Karnataka HC Gives Trust Chance to Substantiate Panchayat-Tax Exemption Claim Under Charity Rules for Its Educational Buildings

Mangala Charitable Trust challenged a Grama Panchayat order and property-tax demand notice in a writ petition.

The Single Judge, relying on *Navodaya Education Trust v. Commissioner, City Municipal Council*, quashed both. The Panchayat appealed, arguing that the exemption provisions under the Karnataka Grama Swaraj and Panchayat Raj Act, 1993 and the Karnataka Panchayat Raj (Grama Panchayat Taxes and Fees) Rules, 1994 differ from those considered in *Navodaya Education Trust*.

The Trust maintained that the buildings were used for educational purposes and relied on *Indus Trust* and *T.M.A. Pai Foundation*.

Section 199(1) of the Karnataka Grama Swaraj and Panchayat Raj Act, 1993 provides for taxation of buildings and lands by Grama Panchayats; Rule 3 of the Karnataka Panchayat Raj (Grama Panchayat Taxes and Fees) Rules, 1994 prescribes the procedure for levying such taxes.

Rule 6(c) exempts buildings and lands “used solely for charitable or public religious purposes and not let out for rent”; educational use is not independently specified as an exempt category.

The Court distinguished *Navodaya Education Trust* because it concerned Section 94 of the Karnataka Municipalities Act, 1964, under which the relevant exemption provisions differ.

It noted the Trust’s reliance on *Indus Trust* and *T.M.A. Pai Foundation*, but did not decide their application to the facts.

The Court held that the exemption applicable to Grama Panchayat taxation is governed by the specific terms of Rule 6(c), rather than the provisions considered in *Navodaya Education Trust*.

The record showed that the Trust had not produced material before the Panchayat or the Appellate Authority establishing that the properties were used solely for charitable or public religious purposes and were not let out for rent.

Accordingly, the exemption question required consideration under the 1994 Rules, and the existing demand notice could be treated as a show-cause notice to permit the Trust to submit evidence and be heard.

The Trust was permitted to file a reply with supporting documents and make oral submissions, after which the Grama Panchayat was directed to decide its exemption claim under the 1994 Rules within three months of receiving a certified copy of the judgment. Any tax paid in excess was to be adjusted appropriately.