1999 Supreme(Cal) 44

High Court of Calcutta
Tarun Chatterjee, J.
Motilal Naresh Kumar
Vs.
Calcutta Municipal Corporation & Ors.
C.O. No. 1889 of 1995
Decided on : 5th February, 1999

In determining the annual value under section 174, taxes paid by the owner on behalf of the tenant are to be deducted from the gross amount paid by the tenant to the owner for the purpose of computing "rental value" of the premises and expenses incurred by the landlord in providing services and amenities to tenant are to be deducted in arriving at the said "rental value".

Headnote:

MUNICIPAL ASSESSMENT - Annual value - Determination - Whether taxes paid by the owner on behalf of the tenant are to be deducted from the gross amount paid by the tenant to the owner for the purpose of computing "rental value" of the premises and whether expenses incurred by the landlord in providing services and amenities to tenant are to be deducted in arriving at the said "rental value"?

Fact of the Case:

The petitioner, a registered partnership firm, was the owner of a space measuring about 6053 sq. ft. on the first floor (eastern block) in a two-storied building (premises No.1 Crooked Lane, Calcutta). An agreement was produced by the petitioner before the Hearing Officer which was kept on record from which it appears that by the said agreement entered into by and between the petitioner and Bank of India. The Bank of India was inducted as a tenant under the petitioner in respect of the aforesaid space of the said premises. The said agreement provided inter alia, that the landlord would be paid a composite amount by the Bank. The case of the petitioner before the Hearing Officer as well as before the appellate tribunal was that this composite amount paid by the tenant included not only the rent but also a reasonable and fair compensation for some of the obligations which the petitioner agree to perform on behalf of the Bank viz. the following:- i) To pay the occupier's share of the consolidated rate determined by the Corporation so as to absolve the Bank from any obligation to reimburse the petitioner in respect thereof; ii) To pay commercial surcharge payable' by the Bank to the Corporation so as to absolve the Bank from any obligation to separately reimburse the petitioner in respect of payment of such commercial surcharge; iii) To render certain services such as provision for Guard, Sewerage, day to day maintenance etc.

Finding of the Court:

The Court held that in determining the annual value under section 174, taxes paid by the owner on behalf of the tenant are to be deducted from the gross amount paid by the tenant to the owner for the purpose of computing "rental value" of the premises and expenses incurred by the landlord in providing services and amenities to tenant are to be deducted in arriving at the said "rental value".

Issues: 1. Whether taxes paid by the owner on behalf of the tenant are to be deducted from the gross amount paid by the tenant to the owner for the purpose of computing "rental value" of the premises? 2. Whether expenses incurred by the landlord in providing services and amenities to tenant are to be deducted in arriving at the said "rental value"?

Ratio Decidendi: 1. The Court held that the "rent" cannot be understood, as contemplated in West Bengal Premises Tenancy Act for the purpose of determination of annual value of a premises. When the annual value is to be determined on the basis of the contractual rent, care must be taken to exclude from the gross payment made by the tenant to the landlord, any such amount which may not strictly relate to the use and occupation of the premises. 2. The Court held that the hypothetical rent is to be estimated in the case of all hereditaments on the assumption that the tenant pays all tenant's rates and taxes. If, therefore, an actual rent is used as a basis for calculating the hypothetical rent of a hereditament and that rent includes such a rate, a deduction must be made from it; and for this purpose the amount to be deducted must be ascertained irrespective of the fact that, in paying the rate, the landlord receives an allowance or abatement.

Final Decision: The Court allowed the application and set aside the impugned order of the Tribunal to the extent indicated. The annual value of the premises in question was determined at Rs.4,01,704.00/-.