1978 (4) TMI 197 - HC - Companies Law

Summary

Issues Involved:
1. Legality of the demand notices for property tax.
2. Applicability of amendments to the Municipalities Act and Municipal Corporation Act.
3. Compliance with procedural requirements for imposing property tax.
4. Exemption from property tax for properties allegedly owned by the Union Government.
5. Validity of an agreement waiving the development authority's power of taxation.

Issue-wise Detailed Analysis:

1. Legality of the demand notices for property tax:
The petitioner, Bharat Aluminum Company Ltd., challenged the legality of two demand notices issued by the Special Area Development Authority (SADA) for property tax for the years 1976-77 and 1977-78. The notices demanded Rs. 13,22,100 and Rs. 13,65,673.50 respectively. The petitioner argued that the development authority was not competent to impose the property tax.

2. Applicability of amendments to the Municipalities Act and Municipal Corporation Act:
The petitioner contended that the development authority could only draw upon the powers of taxation as they existed in the Municipal Corporation Act, 1956, or the Municipalities Act, 1961, on 27th February 1976, when clause (d) was inserted in section 69 of the 1973 Adhiniyam. Since sections 127A and 135, which directly imposed property tax, were inserted after this date, the petitioner argued that the development authority could not exercise these powers. The court held that the Municipalities Act, the Municipal Corporation Act, and the 1973 Adhiniyam are supplemental to each other. Thus, the development authority could draw upon the powers contained in section 127A of the Municipalities Act and section 135 of the Municipal Corporation Act, even though these provisions were subsequently introduced in these Acts.

3. Compliance with procedural requirements for imposing property tax:
The petitioner argued that the development authority should have followed the procedure contained in section 129 of the Municipalities Act and section 133 of the Municipal Corporation Act for imposing the tax. The court held that sections 127A and 135, by their own force, impose the tax directly by the State Legislature, making it unnecessary to follow the ordinary procedure for imposing the tax. The development authority, having the same powers as the municipality or the municipal corporation, could directly recover the tax without following the normal procedure.

4. Exemption from property tax for properties allegedly owned by the Union Government:
The petitioner claimed that the properties over which the property tax was imposed were owned by the Union Government and hence exempt under section 127A(2)(a)(i) of the Municipalities Act and section 136(a)(i) of the Municipal Corporation Act. The court rejected this contention, stating that the petitioner, being a Government company incorporated under the Companies Act, had a separate legal entity. The properties owned by the petitioner could not be considered as owned by the Union Government. The court emphasized that the corporate veil could not be lifted in this case to equate the properties of the petitioner with those of the Union Government.

5. Validity of an agreement waiving the development authority's power of taxation:
The petitioner relied on an agreement dated 24th June 1976, wherein the development authority agreed not to exercise its power of taxation in consideration of an annual sum of Rs. 3,00,000 from the petitioner. The court held that a public authority could not fetter the future exercise of its statutory power by a private contract unless the contract was entered into in exercise of its statutory power. The court found no statutory provision enabling the development authority to enter into such an agreement. Moreover, the agreement was unauthorized as it was executed by the chairman without a proper decision from the development authority to waive the imposition of any tax other than octroi.

Conclusion:
The petition was dismissed, and the court upheld the legality of the demand notices for property tax. The development authority was deemed competent to impose and recover the property tax as per the amended provisions of the Municipalities Act and the Municipal Corporation Act. The properties of the petitioner were not exempt from property tax, and the agreement waiving the development authority's power of taxation was found to be invalid. The security amount deposited by the petitioner was ordered to be refunded.