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TMI Blog1975 (1) TMI 62X X X X Extracts X X X X X X X X Extracts X X X X ..... ter VIII of Schedule A of the Corporations Act. A separate section of the assessment book was prepared by the Cornmissioner of. the Corporation for each official year in respect of the assessment of property tax on certain kinds of properties like textile mills, factories and buildings of university. These properties were classified special properties. The rateable value of properties included in the Special Property Section was previously determined on a flat rate for every 100 sq. ft. of the floor area. In arriving at the figure of the rateable value, the plants and machinery situate upon lands and buildings were also taken into account as provided in clauses (2) and (3) of rule 7 of the Taxation Rules. There was some increase in the rateable value fixed by the Commissioner for the years 1964-65 and 1965-66. The Commissioner also made initial entries in assessment book in respect of those properties for the year 1966-67. A number of writ petitions under article 32 of the Constitution were filed in this Court challenging the validity of the assessments for, the years 1964-65 and 1965- 66 as well as the initial entries for the year 1966-67. Those writ petitions were disposed of by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sess property taxes if the original assessment was affected by a decree or order of a court on either of the grounds on which the Supreme Court had set aside the assessment for the official years 1964-65, 1965-66 and 1966- 67 in New Manek Chowk Mills case (supra). The amending Act also substituted new rule 7 for the old rule which contained the offending clauses (2) and (3). Rule 21B was also in- serted by the amending Act and the said rule permitted the Municipal Commissioner to make fresh valuation of properties after the expiry of the official year if preparation or completion of the assessment before the expiry of the official year were or would be affected on account of any order of a court.. After the amending Act had come into force, the Corporation initiated proceedings for re- assessment of lands and buildings of the petitioners to property tax for the official years 1964-65, 1965-66 and 1966-67. When notices were served on the petitioners to furnish return of the particulars, the petitioners filed petitions in the High Court challenging the validity of those notices. Those petitions were allowed by the High Court as per judgment dated July 3, 1969 on the ground that the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s made, by the Deputy Municipal Commissioner for the official years 1966-67, 1967-68 and 1968-69. Those writ petitions were allowed by the Gujarat High Court as per judgment dated October 27, 1969. it was held that section 49 of the Corporation Act did not contemplate delegation of judicial or quasi-judicial powers by the Municipal Commissioner under taxation rule 18 and that disposal of complaints by the Deputy Commissioner was not permissible. The High Court also declared section 406(2) (e) violative of article 14. Part of rule 42 which related to distress or attachment for default in payment of tax was also struck down on the ground that it could not stand independently of section 406 (2) (e). The fixation of special rate of 9 per cent for conservancy tax in respect of large premises including mills and factories was also held to be illegal and void. The official year 1969-70 having in the meantime commenced, the Municipal Commissioner adopted under taxation rule 21 the entries of the official year 1968-69 as the entries for the official year 1969-70. Complaints were then filed by the petitioners against the amount of rateable value entered in the assessment books. During the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lause (b) and the relevant part if clause (c) of that section read as under : For the purpose of sub-section (1) of section 127 property taxes shall comprise the following taxes which shall, subject to the exceptions, limitations and conditions herein- after provided, be levied on buildings and lands in the City (a)................ (b) a conservancy tax at such percentage of their rateable value as will in the opinion of the Corporation suffice to provide for the collection, removal and disposal, by municipal agency, of all excrementitious and polluted matter from privies, urinals and cess-pools and for efficiently maintaining and repairing the municipal drains- constructed or used for the receipition or conveyance of such matter, subject however to the provisos that the minimum amount of such tax to be levied in respect of any one separate holding of land or of any one building or of any one portion of a building which is let as a separate holding shall be eight annas per mensem and that the amount of such tax to be levied in respect of any hotel, club or other large premises may be specially fixed under section 137; (c) a general tax of not less than twelve per cent. of their ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an appeal made against a rateable value after a bill for any property tax a assessed upon such value has been presented to the appellant, unless the amount claimed from the appellant has been deposited by him with the Commissioner. Section 411 (as amended by Act 8 of 1968) makes provision for appeal to the High Court from a decision of the Judge in an appeal in certain contingencies. Clause (54) of section 2 defines "rateable value" to mean the value of any building or land fixed in accordance with the provisions of the Act and the rules for the purpose of assessment to property taxes. According to section 453, the rules in the schedule as amended from time to time shall be deemed to be part of the Act. Chapter VIII of the schedule contains the Taxation Rules. According to clause (1) of rule 7, in order to fix the rateable value of any building or land assessable to a property-tax there shall be deducted from the amount of the annual rent for which such land or building might reasonably be expected to let from year to year a sum equal to ten per cent of the said annual rent, and the said deduction shall be in lieu of all allowance for repairs or on any other account whatever. Claus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... premises, exclusive of furniture or machinery contained or situate there in or thereon, might reasonably be expected to let from year to year with reference to its use;and shall include all payments made or agreed to be made to the owner by a person (other than the owner) occupying the building or land or premises on account of occupation, taxes, insurance or other charges incidental thereto Provided that, for the purpose of sub clause (ii),- (a) in respect of any building or land or premises the standard rent of which has been fixed under section 11 of the Bombay Rents, Hotel and Lodging House Rates Control Act, 1.947, the annual rent thereof shall not exceed the annual amount of the standard rent so fixed; (b) in the case of any land of a class not ordinarily let, the annual rent of which cannot in the opinion of the Commissioner be easily estimated, the annual rent shall be deemed to be six per cent of the estimated market value of the land at the time of assessment; (c) in the case of any building of a class not ordinarily let, or in the case of any industrial or other premises of a class not ordinarily let, or in the case of a class of such premises the building or building ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spect of any property belonging to such class for which such different rate may have been determined by the Corporation, at any other different rate under this subsection.' 10. In section 406 of the principal Act, in sub-section (2),- (1)for the words 'shall be heard' the words 'shall be entertained' shall be substituted; and (2)the following proviso shall be added after clause (e), namely :- 'Provided that where in any particular case the Judge is of opinion that the deposit of the amount by the appellant will cause undue hardship to him the, Judge may in his discretion dispense with such deposit or part thereof, either un- conditionally or subject to such conditions as he may deem fit.' 11.in section 411 of the principal Act, after clause (a), the following clause shall be inserted, namely :'- "(b) from any order of the Judge under the proviso to sub-section (2) of section 406; and;" 12. In Schedule A to the principal Act, in Chapter VIII,- (i)in sub-rule (3) of rule 7, for the words annual rent for which such building, land or premises might reasonably be expected to let from year to year a sum equal to ten per cent of the said annual rent' the words 'annual letting valu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... violative of article- 14 and is constitutionally valid. (iii) Section 49 does not suffer from the vice of unreasonableness and is constitutionally valid and so_ also is section 13(1) of Gujarat Act 5 of 1970. (iv)The proviso to section 129(b) is not violative of article 14 nor does it suffer from the vice of excessive delegation of legislative power. (v)Section 13(2) of Gujarat Act 5 of 1970 is not violative of article 14 or article 19(1)(f) and cannot be challenged as constitutionally invalid. (vi)Section 406(2)(e) and section 411(bb) are null and void as being in. contravention of article 14 : Rule 42 of the Taxation Rules is also ultra vires and void in so far as it provides that if an appeal is preferred or entertained against thetax, warrant shall not issue for the recovery, of the amount of tax. (viii) The Resolutions passed by the Corporation for the official years 1967-68, 1968-69, 1969-70 and 1970-71 to the extent to which they fix the rate of conservancy tax at 9 per cent inter alia in respect of textile, mills and factories belonging to the petitioners are ultra vires the proviso to section 129(b) and the rate of conservancy tax applicable in respect of these texti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct of levying the tax. As against the above, the following four contentions were advanced on behalf of the Corporation : - (1) There is no discrimination in the matter of completed assessments and pending assessment because the prior law did not require valuation to be restricted to standard rent. The impugned provision is merely declaratory of previous state of law. (2) There is no discrimination in the matter of completed assessment,% pending assessments because as a matter of fact valuation assessments finalised before December 23, 1972 were in disregard of the provisions of the Rent Act. (3) Pending cases constitute a class by themselves and any law which makes a distinction between decided cases and pending cases is not violative of article 14 of the Constitution as the above distinction is based upon rational classification. (4) In any case so far as the year 1969-70 is concerned, there is no discrimination or violation of article 14. The High Court rejected the first three contentions urged can behalf of the Corporation but accepted the fourt contention. Accordingly, it held that clause (i) of section 2(1A) was valid in so far a,,, it was applicable to the official year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to April 1, 1970 between pending cases and the cases in which assessment had already been completed. So far as this aspect is concerned, we find that in the case of Assessment Committee of the Metropolitan Borough of Poplar.V. Hobberis AIR 1951 Bombay 320 the House of Lords held by majority that in arriving at the valuation for this purposes of the Valuation (Metropolis) Act, 1969, of a hereditament to which the Increase of Rent and Mortgage interest (Restriction) Act 1920 applies, the maximum gross value to be assigned to that hereditament is not limited to the standard rent of the creditament together with the additions thereto permitted by the latter Act. It was further held that the above mentioned Act of 1920 is not to be taken into account in determining the valuation for rating purposes of the hereditaments to which it applies. Following the above decision of the House of Lords a Division Bench of the Bombay High Court held in the case of Gulam Ahmed Rogay v. Bombay Municipality That in arriving at the rateable value for purposes of section 154(1) ,of the City of Bombay 'Municipal Act, 18 8 8 of property to which the Bombay Rents, 'Hotel & 'Lodging house Rates Control Act, 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stituticonal validity of a statutory provision. In case any party ass-ails the validity of any provision on the ground that it is violative of article 14 of the Constitution, it is for that party to make the necessary averments and adduce material to show discrimination violative of article 14. No averments were made in the petitions before the High Court by the petitioners that the .assessments before the coming into force of Ordinance 6 of 1969 bad been made by taking into account the rent restriction provisions of the Bombay Rent Act. Paragraph 2B and some other paragraphs of petition No. 233 of 1970 before the High Court, to which our attention was invited by Mr. Tarkunde, also do not contain that averment. No material on this factual aspect was in the circumstances produced either on behalf of the petitioners or the Corporation. The High Court, as already observed, decided the matter merely on the basis of a pre- sumption. It is, in our opinion, extremely hazardous to decide the question of the constitutional validity of a provision on the basis of the supposed existence of certain facts by raising a presumption. The facts about the supposed existence of which presumption was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red in 1953 to Shri H. V. Divetia, a former Judge of. the High Court of Judicature at Bombay as umpire. Shri Divetia held that flat rate floor area method which was being adopted by the Municipal Corporation of the city of Bombay in similar cases was the proper method. The municipal authorities consequently adopted that method. The award of Shri Divetia was effective only till the official year 1954-55, but its application was extended by agreement between the parties up to the year 1958-59. The municipal authorities continued to value the lands; and buildings aforesaid on the flat rate floor area method for the year 1959-60 and onwards to prevent any dispute being raised. The affidavit further shows that notwithstanding decision in Padma Devi's case (supra) the Corporation continued as before to value the properties included in the Special Property Section on the flat rate floor area method. Both the valuers as well as the persons liable to pay property taxes were not conscious of any impact of rent restriction for the purposes of property taxes. The Collector has denied that in determining the rateable value the Municipal Commissioner had been taking into account the standard ren ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d out in pending cases. The very basis of striking down the impugned provisions on the ground of being violative of article 14 would thus disappear. Apart from the above. we are of the opinion that classification by treating decided cases as belonging to one category and pending cases as belonging to another category is reasonable and not per se. offensive to article 14. It is well-establioshed that article 14 forbids class legislation but does not forbid classification. Permissible classification must be founded on an intelligible differentia which distinguishes persons or things that are grouped together from others left out of the group, and the differentia must have a rational relation to the object sought to be achieved by the statute in question. In permissible classification mathematical nicety and perfect equality are not required. Similarity, not identity of treatment, is enough. If there is equality and uniformity within each group, the law will not be condemned as discriminative, bought due to some fortuitous circumstances arising out of a peculiar situation some included in a class get an advantage over others, so long as they are not singled out for special treatment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liability in respect of transactions completed even before the date on which. the Act is enacted does not appear to be restricted. If, as is conceded-and in our judgment rightly by a statute imposing civil liability in respect of post enactment transactions, not discrimination is practiced, by a statute which imposes liability in respect of transactions which have taken place after a date fixed by the statute, but before its enactment, it cannot be said that discrimination is practiced." In the case of fain Bros. & Ors. v. The Union of India & Ors. [1970] 3 S.C.R. 253 it was urged on behalf of the appellants that clause (g) of section 297(2) of the Income-tax Act, 1961 was violative of article 14 inasmuch as in the matter of 'imposition of penalty, it discriminated between two sets of assesses with reference to a particular date, namely, those whose assessment had been completed before 1st day of April, 1962 and others whose assessment was completed on or after that date. While upholding the validity of the above provision, this Court observed "Now the Act of 1961 came into force on first April 1962. It repealed the prior Act of 1922. Whenever a prior enactment is repealed and n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar as the rate of conservancy tax in respect of the large premises had been fixed at 9 per cent instead of 3 per cent, observed that the power to fix different rates of conservancy tax for different classes of properties is limited by the actual cost element and the differential rate of conservancy tax fixed for a particular class of properties must be related to the actual cost involved in supplying conservancy service to that class. The High Court agreed that large premises could be treated as a class and given differential treatment in the matter of fixation of conservancy tax. On the question, however, as to what rate of conservancy tax should be fixed for large premises, the High Court. observed that there was nothing in the affidavits filed on behalf of the Corporation which might show that the Corporation was guided by the actual cost of conservancy service supplied to each class. We may at this stage advert to the scheme of the Corporation Act in the matter of levy of conservancy tax. Clause (b) of section 129 states that the rate of conservancy tax shall be such percentage of rateable value as will in the opinion of the Corporation suffice to provide the collection, remova ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erence to the cost or probable cost of the collection, removal and disposal, by the agency of municipal conservancy staff, of excrementitious and polluted matter from the premises. The rate of conservancy tax .covered by section 137(3) would be lower compared to the general rate of conservancy tax under clause (b) of section 129 which would be fixed after taking into account not only the cost or probable cost referred to in section 137(3) but also the expenses for efficiently maintaining and repairing the municipal drains constructed or used for the receiption or conveyance of excrementitious and polluted matter. The scheme of the Corporations Act appears to be that in the case of premises used solely for public purposes and not intended to be used for purposes of profit or in the case of premises intended to be used for residential or charitable or religious purposes in respect of which conservancy tax is payable by the Government, the rate of conservancy tax should be lower compared to the rate of general conservancy tax. Sub-section (1) deals with large premises like hotels, clubs and stables which in the very nature of things require greater conservancy service, and it hardly s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion has determined the rate of conservancy tax at 9 per cent are proper- ties belonging to a class the cost of pro- viding conservancy services to which is proportionately higher than corresponding cost in respect of other properties. I state that it is not necessary for the purpose of determining such higher rate that the Corporation or the Commissioner should separately work out the expenditure involved in dealing with these properties. I deny that there is no valid justification for providing a higher rate of conservancy tax in respect of such properties. I submit that it is competent to the Corporation to take notice of the higher cost of conservancy services required to be incurred in respect of these properties and to form an opinion on general facts-that the cost of providing conservancy services to these properties would be higher and to what extent. I submit that matters of this type do not demand an arithmetical accuracy and broad compliance in matters of this type is sufficient for compliance with law. I submit that according to the estimate of the Municipal Corporation, to meet the total expenditure of conservancy services, if a unit rate of conservancy tax was to be p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oration has to meet for conservancy service for that particular class of property ? After giving the matter our consideration, we are of the view that what is required by section 129 is that before determining the rates of conservancy Tax for different categories of properties the Corporation should find out the total expense it would have to incur for the various purposes mentioned in clause (b) of that section. After having ascertained the total expense it would be permissible to the Corporation to fix different rates of conservancy tax for various categories of properties. It is not essential, except in cases mentioned in sub-sections (2) and (3) of section 137 that the rate of conservancy tax for a particular category of properties should be such as would be related only to the expense for conservancy service for that particular category of properties. According to the proviso which has been added to clause (b) of section 129 of the Corporations Act by Act 5 of 1970, when determining under section 99 or section 150 the rate at which conservancy tax shall be levied for any official year or part of an official year, the Corporation may determine different rates for different clas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Corporation" mentioned in clause (b) of section 129 is formed after budget estimates are prepared in accordance with sections 95, 96 and 100 of the Corporations Act. According to the above provisions the Commissioner is to make a statement of proposals as to the taxation which would in his opinion be necessary or expedient to impose under the provisions of the Act in the Annual Budget estimate of the next official year. The Standing Committee then considers the estimates and proposals of the Commissioner, and after having obtained from the Commissioner further details and information as they think fit, the Committee frames the budget estimates. The budget estimates contain proposals of rates and extents of municipal taxes. The budget estimates are then printed and the printed copies are sent to each municipal councillor. The budget estimates are thereafter laid before the Corporation which then considers the same. In considering the budget estimates the Corporation is entitled to refer them back to the Standing Committee for further consideration or to adopt them us they stand or subject to alterations. The entire procedure provides built-in safeguards and lays down adequate guide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l for the parties, we are unable to subscribe to the view taken by the High Court. Section 406 (2) (e) as amended states that no appeal against a rateable value or tax fixed or charged under the Act shall be entertained by the Judge in the case of an appeal against a tax or in the case of an appeal made against a rateable value after a bill for any property tax assessed upon such value has been presented to the appellant unless the amount claimed from the appellant has been deposited by him with the Commissioner. According to-the proviso to the above clause. where in any particular case the Judge is of opinion that the deposit of the amount by the appellant will cause undue hardship to him, the Judge may in his discretion dispense with such deposit or part thereof, either unconditionally or subject to such conditions as he may deem fit. The object of the above provision apparently is to ensure the deposit of the amount claimed from an appellant in case he, seeks to file an appeal against a tax or against a rateable value after a bill for any property tax assessed upon such value has been presented to him. power at the same time is given to the appellate judge to relieve the appella ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no legal or constitutional impediment to the imposition of such conditions. It is permissible, for example. to prescribe a condition in criminal cases that unless a convicted person is released on bail, he must surrender to custody before his appeal against the sentence of imprisonment would be entertained. Likewise, it is permissible to enact a law that no appeal shall lie against an order relating to an assessment of tax unless the tax had been paid. Such a provision was on the statute book- in section 30 of the Indian Income-tax Act, 1922. The proviso to that section provided that " . . . . . no appeal shall lie against an order under sub-section (1) of section 46 unless the tax had been paid". The same is not abused by a recalcitrant party and there is no difficulty in the enforcement of the order appealed against in case the appeal is ultimately dismissed. It is open to the legislature to impose an accompanying liability upon a party upon whom a legal right is conferred or to prescribe conditions for the exercise of the right. Any requirement for the discharge of that liability or the fulfillment of that condition in case the party concerned seeks to avail of the said right ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the soil and pavement of any street, railway or tramway for laying down and placing electric supply lines and other works. Although the roads and public streets under which the petitioner-company has laid down underground supply lines vest in the, Corporation under section 202 of the Corporation Act, the liability to pay property tax in respect of the space in which supply lines are laid is sought to be fastened upon the petitioner-company in view of the provisions of section 139(1) of the Corporations Act. According to section 139(1), subject to the provisions of sub-section (2), with which we are not concerned, property taxes assessed upon any premises shall be primarily leviable if the premises are held immediately from the Government or from the Corporation, from the actual occupier thereof. The word "premises" as defined in section 2(46) includes land. The case of the Corporation as set out in the affidavit of Shri Narendra R. Desai, Town Development Officer of the Corporation is that only such area of the land as is occupied by the under,ground supply lines that is valued for the purposes of assessing property taxes. It is stated that for the purpose of laying supply lines, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Pollock, C. B. said 'There is no distinction between the occupying land, by passing through a fixed point of space in the air to another fixed point, or by passing in the same manner through land or water. Land extends upwards as well as downward. In the case of Mayor, Aldermen and Councillors of the City of Westminster & Ors. v. The Southern Railway Company, the Railway Assessment Authority and W. H. Smith & Son, Limited & Ors. [1936] A.C. 511. Lord Russel of Killowen observed "Subject to special enactments, people are rated as occupiers of land, land being understood as including not only the space of the earth but all strata above or below." There can, therefore, be no doubt that land in entry 49, of List It would include the underground strata. It may be stated that the word "land" has also been defined in clause (30) of section 2 of the Corporations Act to include land which is being built upon or is built upon or covered with water. benefits to arise out of land. things attached to the earth or Dermanently fastened to anything attached to the earth and rights created by legislative enactment over the street. The definition is of inclusive nature and does not exclude from its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rse, and of making other tunnels in connection therewith, reserving to himself mineral and other rights :- Held, reversing the decision of the Court of Appeal, that the statute and grant gave the company not merely an easement but possession of the tunnels and water-course, that the right reserved to the owner were subordinate to the rights granted to the company, and that the company were de facto in occupation of the tunnels and water-course and rateable to thepoor in respect thereof." "Along the tunnel for a considerable distance the company have placed iron tubbing; in parts they have placed brick arches, it seems to me that in these parts they occupy land precisely in the same sense as a water company does by its pipes or a tramway company by its rails, or a telephone company by the supports for its wires." It was further observed : "The question whether a person is an occupier or not within the rating law is a question of fact, and does not depend upon legal title. The person legally possessed may not occupy. On the other hand, a person may be occupier either with or without the consent of the owner." Lord Herschell also relied upon the case of Rex v. Chelsea Waterworks ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the land through which their electric supply lines had been laid. It has been argued by Mr. Tarkunde that even if the petitioner electricity company may be held to be actual occupier of the underground space on which its supply line has been laid the petitioner company does not hold the said space from the Corporation. It is urged that the petitioner-company is in occupation of that space under a statute and not from the Corporation. In order to hold that space from the Corporation, it was essential, according to the learned counsel that there should have been some agreement between the petitioner company and the Corporation or that the Corporation should have given its consent for that purpose. We are unable to accede to the above submission.Clause (a) of section 139(1) of the Corporations Act fastens the liability for payment of property tax on the actual occupier of the premises held immediately from the Government or from the Corporation. In order to attract the liability under the above clause, it is not essential that there should have been an agreement between the actual occupier and the Government or the Corporation for the holding of the premises or that the holding must ..... X X X X Extracts X X X X X X X X Extracts X X X X
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