Ad Tax Cannot Be Imposed On Educational Institutions For Putting Up Non-Commercial Signages On Their Property: Karnataka High Court

The Karnataka High Court has set aside an advertisement tax demand notice issued by the Bruhat Bengaluru Mahanagara Palike (BBMP) to an educational institution for displaying non-commercial signage and boards on its own property.Justice Sachin Shankar Magadum held thus while allowing the petition filed by BS Gupta, Secretary of Gupta Education Trust, who had challenged the legality/validity of the order issued by BBMP, under Section 134 of the Karnataka Municipal Corporation Act, 1976. The court said “This Court is of the view that power to levy advertisement tax under Section 134 of the Act must be strictly confined to displays that fall within the statutory definition of advertisement under the above said section, which necessitates a commercial or promotional character. The signage in question or hoardings being a non-commercial institutional identifier does not meet this threshold.” It added “However, if the Corporation is of the view that signage of a particular size or form affects the urban landscape or public aesthetics, it is always open to the Corporation to frame uniform, reasonable and non arbitrary regulatory policies in exercise of its planning or building control establishments.”BackgroundThe petitioner is a registered educational institution engaged in imparting education through its college. Gupta Education Trust is a charitable trust and is offering PU courses in Commerce and Science, and degree courses in B.Com and B.BA disciplines and a PG course in M.Com. The building where this institution runs the courses is used for educational purposes, and no commercial activities are undertaken in the said building. Challenging the demand notice on the ground that it is a charitable and non-commercial institution, not engaged in any form of commercial advertising as contemplated under the relevant taxing provisions. It was contended that the levy of advertisement tax on such an institution is ultra vires, amounts to an unreasonable fiscal burden, and is not envisaged under the statutory scheme of the Act. Moreover, the tax demand is without jurisdiction, misconceived and violative of Article 14 and 19(1)(g) of the Constitution of India.The corporation submitted that the impugned orders are legally sustainable, having been passed in accordance with law. Reliance was placed on Section 134 of the Act to contend that the Corporation is duly empowered to levy tax on advertisements, including signage and hoardings. Since the petitioner-institution had erected hoardings and display boards without obtaining prior permission from the Corporation, and therefore, the levy of advertisement tax is justified and in consonance with the statutory provisions. The bench referred to Section 134 of the Act, which empowers the Corporation to levy tax on those entities where the essence of advertisement is to promote or bring to notice for commercial advantage. It then said “The object of establishing educational institutions is charitable and not commercial. A plain reading of Section 134 suggests that legislative intent behind the imposition of tax, commercial or promotional advertisements, particularly those aimed at attracting public attention for commercial benefit.” Court noted that in the present case, the signage and boards displayed by the petitioner/institution are fixed on the property owned and possessed by the petitioner/institution and these hoardings are meant purely for institutional identification and providing directions to students, parents and staff devoid of any promotional or commercial messaging encouraging profit oriented activity. The court thus said, “The placement of signage and hoardings on the college building does not display any promotional content, advertisement of third party goods or services or inducement to the public to avail any trade offering. The placement of signage on the college building being part and parcel of the institution's physical infrastructure is not intended to solicit business.” Following this it held “Such signage lacks the essential character of an advertisement as defined under Rule 2A(1) of the BBMP Advertisement Bye-laws 2006. Therefore, in absence of any commercial or promotional content, the said signage cannot be subjected to advertisement tax under Section 134 of the Act.” It added “In this case, no provision under the Act clearly brings such non-commercial educational signage within the ambit of taxation. The respondent/Corporation has not placed on record any material to show that signage in question is in the nature of commercial promotion or carries any element of inducement. Even assuming that the respondent/Corporation has reservations regarding the size, placement or aesthetic aspects of the signage affixed to the petitioner's college building or hoardings erected on top of the educational institution, such concern pertains to the regulatory domain rather than taxing power of the Corporation.” Accordingly, it allowed the petition and...

Ad Tax Cannot Be Imposed On Educational Institutions For Putting Up Non-Commercial Signages On Their Property: Karnataka High Court

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