Holding

The levy under the 1979 Act is on the entire multi‑storeyed building (or part thereof) and the classification based on height is a valid legislative distinction, so the Act does not offend Article 14.

Summary

The Supreme Court examined appeals by Tata Iron and Steel Co. Ltd. and others challenging the West Bengal Multi-Storeyed Buildings Tax Act, 1979 on the ground that it violated Article 14 by discriminating between owners of multi‑storeyed buildings based on the portion of the building taxed. The appellants argued that the tax was levied on the covered space of individual units, changing the unit of assessment from the whole building to parts, and that the classification of buildings with five or more floors for higher rates lacked a nexus with the nature of the levy. The Court held that the Act imposes tax on the entire multi‑storeyed building (or part thereof) and that the classification based on height is a permissible legislative distinction, not violative of equality. It further observed that the method of apportioning the levy among owners or occupiers does not alter the character of the tax. Consequently, the Act was upheld as valid, except for the already struck‑down Section 25(2). The appeals were dismissed.

Issues considered

Whether the West Bengal Multi-Storeyed Buildings Tax Act, 1979 violates Article 14 of the Constitution by discriminating between owners of multi‑storeyed buildings.
Whether the unit of assessment under the Act is the whole building or individual occupied units, and whether the classification based on building height has a requisite nexus with the nature of the levy.
Whether Section 25(2) of the Act is ultra vires.

Legislation cited

Constitution of Indias. Article 14

Subjects

Article 14tax discriminationmulti‑storeyed building taxclassification of buildingsnexus testWest Bengal legislationconstitutional validitylevy assessment

Judgment

- TATA IRON AND STEEL CO. LTD. AND ORS.
v.
STATE OF WEST BENGAL
A

APRIL 29, 2002

[S. RAJENDRA BABU AND DORAISWAMY RAJU, JJ.] B
,
West Bengal Multi-Storeyed Buildings Tax Act, 1979-Sections 2(j) and
3-Tax-levy of on multi-storeyed buildings-Plea that the same is
discriminatory because of want of nexus between nature of levy and
classification of the building under the Act-Held, levy of tax justified and is c
not discriminatory-Constitution of India, 1950-Article 14.

After West Bengal Multi-Storeyed Building Tax Act, 1975 was held

-- to be ultra vires, West Bengal Multi Storeyed Building Tax Act, 1979 was
enacted effecting several changes in the 1975 Act. Definition of 'owner' and
Section 3 were altered.
D

'> Appellants challenged the validity of the 1979 Act contending that
since the intention of the Act was to levy tax in respect of the covered
portion of building occupied or possessed by the owner or deemed owner
and not on the owner or on the entire building, therefore, levy of tax o~ E
multi-storeyed building was discriminatory because of want of appropriate
relationship or nexus between the nature of levy and classification of the
building made in the Act.

Respondents contended that appellants being owner of entire building,

• .,, contention of part-ownership was not relevant; that Section 2(1) would
include such owners who own the entire building; and that such owner of
F

building constitute a separate category of tax payers and hence mode of
tax was j ustifia hie.

Single Judge of High Court declared the 1979 Act as valid except
Section 25(2) of the Act which. was held to be ultra vires. The judgment of G
Single Judge was affirmed by Division Bench. Hence the present appeals.

Dismissing the appeals, the Court

HELD: l. It cannot be said that the unit of assessment changes from
591 H
592 SUPREME COURT REPORTS [2002) 3 S.C.R.

A the entire multi-storeyed building to individual units occupied by deemed
owner or occupier. The scheme of taxation, is upon the entire multi-storeyed
building or part thereof. The expression 'owner', if read along with Section
3 and Section 5 of the Act, will cover the multi-storeyed building and though
for the purpose of taxation different units of the building are taken into
B consideration, the taxation is on the entire building. (597-H; 597-F, (;)

2. It is not correct to say that the taxation being on the covered space
of a portion of a building would not be a relevant factor if multi-storeyed
building is brought to tax. The levy is upon the multi-storeyed building is ·;,...
clear from. the provisions of Section 3 of the Act, but if the distribution of
C the levy is made upon the owners and in some cases upon the occupiers it
will not change the purpose of the Act to levy a tax on the multi-storeyed
building by reason of the fact that tax is levied on such occupied or covered
area in the multi-storeyed building which is in possession of the owner or

-
the occupier. This kind of classification has been not on-known.
[598-A, B, CJ
D
3. It cannot be said that the method of determining the rate of levy
would be a relevant fact in considering the character of levy, and that the
standard on which tax is levied is a relevant consideration in determining
the nature of the tax although it cannot be regarded as conclusive in the
E matter. From the scheme of taxation in the present case it is clear that the
levy is upon the multi-storeyed buihijng or part thereof which may be in
the occupation of the owner or a partkular occupier who is deemed to be
the 'owner' thereof for the purpose of the Act. Therefore, the measure of
taxation also does not vary in so far as the Act is concerned. [598-D, E]

F Mis. R.R. Engineering Company v. Zilla Parishad, B~reilly and Anr.,
[1980) 3 SCC 330 and The Hinger-Rampur Coat Co. Ltd dnd Ors. v. The
State of Orissa and Ors., [1961) 2 SCR 537, distinguished.

Re. A Reference under Government of Ireland Act, (1920) (1936) 2 All
G ER 111, referred to.

4. It cannot be said that there is discrimination between two sets of
buildings because of want of appropriate relationship or nexus between the
nature of levy and the classification of the building made under the Act.
The contention that if multi-storeyed buildings are classified into five stories
H and above as against buildings having less than five floors, it would offend
_,.(

TATA IRON AND STEEL CO. LTD. v. STATE [RAJENDRA BABU, J.] 593

the doctrine of equality, has no basis, Apart from the fact that somewhere A
limit has to be drawn between different types of buildings and if Legislature
thinks five floors and above should be subject to tax, no fault can be found
with it. It cannot be said that those who live in these kinds of buildings
which are subject to taxation upto fourth floor are similar to those who
live in the buildings having less that five floors because the provisions of B
the Municipal Corporation Act and bye-laws thereto provide certain special

- ~
amenities in the buildings having five floors or more. [599-A, B; 598-F-H]

1995.
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 4464 of

c
From the Judgment and Order dated 23.3.1987 of the Kolkata High
Court in A. No. 272 of 1982.

WITH

C.A. No. 4465 of 1995. D

Bhaskar P. Gupta, B. Sen, Tapas Ray, S. Sukumaran, Raghu M., Ms.
', Divya Nair, N. Sudhakaran, Ms. Meera Mathur, Dilip Sinha, D. Krishnan, D.
Mohanty and J.R. Das for the appearing parties.

The Judgment of the Court was delivered by
E

RAJENDRA BABU, J. : In these appeals the validity of the West
Bengal Multi-Storeyed Building Tax Act, 1979 [West Bengal Act XVII of
1979] (hereinafter referred to as 'the Act') is challenged by the appellants.
F
The learned Single Judge of the High Court, who examined the matter
in the first instance, rejected all the contentions put forth on behalf of the
appellants and declared that the Act was a valid piece of legislation, except
in regard to Section 25(2) of the Act which was held to be ultra vires and,
therefore, the said Section was declared to be invalid. Against this order
appeals were preferred to the Division Bench and the Division Bench affirmed G
the order made by the learned Single Judge and dismissed the appeals. Hence,
these appeals by special leave.

The impugned Act imposes a tax on 'multi-storeyed building' which
expression is defined under the Act. On an earlier occasion, the West Bengal H
594 -SUPREME COURT REPORTS [2002) 3 S.C.R.

A Multi-storeyed Building Tax Act, 1975 [hereinafter referred to as 'the 1975
Act'] was enacted in 1975 which also provided for tax on every multi-
storeyed building or a part thereof. The validity of the 1975 Act was challenged
in several writ petitions filed before the Calcutta High Court wherein the
High Court took the view that the 1975 Act applied to all buildin~s equally
in the matter of tax regardless of the cost. of construction, their capacity to
B yield income, their use and their potentiality and thus the Legislature treated
unequals as equals in their essential features as equals in the burden of
taxation and held the Jaw to be ultra yires. Thereafter, the Act was enacted
in 1979 effecting several changes in the 1975 Act. The definition of the
expression 'owner' is now changed and Section 3, which is the charging
C Section, is substantially altered. These provisions were in challenge before •
,the High Court as is done before us now.

The contentions advanced before the High Court on behalf of the
appellants are reiterated before us.- It is contended that on a reading of the
new definition of 'owner' alorig with the charging Section, the intention of -
D the Legislature is to tax the person in respect of the portion occupied or
possessed by him on the basis of the annual value and he is not responsible
or liable to pay tax in respect of the portions occupied or possessed by others; :r
that the intention is to assess buildings by parts whether they are occupied by
deemed owners or actual owners and the Act contemplates separate assessment
E and filing of returns by each deemed owner and where there is no deemed
owner by the owner himself and as such, owners are not liable for the payment
of tax for portions let out or in the occupation of others; that the Act clearly
contemplates separate assessments in respect of each part possessed by a
deemed owner or the owner; that this is apparent from the definition of
"owner" read along with Section 3(3) and Section 5 of the Act; that the unit
F of assessment changes from the entire multi-storeyed building to individual
units occupied by deemed owner or occupier; that the Act seeks to tax every
occupier of a building be he the owner or occupier in respect of the portion
of the building in his occupation, the tax being on the covered space of such
portion; that this being the purpose of the Act, the fact that such occupied
G covered space is in a multi-storeyed building or in any other building is not
a relevant factor for classification; that the substance of the legislation must
be ascertained from the relevant provisions of the statute and it is not disputed
that the subject of the levy, the nature of which defines the quality of the levy
is not to be confused with the mdasure of the liability, that is to say, the
quantum of the tax; that if the levy is to be regarded as one in respect of
H multi-storeyed buildings and the measure of the liability is defined in terms
TATA IRON AND STEEL CO. LTD. v. STATE [RAJENDRA BABU, J.] 595

of the annual value of the floor area occupied by individual owners/occupiers, A
there must be a nexus between the two indicating a relationship between the
levy on the multi-storeyed building and the criteria for determining the measure
of liability; that if there is no nexus at all it can be inferred that the levy is
not what it purports to be; that the statutory ~rovisions for measuring the
liability on account of the levy throws light on the general character of the
tax; that the standard on which the tax is levied was a relevant consideration B
for determining the nature of the tax although it cannot be regarded as
conclusive in the matter; that the standard laid down for measuring the liability
must bear a relationship to the nature of the levy; that when the provisions
of the impugned Act are examined in the totality, there can be found no such
relationship or nexus; that there is no difference between an occupier of x C
square metre of covered space in a multi-storeyed building and an occupier
of x square metre of covered space in a 4-storeyed building, when the tax is
on the covered space occupied and not on the entire building; that the Act,
therefore, discriminates and offends Article 14 of the Constitution; that since
Section 25(2) of the Act has been held to be unconstitutional and the 1975
Act was declared to be bad all tax collected under the 1975 Act should be D
in any event be directed to be refunded. In the additional submissions urged
on behalf of the appellants it is contended that if a part of the multi-storeyed
•> building is owned by any Diplomatic or Consular mission of a foreign State
or if a notification is issued by the State Government in terms of S.ection 3(5)
of the Act, then such part cannot be taxed but the other parts of the same E
building will be subject to tax; that is, therefore, appears that the unit of
taxation is not linked with the multi-storeyed building as a whole, but with
the parts of tire multi-storeyed building in the occupation of owners or deemed
owners; that thus, for every unit of taxation, namely the area in the occupation
of an owner or deemed owner, the annual value will have to be determined
in the manner provided in Section 5 of the Act and they divided by the F
covered space of that unit to arrive at the annual value per square metre and
they multiplying the total covered area of that unit by the appropriate rate of
tax; that to conclude, under Section 5 of the Act, the annual value for the
purpose of levying of the tax has to be based on the annual value of the
building or a part thereof and the owner who occupies a part of a five G
storeyed building has also to bear the burden of the tax although he is in no
better position than the owner of a four storeyed building; that as such the
entire concept of imposition of the tax on multi-storeyed buildings becomes
meaningless because the person is being assessed purely on what he possesses';
that a multi-storeyed building or a group housing society will have several
flats and several owners of such flats and according to the scheme of the Act, H
596 SUPREME COURT REPORTS [2002) 3 S.C.R.

A each such flat will be taxed with reference to its own annual value, determined
under Section 5; that the unit of taxation therefore is the individual flat and
not the whole building and each owner is taxed individually with reference
to the space in his occupation.

Shri B. Sen and Shri Tapas Ray, the learned Senior Advocates flppearing
B for the respondents, submitted that the appellants herein are owners of the
entire building and hence the arguments advanced attacking the part-ownership
will not be germane or relevant; that the definition of 'owner' under Section
2(f) of the Act would include such owners or persons as the appellants who
own the entire building; that the tax is levied on the building and such
C taxation has adopted the mode of collection as is provided under the Calcutta
Municipal Corporation Act; that buildings consisting of five floors or more
fall into a special class and, therefore, the owners of such buildings constitute
a separate category of tax payers; that such owners or persons being
economically better off can afford to pay the tax and, therefore, the
classification made and the mode of taxation adopted under the Act is perfectly
D justifiable and calls for no interference at our hands.

In order to appreciate the rival contentions it is necessary to briefly
note the relevant provisions of the Act.

Section 3 is the charging Section which provides for (i) levy of annual
E tax; (ii) payable by the owner to the State Government; (iii) on the covered
space of multi-storeyed building or part thereof, and (iv) at different rates on
the annual value. The expression "annual value" is defined in Section 5 of
the Act to the effect that if the annual value of any multi-storeyed building
or part thereof has been computed by a municipal corporation or a municipality
F or other local authority that computation divided by the covered space of
such multi-storeyed building or part thereof shall be the 'annual value' for
the purpose of the Act and ifthe computation has not been made the 'annual
· value' shall be deemed to be the gross annual rent at which the multi-storeyed
building or part thereof might be reasonably expected to let from year to year
with certain deductions for the cost of repairs and for other expenses. There
G is a special definition of the expression 'owner' under the Act giving an
extended meaning to cover different types of ownership including tenant
occupying portions of multi-storeyed buildings who shall be deemed to be
the owners of the part of building for the purpose of collection of tax under
the Act. On this analysis of the provisions of the Act we now proceed to
H consider the arguments advanced before us.
TATA IRON AND STEEL CO. LTD. v. STATE [RAJENDRA BABU, J.] 597

- In the first place, the arguments raised before us on behalf of the
appellants do not really fall for consideration inasmuch as from the facts
extracted from the judgment of the learned Single Judge it is clear that the
appellants own the buildings fully and, therefore, the question of part-
A

ownership or any discrimination arising thereto need not be examined at their
instance at all.
B
The High Court has noticed the factual position in relation to the
appellants before this Court as follows :

"The petitioner in Matter No. 288 of 1980 is the Life Insurance
Corporation of India. The Corporation owns various premises in C
Calcutta, about 29 of which are five storeyed or more than five
storeyed. Some of the said premises are wholly or in part let out to
various tenants and/or leased out to various lessees who from their
respective tenanted or leased out premises, carry on trade or business
of a commercial nature of use their respective portions for the purpose
of residence. Some of the said premises or in part house the officers D
of the Corporation .
... The Tata Iron and Steel ~o. Ltd. and the Indian Tube Co. Ltd. are
)
the first two petitioners in Matter No. 1300 of 1980. They are the
owners of a 18 storeyed building at 43, Chowringhee Road, Calcutta E
popularly known as "Tata Centre". The petitioners use a portion of
the building for their respective business and commercial activities
and have let out other portions to various tenants who also use the
same for their business and commercial activities."

Even otherwise, the scheme of taxation, to which we have adverted to F
just now, is upon the entire multi-storeyed building or part thereof. However,
in any given case, if a person is in occupation of a portion of a multi-storeyed
building as tenant, who can also be deemed to be the 'owner' of >uch multi-
storeyed building, he will be liable to pay tax to the extent of portion which
is in his occupation and such levy of tax for portions let out or in the occupation G
ofothers will not impinge upon the provisions of Article 14 of the Constitution.
The expression 'owner', if read along with Section 3 and Section 5 of the
Act, will cover the multi-storeyed building and though for the purpose of
taxation different units of the building are taken into consideration, the taxation
is on the entire building. Therefore, the argument that the unit of assessment
changes from the entire multi-storeyed building to individual units occupied H
598 SUPREME COURT REPORTS [2002) 3 S.C.R.

A by deemed owner or occupier cannot be accepted. The argument that the l"'f'
taxation being on the covered space of a portion whether he be the owner or
the eccupier in respect of a portion of a building would not be a relevant
factor if multi-storeyed building is brought to tax, but we do not think this
position is correct. The levy is upon the multi·storeyed building is clear from
the provisions of Section 3 of the Act, but if the distribution of the levy is
B made upon the owners and in some cases upon the occupiers it will not
change the purpose of the Act to levy a tax on the multi-storeyed building
by reason of the fact that tax is levied on such occupied or covered area in
the multi-storeyed building which is in possession of the owner or the occupier. _,,_...
This kind of classification has been not un-known.
c
The learned counsel for the appellants relied upon the decisions in RE.
A Reference under Government of Ireland Act, (1920), ( 1936) 2 All ER 111;
Mis R.R. Engineering Company v. Zilla Parishad, Bareilly and Anr., [1980]
3 SCC 330, and The Hinger~Rampur Coal Co. Ltd. and Ors. v. The State of
Orissa and Ors., [ 1961] 2 SCR 53 7, to contend that the method of determining
D
the rate of levy would be a relevant fact in considering the character of levy
and that the standard on which tax is levied is a relevant consideration in
determining the nature of the tax although it cannot be regarded as conclusive ·r
in the matter. These decisions cannot be of any assistance to the learned ' ~,

counsel for the appellants because from the scheme of taxation in the present
E case it is clear that the levy is upon the multi-storeyed building or part
thereof which may be in the occupation of the owner or a particular occupier
who is deemed to be the 'owner' thereof for the purpose of the Act. Therefore,
the measure of taxation also does not vary in so far as the Act is concerned.
We find no substance in this argument.
F
The argument advanced on behalf of the appellants that _if multi-storeyed
buildings are classified into five stories and above as against buildings having
less than five floors it would offend the doctrine of equality has absolutely
no basis. Apart from the fact that somewhere limit has to be drawn between.
different types of buildings and if Legislature thinks five floors and above
G should be subject to tax, no fault can be found with it. It cannot be said that
.-;

those who live in these kinds of buildings which are subject to taxation upto
fourth floor are similar to those who live in the buildings having less than
five floors because it appears from the provisions "of the Municipal Corporation
Act and bye-laws thereto certain special amenities have to be provided in the
H buildings having fi_ve floors or more, as noticed by the High Court. Hence, -r
TATA IRON AND STEEL CO. LTD. v. STATE [RAJENDRA BABU, I.] 599

<
this contention is rejected. A

We do not find that there is any substance in the contention based on
discrimination between two sets of buildings nor are we impressed with the
other argument that there is dis_crimination because of want of appropriate
relationship or nexus between the· nature of levy and the classification of the
building made under the Act. B

Therefore, these appeals have no substance and stand dismissed. No
costs.

K.K.T. Appeals dismissed. C

.
;