The Karnataka High Court, in response to M/s BM Habitat's petition, has ruled that property tax on a building is only applicable post-completion, emphasizing the importance of the occupancy certificate. Despite the corporation's insistence on an earlier start date, the court recognized delays in property inspection and certificate issuance. The directive mandates property tax collection from a date that aligns with the certificate's issuance, promoting fair tax application based on actual utilization rather than theoretical completion dates. This interpretation ensures a practical approach to property tax and safeguards against undue taxation during the construction phase.
The Karnataka High Court, in its recent deliberation on M/s BM Habitat's petition, has provided a nuanced interpretation regarding the imposition of property tax concerning the completion of a building. The court emphasized that property tax should only be levied once a building reaches completion. Until then, the levy remains confined to vacant or open land. The court's directive instructs the Mysuru City Corporation to initiate the collection of property tax concerning the petitioner's multiplex building on Vinobhanagar Road, Jayalakshmipuram.
On January 18, 2006, a plan sanction letter was issued for the construction of the building. Subsequently, on May 3, 2007, a commencement certificate was granted, marking the beginning of the construction process. The construction ended on December 2, 2010. Following this, the company sought an occupancy certificate, which was officially granted on April 25, 2011.
However, a legal issue came up when, on May 2, 2015, the city corporation issued a notice demanding property tax payment from January 17, 2008. This date was attributed to the conclusion of the two-year validity period of the sanctioned plan. Legal proceedings ensued, leading to an order for reconsideration by the High Court on February 16, 2018. Despite this, the city corporation persisted in its stance, reiterating the demand for property tax on January 17, 2008, which subsequently prompted further litigation.
The petitioner presented a compelling case, citing impediments in the construction timeline. Delays were attributed to the necessity of obtaining a no-objection certificate from the deputy commissioner for the multiplex's operation and a subsequent delay in securing fire clearance. The petitioner highlighted that construction could only conclude in July 2010. Furthermore, the delay in acquiring the occupancy certificate was underscored, with representations submitted in July and December 2010, preceding the certificate's eventual issuance on April 25, 2011.
The city corporation asserted that, according to the sanctioned plan, the building had been completed by January 17, 2008, when its two-year validity ended. Justice Suraj Govindaraj, however, critically observed the considerable delay on the corporation's part in inspecting the property and issuing the occupancy certificate. The absence of documented evidence indicating the petitioner's utilization of the property before the certificate's issuance was duly noted.
Based on these facts, the instruction was issued for the corporation to initiate the collection of property tax on April 25, 2011. The Court asserted that property tax would solely be applicable to the constructed building after the issuance of the occupancy certificate. This decision is grounded in acknowledging that property utilization is the crucial determinant for tax applicability.
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