Lucknow Nagar Nigam and Ors. Vs. Kohli Brothers Colour Lab Pvt. Ltd. and Ors. (Neutral Citation: 2024 INSC 135) - (Supreme Court) (22 Feb 2024)

Enemy properties vested in the Custodian are not Union properties; Assessee is liable to pay property tax on it

MANU/SC/0128/2024

Property

Present Civil Appeal has been filed by the Lucknow Nagar Nigam ('Municipal Corporation') impugning the judgment of the High Court that has allowed the Writ Petition filed by Respondent ('the Assessee'), thereby holding that the Assessee is exempt from payment of property tax under the provisions of the UP Municipal Corporation Adhiniyam, 1959

The Custodian for Enemy Property in India does not acquire ownership of the said properties. The enemy properties vest in the Custodian as a trustee only for the management and administration of such properties. Central Government may, on a reference or complaint or on its own motion initiate a process of divestment of enemy property vested in the Custodian to the owner thereof or to such other person vide Rule 15 of the Rules. Hence, the vesting of the enemy property in the Custodian is only as a temporary measure and he acts as a trustee of the said properties.

Union of India cannot assume ownership of the enemy properties once the said property is vested in the Custodian. This is because, there is no transfer of ownership from the owner of the enemy property to the Custodian and consequently, there is no ownership rights transferred to the Union of India. Therefore, the enemy properties which vest in the Custodian are not Union properties. As the enemy properties are not Union properties, Clause (1) of Article 285 of the Constitution of India, 1950 does not apply to enemy properties. Clause (2) of Article 285 is an exception to Clause (1) and would apply only if the enemy properties are Union properties and not otherwise.

The High Court was not right in holding that the Respondent as occupier of the subject property, is not liable to pay any property tax or other local taxes to the Appellant. In the result, the impugned order of the High Court is set aside. Consequently, any demand for payment of taxes under the Act of 1959 made and thereby paid by the Respondent to the Appellant-authority shall not be refunded. Appeal allowed.

Tags : TAX EXEMPTION ELIGIBILITY