Important Point
The annual value u/s. 166 of Calcutta Municipal Act, 1951 for property tax has to be fixed on the basis of fair rent determinable u/s. 8 of the West Bengal Premises Tenancy Act, 1956 and not on the basis of actual rent being realised by the landlord.

Headnote:Calcutta Municipal Act, 1951-Sections 168 and 180-Determination of annual value for property tax-West Bengal Premises Tenancy Act, 1956-Section 8(1)(c)-Fair rent-Construction of Multistoreyed Building in Calcutta after 1956 - Determination of annual value for property tax-Whether annual value should be fixed on the basis of fair rent as contemplated under West Bengal Premises Tenancy Act, 1956 or on the basis of actual rent being realised by the appellant? (The former)-Case Law discussed.
       Held : From the aforesaid decisions the principle which is deducible is that when the Municipal Act requires the determination of the annual value, that Act has to be read along with Rent Restriction Act which provides for the determination of fair rent or standard rent. Reading the two acts together the rateable value cannot be more than the fair or standard rent which can be fixed under the Rent Control Act. The exception to this rule is that whenever any Municipal Act itself provides the mode of determination of the annual letting value like the Central Bank of India’s case (supra) relating to Ahmedabad or contains a non-obstante clause as in Ratna Prabha’s case (supra), then the determination of the annual letting value has to be according to the terms of the Municipal Act. In the present case, Section 168 of the Municipal Act does not contain any non-obstante clause so as to make the Tenancy Act inapplicable and nor does the Act itself provide the method or basis for determining the annual value. This Act has therefore, to be read along with Tenancy Act of 1956 and it is the fair rent determinable under Section 8(1)(d) which alone can be the annual value for the purpose of property tax. (Para 17)
       For the aforesaid reasons, we are of the view that the decision of Calcutta High Court, under appeal, cannot be sustained. The annual value under Section 168 of the Municipal Act has to be fixed on the basis of fair rent determinable under Section 8 of the Tenancy Act. (Para 18)
       We, however, find that the proviso to Section 8(1)(d) of the Tenancy Act has not been considered so far in dealing with the question with regard to the fixation of the annual value. The decisions of this Court referred to hereinabove clearly bring out that the annual value cannot be more than the ‘fair rent’ or ‘standard rent’ (whatever may be the nomenclature in the relevant law of the State) which is determinable under the Rent Restriction Act. The proviso to Section 8(1)(d) of the Tenancy Act regards the contractual rent, for a period of 8 years, when the premises was first let out, to be the ‘fair rent’. When, therefore, the rateable value or the annual value for the purpose of determining the municipal tax has to be the ‘fair rent’ determinable under the Tenancy Act then, because of the proviso, it is agreed rent for a period of eight years which is the ‘fair rent’ and has to be taken into consideration in determining the property tax. Because of the proviso the annual value of the building for the period of eight years from the first letting has to be fixed on the basis of contractual rent and thereafter the annual value will have to be revised and fixed as per the formula contained in Section 8(1)(d) of the Tenancy Act namely 6-3/4 per cent, per annum on the aggregate amount of the actual cost of construction and the market price of the land on the date of commencement of construction as provided in that provision. To put it differently, it is only the ‘fair rent’ which can be taken into consideration for the purpose of fixing the annual value under the Municipal Act. Because of the fiction created by the proviso to Section 8(1)(d) of the Tenancy Act, the contractual rent is regarded as the ‘fair rent’ for a period of eight years from the date the premises was first let out. It is for that reason that this figure of ‘fair rent’ will be the annual value which will have to be revised after eight years when the proviso will no longer be applicable and the ‘fair rent’ will have to be determined on the basis of the formula contained in the said provision. (Para 19)
       In the present case, it is not known as to when the property was first let out and when does the period of eight years come to an end. It is no doubt true that in Special Leave Petition, it has been stated that the premises were constructed after 1964 and they were let out only in 1966 but the assessing authority has not examined the question by taking into consideration the effect of the proviso to Section 8(1)(d) of the Tenancy Act. It would, therefore, be necessary to determine as to when the property was first let out so that for a period of eight years, during the subsistence of tenancy, the contractual rent being the ‘fair rent’ will be regarded as the basis for fixing the annual value under Section 168 of the Municipal Act. Thereafter the annual value has to be determined in accordance with Section 8(1)(d) of the Tenancy Act. (Para 20)
       Accordingly, for the aforesaid reasons, the appeals are allowed. The impugned judgment of the High Court and the decision of the assessing authority is set aside with a direction that the assessing authority shall make a fresh assessment in accordance with law. Parties to bear their own cost. (Para 21)

Judgment

Kirpal, J.-Leave granted in SLP (C) No. 7343 of 1982.

2. The only question which arises in these appeals relates to the determination of annual value under Section 168 of the Calcutta Municipal Act, 1951 in respect of buildings which are actually let out to tenants on rent agreed, but not fixed by the Controller under the Rent Restriction Act for the purpose of assessment of property tax.

3. The appellant constructed a multi-storey building in Calcutta after the year 1956. By notice dated 10.10.1966 issued under Section 180 of the Calcutta Municipal Act, 1951 (hereinafter referred to as the ‘Municipal Act’), the respondent assessed the annual value of the said building at Rs. 63365/- with effect from 3rd quarter of 1966-67. The appellant filed objections to the aforesaid valuation. While disposing off the objections the special Officer reduced the value to Rs. 49,368/-. The appellant filed an appeal against the said order before the Court of Small Causes, Calcutta. The appeals for subsequent years for similar orders passed by the special Officer were also filed by the appellant. The main contention of the appellant in the said appeal was that the annual valuation of the property ought to be fixed on the basis of fair rent as contemplated under the Municipal Act read along with the provisions of Section 8(1)(d) of the West Bengal Premises Tenancy Act, 1956 (hereinafter referred to as the “Tenancy Act”) and not on the basis of the actual rent being realised by the appellant.

4. In order to lead evidence relating to the actual cost of construction of the building, the appellant moved an application before the Small Causes Court for permission to examine an expert valuer as a witness to prove the cost of construction of the said building. The Chief Judge of the Small Causes Court rejected the said application on the ground that such evidence was neither necessary for relevant for examining the correctness or otherwise of the determination of the annual valuation under Section 168(1) of the Municipal Act. A revision petition filed against the said order was rejected by the High Court of Calcutta. After the decision of this Court in the case of Dewan Daulat Rai Kapoor etc. etc. v. New Delhi Municipal Committee & Anr. etc. etc.1, wherein it was inter alia held that a building is governed by the provisions of the Rent Control Legislation and the landlord cannot reasonably be expected to receive anything more than the standard rent, the appellant once again applied to the Small Causes Court for recalling its earlier order and for permitting the appellant to lead evidence for the purpose of determination of the actual cost of construction. This application was allowed as the Chief Judge of the Small Causes Court was of the opinion that in view of the decision of this Court in Dewan Daulat Rai case (supra), the assessing authority has to follow the principle laid down in the Tenancy Act for determining the fair rent as the building had been constructed after 1956. It accordingly recalled its earlier order dated 7.6.1974 and allowed the appellant’s prayer for examining his expert valuer in order to arrive at the fair rent of the premises in accordance with the provisions of the Tenancy Act.

5. The respondent then filed appeals against the aforesaid decision of the Chief Judge, Small Causes Court. It was contended before the High Court that the decision in Dewan Daulat Rai’s case and other cases where the similar view had been taken, was distinguishable as the provisions of the West Bengal Statutes were different. Accepting this contention, the High Court came to the conclusion that on a correct interpretation of the Municipal Act and the Tenancy Act, the rateable value had to be fixed on the basis of the actual rent received and not on the basis of cost of construction. The order of the Chief Judge, Small Causes Court, who had allowed the examination of a expert valuer, was accordingly set aside. Hence, these appeals by special le

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1998 Supreme(SC) 405

Important PointThe annual value u/s. 166 of Calcutta Municipal Act, 1951 for property tax has to be fixed on the basis of fair rent determinable u/s. 8 of the West Bengal Premises Tenancy Act, 1956 and not on the basis of actual rent being realised by the landlord.

Cases Referred (11)

Important Point
The annual value u/s. 166 of Calcutta Municipal Act, 1951 for property tax has to be fixed on the basis of fair rent determinable u/s. 8 of the West Bengal Premises Tenancy Act, 1956 and not on the basis of actual rent being realised by the landlord.