Annual letting value cannot be replaced by an arbitrary floor-area formula under municipal rating law.

A municipal rule fixing the annual letting value of mills, factories and related buildings solely by floor area was invalid because the governing statute required valuation on a recognised basis such as capital value or annual letting value. The court held that a uniform rate per 100 square feet did not reflect the rent a hypothetical tenant might reasonably pay and improperly displaced the statutory valuation scheme, while also narrowing the taxpayer's right to object to valuation itself. The rule was therefore ultra vires, and tax demands raised under it could not stand.

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Issues: Whether Rule 2C framed under the Bombay Municipal Boroughs Act, 1925 was valid to the extent it fixed the annual letting value of mills, factories and buildings relating thereto solely on the basis of floor area for the purpose of levy of house-tax and water-tax.

Analysis: The Act permitted levy of a rate on lands and buildings on the basis of capital value or annual letting value. Annual letting value meant the rent for which the property might reasonably be expected to let from year to year. The impugned rule did not adopt either recognised basis of valuation, but fixed a uniform rate per 100 square feet of floor area. That method bore no relation to the rent a hypothetical tenant might reasonably pay and also curtailed the taxpayer's statutory right to object to the valuation, since the objection would be confined in substance to area rather than to a lawful valuation. The relied-upon precedent under the Madras municipal law was distinguishable because the statutory scheme there was materially different.

Conclusion: Rule 2C was invalid and ultra vires. The tax demands made on that basis could not be sustained.

Ratio Decidendi: Where a municipal statute authorises rating on capital value or annual letting value, the municipality must adopt a recognised method of valuation consistent with that statutory basis and cannot substitute an arbitrary floor-area formula.

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