TaxTMI 
TaxTMI 
2003 (8) TMI 476
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.... Legislature is competent to make a law conferring authority on the local bodies to impose property tax to generate revenue for providing civic amenities like supply of water, drainage, sewerage, collection, removal and disposal of solid waste, fire prevention and fire safety, maintenance of streets and public places and other allied services in the municipal areas where lands or buildings are situated. A brief survey of the history of the legislation is necessary. The repealed Act i.e. Calcutta Municipal Act of 1951 levied equal tax on owner and occupier of the lands and buildings within the municipal area. It provided for Issuance of two separate Bills where the premises are occupied only by one tenant. The occupant's share of tax was collected from the tenant as the occupier's Bill. However, in the case of premises having more than one occupier, the 1951 Act had provided that the taxes under both the Bills i.e. the owner's and the occupier's Bill, would be paid by the owner, but In turn, he was competent to collect half of the total taxes paid i.e. occupier's share proportionately from each occupier. The taxes were charged on the rent payable and the rate was also low. The work....
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.... pay to the owner the 'rent' or any portion of the rent. Section 2(62) defines the word 'owner' to include person for the time being receiving the- rent of the property on his own account or as agent or trustee. Section 170 is a charging section which empowers the Corporation amongst other taxes to levy tax on consolidated rate on lands and buildings. Section 171 and 171(2) provide that such consolidated rate shall be 11% where the annual value of the property does not exceed Rs. 600/-, Where the annual value exceeds Rs. 600/- but does not exceed Rs. 18,000/- the percentage or annual value is worked out on a mathematical formula which is specified thus "by dividing the annual value by 600 and then adding 10 to the quotient. The sum thus worked out being rounded off to the nearest first place of the decimal." Where the annual value exceeds Rs. 13,000/- the consolidated rate would be 40% of the annual value." ' Sub-section (4) of Section 171 which is mainly attacked by the appellants provides that "where any land and building or hut or portion thereof is used for commercial or non-residential purpose, the Corporation may levy a surcharge on the consolidated rate on such land or buil....
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....y the owner should always be deemed to be reasonable rent in the absence of fraud, collusion and other extraneous considerations is too general and broad proposition of law which cannot be accepted for the purpose of determining the annual value of the property for the purposes of Section 174 of the 1930 Act, In the light of clear and unambiguous provisions of Section 174 of the 1980 Act, it cannot be held that the amount realised by a tenant from a sub-tenant cannot, at all be taken into consideration for the purposes of determining the gross annual rent in the absence of extraneous considerations. There is no substance in the submission of the learned counsel appearing for the appellant that allowing the municipal corporations to assess the annual rateable value on the basis of the income of a tenant from the property would be grossly unfair and would have the effect of rendering the rate provisions of the Act unreasonable, arbitrary and unconstitutional. The Act itself has taken care by making sufficient provision in Sections 193 and 194 regarding the liability to pay the rent and apportionment of such liability when the premises are assessed, let or sub-let. On proof of creatio....
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.... The municipal authorities shall keep in mind the various pronouncements of this Court, the statutory provisions made in the specified Municipal Acts, keeping in mind the applicability or non-applicability of the Rent Act and the peculiar circumstances of each case, to find out the gross annual rent of the building including service charges, if any, at which such land or building might, at the time of assessment, be reasonably expected to let from year to year in terms of Section 174 of the 1980 Act", Further, Sub-section (5) of Section 178 obligates the Municipal commissioner to supply on payment necessary Information to owner, lessee or occupier about the apportionment of the "consolidated rate" of such property among several occupiers of such land or building. Furnishing of such information, however, does not preclude the Corporation from recovering the dues from any of such persons owning or occupying land or building. Section 180 provides for revision of the assessment of valuation for consolidated rate and enables owners and occupiers of the property to submit returns pursuant to public notice for revision of assessment of annual value. Section 182 obligates the owner or occ....
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....rden of "consolidated rate" is shared by the tenant or occupier including 'surcharge' where the property is being used for non-residential/commercial purposes. The same method is to be adopted in accordance with Sub-section (2) of Section 194 where the accommodation is sub-let. In that eventuality, the burden of tax on tenant would be proportionate to consolidated rate calculable on the basis of actual rent received by him and the remaining which is to be calculated on the basis of likely rent would be shared by the sub-tenant. Section 195 of the Act fays down the mode of recovery of the 'consolidated rate'. under Sub-section (1) of the said section, the primary liability would be of the 'lessor,' 'superior lessor' or 'the owner.' If the 'person primarily liable' to pay the "consolidated rate." fails to pay, it will be recoverable from the occupier by attachment of his rent in proportion to the sum due against him. On such recovery from the occupier, the occupier would be liable to adjustment of his dues to the lessor, superior lessor or the owner. Apart from the above, there are other modes of recovery by a service of Bill and notice of demand and coercive method under Bengal Pub....
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....lant in this batch of petitions in their own way and different status of their clients, have mainly challenged the provisions of Sections 184, 189, 194, 230, 231 and 234A, It is contended in common that they are unworkable, impractical and hence unconstitutional, It is submitted that although, a major portion of the tax is actually levied on the tenants, sub-tenants and the occupants, there Is no proper machinery, method and mode of assessment by involving this class of persons. They are, thus, denied opportunity in the method of valuation and assessment. There are no legal and constitutional safeguards against illegal determination of consolidated rate before affecting recovery by coercive action of attachment of rent or distress and sale of the property on which tax is imposed. We have also heard learned counsel appearing for the respondent-Corporation, who has taken us through the various provisions of the Act. He strenuously urged that the alleged ground of unwork ability of the provisions is a total misconception of the provisions and their misinterpretation. It is submitted that primary liability to pay tax is on the owner of the property but in cases where the property has ....
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....ate various steps for determination of 'consolidated rates.' We have examined the scheme in detail and we find that at the time of determination of valuation, assessment, revision of assessment and amendment of the assessment, public and written notices are required to be given to all concerned parties including owner, tenant, sub-tenant and occupier' on tax and 'surcharge' proposed to be levied for commercial or non-residential user of the properties. The tenants, sub-tenants and occupiers are entitled to written notices. The provisions contain a detailed procedure under which the tenants, sub-tenants or occupiers pursuant to a public notice and written notice, are entitled to participate. In the process of valuation and assessment of consolidated rate by filing returns and objections. See Section 181, 184 and 186 of the Act which read thus :- "181. Submission of returns and inspection of lands and buildings for purposes of assessment - (1) The Municipal Commissioner, may, with a view of enabling him to determine the annual value of any land or building [in any ward or pan thereof] and the person primarily liable for the payment of any consolidated rate on such land or building, ....
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....the notice the place, time and date, not less than one month thereafter, when he will proceed to consider such valuation. (4) When a revision in the annual valuation of any land or building has been made under Sub-section (2) of Section 180, the Municipal Commissioner shall cause the respective valuation to be entered in the assessment list and shall give a written notice thereof to the owner or to any lessee, sub-lessee or occupier of such land or building, and shall also specify in the notice the place, time and date, not less than one month thereafter, when he will proceed to consider such valuation". "186. Objections against valuation of assessment. - Subject to the provisions of Section 181 or Section 182, any objection to the annual value of a lend or building as entered in the assessment list shall be made by the owner or the person liable to pay the consolidated rate, in writing, to the Municipal Commissioner before the date fixed in the notice under Section 184 [or Section 185] and shall state in what respect the annual value is disputed". [Underlining for emphasis] Learned counsel appearing for the Corporation submits that in the city of Calcutta, there are such large....
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....as to right to file an appeal an appeal under Section 406. This should be more so, if there is an agreement between the landlord and tenant where under the obligation to discharge and pay the property taxes is cast upon the tenant. It is true that this is a private arrangement between the parties and cannot form the basis of a legal right but it is certainly an additional factor conferring the requisite locus standi upon the tenant. Even where the Bombay Rent Act is not applicable to a particular building, the existence and proof of such an agreement would enable the tenant to claim the requisite locals standi . Holding otherwise would be grossly unjust to the tenant. While he is made liable, statutorily or by private treaty, for the enhancement in the property taxes, he is not being allowed to question the same, It is true, as contended by the learned counsel for the Corporation, that no prudent owner of a building will allow the assessment to be enhanced unreasonably just to spite the tenant, it cannot at the same time be said that the tenant has no right to file an appeal against the assessment or enhancement, as the case may be, when he is a person directly affected by such ass....
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....ent, the Municipal authorities cannot in law be made to wait for finalising assessment till the dispute of rent is decided by some other forum. In the event of a dispute regarding rent, it is open to the tenant to raise suitable objection before the competent authority under the provisions of the Act for its decision in the course of valuation and assessment of 'consolidated rate.' Non-participation by Owner: It is next urged that if the actual rent realised does not suffer any change, the entire increase of tax based on market valuation is to be borne by the tenant and the owner is not affected at all. These circumstances are such that an owner, since he is not affected by increasing valuation, may choose not to attend the hearing at the time of assessment, as he knows that he is entitled to receive the entire increase in the property tax from the tenant or occupiers and his individual liability based on actual rent remains unchanged. The aforesaid ground also does not seem to be acceptable. It is true that burden of tax based on valuation in the assessment is to be borne by the tenant or occupier but as we have examined the provisions, even though the landlord remains inactive....
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.... land or building for the period ending on the date of presentation of the appeal on the valuation determined under Section 188 has been deposited [In the office of the Corporation] and the appeal shall abate unless such consolidated rate is continued to be deposited till the appeal is finally disposed of." As we had examined the provisions, since the tenants, sub-tenants or occupiers have to share the burden of tax to an appreciable extent, right of appeal cannot be denied to them. If the right of appeal is held to be available to them on payment of the entire tax levied on the whole building even though they occupy only a portion of it, the remedy of appeal would be highly onerous and virtually denied. In the aforesaid circumstances, on examination of provisions of the Act and as reasonably construing Section 189(6) of the Act, we find that the 'right of appeal' as an effective remedy has to be given to a tenant, sub-tenant or occupant who is a 'person liable' with 'person primarily liable' for payment of 'consolidated rate' and it would be available only on payment of the 'consolidated rate' as apportioned as his liability and held payable by him. Any other interpretation, wou....
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....ack on the Act. Here the courts have to play a cautious role of weeding out the wild from the crop, of course, without infringing the Constitution. For doing this, the courts have taken help from the Preamble, Objects, the scheme of the act, its historical background, the purpose for enacting such a provision, the mischief, if any which existed, which is sought to be eliminated. The principle of reading down, however, will not be available where the plain and literal meaning from a bare reading of any impugned provisions clearly shows that it confers arbitrary, uncanalised or unbridled power." On behalf of the Corporation learned counsel placed heavy reliance on paragraph 16 of the Judgment of this Court in Central Bank of India (supra). It is argued that comparable provisions of Bombay Act were examined and contention was rejected that right of appeal to tenants, sub-tenants or occupiers on pre-deposit of tax for the entire property or premises is inequitable and virtual denial of right of appeal. We have carefully gone through the decision of this court in the case of Central Bank of India (supra) which arose out of Bombay Provincial Municipal Corporation Act 1949 (for short th....
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....t of such sum, and may, in addition to have recourse to other remedies that may be open to him, deduct the amount so recovered from the amount of any rent becoming due from time to time from him to such person. "196. Payment of consolidated rate on lands and buildings.- (1) Save as otherwise provided in this Act, the consolidated rate on any land or building under this Chapter shall be paid by the person liable for the payment thereof in quarterly instalments and, for the purposes of this section, each quarter shall be deemed to commence on the first day of April, first day of July, first day of October, and first day of January, of a year. (2) The Municipal Commissioner shall cause to be presented to the person liable for payment of the consolidated rate a comprehensive bill in respect of such rate to be paid in quarterly instalments, showing separately the amount of the consolidated rate due against each quarter and the date on which the consolidated rate for each quarter is due. Shall bill shall be sent by post under certificate of posting or by courier agency to the person liable for payment of the consolidated rate, not later than the 31st day of May." It is true that vario....
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....e right of appeal in that case was held to be allowable only on full deposit of property tax for the whole property or building which is treated to be one unit for valuation and assessment of tax. We have noticed the distinguishing features and the scheme of the Act applicable to Calcutta before us for interpretation and the Act applicable to Bombay. We have resorted to a reasonable interpretation of the provisions of Act applicable to Calcutta. We have come to the conclusion that as tenant, sub-tenant and occupants are "persons liable" with owner or lessor being the 'persons primarily liable', the former category of 'persons liable' have a right to prefer appeal against proposed valuation and assessment of "consolidated rate" by deposit of that portion of "consolidated rate" or surcharge which is found leviable and payable by them. Such portion of "consolidated rate" and 'surcharge' is separately determined and ascertainable from the order of assessment and the demand bills and notices for recovery, if any, issued to the persons "primarily liable" or "persons liable." The decision of this Court in the case of Central Bank of India (supra) on the provisions of Bombay Act, therefor....
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....tionally treated as 'rent'. We have to examine the provisions of Section 231 of the Act in the light of the scheme of the Act. Section 231 of the Act reads thus: "Mode of recovery - If any person primarily liable to pay any consolidated rate on any land or building and is entitled to recover any sum from an occupier of such land or building, he shall have, for recovery thereof, the same rights and remedies as if such sum were rent payable to him by the person from whom he is entitled to recover such sum." We find that the machinery provisions for assessment and recovery of tax basically involve the owner or the lessor who is 'primarily liable' for the tax on property although in the course of assessment and recovery of portion of tax from the tenants, sub-tenants or occupants, their involvement is also directed. It is with the purpose to make procedure of recovery of tax simpler that the owner or the lessor is proceeded against as the "person primarily liable." The owner or lessor of the property is 'primarily' required to satisfy the demand towards tax with right to recover it from the tenant, sub-tenant or the occupant. If the landlord or the owner is obliged to make payment o....
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.... down in the provisions of the Tenancy Act. A provision to fictionally treat 'tax' as 'rent' is necessitated because in the absence of such a fiction in Section 231 of the Act, the landlord would be compelled to pay the whole amount of tax which is recoverable from him under the Act and would be left to an expensive and cumbersome remedy of filing a civil suit for recovery of such tax paid on behalf of the tenant, sub-tenant or occupant. Such a fiction is required to be incorporated under Section 231 of the Act because a private party cannot recover tax. If a lessor is obliged to pay a portion of tax leviable on the tenant, the landlord can recover the same not as 'tax' but only as part of 'rent.' The fiction created by the legislation in Section 231 to treat 'tax' as 'rent' has to be taken to its logical conclusion. The Act under consideration and the Tenancy Act both are State Legislations. No question arises of legislative incompetence. There does not appear any inter se conflict between the two Acts. Both have to be read and applied harmoniously to achieve the legislative intent in the two enactments. The contention based on Section 231 of the Act, therefore, also does not comm....
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....is not included in rent and there is no obligation on such landlords occupying tenanted premises on rent which is more than Rs. 3,000/- per month, to pay property tax directly or through the landlord in accordance with the Tenancy Act. It is, thus, contended that the provisions of the Act create a discriminatory situation between tenants paying less than Rs. 3,000/- per month rent and covered by Tenancy Act and tenants paying more than Rs. 3,000/- per month rent and falling outside the provisions of the Tenancy Act. We have examined the scheme of the Act and we find that in apportioning the burden of tax on landlord and tenant a uniform scheme or tax structure has been evolved under the Act on the basis of actual and notional rental value of the premises. The liability of the landlord towards tax is limited to the valuation based on actual rent received and the assessment made of the tax based on letting value of the premises is the liability of the tenant/sub-tenant or occupier. Merely because Tenancy Act is attracted to accommodations with rent less than Rs. 3,000/- per month and not to other accommodations having higher rent, does not create any dis-similar situation in applica....