Madras High Court: Hostels for Working Men and Women Must Be Taxed as Residential Properties
The Madras High Court in M Divya v The Senior Revenue Officer has held that hostels for working men and women should be treated as residential properties, not commercial ones, for the purpose of property tax, water tax and electricity charges.
Justice Krishnan Ramasamy said that the financial burden of higher commercial tariffs would ultimately fall on hostel residents, most of whom belong to economically weaker backgrounds. The Court stressed that authorities must consider the service recipient’s perspective while fixing tax categories.
The Court noted that hostel owners only provide rooms for living and sleeping, which is a purely residential usage. Since there is no commercial activity happening inside the hostels, they cannot be classified as commercial establishments.
A batch of petitions had challenged the authorities’ move to change hostel taxes from residential tariff to commercial tariff. While municipal bodies argued that hostel owners run their facilities like a business and therefore commercial rates should apply, the Court disagreed.
The Court said that treating hostels as commercial units would unfairly charge more from poorer hostel residents, while people living in bungalows and apartments would continue paying lower residential tariffs. This, it said, goes against the intent of the law.
All demand notices raised against the petitioners were quashed. The authorities have been directed to levy taxes on these hostels at residential rates.
However, the Court clarified that this ruling is not automatically applicable to all hostels. Each case must be verified to ensure that the property is used only for residential purposes before granting this benefit.
