Kochi: The Kerala High Court ordered that building owners are liable to pay revised property tax only for the past three years, after adjusting previously paid amounts. A bench of Justice Bechu Kurian issued the order while considering a petition moved by an Ernakulam-based hotelier against the Kochi Municipal Corporation.

The petition sought the court’s intervention to decide whether, despite the creation of a charge on the property enabling the Municipality to recover the arrears of tax as arrears of public revenue, the limitation period would stand extended beyond three years.

According to the bench, despite the provisions of the Limitation Act stipulating a period of limitation of 12 years for recovery of the amounts due, when it becomes a charge on the property, the period of limitation stipulated in the special statute will have to be given preference and the same will prevail over the general period prescribed under the Limitation Act. 

“Neither section 538B nor section 237 of the Kerala Municipality Act, 1994, extends the period of limitation for recovery of amounts due to the Municipality. The creation of a charge on the property as well as the recovery of arrears of tax as an arrear of public revenue would not extend the limitation period prescribed under section 539 of the Act and the Municipalities are governed by the said provision. Viewed in the above perspective, the Municipality could have recovered only amounts as arrears for a period of three years,” said Justice Bechu Kurian.

Petitioners who are owners of buildings situated within the Kochi Corporation limit approached the court after receiving a property tax demand notice.

They have challenged the demand notices issued to them, demanding property tax in relation to the buildings owned by them for the period from 2016-17 till the date of demand notice.

They also appealed to the court to give relief for a declaration that the provisions of the Kerala Municipality Act, 1994 do not permit enhancement of property tax with retrospective effect. 

The petitioner is the owner of a room in a commercial building in Ernakulam. The property tax due for the building has already been paid till the first half of the year 2020-21. In the year 2009, provision for property tax in the Act was amended.

Though rules were framed in 2011, the Municipal Council failed to fix the minimum and maximum limits of rates of the basic property tax. However, served on 24-06-2021, property tax computed as per the new rates were demanded for the period from 01-04-2016 till 31-03-2021.

The petitioner alleged that the levy of property tax has been carried out without complying with the provisions of the Act or the Rules and further that the required deductions have not been granted while calculating the tax.

The bench held that the owners of buildings can be made liable to pay the annual property tax demanded in the respective demand notices at the revised rates from a period three years prior to the date of demand, after deducting the property tax already paid.

The bench further stated that no amount under the respective demand notices at the revised rates can be recovered for the periods till three years prior to the date of demand and the owners of buildings in Kochi Corporation cannot be put to any prejudice for non-payment of property tax for those periods.

The demand of property tax as per the respective demand notices in all these cases from 2016-17 till three years prior to the date of demand notices shall not be enforced, if not paid voluntarily, added the bench.
(With Live Law inputs)