TaxTMI 
TaxTMI 
TaxTMI 
2022 (12) TMI 1327
X X X X Extracts X X X X
X X X X Extracts X X X X
....6799, 26796, 27014, 27183, 27184, 27213, 27252, 27256, 27258, 27336, 27337, 27341, 27431, 27939, 27985, 27989, 27992, 28037, 28101, 28377, 28380, 28474, 28654, 28660, 28663, 28662, 28666, 28670, 28842, 28959, 29059, 29085, 29196, 29204, 29247, 29442, 29470, 29478, 29485, 29483, 29488, 29490, 29495, 29497, 29501, 29489, 29493, 29499, 29502, 29503, 29507, 29494, 29500, 29504, 29506, 29508, 29509, 29896, 29942, 29946, 29947, 29951, 29954, 29996, 30078, 30083, 30091, 30097, 30105, 30106, 30115, 30118, 30288, 30290, 30295, 30300, 30303, 30383, 30405, 30423, 30446, 30448, 30455, 30574, 30612, 30616, 30854, 30863, 31154, 31177, 31188, 31190, 31219, 31221, 31224, 31225, 31251, 31288, 31411, 31414, 31430, 31435, 31560, 31713, 31732, 31744, 31774, 31882, 31886, 31977, 31982, 32087, 32208 & 32211 of 2022 And WMP.Nos.17875, 17876, 18691, 18693, 19216, 19217, 19561, 19560, 19679, 19957, 19759, 19761, 19835, 19840, 19966, 19967, 20041, 20152, 20170, 20173, 20174, 20175, 20447, 20449, 20773, 20800, 20802, 20803, 20830, 20831, 20823, 20825, 20997, 21001, 20999, 21146, 21202, 21205, 21251, 21249, 21250, 21252, 21253, 21255, 21256, 21258, 21259, 21261, 21262, 21260, 21263, 21324, 21326, 21641, 21642....
X X X X Extracts X X X X
X X X X Extracts X X X X
...., 31515, 31622 & 31623 of 2022 Honourable Dr. Justice Anita Sumanth For the Petitioners : Mr.T.V.Ramanujan Senior Counsel For Ms.R.Ramya, Mr.S.Sundaresan, Mr.C.Jagadish, Mr.T.V.Lakshmanan And Others For the Respondents : Ms.Vaitheeswari Standing Counsel for R1 and R3 and Mr.P.S.Raman, Senior Counsel Assisted by Mrs.C.Sangamithirai, Special Government Pleader for R2 And Others COMMON ORDER A welfare State has necessarily to balance augmenting of its revenues so as to provide for sources of funds for welfare measures and other expenses of the State on the one hand, and mitigating the hardship of taxes as far as possible to its citizens, on the other. 2. The official website of the Income Tax Department refers to the perfect balance achieved by the emperor Manu in this regard stating that 'As the calf and the bee take their food little by little, even so must the king draw from his realm moderate, annual taxes'. One would assume that this would constitute the method of exaction in all revenue matters, whether Central or State. That said, it is also an admitted position that the taxes imposed on property assume a lions' share of the resources of the State and thus, the power of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s report has been accepted by the State in passing the impugned G.O. The G.O. was gazetted on 11.04.2022 and a Notification issued for implementation of general revision of property tax within the limits of Greater Chennai and Coimbatore Corporations, with effect from the current year, i.e., with effect from the first half of 2022-23. 7. The Notification had been published on 12.04.2022 (Chennai) and 13.04.2022 (Coimbatore) in both English and vernacular newspapers as per Section 98A of the 1919 Act and there was a call for objections, to be addressed to the Principal Secretary/Commissioner, of the Corporations, within 30 days from date of publication of the Notification. The Notification stated that upon expiry of the 30 day period, objections shall be considered and a decision taken by the Council. This was followed by CR No.63 dated 30.05.2022 and CR No.94 dated 26.05.2022 issued by the two Corporations. 8. The Resolution was passed after having taken note of 30 objections that were received from taxpayer base of 13 lakh (approx.) assessees in Chennai. The number of taxpayers in Coimbatore have not been provided. In almost all the cases, the objections have been answered simpl....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... (iv) The 1919 and 1981 enactments provide for the regulation of all matters relating to the levy, assessment, collection and recovery of property tax as well as a framework of statutory remedies for those aggrieved by the orders/assessments. The Councils of the respective Corporations are the ultimate authorities in whom vests all power necessary for the levy of property tax and all matters connected and incidental thereto. The impugned enhancements however, have not emanated from the Council, but at the instance of the State, vide the impugned G.O. This constitutes a usurping of the power of the Council by the State and is an excess of authority in terms of Article 162 of the Constitution of India. (v) The provisions of the 1919 and 1981 Acts that touch upon the subject of taxation are Sections 98, 98A, 99 and 100, in the former, and Sections 117, 118, 121 and 122 in the latter. These provisions set out a specific methodology for determination of property tax and the impugned G.O. and CRs, do not take note of this methodology and procedure, thus vitiating the same in full. (vi) The statutory duty and responsibility for determination of the tax as well as revision of rates, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s refer, in vague terms, to Basic Street Rate (in short 'BSR'), which is a parameter entirely unknown to the tax paying public of Tamil Nadu. (xv) BSR, as a concept, was never the methodology for levy of tax, as in the past the assessment of property tax was consistently done on a case to case basis depending upon the returns filed by individual property owners. (xvi) Apart from being contrary to the methodology set out under the Statute, adoption of a general value, such as a uniform and standardised street rate for the purposes of assessment, would be incorrect insofar as all houses in the street would be grouped as one for the purposes of the rate and individual differences would be entirely lost sight of. (xvii) Therefore, as the basis upon which the street rates have been arrived at is a mystery, such an unknown and alien methodology cannot be simply thrust upon the citizens without any statutory backing or scientific basis. (xviii)There was, in 1997 a move to amend the provisions of Sections 99 and 100 of the Act to provide for a standardised methodology for the levy of tax on buildings and lands within the city. Those amendments did not see the light of day and have ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....No.23 of 1964, dated 30.10.1964) (xiv)Bangalore Woollen, Cotton and Silk Mills Co. Ltd., Bangalore v. Corporation of the City of Bangalore (Civil Appeals Nos.448 and 449 of 1957, dated 05.04.1961) (xv)The Berar Swadeshi Vanaspathi and Ors. v. The Municipal Committee, Shegaon and Ors. (Civil Appeal No.234 of 1959, dated 28.03.1961) (xvi)Municipal Board, Sitapur v. Prayag Narain Saigal and Ors. (Civil Appeal Nos.847-848 of 1966, dated 16.01.1969) (xvii)City Municipal Council, Mangalore and Ors. v. Frederick Pais and Ors. (Civil Appeal Nos.1302 to 1906 of 1968, dated 13.10.1969) (xviii)Kunnathat Thathunni Moopil Nair v. The State of Kerala and Ors. (Petitions Nos.13 to 24, 42 and 46 to 54 of 1958, dated 09.12.1960) (xix)Bharat Kala Bhandar Ltd. v. Municipal Committee,Dhamangaon (Civil Appeals Nos.600 and 679 of 1964, dated 26.03.1965) (xx)New Manek Chowk Spinning and Weaving Mills Co. Ltd. and Ors. V. Municipal Corporation of The City of Ahmedabad and Ors. (Writ Petitions Nos.133, 156 & 157, 159-171, 178, 184, 206-210 and 234 of 1966, dated 21.02.1967) (xxi)The State of Kerala v. Haji K.HajiK.Kutty Naha and Ors. (Civil Appeals Nos.1052 of 1968 and batch, dated 13.08.19....
X X X X Extracts X X X X
X X X X Extracts X X X X
....orate upon in the later part of this order also provide illuminating historical context to the levy of property tax over the Ages. The state enactment has complete clarity on the mode and methodology to be applied in the assessments of properties, which is the Annual Rental Value, and intervention is required in respect of the manner of implementation of the provisions. 18. The respondents submit that there are 200 wards in the Greater Chennai Corporation, including 93 areas annexed to the Greater Chennai Corporation in 2011 as well as those comprising the erstwhile Corporation of Chennai. There has been no revision in the rates of property tax since 1998 in respect of 107 wards of the Greater Chennai Corporation, and since 2008 in regard to 93 wards added later. 19. General revision of property tax was attempted in 01.04.2018 under G.O.No.73, Municipal Administration and water Supply Department, dated 19.07.2018 and G.O.(Ms) No.76, Municipal and water Supply Department dated 26.07.2018. The proposals contained in the aforesaid were abandoned as instead, G.O.(Ms) No.150 dated 19.11.2019 came to be issued providing for the constitution of a Committee to examine the issues related ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....as the ARV determined will be far less than the rent realisations, if taken on actual basis. 25. The details of the properties as provided by the respondents, including full addresses and the rental values, are not extracted in this order in the interests of the privacy of the property owners. To be noted that there has been no rebuttal by the petitioners to the aforesaid statistics and area-wise rental values. 26. The State vehemently objects to the petitioner's submissions that Basic Street Rate was never part of property tax assessments in Tamil Nadu. The respondents were asked to place on record material to establish this submission, specifically, that a uniform and standardised rate of tax was the basis of taxation at any point in time, in the past. This is to test the rival submissions that BSR constituted a gross departure from the practice followed hitherto as the petitioners argue, and the stand of the respondents to the contrary. 27. The Court takes cognisance of the position that the manner and methodology followed in property tax assessments over the years is unclear, to state the least. While the statutory provisions provide for the adoption of annual rental value (....
X X X X Extracts X X X X
X X X X Extracts X X X X
....etermining annual value and gross annual rent, what impresses is that there has been application of mind to various relevant aspects, and an analysis and exchange of information between the States, at least the Southern States, such as Madras and Hyderabad as early as in 1977, to arrive at a method of assessment that would not just straddle, but also balance the interests of the people and the State. This is commendable. 34. The efforts to rationalize property tax assessment continued and G.O.Ms.No.11 dated 04.01.1983 considered a situation that 'rent' may be removed from the ambit of the enactment and that the mode of assessment may be shifted wholesale to a new basis, such as value of land, plinth area, location and usage after dividing the area into various zones and sub-zones. Following this methodology will obviate the necessity for arriving at a annual rental value or fair rent method. 35. After examining the proposal from the Vice Chairman, Madras Metropolitan Development Authority under cover of his letter dated 30.03.1982, the Commissioner, Corporation of Madras was directed to undertake studies in this regard to be carried out by the Operations Research Group (ORG) of t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....account. . . . . 37. Thereafter, G.O.Ms.No.1120 dated 23.11.1987 was issued considering an earlier ban imposed against the quinquennial revision of property tax in the Madras and Coimbatore Corporations. Under this Government Order, the ban was removed. In G.O.Ms.No.1178 dated 10.12.1987, Part I-A in the 1919 Act stood substituted in entirety to provide for the method of assessment of property tax. 38. In terms of this procedure, an assessee was to file a return of property tax within a specific time and if such a return was not filed, the Commissioner was entitled to authorize any person not below the rank of Bill Collector to enter upon, make the inspection of the assessable item, prepare the return and pass an order of assessment in compliance with the principles of natural justice. Part V provides for revision of assessment by a constitution of a Taxation Appeals Tribunal for disposing appeals preferred by those aggrieved by assessments. 39. Annexure XII of the compilation contains minutes of the meeting of the Cabinet held on 26.11.1991. The first item on the agenda was revision of house tax in Municipal Corporations and Item No.1 (b) dealt with house tax revision in Town....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ve project/exercise of compiling the rental rates per street and a tabulation of the rates arrived at qua each street is placed before the Court at page 95 of compilation dated 19.09.2022. 47. A Committee set up for that express purpose had selected two to four houses per street and arrived at the average/rate that would be treated as the base rate for that street. It is that rate that is being applied across the city of Chennai in assessments for the last more than three decades, according to the State. 48. To a pointed question as to whether assessment orders issued thus far had over the years contained any reference to BSR, the State has circulated assessment orders passed as early as in 1978, 1979 and 1980 that contain reference to BSR. 49. A consolidated report dated 19.09.2022 has been filed by the Corporation which sets out in extenso the measures taken by the City Corporation from 1977 onwards till 2005 to drive home their submission that BSR has always been an integral part of the methodology of assessment for assessing property tax. 50. The procedure of quinquennial revision was done upto 1977-78. Some Writ Petitions thereafter came to be filed challenging the revisio....
X X X X Extracts X X X X
X X X X Extracts X X X X
....o so comply and remit the amounts. That apart, the grievances expressed by the petitioners was also legitimate. 57. The officials of the Greater Chennai Corporation, who were present at the hearing were directed to ensure that the website was made user-friendly and contained all necessary details to inform the assessees of the basis of assessment. At the hearing conducted on 02.09.2022, the Greater Chennai Corporation was directed to upload on the websites, the compendium of Basic Street Rates arrived at originally, accompanied by the revised factorial, in the interests of transparency and such that the assessees would be aware of the revision in the rates. 58. The officials of the City Corporation have, from time to time, accessed the website of the Chennai Corporation in Court for live demonstrations to update not just the Court but more importantly, all the counsel present, as to the measures taken for upgradation and progress in streamlining of the website of the Greater Chennai Corporation. This is a work in progress and calls for sustained effort and improvement. 59. As regards the Coimbatore Corporation, the respondents in that batch of writ petitions concede to the posit....
X X X X Extracts X X X X
X X X X Extracts X X X X
....imbatore Corporation has not really established the application of BSR, over time. That said, there has been a great degree of opaqueness in the reach of the Notifications and Government Orders under which this methodology was promulgated at the relevant point in time, and this is on account of, in some measure, to the absence of robust methodologies for dissemination of information at the relevant point in time. 65. A perusal of the documents presented by the Chennai Corporation presented leaves me in no doubt that the respondents have arrived at BSR as early as in 1998 and applied the same in framing property tax assessments. True, they have not been consistent in the application of this methodology and where returns had been filed even earlier based on ARV computed on actuals on based upon the Rent Control Act, there is every possibility that such assessments continued without revision. 66. As a concept however, and a methodology for computation of taxes on property, it is my conclusion that the respondents have been implementing the same in assessments, albeit not consistently, and it is not a new methodology that is being introduced now under the impugned proceedings. 67. T....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d." 72. This would, the Court trusts, address the grievances of the petitioners in regard to the difficulties encountered in navigating the website, obtaining the basis of calculation and having the grievances addressed. The respondents are put to strict compliance of their undertaking before this Court and must ensure that future amendments, Notifications and Government Orders as and when they are passed, are updated on the website within 24 hours of such amendment/updation/GO having been issued. 73. All the issues raised and answered below turn on an interpretation of the provisions of Sections 98 to 100 of the Chennai City Municipal Corporation Act, 1919 coming under Part III (Taxation and Finance) and Chapter V (Taxation - Enumeration of taxes), that deal comprehensively with matters concerning tax, in one manner or the other, extracted below. The provisions under the 1981 Act are analogous and hence not extracted. "98. Enumeration of taxes and duties.---- The [council] may levy --- (a) a property tax, (b) a tax on companies, (c) a profession tax, (d) a tax on carriages and animals, (e) a tax on carts, (f) a tax on timber brought into the city, [and may, with ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....se--- (a) a tax for general purposes; (b) a drainage tax for the purpose of defraying the expenses connected with the drainage system of the city ; (c) a lighting tax for the purpose of defraying the expenses connected with the lighting of the city: Provided that where the drainage tax is levied the council shall declare what proportion of the tax is levied in respect of drainage works and the proportion so declared shall also be specified in the notice published under sub-section (2) of section 98-A. (2) Save as otherwise provided in this Act, these taxes shall be levied at such percentages of the annual value of buildings and lands as may be fixed by the council: Provided that the aggregate of the percentage so fixed shall not, in the case of any land or building, be less that 151/2 per cent, or greater than [25] per cent of its annual value.] (3) For the purpose of assessing the property tax, the annual value of any building or land shall be determined by the commissioner: [Provided that the annual value of any building or land the tax for which is payable by the commissioner shall be determined by the Mayor.] 100. Method of assessment of property tax.---- (1) ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....chedule IV to such case or class of cases]." 74. I now address the specific issues raised by the petitioners. I The trigger for the enhancement is itself misconceived. 75. Petitioners argue that the recommendations of the Central Finance Commission do not bind the State Governments. In the present case, the impugned GO and CRs make it apparent that it is, in fact, the Central Finance Commission recommendations that form the basis of the present enhancement. In such circumstances, the very basis of the enhancement, according to the petitioners, is misconceived and militates against the constitutional scheme. 76. Article 280 reads thus: 280. Finance Commission (1) The President shall, within two years from the commencement of this Constitution and thereafter at the expiration of every fifth year or at such earlier time as the President considers necessary, by order constitute a Finance Commission which shall consist of a Chairman and four other members to be appointed by the President (2) It shall be the duty of the Commission to make recommendations to the President as to (a) the distribution between the Union and the States of the net proceeds of taxes which are to be, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....P." 7.98 This condition in the report for 2020-21 shall continue to be applicable as an entry level condition for all the urban local bodies for availing the grants. Further, this condition is over and above the requirement of timely online availability in the public domain of both unaudited accounts for the previous year and audited annual accounts for the year before previous. In a democratic system, proximity of the elected representative to the tax payer often reduces the willingness to mobilise revenues. Moreover, somewhat curiously, some States have ceilings on property tax rates in urban areas, which militates against the entire principle of decentralisation and devolution of finances and functions to local governments. Instead, the provision of a statutory floor to the property tax rate will help promote the buoyancy of such tax revenues and facilitate the mobilisation of revenues by local governments. 7.99 The conditions mentioned above, have a two-fold implication. First, a State can avail of the grant only if it notifies the floor rates of property tax by suitably amending the relevant State Municipal and Municipal Corporation Acts. However, this condition is a one-t....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Category 2: Recommendation followed by consultation; Category 3: Recommendation with accountability; Category 4:Non-qualifying recommendation and Category 5: Recommendations which are obligatory in nature. 80. The Bench then went on to discuss the category under which the recommendations of the GST Council would fall. In the present case, the recommendations leading to the passing of the impugned CR and GO are of an advisory nature, though the States would be expected to address the issues raised with the seriousness that such issues deserve. 81. The recommendations refer to the falling collections from taxes and urge all States to address this failure and do the needful to ensure that the levy and collections of property tax are optimised. It is in the best interests of the economy that the State pay heed to such recommendations as they are made in the best interests of the economy, as a whole. That apart, the impugned enhancement is based upon the deliberations and conclusions arrived at by the Committee constituted in 2019. 82. Property taxes are a major source of revenue to the State and the report of the Committee as well as the analysis of data supplied by the respondents....
X X X X Extracts X X X X
X X X X Extracts X X X X
....further. 86. The decision in the case of S.Arunachalam (supra) challenging G.O.Ms.No.542, Local Administration and Water Supply Department, dated 29.04.1986 is to the effect that Executive power under Article 162 of the Constitution of India is unavailable in respect of a subject matter which is covered by other legislation. In other words, there could be no interference by the Executive in an occupied field. 87. The Hon'ble Supreme Court in Ram Jaaway V. State of Punjab (AIR 1955 SC 549) and B.N.Nagarajan V. State of Mysore (AIR 1966 SC 1942) as well as of this Court in V.Chandra V. Government of Tamil Nadu and others (ILR 1996 (1) Mad.1007), reiterate the settled position that the Executive cannot intervene in a subject matter which is covered by an enactment, being an occupied field. 88. The petitioners have referred to the judgement in the case of B.N.Nagarajan and others. The judgement is distinguished by the State that submits that the conclusion of the Hon'ble Supreme Court in that case striking down the Government Order challenged as being an excess of power under Article 162, was rendered in an altogether different context. In that case, the impugned G.O. was not adviso....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the Corporations. 93. In K.Lakshminarayanan and others (supra), this Court dismissing the Writ Petitions filed by those petitioners questioning the nominations made by the Central Government under Section 3(3) of the Government of Union Territories Act, 1963, refers to the division of Legislative and Executive authority and the Constituent Assembly debates on 'discretion', in the context of centralisation that must vest in the Union. 94. Reference is made to the judgment of State of Rajasthan V. Union of India ((1977) 3 SCC 592) quoting Dr.Ambedkar on the federal nature of our Constitution and clarifying that the Constitution could well be moulded to be either unitary or federal per the requirement of time and circumstances. 95. No doubt, the impugned GO, CR and Notification do make reference to the recommendations of the Central Finance Commission. However, such references do not, in my considered view, dilute the proposal for enhancement as the need for such enhancement has been made out by the State, de hors the recommendations of the Central Finance Commission. The admitted position that there has been no enhancement of property tax for the last nearly three decades would it....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... issues that have been agitated in these Writ Petitions, being the basis of enhancement and the procedure to be followed in the levy and collection of taxes. It is incumbent upon the authorities to have provided due explanation to these queries and this Court deprecates the casual, careless manner and mechanical fashion in which the objections have been disposed. 103. Furthermore, I find it inconceivable that there have been only 30 objections received from out of a tax payer base running to lakhs and it is thus quite evident that the only reason for this cold response is the lack of publicity that was accorded to the enhancement in the first place. 104. The Corporations have not thought it fit to inform the tax payers sufficiently in advance, or in a proper manner about the proposals and how it intends to implement the same and this is very remiss on their part. Remittance of tax, though a statutory duty, does affect the out-of-pocket of an assessee and any enhancement must be clearly thought out, put to the tax payer for response and only then implemented, after considering objections. Failure to do so would impinge upon the substantive right of an assessee to be well aware of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tion of special assessees was different, all the counters filed by the respondents are in general terms and no counters have been specifically filed in these Writ Petitions. No specific submissions have been made in regard to these buildings, even by these petitioners. 111. Thus, while this order encompasses and covers the assessees who own special types of buildings, these petitioners/respondents are at liberty to bring to the notice of this Court any variance in the position relating to taxability of their properties, in which case, the Court will consider if amendments are required to be made to this order and directions issued accordingly. 112. Section 99(2) states that tax would be levied at such percentages of annual value of the buildings and lands as may be fixed by the Council which, as per proviso, cannot be less than 15% or greater than 25% of the annual value. It is for the fixation of the annual value that the deeming methodology under Section 100(2) would be applied. 113. The petitioners would submit that the proper methodology and, in fact, the methodology that is being followed till date is based on the Rent Control Act as it is that enactment that specifically p....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... fact that the Rent Control Act has been repealed with effect from 22.02.2019 but would still urge that the principles of determination of fair rent under that Act could continue to be applied for other purposes including assessment of property tax. 119. The respondents in that case, as in the matters before me, argued that it was not mandatory that only the Rent Control Act should be applied and that fair rent could be determined by any number of procedures/methodologies. In fact, they went so far as to say that applying the Rent Control Act would distort the scheme of property tax under the 1919 Act in the following terms, captured at paragraphs 7 and part of 8 of the judgment: '7. Dealing with the petitioner's contention that the annual value of a building can only be arrived at with reference to the provisions of the Rent Control Act, dealing with the fixation of fair rent of buildings, the respondents state that those provisions are not mandatory, that every owner or tenant occupying a building is not under any legal obligation to have the rent of that building fixed under the provisions of that Act, that the fair rent is fixed either at the instance of the tenant or th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s in the City as urged by the petitioner? 4. Whether the reason as to why and how the revision of assessments has taken place in a particular case should be set out in the notices issued under rules 2-B, 3 and 3-A of schedule IV to the Madras City Municipal Corporation Act, 1919 ?' 121. The first question was answered in favour of the petitioner stating that property tax cannot be levied on plinth area basis. The second related to whether the plinth area basis had, in fact, been applied in effecting general revision, which, on the facts presented by those respondents, the Court declined to answer. They also recorded the submission of the learned Advocate General that in any given case, if it were shown that plinth area was adopted as the basis, those assessments would not be pursued. 122. While dealing with the 3rd and 4th issues, which is, as to whether the basis of revision must be set out in the pre-assessment notice, the Court considered the specific argument that the annual value has to be determined only with reference to the fair rent formula under the Madras Buildings (Lease and Rent) Control Act, 1960. 123. The Court considered the judgments of the Hon'ble Supreme Cou....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ions called for and disposed. Thus the ratio of this judgment is of no avail to the petitioners. 129. In Bangalore Woollen, Cotton and Silk Mills Co. Ltd. that turns on a challenge to the constitutionality of Octroi duty on cotton and wool in terms of Section 98 of the City of Bangalore Municipal Corporation Act, 1949, one of the questions raised is as to whether the failure to notify the final resolution of the imposition of tax in the Government Gazette is fatal to the tax. In the present case, I have held that there is no failure procedurally, as the respondents have followed the process set out under the Acts. 130. In Patel Gordhandas Hargovindas (supra), a Constitutional Bench of the Hon'ble Supreme Court considered an appeal on certificate granted by the Bombay High Court challenging imposition of a rate by the Municipal Commissioner, Ahmedabad, on vacant lands. The levy of rate was under Section 73 of the Bombay Municipal Boroughs Act, 1925. 131. The Court considers the history of the word 'rate' which corresponds largely with the word 'tax' that we deploy for academic purpose. The discussion is extracted below: 8. The word "rate" has come to our country for the purpose....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Act, 1925 codified the enactments thus far, providing for uniformity and proper methodology in the levy and collection of property tax. 134. At paragraph 14, the three methodologies commonly adopted for determining rateable value are stated to be i) the actual rent, where the land or building was actually let, ii) hypothetical rent where one would assume a hypothetical figure in situations such as the owner and occupier being one and the same and based on other comparable properties and based on the rent fetched by comparable properties and iii) on capital value of the premises, being contractor's method or contractor's test to determine the structural value of the property. 135. One hardly needs to refer to method (iii), since the 1919 Act clearly provides for Annual Rental Value (ARV) to be the basis of levy of property tax. This judgment is thus useful to understand the context behind the evolution of enactments dealing with levy of tax on properties. 136. In City Municipal Council, Mangalore (supra) three Judges of the Hon'ble Supreme Court considered appeals against orders of the Mysore High Court quashing demands of property tax. Therein, there is a reference to the Madra....
X X X X Extracts X X X X
X X X X Extracts X X X X
....se to statutory remedial measures, if the demand by the Panchayat was exorbitant, unreasonable or without any quid pro quo. In the present scenario as well, there are several statutory remedies available for challenging demands, if they are found to be either arbitrary or if the basis of assessment, is misapplied. 143. Finally, there are three recent judgments of the Hon'ble Supreme Court that, in my view, would be relevant in the context of the issue now before me. In New Delhi Municipal Council and others (supra) the challenge was to a decision of the Delhi High Court relating to the constitutional validity of the NDMC (Determination of Annual Rent) Bye-laws, 2009. 144. Vide these bye-laws, there had been a change introduced in the earlier regime of determining rateable value for the purpose of levying property tax. The earlier system proceeded on the basis of annual rent that the land/building may reasonably be expected to fetch from year to year and a percentage was prescribed on that basis, for the purpose of computation of property tax. 145. The change brought in a system of unit area method (UAM). On the basis of the changed method, Unique Area Value (UAV) per sq. ft. / m....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rty either for the reason that the rent fixed was more than Rs.3,500/- per month, or the property had been newly constructed and exempt from the provisions of the Act for a period of 10 years. Three separate and distinct groups of cases dealing with municipal property tax legislation were set out as having been dealt with by the Hon'ble Supreme Court over the years. 151. The three groups as demarcated by the Court and the conclusions in each situation are extracted below: 8. This Court has dealt with three different groups of cases that have come before it dealing with property tax legislation in the various States of this country. The first group is a group of cases where the Municipal Acts of the States define annual value to be the hypothetical rent that a landlord could reasonably be expected to receive if his property was let out to a hypothetical tenant. It is in this situation that this Court held that such hypothetical rent could not exceed the standard rent fixed or fixable under the rent control statute which obtained in that State. This was laid down in The Corporation of Calcutta v. Padma Debi & Others, 1962 SCR (3) 49 and followed in a number of judgments, which inc....
X X X X Extracts X X X X
X X X X Extracts X X X X
....'ble Supreme Court decided the controversy relating to the extent of powers of the Commissioner in assessment of property tax of buildings located in the State of Andhra Pradesh. Though this judgment settles the powers of the Commissioner, inter alia, the Court has spoken on the criteria for determination for levy of property tax as well. 154. The provisions of the Hyderabad Municipal Corporations Act, 1955 and the relevant rules in the Hyderabad Municipal Corporations (Assessment of Property Tax) Rules, 1990 provided that tax shall be levied at such percentages of rateable value as may be fixed by the Commissioner. It also provided for the method and manner of determination of such rateable value which is the annual rental value of the property. 155. Thus, there was a complete scheme of assessment of tax that is inbuilt in that Statute and in the Rules. Neither the Act nor the Rules provide for a fair rent under the Rent Control Act to be binding upon the Commissioner and the Court lauded this discretion, since they noted that determination of annual rental value depended on several criteria that may expand beyond the criteria set out under the Rent Control Act. 156. At paragra....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s and obtaining of necessary approvals, the Rules were made operative from 01.04.1947. 159. The question that fell for determination was as to whether the impugned Rule which entitled the Municipality to collect tax after computation of annual letting value solely on the area of the factory and buildings was correct. The expression 'annual letting value' was defined in Section 3(1) of the Act as meaning annual rent for which any building or land, exclusive of furniture or machinery contained therein, might reasonably be expected to let from year to year. 160. This was to include all payments made or agreed to be made by a tenant to the owner on account of the occupation, taxes, insurance or other charges that were incidental to his tenancy. Prior to 1947, tax had been levied, both in respect of the properties as well as water tax, based on annual letting value. 161. With the amendment, the basis of tax was changed to assessment on valuation computed on the floor area of the structures and not on capital value or on annual rent. Thus, the Court noticed that both methods of valuation, being capital value and rental value had been ignored by the Municipality and a new method unsanc....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rinciples of natural justice. In the present case, the respondents have applied BSR in property tax assessments since 1998 and hence such a situation, of change in methodology, does not arise. 166. The efforts of the respondents in presenting an overall and continuous history of the levy of property tax over the last several decades has been illustrative and informative. Substantial materials have been placed before me by the State to show that this change in methodology has been accompanied by application of mind and scientific study. 167. Over and above this, I am also convinced that the adoption of BSR is acceptable, from a common sense approach as well. With the large scale expansion of Corporation limits as well as the manifold explosion in the number of properties, assessment on a property to property basis is, in my considered view, not practicable. 168. To this end, I do not see any fallacy or the flaw in the authorities adopting the mean average rental value of properties in a given street to formulate a BSR. The authorities have placed material explaining that there has been an in depth study of the properties in each street and selection of a few representative houses....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ab imposed is punitive in nature. Moreover, they argue that there is no basis for the slabs imposed. 177. In my considered view, there is no merit in the aforesaid submissions. Evidently, and as the respondents have also pointed out, the fixation of slabs is intended as a benefit extended to owners of properties graded on the basis of size. The factorial for properties admeasuring less than 600 sq. ft., has been enhanced from 1.25 to 1.50, for properties between 601 to 1200 from 1.50 to 1.75, for properties between 1201 to 1800 the factorial stands enhanced from 1.75 to 2.00. In all situations, there is an enhancement of .5 percentage of the rate previously applicable. Properties admeasuring above 1801 sq. ft. stands enhanced to 2.00 from 1.50 as it was previously. 178. The respondents project as though the slab system existed even earlier and the tabulation extracted above reveals the slabs fixed in 2011. However, no document has been produced by the Corporation/State in support of the existence of slab rates prior to the present impugned proceedings. This point has not been argued by the petitioners. 179. However, even assuming that the fixation of slab has been done for the f....