Can municipalities levy urban development taxes and fire indemnities on railway properties? Notice of issuance from the High Court of Rajasthan

The High Court of Rajasthan has issued a Notice of Dispute of Urban Development Tax and Fire Tax by Ajmer Municipal Corporation, Ajmer, on properties owned by the Ministry of Railways through the Rail Land Development Authority.

Judge Pankaj Bhandari and Judge Sameer Jainobserved,

“Issue notice to respondents, returnable within two weeks. In addition, additional sets may be served on the additional Solicitor General and additional Attorney General concerned.”

Essentially, the Ministry of Railways in its 2009-10 budget had announced the development of Multi-Functional Complex (MFC) in various states of India including Ajmer. The petitioner, which is a Special Purpose Company (SPC), applied for the tender and successfully won the contract for the development of the MFC at Ajmer Railway Station. In this regard, a sublease agreement was concluded on 31.03.2015 between Rail Land Development Authority (RLDA) and the applicant company.

Later, the applicant company received a notice dated 31.05.2022 under Section 130 of the Municipalities of Rajasthan Act 2009, raising a claim of Rs.13,41,311/- towards Urban Development Tax . The applicant company replied that the Urban Development Tax is not applicable on the MFC in question as the property is owned by the Union of India, Ministry of Railways through RLDA.

Subsequently, the North Western Railway clarified to the Nagar Nigam, Ajmer that MFC Ajmer is owned by the Ministry of Railways and therefore, under Section 285 of the Constitution and also under Section 184 of the Railways Act, 1989 is exempt from taxes imposed by the State Government. Later, the Nagar Nigam issued a letter demanding an amount of Rs.21,18,648/- as per the provisions of the UD Tax Act and Fire Tax/Tax and also ordering that if the petitioner fails to deposit the said amount , the necessary measures under the Municipality Law 2009 will be taken. Injured by it, the applicant company has filed the present motion in brief.

The plea alleged that the mere reading of the lease agreement made it clear that the proposed MFC to be developed was to be carried out on land owned by the Union of India through the Ministry of Railways.

According to the plea, this Urban Development Levy was introduced in the notification of 24.08.2016 issued by the Department of Local Government, Government of Rajasthan enacted under Section 102 of the Municipalities Act 2009 of the Rajasthan, provided that UD tax is imposed on properties held by the Union of India, if said properties are used for commercial purposes.

It has also been alleged that Section 285 of the Constitution as well as Section 184 of the Railways Act 1989 provide that property owned by the Union of India or its subsidiaries shall be exempt from taxes levied by the local state or state government authorities. Government itself unless the central government provides for the levying of a tax.

In addition, Section 107 of the 2009 Act provides for exemption from taxes levied by the municipality under Section 102 and Section 103 and within said exempt land buildings belonging to the central government are exempt taxes imposed under Sections 102 and 103. However, the plea states that no such reservation exists with respect to property vested in the central government and that, therefore, property vested in the central government, whatever whatever their uses and nature, are exempt from any tax levied by the municipality under articles 102 and 103 of the law of 2009.

The plea stated that the petitioner filed a Fire NOC application in 2018, and that it has been pending before the municipal authorities since then, while the fire permit requirement notification was brought by the after. As such, the plea noted that the notification cannot be applied retroactively and no levy or recovery can be made on the retroactive application of the notification. Furthermore, it is common knowledge that any law, especially tax law or the imposition of new levies/taxes/taxes, is only prospective, the plea added.

In this regard, according to the plea, the Petitioner’s request for fire cess or tax (however named) in respect of the MFCs/premises in question built on the land of Railway, owned by the central government, is unlawful, wrong in view of the act and deserves to be struck down being in violation of Section 285 of the Constitution of India, Section 184 of the 1989 Act and also ultra vires Section 107 of the 2009 Act

Further, the plea mentioned that Section 285 and Section 289 vis-à-vis between the central government and the state government are based on the doctrine that one sovereign cannot impose taxes on another. sovereign and the disputed notification violates said doctrine.

The plea added that an identical controversy is awaiting judgment in M/s Jodhpur Multi Functional Complex Private Limited c. state of rajasthan [D.B. Civil Writ Petition no. 4166/2019]in which the Jodhpur Bench Court issued an interim order suspending recovery under Section 130 of the 2009 Act.

Adv. Nitish Kumar Bagri and Adv. Vineet R. Dave appeared on behalf of the applicant company.

Case title: Taleda Square Pvt. ltd. vs. state of rajasthan

Click here to read/download the order

Luisa D. Fuller