2022 (12) TMI 1327 - HC - Indian Laws

Enhancement to property tax in terms of the Chennai City Municipal Corporation Act, 1919 and the Coimbatore City Municipal Corporation Act 1981 - HELD THAT - The efforts to rationalize property tax assessment continued and G.O.Ms.No.11 dated 04.01.1983 considered a situation that rent may be removed from the ambit of the enactment and that the mode of assessment may be shifted wholesale to a new basis such as value of land plinth area location and usage after dividing the area into various zones and sub-zones. Following this methodology will obviate the necessity for arriving at a annual rental value or fair rent method. After examining the proposal from the Vice Chairman Madras Metropolitan Development Authority under cover of his letter dated 30.03.1982 the Commissioner Corporation of Madras was directed to undertake studies in this regard to be carried out by the Operations Research Group (ORG) of the Madras Metropolitan Development Authority under World Bank Systems for rationalization of property tax assessment. The records reveal notes written in hand calling for the report of the ORG and Annexure VIII of compilation filed by the Greater Chennai Corporation on 21.09.2022 contains a report of the study submitted during September 1985. Property taxes are a major source of revenue to the State and the report of the Committee as well as the analysis of data supplied by the respondents reveal more than adequately that this source of revenue was not being deployed effectively. Non-deployment of revenue sources only leads to the denial of proper infrastructure and facilities to the citizens and the enhancement in property tax rates is only a move forward in that direction - the present impugned enhancement is not vitiated simply by virtue of the recommendations made by the Finance Commission. At best it is an exercise in collaboration by the Union and State in the best interests of the Country. This argument is answered accordingly. The impugned G.O. cannot be considered as a diktat. It does precede the CRs and is couched in affirmative terms indicating that changes are strongly urged in the property tax regime. However in conclusion it advises rather urges that the Corporations take note of and address the issues raised effectively in the best interests of the State/District. The impugned GO CR and Notification do make reference to the recommendations of the Central Finance Commission. However such references do not in my considered view dilute the proposal for enhancement as the need for such enhancement has been made out by the State de hors the recommendations of the Central Finance Commission. The admitted position that there has been no enhancement of property tax for the last nearly three decades would itself suffice to justify a proposal for enhancement now - the challenge to the impugned G.O. and CR on these grounds stands rejected. Arbitrary and illegal procedure followed in enhancement - violation of principles of natural justice - HELD THAT - In the present case public notice has admittedly been issued and objections have admittedly been called for from the taxpayers falling within the jurisdiction of both the Chennai and Coimbatore Corporations. In the former there are 13 lakhs/approx. assessees. The information relating to the number of assessees in Coimbatore has not been supplied by the Coimbatore Corporation. From among approximately 13 lakhs 30 objections have been received. The disposal of the objections is merely by way of reiteration of the Council Resolution and Notification - the objections been dealt with in a serious manner as would behove the respondents there would have been no necessity for the present Writ Petitions since complete clarity could be provided by the Corporations even at that stage. The State would be well advised to put in place proper machinery in this regard and to ensure that future modifications including enhancements are made in accordance with fairness transparency and following a fair and transparent procedure for dealing with tax payer queries grievances and objections - Though an infirmity it has been cured by virtue of the efforts taken by the City Corporation pendente lite where efforts do appear to have been taken to enable the infrastructure both physical as well as by use of technology to provide services in method of computation provision of grievance resolution centres facilitation counters and an easy-to-use website to ease the burden upon the taxpayers. Basis of enhancement is arbitrary and contrary to the provisions of the Act or not - HELD THAT - In the present case there is no doubt that the respondents have complied with the procedure for enhancement though as noted in the paragraphs above the entirety of the procedure followed appears to be rather farcical. However there is no dispute on the position that the impugned/offending orders have been placed in public domain and objections called for and disposed - In PATEL GORDHANDAS HARGOVINDAS VERSUS MUNICIPAL COMMISSIONER AHMEDABAD 1963 (3) TMI 53 - SUPREME COURT a Constitutional Bench of the Hon ble Supreme Court considered an appeal on certificate granted by the Bombay High Court challenging imposition of a rate by the Municipal Commissioner Ahmedabad on vacant lands. The levy of rate was under Section 73 of the Bombay Municipal Boroughs Act 1925. The provisions of the Hyderabad Municipal Corporations Act 1955 and the relevant rules in the Hyderabad Municipal Corporations (Assessment of Property Tax) Rules 1990 provided that tax shall be levied at such percentages of rateable value as may be fixed by the Commissioner. It also provided for the method and manner of determination of such rateable value which is the annual rental value of the property - there was a complete scheme of assessment of tax that is inbuilt in that Statute and in the Rules. Neither the Act nor the Rules provide for a fair rent under the Rent Control Act to be binding upon the Commissioner and the Court lauded this discretion since they noted that determination of annual rental value depended on several criteria that may expand beyond the criteria set out under the Rent Control Act. Admittedly there is no restriction on the methodology as to how ALV is to be determined and thus there is substantial play in the joints that has been afforded to the respondents in this regard - This issue is thus held in favour of the respondents. Whether the slab rate provided within the BSR is permissible? - HELD THAT - Evidently and as the respondents have also pointed out the fixation of slabs is intended as a benefit extended to owners of properties graded on the basis of size. The factorial for properties admeasuring less than 600 sq. ft. has been enhanced from 1.25 to 1.50 for properties between 601 to 1200 from 1.50 to 1.75 for properties between 1201 to 1800 the factorial stands enhanced from 1.75 to 2.00. In all situations there is an enhancement of .5 percentage of the rate previously applicable. Properties admeasuring above 1801 sq. ft. stands enhanced to 2.00 from 1.50 as it was previously - The respondents project as though the slab system existed even earlier and the tabulation extracted above reveals the slabs fixed in 2011. However no document has been produced by the Corporation/State in support of the existence of slab rates prior to the present impugned proceedings. This point has not been argued by the petitioners. Petition dismissed.

Summary

Issues Involved:
1. Challenge to G.O.Ms.No.53 and consequential Council Resolution revising property tax.
2. Property tax General Revision Notices for the period 2022-23.
3. Legitimacy of new tax rates structured on a slab basis.

Detailed Analysis:

I. Challenge to G.O.Ms.No.53 and Council Resolution:
The petitioners challenged the G.O.Ms.No.53 and Council Resolution revising property tax in Chennai and Coimbatore, arguing that the revision was solely triggered by the Central Finance Commission's recommendations, which they claimed was unconstitutional and contrary to the federal structure. They also argued that the State's intervention in property tax matters was unlawful, as the respective statutes did not envision a role for the State in determining property tax. The court found that the recommendations of the Central Finance Commission were advisory and not binding, and the State's actions were in the best interests of the economy. The court held that the impugned G.O. and CR were valid, as the Corporations had applied their minds and followed the proper procedure.

II. Property Tax General Revision Notices for 2022-23:
The petitioners argued that the property tax revision notices for the first half of 2022-23 were erroneous and illegal, as the increase in tax rates cannot be retrospective. The court agreed, stating that any enhancement in tax rates would affect substantive civil rights and that the reference to the first half of 2022-23 was erroneous and illegal. The court set aside the property tax General Revision Notices for the period 2022-23 (II) and directed that the amendments would be operative from the first half of 2023-24.

III. Legitimacy of New Tax Rates Structured on a Slab Basis:
The petitioners challenged the new tax rates structured on a slab basis, arguing that it was arbitrary and discriminatory, particularly to owners of larger properties. The court found that the adoption of Basic Street Rate (BSR) was proper and compliant with the statutory prescription. The court held that the respondents had applied BSR in property tax assessments since 1998, and the adoption of BSR was acceptable. The court also found that the slab system was intended as a benefit to owners of properties graded on the basis of size and was not discriminatory.

Conclusion:
The court confirmed the amendments by way of the impugned Government Order and Council Resolution, dismissing the challenges to the same. The property tax General Revision Notices for the period 2022-23 (II) were set aside, and the amendments were directed to be operative from the first half of 2023-24. The court also directed the Corporations to ensure that their websites were kept robust and grievance mechanisms were put in place to enable all property tax assesses to seek clarifications. All writ petitions were disposed of in these terms, with no order as to costs.