Supreme Court of India
INDIA AUTOMOBILES (1960) LTD.versusCALCUTTA MUNICIPAL CORPORATION AND ANR.
- Citation
- 2002 INSC 76
- Decided
- 13 February 2002
- Disposal
- Disposed off
- Bench
- G B PATTANAIK
Holding
Under Section 174 of the Calcutta Municipal Corporation Act, 1980, the annual value may be determined by considering the actual rent received by the owner, the standard rent fixed under Rent Control Acts, and the rent received by the tenant from sub‑tenants, and the non‑obstante clause does not bar such considerations.
Summary
India Automobiles (1960) Ltd., the owner of a nine‑storey commercial building, leased the premises to a tenant who sub‑let parts of it. The Calcutta Municipal Corporation fixed the annual value of the property under Section 174 of the Calcutta Municipal Corporation Act, 1980, by taking into account the rent paid by the sub‑tenants, whereas the Municipal Assessment Tribunal had fixed the value based only on the rent received by the owner. The High Court set aside the Tribunal’s order and directed it to consider the total rent received from sub‑tenants, prompting the owners to appeal. The Supreme Court examined whether the non‑obstante clause in Section 174 bars consideration of the Rent Acts and whether the rent received from sub‑tenants can be used in valuation. It held that the municipal authority may consider the actual rent received by the owner, the standard rent fixed under Rent Control Acts, and the rent received by the tenant from sub‑tenants, and that the non‑obstante clause does not preclude such considerations. The Court remanded the matter to the Tribunal to determine the annual value on these broader grounds, thereby dismissing the appeal.
Issues considered
- The effect of the non‑obstante clause in Section 174 of the Calcutta Municipal Corporation Act, 1980 on the applicability of the West Bengal Premises Tenancy Act, 1956 for determining annual value.
- Whether the rent received by a tenant from sub‑tenants may be taken into account in fixing the gross annual rent under Section 174.
- Whether the standard or fair rent fixed under Rent Control legislation must be accepted as the basis for annual valuation despite the non‑obstante clause.
- Whether the actual rent received by the owner alone is the sole criterion for determining the annual value of the property.
Legislation cited
- Bombay Rent, Hotel and Lodging House Rates Control Act, 1947s. 11
- Calcutta Municipal Corporation Act, 1951s. 168
- Calcutta Municipal Corporation Act, 1980s. 170, s. 174, s. 180, s. 181, s. 186, s. 188, s. 189, s. 193, s. 194
- Delhi Rent Control Act, 1958s. 2(k), s. 4, s. 5, s. 6, s. 9
- Madhya Pradesh Municipal Corporation Act, 1956s. 138
- West Bengal Premises Tenancy Act, 1956
Subjects
property taxmunicipal valuationannual valuenon‑obstante clauserent controlstandard rentsub‑lettingCalcutta Municipal Corporation ActSection 174reasonableness
Judgment
INDIA AUTOMOBILES (1960) LTD. A
v.
CALCUTTA MUNICIPAL CORPORATION AND ANR.
FEBRUARY 13, 2002
[G.B. PATTANAIK, R.P. SETHI AND B
BlSHESHWAR PRASAD SINGH, JJ.]
>· Calcutta Municipal Corporation Act, 1980:
Section 174-Land or building-Annual Valuation-Determination of- C
Basis-Gross annual rent actually paid by tenant or rent paid by sub-tenants
to tenants-Held, the basis of annual valuation is the standard rent where the
Rent Control Act is applicable· -In all other cases the basis ofannual valuation
is the actual rent received by the owner, the hypothetical standard rent, the
rent being received by tenant from his sub-tenant and the prevalent rate of
rent in the vicinity of the property being assessed-Where standard or fair
rent has been f1JCed the municipal authorities should generally accept the same
as the basis of valuation notwithstanding the non-applicability of the Rent
Acts.
Words and Phrases:
"Reasonably"--Meaninf( of-In the context ofs.174(1) of the Calcutta
Municipal Corporation Act, 1980.
The appellant leased out the suit property to its tenant and the
respondent-Corporation fixed the annual value of the suit property under
. Section 174 of the Calcutta Municipal Corporation Act, 1980 by taking in to
consideration the rent paid by the sub-tenants to the tenant But the Municipal
Assessment Tribunal fixed the annual value of the suit property on the basis
of the rent actually received by the Appellant-owner from its tenant However,
the High Court held that the annual valuation would be fixfd notwithstanding
anything contained in the West Bengal Premises Rent Control Act, 1956 and
set aside the order of the Tribunal and directed it to hear the appeal on merits
keeping the mind the total amount paid by the sub-tenants to the tenant of
the appellant. Hence this appeal.
On behalf of the appellant it was contended that while assessing the value
961
962 SUPREME COURT REPORTS [2002] I S.C R.
A of the suit property the amount taken by the tenant from a sub-tenant could
not be taken into consideration and that the valuatioro had to be based on the
basis of the actual rent received by the appellant from its tenant.
Disposing of the appeal, the Court
B HELD : 1.1. In cases where the municipal laws exclude the applicability
of the Rent Acts by incorporating non-obstante clause in the taxing statute,
the powers of the authorities under the Municipal Acts are not circumscribed
s
by the limits indicated in Padma Debis case. i.e. the criterion for fixing the
annual value was the rent realisable by the landlord and not the value of the
C holding in the hands of the tenant and the value of the property to the owner ~
was the standard rent in making the assessment. 1984-H)
Corporation of Calculla v. Smt. Padma Debi. 11962) 3 SCR 49, referred
to.
1.2. In cases where the fair rent payable by the tenant has been
D determined and there is no justification for refusing to accept that fair rent
as the rental value of the premises, the municipal authorities should generally
accept the standard rent fixed, notwithstanding the non-applicability of the
Rent Act because such a view would be a reasonable guideline to determine
the rate of rent at which such land or building might, at the time ofassessmcnt,
E be reasonably expected to be let from year to year. The rent which the tenant
is receiving from his sub-tenant is also an important statutory consideration
for determining the rent at the time of asst.-ssment to which the property might
reasonably be expected to be let from year from year to year. Such a
consideration is also justifitd on the principle' of reasonableness. (985-A-BI '
F 1.3. It is not possible to agree that in all cases, nomithstanding the non-
obstante clause, t:1e annual rental ~alue cannot be fixed bc:yond the standard
rent determined or determinable under the Rent statute. It is also difficult to
hold that in all cases the rent actually paid by the sub-tenant to the tenant be
taken as a sole criterion for detet mining the annual value on the assumption
G that such land or building might, at the time of assessment, is reasom•bly
expected to get the 11foresaid amount of rent if let f, om year to )'ear. The
argument that the rent actually rel.uved h tlw ""'n" '~101Jld u!ways be
deemed to be reasonable rent in the al>sc•1n of 1.-auu, _.,u11,m11 , 11d other
extraneous considerations is too v:eneral ar>rl ~ bn•'.ld pn-.p<'">ilh.1 of I.. · 1 \\ hich
cannot be accepted for the purpose' of :l"tcrm1rh1'! t'1~ ll'•oi:.I ,rive of the
H property for the purposes of Section J"l 4 <'l :he 1 'l«•ti.t vt"ninpal
!NOIA AC WMOB!Ll::S ( 1Y6Q) LTD. v CALCUTT A MUNICIPAL CORPN 963
Corporation Act, 1980. In the light of clear and unambiguous provisions of A
Section t 74 of the Act, it cannot be held that the amount realised by a tenant
-'). from a sub-tenant cannot at all be tak~n into consideration for the proposes
of determining the gross annual rent in the absence of extraneous
considerations. (985-C-El
2.1. Allowing the Municipal Corporations to assess the annual rateable B
value on the basis of the income of a tenant from the property would not be
grossly unfair and would not have the effect of rendering the rate provisions
of the Act unreasonable, arbitrary and unconstitutional. The Act itself has
•· taken care by making sufficient provision in Sections 193 and 194 regarding
the liability to pay the rent and apportionment of such liability when the C
premises are assessed, let or sub-let. On proof of creation of sub-tenancy, the
owners of the building may also be entitled to seek eviction of their tenants
under the relevant provisions of the Rent Acts applicable in the State where
the land or property is located. (985-F-G[
2.2. The Calcutta Municipal Corporation Act, 1980 requires the D
application of mind by the municipal authorities to determine the rents on
the basis of reasonableness by keeping into account all relevant circumstances
including the actual rent received by the owner, the hypothetical Standard
rent, the rent being received by the tenant from his sub-tenant and other
relevant consideration, such as prevalent rate of rent of lands and building
in the vicinity of the property being assessed. Only because the owner of the E
building is not getting tl>e same rent which the sub-tenant is paying to his
lessor, cannot be made a basis to deprive the Corporations from determining
the annual valuation and taxing the land or building on that basis. If such a
plea is accepted, it would be against the provisions of the statute which has
been enacted to provide civic services in the form of water, drainage, sewerage, F
collection, removal, and disposal of solid waste, fire prevention and fire safety
maintenance of street and public places, etc. in the Municipal area where such
land or building is situate. (986-B-C[
3. The basis for determination of annual rent value has to be the
standard rent where the Rent Control Act is applicable and in all other cases G
reasonable determination of such rent by the municipal authorities keeping
in view various factors as already indicated, including the rent which the
· tenant is getting from his sub-tenant. In appropriate cases the owner of the
property may be in a position to satisfy the authorities that the gross annual
rent of the building of which the annual valuation was being determined
cannot be more than the actual rent received by such owner from his tenant. H
964 SUPREME COURT REPORTS (2002) I S.C.R.
A The municipal authorities shall keep in mind the various pronouncements of
this Court, the statutory provisions made in the specified Municipal Acts, and
also keeping in mind the applicability or non-applicability of the Rent Act ~
and the peculiar circumstances of each case, to find out the gross annual rent
of the building including service charges, if any, at which such land or building ...
might, at the time of assessment, be reasonably expected to be let from year
B to year in terms of Section 174 of the Act [986-E-GI
Smt. Padma Debi v. Corporation ofCalcutta, (1962 [ 3 SCR 49; Corporation
ofCalcutta v. Life Insurance Corporation of India, (1970( 2 SCC 44; v. Guntur
Municipal Council v. Guntur Town Rate Payers' Association, (1971] 2 SCC 423;
c Municipal Corporation v. Smt. Ratnaprabha. ]1976] 4 SCC 622; Diwan Dau/at
Rai Kapoor v. New Delhi Municipal Committee, :1 1186! 1SCC685; BalbirSingh
~
v. MCD, (1985] l SCC 167; Srikant Kashinath J1tur1 v. Corporation of the City
of Belgaum, (1994]] 6 SCC 572; Indian Oil Corporation Ltd. v. Municipal
Corporation, (1995] 4 SCC 96; Asstt. General Manuger, Central Bank of India
v. Commissioner Municipal Corporation for the C11y ofAhmedabad, [1995] 4 SCC
D 696; Ea~t India Commercial Co. Pvt. Ltd v. Corporation of Calcutta, (1998] 4
SCC 368 and Government Servant Cooperative House Bui/din~ Society Ltd v.
Union of India. (1996] 6 SCC 381, referred to.
~
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 5109 of
2000.
E
From th~ Judgment and Order dated 4.1.2000 of the Kolkatta High
Court in C.O. No. 2468 of 1999.
Jaid.:ep uupta, Anil Agarwal and K.V. Vijaykumar fur the Appellant. .._
F Tapash C. Ray, Gaurav Jain and Abha Jain for the Respondents. '
The Judgm~nt of the Court was delivered by
SETHI, J. Aggrieved by the determination of annual valuation made
in terms of Section 174 of the Calcutta Municipal Corporation Act, 1980
G
(hereinafter called "the 1980 Act"), the appellant-owner of a nine storeyed
building, admittedly, used for commercial purposes, filed an appeal before ,,_
the Municipal Assessment Tribunal who vide its order dated 26th February,
1999 allowed the appeal and fixed the annual value on the basis of rent
actually received by the appellant-owner. Feeling aggrieved, the respondent-
H corporation approach.ct the High Court under Article 227 of the Constitution
INDIA AUTOMOBILES (1960) LTD. v. CALCUTTA MUNICIPAL CORPN. [SETHI, 1-] 965
of India who, vide the order impugned in this appeal, set aside the order of A
---+
the Tribunal and directed it to hear the appeals on merits keeping in mind
that total amount paid by the sub-tenants to the tenant of the appellant should
also be taken into consideration in assessing the annual valuation.
It is not disputed that the property in question was leased out by the
appellants to their tenant, named Banwarilal Pasari at a rental of Rs. 75,000 B
per month vide a duly executed lease deed (Annexure P-l). There is also no
dispute that the building is a nine storeyed building and is used for commercial
purposes. The respondent-Corporation carried out the general revision of the
annual valuation of the premises effective from fourth quarter of 1984-85
J_
and also for the period from fourth quarter of 1990-91. Proposed valuation C
was communicated to the owners vide two notices issued under the 1980 Act
directing them to attend the hearing before the Hearing Officer of the
Corporation on the date specified in the notice. The appellant submitted
objections to the notices and objected to the same challenging the proposed
valuation and the basis thereof. The Hearing Officer vide his two orders
dated 15.4.1996 fixed annual valuation from fourth quarter of 1984-85 at Rs. D
18,80,600 and from fourth quarter of 1990-91 at Rs. 21,63,560. The annual
valuation assessment was made under Section 174 of the l 980 Act by taking
into consideration the rent paid by the sub-tenants. The Municipal Assessment
Tribunal accepted the appeal of the owners by relying upon the judgment of
this Court in Corporation of Calcutta v. life Insurance Corporation of India, E
[1970] 2 SCC 44. Not satisfied with the judgment of the Tribunal, Municipal
Corporation moved the High Court by way of a petition under Article 227 of
the Constitution of India, which was allowed by setting aside the order of the
Tribunal vide judgment impugned in this appeal. The High Court held that
the aforesaid decision of this Court had no application to an assessment made
under Section 174 of the 1980 Act which was found to be materially different F
from Section 168 of the Calcutta Municipal Act, 1951 under which the
assessment had been made in life Insurance Corporation's case (supra). The
High Court further held that under 1951 Act the annual valuation in no case
could exceed the standard rent fixed by the West Bengal Premises Rent
Control (Temporary Provision) Act, 1950 but under the 1980 Act which had G
a non-obstante clause, the annual valuation can be fixed notwithstanding
anything contained in the_ West Bengal Tenancy Act, 1956 or any other law.
for the time being in force. It has been further held that under the 1980 Act,
the consolidated rate is primarily leviable, if the land and building is let upon
lessor and if the land and building is sub-let, still upon the superior lessor
under Section 193 of the Act, and for that reason Section 194 of the Act has H
966 SUPREME l Ol 'RT REl'OR l" 120021 1 S.C.R.
A conferred a nght upon the lessor, ksse~ o.r the sub· lesset to recover the
excess amount from their resp~ctive tenants for th~ \!xcess pavable by them
due to creation of tenancy or sub-tenancy. It was furtht:r held that the Municipal
Corporation is in no way bound by the fixation of standard rent or fair rent
by the Rent Controller and the rent realised by a tenant from the sub-tenant
B or by a sub-tenant from his tenant is required to be taken into consideration
and such amount to be treakd as gross rent of the land or building for .he
purposes of Section 174 of the I980 Act. Finding that the Appellate Tribunal
had acted illegally and with mater~al irregularity 'n holding that in assessing
annual valuation of the building the amount realist:d from the sub-tenants
cannot be taken into consideration, the matter was remanded to the Tribunal
C to hear the appeal afresh on merits and decide the , ."1e in the light of the
observations made by the High Court. Not satisfied v.n·· rhe Judgment of the
High Court, the owners of the building have preferred t~ is appeal. When this
appeal was listed in the Court on 10th November, 2001, tti~ Judges constituting
the Bench kit that following observations of this Court in the case of LIC
required reconsideration:
D
"But under the Act the qudntum of the consolidated rate depends
upon the dnnual value of land or building on !he gross rent for v.hich
the land or buildmg might reasonably be expected 'o kt Jnd not the
gro;s rent at which the ,;ubordinak intere~t of a tenant may be expected
to sublet"
E
The Bench directed the Registry to !'!ace the matter before the Hon 'ble Ch id
Justice for 'isting this matter be•or<: a Be'\Ch ;if thrt:~ Judves. In such
circumstances this appeal has com<: bdore us.
It is contended on behalf of the appellant that the ,rder passed by the
F Municipal Assessment Tribunal was strictly according to law and did not '
suffer from any infirmity with which the High Court could have interfered.
It is submitted that while assessing the valuation of the property, the amount
taken by the tenant from a ;;ub-knant cannot be tdken into con,ideration in
view of the judgment of this Court in LIC's case (supra). According to the
G appellant, the annual value of the land and building has to be deemed to be
gross annual rent including service charges as conkmplated under Section
174 of the 1<l80 Act which does not include the rent received by a tenant
from the sub-tenant According to the appellant annual value has to be
determined on the basis of the actual rent received by the owner unless it is
established that such rent is not bonafide paid and that the same is shown
H fraudulentlv only for the purposes of depriving the authorities from assessing
INDIA Al' rDMOB!LES (I %0) LTD." CALCUTTA MUNICIPAL CORPN. [SETHI,J.] 967
the annual r<'ntal value. It is argued on behalf of the appellant that despite the A
chan~es made in the 1980 Act, the law laid down in Padma Debi's case is
still valid for the purpose of determining the gross annual rent of a building
under the Calcutta Municipal Corporation Act. As in the present case the
...... assessment made by the Tribunal proceeds on the basis of the actual rent
received by the appellant and in the absence of any allegations of extraneous B
circumstances, the order of the Tribunal has to be upheld by setting aside the
impugm;d judgment. It is also stated that in the present case there is no
difference between the standard rent and the actual rent realized by the landlord
from the tenant because of application of Section 2 and Section 9 of the West
Bengal Premises Tenancy Act. The issue as to whether the standard rent is
the upper limit of the reasonable rent does not fall for decision, under the C
circumstances of the present case.
It is contended on behalf of the respondent-Corporation that the High
Court has correctly interpreted Section 174 of 1980 Act which is in accordance
- with the various judgments of this Court. It is submitted that in The
Corporation of Calcutta v. Sm/. Padma Debi and Ors.. [ 1962] 3 SCR 49, this
Court had divid.:d the municipal laws into two distinct groups. One such
D
group, referred to municipal laws of certain States which did not expressly
exclude application vf Rent Restriction Acts in the matter of determination
of annual value of a building for the purposes of levying property taxes and
the oth.:r group of 'uch municipal laws which expressly exclude application E
of Rent Restriction Acts in the matter of such determination. It is submitted
that unlike l'akutta Municipal Act, 1923 and Calcutta Municipal Act, 1951,
the new 1980 A~t contains specific provision in Section 174 providing a non
D
obstante clause specifically excluding the operation and effect of the West
Bengal Premises Tenancy Act, 1956 and &ny such other law in force, which
would fall :n the second group of cases as referred to in Padma Debi's case F
(supra). To appreciate the rival contentions of the parties, it is necessary to
make reference to some statutory provisions relevant for the purposes of
re>olving the controversy. The 1980 Act was enacted to amend and consolidate
the law relating to the municipal affairs of Calcutta. Chapter XII deals with
the power of taxation at consolidated rates. Section 170 authorises the G
Corporation to levy certain taxes enumerated therein. Section 174, dealing
with the determination of annual valuation of the property within the municipal
corporation provides:
"174. Determination of annual valutation - (I) Notwithstanding
anything contained in the West Bengal premises Tenancy Act, 1956 H
-
968 SUPREME COURT REPORTS [2002] I S.C.R.
A or in any other law for the time being in force, for the purpose of
assessment to the consolidated rate, the annual value of any land or
B
building shall be deemed to be •he gross annual rent including service
charges, if any, at which such land or building might at the time of
assessment be reasonably expected to let from year to year, less an
allowance of ten per cent, for the cost of repairs and other expenses
necessary to maintain such land or building in a state to command
-
such gross rent:
Provided that where there is a transfer, inter vivas, of ownership of
any land or building since the last preceding periodical assessment
c under Section 179, the annual value of such land or building shall be
fixed at seven and a half per cent of the amount stated in the deed
of transfer as consideration for such transfer or, if no consideration
is stated in such deed of transfer, at seven and a half per cent of the
-
estimated market value thereof:
D Provided further that while determining the annual value in the case
of any land or building or portion thereof exclusively used by the
owner for his residential purpose, the gross annual rent of such land
or building or portion, as the case may be, shall be reduced, -
(a) where the gross annual rent does not exceed six hundred rupees,
E by thirty per cent;
(b) where the gross annual rent exceeds six hundred rupees but does
not exceed eighteen thousand rupees, by such percentage of the
gross annual rent as is worked out by dividing the gross annual
rent by six hundred and subtracting the quotient from thirty-one,
F the difference being rounded off to the nearest place of decimal:
Provided also that no such reduction in gross annual rent shall be
made-
(a) in case. the total covered area in any land or building under
occupation for residential purpose by the owner exceeds one
G hundred and fifty square metres, or
(b) where a person owns or occupies for residential purposes more
than one plot of land or building or portions thereof within the
municipal limit of Calcutta.
H (2) The annual value of any land which is not built upon shall be
INDIA AUTOMOBILES (1960) LTD. v. CALCUTTA MUNICIPAL CORPN. [SETHI, J] 969
fixed at seven per cent of the estimated market value of the land. A
-~
(3 )If the gross annual rent of any class or classes of land or buildings
used exclusively for hospital or educational purposes or for the
purposes of sports or as a place of worship or as a place for disposal
,
of the dead cannot be easily estimated, the gross annual rent of such
building shall be deemed to be five per cent of the value of the B
building obtained by adding the estimated cost of erecting the building
at the time of assessment less a reasonable amount to be deducted on
account of depreciation, if any, to the estimated present market value
of the land valued with the building as part of the same premises.
• (4) In the case of any land or building or part thereof used for public c
cinema shows or theatrical performances or as a place of similar
public recreation, amusement or entertainment, the gross annual rent
of such land or building or part thereof, as the case may be, shall be
deemed to be seven and a half per cent of the gross annual receipts
-- in respect of such cinema shows or theatrical performances or place
of public recreation, amusement or entertainment, including receipts
D
~ from rent and advertisements and sale of admission tickets but
excluding taxes on the same of such tickets:
Provided that the provisions of this sub-section shall not apply in the
case of temporary fairs, circuses, and casual shows or performances.
E
(4A) If the gross annual rent of any land or building or part thereof
cannot be easily estimated, the gross annual rent of such land or
building for the purposes of sub-section (I) shall be deemed to be
• seven and half per cent of the value of the building obtained by
adding the estimated present cost of erecting the building at the time
I F
of assessment less a reasonable amount to be deducted on account of
depreciation, if any, to the estimated present market value of the
land:
Provided that the estimated present cost shall not include the cost of
any plant or machinery, excepting those enumerated in Schedule VIII, on the G
land or the building as aforesaid.
(5) The annual value as determined under this Chapter shall be rounded
off to the nearest ten rupees."
Section 180 deals with the revision of assessment and Section 181 provides H
970 SUPREME l'OIJRT REPOR1S (2002] 1 S.C.R.
A for settlement of returns and inspection of '.ands and buildings for the purposes
of assessment. Section 186 provides that subject to provisions of Section 181
or Section 182 any objection to the annuai v-.iue of the land and building as
entered in the assessment list shall be made by the owner or the person liable
to pay the consolidated rate, in writing, to the Municipal Commissioner before
B the date fixed in the notice under Section 194 or Section 195 and shall state
in what respect the annual value is disputed. Section 188 deals with the
hearing of objections and Section 189 provides an appeal before the Municipal
Assessment Tribunal. Section 193 catalogues the incidence of consolidated
rate on lands and buildings and provides:
C "193(1) The consolidated rate on lands and buildings shall be primarily
leviable. -
(a) if the land or building is let, upon the lessor;
(b) if th.: land or building is sublet, upon the superior lessor;
D (c) if the land and building is unlet, upon the person in whom the
right to 1et such land or building vests.
t2) The consolidated rate on any land or buildin!,,. which is the property
of the C-orporation and the possession of which has been delivered
E under any agreement or licensing arrangement, shall be leviable upon
the transfen:.e or the licensee as the case may be.
(3) rhe liability of the se\.:ral owners of any land or building
constituting a single unit of assessment, which is of purports to be
severall} owned in part or flats or rooms, for payment of consolidated •
F rates or any mstalment thereof payable during the period of such
ownership shall be joint and several:
Provided that the Municipal Commissioner may apportion the amount
of consolidated rate on which land or building among the co-owners.
G (4) Notwithstanding the vesting of any land in the State under the
Calcutta Thika Tenancy (Acquisition and Regulation) Act, 1981, in
the case of any land comprised in a thika tenancy, the consolidated
rate assessed in respect of such land and any hut or builping made
thi:reon shall be primarily leviable upon then thika tenant.
H Section I 94 provides:
INDIA AUTOMOBILES ( 1960) LTD. v. CALCUTTA MUNICIPAL CORPN. [>ETH!, J] 971
"194. Apportionment of liability for consolidated rate on land or A
building when the premises assessed are Jet or sublet · · · (I) If the
annual valuation of any land or building exceeds the amount calculated
on the basis of the rent of such land or building payable to the person
upon whom the consolidated rate on such land or building is leviable
under Section I 93, such person shall be entitled to receive from his B
tenant and difference between the amount of the consolidated rate on
such land or building and the amount which would be leviable ifthe
consolidated rate on such land or building were calculated on the
basis of the rent payable to him.
(2) If the annual valuation of any land or building which is sublet C
exceeds the amount calculated on the basis of rent of such land or
building payable to the tenant by his sub-tenant or to the sub-tenant
by the person holding under him, the tenant or the sub-tenant shall be
entitled to receive from his sub-tenant or the person holding under
him, as the case may be, the difference between any·sum :-ecovered
under this Act from such tenant or sub-tenant and the amount of D
consolidated rate on such land or building which would be leviable
if the annual valuation of such land or building were calculated on
the basis of rent payable to the tenant by him sub-tenant or the sub-
tenant by the person holding under him,"
It may be noticed at this stage that bdore the incorporation af Section E
174 of 1980 Act, Section 168 of the Calcutta Municipal Act, 1951 dealt with
the assessment of lands and huildings to the consolidated rate. Sub-section
(1) of Section 168 provided:
"168 (I) For the purposes of ass~>sment to the consolidated rate the F
dnnual value of any land or building shall be deemtd to be the gross
annual rent at which the land or building might at the time of
assessment be reasonably expected to let from year to year, less, in
the case of a building, an allowance of ten per cent for the cost of
repairs and for all other expenses necessary to maintain the building
in a state to command such gross rent: G
Provided that in respect of any land or building the rent of which has
been fixed under the provisions of West Bengal Premises Rent Control
(Temporary Provisions) Act, I 950 or the West Bengal Premises
Tenancy Act, 1956, the annual value thereof shall not exceed the
annual amount of the rent so fixed." H
972 SUPREME COURT REPORTS [2002) I S.C.R.
.A '
Similarly, Section 127 of the Calcutta Municipal Act, 1923 provided: "127.For
-· the purpose of assessing land and buildings to the ·consolidated rate,-
(a) the annual value of land, and the annual value of any building
erected for letting purpose or ordinarily let, shall be d~emed to be
·-. the gross annual rent at which the land or building might at the
B time of assessment reasonably be expected to let from year to
year, less, in· the case of a building, an allowance of ten per cent
for the cost of repairs and for all other expenses necessary to
maintain the building in a state to _command such gross rent; and
. .;
(b) the annual value of any building not erected for letting purposes
c and not ordinarily let shall be d~e'med to. be five per cent on the
sum obtained by adding the estimated present cost of erecting the
building, less a reasonable amount to be deducted on account of
depreciation (if any), to the· estimated present value of the land
·valu.ed with the building as part of the same premises.
D Provided as follows:-
(i) '.
the annual' value of the bus'f.e shall be deemed to' be the gross ·~
annual rent at which the land contained 'within it, excluding the
. lands which have been left vacant for the purposes of any bustee
street prescribed in or under a standard plan approved by the
E Corporation under Chapter XXIJ, might reasonably be expected
• to let from year to year, plus the gross annual rent at which the
huts erected thereon might reasonably be expected to let from
year to year, after deducting therefrom the rent of the land and an
allowance of ten per cent, for the cost· of repairs _and for all
. expenses necessary to maintain such huts in a state to command '
F such gross ren~·
(ii) in calculating the value of any land or buildL"lg under this section,
the value of any machinery on such land or in such building shall
be excluded, but all fixtures including lifts and electric and other
fittings ~hich add to the convenience of the building shall be
G valued, subject in the case of a lift to such deduction from the
valuation, as the Executive Officer may think proper, on account
of the cost of repairS to, maintenance of," and attendance on, such ·.
lift;
• (iii) if in the case of a building valuea under clause (b), the annual
H value ·of which does not exceed five hundred rupees, any
;
INDIA AUTOMOBILES (1960) LTD. v. CALCUTTA MUNICIPAL CORPN. [SETHI, I.] 973 .
a
exceptional circumstances exist which render valuation of five A
per cent, on the cost of erecting .the building less depreciation,
exces~ive, a lower percentage may be taken; . ,
(iv) when any building has been valued at a special percentage taken
under proviso (iii), it may be re-valued· at any time after the
exception circumstances referred to in that proviso have ceased tci B·
exist."
The words "notwithstanding anything contained in the West Bengal
Premises Tenancy Act, 1956 or any other law for the time being in force"
appearing in Section 174 of 1980 Act were non existent in Section 168 of C
1951 Act and Section 123 of. 1923 Act. In support of their view points,
learned counsel for the parties have relied upon various judgments of this
Court reported in Smt. Padma Debi's case (supra); l!C's case (supra); G_untur
Municipal Council v. Guntur Town Rate Payers' Association, [1971) 2 SCC
423; Municipal Corporation, Indore a_nd Ors. v. Smt. Ratnaprabha and Ors.,
[1976) 4 SCC 622; Diwan Dau/at Rai Kapoor and Ors. v. New Delhi Municipal D
Committee a!'d Ors., [1980) I SCC 685; Ba/bir Singh and Ors. v. MCD and
Ors., [1985)11 SCC 167; Srikant Kas.hinath Jituri and Ors. v. Corporation of
the City of Belgaum, [1994} 6 SCC 572; Indian Oil Corporaiion Ltd. v.
Municipal Corporation and Anr. [1995) 4 SCC 96; Asstt. General Manager,
Central Bank of India and Ors. v. Commissioner Municipal Corporation for E
the City ofAhmedabad and Ors., [1995) 4 SCC 696; East India Commercial
Co. Pvt. Ltd v. Corporation of Calcutta, [1998) 4 SCC 368 and Government
Servant Cooperative House Building Society Ltd and Ors. v. Union of India
and Ors., [1998) 6 SCC_ 381.
j
In Padma Debi's case (supra) this Court dealt with the law relating to F
annual valuation under Section 127 of Bengal Act No. 3 of 1923 and held
that the words "gross annual rent" at which the land or building might, at the
time of assessment, reasonably be expected to let from year to year implies
that the rent which the landlord might realise if the house was let is the basis
for fixing the annual value of the building. The criterion was the rent realisable G
. by the landlord and not the value of the holding in the hands of the· tenant.
The value of the property to the owner is the standard rent in making the
assessment. The word "reasonably" appearing in the section was held to be
not capable of precise definition as in· ultimate analysis the same was the
question of fact,, Whether a particular act was reasonable or not depended
upon the circumstances in a given case._ A bargain between a willing lessor H.'
974 SUPREME COURT REPORTS (2002; I S.C.R
A and willing lessee uninfluenced by any extraneous circumstances can afford
a guiding test of reasonableness. The phrase "at the time of assessment" was
held to mean the assessment commenced with the making of the valuation
under Section 131 of the Act and ended with the detennination of the objection
under Section 140 thereof. As in that case the Rent Control Act of 1950 was
B found to be in existence before detennination of the assessment, the corporation
was held to have no power to fix the annual value of the premises higher than
the standard rent.
In LIC's case (supra) this Court dealt with Section 168 of the Ca!cutta
Municipal Corporation Act for the purposes of dete1mination of annual value
C of the premises. The facts of that case were that M/s. A. Firpo Ltd. \\ere the
tenants of the building belonging to Asiatic Assurance Ccmpany Ltd. under
a lease at a monthly rent of Rs. 2,000 which was increased by mutual
agreement to Rs. 2800 per month. Mis. A. Firpo Ltd., the lessee had sub-let
a major part of the premises to five different .tenants and the aggregate rent
received from the sub-tenants amounted to Rs. 4520. The corporation assessed
D the annual value of the premises at Rs. 32076 for six years. The o~jection
raised by the owner against the detennination of the annual value was rejected
by the Special Officer of the Corporation and in appeal filed by the LIC,
which had statutorily acquired the right of the owner of the building, the
court of Small Causes assessed Rs. 30240 as the annual value. The said order ·
E was con finned in appeal to the High Court under Section 183(3) of the
Calcutta Municipal Corporation Act, 1951. In appeal filed in this Court, the
corporation claimed that in determining the annual value of the premises the
assessing authority was entitled to take into consideration the rental received
by Mis.A. Firpo Ltd. from its sub-tenant. Reliance was placed upon Padma
Debi's case. This Court approved the judgment in Padma Debi's case, but
F finding that as the standard rent stood detennined by the definition in Section
2(10)(b) of the West Bengal Premises Rent Control (Temporary Provisions)
Act, 1950, held that the High Court was right in assessing the annual value
on the basis of the standard rent as statutorily determined. It was further held
that under the Act the quantum of consolidated rate depends upon the value
G of the land or building or the gross rent for which the land or building might
reasonably be expected to let and not the gross rent at which the subordinate
interest of a tenant may be expected to sub-let. In detennining the .issessmcnt
of annual value, the assessing authority is not concerned with the rent which
the tenant may receive from his sub-tenant. It is the gross rent which the
owner may realise by letting the land or building under d bargain uninfluenced
H by extraneous con.:aderations which determim:s the annual value.
.NDIA AUTOMOBILES ( 1960) LTD. v. CALCUTTA MUMCirAL CORPN. [SETHI, J.] 975
In Guntur Town Rate Payers' Association's case (supra) it was held A
that the test for determining the rent at which the building may reasonably'
be expected to be let is essentially what rent premises can lawfully fetch, if
let out to a hypothetical tenant. The municipality is not free to assess any
arbitrary annual value and has to look to and is bound by the fair or the
standard rent which would be payable for a particular premises under the B
Rem Control Act in force during the year of assessment. Such findings were
returnt:d on the basis of the judgment of this Court in Padma Debi's case.
In Smt. Ratnaprabha 's case (supra) this Court for the first time
• considered the effect of non obstante clause appearing in Madhya Pradesh
M;,inicipal Corporation Act, 1956 for determining the gross annual rent for C
which the building might reasonably be expected to be let. Clause (b) of
Section 138 of the said Act provided:
.. (b) The annual value of any building shall notwithstanding anything
contained in any other law for the time being in force be deemed to
be the gross ?nnual rent at which such building, together with its D
appurtenances and any furniture that may be let for use or enjoyment
therewith might reasonably at the time of assessment be expected to
be let from year to year, less an allowance of ten per cent for the cost
of repairs and for all other expenses nece;:ssary to maintain the building
in a state to command such gross annual rent."
E
lntt:rpreting the section, the Court held:
"As has been stated, clause (b) of section 138 of the Act provides that
the annual value of any building shall 'notwithstanding anything
contained in any other law for the time being in force' be deemed to
be the gross annual rent for which the building might "reasonably at F
the time of the assessment be expeckd to be let from year to year".
While therefore the requirement of the law 1s that the reasonable
letting value should determine the annual value of the building, it has
also been specifically provided that this would bL so 'notwithstanding
anything contained in any other law for the time being in force'. It G
appears to us that it would be a proper interpretation of the provisions
of clause (b) of sect10n 138 of the Act to hold that in a case where
the standard rent of a building has been fixed under Section 7 of the
Madhya Pradesh Accommodation Control Act, and there is nothing
to show that there has been fraud or collusion, that would be its
reasonable letting value, but, where this is not so, and the building H
976 SUPREME COURT REPURI S l2l102) I S.C.R.
A has never been let out and is being used in a manner where the
question of fixing its standard rent does not arise, it would be
pennissible to fix its reasonable rent without regard to the provisions
of the Madhya Pradesh Accommodation Control Act, 196i. This view
will, in our opinion, give proper effect to the non-obstante clause in
clause (b) with due regard to its other provision that the letting value
B should be 'reasonable'."
After referring to Padma Debi's case, L/C's case and Guntur Town Rate
Payer's case (supra), it was held in that case that the High Court had not
properly appreciated the difference between the wording of Section 127 of
C the Calcutta Municipal Corporation Act, 1913 and Section 138(c) of the
Madhya Pradesh Municipal Corporation Act, 1956 and thus committed an
error in thinking that the case was virtually similar to Padma Debi's case.
In Diwan Dau/at Rai 's case (supra) this Court held that the facts of the
case were covered by the decisions of this Court in UC' case and Guntur
D Town Rate Payer's case (supra). The landlord cannot, reasonahly. expect to
get more rent than the standard rent payable in accordance with the principles
laid down in the Rent Control Act. ln a case where the standard rent of the
building has not been fixed by the Controller, the assessing authority has to
arrive at its own figures of standard rent by applying the principles laid down
E in the Rent Act. Such a task has to be performed by the assessing authority
as a part of process of assessment and in doing so it does not usurp the
functions of the Rent Controller because it does not fix the 'tandard rent
which would be binding between the landlord and tenant but merely arrives
at an estimate of standard rent for the purposes of detennining the annual
value of the building. The Court referred to Section 2(k) of the !Jelhi Rent
F Control Act, 1958 which defines the standard rent. Sub-section ( l) of Section
4 of the Delhi Rent Control Act provided that, "no tenant shall, notwithstanding
any agreement to the contrary, be hable to pay to his landlord for the
occupation of any premises any amount in excess of the standard rent of the
premises" and sub-section (2) of Section 4 declares that "subject to provisions
G of sub-section (I) any agrc1:ment for the payme,.,t of rent in excess of the
standard rent shall be construed «S if it were an agreement for the payment
of the standard rent only". Section 5, sub-section (I) enacted a prohibition
injuncting that "no person shall claim or receive any rent in excess of the
standard rent, notwithstanding any agreement to the contrary" Section 6
proceeded to set out different fonnulae for determination of standard rent in
H different classes of cases. Section 9, Sub-section (I) provided that the
INDIA AU IUMOBILES (!960) LTD. v. CALCUTTA MUNICIPAL CORPN. (SETHI, J.l 977
Cuntroller shall, on an application made to him, either by the landlord or by A
the tenant, fix in respect of any premises the standard rent referred to in
section 6 and sub-section (2) of section 9 laid down that in fixing the standard
rent of any premises the Controller shall fix an amount which appears to him
to be reasonable having regard to the provisions of Section 6 and the
circumstances of the case. It appears that in this case the court did not directly B
deal with the effect of a non-obstante clause in the taxing municipal law. The
case was found to be nearer to the law settled in LIC's case and Guntur Town
Rate Payee ·s case (supra). Dealing with the case for the determination of the
annual value where no standard rent has been fixed, the Court observed:
•
... ..The problem can also be looked at from a slightly different angle. c
When the Rent Control legislation provides for fixation of standard
rent, which alone and nothing more than which the tenant shall be
liable to pay to the landlord, it does so because it con~iders the
measure of the standard rent prescribed by it to be reasonable. It lays
down the norm of reasonableness in regard to the rent payable by the
tenant to the landlord. Any rent which exceeds this norm of D
~ reasonableness is regarded by the legislature as unreasonable or
excessive. When the legislature has laid down this standard of
•
reasonableness, would it be right for the court to say that the landlord
may reasonably expect to receive rent exceeding the measure provided
by this standard? Would it be reasonable on the part of the landlord E
to expect to receive any rent in excess of the standard or norm of
reasonableness laid down by the legislature and would such expectation
be countenanced by the court as reasonable'! The legislature obviously
regards n:covery of rent in excess of the standard rent as exploitative
of the tenant and would it be proper for the court to say that it would
~ be reasonable on the part of the landlord to recover such exploitative F
rent from the tenant? We are, therefore, of the view that, even if the
standard rent has not been fixed by the Controller, the landlord cannot
reasonably expect to receive from a hypothetical tenant anything more
than the standard rent determinable under the Act and this would be
so equally whether the building has been let out to a tenant who has G
lost his right to apply for fixation of the standard rent or the building
is self-occupied by the owner. The assessing authority would, in either
case, have to arrive at its own figure of the standard rent by applying
principles laid down in the Delhi Rent Control Act, 1958 for
determination of standard rent and determine the annual value of the
building on the basis of such figure of standard rent." H
978 SVPREME COURf REPORTS [2002] I S.C.R.
A In Balbir Singh 's case (supra) the Court dealt with four different
categories of properties, namely, (i) where the prooerties are self-occupied,
that is, occupied by the owners; (ii) where the properties are partly selt:
occupied and partly tenanted; (iiiJ where the land on which the property is
constructed is leasehold land with a restriction that the leasehold interest shall
not be transferable without the approval of the lessor and (iv) where the
B property has been constructed in stages, and to provide a criteria how rateable
value can be determined in respect of those four categories of properties.
Relying upon Dewan Daulat Rai Kapoor's case it was held that criteria for
determining the rateable value of a building is the annual rent which the
owner might reasom.blv expect to get from a hypothetical tenant, if the
C building were to let from year to year less certain deductions. What is
"reasonable" is a question of fact which depended on the facts and
circumstances of a given ~ · 11tion Ordinarily "a bargain between a willing
lessor and a willing les e• unintluenc i by any extraneous circumstances
may afford a guiding test ,. reasonableness" dnd in normal circumstances the
D actual rent payable by a ter 1t to the landlord would afford reliable evidence
of what the landlo1 d may reasm 1ly expect to get from the hypothetical
tenant, unless the rent is inflateu or depres~ed by reason of extraneous
considerations such as relationship, expectation of some other benef;t, etc. ..
But in case of a building subject to Rent Control kgislation this approximation
between may and often does get displaced, because under Rent Control
E legislation the landlord cannot claim to recover from the tenant anything
more than the standard rent and his reasonable expectation must, therefore,
be limited to the measure of the ~tandard rent lawfully recoverable by him.
There was no dispute that the area wher.: the property so.mght to be taxed was
situated, the provisions of Rent Restr.ction Acts wen:: apphcablc and there
was non obstante clause in the municipal law :.mder which th.: annual ~dlue
F had been assessed.
In Srikant Kashinath Jituri s case (supra), this court observed:
" .. we fod compelled to expreo;s our doubt~ as to the soundness· an<i
continu:ng relevance of th.: view taKen o; this Court in several .,artier
G dedsinns that the property \dJ( rnuot be d~krmincd on the basis of fair
rent alone regardless of the actual rent receivd. Fair rent very often
m-:ans the rent prevailing prior to 1950 with some mmor moditications
and additions. Property tax is the main source of revenue to the
municipalities and municipal corporations. To compel the~e local
H bodies to levy and collect the property tax on the basis of fair rent
INDIA AUTOMOB!Ll:.S (' 9601 LTD. v. CALCUTT A MUNICIPAL CORPN. [SETHI, J.l 979
alone, while asking them at the same time to perform all their A
obligatory and discretionary functions prescribed by the statute may
'Je to ask for the impossible. The wst of maintaining and laying
rodds, drains and other amenities, the salaries of staff and wages of
employees - in short, all types of expenditure have gone up steeply
over the last more than forty years. In such a situation, insistence B
upcin levy of property tax on the basis of fair rent alone - disregarding
the actual rent received- is neither justified nor practicable. None of
the enactments says so expressly. The said principle has been evolved
by courts by a process of interpretation. Probably a time has come
when the said principle may have to be reviewed."
•
In Indian Oil Corporation's case (supra) this Cou1t approved the view
c
taken in Ratnaprabha 's case and in the interest of public good declined to
reconsider the aforesaid decision. It was observed that the decision of this
Court in Ratnaprabha's case, on the construction of Section !38(b) of M.P.
Act, has all along been understood and justified on the basis of the presence
of non obstante clause and the later decisions have distinguished it on that D
ground. The existence of non obstante clause in M.P. Act was held to be the
basis on which the decision in Padma Debi's case was distinguished in
Ratnaprabha 's case itself.
In Assistant Cienerul Manager, Central Bank of India's case (supra) it E
was contended on behalf of the appellant that even where the standard rent
was not fixed and the Rent Act not applicable, it must be presumed that the
annual rent for such buildings or lands or premises would be the standard
rent alone and not the actual rent received. In that case Section 129(c) of the
•
Municipal Corporation Act provided that the general taxes not less than 12%
, and not more than 13% of the rateable value of the buildings/lands may be F
levied if the corporation so determines on a graduated scale. The expression
"rateable value" was defined in clause (54) of Section 2 to mean, "the value
of any building or land fixed whether with reference to any given premises
or otherwise in accordance with the provisions of this Act and the rules for
the purpose of assessment of property taxes". Rule 7 of the Taxation Rules G
provided that in order to fix the rateable value of any building, land or
premises, there shall be deducted from the amount of the Annual Letting
Value of such building a sum equal to ten per cent of the Annual Letting
Value and the said deduction shall be in lieu of all allowances for repairs or
any other account whatsoever. Sub-clause (ii) of the definition provided that
"in relation to any other period, the 2.nnual rent for which any building or H
980 SUPRt:ME COURT REPORTS (2002 j I S C.R.
A land or premises, exclusiVt: of furniture or machmery contamed or situate
therein or thereon, might reasonably be expected to let from year to year with
reference to its use and shall include all payments made or agreed to be made
to the owners by a person other than the owner occupying the bmlding or
land or premises on account of occupation, taxes, insurance or other charges
B incidental thereto". The proviso added to sub-clause (ii) was to the following
effect:
"(a) (I) n respect of any building or land or premises the standard rent
of which has been fixed under Section 11 of the Bombay Rent>,
Hotel and Lodging House Rates Control Act, 1947. the annual rent
c thereof shall not exceed tht: annual amc.. ,1t of the standard rent so
fixed:
(aa) in respect of any building or land, or pi .:mises, the standard rent
of wliich is not fixed under Section 11 of the Bombay Rent, Hotel
and Lodging House Rates Control Act, 1947, the annual rent received
D by the owner in respect of such building or land or premises shall,
notwithstanding anything contained in any other law for the time
being in force. be deemed to be the annual rent for which such
building or land or premises might reasonJbly be expected to let from
year to year with reference to its use."
E Dealing w'th the points in controversy. the arguments urged and the :ssu~s
involved, the Court held:
.. It is true that the Bomba) Rent Act dt:tlnt:s whdt standard rent ;s,
provides for fixation of standard rent by the Court and further provides ..
that no :andlord shall claim or receive any amount over and above
F the standard rent, making the same punish<ible with impnsonment
and fine. Yet, the fact remains that Municipal Corporations Act says
expressly that notwithstanding anything contained in any other law
for the time being in force, the "annual rent received" -- - which
means the actual rent received • in respect of building etc., for which
standard rent is not fixed under Section 11 of the Bombay Rent Act
G
shall be deem.:d to be the annual rent for which such building etc.
might reasonably be expected to be let from yt:ar to year with reference
to its use. The validity of proviso (aa), though raised in the grounds
of appeal in the special leave petition, has not been urged before us.
probably advisedly. Being a taxing enactment and also because th~
H proviso docs no more than to treat the actual rent received as the
INDIA Al TOMOBILES (1960) LTD.•. CALCUTTA MUNICIPAL CORPN. [SETHI, J) 981
annual nmt, the reasonableness of the said provision can hardly be A
questioned. Be that as it may, we see no reason why the express
~
:anguage and command of proviso (aa) is not respected. Both the
enactments, viz., Bombay Rent Act and Bombay Provincial Municipal
Corporations Act are State enactments. Indeed, the Municipal
Corporations Act is a later enactment. In view of the express provision
in proviso (aa), it must be held that for the purpose of the Municipal B
Corporation Act, the actual rent received is the annual rent for the
purposes of determining the annual letting value. The counsel for the
appellants say that it cannot be. They say that one State enactment
cannot be read so as to defeat and nullify the provisions of another
• State enactment. The submission is that both must be read c
harmoniously. The said argument, in our opinion, would have been
perfectly justified if the non obstante clause were not there in proviso
(aa). In its presence, acceptance of the said argument means that we
ignore the non obstante clause in proviso(aa) altogether. Such a course
is not permissible to us. The Court cannot treat any provision in an
enactment as superfluous much less can it ignore its existence. The D
.. learned counsel, however, rely upon certain decisions in suppon of
~ their submissions to which a brief reference would now be in order."
Accordingly, we hold that proviso (aa) means what it says and has to
be applied and followed in the cases covered by it. So far as the
E
Municipal Corporations Act is concerned, the annual rent is the actual
rent received where the standard rent is not fixed under Section 11 of
the Bombay Rent Act and it constitutes the basis for determining the
; annual letting value. rateable value and property taxes. That is the
plain effect and meaning of proviso (aa). So far proviso (aaa) is
• concerned, an apprehension was expressed that it would enable the F
Commissioner to question the actual rent received in every case and
it would be an endless enquiry. In our opinion, however, the said
provision is conceived to meet situations where the rent put forward
as the actual rent received is not a genuine plea., i.e., where it is a
false plea. A landlord may let out a building at less than market rent
G
for many a reason, e.g., the tenant is a close friend or a close relative
or because the tenant is a charitable or religious organisation. Proviso
(aaa) does not enable the Commissioner to ignore such situations for,
in such cases, the rent actually received is genuinely stipulated one.
This power is reserved to the Commissioner only with a view to
ensure that by merely putting forward a figure which is not true, H
982 SUPREME COURT REPORTS [2002] I S.C.R.
A persons do not escape the correct levy.''
In East India Commerciul Co. Pvt. ltd s case (supra) :his Court
considered the determination of annual value under s~ction 168 of the Calcutta
Municipal Corporation Act, 1951 in n:spect of buildings which were actually
let out to tenants on rent agretd but not fixed by the Controller under the
B Rent Restriction Act for the purposes of assessment of property tax After
referring to the relevant provisions of Jaw and the judgments of this Court,
it was held:
"From the aforesaid decisions, the principle which is deducible is that
when the Municipal Act requires the d ' 'lllination of the annual
c value, that Act has to be read along with Restriction Act which
provides for the det.:rmination of fair rent l ;tandard rent. Reading
the two Acts together the rateable value car.. ., be more than the fair
or standard rent which can be fixed ur.der the Rent Control Act. The
exception to this rule is that whenever any Municipal Act itself
D provides the modes of determmation of the annual letting value like
the Central Bank of India case [ l 995] 4 SCC 696 relating to
Ahmedab1d or contains a non obstantc clause as in Ratnaprabha case
1976 (4) sec 622 then the determination of the annual letting value
has to be according to the terms of :he Municip3l Act. In the present
case, ~tction 168 of the Mun:cipal Act does TJot cont,lin any non
E obstante clause so as to make the Tenan'y Act i.napplicablt &nd nor
does the Act itsdf pro\ 1dc the method ,Jr basis for dctem1ining the
annual value. This Act has. therefore. to he read ulonr with Tenancy
Act of 1956 and it is the fair rent determinable under Section 8(J)(d)
which alone can be the annual value ~or tht purposes of property
tax."
F •
Dealing with the M.P. Municipal Corporatiun Act, 1956 the Court held that
the existence of non obstante clause was crucial in detcnnining the annual
value. The court observed:
"In Section I 68 of the Municipal Act with which we are concerned
G
in tht: present case the non obstante clause is not there. The Municipal
Act is difterent from the M.P. Municipal Act, 1956. Section 168 of
the Municipal Act is similar to the comsponding provisions in Delhi
and in Andhra Pradesh and therefore, it is the ratio of the decisions
of Padma Debi, fl962] 3 SCR 49, Dewan Dau/at Rai, [1980] I SCC
H 685 and Guntur Municipal Council, [1970] 2 SCC 803 which should
INDIA ACTOMOBILES (1900) LlU. v CALCUTTA MLINJCIPAL CORPN. [SETHl,l.I 983
apply." A
·~ In Government Servant Cooperative "s case (supra) this Court dealt
with Section 116 of the De !hi Municipal Corporati<>n Act prov:ding for
determination of rateable value of land or building assessable to property
taxes and held that where there is a legislation fixing the standard rent of the
premises, the rent at which premises could be reasonable expected to be kt B
cannot exceed the statutory ceiling. But where there is no statutory control
on rent which is charged, the annual rent actual!)' received by the landlord
shall be the basis for determining the rateable value of the property. It held:
..
"Therefore, the annual rent actually received by the landlord, ;n the
. absence of any special circumstances, would be a good guide to c
decide the rent which the landlord might reasonably expect to receive
from a hypothetical tenant. Since the premises in the present case are
not controlled by any rent control legislation, the annual rent received
by the landlord is what a willing lessee, uninfluenced by other
circumstances, would pay to a willing lessor. Hence, actual annual
D
rent, in these circumstances, car: be taken as the annual rateable value
• of the property for the assessment of property tax. The municipal
,. corporation is, therefore, entitled to revise the rateable value of the
prop1mies "hi ch have been freed from rent control on the basis of
annual rent actually received unless the owner satisfies the municipal
corporation that there are other considerations which have affected E
the quantum of rent."
A perusal of ~arious judgments, relied uron by the learned counsel for
.. tbe parties, clearly shows that this Court has taken a consistent view regarding
the determination of annual value of land or building fot the purposes of
• determination of taxes under the Municipal Acts. On the basis of various F
Statutes relating to the determination of the annual value for the purposes of
... Municipal Acts, this Court has devised two distinct groups. One such group
deals with the municipal laws of some States which do not expressly exclude
application of Rent Restrictions Acts in the matter of determination of annual
value of a building for the purposes of levying municipal taxes and the other
G
group deals with the municipal laws which expressly exclude application of
the Rent Restriction Acts in the matter of determination of annual value of
land or building on rental method. Whereas in the first category of cases the
determination of annual value has to be made on the basis of fair or standard
rent notwithstanding the actual rent, even if it exceeds the statutory limits. In
the other group where the restriction in the Rent Acts has been excluded, the H
I
~
984 SllPRFMc COURT REPORTS [2flU2] l S.C.R.
A detennination of annual value of building on rental method is referable to the
method provided under the relevant Municipal Act. Whereas the Padma Debi's
.,-.
case, LIC's case, Guntur Town Rate Pa} e's case, Dewan Dau/at Rai's case
(supra) deal with the first group of municipal laws, the cases in Ratanprabha 's
case, AGM, Central Bank of India's case, East India Commercial Company's
B case, Ba/bir Singh 's case, Indian Oil Corporation's case and Srikant 's case
(supra) deal with the second group As already noticed, this Court in LIC 's
case dealt with the first category as !n Section 168 of the Calcutta Municipal
Corporation Act, there existed no non-obstantc clause. The observations of
the Bench of this Court which dealt with the case on 10th October, 200 I
cannot be taken in isolation. Justice Shah, J. in l!C's case referring to the
C proviso to Section '68(1) of the Calcutta Municipal Corporation Act which
dealt with the land and building, the standard rent of which had been fixed
under Section 9 of the West Bengal Pn:mises Rent Control (Temporary
Provisions) Act, 1950 observed:
"By the addition of the proviso, in our judgment, the meaning of the
D expression ·'gross rent at which the land or building might reasonably
be expected to let" is not alti:red: In the present case, there is no order .
of the Controller fixing standard rent under Section 9 of the We>t
Bengal Premises Rent Control ("I emporary Provisions) Act, 1950, but
.
the standard rent stands detennined by the ddinition of that expression
in Section 2( I) lb) of that Act. which provides (omitting paras not
E relt:vant):
"StandarJ rent" in relation to any premises means----
(a) xx x xxx xxx
..
(bb where the rent has bt:en fixed under Section 9, the rent so fixed,
F or at which it would have been fixed if appiication were made under
the said section."
As already noticed even without specific determination, the standard
rent was held to have been statutorily detennined under Section 2(10)(b) of
G the Rent Act. Upon analysis of the various municipal laws and the judgments
of this Court it is held that in cases where the municipal laws excludes the
applicability of the Rent Acts by incorporating non obstante clause in the
taxing statute, the powers of the authorities under the Municipal Acts are not
circumscribed by the limits indicated in Padma Debi's case and followed in
that group of cases. In cases where the fair rent payable by the tenant has
H been detennined and there is no justification for refusing to accept that fair
INDIA AUTOMUBILES (1960) LTD v. CALCl'TTA MUNICIPALCORPN. [SETHI, J] 985
rent as rental value of the premises, the municipal authorities should generally A
accept the smndard rent fixed, notwithstanding the non applicability of the
• Rent Acts because such a view would be reasonable guideline to determine
the rate of rent at which such land or building might, at the time of assessment,
be reasonably expected to let from year to year. The rent which the tenant
is receiving from his sub-tenant is also an important statutory consideration
for determining the rent at the time of assessment to which the property
B
might reasonably be expected to be let from year to year. Such a consideration
is also justified on the principles of reasonableness. We cannot agree that in
all cases, notwithstanding the non obstante clause the annual rental value
~
cannot be fixed beyond the standard rent determined or determinable under
• the Rent statute. We also find it difficult to hold that in all cases the rent c
actually paid by the sub-tenant to the tenant be taken as a sole criterion for
determining the annual value on the assumption that such land or building
might, at the time of assessment, is reasonably expected to get the aforesaid
amount of rent if let from year to year. The argument that the rent actually
received by the owner should always be deemed to be reasonable rent in the
' absence of fraud, collusion and other extraneous considerations is too general D
• and broad proposition of law which cannot be accepted for the purposes of
~
determining th~ annual value of the property for the purposes of Section 174
of the 1980 Act. In the light of clear and unambiguous prov1s1ons of Section
174 of the 1980 Act. it cannot be held that the amount realised by a tenant
from a sub-t.:nant cannot, at all be taken :nto consideration for the purposes E
of determining the gross annual rent in the absence of extraneous
considerations. There is no substance in the submission of the learned counsel
app<!aring for the appellant that allowing the Municipal Corporations to assess
the annual rateable value on the basis of the income of a tenant from the
property would be grossly unfair and would have the effect of rendering the
rate provisions of the Act unreasonable, arbitrary and unconstitutional. The F
Act itself has taken care by making sufficient provision in Sections J93 and
194 regarding the liability to pay the rent and apportionment of such liability
when the premises are assessed, let or sub-let. On proof of creation of sub-
tenancy, the owner of the building may also be entitled to seek eviction of
their tenants under the relevant provisions of the Rent Acts applicable in the G
State where the land or property is located. We find some substance in the
submission of the learned counsel for the appellant that permitting the
Municipal Authorities to assess the annual value only on the basis of the rent
paid by the sub-tenant to the tenant and fixing its liability on the owner may
adversely affect the owners of the buildings who have let their premises at
a time when rents were meagre and who under the Rent Control Statutes are H
986 '>UPREMF COURf REPORTS [2002] I S.C.R.
A deprived of getting possession back of the lands and buildings from their
tenants. The 1980 Act, therefore, requires the application of mind by the
municipal authorities to determine the ren• on the basis ofreasonableness by
keeping into account all relevant circumstances including the actual rent
received by the owner, hypothetical Standard rent, the rent being received by
B the tenant from his sub-tenant and other relevant consideration, such as
prevalent rate of rent of lands and building in the vicinity of the property
being assessed. Only because the owner of the building is not getting the
same rent which the sub-tenant is paying to his lessor, cannot be made a basis
to deprive the Corporations from determining the annual valuation and taxing
the land or building on that basis. If such a plea is accepted, it would be
C against the provisions of the statute which has been enacted to provide civic
services in the form of water, drainage, sewerage, collection, removal and
disposal of solid waste, fire prevention and fire safety maintenance of street
and public places, etc., in the Municipal area when such land or building is
situate. We do not find any conflict in the judgments of this Court so far as
the determination of annual value of the property under the municipal laws
D is concerned. Distinction, if any, ;s based upon the relevant provision of the
statute of a State with which this Court was dealing, particularly with respect
to such Statutes which contained a non obstante clause. We are of the view
that the basis for determination of annual rent value has to be the standard
rent where the Rent rontrol Act 1s applicable and in all other cases reasonable
E determination of such rent by the municipal authorities keeping in view various
factors as indicated herein earlier, including the rent which the tenant is
getting from his sub-tenant. In appropriate cases the owner of the property
may be in a position to 1atist) the authorities that the gross annual rent of the
building of which the annual valuation was being determined cannot be more
than the actual rent received by such owner from his tenant. The municipal
F authorities shall keep in mind the various pronouncements of this Court, the •
statutory provisions made in the specified Municipal Acts, keeping in mind
the applicability or non-applicability of the Rent Act and the peculiar
circumstances of each case, to find out the gross annual rent of the building
includ1ng service charges, if any, at which such land or building might, at the
G time of assessment, be reasonably expected to let from year to year in terms
of Section 174 of the 1980 Act.
Keeping in view the facts of the present appeal we are of the opinion
that the High Court was right in remanding the appeals to the Appellate
Tribunal for decidmg on merits but was not justified to restrict the consideration
H only on the basis of rent being paid by the sub-tenant to the tenant for the
INDIA AUTOMOBILES ( 1960) LTD. v. CALCUTT A MUNICIPAL CORPN. [SETHI, J.] 987
purposes of determining the gross annual value. The Appellate Tribunal shall A
· consider the appeals in the light of our Judgment by keeping in mind all the
circumstances including the rent actually received by the owner of the building
and the rerit being paid to the tenant by his sub-tenant. The Appellate Tribunal
shall also keep in mind the peculiar circumstances of the case, if any, for
determining the gross dnnual rent at which the building in controversy, at the B
time of assessment, is reasonably expected to let from year to year, less the
allowances and other considerations referred to in Section 174 of the 1980
Act. If the annual valuation determined is more than the gross annual rent
which the appellant is actually receiving from his tenant, the appe!lant shall
be at liberty to recover the excess amount paid in terms of Section 194 of the
1980 Act. C
With these observations the appeal is disposed of. Costs to abide by the
ultimate result.
V.S.S, Appeal disposed of.
•
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