I-T dept says demand unconstitutional

DEPARTMENT OF POSTS JOINS IN

The court asked BBMP to clarify what civic amenities it providedThe cash-strapped Bruhat Bengaluru Mahanagara Palike (BBMP) has slapped a demand note of Rs 80 lakh as service tax on the High Court; but guess what it got back? It received a shocking reply from the High Court asking the BBMP to clarify what civic amenities it has provided.This comes in the backdrop of the notice issued by the BBMP’s Vasanthnagar assistant revenue officer on December 4, 2015, demanding Rs 80.80 lakh as tax payable for the High Court buildings.The demand was made under self-assessment tax payable at Rs 5 per sq ft for non-residential purposes.The High Court assistant registrar’s reply shocked the civic agency’s officials. He countered the BBMP commissioner asking him to clarify what civil amenities the agency had provided.The letter reads: “I am directed to request you to clarify as to what civil amenities the BBMP has provided to the High Court buildings as civil amenities like water supply and drainage facility are provided by the Bangalore Water Supply & Sewerage Board (BWSSB). The clarification sought for is required for taking further necessary action in the matter. An expeditious reply in the matter is solicited.”Interestingly, the BBMP is yet to take a call on the High Court’s reply. It has not yet decided to write back to the high court assistant registrar to stress on its demand.The registrar of city civil court, too, wrote on the same lines to the BBMP’s east zone joint commissioner stating that they are not liable to pay the service tax.Their reply reads: “The city civil court building or land is belonging to the state government of Karnataka used for the purpose of government and not used or intended to be used for residential or commercial purpose. As such, under section 110 (general exemption), the KMC (Karnataka municipal Corporation) Act 1976, the city civil court building or land is exempted from payment of property tax. Accordingly, under section 108A (3) of the KMC act, it is not applicable to the city civil court complex.Therefore, I am directed to request you to furnish if there is any amended rules or government order/circular available with regard to payment of property tax for the government building to this court for taking further action in the matter.”However the erstwhile BBMP commissioner M Lakshminarayana had issued a circular on December 2, 2014 to all zonal joint commissioner’s and revenue department officials ordering them to collect service tax from state and central government buildings functioning in BBMP limits. Lakshminarayana had ordered to collect the service taxes from the year 2008-09 from all the central and government buildings and from empty site those owned by them.According to the KMC Act 1976 section 110, apart from the worshipful places and those buildings which are exempted from paying the taxes all have to pay 25 per cent of the exact tax amount as service tax to the civic body.Most of the government offices are situated in BBMP’s east zone. The government buildings come under the commercial business categories and are liable to pay the taxes to the civic body.Meanwhile, the Income Tax department has shot off a reply to the BBMP demand that they pay property tax on No 5, Infantry road. It says that the notice is contrary to article 285 of the Constitution of India.SV Srinivasa Raghavan, Income Tax officer (Hq) (infra), writes: “I am directed to refer to your notice cited above calling upon this department to pay a sum of Rs 4,75,020 plus interest of two per cent per annum for the period of 2010-11 to 2015-16 being a property tax in respect of above said property.In this connection I am further directed to inform you that the properties occupied by the Income Tax department either for office use of for residential are owned by the President, Union of India for the purpose of government. Article 285 of the constitution of India exempts the property of the union from all taxes imposed by a state or by any authority within a state. In view of article 285 of the constitution of India, all the properties of the Union are exempt from all taxes imposed by a state or by any authority within a state irrespective of the purpose for which the property being used.However, a demand has been raised on the properties occupied by the Income Tax department by invoking section 110(1)(j) of the KMC act, by contending that the property occupied only for the purpose of office is alone exempt and the property occupied for residential/quarters is not exempt from payment of property tax.Meanwhile, the ministry of urban development, in its order dated on December 15, 2010 has issued an office memorandum to its departments to pay service charges for the services provided by the appellant municipal corporations.No property tax will be paid but service charges calculated at 75 per cent, 50 per cent, or 33 per cent or 1/3 per cent of property tax levied on property owners will be paid, depending upon utilization of full or partial or nil services. But the municipal corporations shall not resort to coercive steps (such as stoppage of services) nor resort to revenue recovery proceedings for recovery of service charges from its departments. The Centre issued this order after Supreme Court ordered on November 19, 2009 while disposing of the civil appeal No 9458-63/2003 filed by Rajkot Municipal Corporation relating to payment of service charges by the Central departments to urban local bodies.Meanwhile, C Nagarajan, manager of mail motor service of department of posts has replied to BBMP stating that as per the Supreme Court’s civil appellate jurisdiction New Delhi appeal No 6532 of 2002 dated January 21, 2004 regarding payment of service charges to the buildings of posts and telegraph department, this office need not pay the service charges in respect of this office property No 4, Millers Road.