Kerala High Court dismisses plea by private bus operators to continue tax exemption granted during COVID period

The Kerala High Court on Wednesday dismissed a batch of petitions filed by private bus operators who had sought an extension of the tax exemption that was granted to them during the COVID-19 pandemic in 2020-2021 [Vakiyath Koya & Ors. v State of Kerala]. .Justice Bechu Kurian Thomas opined that the government had paid heed to the concerns of the petitioners as it had extended absolute exemption from payment of tax for a period of 12 months and partial exemption for 3 months, since the pandemic took root in 2020."Since exemption from payment of tax was granted for reasonable periods, it cannot be said that despite the restrictions and regulations brought in due to Covid-19 pandemic, the Government had not considered the plight of the stage carriage operators and contract carriage operators," the Court said in its order..The Court also dismissed the argument for extension of tax exemption made on the basis of the doctrine of legitimate expectation."Further, the concept of legitimate expectation cannot be extended or stretched to assume that as and when a restriction is brought in, the Government should immediately order tax exemption. The grant of tax exemption for one quarter or more than one quarter of a year, cannot also give rise to a legitimate expectation that for every quarter of the year or for periods beyond that, the exemption will be extended," the Court held..The Court passed the judgment on a batch of petitions preferred by owners of stage carriages as well as contract carriages, claiming the benefit of exemption from payment of tax for the period affected by the restrictions and regulations imposed due to the Covid-19 pandemic, from July 1, 2021 to March 31, 2022. The petitioners pointed out that the lack of government support for private stage carriage operators has caused their numbers to dwindle from 34,000 in 2016 to 12,000 in 2021. .The Court, at the outset, accepted that while the government-run/supported, public transportation could to a large measure, withstand the perils of the pandemic, the privately run public transportation system could not bear the economic brunt of the circumstances.However, it said that even though unprecedented situations warrant extraordinary actions, in the matter of taxation, the court must go strictly by the letter of law, while interpreting a statute.In the instant case, the Court went through the relevant provisions of the the Kerala Motor Vehicles Taxation Act, 1976 and found as followsSection 3: The burden of tax under the Act is not necessarily on the use of the vehicle on the roads, but the liability falls even on vehicles kept ready for use on roads. Therefore, petitioners cannot claim any benefit for non-payment of tax merely on the ground of restrictions and regulations imposed due to the pandemic;Section 5: If previous intimation is given about the non-use of the vehicle for a minimum of one month in a quarter, it shall be deemed that the vehicle is not used or kept ready for use in the State. None of the petitioners claimed the benefit of section 5 for the periods in question;Section 22: The Government has the power, in public interest, to make an exemption or reduction in the rate of tax, either prospectively or retrospectively. Out of a period of 15 months within the pandemic, absolute or total exemption from tax was granted for 12 months. Therefore, it cannot be said that the Government had not considered the plight of the petitioners..Moreover, the Court held that grant of exemption from tax is a matter to be decided based on policy."Even if circumstances existed similar to those for the period during which exemption was granted, that will not confer a right to obtain an exemption from tax for other periods. No semblance of arbitrariness or unreasonableness is reflected in the manner of grant or denial of tax exemption," the Court said while dismissing the petitions. .Advocates KV Gopinathan Nair, G Hariharan, OD Sivadas, and I Dinesh Menon appeared for the petitioners and advocate Stalin P Davis appeared for impleading respondents supporting the petitioners' cause. Senior Government Pleader Dr. Thushara James appeared on behalf of the respondents. .[Read Judgment]