Karnataka High Court Upholds Bengaluru's Uniform Property Tax On Five-Star Hotels, Rejects Article 14 Challenge

The Karnataka High Court has recently upheld the application of a uniform property tax slab to Five-Star Hotels under the Bruhat Bengaluru Mahanagara Palike (BBMP) Property Tax Rules, ruling that such hotels constitute a distinct and uniform class irrespective of where they are located in Bengaluru.

A Division Bench of Justice D.K. Singh and Justice T.M. Nadaf dismissed an intra-court appeal filed by M.R. Kodandaram, owner of Gokula Grand Hotel & Spa, challenging a Single Judge's refusal to interfere with a BBMP circular, demand notice, and the uniform property tax applicable to Five-Star Hotels.

"Five-Star Hotels constitute distinct and uniform class and therefore, imposing uniform tax on Five-Star hotels irrespective of their location does not violate any of the provisions of the Karnataka Municipal Corporation Act, 1976 or Bruhat Bengaluru Mahanagara Palike Property Tax Rules, 2009," the court ruled.

It added, "We are of the view that as Five-Star Hotels constitute a separate uniform and distinct class, irrespective of their location, applying uniform slab/tax on such hotels would not be in violation of Article 14 of the Constitution of India"

Kodandaram had argued that even among Five-Star Hotels, property tax should be determined based on the location of the hotel instead of applying a common tax slab across the city.

Rejecting the contention, the court observed that persons can be classified for taxation purposes so long as the classification satisfies the test under Article 14 of the Constitution.

It found that Five-Star Hotels form a separate, uniform and distinct class and that applying a common tax slab to them would not violate Article 14 of the Constitution.

While dismissing the appeal, the court granted limited relief on the question of penalty. It permitted the hotel owner to submit a representation before the BBMP Commissioner within three weeks regarding the penalty.

The court directed the Commissioner to decide the representation after giving the hotel owner an opportunity of hearing. It also ordered that no coercive steps be taken to recover the penalty until the representation is decided.

The court also directed the BBMP to first give the hotel owner an opportunity to reconcile the tax demand before issuing a fresh demand notice covering the tax, interest, and penalty.

Once the fresh demand notice is issued, the hotel owner will have three weeks to pay the tax and interest. The issue of penalty will be decided separately after the Commissioner considers the representation.

For Appellant: Advocate S.R. Kamala Charan for Pradeep S Sawkar

For Respondent: Advocate S.H. Prashanth for R2 and B. Ravindranath, AGA for R1