Kerala High Court strikes down municipal rule imposing 25% property tax

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The Kerala High Court has struck down Rules 9(4A) and 9(4C) of the Kerala Municipality Rules (Property Tax, Service Tax and Surcharge) which prescribe the fixing of property tax at a minimum of 25% above the tax collected for the previous year.

The petitioner, KPMuhammed Asraf, owner in possession of a building in Taliparamba Municipality, seeks to state that Rule 9(4A) and Rule 9(4C) of the Kerala Municipality Rules (Property Tax, Service Tax and Surtax), 2011 which prescribes the fixing of the property tax at a minimum of 25% above the tax levied for the previous year, even if the property tax obtained when calculating in accordance with the said rules is less than the tax levied for the previous year, is ultra vires Section 233 of the Kerala Municipality Act 1994. The applicant also requests reimbursement of the excess tax collected from the applicant in respect of his building.

These rules are ultra vires, argues the applicant. Section 233 does not empower the government and municipalities to fix the property tax at a minimum of 25% in addition to the tax levied for the previous year, unless the property tax so calculated is within the brackets minimum and maximum prescribed, insists the petitioner.

The Single Bench of Judge N.Nagaresh held that Section 233 does not empower the authorities to proceed with fixing the property tax in this manner. Pursuant to Section 233(2)(a) for the purposes of levying a property tax, the government fixes, by notification, the minimum and maximum limits of the basic property tax rates applicable to a baseboard area of 1 square meter of the categories of buildings in accordance with the use and the date of their entry into force. Therefore, there should be a minimum and maximum limit on basic property tax rates.

The court said that Rules 9(4A) and 9(4C) of the Kerala Municipality (Property Tax, Service Tax and Surcharge) Rules 2011, which prescribe the fixing of property tax at a minimum of 25% above the tax levied for the previous year, if the property tax arrived at the calculation in accordance with the rules, 2011 is less than the tax levied for the previous year, is ultra vires the Municipality Act 1994 from Kerala. Rule 9 (4A) and Rule 9 (4C) are therefore set aside to this extent.

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