The petitioners in both the writ petitions challenge the respective assessment made under the Building Tax Act, 1975 (hereinafter referred to as “the Act”). 2. Since the facts are more or less similar, the difference if any, shall be noticed wherever applicable and reference to each of the writ petition is unnecessary. Both the petitioners constructed a Bus stand under a Build Operate and Transfer Scheme (BOT) for the local authority. The petitioners were given lands, belonging to the local authority, on which the construction was carried on, without a pie being spent by the local authority. However, the money expended on such construction was to be recouped by each of the petitioners, by operating the facilities, as also collecting the fees and other revenues from the users of the facilities, provided in the complex.
3. The petitioners as “Concessionaire” were conferred with the concession to construct and maintain the complex; for the 'Concession Period'; as provided in the respective agreements. This conceded and included the right to occupy the complex; rent or lease the commercial and parking space and charge, collect and retain the revenues collected from the licensees, bus operators and other users of the various facilities; within the complex. Such permission to operate; termed 'concession period'; under the BOT Scheme with respect to the petitioner in WP(C) 26207/2012 is for 29 years and 3 months, while the petitioner in WP (C)8717/2013 has such right for 49 years.
4. The petitioner in one writ petition has entered into a contract, with the Kannur Municipality and the latter indicates an agreement with the Chengala Grama Panchayat. The Municipality though stands by the agreement, supports the Government insofar as the building tax levy is concerned. The Panchayat, however, has not chosen to appear despite notice. The land in both the cases belongs to the local authority, the former by way of proceedings initiated under the Land Acquisition Act, and the later by an assignment by the Public Works Department.
5. The issue raised herein is with respect to the liability to pay tax under the Act of 1975. The levy as per Section 5(1) is on the building and the rate is fixed with reference to the plinth area of the building. The liability to pay tax is on the owner of the building as is clear from Section 5(6). The entire controversy revolves on the interpretation to be given to the definition of 'owner' as defined in Section 2(i) of the Act, which is extracted hereunder:-
“Owner” includes a person who for the time being is receiving, or is entitled to receive, the rent of any building, whether on his own account or on account of himself and others or as an agent, trustee, guardian or receiver or any other person or who should so receive the rent or be entitle to receive it if the building or part thereof were let to a tenant”
6. The learned counsel appearing for the petitioners' takes me through the various clauses in the agreement, which, according to them indicate that definitely, the right conferred on the petitioners herein, who have expended money to construct the building, is only to recoup the amounts, so expended, along with a reasonable profit; which any prudent businessman would expect when entering into such transaction. Originally both the assessments were proposed on the building and when the local authority resisted the same on the ground of an exemption available to them under Section 3 of the Act of 1975, the authorities trained their guns at the “concessionaire” who was awarded the contract, to build and operate the complex, for the periods, respectively specified in the two agreements.
7. Both the petitioners were before this Court challenging the rejection of the exemption by the Government and this Court set aside the separate orders, for reason only of violation of principles of natural justice. Again a fresh consideration was made and the order rejecting the claim of exemption, is impugned in both the above writ petitions. W.P(C)26207/2012 challenges Exts.P1 and P2 orders passed respectively by the Government and the Thahasildar, Kannur. Ext.P1 is the order of rejection of claim of exemption and Ext.P2 is the subsequent assessment made and the demand raised. W.P(C) No.8717/2013 challenges Exts.P6 and P10 again being the assessment order and the Government Order declining exemption.
8. On a reading of the impugned orders, without verbatim re-production, the reason for rejection is more or less similar and is based on the definition of 'owner' in the Act of 1975, which, according to the Government, includes a person who for the time being is receiving or is entitled to receive the rent of any building. The petitioners in both these writ petitions, being persons who are in occupation of the building, entitled to receive the revenue from such building; according to the Government, is liable to the tax assessed on the building. That is the essential contention raised for consideration of this Court; whether the building would be assessable to tax and if so, on whom is the liability cast as per the Act.
9. The learned counsel for the petitioners contend that the real owner of the building, on the specific terms of the agreement itself, is the Local Self Government Institution. When the owner of the building is exempted from tax, there can be no levy made on the persons who are included by the definition. The persons included by the definition clause, step into the shoes of the owner for the purpose of satisfying the liability under the Act and cannot have a liability, which the owner itself does not have. The petitioners, who are the “Concessionaires”, merely get a right to collect the revenue as fees or rent from the users, lessees, etc.; so as to recoup the expenditure of construction. The specific terms prescribed for such operations, as also the mandate to surrender the building encumbrance free to the LSGIs, on expiry of the term, again, points to the ownership by the latter. In both the cases, the LSGI entered into a BOT model, following the guidelines prescribed by the Government, evident from Ext.P8 circular produced in W.P(C)26207/2012. The various other schemes referred to in the circular indicates that under the BOT scheme, there is no ownership conferred on the awardee of the contract to build operate and transfer. The specific clause in both the agreements enabling the LSGIs to terminate the concession, further asserts the ownership on the Municipality and the Panchayat, is the argument.
10. The learned Special Government Pleader (Taxes) draws the attention of this Court, to certain clauses in the agreement, which according to the Government, sheds light on the true ownership of the building. The reference made are to the definition of Transfer and to clauses (6.1), 8.1 (xxiii) and 33.3. According to the Government, the above clauses make it clear that the transfer to the LSGI would be only on transfer of possession, and in the meanwhile, the petitioners who are “Concessionaire” would be entitled to collect and retain the fees collected for the facilities offered in the complex. The handing over of the complex to the Municipality or the Panchayat would be only on the expiry of termination of concession period and “Concessionaire” is given an absolute authority with respect to granting of leases of every nature and collection of revenues therefrom. Hence, it is crystal clear that the ownership as defined under the Act, is with the “Concessionaire”; not as the term means in common parlance or in law, but as provided for in the statute by a definition, which includes the liability to be cast on any person who is entitled to the benefits aforementioned. The charge is on the building and the 'owner' of the building; and any person who comes within the inclusive definition, has the liability to satisfy the same, is the argument.
11. According to the Municipality, the liability of building tax is on the petitioner who is the “Concessionaire”. The Senior Counsel submits that he has instruction to disown Ext.P12, which, according to the Municipality has been issued without the concurrence of the Council. The learned Counsel for the petitioner, however, contends that for breach, the Municipality had proceeded for cancellation of the “Concession” granted; the challenge against which is pending before this Court. The fact being so, the Municipality cannot decline the ownership of the building, merely for the purpose of mulcting the liability of building tax on the petitioner herein, is the plea.
12. Ext.P12, is a letter issued by the Secretary of the Municipality, which is in consonance with the terms of the agreement and which; without doubt, asserts the ownership of the building, on the Municipality itself. It is strange that the Municipality now takes up a contention, which is self-defeating and against the specific terms of the agreement exhibited as Ext.P3. In any event, the liability to tax under the Act of 1975 does not surely depend upon the opinion or concession of the Municipality. In the other writ petition, definitely, the Panchayat is deemed to have asserted its ownership since, they have chosen not to appear in the aforesaid proceedings and refute the challenge to the denial of exemption, raised by the Concessionaire therein.
13. Undisputedly, the charge is on the building and the liability to satisfy the same is cast on the owner of the building. In consonance with the charging section, the exemption granted under Section 3 is also inter alia on the buildings, “owned by the Government of Kerala or the Government of India or any local authority”(sic). It is not disputed that the Municipality and the Panchayat, herein, come within the ambit and scope of “local authority” as understood in the exemption clause. Hence, what has to be looked at first, is the ownership of the building, not in accordance with the definition of the Act, but in accordance with the normal connotation of such term.
14. The terms of the agreement entered into with the respective “Concessionaire”, clearly indicate that the land on which the complex was built belongs to the LSGI. In one case, acquired under the Land Acquisition Act and in the other, on valid transfer made by the Government. The agreement is couched in such manner, as to effectuate surrender of the land to the “concessionaire”, only for the purpose of constructing the Bus Terminal Complex. The construction is for and on behalf of the LSGI. By the specific terms, the LSGI does not have to expend money for such construction, but, it is the 'Concessionaire' who expends money for such construction. In return, he is granted the “concession” to occupy the building and lease or rent out the facilities, so as to recoup the amounts expended. The “Concession”, is not for such time as recouping of expenses is made; but for a specified period. This again indicates that the “Concessionaire” may or may not recoup the amounts, with or without a reasonable profit. But however, the transfer has to be effected, on any count, after the “Concession period” specified. The Concessionaire in both the cases, cannot hold on to the building or occupy the same or operate the facilities thereon after the specified period, prescribed in each of the agreements.
15. The BOT Scheme has been implemented on the specific guidelines issued by the Government, as evidenced from Ext.P8 in W.P (C) 26207/2012. As has been pointed out by the learned counsel for the petitioner, there are various schemes under which the LSGI can implement projects with private sector participation. Build, Operate and Transfer(BOT); is one of the models by which the private participation, in implementation of public projects, could be carried out. The BOT model, envisages a contractual agreement, where the developer undertakes the construction of an infrastructure facility, which includes the financing of such construction by the awardee/developer. In return, the awardee/developer is permitted operation of the facility over a fixed term. The revenue collected from charging the facility users, enables the recovery of the investment made by the developer in the project. The intention clearly, is to provide infrastructure facilities to the general public, within the area of jurisdiction of the LSGI and after a period by transfer, take over possession of such building, by which transfer; the operation and maintenance of the facilities provided therein also devolves upon the LSGI. The enduring benefit of such building is on the LSGI's, and resultantly on the users. The LSGI's are duty bound to provide such infrastructural facilities within its jurisdictional area, to which end they strive, so to do, with private participation. The BOT model as noticed in Ext.P8, clearly draws a distinction insofar as the ownership is concerned. Reference can usefully be made to the other models, like the Build, Own and Operate (BOO), or Build, own, operate and Transfer (BOOT) models; which confer ownership on the awardee. The BOT Model retains ownership with the LSGI itself.
16. The agreements produced in the respective writ petitions, are entered into after obtaining the “clearance certificate” specified in Ext.P8 circular. Such clearance in W.P(C) 8717/2013 is produced as Ext.P1(a). The terms of the agreement also are more or less similar, almost to the point of being identical. The very purpose of the agreement has been encapsulated in clause (F) of both the agreements which, as seen from Ext.P3 in W.P(C)26207/2012 is extracted hereunder:-
i. Construct and maintain the Central Bus Terminal Complex on the land as specified in Schedule A provided by Kannur Municipality at Thavakkara, Kannur.
ii. Carry out operation of the commercial and parking space and its surroundings during the concession period.
iii. Construct lighting, wastewater treatment plant and drainage system as required.
iv. Maintain the Central Bus Terminal Complex and all its components during the Concession Period.
v. Undertake all other works connected with the construction, operation and maintenance of the Central Bus Terminal Complex.
In the other writ petition, as was noticed, clause 1 to 4 are identical, while clause 5 is absent.
17. Clause (F) clearly indicate the purpose behind the agreement, being, the construction, operation and maintenance of the complex with eventual transfer of operation and maintenance to the LSGI. It cannot be said that the ownership of the building remains at any time, with the awardee, even during the concession period. The LSGI has the right to inspect the building and the facilities provided thereon and the agreement provides in detail the instances where the “Concession” could be terminated for breach. The ownership, hence, at all times, during the construction and the “Concession Period”, has to be conceded to the LSGI. The “transfer” referred to in the BOT model, is not indicative of a transfer of ownership, but, only postulates a transfer of the right to operate and maintain the complex. The ownership, hence, undoubtedly, is on the LSGI and not on the awardee; the petitioner herein.
18. The liability of an owner, defined under Section 2(i) and imposed by Section 5(6) would be extended, to a person who is for the time being receiving or is entitled to receive the rent of any building whether on his own account or on account of himself or others as an agent and so on and so forth, as provided in the definition. The petitioners herein, are both persons, who would come in such inclusive definition and would have the liability to pay tax, subject, however, to that liability being in existence on the owner.
19. The components of taxation have been succinctly stated by the Hon'ble Supreme Court in 1985 Supl. SCC 205 in Messrs Govind Saran Ganga Saran v. Commissioner of Sales Tax and others:-
“The components which enter into the concept of a tax are well known. The first is the character of the imposition known by its nature which prescribes the taxable event attracting the levy, the second is a clear indication of the person on whom the levy is imposed and who is obliged to pay the tax, the third is the rate at which the tax is imposed, and the fourth is the measure or value to which the rate will be applied for computing the tax liability. If those components are not clearly and definitely ascertainable, it is difficult to say that the levy exists in point of law. Any uncertainty or vagueness in the legislative scheme defining any of those component of the levy will be fatal to its validity.”
20. The levy of tax hence, occurs on the happening of a taxable event. The taxable event herein is the construction of the building, on completion of which the person who has the liability to pay, has an obligation to satisfy such levy. The other components as far as this case is concerned need not, be looked into. From the discussion earlier, this Court has come to the irrefutable conclusion that the owner of the complex in both the cases, is the LSGI. Such buildings owned by the LSGI's, are exempted from the purview of the Act of 1975, by virtue of Section 3. Hence, though there is a levy on the construction of the building being completed, there is no liability on the owner, to satisfy the same, by reason of the exemption clause available in the statute itself. When the owner has no liability, neither does any person, who is entrusted with the operation and maintenance of the building; unless there is a charge on such activity or a liability so cast in exclusion to the real owner.
21. The Government in declining exemption to the subject buildings, bifurcated the definition of the owner and found the person included in the definition, to have the liability; despite, the owner/LSGI itself being exempted. An inclusive definition is a devise employed, often to bring within a definition, persons or things which in common parlance or in normal usage would not be, so included. But, that is not to say that the normal connotation of the term, would be excluded [(1976) 2 SCC 942 Jagir Singh v. State of Bihar]. On the subject definition, it would be puerile to contend that, despite the owner being exempted, the person who has been conferred a concession to operate facilities in the building and collect revenue thereon, would be liable under the Act. The liability of the owner to satisfy the tax levied, under the charging section, having been exempted, the petitioners who are the “Concessionaires”, the status and terms of which, have been discussed earlier, cannot be said to have any liability to satisfy the tax under the Act of 1975. There is no liability cast on a person included in the definition clause; in exclusion to or in derogation of a person/body, on whom the normal incidence of ownership is conferred.
22. The above reasoning leads to the conclusion that the petitioners have no liability, to satisfy the tax levied under Section 5 of the Act of 1975, since the owner on whom the liability is cast, is exempted from paying such taxes. The writ petitions are allowed. Ext.P1 in W.P(C) 26207/2012 and Ext.P10 in W.P(C) No.8717/2013 declining exemption to the building, owned by the LSGI and fixing the liability to pay tax on persons who have been granted the concession to operate and maintain the subject building are set aside. It is declared that the subject buildings owned by the LSGI's, does not visit the owner or any person claiming under the owner; specifically one with a confined right to operate and maintain the complex; with liability to pay tax under Section 5 of the Act of 1975. The assessment orders produced as Exts.P2 and P6 in the respective writ petitions, hence, cannot be acted upon, since the owner has no liability, by reason of the exemption.
Writ petitions are allowed, the parties are left to suffer their respective costs.
jma Sd/-
(K. VINOD CHANDRAN, JUDGE) //true copy// P.A to Judge