MP High Court quashes Narmada tax, orders refund with 9% interest

The Madhya Pradesh high court on Tuesday quashed the controversial Narmada tax (water tax) imposed on the builders and asked the government to refund their deposits with 9% interest.

The Madhya Pradesh high court on Tuesday quashed the controversial Narmada tax (water tax) imposed on the builders and asked the government to refund their deposits with 9% interest.

The state government had introduced the tax in September 2012 under which a builder was required to deposit the tax at the time of seeking building permission.

As per the Tuesday order, the tax money will be refunded to the builder with interest from the date the money was deposited by him. About 30 developers will benefit from the judgment.

The judgment was announced by chief justice AM Khanvilkar and justice SS Kemkar, heading a division bench of the high court (Jabalpur), on a case filed by the Confederation of Real Estate Developers Association of India (CREDAI) in 2013.

Counsel for the petitioner, Siddharth Gupta said that the tax was charged as a precondition to granting building permissions for their residential and commercial projects. The amount ranged between R90 lakh and R 1.5 crore, he said.

Gupta said the tax was challenged on the ground that a municipal corporation had no authority under the Bhumi Vikas Rules 2012 or the Municipal Corporation Act 1956 for levying/ demanding any such tax while processing the building permission.

The state government had imposed the Narmada Tax at the flat rate of R15 per square feet, which with respect to building permissions of residential colonies stood quantified at around R80 Lakh to R1.5 crore payable by the applicant.

Gupta claimed that imposition of the tax also went against the provisions of Section 132 of the Municipal Corporation Act as no water supply was being taken by any developer or person from the resources of the BMC.