Point of Law: Exemption under Section 3(1)(b) available to a hospital that provides a substantial amount of free medical relief to poor or needy. .

JUDGMENT :

(A.K. Jayasankaran Nambiar, J.)

1. The appellant, M/s. Lisie Medical Institutions is a trust formed under a Trust Deed dated 03.04.1990 to take over the management of Lisie Hospital, Ernakulam. The present appeal comes before us pursuant to a remand by the Supreme Court through its judgment dated 09.02.2023 in Civil Appeal No.6799 of 2017. The said judgment was rendered by a three Judge Bench to which the judgment of a two Judge bench in Lisie Medical Institutions v. State of Kerala, (2017) 14 SCC 533, was referred after doubting the correctness of an earlier two Judge bench decision of the Supreme Court in SH Medical Centre Hospital v. State of Kerala, (2014) 11 SCC 381. The brief facts necessary for a disposal of this appeal are as follows:

2. The appellant trust runs a hospital by the name of Lisie Hospital at Ernakulam. In respect of a building that was constructed by it in 2013, wherein it was providing medical treatment at concessional rates, it was served with a notice demanding building tax under the Kerala Building Tax Act (hereinafter referred to as “the Act” for brevity). As per Section 3(2) of the Act, whenever any question arises as to whether a building qualifies for exemption in terms of Section 3(1) of the Act, the said question has to be referred to the Government which is then obliged to decide the question after giving the interested parties an opportunity to present their case. Section 3(3) of the Act makes it clear that a decision of the Government on the question referred to it under Section 3(2) shall be final and shall not be called in question in any court of law.

3. On a reference made to the government at the instance of the appellant, the Government, by Ext.P9 order dated 17.03.2016, found that the building constructed by the appellant in 2013 would not qualify for the exemption contemplated under Section 3(1) of the Act for “buildings used principally for religious, charitable or educational purposes” when read with Explanation 1 to the said provision which clarified that for the purposes of Section 3(1) of the Act, “charitable purpose includes relief of the poor and free medical relief”. The Government reasoned that the appellant was not providing medical relief free of cost and hence it did not satisfy the definition of charitable purpose under the exemption provision. The Government also examined the income-expense statement of the appellant’s institution and found that the appellant expended only a nominal amount for charitable purposes and that insofar as the appellant’s hospital was providing medical relief by collecting fees, it would not qualify for the exemption.

4. It was aggrieved by the said order of the Government that the appellant approached this Court through W.P(C).No. 20448 of 2016 that was dismissed following the judgment of the Supreme Court in SH Medical Centre Hospital (supra). This writ appeal, which was preferred against the said judgment, was also dismissed by an earlier Division Bench following the same judgment of the Supreme Court. In a further appeal preferred before the Supreme Court, however, the matter was referred by a two Judge Bench that doubted the correctness of the two Judge Bench decision in SH Medical Centre Hospital (supra), and the matter placed before the three Judge Bench that passed the judgment dated 09.02.2023 restoring this appeal to the file of this Court.

5. Before we proceed to discuss the merits of the appellant’s claim for exemption of its building as a “building used principally for a charitable purpose”, we might notice that the reason for the two Judge Bench in Lisie Medical Institutions (supra) doubting the correctness of the view taken by the earlier two Judge Bench in SH Medical Centre Hospital (supra) was that the latter Bench had taken the statutory provision under the Explanation to Section 3(1) of the Act as reading “charitable purpose means relief of the poor and free medical relief” whereas the statutory provision actually r