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Reportable

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 1640 of 2015 (@ SLP(C) NO. 12269 OF 2014)

State of Kerala & Ors. ... Appellants

                               Versus

A.P. Mammikutty ... Respondent

J U D G M E N T

Dipak Misra, J.

The  respondent  invoked  the  jurisdiction  of  the  High

Court  of  Kerala  at  Ernakulam  under  Article  226  of  the

Constitution assailing the demand of luxury tax imposed on

a building that consists of 13 residential apartments.  The

Tahasildar who is the competent statutory authority under

the  Kerala  Building  Tax  Act,  1975  (for  brevity  “the  Act”)

imposed luxury tax on the building on the base of Section

5A  of  the  Act   vide  order  dated  1.10.2003  in  Ref

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B4-6435/03 whereby he had measured the plinth area of all

the residential  apartments and computed the tax treating

the same as a singular building.   

2. The learned Single Judge opined that the levy of luxury

tax of the entire building on the owner was not permissible

under the Act, for the scheme is to levy luxury tax for each

residential apartment, plinth area of which is in excess of

the limit provided under Section 5A of the Act.  It has been

further ruled by the learned Single Judge that if the plinth

area  of  each  residential  apartment  was  below  278.7  sq.

mts., there was no scope of levying luxury tax.  And if the

concerned Tahsildar had found that the plinth area of the

residential apartments in toto was above 278.7 sq. metres,

the luxury tax for such apartments could be demanded, the

writ  petition  was  disposed  of  with  the  direction  that

Tahsildar  would verify  the  plinth area of  each residential

apartment  and  levy  luxury  tax  only  for  such  of  the

residential apartment plinth area of which was in excess of

the limit provided under Section 5A of the Act.  The relevant

part of the opinion expressed by the learned Single Judge is

reproduced below:-  

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“Even though petitioner is the owner of the entire building, luxury tax is leviable only if the plinth area of each residential apartment is in excess of the limit provided under Section 5A of the Kerala Building  Tax  Act.   Tahsildar  has  demanded luxury tax by clubbing the plinth area of various residential  apartments.  This is not permissible under the Act and the scheme is to levy luxury tax for each residential apartment, plinth area of which  is  in  excess  of  the  limit  provided  under Section  5A  of  the  Act.   If  plinth  area  of  each residential apartment is below 278.7 sq. meters then  there  is  no  scope  for  levying  luxury  tax. However, if Tahsildar on inspection finds that the plinth area of any residential apartment is above 278.7 sq. metres, then he can demand luxury tax for such of the apartment or apartments.”

3. Being aggrieved by the aforesaid judgment and order

passed by the learned Single Judge dated 12.06.2008 the

State of Kerala and its functionaries preferred writ appeal

No. 2150 of 2008.  The Division Bench referred to Section

5A  of  the  Act,  dictionary  clause  contained  in  Section  2,

especially, Section 2 (k) and the Explanation II to Clause (e)

of Section 2 and came to hold that if there is one building

having more than one floor  and they  are inter-connected

with each other and if  one floor is of no use without the

existence of another floor, then it has to be considered as

one building.  The Division Bench further proceeded to state

that as there were 13 independent flats or apartments and

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each  of  the  building  could  be  used  on  its  own  without

reference to the other apartment, the question of taking the

measurement  of  another  building  to  calculate  the  plinth

area  would  not  arise.   The  conclusion  recorded  by  the

Division Bench reads as follows:-

“For the purpose of calculating the plinth area, if the intention of the legislature was to adopt the entire  Explanation  (2)  to  clause  (e)  even  with reference to proviso to 2(k) there was no need to mention the aggregate area where a building has more than one floor.  The very reference to more than  one  floor  of  a  building  would  explicitly mean, if read along with the proviso that whether the building is a single unit so far as functional use  is  concerned,  or  separate  units,  so  far  as functional utility of the building.  If there is one building having more than one floor and they are interconnected with each other, in other words, if one  floor  is  of  no  use  without  the  existence  of another floor, then it has to be considered as one building.  Therefore, if there are 13 independent flats  or  apartments and if  each of  the building could be used on its own without reference to the other  apartment,  the  question  of  taking  the measurement of another building to calculate the plinth area would not arise.”

4. The singular question that emanates for consideration

is  whether  under  the  provisions  of  the  Act,  the  revenue

authorities  are  entitled  to  levy  the  demand of  luxury  tax

from  the  respondent  by  clubbing  the  plinth  area  of  the

apartments which are 13 in number or the plinth area of

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the individual apartment should be taken into consideration

for levy of the said impost.  

5. Relying on Section 2(e) of the Act, it is contended by

the learned counsel for the State that on a plain reading of

Explanation  II,  it  is  vivid  that  a  building  consisting  of

different apartments or flats can be deemed to be a separate

building, if two conditions, namely, that the apartments or

flats  are  owned  by  different  persons;  and  the  cost  of

construction  of  the  building  has  been  met  by  all  such

owners jointly, are satisfied.  The submission of the learned

counsel for the appellants is that the ownership of all the 13

apartments rests with the respondent himself and the cost

of  construction having been singularly borne by him, the

twin conditions enshrined under the Explanation II are not

satisfied,  and,  therefore,  it  is  impermissible  to  treat  the

individual apartments of the building as different buildings.

Learned  counsel  would  emphasise  that  the  situation

envisaged under Explanation II to Section 2(e) would arise

in a situation where the apartments are pre-booked by the

buyers and whole consideration is paid in advance to the

builder  thereby  satisfying  the  condition  of  separate

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ownership and joint meeting of costs.  Reliance has been

placed on Section 5A of the Act and other definitions under

Section 2 and on that basis, it is urged that the plinth area

as prescribed is  far  excess of  the same inasmuch as the

residential portion of the building is 590.4 sq.mts.   

6. The  submission  of  the  learned  counsel  for  the

respondent is that the Explanation II to Section 2(e) has no

application for the levy of luxury tax, for it is only applicable

for the purpose of levy of building tax.  It is argued by him

that levy of luxury tax is only for a residential building and

the reference to building in Explanation II  in Section 2(e)

does not apply to a residential building.   Learned counsel

has drawn distinction between “residential building” and a

“building” by drawing our attention to Section 2(l) of the Act.

It  is  propounded by him that none of  the 13 apartments

individually  have  the  plinth  area of  more  than 278.7  sq.

mts. and hence, the proviso to Section 5A of the Act is not

applicable to the present case.  It is contended that demand

has to be made for the residential apartments and not for

the owner who is holding the whole unit.  Elaborating the

said stand, it is submitted that there cannot be clubbing of

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the  residential  apartments  together  for  the  purpose  of

imposition of luxury tax.  

7. To appreciate the rival submissions, it is necessary to

extract  the  relevant  part  of  Section  2(e),  which  defines

“building”.  It is as under:-

“ “Building” means a house, out-house, garage or any other structure, or part thereof, whether of masonry, bricks, wood, metal  or other material but does not include any portable shelter or any shed constructed principally  of  mud,  bamboos, leaves,  grass,  thatch  or  a  latrine  which  is  not attached to the main structure.

[...]

Explanation  II:  Where  a  building  consists  of different apartments or flats owned by different persons  and  the  cost  of  construction  of  the building  was  met  by  all  such  persons  jointly, each such apartment or flat shall be deemed to be a separate building.”        [Emphasis supplied]

8. Section 2(k) of the Act, which defines the “plinth area”,

reads as follows:-

“plinth area” means the area included in the floor of a building and where a building has more than one floor the aggregate area included in all the floors together:      [Emphasis supplied]

Provided that in case of a building referred to in the Explanation (2) to clause (e), the plinth area shall be calculated separately.”  

9. Section  2(l)  of  the  Act  that  defines  “residential

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building”, is as follows:-

“‘residential  building’  means  a  building  or  any other structure or part thereof built  exclusively for  residential  purpose including out-houses or garages appurtenant to the building for the more beneficial  enjoyment  of  the  main  building  but does not include hotels, boarding places, lodges and the like.”

10. Section 5A stipulates charge of luxury tax.  The said

provision, being of significance, to deal with the controversy

in hand, is reproduced below:-

“5A. Charge of  luxury tax.- (1)  Notwithstanding anything  contained  in  this  Act,  there  shall  be charged  a  luxury  tax  of  two  thousand  rupees annually  on  all  residential  buildings  having  a plinth area of 278.7 square metres or more and completed on or after the 1st day of April, 1999.   

11. As is evident, the aforesaid provision commences with

a  non-obstante  clause,  and,  therefore,  has  to  be  given

primacy  over  the  other  provisions  of  the  Act.   It  clearly

provides  that  luxury  tax  of  Rs.2,000/-  is  payable  by  the

owners of all  residential  buildings constructed on or after

1.4.1999 having plinth area of 278.7 sq.mts. or more.  In

the  instant  case,  there  is  no  cavil  over  the  fact  that  the

building in question consists of  three storeys and has 13

apartments/ flats.  There is no dispute over the fact that the

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aggregate area is more than 278.7 sq.mts.  The controversy

that has emerged is what is meant by the term “residential

building” and whether each of the 13 apartments constitute

a separate building or is a singular building for the purpose

of levy of luxury tax.  There is no quarrel over the fact and it

is also manifest that each of the residential apartments has

the plinth area of  less than 278.7 sq.mts.,  but  when the

entire plinth area of 13 apartments is taken by applying the

method of clubbing or when the plinth area is aggregated, it

exceeds 278.7 sq.mts.  It is the admitted position that the

building has been constructed after 1.4.1999, that is, the

date provided in Section 5A of the Act.  

12. Section 2(k) of the Act defines the term “plinth area”

and  Section  2(l)  of  the  Act  defines  the  term  “residential

building”.  We have already quoted the aforesaid provisions.

As  we  notice,  the  term  “plinth  area”  means  the  area

included  in the  floor  of  a  building  and where  a  building

consists of  more than one floor,  aggregate area of  all  the

floors  and  hence,  the  plinth  area  can  include  the  entire

construction,  that  is,  the  floor  area  of  a  multi-storied

building.  The  question  would  still  arise  whether  different

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apartments owned by separate persons can be clubbed and

aggregated in a multi-storied building.  The proviso thereto

states  that  the  plinth  area  of  an  entire  building  can  be

separated.  It is postulated therein that in case of a building

when Explanation II to Section 2(e) is attracted, the plinth

area  should  be  calculated  separately.   The  issue  which

requires examination and apposite answer is  whether the

Explanation  II  to  Section  2  (e)  as  an  ameliorative  and

beneficial  provision,  restricts  and  debars  calculation  and

computations of plinth area of each independent apartment

by different owners in a multi-storied building.    

13. Having dealt  with the concept of  plinth area and its

applicability  in  the  backdrop  of  the  provision,  we  are

required  to  scan  the  definition  of  “building”.   As  noted

earlier, “building” has been defined in Section 2(e) of the Act

to mean a house, out-house, garage or any other structure,

or part thereof.  The construction can be masonry, bricks,

wood, metal or other material.  It does not include portable

shelter or sheds including a latrine which is not attached to

the  main  structure.   Explanation  II  is  the  fulcrum  that

would  determine  the  question  that  has  emanated  for

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consideration in this case.  The said Explanation lays the

stipulation  that  when  a  building  consists  of  different

apartments or flats owned by different persons and cost of

the  building  has  to  be  met  by  all  such  persons,  each

apartment or flat is deemed to be a separate building.  On a

dissection  of  the  said  provision,  it  appears  that  said

Explanation would apply when there is a building; that the

building must consist of different flats or apartments; that

each apartment or flat must be owned by different persons

and cost of construction of the building must have been met

jointly, and in such cases plinth area cannot be clubbed.

Learned counsel for the appellant-State has submitted that

as there has been no contribution of funds at the time of

construction.  The Explanation II to Section 2(e) would not

be applicable and the respondent has to be treated as the

sole owner.  As we perceive, Explanation II to Section 2(e)

takes care of a situation where the building is constructed

and there are different owners who have paid the purchase

price  for  their  respective  apartments.   The  Explanation

should not be read as a negative provision, detrimental and

fatal  to  cases  where  there  are  separate  owners  of  the

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apartments,  for  that  is  not  the  basic  object  and purpose

behind the Explanation II to Section 2(e) of the Act. It is a

benevolent  and  beneficial  provision  which  has  not  been

enacted to curtail and nullify what is logical and apparent to

reason.    

14. In  this  context,  it  is  imperative  to  analyse  what  is

meant  by  “residential  building”.   The definition  in  clause

2(l), means a building or any other structure or part thereof

used  for  residential  purpose  and  house  or  out-house  or

garage  appurtenant  to  a  building  for  more  beneficial

enjoyment. It excludes hotels, boarding places, lodges and

the like.  Thus, the expression “residential building” cannot

be interpreted without reference to the term “building” and

Explanation II  to Section 2(e) of the Act.  Therefore, each

residential  building  owned  by  single  owner  would  be

subjected  to  luxury  tax,  if  it  has  the  plinth  area  which

exceeds 278.7 sq.mts.  It makes no difference whether the

residential building consists of one floor or it is two-storied

or three-storied or consists of multiple flats or apartments.

The entire plinth area in the residential building owned by a

singular owner is required to be aggregated.  It is noticeable

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that Section 5A does not refer to aggregate plinth area of all

the floors.  The intention of the legislature is apparent that

if a person is the owner of the plinth area of 278.7 sq.mts or

more  in  one  building,  even  if  it  consists  of  separate  or

distinct apartments, he would be liable to pay the luxury tax

under Section 5A of the Act.  It also becomes further clear

when  the  definition  of  “plinth  area”  in  Section  2  (k)  is

properly appreciated.  It clearly postulates that “plinth area”

means the area included in the floor of  the building and

where  building  has  more  than  one  floor  aggregate  area

included in all the floors are taken together. The proviso to

the  said  definition  lays  down  that  in  case  of  a  building

referred to in the Explanation II  to clause (e),  the “plinth

area” shall be calculated separately.  Thus, Section 2(k) has

an  insegragable  nexus  with  the  definition  of  “building”.

Explanation  II  to  Section  2(e)  which  defines  “residential

building”  only  conveys  about  the  building  meant  for

residential purpose and what it includes.  Section 5A is the

charging  Section  and  as  has  been  stated  earlier,  it

commences with a non-obstante clause.  It determines the

annual  luxury  tax  on  all  residential  buildings  having  a

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plinth area of 278.7 sq. mts. or more.  It provides a date for

completion  that  is  1st April  1999.   Though,  it  does  not

provide  for  aggregate  it  refers  to  residential  building

definition of which refers to a building.  Section 2(k) defines

“plinth  area”  of  the  building.   Section  5A  also  includes

“plinth area”.  Though the term “aggregate” is not mentioned

but the words therein are buildings having plinth area and

in  that  context  one  is  required  to  scan  and  analyse  the

meaning  of  the  term “building”  and  the  “plinth  area”  as

defined  under  Section  2(e)  and 2(k)  respectively.   “Plinth

area” as defined clearly provides that when one building has

more  than one  floor,  the  aggregate  area  includes  all  the

floors.   To give an example,  a building consisting of  four

storeys belongs to a single owner, the aggregate of all the

floors are to be included for calculation of the plinth area

and thereby the computation of the luxury tax has to be

determined as provided under Section 5A.  Be it noted, the

proviso to Section 2(k) clearly stipulates that if a building as

referred falls under Explanation II to Section 2(e), the plinth

area  shall  be  calculated  separately.   The  Explanation  II

refers  to  different  apartments  or  flats  owned  by  different

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persons.  It also states that the cost of the construction of

the building is to be met by all such persons jointly.  This

Explanation,  as noted before,  is required to be appositely

understood.  The learned counsel for the state would submit

that  if  there  is  initial  booking  and  the  persons  have

contributed  for  the  construction  definitely  there  shall  be

separate  computation.  The Explanation II  has to  be read

with Section 5A which starts with a non-obstante clause.

Section  5A  as  has  been  mentioned  before  refers  to

“residential building” having plinth area 278.7 sq. mts. or

more and, therefore, the said provision also takes note of

this  definition.   In  view  of  the  above,  the  contention

advanced by the learned counsel for the State is difficult to

accept.   The  definitions  have  to  be  given  a  proper

construction.  There can be a case where the owner erects a

multi-storied building consisting 10 floors.  He builds it at

his own cost and thereafter he sells the apartments or flats

to 10 persons and in that event he ceases to be the owner of

the building.  The 10 purchasers become the owners of flats

and in such a situation it will lead to an absurdity because

one single person who once owned the entire building or

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several apartments, though has ceased to be the owner in

law yet is asked to pay the luxury tax solely on the ground

that at the time of construction there was no contribution

by the purchasers or to put it differently there had been no

prior booking.  This is not the intention. The Explanation II

to Section 2(e) has to be read harmoniously with proviso to

Section 2(k) and Section 5A of the Act.  The intention of the

legislature as gatherable is that ownership of different flats

and the cost of construction of building are met by all such

persons.    The  meeting  of  the  cost  jointly  is  not  to  be

narrowly  construed  to  mean  that  there  has  to  be  an

investment before the commencement of the construction of

the building.  The persons who purchase afterwards they

really share the value of the construction cost apart from

the profit margin due to the builder or the seller.  Unless

such an interpretation is placed, the original owner of flats

when  he  ceases  to  be  the  owner  of  the  building  or  the

purchaser  of  a  small  apartment  less  then  278.7  square

meters  would  still  be  liable  to  pay  luxury  tax.  Such  an

interpretation would lead to absurdity.   

15. In our considered opinion, the principle of  purposive

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interpretation of the provision has to be adopted and when

such a construction is placed, it serves the legislative intent.

To elaborate,  a  person may have  a  three-storied  building

and he owns it, then there has to be different computation

as per the main part of Section 2(k) and for that it has to be

calculated as is done by the revenue authority.   Once he

ceases  to  be  the  owner,  he  will  not  be  liable  to  pay  the

luxury tax.  But as long as he continues to be the owner, as

per Section 5A, he will be liable to pay the luxury tax for all

floors/apartments subject to the cap provided under Section

5A of the Act.  In this context we may refer to the decision in

State  of  T.N.  v.  Kodaikanal  Motor  Union  (P)  Ltd.1

wherein this Court, after referring to K.P. Varghese b. ITO2

and Luke v. IRC3, observed thus:-  

“The  courts  must  always  seek  to  find  out  the intention  of  the  legislature.  Though  the  courts must find out the intention of the statute from the language used, but language more often than not is an imperfect instrument of expression of human thought. As Lord Denning said it would be idle to expect every statutory provision to be drafted with divine prescience and perfect clarity. As Judge Learned Hand said, we must not make

1 (1989) 3 SCC 91 2 (1981) 4 SCC 172 : 1981 SCC (Tax) 293 3 (1964) 54 ITR 692 : 1963 AC 557 (HL)

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a fortress  out  of  dictionary but  remember  that statutes  must  have  some  purpose  or  object, whose  imaginative  discovery  is  judicial craftsmanship.  We  need  not  always  cling  to literalness and should seek to endeavour to avoid an unjust or absurd result. We should not make a mockery of legislation. To make sense out of an unhappily worded provision, where the purpose is apparent to the judicial eye ‘some’ violence to language is permissible.”

16. In Keshavji Ravji and Co. v. CIT4 it has been held by

this  court  that  when  in  a  taxation  statute  where  literal

interpretation leads to a result that does not sub-serve the

object of the legislation another construction in consonance

with the object can be adopted.  

17. In the case at hand, as is noticeable, the learned Single

Judge had remanded the matter to the revenue authority

and  the  Division  Bench  has  declined  to  interfere.   The

Division Bench has applied the functional unit test.  We do

not accept the same.  The learned Single Judge, as we have

reproduced a paragraph hereinbefore, has opined that when

the plinth area of any residential apartment is above 278.7

sq. mts., then the authority can demand luxury tax for such

apartment or flat.  Be it noted, the learned Single Judge has

4 (1990) 2 SCC 231

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held  that  even  if  the  person  is  the  owner  of  the  entire

building  the  computation would be  apartment-wise.   The

said analysis  is  also incorrect.   We have given purposive

interpretation to Explanation II  as it  has to be read with

Section  5A  of  the  Act.   When  the  owner  parts  with  the

building each apartment will be segregable for the purpose

of luxury tax.   If he remains the owner for the whole or part

then he will be liable to pay for the plinth area in respect of

the flats or apartments that is retained by him subject to

the cap as envisaged under Section 5A of the Act.  If he sells

away  the  entire  building  then  it  has  to  be

flat/apartment-wise  calculation/computation,  for  every

apartment owner is  different  than the  others.   Thus,  the

plinth  area  would  be  different.   To  clarify  further,  if  a

singular person purchases three flats, he will be liable on

the  basis  of  aggregate  plinth  area  subject  to  the  cap

envisaged under Section 5A of the Act.   

18. In view of the aforesaid, we allow the appeal and set

aside the order of the revenue authority and that of the High

Court in writ petition and the writ appeal, and remand the

matter to the revenue authority to compute the luxury tax

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in the manner which we have clarified hereinabove.  There

shall be no order as to costs.   

.............................J. [Dipak Misra]

..........................., J. [Prafulla C. Pant]

New Delhi July 1, 2015   

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