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2012 Supreme(Bom) 1718
High Court of Judicature at Bombay
D.Y. CHANDRACHUD
The Municipal Corporation of Greater Mumbai & Others
Versus
Dalamal Tower Premises Co-operative Society Limited & Another
APPEAL NO.801 OF 2004 IN WRIT PETITION NO.2120 OF 2004
Decided On : 11-09-2012
For the Appellants:A.Y. Sakhare, Senior Advocate with S.S. Pakale, Ms. Geeta Joglekarand, Ms. Nikita Trivedi i/b. S.H. Ujjainwala & Ors., Advocates.
For the Respondents:R1 & R2, Dr. Milind Sathe, Senior Advocate with Arif Doctor i/b. M/s. Junnarkar & Associates, Advocates, R3, A.B. Ketkar, AGP. For the Intervenor:Janak Dwarkadas, Senior Advocate with Sharan Jagtiani & Gaurav Mehta i/b. Mahimtura & Co., Advocates.
Headnote:MUMBAI MUNICIPAL CORPN. ACT - Section 154(1) - Determination of rateable value for taxation. Where premises were exempted from provisions of Maharashtra Rent Control Act, 1999, actual rent received by landlord is a relevant consideration for determination of rateable value for taxation.
The charge of tax under Section 143 is on buildings and lands in Mumbai. The measure of the property tax is the rateable value under Section 154 which is based on the amount of annual rent for which the building or land may reasonably be expected to let from year to year.
Where the premises of which the rateable value is to be determined are immune from the operation of the Rent Act is a result of the application of Section 3 of the Maharashtra Rent Control Act, 1999, the standard rent determinable with reference to the provisions of the Rent Act is not an inflexible outer limit. It is where the Rent Act is applicable to the premises of which assessment is sought to be made that the reasonable expectation of the landlord cannot exceed an amount computed with reference to the standard rent. As a natural corollary, when the Rent Act does not apply to the premises, the landlord is not constrained to a situation where he can charge no more than the standard rent.
That is a circumstance which can be taken into consideration by the assessing authority and the actual rent realised by the landlord is a material factor. If there are special circumstances on the basis of which the landlord submits that the actual rent is not reflective of what the premises may reasonably be expected to let, the burden lies on him to establish the existence of such circumstances to the satisfaction of the assessing authority. Where the premises are exempt from the provisions of the Maharashtra Rent Control Act, 1999, it is not unlawful for the landlord to claim or receive an extent in excess of the standard rent since the provision of Section 10 would not be attracted. In such a case, the actual rent received by the landlord is in the absence of special circumstances a relevant consideration which maybe borne in mind by the assessing authority while determining the rateable value for the purpose of municipal taxation under Section 154(1) of the Mumbai Municipal Corporation Act, 1888.
The assessing authority must have regard to all relevant facts and circumstances while applying the standard of reasonableness under Section 154(1), including the prevalent rate of rents of lands and buildings in the vicinity of the property being assessed, the advantages and disadvantages relating to the premises, such as, the situation, the nature of the property, the obligations and liabilities attached thereto and other features; if any, which enhance or increase their value.
The Reference :
On a difference of opinion between Mr. Justice D.K. Deshmukh and Mr. Justice R.G.Ketkar, constituting a Division Bench, in an appeal arising out of the decision of a Single Judge, the following question of law has been sent for reference to a third judge:
“(i) In view of the repeal of the Bombay Rent Act and enactment of the Maharashtra Rent Control Act, is the Bombay Municipal Corporation justified in taking into consideration the actual amount of rent received or receivable by the landlord in relation to the units which are let out, but where the lease is exempted from the provisions of the Rent Act for determination of annual letting value with effect from 1 April 2000?”
The Controversy:
2. Section 140 of the Mumbai Municipal Corporation Act, 1888, provides for the levy of taxes on buildings and lands in Brihan Mumbai. These taxes which are called property taxes comprise of: (i) water tax; (ii) additional water tax; (iii) sewerage tax; (iv) additional sewerage tax; (v) general tax; (vi) education cess; (vii) street tax; and (viii) betterment charges. Section 154(1) aligns the ratable value of a building or land assessable to property taxes with the annual rent for which such land or building “might reasonably be expected to let from year to year”. In several judgments of the Supreme Court dating back to the Corporation of Calcutta vs. Padma Debi, (AIR 1962 SC 151)it has been held that where rent control legislation prescribes that a landlord can recover no more than the standard rent from the tenant and renders it unlawful for a landlord to recover rent in excess of the standard rent, in assessing the annual value for the purposes of municipal legislation for the levy of property taxes, the standard rent is the upper limit of the rent at which a building can reasonably be expected to let. The Bombay Rents, Hotel and Lodging House Rates Control Act, 1947 provided certain exemptions in Section 4. Upon the enactment and enforcement of the Maharashtra Rent Control Act, 1999, the exemption has been recast and broadened in Section 3.
3. The issue which falls for determination relates to the consequences, if any, that would ensue in computing the ratable value of land or building where the premises in a building are exempt from the provisions of rent control legislation. According to the Municipal Corporation, when the premises are exempt from the operation of the rent control legislation, the contractual bargain between a landlord and a tenant is not circumscribed by the provision for the fixation of standard rent in the Rent Act. Moreover, once the premises are exempt from the Rent Act, it is not unlawful for a landlord to receive rent in excess of the standard rent. On the other hand, according to the property owners, the true test to be applied is whether rent control legislation is in operation in the area in which the premises are situated and if it is, it would make no difference that the premises are exempt from the operation of rent control legislation. Hence, according to the property owners even if the premises are exempt from the Rent Act, the annual value for the purposes of municipal legislation cannot exceed the standard rent under rent legislation.
Submissions:
4. On behalf of the Municipal Corporation, Counsel submitted that:
(i) The view which has been taken by Mr.Justice Ketkar accords with the statutory provisions contained in the Mumbai Municipal Corporation Act, 1888 and the law laid down by the Supreme Court and should be accepted;
(ii) Under Section 139A, property taxes leviable on lands and buildings in Brihan Mumbai are to consist of the water tax, water benefit tax, sewerage tax, sewerage benefit tax, general tax, education cess, street tax and betterment charges. Sub-section (2) of Section 139A makes it clear that for the purpose of the levy of property taxes, the expression “building” includes a flat, a gala, a unit or any portion of the building;
(iii) Section 154(1) r
