Madras High Court: Activities Carried Out In Hostel By Recipients Of Service Are Residential In Nature; Can’t Be Considered For Commercial Tariff

The Madras High Court held that the activities carried out in the hostel rooms by the recipients of service are only residential activities and hence, the usage of such properties cannot be considered for commercial tariff.

The Court held thus in a batch of various Writ Petitions filed against the demand notices issued by the concerned authorities.

A Single Bench of Justice Krishnan Ramasamy observed, “As far as petitioners are concerned, they are in the business of renting out their properties in the form of hostels for the working men/women and therefore, the commercial activities would not come into picture, i.e., the activities carried out in the hostel rooms by the recipients of service is only the residential activities. In other words, the hostel rooms are only used as residences/sleeping apartments by the inmates. Therefore, it is clear that the usage of petitioners' properties would fall within the purview of “residential premises, since no commercial activities are carried out therein.”

The Bench emphasised that the hostel rooms have been used as sleeping apartments by the inmates and thus, at any cost, the inmates of the respective hostels will not lose their status as ‘residents’ of the premises.

Advocate Aparna Nandakumar represented the Petitioners, while AGP C. Selvaraj represented the Respondents.

Brief Facts

The main contention of the Petitioners was that the impugned demand notices were issued by the concerned Respondents without any proper prior notice. In other words, no communication or intimation was given to the Petitioners before conversion of property tax, pertaining to the Petitioners' properties, from residential tariff to commercial tariff. Therefore, it was argued that the demand notices were issued in violation of principles of natural justice.

It was further submitted that the Petitioners who have been running hostel, would not fall under the category of commercial units/premises. The Petitioners’ contention was that they are providing accommodations to the people of economically weaker section and lower middle-class people and the inmates of the hostel rooms used to get lower amount of salary and hence, they will not be in a position to afford independent apartment/house/flat, etc., to reside therein.

Reasoning

The High Court in the above context of the case, noted, “If the contention of the respondents is accepted and different yardsticks are applied, then it would be a clear discrimination against the poor people. In other words, applying different yardsticks would result in charging twice the amount towards property tax, water tax, water charges and electricity charges for the inmates of the hostel under the pretext of classifying the hostels as commercial units. Even for the usage of water for their personal activities, such as taking bath, washing out the toilets, they are compelled to pay high rate of tax when compared to the people, who can afford to live in individual houses/apartments/bungalow, etc.”

The Court added that the said discrimination violates Articles 14 and 19(1)(8) of the Constitution. It remarked that the intention of our Legislation is not to squeeze the poor by way of imposing high rate of tax under commercial tariff and pass on the benefits to the rich by imposing low rate of tax under residential tariff for the very same nature of activities.

“Therefore, it is incorrect to levy double the amount towards property tax, water tax, water charges, etc., for a hostel, in which, when a person resides by treating it as a sleeping apartment. While levying tax, the respondents are supposed to have look from the perspective of recipient of service and not from the perspective of service provider. Thus, in the present cases, sharing hostel rooms by working women/men, after their avocation, is a “residential activity” and accordingly, every hostel rooms has to be treated as “residential unit”, unless and otherwise if it is used for any commercial activities”, it said.

The Court clarified that while imposing taxes, such as property tax, water tax, water charges and electricity charges, every hostel room has to be verified as to whether the activities carried out therein are residential in nature.

“… even in a house or a hut, if a person uses any portion thereof as a sleeping apartment, it will not lose its status as “residence”, due to his absence or since he is having another dwelling unit, in which he resides, if he is at liberty to return to such house at any time and has not abandoned his intention of returning. Hence, if a portion of the said house or hut is used as a sleeping apartment, the said house/hut has to be considered as “residence”, it observed.

The Court was of the view that the hostel rooms have to be treated as a “residential premises” even if the inmates are having another dwelling house elsewhere and hence, the Petitioners’ properties have to be considered as residential premises, for which, the Respondent is supposed to have determined the property tax, water tax, water charges, etc., by applying residential tariff.

“… it is clear that activities carried on at the petitioners' hostels are only residential in nature and it is not commercial. Therefore, the 1st issue is hereby answered by holding that the petitioners' property cannot be considered as commercial property and thus, the commercial tariff will not apply for the petitioners' properties”, it held.

The Court further observed that though an alternate remedy is available for the Petitioners in terms of Section 100 of the Tamil Nadu Urban Local Bodies Act, 1998, they can also agitate before the High Court by way of filing Writ Petitions on the aspect of violation of principles of natural justice and there is no bar for the Petitioners to approach the High Court without filing statutory Appeal, which will be filed only on the factual aspects and not on legal issues.

“When a legal issue raised, the same shall be entertained by this Court by invoking the powers available under Article 226 of the Constitution of India. Accordingly, the 2nd issue is also answered”, it also added.

Conclusion

The Court, therefore, concluded as follows –

i) The nature of activities carried on by the Petitioners is only residential in nature and accordingly, the residential tariff will apply for the purpose of levying the property tax, water tax and water charges for the Petitioners' properties.

ii) It is needless to state that if the property tax as well as the water tax are required to be collected in the residential tariff and ultimately, the electricity charges is also required to be collected only in the residential tariff.

iii) There is a clear violation of principles of natural justice. In these cases, no notice was issued to the Petitioners prior to the conversion of their properties from residential tariff into commercial tariff. Therefore, on this aspect also, the impugned notices are liable to be quashed.

“… this order cannot be followed in a blindfolded manner by all the hostels, unless and otherwise if they substantiate, before their case before the appropriate Authorities concerned or before any Court of Law, that the inmates are using the rooms only for the purpose of residential activities”, it clarified.

Accordingly, the High Court allowed all the Writ Petitions, quashed the impugned notices, and directed the Respondents to treat the Petitioners’ property as “residential unit” and levy the taxes, such as property tax, water tax and electricity charges.

Cause Title- M. Divya v. The Senior Revenue Officer (Case Number: W.P.Nos.10194 of 2025, etc., Batch)

Appearance:

Petitioners: Advocates Aparna Nandakumar, T. Saikrishnan, S. Senthil, N.K. Ponraj, and Kingston Jerold.

Respondents: AGP C. Selvaraj, Advocates (Standing Counsel) P. Prithvi Chopda, D. Ferdinand, K.N. Umapathy, Najeeb Usman Khan, N. Velmurugan, V. Vijayalakshmi, and D.R. Arunkumar.

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