India
Automobiles Ltd. Vs. Calcutta Municipal Corporation & Anr [2002] Insc 74 (13 February 2002)
G.B.
Pattanaik, R.P. Sethi && Bisheshwar Prasad Singh Sethi,J.
Aggrieved
by the determination of annual valuation made in terms of Section 174 of the
Calcutta Municipal Corporation Act, 1980 (hereinafter called "the 1980
Act"), the appellant-owner of a nine storeyed building, admittedly, used
for commercial purposes, filed an appeal before the Municipal Assessment
Tribunal who vide its order dated 26th February, 1999 allowed the appeal and
fixed the annual value on the basis of rent actually received by the
appellant-owner. Feeling aggrieved, the respondent-corporation approached the
High Court under Article 227 of the Constitution of India who, vide the order
impugned in this appeal, set aside the order of the Tribunal and directed it to
hear the appeals on merits keeping in mind that total amount paid by the
sub-tenants to the tenant of the appellant should also be taken into
consideration in assessing the annual valuation.
It is
not disputed that the property in question was leased out by the appellants to
their tenant, named Banwarilal Pasari at a rental of Rs.75,000/- per month vide
a duly executed lease deed (Annexure P-1). There is also no dispute that the
building is a nine storeyed building and is used for commercial purposes. The
respondent-Corporation carried out the general revision of the annual valuation
of the premises effective from fourth quarter of 1984-85 and also for the
period from fourth quarter of 1990-91. Proposed valuation was communicated to
the owners vide two notices issued under the 1980 Act directing them to attend
the hearing before the Hearing Officer of the Corporation on the date specified
in the notice. The appellant submitted objections to the notices and objected
to the same challenging the proposed valuation and the basis thereof. The
Hearing Officer vide his two orders dated 15.4.1996 fixed annual valuation from
fourth quarter of 1984-85 at Rs.18,80,600/- and from fourth quarter of 1990-91
at Rs.21,63,560/-. The annual valuation assessment was made under Section 174
of the 1980 Act by taking into consideration the rent paid by the sub-tenants.
The Municipal Assessment Tribunal accepted the appeal of the owners by relying
upon the judgment of this Court in Corporation of Calcutta vs. Life Insurance
Corporation of India [1970 (2) SCC 44]. Not satisfied
with the judgment of the Tribunal, Municipal Corporation moved the High Court
by way of a petition under Article 227 of the Constitution of India, which was
allowed by setting aside the order of the Tribunal vide judgment impugned in
this appeal. The High Court held that the aforesaid decision of this Court had
no application to an assessment made under Section 174 of the 1980 Act which
was found to be materially different from Section 168 of the Calcutta Municipal
Act, 1951 under which the assessment had been made in Life Insurance
Corporation's case (supra). The High Court further held that under 1951 Act the
annual valuation in no case could exceed the standard rent fixed by the West
Bengal Premises Rent Control (Temporary Provision) Act, 1950 but under the 1980
Act which had a non-obstante clause, the annual valuation can be fixed
notwithstanding anything contained in the West Bengal Tenancy Act, 1956 or any
other law for the time being in force. It has been further held that under the
1980 Act, the consolidated rate is primarily leviable, if the land and building
is let upon lessor and if the land and building is sub-let, still upon the
superior lessor under Section 193 of the Act, and for that reason Section 194
of the Act has conferred a right upon the lessor, lessee or the sub-lessee to
recover the excess amount from their respective tenants for the excess payable
by them due to creation of tenancy or sub-tenancy. It was further held that the
Municipal Corporation is in no way bound by the fixation of standard rent or
fair rent by the Rent Controller and the rent realised by a tenant from the
sub-tenant or by a sub-tenant from his tenant is required to be taken into
consideration and such amount to be treated as gross rent of the land or
building for the purposes of Section 174 of the 1980 Act. Finding that the
Appellate Tribunal had acted illegally and with material irregularity in
holding that in assessing annual valuation of the building the amount realised
from the sub-tenants cannot be taken into consideration, the matter was
remanded to the Tribunal to hear the appeal afresh on merits and decide the
same in the light of the observations made by the High Court. Not satisfied
with the Judgment of the High Court, the owners of the building have preferred
this appeal. When this appeal was listed in the Court on 10th November, 2001, the Judges constituting the Bench
felt that following observations of this Court in the case of LIC required
reconsideration:
"But
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 sublet" The Bench
directed the Registry to place the matter before the Hon'ble Chief Justice for
listing this matter before a Bench of three Judges. In such circumstances this
appeal has come before us.
It is
contended on behalf of the appellant that the order passed by the Municipal
Assessment Tribunal was strictly according to law and did not suffer from any
infirmity with which the High Court could have interfered. It is submitted that
while assessing the valuation of the property, the amount taken by the tenant
from a sub-tenant cannot be taken into consideration in view of the judgment of
this Court in LIC's case (supra). According to the appellant, the annual value
of the land and building has to be deemed to be gross annual rent including
service charges as contemplated under Section 174 of the 1980 Act which does
not include the rent received by a tenant from the sub-tenant. According to the
appellant annual value has to be determined on the basis of the actual rent
received by the owner unless it is established that such rent is not bonafide
paid and that the same is shown fraudulently only for the purposes of depriving
the authorities from assessing the annual rental value. It is argued on behalf
of the appellant that despite the changes made in the 1980 Act, the law laid
down in Padma Debi's case is still valid for the purpose of determining the
gross annual rent of a building under the Calcutta Municipal Corporation Act.
As in the present case the assessment made by the Tribunal proceeds on the
basis of the actual rent received by the appellant and in the absence of any
allegations of extraneous circumstances, the order of the Tribunal has to be
upheld by setting aside the impugned judgment. It is also stated that in the
present case there is no difference between the standard rent and the actual
rent realized by the landlord from the tenant because of application of Section
2 and Section 9 of the West Bengal Premises Tenancy Act. The issue as to
whether the standard rent is the upper limit of the reasonable rent does not
fall for decision, under the circumstances of the present case.
It is
contended on behalf of the respondent-Corporation that the High Court has
correctly interpreted Section 174 of 1980 Act which is in accordance with the
various judgments of this Court. It is submitted that in The Corporation of
Calcutta vs. Sm.Padma Debi & Others [1962 (3) SCR 49], this Court had
divided the municipal laws into two distinct groups. One such group, referred
to municipal laws of certain States which did not expressly exclude application
of Rent Restriction Acts in the matter of determination of annual value of a
building for the purposes of levying property taxes and the other group of such
municipal laws which expressly exclude application of Rent Restriction Acts in
the matter of such determination. It is submitted that unlike Calcutta
Municipal Act, 1923 and Calcutta Municipal Act, 1951, the new 1980 Act contains
specific provision in Section 174 providing a non obstante clause specifically
excluding the operation and effect of the West Bengal Premises Tenancy Act,
1956 and any such other law in force, which would fall in the second group of
cases as referred to in Padma Debi's case (supra).
To
appreciate the rival contentions of the parties, it is necessary to make
reference to some statutory provisions relevant for the purposes of resolving
the controversy. The 1980 Act was enacted to amend and consolidate the law
relating to the municipal affairs of Calcutta. Chapter XII deals with the power of taxation at consolidated rates.
Section 170 authorises the Corporation to levy certain taxes enumerated
therein. Section 174, dealing with the determination of annual valuation of the
property within the municipal corporation provides:
"174.
Determination of annual valutaion –
(1)
Notwithstanding anything contained in the West Bengal premises Tenancy Act,
1956 or in any other law for the time being in force, for the purpose of
assessment to the consolidated rate, the annual value of any land or building
shall be deemed to be the gross annual rent including service charges, if any,
at which such land or building might at the time of assessment be reasonably
expected to let from year to year, less an allowance of ten per cent, for the
cost of repairs and other expenses necessary to maintain such land or building
in a state to command such gross rent:
Provided
that where there is a transfer, inter vivos, of ownership of any land or
building since the last preceding periodical assessment under Section 179, the
annual value of such land or building shall be fixed at seven and a half per
cent of the amount stated in the deed of transfer as consideration for such
transfer or, if no consideration is stated in such deed of transfer, at seven
and a half per cent of the estimated market value thereof:
Provided
further that while determining the annual value in the case of any land or
building or portion thereof exclusively used by the owner for his residential
purpose, the gross annual rent of such land or building or portion, as the case
may be, shall be reduced, ---
(a) where
the gross annual rent does not exceed six hundred rupees, by thirty per cent;
(b) where
the gross annual rent exceeds six hundred rupees but does not exceed eighteen
thousand rupees, by such percentage of the gross annual rent as is worked out
by dividing the gross annual rent by six hundred and subtracting the quotient
from thirty-one, the difference being rounded off to the nearest place of
decimal:
Provided
also that no such reduction in gross annual rent shall be made—
(a) in
case the total covered area in any land or building under occupation for
residential purpose by the owner exceeds one hundred and fifty square metres,
or
(b) where
a person owns or occupies for residential purposes more than one plot of land
or building or portions thereof within the municipal limit of Calcutta.
(2)
The annual value of any land which is not built upon shall be fixed at seven
per cent of the estimated market value of theland.
(3) If
the gross annual rent of any class or classes of land or buildings used
exclusively for hospital or educational purposes or for the purposes of sports
or as a place of worship or as a place for disposal of the dead cannot be
easily estimated, the gross annual rent of such building shall be deemed to be
five per cent of the value of the building obtained by adding the estimated
cost of erecting the building at the time of assessment less a reasonable
amount to be deducted on account of depreciation, if any, to the estimated
present market value of the land valued with the building as part of the same
premises.
(4) In
the case of any land or building or part thereof used for public cinema shows
or theatrical performances or as a place of similar public recreation,
amusement or entertainment, the gross annual rent of such land or building or
part thereof, as the case may be, shall be deemed to be seven and a half per
cent of the gross annual receipts in respect of such cinema shows or theatrical
performances or place of public recreation, amusement or entertainment,
including receipts from rent and advertisements and sale of admission tickets
but excluding taxes on the same of such tickets:
Provided
that the provisions of this sub-section shall not apply in the case of
temporary fairs, circuses, and casual shows or performances.
(4A)
If the gross annual rent of any land or building or part thereof cannot be
easily estimated, the gross annual rent of such land or building for the
purposes of sub-section (1) shall be deemed to be seven and half per cent of
the value of the building obtained by adding the estimated present cost of
erecting the building at the time of assessment less a reasonable amount to be
deducted on account of depreciation, if any, to the estimated present market
value of the land:
Provided
that the estimated present cost shall not include the cost of any plant or
machinery, excepting those enumerated in Schedule VIII, on the land or the
building as aforesaid.
(5)
The annual value as determined under this Chapter shall be rounded off to the
nearest ten rupees." Section 180 deals with the revision of assessment and
Section 181 provides for settlement of returns and inspection of lands and
buildings for the purposes of assessment. Section 186 provides that subject to
provisions of Section 181 or Section 182 any objection to the annual value of
the land and building as entered in the assessment list shall be made by the
owner or the person liable to pay the consolidated rate, in writing, to the
Municipal Commissioner before the date fixed in the notice under Section 194 or
Section 195 and shall state in what respect the annual value is disputed.
Section 188 deals with the hearing of objections and Section 189 provides an
appeal before the Municipal Assessment Tribunal. Section 193 catalogues the
incidence of consolidated rate on lands and buildings and provides:
"193(1)
The consolidated rate on lands and buildings shall be primarily leviable, --
(a) if
the land or building is let, upon the lessor;
(b) if
the land or building is sublet, upon the superior lessor;
(c) if
the land and building is unlet, upon the person in whom the right to let such
land or building vests.
(2)
The consolidated rate on any land or building, which is the property of the
Corporation and the possession of which has been delivered under any agreement
or licensing arrangement, shall be leviable upon the transferee or the
licensee, as the case may be.
(3)
The liability of the several owners of any land or building constituting a
single unit of assessment, which is of purports to be severally owned in part
or flats or rooms, for payment of consolidated rates or any instalment thereof
payable during the period of such ownership shall be joint and several:
Provided
that the Municipal Commissioner may apportion the amount of consolidated rate
on which land or building among the co-owners.
(4)
Notwithstanding the vesting of any land in the State under the Calcutta Thika
Tenancy (Acquisition and Regulation) Act, 1981, in the case of any land
comprised in a thika tenancy, the consolidated rate assessed in respect of such
land and any hut or building made thereon shall be primarily leviable upon then
thika tenant.
Section
194 provides:
"194.
Apportionment of liability for consolidated rate on land or building when the
premises assessed are let or sublet ---
(1) If
the annual valuation of any land or building exceeds the amount calculated on
the basis of the rent of such land or building payable to the person upon whom
the consolidated rate on such land or building is leviable under Section 193,
such person shall be entitled to receive from his tenant and difference between
the amount of the consolidated rate on such land or building and the amount
which would be leviable if the consolidated rate on such land or building were
calculated on the basis of the rent payable to him.
(2) If
the annual valuation of any land or building which is sublet exceeds the amount
calculated on the basis of rent of such land or building payable to the tenant
by his sub-tenant or to the sub-tenant by the person holding under him, the
tenant or the sub-tenant shall be entitled to receive from his sub-tenant or
the person holding under him, as the case may be, the difference between any
sum recovered under this Act from such tenant or sub-tenant and the amount of
consolidated rate on such land or building which would be leviable if the
annual valuation of such land or building were calculated on the basis of rent
payable to the tenant by him sub-tenant or the sub-tenant by the person holding
under him." It may be noticed at this stage that before the incorporation
of Section 174 of 1980 Act, Section 168 of the Calcutta Municipal Act, 1951
dealt with the assessment of lands and buildings to the consolidated rate.
Sub-section (1) of Section 168 provided:
"168
(1) For the purposes of assessment to the consolidated rate the annual value of
any land or building shall be deemed to be the gross annual rent at which the
land or building might at the time of assessment be reasonably expected to let
from year to year, less, in the case of a building, an allowance of ten per
cent for the cost of repairs and for all other expenses necessary to maintain
the building in a state to command such gross rent:
Provided
that in respect of any land or building the rent of which has been fixed under
the provisions of West Bengal Premises Rent Control (Temporary Provisions) Act,
1950 or the West Bengal Premises Tenancy Act, 1956, the annual value thereof
shall not exceed the annual amount of the rent so fixed." Similarly,
Section 127 of the Calcutta Municipal Act, 1923 provided:
"127.
For the purpose of assessing land and buildings to the consolidated rate,--
(a)
the annual value of land, and the annual value of any building erected for
letting purpose or ordinarily let, shall be deemed to be the gross annual rent
at which the land or building might at the time of assessment reasonably be
expected to let from year to year, less, in the case of a building, an
allowance of ten per cent for the cost of repairs and for all other expenses
necessary to maintain the building in a state to command such gross rent; and
(b)
the annual value of any building not erected for letting purposes and not
ordinarily let shall be deemed to be five per cent on the sum obtained by
adding the estimated present cost of erecting the building, less a reasonable
amount to be deducted on account of depreciation (if any), to the estimated
present value of the land valued with the building as part of the same
premises.
Provided
as follows:-
i) the
annual value of the bustee shall be deemed to be the gross annual rent at which
the land contained within it, excluding the lands which have been left vacant
for the purposes of any bustee street prescribed in or under a standard plan
approved by the Corporation under Chapter XXII, might reasonably be expected to
let from year to year, plus the gross annual rent at which the huts erected
thereon might reasonably be expected to let from year to year, after deducting therefrom
the rent of the land and an allowance of ten per cent, for the cost of repairs
and for all expenses necessary to maintain such huts in a state to command such
gross rent;
ii) in
calculating the value of any land or building under this section, the value of
any machinery on such land or in such building shall be excluded, but all
fixtures including lifts and electric and other fittings which add to the
convenience of the building shall be valued, subject in the case of a lift to
such deduction from the valuation, as the Executive Officer may think proper,
on account of the cost of repairs to, maintenance of, and attendance on, such
lift;
iii)
if in the case of a building valued under clause (b), the annual value of which
does not exceed five hundred rupees, any exceptional circumstances exist which
render a valuation of five per cent, on the cost of erecting the building less
depreciation, excessive, a lower percentage may be taken;
iv) when
any building has been valued at a special percentage taken under proviso (iii),
it may be re-valued at any time after the exception circumstances referred to
in that proviso have ceased to exist." The words "notwithstanding
anything contained in the West Bengal Premises Tenancy Act, 1956 or any other
law for the time being in force" appearing in Section 174 of 1980 Act were
non existent in Section 168 of 1951 Act and Section 123 of 1923 Act.
In
support of their view points, learned counsel for the parties have relied upon
various judgments of this Court reported in Sm.Padma Debi's case (supra); LIC's
case (supra); Guntur Municipal Council v. Guntur Town Rate Payers' Association
[1971 (2) SCC 423]; Municipal Corporation, Indore & Ors. v. Smt.Ratnaprabha
& Ors. [1976 (4) SCC 622]; Diwan Daulat Rai Kapoor & Ors. v. New Delhi Municipal Committee & Ors. [1980(1)
SCC 685]; Balbir Singh & Ors. v. MCD & Ors. [1985 (1) SCC 167]; Srikant
Kashinath Jituri & Ors. v. Corporation of the City of Belgaum [1994 (6) SCC
572]; Indian Oil Corporation Ltd. v. Municipal Corporation & Anr. [1995 (4)
SCC 96]; Asstt. General Manager, Central Bank of India & Ors. v.
Commissioner Municipal Corporation for the City of Ahmedabad and Ors. [1995 (4)
SCC 696]; East India Commercial Co. Pvt. Ltd. v. Corporation of Calcutta [1998
(4) SCC 368]; Government Servant Cooperative House Building Society Ltd. &
Ors. v. Union of India & Ors. [1998 (6) SCC 381];
In Padma
Debi's case (supra) this Court dealt with the law relating to annual valuation
under Section 127 of Bengal Act No.3 of 1923 and held that the 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 implies that the
rent which the landlord might realise if the house was let is the basis for
fixing the annual value of the building. The criterion was 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 rent in making the assessment.
The word "reasonably" appearing in the section was held to be not
capable of precise definition as in ultimate analysis the same was the question
of fact. Whether a particular act was reasonable or not depended upon the
circumstances in a given case. A bargain between a willing lessor and willing
lessee uninfluenced by any extraneous circumstances can afford a guiding test
of reasonableness. The phrase "at the time of assessment" was held to
mean the assessment commenced with the making of the valuation under Section
131 of the Act and ended with the determination of the objection under Section
140 thereof. As in that case the Rent Control Act of 1950 was found to be in
existence before determination of the assessment, the corporation was held to
have no power to fix the annual value of the premises higher than the standard
rent.
In LIC's
case (supra) this Court dealt with Section 168 of the Calcutta Municipal
Corporation Act for the purposes of determination of annual value of the
premises. The facts of that case were that M/s.A. Firpo Ltd. were the tenants
of the building belonging to Asiatic Assurance Company Ltd. under a lease at a
monthly rent of Rs.2,000/- which was increased by mutual agreement to Rs.2800/-
per month. M/s.A.Firpo Ltd., the lessee had sub-let a major part of the
premises to five different tenants and the aggregate rent received from the
sub-tenants amounted to Rs.4520/-. The corporation assessed the annual value of
the premises at Rs.32076/- for six years. The objection raised by the owner
against the determination of the annual value was rejected by the Special
Officer of the Corporation and in appeal filed by the LIC, which had
statutorily acquired the right of the owner of the building, the court of Small
Causes assessed Rs.30240/- as the annual value. The said order was confirmed in
appeal to the High Court under Section 183(3) of the Calcutta Municipal
Corporation Act, 1951. In appeal filed in this Court, the corporation claimed
that in determining the annual value of the premises the assessing authority
was entitled to take into consideration the rental received by M/s.A. Firpo
Ltd. from its sub-tenant. Reliance was placed upon Padma Debi's case. This
Court approved the judgment in Padma Debi's case, but finding that as the standard
rent stood determined by the definition in Section 2(10)(b) of the West Bengal
Premises Rent Control (Temporary Provisions) Act, 1950, held that the High
Court was right in assessing the annual value on the basis of the standard rent
as statutorily determined. It was further held that under the Act the quantum
of consolidated rate depends upon the value of the land or building or 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 sub-let. 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 realise by
letting the land or building under a bargain uninfluenced by extraneous
considerations which determines the annual value.
In Guntur
Town Rate Payers' Association's case (supra) it was held that the test for
determining the rent at which the building may reasonably be expected to be let
is essentially what rent premises can lawfully fetch, if let out to a
hypothetical tenant. The municipality is not free to assess any arbitrary
annual value and has to look to and is bound by the fair or the standard rent which
would be payable for a particular premises under the Rent Control Act in force
during the year of assessment. Such findings were returned on the basis of the
judgment of this Court in Padma Debi's case.
In Smt.Ratnaprabha's
case (supra) this Court for the first time considered the effect of non obstante
clause appearing in Madhya Pradesh Municipal Corporation Act, 1956 for
determining the gross annual rent for which the building might reasonably be
expected to be let. Clause (b) of Section 138 of the said Act provided:
"(b)
The annual value of any building shall notwithstanding anything contained in
any other law for the time being in force be deemed to be the gross annual rent
at which such building, together with its appurtenances and any furniture that
may be let for use or enjoyment therewith might reasonably at the time of
assessment be expected to be let from year to year, less an allowance of ten
per cent for the cost of repairs and for all other expenses necessary to
maintain the building in a state to command such gross annual rent."
Interpreting the section, the Court held:
"As
has been stated, clause (b) of section 138 of the Act provides that the annual
value of any building shall 'notwithstanding anything contained in any other
law for the time being in force' be deemed to be the gross annual rent for
which the building might "reasonably at the time of the assessment be
expected to be let from year to year". While therefore the requirement of
the law is that the reasonable letting value should determine the annual value
of the building, it has also been specifically provided that this would be so
'notwithstanding anything contained in any other law for the time being in
force'. It appears to us that it would be a proper interpretation of the provisions
of clause (b) of section 138 of the Act to hold that in a case where the
standard rent of a building has been fixed under Section 7 of the Madhya
Pradesh Accommodation Control Act, and there is nothing to show that there has
been fraud or collusion, that would be its reasonable letting value, but, where
this is not so, and the building has never been let out and is being used in a
manner where the question of fixing its standard rent does not arise, it would
be permissible to fix its reasonable rent without regard to the provisions of
the Madhya Pradesh Accommodation Control Act, 1961. This view will, in our
opinion, give proper effect to the non-obstante clause in clause (b) with due
regard to its other provision that the letting value should be 'reasonable'."
After referring to Padma Devi's case, LIC's case and Guntur Town Rate Payer's case(supra),
it was held in that case that the High Court had not properly appreciated the
difference between the wording of Section 127 of the Calcutta Municipal Corporation
Act, 1923 and Section 138(c) of the Madhya Pradesh Municipal Corporation Act,
1956 and thus committed an error in thinking that the case was virtually
similar to Padma Debi's case.
In Diwan
Daulat Rai's case (supra) this Court held that the facts of the case were
covered by the decisions of this Court in LIC'case and Guntur Town Rate Payer's
case (supra). The landlord cannot, reasonably, expect to get more rent than the
standard rent payable in accordance with the principles laid down in the Rent
Control Act. In a case where the standard rent of the building has not been
fixed by the Controller, the assessing authority has to arrive at its own
figures of standard rent by applying the principles laid down in the Rent Act.
Such a task has to be performed by the assessing authority as a part of process
of assessment and in doing so it does not usurp the functions of the Rent
Controller because it does not fix the standard rent which would be binding
between the landlord and tenant but merely arrives at an estimate of standard
rent for the purposes of determining the annual value of the building. The
Court referred to Section 2(k) of the Delhi Rent Control Act, 1958 which
defines the standard rent. Sub-section (1) of Section 4 of the Delhi Rent
Control Act provided that, "no tenant shall, notwithstanding any agreement
to the contrary, be liable to pay to his landlord for the occupation of any
premises any amount in excess of the standard rent of the premises" and
sub-section (2) of Section 4 declares that "subject to provisions of
sub-section (1) any agreement for the payment of rent in excess of the standard
rent shall be construed as if it were an agreement for the payment of the
standard rent only". Section 5, sub-section (1) enacted a prohibition injuncting
that "no person shall claim or receive any rent in excess of the standard
rent, notwithstanding any agreement to the contrary". Section 6 proceeded
to set out different formulae for determination of standard rent in different
classes of cases. Section 9, Sub-section (1) provided that the Controller
shall, on an application made to him, either by the landlord or by the tenant,
fix in respect of any premises the standard rent referred to in section 6 and
sub-section (2) of section 9 laid down that in fixing the standard rent of any
premises the Controller shall fix an amount which appears to him to be
reasonable having regard to the provisions of Section 6 and the circumstances
of the case. It appears that in this case the court did not directly deal with
the effect of a non-obstante clause in the taxing municipal law. The case was
found to be nearer to the law settled in LIC's case and Guntur Town Rate
Payee's case (supra). Dealing with the case for the determination of the annual
value where no standard rent has been fixed, the Court observed:
"The
problem can also be looked at from a slightly different angle. When the Rent
Control legislation provides for fixation of standard rent, which alone and
nothing more than which the tenant shall be liable to pay to the landlord, it
does so because it considers the measure of the standard rent prescribed by it
to be reasonable. It lays down the norm of reasonableness in regard to the rent
payable by the tenant to the landlord. Any rent which exceeds this norm of
reasonableness is regarded by the legislature as unreasonable or excessive.
When the legislature has laid down this standard of reasonableness, would it be
right for the court to say that the landlord may reasonably expect to receive
rent exceeding the measure provided by this standard? Would it be reasonable on
the part of the landlord to expect to receive any rent in excess of the
standard or norm of reasonableness laid down by the legislature and would such
expectation be countenanced by the court as reasonable? The legislature
obviously regards recovery of rent in excess of the standard rent as
exploitative of the tenant and would it be proper for the court to say that it
would be reasonable on the part of the landlord to recover such exploitative
rent from the tenant? We are, therefore, of the view that, even if the standard
rent has not been fixed by the Controller, the landlord cannot reasonably
expect to receive from a hypothetical tenant anything more than the standard
rent determinable under the Act and this would be so equally whether the
building has been let out to a tenant who has lost his right to apply for
fixation of the standard rent or the building is self-occupied by the owner.
The assessing authority would, in either case, have to arrive at its own figure
of the standard rent by applying principles laid down in the Delhi Rent Control
Act, 1958 for determination of standard rent and determine the annual value of
the building on the basis of such figure of standard rent." In Balbir
Singh's case (supra) the Court dealt with four different categories of
properties, namely, (i) where the properties are self-occupied, that is,
occupied by the owners; (ii) where the properties are partly self-occupied and
partly tenanted; (iii) where the land on which the property is constructed is
leasehold land with a restriction that the leasehold interest shall not be
transferable without the approval of the lessor and (iv) where the property has
been constructed in stages, and to provide a criteria how rateable value can be
determined in respect of those four categories of properties. Relying upon Dewan
Daulat Rai Kapoor's case it was held that criteria for determining the rateable
value of a building is the annual rent which the owner might reasonably expect
to get from a hypothetical tenant, if the building were to let from year to
year less certain deductions. What is "reasonable" is a question of
fact which depended on the facts and circumstances of a given situation.
Ordinarily, "a bargain between a willing lessor and a willing lessee
uninfluenced by any extraneous circumstances may afford a guiding test of
reasonableness" and in normal circumstances the actual rent payable by a
tenant to the landlord would afford reliable evidence of what the landlord may
reasonably expect to get from the hypothetical tenant, unless the rent is
inflated or depressed by reason of extraneous considerations such as
relationship, expectation of some other benefit, etc. But in case of a building
subject to Rent Control legislation this approximation between may and often
does get displaced, because under Rent Control legislation the landlord cannot
claim to recover from the tenant anything more than the standard rent and his
reasonable expectation must, therefore, be limited to the measure of the
standard rent lawfully recoverable by him. There was no dispute that the area
where the property sought to be taxed was situated, the provisions of Rent
Restriction Acts were applicable and there was non obstante clause in the
municipal law under which the annual value had been assessed.
In Srikant
Kashinath Jituri's case (supra), this court observed:
"....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. Property 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
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. Probably a time has come
when the said principle may have to be reviewed." In Indian Oil
Corporation's case (supra) this Court approved the view taken in Ratnaprabha's
case and in the interest of public good declined to reconsider the aforesaid
decision. It was observed that the decision of this Court in Ratnaprabha's
case, on the construction of Section 138(b) of M.P. Act, has all along been
understood and justified on the basis of the presence of non obstante clause
and the later decisions have distinguished it on that ground. The existence of
non obstante clause in M.P. Act was held to be the basis on which the decision
in Padma Debi's case was distinguished in Ratnaprabha's case itself.
In
Assistant General Manager, Central Bank of India's case (supra) it was contended on behalf of the appellant that even
where the standard rent was not fixed and the Rent Act not applicable, it must
be presumed that the annual rent for such buildings or lands or premises would
be the standard rent alone and not the actual rent received. In that case
Section 129(c) of the Municipal Corporation Act provided that the general taxes
not less than 12% and not more than 13% of the rateable value of the
buildings/lands may be levied if the corporation so determines on a graduated
scale. The expression "rateable value" was defined in clause (54) of
Section 2 to mean, "the value of any building or land fixed whether with
reference to any given premises or otherwise in accordance with the provisions
of this Act and the rules for the purpose of assessment of property
taxes". Rule 7 of the Taxation Rules provided that in order to fix the rateable
value of any building, land or premises, there shall be deducted from the
amount of the Annual Letting Value of such building a sum equal to ten per cent
of the Annual Letting Value and the said deduction shall be in lieu of all
allowances for repairs or any other account whatsoever. Sub-clause (ii) of the
definition provided that "in relation to any other period, the annual rent
for which any building or land or premises, exclusive of furniture or machinery
contained or situate therein or thereon, might reasonably be expected to let
from year to year with reference to its use and shall include all payments made
or agreed to be made to the owners by a person other than the owner occupying
the building or land or premises on account of occupation, taxes, insurance or
other charges incidental thereto". The proviso added to sub-clause (ii)
was to the following effect:
"(a)
(I)n respect of any building or land or premises the standard rent of which has
been fixed under Section 11 of the Bombay Rents, Hotel and Lodging House Rates
Control Act, 1947, the annual rent thereof shall not exceed the annual amount
of the standard rent so fixed;
(aa)
in respect of any building or land, or premises, the standard rent of which is
not fixed under Section 11 of the Bombay Rent, Hotel and Lodging House Rates
Control Act, 1947, the annual rent received by the owner in respect of such
building or land or premises shall, notwithstanding anything contained in any
other law for the time being in force, be deemed to be the annual rent for
which such building or land or premises might reasonably be expected to let
from year to year with reference to its use." Dealing with the points in
controversy, the arguments urged and the issues involved, the Court held:
"It
is true that the Bombay Rent Act defines what standard rent is, provides for
fixation of standard rent by the Court and further provides that no landlord
shall claim or receive any amount over and above the standard rent, making the
same punishable with imprisonment and fine. Yet, the fact remains that
Municipal Corporations Act says expressly that notwithstanding anything
contained in any other law for the time being in force, the "annual rent
received" -- which means the actual rent received - in respect of building
etc., for which standard rent is not fixed under Section 11 of the Bombay Rent
Act shall be deemed to be the annual rent for which such building etc. for
which such building etc. might reasonably be expected to be let from year to
year with reference to its use. The validity of proviso (aa), though raised in
the grounds of appeal in the special leave petition, has not been urged before
us, probably advisedly. Being a taxing enactment and also because the proviso
does no more than to treat the actual rent received as the annual rent, the
reasonableness of the said provision can hardly be questioned. Be that as it
may, we see no reason why the express language and command of proviso (aa) is
not respected. Both the enactments, viz., Bombay Rent Act and Bombay Provincial
Municipal Corporations Act are State enactments. Indeed, the Municipal
Corporations Act is a later enactment. In view of the express provision in
proviso (aa), it must be held that for the purpose of the Municipal Corporation
Act, the actual rent received is the annual rent for the purposes of
determining the annual letting value. The counsel for the appellants say that
it cannot be. They say that one State enactment cannot be read so as to defeat
and nullify the provisions of another State enactment. The submission is that
both must be read harmoniously. The said argument, in our opinion, would have
been perfectly justified if the non obstante clause were not there in proviso (aa).
In its presence, acceptance of the said argument means that we ignore the non obstante
clause in proviso(aa) altogether. Such a course is not permissible to us. The
Court cannot treat any provision in an enactment as superfluous much less can
it ignore its existence. The learned counsel, however, rely upon certain
decisions in support of their submissions to which a brief reference would now
be in order." Accordingly, 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 taxes. That 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. Proviso (aaa) does not enable
the Commissioner to ignore such situations for, in such cases, the rent
actually received is 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 levy." In East India
Commercial Co. Pvt. Ltd's case (supra) this Court considered the determination
of annual value under Section 168 of the Calcutta Municipal Corporation Act,
1951 in respect of buildings which were actually let out to tenants on rent
agreed but not fixed by the Controller under the Rent Restriction Act for the
purposes of assessment of property tax. After referring to the relevant
provisions of law and the judgments of this Court, it was held:
"From
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 modes of determination of the annual letting value like the
Central Bank of India case 1995 (4) SCC 696 relating to Ahmedabad or contains a
non obstante clause as in Ratnaprabha case 1976 (4) SCC 622 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 Tenancy Act of
1956 and it is the fair rent determinable under Section 8(1)(d) which alone can
be the annual value for the purposes of property tax." Dealing with the
M.P. Municipal Corporation Act, 1956 the Court held that the existence of non obstante
clause was crucial in determining the annual value. The court observed:
"In
Section 168 of the Municipal Act with which we are concerned in the present
case the non obstante clause is not there. The Municipal Act is different from
the M.P. Municipal Act, 1956. Section 168 of the Municipal Act is similar to
the corresponding provisions in Delhi and in Andhra Pradesh and therefore, it
is the ratio of the decisions of Padma Debi 1962 (3) SCR 49, Dewan Daulat Rai 1980
(1) SCC 685 and Guntur Municipal Council 1970(2) SCC 803 which should
apply." In Government Servant Cooperative's case (supra) this Court dealt
with Section 116 of the Delhi Municipal Corporation Act providing for
determination of rateable value of land or building assessable to property
taxes and held that where there is a legislation fixing the standard rent of
the premises, the rent at which premises could be reasonable expected to be let
cannot exceed the statutory ceiling. But where there is no statutory control on
rent which is charged, the annual rent actually received by the landlord shall
be the basis for determining the rateable value of the property. It held:
"Therefore,
the annual rent actually received by the landlord, in the absence of any
special circumstances, would be a good guide to decide the rent which the
landlord might reasonably expect to receive from a hypothetical tenant. Since
the premises in the present case are not controlled by any rent control
legislation, the annual rent received by the landlord is what a willing lessee,
uninfluenced by other circumstances, would pay to a willing lessor. Hence,
actual annual rent, in these circumstances, can be taken as the annual rateable
value of the property for the assessment of property tax. The municipal
corporation is, therefore, entitled to revise the rateable value of the
properties which have been freed from rent control on the basis of annual rent
actually received unless the owner satisfies the municipal corporation that
there are other considerations which have affected the quantum of rent." A
perusal of various judgments, relied upon by the learned counsel for the
parties, clearly shows that this Court has taken a consistent view regarding
the determination of annual value of land or building for the purposes of
determination of taxes under the Municipal Acts. On the basis of various
Statues relating to the determination of the annual value for the purposes of
Municipal Acts, this Court has devised two distinct groups. One such group
deals with the municipal laws of some States which do not expressly exclude
application of Rent Restrictions Acts in the matter of determination of annual
value of a building for the purposes of levying municipal taxes and the other
group deals with the municipal laws which expressly exclude application of the
Rent Restriction Acts in the matter of determination of annual value of land or
building on rental method. Whereas in the first category of cases the
determination of annual value has to be made on the basis of fair or standard
rent notwithstanding the actual rent, even if it exceeds the statutory limits.
In the other group where the restriction in the Rent Acts has been excluded,
the determination of annual value of building on rental method is referable to
the method provided under the relevant Municipal Act. Whereas the Padma Debi's
case, LIC's case, Guntur Town Rate Payee's case, Dewan Daulat Rai's case
(supra) deal with the first group of municipal laws, the cases in Ratanprabha's
case, AGM, Central Bank of India's case, East India Commercial Company's case, Balbir
Singh's case, Indian Oil Corporation's case and Srikant's case (supra) deal
with the second group. As already noticed, this Court in LIC's case dealt with
the first category as in Section 168 of the Calcutta Municipal Corporation Act,
there existed no non-obstante clause. The observations of the Bench of this
Court which dealt with the case on 10th October, 2001 cannot be taken in isolation.
Justice
Shah, J. in LIC's case referring to the proviso to Section 168(1) of the
Calcutta Municipal Corporation Act which dealt with the land and building, the
standard rent of which had been fixed under Section 9 of the West Bengal
Premises Rent Control (Temporary Provisions) Act, 1950 observed:
"By
the 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 Section 9 of the West Bengal Premises
Rent Control (Temporary Provisions) Act, 1950, but the standard rent stands
determined by the definition of that expression in Section 2(1) (b) of that
Act, which provides (omitting paras not relevant):
"Standard
rent" in relation to any premises means-- (a) x x x (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." As already noticed
even without specific determination, the standard rent was held to have been
statutorily determined under Section 2(10)(b) of the Rent Act. Upon analysis of
the various municipal laws and the judgments of this Court it is held that in
cases where the municipal laws excludes the applicability of the Rent Acts by
incorporating non obstante clause in the taxing statute, the powers of the
authorities under the Municipal Acts are not circumscribed by the limits
indicated in Padma Debi's case and followed in that group of cases. In cases
where the fair rent payable by the tenant has been determined and there is no
justification for refusing to accept that fair rent as rental value of the
premises, the municipal authorities should generally accept the standard rent
fixed, notwithstanding the non applicability of the Rent Acts because such a
view would be reasonable guideline to determine the rate of rent at which such
land or building might, at the time of assessment, be reasonably expected to
let from year to year. The rent which the tenant is receiving from his
sub-tenant is also an important statutory consideration for determining the
rent at the time of assessment to which the property might reasonably be
expected to be let from year to year. Such a consideration is also justified on
the principles of reasonableness. We cannot agree that in all cases,
notwithstanding the non obstante clause the annual rental value cannot be fixed
beyond the standard rent determined or determinable under the Rent statute. We
also find it difficult to hold that in all cases the rent actually paid by the
sub-tenant to the tenant be taken as a sole criterion for determining the
annual value on the assumption that such land or building might, at the time of
assessment, is reasonably expected to get the aforesaid amount of rent if let
from year to year. The argument that the rent actually received by the owner
should always be deemed to be reasonable rent in the absence of fraud,
collusion and other extraneous considerations is too general and broad
proposition of law which cannot be accepted for the purposes of determining the
annual value of the property for the purposes of Section 174 of the 1980 Act.
In the light of clear and unambiguous provisions of Section 174 of the 1980
Act, it cannot be held that the amount realised by a tenant from a sub-tenant
cannot, at all be taken into consideration for the purposes of determining the
gross annual rent in the absence of extraneous considerations. There is no
substance in the submission of the learned counsel appearing for the appellant
that allowing the Municipal Corporations to assess the annual rateable value on
the basis of the income of a tenant from the property would be grossly unfair
and would have the effect of rendering the rate provisions of the Act
unreasonable, arbitrary and unconstitutional. The Act itself has taken care by
making sufficient provision in Sections 193 and 194 regarding the liability to
pay the rent and apportionment of such liability when the premises are
assessed, let or sub-let. On proof of creation of sub-tenancy, the owner of the
building may also be entitled to seek eviction of their tenants under the
relevant provisions of the Rent Acts applicable in the State where the land or
property is located. We find some substance in the submission of the learned
counsel for the appellant that permitting the Municipal Authorities to assess
the annual value only on the basis of the rent paid by the sub-tenant to the
tenant and fixing its liability on the owner may adversely affect the owners of
the buildings who have let their premises at a time when rents were meagre and
who under the Rent Control Statutes are deprived of getting possession back of
the lands and buildings from their tenants. The 1980 Act, therefore, requires
the application of mind by the municipal authorities to determine the rents on
the basis of reasonableness by keeping into account all relevant circumstances
including the actual rent received by the owner, hypothetical Standard rent,
the rent being received by the tenant from his sub-tenant and other relevant
consideration, such as prevalent rate of rent of lands and building in the
vicinity of the property being assessed. Only because the owner of the building
is not getting the same rent which the sub-tenant is paying to his lessor,
cannot be made a basis to deprive the Corporations from determining the annual
valuation and taxing the land or building on that basis. If such a plea is
accepted, it would be against the provisions of the statute which has been
enacted to provide civic services in the form of water, drainage, sewerage,
collection, removal and disposal of solid waste, fire prevention and fire
safety maintenance of street and public places, etc., in the Municipal area
when such land or building is situate.
We do
not find any conflict in the judgments of this Court so far as the
determination of annual value of the property under the municipal laws is
concerned. Distinction, if any, is based upon the relevant provision of the
statute of a State with which this Court was dealing, particularly with respect
to such Statutes which contained a non obstante clause. We are of the view that
the basis for determination of annual rent value has to be the standard rent
where the Rent Control Act is applicable and in all other cases reasonable
determination of such rent by the municipal authorities keeping in view various
factors as indicated herein earlier, including the rent which the tenant is
getting from his sub-tenant. In appropriate cases the owner of the property may
be in a position to satisfy the authorities that the gross annual rent of the
building of which the annual valuation was being determined cannot be more than
the actual rent received by such owner from his tenant. The municipal
authorities shall keep in mind the various pronouncements of this Court, the
statutory provisions made in the specified Municipal Acts, keeping in mind the
applicability or non-applicability of the Rent Act and the peculiar
circumstances of each case, to find out the gross annual rent of the building
including service charges, if any, at which such land or building might, at the
time of assessment, be reasonably expected to let from year to year in terms of
Section 174 of the 1980 Act.
Keeping
in view the facts of the present appeal we are of the opinion that the High
Court was right in remanding the appeals to the Appellate Tribunal for deciding
on merits but was not justified to restrict the consideration only on the basis
of rent being paid by the sub-tenant to the tenant for the purposes of determining
the gross annual value. The Appellate Tribunal shall consider the appeals in
the light of our Judgment by keeping in mind all the circumstances including
the rent actually received by the owner of the building and the rent being paid
to the tenant by his sub-tenant. The Appellate Tribunal shall also keep in mind
the peculiar circumstances of the case, if any, for determining the gross
annual rent at which the building in controversy, at the time of assessment, is
reasonably expected to let from year to year, less the allowances and other
considerations referred to in Section 174 of the 1980 Act. If the annual
valuation determined is more than the gross annual rent which the appellant is
actually receiving from his tenant, the appellant shall be at liberty to
recover the excess amount paid in terms of Section 194 of the 1980 Act.
With
these observations the appeal is disposed of. Costs to abide by the ultimate
result.
.......................J.
(G.B. Pattanaik)
.......................J.
(R.P. Sethi)
.......................J.
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