Full Judgment Text
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CASE NO.:
Appeal (civil) 1083-1084 of 2000
PETITIONER:
Agastyar Trust
RESPONDENT:
Commissioner & Secretary to Government Revenue Department & Anr.
DATE OF JUDGMENT: 15/03/2005
BENCH:
S.N. Variava, Dr. AR. Lakshmanan & S.H. Kapadia
JUDGMENT:
J U D G M E N T
Dr. AR. Lakshmanan, J.
These appeals were filed by the appellant-Trust against the final
judgment and order dated 30.7.1999 passed by the High Court of Judicature at
Madras in Writ Appeal No. 1190 of 1999 and C.M.P. No. 11716 of 1999
whereby the High Court dismissed the appeal preferred by the appellant against
the order of the learned single Judge of the High Court in Writ Petition No.
14745 of 1988 and W.M.P.No.22080 of 1988 denying the appellant exemption
from paying urban land tax. The short facts are as follows:
The instant case relates to the exemption of the land held by the
appellant for the period 1965 to 1976 from the payment of urban land tax under
the Tamil Nadu Urban Land Tax Act, 1966 (hereinafter referred to as "the
Act"). The appellant-Trust was established under a trust deed with charitable
objects in the year 1941. By a deed, the appellant-Trust declared and affirmed
to be a public trust with charitable or religious objects. The State of Tamil
Nadu issued G.Os being G.O.Ms. No. 1947 dated 17.9.1976, 2056 dated
4.10.1976 and 2625 dated 27.12.1976 respectively declaring the norms for
exemption from the payment of Urban Land Tax under the Act. The said G.O.
stipulated that all institutions recognized as charitable institutions under the
Indian Income Tax Act will be dealt as such under the Act. It is also stipulated
that exception is to be given if the income is used solely for the objectives and
purpose of the Trust.
It is pertinent to notice that the appellant-Trust was recognized as a
public charitable trust under Section 12A(a) of the Income Tax Act vide order
29.4.1977 passed by the Income Tax Appellate Tribunal. In this context, it is
pertinent to notice that the appellant claims exemption of the land held by it for
the period from 1965 to 1976 from the payment of urban land tax under the
Act. Since the order was passed on 29.4.1977 by the Income Tax Appellate
Tribunal recognizing the appellant-Trust as a charitable Trust under Section
12A(a) of the Act, the appellant cannot claim the benefit of the order dated
29.4.1977 to their Trust since the exemption of the land from payment of urban
land tax was claimed only for the period 1965 to 1976. The Assessing
Authority under the Act imposed urban land tax on the appellant-Trust. The
appellant preferred Writ Petition No. 4468 of 1977 which was allowed by the
High Court allowing the appellant to approach the authorities under Section 27
of the Act. Pursuant to the order of the High Court, the appellant approached
the authorities for exemption under Section 27 of the Act which was rejected
by the authorities on 28.1.1982. The appellant preferred a writ petition being
W.P. No. 1562 of 1982. The respondents issued a fresh G.O. being G.O. Ms.
No. 1834(Rev.) dated 29.10.1983 stipulating fresh and additional norms for the
benefit of exemption from payment of urban land tax. The Writ Petition No.
1562 of 1982 filed by the appellant was allowed directing fresh disposal of the
appellant’s application keeping in view that bodies which have been
recognized as charitable institutions must be exempted by the Urban Land Tax
Authorities. The appellant-Trust requested for disposal of its application in
terms of the judgment and order dated 18.4.1988 passed by the High Court.
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While so, the respondents asked the appellant to make a fresh application along
with audited statements. The appellant requested the authorities that its
pending application be considered. The respondents by order dated 4.10.1988
rejected the application of the appellant vide order Lr.(Ms) No.1896 on the
ground that the appellant did not satisfy the norms stipulated in G.O.Ms. No.
1834(Rev) dated 29.10.1983. In the meanwhile, a Contempt Application was
filed bringing to the notice of the High Court that the application of the
appellant was decided de hors the directions of the High Court in W.P.No.
1562 of 1982 directing the authorities to dispose of the application keeping in
view that bodies which have been recognized as charitable institutions must be
exempted by the Urban Land Tax Authorities. The said contempt application
was withdrawn with liberty to challenge the order dated 4.10.1988 passed by
the respondents. Hence the appellant preferred W.P.No. 14745 of 1988 and
C.M.P. No. 22080 of 1988 challenging the aforesaid order. The said writ
petition was rejected by the learned single Judge on 3.9.1998. The appellant
preferred Writ Appeal No. 1190 of 1999 along with C.M.P. No. 11716 of 1999
which was again dismissed by the Division Bench on 30.7.1999. Aggrieved by
that, the appellant preferred the special leave petitions on 16.12.1999 and this
Court granted leave on 11.2.2000.
We heard Mr. Uday U. Lalit, learned senior counsel appearing for the
appellant-Trust and Mr. S. Balakrishnan, learned senior counsel appearing for
the respondents.
Leaned senior counsel appearing for the appellant invited our attention
to the orders passed in various writ petitions, the Government Orders and also
of the impugned orders and the orders passed by the authorities rejecting the
claim for exemption. He submitted that the appellant-Trust was entitled to
exemption from paying urban land tax as it met the criterion laid down in the
Government Order G.O.Ms. No. 2625 (Rev) dated 27.12.1976, which clearly
stated that all institutions recognized as charitable institutions under the Income
Tax Act will be dealt as such for the purpose of concessions under the Act. He
would further submit that the High Court has failed to appreciate that the
entitlement to exemption from paying urban land tax should have been decided
in accordance with the law that existed in the assessment years for which the
exemption was sought and not in accordance with any subsequent Government
Order. It was further contended that the High Court has failed to appreciate
that the G.O. Ms. No. 1834 dated 29.10.1983 cannot be construed as to have
the effect of altering the law applicable in the year of assessment in which the
claim of exemption was made. It was further contended that the subsequent
G.O.Ms. No. 1834 dated 29.10.1983 laid down additional conditions for the
grant of exemption and they will not have effect of denying the appellant the
benefit as it is not restrospective in effect and consequently it can not be
applied to the assessment years for which the exemption was sought. Learned
senior counsel invited our attention to the order passed by the High Court in
Writ Petition No. 1562 of 1982 which had directed the respondents to consider
the claim of the appellant in accordance with the terms and conditions of the
Government Order G.O. Ms. No. 2625 (Rev) dated 27.12.1976 and accordingly
the claim should have been settled in the light of the said Government Order.
He would further submit that the order passed in Writ Petition No. 1562 of
1982 has become final in so far as the parties were concerned since no appeal
had been filed against it and the principle of res judicata under Section 11
Explanation 4 of the C.P.C. is applicable to the present case and the
Government is precluded from relying on the basis of the G.O. Ms. No. 1834
dated 29.10.1983 which it did not bring to the notice of the Court during the
pendency of the writ petition.
Mr. S. Balakrishnan, learned senior counsel appearing for the
respondents, reiterated the contentions raised before the authorities and also of
the High Court and submitted that the appellant is not entitled to claim
exemption from payment of urban land tax on the basis of the order passed by
the Income Tax Authorities since the exemption claim made by the appellant
was only for the period 1965 to 1976 from payment of urban land tax and
whereas the Income Tax Department recognized the appellant as a public
charitable trust under Section 12A(a) of the Income Tax Act vide Order dated
29.4.1977 passed by the Income Tax Appellate Tribunal. He would further
submit that G.O.Ms. Nos. 1947, 2056 and 2625 were subsequently modified by
the respondents and that the appellant-Trust itself requested for the disposal of
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its application in terms of the judgment and order dated 18.4.1988 passed by
the learned single Judge of the High Court and thereafter the respondents asked
the appellant to make the fresh application along with audited statements.
Unfortunately, the subsequent G.O. Ms. No. 1834(Rev) dated 29.10.1983 was
not brought to the notice of the learned single Judge while disposing of writ
Petition No. 1562 of 1982. The authorities while considering the claim for
exemption as per the orders of the Court considered all the earlier G.Os and
G.O.Ms. No. 1834(Rev) dated 29.10.1983 and rejected the claim for exemption
made by the appellant. G.O. Ms. No. 1834(Rev) dated 29.10.1983 was already
in existence when the authorities considered the application on 4.10.1988 for
claim for exemption and rejected the same by a detailed order.
The contention of the learned senior counsel appearing for the appellant
that the criteria laid down in G.O. Ms. No. 2625 (Rev) dated 27.12.1976 alone
should have been taken into consideration and not the other G.Os has no force
since while construing the claim, after remand, the authorities are under
obligation to consider all the G.Os which are in existence at the time of
disposal of the application. Therefore, we hold that the authorities had rightly
applied the test in terms and conditions mentioned in G.O. Ms. No. 1834 dated
29.10.1983 to the case on hand. The only contention which was urged by the
learned senior counsel appearing for the appellant was that since the appellant-
Trust was recognized as a public charitable trust under Section 12A(a) of the
Income Tax Act, the appellant-Trust should have been granted exemption from
payment of urban land tax for the period 1965-1976. As already noticed the
said claim has no force since the income Tax Department has recognized the
appellant-Trust as a charitable Trust under Section 12A(a) of the Income Tax
Act only on 29.4.1977 and, therefore, the said order cannot be given
retrospective effect.
We have perused G.O.Ms. No. 2625 (Rev) dated 27.12.1976 passed by
the Government of Tamil Nadu which in turn refers to earlier G.O. Ms. 1947
Dated 17.9.1976 and G.O. Ms. No. 2056 (Rev) dated 4.10.1976. Clause (vi) of
the said G.O. is reproduced hereunder:
"In the G.O. first cited, Government have directed that total
exemption from payment of urban land tax be given to all
educational, religious, charitable and philanthropic institutions in
respect of vacant land and land on which buildings have been
constructed from which the institutions derive income which is being
used solely for their objectives and purposes, they have also directed
that urban land tax be reduced to 50% in respect of both vacant land
and land on which buildings have been constructed which belong to
community recreation centres, clubs and cine studios. These
concessions are operative with retrospective effect from 01.07.1975
and will be available only so long as the urban land is specifically
used for the purposes of the institutions concerned. If there is
violation in the use of or diversion of the income derived from the
urban land, the full urban land tax is to be levied as provided for in
the Act. If the institution concerned disposes of urban land by sale,
gift, etc. it has to pay the Government the entire amount of urban
land tax payable upto the date of such alienation. In the same G.O.
the Government have constituted an ’Empowered Committee’ for
the purpose of examining and making recommendations to the
Government regarding cases eligible for the above concessions.
These concessions will now be given with retrospective effect from
the Faslis from which such exemption has been prayed for by the
respective institutions provided that there will be granted as provided
for in the G.O. first cited on specific application to Government and
on the basis of the recommendation of the Empowered Committee."
It is seen from the above G.O. that the total exemption from payment of
urban land tax be given to all educational, religious charitable and
philanthropic institutions in respect of vacant land and land on which buildings
have been constructed from which the institutions derive income which is
being used solely for their objectives and purposes. The G.O. further
stipulates that if there is violation in the use of or diversion of the income
derived from the urban land, the full urban land tax is to be levied as provided
for in the Act. The G.O. further states that these concessions will now be given
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with retrospective effect from the Faslis from which such exemption has been
prayed for by the respective institutions provided there will be granted as
provided for in the G.O. first cited that is G.O. Ms. No. 1947 (Rev) dated
17.9.1976 on specific application to Government and on the basis of the
recommendation of the Empowered Committee.
Learned counsel appearing for the appellant fairly conceded that the
appellant-Trust have based their claim only on the basis of the Government
Order and of the order passed by the Income Tax Department and have not
made any specific application to the government before 29.9.1980. No earlier
application was ever produced either before the High Court or before this
Court. The recommendations of the Empowered Committee have also not
produced or placed before us. It is thus clear that the appellant-Trust is not
entitled to claim exemption from payment of Urban land Tax in the absence of
any prayer for such exemption by a specific application to the Government and
on the basis of the recommendation of the Empowered Committee.
As already noticed, the respondents while considering G.O. Ms. No.
1834 dated 29.10.1983 which was already in existence, the said G.O. in turn,
refers to five other Government Orders which are as follows:
1. G.O. Ms. No. 1947, Revenue dated 17.9.1976
2. G.O. Ms. No. 2625, Revenue dated 27.12.1976
3. G.O. Ms. No. 1803 Revenue dated 1.8.1978
4. Government letter No. 78025(a)/Ui/78-13 Revenue
Dated 24.9.1980
5. G.O. Ms. No. 461, Revenue dated 17.3.1983
The existing guidelines as per the above G.O. are as under:
1. The institutions should have been recognized as charitable and
exemption granted under Section 12A(a) of the Income Tax Act, 1961.
2. The institutions should spend at least 90% of its net income towards its
objectives and purposes, after deducting all the inevitable charges like
payment of local taxes, repairs and maintenance etc.
3. The institution should be a public trust and not a private trust.
The exemption committee constituted in G.O. Ms. No. 461, Revenue
dated 17.8.1983 felt that the existing norms for grant of exemption from urban
land tax needed some revision, since in the existing norms there is no ceiling
regarding the expenses on establishment to be deducted out of the income in
respect of religious institutions and trusts. They felt that the present norms
require the institution to spend 90% of the net income towards its objectives
which is on the high side and, therefore, the Government on the basis of the
recommendation of the Committee revised the norms and guidelines for grant
of exemption to the religious charitable trust etc.
In this context, it is useful to see the order dated 4.10.1988 passed by the
Commissioner and Secretary to the Government, Revenue Department. A
detailed order was passed by the Commissioner and Secretary to the
Government of T.N. It is useful to reproduce paragraph 3 of the said order
which reads as under:
"Section 29(k) of the Tamil Nadu Urban Land Tax Act, 1966 provides
for grant of exemption to any Urban land actually used for religious,
charitable or philanthropic purposes by such religious, charitable or
philanthropic institutions but not including any Urban Land owned by
such institutions and (i) which is vacant or (ii) in which buildings,
from which income is derived, have been constructed. While
examining the instant case with reference to above Section, it is seen
that the trust owns 62 grounds and 2243 sq. ft. of Urban lands in
Tondiarpet, T. Nagar and Thiruvottiyur Villages. The whole extent is
assessed to Urban Land tax, for which it has sought exemption. The
Urban lands in Tondiarpet Village are used for running cinema
theatre, saw mill, godown etc. and the lands in T.Nagar and
Thiruvottiyur villages are used as residential buildings. The
objectives of the Trust, according to the trust deed, are as follows:
i) to establish, conduct and maintain residential and non-
residential schools, colleges and other institutions for
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imparting general, technical, vocational, professional
and/other kinds of education and training for the welfare
of the general public.
ii) to provide scholarships for the benefits of students and to
make donations and grants to other institutions for the
benefit of students and scholars and in furtherance of
education and
iii) such other things.
It is obvious from the above, that the buildings are not used for
the objective of the trust. The trust is not running any
educational institution in accordance with its objectives. It has
not also furnished any evidence to show that it is providing
scholarships for the benefits of students. In view of this, the
lands which are used as Cinema theatre, saw mill, godowns, let
out for residential and commercial purposes do not deserve
exemption under Section 29(k) of the Act."
It was further observed,
"The grant of exemption under section 27(1) is obligatory and not
mandatory, and it is a matter of Governmental discretion governed
by reasonable guidelines issued by the Government. Accordingly,
the Government have issued executive instructions in G.O.(Ms)
No.1947, Revenue dated 17.9.1976 and in G.O.(Ms) No. 2625,
Revenue dated 27.12.1976 for the grant of exemption under section
27(1) of the Act in respect of the vacant lands and the lands on
which buildings have been constructed from which the Charities,
philanthropic and Educational Institutions derive income which is
being used solely for the objectives of and purposes of such
institutions but subject to the conditions that such concessions will
be granted on specific application to Government. The Government
in G.O.Ms.No.1834, Revenue, dated 29-10-1983, have also
prescribed certain norms and conditions for grant of exemption
under Section 27(1) of the Act."
The paragraphs 5 & 6 of the order read as under:
"While examining the case, with the available particulars already
furnished by the Trust, it is considered that the trust is not eligible
for grant of exemption for the following reasons:-
i) The trust has not satisfied the main norms that it has to spend
90% of its income for its objectives and purposes during the
years 1976-77, 1977-78 and 1978-79 it has spent only 9.9%,
49.5% its net income for its objectives.
ii) The whole extent of the lands are used for commercial and
residential purposes. No piece of land is used for the
charitable purpose. Further it has not produced any evidence
to show that the income is spent for the objectives and
purposes of the Trust.
iii) Though the Trust has satisfied one of the norms that it has
been recognized as a charitable institution under Section
12a(a) of the Income Tax Act, 1961 it has no binding force to
exempt the lands owned by the Trust from the provisions of
the Urban Land Tax Act also.
iv) Further the lands owned by the Trust are not eligible for grant
of exemption under Section 29(K) of the Act since the
buildings are used as Cinema Theatre, Saw Mills, Godowns
and let out for commercial/residential purposes.
v) The Trust is also not eligible for grant of exemption Under
Section 27(1) (Hardship clause) of the Act, because the lands
are used for running cinema theatre, saw mill, godowns and
let out for commercial/residential purposes and it derives a
large income from the lands. Hence it has no undue hardship
to pay the tax.
In the circumstances stated above, the Government have decided that
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the Agasthyar Trust is not eligible for grant of exemption from the
payment of urban land tax in accordance with the Tamil Nadu Urban
Land Tax Act, 1966, and the existing executive orders. Your
exemption petitioner is accordingly rejected."
Aggrieved by the above order, the appellant preferred writ petition
before the High Court to quash the above order dated 4.10.1988 and to direct
the respondents herein to grant exemption from payment under Section 27 of
the Act in respect of the urban land held by the Trust. The said writ petition
was dismissed by a detailed order passed by the learned single Judge which
was affirmed by the Division Bench of the High Court in W.A.No. 1190 of
1999. The order passed by the Division Bench of the High Court reads as
under:
"Heard both sides. In an enquiry initiated at the instance of the
appellant, who has claimed exemption from payment of Urban Land
Tax it has been found that the appellant does not satisfy the guidelines
mentioned in G.O.Ms.No.1843 Revenue dated 29-10-1983 for claiming
exemption as prayed for. It has been found that the appellant trust does
not satisfy the claim that it has to spend 90% of its income for charitable
purposes. It has only spent 9.9% and 49.5% of its net income for the
said objectives. Inter alia it has further been found that the whole extent
of the lands of the appellant are used for running cinema theatre, saw
mill, godowns the same are let out for commercialized residential
purposes and they truly derives a large income from the lands and no
piece of land is used for charitable purposes. Moreover no evidence has
been produced by the appellant to show that the income of the trust is
spent for the charitable purposes. The aforesaid finding of the 1st
respondent has been affirmed by the learned single Judge in the writ
petition. We do not find any irregularity or illegality in the finding of
the learned single Judge and the same does not call for any interference
in the present appeal. Present appeal, in the circumstances, is dismissed.
Consequently, C.M.P. No. 11716/99 is also dismissed."
We have also perused the grounds of appeal filed in W.A. No. 1190 of
1999. The appellant has not raised any ground in the writ appeal that G.O. Ms.
No. 1834 dated 29.10.1983 is not at all applicable to the present case and the
Government is precluded from relying on the said G.O. The said ground is
taken for the first time only in this Court saying that the entitlement from
exemption should have been decided in accordance with law that existed in the
assessment year for which the exemption was sought and not in accordance
with any subsequent Government Order.
Ground No. 12 taken in the writ appeal needs special mention in this
context which reads as follows:
"In any event, the learned judge ought to have permitted the
appellant to satisfy the requirements of G.O. Ms. 1834 Revenue
dated 29.10.1983 as submitted as an alternative prayer by the
appellant’s counsel during the course of his arguments."
In the matter of exemption, under the provisions of Tamil Nadu Land Tax
Act, there is a marked difference between Sections 27 and 29 of the Act.
Sections 27 and 29 of the Act read as under:
27. Power of Government to exempt or reduce urban land tax.-
(1) The Government, if satisfied that the payment of urban land tax
in respect of any class of urban lands or by any class of persons will
cause undue hardship, they may, subject to such rules as may be
made in this behalf, by order-
(a) exempt such lands or persons from the payment of the urban land
tax; or
(b) reduce the amount of such urban land tax whether prospectively
or retrospectively.
(2) The Government may at any time cancel or modify any order
issued under sub-section (1) and upon such cancellation or
modification, the entire amount of urban land tax, or the amount of
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urban land tax due under the modified order, as the case may, shall
be payable in respect of the land concerned with effect from the fasli
year in which such cancellation or modification is made:
Provided that no such cancellation or modification shall be
made unless the party likely to be affected by such cancellation or
modification has had a reasonable opportunity of making his
representations.
29. Exemptions.- Nothing in this Act shall apply to-
(a) any urban land owned by the State or the Central Government;
(b) any urban land owned by \026
(i) the Corporation of Madras;
(ii) a Municipal Council constituted under the Tamil Nadu District
Municipalities Act, 1920 (Tamil Nadu Act V of 1920);
(iii) A Township Committee constituted under the Mettur Township
Act, 1940, (Tamil Nadu Act XI of 1940) the Courtallam Township
Act, 1954 (Tamil Nadu Act XVI of 1954), the Bhavanisagar
Township Act, 1954, (Tamil Nadu Act XXV of 1954) or section 4 of
the Tamil Nadu Panchayats Act, 1958 (Tamil Nadu Act XXXV of
1958) or under any other law for the time being in force.
(iv) a Panchayat or Panchayat Union Council constituted under any
law for the time being in force;
(c) any urban land owned by a religious institution, which is set apart
for public worship and is actually so used, including any urban land
owned by such institution and which is appurtenant thereto but not
including any urban land owned by such institution and \026
(i) which is vacant, or
(ii) in which buildings from which income is derived have been
constructed;
(d) (i) any urban land on which hospitals maintained by \026
(a) the Government, any local authority or such other authority
specified by the Government in this behalf; or
(b) by any private institution which is in receipt of grant either from
the Central Government or from the State Government;
have been constructed and any urban land appurtenant to such
hospitals; or
(ii) any urban land used for purposes directly connected with such
hospitals, but not including any urban land \026
(a) which is vacant, or
(b) in which buildings, from which income is derived have been
constructed.
Explanation.- For the removal of doubts, it is hereby declared that
the urban land on which staff quarters including nurses quarters or
any other buildings directly connected with the purposes of the said
hospitals have been constructed shall be deemed to be urban land
used for purposes directly connected with the said hospitals;
(e) any urban land solely used for purposes connected with the
disposal of the dead;
(f) roads or urban lands used for communal purposes;
(g) any urban land used for public purposes, provided that no rent is
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charged for, or no remuneration is derived from, such user;
(h) any urban land used by schools, colleges or universities for
purposes directly connected with education, but not including any
urban land owned by such educational institutions and \026
(i) which is vacant, or
(ii) in which buildings from which income is derived have been
constructed.
Explanation I.- For the purposes of this clause, schools or colleges
shall mean only such schools or colleges which are educational
institutions recognized either by the Government or by any
University, as the case may be.
Explanation II.- For the removal of doubts, it is hereby declared
that the urban land on which schools, colleges or universities or staff
quarters or hostels or other buildings used for the welfare of the
students, have been constructed, or used as playgrounds attached to
such schools, colleges or universities, shall be deemed to be urban
land used for the purposes directly connected with education;
(i) any urban land used for public parks, public libraries and public
museums;
(j) any urban land used \026
(i) for charitable purposes of sheltering destitute persons or animals;
(ii) for orphanages, homes and schools for the deaf and dumb and for
the infirm and diseased;
(iii) for asylum for the aged and for fallen women;
(k) subject to the provisions of this section, any urban land actually
used for religious, charitable or philanthropic purposes by such
religious, charitable or philanthropic institutions, as the Government
may, by notification, specify, but not including any urban land
owned by such institutions and \026
(i) which is vacant, or
(ii) in which buildings from which income is derived have been
constructed;
(l) any urban land used for the preservation of ancient monuments."
While under Section 29, the exemption is granted by the statute itself
and is automatic in respect of the urban lands owned by the authorities or
institutions referred to therein, the exemption under Section 27 is not so. For
exemption under Section 27, power is vested with the State Government to
exempt the lands or persons from payment of tax "if the Government is
satisfied that the payment of urban land tax \005\005would cause undue hardship".
Such power can be exercised by the Government only on specific application
by the person or institution seeking exemption and on placing satisfactory
material for exercise of such power. The exemption under Section 27 is not a
matter of right and does not follow as a matter of course.
No other contention was raised. There is absolutely no merit in the civil
appeals. The appellant is not entitled to exemption from payment of urban
land tax during the period 1965-1976 as prayed for.
The appeals are accordingly dismissed. No costs.