TaxTMI 
TaxTMI 
2003 (7) TMI 684
X X X X Extracts X X X X
X X X X Extracts X X X X
....hi on which it constructed a cinema complex known as Delite Cinema Complex. The construction was completed in or about the year 1954. The company had installed certain plant and machinery, furniture and fixtures in the said construction of cinema house. By an order made on 30th May, 1988 the first respondent Municipal Corporation of Delhi revised the rateable value of the appellant's property to Rs. 2,16,970 w.e.f. 1.4. 1968, Rs. 2,18,150 w.e.f. 1.4.1970 and Rs. 2,20,510 w.e.f. 1.7.1970. For the purpose of arriving at the rateable value the assessing authority added the cost incurred by the appellant towards installation of plant and machinery, furniture and fixtures to the cost of the building. The appellant challenged the assessment order by a statutory appeal under Section 169 of the DMC Act contending that the costs incurred towards plant and machinery, furniture and fixtures could not be added to the cost of the building for the purpose of rateable value as they are movable items and not part and parcel of the building. It was also contended that there was no specific notification issued by the Commissioner of the Municipal Corporation for including the value of moveable i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t the judgment of this Court in New Manek Chowk Spg. and Wvg. Mills Co. Ltd. etc. v. Municipal Corporation of the City of Ahmedabad and Ors.. AIR (1967) SC 801 was distinguishable. The High Court also relied on its own judgment in Municipal Corporation of Delhi v. Pragati Builders and Ors., (supra) and the judgment of this Court in Hindustan Lever Ltd. v. Municipal Corporation of Greater Bombay and Ors., (supra), set aside the judgment of the appellate authority and remitted the assessment to the assessing authority for making afresh assessment orders. The appellants are in appeal before this Court. Civil Appeals Nos. 8570-73 of 2002 The appellants in these cases are owners of certain premises in which either lifts or air-conditioners or both have been installed. The Commissioner of Municipal Corporation of Delhi exercising his powers under Section 116(3) of the Act issued a notification dated 23.10.1989/24.10.1989 to the following effect :- "Municipal Corporation of Delhi Public Notice : Lift containing or situated in or upon any building form an integral part of such building for its more beneficial enjoyment and is not plant or machinery contained or situated in or u....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ur purpose. Section 115 provides that general tax shall be levied in respect of all lands and buildings in Delhi. There are certain exceptions made in this section which are again not relevant for us. Section 116 is the crucial section which has generated considerable debate at the bar and bears reproduction. "116. Determination of rateable value of lands and buildings assessable to property taxes - (1) the rateable value of any land or building assessable to property taxes shall be the annual rent at which such land or building might reasonably by expected to let from year to year less - (a) a sum equal to ten percent 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, and (b) the water tax or the scavenging tax or both, if the rent is inclusive of either or both of the said taxes :- Provided that if the rent is inclusive of charges for water supplied by measurement, then, for the purpose of this section the rent shall be treated as inclusive of water tax on rateable value and the deduction of the water tax shall be ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ut does not include any portable shelter." "Land has been defined in section 2(24) as follows "2(24) "Land" includes benefits to arise out of land, things attached to the earth of permanently fastened to anything attached to the earth and rights created by law over any street." "Rateable value" is defined in section 2(47) as follows : "2(47) "Rateable value" means a regulation made by the Corporation under this Act, by notification in the Official Gazette." The 1994 Bye-Laws Section 481 empowers the Corporation, subject to the provisions of the Act, to make bye-laws to provide for all or any of the matters dealt with in the section. Paragraph A deals with bye-laws relating to taxation. After enumerating a number of topics on which bye-laws could be made, in entries 1 to 8, entry 9 gives power to the Corporation as under :- "Entry 9 : Any other matter relating to the levy, assessment, collection, refund or remission of taxes, under this Act." In exercise of its power to make bye-laws, the Delhi Municipal Corporation has made a set of bye-laws styled as "DMC determination of Rateable Value Bye-Laws 1994", which were brought into force w.e.f. 24.10.1994. These bye....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lent rent, whichever is higher; Explanation II - For the purposes of this bye-law, the annual rent of the premises includes the annual rent of the land and building thereon, and such other fixtures and fittings as are considered necessary for the use and enjoyment of the land and building purpose for which they are intended to be used and shall include lifts, elevators, storage tanks, pipe-lines, railway lines, runways, underground cables, air-conditioning plant in centrally air-conditioned buildings, swimming pools, chairs and screen in cinema halls, theatres and auditoria, cost of insulations and racks in cold storage buildings but save as aforesaid, no account shall be taken of the value of any fistures and fittings contained or situated in or upon any land or building." We may mention here that these bye-laws were challenged as ultra-vires the delegated powers of legislation of the Corporation By a judgment in Delhi Urban House Owner's Welfare Association and Anr. v Union of India and Ors., 60 (1995) DLT 644 a Division Bench of the Delhi High Court held that the explanation to bye-law 3(l)(a), bye-law 3(l)(c)(ii) and bye-law 3(1 )(e) were bad and they were struck-down....
X X X X Extracts X X X X
X X X X Extracts X X X X
....o levy property tax by including within the rateable value anything other than what is expressly permitted by the Act and must, in doing so, exclude what is expressly excluded by the Act. In Haji Dawood v. Municipal Commissioner. City of Bombay, AIR (1922) Bom. 386 the question had arisen before the Bombay High Court as to whether, in the case of a building fitted with electric fittings and fans, bath tubs and lavatories, deduction could be allowed for the reasonable cost of bath tubs and lavatories and electric lights and fans for working out the rateable value. The High Court was of the opinion that the baths and lavatories were undoubtedly annexed to be freehold, as also electric fillings, except perhaps such fittings as are attached with plugs in the wall. It was also held that without these conveniences the premises would be not let unless perhaps a tenant were found to take the premises on a long lease on favourable terms on the understanding that he should put up such fitting himself With regard to the electric fittings and fans it was urged that they should be treated as "machinery" under section 154(2) of the Bombay Municipal Corporation Act, 1888 (hereinafter referred ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rder to find out whether that structure or anything in that structure falls within the definition of building. When there is no building or no structure, then undoubtedly you turn to the definition of "land" and even when you have a building and land, the Legislature has distinguished between a structure standing on the land and the land under structure." It was held that these definitions are material for various purposes and the taxing authority cannot turn to the definition of "land", if it falls to bring the case within the definition of "building", when it is dealing with a structure, and what is contained in that structure. The High Court laid down two tests, namely, (1) the nature and extent or degree of annexation to the property and (2) the object, intention or purpose of the annexation. Since the facts were not clear, the case was remanded back to the lower appellate court for deciding the factual matrix. In Pragati Builders (supra) it was held as under :- "21. We can cull from the above discussion the following points which are to be kept in mind while determining the rateable value of a building : (a) Has the machinery installed in a building become part of the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....land and belonging to any of the classes specified from time to time by public notice by the Commissioner, with the approval of the Corporation, shall be deemed to form part of such building or land for the purpose of fixing the rateable value thereof under sub-rule (1). But save as aforesaid, no account shall be taken of the value of any plant or machinery contained or situated in or upon any such building or land. In our judgment, the language of sub-section (3) of section I 16 of DMC Act is pari-materia with rule 7(2) under the BPMC Act, 1949 The contention was that sub-rule (2) of Rule 7 was beyond the legislative competence of the State as the State could not levy a property tax on plant and machinery in the guise of levying taxes on lands and buildings. It was also urged that the power given to the Commissioner to notify and machinery or class of machinery upon which it would be treated as part of the building was uncanalised, arbitrary and invalid on account of excessive delegation of power. With regard to the first contentions, this Court held that Courts can look into legislative practice (see in this connection Ralla Ram v. The Province of East Punjab - (1948) FCR 207.....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Commissioner with the approval of the Corporation irrespective of the question as to where they are to be found. It, therefore, depended on the arbitrary will of the Commissioner as to what machinery he would specify and what he would not. Moreover, he was the only person who could examine this question. There was no right of appeal from any specification made under sub-rule (3) of rule 7 except that the Commissioner was to act under the directions of the Standing Committee. For all these reasons it was held that sub-rule (3) of rule 7 was invalid on account of excessive delegation of power by legislature. The Full Bench of the Delhi High Court has brushed aside the judgment in New Manek Chowk (surpa) by the following observation - "23. However, in the instant case the Commissioner is not the only person who can determine, as to whether any plant and machinery contained or situated in or upon any land or building and belonging to any of the classes specified from time to time by public notice shall be deemed to form part of the land or building but therefore he was required to obtain the approval of the Standing Committee. Thus, it cannot be said that wholly unguided and unc....
X X X X Extracts X X X X
X X X X Extracts X X X X
....om year to year a sum equal to ten percent of the said annual rent and the said deduction shall be in lieu of all allowances for repairs or on any other account whatsoever. (2) The value of any machinery contained or situated in or upon any building or land shall not be included in the rateable value of such building or land." The appellant there contended that the value of the air-conditioning machinery including the cost of false ceiling had to be excluded from the cost of the building computation of rateable value in accordance with sub- section (2) of Section 154 of the BMC Act. It was contended specifically by the Corporation that as machinery had been embedded in the building it became an integral part of the building and that its cost should not be excluded under sub-section (2) of Section 154. A large number of authorities as well as the provisions of Section 3 of the Transfer of Property Act were relied upon by the Corporation. This Court, after noticing Poona Municipal Corporation (supra), (vide para 9) observed :- "When the legislature sought to exclude the value of machinery of the type mentioned in sub-section (2) from forming a pan of rateable value, some mea....
X X X X Extracts X X X X
X X X X Extracts X X X X
....o error in not keeping in mind the respective functional roles of the definitions of "land", "building" and "premises" and conceptually allowing them to overlap. In any event, it cannot be forgotten that Section 116 itself indicates, in terms, how the rateable value of land and building assessable to the property taxes is to be determined. Sub-section (3) of Section 116 lays down the general rule that no account shall be taken of the value of any plant or machinery in or upon any land or building subject only to the one exception namely that if such plant or machinery has been notified by a public notice by the Commissioner, with the previous approval of the Standing Committee, then it shall be deemed to form a part of such land or building for the purpose of determination of the rateable value. The words used in sub-Section (3) of Section 116 of the DMC Act are "land" or "building". Hence, the principle of interpretation evolved in Poona Municipal Corporation (supra) was very much relevant and applicable. In any event, the definition of "premises" was wholly irrelevant for interpretation of sub-Section (3) of Section 116. The legislative history unmistakably points towards o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....concept of rateable value, as generally understood, does not admit the inclusion of the cost of such plant or machinery in the computation of the rateable value of the building. The legislature has, therefore, made a specific provision that if their cost has to be included, a previous notification has to be issued under sub- section (3) of Section 116. This was purportedly done by the notification dated 23.10.1989 and, if at all valid, it would become operative from the said date and not from any date earlier. The High Court also seems to have lost sight of the fact that the Explanation II of 1994 bye-laws was struck down by the High Court and its invalidity was upheld by this Court. The learned counsel for the respondent advanced before us the same arguments which appealed to the Full Bench. He contends that whatever might have been the situation in 1888, Municipal Legislation must be progressively interpreted. With the concept of 'plant' and 'machinery' undergoing changes, as a result of series of rapidly advancing tachnology, the rateable value of a 'building' or 'premises' to the owner must be taken to be letting return inclusive of all pla....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ts contends that reading the provision of the D.M.C. Act, particularly the definition of the expression 'land', 'building', 'premises', 'rateable', it is clear that the exclusion contemplated by sub-section (3) of Section 116 of the Act can only be of such item which could not normally be included in the concept of land or building. Hence, the Commissioner's power to notify plant or Machinery under Section 116(3) must be read as extending only to such things of the same nature as would fall within the definition of "land" as defined in Section 2(24) of the Act. He, therefore, contends that there is thus sufficient guideline indicated in the statute itself and, therefore, the constitutionality of the statute must be upheld. Despite anxiously scanning the provisions of the statute, we hardly find any such guidelines therein. The contention of the learned counsel for the respondent that the statute indicates the guidelines, namely, that the Commissioner's power to notify under Section 116(3) is only in respect of things which are of the same nature as would fall within the ambit of expression "land", as defined under Section 2(24), appears to be....
X X X X Extracts X X X X
X X X X Extracts X X X X
....The legislatures in India have been held to possess wide power of legislation subject, however, to certain limitations such as the legislature cannot delegate essential legislative functions which consist in the determination or choosing of the legislative policy and of formally enacting that policy into a binding rule of conduct. The legislature cannot delegate uncanalised and uncontrolled power. The legislature must set the limits of the power delegated by declaring the policy of the law and by laying down standards for guidance of those on whom the power to execute the law is conferred. Thus the delegation is valid only when the legislative policy and guidelines to implement it are adequately laid down and the delegate is only empowered to carry out the policy within the guidelines laid down by the legislature. The legislature may, after laying down legislative policy, confer discretion on an administrative agency as to the execution of the policy and leave it to the agency to work out the details within the framework of the policy. When the Constitution entrusts the duty of law making to Parliament and the legislatures of States, it impliedly prohibits them to throw away that r....