Pradeep Oil
Corporation Vs Municipal Corporation of Delhi and ANR
JUDGMENT
Dr. Mukundakam
Sharma, J.
1.
Whether
an agreement for erection of oil storage tank together with pump house, chowkidar
cabins, switch room, residential rooms and verandah for storing oil decanted from
the railway tankers, which bring petroleum products to the site at which they are
decanted, would amount to lease or license, is one of the several questions which
falls for consideration in these appeals, which has arisen out of a Full Bench
decision rendered by the High Court of Delhi at New Delhi while disposing a
batch of petitions bearing Nos. LPA 53, 54, 55, 57 and 58/1987.
2.
Before
dwelling into the question of law involved hereinabove and in order to
appreciate the contentions raised by the parties hereto, we may notice few
basic fact which has resulted into filing of these appeals.
3.
The
appellant herein had been granted under the Government Grant Act separate and distinct
licenses by the President of India acting through Superintendent of Northern
Railway, Delhi for the purpose of maintaining depot for storage of petroleum products
at a yearly license fee of Rs. 20,640/- and Rs. 31,000/- per annum
respectively.
4.
Under
the aforesaid grant, the appellant had been given the right to erect/construct `petroleum
installation buildings' consisting of petroleum tanks, buildings and other
conveniences for receiving and storing therein petroleum in bulk, and
consequently possession of land has been given.
5.
Consequent
to the said agreement the administration granted `exclusive possession' of the
said land to the appellant who entered the land for the purpose and the terms
mentioned therein in the aforesaid agreement/grant. Consequently, the appellant
submitted layout building plans for the construction of the oil depot and the standing
committee of the Municipal Corporation of Delhi (in short "MCD")
approved the layout plan for the construction of 10 oil storage tanks of petroleum
products.
6.
Subsequent
to that the appellant raised various constructions comprising of an
administration block etc. along with huge petroleum storage tanks for storing petroleum
products. A boundary wall around the installations and the administrative block
was also constructed. The nature of the construction which is stated to be wide
range and extensive user, is more than 40 years old now.
7.
The
respondent MCD vide its Order dated 17.08.1984 passed an assessment order with regard
to the property tax qua the aforesaid property and confirmed the rateable value
proposed by it. The said assessment order was challenged by the appellant
before the appellate Court/MCD Tribunal which vide its Order dated 12.7.1985
set aside the assessment order passed by the respondent MCD and held that the
appellant is only a licensee in the property and is not a tenant, therefore, no
property tax can be levied on the appellant under Section 20(2) of the Delhi Municipal
Corporation Act, 1957 (in short "MCD Act"). Aggrieved by the
aforesaid order of the appellate Court, the respondent MCD filed a writ
petition.
However, the said
writ petition was dismissed by the Ld. Single Judge of the Delhi High Court on 05.08.1986
holding that the petroleum storage tanks do not fall within the definition of building
under the MCD Act. It was further held by the Ld. Single Judge that the grant
in favour of the petitioner was a license and hence the petitioner is not liable
for the payment of any property tax in respect of the land or the petroleum storage
tanks. Challenging the aforesaid order of Ld. Single Judge, an LPA was filed and
subsequently, the same was referred to a Full Bench of High Court. The Full Bench
of the High Court vide its impugned judgment and order dated 17.09.2002 held 4that
the petroleum storage tanks are a building and the petitioner was a lessee and not
a licensee in the property in question.
8.
It
was forcefully argued before us by the learned counsel appearing for the
appellant that no property tax is payable qua the property in question under
the provisions of section 119 of the DMC Act read with Article 285 of the
Constitution of India, as the property in question is a government property. It
was further contended that the incidence to pay property tax qua the petroleum installations
including the tanks cannot fall upon the appellant under section 120(2) of the DMC
Act because the appellant is a mere licencee of government land having permission
to construct and consequently having constructed thereupon is neither a tenant
nor a lessee and the agreement in question does not create any leasehold right or
tenancy in the favour of the appellant. In other words, the submission was that
the agreement in question is a licence deed. It was further contended that the petroleum
storage tanks/depots are not "buildings" and therefore not subject to
5property tax. It was also argued that the petroleum storage tanks/depots being
plant and machinery are liable to be exempted under the provisions of section 116(3)
of the DMC Act.
9.
On
the other hand, the learned counsel appearing for the respondent MCD submitted that
the indentures in question are indeed a lease and not a licence. It was argued that
the question as to whether such an oil storage tank would be building or not is
no longer res integra in view of judgment of the Supreme Court in the case of Municipal
Corporation of Greater Bombay v. Indian Oil Corporation, AIR 1991 SC 686. It
has been further contended that that the question as to whether the indentures
in question constitute lease or license so as to attract the provisions of
Section 120 of the MCD Act would depend upon the construction thereof. It was
urged that having regard to the nature of the interest conveyed, it would be erroneous
to construe the instrument as a license as the land having been used for the purpose
of construction of a building, the object thereof being clear, it could not
have been construed to be a license and must be construed to be a lease. It was
further argued that it is not a case where it could be said that no interest in
the land had been created by reason of the instruments in question.
10.
Before
addressing the rival contentions, it would be useful to reiterate few relevant
provisions of the MCD Act. "2(3) "building" means a house, out-house,
stable, latrine, urinal, shed, hut wall (other than a boundary wall) or any
other structure, whether of masonry, bricks, wood, mud, metal or other material
but does not include any portable shelter". xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
"2(24). "land" includes benefits to arise out of land, things attached
to the each or permanently fastened to anything attached to the earth and rights
created by law over any street: xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
"Taxation of Union
properties.--(1) Notwithstanding anything contained in the foregoing provisions
of this chapter, lands and buildings being properties of the union shall be exempt
from the property taxes specified in Section 114: Provided that nothing in this
sub-section shall prevent the Corporation from levying any of the said taxes on
such lands and buildings to which 7immediately before the 26th January, 1950
they were liable or treated as liable so long as that tax continues to be
levied by the Corporation on other lands and
buildings.xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx"120(2). If any land has
been let for a term exceeding one year to a tenant and such tenant has built upon
the land, the property taxes assessed in respect of that land and the building erected
thereon shall be primarily livable upon the said tenant, whether the land and building
are in the occupation of such tenant or a sub- tenant of such
tenant.xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx".
Property taxes a first
charge on premises on which they are assessed.--Property taxes due under this Act
in respect of any land or building shall, subject to the prior payment of the land
revenue if any, due to the Government thereon be a first charge- (a) in the case
of any land or building held immediately from the Government, upon the interest
in such land or building of the person liable for such taxes and upon the goods
and other movable properties if any found within or upon such land or building and
belonging to such person; and (b) in the case of any other land or building upon
such land or building and upon the goods and other movable properties/ if any, found
within or upon such land or building and belonging to the person liable for
such taxes."
11.
We
may also notice the language of Article 285 of the Constitution of India which
reads as follows: - "285. Exemption of property of the Union from State
taxation (1) The property of the Union shall, save insofar as Parliament may by
law otherwise provide, be exempt from all taxes imposed by a State or by any
authority within a State. (2) Nothing in clause (1) shall, until Parliament by law
otherwise provides, prevent any authority within a State from levying any tax on
any property of the Union to which such property was immediately before the commencement
of this Constitution liable or treated as liable, so long as that tax continues
to be levied in that State."
12.
It
would be useful to examine at this stage the definition of "lease"
and "license" as envisaged under Section 105 of the Transfer of
Property Act, 1882 and section 52 of the Indian Easements Act, 1882 respectively.Section
105 of the Transfer of Property Act, 1882 reads: - "105. Lease Defined.--A
lease of immovable property is a transfer of a right to enjoy such property, made
for a certain time, express or implied, or in perpetuity, in consideration of a
price paid or promised, or of money, a share of crops, service or any other thing
of value, to be rendered periodically or on specified occasions to the
transferor by the transferee, who accepts the transfer on such terms."On the
other hand, Section 52 of the Indian Easements Act, 1882 reads as: "License,
defined.--Where one person grants to another, or to a definite number of other
persons, a right to do, or continue to do, in or upon the immovable property of
the grantor, something which would, in the absence of such right, be unlawful, and
such right does not amount to an easement or an interest in the property, the
right is called, a license."
13.
A
license may be created on deal or parole and it would be revocable. However, when
it is accompanied with grant it becomes irrevocable. A mere license does not create
interest in the property to which it relates. License may be personal or contractual.
A licensee without the grant creates a right in the licensor to enter into a
land and enjoy it. In Halsbury's Laws of England, 4th Edition, Vol. 27 at page
21 it is stated: - "license coupled with grant of interest: A license coupled
with a grant of an interest in property is not revocable. Such a license is capable
of assignment, and covenants may be made to run with it. A right to enter on
land and enjoy a profit a prendre or other incorporeal hereditament is a license
coupled with an interest and is irrevocable. Formerly it was necessary that the
grant of the interest should be valid; thus, if the interest was an incorporeal
hereditament, such as a right to make and use a watercourse, the grant was not valid
unless tinder seal, and the license, unless so made, was therefore a mere license
and was revocable but since 1873 the Court has been bound to give effect to equitable
doctrines and it will restrain the revocation of a license coupled with a grant
which should be, but is not, under seal."
14.
Lease
on the other hand, would amount to transfer of property. In Associated Hotels of
India Ltd. v. R.N. Kapoor, [1960] 1 SCR 368, the following well established
proposition were laid down by a Constitution Bench for ascertaining whether a
transaction amounts to a lease or a license: - "27. There is a marked distinction
between a lease and a license. Section 105 of the Transfer of Property Act defines
a lease of immovable property as a transfer of a right to enjoy such property
made for a certain time in consideration for a price paid or promised. Under Section
108 of the said Act, the lessee is entitled to be put in possession of the property.
A lease is thereforee a transfer of an interest in land.
The interest transferred
is called the leasehold interest. The Lesser parts with his right to enjoy the property
during the term of the lease, and it follows from it that the lessee gets that right
to the exclusion of the Lesser. Whereas Section 52 of the Indian Easement Act
defines a license.Under the aforesaid section, if a document gives only a right
to use the property in a particular way or under certain terms while it remains
in possession and control of the owner thereof, it will be a license. The legal
possession, thereforee, continues to be with the owner of the property, but the
licensee is permitted to make use of the premises for a particular purpose. But
for the permission his occupation would be unlawful. It does not create in his favor
any estate or interest in the property.
There is, therefore, clear
distinction between the two concepts. The dividing line is dear through sometimes
it becomes very thin or even blurred. Alone time it was thought that the test of
exclusive possession was infallible and if a person was given exclusive possession
of a premises, it would conclusively establish that he was a lessee. But there was
a change and the recent trend of judicial option is reflected in Errington v. Errington
1952 (1) All ER 149, wherein Lord Denning reviewing the case law on the subject
summarises the result of his discussion thus at p. 155:"The result of all these
cases is that, although a person who is let into exclusive possession is, prima
facie to be considered to be tenant, nevertheless he will not be held to be so if
the circumstances negative any intention to create a tenancy."
15.
It
is quite clear that the distinction between lease and license is marked by the
last clause of Section 52 of the Easement Act as by reason of a license, no estate
or interest in the property is created. In the case of Qudrat Ullah v.
Municipal Board, Bareilly, (1974) 1 SCC 202 it was observed at p. 398 thus: - "...
If an interest in immovable property, entitling the transferors to enjoyment is
created, it is a lease; if permission to use land without right to exclusive possession
is alone granted, a license is the legal result." (emphasis underlined)
16.
A
license, inter alia, (a) is not assignable; (b) does not entitle the licensee
to sue the stranger in his own name; (c) it is revocable and (d) it is determined
when the grantor makes subsequent assignment. The rights and obligations of the
lessor as contained in the Transfer of Property Act, 1882 are also subject to
the contract to the contrary. Even the right of assignment of leasehold property
may be curtailed by an agreement.
17.
In
the present case grant has been made by the President of India in terms of
Section 2 of the Government Grants Act, 1895 and the Transfer of Property Act, 1882
may have little bearing in the instant case. The former, i.e. the Government Grants
Act, 1895 being a special statute would prevail over the general statute, i.e.
the Transfer of Property Act, 1882. Accordingly, the rights and obligations of
the parties would be governed by the terms of the provisions of Government Grants
Act, 1895 whereunder the Government is entitled to impose limitations and restrictions
upon the grants and other transfer made by it or under its authority.
18.
In
view of the aforesaid legal position with regard to the applicability of the Government
Grants Act, we have considered the grant in question after hearing both the parties
at length and perused the entire record.
19.
A
bare perusal of the grant in question reveals that in the grant, the appellant herein
i.e. grantee has been described as licensee. But in our considered view the 14mere
use of the word "licensee" would not be sufficient to hold the grant
in question as a license. Simply using the word "licensee" would neither
be regarded as conclusive nor determinative. In terms of Clause (1) of the said
indenture the licensee was to have the use of a piece of land for maintaining a
depot for petroleum goods received through railways but thereby his rights to
deal with the property and the goods brought thereon had not been taken away. Clearly,
an embargo has been placed as regards the user of the construction made thereon
to the extent that the same would be used solely for the storage of petroleum products
but such restriction by itself can also be imposed in a case of lease. The
grant in question clearly states that the constructions are to be made as per specifications
approved by the Chief Inspector of Explosives which condition was also otherwise
governed by the provisions of Explosives Act. Further, the pipelines are required
to be laid at railway levels or demised in favor of the grantee, where for
expenses are to be paid by it. It further sates that the pipelines are to be laid
underground in such a manner that vehicles can pass over that.
20.
The
present appellant i.e. licensee is required to pay the sum specified therein
which has been described as 'rent' in terms of Clause 7. It further reveals
that the licensee is also required to pay all taxes payable in respect of the said
land for the time being found to be payable and proportionately and all cesses,
and taxes in respect of the premises applicable to the land, tanks, works and conveniences
if the same be not separately assessed in respect thereof. It further stipulates
that the licensee shall not be entitled to assign, mortgage, sub-let or otherwise
transfer the privileges without previously obtaining the consent in writing of the
Administration. The licensee shall not use the said land or any part thereof or
permit the same to be used for worship, or religious or educational purposes or
for any other purpose not specified in Clause 1 thereof but such a claim is not
determinative. Clause (9) of the said 16 indenture stipulates that either party
would be entitled to terminate the license without assigning any reasons by giving
to the other party at any time three calendar months' notice in writing. It is to
be noted that even under Section 106 of the Transfer of Property Act, 1882 no
reason is required to be assigned for determining the lease.
21.
Further,
Clause 11 of the indenture in question provides that nothing contained herein be
construed to create a tenancy in favor of the licensee of the said land but
again in our considered view, the mere description of the grant in question is
not decisive. Under the grant in question, the Administration has been given power
under Clause 12 to re-enter upon and retake and absolutely retain the possession
of the said land but the same could be permissible in law only upon determination
of grant which would require 3 months' prior notice. It is to be noted that
Clause 12 further stipulates that the licensee shall at all times keep the Administration
indemnified against and shall reimburse it towards all claims, demands, suits,
losses, damages, costs etc. which it may sustain or incur by reason of
inconsequence of any injury to any person or to any property resulting from any
explosion or leakage of any petroleum kept or placed by the licensee upon the
said land.
22.
Clause
14 of the indenture in question provides that the licensee shall follow all petroleum
rules and regulations applicable to the construction, maintenance of petrol pump
or stores and for public safety. It is significant to note that the aforesaid clause
clearly provides that all taxes in respect of the said patrol pump, stores,
buildings under the control of the licensee shall be paid by the licensee. However,
the rights of the parties on determination of the grant have been specified.
23.
The
aforesaid clauses of the indenture in question clearly shows that a bundle of
rights have been conferred upon the grantee i.e. the appellant herein.
24.
It
is well settled legal position that a deed must be read in its entirety and reasonably.
The intention of the parties must also as far as possible be gathered from the expression
used in the document itself.
25.
In
Union Bank of India v. Chandrakant Gordhandas Shah, (1994) 6 SCC 271, an
instrument was held to be a deed of lease as the lessee was conferred right to exclusive
possession where for various terms of the indenture which were taken into
consideration for finding out whether the same was lease or a license.
Similarly, In Vayallakath Muhammedkutty v. Illikkal Moosakutty JT 1996 (6) 665,
where the defendant was given exclusive possession of the disputed premises for
running a hotel but was not given the permission to sub- lease the property, the
document was held to be a license. "9. .... this Court has indicated that for
a consideration as to whether a document creates a license or lease, the
substance of the document must be preferred to the form. It is not correct to say
that exclusive possession of a party is irrelevant but at the same it is also not
conclusive. The other tests, namely, intention of the parties and whether the document
creates any interest in the property or not are important considerations."
26.
In
Om Parkash v. Dr. Ravinder Kumar Sharma, 1995 Supp.(4) SCC 115, a deal was held
to be a license where the keys of the premises was to be taken in the morning and
returned in the evening and a portion thereof was occupied by the mother of the
licensor.
27.
In
Swarn Singh v. Madan Singh, 1995 Supp.(1) SCC 306 it was held: - "3. On a careful
consideration of the above arguments, we feel that there is no substance in any
one of them. To our mind it is very clear that the right granted under the above
document is nothing but a license. Our reasons are as under: (1) the nomenclature
of the document is license. Of course, we hasten to add that nomenclature is not
always conclusive; (2) the document in question in no unambiguous terms says
that the possession and control shall remain with the owner. This is a clear
indication of the fact that no interest in immovable property has been conferred
on the grantee. If it were to be a case of lease under Section 105 of the Transfer
of Property Act, there must be an interest in the immovable property. On the 20
contrary, if it were to be a license under Section 52 of the Easements Act, no such
interest in immovable property is created. The case on hand is one of such. (4)
No doubt there is a statement in the document that "I shall not sublet it
to further anybody else. This is nothing more than an affirmation of the requirement
that the licensee must use the property. No doubt under Section 52 of the Easements
Act, license is personal but where an affirmation is made that such an affirmation
cannot alter the relationship of the parties as Lesser and lessee. In this view
factually the case Capt. BVD' Douza v. Antonio Fausto Fernandes, Quoted from the
judgment and order dated 3.5.1993 of Andhra Pradesh Admn. Tribunal at Hyderabad
in OA No. 47322/91 and 5668/92, is distinguishable."
28.
In
Lilawati H. Hiranandani v. Usha Tandon, AIR 1996 SC 441, an assignment made to the
effect that the owner permitted the licensee to occupy a portion with no right
or interest created in his favor and also undertaken to vacant the premises within
one month, was held to be a case of license.
29.
In
view of the aforesaid well settled legal position, whether a particular document
will constitute "lease" or "license" would inter alia
depend upon certain factors which can be summarized as follows: - (a) whether a
document creates a license or lease, the substance of the document must be
preferred to the form; (b) the real test is the intention of the parties --
whether they intended to create a lease or a license; (c) if the document
creates an interest in the property, it is a lease; but if it only permits
another to make use of the property, of which the legal possession continues
with the owner, it is a license; and (d) if under the document a party gets exclusive
possession of the property, prima facie, he is considered to be a tenant; but
circumstances may be established which negative the intention to create a lease.
30.
Reverting
back to the factual situation of the case at hand, admittedly, the appellant is
in possession of the buildings in question since 1958. They have been permitted
to raise huge constructions and the nature of construction is of wide range. An
administration block along with tanks for storing petroleum had been constructed.
A boundary wall around installations and administrative block had also been constructed.
Admittedly, the grantee is in exclusive possession over the lands in question along
with construction thereon without any let or hindrance from the Administration.
Further, the appellant had been continuously carrying on their business without
any interference from any quarter whatsoever since 1962. As in the instant
case, exclusive possession has been granted, as discussed hereinbefore, there is
a strong presumption in favour of tenancy. That being the case, it is for the
appellant to show that despite the right to possess the demised premises exclusive;
a right or interest in the property has not been created. The burden therefore
would be on the appellant/grantee to prove contra.
31.
The
aforesaid burden is not discharged in the present case rather for the purposes
resisting its eviction from the suit land in the proceeding initiated under the
Public Premises Unauthorized Occupants Eviction Act, the appellant has taken
the stand pleading non-applicability of the Indian Easement Act and has
themselves termed the arrangement as a tenancy by describing the fee as
rentals. The said factor is also a vital factor as on the own showing of the
appellant the arrangement was nothing but a lease. The appellant therefore
cannot take up a plea by which they approbate and reprobate at the same time.
32.
In
Street v. Mountford, 1985 Appeal Cases 809, it was held that when exclusive possession
is granted in lieu of only rent payable therefore, the presumption that the instrument
is that of a lease becomes stronger. In the present case the Administration has
also option to revise the rent. Had it been a case of mere right to use the property,
such provision would not have been there. Further, the manner in which the rent
is to be paid is also 24 important. It is to be paid annually in a case of a license
pure and simple, the indenture would not normally contain a claim that rent
would be paid annually.
33.
In
Capt. B. V. D'Souza v. Antonio Fausto Fernandes, [1989] 3 SCR 626 , this Court
observed: "However, this cannot answer the disputed issue as it creates a
license or lease, the substance of the document must be referred to the form, As
was observed by this Court in Associated Hotels of India Ltd. v. R.N. Kapoor, [1960]
1 SCR 368 , the real test is the intention of the parties -- whether they intended
to create a lease or license. If an interest in the property is created by the
deed it is a lease but if the document only permits another person to make use of
the property "of which the legal possession continues with the owner"
it is a license. If the party in whose favor the document is executed gets exclusive
possession of the property prima facie he must be considered to be a tenant: although
this factor by itself will not be decisive. Judged in this light, there does
not appear to be any scope for interpreting Ex. 20 as an agreement of leave and
license."
34.
It
is true that there are indeed certain restrictions which have been imposed by the
Administration with regard to the construction of the building storage tank, etc.,
but in our considered view such restrictions are not decisive for 25 the
purpose of determining as to whether a document is a lease or license as such
restrictions could also be imposed in case of a lease as well. In Glenwood
Lumber Co. Ltd. v. Philips, 1904-1907 All ER (Reprint) 203, it was held: "In
the so-called license itself it is called indifferently a license and a demise,
but in the Act it is spoken of as a lease, and the holder of it is described as
the lessee. It is not, however, a question of words, but of substance. If the
effect of the instrument is to give the holder an exclusive right of occupation
of the land though subject to certain reservations or to a restriction of the
purposes for which it may be used, it is in law a demise of the land
itself."
35.
We
may also notice the undisputed fact that in the present case the parties have agreed
that for the purpose of determination of the agreement three calendar months' notice
had to be given. Undoubtedly, such clause in the document in question has a significant
role to play in the matter of construction of document. Clearly, if the parties
to the agreement intended that by reason of such agreement merely a license would
be created such a term could not have been inserted.
36.
It
is well settled legal position that a license can be revoked at any time at the
pleasure of the licensor. Even otherwise, unless the parties to the agreement had
an intention to enter into a deed of lease the Administration would not have
agreed to demise the premises on payment of rent in lieu of grant of exclusive possession
of the demised land and further stipulated service of three months' notice calling
upon either party to terminate the agreement. In view of the same, the argument
advanced by the learned counsel of the appellant that a stipulation having been
made in the agreement itself that by reasons thereof the grantee shall not be a
tenant and thus the deed must be construed to be a license cannot be accepted. In
our considered view, such a clause may at best be one of the factors for construction
of the document in question but the same by itself certainly be a decisive
factor.
37.
The
next question which needs to be addressed in view of the aforesaid well settled
legal position is whether the agreement in question should be interpreted as lease
or license having regard to the object sought to be achieved by the provisions
of DMC Act.
38.
By
reason of the provisions of the DMC Act, the MCD is required to render several services
as specified therein for the purpose whereof, tax is required to be imposed
both on land as also on building. The definition of "land" and '"building"
as provided in the DMC Act must be given its full effect. As mentioned hereinbefore
in the case of Municipal Corporation of Greater Bombay case (supra), even an
oil tanker has been held to be building.
39.
The
tax is imposed upon the holders of land and building by the MCD which is compensatory
in nature. The word "letting out" in the context of the grant therefore
must receive its purposive meaning. The MCD renders services and the benefits of
such services are being taken by all concerned, viz., the owner of the land or building.
Even a person who is in possession of a land or building, whether legal or
illegal, takes benefits of such services rendered by the MCD. The MCD for the
purpose of realization of tax is 28 not concerned with the relationship of the parties.
It is concerned only with imposition and recovery of tax which is payable on
all lands and buildings in accordance with law. The exceptions thereof have been
enumerated in the Act itself. Section 119 of the MCD Act is one of such
provisions. Such an exemption clause, as is well known, must be construed
strictly. Section 119 of the MCD Act would apply if the lands and buildings are
the properties of Union of India. The MCD has the right to levy the property tax
in terms of Section 114 of the MCD Act in the manner as specified therein.
40.
By
reason of the agreement in question, the buildings in question do not belong to
the Administration. Admittedly, it belongs to the grantee i.e. appellant herein.
As discussed hereinbefore, the Oil tanks has been construed as buildings for
the purposes of tax. Therefore, Section 119 of the MCD Act would not apply to
the building in question. That being the case, the grantee/appellant is liable
to pay tax although the ownership of the land may belong to the Administration.
Section 115 of the MCD Act clearly provides that the general tax shall be
payable in respect of lands and buildings. Such lands and buildings may be in lawful
occupation of the owner. The occupation of the said building may be lawful or unlawful.
Even in a case where apartments are constructed on the land belonging to the Government
or a statutory body but the occupier of the apartment is liable to pay tax. If
a person encroaches upon somebody's lands and constructs buildings thereupon, he
would also be liable to pay tax. Once it is held that the grantee were liable to
pay tax, the same becomes payable from the date of accrual of the liability. The
said position is also fortified from specific stipulation in the agreement that
the liability to pay all taxes including municipal taxes is on the grantee.
41.
The
learned counsel for the appellant has placed strong reliance on the decision of
this Court in HUDCO v. MCD; (2001) 1 SCC 455 to contend that land belonging to the
government is immune from the payment of property tax by 30virtue of section
119(1) of the DMC Act and Article 285 of the Constitution of India. In the
HUDCOs case vacant land of the government, prior to execution of the lease deed
in favour of HUDCO, was sought to be taxed and that no building had been constructed
by HUDCO. HUDCOs own case was that interest in land could pass only on
execution of lease and construction thereon under section 120(2) of the MCD
Act. MCD had invoked Section 120(1) DMC Act to fasten liability on HUDCO and not
under Section 120(2) DMC Act after construction was made by HUDCO and lease
deed executed bythe government. In that case, this Court has held that vacant
land belonging to the Government was not taxable by virtue of section 119 DMC Act
and Article 285 of the Constitution of India. However, in our considered view, the
case at hand is totally different. The HUDCO judgment dealt with the case where
vacant land belonging to the lessor/Government and in regard whereto no lease
deed had been executed and no construction had been made by the lessee/HUDCO. The
land belonging to the central government was sought to be taxed under section
120(1) of the DMC Act which fastens liability on the lessor. Since land
belonged to UOI the same was exempted from payment of tax until the lease deed
was executed and construction made thereon by HUDCO-under Section 120(2).
42.
Incidence
to pay tax under section 120(2) DMC Act is with regard to a composite
assessment of land and buildings as section 120(2) talks of a composite
assessment only. In the present case vacant land or property of Railways is not
sought to be taxed as was in the case of HUDCO Vs. MCD under section 120(1) DMC
Act, but property tax/Composite Assessment is sought to be made on the installations/stotage
depots having been constructed by the appellant-by virtue of Section 120(2) DMC
Act. It is important to notice that w.e.f. the date of execution of lease deed and
construction made thereon by HUDCO, HUDCO has been paying the property tax. HUDCOs
case is therefore not applicable.
43.
In
view of the aforesaid discussion, we are of the considered view that the document
in question constitutes lease in favor of the appellant-grantee; and
accordingly liable to pay taxes.
44.
In
view of the same, we find no merit in the present appeal, accordingly, the same
is liable to be dismissed and hence dismissed. No order as to costs.
............................................J
[Dr. Mukundakam Sharma ]
............................................J
[ Anil R. Dave ]
New
Delhi,
April
6, 2011
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