Madurai Multi Functional Complex Private Limited v. Madurai Corporation & Others 

"Article 285(1) stands as an Iron dome which cannot be breached. Property of the Union of all kinds and hues can take shelter within it" 

Justices GR Swaminathan and M Jothiraman 

Source: Madras High Court 

Why in News?  

Recently, the bench of Justice GR Swaminathan and Justice M Jothiraman has held that Union property remains exempt from State taxation under Article 285(1) of the Constitution of India (COI) , regardless of commercial use. 

• The Madras High Court held this in the matter of Madurai Multi-Functional Complex Private Limited v. Madurai Corporation & Others (2025). 

What was the Background of the Madurai Multi Functional Complex Private Limited v. Madurai Corporation & Others Case? 

• The Railway Land Development Authority (RLDA) was constituted under Section 4A of the Railways Act, 1989 to develop vacant railway lands for commercial purposes. 
• RLDA entered into a lease agreement with Ircon Infrastructure & Services Limited in 2013 for developing railway lands throughout India.  
• Subsequently, Ircon entered into a 30-year sub-lease agreement with Madurai Multi Functional Complex Private Limited for a specific railway property in Madurai. 
• The multi-functional complex was constructed by Ircon on a 2700 square meter plot within the Railway Station premises in Madurai, and was later developed by the appellant company.  
• The Madurai Corporation assessed this building for property tax and issued a demand notice dated 3rd March, 2018, calling upon the company to pay half-yearly tax amounting to Rs. 10,07,623.  
• The company challenged this demand through a writ petition, which was initially dismissed by the single judge, leading to the current intra-court appeal. 
• The core dispute centered around whether the municipal corporation had jurisdiction to levy property tax on a building constructed on railway land and operated by a private company under a sub-lease arrangement, despite the land belonging to the Railways. 

What were the Court's Observations? 

• The Court observed that Article 285(1) of the Constitution provides absolute immunity to Union property from State taxation without any qualification regarding the nature or use of such property. 
  • The Court noted that the expression "property" in Article 285(1) is unqualified and must be understood in its absolute sense, covering all types of Union property whether vacant, constructed, used for public interest, or commercial purposes. 
• The Court observed that RLDA, despite being a statutory creation, lacks juristic personality and remains an alter-ego of the Railways without separate legal entity status. It cannot sue or be sued in its own name, lacks perpetual succession or common seal, and cannot hold properties independently.  
• The Court found that the lease agreements clearly retained title over both land and buildings with RLDA, which represents the Railways. 
• The Court observed that the assessment and levy of property tax is on the land and building, not on individuals or persons. Since the land admittedly belongs to Railways and the building title was never transferred to either Ircon or the appellant company, the entire property remains Union property entitled to constitutional immunity. 
• The Court observed that commercial use of Union property does not affect its tax exemption status under Article 285(1). The constitutional provision creates an "Iron dome" of protection that cannot be breached, sheltering all Union properties regardless of their utilisation.  
• The Court observed that since the appellant enjoys municipal facilities, the corporation may enter into special agreements for service charges while respecting the constitutional tax immunity. 

What is Article 285 of Indian Constitution? 

• Article 285 deals with Exemption of property of the Union from State taxation. 
• General Exemption Rule: The property of the Union of India is exempt from all taxes imposed by any State or authority within a State. 
• Parliamentary Override: Parliament can make laws to remove this tax exemption for Union property if it chooses to do so. 
• Pre-Constitution Exception: If any Union property was already being taxed by a State authority before the Constitution came into force in 1950, that taxation can continue. 
• Continuation Condition: The pre-existing taxation can only continue as long as the same tax is being levied in the same State. 
• Parliamentary Control: Parliament retains the power to stop even the pre-Constitution taxation through legislation. 
• Absolute Protection: Unless Parliament specifically provides otherwise, Union property enjoys complete immunity from State-level taxation. 
• Scope Coverage: The exemption applies to all types of Union property without qualification regarding their use or nature. 
• Authority Limitation: No State government or local authority can impose any tax on Union property without Parliamentary permission. 
• Practical Impact: This provision ensures that the Union government's property cannot be taxed by States, maintaining federal financial independence while allowing Parliament ultimate control over taxation policy.