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High court dismisses petitions against local body tax
October, 07th 2014

The Bombay high court dismissed petitions challenging 'Local Body Tax' or LBT - a levy that replaced 'octroi' in many cities in the state. Civic employee unions had challenged the constitutional validity of LBT in the court.

The petitions were filed by employee unions of civic bodies of Thane, Navi Mumbai, Pune, Pimpri-Chinchwad and Nagpur, challenging introduction of LBT in 16 cities in the state - including Thane, Navi Mumbai and Pune. The unions argued that LBT would lead to a financial crisis at civic bodies, which saw 44% to 57% of revenue from octroi.

The judges, however, said: "We do not see how a mere direction to impose Local Body Tax and levy it within municipal limits in lieu of octroi could be said to be destructive of the constitutional scheme."

The judges also observed that they did not find any basis for the complaint that revenue collection would be adversely affected and cause strain on the budget. "Municipal funds are (in) no way decreased or burdened merely because another tax is to be imposed in lieu of octroi," they said.

Counsel for the civic staff unions, advocate Neeta Karnik, contended that the financial condition of the municipal bodies would become precarious in the absence of regular income generated from octroi.

However, advocate Sandeep Shinde and government pleader A B Vagyani who represented the state, justified the local body tax and pointed out that the rates of LBT and octroi were the same, with revenue going to the respective municipal corporations.

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