TaxTMI 
TaxTMI 
2022 (11) TMI 1477
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....shmeet 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 the alleged contemnor for disobedience of order....
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....ion 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 fixation of rateable value of any buildings or lands has been pegged down to the standa....
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....mployee 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 is eliminated to the extent possible, (5) There is transparency and easy to understand, (6) Tax revenue can keep ....
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.... 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 compassionate allowances to the widows of such officers and servants who die while in municipal service and to such other relation of the officers and servants as the corpo....
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....s 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 for the next ensuing official year-- (i) arising from sales, leases and other dispositions of immovable property vesting in the corporation by reason of the enactment of the City of Bombay Municipal (Amendment) Act, 1933 or acquired by the Corporation for any of the purposes of Chapter XII-A; an....
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....orporation 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 leviable on buildings and lands in Brihan Mumbai under this Act shall include water tax, water benefit tax, sewerage tax, sewerage benefit tax, general tax, education cess, street tax and betterment charges. (2) For the purposes of levy of property taxes, the expression "Building" includes-a flat, a gala, a unit or any portion of the building. (3) All or any of the property taxes may be imposed on a graduated scale. (4) Save as otherwise ....
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....ration 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 and the rate thereof. (1) Notwithstanding anything contained in Section 140 or any other provision of this Act, the Corporation may pass a resolution to adopt levy of property tax on buildings and lands in Brihan Mumbai on the basis of capital value of the buildings and lands on and from such date, and at such rates, as the Corporation may determine in accordance with the provisions of Section 128: Provided that, for the period of five years from the date on and from which such property tax is levied on capital value, the tax shall not: (a) exceed,- ....
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.... 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, buildings and lands in respect of which the process of fixing capital value is in progress on the 26th August 2010, being the date of coming into force of Section 3 of the Maharashtra Municipal Corporations and Municipal Councils (Third Amendment) Act, 2010, until it is so fixed, the tax leviable and payable in respect of such buildings and lands shall provisionally be equal to the amount of tax leviable and payable in the preceding year, that is to say, for the year commencing on the first day of April 2009 and ending on the thirty-first day of March 2010 and such provisional tax shall be leviable and payable for each of the years 2010-2011, 2011-2012 and 2012-....
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....ts 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 or land assessable to a property-tax, there shall be deducted from the amount of the annual rent for which such land or building might reasonably be expected to let from year to year as unequal to ten per centum of the said annual rent and the said deduction shall be in lieu of all allowances for repairs or on any other account whatever. (1A) In order to fix the capital value of any building or land assessable to a property tax the Commissioner shall have regard to the value of any building or land as indicated in the Stamp Duty Ready Reckoner for the time being in force as prepared under the Bombay Stamp (Determination of True Market Value of Property) Rules, 1995, framed under the provisio....
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....ops 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 subsection (1B). (1B) The Commissioner shall with the approval of the Standing Committee, frame such Rules as respects the 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 Under Sub-section (1A). (1C) The capital value of any building or land fixed Under Sub-section (1A) shall be revised every five years: Provided that, the Commissioner may, for reasons to be recorded in writing, revise the capital value of any building or land any time during the said period of five years and shall accordingly amend the assessment book in relation to such building or land Under Section 167. (1D) (a) Notwithstanding anything contained in subsection (1C),- (i) due to the s....
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....e, 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 behalf, with information or with a written return signed by such owner or occupier- (a) as to the name and place of abode of the owner or occupier, or of both owner and occupier of such building or land; and (b) as to the details in respect of any or all the items as enumerated in Clauses (a) to (e) of subsection (1A) of Section 154 in relation to such building or land or any portion thereof. (2) Every owner or occupier on whom any such requisition is made shall be bound to comply with the same and to give true information or to make a true return to the best of his knowledge or belief. (3) The Commissioner may also for the purpose aforesaid make an inspection of any such building or land. 156. Assessment book what to contain. The Commissioner shall keep a book, in such form and manner as he may, with the approval of the Standing Committee, determine, and such boo....
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.... 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 Mumbai, namely: 1. Short title and commencement: (i) These Rules may be called for the Factors and Categories of Users of Buildings or Lands (Assignment of Weightages by Multiplication) Fixation of Capital Value Rules, 2010. (ii) They shall come into force forthwith. xxx xxx xxx 3. Capital of open land: Save otherwise provided in these rules, where, within the precincts of a building there is vacant land other than the land 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....
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....) dry balcony and (v) niches; and (2) The total built-up area of a building shall be reckoned by including the areas of the following items, namely: (i) total area of the flats in the building computed in accordance with Sub-rule (1), (ii) basement, (iii) stilt, (iv) porch, (v) podium, (vi) service floor, (vii) refuge area, (viii) entrance lobby, (ix) lounge, (x) air-conditioning plant room, (xi) air handling room, (xii) the structure for an effluent treatment plant and (xiii) watchman cabin (3) The built-up 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 (4) Where only the carpet area of a flat or building is available on the record of the Corporation and the total built-up area thereof, computed in the manner as aforesaid in Sub-rule (1), or, as the case may be, Sub-rule (2), is not available on such record,....
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....ve possession is attached to a flat, the capital value of such terrace of a non-residential flat shall be fixed at 40% of the relative rate of base value of such flat, and of residential flat at 10% of the relative rate of base value of such flat; and by applying the relevant weightages by multiplication provided for in these rules. 15. Fixation of capital value of mezzanine floor, loft and attic floor: (a) the capital value of mezzanine floor shall be fixed at 70% of the relative rate of base value of the flat beneath the mezzanine floor; and by applying the relevant weightages by multiplication provided for in these rules; (b) the capital value of loft or attic floor shall be fixed at 50% of the relative rate of base value of the flat beneath the loft, or as the case may be, the attic; and by applying the relevant weightages by multiplication provided for in these rules; Provided that, where the rate of base value applicable to the mezzanine floor, loft or attic floor having regard to its user is higher or, as the case may be, lower than the rate of base value applicable to the flat beneath such mezzanine floor, loft or attic floor, the capital value of such mezzanine flo....
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....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) Notwithstanding anything contained in Sub-rules (1) and (2), where a cessed building is, or is being, demolished, or has collapsed, the land beneath the building or portion of the building which is demolished or collapsed shall be deemed to be open land and the capital value thereof shall be fixed as open land and assigning thereto a weightage by multiplication of 0.30 of the base value of open land. 18. The capital value of storage tank.-The capital value of storage tank shall be fixed in the following manner, namely: (1) storage tank above the ground level: (a) land-at the rate of open land in the Ready Reckoner and weightage by multiplication to be assigned thereto shall be 1.25, (b) storage tank-capacity of storage tank in litres multiplied by the rate of Rs. 40 per litre, with weightage by multiplication to be assigned thereto on account of age factor as in Schedule 'C', (c) total capital value of a storage tank = total of items (a) and (b). (2) storage tank below the ground level: (a) land-at the ra....
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....e examples based and worked out on the formulae as aforesaid are shown in the Appendix. 22. Non-application of Guidelines of Stamp Duty Valuation.-Notwithstanding anything contained in the "Important Guidelines of Stamp Duty Valuation" as specified in the Ready Reckoner, the provisions made in these Rules shall have primacy over those guidelines and none of those guidelines shall apply for fixing capital value under the Act and these rules. 11. The relevant portion of Capital Value Rules of 2015 is as under: No. AC/NTC/1147/2014-15. In exercise of the powers conferred by Clause (e) of Sub-section (1A), Sub-section (1B) and Sub-section (1C) 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 subsection (1B), hereby makes the following Rules to provide for the factors and categories of users of lands and buildings and the weightage by multiplication to be assigned to various such factors and categories for the purpose of fixing the capital value of lands and buildings in Brihan Mumbai, namely....
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....plication to be assigned to a building on account of age factor, for the purpose of fixing capital value, shall be according to the age of the building as shown in column (2) of Schedule 'C' and the weightage by multiplication be assigned thereto shall be as shown in column (3) of the said Schedule "C". 8. The weightage by multiplication on account of floor factor to be assigned to RCC building with 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. Carpet Ar....
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.... 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 to a flat, the capital value of such terrace of a non-residential flat shall be fixed at 50% of the relative rate of base value of such flat, and of residential flat at 20% of the relative rate of base value of such flat; and by applying the relevant weightages by multiplication provided for in these rules. 15. Fixation of capital value of mezzanine floor, loft and attic floor: (a) the capital value of mezzanine floor shall be fixed at 70% of the relative rate of base value of the flat beneath the mezzanine floor; and by applying the relevant weightages by multiplication provided for in these rules; (b) the capital value of loft or attic floor shall be fixed at 50% of the relative rate of base value of the flat beneath the loft, or as the case may be, the attic; and by applying the relevant weightages by m....
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....ollowing 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 weightage by multiplication on account of floor factor (FF) for RCC building with lift (schedule 'D') X carpet area (CA). CV = BV x UC x NTB x AF x FF x CA 22. Non-application of Guidelines of Stamp Duty Valuation.-Notwithstanding anything contained in the "Important Guidelines of Stamp Duty Valuation" as specified in the Ready Reckoner, the provisions made in these Rules shall have primacy over those guidelines and none of those guidelin....
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....ed the challenge as to the validity of various provisions of the MMC Act. It, however, held Rules 20, 21 and 22 of the Capital Value Rules 2010 and 2015 to be ultra vires the provisions of the MMC Act. 14. Before considering the challenge raised on various grounds, at the outset the High Court dealt with the approach to be adopted by a Court while dealing with the challenge to the validity of tax laws, and concluded that in case of taxing statute, more latitude would be required to be given to the legislature and that the burden on the Petitioners challenging the validity would be more onerous. Thereafter the challenge was considered under following heads: (a) The argument on legislative competence. The submission that the tax in terms of the instant legislation would be one covered by Entry 86 of List I of the Seventh Schedule to the Constitution, was not accepted and the challenge in that behalf was rejected with following conclusions: 155. The legislation providing for the levy of property tax by a municipality on the basis capital value will be covered by Entry 49 of List-II. Now coming to the impugned provisions, we find that capital value of lands and buildings is adop....
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....our heads, an element of quid pro quo exists, that by itself does not mean that the levy ceases to be in the nature of tax. We, therefore, reject the argument that these four taxes cannot be levied in respect of vacant land or a land under construction which is not enjoying any service such as water supply or collection of sewerage or waste. 159. Where the facilities of water supply or sewerage collection are provided to a land or building, as per the Rules framed Under Sections 169 and 170 of the BMC Act, the water charges or sewerage charges, as the case may be, by way of fees can be recovered which would have direct nexus with the quality and quantity of services provided. Where charge is collected, taxes covered by the above four heads cannot be levied. Therefore, we do not agree that the aforesaid four taxes are not in substance a tax but the same are in the nature of fees. (c) Challenge to the validity of Sub-section (1)(c)(a) of Section 140 regarding levy of Education Cess. The submissions were rejected thus: 160. ..... On plain reading of Sub-section (1) of Section 195E, it is clear that this Section provides for levy of additional tax on buildings and lands which....
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....ty. If the said argument is accepted, it will lead to absurdity for the reason that the exercise of fixing the capital value of all properties, fixing the rate of tax at a particular percentage of capital value, imposition, levy and collection will have to be done by the Corporation which consists of the elected councillors and nominated councillors and by no other municipal authority. It will be impossible for the Corporation to do so. xxx xxx xxx 181. To conclude, the BMC Act has been already amended in terms of Article 243-ZF. Perusal of various provisions of Part-IXA of the Constitution of India shows that the constitutional provisions itself provide for the State Legislature enacting law providing for constitution of committees and conferring them with powers and authority. We have already referred to the various provisions including Clause (b) of Article 243-W. Therefore, the provision of Section 4 of the BMC Act is consistent with the provision of Part-IXA. Clauses (a) and (b) of Article 243-X cannot be read in isolation and merely because Legislature authorizes the Standing Committee to fix the rates of property taxes and to approve Rules framed by the Commissioner in a....
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....anding Committee which will be considered by the Corporation in accordance with Clause (e) of subsection (1) of Section 128 for determination of rates. The BMC Act does not provide for delegation of essential functions of the Corporation. Conferment of powers on the Standing Committee and Improvement Committee and other municipal authorities is within the four corners of Part-IXA of the Constitution. Therefore, the argument of excessive delegation has no merit and deserves to be rejected. (g) Submission based on violation of Article 14 of the Constitution of India. The submission that there was manifest arbitrariness in the impugned provisions and that the provisions were confiscatory in nature, were rejected by the High Court. It was observed thus: 189. .... There is an argument canvassed that there is a disparity of tax payable in respect of residential and hotel properties. An argument is canvassed that there is disparity between five star hotel properties and other hotel properties. On first principle, the submissions cannot be accepted. The user of residential properties, 5-Star hotel properties and other hotel properties is different. These properties form part of disti....
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....alue. (iii) Rule 20 of the Capital Value Rules of 2010 was held to be ultra vires the provisions of Sub-section (1A) and (1B) of Section 154 of the MMC Act. 16. On the first issue, the High Court observed that neither Clause (e) of Sub-section (1A) nor Sub-section (1B) of Section 154 of the MMC Act conferred powers to frame Rules with retrospective effect. The Capital Value Rules of 2010, which came into effect from 20.3.2012, were, therefore, held to be applicable prospectively and that said Rules could not be applied from 1st April, 2010. 17. With regard to the second issue, it was observed that there was no provision in the MMC Act regarding consideration of development potential of vacant land for determining its capital value. The conclusion arrived at by the High Court in that behalf was as under: 211. Now we turn to the Capital Value Rules of 2010. As stated earlier, there is no provision which enables the Commissioner to frame Rules for laying down guidelines for determining capital value. Rule 2 contains definition. Rule 3 provides that where within the precincts of the building there is a vacant land other than the land appurtenant to the building, such land shall b....
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....ion (1A) of Section 154, factors which are to be taken into consideration for determining base value can be subject matter of rules. The factors referred in Clause (e) will have to be considered ejusdem generis. The other factors provided are nature of the land, type of land and structure, areas of land or building, user category such as residential or commercial and the age of the building. Under Clause (e) of Sub-section (1A) of Section 154, Rules cannot be framed to decide how the capital value should be determined. In fact, framing Rules for laying down the method of calculating the capital value is itself ultra vires the statutory Rule making power. 18. Rule 20 of the Capital Value Rules of 2010 was struck down by the High Court on the reasoning that the effect of said Rule would be that the value higher than what was provided for in Stamp Duty Ready Reckoner would be taken into consideration while computing the property tax. The High Court observed as under: 216. Rule 20 of Capital Value Rules, 2010 deals with valuation of open land capable of utilizing more than 1.0 FSI or transfer of development right (TDR). It provides that as the Ready Reckoner provides for the rate of....
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....as been struck down, the capital value of properties covered by the said Rules shall not be fixed in accordance with Rule 21. As a result of striking down of Rules 20, 21 and 22, in those cases where the capital value has been finally fixed either by issuing notice Under Section 162 of the BMC Act or by issuing final bills, the Commissioner or the officer empowered to exercise delegated powers will have to re-determine the capital value in accordance with Sub-section (1A) of Section 154 and serve a fresh special assessment notice. We hold that if a complaint is filed after service of special assessment notice, the same shall be disposed of only after giving an opportunity of being heard to the Assessee filing such complaint. Only after the complaint is disposed of in such a fashion, a final bill can be served. (iv) As the Municipal Commissioner will require a reasonable time to do the tasks as aforesaid, the interim orders which are operating in these petitions will have to be continued till the service of final bills. We also make it clear that though we are setting aside the final bills issued, no party will be entitled to claim refund of the amounts paid under the interim orde....
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....ecting to the special assessment notices issued under subsection (2) of Section 162 shall be disposed of only after giving an opportunity of being heard to the complainants. (iv) Till the expiry of a period of 21 days from the date on which fresh special assessment notices are served in accordance with Clause (ii) above, the ad-interim/interim orders which are operating in these petitions till today shall continue to operate subject to compliance of requirement of deposit of amounts by the Petitioners as set out in those orders. In those cases where the complaints are lawfully filed within stipulated time pursuant to the special assessment notices, the ad-interim/interim reliefs will continue to operate on the same conditions till the date of service of fresh final bills; (v) Rule is made partly absolute on the above terms; (vi) All pending chamber summonses and notices of motion stand disposed of. 20. The Corporation being aggrieved by the decision of the High Court on three issues as stated above, approached this Court by filing Special Leave Petition (Civil) No. 17009 of 2019. While issuing notice in the matter on 29.7.2019, by way of interim relief, it was directed: Pe....
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....an of Maharashtra Law Commission and Dr. Roshan Namavati, expert on valuation to make recommendation on the introduction and smooth implementation of capital value system. (Para 13, Pg 9 of consolidated counter affidavit on behalf of Respondents 2 to 4) 4. On 08.10.2010, the expert committee published draft Rules in various newspapers for comments of public at large (Pg 79 to 94 in Compilation of Corporation-Vol 4). The committee received 254 objections and suggestions all of which were considered and scrutinized by the committee. Thereafter, certain benevolent changes were made by the committee and draft Rules were recommended to the Corporation on 29.12.2010. (Para 14, Pg 10 of consolidated counter affidavit) 5. After the Rules were published, the Corporation appointed a chartered accountant firm to suggest a revenue neutral rate. Revenue neutral rate means such rate as would yield the same amount of property tax as being levied by the Corporation before introduction of capital value system. (Para 39, Pg 22 of consolidated counter affidavit) 6. Evidently, the rates can be determined only after capital value of all properties are calculated on memorandum basis. The work of f....
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.... of all these properties before 31st March 2011. As a result of this, the work of fixing capital value would continue during the year 2011-2012 also. Unless the capital value of all the properties is fixed and the total extent thereof is ascertained, it may not also be feasible. 11. Accordingly, by Maharashtra Ordinance No. X of 2011, the State Legislature expanded the scope of certain transitory provisions as contained in Sections 128, 140A, 154A and 219A of the Mumbai Municipal Corporation Act, 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 2010-11 and 2011-12. Further, with a view to prevent loss of revenue in respect of tax on properties which have escaped from assessment, a new Section 216B has also been inserted in the Act to enable the Corporation to assess such properties at any time within six years from the date on which such properties should have been assessed. (Statement of object and reasons on Pg 141 and 142 in Compilation of Corporation-Vol 4). The said ordinance culminated into Act No. XI of 2011 (Pg 143 to 148 in Compilation of Corporation-Vol 4). 1....
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....vened in the proceedings as well as filed substantial challenge in the form of Special leave Petition (Civil) No. 2568 of 2019 submitted that the property tax as a percentage of value was confiscatory and exorbitant. On facts it was stated that initially for a property situated in the city a property tax was to the tune of Rs. 6.29 crores per annum which had now risen to Rs. 17.78 crores showing an increase of 275 %. Reliance was placed on paragraph 34 of the decision of this Court in Patel Gordhandas Hargovindas and Ors. v. Municipal Commissioner, Ahmedabad and Anr. AIR 1963 SC 1742. It was further submitted that the impugned provisions suffered from excessive delegation which was without any guidelines and in any case could not be retrospective in operation. In support of the submission, reliance was placed on the decisions of this Court in Marathwada University v. Seshrao Balwant Rao Chavan (1989) 3 SCC 132, Delhi Race Club Limited v. Union of India and Ors. (2012) 8 SCC 680, Devi Das Gopal Krishnan etc. v. State of Punjab and Ors. AIR 1967 SC 1895 and Avinder Singh and Ors. v. State of Punjab and Ors (1979) 1 SCC 137. Learned Senior Counsel then submitted that the tax could b....
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....ned Counsel, the element of property tax under the new regime would be almost twenty times the rent and thus would be confiscatory. It was submitted that tax on lands and buildings must be directly on the land as a unit and must have a definite relationship with the land. The learned Counsel further submitted that the unit for calculation according to SDRR and the Capital Value Rules, was not the same. In one case, the reckonable unit was the built-up area while under the second, the reckonable unit was the carpet area. (E) Mr. Darius Khambata, learned Senior Advocate who appeared in I.A. No. 157014 of 2014 submitted that Rules 20, 21, 22 of the Capital Value Rules of 2010 and 2015 were rightly held to be ultra vires. It was further submitted that the factors delineated in Sub-clause (a) to (d) of Section 154(A) of the MMC Act would be matters "in praesenti" and not with regard to future prospects and that no reliance could be placed on Sub-clause (e) to introduce the concept of something "in futuro" i.e., the potential in the market or capital value. It was further submitted that there could be no retrospectivity to any delegated legislation when the parent Act did not give an....
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....e 243Y of the Constitution. It was observed: 14. Article 243I of the Constitution of India mandates constitution of a Finance Commission by the Governors of the States at the expiration of every 5th year. Article 243Y further mandates that the Finance Commission constituted Under Article 243I shall also review the financial position of the municipalities and make recommendations to the Governors as to the various aspects specified therein. As per Clause (2) of Article 243Y, the Governor shall cause every recommendation made by the Finance Commission under the said Article together with an explanatory memorandum as to the action taken thereon to be laid before the legislature of the State. 26. It is true that certain functions are entrusted to the Finance Commission and the recommendations made by the Finance Commission must carry great weightage. However, the matter has to be seen from the perspective: whether any "measures needed to improve the financial position of the municipalities" must necessarily emanate from the recommendations of the Finance Commission. Sub-article (2) contemplates that the recommendations made by the Finance Commission along with the explanatory memora....
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....cheme relating to property tax as is discernable from the provisions of the MMC Act. Section 139 deals with taxes including property taxes that can be imposed. Section 139A deals with the kinds of property taxes while Section 140 deals with the per centum of their rateable value or the capital value as the case may be. Section 140A enables the Corporation to adopt levy of property tax on the basis of Capital Value of buildings and lands and puts a cap in the proviso to Sub-section (1). Section 154 then deals with how rateable value and capital value are to be determined. Sub-section (1) deals with rateable value while Sub-section (1A), (1B) and (1C) deal with capital value. The first part of Section 154(1A) contemplates that the value indicated in the Stamp Duty Ready Reckoner for the time being in force, would be the "base value." According to the second part, if such ready reckoner value is not available, the market value can be taken into account while arriving at a base value. According to the provision, while fixing the capital value, the Commissioner "shall have regard" to the factors enumerated in Sub-clauses (a) to (e). Thus, the factors on the basis of which capital value ....
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....ercentage of capital value would still be illegal for the reason that the law provides that it should be levied on the annual value and not otherwise. By levying it otherwise directly at a percentage of the capital value, the real incidence of the rate is camouflaged, and the electorate not knowing the true incidence of the tax may possibly be subjected to such a heavy incidence as in some cases may amount to confiscatory taxation. We are therefore of opinion that fixing of the rate at a percentage of the capital value is not permitted by the Act and therefore Rule 350-A read with Rule 243 which permits this must be struck down, even though mathematically it may be possible to arrive at the same actual tax by varying percentages in the case of capital value and in the case of annual value... (emphasis supplied) (B) In Polychem Ltd. (1974) 2 SCC 198, a part of the land was being constructed upon while the rest was lying vacant. The Assessor divided the plot notionally into two parts-one, which was being built upon 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 a....
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....tegories. Therefore, all "land" must fall in one of these two categories for purposes of rating and not outside. (emphasis supplied) 33. Both the decisions were rendered in the regime when the property tax could be levied on rateable value. In the first decision, it was found that fixing of the rate at a percentage of the capital value was not a modality permitted by the Act and, therefore, Rules 350-A read with Rule 243, which permitted such exercise, were struck down. Therefore, to the extent the Rules went beyond the statutory import and extent, the transgression was not accepted by this Court. In the second decision, it was held that so long as the building was not completed and ready for occupation, the land in question for the purposes of rating must be equated with and treated as "vacant land". In the second decision, the construction was actually going on but the building was not ready. The conclusion from the second decision is quite clear that unless and until the building was 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 lon....
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....se value of open land with 1 (one) floor space index. However, the open land in question may be capable of utilizing more than 1 (one) floor space index, for instance in certain areas the floor space index may be 1.5 or 2. Such component i.e. the capability of the land in question in utilizing more then 1 (one) floor space index is a postulate which is sought to be reckoned by Rule 20. The second component to be added in terms of Rule 20 is the intended or proposed utilization of Transfer of Development right which has been approved under the building plan submitted for approval. Nonetheless, this component is the intended use or exploitation in future and not something which is available in praesenti. 38. To the extent Rule 20 of the Capital Value Rules of 2010 and the Capital Value Rules of 2015 empower the Commissioner to consider the capability of the open land of utilizing more than 1 floor space index (FSI) or any transfer of development right (TDR), would go well beyond 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 Capi....