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CASE NO.:

Appeal (civil) 4104 of 1998

PETITIONER:

LT. COL. PR. CHAUDHARY (RETD.) ETC.

RESPONDENT:

MUNICIPAL CORPORATION OF DELHI AND ANR.

DATE OF JUDGMENT: 26/04/2000

BENCH:

D.P WADHWA & N. SANTOSH HEGDE

JUDGMENT:

JUDGMENT

2000 (3) SCR 607

The Judgment of the Court was delivered by

D.P. WADHWA, J. Appellant in Civil Appeal No. 4104 of 1998 is aggrieved by

judgment dated July 7, 1997 of the Division Bench of Delhi High Court

dismissing his writ petition wherein he had sought setting aside the order

of assessment dated March 12, 1991 assessing the rateable value of his

property for the purpose of property tax under Section 116 of the Delhi

Municipal Corporation Act, 1957 (for short the "Act"). The property of the

I. 116. Determination of rateable value of lands and buildings

assessable to property taxes. (1) The rateable value of any land or

building assessable to property taxes shall be the annual rent at which

such land or building might reasonably be expected to let from year to year

less -

(a) a sum equal to ten per cent of the said annual rent which shall be in

lieu of all allowances for costs of repairs and insurance, and other

expenses, if any, necessary to maintain the land or building in a state to

command that rent, and

(b) the water tax or the scavenging tax or both, if the rent is inclusive

of either or both of the said taxes :

Provided that if the rent is inclusive of charges for water supplied by

measurement, then, lor the purpose of this section the rent shall be

treated as inclusive of water tax on rateable value and the deduction of

the water tax shall be made as provided therein :

Provided further that in respect of any land or building the standard rent

of which has been fixed under the Delhi and Ajmer Rent Control Act, 1952

(38 of 1952), the rateable value thereof shall not exceed that annual

amount of the standard rent so fixed. appellant comprised of his house

constructed on a plot of land bearing No. 11-1787 Chitranjan Park, New

Delhi, measuring 311 Sq. yards. The writ petition was dismissed by the High

Court relying on its earlier judgment in the case of Ravish Chander Rastogi

v. Municipal Corporation of Delhi decided by the same Division Bench on May

29, 1997. Civil Appeal No. 4105 of 1998 is against that judgment of the

High Court. It would, therefore, be appropriate to refer to the facts in

the case of Ravish Chander Rastogi.

The appellant Ravish Chander Rastogi is the owner of the property bearing

No. 55, Anand Lok, New Delhi. He was served with a notice dated March 20,

1986 under Section 126 of the Act proposing to enhance rateable value for

the purpose of property tax from existing Rs. 1280 to Rs. 1,79,000 with

effect from April 1, 1985. The reason for increase in the proposed rateable

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value was that the appellant had made new construction. Appellant filed his

objections to the proposed rateable value. The assessing officer proceeded

to assess the rateable value on the basis that the property was in the

self-occupation of the appellant and rateable value, therefore, had to be

determined under Section 6(1)2 of the Delhi Rent Control Act, 1958 (for

short the 'Rent Act'). For this two components are necessary: (1) market

value of the land on the date of commencement of construction and (2)

reasonable cost of construction. The assessing officer arrived at the

market value of the plot,

[Explanation. - The expression "water tax" and "scavenging tax" shall mean

such taxes of that nature as may be levied by an appropriate authority]

(inserted by Act No. 67 of 1993 - w.e.f. 1.10.1993)

(2) The rateable value of any land which is not built upon but is capable

of being built upon and of any land on which a building is in process of

erection shall he fixed at five per cent of the estimated capital value of

such land.

(3) All plant and machinery contained or situate in or upon any land or

building and belonging to any of the classes specified from time to time by

public notice by the Commissioner with the approval of the Standing

Committee, shall be deemed to form part of such land or building for the

purpose of determining the rateable value thereof under sub-section (1) but

save as aforesaid no account shall be taken of the value of any plant or

machinery contained or situated in or upon any such land or building.

2. Section 6(1) Subject to provisions of sub-section (2) 'standard rent' in

relation to any premises means -

(A) in the case of residential premises -

(2) where such premises have been let out at any time on or after the 2nd

day of June. 1944. -

(b) in any other case, the rent calculated on the basis of seven and a-half

per cent, per annum of the aggregate amount of the reasonable cost of

construction and the market price of the land comprised in the premises on

the date of the commencement of the construction.

Provided that where the rent so calculated exceeds twelve hundred rupees

per annum, this clause shall have effect as if for the words "seven and a-

half per cent", the words "eight and one-fourth per cent" had been

substituted;

(B) ..which measured 812 sq. yards at Rs. 6,00,000 as on the date when

building plans were sanctioned. He then estimated the reasonable cost of

construction at Rs. 12,98,000. Keeping in view the provisions of the Rent

Act he arrived at the aggregate of market value of the land and the cost of

construction at Rs 18,98,000. Standard rent of the property at the rate of

8.25% was thus Rs. 1,56,585. After 10% rebate for repairs, rateable value

was arrived at Rs. 1.40.930. The effective date of fixation of rateable

value was taken as March 17. 1986 when the appellant applied for the

occupancy certificate of the premises. Objections of the appellant that the

principles laid by this Court in Dr. Balbir Singh and Others v. Municipal

Corporation, Delhi and Others3 be taken into consideration while fixing the

rateable value, were not consid-ered relevant as it was observed that the

observations of this Court were made in the context of the applicability of

Section 9(4)4 of the Rent Act and that provisions of Section 9(4) would be

applicable only where it was not possible to determine the standard rent of

the premises on the principles set froth in Section 6 of the Rent Act. From

the assessment order the appellant filed an appeal before the District

Judge under Section 169 of the Act, which came for decision before Mr. P.K.

Dham, Additional District Judge, Delhi. Learned Additional District Judge

noticed three houses in the neighbourhood of the appellant where rateable

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value of the property was fixed at Rs. 12,660 (house No. 52), Rs. 21,660

(house No. 15) and Rs. 40,800 (house No. 6). According to learned

Additional District Judge principles laid by this Court in Dr. Balbir

Smell's case were fully applicable, which were ignored by the assessing

officer. He, therefore, set aside the assessment order and remanded the

matter buck to the assessing authority to decide the case afresh in

accordance with law after giving opportunity to the appellant to be heard.

Now, it was the respondent Municipal Corporation of Delhi, which felt

aggrieved and sought to challenge the order of the learned Additional

District Judge by filing a writ petition in the High Court under Article

226 of the Constitution. Submission of the appellant that principles laid

by this Court in Dr. Balbir Singh's case were applicable did not find

favour with the High Court when it observed:

[1985] 2 SCR 439 9. Controller to fix standard rent, etc. - (1) to (3) ....

(4) Where for any reason it is not possible to determine the standard

rent of any premises on the principles set forth under Section 6. the

Controller may fix such rent as would be reasonable having regard to the

situation, locality and condition of the premises and the amenities

provided therein and where there are similar or nearly similar premises in

the locality having regard also to the standard rent payable in respect of

such premises.

(5) to (7)....

"It appears that in Dr. Balbir Singh's case there are certain observa-tions

made which appear to lend support to the contention raised on behalf of the

assessee that the figure of standard rent having been arrived at has to be

further scaled down. These observations made in Dr. Balbir Singh's case

display only an anxiety on the part of their Lordships to see that as far

as practicable the properties situated in one locality are assessed by

uniform standard so as to avoid the criticism of invidious discrimination.

The observations have to be read in the light of the statutory provisions.

The judgment in Dr. Balbir Singh's case cannot be read as laying down

something which is not contemplated by the law itself, when the field is

entirely covered by the statutory law."

The argument of the appellant was that after having arrived at the figure

of standard rent the assessing authority should have treated that to be the

upper limit and thereafter he should have proceeded to apply the principle

of parity. This principle meant that the assessing authority must proceed

to find out the standard rent of similarly situated properties in the

locality whose construction might be older than that of the property of the

appellant and after having done this exercise the assessing authority

should reduce the standard rent of the premises in question so as to bring

it at par with the standard rent of other older premises in the locality.

It would be only on that basis there would be equality and parity in the

assessment of rateable value of the property tax as amongst all the

properties situated in one locality which would be more or less same. This

submission was also negatived by the High Court by making the following

observations :

"For several reasons, the submission of the learned counsel for the

assessee does not appeal to us. The learned counsel for the MCD has rightly

pointed out that firstly there is no warrant in law to support the

submission of the learned counsel for the assessee. Secondly, if the

proposition canvassed by the assessee was to be accepted, it would be

expecting the assessing authority to perform an exercise nearing

impossibility. Rarely it would be possible to expect two premises having

similar nature of construction and accommodation. The as-sessing authority

is not possessed of any machinery under the law which would enable it to

collect and record such evidence. There is no adversary system of deciding

assessment matters before the assessing authority. There is no independent

agency available to assessing authority which would go out searching and

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collecting evidence and then bring on the record of the assessing authority

such material as would enable the principle of parity canvassed by the

learned counsel for the assessee being applied. If the assessing authority

was itself to undertake that exercise, it would be busy collecting evidence

in the field left with hardly any time to sit in the office and finalise

the assessments. The time and energy which the assessing authority would be

required to spend in finalising individual assessments of the properties

would be so much that the imposition of such a tax would be counter

productive and may persuade the Municipal Corporation to drop the tax

itself instead of undertaking extremely onerous task of assessing and

realising the tax. There is yet another flaw inherent. For the purpose of

assessing one house property, the assessing authority must conduct survey

of the entire locality to find out the property least valued and then scale

down the value of property under assessment. It was also submitted by the

learned counsel for the MCD that by a series of decisions of the Supreme

Court it is well settled that for the purpose of finding out reasonable

rent, the assessing authority has to keep in view the principles of

standard rent as deducible form the provisions of Rent Control Law which

permits cost of construction being adopted as basis for calculating the

rateable value in the case of self-occupied properties. It is fair and

reasonable if the assessing authority works out the cost of land by

reference to the date of commencement of construction and the reasonable

amount spent in construction. That exercise is by itself time consuming

exercise, yet once it is done the facts found would be relatable to the

facts as actually exist. Where is then the occasion for going a step ahead

and then finding out the value of land and cost of construction of

comparable properties of the locality so as to scale down the rateable

value and standard rent determined of the properties under assessment? The

Delhi Rent Control Act nowhere contemplates such an exercise being

undertaken for the purpose of finding out standard rent so as to ascertain

the reasonable letting value."

High Court allowed the writ petition, set aside the order of learned

Additional District Judge and restored that of the assessing authority.

On grant of leave to appeal by the appellant these matters have come before

us. We are concerned in these appeals as the law existed prior to the

amendment of the Rent Act in 1988. By the Act 57 of 1988 the Rent Act was

not to apply to certain premises as provided in Section 35 of the Rent Act.

In Dr. Balbir Singh's case this Court was concerned with the determi-nation

of rateable value in respect of properties situated in Delhi and governed

by the provisions of the Delhi Municipal Corporation Act, 1957 and the

Punjab Municipal Act, 1911. The Court considered four different categories

of properties, namely (1) where the properties are self-occupied, that is,

occupied by the owners; (2) where the properties are partly self-occupied

and partly tenanted; (3) where the land on which the property is

constructed is lease hold land with a restriction that the lease hold

interest shall not be transferable without the approval of the lessor and

(4) where the property has been constructed in stages. Under provisions of

Delhi Municipal Corporation Act as well as Punjab Municipal Act, the

criteria for determining rateable value of building is the annual rent at

which such building reasonably be expected to let from year to year. The

word 'reasonably' in the definition is very important. What the owner might

reasonably expect to get form a hypothetical tenant, if the building were

let from year to year, affords the statutory yardstick for determining the

rateable value. Now what is reasonable is a question of fact and it depends

on the facts and circumstances of a given situation. The Court considered

various provisions of the Delhi Municipal Corporation Act and the Punjab

Municipal Act as well as that of the Delhi Rent Control Act, 1958. Delhi

Rent Control Act was amended in 1988 when certain properties were taken out

of the purview of that Act. The four categories have been considered at

pages 461, 466, 468 and 473 of the Report. The statement of law laid by

this Court after considering various statutory provisions made in respect

of the first category we quote :

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3. Act not to apply to certain premises. - Nothing in this Act shall apply:

(a) to any premises belonging to the Government;

(b) to any tenancy or other like relationship created by a grant from

the Government in respect of the premises taken on lease or requisitioned

by the Government:

Provided that where any premises belonging to Government have been or are

lawfully let by any person by virtue of an agreement with the Government or

otherwise, then, notwithstanding any judgment, decree or order of any court

or other authority, the provisions of this Act shall apply to such tenancy.

(c) to any premises, whether residential or not, whose monthly rent

exceeds three thousand and five hundred rupees; or

(d) to any premises constructed on or after the commencement of the

Delhi Rent Control (Amendment) Act, 1988. for a period of ten years

from the date of completion of such construction. "The retable value of

the premises, whether residential or non-residential cannot exceed the

standard rent, but, as already pointed out above, it may in a given case be

less than the standard rent. The annual rent which the owner of the

premises may reasonably expect to get if the premises are let out would

depend on the size, situation, locality and condition of the premises and

the amenities provided therein and all these and other relevant factors

would have to be evaluated in determining the rateable value, keeping in

mind the upper limit fixed by the standard rent. If this basic principle is

borne in mind, it would avoid wide disparity between the rateable value of

similar premises situate in the same locality, were some premises are old

premises constructed many years ago when the land prices were not high and

the cost of construction had not escalated and others are recently

constructed premises when the prices of the land have gone up almost 40 to

50 times and the cost of construction has gone up almost 3 to 5 times in

the last 20 years. The standard rent of the former category of premises on

the principles set out in sub-section (l)(A)(2)(b) or (l)(B)(2)(b) of

Section 6 would be comparatively low, while in case of latter category of

premises, the standard rent determinable on these principles would be

unduly high. If the standard rent were to the measure of rateable value,

there would be huge disparity between the rateable value of old premises

and recently constructed premises, though they may be similar and situate

in the same or adjoining locality. That would be wholly illogical and

irrational. Therefore, what is required to be considered for determining

rateable value in case of recently constructed premises is as to what is

the rent which the owner might reasonably expect to get if the premises are

let out and that is bound to be influenced by the rent which is obtainable

for similar premises constructed earlier and situate in the same or

adjoining locality and which would necessarily be limited by the standard

rent of such premises. The position in regard to the deter-mination of

rateable value of self-occupied residential and non-residential premises

may thus be stated as follows : The standard rent determinable on the

principles set out in sub-section (2)(a) or (2)(b) or (l)(A)(2)(b) or (l)

(B)(2)(b) of Section 6, as may be applicable, would fix the upper limit of

the rateable value of the premises and within such upper such upper limit,

the assessing authorities would have to determine as to what is the rent

which the owner may reasonably expect to get if the premises are let to a

hypothetical tenant and for the purpose of such determination, the

assessing authorities would have to evaluate factors such as size,

situation, locality and condition of the premises and the amenities therein

provided. The assessing authorities would also have to take into account

the rent which the owner of similar premises constructed earlier and

situate in the same or adjoining locality, might reasonably expect to

receive from a hypothetical tenant and which would necessarily be within

the upper limit of the standard rent of such premises, so that there is no

vide disparity between the rate of rent per square fool or square yard

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which the owner might reasonably expect to get in case of the two premises.

Some disparity is bound to be there on account of the size, situation,

locality and condition of the premises and the amenities provided therein.

Bigger size beyond a certain optimum would depress the rate of rent and so

also would less favourable situation or locality or lower quality of

construction or unsatisfactory condition of the premises or absence of

necessary amenities and similar other factors. But after taking into

account these varying factors the disparity should not be

disproportionately large."

We find ourselves unable to subscribe to the reasoning of the High Court

and the views expressed by it. Law as interpreted by this Court cannot be

brushed aside by saying to the effect that it is not in conformity with the

statutory provisions. Law laid by this Court is explicit and admits of no

doubt. For the purpose of arriving at the rateable value the basic

principle is the annual rent which the owner of the premises may reasonably

expect to get if the premises were let out to a hypothetical tenant. It

would depend on the size, situation, locality and condition of the premises

and the ameni-ties provided therein. All these and other relevant factors

would have to be followed in determining the rateable value. That, however,

cannot be in excess of the standard rent which would be the upper limit.

But then con-sidering the run away prices of land and building materials,

if the standard rent were to be the measure of rateable value, there would

be a huge disparity between rateable value of old premises and those

recently constructed though they may be similar and situated in the same or

even adjoining locality. Considering the same and similar services which

are provided by the local authority if there is vast disparity between the

rateable value of the old premises and the new premises that would be

wholly illogical and irrational. To avoid such a situation, Dr. Balbir

Singh's case laid the principles which have to be followed in arriving at

the rateable value of the newly constructed premises. Of course, rateable

value cannot be the same but then at the same lime a wide disparity would

certainly be irrational, unreasonable and unfair which situation could be

avoided by following the principles laid by this Court, otherwise the

rateable value recording wide disparity would be struck down. There cannot

be any ambiguity as to the principles laid by this Court in arriving at the

rateable value.

We also find that the reasoning of the High Court is flawed that the

Municipal Corporation of Delhi has no machinery if required to follow the

principles laid by this Court. No two premises can be similar, in all

revenue matters, there is no adversary system. Assessment records of the

rateable value of the premises in the locality are certainly available in

the records of the Municipal Corporation of Delhi. It has a field stall" on

the reports of which notices for enllancement of the rateable value are

issued. Assessing authority hears the objections to the fixation of

rateable value and acts in quasi-judicial capacity. Is orders are

appealable. It cannot act in arbitration fashion ignoring principles of law

laid by the Court. It cannot fall back on the spacious plea that it has no

means to act on the principles of law laid by this Court. Even notice for

enllancement of rateable value has to be based on reasons which must exist

on record and the owner is entitled to be apprised of those reasons. High

Court lent its support to the plea of the Municipal Corporation of Delhi

which is contrary to the principles laid by this Court.

The appeals are allowed with costs. Judgments of the High Court in both the

appeals are set aside. Matter will go back to the Assessing Officer of the

Municipal Corporation of Delhi to arrive at the rateable value in

accordance with law keeping in view the principles laid by this Court in

the case of Dr. Balbir Singh and Others v. Municipal Corporation, Delhi and

Others*.