In a significant ruling, the Madras High Court has held that tax concessions for vehicles used by educational institutions cannot be denied merely because the vehicles are registered in the name of the trust managing the institution rather than the school itself. The judgment was delivered by Justice G.K. Ilanthiraiyan in the case of M/s Bala Bhavan Educational Trust v. Regional Transport Officer (W.P. No. 7351 of 2017).
Background of the Case
The case revolves around the Bala Bhavan Educational Trust, which operates the Padma Seshadri Bala Bhavan (PSBB) Matriculation School and Bala Bhavan Primary School in Chennai. The Trust had been using buses for transporting its students and staff for various school-related activities. The buses were registered in the name of the Trust rather than the individual schools.
The dispute began when the Regional Transport Officer (RTO), Chennai, issued a demand notice dated November 30, 2016, requiring the Trust to pay a higher rate of road tax amounting to Rs. 9,51,300. The demand was made on the grounds that the buses were not registered in the name of the school’s Principal, Correspondent, or Manager, as required for availing concessional tax rates under the Tamil Nadu Motor Vehicles Taxation Act, 1974.
Legal Issues Involved
The primary legal issue in the case was whether vehicles used exclusively for school purposes, but registered in the name of a Trust managing the school, qualified for a concessional tax rate. The Trust argued that since its activities were solely related to running the educational institutions, the buses should be considered “educational institution buses” under Section 2(11) of the Motor Vehicles Act, 1988, and thus eligible for concessional tax rates.
The RTO contended that according to the Tamil Nadu Motor Vehicles (Regulation and Control of School Buses) Special Rules, 2012, vehicles must be registered in the name of the school to qualify for such concessions. The RTO argued that the Trust could be involved in other activities, including commercial ones, and therefore, the buses could be used for purposes other than school activities.
Quoting the relevant provisions, the court stated:
“The buses of the petitioner were used solely for the purpose of ferrying the school staff and students for activities such as sports/tournaments, educational trips, annual day programs, cultural events, and picking up and dropping students and staff from their residences to the school.”
The court further observed:
“The mere fact that the buses were registered in the name of the Trust and not directly in the name of the school does not change their nature as ‘educational institution buses’ under Section 2(11) of the Motor Vehicles Act.”
Justice Ilanthiraiyan referred to the Supreme Court’s decision in Escorts Farms Ltd. v. Commissioner, Kumaon Division, Nainital, U.P. (2004) 4 SCC 281, and held that where a Trust’s functioning and operations are solely in relation to the educational institution, the vehicles do not cease to be ‘educational institution buses’ merely because of the registration in the Trust’s name.
Key Observations from the Judgment
Justice Ilanthiraiyan noted:
“The objective of the legislation is to provide tax relief for vehicles used solely for educational purposes. Denying such relief on technical grounds, like registration in the Trust’s name, would defeat the purpose of the concessional tax provision.”
The court also rejected the RTO’s contention that the buses were liable for higher tax rates due to possible non-educational use, stating:
“The vehicles were registered and regularly renewed as educational institution buses. No evidence has been provided by the respondents to show that these buses were used for purposes other than those related to the school’s activities.”
Justice G.K. Ilanthiraiyan, while allowing the writ petition, quashed the impugned demand notice issued by the RTO. The court observed that the Trust’s primary and exclusive activity was to run the PSBB schools, and all its properties, including the buses, were used solely for educational purposes.
