STATE TRADING CORPN. INDIA LTD. Vs. NEW DELHI MUNICIPAL COUNCIL
Supreme Court of India (Division Bench (DB)- Two Judge)
Appeal (Civil), 2772 of 2009, Judgment Date: Feb 03, 2016
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 2772 OF 2009
STATE TRADING CORPN. INDIA LTD. APPELLANT
VERSUS
NEW DELHI MUNICIPAL COUNCIL RESPONDENT
WITH
CIVIL APPEAL NO.787 OF 2016
(Arising out of SLP (C) No.18110 of 2006)
WITH
CIVIL APPEAL NO. 2773 OF 2009
WITH
CIVIL APPEAL NO. 2774 OF 2009
WITH
CIVIL APPEAL NO. 2775 OF 2009
WITH
CIVIL APPEAL NO. 2777 OF 2009
WITH
CIVIL APPEAL NO. 2778 OF 2009
WITH
CIVIL APPEAL NO. 2779 OF 2009
WITH
CIVIL APPEAL NO. 2780 OF 2009
WITH
CIVIL APPEAL NO. 2781 OF 2009
J U D G M E N T
KURIAN, J.
1. Leave granted in SLP (C) No. 18110/2006.
2. The basis of assessment of property tax under the New Delhi Municipal
Council Act, 1994 (in short the “NDMC Act”) is the subject matter of these
appeals. In Chapter VIII of Taxation, Section 60 of the NDMC Act has dealt
with the subject. Under Section 60(1)(a), the Municipal Council is
entitled to levy the property tax. Under sub-section (3) the property tax
shall be levied, assessed and collected in accordance with the provisions
of the Act and the bye-laws made thereunder. Section 61 of the NDMC Act
speaks about the rates of property tax and it is provided that unless
otherwise specified under the Act, the property tax shall not be less than
10% and not more than 30% of the rateable value of lands and buildings.
Section 63 of the NDMC Act deals with the determination of rateable value
of lands and buildings. The provision reads as follows:
“63. Determination of rateable value of lands and buildings
assessable to property tax.-(1) The rateable value of any lands or building
assessable to any 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 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:
Provided that in respect of any land or building the standard rent of
which has been fixed under the Delhi Rent Control Act, 1958 (59 of 1958)
the rateable value thereof shall not exceed the annual amount of the
standard rent so fixed.”
3. Though the learned senior counsel appearing for the appellants sought
to place reliance on the proviso under section 63(1) of the NDMC Act, we
are afraid the contention cannot be appreciated. The concept of standard
rent is no more available under the Delhi Rent Control Act, 1958, since the
said provision has been struck down in the case of Raghunandan Saran Ashok
Saran (HUF) Vs. Union of India & Others reported in 95 Delhi Law Times 508
(2002)(DB). Additionally, it is also to be noted that the standard rent in
the case of the appellants has never been fixed under the Delhi Rent
Control Act, 1958.
4. In the cases before us there are two categories of buildings 1)self-
occupied and 2) out of the leased premises a portion which is self occupied
and the rest let out on sub-lease under due permission from the Government
of India. In case the premises is sub-let, there is a condition that the
lessee should pay to the Government 25% of the gross rent fetched out of
the sub-lease.
5. In the impugned judgments, the High Court has taken the view that
since there is already a payment of rent by the sub-lessee, there need not
be any other exercise for assessment of the reasonable rent. The High
Court has based its decision under bye-law 12 of the New Delhi Municipal
Committee Byelaws Relating to the Assessment and Collection of House Tax.
For the purpose of reference, we may extract the provision of bye-law 12:
“12. The annual value of a building or house which is in the owner's
own occupation either for residential purposes or for commercial purposes
and the standard rent of which has not so far been fixed by a competent
authority may be calculated under section 8(1)(b) on the basis of rents of
similar accommodation prevalent in the locality and in the event of the
Committee being of the opinion that the same is not feasible, the annual
value may be calculated under section 3(1)(c).”
6. However, it is pointed out that the Punjab Municipal Act, 1911 has
been repealed and as per Section 416(2) of the NDMC Act what is saved is
only the provisions under the bye-laws which are not otherwise inconsistent
with the provisions of the NDMC Act. Since there is a provision and
procedure under Section 63 the NDMC Act for calculating the annual rent,
one need not refer at all to the bye-laws as quoted above since they are
apparently inconsistent with the provisions of the NDMC Act. In short, it
is impermissible to refer to the bye-laws framed under the Punjab Act in
view of specific provisions made under the NDMC Act providing for the levy,
assessment and collection of property tax.
7. Therefore, the only basis for fixation of rateable value is the
annual rent at which the land or building might reasonably be expected to
be let from year to year, subject to the deductions provided under the Act.
8. The basis of the impugned judgments which was wholly based on the bye-
laws having been thus knocked down, we have to get back to the provisions
under the NDMC Act for the purposes of the fixation of the rateable value
which is based on the rent which can be reasonably fetched by letting out
the premises.
9. Our attention has been invited to a three Judge Bench decision of
this Court in Dewan Daulat Rai Kapoor and Others Vs. New Delhi Municipal
Committee and Others reported in (1980) 1 SCC 685 wherein this Court has
dealt with in detail as to what is the scope of the expression “reasonably
be expected to let from year to year”. The whole consideration is
available in paragraph 2 of the Judgment which reads as under:
“ 2. It is obvious from this definition that unlike the English Law
where the value of occupation by a tenant is the criterion for fixing
annual value of the building for rating purposes, here it is the value of
the property to the owner which is taken as the standard for making
assessment of annual value. The criterion is the rent realisable by the
landlord and not the value of the holding in the hands the tenant. The rent
which the landlord might realise if the building were let is made the basis
for fixing the annual value of the building. The word "reasonably" in the
definition is very important. What the landlord might reasonably expect to
get from a hypothetical tenant, if the building were let from year to year,
affords the statutory yardstick for determining the annual value. Now, what
is reasonable is a question of fact and it would depend on the facts and
circumstances of a given situation. Ordinarily, as pointed out by Subba
Rao, J., speaking on behalf of the Court in Corporation of Calcutta v.
Padma Devi(1); "a bargain between a willing lessor and a willing lessee
uninfluenced by any extraneous circumstances may afford a guiding test of
reasonableness. An inflated or deflated rate of rent based upon fraud,
emergency, relationship and such other considerations may take it out of
the bounds of reasonableness". The actual rent payable by a tenant to the
landlord would in normal circumstances afford reliable evidence of what the
landlord might reasonably expect to get from a hypothetical tenant, unless
the rent is inflated or depressed by reason of extraneous considerations
such as relationship, expectation of some other benefit etc. There would
ordinarily be in a free market close approximation between the actual rent
received by the landlord and the rent which he might reasonably expect to
receive from a hypothetical tenant....”
10. In the second category of cases before us the actual rent payable by
a tenant to the landlord is available for verification by the assessing
officer. But the question is whether that rent paid by the sub-lessee is
in normal circumstances and whether it is either inflated or depressed by
reason of any other consideration or relationship. Having regard to the
agreement with the Government of India for payment of 25% of the gross rent
fetched from the sub-lessee, we are inclined to hold that the 25% that is
being paid to the Government of India by the lessee out of the rent
collected from the sub-lessee is inflated to include the extra 25% since
the rent actually available to the lessee is only 75% of the amount
actually paid by the sub-lessee to the lessee. Therefore, going by the
principle settled by this Court in the case of Dewan Daulat Rai Kapoor
(supra), the rateable value under section 63 of the NDMC Act, in the case
of the appellants coming under the second category has to be fixed on the
basis of 75% of the amount received from the sub-lessee by the appellants.
On that basis, the rateable value of the premises both tenanted and self-
occupied will be fixed by the assessing officer. This is however, subject
to the production of proof of payment/adjustment/ appropriation of the 25%
by the lessee with the Government of India.
11. As for the first category, where the building is self-occupied and
where there is no sub-lease, the annual rent will have to be fixed as held
by this Court in the case of Dewan Daulat Rai Kapoor (supra) and in the
case of India Automobiles Ltd. Vs. Calcutta Municipal Corporation and
Another reported in (2002) 3 SCC 388 on the basis what the landlord might
reasonably expect to get from a hypothetical tenant. Such
fixation has to be made only as per the NDMC Act. It is for the assessing
officer to make the fixation in accordance with law. The assessment for
the disputed period shall be completed within three months from today.
11. The impugned judgments are hence set aside. The appeals are allowed
as above with no order as to costs.
.....................J.
[KURIAN JOSEPH]
....................J.
[ROHINTON FALI NARIMAN
NEW DELHI;
FEBRUARY 03, 2016
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