Tax Levies — Property, Profession, Entertainment, Advertisement

A municipality is, above all, a taxing authority. The Kerala Municipality Act, 1994 hands the urban local body its principal revenue engines — property tax, profession tax, advertisement tax and a clutch of minor imposts — but it chains every one of them to Article 265 of the Constitution: no tax may be levied or collected except by authority of law. For the judiciary and CLAT-PG aspirant the examinable core is not the rate but the procedure: what the Council must resolve, what the Secretary must assess, and when a demand collapses for want of either. This note maps the four levies, the statutory machinery behind each, and the case law that has policed the boundary between a valid levy and an illegal exaction.

The constitutional anchor: Article 265 and the Twelfth Schedule

Municipal taxation is a delegated power. Article 243-X of the Constitution, inserted by the Seventy-Fourth Amendment, authorises a State legislature to empower municipalities to levy taxes; the Kerala Municipality Act, 1994 is that empowering law, enacted in line with Part IX-A and the Twelfth Schedule. Every levy therefore traces back to Article 265 — “no tax shall be levied or collected except by authority of law” — which the Kerala High Court has repeatedly treated as the master switch for property tax demands. A municipality cannot invent a tax, nor levy at a rate, nor collect by a method the Act does not sanction. This constitutional discipline is the thread running through every section below, and it explains why courts strike down demands not for being excessive but for skipping a statutory step. For the wider scheme of municipal powers see our introduction and constitutional background and the Kerala Municipality Act hub.

Section 230: the enumeration of taxes

Section 230 is the gateway provision. It enumerates the taxes and duties a municipality may levy — property tax, profession tax, advertisement tax, tax on timber brought into the area, and such other taxes as the Government may authorise — and it conditions the levy on a resolution of the Council, subject in many cases to Government approval and prior publication. The structure is deliberate: the Council decides whether and at what rate to levy within the statutory ceiling, the Government supervises, and only then does the Secretary's assessment machinery engage. The enumeration is exhaustive in the sense that a municipality possesses no residuary taxing power; anything outside Section 230 and the sections that follow it is, by Article 265, beyond authority. Property tax is then elaborated by Sections 233 onward, profession tax by Sections 245 to 254, and advertisement tax by Section 271 — each examined below.

Property tax: Section 233 and what it comprises

Property tax is the backbone of municipal finance. Section 233 authorises the levy of property tax on buildings and lands within the municipal area, and the tax is a composite: a general purpose component plus service components — lighting, sanitation, drainage and water cess — worked out under the Kerala Municipality (Property Tax, Service Cess and Surcharge) Rules, 2011. The charge is on the building or land, assessed on annual value or, under the reformed plinth-area system, on floor area, age, use and zone. Crucially the levy is not self-executing: the Council must first resolve the rate within the band Section 233 prescribes, the rate must be notified, and only a notified rate can support an individual assessment. This separation of levy (the Council's general resolution) from assessment (the Secretary's application to a particular property) is the fault line on which most property-tax litigation turns. The charge attaches to the building or land irrespective of ownership of the soil, and exemptions are read strictly: places of public worship, burial grounds and buildings used for educational or charitable purposes may be relieved only where the Act and notified rules expressly provide, the burden of establishing exemption resting on the claimant. The annual revision cycle, the right of the assessee to appeal an assessment, and the limitation within which the municipality must act all flow from this same statutory frame, so that a property-tax dispute is almost always a dispute about whether one of these procedural conditions was satisfied.

No levy, no assessment: the Section 233 procedure

The Kerala High Court has held in Perinthalmanna Municipality v. Abdul Kareem that property tax cannot be levied without following the statutory assessment procedure under Section 233. The court reasoned that in the absence of a valid levy there can be no assessment and no collection, because the mandate of Article 265 requires both the levy and the collection of a tax to be backed by the authority of law. A demand raised without the prior resolution and notification, or without the prescribed assessment steps, is therefore void — not merely irregular. The decision is a clean illustration of the levy/assessment distinction: a municipality that jumps straight to a demand notice, however genuine the underlying liability, has acted without authority of law. For aspirants the takeaway is that procedure under Section 233 is jurisdictional, not directory, and its omission is fatal to the demand.

Section 242: penalty tax confined to unlawful buildings

Section 242 empowers a municipality to impose tax and penalty in respect of buildings constructed or reconstructed in breach of the Act. In Dr. P.J. Joy v. The Corporation of Kochi (2024:KER:26055) a Division Bench of the Kerala High Court read the provision narrowly. The Corporation had sought to levy tax and penalty on a lawfully constructed building merely because it lacked fire and pollution clearances. The court rejected this, holding that Section 242 is attracted only where the building itself is constructed or reconstructed unlawfully, or where such an unlawfully constructed building is put to a use mentioned in Section 233(2); mere absence of operational certificates on a lawfully built structure does not trigger the penal levy. The case confirms that penal taxation provisions are construed strictly against the revenue, and that Section 233(2) qualifies, rather than expands, the charge.

Profession tax: Sections 245 to 254

Profession tax falls on persons who carry on a trade, profession, calling or employment within the municipal area, and on companies and persons transacting business there. Section 245 fixes the net: it reaches companies transacting business in the area for not less than sixty days in a half-year, persons exercising a profession within the area, and those who reside in the area while drawing income from employment or investments. The levy is half-yearly. Section 254 governs the tax on salaried employees, with the Secretary issuing notices in May and November requiring employers to furnish salary details, and the employer remitting by August and February. The slabs are graduated by half-yearly income, beginning above the statutory threshold and rising in bands; the related chapter on funds, property and liabilities situates this revenue within the Municipal Fund.

The Article 276 ceiling on profession tax

Profession tax is unusual in that the Constitution itself caps it. Article 276(2) provides that the total amount payable by any one person to the State and all local authorities together by way of taxes on professions, trades, callings and employments shall not exceed two thousand five hundred rupees per annum. That ceiling was raised from the original two hundred and fifty rupees by the Constitution (Sixtieth Amendment) Act, 1988. A municipal slab that pushed an individual's aggregate profession-tax liability past Rs 2,500 a year would be pro tanto unconstitutional, and the Kerala slabs are calibrated to stay within it — the top half-yearly bracket sits at Rs 1,250, doubling to exactly Rs 2,500 a year. This is a favourite examiner's hook: profession tax is a State subject under Entry 60 of List II, but its quantum is constitutionally fenced, distinguishing it sharply from property and advertisement taxes, which carry no such constitutional cap.

Advertisement tax: Section 271 and the permission regime

Section 271 levies a tax on advertisements. Every person who erects, exhibits, fixes or retains on or over any land, building, wall, hoarding or structure any advertisement, or who displays an advertisement to public view in any place, public or private, must pay tax at rates the Council determines with Government approval and subject to notified exemptions. The levy is buttressed by a control regime: once the tax is in force, no advertisement may be erected or displayed without the written permission of the Secretary, and unauthorised advertisements may be removed. The tax thus does double duty as revenue and as a planning and aesthetic control over hoardings. The permission requirement is independent of the tax: a person may be liable to pay even where permission was never sought, and may simultaneously face removal of the offending hoarding and prosecution for displaying it without sanction. The recurring litigation question is jurisdictional in a different sense — not whether the procedure was followed, but whether the thing displayed is an “advertisement” at all. If it is not, the entire edifice of tax, permission and penalty falls away, which is why the meaning of the word, settled by the Supreme Court, becomes the decisive threshold question in almost every advertisement-tax dispute.

What is an advertisement? The ICICI Bank test

The leading authority on the meaning of “advertisement” for municipal tax is ICICI Bank Ltd v. Municipal Corporation of Greater Bombay (2005) 6 SCC 404, decided on 4 August 2005. The Corporation had treated illuminated signboards above the bank's ATM centres as taxable advertisements. The Supreme Court held that to qualify as an advertisement the display must primarily have a commercial purpose and be indicative of business activity — it must seek to influence the public to buy a product or service or attract them towards it. A mere name board that identifies the location or occupant of premises, without that commercial solicitation, is not an advertisement. The Court declined to rule the ATM boards taxable in the abstract and remanded the matter, directing the Corporation to examine, on the facts, whether the boards carried the flavour of commercial or business interest. Although decided under the Bombay Municipal Corporation Act, the commercial-purpose test is treated as the general standard and applies squarely to Section 271 of the Kerala Act.

Entertainment tax: a separate statute

Entertainment tax in Kerala is, for the urban local body, not found in the Kerala Municipality Act, 1994 itself but is levied through the Kerala Local Authorities Entertainments Tax Act, 1961, with an additional tax under the Kerala Additional Tax on Entertainments and Surcharge on Show Tax Act, 1963. Under that scheme the local authority collects a tax on payments for admission to cinemas and other entertainments, with surcharge on show tax stacked on top. The examinable point is one of legislative scheme: where property, profession and advertisement taxes live inside the Municipality Act, the entertainment levy is exported to dedicated statutes, and a question that asks for the “entertainment tax section of the Municipality Act” is testing whether the candidate knows there is none — the power is conferred by the 1961 Act and routed to municipalities as the assessing local authority. After the introduction of GST, the field of entertainment taxation has narrowed, but local-body entertainment levies on admissions survive as a constitutionally distinct head.

Timber tax and the minor imposts

Beyond the four headline levies the Act carries minor taxes that round out the enumeration in Section 230. Section 277 levies a tax on timber brought into the municipal area, with Section 278 prescribing the machinery for its collection. These are octroi-like imposts on a specific commodity entering the urban area and survive as small but settled revenue heads. The Act also contemplates Government-directed levies and the assignment of certain taxes by the Government to the municipality, alongside an escaped-assessment power that lets the Secretary reopen and bring to tax any property or person that has escaped the net for a prior period. Read together these provisions show a layered fiscal architecture: a closed enumeration, a Council resolution to activate each levy, a Secretary-driven assessment, and a residuary power to recover what was missed — all under the Article 265 leash.

Enforcement, recovery and the offence backdrop

A levy is only as good as its recovery machinery. Unpaid municipal taxes are recoverable as arrears of public revenue, with distraint, attachment and sale available against the defaulter's property, and interest and penalty riding on delayed payment of profession tax. Evasion — failing to furnish returns, displaying advertisements without permission, or obstructing assessment — is met by the penal provisions of the Act, which is why the taxation chapter cannot be read in isolation from Chapter XXIV on offences and procedures and the broader penalties framework. The constitutional discipline persists even here: recovery, like levy, must follow the statutory route, and a demand void for want of a valid levy cannot be salvaged by the recovery machinery, because under Article 265 collection too must be backed by authority of law.