Absence Of Formal Demand Notice For Property Tax During Pendency Of Litigation Does Not Absolve Assessee's Obligation To Pay: Kerala High Court

The Division Bench of Justices A.K. Jayasankaran Nambiar and P.M. Manoj stated that “The liability to pay the tax once assessed is on the assessee and in a situation where the assessee continuously pays the tax based on the assessment that is conducted, the mere fact that the Corporation did not choose to issue a demand notice for a period when the assessee refrained from paying the tax on account of pending litigation between the parties, and in the absence of any order staying the demand of such tax, cannot be a reason to prevent the Corporation from collecting the tax amounts at a later stage of the proceedings.”

In this case, the issue was with regard to the liability of the appellant/assessee to pay property tax for the unauthorised construction and occupancy of areas earmarked as recreational area and car park in the approved plan pertaining to the building, on the basis of which the construction was affected.

The grievance in the writ petition was essentially with regard to the demand of property tax made by the respondent/corporation for the periods from 2009-10 to 2021-22 when the assessee refused to pay the tax dues for the disputed areas by citing the pendency of litigation pertaining to the main dispute between the parties.

The Single Judge noticed the lapse on the part of the Corporation in not issuing the formal demand notices and exempted the assessee from the obligation to pay penal interest on the property tax dues.

The writ petition was disposed by quashing the impugned demand notices and directing the assessee to pay the tax as demanded, without the penal interest, but together with simple interest at the rate of 12% per annum from the respective due dates of payment for each financial year.

The main contention of the assessee was mainly that the Single Judge erred in confirming the demand of property tax that was made through notices, that had been issued in violation of the statutory periods prescribed under Section 539 of the Kerala Municipality Act.

The bench observed that it is also not in dispute that it was on account of the pending litigation between the Corporation and the assessee that the Corporation did not issue a formal demand notice for property tax in respect of the area under dispute, namely the portion of the building which was earmarked as recreational area and car park under the approved plan.

The bench stated that merely for that reason it will not be open to the assessee to refrain from paying the property tax which was otherwise due in respect of the building in accordance with the approved plan and in respect of which he had already obtained an occupancy certificate, and in fact occupied the premises.

“The non-issuance of a formal demand notice seeking recovery of the property tax dues in respect of the disputed areas can only result in deprivation of penal interest, that is due from the assessee to the Corporation,” opined the bench.

The bench deleted the portion of the judgment of Single Judge that directs the assessee to pay interest at the rate of 12% per annum.

In view of the above, the bench affirmed the findings of the Single Judge.

Case Title: Vinu Koshy Abraham v. Corporation of Cochin

Case Number: WA NO. 2085 OF 2023

Citation: 2025 LiveLaw (Ker) 313

Counsel for Appellant/ Assessee: P.G. Jayashankar, P.K. Reshma, S. Rajeev, Sajana V.H, Shaiju George and Aadersh R.S. Panicker

Counsel for Respondent/ Department: C.N. Prabhakaran

Click Here To Read/Download the Order