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TMI Blog1974 (3) TMI 118X X X X Extracts X X X X X X X X Extracts X X X X ..... the doctrine of sterility with which the land was said to have been struck during the period when a building was being actually put upon it. The appellant Corporation questions the applicability of this doctrine to rating of land in this country. Before proceeding further we may briefly give the facts and circumstances in which the question mentioned above arises. The respondent Company is the Owner of 6652 sq. yds. of land out of which 450 sq. yds. were deducted for having, fallen within the set back line . Out of the remaining area of 6202 sq. yds, 1060 sq. yds. was being built upon at the relevant time whilst the remaining 5142 sq. yds, was lying vacant during the period under consideration. As the respondent Company did not lead any evidence about the hypothetical rent of any part of land the Assessor Collector of Bombay Municipal Corporation determined the market value of the whole land as ₹ 62020/- at ₹ 10/per sq. yd. He then calculated the hypothetical rent by taking a rate of interest of 31 % per annum as the reasonable return on this value so that the hypothetical annual rental value came to ₹ 2170/- From 1-1-1962 the Assessor divided the plot notio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty to land rateable under the provisions of the Act. It was contended that the essential distinction between the Indian and the English law, overlooked by the Division Bench, was that the basis for determining rateable value in this country was the value of the property to the owner and not to the occupier. Hence, it was urged, every kind of land, as defined by Sectoin 3(r) of the Act, was rateable under Section 154 of the Act simply because it had a value to the owner of it and not because it was yielding any income or was usefully or beneficially occupied or enjoyed by a tenant or any other kind of occupant paying for the use of it. It was contended that, in so far as the rent paid by an actual tenant or that which a hypothetical tenant would presumably pay for the land, in the condition it actually was (i.e. rebus sic stantibus ), is to be taken into account, this could be done only for the purpose of determining the value of the land to the owner and not, as it had been done in England, to its occupant. This distinction, it was pointed out, logically flows from the essentially different bases of rateability adopted in India, where even vacant land was rateable, and, in Englan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act says 3(r) Land includes land which is being built upon or is built upon or covered with water banefits to arise out of land, things attached to the earth or permanently fastened to anything attached to the earth and rights created by legislative enactment over any street ; and Section 3(s) says 3(s) building includes a house, out-house stable shed, hut and every other such structure, whether of masonry, bricks, wood, mud, metal or any other material whatever; But, section 143 of the Act seems to make a distinction between buildings and land when it says that the general tax shall be levied in respect of all buildings and land , and, thereafter, it continues to mention both, Similarly, Section 144 mentions buildings and land as though they were separate. Section 144(A) goes on to provide : 144A. (1) Notwithstanding anything contained in Section 140, the general tax leviable in respect of any building used for residential purposes- (a) completed, or first let out or occupied on or after the 1st day of April, 1956 ; and (b) consisting exclusively of tenements the annual rent of each of which tenements determined as provided in sub- section (1) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tended on behalf of the respondent, there can be no hypothetical tenant of a building of which the law prohibits. any use or occupation. A building which is in the course of construction would be, it was urged, a building in an incomplete state of which. no occupation was possible by an actual or hypothetical tenant of it., There is no doubt that rates belong to the category of property taxes mentioned in Section 139(1) of the Act. Section 146 makes, fresh taxes Leviable primarily from the actual occupier of the premises upon which the said taxes are assessed, if such occupier holds the said . premises immediately from the Government or from the corporations or from a fazendar . Section 146(2) makes it clear that in other cases they are leviable as follows : (a)- if the premises are let, from the lessor; (b) if the premises are sub-let, from the superior lessor; and (c) if the premises are unlet, from the person in whom the right to let the same vests . Section 146(3) lays down that : if any land has been let for any term exceeding one year to a tenant, and such tenant or any person deriving title howsoever from such tenant has built upon the land, the property ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hing each, either by name or number, as he shall think fit; (b) the rateable value of each such building and land determined in accordance with the foregoing provisions of this Act; (C) the name of the person primarily liable for the payment of the property-taxes, if any, leviable on each Such building or land; (d) if any such building or land is not liable to be ,assessed to the general tax, the reason of such non-liability; (e) when the rates of the property-taxes to be levied for year have been-duly fixed by the corporation and the period fixed by public notice, as hereinafter provided, for the .receipt of complaints against the amount of rateable value entered in any portion of the assessment-book, has expired, and in the case of any such entry which is complained against when such complaint has been disposed of in accordance with the provisions hereinafter contained, the amount at which each building or land entered in such portion of the assessment-book is assessed to each of the property-taxes, if any, leviable thereon; (f) if, under Section 169 or 170, a charge is made for water supplied to any building or land by measurement ,or the water-tax or charged or wat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Calcutta case which went to the Privy Council, a golf club was making use of some land with a few holes made in it for occasional practice by persons aspiring to become golfars. The Club used to pay a nominal amount for the use of the land. This Court also referred to the decision of the House of Lords in Polar Assessment Committee vs. Roberts.(1922) 2A.C. 93) to indicate : The distinction between occupier and owner, in this connection, is of primary importance. The occupation value of property may be, and often is, distinct from its value to the owner . This Court then cited the weighty observations of Atkin, L.J., as he then was, which were approved by Lord Carson in his dissenting judgment (at page 58) : How then is the annual rent to be ascertained? It is obvious that the definition presupposes that the premises are deemed to be vacant and are deemed to be capable of being let . The respondent, however relies upon the following passage in the judgment of this Court(l) (at page 56) : A law of the land with its penal consequences cannot be ignored in ascertaining the reasonable expectations of a landlord in the matter of rent . It was urged on behalf of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch for the first time applied the concept of net annual value and rateable value as the basis for levying a rate for purposes of local taxation; that basis was always there for centuries before the Act of 1925 was passed . Here, it was held by a majority of five Judges of this Court, that a rule imposing a tax called a rate , directly as a percentage of the capital value , is ultra vires the Act and the assessment based on this manner must be struck down . The reasoning adopted was :(at pages633-34): If the law enjoins that the rate should be fixed on the annual value of lands and buildings, the municipality cannot fix it on the capital value, and then justify it on the ground that the same result could be arrived at by fixing a higher percentage as the rate in case it was fixed in the right way on the annual value. Further by, fixing the rate as a percentage of the capital value directly, the real incidence of the levy is camouflaged . This case links the nature of the property tax called a rate levied for local Govt. purposes with the mode adopted for its levy. Each mode had necessarily to be directed to finding out the annual rentel value of land as that was what wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the property including the person actually in occupation, even though he happens to be the owner of the property. The rent is that which he will pay in the higgling of the market , taking into account all existing circumstances and any relevant future trends. if the Property affords the opportunity for the carrying on of a gainful trade, that fact also must be taken into account. The property is assumed to be vacant and to let and the material date for the valuation is that of the proposal which gives rise to the proceedings. The actual rent paid for the property is not conclusive evidence of value, though such actual rent may serve as an indication as to what a hypothetical tenant can afford to pay. However, if the actual rent is paid on terms which differ from those of the hypothetical tenancy it must be adjusted, if possible, to the terms of the hypothetical tenancy before it affords evidence of value. (See Halsbury s Laws of England, (3rd ed.) Vol. 32, P. 60 and onwards). It is also well recognised that while valuing the property in question every intrinsic quality and every intrinsic circumstance which tends to push the rental value up or down must be taken into consideratio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has actually been built upon.- But, relevant provisions of the Act do not mention and seem to take no account, for purposes of rating, of any building which is only in the course of being constructed although Section 3 (r) of the Act makes it clear that land which is being built upon is also land . Hence, so long as a building is not completed or constructed to such an extent that atleast a partial completion notice can be given so that the completed portion can be occupied and let, the land can, for purposes of rating, be equated with or treated as vacant land. It is only when the building which is being put up is in such a state that it is actually and legally capable of occupation that the letting value of the building can enter into the computation for rating rebus sic stantibus . Although, the definition of land, which is rateable, covers three kinds of land , yet, for the purposes of rating Sec. 154 recognises only two categories. Therefore,. all land must fall in one of these two categories for purposes of rating and not outside. The doctrine of sterility, in the context of the provisions we have to construe, cannot apply here. In England, what happens is that when ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... use they are based upon the concept of rating exclusively by reference to the beneficial occupation or of the income enjoyed by an occupier. It was, however, pointed out by the respondent that in London County Council v. Erith (Churchwardens Overseers of Parish), (1893 A.C. 562 @ 591.) Lord Herschell, L.C., expressed some dissatisfaction with the rather wide application of the doctrine of sterility in some cases in England and explained it as follows (at page 591) Now, if land is struck with sterility in any and everybody s hands , whether by law or by its inherent condition, so that its occupation is, and would be, of no value to any one, I should quite agree that it cannot be rated to the relief of the poor. But I must demur to the view that the question whether profit (by which I understand is meant pecuniary profit) can be derived from the occupation by the occupier is a criterion which determines whether the premises are rateable, and at what amount they should be assessed; and I do not think that a building in the hands of a school board is incapable of being beneficially occupied by them and is not so occupied because they are prohibited from deriving pecuniary prof ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the purpose of determining the rateable value by a reference to the hypothetical tenant. Here, the basis of rating is not the actual income from bene ficial occupation, as it may be in England (even there a tendency to shift the former or traditional base is discernable), but of ownership of land which is capable of beneficial occupation. In other words, the concept of annual value of the land to the owner, though obviously linked up with its utility or annual letting value, is more comprehensive than and different from the test of the actual income yielded which has been applied in England in a number of cases. Where,the landlord is in actual occupation the land does not cease to have, rateable value. In such a case, rateable value would be determined by asking the question : What would or could be reasonably expected to pay from year to year if he was not the owner but wanted to take it on rent? The standard of reasonable expectation from a hypothetical tenant, applied by contemplating a hypothetical bidding or higgling in a market, however difficult and unsatisfactory as a method of valuation, has to be resorted to in a case beset with such difficulties as the one before us. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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