall be assessed and half yearly tax determined once in four years and shall be payable by the owner of the assessed property within thirty days of the commencement of each half year. Government has not framed the rules in this regard. In the absence of prescribed rules, different Corporations follow different methods for determining the annual value of the buildings. The Corporation has devised a twelve point formula for assessment of the annual value of buildings and property tax leviable.