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TMI Blog2022 (12) TMI 1327X X X X Extracts X X X X X X X X Extracts X X X X ..... 03.1982, the Commissioner, Corporation of Madras was directed to undertake studies in this regard to be carried out by the Operations Research Group (ORG) of the Madras Metropolitan Development Authority under World Bank Systems for rationalization of property tax assessment. The records reveal notes written in hand, calling for the report of the ORG and Annexure VIII of compilation filed by the Greater Chennai Corporation on 21.09.2022 contains a report of the study submitted during September, 1985. Property taxes are a major source of revenue to the State and the report of the Committee as well as the analysis of data supplied by the respondents reveal more than adequately, that this source of revenue was not being deployed effectively. Non-deployment of revenue sources only leads to the denial of proper infrastructure and facilities to the citizens and the enhancement in property tax rates is only a move forward in that direction - the present impugned enhancement is not vitiated simply by virtue of the recommendations made by the Finance Commission. At best, it is an exercise in collaboration by the Union and State in the best interests of the Country. This argument is answered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovide services in method of computation, provision of grievance resolution centres, facilitation counters and an easy-to-use website, to ease the burden upon the taxpayers. Basis of enhancement is arbitrary and contrary to the provisions of the Act or not - HELD THAT:- In the present case, there is no doubt that the respondents have complied with the procedure for enhancement, though as noted in the paragraphs above, the entirety of the procedure followed appears to be rather farcical. However, there is no dispute on the position that the impugned/offending orders have been placed in public domain and objections called for and disposed - In PATEL GORDHANDAS HARGOVINDAS VERSUS MUNICIPAL COMMISSIONER, AHMEDABAD [ 1963 (3) TMI 53 - SUPREME COURT] , a Constitutional Bench of the Hon ble Supreme Court considered an appeal on certificate granted by the Bombay High Court challenging imposition of a rate by the Municipal Commissioner, Ahmedabad, on vacant lands. The levy of rate was under Section 73 of the Bombay Municipal Boroughs Act, 1925. The provisions of the Hyderabad Municipal Corporations Act, 1955 and the relevant rules in the Hyderabad Municipal Corporations (Assessment of Prope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 25894, 26056 & 25897 of 2022 And WP.Nos.26134, 26173, 26179, 26183, 26187, 26190, 26174, 26180, 26184, 26188, 26176, 26182, 26186, 26189, 26193, 26198, 26228, 26230, 26235, 26237, 26244, 26232, 26236, 26238, 26242, 26279, 26357, 26484, 26559, 26577, 26621, 26622, 26686, 26736, 26742, 26786, 26790, 26798, 26800, 26791, 26794, 26799, 26796, 27014, 27183, 27184, 27213, 27252, 27256, 27258, 27336, 27337, 27341, 27431, 27939, 27985, 27989, 27992, 28037, 28101, 28377, 28380, 28474, 28654, 28660, 28663, 28662, 28666, 28670, 28842, 28959, 29059, 29085, 29196, 29204, 29247, 29442, 29470, 29478, 29485, 29483, 29488, 29490, 29495, 29497, 29501, 29489, 29493, 29499, 29502, 29503, 29507, 29494, 29500, 29504, 29506, 29508, 29509, 29896, 29942, 29946, 29947, 29951, 29954, 29996, 30078, 30083, 30091, 30097, 30105, 30106, 30115, 30118, 30288, 30290, 30295, 30300, 30303, 30383, 30405, 30423, 30446, 30448, 30455, 30574, 30612, 30616, 30854, 30863, 31154, 31177, 31188, 31190, 31219, 31221, 31224, 31225, 31251, 31288, 31411, 31414, 31430, 31435, 31560, 31713, 31732, 31744, 31774, 31882, 31886, 31977, 31982, 32087, 32208 & 32211 of 2022 And WMP.Nos.17875, 17876, 18691, 18693, 19216, 19217, 19561, 1956 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0, 30273, 30587, 30588, 30604, 30615, 30617, 30620, 30621, 30653, 30654, 30655, 30656, 30651, 30652, 30658, 30659, 30691, 30692, 30724, 30726, 30841, 30847, 30843, 30846, 30878, 30879, 30884, 30885, 31016, 31017, 31156, 31157, 31180, 31181, 31189, 31190, 31212, 31213, 31324, 31326, 31331, 31332, 31415, 31416, 31420, 31422, 31514, 31515, 31622 & 31623 of 2022 Honourable Dr. Justice Anita Sumanth For the Petitioners : Mr.T.V.Ramanujan Senior Counsel For Ms.R.Ramya, Mr.S.Sundaresan, Mr.C.Jagadish, Mr.T.V.Lakshmanan And Others For the Respondents : Ms.Vaitheeswari Standing Counsel for R1 and R3 and Mr.P.S.Raman, Senior Counsel Assisted by Mrs.C.Sangamithirai, Special Government Pleader for R2 And Others COMMON ORDER A welfare State has necessarily to balance augmenting of its revenues so as to provide for sources of funds for welfare measures and other expenses of the State on the one hand, and mitigating the hardship of taxes as far as possible to its citizens, on the other. 2. The official website of the Income Tax Department refers to the perfect balance achieved by the emperor Manu in this regard stating that 'As the calf and the bee take their food little by little, even so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith the need of the State and in line with measures taken elsewhere in the Country for levy and collection of property tax. 6. The Committee had made certain recommendations proposing augmenting of rates of the taxes as well as the Basic Street Rates (BSR). There was also a proposal for adoption of a slab system. The Committee's report has been accepted by the State in passing the impugned G.O. The G.O. was gazetted on 11.04.2022 and a Notification issued for implementation of general revision of property tax within the limits of Greater Chennai and Coimbatore Corporations, with effect from the current year, i.e., with effect from the first half of 2022-23. 7. The Notification had been published on 12.04.2022 (Chennai) and 13.04.2022 (Coimbatore) in both English and vernacular newspapers as per Section 98A of the 1919 Act and there was a call for objections, to be addressed to the Principal Secretary/Commissioner, of the Corporations, within 30 days from date of publication of the Notification. The Notification stated that upon expiry of the 30 day period, objections shall be considered and a decision taken by the Council. This was followed by CR No.63 dated 30.05.2022 and CR No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the directions under the impugned G.O. constitute unlawful intervention in an otherwise occupied field. (iii) The intervention by the State is fatal to the impugned revision, seeing as the respective statutes do not, in any manner, envision a role for the State to play in matters relating to the determination of property tax. (iv) The 1919 and 1981 enactments provide for the regulation of all matters relating to the levy, assessment, collection and recovery of property tax as well as a framework of statutory remedies for those aggrieved by the orders/assessments. The Councils of the respective Corporations are the ultimate authorities in whom vests all power necessary for the levy of property tax and all matters connected and incidental thereto. The impugned enhancements however, have not emanated from the Council, but at the instance of the State, vide the impugned G.O. This constitutes a usurping of the power of the Council by the State and is an excess of authority in terms of Article 162 of the Constitution of India. (v) The provisions of the 1919 and 1981 Acts that touch upon the subject of taxation are Sections 98, 98A, 99 and 100, in the former, and Sections 117, 118, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... less certain statutory deductions. (xiii) The Annual Rental Value (ARV) is thus the basis of levy of property tax and evidently, such ARV shall be based only upon the computational methodology set out under the Tamil Nadu Buildings (Lease and Rent Control) Act 1960 (in short 'Rent Control Act') (xiv) The impugned G.O. and CRs refer, in vague terms, to Basic Street Rate (in short 'BSR'), which is a parameter entirely unknown to the tax paying public of Tamil Nadu. (xv) BSR, as a concept, was never the methodology for levy of tax, as in the past the assessment of property tax was consistently done on a case to case basis depending upon the returns filed by individual property owners. (xvi) Apart from being contrary to the methodology set out under the Statute, adoption of a general value, such as a uniform and standardised street rate for the purposes of assessment, would be incorrect insofar as all houses in the street would be grouped as one for the purposes of the rate and individual differences would be entirely lost sight of. (xvii) Therefore, as the basis upon which the street rates have been arrived at is a mystery, such an unknown and alien methodology cannot be sim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... peciality Hospitals India Pvt. Ltd. v. The Commissioner, Corporation of Chennai, Rippon Building, Chennai-600 003 and others (W.P.Nos.35304 of 2019 and batch dated 03.03.2021) (xii)Commissioner v. Griha Yajamanula Samkhya and Others [(2001) 5 SCC 651) (xiii)Raza Buland Sugar Co. Ltd. v. Municipal Board, Rampur (Civil Appeal No.23 of 1964, dated 30.10.1964) (xiv)Bangalore Woollen, Cotton and Silk Mills Co. Ltd., Bangalore v. Corporation of the City of Bangalore (Civil Appeals Nos.448 and 449 of 1957, dated 05.04.1961) (xv)The Berar Swadeshi Vanaspathi and Ors. v. The Municipal Committee, Shegaon and Ors. (Civil Appeal No.234 of 1959, dated 28.03.1961) (xvi)Municipal Board, Sitapur v. Prayag Narain Saigal and Ors. (Civil Appeal Nos.847-848 of 1966, dated 16.01.1969) (xvii)City Municipal Council, Mangalore and Ors. v. Frederick Pais and Ors. (Civil Appeal Nos.1302 to 1906 of 1968, dated 13.10.1969) (xviii)Kunnathat Thathunni Moopil Nair v. The State of Kerala and Ors. (Petitions Nos.13 to 24, 42 and 46 to 54 of 1958, dated 09.12.1960) (xix)Bharat Kala Bhandar Ltd. v. Municipal Committee,Dhamangaon (Civil Appeals Nos.600 and 679 of 1964, dated 26.03.1965) (xx)New Mane ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dologies adopted generally in assessing properties. While providing a historical background to the levy of the tax itself is well taken, I bear in mind that the State enactment is itself of 1919 vintage, going even further back than the dates of the publications cited. 17. Some judgements cited by Mr. T.V.Lakshmanan that I elaborate upon in the later part of this order also provide illuminating historical context to the levy of property tax over the Ages. The state enactment has complete clarity on the mode and methodology to be applied in the assessments of properties, which is the Annual Rental Value, and intervention is required in respect of the manner of implementation of the provisions. 18. The respondents submit that there are 200 wards in the Greater Chennai Corporation, including 93 areas annexed to the Greater Chennai Corporation in 2011 as well as those comprising the erstwhile Corporation of Chennai. There has been no revision in the rates of property tax since 1998 in respect of 107 wards of the Greater Chennai Corporation, and since 2008 in regard to 93 wards added later. 19. General revision of property tax was attempted in 01.04.2018 under G.O.No.73, Municipal Ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he yawning gap between the actual rentals in certain areas when compared with the rentals, as determined under the present impugned methodology, the former being substantially higher in several instances. Thus, the specific submission is that in standardising the methodology for computation of ARV, taxpayers will stand to gain, as the ARV determined will be far less than the rent realisations, if taken on actual basis. 25. The details of the properties as provided by the respondents, including full addresses and the rental values, are not extracted in this order in the interests of the privacy of the property owners. To be noted that there has been no rebuttal by the petitioners to the aforesaid statistics and area-wise rental values. 26. The State vehemently objects to the petitioner's submissions that Basic Street Rate was never part of property tax assessments in Tamil Nadu. The respondents were asked to place on record material to establish this submission, specifically, that a uniform and standardised rate of tax was the basis of taxation at any point in time, in the past. This is to test the rival submissions that BSR constituted a gross departure from the practice followed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bad formula was an acceptable formula that may be adopted in Tamil Nadu as well. Council Resolution bearing No.534/1977 19.06.1977 was passed to aforesaid effect. 33. While the details of the Council Resolution are unnecessary insofar as they go into the specifics of the various parameters to be adopted by the Corporations in determining annual value and gross annual rent, what impresses is that there has been application of mind to various relevant aspects, and an analysis and exchange of information between the States, at least the Southern States, such as Madras and Hyderabad as early as in 1977, to arrive at a method of assessment that would not just straddle, but also balance the interests of the people and the State. This is commendable. 34. The efforts to rationalize property tax assessment continued and G.O.Ms.No.11 dated 04.01.1983 considered a situation that 'rent' may be removed from the ambit of the enactment and that the mode of assessment may be shifted wholesale to a new basis, such as value of land, plinth area, location and usage after dividing the area into various zones and sub-zones. Following this methodology will obviate the necessity for arriving at a annua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fter the commencement of the Constitution. In fact, the Kerala Building Tax Act of 1951 did this exactly and was struck down on the ground that the various elements such as the character of the building, the place where it is situated, the cost of its construction and the period for which it will endure have not been taken into account. . . . . 37. Thereafter, G.O.Ms.No.1120 dated 23.11.1987 was issued considering an earlier ban imposed against the quinquennial revision of property tax in the Madras and Coimbatore Corporations. Under this Government Order, the ban was removed. In G.O.Ms.No.1178 dated 10.12.1987, Part I-A in the 1919 Act stood substituted in entirety to provide for the method of assessment of property tax. 38. In terms of this procedure, an assessee was to file a return of property tax within a specific time and if such a return was not filed, the Commissioner was entitled to authorize any person not below the rank of Bill Collector to enter upon, make the inspection of the assessable item, prepare the return and pass an order of assessment in compliance with the principles of natural justice. Part V provides for revision of assessment by a constitution of a Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... running to 11 pages, contains a location code, location name, rate per sq. ft. in paise and land value per ground in lakhs. 45. Proceedings bearing number 10784/1999 dated 02.12.2004 came to be passed referring specifically to BSR and the proceedings read thus: 46. In 1998-99, the revenue Department has embarked upon the massive project/exercise of compiling the rental rates per street and a tabulation of the rates arrived at qua each street is placed before the Court at page 95 of compilation dated 19.09.2022. 47. A Committee set up for that express purpose had selected two to four houses per street and arrived at the average/rate that would be treated as the base rate for that street. It is that rate that is being applied across the city of Chennai in assessments for the last more than three decades, according to the State. 48. To a pointed question as to whether assessment orders issued thus far had over the years contained any reference to BSR, the State has circulated assessment orders passed as early as in 1978, 1979 and 1980 that contain reference to BSR. 49. A consolidated report dated 19.09.2022 has been filed by the Corporation which sets out in extenso the measures ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on as well as in navigating the website of the Corporations. 56. The petitioners number 155 out of a tax base of approximately 13 lakh assessees. This Court was thus of the view that urgent and immediate measures must be taken by the authorities to enable those assessees who had chosen to comply and not challenge the demands, to so comply and remit the amounts. That apart, the grievances expressed by the petitioners was also legitimate. 57. The officials of the Greater Chennai Corporation, who were present at the hearing were directed to ensure that the website was made user-friendly and contained all necessary details to inform the assessees of the basis of assessment. At the hearing conducted on 02.09.2022, the Greater Chennai Corporation was directed to upload on the websites, the compendium of Basic Street Rates arrived at originally, accompanied by the revised factorial, in the interests of transparency and such that the assessees would be aware of the revision in the rates. 58. The officials of the City Corporation have, from time to time, accessed the website of the Chennai Corporation in Court for live demonstrations to update not just the Court but more importantly, all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .(Ms.No.228 dated 13.11.2008 iv) Circular bearing Na.Ka.No.34283/2008/B4, dated 10.07.2008 v)Circular No.70035/2005/R1 dated 11.03.2009 vi)Order dated 04.04.2016 passed in W.P.No.10514 of 2016 vii)Proceedings of the Commissioner, Coimbatore Corporation dated 02.06.2008 viii) G.O.(Ms.)No.110 dated 23.06.2008 64. The Coimbatore Corporation has not really established the application of BSR, over time. That said, there has been a great degree of opaqueness in the reach of the Notifications and Government Orders under which this methodology was promulgated at the relevant point in time, and this is on account of, in some measure, to the absence of robust methodologies for dissemination of information at the relevant point in time. 65. A perusal of the documents presented by the Chennai Corporation presented leaves me in no doubt that the respondents have arrived at BSR as early as in 1998 and applied the same in framing property tax assessments. True, they have not been consistent in the application of this methodology and where returns had been filed even earlier based on ARV computed on actuals on based upon the Rent Control Act, there is every possibility that such assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the website for the public. b. Facilitation arrangements to be made in Zonal Offices to address the queries of assessees with regard to revision of property tax. c. To submit documents regarding discussions held in GCC regarding implementation of General Revision. d. Evidences for streetwise Monthly Rental Value collected." 72. This would, the Court trusts, address the grievances of the petitioners in regard to the difficulties encountered in navigating the website, obtaining the basis of calculation and having the grievances addressed. The respondents are put to strict compliance of their undertaking before this Court and must ensure that future amendments, Notifications and Government Orders as and when they are passed, are updated on the website within 24 hours of such amendment/updation/GO having been issued. 73. All the issues raised and answered below turn on an interpretation of the provisions of Sections 98 to 100 of the Chennai City Municipal Corporation Act, 1919 coming under Part III (Taxation and Finance) and Chapter V (Taxation - Enumeration of taxes), that deal comprehensively with matters concerning tax, in one manner or the other, extracted below. The prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction of or a direction from the [State Government]. 99. Description and class of property tax.--- (1) If the council by a resolution determines that a property tax shall be levied, such tax shall be levied on all buildings and lands within the city save those exempted by under this Act or any other law. The property tax may comprise--- (a) a tax for general purposes; (b) a drainage tax for the purpose of defraying the expenses connected with the drainage system of the city ; (c) a lighting tax for the purpose of defraying the expenses connected with the lighting of the city: Provided that where the drainage tax is levied the council shall declare what proportion of the tax is levied in respect of drainage works and the proportion so declared shall also be specified in the notice published under sub-section (2) of section 98-A. (2) Save as otherwise provided in this Act, these taxes shall be levied at such percentages of the annual value of buildings and lands as may be fixed by the council: Provided that the aggregate of the percentage so fixed shall not, in the case of any land or building, be less that 151/2 per cent, or greater than [25] per cent of its annual val ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... value of the land, the present cost of erecting the building and the amount to be deducted for depreciation, shall be estimated or revised in any case or class to cases to which clause (a) of the first proviso to sub-section (2) applies, and they may, by such rules, restrict or modify the application of the provisions contained in Schedule IV to such case or class of cases]." 74. I now address the specific issues raised by the petitioners. I The trigger for the enhancement is itself misconceived. 75. Petitioners argue that the recommendations of the Central Finance Commission do not bind the State Governments. In the present case, the impugned GO and CRs make it apparent that it is, in fact, the Central Finance Commission recommendations that form the basis of the present enhancement. In such circumstances, the very basis of the enhancement, according to the petitioners, is misconceived and militates against the constitutional scheme. 76. Article 280 reads thus: 280. Finance Commission (1) The President shall, within two years from the commencement of this Constitution and thereafter at the expiration of every fifth year or at such earlier time as the President considers n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns as well as because of vested interests, property tax yields remain negligible in India. We recommend that to qualify for any grants for urban local bodies in 2021-22, States will have to 8 appropriately notify floor rates and thereafter show consistent improvement in collection in tandem with the growth rate of State's own GSDP." 7.98 This condition in the report for 2020-21 shall continue to be applicable as an entry level condition for all the urban local bodies for availing the grants. Further, this condition is over and above the requirement of timely online availability in the public domain of both unaudited accounts for the previous year and audited annual accounts for the year before previous. In a democratic system, proximity of the elected representative to the tax payer often reduces the willingness to mobilise revenues. Moreover, somewhat curiously, some States have ceilings on property tax rates in urban areas, which militates against the entire principle of decentralisation and devolution of finances and functions to local governments. Instead, the provision of a statutory floor to the property tax rate will help promote the buoyancy of such tax revenues and f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upreme Court discussed in detail the constitutional architecture behind the levy of Goods and Services Tax. In dealing with the contextual meaning of the term 'recommendation', such recommendations have been categorised as five in number, Category No.1: Recommendation by the President prior to laying before the Parliament for voting, Category 2: Recommendation followed by consultation; Category 3: Recommendation with accountability; Category 4:Non-qualifying recommendation and Category 5: Recommendations which are obligatory in nature. 80. The Bench then went on to discuss the category under which the recommendations of the GST Council would fall. In the present case, the recommendations leading to the passing of the impugned CR and GO are of an advisory nature, though the States would be expected to address the issues raised with the seriousness that such issues deserve. 81. The recommendations refer to the falling collections from taxes and urge all States to address this failure and do the needful to ensure that the levy and collections of property tax are optimised. It is in the best interests of the economy that the State pay heed to such recommendations as they are made in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ard to the subject under consideration, being levy and assessment of property tax. The impugned G.O., is not an exercise of authority under Article 162, and to make this abundantly clear, the concluding paragraph of the G.O., uses the word 'advise' not 'direct'. Thus the impugned G.O. is merely an advisory and purports to be nothing further. 86. The decision in the case of S.Arunachalam (supra) challenging G.O.Ms.No.542, Local Administration and Water Supply Department, dated 29.04.1986 is to the effect that Executive power under Article 162 of the Constitution of India is unavailable in respect of a subject matter which is covered by other legislation. In other words, there could be no interference by the Executive in an occupied field. 87. The Hon'ble Supreme Court in Ram Jaaway V. State of Punjab (AIR 1955 SC 549) and B.N.Nagarajan V. State of Mysore (AIR 1966 SC 1942) as well as of this Court in V.Chandra V. Government of Tamil Nadu and others (ILR 1996 (1) Mad.1007), reiterate the settled position that the Executive cannot intervene in a subject matter which is covered by an enactment, being an occupied field. 88. The petitioners have referred to the judgement in the case o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncil dated 26.05.2022. 92. The trajectory of events are, in my view, acceptable and indicate application of mind by the Corporations. Undoubtedly, the events have been spearheaded by the Union, specifically the Central Finance Commission and consequently the State. However, the ultimate decision has been taken by the authorities of the Corporations. 93. In K.Lakshminarayanan and others (supra), this Court dismissing the Writ Petitions filed by those petitioners questioning the nominations made by the Central Government under Section 3(3) of the Government of Union Territories Act, 1963, refers to the division of Legislative and Executive authority and the Constituent Assembly debates on 'discretion', in the context of centralisation that must vest in the Union. 94. Reference is made to the judgment of State of Rajasthan V. Union of India ((1977) 3 SCC 592) quoting Dr.Ambedkar on the federal nature of our Constitution and clarifying that the Constitution could well be moulded to be either unitary or federal per the requirement of time and circumstances. 95. No doubt, the impugned GO, CR and Notification do make reference to the recommendations of the Central Finance Commission. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the respondents, there would have been no necessity for the present Writ Petitions, since complete clarity could be provided by the Corporations even at that stage. 102. It pains the Court to state that the objections have been disposed frivolously without accordance of any weightage to the queries raised. All the queries pertain to issues that have been agitated in these Writ Petitions, being the basis of enhancement and the procedure to be followed in the levy and collection of taxes. It is incumbent upon the authorities to have provided due explanation to these queries and this Court deprecates the casual, careless manner and mechanical fashion in which the objections have been disposed. 103. Furthermore, I find it inconceivable that there have been only 30 objections received from out of a tax payer base running to lakhs and it is thus quite evident that the only reason for this cold response is the lack of publicity that was accorded to the enhancement in the first place. 104. The Corporations have not thought it fit to inform the tax payers sufficiently in advance, or in a proper manner about the proposals and how it intends to implement the same and this is very remiss on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... buildings of the nature referred to in the proviso would constitute special type of buildings. The petitioners in W.P.Nos. 19914, 30863, 31188, 31190, 29247, 28654, 28660, 28663, 28037, 29896, 31774, 32208 and 32211 of 2022 comprise assessees of special buildings. Though, in the regime of taxation hitherto followed, the basis of taxation of special assessees was different, all the counters filed by the respondents are in general terms and no counters have been specifically filed in these Writ Petitions. No specific submissions have been made in regard to these buildings, even by these petitioners. 111. Thus, while this order encompasses and covers the assessees who own special types of buildings, these petitioners/respondents are at liberty to bring to the notice of this Court any variance in the position relating to taxability of their properties, in which case, the Court will consider if amendments are required to be made to this order and directions issued accordingly. 112. Section 99(2) states that tax would be levied at such percentages of annual value of the buildings and lands as may be fixed by the Council which, as per proviso, cannot be less than 15% or greater than 25% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 100, that the basis was quite correct and should not be interfered with. A specific contention was also raised by the petitioner therein that the annual value of the buildings can only be arrived at with reference to the provisions of the Rent Control Act. 118. At this juncture, the petitioners would draw heed of this Court to the fact that the Rent Control Act has been repealed with effect from 22.02.2019 but would still urge that the principles of determination of fair rent under that Act could continue to be applied for other purposes including assessment of property tax. 119. The respondents in that case, as in the matters before me, argued that it was not mandatory that only the Rent Control Act should be applied and that fair rent could be determined by any number of procedures/methodologies. In fact, they went so far as to say that applying the Rent Control Act would distort the scheme of property tax under the 1919 Act in the following terms, captured at paragraphs 7 and part of 8 of the judgment: '7. Dealing with the petitioner's contention that the annual value of a building can only be arrived at with reference to the provisions of the Rent Control Act, dealing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he plinth area basis could be adopted for determining the annual value of buildings? 2. Whether the second respondent has adopted the plinth area basis in making the general revision of assessments? 3. Whether the fair rent formula is to be uniformly applied by the second respondent in determining the annual value of all buildings in the City as urged by the petitioner? 4. Whether the reason as to why and how the revision of assessments has taken place in a particular case should be set out in the notices issued under rules 2-B, 3 and 3-A of schedule IV to the Madras City Municipal Corporation Act, 1919 ?' 121. The first question was answered in favour of the petitioner stating that property tax cannot be levied on plinth area basis. The second related to whether the plinth area basis had, in fact, been applied in effecting general revision, which, on the facts presented by those respondents, the Court declined to answer. They also recorded the submission of the learned Advocate General that in any given case, if it were shown that plinth area was adopted as the basis, those assessments would not be pursued. 122. While dealing with the 3rd and 4th issues, which is, as to wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sent case, there is no doubt that the respondents have complied with the procedure for enhancement, though as noted in the paragraphs above, the entirety of the procedure followed appears to be rather farcical. However, there is no dispute on the position that the impugned/offending orders have been placed in public domain and objections called for and disposed. Thus the ratio of this judgment is of no avail to the petitioners. 129. In Bangalore Woollen, Cotton and Silk Mills Co. Ltd. that turns on a challenge to the constitutionality of Octroi duty on cotton and wool in terms of Section 98 of the City of Bangalore Municipal Corporation Act, 1949, one of the questions raised is as to whether the failure to notify the final resolution of the imposition of tax in the Government Gazette is fatal to the tax. In the present case, I have held that there is no failure procedurally, as the respondents have followed the process set out under the Acts. 130. In Patel Gordhandas Hargovindas (supra), a Constitutional Bench of the Hon'ble Supreme Court considered an appeal on certificate granted by the Bombay High Court challenging imposition of a rate by the Municipal Commissioner, Ahmedabad, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... distinguished with the capital value of land and building. Thus, the basis was clearly, 'letting value' and not 'capital value'. 133. In 1869, the Valuation (Metropolis) Act came to be passed levying tax on the rateable value which meant gross value less deductions. 'Gross value' mean the 'annual rent' which a tenant might reasonably be expected to pay. The Rating and Valuation Act, 1925 codified the enactments thus far, providing for uniformity and proper methodology in the levy and collection of property tax. 134. At paragraph 14, the three methodologies commonly adopted for determining rateable value are stated to be i) the actual rent, where the land or building was actually let, ii) hypothetical rent where one would assume a hypothetical figure in situations such as the owner and occupier being one and the same and based on other comparable properties and based on the rent fetched by comparable properties and iii) on capital value of the premises, being contractor's method or contractor's test to determine the structural value of the property. 135. One hardly needs to refer to method (iii), since the 1919 Act clearly provides for Annual Rental Value (ARV) to be the basi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y considered view, this is a step forward in the right direction. In the event of a dispute, statutory revision/appeal remedies are always available. 142. In Nagar Panchayat, Kurwai (supra), the challenge was to a fee levied for parking of motors, trucks and buses in the bus stand, owned and maintained by the Nagar Panchayat. The challenge was repelled, the Court reiterating recourse to statutory remedial measures, if the demand by the Panchayat was exorbitant, unreasonable or without any quid pro quo. In the present scenario as well, there are several statutory remedies available for challenging demands, if they are found to be either arbitrary or if the basis of assessment, is misapplied. 143. Finally, there are three recent judgments of the Hon'ble Supreme Court that, in my view, would be relevant in the context of the issue now before me. In New Delhi Municipal Council and others (supra) the challenge was to a decision of the Delhi High Court relating to the constitutional validity of the NDMC (Determination of Annual Rent) Bye-laws, 2009. 144. Vide these bye-laws, there had been a change introduced in the earlier regime of determining rateable value for the purpose of levyi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, ultra vires the provisions of the NDMC Act. They are in excess of the scope and ambit of powers vested in the NDMC Act under Section 388(1)(A)(9) of the NDMC Act." 150. In Municipal Corporation of Delhi (supra) the Hon'ble Supreme Court considered the question as to whether after the 1988 amendment to the Delhi Rent Control Act, such enactment did not apply to a particular property either for the reason that the rent fixed was more than Rs.3,500/- per month, or the property had been newly constructed and exempt from the provisions of the Act for a period of 10 years. Three separate and distinct groups of cases dealing with municipal property tax legislation were set out as having been dealt with by the Hon'ble Supreme Court over the years. 151. The three groups as demarcated by the Court and the conclusions in each situation are extracted below: 8. This Court has dealt with three different groups of cases that have come before it dealing with property tax legislation in the various States of this country. The first group is a group of cases where the Municipal Acts of the States define annual value to be the hypothetical rent that a landlord could reasonably be expected to r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion or restriction placed, upon the specific methodology for determination of ARV. Evidently, and this is in the interests of the petitioners as well as the respondents, the most scientific and practical methodology must be applied, of which two are fixation of rent under the Rent Control Act and based upon the BSR. 153. In Griha Yajamanjula Samkhya (supra), three Judges of the Hon'ble Supreme Court decided the controversy relating to the extent of powers of the Commissioner in assessment of property tax of buildings located in the State of Andhra Pradesh. Though this judgment settles the powers of the Commissioner, inter alia, the Court has spoken on the criteria for determination for levy of property tax as well. 154. The provisions of the Hyderabad Municipal Corporations Act, 1955 and the relevant rules in the Hyderabad Municipal Corporations (Assessment of Property Tax) Rules, 1990 provided that tax shall be levied at such percentages of rateable value as may be fixed by the Commissioner. It also provided for the method and manner of determination of such rateable value which is the annual rental value of the property. 155. Thus, there was a complete scheme of assessment of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Lokmanya Mills Barsi Ltd., the challenge was to Rule 2-C framed by the Barsi Borough Municipality in terms of the Bombay Municipal Boroughs Act, 1925. There was a resolution passed by the Municipality in 1944 to enhance the levy of tax on the assessment of lands and buildings. The rental value was fixed at Rs.40/- for every 100 sq. ft. and after following the process of calling for objections and obtaining of necessary approvals, the Rules were made operative from 01.04.1947. 159. The question that fell for determination was as to whether the impugned Rule which entitled the Municipality to collect tax after computation of annual letting value solely on the area of the factory and buildings was correct. The expression 'annual letting value' was defined in Section 3(1) of the Act as meaning annual rent for which any building or land, exclusive of furniture or machinery contained therein, might reasonably be expected to let from year to year. 160. This was to include all payments made or agreed to be made by a tenant to the owner on account of the occupation, taxes, insurance or other charges that were incidental to his tenancy. Prior to 1947, tax had been levied, both in respect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... odology as applied must be one which is normally accepted as being a reasonably accurate method for determination of annual value and must not present difficulties in the mode of computation involved. (iv) Any change in methodology, assuming that the governing enactment provides for the same, must be carried out in strict compliance with the statutory provisions and in compliance with the principles of natural justice. In the present case, the respondents have applied BSR in property tax assessments since 1998 and hence such a situation, of change in methodology, does not arise. 166. The efforts of the respondents in presenting an overall and continuous history of the levy of property tax over the last several decades has been illustrative and informative. Substantial materials have been placed before me by the State to show that this change in methodology has been accompanied by application of mind and scientific study. 167. Over and above this, I am also convinced that the adoption of BSR is acceptable, from a common sense approach as well. With the large scale expansion of Corporation limits as well as the manifold explosion in the number of properties, assessment on a prope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ument does not appeal as every State/UT is at liberty to design the levy of tax to suit its tax base, and in the best manner that it conceives. 176. The petitioners, who have challenged this particular aspect of the matter, would argue that have been discriminated against, merely for ownership of a larger property. Ownership of properties that are larger in dimensions is not a sin and the slab imposed is punitive in nature. Moreover, they argue that there is no basis for the slabs imposed. 177. In my considered view, there is no merit in the aforesaid submissions. Evidently, and as the respondents have also pointed out, the fixation of slabs is intended as a benefit extended to owners of properties graded on the basis of size. The factorial for properties admeasuring less than 600 sq. ft., has been enhanced from 1.25 to 1.50, for properties between 601 to 1200 from 1.50 to 1.75, for properties between 1201 to 1800 the factorial stands enhanced from 1.75 to 2.00. In all situations, there is an enhancement of .5 percentage of the rate previously applicable. Properties admeasuring above 1801 sq. ft. stands enhanced to 2.00 from 1.50 as it was previously. 178. The respondents projec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a challenge to a G.O. and CR that have far reaching public consequences. Conclusion 186. In conclusion, i) The amendments by way of impugned Government Order in G.O.Ms.No.53 dated 30.03.2022, Gazette Notification dated 11.04.2022 and Council Resolution (CR) Nos.63 of 2022 dated 30.05.2022 (Chennai) and 94 dated 26.05.2022 (Coimbatore) stand confirmed and challenges to the same are dismissed. ii) Property tax General Revision Notices for the period 2022-23 (II), i.e., second half onwards are set aside. The petitioners have been enjoying the benefit of interim protection till date. More importantly, seeing as clarity in regard to the entire process has been obtained only pending Writ Petitions, this Court directs that qua the Writ Petitioners, the amendments will be operative on and from the first half of 2023-24, i.e., 01.04.2023 onwards. The challenge to the property tax demands as aforesaid is accepted. However, pending Writ Petitions, if the petitioners have settled the amounts to be paid, they shall continue to do so in line with the amendments that have now been upheld. iii) The Corporations will ensure that the websites are kept robust and grievance mechanisms are put ..... X X X X Extracts X X X X X X X X Extracts X X X X
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