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TMI Blog1996 (7) TMI 575X X X X Extracts X X X X X X X X Extracts X X X X ..... on of the hotel, including the land. On 31.7.90 the DDA informed the Director (Taxation) NDMC of its having contributed land worth Rs, 5 crores for construction of the Hotel under the collaboration agreement. 3. In 1983-84, the hotel building was constructed and a five star deluxe hotel has come up. Ever since then the respondent-NDMC has been assessing the hotel- building for property tax from year to year, but the assessment is yet to achieve a finality. For the years 1983-84 to 1991-92, the Assessing Authority has fixed the rateable value by reference to Chapter V of the Delhi Rent Control Act, 1958. All such orders were appealed against and set aside. The appellant has deposited the admitted amount of tax for all these years. For the years 1992-93 to 1994-95 again the hotel building was assessed by reference to Chapter-V of the DRC Act. Appeals have been preferred which are pending before the Appellate Authority. The demand raised by the NDMC has been stayed by the Appellate Authority, permitting the appellant to deposit admitted amount of tax only. 4. On 9.12.94, the appellant was asked through a letter by the respondent No. I for certain details about the cost of land, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... requiring to be answered by interpretation of legal provisions. The principles on which an Assessing Authority should proceed to assess a hotel building not let out as a unit and the mode of assessment to be adopted is not free from difficulty. There arc good number of five star and threestar hotels in Delhi. Figure of other hotels and lodging houses in Delhi may run into thousands. A large amount of revenue recoverable to a public body is involved. Decision by the High Court on the relevant principles of law setting at rest the controversy with which the Assessing Authorities are being faced from day- to-day would curb the litigation and expedite realisation of revenue. For all such reasons, we are of the opinion that the writ petition should have been heard and disposed of on merits. During the course of hearing of the LPA, we had made it clear to the I earned Counsel for the parties that if at all we may find the appeal worth being allowed and the civil writ petition worth being heard on merits then we will dispose of not only the appeal but the writ petition also on merits. Both the learned Counsel for the parties had agreed with that suggestion and addressed the Court on the m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tel's case (supra). 12. Under Section 61 of the NDMC Act, property tax is leviable on the rateable value of lands and buildings. Rateable value is defined by Section 2(42) to mean the value of any land or building fixed in accordance with the provisions of this Act and the bye-laws made thereunder. Under Section 63 rateable value of any lands or buildings assessable to any property taxes shall be the annual rent at which such land or buildings might reasonably be expected to let from year to year less a sum equal to 10% of the said annual rent. It is well settled that use of the phrase - the annual rent at which such land or building might reasonably be expected to let calls for determination of annual rental value in accordance with the principles applicable to determination of standard rent. (See Dewan Daulat Rai Kapur v. NDMC, AIR 1980 SC 541; Dr. Balbir Singh v. MCD, AIR 1985 SC 339 and NDMC v. East India Hotels Ltd, (supra). 13. Section 6 of Delhi Rent Control Act, 1958 lays down principles for determination of standard rent in relation to any premises . Premises has been defined by Section 2(i) as under :- 2. Definitions.-In this Act, unless the context other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... may reproduce that paragraph for the sake of ready reference. It is as under :- Now, let us take up for consideration the first category of premises, in regard to which the question of determination of rateable value arises, namely, where the premises are self occupied, that is, occupied by the owners. We will first consider the case of residential premises. It is clear from the above discussion that the rateable value of the premises would be the annual rent at which the premises might reasonably be expected to be let to a hypothetical tenant and such reasonable expectation cannot in any event exceed the standard rent of the premises, though in a given situation it may be less than the standard rent. The standard rent of the premises would constitute the upper limit of the annual rent which the owner might reasonably expect from a hypothetical tenant, if he were to let out the premises. Even where the premises are self occupied and have not been let out to any tenant, it would still be possible to determine the standard rent of the premises on the basis of the hypothetical tenancy. The question in such case would be as to what would be the standard rent of the premises if th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion where there is no letting out and in case of premises which were constructed after 9th June, 1955 which have never been let out at any time the standard rent would be determinable on the principles laid down in Sub-section (1)(A)(2)(b) of Section 6. So also in case of premises which have been constructed before 9th June, 1955 but after 2nd June, 1951 the standard rent would like reasons be determinable after the provisions of Sub-section (1)(A)(2))(b) of Section 6 if they have not been actually let out at any time since their construction but if these two categories of premises have been actually let out at some point of time in the past, then in the case of former category, the annual rent agreed upon between the landlord and the tenant when the premises were actually first let out will be deemed to be standard rent for five years from the date of first letting out and in the case of the latter category, the annual rent calculated with reference to the rent at which the premises were actually let for the month of March, 1958 or if they were not so let, with reference to the rent at which they. were last actually let out shall be deemed to be the standard rent for seven years f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he standard rent determinable on these principles would be unduly high. If the standard rent would be the measure of rateable value there would be huge disparity between the RV of old premises and recently constructed premises though they may be similar and situated in the same or adjoining locality. That would be wholly illogical and irrational. Therefore what is required to be considered for determining RV in case of recently constructed premises is as to what is the rent which the owner might reasonably expect if the premises are let out and that is bound to be influenced by the rent which is obtainable for similar premises constructed earlier and situated in the same or adjoining locality and which would necessarily be limited by the standard rent of such premises. The position in regard to determination of RV of self occupied residential and non residential premises may thus be stated as follows : The standard rent determinable on the principle set out in Subsection (2)(a) or (2)(b) or (1)(A)(2)(b) or (1)(B)(2)(b) of Section 6 as may be applicable would fix the upper limit of the RV of the premises and within such upper limit the Assessing Authorities would have to determine a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e applicable [for the case at hand the applicable provision being Section 6(1)(B)(b)]. That would constitute the upper limit of the rateable value of the premises. Having determined such upper limit the Assessing Authority may in appropriate cases scale down the same by evaluating factors such as size, situation, locality and condition of the premises and the amenities provided therein. Such factors cannot, however, be taken into account for the purpose of crossing beyond the upper limit determined by standard rent rateable value of the premises. 18. A perusal of the impugned order of assessment dated 18.12.95 shows that having analysed the facts of the case and the material available on record, the Assessing Authority formed an opinion that the assessee had defaulted in supplying complete information and documents though available in its possession and therefore it was not possible to finalise the assessment on cost of construction and market price of the land basis. Having formed that opinion the Assessing Authority has proceeded to fix the standard rent by resorting to Section 9(4) of the DRC Act. 19. In Dr. Balbir Singh (Supra) their Lordships have disapproved such a cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g unusual for them or beyond their competence and capability. It may be noted that even while fixing standard rent under Sub-section (4) of Section 9, the Assessing Authorities have to rely on such material as may be available with them and determine the standard rent on the basis of such material by a process of estimation. (para 18, page 355). (underlining by us) 20. A perusal of the impugned order of assessment further reveals that the Assessing Authority had found the following deficiencies on the part of the assessee:- (i) the assessee did not produce a broad break up of expenditure incurred on the construction of the hotel premises for providing the facilities and amenities (para 5.3). (ii) the assessee has informed having incurred expenditure of ₹ 13,05,67,630.00 on building sanitary installation and electric installation initially and further an amount of ₹ 2,22,09,854.00 incurred later on additions and alterations, but the information is not supported by a copy of the relevant audited accounts and the balance sheets (para 5.4); (iii) ledger folio No. 3121 gives the value of improvement to building as on 31.3.94 at ₹ 4,01,25,917.00 , whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... less 10% for the year 1994-95 on the basis of chapter-V of the Delhi Rent Control Act. 24. Thus the concluding part of the order of assessment vide para 13 read with the opening sentence of the order of assessment leaves no manner of doubt in holding that the figure of ₹ 45,90,88,196.00 was arrived at on the basis of Chapter V of the DRC Act and the same has been maintained for the year 1995-96. This is what the Supreme Court has expressly disapproved in NDMC v. East India Hotel Ltd. (supra) the Assessing Authority has inspite of having noticed the judgment of the Supreme Court unwittingly fallen into the same error as was corrected by the Supreme Court in East India Hotel's case (supra). 25. Yet another serious flaw which we find in the order of Assessing Authority is failure on its part to exercise the power conferred by Sections 77,81,119 and 122 of the NDMC Act. The Assessing Authority should not have felt helpless and should have exercised the power conferred on it b) the various provisions of the NDMC Act and compelled the assessee to divulge the required information. At least there should have been no hitch in engaging own Valuer if it was necessitated. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 116 of DMC Act, 1957 is by finding out 'the annual rent at which such land or building might reasonably be expected to let from year to year'. The use of this phrase, specially the word reasonably has given rise to voluminous litigation, at least a few cases having travelled upto the Apex Court, the notable of them being Corporation of Calcutta v. Padma Devi, AIR 1962 SC 151, Corporation of Calcutta v. Life Insurance Corporation of India, AIR 1970 SC 1417; Guntur Municipal Council v. Guntur Tow Rate Payers Association, AIR 1971 SC 353, Dewan Daulat RaiKapurv. NDMC, AIR 1980 SC 541.Dr.Balbir Singh v. MCD, AIR 1985 SC 339 and Morvy Municipalities v. Union of Inilia, AIR 1993 SC 1508. The use of the phrase reasonably calls for standard rent of the accommodation being determined by the Tax Assessing Authority limited for the purpose of finding out the rateable value. Determining the quantum of standard rent by reference to any premises calls for a complex exercise which the Assessing Authorities burdened with thousands of assessment cases find very difficult to perform with expedition more so when they are faced with unwilling tax payers. In some of the cases the v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fe enjoyed by them. 33. A tax is a pecuniary charge imposed by State or public authority upon persons or property to meet the public needs of the authority. Taxation has existed since long. It is not only a means of raising revenue but also a powerful instrument of regulating the economy. Howsoever skilled the draftsman may be, he is after all a human being and ambiguities and loopholes are bound to occur in the drafting. Complexities in the legislative drafting having crept in wittingly or unwittingly, ambiguities and loopholes detected breed corruption. Those who administer the taxation laws if unscrupulous and corrupt, can easily enrich their private coffers at the cost of public coffers. Honest and upright officials find their heads taxed and tables full with piling up pending dockets. The complexity of procedure and difficulties of assessment defy solution. Unscrupulous and shrewd tax payers successfully utilise such complexities and loopholes for digging out holes to escape from the dragnet. Honest tax payers find themselves crushed and feel suffocated. The experience learnt out of thousands of cases which are being filed everyday in the Courts of Law challenging the order ..... X X X X Extracts X X X X X X X X Extracts X X X X
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