No Double Tax After Building Regularization, Assessee Liable To Pay Tax At Regular Rate Only: Kerala High Court

Justice Ziyad Rahman A.A. stated that “once a regularization came into effect, the liability of the petitioners is to pay the tax at the regular rate, as the said building cannot be treated as unauthorised for that period.”

The assessees/petitioners are joint owners of a building of the 2nd respondent/Municipality. Earlier, notice was issued to the assessees by the 2nd respondent/Municipality on 11.01.2016 alleging that the assessee had carried out certain unauthorized construction in the said property.

A reply was submitted to the same, and the dispute with regard to the unauthorized construction was ultimately settled as per the order passed by the Government on 11.02.2022, directing regularization of the building.

An order was issued by the Town Planner for regularizing the building in compliance of Ext.P10 proceedings and the occupancy certificate (Ext.P12) was issued after regularization of the unauthorized construction.

Thereafter, notice (Ext.P13) was issued to the assessee, requiring him to pay the property tax along with twice the rate of tax treating the building as unauthorized. The said notice contained the period from 2016-2017, 2021-22 and 2022-2023.

The matter was taken up by the Government and ultimately the Government issued order (Ext.P14), wherein the demand of the tax arrears was directed to be confined to the period from 2019-2020 onwards.

A demand notice (Ext.P15) was issued by the 2nd respondent/Municipality in such circumstances, demanding tax by three times for the period from 2019-2020 to 2022-2023. Immediately, the assessee requested for exemption from payment of the property tax.

The assessee submitted that since Ext.P12 would indicate that the building is regularized with effect from 28.05.2022, it was not proper for the department/respondents to demand tax, double the rate along with the regular rate of tax, pertaining to the period after the said date.

The bench stated that “it is discernible from Ext.P14 that, the Municipality was directed to demand tax arrears for the period from 2019-2020 onwards. Ext.P15 is the demand notice issued based on Ext.P14. But in the said notice, while demanding tax at the rate of two times in addition to the normal rate, the demand was made for the period pertaining to 2022-2023 as well, which period is after the date of regularization.”

The building was regularized on 28.05.2022. Therefore, the 2nd respondent/Municipality could not have imposed two times of the normal tax along with regular rate of tax for a period after 28.05.2022, observed the bench.

In view of the above, the bench quashed the demand notice (Ext.P15) to the extent it contains the demand of property tax in respect of the building of the assessees/petitioners at the rate of two times of the normal rate pertaining to the period after 28.05.2022.

Case Title: Koovatt Laila v. State of Kerala

Citation - 2025 LiveLaw (Ker) 457

Case Number: WP(C) NO.21495 OF 2024

Counsel for Petitioner/Assessee: K. Praveen Kumar

Counsel for Respondent/Department: Deepa K.R.