Madras High Court upholds Tamil Nadu government's decision to hike property tax but strikes down retrospective application

The Madras High Court recently upheld the Tamil Nadu (TN) government's order to increase property tax in Coimbatore and Chennai, but said that the new tax slabs will be operative only from April 1, 2023. 

In a Judgement passed on December 23, Justice Anita Sumanth upheld the validity of a government order (GO) issued by the state Municipal Administration Department on March 30 this year, advising all civic corporations to revise property tax rates. 

The Department had said at the time that the Central Finance Commission (CFC) had recommended such revision in property tax rates to qualify for financial assistance under schemes such as the Swachh Bharat Mission and Atal Mission for Rejuvenation and Urban Transformation.

The Court was hearing a bunch of 150 petitions from Coimbatore and Chennai challenging the GO and the Chennai civic body’s Council Resolution giving it effect.

While the Court dismissed all the 150 petitions, it also set aside the Property tax General Revision Notices 2022-23 that mandated the hike to be implemented from April 15, 2022.

Justice Sumanth said that the above notices were "erroneous and absurd" and that the civic authorities' insistence on payment of revised tax from the first half of the financial year 2022-23 beginning on April 15 was illegal.

The Court said it was absurd to demand revised tax from April 15 on the basis of council resolutions passed on May 30 and 26 and that it had been settled by courts over the years that any increase in tax cannot be retrospective since it will adversely affect substantial civil rights.

The Court went on to say that the State and Union governments had every right to collect taxes and to periodically revise rates as long as such process was mindful and transparent.

In the present case however, the Court noted that the TN government had failed to give enough publicity to the proposed hike and the rationale behind it.

It noted that the civic bodies had called for objections from the public before implementing the hike but it had received just 30 objections.

Even those had been responded to merely perfunctorily, the Court noted.

"In my view, the procedure followed by the corporations has been by the book and there has been strict compliance with the letter of the law. However, the spirit of the law is quite another matter and there has been a total lack of transparency in calling for objections. Moreover, the manner in which the objections have been dealt with is farcical," Justice Sumanth said.

It said that had the process been transparent and interactive, the petitioners would not have been forced to approach the High Court with the present batch of writ petitions.

“It pains the court to state that the 30 objections have been disposed of frivolously without accordance of any weightage to the queries raised. All the queries pertain to issues that have been agitated in these writ petitions. It is incumbent upon the authorities to have provided due explanation to these queries, and this court deprecates the casual, and careless manner and mechanical fashion in which the objections have been disposed of,” the Court said.

It, therefore, disposed of the matter saying that the GOs and General Revision Notices stood "confirmed" and the challenges to the same were dismissed. 

The Court, however, directed the Chennai and Coimbatore civic corporations to ensure their official websites are "kept robust" and adequate grievance mechanisms put in place to enable all property tax assesses to seek clarifications on their property tax assessments.

Senior counsel KM Vijayan, PH Arvind Pandian, TV Ramanujan, senior advocate M Aravind Subramaniam appeared for the petitioners.

Senior counsel PS Raman, Additional Advocate General J Ravindran and Additional Government Pleader K Surendran appeared for the State and civic authorities.

[Read Judgment]