Charitable trusts must prove each year that school buildings serve a public charitable purpose to claim property-tax exemption, Bombay High Court rules

Petitioner No. 1, a public charitable trust, operated primary, secondary, junior-college and commerce-college institutions on a common campus in Pimpri.

It claimed exemption from municipal property tax under Section 132(1)(b) of the Maharashtra Municipal Corporations Act, 1949, relying, among other things, on a 1991 “No Tax Due” certificate and asserting that the premises were used solely for education and charitable purposes.

PCMC raised property-tax demands, including arrears, and by an order dated 10 January 2012 rejected the Trust’s objections and its claim to exemption.

The Trust sought to quash that order and subsequent demands; interim protection against coercive action was granted in 2012, and the Petition was amended in 2023 to challenge later demands and an attachment notice.

PCMC opposed the Petition, including on the grounds that exemption was not automatic, had to be established for the relevant period, and an appeal was available under Section 406.

Whether the Trust’s buildings and lands, used to operate educational institutions, qualified for exemption from general property tax as property “solely occupied and used for a public charitable purpose” under Section 132(1)(b).

Whether the Trust was entitled to a continuing or blanket exemption, or instead had to establish eligibility for each relevant assessment year.

Section 132(1)(b) of the Maharashtra Municipal Corporations Act, 1949 exempts buildings, lands or portions thereof that are solely occupied and used for public charitable purposes; under Section 132(2), property in which trade or business is carried on, or from which rent is derived, is not treated as so occupied and used.

“Charitable purpose” is informed by Section 9 of the Maharashtra Public Trusts Act, 1950, which includes education.

The exemption is not automatic merely because a trust runs an educational institution: the claimant must establish that the relevant property is solely used for a public charitable purpose, and the claim is assessed on the facts and material for the relevant period.

In Municipal Corporation of Delhi v. Children Book Trust, (1992) 3 SCC 390, the Supreme Court held that education is not charitable per se where carried on with a profit motive; public benefit or philanthropy must be present.

The Bombay High Court treated that decision as distinguishable in its application because of the different statutory and regulatory scheme, while relying on its discussion of the charitable character of education.

The Court also relied on Sindhu Educational Trust v. State of Maharashtra, W.P. No. 2886 of 2013, for the proposition that entitlement under Section 132 depends on the particular facts and use of the property, and that collection of fees alone does not necessarily defeat exemption.

The Court held that operating a school, or being registered as a public trust, did not by itself establish that the campus was used for a public charitable purpose.

The Trust had to demonstrate, with appropriate material, that the property was solely occupied and used for that purpose; a claim could not be granted permanently or in a blanket manner, but had to be considered for each relevant year.

Although Children Book Trust arose under a different statutory framework, its reasoning supported the need to distinguish education conducted for public benefit from education conducted with a profit motive.

On the pleadings before it, the Court found that the Trust had not established the required basis for exemption and had not pursued a year-specific claim supported by appropriate material.

It therefore declined to interfere with the impugned demand and order.

It dismissed the Writ Petition, discharged the Rule and vacated the interim order.

The Trust was permitted to apply to PCMC for exemption for future years, supported by appropriate material.