'Charitable Purpose' Not Limited To 'Free Medical Relief' : Supreme Court On Kerala Building Tax Exemption; Overrules 2014 Judgment

In a notable verdict, the Supreme Court on Thursday held that the meaning of the term "charitable purposes" used in the Kerala Building Tax Act 1975 is not limited to free medical relief.A 3-judge bench comprising Chief Justice of India DY Chandrachud, Justices PS Narasimha and Justice JB Pardiwala overruled the judgment delivered by a 2-judge bench 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’.Based on the verdict in SH Medical Centre, the Kerala High Court had denied building tax exemption to Lisie Medical Institutions on the ground that they were not providing medical services for free. Challenging the High Court's judgment, Lisie approached the Supreme Court. In 2017, a two-judge bench doubted the decision in SH Medical Center and referred to a three-judge bench for an authoritative pronouncement.Section 3(1) of the Kerala Building Tax Act 1975 states that the Act does not apply to "buildings used principally for religious, charitable or educational purposes or as factories or workshops." The provision also provides for an explanation which states–"For the purposes of this sub-section, “charitable purpose” includes relief of the poor and free medical relief."Hearing the reference today, the bench led by the CJI noted that the explanation uses the word "includes" and hence it cannot be regarded as an exhaustive definition."When a statute uses the word "includes", it is a well settled principle of interpretation that the definition is not intended to be exhaustive", the bench observed in the order.The CJI-led bench further noted that the 2-judge bench in SH Medical Centre construed the explanation to Section 3(1) to mean that "charitable purpose" is confined only to relief of the poor and free medical relief. "This observation of the two judge bench in SH Medical Centre Hospital would not afford with the plain meaning of the Explanation to Section 3(1)", the bench observed.The bench further added in the order :"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. We clarify that the decision in SH Medical Centre is overruled to the above extent".However, the bench clarified that the other findings in SH Medical Centre is not touched upon. On factual aspects, the Top Court did not make any pronouncement and remanded the matter to the High Court which had earlier dismissed the appellant's petition solely relying on SH Medical Centre.Senior Advocate R Basant appeared for the appellant and Senior Advocate V Giri appeared for the State.Case : Lisie Medical Institutes vs State of Kerala C.A. No. 6799/2017Citation : 2023 LiveLaw (SC) 118Kerala Building Tax Act 1975 -Explanation to Section 3(1)- 'Charitable purpose' not limited to 'free medical relief'- The Explanation goes to indicate that ‘charitable purposes’ includes and is, therefore, not confined to the relief of the poor and free medical relief. Consequently, the decision in SH Medical Centre Hospital vs State Of Kerala & Ors (2014) 11 SCC 381 to the extent of the interpretation which is placed on the Explanation to Section 3(1)(b) of the Kerala Building Tax Act 1975 does not correctly reflect the position in law which is clarified above. The decision in SH Medical Centre Hospital is, therefore, overruled to the above extent- Para 10Kerala Building Tax Act 1975 -Explanation to Section 3(1)- Section 3(1)(b) provides that nothing in the Act shall apply to buildings which are used ‘principally’ for specific purposes, including among them, ‘charitable purposes’. The expression “principally” conveys the meaning of that which is the dominant purpose. The interpretation placed by the two-Judge Bench on the expression “principally used for charitable purposes” does not call for interference in view of the statutory language used in Section 3(1). Principal use refers to the dominant substantive use as distinguished from an ancillary use- Para 9Click here to read the judgment

'Charitable Purpose' Not Limited To 'Free Medical Relief' : Supreme Court On Kerala Building Tax Exemption; Overrules 2014 Judgment

Padmakshi Sharma

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