AI Drafter 
TaxTMI 
TaxTMI 
2001 (9) TMI 1179
X X X X Extracts X X X X
X X X X Extracts X X X X
....s passed by the Assessing Officers in terms whereof rateable value of the properties in question were enhanced on the ground that the said constructions do not come within the definition of "building" attracting house tax under the said Act. 3. Before adverting to the question involved we may notice the basic fact of the matter. The respondent herein had been granted separate and distinct licenses by the President of India acting through Superintendent of Northern Railway, Delhi for the purpose of maintaining depot for storage of petroleum products at a yearly license fee of Rs. 20,640/- and Rs. 31,000/- per annum respectively. 4. The properties in question were assessed at a rateable value which were sought to be increased. Objections thereto were filed by the respondents. A contention was raised that the storage tanks would not come within the purview of the definition of 'building' as contained in Section 2(3) of the Act and thus no tax would be livable as provided under Section 114 of the said Act. In the said appeal the following questions were raised: (a) Whether such steel structures are buildings within the meaning of Delhi Municipal Corporation Ac....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nding anything contained in the foregoing provisions of this chapter, lands and buildings being properties of the union shall be exempt from the property taxes specified in Section 114: Provided that nothing in this sub-section shall prevent the Corporation from levying any of the said taxes on such lands and buildings to which immediately before the 26th January, 1950 they were liable or treated as liable so long as that tax continues to be levied by the Corporation on other lands and buildings. 120(2). If any land has been let for a term exceeding one year to a tenant and such tenant has built upon the land, the property taxes assessed in respect of that land and the building erected thereon shall be primarily livable upon the said tenant, whether the land and building are in the occupation of such tenant or a sub- tenant of such tenant. 123. Property taxes a first charge on premises on which they are assessed.--Property taxes due under this Act in respect of any land or building shall, subject to the prior payment of the land revenue if any, due to the Government thereon be a first charge- (a) in the case of any land or building held immediate....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he event of this Court agreeing with the appellants, the observations of the two Division Benches of this Court by which both the judgments under appeal have already been approved may lead to an anomalous situation. Therefore, we deem it appropriate that these appeals be heard and decided by a larger Bench." 11. Mr. Nandrajog, learned Counsel appearing for the appellant would submit that the question as to whether such an oil storage tank would be building or not is no longer rest integra in view of judgment of the Supreme Court Municipal Corporation of Greater Bombay v. Indian Oil Corporation AIR1991SC686 . 12. Counsel, however, submitted that the question as to whether the indentures in question constitute lease or license so as to attract the provisions of Section 120 of the Act would depend upon the construction thereof. It was urged that having regard to the nature of the interest conveyed, the learned Single Judge committed a manifest error in construing the same to be a license. According to the learned Counsel the land having been used for the purpose of construction of a building, the object thereof being clear, it could not have been construed to be a license and mu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....to make and use a watercourse, the grant was not valid unless tinder seal, and the license, unless so made, was Therefore a mere license and was revocable but since 1873 the Court has been bound to give effect to equitable doctrines and it will restrain the revocation of a license coupled with a grant which should be, but is not, under seal." 16. Lease on the other hand, would amount to transfer of property. In Associated Hotels of India Ltd. v. R.N. Kapoor [1960]1SCR368 , the following proposition has been held to be well established for ascertaining whether a transaction amounts to lease or license. "27. There is a marked distinction between a lease and a license. Section 105 of the Transfer of Property Act defines a lease of immovable property as a transfer of a right to enjoy such property made for a certain time in consideration for a price paid or promised. Under Section 108 of the said Act, the lessee is entitled to be put in possession of the property. A lease is Therefore a transfer of an interest in land. The interest transferred is called the leasehold interest. The Lesser parts with his right to enjoy the property during the term of the lease, and it foll....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... not in the instant case. 20. In terms of the provisions of Government Grants Act, the rights and obligations of the parties would be governed by the provisions of the said Act in terms where of which the Government is entitled to impose limitations and restrictions upon the grants and other transfer made by it or under its authority. Provisions of Government Grants Act Therefore are not of much relevance for determination of the question at hand. 21. Having the aforesaid legal principles in mind we have to consider the grant in question. 22. By reason of the said grant, grantee has been described as licensee but the same is not determinative. In terms of Clause (1) of the said indenture the licensee was to have the use of a piece of land for maintaining a depot for petroleum goods received through railways but thereby his rights to deal with the property and the goods brought thereon had not been taken away. An embargo has been placed as regards the user of the construction made thereon to the extent that the same would be used solely for the storage of petroleum products but such restriction by itself can also be imposed in a case of lease. Constructions are to be made a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....aid land. Again the said claim does not have much relevance in the interpretation of a grant. Further the licensee was not entitled to any claim from the administration in respect of any damage which he might sustain on account of fire or other cause which claim is of not much importance. Clause 14 of the indenture provides that the licensee shall follow all petroleum rules and regulations applicable to the construction, maintenance of petrol pump or stores and for public safety. All taxes in respect of the said patrol pump, stores, buildings under the control of the licensee shall be paid by the licensee. The rights of the parties on determination of the grant have been specified. 23. The learned Counsel appearing for the appellant would contend that even by reason of the said grant a bundle of rights have been conferred upon the grantee. Legal possession was to be with the grantee and even for the purpose of determining the agreement three months' notice is necessary. 24. A deed as is well known must be read in its entirety and reasonably. The intention of the parties must also as far as possible be gathered from the expression used in the document. 25. In U....
X X X X Extracts X X X X
X X X X Extracts X X X X
....license under Section 52 of the Easements Act, no such interest in immovable property is created. The case on hand is one of such. (4) No doubt there is a statement in the document that "I shall not sublet it to further anybody else. This is nothing more than an affirmation of the requirement that the licensee must use the property. No doubt under Section 52 of the Easements Act, license is personal but where an affirmation is made that such an affirmation cannot alter the relationship of the parties as Lesser and lessee. In this view factually the case Capt. BVD' Douza v. Antonio Fausto Fernandes, Quoted from the judgment and order dated 3.5.1993 of Andhra Pradesh Admn. Tribunal at Hyderabad in OA No. 47322/91 and 5668/92, is distinguishable." 29. In Delta International Ltd. v. Shyam Sundar Ganeriwala, [1999]2SCR541 . It has been held that where the parties have been advised by the lawyers and document has been termed to be a license it should ordinarily be held to be a license. Reference in this connection may also be made to ICICI v. State of Maharashtra (1999)5SCC708 . 30. We may further notice a learned Single Judge of this Court in Bharat Petroleum in 46 (1....
X X X X Extracts X X X X
X X X X Extracts X X X X
....intention of the parties -- whether they intended to create a lease or a license; (c) if the document creates an interest in the property, it is a lease; but if it only permits another to make use of the property, of which the legal possession continues with the owner, it is a license; and (d) if under the document a party gets exclusive possession of the property, prima facie, he is considered to be a tenant; but circumstances may be established which negative the intention to create a lease." 38. Whether any indenture constitutes lease, or license the nomenclature of the document may not be decisive, as it is necessary to consider the substance of the transaction and not its mere form. Particular words and phrases may be used in a document but such usage may be for various purposes. The document having regard to the purport and object of the Act, must thus be construed having regard to the principal object and purport thereof. For the said purpose even the doctrine of purposive construction may be taken recourse to. But once the Court is in a position to ascertain the substance thereof so as to enable it to arrive at a finding as to whether thereby an interes....
X X X X Extracts X X X X
X X X X Extracts X X X X
....out any claim for compensation whatsoever on the part of the appellant. The deed postulates that buildings and other conveniences may be taken over by the administration on mutually agreed terms. However, the appellant on such determination of the grant would be entitled to pull down and remove from the site the materials at its own expense within two months upon determination thereof. 40. Clause 11 of the said indenture whereupon Mr. Sethi placed strong reliance, reads thus: "11. Nothing herein contained shall be construed to create a tenancy in favor of the Licensee (s) of the said premises and the Administration may for their mere motion upon the determination of this license re-enter upon and retake and absolutely retain possession of the said land." 41. However, such a covenant cannot be conclusive as regards determination of the rights of the parties under a covenant. 42. The respondents are in possession of the buildings in question since 1958. They have been permitted to raise huge constructions. The nature of construction is of wide range. An administration block Along with tanks for storing petroleum had been constructed. A boundary wall around installat....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ase, includes not only the premises, but fittings, fixtures and the petrol service station also. license was granted specifically to run the petrol service station on the terms and conditions specified therein. There are a number of other terms and conditions in the document which indicate that it was a license deed. Firstly, the license was for the purpose of running the petrol service station which was set up by the licensor. The possible grant of sub-lease was reserved for the future in the event of Delta obtaining consent from its landlord Malika Investments Company. The licensee was not obliged to pay any part of the outgoings in respect of the premises which indicates that the charges attendant upon occupation of the premises were to be paid and borne by the licensor. He was also required to keep the plant and machinery at the said premises in good repair and was required to obtain necessary insurance policies for the business. A further clause to the effect that the licensee was permitted to carry on business in the name of the licensor indicates that the premises were not let out otherwise there was no question of permitting the use of the licensor's name. It is true th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ing whether or not a tenancy has been granted, the Court will ignore any provisions in the agreement which are mere pretences or shams seeking to negative a tenancy." A necessary feature of a lease is that the lessee shall acquire a right of possession to the exclusion of the Lesser. 47. In Fachhini v. Bryson, reported in (1952) 1 TLR 1386 : 214 LT 192, Denning, L.J. stated: "In all the cases where an occupier has been held to be a licensee there has been something in the circumstances, such a family arrangement, an act of friendship or generosity or such like, to negative any intention to create a tenancy." Interestingly it may be noticed that in Fachhini (supra), also there existed a clause "nothing in this agreement shall be construed to create a tenancy." 48. In Capt. B. V. D'Souza v. Antonio Fausto Fernandes [1989]3SCR626 , the Apex Court while construing an agreement which was labelled as leave and license held: "However, this cannot answer the disputed issue as it creates a license or lease, the substance of the document must be referred to the form, As was observed by this Court in Associated Hotels of India Ltd. v. R.N. Kapoor [1960]....
X X X X Extracts X X X X
X X X X Extracts X X X X
....11. It is manifest that four reasons have been advanced by the High Court to upset the judgment and decree of the Trial Court. These are, (i) that deed Ex. D5 was drafted as a formal document apparently by some lawyer and parties thereto were persons quite conversant with mining lease; and consequently with the meaning of the "consideration" and "royalty"; (ii) the word "royalty" used in the document must be understood the way it is used and understood by the persons in the mining business; (iii) the consideration money was Rs. 30,000/- only as the endorsement of registration on the deed indicates and that was the total consideration; and (iv) in the plaint distinction has been kept between the word "consideration" and "royalty" and so royalty could not be part of the consideration. 12. With respect we do not agree with any of those reasons. It may be true that that document Ex. D5 written in English language, may have been prepared by a lawyer and was entered into between persons conversant with the vocabulary employed in mining leases. Yet these factors per se cannot conclude the matter that the word "royalty" used in the document was meant to be royalty as such. If inte....
X X X X Extracts X X X X
X X X X Extracts X X X X
....State, and on that basis have the document voided. Therefore, we are of the view that the word "royalty" was used in the deed misdescriptively and was really meant to cover an important item of the consideration due for future payments." 52. It may be that certain restrictions have been imposed with regard to the construction of the building storage tank, etc., but such restrictions are not decisive for the purpose of determining as to whether a document is a lease or license as such restrictions could also be imposed in case of a lease. In Glenwood Lumber Co. Ltd. v. Philips, reported in 1904-1907 All ER (Reprint) 203, it was held: "In the so-called license itself it is called indifferently a license and a demise, but in the Act it is spoken of as a lease, and the holder of it is described as the lessee. It is not, however, a question of words, but of substance. If the effect of the instrument is to give the holder an exclusive right of occupation of the land though subject to certain reservations or to a restriction of the purposes for which it may be used, it is in law a demise of the land itself." Furthermore in this case the parties have agreed that for the purp....
X X X X Extracts X X X X
X X X X Extracts X X X X
....on, was wholly redundant as is stated therein: "10. The combined effect of the above two sections of the Grants Act is that terms of any grant or terms of any transfer of land made by a Government would stand insulated from the tentacles of any statutory law. Section 3 places the terms of such grant beyond the reach of any restrictive provision contained in any enacted law or even the equitable principles of justice, equity and good conscience adumbrated by common law if such principles are inconsistent with such terms. The two provisions are so framed as to confer unfettered discretion on the Government to enforce any condition or limitation or restriction in all types of grants made by the Government to any person. In other words, the rights, privileges and obligations of any grantee of the Government would be completely regulated by the terms of the grant, even if such terms are inconsistent with the provisions of any other law." 57. Scope and object of the provisions of the Government Grants Act has been stated by the Apex Court in The State of U.P. v. Zahoor Ahmad and Anr. [1974]1SCR344a , in the following terms: "15. In the present case the High Court cor....
X X X X Extracts X X X X
X X X X Extracts X X X X
....be inferred from the above conduct of the parties as reflected in one of the terms of the agreement that they were aware that the lessee may have to pay the property tax? The answer to question must be rendered in the affirmative. 61. Why the document has been termed as a license despite the fact that thereby a right in property is created, is not for the Court to answer, particularly, when the deed is an old one. The owner of the property, be it the Central Government or otherwise, would always be keen to see that it is not involved in unnecessary litigation. The common knowledge is that the owner of the property is always a stronger side. The grantee at the relevant point of time was merely a company incorporated under the Companies Act. It had not become a Public Sector Undertaking. It was interested in obtaining a grant for long time so as to facilitate storage of all petroleum products. For the purpose of transportation of petroleum product from the wagons to its storage tank, lands other than belonging to Railway Administration was not available. Company dealing in petroleum products would not have any option other than to succumb to the diktats of the officers of the Rail....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ct of lands and buildings. Such lands and buildings may be in lawful occupation of the owner. The occupation of the said building may be lawful or unlawful. Even in a case where apartments are constructed on the land may belong to the Government or a statutory body but the occupier of the apartment are liable to pay tax. If a person encroaches upon somebody's lands and constructs buildings thereupon, he would also be liable to pay tax. Once it is held that the grantees were liable to pay tax, the possibility that the term 'license' has been used so as to avoid the payment of tax, also cannot be ruled out. 64. A contention has been raised by Mr. Sethi to the effect that as the agreement is an unregistered one, having regard to the provisions contained in Section 117 of the Transfer of Property Act and Section 17 of the Registration Act, Sub-section (1) of Section 120 would not be attracted. Having regard to the fact that the grantee is the owner of the building, the property tax in terms of Clause C to Sub-section 2 of Section 120 must not be construed in a pre-emptive manner. The words "let for a term exceeding one year to a tenant" would not mean the right of the pa....