'No Legitimate Expectation': Kerala High Court Dismisses Private Bus Operators' Plea For Extension Of Tax Exemption Granted During Covid-19

The Kerala High Court on Wednesday dismissed a batch of petitions moved by private bus operators seeking an extension of the tax exemption granted to them owing to the Covid-19 pandemic in 2020-2021. 

"Since exemption from payment of tax was granted for reasonable periods, it cannot be said that despite the restrictions and regulations brought in due to Covid-19 pandemic, the Government had not considered the plight of the stage carriage operators and contract carriage operators."

Justice Bechu Kurian Thomas also dismissed the argument for the extension of tax exemption made on the basis of the doctrine of legitimate expectation.

"Further, the concept of legitimate expectation cannot be extended or stretched to assume that as and when a restriction is brought in, the Government should immediately order tax exemption. The grant of tax exemption for one quarter or more than one quarter of a year, cannot also give rise to a legitimate expectation that for every quarter of the year or for periods beyond that, the exemption will be extended." 

The Court was adjudicating upon a batch of petitions filed by owners of stage carriages and contract carriages claiming the benefit of exemption from payment of tax for the period affected by the restrictions and regulations imposed due to the Covid-19 pandemic, from July 1, 2021, to March 31, 2022.

Appearing through Advocates K.V Gopinathan Nair, G Hariharan, OD Sivadas, and Dinesh Menon, the petitioners pointed out that the lack of government support for private stage carriage operators has caused their numbers to decline from 34,000 in 2016 to 12,000 in 2021. Advocate Stalin P Davis appeared for the impleading respondents who supported the petitioners' case.

Senior Government Pleader Thushara James appeared on behalf of the respondents and resisted the petitions. 

The Court accepted that while the government-run or aided public transportation could withstand the perils of the pandemic to a large measure, the privately run public transportation system could not bear the economic brunt of the circumstances. However, the Single Judge opined that although unprecedented situations warrant extraordinary actions, in the matter of taxation, the Court must go strictly by the letter of law while interpreting a statute.

The Bench went through the relevant provisions of the Kerala Motor Vehicles Taxation Act, 1976 and interpreted the following provisions as such:

As per Section 3, the burden of tax is not necessarily on the use of the vehicle on the roads, but the liability falls even on vehicles kept ready for use on roads. Therefore, petitioners cannot claim any benefit for non-payment of tax merely on the ground of restrictions and regulations imposed due to the pandemic.

As per Section 5, if the previous intimation is given about the non-use of the vehicle for a minimum of one month in a quarter, it shall be deemed that the vehicle is not used or kept ready for use in the State. None of the petitioners claimed the benefit of section 5 for the periods in question.

Under Section 22, the Government has the power, in public interest, to make an exemption or reduction in the rate of tax, either prospectively or retrospectively. Out of a period of 15 months within the pandemic, absolute or total exemption from tax was granted for 12 months. Therefore, it cannot be said that the Government had not considered the plight of the petitioners.

Moreover, the Court held that the grant of exemption from tax is a matter to be decided based on policy.

"Even if circumstances existed similar to those for the period during which exemption was granted, that will not confer a right to obtain an exemption from tax for other periods. No semblance of arbitrariness or unreasonableness is reflected in the manner of grant or denial of tax exemption." 

As such, the petitions were dismissed. 

Case Title: Vakiyath Koya & Ors. v State of Kerala & Ors. 

Citation: 2022 LiveLaw (Ker) 230

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