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CASE NO.:

Appeal (civil) 1990 of 1995

PETITIONER:

MATHURAM AGRAWAL

RESPONDENT:

STATE OF MADHYA PRADESH

DATE OF JUDGMENT: 28/10/1999

BENCH:

S.P. BHARUCHA & B.N. KIRPAL & V.N. KHARE & S.S.M. QUADRI & D.P. MOHAPATRA

JUDGMENT:

JUDGMENT

1999 ( 4 ) Suppl. SCR 195

D.P. MOHAPATRA, J. This case calls in question the vires of proviso to

clause (b) of sub-section (2) of Section 127-A of Madhya Pradesh

Municipalities Act, 1961 (for short the 'Act') and the levy and collection

of property tax in respect of the buildings owned by the appellant.

The relevant facts of the case, shorn of unnecessary details, may be stated

as under:

The appellant and respondents 4 to 7 are joint owners of 13 separate items

of house properties bearing No. 56/2(1) to 56(2)/13 situated in ward No. 15

of Raigarh Municipal area. The assessment proceeding for the purpose of

levying property tax was initiated under the provisions of the Madhya

Pradesh Municipalities Act, 1961 (M.P. Act No. 37 of 1961) (hereinafter

referred to as 'the Act') by the Municipal Council, Raigarh, respondent

no.2 herein. The Municipality purporting to invoke the proviso to the

section 127-A(2) of the Act aggregated the annual letting value of all the

buildings and levied property tax on the deemed annual letting value so

aggregated. The assessment order was followed by the demand notice.

Feeling aggrieved by the levy and collection of property tax in the manner

aforementioned, the appellant and respondents 4 to 7 preferred appeal under

Section 139 of the Act before the Civil Judge Class-II, Raigarh. The

appellate authority allowed the appeal and quashed the assessment order and

the demand notice. On a revision petition being filed by the Municipality

the District Judge, Raigarh allowed the revision, set aside the order of

the appellate authority and confirmed the order of assessment made by the

concerned authority.

The appellant and the respondents 4 to 7 filed the Writ Petition in the

High Court of Madhya Pradesh challenging the order of assessment, inter

alia, on the grounds that it was not in conformity with the provisions of

the Act. They also challenged the constitutional validity of the proviso to

sub-clause (b) of Section 127(A) (2) of the Act. By the impugned judgment a

Division Bench of the High Court rejected the contentions raised by the

petitioners including the challenge to the constitutional validity of the

proviso to Section 127(A)(2) and confirmed the assessment order of the

municipality and dismissed the writ petition. The High Court placed

reliance mainly on the decision of this Court in Administrator Municipal

Corporation, Bilaspur v. Dattatraya Dahankar, Advocate and Anr., [1992] 1

SCC 361 and its own decision in the case of Leelawati Mishra and Ors. v.

President, Municipal Committee, Mungaoli, (1990) M.P.L.J. 28. Thereafter

one of the petitioners in the Writ Petition, Mathuram Agrawal, filed this

appeal challenging the judgment of the High Court.

When the case was taken up by a Bench of two learned Judges of this Court a

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submission was made on behalf of the petitioner that in the light of the

decision of this Court in the case of Administrator, Municipal Corporation,

Bilaspur (Supra) decided by a Bench of three learned Judges of this Court

construing Section 127(1)(2) of the Act the question as to the

constitutional validity of that proviso arises for consideration. Taking

note of the said submission the bench passed the order dated 13.2.95,

relevant portion of which reads as follows:

"In view of the construction made by a Bench of three learned Judges in the

above quoted decision, the question of considering the constitutional

validity of the provision does arise. However, the question for

consideration also is whether the alternative construction which would

support the constitutional validity of the provision is to be preferred and

is also available on the language of the statute. It is, therefore,

appropriate that the matter is considered by a Bench of five learned

Judges."

The question that arises for consideration is when several items of

properties (houses, buildings or lands) within the municipality, the annual

letting value of each of which dose not exceed Rs. 1,800 per annum, are

owned by one person, then, is the owner liable to pay property tax for such

properties.

Since determination of the question largely depends on interpretation of

Section 127 (A) and its interaction with other relevant provisions of the

Act it would be convenient to quote the relevant statutory provisions

before proceeding to consider the merits of the case.

S.126 Definition of annual letting value - In this Chapter, the expression

"annual letting value" shall mean:

(i) where any building or land is let out, the annual rent for which it is

actually let out;

(ii) where the rent of any building has been determined under the Madhya

Pradesh Accommodation Control Act, 1955 (23 of 1955), the annual rent as so

determined; and

(iii) in any other case, the annual rent for which any building or land

exclusive of furniture or machinery contained or situated therein or

thereon, might reasonably be expected to let from year to year, and shall

include any payment made or agreed to be made by a tenant to the owner of

the building or land on account of occupation taxes, insurance or other

charges incidental to the tenancy;

Provided that if it appears to the Council that the annual rent of any

building or land is much lower than the annual rent for which it might

reasonably be expected to let at the time of assessment, such letter rent

shall be deemed to be the annual letting value in respect of such building

or land."

Section 127 reads as follows:

"127 Taxes which may be imposed (1) A Council may, from time to time and

subject to the provisions of this Chapter, and any general or Special order

which the State Government may make in this behalf, impose in the whole or

in any part of the Municipality any of the following taxes, for the

purposes of the Act, namely:-

(0 a tax payable by the owner of houses, buildings or lands situated within

the limits of Municipality with reference to annual letting value of the

house, building or land called property tax:

127(A) Imposition of property tax (1) Notwithstanding anything contained in

this Chapter, as and from the financial year 1976-77, there shall be

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charged, levied and paid for each financial year a tax on the lands or

buildings or both situate in a Municipality other than Class IV

Municipality at the rate specified in the table below:

TABLE

(0 where the annual letting value 6 per centum of the annual

exceeds Rs. 1800 but does not letting value

exceed Rs. 6000

(ii) where the annual letting value 8 1/3 per centum of the exceeds

Rs. 6000 but does not annual letting value

exceed Rs. 12000 (iii) where the annual letting value 10 per centum

of the annual exceeds Rs. 12000 but does not letting value exceed Rs.

18000

(iv) where the annual letting value 15 per centum of the annual

exceeds Rs. 18000 but does not letting value

exceed Rs. 24000

(v) where the annual letting value 20 per centum of the annual

exceeds Rs. 24000 letting value

(2) The property tax levied under sub-section (1) shall not be leviable in

respect of the following properties, namely:-

(a) building and lands owned by or vesting in-(i) the Union Government

(ii) the State Government; (iii) the Council;

(b) buildings and lands the annual letting value of which does not exceed

eighteen hundred rupees:

Provided that if any such building or land in the ownership of a person who

owns any other building or land in the same Municipality, the annual

letting value of such building or land shall for the purpose of this

clause, be deemed to be the aggregate annual letting value of all buildings

or lands owned by him in the Municipality.

(Emphasis supplied)

xxx xxx

xxx"

From the statutory provisions quoted above it is clear that the incidence

of the tax is the house, building or land situated within the limits of the

municipality. The tax is to be paid by the owner(s) of the house, building

or land. The amount of tax to be paid by the owner(s) is to be determined

with reference to the annual letting value of the house, building or land

in question. The manner of determination of the annual letting value is

prescribed in section 126 of the Act. The Table in Section 127, which

provides for the rate at which the tax is to be levied, starts with

property the annual letting value of which exceeds Rs. 1,800 per annum but

does not exceed Rs. 6,000, and in such a case the tax is to be levied at 6

per centum of the annual letting value. As the annual letting value of the

property escalates the rate of tax increases. The very fact that no rate of

tax is prescribed in the Table for a property the annual letting value of

which is less than Rs. 1800 clearly indicates the intention of the

Legislature not to levy the tax on such properties. This position is

further clarified in clause (b) of subsection (1) of Section 127 in which

it is laid down that house, building and lands annual letting value of

which does not exceed Rs. 1800 are exempt from property tax.

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On a fair reading of the proviso to section 127 (A)(2)(b) it is clear that

in respect of any building or land whose letting value is less than Rs.

1800 which is owned by a person who owns any other building or land in the

same municipality, the annual letting value of such building or land shall

be deemed to be the aggregate annual letting value of all building or lands

owned by him in the municipality. The provision also makes it clear that

this exception is meant for the purpose of this clause i.e., clause (b) of

subsection (2). It follows, therefore, that the exemption to the levy under

subsection (1) of section 127(A) will not be available in a situation to

which the proviso applies.

Then the further question for determination is whether such a building or

land, annual letting value of which does not exceed Rs. 1800, automatically

becomes liable for payment of tax and if so what is the rate of tax in such

a case. The provision in sub-section (1) of section 127(A), which is a

charging section, makes no provision regarding the rate at which the tax is

to be paid in case the building or land in question annual letting value of

which is less than Rs. 1800 is to be taxed.

Another question that arises for consideration in this connection is

whether sub-section (1) of Section 127-A and the proviso to sub-section 2

(b) should be construed together and the annual letting values of all the

buildings owned by a person to be taken together for determining the amount

to be paid as tax in respect of each building. In our considered view this

position cannot be accepted. The intention of the Legislature in a taxation

statute is to be gathered from the language of the provisions particularly

where the language is plain and unambiguous. In a taxing Act it is not

possible to assume any intention or governing purpose of the statute more

than what is stated in the plain language. It is not the economic results

sought to be obtained by making the provision which is relevant in

interpreting a fiscal statute. Equally impermissible is an interpretation

which does not follow from the plain, unambiguous language of the statute.

Words cannot be added to or substituted so as to give a meaning to the

statute which will serve the spirit and intention of the legislature. The

statute should clearly and unambiguously convey the three components of the

tax law i.e., the subject of the tax, the person who is liable to pay the

tax and the rate at which the tax is to be paid. If there is any ambiguity

regarding any of these ingredients in a taxation statute then there is no

tax in law. Then it is for the legislature to do the needful in the matter.

In the case of Bank of Chettinad Ltd. v. Commissioner of Income-tax,

Madras, the Privy Council quoted with approval the following passage from

the opinion of Lord Russel of Killowen in Inland Revenue Commissioners v.

Duke of Westminster, (1936) A.C. 1:

"I confess that I view with disfavour the doctrine that in taxation cases

the subject is to be taxed if in accordance with a Court's view of what it

considers the substance of the transaction, the Court thinks that the case

falls within the contemplation or spirit of the statute. The subject is not

taxable by inference or by analogy, but only by the plain words of a

statute applicable to the facts and circumstances of his case. As Lord

Cairns said many years ago in (1869) 4 H L 100(2) at p. 122: "As 1

understand the principle of all fiscal legislation it is this" If the

person sought to be taxed conies within the letter of the law he must be

taxed, however great the hardship may appear to the judicial mind to be. On

the other hand if the Crown, seeking to recover the tax, cannot bring the

subject within the letter of the law, the subject is free, however,

apparently within the spirit of the law the case might otherwise appear to

be."

In the case of RUSSEL (INSPECTOR OF TAXES) v. SCOTT. 1948 The All England

Law Reports page 1, Lord Simonds in his opinion at page 5 observed:

"My Lords, there is a maxim of income tax law which, though it may

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sometimes be over-stressed, yet ought not to be forgotten. It is that the

subject is not to be taxed unless the words of the taxing statute (

unambiguously impose the tax on him. It is necessary that this maxim should

on occasion be reasserted and this is such an occasion."

In Administrator, Municipal Corporation, Bilaspur v.. Dattatraya Dahankar,

Advocate and another (supra) this Court while accepting the position that

each building is a unit for the purpose of taxation and that there I is no

provision for taxation in respect of a building having annual letting value

less than Rs. 1800 and that the deeming proviso to clause (b) of sub-

section (2) as expressly stated is "for the purpose of this claluse", held

that since the aggregation of annual letting value of all buildings or

lands is permitted, then, all such buildings or lands have to be taken as

one unit for the purpose of taxation. The Court was of the view that any

other construction would render the proviso nugatory and defeat the object

of the Act.

This construction, in our considered view, amounts to supplementing the

charging section by including something which the provision does not state.

The construction placed on the said provision does not flow from the plain

language of the provision. The proviso requires the exempted property to be

subjected to tax and for the purpose of valuing that property alone the

value of the other properties is to be taken into consideration. But, if in

doing so, the said property becomes taxable, the Act does not provide at

what rate it would be taxable. One cannot determine the ratable value of

the small property, by aggregating and adding the value of other

properties, and arrive at a figure which is more than possibly the value of

the property itself. Moreover, what rate of tax is to be applied to such a

property is also not indicated.

Take, for instance, a case where a person owns 10 buildings, 8 of which are

small ones fetching annual rental value of Rs. 1,500 each and the other 2

fetch annual rental value of Rs. 60, 000 each; then applying the ratio of

Administrator Municipal Corporation, Bilaspur (supra) the annual rental

value of each of the small buildings will come to Rs. 1, 32,000 and the

owner will have to pay tax according to the highest slab for each building.

Such an intention on the part of the legislature cannot be accepted,

particularly in the absence of specific provision in the charging section.

In view of the discussions in the foregoing paragraphs the proviso to

clause (b) of sub-section(2) of section 127-A of the Act being contrary to

the charging section is struck-down as ultra vires.

The appeal is allowed and the judgment of the High Court under challenge is

set aside. There will, however, be no order as to costs.

V.S.S.

Appeal allowed.