1969 (2) TMI 172 - SC - Indian Laws

Summary

Issues Involved:
1. Primary liability for property tax under the Bombay Municipal Corporation Act, 1888.
2. Interpretation of Section 146(2) and Section 146(3) of the Act.
3. Composite assessment of land and building.
4. Contemporanea expositio principle in statutory interpretation.

Detailed Analysis:

1. Primary Liability for Property Tax:
The core legal question in this appeal is whether the primary liability to pay property taxes under the Bombay Municipal Corporation Act, 1888, falls on the appellant, a banking company incorporated in the UK, which owns land leased to a third party who has constructed a building on it. The appellant contends that the primary liability should fall on the lessee who constructed the building.

2. Interpretation of Section 146(2) and Section 146(3) of the Act:
The appellant argued that Section 146(2) of the Act should necessitate separate assessments for the land and the building. Alternatively, even if a composite assessment is considered, the primary liability should be on the owner of the building (the lessee) rather than the owner of the land (the appellant). The respondent argued that Section 146(2) mandates a composite assessment of the land and building as one unit, with the primary liability falling on the landlord, except in cases covered by Section 146(3), where the tenant is primarily liable.

The court found the respondent's argument well-founded. It concluded that the language of Section 146(2) indicates a legislative intent for a composite assessment when land and building are owned by different persons. The term "premises" in Section 146(1) and (2) contrasts with "land and building" in Section 146(3), suggesting a composite assessment for the former. Therefore, the primary liability for tax assessment in such cases is on the lessor of the land under Section 146(2)(a).

3. Composite Assessment of Land and Building:
The court emphasized that the scheme of Section 146 is to have a composite assessment of tax on the land and the building together when the land is leased, and the tenant has built upon it. The primary liability for such a composite unit falls on the lessor of the land. The appellant's objection that it was only the lessor of the land and not the building was dismissed. The court interpreted the lessor in Section 146(2)(a) to mean the lessor of the land on which the tenant has constructed the building. Section 147 supports this interpretation by allowing the lessor to recover excess tax paid from the tenant.

4. Contemporanea Expositio Principle in Statutory Interpretation:
Assuming ambiguity in Section 146(2), the court applied the principle of contemporanea expositio, which refers to the long-standing practice and interpretation by authorities. The court noted that since the Act's inception in 1888, the Bombay Municipal Corporation has consistently treated land and buildings as a single unit for tax purposes and charged the property tax to the landowner when the land is leased for less than a year, and the tenant constructs a building. This long-standing administrative practice supports the court's interpretation.

Conclusion:
The court dismissed the appeal, affirming that the primary liability for property tax in this case falls on the appellant as the lessor of the land, in line with the composite assessment principle and long-standing administrative practice. The appeal was dismissed with costs.