'Not Providing Free Medical Relief': Kerala High Court Dismisses Lisie Hospital's Plea Seeking Building Tax Exemption

The Kerala High Court recently dismissed the Appeal preferred by Lisie Hospital, claiming building tax exemption in respect of one of its buildings constructed in the year 2013. The Apex Court in February 2023, had remanded the matter to the High Court for decision on the factual aspects of the case, after clarifying that the term 'charitable purposes' in Section 3(1) of the Kerala Building Tax Act (hereinafter, 'the Act') would not be limited to "free medical relief" alone. Lisie Hospital had sought tax exemption relying on tax exemption for 'buildings used principally for religious, charitable or educational purposes or as factories or workshops'.The Division Bench comprising Justice A.K. Jayasankaran Nambiar and Justice Mohammed Nias C.P. in the writ appeal before it, found that the building in question was not used 'principally' for providing free medical relief for inclusion under the definition of 'charitable purpose'. "...we find that it is not in dispute that the building of the appellant was not principally used for providing free medical relief as required under the statutory provision for inclusion under the definition of charitable purpose. It is also not the case of the appellant that it rendered in the said building, any of the other services that qualify as charitable purpose under Section 3 of the Act. We therefore cannot see how the appellant’s building would qualify for the exemption under Section 3 of the Act in respect of the medical relief provided in the building in question," the Court observed. The Bench added that even a liberal and expansive interpretation of the term 'charitable purpose' could also not be adopted since the hospital had expended only 4.23% and 4.56% of its total income for the years 2013-14 and 2014-15 towards free medical relief, which "cannot be seen as substantial in any sense of the term". Factual BackgroundLisie Hospital was served with a notice demanding building tax under the Act, in respect of a building constructed by it in 2013, wherein it was providing medical treatment at concessional rates. On a reference made to the Government as per Section 3(1) of the Act to ascertain as to whether the said building would qualify for tax exemption, it was held that building would not be eligible for tax exemption. The Government reasoned in its Order dated March 17, 2016, that when read with Explanation 1 to Section 3(1) of the Act which stipulates that exemption in respect of buildings used for charitable purpose would include relief of the poor and free medical relief, the building under consideration did not satisfy the said purpose. The Government also examined the income-expense statement of the appellant’s institution and found that only a nominal amount was spent for charitable purposes. When the Government Order was appealed against by the appellant before the Supreme Court, the Court dismissed the plea, in SH Medical Centre Hospital vs State Of Kerala & Ors (2014) 11 SCC 381 to the extent it held that ‘charitable purpose’ meant only ‘relief of the poor and free medical relief’. An earlier Division Bench of the High Court had denied building tax exemption to Lisie Medical Institutions on the ground that they were not providing medical services for free.In 2017, when a further appeal was preferred before the Supreme Court, a two-judge bench doubted the decision in SH Medical Center (Supra) and referred to a three-judge bench for an authoritative pronouncement. The referring Bench took the view on the ground that the Explanation to the provision merely clarified that "relief to the poor and free medical relief" was only one of the facets of charitable purpose, and that the use of the word 'includes' in the Explanation indicated that there could be other facets of charitable purposes as well. The 3 Judge Bench on February 9, 2023, held that while the building would have to 'principally' be used for the charitable purposes in order to qualify for the exemption contemplated under Section 3(1) of the Act, the meaning of the term 'charitable purposes', would not be limited to free medical relief."Undoubtedly, Section 3(1) provides that nothing in the act shall apply to buildings which are used principally for specific purposes, including among them, charitable purposes. The Explanation shows that charitable purpose includes and is therefore not confined to relief of poor and free medical relief. Consequently, the decision in SH Medical to the extent of the interpretation of Explanation 1 of Section 3 does not correctly reflect the position of law," the Supreme Court had held while overruling the SH Medical Centre Case (Supra) to that extent. It however, remanded the matter to the High Court, not having embarked upon any of the factual aspects in the matter. Arguments RaisedIt was contended by Advocates Issac M. Perumpillil and Jijo Paul Kallookkaran on behalf of the appellant that the appellant’s building would qualify for exemption since the principal use of it...

'Not Providing Free Medical Relief': Kerala High Court Dismisses Lisie Hospital's Plea Seeking Building Tax Exemption

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