Chaman Lal and others vs The State of Punjab and others

B.R. Tuli, J.—The petitioners are owner of properties situate at 1-Race Course Road, Amritsar bearing Nos. B-XIII/44S 1786 and 1787, for the purposes of Punjab Urban Immoveable Property Tax Act, 1940 (hereinaiter called the Act). It is stated by the petitioners that these properties were constructed in the year 1936 at a cost of Rs. 20,000, and for the years 1946-5l the gross rental value of these properties was assessed at Rs. 950/- per annum. For the period of five years, 1951 to 1956, the gross rental value was increased to Rs. 1080 /-, for the years 1956-61 it was increased to Rs. 1380/- and for the period 1961-66 it was further increased to Rs. 1940/-. The gross rental value of Rs. 1940/- was split up as Rs. 1400/ for property BXIII-44S-1786 and Rs. 540/- in respect of property B-XIII-44S-1787. For the years 1966-71 the Assessing Authority proposed to raise the gross rental value of these properties to Rs. 2640/- per annum. The petitioners objected to that valuation and pleaded that the gross rental value of these properties should not exceed Rs. 1125/- per annum as determined by the income tax Appellate Tribunal. Reliance was also placed on a judgment of their Lordships of the Supreme Court in The The Corporation of Calcutta Vs. Sm. Padma Debi and Others, . The Assessing Authority did not agree to reduce the gross rental value to Rs. 1125/- per annum but retained it at Rs. 1940/-, as was the value for the period 1961-66, by order dated January 17, 1966. Against that order the petitioner preferred an appeal to the Deputy Excise and Taxation Commissioners, who dismissed the same by order dated May 3, 1966. The revision petition met the same late at the hands of the Joint Excise and Taxation Commissioner, Punjab, Patiala, on April 21 1967. Copies of these orders are annexures C, ''E'' and ''G'' to the writ petition, The petitioners then filed the present writ petition in this Court on October 17, 1967, which was admitted on October 20, 1967. The return to the writ petition has been filed by Shri M.P. Mittra Excise and Taxation Officer, Amritsar.

The learned counsel for the petitioners has pleaded that both the properties are in the possession of owners wherein they reside. They have never been let put to, tenants. As the properties are situate in Amritsar, where the East Punjab Urban Rent Restriction Act is operative, the fair, rent of the properties should be determined in accordance with Section 4 of the said Act because under the provisions of that Act no landlord can, charge or recover higher rent than the fair rent determined under that Act. Reference is invited to Sections 6 and 19 (2) of the Rent Act which provide that no landlord shall claim or receive any amount in excess of the fair rent and if he does so, he commits an offence for which he can be punished with imprisonment which may extend to two years and with fine. The argument proceeds that the Assessing Authority should imagine that the properties are let out to a tenant and then determine its rental value according to the provisions of the Rent Act. Reliance is placed on the judgment of their Lordships, referred to above, in which it was observed with reference to Section 127 (a) of Calcutta Municipal Act, 1923, under which the annual valuation of the premises for the assessment of the tax was determined, as under:

It is said that Section 127 (a) does not contemplate the actual rent received by a landlord but a hypothetical rent which he can reasonably be expected to receive if the building is let. So stated the proposition is unexceptionable. Hypothetical rent may be described as a rent which a landlord may reasonably be expected to get in the open market but on open market cannot include a "black market", a term euphemistically used for commercial transactions entered into between parties in defiance of law. In that situation, a statutory limitation of rent circumscribes the scope of the bargain in the market. In no circumstances the hypothetical rent can exceed that limit.

Mahajan, J. in Inder Mohan v. The Excise and Taxation Commissioner, Punjab ILR (1962) 2 P&H 884, considered the matter of determining the gross rental value of the property for the purposes of the tax under the Act and after reference to Section 3 of the Act and Rule 4(e) and (f) of the Punjab Urban Immoveable Property Tax Rules, 1941, as under:

It will be apparent from the combined reading of these two clauses that it is the actual gross annual rent earned or which could reasonably be earned in respect of the property which will become the annual renting value. Clause (f) permits the assessing authority on the basis of any other property in the locality to revise the annua) letting valuation if the average gross annual rent ascertained under Clause (e) be not fair or reasonable. Even in this eventuality it is again the gross annual rent at which such property may reasonably be expected to be let from year to year. Therefore, if the property is subject to the provisions of the East Punjab Urban Rent Restriction Act, it must be held that it cannot earn or cannot be reasonably expected to earn more rent than what that Act permits. Therefore, fixing the annual rent in disregard of the restrictions on enhancement of rent by the East Punjab Urban Rent Restriction Act would be a violation of Clauses (e) and (f) of Rule 4. Thus, it was incumbent on the assessing authority to determine the annual rental Value for purposes of the assessment of the tax, with reference to the provisions of the East Punjab Urban Rent Restriction Act.

The learned Judge then quashed the orders of the Assessing Authority and the orders passed in appeal and revision and directed the Assessing Authority to proceed to assess the annual rental value of the property in accordance with law.

A Division Bench of this Court (Dulat and Pandit, JJ.) in Municipal Corporation of Delhi v. Ganesh Das (1964) 66 P.L.R. 361, interpreted Section 3(1) (b) of the Punjab Municipal Act, 1911, wherein annual value has been defined, as under:

According to Section 3(1)(b) of the Act, the annual value in the case of any house or building means a gross annual rent at which such house or building may reasonably be expected to let from year to year. The expression "reasonably be expected to let" has been interpreted by this Court as the amount which a landlord can recover under the law, but not the sum which he may chose to receive from his tenant in violation of the law. Thus, the Rent Control Act does modify the definition of the "annual value" as given in the Punjab Municipal Act.

Shamsher Bahadur, J. in Tejaswi Chand Khanna v. The Joint Excise and Taxation Commissioner, Punjab, and others C.W. 2662 of 1965, C.W. No. 2662 of 1965 decided on February 23, 1967), held, following the judgment of their Lordships of the Supreme Court referred to above, that the reasonable rent envisaged in the provisions of the Punjab Urban Immoveable Property Tax Act, and the Rules made thereunder, can be nothing more than the fair rent of the building whose fixation has to be made under the provisions of the East Punjab Rent Urban Restriction Act. Where fair rent of a building has not been fixed by the Rent Controller, the Assesing Authority has to determine the same in accordance with the provisions of the East Punjab Urban Rent Restriction Act.

The same point was considered by Kapur, J. of the Delhi High Court in Girdhari Lal v. Excise and Taxation officer (1967) 69 P.L.R. 356, and the learned Judge held that the annual value of property is to be determined on the basis of the rent whicri the owner of the property can lawfully recover from his tenant. For this purpose, the Assessing Authorities have to determine the fair rent which the owner can recover under the provisions of the East Punjab Urban Rent Restriction Act.

The learned counsel for the respondents has not been able to cite any decision taking a different view and has, in fact, conceded that the Assessing Authority ought to have determined the gross rental value of the properties in question in accordance with the provisions of the Rent Act.

For the reasons given above, this petition is accepted with costs and the order of the Assessing Authority, the Deputy Excise and Taxation Commissioner, and the Joint Excise and Taxation Commissioner, Punjab, copies of which are annexures ''C, ''E'' and ''G'' to the writ petition, are hereby quashed, and the Assessing Authority is directed to determine the gross rental Value of the properties in accordance with the provisions of the East Punjab Urban Rent Restriction Act. Counsel''s fee Rs. 100/-.