2003 (7) TMI 684 - SC - Indian Laws

Whether the cost of the plant and machinery installed in or upon a building is includible for the purpose of arriving at the rateable value of the building? and Whether Section 116 (3) of the Delhi Municipal Corporation Act, 1957 (hereinafter referred to as the DMC Act ) vests arbitrary and uncanalised discretion in Commissioner and is, therefore, invalid for excessive delegation of legislative powers?

Summary

Issues Involved:
1. Whether the cost of the plant and machinery installed in or upon a building is includible for the purpose of arriving at the rateable value of the building?
2. Whether Section 116(3) of the Delhi Municipal Corporation Act, 1957 vests arbitrary and uncanalised discretion in the Commissioner and is, therefore, invalid for excessive delegation of legislative powers?

Detailed Analysis:

Issue 1: Inclusion of Plant and Machinery in Rateable Value
The central question was whether the cost of plant and machinery installed in a building should be included in the rateable value of the building.

Background:
The appellant company owned a cinema complex and contested the inclusion of costs for plant and machinery, furniture, and fixtures in the rateable value of the building as determined by the Municipal Corporation of Delhi (MCD). The appellate court initially ruled in favor of the appellant, but the High Court remitted the matter back to the assessing authority, prompting the appeal to the Supreme Court.

Legal Provisions:
Section 116 of the DMC Act was scrutinized, which outlines the determination of rateable value and includes a provision (Section 116(3)) that allows the Commissioner to deem certain plant and machinery as part of the building for rateable value purposes, subject to a public notice and approval from the Standing Committee.

Judicial Precedents:
- New Manek Chowk Spg. and Wvg. Mills Co. Ltd. v. Municipal Corporation of the City of Ahmedabad: Held that plant and machinery should not be included in the rateable value unless specifically notified.
- Hindustan Lever Ltd. v. Municipal Corporation of Greater Bombay: Reinforced that embedded machinery should not be included in rateable value calculations.

Supreme Court's Findings:
The Court concluded that lifts and air-conditioners are 'plant' and 'machinery' and cannot be included in the rateable value unless a valid notification under Section 116(3) is issued. The Court emphasized that the legislative history and practice have consistently excluded such costs unless expressly included by statute.

Issue 2: Validity of Section 116(3) of the DMC Act
The second issue was whether Section 116(3) of the DMC Act constitutes an excessive delegation of legislative power by granting arbitrary discretion to the Commissioner.

Arguments:
- Appellant: Argued that Section 116(3) is invalid as it provides unguided and uncanalised discretion to the Commissioner, similar to the invalidated Rule 7(2) under the BPMC Act.
- Respondent: Contended that the statute provides sufficient guidelines and that the Commissioner's discretion is not arbitrary, as it requires approval from the Standing Committee.

Supreme Court's Findings:
The Court found that Section 116(3) suffers from the same defects as Rule 7(2) of the BPMC Act, which was struck down for excessive delegation. The Court held that the statute lacks clear guidelines and does not provide for an appeal mechanism against the Commissioner's inclusion of plant and machinery in the rateable value.

Conclusion:
1. Section 116(3) Invalidity: The Court declared Section 116(3) of the DMC Act invalid for delegating unguided and uncanalised legislative powers to the Commissioner.
2. Exclusion of Plant and Machinery Costs: The costs of plant and machinery, including lifts and air-conditioners, cannot be included in the rateable value of land or buildings unless a valid notification is issued.
3. Overruling of Previous Judgments: The decisions in Pragati Builders and the Full Bench of the High Court were overruled.
4. Remittance to Assessing Authority: The impugned assessment orders were set aside and remitted to the assessing authority for fresh orders in accordance with the law and the Court's observations.

Orders:
The appeals were allowed, the judgments of the High Court were set aside, and the assessment orders were remitted back to the assessing authority for fresh determination. No order as to costs was made.