1990 (11) TMI 407 - SC - Indian Laws

Petroleum storage tanks qualify as taxable structures under property tax laws despite not being permanently fixed

The Municipal Corporation of Greater Bombay Versus The Indian Oil Corporation

The SC held that petroleum storage tanks constitute structures within the meaning of property tax legislation and are exigible to property tax. The Court ... Levy of the property tax - Rateable value of the installations on the demised property consisting of the buldings, structures and tanks - definition of 'land' or 'building' - storage tanks of petroleum products are 'land' within the meaning of Section 3(r) or 'buildings' as defined Under Section 3(s) of the Act - HELD THAT:- It is seen that the structure must be an entity in itself, although not necessarily a building in itself, adopted to the particular purpose it serves. In its ordinary sense a structure is something which is constructed by way of being built as is a building. But method of construction by itself is not conclusive. Structure by itself may not be a building but it may be analogous to a building, outhouse, shed, hut or a stable. Ship is like a floating building but it is not a structure. A crane gantry or a turnable is a structure but is not a building. Weighing bridge is a structure. Tilting furnaces mains are in the nature of structure. The British Act levies property tax on the tenant and each item by itself is exigible to separate rateability. But under the Act the incidence of taxation is on the building or land. So the building or its accompaniments like house, out-house, garage, stable, shed, hut and such other structures must also be an entity by itself although not necessarily a building, erected on the land. The adverb 'such' must be construed in this perspective. Looking at the tank it would be apparent to be a structure, shorn of the feat of engineering mechanism put up to have the tank rested on the land. Mechanism or feat of engineering is not a conclusive test. It is undoubted that if the tanks are situated within a Plant they would be integral part of the plant and get exempted from assessment Under Section 154 of the Act but there exist no such plant on the demised site. It is also equally undoubted that harmonious construction must be adopted consistent not only with the principles of taxation to make rateable value but also those relating to income-tax, wealth-tax etc. In New Manek Chowk Spinning and Weaving Mills Co. Ltd. and Ors. v. Municipal Corporation of the City of Ahmedabad and Ors. 1967 (2) TMI 97 - SUPREME COURT], the Constitution Bench was concerned with levy of the property tax on textile factories at flat rate under Bombay Provincial Municipal Corporation Act, 1949 whose constitutional validity was impugned by Article 14 which this Court held to be ultra vires. It is not of much assistance to the respondent. The tanks, though, are resting on earth on their own weight without being fixed with nuts and bolts, they have permanently been erected without being shifted from place to place. Permanency is the test. The fact that no nuts and bolts were used to imbed the tank to the earth by itself is not conclusive. Though the witness stated that the tank is capable of being shifted, as a fact the tanks were never shifted from the places of erection. By scientific process, the tanks stand on their own weight on the earth at the place of erection as a permanent structure. The petroleum products are being stored through pipes and are taken out by mechanical process. The operational mechanisation also though relevant, is not conclusive. The rateable is based on the rent, which the building or land is capable to fetch. Due to erection of the tanks whether the value of the demised property had appreciated or not, is also yet another consideration. Undoubtedly, when the tanks are erected and used for commercial purposes, the value of the demised property would get appreciated. The annual letting value is capable of increase. However, the rate of increase is a question of fact but the fact remains that the value of the land gets increased by virtue of erection of the storage tanks. Considering from this perspective we have no hesitation to hold that the petroleum storage tanks are structures or things attached to the land within the definition of Sections 3(s) and 3(r) of the Act. Thereby they are exigible to property tax. In this view the appeal is allowed and the judgment of the High Court is reversed and that of the Court of Small Causes is affirmed. 1. ISSUES PRESENTED and CONSIDEREDThe core legal question considered in this judgment was whether the petroleum storage tanks installed by the respondent on leased land were classified as 'land' or 'buildings' under Sections 3(r) and 3(s) of the Bombay Municipal Corporation Act, 1888, and thereby subject to property tax. The determination of whether these tanks qualified as structures or buildings for the purposes of taxation was central to the case.2. ISSUE-WISE DETAILED ANALYSISThe primary issue was whether the storage tanks constituted 'land' or 'buildings' under the Act and were thus subject to property tax. The analysis involved several components:- Relevant Legal Framework and Precedents: The legal framework included Sections 3(r) and 3(s) of the Bombay Municipal Corporation Act, 1888, which define 'land' and 'building' respectively. Section 3(r) includes land built upon or covered with water, benefits arising out of land, things attached to the earth, or permanently fastened to anything attached to the earth. Section 3(s) defines 'building' to include a house, out-house, stable, shed, hut, and every other such structure made of various materials.- Court's Interpretation and Reasoning: The Court interpreted the definitions in the context of the Act's purpose of fixing rateable value for property taxation. It referred to various dictionary definitions and judicial precedents to elucidate the meaning of 'building' and 'structure.' The Court emphasized the need for a pragmatic interpretation that aligns with the Act's purpose and accommodates modern technological advancements.- Key Evidence and Findings: The Court considered the physical characteristics of the tanks, including their construction, installation, and intended permanence. The tanks were constructed of steel plates, rested on sand and asphalt foundations, and were not bolted to the ground. Despite this, their substantial size and weight indicated a degree of permanence.- Application of Law to Facts: The Court applied the legal definitions to the facts, considering whether the tanks were analogous to buildings or structures. It concluded that the tanks were not buildings in the traditional sense but could be considered structures due to their permanence and the manner in which they were installed.- Treatment of Competing Arguments: The respondent argued that the tanks did not meet the statutory definitions of 'building' or 'structure' due to their construction and lack of conformity with building regulations. The Court rejected this argument, noting that not all structures need to conform to such regulations and emphasizing the inclusive nature of the statutory definitions.- Conclusions: The Court concluded that the petroleum storage tanks were structures within the meaning of the Act, as they were permanently erected and contributed to the rateable value of the land. Consequently, they were subject to property tax.3. SIGNIFICANT HOLDINGS- Preserve Verbatim Quotes of Crucial Legal Reasoning: The Court stated, 'The word 'includes' is generally used to enlarge the meaning of words or phrases used in the statute so that, words and phrases may be construed as comprehending not only such things as they signify according to their nature and import, but also these things which the interpretation clause declares that they shall include.'- Core Principles Established: The judgment established that the definitions of 'land' and 'building' in the Bombay Municipal Corporation Act are inclusive and should be interpreted broadly to fulfill the legislative intent of taxation. The Court highlighted the importance of considering the purpose of the law and the need for its interpretation to evolve with technological and societal changes.- Final Determinations on Each Issue: The Court determined that the storage tanks were structures attached to the land within the definitions of Sections 3(r) and 3(s) of the Act. As a result, they were subject to property tax. The appeal was allowed, reversing the High Court's decision and affirming the judgment of the Court of Small Causes.