New Manek Chowk Spinning and Weaving
Mills Co. Ltd. and O Vs. Municipal Corporation Of The City of Ahmadabad &
Ors [1967] INSC 36 (21 February 1967)
21/02/1967 MITTER, G.K.
MITTER, G.K.
RAO, K. SUBBA (CJ) SHAH, J.C.
SHELAT, J.M.
BHARGAVA, VISHISHTHA
CITATION: 1967 AIR 1801 1967 SCR (2) 679
CITATOR INFO:
F 1967 SC1916 (3) R 1969 SC 378 (5) F 1970
SC1133 (13) F 1970 SC1292 (2,3) F 1972 SC 828 (23,26) R 1972 SC 845 (30) F 1975
SC1234 (2,3,6,9,10) F 1980 SC1789 (36) R 1983 SC 762 (14,16) D 1988 SC 322 (1)
R 1990 SC 85 (22)
ACT:
Bombay Provincial Municipal Corporation Act
(49 of 1949)Levy of proper tax on textile factories at flat rate per 100 sq.
ft. of floor areass-Method whether permissible under Act-Whether violative of
Constitution of India, Art. 14Machinery specified by Commissioner to be
included in the term 'land' for the purpose of taxation-Rules 7(2) and (3)
giving power to Commissioner to specify such machinery without giving
guidance-Rules whether suffer from excessive delegation.
HEADNOTE:
The petitioners were certain textile mills of
Ahmadabad.
They filed writ petitions under Art. 32 of
the Constitution against assessment to proper tax by the Corporation of the
City of Ahmadabad under the provisions of the Bombay Provincial Municipal Corporation
Act, 1949. The following contentions fell for consideration : (i) The method of
adopting a flat rate for a floor area for determining the annual value adopted
by the Corporation was against the provisions of the Act, as well as against
all recognised principles of valuation for the purpose of rating; it was also
violative of Art. 14; (ii) Rules 7(2) and (3) made under the Act gave unguided
power to the Commissioner to specify machinery to be treated as part of the
'land' for the purpose of taxation and therefore were bad due to excessive
delegation. They also fell beyond the ambit of Entry 49 of List 11 of the
Seventh Schedule.
HELD : (i) The method of levy of tax on the
basis of floor area was against the provisions of the Act and the Rules made
thereunder. The latter clearly laid down that the rateable value of the
property must be assessed after determining the rack rent or the annual rental
value in respect of each premises which is to be computed on the basis of the
annual rent for which the property might reasonably be expected to let from
year to year. It did not lie in the mouth of the municipality to say that the
irregularity was open to correction. [693 G-H; 694 A-B; 684 G-H] (ii) It had
not been established that condition prerequisite for determination of annual
value of textile factories at Ahmadabad on the basis of the rental value per
foot super of floor area existed at the relevant time, nor had it been shown
that the so-called contractor's method was adopted by the Municipal authorities
of Ahmadabad. The method was also not one which is generally recognised by
authorities on rating. [693E] (iii) Applied indiscriminately-as it appeared to
have been done in the present case-the method of taxation on the basis of floor
area was sure to give rise to inequalities as there had been no classification
of factories on any rational basis. Further there did not seem to be any basis
for diving the factories and the buildings thereof under two general classes as
buildings for processing and buildings for non-processing purposes Article 14
was therefore clearly violated. [693 F-G] 680 Lokmanya Mills v. The Barsi
Borough Municipality, [1962] 1 S.C.R. 306, relied on.
Bhuvaneswariah v. State, A.I.R. 1950 Mys. 170
and N. Kunhali Haji v. State of Kerala, A.I.R. 1966 Ker. 14, referred to.
(iv) Rules 7(2) and (3) were invalid on
account of excessive delegation of powers by the Legislature. Under these rules
the specification of the classes of machinery for the purpose of taxation is
done by the Commissioner with the approval of the Corporation irrespective of
the question as to where they are to be found. It therefore depends on the
arbitrary will of the Commissioner as to what machinery he would specify and
what he would not. Moreover, he is the only person who can examine this
question as there is no right of appeal. [701 D-F] (v) Entry 49 in List II of
the Seventh Schedule only permitted levy of tax on land and buildings. It did
not permit the levy of tax on machinery contained in or situate on the building
even though the machinery was there for the use of the building for a
particular purpose. Rule 7(2) which levied such a tax was therefore beyond the
legislative competence of the State. [701 A-C] In re. The Central Provinces and
Berar Act No. XIV of 1938, [1939] F.C.R. 18, Diamond Sugar Mills Ltd. &
Anr,. v. State of Uttar Pradesh & Anr. [1961] 3 S.C.R. 242, Ralla Ram v. The
Province of East Punjab, [1948] F.C.R. 207, R. v. St. Nicholas, Gloucester,
[1783] I.T.R. 723, Kirby v. Hunslet Union [1906] A.C. 43 and Smith v. Willesden
Union, [1919] 89 L.J.K.B. 137, considered.
ORIGINAL JURISDICTION: Writ Petitions Nos.
133, 156 & 157, 159-171, 178, 184, 206-210 and 234 of 1966.
Writ Petitions under Art. 32 of the
Constitution of India for enforcement of fundamental rights.
S. T. Desai, K. M. Desai, and Ravinder
Narain, for the petitioners (in all the petitions).
M. C. Setalvad, Purshottam Trikamdas, Vithal
Bhai B. Patel and L N. Shroff, for respondents Nos. 1 and 2 (in W.P. No. 133 of
1966.
Purshottam Trikamdas Vithalbhai B. Patel and
L N. Shroff, correspondents Nos. 1 and 2 (in W. Ps. Nos. 156 and 206 of 1966).
Vithalbhai B. Patel and I.N. Shroff, for
respondents 1 Nos.
1 and 2 (in W.P. Nos. 157, 159-171, 178, 184,
207-210 and 234 of 1966.
B. Sen and R. H. Dhebar, for respondent No. 3
(in all the petitions).
The Judgment of the Court was delivered by
Mitter, J. This is a group of Writ Petitions under Art. 32 of the Constitution
challenging the validity of the assessment book relating to special Property
section prepared and published by the Municipal Corporation of the City of Ahmadabad
by which the 681 Municipality seeks to impose or has imposed property tax on
properties described as Special Properties like textile mills, factories,
buildings of the universities, etc. on the basis of a flat rate per 100 sq. ft.
of the floor area of the property situate within the municipal limits of the
city. In Writ Petitions Nos. 133, 156-157, 159-171, 178, 184 and 234 of 1966,
the challenge relates to the validity of the assessment book relating to the
year 1966-67; in Writ Petitions No. 206 and 210 of 1966 the challenge relates
to the years 1964-65 and 1965-66 while in W.P. Nos. 207, 208 and 209 of 1966
the challenge relates only to the year 1965
66. The difference lies in this So, far as
the assessments for the year 1966-67 are concerned, there has been no
authentication of the assessment book after the disposal of all complaints
relating to the entries made in the book, while the challenge relating to the
years 1964-65 and 196566 is made at a stage after such authentication and in
respect of which attachments of property belonging to the assessees have
already been levied. In W. P. No. 234 of 1966 filed in October 1966, the issue
of a distress warrant and the levy of attachment are also challenged. Several
textile mills in the city of Ahmadabad are before this Court in these petitions
and they have a common complaint against the assessments.
To appreciate the points raised in these
petitions, it is necessary to take a bird's eye view of the relevant provisions
of the Bombay Provincial Municipal Corporations Act (LIX of 1949) under which
the assessments were purported to be made. Section 127(1) of the Act makes it
obligatory on the Corporation of the City of Ahmadabad to impose, among other
taxes, a property tax. Sub-s. (3) of the section provides that municipal taxes
shall be assessed and levied in accordance with the provisions of the Act and
the rules and sub-s. (4) lays down that nothing in this section shall authorise
the imposition of any tax which the State Legislature has no power to impose in
the State under the Constitution; (it is needless to add that the Act has been
amended after the Constitution came into force). Section 128 empowers the
Corporation to recover the tax by the processes laid down in the section in the
manner prescribed by rules. These are inter alia (1) by presenting a bill;
(2) by serving a written notice of demand;
(3) by distraint and sale of the defaulter's movable property; and (4) by the
attachment and sale of a defaulter's immovable property.
Section 129 lays down that for the purposes
of sub-s. (1) of s. 127 property taxes shall comprise the taxes mentioned which
shall, subject to the exceptions, limitations and conditions provided, be
levied on buildings and lands in the city. One of these mentioned in cl. (c) is
a general tax of not less than 12 per cent of their rateable value which may be
levied, if the Corporation so determines, on a graduated scale. A building has
been defined in s. 2 sub-s. (5) and land in S. 2 sub-s. (30). 'Land' under this
definition includes land which is being built upon or is built upon or covered
682 with water, benefits to arise out of land, things attached to the earth or
permanently fastened to anything attached to the earth and rights created by
legislative enactment over any street. Under s. 2 (49) 'property tax' means a
tax on buildings and lands in the city. Section 2(53) defines 'rack rent' as
the amount of the annual rent for which the premises with reference to which
the term is used might reasonably be expected to let from year to year as
ascertained for the purpose of fixing the rateable value of such premises and
under s. 2(54) 'rateable value' means the value of any building or land fixed in
accordance with the provisions of the Act and the rules for the purpose of
assessment to property taxes. Under s. 453 the rules in the Schedule as amended
from time to time shall be deemed to be part of the Act. The relevant taxation
rules are to be found in Chapter VIII of the rules. Rule 7(1) provides that
"In order to fix the rateable value of any building or land assessable to
a property tax there shall be deducted from the amount of the annual rent for
which such land or building might reasonably be expected to let from year to
year a sum equal to ten per cent of the said annual rent, and the said
deduction shall be in lieu of all allowances for repairs or on any other
account whatever." Under r. 7(2) all plant and machinery contained' or
situate in or upon any building or land and belonging to any of the classes
specified from time to time by public notice by the Commissioner, with the
approval of the Corporation, shall be deemed to form part of such building or
land for the purpose of fixing the rateable value thereof under sub-r. (1) but,
save as aforesaid, no account shall be taken of the value of any plant or
machinery contained or situated in or upon any such building or land. Rule 7(3)
runs:
"A statement setting out clearly the
classes of plant and machinery specified from time to time by the Commissioner
under sub-rule (2) and describing in detail what plant and machinery falls
within each such class shall be prepared by the Commissioner under the
directions of the Standing Committee and shall be open to inspection at all
reasonable hours by members of the public at the chief municipal office."
Rule 9 provides inter alia:
"The Commissioner shall keep a book, to
be called "the assessment-book", in which shall be entered every
official year(a) a list of all buildings and lands in the city. distinguishing
each either by name or number as he shall think fit, and containing such
particulars regarding the location or nature of each as will, in his opinion,
be sufficient for identification;
683 (b) the rateable value of each such
building and land determined in accordance with the provisions of this Act and
the rules;
(c) the name of the person primarily liable
for the payment of the property taxes, if any, leviable on each such building
or land;
(d) if any such building or land is not
liable to be assessed to the general tax, the reason of such non-liability;
(e) when the rates of the property-taxes to
be levied for the year have been daily fixed by the Corporation and the period
fixed by public notice, as hereinafter provided, or the receipt of complaints
against the amount of rateable value entered in any portion of the assessment
book has expired, and in the case of any such entry which is complained
against, when such complaint has been disposed of in accordance with the
provisions hereinafter contained, the amount at which each building or land
entered in such portion of the assessment book is assessed to each of the
property-taxes, if any, leviable thereon;
Rule 10 provides for preparation of ward.
assessment books for each of the wards into which the city is for the time
being divided for the purpose of election and the ward assessment books and
their respective parts shall collectively constitute the assessment book. Under
r. 13(1) when the entries required by cls. (a), (b), (c) and (d) of rule 9 have
been completed, as far as practicable, in any ward assessment book, the
Commissioner shall give public notice thereof and of the place where the ward
assessment book or a copy of it may be inspected. Under r. 15(i) the
Commissioner must, at the time and in the manner prescribed in r. 13, give
public notice of a day, not being less than 15 days from the publication of
such notice, on or before which complaints against the amount of any rateable value
entered in the ward assessment book will be received in hit office. Rule 16
provides for the time and manner of filing complaints against valuation. Rule
17 lays down that the Commissioner must give notice to each complainant of the
time and place when his complaint will be investigated.
Rule 18 prescribes for the investigation and
disposal of the complaint in the presence of the complainant by the
Commissioner. Under r. 19(1) when all such complaints, if any, have been
disposed of and the entries required by cl.
(e) of r. 9 have been completed in the ward
assessment book the said book shall be authenticated by the Commissioner who
shall 684 certify under his signature that except in the cases, if any, in
which amendments have been made as shown therein, no valid objection had been
made to the rateable value entered in the said book. Under sub-r. (2) of the
said rule, the ward assessment book shall thereupon, subject to such
alterations as may be made under the provisions of r. 20, be accepted as conclusive
evidence of the amount of each property tax leviable on each building and land
in the ward in the official year to which the book relates. Rule 21(1) lays
down that it shall not be necessary to prepare a new assessment book every
official year and that subject to the provisions of sub-r. (2) the Commissioner
may adopt the entries in the last preceding year's book with such alterations
as he thinks fit, as the entries for each new year. Under sub-r. (2) a new
assessment book has to be prepared at least once in every four years.
The writ petition of which the papers were
placed in detail before the Court is No. 133 of 1966 preferred by the New Manek
Chowk Spinning and Weaving Mills Ltd. The respondents are: (1) the Municipal
Corporation of the City of Ahmadabad, (2) the Deputy Municipal Commissioner of
the same city and (3) the State of Gujarat. The challenge in this case relates
to the validity of the assessment book for the year 1966-67. The complaint is
that respondent No. 1 by the said book imposed property tax on the petitioner
on the basis of a flat rate per 100 sq. ft. of the floor area of the
petitioners' property as also of all other textile mills, factories, university
buildings etc. under r. 9 of the Taxation Rules. Annexure 'A' to the petition
gives a synopsis of the entries relating to the year of assessment 1966-67. It
is divided into three parts, the first being headed 'buildings', the second
'additional land' and the third 'machinery'. So far as 'buildings' are
concerned, there are three columns, the first being the area of the building in
square feet, the second monthly rental per 100 sq. ft. and the third the annual
rental. The building is again divided into two classes, one for processing and
the other non-processing. The monthly rental for the processing part of the
building is taken at Rs. 6-10-0 per 100 sq. ft.
while that for the non-processing portion is
Rs. 5-4-0 per 100 sq. ft. With regard to the additional land, the valuation is
on the basis of the market rate per sq. ft. of land and as regards machinery
the valuation is taken to be effective value of which the annual rental at 71 %
is taken as the annual value. The petitioner's complaint is that while under
the provisions of the Act and the rules made thereunder it was clear that the
rateable value of the property must be arrived at after determining the rack
rent or the annual rental value in respect of each premises which is to be
computed on the basis of the annual rent for which the property might
reasonably be expected to let from year to year, the municipal corporation of Ahmadabad
had adopted the method of determining the annual rent on a flat rate method
according to the floor area, 685 irrespective of the locality, quality, age and
nature of the property which was not a recognised method and was not
permissible in law. According to the petition, a formula on the flat rate
method of a fixed amount per 100 sq. ft. for arriving at the rental was not
only against the express provisions of the Act but was also against the recognised
concepts of valuation in the Law of Rating. The method adopted by respondent
No. 1 in this case was arbitrary and repugnant to the petitioner's right
guaranteed under Art. 14 of' the Constitution. It was said that the buildings
of the textile mills. were situate in different localities some of which were
in the heart of the city and some on its outskirts. There was no uniformity in
the floor area of the mills concerned nor was the age of the buildings in all
cases the same. It was further complained that buildings in respect of the
properties covered by the special property section included textile mills taxed
on the fixed rate method whereas. buildings other than those of textile mills
were taxed on the basis of annual rent for which such premises were reasonably
expected to let from year to year.
A further complaint was made that respondent
No. 1 had assessed the property tax apart from buildings and lands on the plant
and machinery of the petitioner. It was submitted that the imposition of
property tax on plant and machinery was beyond the legislative competence of
the State. Sub-r.
(3) of r. 7 was challenged as giving the
Commissioner arbitrary and unguided power to set out the classes of plant and
machinery and to describe what plant and machinery fell within each such class.
for the purpose of assessment of property tax. Moreover, such classification by
the Commissioner was made final and binding and no right was given to any
person affected thereby to object to the same nor was any right of appeal against
such decision of the Commissioner provided. A complaint was also made that
respondent No. 1 had not prepared any ward assessment books for the year
1966-67. It is the petitioner's case that the figures in the assessment book
for the year 1966-67 were adopted from those of the previous year 1965-66,
under r. 21 of the Taxation Rules. It was submitted that such adoption was
invalid and improper inasmuch as the assessment books for the previous years
were bad in law. The assessment books for the previous years were also bad in
law inasmuch as the same were authenticated under r. 19 by the Deputy Municipal
Commissioner and not by the Commissioner as contemplated in the said rule. The
complaints were not considered by the Municipal Commissioner him self. It was
said that the action of the Deputy Municipal Commissioner under a purported
delegation of power by order dated November 20, 1964 was invalid as a
quasi-judicial function could not be delegated. In this connection, reference
was.
made to s. 49(i) of the Act. It was further
contended that even in the year 1966-67 the power of conducting proceedings
under rr.13,. 15, 16, 17, 18 and 19 of the Taxation Rules had been deputed by
the Municipal Commissioner in favour of the Deputy Municipal 686 Commissioner
and as such deputation was bad in law.
Finally, the petition proceeded on the basis
that the imposition of property tax on the flat rate method on textile mills as
under the special property section was ultra vires the Act and the rules made
therein and was violative of the fundamental rights of the petitioner
guaranteed under Arts. 14, 31(i) and 19 of the Constitution and the procedure
adopted in preparing the assessment book was ultra wires the procedure laid
down by the Act and the rules. The grounds of challenge are formulated in
paragraph 35 of the petition. Among the prayers are a writ of mandamus or any
similar writ directing respondent No. 1 to forbear from taking any steps for
the imposition and realisation of the property tax pursuant to the preparation
of the assessment book for the year 1966-67 relating to the Special Property
section; a writ of certiorari or other similar writ to quash the assessment
book for the said year;
a writ of prohibition or other order
restraining respondent No. 2, the Deputy Municipal Commissioner from acting
under deputation under s. 49 (1) and. other reliefs.
The points raised in the counter affidavit
are as follows:(1) The tax being based on the amount of rent for which the
property is or may be let from year to year, such rent has got to be
ascertained from either the actual or the hypothetical rent for which the
property along with all the equipment like plant and machinery and amenities
that it contains, is or may be let and such annual rent where the property is
let as a factory equipped as a factory would be the rent that it would fetch as
a factory and not as a bare building. (2) Rule 7(2) only gives power to the
Corporation to include such plant and machinery as it may determine from time
to time taking into consideration various factors like the situation of the
city, its facilities for transport to other parts of the State and the country,
whether the industry is well established or is just being developed etc.
(3) Although under r. 9(b) the amount of the rateable
value of the property in the previous year is to be entered, it is open to the
Corporation to take any fresh circumstances into consideration before adopting
the entry from the earlier year. Entry in col. (b) is neither the imposition of
the tax nor the final amount on the basis whereof the tax is leviable. It is in
the nature of a proposal by the Corporation and is subject to objection by the
assessee and the tax becomes leviable after the objections have been disposed
of and the amount is entered in column (e). (4) After the tax has become
leviable under the Rules, the assessee is entitled, if he so desires, to file
an appeal under s. 406 against either the rateable value or the tax fixed or
charged under the Act. The Court of Small Causes can hear and determine the
appeal. Under s. 4 10 there is a provision for a reference to the District
Court and s. 411 provides for an appeal to it. The High Court would have the
power of revision of the order of the District Judge. (5) The fixing of the
rateable value on 687 floor area basis is in accordance with the accepted
principles and methods in the Law of Rating. In various cities it is common to
let out premises on the basis of the floor area. The computation of rateable
value by this means depends on the estimate of the annual, rent at which the
property may be reasonably expected to let from year to year. The situation of
the building, The age of the building, the material used for the building are
not relevant for, if the mill containing all plant and machinery and other
equipment is let, it is let as a factory for carrying on a business of
manufacture of textiles. The grievance of the petitioner is open to redress
under s. 406 and the other sections mentioned. (6) It is not incumbent on
respondent No. 1 to maintain any ward assessment books, and (7) under s. 49(1)
the power to dispose of complaints against the fixing of rateable value was
duty deputed to the Deputy Commissioner and there was nothing illegal about it.
The points formulated by Mr. S. T. Desai are
as follows:-(1) The method of adopting a flat rate for a floor area for
determining the annual value adopted by the Municipal Corporation of Ahmadabad
was against the express provisions of the Act. (2) The method was also in
violation of all recognised concepts and principles of valuation for the
purpose of rating. (3) The imposition of tax on a flat rate method was
violative of Art. 14 of the Constitution. (4) Rule 7(2) and r. 7(3) were ultra
vires the Constitution as beyond the legislative competence and entry 49 of
List 11.
(5) The delegation of powers of the
Commissioner to the Deputy Commissioner was. bad as it involved the delegation
of quasi-judicial power, and (6) Rule 7(3) suffered from excessive delegation
and was violative of' Art. 14 of the Constitution.
The first, second and third points may be
taken together.
In the forefront of his argument Mr. Desai
relied on a decision of this Court in The Lokmanya Mills v. The Barsi Borough
Municipality.(1) There the common question in the appeals related to the
validity of r. 2C framed under the Bombay Municipal Boroughs Act, 1925. Under
s. 73 of the Act the Municipality was entitled to levy a rate on lands and
buildings. In 1947 new rules were made after obtaining the approval of the
Government of Bombay for the purpose of enhancing the assessment of lands and
buildings within the area of the Municipality. Rule 2C of the new rules
provided that:
"As regards Mills, factories and
buildings relating thereto, the annual letting value shall be fixed at Rs.
40/per 100 square feet or part thereof for every floor, ground floor or cellar
and the tax shall be assessed on the said annual letting value, at the ordinary
rate.
(1) [1962] 1 S.C.R. 306.
688 The Municipality prepared an assessment
list under the new scheme of taxation in respect of factories and buildings
relating thereto and issued notices of demand calling upon the appellants to
pay house tax and water tax so assessed.
The question before this ,Court was whether
rule 2C was ultra vires. This Court examined the provisions of the Act under
which the rate could be levied on lands and buildings' assessed on the
valuation thereof based on annual letting value. It was said:
"If the rate is to be levied on the
basis of capital value, the building to be taxed must be valued according to
some recognised method of valuation: if the rate is to be levied on the basis
of the annual letting value, the building must be valued at the annual rental
which a hypothetical tenant may pay in respect of the building. The
Municipality ignored both the methods of valuation and adopted a method not
sanctioned by the Act. By prescribing valuation computed on the area of the
factory building, the Municipality not only fixed arbitrarily the annual
letting value which bore no relation to the rental which a tenant may
reasonably pay, but rendered the statutory right of the tax-payer to challenge
the valuation illusory. An assessment list prepared under s. 78, before it is
authenticated and finalised, must be published and the taxpayers must be given
an opportunity to object to the valuation. By the assessment list in which the
valuation is not based upon the capital value of the building or the rental
which the building may fetch, but on the floor area, the objection which the
tax-payers may raise is in substance restricted to the area and not to the
valuation." It was further observed that if the Municipality had adopted
any of the recognised methods of valuation for assessing the annual letting
value, the tax would not be open to challenge. The Court further noted:
"In any event, there is no evidence on
the record of this case that the factories and "buildings relating
thereto" such as warehouses, godowns and shops of the Mills situate in the
compound of the mills, may be separately let at the uniform rate prescribed by
the Municipality. The vice of the rule lies in an assumed uniformity of return
per square foot which structures of different classes which are in their nature
not similar, may reasonably fetch if let out to tenants and in the virtual
deprivation to the rate-payer of his statutory right to object to the
valuation." It may be interesting to note that an Act was passed to
validate the said imposition. On a Writ Petition No. 1476 of 1966 the Bombay
High Court held the Validating Act to be ultra vires. The 689 contention put
forward before the Bombay High Court was inter alia that the levy of a tax on
buildings and lands on the basis of floor area was necessarily arbitrary and
capricious in that the valuation of buildings and lands so arrived at could
have no relation to their actual value, for the value of buildings depended,
among other things, upon location, age, mode of construction, material used
etc. A uniform rate on buildings and lands of widely differing values was
clearly discriminatory because of lack of classification leading to inequality.
It was further argued that there was violation of Art. 14 in that the owners of
mills and factories were discriminated against as compared to the owners of
other buildings and lands. These grounds were upheld by the Bombay High Court.
Reference was made by Mr. Desai to decisions
of other High Courts wherein similar observations were made. In Bhuvaneswariah
v. State(1), the Mysore Buildings Tax Act, 1963 and Schedule 11 thereto were
challenged before the High Court of Mysore. It was pointed out that under the
scheme of the Act a cow-shed and an ultra modern cinema house in the best
locality would be charged with the same amount of tax if the extent of floorage
of both were the same. The High Court held that the Act suffered from lack of
rational classification because:
"The floorage basis is not only
unscientific, it is something arbitrary and mechanical. It does not conform to
any of the known principles of taxation. In the very nature of things, under
that basis the incidence of tax must fall unevenly on things similar." N.
Kunhali Haji v. State of Kerala(2) was a case where under the Kerala Buildings
Tax Act, 1961 (19 of 1961) tax was sought to be imposed not on the basis of
letting value but on the floor area of buildings. It was held that the lack of
classification had resulted in inequality with the result that the provisions
of the Act were held to be invalid. Relying on the above decisions, Mr. Desai
argued that the method adopted by the Municipal Corporation of Abmadabad was
against all known principles of rating and was violative of Art. 14 of the
Constitution. He submitted that there were a number of textile mills situated
in different parts of the city some of which were old and some were of fairly
recent origin. Their method of construction was not the same, some being more
permanent in the nature of things than others. Apart from the question of the
valuation of plant and machinery, Mr. Desai argued, it was impossible to
suggest that a hypothetical tenant would be agreeable to take on rent the
building of a mill which was well-built and of recent origin as another which
was fairly old and not constructed with the same kind of material. Mr. Desai
further argued that the situation of the mill was another factor which any
tenant would (1) A.I.R. 1965 Mysore page 170.
(2) A.I.R. 1966 Kerala 14.
690 take into consideration and even if the
buildings of the two mills were otherwise similar, a tenant would not agree to pay
for one situated on the outskirts of the city the same rent as he would be
willing to pay for the one in the heart of it. In these circumstances, he
argued it was wholly unreasonable to think that a tenant would be willing to
pay Rs. 6-10-0 per 100 sq. R. of the floor area whether it was in the heart of
the city or in the outskirts of it, whether the building was old or whether it
was new and whether it was well constructed or ill-constructed.
Mr. Setalvad tried to argue that such a
method of valuation was not unknown and in any event a person who wanted to
take on rent a textile factory would only be concerned with what profits he
could make out of it and that it did not matter to him as to where it was
situate, in the city, whether the building was old or whether it was new. or
whether it was constructed properly with first class material or not.
According to Mr. Setalvad, the tenant would
only go by the use to which the building could be put. So far as the methods of
valuation are concerned, we may refer to certain well known n textbook,, on the
subject. Halsbury in Vol. 32 (page 76, Art. 106-Third Edition) points out:
"Except in the case of public utility
undertakings which, in the absence of special circumstances, must as a matter
of law be valued on the profits basis, there is no rule of law as to the method
of valuation to be adopted for rating." This does not however mean that it
is open to municipal authorities to fix upon any scale and say that they will
adopt it. They must show, if challenged, that the scale adopted by them allows
the fixing of an annual value and provides a basis for determination of the
same as that which a hypothetical tenant might be expected to pay for the
building. All the textbooks lay down certain methods of valuation. As Halsbury
points out at page 77, Art. 108:
"In the absence of rental evidence of
value, the accounts, receipts or profits of the occupier of the hereditament
may be relevant.
The profits themselves are not rateable but
they may serve to indicate the rent at which the hereditament might reasonably
be expected to let, particularly whether profit is the motive of the
hypothetical tenant in taking the here ditament, or where, the trade can only
be carried on upon that hereditament." In Article 109, the learned author
points out "Where neither actual rents nor the profits of trade afford
evidence of annual rental value, a percentage of the cost of construction of
structural value of the hereditament, or of a suitable hereditament, is
sometimes taken as evidence." 691 This is referred to loosely as "the
contractor's method".
The value taken is sometimes called the
"effective" capital value, that is to say, the capital value leaving
out of account expenditure on unnecessary ornamentation, or accommodation
surplus to requirements and after allowing, if necessary, for age and
obsolescence. The percentage to be applied to capital value is that prevailing
in the market, and not necessarily that at which the actual occupier can borrow
or obtain money. Mr. Setalvad placed reliance on Faraday on Rating (5th
Edition) where the learned author gives four recognised methods of arriving at
the annual value of a here ditament at page 24 of the book, these being
1. The "competitive or comparative
method" i.e. by finding out rents actually paid for the hereditament in
question and/or others of a similar kind, adjusting them to bring into line
with the statutory conditions, and thus arriving directly at an estimate of the
rent..........
2. The "profits basis," or
calculation by reference to receipts and expenditure, which is now required to
be applied to certain public utility undertakings, and may properly be applied
to any other hereditament on which a business is carried on which enjoys
privileges in the nature of a monopoly............
3. The "contractor's method," by
which it is assumed, in the absence of any other better way of estimating the
rent, that the tenant would arrive at it by finding-the figure for which a
contractor would provide him with premises neither more nor less suitable for
his purpose, and the rate of interest on that cost which the contractor would
charge him as rent.
4. The "unit method" by which
schools may be valued at so much a place, hospitals at so much a bed, or
certain industrial premises at so much a furnace, or other unit of output.
Mr. Setalvad laid particular stress on a
passage at page 164 reading:
"Modern factories are frequently found
in groups due to Town Planning or in some cases because Trading Estates have
been developed.
Under these conditions it is often possible
to arrive at the rental value per foot super of floor area by applying the
contractor's basis to typical factories or because there are sufficient rents
or by a combination of the two methods." This is followed by an illustration
of a bakery and warehouse which goes to show that different portions of the
building which were of different nature were measured and valued differently
and then M2Sup.CI/67-15 692 on the valuation of the total the floor area method
was adopted for the purpose of similar buildings. As the learned
author-himself.-points out at page 1 5:
"The floor area method of valuation is
usually used' where there are numerous factories in an area mostly similar and
used for the same trade. In the North mills, are frequently valued on this
method." The learned author also stresses that great care must be taken in
applying the price per square foot which will vary according to the character
of the factory or mill. Lower down in the same page, the learned author points
out that a factory put up years ago may contain machinery which has become old
fashioned and modern machines for the same purpose might occupy far more or
less space, and therefore, require larger or smaller buildings, and probably
reduce the wages bill and effect other economies whilst at the same time giving
more output than the old cumbersome undertaking.
According to the author, the value of the old
factory, from a rental point of view, would be less than that of a new one with
the same power of production, since it would be impossible to find a tenant who
would give the same rent for both concerns in as much as he could obviously
operate in the new buildings more economically than in the old one.
There is nothing in the counter affidavit to
show that conditions in the City of Ahmadabad with regard to textiles mills are
such, as would make the method laid down at p. 164 of Faraday's. book
applicable. The affidavit does not purport to show that the factories were:
constructed at or about the same time or in groups or were so similar in their
operation that their rental value could be determined at per foot super of
floor area applying the contractor's There is nothing, to show that any textile
factory was, valued on the contractor's basis and that from the figures of
valuation go worked out, the rental value per foot super of floor area wag
determined On, the other hand, the affidavit suggests that because 'in various
cities it was common to let out premises on the basis ,of floor area, the
municipal authorities of Ahmadabad had resorted to this method for fixing the
rateable value. We can take-judicial notice of the-fact that sometimes godowns
or buildings constructed for office purposes are let out on the basis of floor
area buteven then, the rate would vary according to the nature of the building
and according to the site of the building in the city. It would also depend
upon the age of the building and the amenities provided therein. It would be
impossible to say that in the City of Ahmadabad a tenant would be willing to
pay at the same rate of rent for factory accommodation, no matter where the
building was situate or when it was put up or how it was constructed.
693 Our attention was also drawn to other
well known books on Rating like Ryde on Rating, Bean and Lockwood on Rating an
Graham Eyre on Rating. Incidentally, we may refer to Witton Booth on Valuations
for Rating (Fourth Edition) at page 125 wherein the learned author states
"Reductions of floor areas to units, as Already described, are necessary
to effect reliable comparisons, but it is merely a mechanical process used in
preparing material for the valuation, the actual valuation being the decision
and application of the appropriate rate or rental value per unit of area. This
may be exactly to a standard, and, indeed, it probably will be to the majority
of properties where these are so nearly alike in character as to be regarded
for rating purposes as identical. Where, however, rates or rental values per
unit of area ale applied indiscriminately, without discernmenton the wholesale,
as it were-inequalities are certain to arise, and these give rise to the whole
method being caustically Preferred to as "valuations by the
foot-rule." The above comment is sufficient to show that this method can
only be applied Where the majority of properties are so nearly Alike in
character as to be regarded identical for rating purposes. There is no such
statement in the affidavit.
We are therefore not satisfied that
conditions prerequisite for determination of annual value of textiles factories
in Ahmadabad on the basis of rental value per foot super of floor area existed
at the relevant time nor has. it been shown to us thatthe. so-called
contractor's basis was adopted by the municipal authorities. of Ahmadabad. The
method is not. also one which is generally recognise by authorities on rating.
Applied indiscriminately as it appears to have been done in this case-it is
sure to give rise to, inequalities,: as there has been no classification of the
factories on any rational basis. Further, there does not seem to be any basis
for dividing the factories and the buildings thereof under two general classes
as buildings used for processing and buildings for Reprocessing. purposes. What
was said by this Court in The Lokmanya Mills' case(1) applies with equal force
to what has been done here andwe must hold that the municipality did not
observe the law and failed in its duty to determine the rateable value of each
building and land, comprised in each of the textile factories in terms of r.
9(b) of therules under the Bombay Provincial Municipal Corporations Act, 1949
so tar as the assessment book for the year 1966-67 is concerned.
Mr. Setalvad argued that at that stage there
is only a proposal and even if the municipality had acted arbitrarily it was
open to the (1) [1962] 1 S. C. R. 306.
694 assessees to take objection thereto and
have proper valuations made and the assessment book prepared properly.
We cannot accept this argument. If the
municipality fails in its initial duty to act in terms of r. 9(b) it does not
lie in its mouth to say that any irregularity, however patent on the face of
it, is open to correction. Moreover, the methods of correction in this regard
are really illusory. The Small Causes Court cannot decide the applicability of
Art. 14 of the Constitution and according to the judgment of the Bombay High
Court in Balkrishna v.
Poona Municipal Corporation(1) (by which the
District Judge would be bound).
"...... the words used in s. 406(1) of
the Act,. do not cover the vires of the tax or the legality of the tax which is
sought to be levied." Earlier, the learned Judges had pointed out after
noting ss, 406 to 413 that :
"the decision of Judge aforesaid upon
any appeal against any such value or tax if no appeal is made therefrom under
s. 411 and if such appeal is made the decision of the District Court in such
appeal shall be final." From this it follows that it would be useless for
the assessee to take objections or file appeals against the decisions on
rateable value to the authorities prescribed by the Act if he was challenging
the determination of the rateable value as being violative of Art. 14 of the
Constitution. It is no answer to such a charge to say that the rateable value
could be determined properly by the municipal authorities acting under the Act
and the rules thereunder when they do not resort to any of the well knownmethods
of valuation and cannot justify their arbitrary method.
With regard to the writ petitions questioning
the annual values appearing in the assessment books for the years 196465 and
1965-66 which were similarly prepared, a point of res judicata was taken in
that some of these mills which have filed writ petitions before this court had
challenged the assessment book in Writ petitions under Art. 226 of the
Constitution before the Gujarat High Court and our attention was drawn to the
judgment of the Gujarat High Court in W.P.
No. 1365 of 1965 decided by that court very
recently. The decision in that case cannot operate as res judicata for the
simple reason that the learned Judges pointed out at page 141 of the transcript
of the judgment made over to us that there were not sufficient averments with
regard to the plea of discrimination and violation of Art. 14 and the submission
based on these grounds was therefore rejected and not gone into. To quote from
the judgment:
"In the absence of any specific averment
to the aforesaid effect, it is quite clear that the aforesaid plea cannot be
(1) 65 D. L. R. 119.
6 9 5 said to have been properly pleaded.
Therefore, we reject that submission on that
ground." Moreover, it appears to us that the right of appeal in a case
where the rateable value is challenged onthe ground of Art. 14 is hardly of any
use to the assessee. As already noted, s. 128 of the Act shows that a municipal
tax may be recovered by presenting a bill or by serving a written notice of
demand or by attachment and sale of the defaulter's immovable property etc. As
the Commissioner is not likely to pay heed to any complaint against the
determination of any rateable value based on Art. 14 of the Constitution, he is
bound to authenticate the assessment book under r. 19 and can under r. 39 cause
to be presented to the assessee a bill for the amount of the tax due. Under r.
41 he can serve upon the person liable for the payment of the tax a notice of
demand in form if the amount of-the tax has not been paid into the municipal
office or deposited with him as required by sub-s. (2) of s. 406 within 15 days
from the service of the bill. Rule 42(1) lAys down that if the person to whom
the notice of demand has been served under r. 41 does not within 15 days from
the said service pay the sum demanded or show sufficient cause for nonpayment
of the same to the satisfaction of the Commissioner and if no appeal is
preferred against the said tax, such sum with costs of recovery may be levied
under a warrant in form to be issued by the Commissioner by distress and sale
of movable property of the defaulter or the attachment and sale of immovable
property of the defaulter etc. Section 406(1) provides for appeals against any
rateable value or tax fixed or charged under the Act. Section 406(2) provides
inter alia as follows:"No such appeal shall be heard unless(a) it is
brought within fifteen days after the accrual of the cause of complaint;
(b) in the case of an appeal against a
rateable value a complaint has previously been made to the Commissioner as
provided under this Act and such complaint has been disposed of;
(e) in the case of an appeal against a tax,
or in the case of an appeal made against a rateable value after; a bill for any
property tax assessed upon such value has been presented to the appellant, the
amount claimed from the appellant has been deposited by him with the
Commissioner." The net result of all this is that unless the assessee pays
the amount of tax demanded, his appeal cannot be heard so that if he questions
the rateable value or the levy of the tax, he must in any event, deposit the
amount demanded. In effect, the Act and the appeal rules do not make any
provision for relief to an assessee 696 who complains that the assessment book
has been prepared in violation of the law. This may be illustrated from what
happened in the case of the Ahmadabad Laxmi Cotton Mills Co.
Ltd. who have preferred Writ Petition No. 207
of 1966. In this case, the municipality prepared the assessment book for the
year 1965-66 adopting the figure from the previous year under. 21. The Mills
finally-complained on July 3, 1965 raising various objections regarding the
jurisdiction and the validity of the imposition of property tax on the floor
area method. These were over-ruled and the assessment was finalised by an order
dated September 15, 1965. On September 17, 1965 the municipality issued a bill
in respect of the assessment. The Mills filed a tax appeal on September 27,
1965. On October 7, 1965 a notice of demand under r. 4 1 (1) of the Taxation
Rules was made on the Mills. A Writ Petition was filed in the Gujarat High
Court being Special Civil Application No. 1155 of 1965 on October 16, 1965.
This petition along with various other petitions filed by other textile mills
was dismissed by a common judgment in Application No. 1365 of 1966 on May 5,
1966. On May 7, 1966 the municipality issued an order of attachment under r.
45(1) of the rules. The Mills filed another Writ Petition in the Gujarat High
Court against the issue of the order of attachment, but this was dismissed in
limine on July 18, 1966. It may be noted that the Mills in common with other
Mills had preferred an application for grant of a certificate under Arts. 132
and 133 of the Constitution against the dismissal of the Writ Petition on May
5, 1966 and such certificate was granted on June 20, 1966.
Mr. Desai's next challenge was directed
against sub-rr. (2) and (3) of r. 7. According to him, it was beyond the
legislative competence of the State to levy a property tax on plant and
machinery The relevant entry in List II of the 7th Schedule is item 49, namely,
'Taxes on land and buildings'. The corresponding entry in List 11 under the
Government of India Act, 1935 was taxes on "lands, buildings, hearths and
windows." Mr. Desai contended that the legislature was not competent by
the definition of 'land' in s. 2(3) of the Act to include plant and machinery
even if they were attached to the earth or permanently fastened to anything
attached to the earth. Mr. Desai argued that it may be that the definition of
'land" in certain Acts embraces plant and machinery but when the legislature
rates to impose a tax on plant and machinery in the garb of land it travels
beyond its powers. He argued that apart from the definition in certain Acts and
deeming provisions contained therein, plant and machinery can never be said to
form part of the land or included in land or building. Counsel conceded that
entries in legislative lists were certainly to be construed very widely but
even then no artificial meaning or arbitrary extension of the meaning of the
words in an entry could be allowed.
In this connection, our attention was drawn
to the observations 697 of Gwyer, C.J. in re. The Central Provinces and Berar
Act No. XIV of 1938(1) that "....a broad and liberal spirit should inspire
those,. whose duty it is to interpret it, but.
I do not imply by this that they are free to
stretch or pervert the language of the enactment in the interests of any legal
or constitutional theory, or even for the purpose of supplying omissions or of
correcting supposed errors." In Diamond Sugar Mills Ltd. & Anr. v. The
State of Uttar Pradesh & Anr.(2) the question was, whether entry 52 of,
List 11 of the' Seventh Schedule which empowered State Legislatures to make ii
law relating to "taxes on the entry of goods Into a local area for
consumption, use or sale therein,," sanctioned the passing of the U.P.
Sugarcane Cess Act, 1960 authorising the State Government to impose ,a on the
entry of sugarcane in the premises of a factory for I consumption or sale
therein. It Was contended by the appellant that the premises of a factory was
not a "local area" within the meaning of the said Entry. The majority
of Judges in that case held the impugned legislation to be beyond the
competence-of the State Legislature and observed:
"In considering the meaning of the words
"local area" in entry 52 we have, on the one hand to bear in mind the
salutary rule that the words conferring the right of legislation should be
interpreted liberally and the powers conferred should be given the widest
amplitude;: on the other hand, we have to guard ourselves against extending the
meaning of the words beyond their reasonable connotation, in an anxiety to
preserve the power of the legislature." In this case, counsel argued the
language was clear. and unambiguous and therefore it was not open to resort to
any artificial definition. He also referred to Legislative Practice in India on
this point and contended that the same was against giving an extended meaning
to the expression 'land and buildings' so as to include plant and machinery.
In re. The Central Provinces and Berar Act
No. XIV of 1938(3), the question was whether a tax on retail sales of 'motor
spirit and lubricants was ultra vires the Provincial Legislature being a duty
of excise within the meaning of entry No. 45 in List 1 of the 7th Schedule to the
Government of India Act, 1935 and not within entry No' 48 of List 11 of that
Schedule. There Gwyer, C. J. referred to the legislative practice preceding the
Constitution Act and said at p. 53 "Lastly, I am entitled to look at the
manner in which Indian Legislation preceding the Constitution Act had (1)
[1939] F. C. R. 18 at 37.
(2) [1961] 3 S. C.R.242.@ 248.
(3) [1939] F. C. R. 18.
698 been accustomed to provide for the
collection of excise duties;............ In all the Acts by which these duties
were imposed it is provided (and substantially by the same words) that the duty
is to be paid by the manufacturer or producer, and on the issue of the
excisable article from the place of manufacture or production." In the
same case, Sulaiman, J. observed:
"Our attention has not been drawn to any
provincial enactment, which might have imposed any excise duty on the retail
sale of motor spirit and lubricants, or for that matter on the retail sale of
any other goods." That courts can look into the legislative practice was
again adverted to in Ralla Ram v. The Province of East Punjab(1) where the
question related to the vires of a Punjab Act taxing the owner of buildings and
lands on their annual value. There the contention was that the tax was really
one on income and as such beyond the competence of the Provincial Legislature.
The Court referred to the Central Provinces and Berar Act's case and examined
the legislative practice in India. Mr. Desai referred us to a large number of
Municipal Acts passed by different Provincial and State Legislatures in India
both before and after 1935 to show that plant and machinery were expressly
excluded from the purview of such taxes. We may refer to a few only of them
which are : Punjab Municipal Act, 1911, s. 3(1); The Madras Act IV of 1884 s.
65(2); Madras District Municipalities Act, 1920 s. 82(2) proviso (b); The Patna
Municipal Corporation Act, 1951, s. 130(3); The Bombay District Municipalities
Act, 1911, s' 3(11); The Bombay Municipal Boroughs Act s. 3(1); The Bombay Municipal
Corporations Act, 1988, s. 154(2); The Calcutta Municipal Act, 1899, s. 151
proviso (2); North West Province and Oudh Municipal Act, S. 3(1) proviso; The
Central Provinces Municipalities Act of 1903 s. 36 proviso; and The Central
Provinces and Berar Municipalities Act, 1922 s. 73 proviso. Mr. Desai also drew
our attention to the English Rating and Valuation Act, 1925.
Therein s. 2(1) gives the power to levy a
consolidated rate and sub-s. (3) states that the rate shall be at a uniform
amount, per pound on the rateable value of each hereditament in that area.
Section 24(1) of that Act provides that plant and machinery in or on the
hereditament as belongs to any of the classes specified in the Third Schedule
to the Act shall be deemed to be a part of the hereditament.
This according to Mr. Desai went to show that
even in England plants and machinery were not considered part of the
hereditament and were made so by a sort of fiction. It was argued that (1)
(19481) F.C.R. 207.
699 by a deeming provision the meaning of a
word may be extended, but when the language was clear, no such extension by way
of interpretation was possible.
Our attention was also drawn to a number of
sections in the Bombay Act of 1949 which on the face of it, went to show that
land in those sections was clearly not meant to include the plant and machinery
situate therein.
On this question, Mr. Setalvad relied on the
principles of rating of plant and machinery in England. We have already noted
the provisions of the Rating and Valuation Act, 1925.
It is pointed out in Ryde on Rating (Eleventh
Edition) at p. 399 :
"From towards the end of the eighteenth
century to the passing of the Rating and Valuation Act, 1925, there has been
controversy as to the inclusion in valuation of machinery and plant, and as to
the extent to which (if machinery and plant were included) the valuation was to
be affected.
The series of judicial authorities on this
subject extends from R. v. St. Nicholas, Gloucester, decided in 1783(1) to
Kirby v.
Hunslet Union (2) and Smith v. Willesden
Union(3), decided in 1906 and 1919. The effect of the decision of the House of
Lords in Kirby v. Hunslet Union(2) was to sweep away the principleson which a
discrimination had previously been made between machinery and plant which was
to be "taken into account" in valuation, and that which was not-such
as physical annexation to the hereditament, or legal annexation in the sense
that the thing in question would pass to the tenant at landlord's fixtures on a
demise....... ; and practically to direct the rating authority to value the
hereditament equipped with Machinery and plant as it appears to the eye.11 The
matter is thus put in Witton Booth on Valuations for Rating (Fourth Edition) at
p. 575 :
"The rateability of plant and machinery
under the law which applied universally before 1925, and which still applies to
hereditaments valued by reference to the profits 'earned therein depends on
legal decisions on what is comprehended by the term "land". These
decisions were based on principles applicable to fixtures generally, of which
rateable plant and machinery were one kind." It will therefore be noticed
that the rateability of plant and machinery depended on judicial decisions as
to the meaning of the (1) [1783] I.T.R. 723.
(3) [1919] 89 L.J.K.B. 137.
(2) [1906] A.C. 43.
700 word "land". There is no reason
why we should accept those decisions as to what was comprehended by the term
"land" when we find in our statutes plant and machinery being
excluded therefrom.
In Kirby v. Hunslet Union (1) Lord Halsbury
expressed; himself thus at p. 49 "......decline myself to enter into what
I may call the original equities which might have guided this matter. It is,
enough for me that a long series of decisions, for certainly half a century,
have established the bald proposition, which is all I am insisting upon,
namely'. that although the machinery may not be part of the freehold, it yet is
to be taken into account, and in saying that, I do not want to muffle it in a
phrase, but what I mean by that is, that to increase the amount of the rate
which is exacted from the tenant you may enter into that question and form a
judgment upon it, although, as a matter of fact, the machinery may not be
attached to the freehold." There, the Act in question was Parochial
Assessment. Act, 1836 under which the assessment of hereditaments was regulated
on the principle that the rateable value was the rent which might be expected
to be given for the hereditament alone. The contention on behalf of the appellant
before the House of Lords was that machinery affixed to the soil so as to
become a part of the freehold must be taken into account in assessing the
rateable value but no other machinery. Delivering judgment, Lord Halsbury
pointed out that :
"The overseer had a comparatively simple
problem to solve, although it is difficult enough sometimes; he sees the place
being conducted as a brewery, or an iron foundry, or what not., he looks at the
premises, he looks at the furniture which is necessary for carrying on the
business as a brewery or foundry; he does not in his own mind analyze, and to
my mind he ought 'not to analyze, what would be likely to be the initial
arrangements between the intended brewer and the owner of the freehold, to see
who should provide this or that engine, or what not, but he looks at the
premises as they are, as they are being occupied, and as they are being used,
and he says to himself, "Well, looking at the whole of the place, such and
such is the rent which would probably be paid by a tenant from year to year for
such an establishment as this." (1) [1906] A.C. 43 701 .rm60 The problem
in our case is not quite. the same. The hypothetical tenant would certainly
take, into Consideration the machinery in the building if he was going to rent
it for the purpose of running a textile factory. But if the State Legislature
had power to levy a tax only on land and buildings, we do not see how the same
could be levied on machinery contained in or situate on the building even
though the machinery was there for the use of the building for a particular
purpose.
It therefore appears to us that r. 7(2) of
the rules framed under the Bombay Act of 1949 was beyond the legislative
competence of the State. The rule also suffers from another defect, namely,
that it does not lay down any principle on which machinery is to be specified
by public notice by the Commissioner to be deemed to form part of such building
for the purpose of fixing the, rateable value. To this, Mr. Setalvad argued
that if the building was equipped with machinery for the purpose of running a
textile mill, whatever machinery was there for the purpose would be valued.
According to him, the question would be, which of the machinery would help in
the enjoyment of the property and thereby add to its rateable value.
Unfortunately, the specification of the classes is done from time to time by
the Commissioner with the approval of the Corporation irrespective of the
question as to where they are to be found. It therefore depends on the arbitrary
will of the Commissioner as to what machinery he would specify and what he
would not. Moreover, he is the only person who can examine this question. There
is no right of appeal from any specification made under sub-r. (3) of r. 7
except that the Commissioner is to act under the directions of the Standing
Committee. Rule 7(2) shows that all plant and machinery may not be taken into
account for the purpose of valuation and any such plant or machinery which is
not included in the classification may escape rateability however much they may
be prized by the tenant who takes the premises on rent. It seems to us,
therefore, that r. 7(2) is beyond the legislative competence of the State
Legislature and sub-r.
(3) of r. 7 is also invalid on account of
excessive delegation of powers by the Legislature.
In view of the above, it is not necessary to
go into the question as to whether the Deputy Municipal Commissioner could
exercise quasi-judicial powers of the Commissioner as regards the determination
of the rateable value under s. 49(1) of the Act and we express no opinion
thereon.
In the result, the petitions are allowed. A
writ of mandamus will issue in each case directing the respondent No. 1,
Municipality, to treat the relevant entries in the assessment book for the
years 1964-65. 1965-66 and 1966-67 relating to special property 702 section
questioned in these petitions as invalid and cancelled; and directing
respondent No. 1 to prepare fresh assessment lists for the said years relating
to the textile mills and other properties dealt within the said special
property section. The petitioners are entitled to costs of these applications.
One set of hearing fee.
G.C. Petitions allowed.
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