Neelamalai Agro Industries Ltd. vs The Executive Officer

Kanakaraj, J.—The Petitioner is a Company owning Tea estates in the Nilgiris District. A portion of the Tea estate is said to be within the jurisdiction of the Respondent/Town Panchayat. The Company has provided standard housing facilities to all the permanent employees of the Tea Estates. There are also other residential quarters for the managerial staff and other members of the staff. The Company also has creches, hospitals, recreation clubs etc. The property-tax for the buildings within the Respondent/Town Panchayat was levied with the tax to the tune of Rs. 11,659.20 per half year. By a notice dated 1.3.1989 the Respondent-Panchayat sought to revise the house tax from Rs. 11,659.20 to Rs. 41,372.10 with effect from 1.4.1988. The Petitioner wrote a latter on 25.3.1988 pointing that the revision is illegal. The Petitioner also called upon the Respondent to give particulars about the capital value adopted in respect of each building. On 3.5.1988 the Respondent sent a reply giving details of the assessment. It was also explained that the house tax which was being levied at 16 per cent of the annual value up to 31.3.1988, had been increased to 20 per cent of the annual value, after duly publishing the change in the rates. The writ petition is to quash the notice dated 1.3.1988 and to direct the Respondent to levy and collect property tax only at the existing rate of Rs. 11,659.20.

A counter affidavit has been filed by the Respondent-Panchayat. It is stated that all the buildings except the buildings exempted for payment of house tax are being assessed to property tax, only in accordance with law. It is also pointed out that foot-paths, street lighting and other amenities like Radio sets and supply of Newspapers have been provided by the Panchayat. The revision of the annual value was made strictly in accordance with Sub-rule (2) of Rule 13 of Paragraph 48 of the Manual on Panchayat Administration Part I. The property tax has been enhanced only to Rs. 17,447.85 with effect from 1.4.1986. The revision of rates from 16 per cent to 20 per cent had been adopted by the Panchayat after due publication of the change in the local Newspapers. There was no objection to the revision of rates as required under Sub-rule (4) of Rule 6 under Paragraph 48 of the said Manual. It is also pointed out that the last quinquennial revision of the annual value was undertaken only in the year 1978. After 1.4.1978. The quinquennial revision has been undertaken only with effect from 1.4.1988. Special notices were issued on 1.3.1988 and the Petitioner did not submit any revision petition within the prescribed time. After the confirmation of the assessment, the Petitioner filed an appeal to the Panchayat Council. The Council by a resolution dated 5.10.198.8 confirmed the revision of assessment. It is also pointed out that there was no mistake in finding out the annual value and there is no case for interference with the levy of property tax.

Mr. B. Ramamoorthy, for the Petitioners argues that no reasons have been given for the revision of annual value and in any event the Respondent has not properly determined the annual value. According to the lamed counsel there has been some confusion between the capital value of the buildings and the annual value of the respective buildings. He refers to the Manual in support of his argument.

Secondly, he points out that under G.O. Ms. No. 3816 Labour, dated 15.9.1986, it is the statutory obligation of the planters to provide housing accommodation and other amenities to the workers and the Planters have made a representation seeking exemption from payment of house tax. The Government Order only says that such a request could not be complied with and that if any local authority was charging an unreasonable rate of property tax, the same may be considered on merits. Thirdly, he refers to Section 120 of the Tamil Nadu Panchayat Act, 1958 and the Instructions mentioned in the said Section for determining the annual values of the building. He also relies on the judgment of a Division Bench in Dindigul Anna District Tax Payers Sangam Vs. Government of Tamil Nadu and Another, for the proposition that the local authorities must give reasons before revising the annual values.

It will be good to briefly refer to the provisions of law relating to the levy and collection of the property tax in the areas covered by the Tamil Nadu Panchayat Act. Section 120 provides for levy of house tax and the Proviso to Sub-section (1) says that the tax may be levied on the basis of the classified plinth area or on the basis of the rent value or capital value or on a combination of any two or more of the above bases. Sub-section (3) says that the house tax shall be levied having regard to the following matters:

(i) The classification of the local area u/s 3:

(ii) The annual receipts of the panchayats:

(iii) The population of the village or town and the predominant occupation of such population; and

(iv) Such other matters as may be prescribed.

Sub-section (3-A) provides for the rate of taxes and the maximum and the minimum rates within which the panchayat can levy property tax. Sub-section (4) says that the Government may make Rules for the manner of ascertaining the annual or capital value of the house. Schedule 1 to the Act prescribes the minimum rate and maximum rate, depending upon the basis of levy whether it is on capital value or annual value as the case may be. Part I of the Manual on Panchayat Administration and Chapter IV of the same relate to the assessment and collection of taxes. Paragraph 49-1 relates to house taxes. Sub paragraph (2) relates to the manner of ascertaining the annual or capital value of the houses. Sub-paragraph (1) relates to the determination of the capital value.

Sub-paragraph (2)(a) relates to the determination of the annual value. For the purpose of this case it is necessary to refer to the entire sub paragraph 2(a) and it is as follows:

(2)(a) The annual value of a house shall be deemed to be the gross annual rent at which the house may reasonably be expected to let from month to month, or from year to year, less a deduction of ten per centum of such annual rent and the said deduction shall be in lieu of all allowances for repairs or on any other account whatever,

b) In the case of

(i) any Government or railway building falling within the definition of "house" under the Madras Panchayats Act, 1958, or

(ii) any building falling within the definition aforesaid of a class not ordinarily let, the gross annual rent of which cannot in the opinion of the executive authority, be estimated the annual value shall be deemed to be six per cent of its capital value:

Provided that in the case of buildings in industrial estates and developed plot estates, where the amenities are provided by the Industries Department or any other authority, the annual value shall be deemed to be four per cent of its capital value.

I have elaborately referred to the provisions of law only to see whether the Respondents have complied with the provisions of law and whether the assessment is legal and valid. Before doing so, it is worthwhile to refer to the judgment of the Division Bench above referred wherein the Division Bench has rejected all the contentions of certain owners, questioning the levy of property tax except one question. No doubt, the said judgment relates to the levy of property tax under the Tamil Nadu District Municipalities Act. But the ratio of the said judgment will also apply to the buildings under the Panchayat Act. Dealing with Rule 9 of Schedule IV to the District Municipalities Act, the Division Bench observed that where notice gives the reason for enhancement as "general revision," it cannot be considered as a reason and does not satisfy that requirement of law. The Division -Bench also observed that if the work sheet had been attached to the special notice, it would have been sufficient. The Division Bench therefore, quashed the special notice only on the ground that the reasons had not been set out for the enhancement of property tax. In the present case, under the column "reason for increase, if any, "it is stated as follows:

Quinuennial revision and enhancement of rate of tax

On the reverse of the special Notice inspect of the buildings belonging to the Petitioners, existing annual value and the revised annual value are set out. What is more, the Petitioner wrote a letter on 25.3.1988 calling for the following informations:

1) Capital value of each building adopted by you for the levy of house tax until now.

2) Rate of house tax adopted until now.

3) Capital value of each building proposed to be adopted with effect from the half year commencing 1st April, 88.

4) Rate of tax imposed to be adopted.

Inasmuchas the capital value of all the buildings had been furnished under cover of the letter dated 3.5.1988 there is no difficulty for the Petitioner to understand, that the annual value is nothing but six per cent of the capital value as per Sub-rule (2)(b)(ii) of Rule 2 of Paragraph 49-I of the Manual which I have already quoted above. The rate of property tax on the annual value has also been furnished by the Respondent. Under such circumstances, held: that the Respondent has furnished all the details and the reasons for the enhancement of property tax. When the Petitioner again wrote on 16.6.1988 objecting to the enhancement, the Respondent has given a reply on 30.6.1988, which in my opinion is a complete answer to the various arguments advanced by the Petitioner.

I have never seen a local authority taking so much pains to explain to the Assessee as to how the tax has been levied. The said letter dated 30.6.1988 not only explains the entire position but has also informed the Petitioner that buildings used for hospitals and the schools had been exempted from payment of house tax. In the counter affidavit it has been mentioned that the appeal filed by the Petitioner to the Town Panchayat Council had been rejected by a Resolution No. 63/88 dated 5.10.1988. Certainly, one cannot except more in which this particular Panchayat has tried to convince the Assessee about the reasons for enhancing the property tax and by following all the requirements of law. In particular I must point out when the quinquennial revision had not been undertaken from 1.4.1978 onwards the Court can take judicial notice of the fact that the capital value of the properties had gone up over a period of 10 years and the increase in the capital value in respect of each building as set out in the reply dated 3.5.1988, shows that they are reasonable. In this connection, it is worthwile to notice the recent judgment of the Supreme Court in Srikant Kashinath Jituri v. Bolgaum Corporation AIR 1955 S.C. 288:

All that is complained of is that the enhancement is excessive. That by itself is not enough. Similarly, the allegation that enhancement is arbitrary or unreasonable is per se not sufficient to override the express statutory bar. The High Court was, therefore, right in holding that the said suit is not maintainable in Civil Court.

Regarding the arguments based on G.O. Ms. No. 3816 dated 15.9.1986 there is no difficulty in holding that the said Government Order does not grant exemption to all buildings in Tea Estate. In fact, the Government has rejected the plea but has only directed each case to be decided on the basis of the facts and circumstances. Therefore, I uphold the impugned notice dated 1.3.1988 and the subsequent confirmation of the same. The writ petition fails and is dismissed.