Bombay HC dismisses housing societies' plea against 'retrospective' property tax

The Bombay High Court has recently dismissed a petition filed by a federation of housing societies in Kharghar Node challenging a property tax demand from the Panvel municipal corporation (PMC). The federation argued that the tax demand was illegal and retrospective, covering the period from 2016 to 2021-22. The HC rejected the petition, stating that it lacked legal foundation and would open floodgates of litigation before the court.

The PMC was established in 2016 and has over 2.6 lakh properties on which property tax can be levied. The HC accepted the PMC's argument that the tax demand was not retrospective but legal as it was for the "untaxed period" since its formation. The municipal taxation law provides for a retrospective levy, demand, and assessment within six years if a person liable to pay tax has escaped such assessment.

The HC dismissed the petition but said the federation could appeal the tax demand under the mechanism provided by the Maharashtra Municipal Corporation Act (MMC), which allows an appeal before a subordinate civil court. However, the aggrieved party must first deposit the tax amount. The petitioner's counsel argued that the plea was maintainable, but the HC disagreed, stating that the grounds raised were vague and could be raised in the appeal mechanisms.

The HC held that the federation's contention that the PMC lacked authority to levy property tax now for past years was untenable. The court expressed astonishment at the contention that all members had been issued similar bills, which could be commonly challenged. It held that the plea was not maintainable under its extraordinary writ jurisdiction by permitting the assesses to bypass the remedy of a statutory appeal.

The HC said that while the existence of an alternate remedy is not an absolute bar on maintainability of a plea, the petitioners were a minuscule lot among PMC taxpayers, and entertaining the challenge would bring about drastic and adverse consequences on the levy of property taxes to other assesses who have not filed any proceedings and are due to pay the bills or have taken a position not to litigate.

In exercising its discretion, the HC decided not to entertain the petition, stating that a public body like the PMC cannot be placed in a cloud of uncertainty when it comes to the levy and recovery of civic taxes. The decision reinforces the legal foundation of retrospective levy, demand, and assessment of property tax by public bodies under the municipal taxation law within six years. It also upholds the appeal mechanisms provided under the MMC Act, which requires the aggrieved party to deposit the tax amount first.

Next (Income-tax department to appeal against NCLT ruling in Jaypee Infratech case)

Bombay HC dismisses housing societies' plea against 'retrospective' property tax

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