Municipal
Board, Saharanpur Vs. Shahdara (Delhi) Saharanpur Light Rail Co. Ltd.
[1998] INSC 565 (24
November 1998)
S.B.
Majmudar, & M. Jagannadha Rao. S.B. Majmudar, J.
Municipal
Board, Saharanpur having obtained the certificate of
fitness to appel to this Court under Article 133 of the Constitution of India
on 12th August, 1976, has filed this appeal. While
grating the certificate, the High Court has observed that the concept and
meaning of the words "common compound" used in the Uttar Pradesh
Municipalities Act, 1916 (hereinafter referred to as 'the Act') is required to
be decided in this appeal. This appeal raises the same contentions which are
raised in the Companion Appeal being Civil Appeal No. 1218 of 1976 moved by the
very same appellant - Municipal Board, Saharanpur against Imperial Tobacco of India Ltd. wherein the High Court has
granted a similar certificate of fitness. Even though the certificates are
granted by the High Court on the common question in both these appeals and even
though our decision of even date in Civil Appeal No. 1218 of 1976 will govern
the present controversy, we deem it fit to highlight the facts particular to
the present respondent and the other questions which were canvassed by the
learned counsel for the respective parties before us in this appeal.
BACKGROUND
FACTS:
----------------
The respondent railway company which has now become defunct, had various
immovable properties situated in one complex within the Saharanpur town. The appellant Municipal
Board, duly constituted under the Act, sought to levy house tax and water tax
in connection with the buildings and lands of respondent railway company during
the relevant years.
The
said taxes were sought to be levied under Section 128(1)(i). The respondent
railway co., functioning since 1905, had several properties in a vast
contiguous area within the limits of the Municipal Board. They included the
railway station, a childerns park, a canteen, a dispensary, administrative
offices, rest-houses, out-houses, officers bungalows etc. The appellant Board
issued a notice to the railway company in 1960, assessing the properties to tax
on buildings and also to water-tax. The appellant Board determined the annual
value with reference to clause (a) of Section 140 of the Act and in doing so it
treated all the buildings as one unit and all the land in the area as
appurtenant to the buildings. A number of objections were raised by the
respondent railway company but they were rejected by the Executive Officer of
the Municipal Board.
The
railway company appealed against the order of the Executive Officer to the
District Magistrate under Section 160 of the Act, The District Magistrate
remanded the case back for proper calculation of the house tax and directed
that the general rate should not be applied to all the buildings but the
buildings should be divided in such a way as to arrive at a fair rate. The
respondent company, or remand, had again submitted to the Executive Officer
that certain buildings and approach roads should be excluded in calculating the
area. It appears that there was some agreement between the parties regarding
the total area to be [considered for the purpose of taxation. But leaving aside
that agreement, which no longer remains operative, several objections on merits
were raised by the respondent railway company but they were all negatived. In
further appeal, the District Magistrate, confirmed the order of the Executive
Officer, subject to the modification that the cost of the buildings for the
purpose of calculating annual value be reduced by 10 per cent by way of
depreciation allowance.
The
tax on buildings was accordingly fixed at Rs. 3,957.75 paise. As regards the
water-tax, the Magistrate considered that the Municipal Board was not entitled
to levy water-tax on the Railway Company. This was on the basis that there was
one hydrant within 600 feet from the railway area. But it appeared that between
the hydrant and the railway area there lay some area of the Northern Railway
surrounded by a wall. According to this interference therefore, the distance
between the hydrant and the premises of the respondent was more than 600 feet
in a zigzag manner and hence the water-tax could not be levied on this complex.
Against
the said order of the District Magistrate, the respondent railway company filed
a Writ Petition being 3508 of 1965 in so far as it referred to house tax while
Writ Petition No. 3415 of 1965 was filed by the appellant Municipal Board
urging that the Railway Company was liable to water-tax. Both these writ
petitions were heard together by a learned Single Judge of the Allahabad High
Court, who took the view that the lands of the railway company were within the
radius of 600 feet from the nearest water-stand point and hence they had to be
considered for imposing water-tax on the buildings of the respondent railway
company situated in these lands. To that extent, the learned Single Judge set
aside the reasoning and finding of the District Magistrate. However, the
learned Single Judge took the view that so far as the levy of water-tax was concerned,
only those buildings in the complex of the respondent which were within the
radius of 600 feet were liable to pay water-tax.
It was
also held that the assessment of water-tax had to be done building-wise and all
the buildings should not be treated as one unit for that purpose. The
assessment also had to be made as per Section 140 (a) of the Act. So far as
levy of house tax was concerned, it was felt that all the buildings situated in
the "common compound" could not be treated as one unit in a
"common compound" and had to be taxed separately by computing the
annual letting value of such buildings and their appurtenants. Resultantly both
the writ petitions were partly allowed by the common order dated 27.2.1970.
That gave rise to two special appeals moved by the respondent railway company
being aggrieved by the common order of the learned Single Judge, in so far as
the same was party against the respondent on both the writ petitions.
While
thee appellant Board also filed a cross special appeal being aggrieved by the
decision of the learned Single Judge regarding water-tax. All the three appeals
were heard together and were disposed of by a common judgment by a Division
Bench of the High Court of Judicature at Allahabad dated 22nd
July, 1974. Against
the said dicision, as noted earlier, on the grant of certificate of fitness
under Article 133 of the Constitution of India, the present appeal is filed by
the Board.
RIVAL
CONTENTIONS:
-----------------
Shri D.K. Garg, learned counsel for the appellant Board submitted that so far
as levy of water-tax was concerned, the Division Bench of the High Court had
committed a patent error in taking the view that even if the water stand pipe
of the Board was at a distance of 600 feet from one of the building of the
respondent company situated in the same "common compound" all other
buildings situated in the very same "common compound" and belonging
to the same respondent could not be subjected to water-tax if such buildings
were more than 600 feet of radius from the nearest water stand pipe. He,
however, fairly stated that if it is held that all these buildings in the
"common compound" were liable to water-tax by assessing water-tax,
sections 140(a) and 140(b) of the Act as applicable at relevant time had to be
applied and assessment had to be made on that basis. So far as the house tax
was concerned, it was submitted by Shri Garg in support of this appeal that all
the buildings situated within the "common compound" which belong to
the same owner respondent should be treated as one unit for the purpose of
assessing water-tax and house tax. It was next contended that in any case the
10 per cent depreciation granted by the District Magistrate and as confirmed by
the learned Single Judge and the Division Bench on the total assessable value
of such buildings for the purpose of house tax was ultra vires and beyond the
scope of the Act and could not have been sustained by the Division Bench. On
the other hand, learned counsel for the Liquidator, who is now in-charge of the
property of the respondent defunct private railway company, which is in
voluntary winding up, submitted that water-tax could not be levied on all those
buildings belonging to the respondent company which were situated in the
"common compound", if such buildings were beyond the distance of 600
feet radius from the nearest water stand pipe and, accordingly, the Division
Bench of the High Court was right in taking this view. It was submitted that
even assuming that for the levy of water-tax, radius of 600 feet from the water
stand pipe for one of the buildings may attract the levy of water-tax for the
entire complex. So far as the house tax is concerned each individual house with
appurtenant land was a unit by itself and all such buildings cannot be treated
as one unit as tried to be submitted by learned counsel for the appellant. He
also submitted that the grant of 10 per cent depreciation of the assessment of
annual letting value for the purpose of levy of water tax and house tax on all
these buildings was legal and valid.
We may
mention that learned counsel for the appellant also submitted that the special
appeals were not maintainable against the decision of the learned Single Judge.
However, this contention cannot be countenanced for the simple reason that even
the appellant, aggrieved by the order of the Single Judge, has also filed a
special appeal and had sought the decision of the Division Bench of the High
Court on merits. The Board's appeal was also heard with the companion appeals
of the respondent. Hence, this contention which is self-destructive cannot be
entrained. Even otherwise if such contention is entertained, it will not
advance the case of the appellant, as the respondent would be well entitled to
bring in challenge the main order of the learned Single Judge directly before
us and the entire period till date will get excluded under Section 14 of the
Limitation Act, Thus, this technical contention cannot be countenanced.
In
view of the aforesaid rival contentions on merits of the appeal, the following
points arise for our consideration:
1)
Whether the Division Bench of the High Court was right when it held that only
those buildings of the respondent, which were situated within the radius of 600
feet from the nearest water stand pipe of the appellant, could be subjected to
water-tax.
2)
Whether for imposition of house tax, all the buildings of respondent situated
in the "common compound" and forming part of one complex could be
treated as one unit for imposing house tax;
3)
Whether 10 per cent depreciation allowed by the learned District Magistrate and
as confirmed in the High Court both by learned Single Judge and the Division
Bench on the assessable annual letting value of such buildings was justified in
law; and 4) What final order? We will deal with these contentions seriatim.
Point
No.1:
-----------
So far as the contention concerning this point is concerned, by a detailed Judgement
in the companion Civil Appeal No.1218 of 1976 decided today we have negatived
this contention. For the reasons recorded therein, therefore, this contention
fails. Point No.1 is, therefore, answered in the negative in favour of the
appellant and against the respondent.
Point
No.2:
So far
as this contention of the appellant that all the buildings situated within the
"common compound" belonging to the respondent railway company should
be treated as one unit for the purpose of house tax is concerned, it becomes
necessary for us to have a look at the relevant statutory scheme. Section 128
(1)(i) of the Act provides as under:
"128.
Taxes which may be imposed (1) Subject to any general rules or special orders
of the State Government in this behalf, the taxes which a municipality may
impose in the whole or any part of a municipality are".
(i) a
tax on the annual value of buildings or lands or of both." In view of the
aforesaid provision, therefore, it has to be held that the appellant Board,
subject to special orders of the State Government, is entitled to impose tax on
the annual value of buildings or lands or of both. It, therefore, becomes clear
that in the complex belonging to the respondent as number of buildings are
situated in the "common compound", house tax can be levied by the
appellant both on the buildings and also on the other open land in which such
buildings are situated. These open lands surrounding the buildings if not
appurtenant to such buildings would be a separate subject of house tax while
buildings with their appurtenant land would form another subject of house tax.
Charge of house tax will settle on all these buildings and lands not comprised
in these building. This becomes clear if we view Section 2 sub-section (2) of
the Act which defines "buildings". It reads as under:
"(2)
"Building" means a house, outhouse, stable, shed, hut or other
enclosure or structure whether of masonry bricks, wood, mud, metal or any other
material whatsoever, whether used as a human dwelling or otherwise, and
includes any verandah, platform, plinth, staircase, doorstep, wall including
compound wall other than a boundary wall of the garden or agricultural land not
appurtenant to a house but does not include a tent or other such portable
temporary shelter." The said definition has to be read with the definition
of the term "compound" under Section 2, sub-section (5). The said term
reads as under:
"5.
"Compound" means land, whether enclosed or not, which is the
appurtenance of a building or the common appurtenance of several
buildings".
On a
conjoint reading of these provisions therefore, it becomes clear that before
the appellant Board can impose house tax under Section 140(a) on any property
situated within its municipal limits if it is a "building" the unit
of tax would be the building concerned including its compound wall and the
compound wall would also cover within it the land situated in the said compound
provided it is appurtenant to the building or a "compound"
appurtenant to the several buildings. It is, therefore, obvious that if the
"common compound" in which the housing complex belonging to the common
owner is situated is not an appurtenance to several buildings within that
complex, then the said land cannot be said to be a part and parcel of the
building for the purpose of house tax. For imposing house tax on buildings
under Section 140(1)(a) it has to be shown that the buildings with their common
appurtenant land or the land in common appurtenance to several buildings
situated nearby are available for imposing such a tax thereon. It is only such
appurtenant land which can form part of the buildings for attracting house tax
assessment proceedings. But if the "common compound" in which such
buildings with appurtenant lands are situated also includes land which cannot
be said to be a common appurtenance to several buildings situated therein or
separately appurtenant to any given building, such land would be outside the
sweep of the term "building".
Such
land, however, on its own could be legitimately made the subject matter of
separate levy of house tax as an independent unit being open land. As seen from
Section 140(1)(b) itself as the Board can impose the tax on annual value of
lands which may not be covered by the sweep of the definition of the term
"building". Once that conclusion is reached, it becomes obvious that
all the buildings situated along with their appurtenant lands in one
"common compound" belonging to the same owner cannot be treated as
one unit for the purpose of imposing house tax under Section 128 (1)(i). The
reasoning of the High Court in this connection cannot be found fault with on
the scheme of the Act. It is pertinent to note that "common compound"
which is relevant for the water-tax as per Section 129 of the Act to which we
have made a detailed reference while deciding the companion appeal No. 1218 of
1976 is conspicuously absent in connection with imposition of house tax on the
annual value of buildings or lands or both as found in Section 128 (1)(i). We,
therefore, endorse the reasoning of the Division Bench of the High Court which
rejected this contention of the appellant Board. Point No.2 is therefore
answered in the negative against the appellant and in favour of the respondent.
Point
No.3:
----------
That takes us to the last main point for consideration. It has to be kept in
view that house tax is to be imposed under Section 128 (1) (i) on the annual
value of buildings or lands or of both. Assessment of annual value has to be
done according to the requirement of Section 140 sub-section (1) which defines
"annual value" as under:
"(1)
"Annual value" means (a) in the case of railway stations, hotels, colleges,
schools, hospitals, factories and other such buildings, a proportion not
exceeding five per centrum to be fixed by rule made in this behalf of the sum
obtained by adding the estimated present cost of exacting the building to the
estimated value of the land appurtenant thereto, and (b) in the case of a
building or land not falling within the provisions of clause (a), the gross
annual rent for which such building, exclusive of furniture or machinery
therein, or such land is actually let, or where the building or land is not
let, or in the opinion of the municipality is let for a sum less than its fair
letting value, might reasonably be expected to let from year to year." It
becomes obvious in the light of the aforesaid provision that up to the limit of
5 per cent of the annual value, the Board can impose house tax on immovable
properties, like railway stations, hotels, colleges, school, hospital etc. mentioned
in the said provision but for doing so the estimated present cost of erected
buildings concerned has to be kept in view and also the estimated value of the
land appurtenant thereto is also to be taken into consideration.
Now,
the phrase "estimated present cost of erecting the building" is
entirely differently worded as compared to the phrase "estimated value of
the land appurtenant thereto".
The
value of the building as well as the land appurtenant once arrived at will have
to be added for computing 5 per cent ceiling up to which by rules the Municipal
Board can impose house tax on the buildings concerned. It becomes at once clear
that when appurtenant land is to be valued it's valuation has to be made as per
its market value obtaining at the time of assessment. But so far as the value
of the building to which such land is appurtenant goes, the computation has to
be made on the estimated present cost of erecting the building to be subject to
the tax. Meaning thereby, at the time of assessment the cost of construction of
such building in its existing state is to be kept in view. Hence such cost must
be arrived at by keeping in view the then existing state of the building and
the cost which would be incurred for erecting such a building.
Consequently
it becomes obvious that while estimating the present cost of erecting the
building concerned, the assessing authority has to keep in view the life of the
building and also the fact as to when it was earlier constructed and in what
present state the building is and what will be the cost of erecting a new
building so as to result into erection of such an old building keeping in view
its life and wear and tear from which it has suffered since it was put up. It
is obvious that if the building is an old one the present cost of erecting such
a building would necessary require further consideration to what would be the
depreciated value of such a buildings; if a new building is erected at the time
of assessment. Such cost, obviously, has to be sliced down by giving due weight
to the depreciation so as to make estimation of present cost of the new
building to ultimately become equal to the erection cost of the building
concerned in its depreciated state.
Consequently,
it cannot be said that 10 per cent depreciation allowed by the District
Magistrate and as confirmed by the High Court on the total estimated cost of
the building for bringing it within the assessable tax net of house tax was an
exercise which was ultra vires provisions of the Act or beyond the jurisdiction
of the assessing authority. On the facts governing the case, it is seen that
the railway station belonging to the respondent, was as old as 1905, there may
be other buildings within the complex which might have seen the light of the
day years before the time of assessment. Naturally, they would not be new
buildings which could have said to have been put up only at the time of
assessment proceedings. They were obviously old buildings. It is not the case
of the appellant or any of them that these buildings were new buildings
recently constructed when assessment proceedings were initiated.
Consequently,
a flat rate of 10 per cent depreciation as granted by the District Magistrate
while computing the annual value for house tax purposes, in the present case,
cannot said to be an unauthorised exercise. The third point for determination,
therefore, has to be answered in the affirmative against the appellant and in favour
of the respondent.
Point
No.4:
----------
As a result of the aforesaid discussion, this appeal succeeds so far as the
first point is concerned.
However,
it stands rejected so far as the last two contentions are concerned. The appeal
is partly allowed accordingly and the Judgment and Order of the Division Bench
will stand modified in terms of this judgment in favour of the appellant Board.
Before parting with this appeal, we may mention that during the pendency of
this appeal, by an interim order dated 20th January, 1977, a three Judge Bench of this Court,
directed as under:
"There
will be stay of restitution pending the disposal of the appeal.
The
appellant undertakes not to press the demand for the recovery of the amount of
Rs.98,950/- and any future dues from the respondent during the pendency of the
appeal in this Court.
The
hearing of the appeal is expedited and the same shall be listed for hearing
along with C.A.1218/76." It is obvious that the aforesaid order in so far
as the interim stay deals with the right of the appellant Board to impose
water-tax on all the respondent is concerned, now there will remain no occasion
for the appellant Board to grant any restitution to the respondent so far as
recovery of water-tax for the relevant time in dispute is concerned.
It
will also be open to the appellant Board to press for payment of recovery of
water-tax which has remained unpaid by the respondent for the relevant year
subject to assessment of all buildings as separate units of taxation.
However,
as the appellant fails on the question of levy of house tax as decided against
it while answering point no.2, so far as house tax levy is concerned, it will
abide by the result of this appeal which is partly decided against the
appellant and will be assessed accordingly for the relevant years. The appeal
is partly allowed as aforesaid. No costs.
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