Municipal tax power after infrastructure transfer

The Supreme Court decided a batch of appeals arising from disputes over property tax in the TTC MIDC Industrial Area. The core question was whether the area fell within the jurisdiction of the Navi Mumbai Municipal Corporation, and if so, who could levy property tax once civic infrastructure was being maintained by the municipal body.

The appellants, industrial units in the MIDC area, argued that the land and infrastructure were developed and maintained by MIDC, so NMMC had no authority to levy or collect property tax, rates, cess, or similar levies. They also relied on the exemption under Clause 7(1) of the First Schedule to the MRTP Act.

The Court traced the statutory background, including the MID Act, the MRTP Act, and the creation of NMMC. It noted that the TTC Industrial Area and MIDC were notified areas, and that NMMC was later constituted for the new city of Navi Mumbai. On the facts, the Court held that the TTC MIDC Industrial Area falls within the jurisdiction of NMMC.

The Court drew a clear distinction between infrastructure charges and municipal taxation. MIDC was entitled to realise fee or service charges for providing infrastructure and amenities in the industrial area. However, the power to levy and collect property tax under Sections 127 and 128-A of the MMC Act lay only with NMMC.

On exemption, the Court held that MIDC and its unit or plot holders were exempt from payment of property tax only so long as MIDC continued to provide the infrastructure facilities and amenities. That exemption ceased once those facilities were handed over to NMMC under the agreement dated 01.12.2005. The Court added that if the transfer was phased, the exemption would end area-wise from the date of transfer.

The appeals were partly allowed on that basis.

Practical takeaway: in MIDC areas, municipal property tax liability turns on jurisdiction and the date on which civic functions are transferred to the local body.