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TMI Blog1967 (9) TMI 149X X X X Extracts X X X X X X X X Extracts X X X X ..... of Maharashtra, permitting the Club to hold racemeetings at both the Courses and for which it paid a sum of licence fees between the two Courses in the ratio of 2: 1 and thus licence fees between the two Courses in the ratio of 1: 2 and thus the share of the Bombay Course came to ₹ 8,66,666. The rating year in question is 1954-55. The assessment was made on the basis of the Club s accounts for the year 1953-54 that being the year concluded before the assessment. According to these accounts the gross receipts of the Club came to ₹ 117 lacs and odd and the expenses . to ₹ 124 lacs and odd; the accounts thus showed a loss of ₹ 7 lacs and odd. The Deputy Municipal Commissioner who is the assessing authority disallowed expenses totalling ₹ 22 lacs and odd as having been wrongly included in the working expenses add determined. 13,22,430 as the gross annual rent and deducting therefrom the 10 percent deduction allowable under s. 15.4 of the Act assessed the net rateable value at Rs, 11,90,187. The respondent-Club thereupon filed an appeal before the Small Cause Court, Bombay, under s. 217 of the Act. The Club claimed in all 19 items of expenses which accordi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the gross rateable value of the :property would after these deductions be ₹ 2,15,750 and after deducting therefrom the statutory deduction of 10 percent. the net rateable value would come to ₹ 1,94,175 a figure, no doubt, less than the actual annual rent of ₹ 3,75,000 payable by the Club under the said lease. The appellantcorporation challenges the correctness of these deductions allowed by the High Court. Before we proceed to consider the contentions urged before us on behalf of the Corporation, we may first look at some of the provisions of the Act. Under s. 139 the Corporation is required to levy property taxes, tax on vehicles and animals, theatre tax and octroi. Section 140 provides that property taxes mean water tax, halalkhor-tax and general tax of not less than 8 per cent. and not more than 26 per cent. of the rateable value of lands and buildings, education cess and betterment charges. Section 154 is concerned with the valuation of property assessable to property taxes and provides how the rateable value of such property is to be determined. Sub-section (1) runs as follows:- In order to fix the rateable value of any building or land assessable to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g balance is divisible between the tenant, that is,, the tenant s share, the landlord, that is, the hypothetical rent or net annual value and rates. The tenant s share is often estimated by applying a percentage to the tenant s capital or it may be directly taken as a proportion of the divisible balance or by applying a percentage to the receipts. (See Halsbury s Laws of England, (3rd ed.), Vol. 32, 87-88). It must be remembered that it is not the profits which are rateable; they serve to indicate the rent at which the premises might reasonably be expected to let, particularly where profit is the motive of the hypothetical tenant in taking the hereditament. This method at one stage used to be adopted in the case of public utilities only. But there are a number of decisions which show that at a later stage it began to be employed to other premises also such as foot ball stadia, markets, racecourses, etc. One of the earliest cases where this method was applied to undertakings which are not public utilities is the case of R. v. Verall([1875] Q.B.D. 9) which was a case of a racecourse. In Sanddown Park Case(1954) 47 R T 351 (CA) (quoted in Ryde on Rating. 11th ed.523) the Court of A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hile offering the rent at which he would take the premises on lease. We now proceed to examine the contentions in regard to the items of expenses in controversy in the light of these principles. The first of these items is Item No. 3 of ₹ 1,07,414 for expenses for upkeep and repairs of the racecourse. The contention on behalf of the Municipal Corporation was that the 10 per cent statutory deduction allowed by s. 154(1) covers all expenses for repairs and therefor deduction of costs of repairs and upkeep, if allowed, would mean a duplicate deduction. Even if 10% statutory deduction were considered inadequate looking to the present rate of prices, the legislature has fixed that percentage as a matter of policy and if it is found to be inequitable or otherwise it is for the legislature and not for the Court to alter it. The question, however, is not the inadequacy of deduction allowed in section 154(1) but as to which are the costs of repairs contemplated by the subsection. Under s. 108(m) of the Transfer of Property Act the lessee is required to use the leased premises as a person of ordinary prudence would use them if they were his own and must keep them in as good a condi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt was therefore right in deducting those expenses from the gross receipts. Next is Item 9 which comprises expenses for the upkeep and repairs of the totalisator set up by the Club. The totalisator is an apparatus or a mechanical device for registering and showing the total operations and the number of tickets sold to betters on each horse in a race. Obviously it is maintained to ensure efficient and expeditious working of the races. It does mechanically the work which if done by human labour would necessitate employment of a large number of persons. It is almost an indispensable adjunct of a modern race course and is necessary to declare within the short time available to the betters which are the horses on which heavy betting has been done in a particular race and the total amount of betting on each of the competing horses in that race. The expenses incurred in the upkeep and repair of such an adjunct necessary to an efficient race course must necessarily be regarded as the outgoings of the business. The Corporation s contention that it is a, machinery and its value therefore is not to be included in rating under S. 154(2) has no merit as it is part of the necessary -equipmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,666 out of the licence fee of ₹ 13 lacs to the Bombay race-course. Counsel urged that the Club was entitled to a deduction of ₹ 4,33,333 only as the licence was for a dual purpose, viz., for the premises as a race course and for permission to conduct race meetings on. the race-course. It was argued that for the first the burden would be on the lessor and for the second on the tenant. The licence Ex. B shows that it was granted to the Committee of the respondent Club. The licence is not a joint licence in favour of the Corporation and the Club. The application for it was made by the Committee on behalf of the Club and not by the Municipal Corporation. If the licence was for a dual purpose prima facie the landlord would either apply separately or join the Club in the application. The licence shows that the application was for horse racing in the race courses leased by them at Mahalaxmi, Bombay and in the Cantonment at Poona. The licence is granted to the licencees............. to hold horse races on the said race courses. Condition I of the licence prescribes that the Club could hold only 36 race meetings in a year out of which not more than 16 should be allotted to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... treat the licence fees as its own expenses and claim deduction therefor on the footing that the fees were expenses incurred by it to earn the receipts. As regards the wheel tax and the water tax there is no justification in distributing them on the ground that during the time racemeetings were not held in Bombay it would be the landlord s obligation to pay those taxes. In our view there is no basis for disallowing a part of these taxes. These again were expenses incurred by the Club in the ordinary course of its business and were as necessary .as other expenses in connection with its business. Counsel for the Corporation lastly urged that if these expenses -were allowed to be deducted the net rateable value arrived at would be less than the actual rent of ₹ 3,75,000 payable by the Club to the Corporation and that such a result cannot be contemplated under any method of assessing the rateable value. It is true -that the net rateable value as calculated by the High Court comes to ₹ 1,94,175 but the rateable value need not always be equal to the actual rent. As aforesaid the measure is what a, hypothetical tenant is expected to pay for a lease from year to Year taking the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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