Commissioner Vs. Griha Yajamanula Samkhya & Ors  Insc 261 (2 May 2001)
Bharucha, D.P. Mohapatra & S.N. Phukan D.P. Mohapatra, J.
Appeal Nos.4057-4060 and Civil Appeal Nos.4061-4088 of 1996
Andhra Pradesh High Court disposed of a batch of Writ Petitions involving the
controversy regarding assessment of property tax of buildings located within
the limits of different Municipal Corporations in the State by the common judgment
rendered on 29th
December, 1994. The
conclusions arrived at by the High Court have been summed up as follows:
power for determination of the rateable value of the building and the
property-tax belongs to the commissioner which cannot be fettered by rules
framed under the Acts;
Committee constituted by the Government has no role to play and the
Commissioner is not bound by their recommendations.
annual rental value to be fixed by the Commissioner in the corporation areas
shall be limited to the fair rent either determined or determinable under the
A.P. Buildings (Lease, Rent and Eviction) Control Act.
Subject to the maximum as above the Commissioner may fix a lesser annual rental
value keeping in consideration the factors as provided for in Section 212 of
the Corporations Act.
annual rental value in respect of all buildings in Municipal Areas, where rent
has been determined under the rent control legislation, would be the gross
annual rental on the basis of such rent determined unless, there is any fraud
or collusion and that in respect of other buildings in the Municipality areas,
the Commissioner has to determine the factors under Section 87(2).
determining the annual rental value the Commissioner may resort to plinth area
method so as to serve him as a basis and guide but it will be open to the assessees
to contest the annual rental value, rateable value or property-tax determined
in respect of their buildings and when objections are raised, the Commissioner
has to decide those objectively without fettering his discretion because of the
determination already made on the basis of the plinth area method.
Rules 3 to 7 of the Corporation and the Municipal rules are to be read only as
enabling provisions for the Commissioner to aid him in discharge of his
functions under the corporation or the Municipal Act to arrive at working
figures for the purpose of determination but not as fettering his discretion in
the matter as conferred upon him under the statutes.
form-A publications already made would be deemed to have been issued by the
Commissioner only on such basis as is stated above and not in pursuance of
recommendations of the Committee.
Before Form-B is issued in respect of buildings and lands, the Commissioner
shall afford opportunity to the assessees to object to the determinations made
and shall decide the objections on considerations as directed above and
provisions of Sections 214 to 225 of the Corporations Act shall be scrupulously
followed subject to the provisions of appeal. Xxx xxx xxx In the result the
writ petitions are allowed to the extent indicated above, but in the
circumstances there shall be no order as to costs.
correctness of the said judgment is under challenge in these appeals filed by
the Commissioners of the Municipal Corporations concerned and the Government of
perusal of the impugned judgment it appears that the main challenge in the case
was against the determination of the annual rental value of the buildings within
the area of Municipal Corporations and Municipalities in the State.
the questions arising in all the appeals are similar and the appeals arise from
a common judgment, all the cases were heard together and they are being
disposed of by this judgment. Determination of the questions raised in these
cases depends on the interpretation of the relevant provisions of the Hyderabad
Municipal Corporations Act, 1955, the Andhra Pradesh Municipalities Act, 1955
as amended by the A.P. Municipalities Act, 1989, the Hyderabad Municipal
Corporations (Assessment of Property Tax) Rules, 1990 (for short the Rules) and
the A.P. Municipalities (Assessment of Taxes) Rules, 1990 (for short the
Municipal Rules). Hyderabad Municipal Corporations Act, 1955 (for short the
Corporation Act) Under Section 2(3) building includes a house, out-house,
stable, latrine, godown, shed, hut, wall, fencing, platform and any other
structure whether of masonry, bricks, wood, mud, metal or of any other material
whatsoever. In section 2(7) Commissioner is defined to mean the Municipal
Commissioner for the city appointed under Section 104 and includes an acting
Commissioner appointed under Section 110.
2(48) defines rateable value to mean the value of any building or land fixed in
accordance with the provisions of this Act and the rules made thereunder for
the purpose of assessment to property taxes.
VIII of the Act contains the provisions regarding Municipal taxation. Sections
197 to 289 are included in the said chapter. In section 197(1)(i) it is
provided that for the purposes of this Act the Corporation shall impose the
following taxes namely :
on lands and buildings. Xxx xxx xxx In section 199 provisions regarding
property taxes are made. Property taxes include
conservancy tax. In sub-section (2) it is provided that save as otherwise
provided in this Act these taxes shall be levied at such percentages of their rateable
value as may be fixed by the Corporation. Provided that the aggregate of the
percentages so fixed shall not in the case of any land or building be less than
15 per cent or greater than 30 per cent.
supplied) Sections 204 to 206 contain provisions regarding person or persons on
whom rests the liability for payment of the property tax.
Sections 207 to 211 are the provisions regarding notice of transfer etc., of
premises assessable to property tax.
sections 212 and 213 are contained the provisions regarding valuation of
property assessable to property taxes.
212 which deals with the determination of the rateable value reads as follows:
value how to be determined (1) (a) The annual rental value of lands and
buildings shall be deemed to be the gross annual rent at which they may
reasonably be expected to be let from month to month or from year to year with
reference to its location, type of construction, plinth area, age of the
building, nature of use to which it is put and such other criteria as may be
supplied) (b) the annual rental value of lands and buildings shall be deemed to
be the gross annual rent at which they may reasonably be expected to be let
from month to month or from year to year, less deduction at the rate of 10% for
buildings aged upto 25 years; and 20% for the buildings aged above 25 years; of
that portion of such gross annual rent which is attributable to the buildings,
apart from their sites and adjacent lands occupied as an appurtenance thereto and
the said deduction shall be in lieu of all allowances for repairs or on any
other account whatsoever.
that a rebate of 40 per cent of the annual rental value shall be allowed in
respect of the residential buildings occupied by the owner inclusive of the
deduction permissible elsewhere.
Section 213 power is vested in the Commissioner to call for information or
returns from owner or occupier or enter and inspect assessable premises. To
enable the determination of the rateable value of any building or land and the
person primarily liable for the payment of any property tax leviable in respect
thereof the Commissioner may require the owner or occupier of such building or
land, or of any portion thereof, to furnish him, within such reasonable period
as the Commissioner specifies in this behalf with information or with a written
return signed by such owner or occupier.
218 mandates the Commissioner to give public notice as far as possible, when
the entries required by clauses (a)(b)(c) and (d) of section 214 have been
completed, and of the place where the ward assessment book or a copy of it, may
Section 220 provision is made for receipt of complaints against the amount of rateable
value in the ward assessment book in the office of the Commissioner.
223 mandates that the Commissioner shall investigate and dispose of the
complaint in the presence of the complainant, if he shall appear, and if not,
in his absence. (emphasis supplied) The Ward assessment books which are to be
authenticated by the Commissioner, is provided under section 224 of the Act.
of the Municipal Corporation Rules contains the provision regarding annual
rental value. Sub- rule(1) of Rule 3 provides that the annual rental value of
lands and buildings shall be deemed to be the gross annual rent at which they
may reasonably be expected to be let from month to month or from year to year
with reference to its location, type of construction, plinth area, age of the
building, nature to use to which it is put and such other criteria as may be
supplied) In sub-rule(2) it is laid down that the Commissioner shall gather the
information relating to the prevailing rental value as specified in Rules 4 to
6 so as to arrive at the rate of rent per month or per year per square meter of
plinth area and then issue a draft notification in a daily newspaper having
circulation in the district and in the District Gazette calling for objection
and suggestions from the public so as to reach the Commissioner within 15 days
from the date of publication of the draft notification, regarding the Division
of the Corporation into Zones and monthly or yearly rental values per square metre
of plinth area in each Zone. The rule further provides that the Commissioner
should consider the objections and suggestions, if any, received in response to
the said notification and revise the Zones and the monthly or yearly rents
wherever necessary and that he shall place the proposals before the Committee
constituted by the Government for its final recommendations. On the basis of
the recommendations of the Committee, the Commissioner shall issue a final
notification in Form-A and publish it in a local newspaper having circulation
in the District and in the District Gazette for information of the public.
contains provisions regarding division of Municipal Corporation area into
Zones. Rule 5 is regarding classification of buildings and Rule 6 provides that
after classification of the buildings based on the type of construction they
shall be further classified taking into consideration the nature of use of such
which contains provision of fixation of monthly or yearly rent reads as follows
(p.355): 7. Fixation of monthly or yearly rent :
buildings located in a zone shall be classified based on types of construction
and nature of use, 36 categories of buildings can be identified in each zone
based on the above criteria. The Commissioner shall gather the information
relating to the prevailing rental value of the buildings of various categories
in a zone and arrive at average monthly or yearly rent fixable for each
category of building per sq. metre of plinth area.
The Commissioner shall then provisionally fix monthly or yearly rent for each
category in a Zone per square metre of plinth area and notify the rate of
monthly or yearly rental so fixed in Form A for adopting the said rates for
fixation of monthly or yearly rental of the buildings in a zone and publish the
same in the District Gazette and in a local newspaper having circulation in the
district calling for objections or suggestions from the Public for such
adoption regarding the division of Municipality into Zones. The notification
shall contain the monthly or yearly rental value of the buildings in a Zone
together with the localities/areas with particulars of door numbers included in
the Zone. The objections or suggestions, if any, on the said notification shall
have to be sent to the Commissioner within 15 days from the date of its publication.
The Commissioner shall consider the objections and suggestions, if any,
received in response to the said notification and revise the Zones and the
monthly or yearly rental values wherever necessary. He shall then place all the
proposals before the District Level Advisory Committee constituted by the
Government for its final recommendations. Thereupon the Commissioner shall
publish a final notification in Form A in the District Gazette and local
newspaper having circulation in the District for information of the public.
(Emphasis supplied) Note- Any notification issued prior to this amendment by
the Commissioner shall be treated as a draft notification.
The Commissioner shall fix the monthly or yearly rent for each category in a
zone per square metre of plinth area and notify the rate of monthly or yearly
rent so fixed in Form A for adopting the said rates fixation of monthly or
yearly rental value of buildings in a zone and for information of the public.
The Commissioner shall issue a notification in Form A furnishing the
localities, area included in the zone and particulars of door numbers included
in the zone. The notification in Form A shall be published in local newspapers
having circulation in the area for information of the public.
The Commissioner shall obtain information of all buildings in respect of plinth
area, type of construction, age of building, nature of use and fix monthly or
yearly rental value as per the rate of monthly rents notified for each category
of a building in a zone. The property tax assessment list of buildings shall be
prepared in Form B.
The rates of monthly or yearly rents for each category of building in a zone
shall be revised once in 5 years taking into consideration the rent component
of cost of living index prevailing at the time of preparation of new assessment
books. In respect of value of the lands on which buildings constructed for the
purposes of choultries, hotels, lodges and cinema theatres whose value
increases and the income on the property does not increase, the average rental
value shall be fixed with reference to the income of the property.
the case of items wherein varying rates are provided, the Municipal Corporation
shall adopt the rates found suitable for the particular municipal area after
taking the local conditions into account. The Commissioner may also increase
the rates so adopted by the Municipal Corporation by not exceeding 10% over the
rates aforesaid for superior quality of better type of flooring and fine
plastering depending upon the workmanship and cost involved.
the entire roof is not of the same description appropriate rates shall be
adopted for the different types of roof for arriving at the total cost of
erection. The rate of cost per square metre plinth area shall be determined in
consultation with the concerned Local Engineer belonging to Roads and Buildings
Department in consonance with the price levels prevailing at the time of such
the case of buildings which are partly occupied by the owner and partly let out
on rent, property tax shall be levied as per Rules 6 and 3 on owner occupied
portions and rental portions respectively.
For the purpose of assessing the vacant land, the estimated capital value of
the land shall be the market value fixed by Registration Department for the
purpose of registration.
Any tax lawfully levied by or on behalf of the Corporation at the commencement
of these rules shall notwithstanding any change in the method or manner of
assessment under these rules, be continued till assessment under these rules is
made.] By virtue of section 5 of the A.P. Municipal Corporation (2nd Amendment)
Act, 1995 (Act No.25 of 1995) the amendment made to the Hyderabad Municipal
Act, 1955 by section 3 was extended to and made applicable also to the Vishakhapatnam
and Vijayawada Municipal Corporations.
the hearing of the cases the main thrust of the arguments advanced by Shri R.F.
Nariman, learned senior counsel appearing for the appellants was against the
conclusions arrived at by the High Court (para 2) that the Committee
constituted by the Government has no role to play and the Commissioner is not
bound by their recommendations.;
3) that the annual rental value to be fixed by the Commissioner in the
corporation areas shall be limited to the fair rent either determined or
determinable under the A.P. Buildings (Lease, Rent and Eviction) Control Act
and (para 7) that the provisions in rules 3 to 7 of the Corporation Rules are
only enabling provisions for the Commissioner to help him in discharge of his
functions but not to fetter his discretion in the matter.
calculation of rateable value of a property for the purpose of determination of
property tax by municipal corporation/council has engaged the attention of this
Court from time to time.
case of the Corporation of Calcutta vs. Smt. Padma Debi and Others ( 1962(3)
SCR 49), this Court held that on a fair reading of the express provisions of
s.127(a) of the Calcutta Municipal Act, 1923, the rental value cannot be fixed
higher than the standard rent under the Rent Control Act. It was further held
that words gross annual rent at which the land or building might at the time of
assessment reasonably be expected to let from year to year in s.127(a) of the
Act implies that the rent which the landlord might realise if the house was let
is the bais for fixing the annual value of the building. The criterion is the
rent realisable by the landlord and not the value of the holding in the hands
of the tenant. The value of the property to the owner is the standard in making
the assessment. Interpreting the word reasonably it was observed that whether a
particular act is reasonable or not depends on the circumstances in a given
situation. A bargain between a willing lessor and a willing lessee uninfluenced
by any extraneous circumstances may afford a guiding test of reasonableness.
The phrase at the time of assessment means that the assessment commences with
the making of the valuation under s.131 of the Act and ends with the determination
of the objection under s.140 thereof. An event which takes place during this
period may be relied upon for assessing the annual value under s. 127(a) of the
case of Guntur Municipal Council v. Guntur Town Rate Payers Association (1971)
2 SCR 423), this Court held that under Section 82(2) of the Madras District
Municipalities Act (5 of 1920) the test is what rent the premises can lawfully
fetch if let out to a hypothetical tenant. The municipality is not free to
assess any arbitrary annual value but has to look to and is bound by the fair
or the standard rent which would be payable for particular premises under the
Rent Control Act in force during the year of assessment. This Court did not
agree that the language of s. 82(2) of the Municipalities Act any distinction
can be made between buildings the fair rent of which has been actually fixed by
the Controller and those in respect of which no such rent has been fixed. This
Court further held that the assessment of valuation must take into account the
measure of fair rent as determinable under the Act. It may be that where the
Controller has not fixed the fair rent the municipal authorities will have to
arrive at their own figure of fair rent but that can be done without any
difficulty by keeping in view the principles laid down in section 4 of the Act
for determination of fair rent. In Corporation of Calcutta vs.Life Insurance
Corporation of India (1971 (1) SCR 248), this Court took note of the decision
in Smt. Padma Debis case (supra) and the interpretation of the proviso to
section 168(1) of the Calcutta Municipal Corporation Act, 1951 and observed:
addition of the proviso, in our judgment, the meaning of the expression gross
rent at which the land or building might reasonably be expected to let is not
altered. In the present case, there is no order of the Controller fixing
standard rent under s. 9 of the West Bengal Premises Rent Control (Temporary
Provision) Act, 1950, but the standard rent stands determined by the definition
of that expression in s. 2(1)(b) of that Act, which provides (omitting parts
rent in relation to any premises means- (a) (b) where the rent has been fixed
under section 9, the rent so fixed; or at which it would have been fixed if
application were made under the said section.
therefore of the view that the High Court was right in assessing the annual
value on the basis of the standard rent as statutorily determined.
Court summed up its views in the following words:
under the Act the quantum of the consolidated rate depends upon the annual
value of land or building on the gross rent for which the land or building
might reasonably be expected to let, and not the gross rent at which the
subordinate interest of a tenant may be expected to be sublet. In determining
the assessment of annual value, the assessing authority is not concerned with
the rent which the tenant may receive from his sub-tenant. It is the gross rent
which the owner may realize by letting the land or building under a bargain
uninfluenced by extraneous considerations which determines the annual value.
Section 193 only provides for apportionment of consolidated rate :
irrelevant in determining annual value.
case of Srikant Kashinath Jituri vs. Corporation of the City of Belgaum ((1994)
6 SCC 572), a Bench of three learned Judges of this Court expressed the doubts
as to the soundness and continuing relevance of the view taken by this Court in
several earlier decisions that the property tax must be determined on the basis
of fair rent alone regardless of the actual rent received. The observations of
this Court are quoted herein-below:
parting with this appeal, we feel compelled to express our doubts as to the
soundness and continuing relevance of the view taken by this Court in several
earlier decisions that the property tax must be determined on the basis of fair
rent alone regardless of the actual rent received. Fair rent very often means
the rent prevailing prior to 1950 with some minor modifications and additions.
tax is the main source of revenue to the municipalities and municipal
corporations. To compel these local bodies to levy and collect the property tax
on the basis of fair rent alone, while asking them at the same time to perform
all their obligatory and discretionary functions prescribed by the statute may
be to ask for the discretionary functions prescribed by the statute may be to
ask for the impossible. The cost of maintaining and laying roads, drains and
other amenities, the salaries of staff and wages of employees in short, all
types of expenditure have gone up steeply over the last more than forty years.
In such a situation, insistence upon levy of property tax on the basis of fair
rent alone disregarding the actual rent received is neither justified nor
practicable. None of the enactments says so expressly. The said principle has
been evolved by courts by a process of interpretation.
a time has come when the said principle may have to be reviewed. In this case,
however, this question does not arise at this stage and, therefore, it is not
necessary to express a final opinion on the said issue.
case of Asstt. General Manager, Central Bank of India and others vs.
Commissioner, Municipal Corporation for the City of Ahmedabad and others (1995
(4) SCC 696), this Court interpreting section 2(1-A)(ii), provisos (aa) & (aaa)
we hold that proviso (aa) means what it says and has to be applied and followed
in the cases covered by it. So far as the Municipal Corporations Act is
concerned, the annual rent is the actual rent received where the standard rent
is not fixed under Section 11 of the Bombay Rent Act and it constitutes the
basis for determining the annual letting value, rateable value and property
is the plain effect and meaning of proviso (aa). So far proviso (aaa) is
concerned, an apprehension was expressed that it would enable the Commissioner
to question the actual rent received in every case and it would be an endless
enquiry. In our opinion, however, the said provision is conceived to meet
situations where the rent put forward as the actual rent received is not a
genuine plea, i.e., where it is a false plea. A landlord may let out a building
at less than market rent for many a reason, e.g., the tenant is a close friend
or a close relative or because the tenant is a charitable or religious organisation.
(aaa) does not enable the Commissioner to ignore such situation for, in such
cases, the rent actually received is the genuinely stipulated one. This power
is reserved to the Commissioner only with a view to ensure that by merely
putting forward a figure which is not true, persons do not escape the correct
in the case of East India Commercial Co. Pvt. Ltd. vs. Corporation of Calcutta
(1998) 4 SCC 368, this Court taking note of several earlier decisions including
Corporation of Calcutta vs. Padma Debi (supra), Guntur Municipal Council v. Guntur
Town Rate Payers Association (supra), Corporation of Calcutta vs. Life Insurance
Corporation of India (supra), Municipal Corporation v. Ratnaprabha (supra) and
Central Bank of India vs. Municipal Corporation for the City of Ahmedabad
(supra), summed up the gist of the principles deducible from the decisions in
the following words :
the aforesaid decisions, the principle which is deducible is that when the
Municipal Act requires the determination of the annual value, that Act has to
be read along with Rent Restriction Act which provides for the determination of
fair rent or standard rent. Reading the two Acts together the rateable value
cannot be more than the fair or standard rent which can be fixed under the Rent
Control Act. The exception to this rule is that whenever any Municipal Act
itself provides the mode of determination of the annual letting value like the
Central Bank of India case relating to Ahmedabad or contains a non obstante
clause as in Ratnaprabha case then the determination of the annual letting
value has to be according to the terms of the Municipal Act. In the present
case, Section 168 of the Municipal Act does not contain any non obstante clause
so as to make the Tenancy Act inapplicable and nor does the Act itself provide
the method or basis for determining the annual value. This Act has, therefore,
to be read along with determining the annual value. This Act has, therefore, to
be read along with Tenancy Act of 1956 and it is the fair rent determinable
under Section 8(1) (d) which along can be the annual value for the purpose of
the statutory provisions noted above, it is clear that the Act provides that
the tax shall be levied at such percentages of the rateable value as may be
fixed by the Corporation. It further provides the method and manner of
determination of the rateable value. The determination of the annual rental
value which is the basis for calculation of the rateable value is also provided
in the Act and the Rules. The Act mandates that the Commissioner shall
determine the tax to be paid by the person concerned in the manner prescribed
under the statute and the rules. It is our view that the Act and the Rules
provide a complete code for assessment of the property tax to be levied for the
buildings and lands within the municipal corporation. There is no provision in
the statute that the fair rent determined under the Rent Control Act in respect
of a property is binding on the Commissioner. The legislature has wisely not
made such a provision because determination of annual rental value under the
Act depends on several criteria. The criteria for such determination provided
under the Act may not be similar to those prescribed under the Rent Control
Act. Further the time when such determination was made is also a relevant
factor. If in a particular case the Commissioner finds that there has been a
recent determination of the fair rent of the property by the authority under
the Rent Control Act he may be persuaded to accept the amount as the basis for
determining the annual rental value of the property. But that is not to say
that the Commissioner is mandatorily required to follow the fair rent fixed by
the authority under the Rent Control Act. The High Court therefore did not
commit any error in holding that the determination of fair rent under the Rent
Control statute will not be binding on the Commissioner for the purpose of
assessment of property tax under the Act.
to the Committee set up by the State Government, we find that the State
Government constituted the Committee under an executive order. Our attention
has not been drawn to any provision of the Act which empowers the State
Government to constitute such a Committee under the statute.
provision is made in the Act for District Level Committees; but its role is
only advisory. The Committee set up by the State Government has no statutory
recommendations are advisory and are not binding on the Commissioner. In this
regard also the High Court cannot be said to have committed any illegality in
holding that the powers of the Commissioner are not fettered by the
recommendation of the Committee.
intent and purpose of the exercise to determine the annual rental value is to
avoid arbitrariness in the process of assessment of the tax and also to ensure
that the landlord does not escape payment of amount due as tax by taking
recourse to fraudulent and manipulated under- writings of the rental value. For
proper implementation of the provisions of the Municipal Act it is necessary
that the power of assessment should be vested in an authority specified in the
statute. The importance of specifying the authority to assess property tax
under the Municipal Act cannot be over- emphasised. Keeping in view the
incidence of the tax the persons who are to bear the burden of payment of the
tax and the effect it will have on the funds of the municipalities for the
purpose of development of the area, the legislature vested the power in the
Commissioner of the Municipal Corporation to complete the exercise. As noted
earlier, the statute makes provision for setting up committees like the
District level Committee; but such committees play an advisory role for
rendering assistance to the Commissioner in the matter. Therefore, the order of
the State Government making the decision of the Committee binding on the
Commissioner is not sustainable and the view taken by the High Court in this
regard is unassailable.
discussions in the foregoing paragraphs, the decision that emerges is that only
the findings/decision of the High Court in point nos.(3) and (5), as stated in
the judgment under challenge, are to be set aside. It is ordered accordingly.
The appeals are allowed in part. No costs.