The main legal point established in the judgment is that Rule 15(c) is an enabling provision empowering the Panchayat to grant exemption to a class of buildings, and the court cannot force the Panchayat to grant such exemption in the absence of a decision by the Panchayat.

S.J. Mukhopadhaya, J.

The matter relates to grant of exemption of house tax u/r 15 (c) of the Tamil Nadu Village Panchayats (Assessment and Collection of Taxes) Rules, 1999 (hereinafter referred to as Rules, 1999). Learned single Judge allowed the prayer of the respondent, Kamaraj College of Engineering and Technology (college for short) by impugned judgment dated 10th April, 2006, reported in 2006 (3) MLJ 1068.

During the pendency of the appeal against the said judgment, in another case of Sriram Educational Trust Vs- President, 89 Perumalpattu Panchayat Union reported in 2008 (1) CTC 449, Division Bench of this Court having affirmed the view of learned single Judge, the matter has been referred to the Larger Bench.

2. The question involved in the present case is – Whether Rule 15 (c) enables the Panchayat to exempt the educational institutions from payment of house tax or mandates the Panchayat to grant such exemption.

3. Learned single Judge held that the college being an educational institution is entitled for exemption and, thereby, directed the Panchayat to grant exemption and refund the house tax already paid.

4. The college was established in the year 1998. It has different buildings to house its classrooms, office, library, hostel and staff quarters. The Panchayat assessed house tax for the first time during the assessment year 2001-02 and issued demand notice on 3rd Dec., 2001 asking the college to pay house tax of Rs.31,900/=, which the college paid. The college also paid house tax for the subsequent financial year 2002-03. For the assessment year 2003-04, house tax was revised to Rs.37,950/= which was also paid by the college. There being further construction made, house tax was revised to Rs.43,010/= for the assessment year 2004-05. This time, instead of paying the house tax, on 17th April, 2004, the college represented and asked for exemption u/r 15 (c) and the Panchayat having refused to grant exemption by letter dated 2nd Aug., 2004, the college finally represented on 14th Sept., 2004 to refund the house tax already paid and, thereafter, filed the writ petition, which was allowed.

5. Learned counsel appearing on behalf of the Panchayat made the following submissions:-

Section 176 of the Tamil Nadu Panchayats Act, 1994 (hereinafter referred to as the Act) mandates that no exemption of tax can be granted as specified u/s 168 or 171 of the Act except in accordance with the rules. Grant of exemption is an enabling provision empowering the Panchayat to grant exemption in accordance with the rules. Therefore, the High Court cannot direct the Panchayat to grant exemption to a particular educational institution till it is shown that the decision taken is arbitrary or discriminatory.

Learned single Judge in the present case, as also the Division Bench in Sriram Educational Trust (supra) failed to notice the provision of Section 176, which specifically mandates that no exemption can be granted except in the manner as prescribed under the rules.

Rule 15 (c) being a subordinate legislation cannot override Section 176 of the Act, which prohibits the Panchayat from giving any exemption except in the manner provided under the rules.

The word “shall” used in Rule 15 (c) should be read as “may” in view of the provision of Section 176, which prohibits exemption of house tax.

If the Panchayat takes a decision not to grant exemption to particular class of buildings, including the college for a specific reason, it cannot be forced to grant such exemption u/r 15(c). Thereby, no educational institution or any other category or class of buildings can claim exemption as a matter of right, till such decision is taken by the Panchayat to grant exemption to a class of buildings.

For meeting the objects and reasons for inserting Article 243 to 243-O of the Constitution vide 73rd Amendment and to enable the Panchayats to acquire the status and dignity of viable institutions, the provision have been made u/s 168 to 171 and, there