Madras HC upholds validity of government order advising all municipal corporations to revise property tax

Judge declares illegal the demand for the revised amount from the first half of 2022-23; orders that it can only be demanded from the second half of the financial year

The Madras High Court has upheld the validity of a government order (G.O.) issued by the Municipal Administration department on March 30 advising all municipal corporations to revise property tax rates since the Central Finance Commission (CFC) had recommended such a revision to qualify for the receipt of financial assistance under schemes such as Swachh Bharat Mission 2.0 and Atal Mission for Rejuvenation and Urban Transformation 2.0.

Justice Anita Sumanth also dismissed a large batch of 150 writ petitions filed against the consequential resolutions passed by the councils of the Greater Chennai Corporation (GCC) as well as the Coimbatore Corporation on May 30 and 26 respectively. The judge refused to accept the argument that the proposal to revise property tax ought to have emanated from the Corporation councils and not from the CFC or the State government.

She, however, declared illegal the insistence on payment of revised tax from the first half of the financial year 2022-23 beginning on April 15. The judge said it was absurd to demand revised tax from April 15 on the basis of council resolutions passed on May 30 and 26. It had been settled by courts over the years that any increase in tax could not be retrospective since it would adversely affect substantial civil rights, she added.

Further, Justice Sumath ordered that all those who had approached the court and filed writ petitions challenging the revision need not pay tax for the second half of 2022-23 too since a clarity on the entire issue arose only during the pendency of the cases. Pointing out that the writ petitioners had also been enjoying interim orders in their favour, the judge said they could begin paying revised tax from the first half of 2023-24.

The judge agreed with senior counsel P.S. Raman, representing the State government, and Additional Advocates General J. Ravindran and S. Silambanan for the two Corporations that though the trigger behind the revision was the CFC recommendations, the latter were only advisory in nature according to Article 280 of the Constitution and the States were expected to address them with the seriousness they deserved.

Further, the May 30 G.O. too was only advisory and the two Corporation councils had deliberated upon the issue independently and decided to revise the tax only after calling for public objections, the counsel told the court. Concurring with them, the judge wrote: “I am of the view that the impugned (under challenge) G.O. cannot be considered as a diktat to the Corporations that were otherwise governed by individual statutes.”

The judge also said: “The trajectory of events are, in my view, acceptable and indicate application of mind by the Corporations. Undoubtedly, the events have been spearheaded by the Union, specifically the CFC, and consequently, the State. However, the ultimate decision has been taken by the authorities of the municipal corporations.”