Judgment

SHAH, J.: - Messrs. A Firpo Ltd., held as tenants premises No. 11, Government Place East, Calcutta, belonging to the Asiatic Assurance Company Ltd. under a lease dated August 6, 1941, at a monthly rental of Rs. 2,000/-. The rent was increased by mutual agreement with effect from November 1953 to Rs. 2,800/- per month. Messrs. A Firpo Ltd., had sublet a major part of the premises to five different tenants and the aggregate rent received from the sub-tenants amounted to Rs. 4,520/-.

2. The Corporation of Calcutta assessed the annual value of the premises at Rs. 32,076/- for six years prior to April 1, 1955. With effect from April 1, 1955, the Corporation assessed the annual value of the premises at Rs. 62,761/-. The objection raised by the owner against the determination of annual value was rejected by the Special Officer of the Corporation . In appeal by the Life Insurance Corporation of India (which had statutorily acquired the rights of the owner) the Court of Small Causes assessed Rupees 30,240/- as the annual value. The order was confirmed in appeal to the High Court under Section 183 (3) of the Calcutta Municipal Corporation Act, 1951. With certificate granted by the High Court, this appeal has been preferred.

3. In this appeal the Corporation claims that in determining the annual value of the premises the assessing authority was entitled to take into consideration the rental received by Messrs Firpo Ltd. from its sub-tenants. This Court in Corporation of Calcutta v. Smt. Padma Debi, (1962) 3 SCR 49 a case arising under the Calcutta Municipal Act, 1923 held that in assessing the annual value under Section 127 (a) of the Calcutta Municipal Act, 1923 the rent which the landlord may realise if the house was let is the basis for fixing the annual value of the building: the criterion being the rent realisable by the landlord and not the value of the holding in the hands of the tenant. The test of reasonableness of the gross annual rent at which the building may at the time of assessment reasonably be expected to let in Section 127 (a) is the rent which the landlord may realise if the house is let under a bargain between a willing lessor and a willing lessee uninfluenced by extraneous considerations, and in determining the reasonableness of the expectation of the landlord in the matter of rent a law which imposes penal consequences cannot be ignored. The law must be taken as one of the circumstances obtaining in the open market placing an upper limit on the rate of rent for which a building can reasonably be expected to let, and since a statutory limitation of rent circumscribes the scope of the bargain in the market, in no circumstances can the hypothetical rent exceed the limit prescribed by the law.

4. It was therefore clearly laid down by this Court in Smt. Padma Debi s case, (1962) 3 SCR 49 that in determining the annual value of the land or building for the purpose of ascertaining the consolidated rate, the standard rent in the maximum amount which can be taken into account.

5. In the present case the Court of Small Causes and the High Court have determined the annual value on the footing of the standard rent.

6. Counsel for the Corporation, however, contended that the decision in Smt. Padma Debi s case, (1962) 3 SCR 49 has no application to this case since that case was decided on the interpretation of Section 127 (a) of the Calcutta Municipal Act, 1923, whereas the present case falls to be determined on the interpretation of Section 168 of the Calcutta Municipal Corporation Act, 1951, of which the scheme is different. Section 168 (1) at the relevant time provided:

For the purpose of assessment to the consolidated rate the annual value of any land or building shall be deemed 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, x x x

Provided that in respect of any land or building the standard rent of which has been fixed un