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TMI Blog2003 (7) TMI 684X X X X Extracts X X X X X X X X Extracts X X X X ..... lding? and Whether Section 116 (3) of the Delhi Municipal Corporation Act, 1957 (hereinafter referred to as the DMC Act ) vests arbitrary and uncanalised discretion in Commissioner and is, therefore, invalid for excessive delegation of legislative powers? Civil Appeals Nos. 3313-3333/2000 3335/2000 The appellant company owned land in Delhi on which it constructed a cinema complex known as Delite Cinema Complex. The construction was completed in or about the year 1954. The company had installed certain plant and machinery, furniture and fixtures in the said construction of cinema house. By an order made on 30th May, 1988 the first respondent Municipal Corporation of Delhi revised the rateable value of the appellant's property to ₹ 2,16,970 w.e.f. 1.4. 1968, ₹ 2,18,150 w.e.f. 1.4.1970 and ₹ 2,20,510 w.e.f. 1.7.1970. For the purpose of arriving at the rateable value the assessing authority added the cost incurred by the appellant towards installation of plant and machinery, furniture and fixtures to the cost of the building. The appellant challenged the assessment order by a statutory appeal under Section 169 of the DMC Act contending that the costs inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igh Court while challenging the order of the Joint Assessor and Collector fixing the rateable value for different years. The writ petitions were disposed of by the High Court by two separate judgment dated 19.2.1999. The High Court negatived the challenge to the validity of Section 116(3) of the D.M.C. Act by holding that is only an enabling provision and that the judgment of this Court in New Manek Chowk Spg. and Wvg. Mills Co. Ltd. etc. v. Municipal Corporation of the City of Ahmedabad and Ors.. AIR (1967) SC 801 was distinguishable. The High Court also relied on its own judgment in Municipal Corporation of Delhi v. Pragati Builders and Ors., (supra) and the judgment of this Court in Hindustan Lever Ltd. v. Municipal Corporation of Greater Bombay and Ors., (supra), set aside the judgment of the appellate authority and remitted the assessment to the assessing authority for making afresh assessment orders. The appellants are in appeal before this Court. Civil Appeals Nos. 8570-73 of 2002 The appellants in these cases are owners of certain premises in which either lifts or air-conditioners or both have been installed. The Commissioner of Municipal Corporation of Delhi exercisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for levy of a tax known as property tax. Section 114 indicates that the property taxes to be levied on lands and buildings in Delhi shall consist of a general tax which is to be levied at a prescribed percentage of rateable value of lands and buildings with in the urban area. There are certain other details and powers of exemption which are not material for our purpose. Section 115 provides that general tax shall be levied in respect of all lands and buildings in Delhi. There are certain exceptions made in this section which are again not relevant for us. Section 116 is the crucial section which has generated considerable debate at the bar and bears reproduction. 116. Determination of rateable value of lands and buildings assessable to property taxes - (1) the rateable value of any land or building assessable to property taxes shall be the annual rent at which such land or building might reasonably by expected to let from year to year less - (a) a sum equal to ten percent of the said annual rent which shall be in lieu of all allowances for costs of repairs and insurance, and other - expenses, if any, necessary to maintain the land or building in a state to command that rent, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble value or assessment or liability to assessment or taxation is declared to be final. The expression building is defined in sections 2( 3) as under : 2(3) building means a house, out-house, stable, latrine, urinal, shed, hut, wall (other than a boundary wall) or any other structure, whether of masonry, bricks, wood, mud, metal or other material but does not include any portable shelter. Land has been defined in section 2(24) as follows 2(24) Land includes benefits to arise out of land, things attached to the earth of permanently fastened to anything attached to the earth and rights created by law over any street. Rateable value is defined in section 2(47) as follows : 2(47) Rateable value means a regulation made by the Corporation under this Act, by notification in the Official Gazette. The 1994 Bye-Laws Section 481 empowers the Corporation, subject to the provisions of the Act, to make bye-laws to provide for all or any of the matters dealt with in the section. Paragraph A deals with bye-laws relating to taxation. After enumerating a number of topics on which bye-laws could be made, in entries 1 to 8, entry 9 gives power to the Corporation a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es, railway lines, runways, underground cables, air-conditioning plant in centrally air-conditioned buildings, swimming pools, chairs and screen in cinema halls, theatres and auditoria, cost of insulations and racks in cold storage buildings but save as aforesaid, no account shall be taken of the value of any fistures and fittings contained or situated in or upon any land or building. We may mention here that these bye-laws were challenged as ultra-vires the delegated powers of legislation of the Corporation By a judgment in Delhi Urban House Owner's Welfare Association and Anr. v Union of India and Ors., 60 (1995) DLT 644 a Division Bench of the Delhi High Court held that the explanation to bye-law 3(l)(a), bye-law 3(l)(c)(ii) and bye-law 3(1 )(e) were bad and they were struck-down. The Delhi Municipal Corporation carried an appeal to this Court and by a judgment in MCD v. Delhi Urban House Owner's Welfare Association, [1997] 8 SCC 335 this Court reversed the judgment of the Division Bench of the Delhi High Court except to the extent the challenge was given up by the Corporation. Consequently, the judgment of the High Court declaring the provisions of bye-law 3(l)(c)(i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns, bath tubs and lavatories, deduction could be allowed for the reasonable cost of bath tubs and lavatories and electric lights and fans for working out the rateable value. The High Court was of the opinion that the baths and lavatories were undoubtedly annexed to be freehold, as also electric fillings, except perhaps such fittings as are attached with plugs in the wall. It was also held that without these conveniences the premises would be not let unless perhaps a tenant were found to take the premises on a long lease on favourable terms on the understanding that he should put up such fitting himself With regard to the electric fittings and fans it was urged that they should be treated as machinery under section 154(2) of the Bombay Municipal Corporation Act, 1888 (hereinafter referred to as the BMC Act ) and their cost was liable to be excluded for rateable value of the building. This contention was summarily rejected by the High Court by observing :- But we have not been referred to any authority under which it is said that electric fittings in a residence come within the term 'machinery . It seems to me that when electric fittings are installed by a landlord they be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terial for various purposes and the taxing authority cannot turn to the definition of land , if it falls to bring the case within the definition of building , when it is dealing with a structure, and what is contained in that structure. The High Court laid down two tests, namely, (1) the nature and extent or degree of annexation to the property and (2) the object, intention or purpose of the annexation. Since the facts were not clear, the case was remanded back to the lower appellate court for deciding the factual matrix. In Pragati Builders (supra) it was held as under :- 21. We can cull from the above discussion the following points which are to be kept in mind while determining the rateable value of a building : (a) Has the machinery installed in a building become part of the said building on account of some degree of annexation? (b) Is the said machinery so annexed to the building for its better enjoyment and enhancement of its utility? (c) Whether any hypothetical tenant would be ready to occupy the said building with all its available facilities and amenities? (d) What reasonable return a tenant would be called upon to pay on the total investment of the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch building or land. In our judgment, the language of sub-section (3) of section I 16 of DMC Act is pari-materia with rule 7(2) under the BPMC Act, 1949 The contention was that sub-rule (2) of Rule 7 was beyond the legislative competence of the State as the State could not levy a property tax on plant and machinery in the guise of levying taxes on lands and buildings. It was also urged that the power given to the Commissioner to notify and machinery or class of machinery upon which it would be treated as part of the building was uncanalised, arbitrary and invalid on account of excessive delegation of power. With regard to the first contentions, this Court held that Courts can look into legislative practice (see in this connection Ralla Ram v. The Province of East Punjab - (1948) FCR 207. The Court then referred to a large number of municipal Acts passed by different Legislatures after 1935 to show that plant and machinery were excluded from the purview of such taxes. The different municipal legislations noticed were :- Punjab Municipal Act, 1911, s.3(l); The Madras Act IV of 1884, s.65(2); Madras District Municipalities Act, 1920 s. 82(2) proviso (b); The Patna Munic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the Commissioner was to act under the directions of the Standing Committee. For all these reasons it was held that sub-rule (3) of rule 7 was invalid on account of excessive delegation of power by legislature. The Full Bench of the Delhi High Court has brushed aside the judgment in New Manek Chowk (surpa) by the following observation - 23. However, in the instant case the Commissioner is not the only person who can determine, as to whether any plant and machinery contained or situated in or upon any land or building and belonging to any of the classes specified from time to time by public notice shall be deemed to form part of the land or building but therefore he was required to obtain the approval of the Standing Committee. Thus, it cannot be said that wholly unguided and uncanalized power was conferred upon a statutory authority. In our considered view, the distinction drawn is hardly valid. While in the case of the DMC Act, the Commissioner is required to obtain the approval of the Standing Committee before notifying any plant or machinery under sub- section (3) of section 116, under the BPMC Act, the Commissioner has to do it with the approval of the Corporati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ning machinery including the cost of false ceiling had to be excluded from the cost of the building computation of rateable value in accordance with sub- section (2) of Section 154 of the BMC Act. It was contended specifically by the Corporation that as machinery had been embedded in the building it became an integral part of the building and that its cost should not be excluded under sub-section (2) of Section 154. A large number of authorities as well as the provisions of Section 3 of the Transfer of Property Act were relied upon by the Corporation. This Court, after noticing Poona Municipal Corporation (supra), (vide para 9) observed :- When the legislature sought to exclude the value of machinery of the type mentioned in sub-section (2) from forming a pan of rateable value, some meaning has to be ascribed to the provision, otherwise the intention of the legislature would get frustrated. We therefore, state that the fact that a machinery gets embedded to a building or becomes an integral part or it has no relevance while deciding the question of applicability of the exemption provision. Again (para 11) it was observed :- According to us, this dischotomy may not be ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ule that no account shall be taken of the value of any plant or machinery in or upon any land or building subject only to the one exception namely that if such plant or machinery has been notified by a public notice by the Commissioner, with the previous approval of the Standing Committee, then it shall be deemed to form a part of such land or building for the purpose of determination of the rateable value. The words used in sub-Section (3) of Section 116 of the DMC Act are land or building . Hence, the principle of interpretation evolved in Poona Municipal Corporation (supra) was very much relevant and applicable. In any event, the definition of premises was wholly irrelevant for interpretation of sub-Section (3) of Section 116. The legislative history unmistakably points towards out to this manner of interpretation. Legislation, like history, has the habit of repeating itself. Legislative practice, which was noticed by this Court in New Manek Chowk (supra), showed that both in England and in India municipal legislation had uniformly tended to exclude the cost of plant and machinery for the purpose of computation of rateable value of land or building subject tio exceptions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n dated 23.10.1989 and, if at all valid, it would become operative from the said date and not from any date earlier. The High Court also seems to have lost sight of the fact that the Explanation II of 1994 bye-laws was struck down by the High Court and its invalidity was upheld by this Court. The learned counsel for the respondent advanced before us the same arguments which appealed to the Full Bench. He contends that whatever might have been the situation in 1888, Municipal Legislation must be progressively interpreted. With the concept of 'plant' and 'machinery' undergoing changes, as a result of series of rapidly advancing tachnology, the rateable value of a 'building' or 'premises' to the owner must be taken to be letting return inclusive of all plant or machinery contained therein, since ultimately such plant or machinery is intended for the beneficial enjoyment of the tenant. Learned counsel also contended that the common law principle, and the principle under Section 3 of the Transfer of Property Act, as to what is 'land' has been applied under the DMC Act which is highlighted by Explanation II to section 3 (1) (e) of 1994 bye-la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wer to notify plant or Machinery under Section 116(3) must be read as extending only to such things of the same nature as would fall within the definition of land as defined in Section 2(24) of the Act. He, therefore, contends that there is thus sufficient guideline indicated in the statute itself and, therefore, the constitutionality of the statute must be upheld. Despite anxiously scanning the provisions of the statute, we hardly find any such guidelines therein. The contention of the learned counsel for the respondent that the statute indicates the guidelines, namely, that the Commissioner's power to notify under Section 116(3) is only in respect of things which are of the same nature as would fall within the ambit of expression land , as defined under Section 2(24), appears to be a classic case of post hoc ergo propter hoc obviously, the power given to the Commissioner under sub-Section (3) of Section 116 is intended to be exercised only in a case where the plant or machinery does not fall within the ambit of the expression 'land' or 'building' as defined in the Act. It is only in such cases that the questions of exercise of the discretion on the part of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The legislature must set the limits of the power delegated by declaring the policy of the law and by laying down standards for guidance of those on whom the power to execute the law is conferred. Thus the delegation is valid only when the legislative policy and guidelines to implement it are adequately laid down and the delegate is only empowered to carry out the policy within the guidelines laid down by the legislature. The legislature may, after laying down legislative policy, confer discretion on an administrative agency as to the execution of the policy and leave it to the agency to work out the details within the framework of the policy. When the Constitution entrusts the duty of law making to Parliament and the legislatures of States, it impliedly prohibits them to throw away that responsibility on the shoulders of some other authority. An area of compromise is struck that Parliament cannot work in detail the various requirements of giving effect to the enactment and, therefore that area will be left to be filled in by the delegatee. Thus the questions is whether any particular legislation suffer from excessive delegation and in ascertaining the same, the scheme the provisi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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