Introduction:

In the case B S Gupta AND The Commissioner & ANR [Writ Petition No. 46688 of 2017; 2025 LiveLaw (Kar) 223], the Karnataka High Court set aside a demand notice issued by the Bruhat Bengaluru Mahanagara Palike (BBMP) that sought to levy advertisement tax on non-commercial signage and hoardings installed by Gupta Education Trust’s educational institution on its own property. The case arose when BS Gupta, Secretary of Gupta Education Trust, challenged the BBMP’s notice issued under Section 134 of the Karnataka Municipal Corporation Act, 1976, contending that the tax was ultra vires and violated constitutional guarantees. Justice Sachin Shankar Magadum heard the matter and delivered a detailed judgment quashing the tax demand, clarifying the limits of the BBMP’s taxing powers under the Act.

Arguments of the Petitioner:

The petitioner, represented by Advocate Rajendra Kumar Sungay T P, argued that Gupta Education Trust is a registered charitable institution solely engaged in providing educational services through courses in commerce, science, and business administration. They submitted that the institution’s building is exclusively used for educational purposes, with no commercial activity undertaken in the premises. It was argued that the signage and boards displayed on the college building and on its premises were purely for institutional identification, providing necessary directions to students, parents, and staff. These signages did not contain any promotional or commercial content that solicited business or advertised third-party products. The petitioner contended that levying advertisement tax on such institutional signboards amounted to an unreasonable fiscal burden, and was not contemplated under the statutory scheme of Section 134 of the Karnataka Municipal Corporation Act, 1976. Furthermore, the demand notice, they claimed, violated Article 14 of the Constitution, which guarantees equality before the law, and Article 19(1)(g), which protects the right to practice any profession or carry on any occupation, trade, or business. According to the petitioner, the tax demand was wholly without jurisdiction and misconceived since the educational signage did not fall within the statutory definition of an “advertisement” as intended under Section 134, which requires a commercial or promotional character for any display to attract the levy. They emphasized that the signage was neither intended to attract public attention for commercial benefit nor did it advertise goods, services, or third-party offerings, but merely served as a means of identification for the educational institution.

Arguments of the Respondents:

On the other side, Advocate Mohan Kumar K V, appearing for the BBMP, defended the legality of the tax demand. The corporation maintained that the impugned notice was issued in accordance with Section 134 of the Karnataka Municipal Corporation Act, which authorizes municipal corporations to levy tax on advertisements, including signage and hoardings erected within their jurisdiction. The BBMP argued that the petitioner had installed large hoardings and signboards without prior permission from the corporation, and as such, the levy of advertisement tax was fully justified. The corporation contended that any signage or hoarding erected on a building constitutes an advertisement if it brings attention to the institution or activity conducted therein, thereby falling within the purview of taxable displays under the Act. It was submitted that requiring prior permission before erecting such signage is part of regulatory norms designed to maintain urban aesthetics and public order, and non-compliance justifies the imposition of tax as well as penal measures. The respondents insisted that the statutory powers of the BBMP under Section 134 were comprehensive and applied to all hoardings and signage, irrespective of whether they advertised third-party products or merely identified an institution. According to the corporation, the nature of the institution—whether commercial or charitable—did not exclude it from the ambit of taxation under the Act, since the display itself constituted an advertisement that warranted the levy of tax to regulate public spaces and prevent visual clutter.

Court’s Judgment:

Justice Sachin Shankar Magadum, after a meticulous review of the pleadings, statutory provisions, and relevant case law, allowed the petition, holding that the BBMP’s demand notice was unsustainable. The court observed that Section 134 of the Karnataka Municipal Corporation Act empowers the corporation to levy tax on advertisements that have a commercial or promotional character, with the legislative intent clearly requiring displays to attract public attention for commercial advantage. Referring to the language of the provision, the court highlighted that taxation under Section 134 cannot be extended to signage devoid of commercial content or promotional messaging. The bench noted that the signage and hoardings erected by Gupta Education Trust were fixed on the institution’s own property and merely served to identify the educational institution and provide directions within the campus. The court emphasized that these signages neither advertised goods or services nor induced the public to avail of any commercial offering, but were integral to the institution’s physical infrastructure and intended solely for informational purposes. It observed that treating such non-commercial institutional identifiers as advertisements liable for tax would amount to an unreasonable interpretation of the Act, imposing an arbitrary and unjustifiable fiscal burden on charitable educational institutions. The court ruled that while the BBMP is well within its rights to frame reasonable and non-arbitrary regulatory policies regarding the size, placement, or aesthetic impact of signboards in exercise of its planning and building control functions, the absence of commercial content in the signage excludes them from the scope of advertisement tax under Section 134. The bench also pointed out that the corporation had failed to provide any material showing that the signages in question carried promotional content or aimed at commercial gain. The court concluded that in the absence of such evidence, the tax demand was without jurisdiction and contrary to the legislative scheme. It further noted that if the corporation has concerns over the aesthetic impact or urban landscape issues related to institutional signage, it could always introduce uniform regulations under its planning authority, but those regulatory measures must not be conflated with the taxing power under Section 134. Accordingly, the court allowed the writ petition, quashed the tax demand notice, and directed the BBMP to consider the petitioner’s representation seeking exemption from advertisement tax, and to pass appropriate orders in accordance with law within eight weeks.