2003 Supreme(SC) 605

2003(4) Supreme 530
SUPREME COURT OF INDIA
(From Mumbai High Court)
Mrs. Ruma Pal & B.N. Srikrishna, JJ.
Municipal Corporation of Greater Mumbai & Anr. -Appellants
versus
Kamla Mills Ltd. -Respondent
Civil Appeal No. 2452 of 2000
With
Civil Appeal No. 2477 of 2000
Decided on 11-7-2003
Counsel for the Parties :
For the Appearing Parties : K.K. Singhvi, Bhim Rao Naik, Aspi Chinoy, Harish N. Salve, Sr. Advocates, Pallav Shishodia, D.N. Mishra, Paresh Shah, E.R. Kumar, Rohit M. Alex, Nikhil Mehra, Advocates.

IMPORTANT POINT
For the determination of the annual value of a property for the purpose of levy of property tax, the rateable value cannot be more than the fair or standard rent which can be fixed under the Rent Control Act.

Headnote:Bombay Municipal Corporation Act -Sections 139 and 154-Bombay Rent Act-Section 5(10), 7 and 11-Property Tax-Manner of determination of rateable value-When a building constructed upon land previously assessed to Municipal tax is demolished for construction of new building-Is it open to Municipal Corporation to assess rateable value of land till construction of building by taking market value of land?-Respondent company running a textile mill, owned a large area of land comprising approximately 38000 sq. mtrs.-Entire property (land and building) assessed at rateable value of Rs. 3,70,505/-Policy decision granting permission to demolish old structures and construct residential buildings-Respondent company demolished some of the old structures standing on a part of its land and got plans approved for construction of new building-Failure to produce relevant material before assessor to show what was the standard rent-Proceedings restored before Assessor.

       Held : The case before us is governed by the provisions of a Rent Restrictions Legislation viz. The Bombay Rent Act. The Bombay Municipal Corporation Act neither contains a statutory definition of rateable value , nor does it lay down the manner in which the rateable value has to be computed, as distinguished from the situation in Commissioner Versus Griha Yajmanule Samkya & Ors. [2001 (5) SCC 561]. The Bombay Municipal Corporation Act neither contains a defining clause, nor a non-obstante clause, which would hold the field, notwithstanding the definition of standard rent in the Bombay Rent Act. Therefore, prima facie, this would be a case which would fall within the general principle laid down by the series of judgments commencing Padma Devi (supra) and ending with Srikant Kashinath Jituri (supra). (Para 22)

       What we are required to consider is what would a hypothetical tenant be willing to offer as reasonable rent for the premises in question. Upon the premises being offered to be let, there would be a hypothetical tenant; that hypothetical tenant would look at the restrictions applicable under the rent legislation and make a reasonable offer. Section 6 in Part-II of the Mumbai Rent Act, therefore, is hardly of relevance. We may examine the question from another angle. It surely cannot be contended that no rateable value can be fixed in respect of the premises occupied by the owner himself. In fact, Section 154 (1) of Mumbai Municipal Corporation Act would apply equally to such premises. Even in such a situation, the rateable value has to be ascertained on the basis of what a hypothetical tenant would offer for it as reasonable rent. If Mr. Singhvi s argument that Section 6(1) of the Mumbai Rent Act makes the provisions of Part-II inapplicable to such premises is accepted, then no taxes would be payable by any owner for self-occupied property. (Para 25)

       It must be remembered that the principle of standard rent has not been invoked by reason of any requirement or declaration under the Municipal Corporation Act, but by reason of the fact that if the rateable value is the reasonable annual rent at which the property may be expected to be let, then we must consider what a hypothetical tenant would be willing to offer as rent for the property let. As has been pointed earlier, the concept of reasonableness would necessarily include the concept of an owner and a tenant who are both law abiding and do not indulge in "black marketing". If there is a rent restriction legislation which imposes a limit on the rent which can be charged, then the concept of "reasonableness" would include that restriction also. This is the reason why in a series of judgments of this Court it has been laid down that the rateable value is limited by the standard rent determined or determinable under the provisions of the Rent Restriction Legislation. The only exception made was in a situation like Griha Yajmanule Samkya & Ors. (Supra), where the Municipal Corporation Act has a detailed method to fix the rateable value. As already noticed by the judgments of this Court, barring the two exceptional cases of Municipal Legislation containing non-obstante clause or deeming clause with regard to the rateable value, it must necessarily be held to be limited by the standard rent determined or determinable under the applicable rent control legislation. (Para 26)

       In the present case, as to whether the premises in question were let before first September, 1940, or thereafter, and, if so, what was the first letting rate, is not ascertainable from the record. In the circumstances, Shri Singhvi submits that the other alternative method of finding out the standard rent is "contractor s method" which has been judicially approved. Under this method the market value of the land has to be ascertained and reasonable return fixed thereupon to determine the standard rent. This is precisely what was done by the assessor and Collector by taking the market value Rs. 3,000/- per sq. mtr. as a fair value with a reasonable return of 12 thereupon. In fact, even the respondent suggested only Rs. 2500/- per sq. mtr. as the fair market value and did not raise any dispute with regard to the fair return. (Para 34)

       It is true that Section 11 of the Rent Act provides that even standard rent can be altered and re-fixed if there is any structural alteration or change in the amenities. It is urged by Shri Singhvi that demolition of the building and increasing the building potential of the land is one such change contemplated by Section 11 (a). This contention, we are unable to accept. Section 11 (a) is intended to enable the Court, upon an application in any suit or proceeding, to modify the standard rent as a result of structural alteration or change in the amenities involving further capital investment of the owner. We do not think that demolition of a building is one such contingency contemplated by Section 11 (a) of the Act. (Para 35)

       In the result, though we accept the proposition urged by the respondent that in the facts of the present case the standard rent would be the limit of the rateable value, we find that there was no material produced on record at any stage by the respondent to show what the standard rent was either in respect of the vacant land or in respect of the land on which the building was constructed and demolished, or in respect of the building after it was constructed. We accept the contention of the appellant that the burden of proving this fact, while objecting to the rateable value fixed by the Commissioner, is always on the respondent-assessee. We also accept the contention of the appellant that the respondent was less than fair to the appellant in not disclosing that its property had been occupied by National Stock Exchange of India Ltd. and National Security Depository Ltd. and in not disclosing the amounts paid by them. The respondent ought to have disclosed the fact, fairly and fully, and urged the legal contentions open to it based thereupon. These facts would have justified our allowing the appeal fully and restoring the assessment orders made by the appellant officers. However, we are not inclined to do so for the reason that the attention of the parties has not been focused on the core issue, as a result of which, perhaps, there was failure to produce relevant material before the assessor to show what was the standard rent. The interests of justice would require that the issue be reconsidered after giving an opportunity to the respondent to discharge the burden placed upon it under law. (Para 36)