2011 (4) TMI 1499 - SC - Indian Laws

Applicability of the Government Grants - agreement for erection of oil storage tank - petroleum products to the site decanted - lease or license - The Appellant had been granted under the Government Grant Act separate and distinct licenses for the purpose of maintaining depot for storage of petroleum products at a yearly license fee. the Appellant is in possession of the buildings 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. The Respondent MCD passed an assessment order with regard to the property tax qua the aforesaid property and confirmed the rate able value proposed by it. The said assessment order was challenged by the Appellant. HELD THAT - 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. 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, 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. 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. Therefore, 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. 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. 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. we find no merit in the present appeal, accordingly, the same is liable to be dismissed

Issues Involved:
1. Whether the agreement for erection of oil storage tanks amounts to a lease or a license.
2. Whether the appellant is liable to pay property tax under the Delhi Municipal Corporation Act, 1957.
3. Whether the petroleum storage tanks qualify as buildings under the DMC Act.
4. Applicability of Section 119 of the DMC Act and Article 285 of the Constitution of India regarding exemption from property tax.
5. Interpretation of the agreement in light of the Government Grants Act, 1895 and the Transfer of Property Act, 1882.

Issue-wise Detailed Analysis:

1. Lease or License:
The primary issue was to determine whether the agreement constituted a lease or a license. The court examined the definitions under Section 105 of the Transfer of Property Act, 1882, and Section 52 of the Indian Easements Act, 1882. It was noted that a lease involves the transfer of a right to enjoy the property, whereas a license merely grants permission to use the property without transferring any interest. The court emphasized that the substance of the document must be preferred over its form, and the intention of the parties is crucial. Despite the agreement referring to the appellant as a "licensee," the court found that the extensive rights and exclusive possession granted to the appellant indicated a lease rather than a license.

2. Liability to Pay Property Tax:
The appellant argued that as a licensee, they were not liable for property tax under Section 120 of the DMC Act. However, the court held that the appellant was a lessee, not a licensee, and thus liable to pay property tax. The court referred to Section 120(2) of the DMC Act, which states that if land has been let for a term exceeding one year and a building has been erected thereon, the property taxes assessed in respect of that land and building shall be primarily livable upon the tenant.

3. Petroleum Storage Tanks as Buildings:
The court addressed whether the petroleum storage tanks qualify as buildings under the DMC Act. It referred to the definition of "building" under Section 2(3) of the DMC Act and previous judgments, including Municipal Corporation of Greater Bombay v. Indian Oil Corporation, which held that oil tanks are considered buildings. Consequently, the court concluded that the petroleum storage tanks in question were indeed buildings and subject to property tax.

4. Exemption from Property Tax under Section 119 of the DMC Act and Article 285 of the Constitution:
The appellant contended that the property was exempt from property tax under Section 119 of the DMC Act and Article 285 of the Constitution, as it was government property. The court clarified that Section 119 exempts Union properties from property tax, but this exemption does not apply to buildings owned by the appellant. The court also distinguished the present case from HUDCO v. MCD, where vacant land belonging to the government was exempt from tax. In this case, the appellant had constructed buildings on the land, making them liable for property tax.

5. Interpretation of the Agreement:
The court examined the agreement in light of the Government Grants Act, 1895, which prevails over the Transfer of Property Act, 1882. The agreement granted the appellant extensive rights and exclusive possession, typical of a lease. The court noted that various clauses in the agreement, including the payment of rent and the right to terminate the agreement with notice, supported the conclusion that the agreement was a lease.

Conclusion:
The court concluded that the agreement constituted a lease, not a license, and the appellant was liable to pay property tax on the petroleum storage tanks, which were considered buildings under the DMC Act. The appeal was dismissed, and no order as to costs was made.

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