TaxTMI 
TaxTMI 
2022 (11) TMI 1477
X X X X Extracts X X X X
X X X X Extracts X X X X
.... H.L. Tiku, Sr. Adv., Vikas Kumar, Yashmeet Kaur, Manish Paliwal, Advs., Corporate Legal Partners, AOR, D.K. Deshmukh, Sr. Adv., Hitesh Kumar Sharma, Akhileshwar Jha, Senha Deshmukh, Deepti S. Rane, Kavya Lokande, Saandhya S. Pawar, Abhishek Bharti, Aarti Mahto, Sandeep Jalan, Amit Dixit, Advs., Balaji Srinivasan, AOR, Kunal Vajani, Chirag M. Shroff, Shubhay Tandon, Advs., P.N. Gupta, AOR, Rattan Lal, Bharti Gupta, Advs., Chirag M. Shroff, AOR, Shailendra P. Singh, Siddharth Dharmadhikari, Advs., Aaditya A. Pande, AOR, Bharat Bagla, Kirti Dadheech, Advs., Sachin Patil, AOR, Udayaditya Banerjee, AOR, Aman Raj Gandhi, AOR, E.C. Agrawala, AOR, Shikhil Shiv Suri, Madhu Suri, Advs., T.R.B. Sivakumar, AOR, K.K. Khurana, Adv., Adbhut Pathak, AOR, Chand Qureshi, AOR, Anand, Mohammad Usman Siddiqui, Aisha Siddiqui and Sakeena Quidwai, Advs. JUDGMENT U.U. LALIT, C.J.I. 1. Leave granted in all Special Leave Petitions. 2. These appeals are challenging the common judgment and order dated 24.4.2019 passed by the Division Bench of the High Court of Judicature at Bombay in Writ Petition No. 2592/2013 and connected matters. Contempt Petition (Civil) No. 38/2021 has been filed against th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....enefit tax, sewerage tax, sewerage benefit tax, general tax, education cess and street tax, which are leviable on the basis of certain percentage of rateable value of the buildings or lands. 2. Section 154 of the Act provides the method of fixing rateable value of any buildings or lands assessable to property tax. The basis to determine the rateable value is the annual rent for which such buildings or lands might reasonably be expected to let from year to year, less 10 per centum of the said annual rent and the said deduction is in lieu of all allowances for repairs or on any other account whatever. 3. The determination or fixation of the rateable value under different Municipal Acts or Municipal Corporation Acts throughout India for the purpose of levy of property taxes under these Acts has resulted in ceaseless dispute. There has been a catena of decisions rendered by various High Courts and the Supreme Court in respect of the matter of fixation of rateable value particularly because of the provisions of Rent Control Legislation in various States including the State of Maharashtra. On account of these decisions the annual rent to be taken into account for fixati....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ther essential civic services and amenities, the salaries of staff and wages of employee and all other types of expenditure have gone up steeply over the last more than 65 years. 4. With a view to exploring the possibility of reforming the property tax system, so as to augment the revenue of the Corporation, the Tata Institute of Social Sciences (TISS), Mumbai were entrusted by the Corporation with the job to study the present system of levy of property taxes and to suggest any alternative system for such levy. After studying various systems available for assessment of property taxes within and without India, they have recommended that Capital Value Based System of Assessment in place of the Annual Rental System may be adopted, as according to them the trend in property tax practices in developing countries is to move away from the Annual Rental Value base to Capital Value base. The capital value based system of assessment has the following merits: (1) Formula based assessment is possible with simplicity, (2) Self-assessment is possible, (3) Greater flexibility in tax administration which provides control over revenue, (4) Subjectivity i....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Rules of 2015', for short), which came into force on 01.04.2015. 8. It must be stated here that on 20.01.2010 a resolution was passed appointing an expert committee comprising of Dr. D.M. Sukthankar, Dr. D.N. Choudhary and Dr. Roshan Namavati to make recommendations on the Capital Value System. The draft Rules prepared by the Committee were published in various newspapers on 18.10.2010 inviting objections. The last date for submissions and objections after due extension expired on 30.11.2010, whereafter final report was submitted. After obtaining the sanction of the Standing Committee, the Capital Value Rules, of 2010 were published on 20.03.2012. Subsequently, the Capital Value Rules of 2015 were also framed. 9. The relevant provisions of the MMC Act dealing with the matters in issue are extracted here for ready reference: 120. Constitution of Fines Fund. Fines collected Under Section 83 shall be credited to a separate fund to be called "the Fines Fund" the proceeds of which shall be expended in promoting the well-being of municipal officers and servants other than those appointed under the provisions of Chapter XVIA of this Act, and for the payment of compassi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....-section (2) and in Clause (d) of Section 126C and in Section 126E; (cc) an estimate of the amount due to be transferred during the next ensuing official year to the municipal fund under the provisions of Sections 460KK and 460LL; (d) a statement of proposals as to the taxation which it will, in his opinion, be necessary or expedient to impose under the provisions of this Act in the next ensuing official year; (2)(a) an estimate of the expenditure which must or should, in his opinion, be incurred by the corporation in the next ensuing official year by reason of the obligations imposed upon the corporation arising out of the transfer to the corporation of the powers, duties, assets and liabilities of the Board of Trustees for the Improvement of the City of Bombay constituted under the City of Bombay Improvement Trust Transfer Act, 1925 or for any of the purposes of Chapter XII-A; (b) an estimate of all balances, if any in the account maintained Under Section 122A, which will be available for re-appropriation or expenditure at the commencement of the next ensuing official year; (c) an estimate of the corporation's receipts and income f....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tes at which the fares and charges in respect of the Brihan Mumbai Electric Supply and Transport Undertaking shall be levied. (2) Except Under Sections 134, 196, 460H and 460I, the rates so fixed and the articles so appointed shall not be subsequently altered for the year for which they have been fixed. (3) Notwithstanding anything contained in subsections (1) and (2), the Corporation may, at any time during the official years 2010-2011, 2011-2012 and 2012-2013 determine, separately for each of the said three years, the rates of property taxes for different categories of users of a building or land or part thereof. The rates of property taxes so determined shall be effective and shall be deemed to have been effective from the 1st of April of those three years and the taxes for the said three years shall be leviable and payable at the rates so determined. xxx xxx xxx 139. Taxes to be imposed under this Act. For the purpose of this Act, taxations shall be imposed as follows, namely: (1) property taxes; (2) a tax on dogs: and (3) a theatre tax; 139A. Property taxes what to consist. (1) Property taxes levi....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... General tax (c) a general tax of not less than eight and not more than fifty per centum of their rateable value, or of not less than 0.1 and not more than 1 per centum of their capital value, as the case may be, together with not less than one-eight and not more than five per centum of their rateable value or not less than 0.01 and not more than 0.2 per centum of their capital value, as the case may be, added thereto in order to provide for the expense necessary for fulfilling the duties of the corporation arising under Clause (k) of Section 61 and Chapter XIV; Education cess (ca) the education cess leviable Under Section 195E; (cb) the street tax leviable Under Section 195G; (d) betterment charges leviable under Chapter XII-A. (2) Any reference in this Act or in any instrument to a water tax or a halalkhor tax shall after the commencement of the Bombay Municipal Corporation (Amendment) Ordinance, 1973, be construed as a reference to the water tax or the water benefit tax or both or the sewerage tax or the sewerage benefit tax, or both as the context may require; 140A. Property taxes to be levied on capital value....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lding or residential tenement, having carpet area of 46.45 sq. meter (500 sq. feet) or less, shall not exceed the amount of property tax levied and payable in the year immediately preceding the year of such adoption of capital value as the basis. Provided also that, for a period of five years commencing on the 1st April 2015, the amount of property tax leviable in respect of a residential building or residential tenement, having carpet area of 46.45 sq. meter (500 sq. feet) or less, shall not exceed the amount of property tax which is being levied and payable in respect of such residential building or tenement as on the 31st March 2015. Provided also that, for the financial year 2019-20, the provisions of the preceding proviso shall apply as if the general tax leviable under Clause (c) of Sub-section (1) of Section 140 do not form part of the property tax leviable under that section. (2) Notwithstanding anything contained in Sub-section (4) of Section 139A or any other provisions of this Act or Resolution, if any, passed by the Corporation for adopting the levy of property tax on the basis of capital value but subject to the provisions of Section 154A, bu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....in Section 163 or 217 or any other provisions of this Act and having regard to the fact that the property tax bill has been issued in accordance with the provisions of Sub-section (2), not being a final bill, such bill shall not be questioned before any forum; and no complaint or appeal shall lie against such bill merely on the ground that capital value in respect of the property which is subject matter of the bill is not yet fixed, or that the amount of tax leviable and payable at the rate of property tax determined by the Corporation is not yet finally ascertained, or on any other ground whatever. Explanation.-For the purposes of this section, after the Corporation adopts the Capital Value as the basis of levy of property tax, the property tax in respect of any taxable building shall be revised after every five years and on each such revision, such amount of property tax, shall not in any case exceed the forty per cent of the amount of the property tax levied and payable in the year immediately preceding the year of the revision. xxx xxx xxx 154. Rateable value or capital value how to be determined. (1) In order to fix the rateable value of any building....
X X X X Extracts X X X X
X X X X Extracts X X X X
....carpet area of building, (c) user category, that is to say, (i) residential, (ii) commercial (shops or the like), (iii) offices, (iv) hotels (upto 4 stars), (v) hotels (more than 4 stars) (vi) banks, (vii) industries and factories, (viii) school and college building or building used for educational purposes, (ix) malls and (x) any other building or land not covered by any of the above categories, (d) age of the building, or such other factors as may be specified by Rules made under subsection (1B)."" to the following factors, namely: (a) the nature and type of the land and structure of the building,- (b) area of land or carpet area of building, (c) user category, that is to say, (i) residential, (ii) commercial (shops or the like), (iii) offices, (iv) hotels (upto 4 stars), (v) hotels (more than 4 stars), (vi) banks, (vii) industries and factories, (viii) school and college building or building used for educational purposes, (ix) malls and (x) any other building or land not covered by any of the above categories, (d) age of the building, or (e) such other factors as may be specified by Rules made under....
X X X X Extracts X X X X
X X X X Extracts X X X X
....urposes of assessment book kept under the provisions of this Act, and the bill for property taxes issued Under Sub-section (2) of Section 140A shall be deemed to have been validly and legally issued under the provisions of this Act. Provided that, in respect of the buildings and lands which are liable to be assessed for the first time on or after the 1st April 2010, the capital value of such buildings and lands shall, until the final capital value is determined under this section, be provisionally equal to the amount of rateable value worked out on the basis of the prescribed letting rates by the corporation in respect of the official year 2009-2010. 155. Commissioner may call for information or returns from owner or occupier or enter and inspect assessable premises. (1) To enable him to determine the rateable value or the capital value, as the case may be, of any building or land and the person primarily liable for the payment of any property tax leviable in respect thereof the Commissioner may require the owner or occupier of such building or land, or of any portion thereof, to furnish him, within such reasonable period as the Commissioner prescribes in this beh....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tion 169, a charge is made for water supplied to any buildings or land by measurement or the water taxes or charges for water by measurement are compounded for, or if, Under Section 170, the sewerage taxes or sewerage charges for any building or land are fixed at a special rate, the particulars and amount of such charges composition or rates; (g) such other details, if any, as the Commissioner from time to time thinks fit to direct. 10. The relevant portion of the Capital Value Rules, 2010 is as under: No. AC/NTC/1310/2011-22 dated 20.03.2012. In exercise of the powers conferred by Clause (e)s of subsection (1A) and Sub-section (1B) of Section 154 of the Mumbai Municipal Corporation Act (Act No. Bom.III of 1888), and of all other powers enabling him in this behalf, the Commissioner, after having obtained the approval of the Standing Committee, as required under the said Sub-section (1B), hereby makes the following Rules to provide for the factors and categories of users of buildings or lands and the weightage by multiplication to be assigned to various such factors and categories for the purpose of fixing the capital value of buildings and lands in Brihan Mumba....
X X X X Extracts X X X X
X X X X Extracts X X X X
....th lift:Weightage by multiplication on account of floor factor to be assigned to a RCC building with lift, for the purpose of fixing capital value, shall be according to the number of floors as shown in column (2) of Schedule 'D' and the weightage by multiplication to be assigned thereto shall be as shown in column (3) of the said Schedule 'D'. 9. Area of hoarding or tower for the purpose of fixing capital value:Area of hoarding or tower for the purpose of fixing capital value thereof shall mean,- (a) in the case of a hoarding, the area of the square of the extremities of the poles on which the hoarding is erected plus the area of the hoarding; and (b) in the case of a tower, the area covered by the extremities of the foundation of the tower. 10. Built-up area of a flat or a building: (1) The total carpet area of a flat shall be reckoned by including the area of the following items, namely: (i) terrace in exclusive possession, (ii) mezzanine floor, (iii) loft (excluding loft in residential flat) or attic, (iv) dry balcony and (v) niches; and (2) The total built-up area of a building shall be reckoned by including the area....
X X X X Extracts X X X X
X X X X Extracts X X X X
....uilding or part thereof; fixed in accordance with the provisions of Sub-rule (1), or, as the case may be, Sub-rule (2) of Rule 11. Explanation.-For the removal of doubts, it is hereby declared that the provisions of this Rule shall not apply to a building or part thereof if,- (1) it is occupied by a licensee to whom it is given on leave and licence; (2) it is occupied by an office bearer or officer or an employee of the landlord. 13. Fixation of capital value of religious buildings: The capital value of a religious building which is a temple, math, gurudwara, mosque, takth, church, durgah, synagogue, or agiary or the like, and is used or intended to be used for the purpose of religious worship or offering prayers or performance of any religious rites or rituals by a person of, or belonging to, the relevant religion, creed, or sect, shall be fixed at the rate of base value applicable to a residential building as indicated in the Ready Reckoner; and by applying the relevant weightages by multiplication provided for in these rules. 14. Fixation of capital value of open terrace:If an open terrace in exclusive possession is attached ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....i) lounge, shall be fixed at the relative rate of base value of the building or part thereof, if any of these items are part of the building or part thereof; and by applying the relevant weightages by multiplication provided for in these rules. 17. Fixation of capital value in respect of demolished building: (1) Where a building is fully demolished, or has fully collapsed, the land beneath it shall be deemed to be open land and the capital value thereof shall be fixed accordingly, as provided for in Rule 21. Explanation-For the purpose of this rule, it is hereby declared that where a building is, or is being, demolished, or has collapsed, resulting in the land on which it stood or stands being rendered open land, or only walls or the like are standing but there is no structure as such which can be occupied, and on such demolition, or collapse, debris or any remains of the demolished or collapsed building are not yet removed, the land beneath such building shall be deemed to be open land. (2) Where only part of a building is demolished or has partly collapsed and the remaining part is yet occupied by occupiers, land beneath the portion of the buil....
X X X X Extracts X X X X
X X X X Extracts X X X X
....er of development right shall be valued at an increased rate in proportion to the higher floor space index or transfer of development right proposed to be utilized and approved under the building plan submitted to the Corporation for approval. 21. Capital value of open land or building or part thereof.-Capital value of open land or building shall be fixed under the provisions of the Act and these Rules in the following manner, namely: (1) Capital value (CV) of open land Rate of base value (BV) of a open land according to Ready Reckoner X weightage by multiplication as per user category (UC) (Part I of Schedule 'A') X permissible or approved floor space index (FSI) X area of land (AL). CV = BV x UC x FSI x AL (2) Capital value (CV) of a building- Relative rate of base value (BV) of a building according to Ready Reckoner X weightage by multiplication as per user category (UC) (Parts II, III, or as the case may be, IV of Schedule 'A') X weightage by multiplication as per the nature and type of building (NTB) (schedule 'B') X weightage by multiplication on account of age of building (AF) (schedule 'C'....
X X X X Extracts X X X X
X X X X Extracts X X X X
....and appurtenant to the building, such land shall be treated as open land and the capital value thereof shall be fixed accordingly, as provided for in Rule 21. 4. User categories of open land and weightages by multiplication to be assigned thereto:User categories of open land shall be as specified in column (2) of Part 1 of Schedule 'A' and the weightages by multiplication to base value, to be respectively assigned thereto the purpose of fixing capital value, shall be as shown in column (3) of the said Part I of Schedule 'A'. 5. User categories of buildings or part thereof and weightages by multiplication to be assigned thereto:User categories of buildings or part thereof shall be as specified column (2) of each of Parts II, III and IV of Schedule 'A' and the weightages by multiplication to the relative base value, to be respectively assigned thereto for the purpose of fixing capital value, shall be as in column (3) of each of the said Parts II, III and Iv of Schedule 'A'. 6. The nature and type of building and the weightage by multiplication to be assigned thereto:The nature and type of a building and type of building shall....
X X X X Extracts X X X X
X X X X Extracts X X X X
....3) The carpet area of any of the following items shall not be reckoned while computing the carpet area of a building or part thereof, namely: (i) lift room above topmost storey, (ii) lift well, (iii) stair-case and passage thereto including staircase room, (iv) chimney and elevated tank, (v) meter room, (vi) pump room, (vii) underground and overhead water tank, (viii) septic tank, (ix) flower-bed and (x) loft in residential flat, (xi) entrance lobby of residential building (4) "deleted" 11. Fixation of capital value of a flat or building or part thereof.- (1) While fixing the capital value of a flat, the capital value of any one or more of the relevant items specified in Sub-rule (1) of Rule 10, as fixed in accordance with the provisions of Rules 14, 15, or Sub-rule (1) of Rule 16, as the case may be, shall be added to the capital value of the flat. (2) While fixing the capital value of a building or part thereof, the capital value of any of the one or more of the relevant items specified in Sub-rule (2) of Rule 10 as fixed in accordance with the provisions of Sub-rule (2) or, as the case may be, (3) of Rule 16, shall be added to the capital valu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d to be open land and the capital value thereof shall be fixed accordingly, as provided for in Rule 21. Explanation-"deleted" (2) Where only part of a building is demolished or has partly collapsed and the remaining part is yet occupied by occupiers, land beneath the portion of the building which is demolished or has collapsed shall be deemed to be open land and the portion of the structure which is occupied shall be treated as a building, for the purpose of fixing the capital value thereof. (3) "deleted 18. "deleted" 19. "deleted". 19. A Assessment of Amenities in Luxurious RCC bldg Where Property tax in respect of amenities of luxurious RCC building was not levied since 1st April 2010 as per Rule 19, while determining the property tax leviable from 1st April 2015, subject to capping as provided for in Section 140A such tax shall be considered which would have been continued to levy from 1st April 2010. 20. Valuation of open land capable of utilising more than 1 floor space index (F.S.I.) or transfer of development right (T.D.R.)-As the Ready Reckoner provides for the rate of base value of open land with 1 flo....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... CV = BV X UC X FSI X LA = 36400 X 1.00 X 2.50 X 80 C.V.= Rs. 72,80,000 (13) OPEN LAND IN SUBURBAN AREA Weightage Rate of base value Rs.33,200 not applicable User Category Residential 1.00 Nature and Type of Building not applicable not applicable Age of Building not applicable not applicable F.S.I. Factor 1.00 1.00 Land Area 80 sq. mtr. not applicable CV = BV X UC X FSI X LA = 33200 X 1.00 X 1.00 X 80 C.V. = Rs. 26,56,000 13. Number of petitions were filed challenging the validity of computation and levy of property tax based on capital value system. The petitions also challenged the vires of Capital Value Rules of 2010 and Capital Value Rules of 2015. Some of the petitions also challenged the amendment effected to the MMC Act pertaining to the implementation of the Capital Value System for computing and assessing property tax. During the pendency of these matters before the High Court interim orders were passed by the High Court on or about 29.01.2014 which were thereafter modified by subsequent order dated 24.02.2014. The operat....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d by Entry-86 of List-I of Seventh Schedule deserves to be rejected. The adoption of capital value as a basis or measure of tax on land and building will not attract Entry-86 of List-I of Seventh Schedule. .... (b) Challenge to the validity of Sub-sections (1)(a) and (1)(b) of Section 140 regarding water tax and sewerage tax. The submissions were rejected with following observations: 158. ..... A tax is a compulsory exaction as a part of common burden without promise of any special advantages to classes of taxpayers, whereas a fee is a payment for services rendered, benefit provided or privilege conferred. Coming back to Sub-sections (1)(a) and (1)(b) of Section 140, the same provide for levy of such water tax as the Standing Committee may consider necessary for providing water supply. The imposition of this tax does not depend on whether the water is being supplied to the premises or property in respect of which water tax is demanded. Similarly, in case of additional water tax, the expenditure incurred or to be incurred for capital works for making or improving the facilities of water supply may not be for a direct benefit to the premis....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n of the BMC to maintain and aid schools of primary education. Therefore, as in the case of the aforesaid four taxes which we have discussed above, this tax is a compulsory exaction as a part of a common burden. We, therefore, do not see any merit in the submission that the aforesaid provisions are ultra vires the provisions of the Constitution of India. The argument whether education cess can be levied on the basis of capital value is dealt with separately. (d) Similarly, the argument with regard to Sub-section (1)(d) of Section 140 dealing with levy of Betterment Charges was rejected with following observations: 162. In none of the Petitions in this group, it is demonstrated that a demand is made from the Petitioners for payment Betterment Charge. Elaborate procedure for determination thereof is laid down. The Authority which has power to determine the charge is the Improvement Committee. As per Section 49B of the BMC Act, the said Committee consists of 26 elected councilors of BMC. Moreover, the betterment charge is not payable on the basis of the capital value. Hence, the main ground of attack in these petitions about the levy of property taxes based on capita....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y taxes. Moreover, we have pointed out that certain provisions of Chapter VIII are machinery provisions. As required by law, the decision adopting Capital Value System has been taken by the Corporation consisting of 227 elected and nominated councillors. This power cannot be said to be unguided power only because Sub-section (1) of Section 140A does not expressly lay down any specific conditions for exercise of the option. The provisions which confer power on the Standing Committee to fix the rates of taxes contain sufficient guidelines. Even the provision of Sub-section (1A) of Section 154 which confer power on the Commissioner to determine capital value contains more than sufficient guidelines. We see no violation of Article 243-X or any other provisions of Part-IX-A. 182. If we accept the submissions canvassed across the bar by the Petitioners, not only the decision to adopt capital value system but the job of fixing rates in case of all categories of property taxes, determination of capital value of all properties liable to taxes, process of serving notices Under Section 162, giving hearing on complaints and deciding the complaints will have to be done by the Corporati....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d. (h) Challenge to the notification issued under the Maharashtra Education Cess Act, 1962 The submissions in that behalf were also negatived with observation that by adopting capital value system, only the computation of property tax was altered. (i) The ground of retrospective operation of the impugned provisions of the BMC Act. The contentions advanced in that behalf were rejected by the High Court after making following observations: 205. The liability to pay property taxes was always provided in the BMC Act. By the impugned amendments, only the basis of computing property taxes has undergone a change. Assuming that there is any retrospective operation, it is no facilitate transition form one regime to another. As per the amendments, the final assessment for the years 2010-11, 2011-12 and 2012-13 can be made after expiry of the respective years. But provisional assessment has to be made during the respective three years. The impugned provisions do not take away or affect any vested right as only the procedure/method of computing the property taxes has undergone a change. By virtue of the impugned amendments, a property in respect of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... we will have to consider the provision of Rule 21. Perusal of Rule 21 and, particularly Clause (1) thereof shows that it lays down how the capital value of the open land is to be determined. It provides for a formula. It provides that the capital value of open land will be equal to rate of base value of open land according to SDRR multiplied by weightage by multiplication as per user category. The said weightage is provided in Part-I under heading "Open Land" multiplied by permissible or approved FSI multiplied by area of the land. Once the base value is determined as per SDRR, it is obvious that the said value is fixed taking into consideration potential of the land. The rates in SDRR are fixed after taking into consideration all the aspects of market value. The capital value has to be decided in accordance with the base value which has to be taken as per SDRR. Clause (1) of Rule 21 provides for weightage by multiplication as per user category. It also provides that the rate of base value shall be multiplied by permissible FSI for determining the capital value of the land. There is no provision under the BMC Act to take into consideration development potential of vacant land for ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tilized and approved under the building plan submitted to the Corporation for approval. Thus, the effect of Rule 20 is that while fixing capital value of open land, its potential for development by using additional FSI or TDR has to be considered. Thus, a value higher than what is provided in SDRR should be taken into consideration. It was further observed thus: 218. Rule 20 provides for taking into consideration potential of construction on the vacant land for making valuation. For the purpose of property taxes, not only a vacant land but even a land under construction will have to be treated as a vacant land. Wherever SDRR is applicable, in view of Sub-section (1A) of Section 154, the base value has to be as per SDRR rate for vacant land. Rule 20 provides for taking into consideration potential for development. It is completely contrary to the provisions of the BMC Act as interpreted in the case of Polychem Limited (supra) which requires even the land under construction to be treated as a vacant land. Moreover, Rule 20 purports to lay down how valuation of the land has to be made. The Rule making power Under Sub-section (1B) or Clause (e) of Sub-section (1A) of Sectio....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... to the properties subject matter of the petitions in this group except Writ Petition No. 2592 of 2013 and PIL 46 OF 2014. We make it clear that only those special assessment notices and final bills which are specifically challenged will stand set aside. In Writ Petition No. 2592 of 2013, the fresh exercise will have to be undertaken only in relation to the properties in respect of which there is a specific prayer for quashing the notices and bills based on final assessment. The details of properties held by 610 members in the lead petition are not set out. Hence, no relief can be extended to the properties of the said members save and except the properties subject matter of bills and notices which are expressly challenged. (vi) This judgment will not affect the final bills which are accepted by the concerned owners. 230. We record our appreciation for the valuable assistance rendered by the learned Counsel appearing for various parties. We dispose of the petitions by passing the following order: ORDER (i) We reject the prayers made for challenging the constitutional validity of various provisions of the Mumbai Municipal Corporation Act, 1888 as prayed....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ned by interim order dated 24.2.2014 passed by the High Court and more particularly by para 5 as quoted above. We are conscious of the fact that there were more than 150 petitions before the High Court but special leave petition has been filed only in one matter. However, since the issues in question are common to all the matters and go to the root of the controversy, we direct that this interim order shall apply in every single petition which was considered by the High Court. Various interim applications have since then been preferred by certain parties seeking impleadment and projecting their view points. At the same time, some of the parties who were aggrieved by the rejection of their submissions challenging the validity of the various provisions of MMC Act and other issues which were answered against them also preferred Special Leave Petitions. 21. Mr. K.K. Venugopal, learned Attorney General for India and Mr. V. Sreedharan, learned Senior Advocate appearing on behalf of the Corporation initially advanced submissions on the issues which were answered against the Corporation. However, after the submissions were advanced on behalf of various impleading applicants ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....and buildings across Greater Mumbai took time. The scale of the work involved was very large and extremely time consuming. The data of the old rateable value system which was in physical form had to be digitized for the purposes of the new capital value system. This voluminous data covered approximately 2.75 lakh properties (or 27.5 lakh individual units). In some cases however, the data was not complete and the carpet area was not available. In these cases the property owners were given notices Under Section 155 of the MMC Act to furnish the details in the prescribed format. The response was however very limited and the officers of the MCGM had to physically ascertain the required information. (Para 31, Pg 19 of consolidated counter affidavit on behalf of Respondents 2 to 4) 7. In light of the same, the State Legislature stepped in and introduced L.A. Bill No. LXXIV of 2010 whereby inserting Sub-section (2) in Section 140A to enable the Corporation to issue provisional bills for the year 2010-11 and treat the rateable value of the building or land as provisional capital value. (Statement of object and reasons on Pg 48 and 49 in Compilation of Corporation-Vol 4). The said ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 12. In March 2012, the State Legislature observed that the process of fixing the capital value which had started in August, 2010 is bound to stretch beyond 31st March 2012. This is to because the proposal submitted to the Standing Committee of the Corporation for Rules and rates have not yet received the approval. The general election of the Corporation is due in February, 2012 and new Standing Committee will be operative only from the end of March, 2012. 13. Accordingly, the bill proposed to expand the scope of transitory provisions so as to enable the Corporation to separately issue the provisional bills on the basis of rateable value treating it as provisional capital value for the years 2012-13, as was done for the period 2010-11 and 2011-12. (Statement of object and reasons on Pg 155 and 156 in Compilation of Corporation-Vol 4). The said ordinance culminated into Act No. VI of 2012 (Pg 157 to 162 in Compilation of Corporation-Vol 4). 14. It is submitted that, in present case there is no retrospective levy of tax. The Section for imposition of tax on capital value was already in force from 01.04.2010. Draft Rules were already published in October, 201....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Learned Senior Counsel then submitted that the tax could be levied by the body constituted of elected representatives and not by the Standing Committee and that the power to tax could not be delegated. It was further submitted that since a new method of levying and computing property tax was revised, it was rightly denied retrospective application. On facts, it was also submitted that certain areas of the properties of the entity which housed pump rooms and other facilities ought to be excluded while arriving at the determination. (B) Dr. Milind Sathe, learned Senior Advocate appeared for certain entities in IA Nos. 110990 of 2019, 163118 of 2019 and 160953 of 2019 and submitted that Rules 20, 21 and 22 of the Capital Value Rules, 2010 and 2015 were rightly struck down by the High Court. Relying on the decision of this Court in The Municipal Corporation of Greater Bombay v. Polychem Ltd. (1974) 2 SCC 198, it was submitted that till the potential of the property was translated into a habitable building, the land must be treated and taxed only as land and not going by its buildable potential. It was further submitted that the process of fixing and/or changing the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....mitted that there could be no retrospectivity to any delegated legislation when the parent Act did not give any indication in that behalf and that the final assessment could have altered the basis in the same financial year and not otherwise. (F) Mr. Abhishek Bharti, learned Counsel relied upon the decision of this Court in State of Himachal Pradesh and Ors. v. Nurpur Private Bus Operators' Union and Ors. (1999) 9 SCC 559, Mr. Shikhil Suri, learned Counsel who appeared for National Centre for Performing Arts and Tata Power Company Limited adopted the submissions of Dr. Milind Sathe and Mr. Darius Khambata, learned Senior Counsel. Mr. Bhushan Deshmukh who appeared for the Petitioner in SLP(C) No. 25689/2019, also adopted the submissions of Dr. Sathe and Mr. Khambata, learned Senior Counsel. Mr. Satish Muley, learned Counsel appearing for a subsequent purchaser, also adopted the submissions of Dr. Sathe and Mr. Khambata, learned Senior Counsel. 24. Mr. V. Sreedharan, learned Senior Counsel for the Corporation made submissions in rejoinder. He also submitted that the overall tax demand of the Corporation under the capital value assessment actually decreased by 12% to R....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Commission. Sub-article (2) contemplates that the recommendations made by the Finance Commission along with the explanatory memorandum as to the action taken thereon must be laid before the Legislature of the State. Thus, it is the Legislature of the State which will ultimately take an appropriate action with respect to the recommendations made by the Finance Commission and the papers placed before it. If the Legislature itself has taken into account certain prevailing situation, which according to the Legislature is causing some prejudice to the financial health and condition of the municipalities and, therefore, the method of imposition of property tax ought to be changed, it cannot then be said that the matter must necessarily and ought to have emanated from the Finance Commission or that in the absence of such recommendations by the Finance Commission, no steps could have been taken by the Legislature. 27. Article 243X of the Constitution states that the Legislature of a State may by law authorize a municipality to levy, collect and appropriate such taxes etc. in accordance with such procedure and subject to such limits as may be specified in law. The exercise undertaken by ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....issioner "shall have regard" to the factors enumerated in Sub-clauses (a) to (e). Thus, the factors on the basis of which capital value can be arrived at are delineated in Sub-clauses (a) to (e) of Sub-section (1A) of Section 154. While Sub-clause (a) to (d) are clear and well defined, Sub-clause (e) refers to the factors as may be specified by Rules under subsection (1B). Said Sub-section (1B) in turn authorizes the Commissioner, to frame such rules, with the approval of the Standing Committee as respects details of categories of building or land and the weightage by multiplication to be assigned to various such factors and categories for the purpose of fixing the capital value. 30. Section 154(1A) of the MMC Act is the crucial provision for the present discussion. The opening part of Sub-section (1A) states that in order to fix the capital value of any building or land assessable to property tax, regard shall be had to the value of any building or land as indicated in the SDRR for the time being in force. The value so indicated in SDRR is to be the base value to which certain factors delineated in Clauses (a) to (e) of Sub-section (1A) are to be applied while fixing the capita....
X X X X Extracts X X X X
X X X X Extracts X X X X
....pon and the other which was lying vacant. One of the questions was: whether during the period when the construction was going on and was not completed, what should be the approach? The following observations are noteworthy: 12. The principles upon which lands are rated in this country have been practically settled by the decisions of this Court. But, no case was brought to our notice in which an application of these principles to land upon which a building was being constructed was involved. In other words, no case was cited by any party in which the doctrine of sterility, as indicated above, was invoked. We will, however, glance at the cases cited before deciding the question raised before us. xxx xxx xxx 22. The abovementioned authorities of this Court, which were cited before us, enable us to hold that the mode of assessment in every case must be directed towards finding out the annual letting value of land which is the basis of rating of land, and, by definition, "land" includes land which is either being built upon or has been built upon. Nevertheless, a reference to the provisions of the Act shows that, after a building has been completed, the letti....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... ready to be occupied, the land must be treated as vacant land. Notably, the second decision was premised on the methodology where the rateable value was the determining criteria. Therefore, so long as the building could not be let out in open market, the land would continue to be treated as "vacant land". 34. However, after the amendments, the emphasis has now changed and the basis for taxation is now to be capital value of land and building. Capital value again can have two dimensions. First, the value of land or building as it stands today or secondly, the value as may be in future as per anticipated development. However, the legislative intent, as is clear from Clauses (a) to (d), is about actual status and user as on the date the capital value is to be reckoned or considered. These clauses clearly show that the features contemplated therein must be in existence as on such date and not what would be the projection in future. 35. There are two ways in which Sub-clause (e) of Sub-section (1A) of Section 154 can be construed. In the first case, said Clause can be read ejusdem generis along with Sub-clauses (a) to (d), in which event the scope of any Rules to be made in terms....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the permissible scope delineated by the provisions of Section 154 of the MMC Act. The High Court, in our view, was, therefore, right in concluding that Rule 20 of the Capital Value Rules of 2010 and the Capital Value Rules of 2015 would be ultra vires the provisions of Sub-sections (1A) and (1B) of Section 154 of the MMC Act. 39. We now turn to the issue regarding retrospectivity of the Capital Value Rules of 2010. The factual narration relied upon by the learned Counsel for the Corporation does show that the preparatory steps were being undertaken since 2010 with the appointment of an expert committee and publication of draft rules. It appears that the Corporation had to collect voluminous data. But in order to enable the Corporation to compute or levy property tax based on capital value, the concerned Rules had to be in force. There being no empowerment to compute and/or levy property tax with retrospective effect by the statute itself, the Rule making power, in any view of the matter, could not have created a liability pertaining to the period well before the Rules came into effect. The first ground as set out in paragraph 15 (supra) was, therefore, rightly answered by the Hi....