Hall given for weddings post school hours doesn’t rob tax-exempt status: HC relief to Malad Trust

The court remarked that hall being given for weddings and other events post school hours to earn some income would not ‘prima facie rob the school of its primary purpose for which it has got tax-exempt status.’

The civic body had claimed that the trust that runs the unaided school surrounded by slums in Malad sometimes gives out the hall for weddings and similar events and therefore BMC was entitled to withdraw a tax exemption for the trust.

However, the bench observed, “As a parallel or example, we may consider a situation where a school building has an assembly hall. But after school hours, that hall is given out so that the trust can earn some income. That does not prima facie rob the trust or the school of its primary purpose, which is what gives it the tax-exempt status.”

“If every activity in a school building is to be assessed in this fashion, then conceivably even a canteen in which there is levy of charges for normal food and drinks for students would result in precisely such a tax exemption being withdrawn,” it added.

A division bench of Justices Gautam S Patel and Kamal R Khata on April 15 passed an order in plea by Sharda Gyan Peeth Trust and its Trustee challenging tax exemption revocation letter by BMC of June, 2018, demand notice issued by civic body in December, 2021 and attachment warrant issued in January, 2022.

The court restrained the BMC officials till further orders from acting upon the impugned demand notice, warrant of attachment and from any taking coercive action against the petitioners.

Senior advocate Ashish Kamat for the petitioners argued that the civic body cannot issue a tax demand or warrant of attachment by ‘executive action or fiat act contrary to the statute’.

The bench noted that BMC had not filed its affidavit in reply since February, 2024 and so far, has not proceeded with coercive action or demand against the petitioners.

It said the petition raised questions about whether the authority concerned of the BMC was competent to issue such a circular.

Granting interim relief to the petitioners, the bench noted, “The school is not going anywhere… We see no urgency in this matter.”

It sought BMC’s reply by May 10 and posted further hearing to June 11. The bench clarified that it had not fully addressed the matter on the merits and had merely passed prima facie observations on the same.