MIDC industrial plots remain exempt from municipal property tax while MIDC provides infrastructure amenities.

The petitioners, an association of industrial unit-holders and individual allottees, occupied leasehold plots in the Badlapur MIDC Industrial Area and paid service charges to the Maharashtra Industrial Development Corporation (“MIDC”) for infrastructure and amenities.

The Kulgaon-Badlapur Municipal Council (“KBMC”) had historically levied property tax on the industrial units on a rateable-value basis. In 2014, KBMC surveyed the area and issued special notices dated 28 November 2015 under Sections 119 and 124 of the Maharashtra Municipal Councils, Nagar Panchayats and Industrial Townships Act, 1965, proposing assessment on a capital-value basis.

Although the petitioners filed objections and were heard, KBMC allegedly did not decide the objections before issuing tax bills and taking coercive recovery steps.

The petitioners challenged the notices, capital-value assessments and KBMC’s jurisdiction to levy property tax, relying on Section 159A read with Clause 7 of the First Schedule to the Maharashtra Regional and Town Planning Act, 1966 (“MRTP Act”).

During the proceedings, a coordinate Bench directed the Urban Development Department to consider the parties’ representations, but the direction was allegedly not complied with, leading to the contempt petition.

The petitioners subsequently relied on the Supreme Court’s decision in Small Scale Entrepreneurs Association & Ors. v. State of Maharashtra & Ors. , Civil Appeal No. 7318 of 2010, decided on 27 May 2026, concerning the applicability of the exemption under Clause 7(1) of the First Schedule to the MRTP Act.

Whether KBMC could levy and recover property tax from industrial units situated on MIDC leasehold plots while MIDC continued to provide the relevant infrastructure and amenities and collect service charges.

Whether the exemption under Section 159A read with Clause 7(1) of the First Schedule to the MRTP Act extended only to MIDC or also to industrial unit-holders and plot allottees occupying MIDC land.

Whether the impugned special notices and tax demands issued on a capital-value basis could be sustained without a determination of the facilities allegedly provided by KBMC or an arrangement between KBMC and MIDC.

Whether contempt proceedings should continue in view of the disposal of the writ petition.

The Court applied Section 159A of the MRTP Act and Clause 7(1) of its First Schedule, under which lands and buildings belonging to or vested in a relevant authority such as MIDC, including buildings constructed on such land, are exempt from taxation by local authorities while the relevant authority provides the amenities and facilities ordinarily supplied by the local authority.

Relying on the Supreme Court’s decision in Small Scale Entrepreneurs Association & Ors. v. State of Maharashtra & Ors. , the Court held that the exemption extends not only to MIDC but also to persons holding plots or units within the MIDC area, since ownership of the land remains vested in MIDC.

The exemption is conditional and continues only so long as MIDC provides the relevant infrastructure and amenities; it ceases, wholly or area-wise, when those responsibilities are handed over to the municipal authority, which may thereafter levy property tax in accordance with law.

The Court also considered the Maharashtra Municipal Councils, Nagar Panchayats and Industrial Townships Act, 1965, under which KBMC had issued the impugned notices and assessments.

The Court treated the Supreme Court’s interpretation of Clause 7(1) as governing the dispute. Because the petitioners’ plots were held under MIDC leases and MIDC continued to provide infrastructure and collect service charges, the statutory exemption prima facie extended to the petitioners’ industrial units and not merely to MIDC itself.

KBMC could claim taxation only by demonstrating that it had assumed responsibility for particular facilities and amenities within the Badlapur MIDC area.

In that event, KBMC and MIDC were required to undertake an appropriate arrangement or agreement concerning the facilities provided and the legally permissible contribution or tax.

In the absence of such an arrangement or a legally established transfer of responsibility, the impugned demands directly raised against the petitioners’ units could not be sustained.

The Court left open KBMC’s right to conduct an appropriate exercise regarding facilities actually provided by it and to enter into an agreement with MIDC if circumstances warranted.

Since the writ petition itself was disposed of on this basis, the Court found no reason to continue the contempt proceedings.

KBMC was permitted to examine what facilities, if any, it provided in the MIDC area and to enter into an appropriate agreement with MIDC for lawful taxation or contributions; the parties’ contentions on that issue were expressly kept open.

The writ petition was disposed of without costs, and the contempt petition was also disposed of as unnecessary.