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PETITIONER: MUNICIPAL CORPORATION OF HYDERABAD

       Vs.

RESPONDENT: HYDERABAD RACE CLUB

DATE OF JUDGMENT11/11/1986

BENCH: THAKKAR, M.P. (J) BENCH: THAKKAR, M.P. (J) RAY, B.C. (J)

CITATION:  1987 AIR   92            1987 SCR  (1) 195  1986 SCC  (4) 696        JT 1986   815  1986 SCALE  (2)771

ACT:     Hyderabad Municipal Corporation Act 1955--Section 202(1) (b)--’Charitable purpose’--Meaning of--User of premises  for Race  Course Club--Whether exemption to general  tax  avail- able.

HEADNOTE:     The appellant--Corporation sought to assess the land and buildings of the respondent club to genera1 tax under s. 202 of  the Hyderabad Municipal Corporation Act, 1955.  The  re- spondent claimed exemption on the ground that occupation and user  of the property for running horse races  and  training the  horses  etc.  constituted occupation and  user  of  the property for a ’charitable purpose’ within the meaning of s. 202(1)(b), which was refused. The respondent approached  the High Court and succeeded. Partly allowing the appeal by the Corporation,     HELD:  1.  For determining whether  exemption  under  s. 202(1) (b) of the Hyderabad Municipal Corporation Act, 1955, was  available, the test to apply is to seek answer  to  the question:  to what use is the property put or for what  pur- pose  is  the  property pat and to  ascertain  whether  such occupation or user is for ’charitable purpose’. [197F]     2.  The  expression ’charitable’ in the  context  of  s. 202(1)(b) means a benevolent activity calculated to  benefit the poor or, the deprived. Horse racing is surely not such a benevolent activity, however charitable a view is taken.  It must be the very activity which is carried on  the  property which  must  be charitable and not the  application  of  the income of such activity. [197H- 198A]     3. The High Court has completely failed to realize  that the  ’occupation’  of the land and buildings or  the  ’user’ must  be for ’charitable purpose’ and that it is  altogether irrelevant as to the manner in which the income of the  club is  utilised.  Section 202(1)(b) makes no reference  to  the question as regards the employment of the income of the club or  the purpose for which the income is so employed.  Exemp- tion is granted 196 only  in respect of buildings which are ’solely’ and  exclu- sively used for charitable purpose. [198B]

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   4. In the instant case, the user of the premises for the Race Course Club will not constitute occupation or user  for a  ’charitable purpose’ within the meaning of  s.  202(1)(b) and of Race Course Club will not be entitled to claim exemp- tion from levy of the general tax. [198F]     5.  The High Court has rightly taken a view  adverse  to the  appellant as regards the levy for the  assessment  year 1966-67,  on  an appreciation  of evidence and there  is  no warrant to disturb the said finding. There is also no reason to  interfere with the valuation of the property as made  by the  Small  Causes Court and confirmed by  the  High  Court. [198G-H]     6. The order passed by the High Court in so far as it is held  that the property is exempt from levy of  general  tax under  s.  202(1)(b) is set aside. The  appellant  would  be entitled to levy general tax from 1967-68 onwards in accord- ance with law. [199B]

JUDGMENT:     CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 395  and 1346 (N) of 1973     From  the  Judgment and Order dated  13.12.1971  of  the Andhra  Pradesh  High Court in A.A.O. No. 279 and  2  16  of 1970.     Vepa  P.  Sarthy, B. Parthasarthi and G.N. Rao  for  the Appellant. V.S.  Desai, Naunit Lal and Kailash Vasdev for the  Respond- ent. The Judgment of the Court was delivered by     THAKKAR,  J.  Believe it or not,  the  most  incongruous arguments  can sometimes find a suiter. Were it not so,  the High  Court of Andhra Pradesh could not have taken the  view that  occupation  or  user of lands and  buildings  for  the purpose of running horse races, and for training the  horses etc.  constitutes occupation or user of the property  for  a ’charitable’ purpose.     The  High Court has taken the said view,  an  impossible view  in our opinion, in the context of the  exemption  from levy  of  municipal taxes claimed by the  Race  Course  Club (respondent herein) in respect of 127 acres, 14 goonthas and 95 sq. yards of land alongwith structures 197 standing thereon, which were sought to be assessed to gener- al tax under Section 202 of the Hyderabad Municipal Corpora- tion  Act (Act in short). The respondent  boldly  contended, and strangely enough succeeded in convincing the High Court, that  Section 202(1)(b) of the Act was attracted as  occupa- tion  and user of the property for running horse  races  and training  of horses etc. constituted occupation and user  of the  property for a ’charitable purpose’ within the  meaning of the said provision. Now, Section 202(1)(b) of the Act is in these terms:                     "202(1) The general tax shall be  levied               in  respect of all buildings and lands in  the               city except--               (a) xxxx               (b)  buildings and lands or  portions  thereof               solely occupied and used for public worship or               for a charitable or educational purpose;               (c) xxxx               (d) xxxx"     The  High Court launched upon an exercise  to  ascertain whether the income of the Race Club was used for a  charita-

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ble purpose. And on perceiving that some of the purposes for which the income was to be employed were charitable purposes concluded  that  the exemption under Section  202(1)(b)  was available.  The  test to apply is to seek an answer  to  the question:  to what use is the property put or for what  pur- pose  is  the property put. And to  ascertain  whether  such occupation  or  user is for a ’charitable’ purpose.  In  the present  case  the occupation and user is to  conduct  horse races  and  to  train horses for racing. Unless  it  can  be posited  that  conducting  of horse races  is  a  charitable purpose,  it  cannot be concluded that the  exemption  envi- sioned  by Section 202(1)(b) is attracted. And even  if  one were  to  take  the most ’charitable’ view  as  regards  the meaning and content of the expression ’charitable’  conduct- ing  of  horse  races or training of horses  for  the  races cannot  be said to be a charitable activity. The  expression charitable  in  the  context of Section  202(1)(b)  means  a benevolent  activity calculated to benefit the poor  or  the deprived.  Surely  horse  racing is not  such  a  benevolent activity,  however charitable a view one takes. It has  also to be emphasized that it must be the very activity which  is carried on on 198 the  property which must be charitable and not the  applica- tion of the income of such activity.     What the High Court has completely failed to realize  is that  the  ’occupation’  of the land and  buildings  or  the ’user’  of the land and buildings must be for a  ’charitable purpose’  and  that it is altogether irrelevant  as  to  the manner in which the income of the club is utilised.  Section 202(1)(b) makes no reference to the question as regards  the employment  of  the income of the club or  the  purpose  for which  the income is so employed. Exemption is granted  only in  respect  of buildings which are ’solely’  used,  meaning thereby  exclusively used, for charitable purpose.  For  in- stance,  if  the premises are occupied for the  purposes  of benevolent activities such as the running of a free  dispen- sary  or  :clinic or for running of a free  school  for  the children, such user of the building would constitute a  user for a charitable purpose and entitle the owner of the build- ing to claim exemption. It is impossible to subscribe to the view that occupation or user for ’any’ purpose would consti- tute a user for a charitable purpose provided the income  is used for a charitable purpose. Clutching at the tail of this reasoning, one would be induced to the conclusion that  user of a building for running a common gaming house (or for  any immoral or illegal purpose) would be user for a ’charitable’ purpose  provided the income of the common gaming  house  is utilised for a charitable purpose. The argument deserves  no further  scrutiny and must be rejected outright. No  further exercise need be undertaken in order to find out whether  or not  Section  202(1)(b)  is attracted in the  facts  of  the present matter. The judgment of the High Court in so far  as the  High  Court holds that Section 202(1)(b)  is  attracted must  therefore  be reversed and set aside. We  are  of  the opinion  that the user of the premises for the  Race  Course Club will not constitute occupation or user for a charitable purpose within the meaning of Section 202(1)(b) and the Race Course  Club  will not be entitled to claim  exemption  from levy of general tax.     Two other questions have been agitated by the  Appellant Municipal Corporation. First, whether the general tax  could have  been lawfully levied for the assessment year  1966-67. The  High  Court  has rightly taken a view  adverse  to  the appellant on an appreciation of evidence. We do not see  any

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fallacy in the reasoning of the High Court. We therefore  do not  propose  to disturb the finding recorded  by  the  High Court in so far as this question is concerned. Secondly,  as regards the valuation of the property. The learned Judge  of the  Small  Causes  Court has valued the  property  at  Rs.4 lakhs. The valuation made by the Small Causes Court has been confirmed by the High 199 Court.  We see no reason to interfere with the valuation  as made  by  the Small Causes Court and confirmed by  the  High Court.  Accordingly, in so far as these two points are  con- cerned,  the  decision rendered by the High  Court  must  be confirmed.     The  appeals are therefore partly allowed to  the  afore said extent. The order passed by the High Court in so far as it is held that the property is exempt from levy of  general tax  under  Section 202(1)(b) is’ set aside.  The  appellant would  be entitled to levy general tax from 1967-68  onwards in  accordance with law. The appeals are partly  allowed  to this extent. There will be no order as to costs. A.P.J.                                               Appeals allowed. 200