FOOD CORPORATION OF INDIA versus BRIHANMUMBAI MAHANAGAR PALIKA & ORS.

Citation: [2020] 4 S.C.R. 1075 · Decided: 19-03-2020 · Supreme Court of India · Bench: ASHOK BHUSHAN · Disposal: Appeal(s) allowed

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Judgment (excerpt)

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FOOD CORPORATION OF INDIA
v.
BRIHANMUMBAI MAHANAGAR PALIKA & ORS.
(Civil Appeal Nos. 9350-9351 of 2019)
MARCH 19, 2020
[ASHOK BHUSHAN AND M. R. SHAH, JJ.]
Constitution of India: Art.285(1) and (2) – Exemption of
property of Union from State Taxation – The Government of
Bombay acquired certain land for Government of India prior to
the year 1964 – Upon completion of the acquisition proceedings,
the lands vested in the Government of India and it constructed
godowns and silos on the acquired land for storage of food grains
and when the FCI came into being in 1965, these godowns
alongwith other godowns of the Government were transferred to
FCI for the purpose of undertaking the purchase, storage,
movement, transport, distribution and sale of food grains and other
food stuff – Demand by Municipal Corporation for property tax
from FCI in respect of these godowns – FCI claimed exemption from
payment of property tax as per Art.285, the property being owned
by the Central Government – High Court in the impugned judgment
primarily relied on s.146 of the Mumbai Municipal Corporation
Act, 1888 in rejecting the claim of exemption u/Art.285 – Hence
the instant appeal – Held: The law is clear that exemption from
payment of taxes on the properties of Central Government as
available under clause (1) of Art.285 can be denied only when
the property in question was exigible to the Municipal Tax prior
to the commencement of the Constitution or any Parliamentary law
provides for properties to be exigible to pay tax to the Municipality
– For the applicability of clause (2) of Art.285, the property on
which tax is sought to be proposed ought to have been subject to
property tax before the commencement of the Constitution – In the
instant case, the constructions on which the property tax is sought
to be imposed by Municipal Corporation came into existence only
after 1964 and were not subject to property tax prior to the
commencement of the Constitution, hence condition for applicability
of Art.285(2) is not satisfied – Resultantly, the Municipal
Corporation is not competent to impose property tax denying the
   [2020] 4 S.C.R. 1075
1075
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SUPREME COURT REPORTS
[2020] 4 S.C.R.
exemption u/Art.285(1) of the Constitution – Plea of Municipal
Corporation that appellant being occupier is liable to pay property
tax in view of s.146 of the 1888 Act is not tenable – The heading
of s.146 is “Primary responsibility for property taxes on whom to
rest” – When there is a claim of exemption from payment of
property tax with regard to property owned by the Government of
India, the question of primary responsibility or secondary
responsibility loses its importance – The statutory provision, may
it be s.146 of 1888 Act, cannot be read in a manner so as to run
contrary to a Constitutional provision – In the event the claim of
Municipality/Corporation to levy property tax is not covered by
sub-clause (2) of Art.285, it cannot be allowed to take recourse
to any statutory provision or device to make exemption u/Art.285(1)
nugatory – Both the premises and building therein were entitled
for exemption from payment of property tax u/Art.285(1) – Mumbai
Municipal Corporation Act, 1888 – s.146 – Government of India
Act, 1935.
Constitution of India: Art.285(2) – Levy of tax on any
property of Union – Object of Art.285(2) – Held: Object of
Art.285(2) is to continue the levy of the such tax which local
authority was enjoying prior to the commencement of the
Constitution so as to maintain the status quo regarding the financial
resources of Municipal Corporation to avoid the complete
exemption from property of Central Government as provided under
Art.285(1) – Tax/Taxation.
Allowing the appeals, the Court
HELD: 1. The Government of India Act, 1935 for the first
time provided for exemption of certain public property from
taxation. Section 154 of the Act, 1935 provided for exemption
from all taxes imposed by, or by any authority within, a Province
or Federated State all the properties vested in His Majesty
whereas Section 155 contained exemption of Provincial
Governments and Rulers of Federated States in respect of
Federal taxation. The main provision of Section 154 although
exempted properties vested in His Majesty from all taxes
imposed by a Province or Federated State or any authority within
but proviso contains an exception to the main provision, which
provided that any property so vested which was immediately
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