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Monday, Dec 09, 2019

HC exempts Delhi Metro from property tax

In a relief worth several crores to the DMRC, the Delhi HC has exempted it from paying property tax to the Municipal Corporation of Delhi, reports Harish V Nair.

delhi Updated: Jun 09, 2008 23:31 IST
Harish V Nair
Harish V Nair
Hindustan Times

In a relief worth several crores to the Delhi Metro Rail Corporation (DMRC), the Delhi High Court has exempted it from paying property tax to the Municipal Corporation of Delhi (MCD) upholding the contention that it enjoyed the privilege under the Indian Railways Act and Delhi Metro Railways (Operation and Maintenance) Act.

This is not good news for the MCD that was waiting for the DMRC to clear dues accrued ever since the mass rapid transit system was commissioned in December 2002. This according to MCD’s Madhu Tewatia “could run to over Rs 400 crore”. The figures annually vary between Rs 70 and Rs 80 crores.

The judgment marks the end of two-year long legal battle between the two corporations over the issue. According to sources, the metro owed another Rs 16.18 crore to the NDMC which was eagerly awaiting the outcome of Metro's petition against MCD in the court.

“The petitioner (DMRC) is entitled to exemption from payment of municipal taxes in view of Section 184 of 1989 Indian Railway Act, but only in respect of assets/properties which have been defined as Railway and not in respect of other assets/properties,” Justice Sanjiv Khanna said in a recent order.

This virtually means that the lines, electrical equipment, installations, stations, warehousing workshops, running room, rest house, etc., constructed for the purpose of or in connection with the railway are exempted.

The DMRC had approached the court after work at some sections could not begin with the MCD refusing to clear developers’ building plans and layouts unless it coughed up the tax. The civic agency argued that the DMRC got prime property at throwaway prices and is making money by leasing it out, indulging in “heavy commercial development” at its stations.

But Justice Khanna cited section 184 of the Railways Act, 1989 which says that a railway administration shall not be liable to pay any tax to any local authority unless the Central Government, by notification, declares the railway administration to be liable to pay the tax specified in such notification.

On the question whether DMRC is in fact a “Railway” which is a pre-condition for the Indian Railway Act to apply, the court said “it qualifies as it is engaged in transportation of passengers on rails”.

The court intervention came after the Additional Assessor and Collector to whom the matter was referred to twice by the court could not come to a satisfactory conclusion.

After examining Section 119 of the Delhi Municipal Corporation Act and corporate entity of the petitioner, he said the DMRC “was liable to pay taxes as any other individual or corporate entity” but the main question whether or not the exemptions under the Indian Railway is attracted was not answered.