Municipal
Corporation of Hyderabad Vs. P.N. Murthy & Ors [1987] INSC
28 (30 January 1987)
Thakkar,
M.P. (J) Thakkar, M.P. (J) Ray, B.C. (J)
CITATION:
1987 AIR 802 1987 SCR (2) 107 1987 SCC (1) 568 JT 1987 (1) 285 1987 SCALE
(1)213
ACT:
Hyderabad
Municipal Corporation Act, 1955 Section 197, 199, 202 & 204--Municipal
Corporation allotting building under 'Low Income Housing Scheme'--Corporation
whether prohibited from levying and collecting 'property tax' from allottees.
HEAD NOTE:
The
appellant-Municipal Corporation of Hyderabad constructed houses under "Low Income Housing Scheme" and
allotted them to the respondents on hire purchase. The agreements executed by
the respondents in favour of the appellant provided (1) that the houses would
remain, till the payment of the last instalment and execution of a conveyance
in favour of the respondents, as the property of the Corporation; and (ii) that
all Municipal taxes, water taxes and electricity charges would be borne by the allottees.
The
appellant served demand notices on the respondents to pay house tax in respect
of their houses. By that time, the instalments had not been fully paid. The
respondents challenged 'the levy of tax on the ground that s.202(1) of the
Hyderabad Municipal Corporation Act prohibits the levy of general tax in
respect of the aforesaid houses, since they had not yet vested unto the allottees
under the hire purchase agreement. A Single Judge negatived the plea of the
respondents-allottees and upheld the validity of tax but the Division Bench in
a Letters Patent Appeal took a contrary view. Hence this appeal by special
leave.
Allowing
the appeal,
HELD:
(1) In order to attract s.202(1)(c) of the Hyderabad Municipal Corporation Act,
a property must satisfy a dual test. The property must not only owned by the
Corporation, it must also be in the occupation of the Corporation itself. It is
in this sense that the word 'vesting' has been used. The expression 'vest'
employed in s.202(1)(c) under the circumstances must of necessity be construed
as vesting both in title as well as in possession. [113G-H] Fruit &
Vegetable Merchants Union v. Delhi Improvement Trust, 108 A.I.R. 1954 S.C.p.
344 and Richardson v. Robertson, [1862] 6 L.T.p. 75, relied upon.
(2)
The scheme underlying ss. 197, 199, 200 and 204 of the Act has to be read and
construed in a meaningful, purposeful and rational manner. Section 197(1)(i)
casts a legal obligation on the Municipal Corporation to levy taxes on lands
and buildings. Section 199(1) makes it obligatory subject to the exceptions,
limitations and conditions to levy a general tax, water tax, drainage tax,
lighting tax/conservancy tax on the buildings and lands in the City of Hyderabad. Whilst the legislature makes it
obligatory on the Corporation to levy the aforesaid taxes, in so far as general
tax is concerned an exception is carved out under s.202(1) and the Municipal
Corporation is relieved from the obligation of imposing taxes in respect of
buildings which are specified in clauses(a) to (d). The exception is made on policy
and principle. Not arbitrarily. Essentially the properties which are used for
public purposes or for purposes of the community are exempted. Clause(d) makes
it abundantly clear that the exemption will not be extended to properties
belonging to the Central Government and State Government if the same are used
for purposes of profit and not a public purpose. The user for the purposes of
the community is the rationale of the thread of principle which runs through
all these three clauses viz. clauses (a), (b) and (d) for granting exemption.
So far as clause(c), which has given rise to the present controversy is
concerned, a different principle is at the bottom, different but no less
rational. The philosophy underlying the exemption is rooted in pragmatism. In
so far as buildings and lands which are the properties of the Corporation and
are used for its own purposes it would be an exercise in futility to collect
taxes from itself in order to augment its own resources.
Surely
the resources would not stand augmented when the Municipal Corporation collects
the taxes from itself. [111D; 112A-F]
3.
Section 204(1) which is a part of the packet of sections relating to this
subject-matter clinches the issue in favour of the Municipal Corporation of Hyderabad. It, in terms, provides that
property taxes shall be leviable primarily from the actual occupier of the
premises upon which the said taxes are assessed, if such occupier holds the
said premises immediately from the Government or from the Corporation. If the
property taxes were not to be levied in respect of the property belonging to
the Corporation which is used and occupied by allottees or other occupiers,
there would be no point or purpose in making the provision in the aforesaid
manner. The provision in terms applies to a situation where the buildings or
the premises are in actual occupation of 109 a person or body other than the
Municipal Corporation itself. In such an event, the property taxes would be leviable
primarily from the said occupier as if the said occupier holds the property
from the Corporation itself. This leaves no room for doubt that the Corporation
is entitled to impose taxes on the buildings which may be owned by itself but
which may be in occupation of others. Otherwise, the provision contained in s.
204(1) would be rendered aimless and otiose. [113B-F]
CIVIL
APPELLATE JURISDICTION: Civil Appeal No. 123(N) of 1973.
From
the Judgment and Order dated 26. 10. 1972 of the Andhra Pradesh High Court in
Writ Appeal No. 444 of 1968.
B. Parthasarthy
and G .N. Rao for the Appellant.
B. Kanta
Rao for the Respondents.
The
Judgment of the Court was delivered by THAKKAR, J. Is the Municipal Corporation
of Hyderabad prohibited from levying Municipal
taxes from persons inducted by it in the property of its own ownership under
the hire purchase agreement? The validity of levy of Municipal taxes by the
Municipal Corporation of Hyderabad from allottees to whom the
Municipal Corporation had allotted buildings constructed under "Low Income
Housing Scheme" launched by it was questioned by the allottees. The
learned Single Judge upheld the validity but the Division Bench in. appeal,
Under Clause 15 of the Letters Patent. took a contrary view. The Municipal
Corporation has preferred the present appeal, Appeal by Special Leave and has
contended that the learned Single Judge was right in upholding the levy and the
Division Bench was wrong in holding it invalid.
The
facts giving rise to the writ petition instituted by the 72 allottees to whom
the houses were allotted need to be stated briefly:-The Hyderabad Municipal
Corporation started a scheme called Low Income Housing Scheme in 1957. In
pursuance of that scheme, the Corporation constructed several houses in various
parts of the Hyderabad City including the locality of Malakpet. After the houses at Malakpet
were completed, applications were invited from persons belonging to 110 that
group for the purpose of allotting these houses. The writ petitioners applied
and the Corporation allotted the houses to them. They are occupying the houses
since 1959. The writ petitioners executed agreements in favour of the
Corporation. According to the terms of the agreement, the allottees were put in
possession of the houses allotted to them. The allottees were to pay 20% of the
sale price as the first instalment and they were required to pay the balance in
monthly instalments. The agreement specifically provides that the houses would
remain, till the payment of the last instalment and execution of a conveyance
in favour of the writ petitioners, as the property of the Corporation. The allottee
has been strictly prohibited from selling or mortgaging or otherwise disposing
of the house or even to sublet or part with possession of the same. Even after
the writ petitioners become owners of the houses, they are precluded from
selling the same within five years of such date. The agreement further provides
that all municipal taxes and water taxes and electricity charges would be borne
by the allottees.
The
writ petitioners were served with a demand notice on 31-12-1964 asking them to pay house taxes from 1-4-1961 onwards. The demand notice, which the writ
petitioners received on 16-4-1965, required the writ petitioners to
file objections, if any before 15 days of the receipt of the notice. The writ
petitioners accordingly filed their objections on 29-41965. The principal
contention of the petitioners was that the houses are not liable to be taxed as
they vest in the Municipal Corporation, and as the writ petitioners are not the
owners of the houses, Negativing this contention, the Municipal Corporation
served a notice dated 19-6-1966 demanding from the petitioners taxes for the
period commencing from 1st April, 1961 to 31st March, 1965. It is this demand
notice which has given rise to the writ petition, giving rise to the present
appeal.
The
challenge to the levy of taxes is built on the argument that inasmuch the
houses under the hire purchase agreement have not yet vested unto the allottees,
the property vests unto the Municipal Corporation and under the circumstances
Section 202(1) of the Hyderabad Municipal Corporation Act (Act) prohibits the
levy of the general tax in respect of these houses.
111 In
order to deal with the plea of the allottees which was negatived by the learned
Single Judge but sustained by the learned Judges of the Division Bench, the
relevant provisions of the Act require to be noticed. They are: Sections 197(1)(i),
199(1), 202(1) and 204( 1)' It is no doubt true that until all the instalments
under the hire purchase agreement were paid, the allottees would not become the
owners of the houses for the title would vest unto them only upon the payment
of all the installments as per the stipulation contained in the agreement. At
the relevant point of time the installments had not yet been fully paid. The
title in regard to the houses therefore continued to vest unto the Municipal
Corporation at the relevant time. The question then is whether Section 202(1)(c)
makes it unlawful to levy general tax from the allottees of these buildings.
The scheme underlying the aforesaid packet of provisions embodied in the Act
deserves to be analysed in this context. Section 197(1)(i) casts a legal
obligation on the Municipal Corporation to levy taxes on lands and buildings.
Section 199(1) makes it obligatory subject to the exceptions, limitations
1.
"Section 197(1)(i): For the purposes of this Act, the Corporation shall
impose the following taxes namely: (a) taxes on lands and buildings; X X X X"
"199(1): The following taxes shall subject to exceptions, limitations and
conditions herein provided be levied on buildings and lands in the City and
shall hereinafter be referred to as property taxes, namely:(a) a general tax;
(b) a
water tax; (c) a drainage tax; (d) a lighting tax; (e) a conservancy tax;"
"202(1): The general tax shall be levied in respect of all buildings and
lands in the city except;
(a) buildings
and lands solely used for purposes connected with the disposal of the dead;
(b) buildings
and lands or portions thereof solely occupied and used for public worship or
for a charitable or educational purpose;
(c) buildings
and lands vesting in the corporation;
(d)
buildings and lands vesting in the Central Government or state Government used
solely for public purposes and not used or intended to be used for purposes of
profit in respect of which the said tax, if levied, would under the provisions
hereinafter contained be primarily leviable from the Central Government or
State Government as the case may be."
"204(1):
Property taxes shall be leviable primarily from the actual occupier of the
premises upon which the said taxes are assessed if such occupier holds the said
premises immediately from the Government or from the Corporation." 112 and
conditions embodied in the relevant provisions, to levy a general tax, water
tax, drainage tax, lighting tax and conservancy tax on the buildings and lands
in the City of Hyderabad. Whilst the legislature makes it
obligatory on the Corporation to levy the aforesaid taxes, in so far as general
tax is concerned an exception is carved out under Section 202(1) and the
Municipal Corporation is relieved from the obligation of imposing taxes in
respect of buildings which are specified in clauses (a) to (d). Evidently the
exception is made on policy and principle. Not arbitrarily. Essentially the
properties which are used for public purposes or for purposes of the community
are exempted. For instance by clause (a) buildings and lands which are used for
purposes connected with the disposal of the dead are exempted inasmuch as the
entire community is interested in such a user.
The
same principle is discernible in regard to clause (b) which provides for
exemption in regard to lands or buildings solely occupied for public worship or
for charitable or educational purpose. The same philosophy is discernible in
the exemption accorded under clause (d) to properties belonging to Central or
State Government which are used solely for a public purpose. Be it realized
that clause (d) makes it abundantly clear that the exemption will not be
extended to properties belonging to the Central Government and State Government
if the same are used for purposes of profit and not for a public purpose. The
user for the purposes of the community is the rationale of the thread of
principle which runs through all these three clauses (viz. clauses (a), (b) and
(d) for granting exemption. So far as clause (c) which has given rise to the
present controversy is concerned, a different principle is at the bottom:
different but no less rational. The philosophy underlying the exemption is
rooted in pragmatism. In so far as buildings and lands which are the properties
of the Corporation and are used for its own purposes, it would be an exercise
in futility to collect taxes from itself in order to augment its own resources.
Surely
the resources would not stand augmented when the Municipal Corporation collects
the taxes from itself. How would one benefit by taking money from one pocket
and putting it in another pocket of oneself? By transfering from one drawer of
one's own cash box into another drawer of the same cash box? The whole purpose
of levying tax is to augment its resources and not merely to engage in an
exercise in accountancy, by crediting in one account and debiting in another,
which does not result in its resources being augmented in reality. In fact a
sizable staff would have to be employed for making the valuation of the
properties, for making assessment of the properties, and for making credit and
debit entries in the relevant accounts. That is the obvious reason why
buildings and lands which vest in the Corporation and which are in its own use
and 113 occupation are sought to be exempted from the levy. Of course clause
(c) which provides for exemptions in respect of "buildings and lands
vesting in the Corporation" is not very happily or perfectly worded. Had
it been drafted with the care and precision to be expected from a perfect
draftsman (who exists only in theory and not in practice), there would have
been no scope for the controversy. But then if the entire scheme is viewed in a
common sense manner, so that the scheme makes sense, the matter cannot present
any serious problem. Section 204(1) which is a part of the packet of sections
relating to this subject matter clinches the issue in favour of the Municipal
Corporation of Hyderabad, the appellant herein. It in terms
provides that property taxes shall be leviable primarily from the actual
occupier of the premises upon which the said taxes are assessed, if such
occupier holds the said premises immediately from the Government or from the
Corporation. If the property taxes were not to be levied in respect of the
property belonging to the Corporation which is used and occupied by allottees
or other occupiers there would be no point or purpose in making the provision
in the aforesaid manner. The provision in terms applies to a situation where
the buildings or the premises are in actual occupation of a person or body
other than the Municipal Corporation itself. 1n such an event the property
taxes would be leviable primarily from the said occupier as if the said
occupier holds the property from the Corporation itself. This leaves no room
for doubt that the Corporation is entitled to impose taxes on the buildings
which may be owned by itself but which may be in occupation of others.
Otherwise, the provision contained in Section 204(1) would be rendered aimless
and otiose. Surely the legislature was enacting a purposeful provision and not
a purposeless provision without aim or object.
For
the aforesaid reasons we are of the opinion that the learned Single Judge was
right in taking the view that the buildings and lands vesting unto the
Corporation not only in title but also in possession (as polarized from those
vesting in title only but not in possession) were exempted from the obligation
imposed by the legislature to levy the property taxes. Buildings and lands
which were merely owned by the Corporation but were in actual possession or
under the actual use and occupation of some one else, that is to say persons or
bodies other than the Corporation itself are not exempted. In order to attract
Section 202(1)(c) a property must satisfy a dual test. The property must not
only be owned by the Corporation, it must also be in the occupation of the
Corporation itself. It is in this sense that the word 'vesting' has been used.
And the proposition that the expression 'vest' is capable of being used in this
sense, depending on the context in which it is emp114 loyed, is supported by
the observations made by this Court in Fruit & Vegetable Merchants Union v.
Delhi Improvement Trust, A.I.R. 1954 S.C.p. 344. It has been observed therein
that the word vest:
"is
a word of variable import and a property must vest in title or may vest in
possession or it may vest in a limited sense, as indicated in the context .....
" Reliance has been placed in this context on a passage from Richardson v. Robertson, [1862] 6 L.T.p. 75
wherein it is stressed that the 'vesting' often means 'vesting' in possession.
The
scheme of the relevant sections has to be read and construed in a meaningful,
purposeful and rational manner.
The
expression 'vest' employed in Section 202(1)(c), under the circumstances must
of necessity be construed as vesting both in title as well as in possession. Be
it realized that there can be no principle in exempting the tenants inducted by
the Municipal Corporation in its property from payment of taxes if the terms of
the lease so provide. Just as the tenants who occupy the properties belonging
to private citizens have to pay property taxes if the terms of the agreement so
provide, the tenants inducted by the Municipal Corporation in buildings owned
by itself have to pay the property taxes if the agreement so provides. There
can be no rational basis for exempting the tenants or persons inducted by the
Municipal Corporation in its own buildings from payment of such taxes. The
concerned provision therefore cannot be read in the manner suggested by the
respondents.
The
learned Single Judge was perfectly justified in negativing their contentions
and in dismissing their writ petition.
The
learned Judges of the Division Bench were in error in reversing the learned
Single Judge. We, therefore, allow this appeal, set aside the order passed by
the Division Bench, and restore the order passed by the learned Single Judge
dismissing the writ petition. There will be no order as to costs.
M.L.A.
Appeal allowed.
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