1995 (8) TMI 322

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.... the Punjab Municipal Act, 1911 (for short, `the Act'). The basis on which the property was assessed was the rent being received by the appellant from State Bank of India to whom they had let out at Rs. 12,687/- per month. The question is whether the actual rent received by the appellants from the tenant would be the measure for determining annual value. Section 3 (1)(b) of the unamended Act reads thus:     "3(1) "annual value" means- xxxxxxxxxxxxxxxxxxx     (b) in the case of any house or building, the gross annual rent at which such house or building together with its appurtenances and any furniture that may be let for or enjoyment therewith, may reasonably be expected to let from year to year subje....

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....ly expect to let the building at the contractual rent and of the contractual rent therefore provided a correct measure for determination of the annual value of the building. This argument was however rejected by the Court and it was held that even if the standard rent of a building has not been fixed by the Controller under Section 9 of the Rent Act, the landlord cannot reasonably expect to receive from a hypothec\tical tenant anything more than the standard rent determinable under the provisions of the Rent Act and this would be so equally whether the building has been let out to a tenant who has lost his right to apply for fixation of the standard rent by reason of expiration of the period of limitation prescribed by Section 12 of the Ren....

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....ed if the building is to be let", which has to be the legal yardstick of a "reasonable expectation" in an "open market". The municipal authorities cannot take advantage of the defiance of the law by the landlord. Rating cannot operate as a mode of sharing the benefits of illegal rackrenting indulged in by rapacious landlords for whose activities the law prescribes condign punishment. The prudence of the landlord has to be assumed and judged by normal standards to determine his "reasonable expectation". Hence rating is to be governed by the fixation of rent by rent control authorities and not by the test of actual income derived by the landlord. The concept of reasonableness of expectation of rent must take the penal law of the State into....