Retrospective Property Tax Demands Invalid Under GPMC Act: Gujarat High Court

The Gujarat High Court has held that the Ahmedabad Municipal Corporation (AMC) could not retrospectively revise the rateable value of a property and demand property tax years after the relevant assessment period had ended, ruling that such demands were contrary to the Gujarat Provincial Municipal Corporations Act, 1949, and the Taxation Rules framed under it.

"Having regard to the statutory provisions and rules thereunder, demand of taxes on the basis of revised rateable value with retrospective effect is invalid and no tax could be taxed to be levied or imposed. Thus, the appellant Corporation having no any jurisdiction and/or authority to raise a demand for a period from 2007-2008 to 2015-2016, in the year 2016," the court observed.

A division bench of Justice Ilesh J. Vora and Justice R.T. Vachhani dismissed a batch of appeals filed by the civic body and upheld the Small Causes Court's decision declaring the special demand notices issued to Bharat Petroleum Corporation Ltd. (BPCL) invalid.

The dispute arose from nine special demand notices issued on July 15, 2016. Through those notices, the corporation retrospectively revised the rateable value of BPCL's petrol pump property for the financial years 2007-08 to 2015-16.

The corporation argued that BPCL had licensed the operation of the petrol pump to Krupa Petroleum under a leave and licence agreement. On that basis, it treated the property as tenanted rather than self-occupied and argued that the reassessment was justified. BPCL challenged the notices before the Small Causes Court, which declared them invalid.

Before the high court, the corporation argued that BPCL had failed to inform the Commissioner about the change in occupancy as required under Rule 5 of the Taxation Rules. It contended that because no such disclosure had been made, Rule 21A allowed the Commissioner to reassess the property once the relevant facts came to his notice. The corporation also maintained that it had followed the procedure prescribed under the law.

BPCL, in response, relied on the division bench's decision in Sushilaben Veljibhai Shah v. Jamnagar Municipal Corporation.

It argued that the Taxation Rules required both the assessment and any amendment to the assessment book to be completed during the relevant official year. It also pointed out that the corporation had neither amended the assessment book during those years nor issued the notice required under Rule 20 before revising the assessments.

After examining the statutory framework, the high court ruled that Rule 21A required the Commissioner to initiate reassessment within one year from the date the relevant facts came to his notice.

The bench noted that the corporation had not produced any evidence to show when the Commissioner first became aware that Krupa Petroleum had taken over the operation of the petrol pump. Without establishing that date, it could not rely on Rule 21A to reopen the assessments years later.

The court observed, "For initiation of proceedings under Rule 21, there must be a knowledge to the Commissioner about the change in the status of the property and there is a limitation of one year to take action."

Holding that the retrospective demand notices were contrary to the GPMC Act and the Taxation Rules, the high court dismissed the appeals and upheld the Small Causes Court's decision declaring the notices invalid.

For Appellant: Nikunt K. Raval

For Respondent: Ajay R. Mehta