Denying Property Tax Exemption to Unaided Schools Does Not Violate Article 14: Kerala High Court

Denying Property Tax Exemption to Unaided Schools Does Not Violate Article 14: Kerala High Court

Introduction

The Kerala High Court has held that denial of property tax exemption to unaided schools does not violate Article 14 of the Constitution. The Court emphasized that a clear distinction exists between government-owned/managed/aided schools, which provide education at free or nominal cost, and unaided schools, which collect fees from students.

Factual Background

The petitioners were unaided schools or trusts/organizations conducting educational institutions imparting education up to standard twelve. They challenged the amendment to the Kerala Panchayat Raj Act, 1994, and Kerala Municipality Act, 1994, which withdrew property tax exemption earlier enjoyed by them till 31.03.2023.

Procedural Background

The petitioners contended that exclusion of unaided schools from property tax exemption, while retaining the benefit for government-owned, managed, and aided schools, amounted to unreasonable classification and violated Article 14 (right to equality).

Contentions of the Parties

• Petitioners’ Contention: Denial of property tax exemption to unaided schools amounts to discrimination and violation of Article 14. Both categories of schools use buildings for the same educational purpose, and therefore, there should be no differential treatment.
• Respondent/Department’s Contention: Exemption is justified because the infrastructure and maintenance of government-owned/managed/aided schools are funded by the State. Levying property tax on such institutions would create an additional burden, whereas unaided schools already recover costs through fees.

Issues

1. Whether denial of property tax exemption to unaided schools violates Article 14?

2. Whether the classification between government/aided schools and unaided schools is based on intelligible differentia?

Reasoning and Analysis

Justice Ziyad Rahman A.A. held that:

• The classification is reasonable because government and aided schools provide education free or at very low cost as part of the State’s welfare function, while unaided schools operate on a fee-based model.
• The intelligible differentia lies in the manner of providing services—one being State-funded, the other fee-driven.
• Granting exemptions to buildings used by government/aided schools furthers the object of the statutes by supporting institutions directly discharging the State’s obligation of free/affordable education.

Outcome

The Court:

• Dismissed the petitions, holding that denial of property tax exemption to unaided schools does not violate Article 14.
• Upheld the legislative classification between government/aided schools and unaided schools as valid and reasonable.

Implications

This judgment clarifies that financial obligations of unaided schools cannot be equated with those of government/aided schools. It reinforces that Article 14 permits reasonable classification based on intelligible differentia and legitimate objectives, particularly when linked to the State’s constitutional duty of providing free education.

Representation

In this case the assessee was represented by Mr. H. Ramanan, Advocate. Meanwhile the respondent was represented by Ms. Deepa K.R., Advocate.