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Judgment
Sethi, J.—Aggrieved by the determination of annual valuation madein terms of Section 174 of the Calcutta MunicipalCorporation Act, 1980 (hereinafter called "the 1980 Act"),the appellant-owner of a nine storeyed building, admittedly,used for commercial purposes, filed an appeal before theMunicipal Assessment Tribunal who vide its order dated26th February, 1999 allowed the appeal and fixed theannual value on the basis of rent actually received by theappellant-owner. Feeling aggrieved, the respondent-corporation approached the High Court under Article 227 ofthe Constitution of India who, vide the order impugned inthis appeal, set aside the order of the Tribunal anddirected it to hear the appeals on merits keeping in mindthat total amount paid by the sub-tenants to the tenant ofthe appellant should also be taken into consideration inassessing the annual valuation.
It is not disputed that the property in question wasleased out by the appellants to their tenant, namedBanwarilal Pasari at a rental of Rs. 75,000/- per month videa duly executed lease deed (Annexure P-1). There is also nodispute that the building is a nine storeyed building and isused for commercial purposes. The respondent-Corporationcarried out the general revision of the annual valuation ofthe premises effective from fourth quarter of 1984-85 andalso for the period from fourth quarter of 1990-91.Proposed valuation was communicated to the owners vide twonotices issued under the 1980 Act directing them to attendthe hearing before the Hearing Officer of the Corporation onthe date specified in the notice. The appellant submittedobjections to the notices and objected to the samechallenging the proposed valuation and the basis thereof.The Hearing Officer vide his two orders dated 15.4.1996fixed annual valuation from fourth quarter of 1984-85 atRs. 18,80,600/- and from fourth quarter of 1990-91 atRs. 21,63,560/-. The annual valuation assessment was madeunder Section 174 of the 1980 Act by taking intoconsideration the rent paid by the sub-tenants. TheMunicipal Assessment Tribunal accepted the appeal of theowners by relying upon the judgment of this Court in Corporation of Calcutta Vs. Life Insurance Corporation of India, . Not satisfied with the judgment ofthe Tribunal, Municipal Corporation moved the High Court byway of a petition under Article 227 of the Constitution ofIndia, which was allowed by setting aside the order of theTribunal vide judgment impugned in this appeal. The HighCourt held that the aforesaid decision of this Court had noapplication to an assessment made u/s 174 of the1980 Act which was found to be materially different fromSection 168 of the Calcutta Municipal Act, 1951 under whichthe assessment had been made in Life Insurance Corporation'scase (supra). The High Court further held that under 1951Act the annual valuation in no case could exceed thestandard rent fixed by the West Bengal Premises Rent Control(Temporary Provision) Act, 1950 but under the 1980 Act whichhad a non-obstante clause, the annual valuation can be fixednotwithstanding anything contained in the West BengalTenancy Act, 1956 or any other law for the time being inforce. It has been further held that under the 1980 Act,the consolidated rate is primarily leviable, if the land andbuilding is let upon lessor and if the land and building issub-let, still upon the superior lessor u/s 193 ofthe Act, and for that reason Section 194 of the Act hasconferred a right upon the lessor, lessee or the sub-lesseeto recover the excess amount from their respective tenantsfor the excess payable by them due to creation of tenancy orsub-tenancy. It was further held that the MunicipalCorporation is in no way bound by the fixation of standardrent of fair rent by the Rent Controller and the rentrealised by a tenant from the sub-tenant or by a sub-tenantfrom his tenant is required to be taken into considerationand such amount to be treated as gross rent of the land orbuilding for the purposes of Section 174 of the 1980 Act.Finding that the Appellate Tribunal had acted illegally andwith material irregularity in holding that in assessingannual valuation of the building the amount realised fromthe sub-tenants cannot be taken into consideration, thematter was remanded to the Tribunal to hear the appealafresh on merits and decide the same in the light of theobservations made by the High Court. Not satisfied with theJudgment of the High Court, the owners of the building havepreferred this appeal. When this appeal was listed in theCourt on 10th November, 2001, the Judges constituting theBench felt that following observations of this Court in thecase of LIC required reconsideration:
"But under the Act the quantum of the consolidatedrate depends upon the annual values of land orbuilding on the gross rent for which the land orbuilding might reasonably be expected to let and not the gross rent at which the subordinateinterest of a tenant may be expected to sublet "
The Bench directed the Registry to place the matter beforethe Hon'ble Chief Justice for listing this matter before aBench of three Judges. In such circumstances this appealhas come before us.
It is contended on behalf of the Appellant that theorder passed by the Municipal Assessment Tribunal wasstrictly according to law and did not suffer from anyinfirmity with which the High Court could have interfered.It is submitted that while assessing the valuation of theproperty, the amount taken by the tenant from a sub-tenantcannot be taken into consideration in view of the judgmentof this Court in LIC's case (supra). According to theappellant, the annual value of the land and building has tobe deemed to be gross annual rent including service chargesas contemplated u/s 174 of the 1980 Act which doesnot include the rent received by a 'tenant from the sub-tenant. According to the appellant annual value has to bedetermined on the basis of the actual rent received by theowner unless it is established that such rent is notbonafide paid and that the same is shown fraudulently onlyfor the purposes of depriving the authorities from assessingthe annual rental value. It is argued on behalf of theappellant that despite the changes made in the 1980 Act, thelaw laid down in Padma Debi's case is still valid for thepurpose of determining the gross annual rent of a buildingunder the Calcutta Municipal Corporation Act. As in thepresent case the assessment made by the Tribunal proceeds onthe basis of the actual rent received by the appellant andin the absence of any allegations of extraneouscircumstances, the order of the Tribunal has to be upheld bysetting aside the impugned judgment. It is also stated thatin the present case there is no difference between thestandard rent and the actual rent realized by the landlordfrom the tenant because of application of Section 2 andSection 9 of the West Bengal Premises Tenancy Act. Theissue as to whether the standard rent is the upper limit ofthe reasonable rent does not fall for decision, under thecircumstances of the present case.
It is contended on behalf of the respondent-Corporationthat the High Court has correctly interpreted Section 174 of1980 Act which is in accordance with the various judgmentsof this Court. It is submitted that in The Corporation of Calcutta Vs. Sm. Padma Debi and Others, , thisCourt had divided the municipal laws into two districtgroups. One such group, referred to municipal laws ofcertain States which did not expressly exclude applicationof Rent Restriction Acts in the matter of determination ofannual value of a building for the purposes of levyingproperty taxes and the other group of such municipal lawswhich expressly exclude application of Rent Restriction Actsin the matter of such determination. It is submitted thatunlike Calcutta Municipal Act, 1923 and Calcutta MunicipalAct, 1951, the new 1980 Act contains specific provision inSection 174 providing a non obstante clause specificallyexcluding the operation and effect of the West BengalPremises Tenancy Act, 1956 and any such other law in force,which would fall in the second group of cases as referred toin Padma Debi's case (supra).
To appreciate the rival contentions of the parties, itis necessary to make reference to some statutory provisionsrelevant for the purposes of resolving the controversy. The1980 Act was enacted to amend and consolidate the lawrelating to the municipal affairs of Calcutta. Chapter XIIdeals with the power of taxation at consolidated rates.Section 170 Authorises the Corporation to levy certain taxesenumerated therein. Section 174, dealing with thedetermination of annual valuation of the property within themunicipal corporation provides:
"174. Determination of annual valuation - (1)Notwithstanding anything contained in the WestBengal premises Tenancy Act, 1956 or in any otherlaw for the time being in force, for the purposeof assessment to the consolidated rate, the annualvalue of any land or building shall be deemed tobe the gross annual rent including servicecharges, if any, at which such land or buildingmight at the time of assessment be reasonablyexpected to let from year to year, less anallowance of ten per cent, for the cost of repairsand other expenses necessary to maintain such landor building in a state to command such gross rent:
Provided that where there is a transfer, intervivos, of ownership of any land or building sincethe last preceding periodical assessment underSection 179, the annual value of such land orbuilding shall be fixed at seven and a half percent of the amount stated in the deed of transferas consideration for such transfer or, if noconsideration is stated in such deed of transfer,at seven and a half per cent of the estimatedmarket value thereof:
Provided further that while determining the annualvalue in the case of any land or building orportion thereof exclusively used by the owner forhis residential purpose, the gross annual rent ofsuch land or building or portion, as the case maybe, shall be reduced, --
(a) where the gross annual rent does not exceedsix hundred rupees, by thirty per cent;
(b) where the gross annual rent exceeds sixhundred rupees but does not exceed eighteenthousand rupees, by such percentage of thegross annual rent as is worked out bydividing the gross annual rent by six hundredand subtracting the quotient from thirty-one,the difference being rounded off to thenearest place of decimal:
Provided also that no such reduction in grossannual rent shall be made-
(a) in case the total covered area in any land orbuilding under occupation for residentialpurpose by the owner exceeds one hundred andfifty square meters, or
(b) where a person owns or occupies forresidential purposes more than one plot ofland or building or portions thereof withinthe municipal limit of Calcutta.
(2) The annual value of any land which is notbuilt upon shall be fixed at seven per cent of theestimated market value of the land.
(3) If the gross annual rent of any class orclasses of land or buildings used exclusively forhospital or educational purposes or for thepurposes of sports or as a place of worship or asa place for disposal of the dead cannot be easilyestimated, the gross annual rent of such buildingshall be deemed to be five per cent of the valueof the building obtained by adding the estimatedcost of erecting the building at the time ofassessment less a reasonable amount to be deductedon account of depreciation, if any, to theestimated present market value of the land valuedwith the building as part of the same premises.
(4) In the case of any land or building or partthereof used for public cinema shows or theatricalperformances or as a place of similar publicrecreation, amusement or entertainment, the grossannual rent of such land or building or partthereof, as the case may be, shall be deemed to beseven and a half per cent of the gross annualreceipts in respect of such cinema shows ortheatrical performances or place of publicrecreation, amusement or entertainment, includingreceipts from rent and advertisements and sale ofadmission tickets but excluding taxes on the sameof such tickets:
Provided that the provisions of this sub-sectionshall not apply in the case of temporary fairs,circuses, and casual shows or performances.
(4A) If the gross annual rent of any land orbuilding or part thereof cannot be easilyestimated, the gross annual rent of such land orbuilding for the purposes of Sub-section (1) shallbe deemed to be seven and half per cent of thevalue of the building obtained by adding theestimated present cost of erecting the building atthe time of assessment less a reasonable amount tobe deducted on account of depreciation, if any, tothe estimated present market value of the land:
Provided that the estimated present cost shall notinclude the cost of any plant or machinery,excepting those enumerated in Schedule VIII, onthe land or the building as aforesaid.
(5) The annual value as determined under thisChapter shall be rounded off to the nearest tenrupees."
Section 180 deals with the revision of assessment andSection 181 provides for settlement of returns andinspection of lands and buildings for the purposes ofassessment. Section 136 provides that subject to provisionsof Section 181 or Section 182 any objection to the annualvalue of the land and building as entered in the assessmentlist shall be made by the owner or the person liable to paythe consolidated rate, in writing, to the MunicipalCommissioner before the date fixed in the notice underSection 194 or Section 195 and shall state in what respectthe annual value is disputed. Section 188 deals with thehearing of objections and Section 189 provides an appealbefore the Municipal Assessment Tribunal. Section 193catalogues the incidence of consolidated rate on lands andbuildings and provides:
"193(1) The consolidated rate on lands andbuildings shall be primarily leviable, --
(a) if the land or building is let, upon thelessor;
(b) if the land or building is sublet, upon thesuperior lessor;
(c) if the land and building is unlet, upon theperson in whom the right to let such land orbuilding vests.
(2) The consolidated rate on any land orbuilding, which is the property of the Corporationand the possession of which has been deliveredunder any agreement or licensing arrangement,shall be leviable upon the transferee or thelicensee, as the case may be.
(3) The liability of the several owners of anyland or building constituting a single unit ofassessment, which is of purports to be severallyowned in part or flats or rooms, for payment ofconsolidated rates or any instalment thereofpayable during the period of such ownership shallbe joint and several:
Provided that the Municipal Commissioner mayapportion the amount of consolidated rate on whichland or building among the co-owners.
(4) Notwithstanding the vesting of any land inthe State under the Calcutta Thika Tenancy(Acquisition and Regulation) Act, 1981, in thecase of any land comprised in a thika tenancy, theconsolidated rate assessed in respect of such landand any hut or building made thereon shall beprimarily leviable upon then thika tenant.
Section 194 provides:
"194. Apportionment of liability for consolidatedrate on land or building when the premisesassessed are let or sublet -- (1) If the annualvaluation of any land or building exceeds theamount calculated on the basis of the rent of suchland or building payable to the person upon whomthe consolidated rate on such land or building isleviable u/s 193, such person shall beentitled to receive from his tenant and differencebetween the amount of the consolidated rate onsuch land or building and the amount which wouldbe leviable if the consolidated rate on such landor building were calculated on the basis of therent payable to him.
(2) If the annual valuation of any land orbuilding which is sublet exceeds the amountcalculated on the basis of rent of such land orbuilding payable to the tenant by his sub-tenantor to the sub-tenant by the person holding underhim, the tenant or the sub-tenant shall beentitled to receive from his sub-tenant or theperson holding under him, as the case may be, thedifference between any sum recovered under thisAct from such tenant or sub-tenant and the amountof consolidated rate on such land or buildingwhich would be leviable if the annual valuation ofsuch land or building were calculated on the basisof rent payable to the tenant by him sub-tenant orthe sub-tenant by the person holding under him."
It may be noticed at this stage that before theincorporation of Section 174 of 1980 Act, Section 168 of theCalcutta Municipal Act, 1951 dealt with the assessment oflands and buildings to the consolidated rate. Sub-section(1) of Section 168 provided:
"168 (1) For the purposes of assessment to theconsolidated rate the annual value of any land orbuilding shall be deemed to be the gross annualrent at which the land or building might at thetime of assessment be reasonably expected to letfrom year to year, less, in the case of abuilding, an allowance of ten per cent for thecost of repairs and for all other expensesnecessary to maintain the building in a state tocommand such gross rent:
Provided that in respect of any land or buildingthe rent of which has been fixed under theprovisions of West Bengal Premises Rent Control(Temporary Provisions) Act, 1950 or the WestBengal Premises Tenancy Act, 1956, the annualvalue thereof shall not exceed the annual amountof the rent so fixed."
Similarly, Section 127 of the Calcutta Municipal Act, 1923provided:
"127. For the purpose of assessing land andbuilding to the consolidated rate,--
(a) the annual value of land, and the annualvalue of any building erected for lettingpurpose or ordinarily let, shall be deemed tobe the gross annual rent at which the land orbuilding might at the time of assessmentreasonably be expected to let from year toyear, less, in the case of a building, anallowance of ten per cent for the cost ofrepairs and for all other expenses necessaryto maintain the building in a state tocommand such gross rent; and
(b) the annual value of any building not erectedfor letting purposes and not ordinarily letshall be deemed to be five per cent on thesum obtained by adding the estimated presentcost of erecting the building, less areasonable amount to be deducted on accountof depreciation (if any), to the estimatedpresent value of the land valued with thebuilding as part of the same premises.
Provided as follows:-
i) the annual value of the bustee shall bedeemed to be the gross annual rent at whichthe land contained within it, excluding thelands which have been left vacant for thepurposes of any bustee street prescribed inor under a standard plan approved by theCorporation under Chapter XXII, mightreasonably be expected to let from year toyear, plus the gross annual rent at which thehuts erected thereon might reasonably beexpected to let from year to year, afterdeducting therefrom the rent of the land andan allowance of ten per cent, for the cost ofrepairs and for all expenses necessary tomaintain such huts in state to command suchgross rent;
ii) in calculating the value of any land orbuilding under this section, the value of anymachinery on such land or in such buildingshall be excluded, but all fixtures includinglifts and electric and other fittings whichadd to the convenience of the building shallbe valued, subject in the case of a lift tosuch deduction from the valuation, as theExecutive Officer may think proper, onaccount of the cost of repairs to,maintenance of, and attendance on, such lift;
iii) if in the case of building valued underClause (b), the annual value of which doesnot exceed five hundred rupees, anyexceptional circumstances exist which rendera valuation of five per cent, on the cost oferecting the building less depreciation,excessive, a lower percentage may be taken;
(iv) when any building has been valued at aspecial percentage taken under proviso (iii),it may be re-valued at any time after theexception circumstances referred to in thatproviso have ceased to exist."
The words "notwithstanding anything contained in theWest Bengal Premises Tenancy Act, 1956 or any other law forthe time being in force" appearing in Section 174 of 1980Act were non existent in Section 168 of 1951 Act andSection 123 of 1923 Act.
In support of their view points, learned counsel forthe parties have relied upon various judgments of this Courtreported in Sm. Padma Debi's case (supra); LIC's case (supra); The Guntur Municipal Council Vs. The Guntur Town Rate Payers' Association etc., ; Municipal Corporation, Indore and Others Vs. Smt. Ratnaprabha and Others, ; Dewan Daulat Rai Kapoor and Others Vs. New Delhi Municipal Committee and Others, ; Dr. Balbir Singh and Others Vs. M.C.D. and Others, ; Srikant Kashinath Jituri and others Vs. Corporation of the City of Belgaum, ; Indian Oil Corporation Ltd. Vs. Municipal Corporation and Another, ; Asstt. General Manager, Central Bank of India and Others Vs. Commissioner, Municipal Corporation for the City of Ahmedabad and Others, ; East India Commercial Co. Pvt. Ltd. Vs. Corporation of Calcutta, ; Government Servant Co-operative House Building Society Limited and Others Vs. Union of India and Others,
In Padma Debi's case (supra) this Court dealt with thelaw relating to annual valuation u/s 127 of BengalAct No. 3 of 1923 and held that the words "gross annual rent"at which the land or building might, at the time ofassessment, reasonably be expected to let from year to yearimplies that the rent which the landlord might realise ifthe house was let is the basis for fixing the annual valueof the building. The criterion was the rent realisable bythe landlord and not the value of the holding in the handsof the tenant. The value of the property to the owner isthe standard rent in making the assessment. The word"reasonably" appearing in the section was held to be notcapable of precise definition as in ultimate analysis thesame was the question of fact. Whether a particular act wasreasonable or not depended upon the circumstances in a givencase. A bargain between a willing lessor and willing lesseeuninfluenced by any extraneous circumstances can afford aguiding test of reasonableness. The phrase "at the time ofassessment" was held to mean the assessment commenced withthe making of the valuation u/s 131 of the Act andended with the determination of the objection under Section140 thereof. As in that case the Rent Control Act of 1950was found to be in existence before determination of theassessment, the corporation was held to have no power to fixthe annual value of the premises higher than the standardrent.
In LIC's case (supra) this Court dealt with Section 168of the Calcutta Municipal Corporation Act for the purposesof determination of annual value of the premises. The factsof that case were that M/s. A. Firpo Ltd. were the tenants ofthe building belonging to Asiatic Assurance Company Ltd.under a lease at a monthly rent of Rs. 2,000/- which wasincreased by mutual agreement to Rs. 2800/- per month.M/s. Firpo Ltd., the lessee had sub-let a major part of thepremises to five different tenants and the aggregate rentreceived from the sub-tenants amounted to Rs. 4520/-. Thecorporation assessed the annual value of the premises atRs. 32076/- for six years. The objection raised by the owneragainst the determination of the annual value was rejectedby the Special Officer of the Corporation and in appealfiled by the LIC, which had statutorily acquired the rightof the owner of the building, the court of Small Causesassessed Rs. 30240/- as the annual value. The said order wasconfirmed in appeal to the High Court u/s 183(3)of the Calcutta Municipal Corporation Act, 1951. In appealfiled in this Court, the corporation claimed that indetermining the annual value of the premises the assessingauthority was entitled to take into consideration the rentalreceived by M/s. A. Firpo Ltd. from its sub-tenant. Reliancewas placed upon Padma Debi's case . This Court approved thejudgment in Padma Debi's case , but finding that as thestandard rent stood determined by the definition in Section2(10)(b) of the West Bengal Premises Rent Control (TemporaryProvisions) Act, 1950, held that the High Court was right inassessing the annual value on the basis of the standard rentas statutorily determined. It was further held that underthe Act the quantum of consolidated rate depends upon thevalue of the land or building or the gross rent for whichthe land or building might reasonably be expected to let andnot the gross rent at which the subordinate interest of atenant may be expected to sub-let. In determining theassessment of annual value, the assessing authority is notconcerned with the rent which the tenant may receive fromhis sub-tenant. It is the gross rent which the owner mayrealise by letting the land or building under a bargainuninfluenced by extraneous considerations which determinesthe annual value.
13.In Guntur Town Rate Payers' Association's case (supra)it was held that the test for determining the rent at whichthe building may reasonably be expected to be let isessentially what rent premises can lawfully fetch, if letout to a hypothetical tenant. The municipality is not freeto assess any arbitrary annual value and has to look to andis bound by the fair or the standard rent which would bepayable for a particular premises under the Rent Control Actin force during the year of assessment. Such findings werereturned on the basis of the judgment of this Court in PadmaDebi's case .
In Smt. Ratnaprabha's case (supra) this Court for thefirst time considered the effect of non obstante clauseappearing in Madhya Pradesh Municipal Corporation Act, 1956for determining the gross annual rent for which the buildingmight reasonably be expected to be let. Clause (b) ofSection 138 of the said Act provided:
"(b) The annual value of any building shallnotwithstanding anything contained in any otherlaw for the time being in force be deemed to bethe gross annual rent at which such building,together with its appurtenances and any furniturethat may be let for use or enjoyment therewithmight reasonably at the time of assessment beexpected to be let from year to year, less anallowance of ten per cent for the cost of repairsand for all other expenses necessary to maintainthe building in a state to command such grossannual rent."
Interpreting the section, the Court held:
"As has been stated, Clause (b) of Section 133 ofthe Act provides that the annual value of anybuilding shall 'notwithstanding anything containedin any other law for the time being in force' bedeemed to be the gross annual rent for which thebuilding might "reasonably at the time of theassessment be expected to be let from year toyear". While therefore the requirement of the lawis that the reasonable letting value shoulddetermine the annual value of the building, it hasalso been specifically provided that this would beso 'notwithstanding anything contained in anyother law for the time being in force'. Itappears to us that it would be a properinterpretation of the provisions of Clause (b) ofSection 138 of the Act to hold that in a casewhere the standard rent of a building has beenfixed u/s 7 of the Madhya PradeshAccommodation Contract Act, and there is nothing toshow that there has been fraud or collusion, thatwould be its reasonable letting value, but, wherethis is not so, and the building has never beenlet out and is being used in a manner where thequestion of fixing its standard rent does notarise, it would be permissible to fix itsreasonable rent without regard to the provisionsof the Madhya Pradesh Accommodation Control Act,1961. This view will, in our opinion, give propereffect to the non-obstante clause in Clause (b)with due regard to its other provision that theletting value should be 'reasonable'."
After referring to Padma Devi's case , LIC's case and GunturTown Rate Payer's case (supra), it was held in that case thatthe High Court had not properly appreciated the differencebetween the wording of Section 127 of the Calcutta MunicipalCorporation Act, 1923 and Section 138(c) of the MadhyaPradesh Municipal Corporation Act, 1956 and thus committedan error in thinking that the case was virtually similar toPadma Debi's case .
In Diwan Daulat Rai's case (supra) this Court held thatthe facts of the case were covered by the decisions of thisCourt in LIC's case and Guntur Town Rate Payer's case (supra).The landlord cannot, reasonably, expect to get more rentthan the standard rent payable in accordance with theprinciples laid down in the Rent Control Act. In a casewhere the standard rent of the building has not been fixedby the Controller, the assessing authority has to arrive atits own figures of standard rent by applying the principleslaid down in the Rent Act. Such a task has to be performedby the assessing authority as a part of process ofassessment and in doing do it does not usurp the functionsof the Rent Controller because it does not fix the standardrent which would be binding between the landlord and tenantbut merely arrives at an estimate of standard rent for thepurposes of determining the annual value of the building.The Court referred to Section 2(k) of the Delhi Rent ControlAct, 1958 which defines the standard rent. Sub-section (1)of Section 4 of the Delhi Rent Control Act provided that,"no tenant shall, notwithstanding any agreement to thecontrary, be liable to pay to his landlord for theoccupation of any premises any amount in excess of thestandard rent of the premises" and Sub-section (2) ofSection 4 declares that "subject to provisions of Sub-section(1) any agreement for the payment of rent in excessof the standard rent shall be construed as if it were anagreement for the payment of the standard rent only".Section 5. Sub-section (1) enacted a prohibition injunctingthat "no person shall claim or receive any rent in excess ofthe standard rent, notwithstanding any agreement to thecontrary". Section 6 proceeded to set out differentformulae for determination of standard rent in differentclasses of cases. Section 9, Sub-section (1) provided thatthe controller shall, on an application made to him, eitherby the landlord or by the tenant, fix in respect of anypremises the standard rent referred to in Section 6 and Sub-section (2) of Section 9 laid down that in fixing thestandard rent of any premises the Controller shall fix anamount which appears to him to be reasonable having regardto the provisions of Section 6 and the circumstances of thecase. It appears that in this case the court did notdirectly deal with the effect of a non-obstante clause inthe taxing municipal law. The case was found to be nearerto the law settled in LIC's case and Guntur Town RatePayee's case (supra). Dealing with the case for thedetermination of the annual value where no standard rent hasbeen fixed, the Court observed:
"The problem can also be looked at from a slightlydifferent angle. When the Rent Controllegislation provides for fixation of standardrent, which alone and nothing more than which thetenant shall be liable to pay to the landlord, itdoes so because it considers the measure of thestandard rent prescribed by it to be reasonable.It lays down the norm of reasonableness in regardto the rent payable by the tenant to the landlord.Any rent which exceeds this norm of reasonablenessis regarded by the legislature as unreasonable orexcessive. When the legislature has laid downthis standard of reasonableness, would it be rightfor the court to say that the landlord mayreasonably expect to receive rent exceeding themeasure provided by this standard? Would it bereasonable on the part of the landlord to expectto receive any rent in excess of the standard ornorm of reasonableness laid down by thelegislature and would such expectation becountenanced by the court as reasonable? Thelegislature obviously regards recovery of rent inexcess of the standard rent as exploitative of thetenant and would it be proper for the court to saythat it would be reasonable on the part of thelandlord to recover such exploitative rent fromthe tenant? We are, therefore, of the view that,even if the standard rent has not been fixed bythe Controller, the landlord cannot reasonablyexpect to receive from a hypothetical tenantanything more than the standard rent determinableunder the Act and this would be so equally whetherthe building has been let out to a tenant who haslost his right to apply for fixation of thestandard rent or the building is self-occupied bythe owner. The assessing authority would, ineither case, have to arrive at its own figure ofthe standard rent by applying principles laid downin the Delhi Rent Control Act, 1958 fordetermination of standard rent and determine theannual value of the building on the basis of suchfigure of standard rent."
In Balbir Singh's case (supra) the Court dealt withfour different categories of properties, namely, (i) wherethe properties are self-occupied, that is, occupied by theowners; (ii) where the properties are partly self-occupiedand partly tenanted; (iii) where the land on which theproperty is constructed is leasehold land with a restrictionthat the leasehold interest shall not be transferablewithout the approval of the lessor and (iv) where theproperty has been constructed in stages, and to provide acriteria how rate able value can be determined in respect ofthose four categories of properties. Relying upon DewanDault Raj Kapoor's case it was held that criteria fordetermining the rate able value of building is the annualrent which the owner might reasonably expect to get from ahypothetical tenant, if the building were to let from yearto year less certain deductions. What is "reasonable" is aquestion of fact which depended on the fact andcircumstances of a given situation. Ordinarily, "a bargainbetween a willing lessor and a willing lessee uninfluencedby any extraneous circumstances may afford a guiding testof reasonableness" and in normal circumstances the actualrent payable by a tenant to the landlord would affordreliable evidence of what the landlord may reasonably expectto get from the hypothetical tenant, unless the rent isinflated or depressed by reason of extraneous considerationssuch as relationship, expectation of some other benefit,etc. But in case of a building subject to Rent Controllegislation this approximation between may and often doesget displaced, because under Rent Control legislation thelandlord cannot claim to recover from the tenant anythingmore than the standard rent and his reasonable expectationmust, therefore, be limited to the measure of the standardrent lawfully recoverable by him. There was no dispute thatthe area where the property sought to be taxed was situated,the provisions of Rent Restriction Acts were applicable andthere was non obstante clause in the municipal law underwhich the annual value had been assessed.
In Srikant Kashinath Jituri's case (supra), this courtobserved:
"....We feel compelled to express our doubts as tothe soundness and continuing relevance of the viewtaken by this Court in several earlier decisionsthat the property tax must be determined on thebasis of fair rent alone regardless of the actualrent received. Fair rent very often means therent prevailing prior to 1950 with some minormodifications and additions. Property tax is themain source of revenue to the municipalities andmunicipal corporations. To compel these localbodies to levy and collect the property tax on thebasis of fair rent alone, while asking them at thesame time to perform all their obligatory anddiscretionary functions prescribed by the statutemay, be to ask for the impossible. The cost ofmaintaining and laying roads, drains and otheramenities, the salaries of staff and wages ofemployees - in short, all types of expenditurehave gone up steeply over the least more than fortyyears. In such a situation, insistence upon levyof property tax on the basis of fair rent alone -disregarding the actual rent received- is neitherjustified nor practicable. None of the enactmentssays so expressly. The said principle has beenevolved by courts by a process of interpretation.
Probably a time has come when the said principlemay have to be reviewed."
In Indian Oil Corporation's case (supra) this Courtapproved the view taken in Ratnaprabha's case and in theinterest of public good declined to reconsider the aforesaiddecision. It was observed that the decision of this Courtin Ratnaprabha's case, on the construction of Section 138(b)of M.P. Act, has all along been understood and justified onthe basis of the presence of non obstante clause and thelater decisions have distinguished it on that ground. Theexistence of non obstante clause in M.P. Act was held to bethe basis on which the decision in Padma Debi's case wasdistinguished in Ratnaprabha's case itself.
It Assistant General Manager, Central Bank of India'scase (supra) it was contended on behalf of the appellantthat even where the standard rent was not fixed and the RentAct not applicable, it must be presumed that the annual rentfor such buildings or lands or premises would be thestandard rent alone and not the actual rent received. Inthat case Section 129(c) of the Municipal Corporation Actprovided that the general taxes not less than 12% and notmore than 13% of the rate able value of the buildings/landsmay be levied if the corporation so determines on agraduated scale. The expression "rate able value" wasdefined in Clause (54) of the Section 2 to mean, "the value ofany building or land fixed whether with reference to anygiven premises or otherwise in accordance with theprovisions of this Act and the rules for the purpose ofassessment of property taxes". Rule 7 of the Taxation Rulesprovided that in order to fix the rate able value of anybuilding, land or premises, there shall be deducted from theamount of the Annual Letting Value of such building a sumequal to ten per cent of the Annual Letting Value and thesaid deduction shall be in lieu of all allowances forrepairs or any other account whatsoever. Sub-clause (ii) ofthe definition provided that "in relation to any otherperiod, the annual rent for which any building or land orpremises, exclusive of furniture or machinery contained orsituate therein or thereon, might reasonably be expected tolet from year to year with reference to its use and shallinclude all payments made or agreed to be made to the ownersby a person other than the owner occupying the building orland or premises on account of occupation, taxes, insuranceor other charges incidental thereto". The proviso added toSub-clause (ii) was to the following effect;
"(a) (I)m respect of any building or land orpremises the standard rent of which has been fixedunder Section 11 of the Bombay Rents, Hotel andLodging House Rates Control Act, 1947, the annualrent thereof shall not exceed the annual amount ofthe standard rent so fixed;
(aa) in respect of any building or land, orpremises, the standard rent of which is not fixedunder Section 11 of the Bombay Rent, Hotel andLodging House Rates Control Act, 1947, the annualrent received by the owner in respect of suchbuilding or land or premises shall,notwithstanding anything contained in any otherlaw for the time being in force, be deemed to bethe annual rent for which such building or land orpremises might reasonably be expected to let fromyear to year with reference to its use."
Dealing with the points in controversy, the arguments urgedand the issues involved, the Court held:
"It is true that the Bombay Rent Act defines whatstandard rent is, provides for fixation ofstandard rent by the Court and further providesthat no landlord shall claim or receive any amountover and above the standard rent, making the samepunishable with imprisonment and fine. Yet, thefact remains that Municipal Corporations Act saysexpressly that notwithstanding anything containedin any other law for the time being in force, the"annual rent received" -- which means the actualrent received - in respect of building etc., forwhich standard rent is not fixed u/s 11of the Bombay Rent Act shall be deemed to be theannual rent for which such building etc. for whichsuch building etc. might reasonably be expected tobe let from year to year with reference to itsuse. The validity of proviso (aa), though raisedin the grounds of appeal in the special leavepetition, has not been urged before us, probablyadvisedly. Being a taxing enactment and alsobecause the proviso does no more than to treat theactual rent received as the annual rent, thereasonableness of the said provision can hardly bequestioned. Be that as it may, we see no reasonwhy the express language and command of proviso(aa) is not respected. both the enactments, viz.,Bombay Rent Act and Bombay Provincial MunicipalCorporations Act are State enactments. Indeed,the Municipal Corporations Act is a laterenactment. In view of the express provision inproviso (aa), it must be held that for the purposeof the Municipal Corporation Act, the actual rentreceived is the annual rent for the purposes ofdetermining the annual letting value. The counselfor the appellants say that it cannot be. Theysay that one State enactment cannot be read so asto defeat and nullify the provisions of anotherState enactment. The submission is that both mustbe read harmoniously. The said argument, in ouropinion, would have been perfectly justified ifthe non obstante clause were not there in proviso(aa). In its presence, acceptance of the saidargument means that we ignore the non obstanteclause in proviso(aa) altogether. Such a courseis not permissible to us. The Court cannot treatany provision in an enactment as superfluous muchless can it ignore its existence. The learnedcounsel, however, rely upon certain decision insupport of their submissions to which a briefreference would now be in order."
Accordingly, we hold that proviso (aa) means whatit says and has to be applied and followed in thecases covered by it. So far as the MunicipalCorporations Act is concerned, the annual rent isthe actual rent received where the standard rentis not fixed u/s 11 of the Bombay RentAct and it constitutes the basis for determiningthe annual letting value, rate able value andproperty taxes. That is the plain effect andmeaning of proviso (aa). So far proviso (aaa) isconcerned, an apprehension was expressed that itwould enable the Commissioner to question theactual rent received in every case and it would bean endless enquiry. In our opinion, however, thesaid provision is conceived to meet situationswhere the rent pub forward as the actual rentreceived is not a genuine plea., i.e., where it isa false plea. A landlord may let out a buildingat less than market rent for many a reason, e.g.,the tenant is a close friend or a close relativeor because the tenant is a charitable or religiousorganisation. Proviso (aaa) does not enable theCommissioner to ignore such situations for, insuch cases, the rent actually received isgenuinely stipulated one. This Power is reservedto the Commissioner only with a view to ensurethat by merely putting forward a figure which isnot true, persons do not escape the correct levy."
In East India Commercial Co. Pvt. Ltd's case (supra)this Court considered the determination of annual valueunder Section 168 of the Calcutta Municipal Corporation Act,1951 in respect of buildings which were actually let out totenants on rent agreed but not fixed by the Controller underthe Rent Restriction Act for the purposes of assessment ofproperty tax., After referring to the relevant provisions oflaw and the judgments of this Court, it was held:
"From the aforesaid decisions, the principle whichis deducible is that when the Municipal Actrequires the determination of the annual value,that Act has to be read along with RentRestriction Act which provides for thedetermination of fair rent or standard rent.Reading the two Acts together the rate able valuecannot be more than the fair or standard rentwhich can be fixed under the Rent Control Act.The exception to this rule is that whenever anyMunicipal Act itself provides the modes ofdetermination of the annual letting value like the Asstt. General Manager, Central Bank of India and Others Vs. Commissioner, Municipal Corporation for the City of Ahmedabad and Others, relating to Ahmedabad or contains a non obstanteclause as in Municipal Corporation, Indore and Others Vs. Smt. Ratnaprabha and Others, then the determination of the annual letting valuehas to be according to the terms of the MunicipalAct. In the present case, Section 168 of theMunicipal Act does not contain any non obstanteclause so as to make the Tenancy Act inapplicableand nor does the Act itself provide the method ofbasis for determining the annual value. This Acthas, therefore, to be read along with Tenancy Actof 1956 and it is the fair rent determinable underSection 8(1)(d) which alone can be the annualvalue for the purposes of property tax."
Dealing with the M.P. Municipal Corporation Act, 1956 theCourt held that the existence of n on obstante clause wascrucial in determining the annual value. The courtobserved:
"In Section 168 of the Municipal Act with which weare concerned in the present case the non obstanteclause is not there. The Municipal Act isdifferent from the M.P. Municipal Act, 1956.Section 163 of the Municipal Act is similar to thecorresponding provisions in Delhi and in AndhraPradesh and therefore, it is the ratio of thedecisions of The Corporation of Calcutta Vs. Sm. Padma Debi and Others, and The Guntur Municipal Council Vs. The Guntur Town Rate Payers' Association etc., which should apply."
In Government Servant Cooperative's case (supra) thisCourt dealt with Section 116 of the Delhi MunicipalCorporation Act providing for determination of rate ablevalue of land or building assessable to property taxes andheld that where there is a legislation fixing the standardrent of the premises, the rent at which premises could bereasonable expected to be let cannot exceed the statutoryceiling. But where there is no statutory control on rentwhich is charged, the annual rent actually received by thelandlord shall be the basis for determining the rate ablevalue of the property. It held:
"Therefore, the annual rent actually received bythe landlord, in the absence of any specialcircumstances, would be a good guide to decide therent which the landlord might reasonably expect toreceive from a hypothetical tenant. Since thepremises in the present case are not controlled byany rent control legislation, the annual rentreceived by the landlord is what a willing lessee,uninfluenced by other circumstances, would pay toa willing lessor. Hence, actual annual rent, inthese circumstances, can be taken as the annualrate able value of the property for the assessmentof property tax. The municipal corporation is,therefore, entitled to revise the rate able valueof the proprieties which ave been freed from rentcontrol on the basis of annual rent actuallyreceived unless the owner satisfies the municipalcorporation that there are other considerationswhich have affected the quantum of rent."
A perusal of various judgments, relied upon by thelearned counsel for the parties, clearly shows that thisCourt has taken a consistent view regarding thedetermination of annual value of land or building of thepurposes of determination of taxes under the Municipal Acts.On the basis of various Statues relating to thedetermination of the annual value for the purposes ofMunicipal Act, this Court has devised two distinct groups.One such group deals with the municipal laws of some Stateswhich do not expressly exclude application of RentRestrictions Acts in the matter of determination of annualvalue of a building for the purposes of levying municipaltaxes and the other group deals with the municipal lawswhich expressly exclude application of the Rent RestrictionAct in the matter of determination of annul value of landor building on rental method. Whereas in the first categoryof cases the determination of annual value has to be madeon the basis of fair or standard rent notwithstanding theactual rent, even if ti exceeds the statutory limits. Inthe other group where the restriction in the Rent Act hasbeen excluded, the determination of annual value of buildingon rental method is referable to the method provided underthe relevant Municipal Act. Whereas the Padma Debi's case,LIC's case, Guntur Town Rate Payee's case, Dewan DaulatRai's case (supra) deal with the first group of municipallaws, the cases in Ratanprabha's case, AGM, Central Bank ofIndia's case, East India Commercial Company's case, BalbirSingh's case, India Oil Corporation's case and Srikant'scase (supra) deal with the second group. As alreadynoticed, this Court in LIC's case dealt with the firstcategory as in Section 168 of the Calcutta MunicipalCorporation Act, there existed no non-obstante clause. Theobservations of the Bench of this Court which dealt with thecase on 10th October, 2001 cannot be taken in isolation.
Justice Shah, J. in LIC's case referring to the provisoto Section 168(1) of the Calcutta Municipal Corporation Actwhich dealt with the land and building,t he standard rent ofwhich had been fixed u/s 9 of the West BengalPremises Rent Control (Temporary Provisions) Act, 1950observed:
"By the addition of the proviso, in our judgment,the meaning of the expression "gross rent at whichthe land or building might reasonably be expectedto let" is not altered. In the present case,there is no order of the Controller fixingstandard rent u/s 9 of the West BengalPremises Rent Control (Temporary Provisions) Act,1950, but the standard rent stands determined bythe definition of that expression in Section 2(1)(b) of that Act, which provides (omitting parasnot relevant):
"Standard rent" in relation to any premisesmeans-
(a) xxx
(b) where the rent has been fixed underSection 9, the rent so fixed, or at which itwould have been fixed if application weremade under the said section."
As already noticed even without specific determination,the standard rent was held to have been statutorilydetermined u/s 2(10)(b) of the Rent Act. Uponanalysis of the various municipal laws and the judgments ofthis Court it is held that in cases where the municipal lawsexcludes the applicability of the Rent Acts by incorporatingnon obstante clause in the taxing statute, the powers of theauthorities under the Municipal Acts are not circumscribedby the limits indicated in Padma Debi's case and followed inthat group of cases. In cases were the fair rent payableby the tenant has been determined and there is nojustification for refusing to accept that fair rent asrental value of the premises, the municipal authoritiesshould generally accept the standard rent fixed,notwithstanding the non applicability of the Rent Actsbecause such a view would be reasonable guideline todetermine the rate of rent at which such land or buildingmight, at the time of assessment, be reasonably expected tolet from year to year. The rent which the tenant isreceiving from his sub-tenant is also an important statutoryconsideration for determining the rent at the time ofassessment to which the property might reasonably beexpected to be let from year to year. Such a considerationis also justified on the principles of reasonableness. Wecannot agree that in all cases, notwithstanding the nonobstante clause the annual rental value cannot be fixedbeyond the standard rent determined or determinable underthe Rent statute. We also find it difficult to hold that inall cases the rent actually paid by the sub-tenant to thetenant be taken as a sole criterion for determining theannual value on the assumption that such land or buildingmight, at the time of assessment, is reasonably expected toget the aforesaid amount of rent if let from year to year.The argument that the rent actually received by the ownershould always be deemed to be reasonable rent in the absenceof fraud, collusion and other extraneous considerations istoo general and broad proposition of law which cannot beaccepted for the purposes of determining the annual value ofthe property for the purposes of Section 174 of the 1980Act. In the light of clear and unambiguous provisions ofSection 174 of the 1980 Act, it cannot be held that theamount realised by a tenant from a sub-tenant cannot, at allbe taken into consideration for the purposes of determiningthe gross annual rent in the absence of extraneousconsiderations. There is no substance in the submission ofthe learned counsel appearing for the appellant thatallowing the Municipal Corporations to assess the annualrate able value on the basis of the income of a tenant fromthe property would be grossly unfair and would have theeffect of rendering the rate provisions of the Actunreasonable, arbitrary and unconstitutional. The Actitself has taken care by making sufficient provision inSections 193 and 194 regarding the liability to pay the rentand apportionment of such liability when the premises areassessed, let or sub-let. On proof of creation of sub-tenancy, the owner of the building may also be entitled toseek eviction of their tenants under the relevant provisionsof the Rent Acts applicable in the State where the land orproperty is located. We find some substance in thesubmission of the learned counsel for the appellant thatpermitting the Municipal Authorities to assess the annualvalue only on the basis of the rent paid by the sub-tenantto the tenant and fixing its liability on the owner mayadversely affect the owners of the buildings who have lettheir premises at a time when rents were meagre and whounder the Rent Control Statutes are deprived of gettingpossession back of the lands and buildings from theirtenants. The 1980 Act, therefore, requires the applicationof mind by the municipal authorities to determine the rentson the basis of the reasonableness by keeping into account allrelevant circumstances including the actual rent received bythe owner, hypothetical Standard rent, the rent beingreceived by the tenant from his sub-tenant and otherrelevant consideration, such as prevalent rate of rent oflands and building in the vicinity of the property beingassessed. Only because the owner of the building is notgetting the same rent which the sub-tenant is paying to hislessor, cannot be made a basis to deprive the Corporationsfrom determining the annual valuation and taxing the land orbuilding on that basis. If such a plea is accepted, itwould be against he provisions of the state which hasbeen enacted to provide civic services in the form of water,drainage, sewage, collection, removal and disposal ofsolid waste, fire prevention and fire safety maintenance ofstreet and public places, etc., in the Municipal area whensuch land or building is situate.
We do not find any conflict in the judgments of thisCourt, so far as the determination of annual value of theproperty under the municipal laws is concerned.Distinction, if any, is based upon the relevant provision ofthe state of a State with which this Court was dealing,particularly with respect to such Statutes which contained anon obstante clause. We are of the view that the basis fordetermination of annual rent value has to be the standardrent where the Rent Control Act is applicable and in allother cases reasonable determination of such rent by themunicipal authorities keeping in view various factors asindicated herein earlier, including the rent which the tenant is getting from his sub-tenant. In appropriate casesthe owner of the property may be in a position to satisfythe authorities that the gross annual rent of the buildingof which the annual valuation was being determined cannot bemore than the actual rent received by such owner from histenant. The municipal authorities shall keep in mind the various pronouncements of this Court, the statutoryprovisions made in the specified Municipal Acts, keeping inmind the applicability or non-applicability of the Rent Actand the peculiar circumstances of each case, to find out thegross annual rent of the building including service charges,if any, at which such land or building might, at the time ofassessment, be reasonably expected to let from year to yearin terms of Section 174 of the 1980 Act.
Keeping in view the facts of the present appeal we areof the opinion that the High Court was right in remandingthe appeals to the Appellate Tribunal for deciding on meritsbut was not justified to restrict the consideration only onthe basis of rent being paid by the sub-tenant to the tenantfor the purposes of determining the gross annual value. theAppellate Tribunal shall consider the appeals in the lightof our judgment by keeping in mind all the circumstancesincluding the rent actually received by the owner of the building and the rent being paid to the tenant by his sub-tenant. The Appellate Tribunal shall also keep in mind thepeculiar circumstances of the case, if any, for determiningthe gross annual rent at which the building in controversy,at the time of assessment, is reasonably expected to letfrom year to year leas the allowances and otherconsiderations referred to in Section 174 of the 1980 Act.If the annual valuation determined is more than the grossannual rent which the appellant is actually receiving fromhis tenant, the appellant shall be at liberty to recover theexcess amount paid in terms of Section 194 of the 1980 Act.
With these observations the appeal is disposed ofcosts to abide by the ultimate result.