1987 (2) TMI 19 - HC - Income Tax

Summary

Issues:
1. Assessment of annual rental value of a cinema building for house tax purposes under the Punjab Municipal Corporation Act, 1976.
2. Validity of the assessment formula adopted by the Municipal Corporation for determining the rateable value.
3. Interpretation of section 93 of the Act regarding the criteria for determining rateable value.
4. Estoppel against statutory provisions.

Analysis:

The petitioner firm, owning a cinema named "Naaz Theatre," challenged the Municipal Corporation's notice proposing an increase in the annual rental value of the theatre building for house tax purposes. The petitioner's objections were rejected, leading to an appeal that was also dismissed. The petitioner contended that the fair rent should be considered the reasonable letting value, contrary to the assessment based on occupied seats and ticket sales. The respondents argued that a mutually agreed formula with the erstwhile Municipal Committee determined the rateable value. However, the petitioner disputed this formula's validity.

The court, after considering the arguments, emphasized that the assessment should align with section 93 of the Act, which mandates the gross annual rent as the rateable value. It was noted that the assessment based on occupied seats and income derived was not in accordance with the statutory provisions. Referring to a previous judgment, the court highlighted that the fair rent under the East Punjab Urban Rent Restriction Act should guide the assessment process. The court rejected the respondents' contention that the petitioner was estopped from challenging the formula, stating that there can be no estoppel against a statute.

Ultimately, the court allowed the writ petition, quashing the orders of enhancement and directing a reassessment of the rateable value in compliance with the law and the court's observations. The parties were left to bear their own costs, concluding the judgment.