MADURAI: The Madurai Bench of the Madras High Court has ruled that Union government properties are exempt from state taxes even if used commercially, setting aside Madurai corporation’s property tax demand on a commercial complex at Madurai railway junction.
The court noted the land belongs to the Southern Railway and remains Union property throughout the lease, even though it was sublet to a private firm. The property, along with the building, will return to the railways after the lease period.
A bench comprising Justices GR Swaminathan and M Jothiraman, which passed the order, noted that the parcel of land, where the complex is situated, belongs to Southern Railway and was leased out by the Rail Land Development Authority (RLDA) to Ircon Infrastructure & Services Limited - which is a wholly owned subsidiary of the Union Ministry of Railways - to develop the land for commercial use. The latter, in turn, had constructed a building and sublet the land to the appellant company, Madurai Multi Functional Complex Private Limited (MMFC), for 30 years.
The Madurai corporation assessed the building for property tax and issued a demand notice in March 2018 calling upon the MMFC to pay half-yearly property tax to the tune of Rs 10.07 lakh. When the same was challenged by the MMFC, the petition was dismissed by a single bench in 2020, considering the facts that the building was constructed by Ircon infrastructure and then leased out to the MMFC and is being put to commercial use.
Responding to the appeal against the said single judge’s order, the local body took a stand that they are not calling upon the railways to cough up the funds towards property tax but that they are only demanding it from the MMFC. However, the division bench rejected it by pointing out that as per the lease agreement, the title of the property remains with the railways.
Further both the land parcel and the building belong to the railways, and would be handed over to it upon expiry of the lease period.