Kerala Municipality Act | Property Tax To Be Paid Only From Date Of Issuance Of Occupancy Certificate: High Court

The Kerala High Court recently held that property tax is liable to be paid only from the period of issuance of the occupancy certificate, and not prior to the same. 

The Court reasoned that since tax can only be levied on a building which becomes capable of being used for residential purposes as per Section 233 (2)(a) of the Kerala Municipality Act, 1994, and since it is only on the issuance of occupancy certificate that a building would get numbered and get electricity, water, and gas, tax would hence be leviable from the date of issuance of such certificate. 

Section 233 provides for 'Property Tax', and sub-section (2)(a) defines the buildings on which the property tax can be levied. 

"If subsection 2 (a) of Section 233 is read in proper perspective, it could mean that the tax can be levied on the building which becomes capable of use for residential purposes or other purposes which is defined under Subsection 2(a). It is not in dispute that without occupancy certificate, the building would not get numbered and electricity, water and gas connections would not be provided to such building. If these facilities are not provided, the building does not become capable of being used for residential purposes or other purposes as defined in Subsection 2(a)," the Single Judge Bench of Justice Dinesh Kumar Singh observed.

The petitioner in this case had been issued the completion certificate for his multi-storied building on February 19, 2015, while the occupancy certificate was issued only on December 1, 2017 by the Municipal Corporation. Meanwhile, demand notices for regarding property tax was issued to the petitioner for the period October 1, 2014 to February 28, 2017. 

It is the petitioner's case that he is not liable to pay property tax for the period before the issuance of the occupancy certificate. The petitioner averred that a building could be used for residential purposes only when it has been numbered and the water and electricity connections have been provided. He thus submitted that the building would not become fit for residential purpose until the issuance of occupancy certificate, and levy of tax prior to the issuance of the same would defeat the very scheme of the Act. The petitioner also relied upon a Government Order which stated that the levy of property tax ought to be from the date of issuance of the occupancy certificate.

On the other hand, it was argued by the counsel for the respondent that the petitioner himself had delayed the issuance of the occupancy certificate. The counsel submitted that the building became fit for use after completion of its construction and the issuance of the completion certificate. The respondent averred that the construction of the building was completed in the year 2015, but the fire NOC was submitted by the petitioner in the year 2016, due to which the occupancy certificate could only be issued in 2017. It was thus submitted that the petitioner could not take advantage of his own wrong by complaining about the delay in receiving the occupancy certificate. 

The Court, on perusing Section 233(2) of the Act, 1994, noted that apart from a bald allegation that the petitioner himself was responsible for the delayed issuance of the occupancy certificate, no proper pleadings had been made by the Municipality on the matter. 

The Court stated that if the delay in issuance of the Fire NOC was because of the Government department, the petitioner could not be blamed for the same. It noted that this aspect had not been addressed by the respondents in their submissions, as to the date of the fire NOC and when it had been submitted before the Municipality for issuance of the occupancy certificate.

"In view thereof, I am of the opinion that the petitioner is liable to pay the tax for the period after issuance of the occupancy certificate and not prior to the said date, the present writ petition to that extent is allowed. The Municipality is entitled to recover the tax from the date of issuance of the occupancy certificate," the Court held, while allowing the plea, and setting aside the impugned demand notices. 

Counsel for the petitioner: Advocates K.I. Mayankutty Mather, R. Jaikrishna, and Narayani Harikrishnan

Counsel for the respondents: Advocates Bindumol Joseph, and B.S. Syamanthak

Citation: 2023 LiveLaw (Ker) 470 

Case Title: M. Baiju v. The Secretary, Kozhikode Municipal Corporation & Anr. 

Case Number: W.P. (C) No. 41735/ 2018

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