JUDGMENT
R.L. Anand, J.
1. Sarvshri R.P. Mayor, Partap Mayor and Dev Kishan Mayor petitioners have filed the present writ petition under Articles 226/227 of the Constitution of India, against the Municipal Corporation of Jalandhar, through its Commissioner, and the Commissioner, Jalandhar Division, Jalandhar, praying for the issuance of a writ of certiorari or any other writ or direction, quashing the notice dated 2nd August, 1976 (Annexure P-1) and the orders dated 21st February, 1979 (Annexure P-5) and 30th April, 1980 (Annexure P-7) passed by the Commissioner, Municipal Corporation, Jalandhar, and the Commissioner, Jalandhar Division, Jalandhar respondents Nos. 1 and 2, respectively.
2. It has been averred by the petitioners that they are the owners of the property No. BIY/1-1552 situated at Ladhowali Road, Jalandhar. The Municipal Corporation, Jalandhar, vide order Annexure P-5 fixed the House Tax on the basis of per square feet upon the value of the land. Upto the year 1974-75 the property referred to above was being assessed to House Tax at the annual rental value of Rs. 2160/- per annum. The Municipal Corporation, Jalandhar, sent a notice dated 2.8.1975 under Section 67(1) of the Punjab Municipal Act, 1911 (for short ‘the Act’) proposing an enhanced annual rental value of Rs. 2160/- to Rs. 38,263/-. On the receipt of this notice (Annexure P-1) the petitioners filed objections before the Secretary, Municipal Committee, Jalandhar, on 23.8.1976 (Annexure P-2). These objections did not find favour of the Sub-Committee of the Municipal Committee which heard the objections on 1.12.1976 and it was stated in Annexure P-3 dated 1.12.1976 that the petitioners had made some additions. The Sub-Committee increased the annual rent value under Section 3(1)(c) of the Act at Rs. 31,114/- with effect from 1.4.1976. The petitioners filed appeal before the Deputy Commissioner, Jalandhar, under Section 84 of the Act (Annexure P-4). The appeal came up for hearing before the Deputy Commissioner on 3.5.1978 and the case was remanded with orders for fresh assessment. In the meanwhile the Punjab Municipal Corporation Act came into operation and the appeal was heard by the Commissioner, as provided under the said Act. Before the Commissioner, the petitioners filed valuation certificate and it was pleaded that there was no justification for addition to the annual rental value, which was quite fairly determined at Rs. 2,160/-. However, the Commissioner did not find favour with the objections and arbitrarily increased the annual rental value to Rs. 31,114/- by adopting the formula that the value of the land was Rs. 2,000/- per Maria. The cost was determined at the rate of Rs. 1.5/- per sq. ft. for the Tin construction, Rs. 20/- for the Bala and Wood Construction, and Rs. 25/- for the lintal construction. It has been averred by the petitioners that the method of valuation adopted by the Commissioner (respondent No. 1) is totally against the recognised’ methods. The petitioner filed an appeal under Section 146 of the Punjab Municipal Corporation Act and again repeated that no addition or alterations had been made on the property in dispute from the date of its construction and even after the assessment year 1974-75. The appeal came up for hearing before respondent No. 2, i.e., the Commissioner, Jalandhar Division, Jalandhar, and vide order dated 30.4.1980 respondent No. 2 dismissed the appeal and maintained the order passed by respondent No. 1. The order of the Commissioner, Jalandhar Division is Annexure P-7. Respondent No. 2 held that the previous order for the assessment year 1974-75 was based upon a wrong presumption that the area of the property in dispute was 4 kanals only whereas the building was found to be on a land measuring 7 Kanals 3 Maria. It was also held that the building was not rented out and was occupied by the landowner himself and, therefore, the annual rental value was to be assessed under Section 3(1) (c) and the amount to be determined under Section
3. Now, the challenge has been given to the impugned orders on the plea that the property was being assessed in the assessment year 1974-75, treating it as 4 Kanals. There was no evidence on the part of the authorities to hold that the area was 7 Kanals and 3 Marias. No spot measurements were taken by the authorities. The mode of assessment, according to the petitioners, was wrong and against the recognised principles. Hence, the present writ petition.
4. Notice of the writ petition was given to the respondents. Written statement has been filed on behalf of respondent No. 1, which has taken preliminary objection, stating that the assessment in regard to the property in question right from the year 1955 for the purpose of property tax was made under Section 3(1) (c) of the Act, which assessment was modified because of additional alterations and the annual rental value was raised to Rs. 2160/- vide order dated 12.7.1975, and there was no objection, whatsoever, filed by the petitioners either in regard to the mode of assessment or in regard to the provisions of the Act. Now the petitioners after a lapse of 25 years have challenged the mode of assessment. The present assessment has also been made under Section 3(1) (c) of the Act as the property in question was not let out for rent and it was not possible to assess the annual rental value of property in question except under Section 3(1)(c) of the Act. Previously, in the year 1955 the Committee had assessed the area to be 4 Kanals. It was a mistake on record. The Committee had to issue another notice under Section 67 of the Act for revising the assessment for the reasons that the area had increased from 4 kanals to 7 kanals 3 marlas. This fact is also admitted by the petitioners in the valuation reports submitted by them. In addition to the above in the valuation report itself the covered area on the ground floor has been admitted to be 23,697 sq. ft. and on the first floor 45 sq. ft. Thus the total area comes to 23,742/- sq. ft. The assessment has been made keeping in view the annual rental value of the site and the building in question in view of the increased commercial importance. The market value of the land has only been fixed at Rs. 2000/- per Maria, i.e. Rs. 40,000/- per Kanal, whereas the market value on the spot at the relevant time was Rs. 1,00,000/- per Kanal. Further, it has been averred in the written statement that the Commissioner in his order has correctly taken it into consideration by adopting a yardstick as to the cost of the building. On merits the stand of respondent No. 1 is that House Tax has been imposed on the basis of estimated cost of building after going into the various aspects of the price of the land, addition of the building and the covered area. The earlier assessment upto the year 1974-75 was on the mistaken fact of the area involved. On the spot and as admitted by the petitioners, the area is 7 kanals 3 marlas, whereas in the earlier assessment the land was considered by mistake as 4 Kanals only. It was found later on that there were other additions and alterations and increase in the land to 7 Kanals 3 marlas and, therefore, fresh notice was necessitated. While justifying the impugned orders, it has been prayed by respondent No. 1 for the dismissal of the writ petition.
5. The parties have also placed certain annexures on the file in support of their case.
6. I have heard Shri Vivek Bhandari, Advocate, on behalf of the writ petitioners, and Mrs. Surjit Bindra, Advocate, on behalf of the respondents and with their assistance have gone through the record of this case.
7. Two points for consideration have arisen in the present writ petition first with regard to the justification by the respondent-authorities to issue notice under Section 67 of the Punjab Municipal Corporation Act, and the second point is whether the mode of assessment made by the respondent-authorities had been correctly adopted or not.
8. So far as the first point is concerned, it has to be answered against the writ petitioners because it has been established on the record that after the assessment made in the year 1974-75 more area is involved. Earlier assessment was based as if the land underneath the building was 4 Kanals only, whereas the existing area is 7 Kanals and 3 Marias. Since, it was a mistake apparent on the face of it, hence the Committee was justified in issuing the notice.
9. On second point the answer of this Court is against the respondent-authorities and in favour of the petitioners. Section 3(1) of the Punjab Municipal Act, 1911 defines the ‘annual value’, which means as follows :-
“(a) in the case of land, the gross annual rent at which it may reasonably be expected to let from year to year :
Provided that in the case of land assessed to land-revenue or of which the land-revenue has been wholly or in part released compounded for, redeemed or assigned, the annual value, shall if, the State Government so direct, be deemed to be double the aggregate of the following amount namely :-
(i) the amount of the land-revenue for the time being assessed on the land, whether such assessment is leviable or not; or when the land-revenue has been wholly or in part compounded for or redeemed, the amount which but for such composition, or redumption would have been leviable and
(ii) when the improvement of the land due to canal irrigation has been excluded from account in assessing the land-revenue, the amount of owner’s rate or water advantage rate or other rate imposed in respect of such improvement;
(b) in the case of any house or building, the gross annual rent at which such house or building together with its appurtenances and any furniture that may be let for use or enjoyment therewith, may reasonably be expected to let from year to year subject to the following deductions :
(i) such deduction not exceeding 20 per cent of the gross annual rent as the committee in each particular case may consider a reasonable allowance on account of the future let therewith;
(ii) a deduction of 10 per cent for the cost of repairs and for all other expenses necessary to maintain the building in a state to command such gross annual rent. The deduction under sub-clause shall be calculated on the balance of the gross annual rent after the deduction (if any) under sub-clause (i);
(iii) where land is let with a building such deduction, not exceeding 20 per cent of the gross annual rent, as the committee in each particular case may consider reasonable on account of the actual expenditures, if any, annually incurred by the owner on the upkeep of the land in a state to command such gross annual rent;
Explanation I.- For the purpose of this clause it is immaterial whether the house or building, and the furniture and the land let for use or enjoyment therewith, are let by the same contract or by different contracts and if by different, contracts whether such contracts are made simultaneously or at different times.
Explanation II.- The term “gross annual rent” shall not include any tax payable by the owner in respect of which the owner and tenant have agreed that it shall be paid by the tenant.
(c) in the case of any house building, the gross annual rent of which cannot be determined under clause (b), 5 per cent on the sum obtained by adding the estimated present cost of erecting the building, less such amount as the committee may deem reasonable to be deducted on account of depreciation (if any) to the estimated market value of the site and any land attached to the house or building :
Provided that –
(i) in the calculation of the annual value of any premises no account shall be taken of any machinery thereon;
(ii) when a building is occupied by the owner under such exceptional circumstances as to render a valuation at 5 per cent on the cost of erecting the building, less depreciation, excessive, a lower percentage may be taken.”
It is the common case of the parties that the property regarding which the assessment is in dispute is in the self occupation of the petitioner and at no point of time it was given on rent. A perusal of the above provision would show that in the case of a land the gross annual rent at which it may be reasonably be expected to let from year to year is to be considered as its annual value. In the case of any house or building the gross annual rent at which such house or building, together with its appurtenance and any furniture that may be let for use or enjoyment therewith, may reasonably be expected to let from year to year subject to some deductions. The authorities were supposed to assess the annual value of the building in question according to clauses (a) and (b) of sub-section (1) of Section 3 of the Punjab Municipal Act, but in the present case it has been assessed according to Section 3(1)(c) thereof by taking into consideration the cost of the building depending upon its construction and the cost of the land. The mode of calculation in the annual value came for consideration before the Hon’ble Supreme Court in New Delhi Municipal Committee v. M.N. Soi and Anr., A.I.R. 1977 S.C. 302, and it was held while interpreting the provisions of section 3(1)(b) of the Act that the Assessing Authorities are obliged not to assess at a higher rental value than the standard rent fixed under the Rent Control legislation. In The British India Corporation v. The Deputy Commissioner, Gurdaspur and Anr., (1969)71 P.L.R. 554, it was held that in cases where fair rent has been fixed by the Rent Controller under Section 4 of the East Punjab Urban Rent Restriction Act, the Municipal Committee is barred from making an assessment on the basis of any other annual rent than the one fixed by the Rent Controller. The mere fact that fair rent has not been fixed in a particular case should make no difference in determining the reasonable letting value of a house or building. The assessing authority can and should have before him the same criteria as the Rent Controller would have in order to determine the fair rent which alone will be the basis of the annual rental value for which a landlord can reasonably be expected to let the building concerned. The reasonable “Letting value” under the Municipal Act is not to be determined by the theory of supply and demand and what a willing prospective lessee is prepared to pay in respect of the building concerned irrespective of the prevailing law relating to rent control. The annual rent at which a building or a house may be let for year to year cannot be assessed by the assessing authority under the Municipal Act at an amount higher than what is or will be the fair rent of the same whether it has been determined or not by the Rent Controller acting under the Rent Control Act. The assessing authority has to make an assessment of the annual rent in accordance with the provisions of the Rent Control Act keeping in view the criteria laid down therein for determining the fair rent. The ratio of this authority will help me to decide the present controversy. The shelter taken by the respondent-authorities of Section 3(1)(c) of the Act is not open to them. There is no finding given by the Commissioner, Municipal Corporation or by the Commissioner, Jalandhar Division, that with regard to the property in dispute the annual value could not be determined under clause (b). Rather the annual value could be easily determined by adopting the criteria as laid down under Section 3(1)(a) and Section 3(1)(b) of the Punjab Municipal Act, and by not adopting this criteria certainly an illegality has been committed by the respondent-authorities in passing the impugned orders.
10. In Devan Daulat Rai Kapoor etc. v. New Delhi Municipal Committee and Anr., etc., A.I.R. 1980 S.C. 541, it was held as follows :-
“According to the definition occurring in Section 3(1)(b) of the Punjab Municipal Act (3 of 1911) ‘annual value’ of a building would be the gross annual rent at which the building may reasonably be expected to let from year to year. It is obvious from this definition that unlike the English Law where the value of occupation by a tenant is the criterion for fixing annual value of the building for rating purposes, here it is the value of the property to the owner which is taken as the standard for making assessment of annual value. The criterion is the rent realisable by the landlord and not the value of the holding in the hands of the tenant. The rent which the landlord might realise if the building were let is made the basis for fixing the annual value of the building. What the landlord might reasonably expect to get from a hypothetical tenant, if the building were let from year to year, affords the statutory yardstick for determining the annual value. There would ordinarily be in a free market close approximation between the actual rent, received by the landlord and the rent which he might reasonably expect to receive from hypothetical tenant. But where the rent of the building is subject to rent control legislation, this approximation may and often does get displaced.
Where a building is governed by the provisions of Rent Control Legislation the landlord cannot reasonably be expected to receive anything more than the standard rent from a hypothetical tenant and the annual value of the building cannot therefore exceed the standard rent. Even in case of a building in respect of which no standard rent has been fixed within the prescribed period of limitation and thus the tenant is precluded from making an application for fixation of standard rent with the result that landlord is lawfully entitled to continue to receive the contractual rent, the annual value must be limited to the measure of standard rent determinable under the Rent Act and cannot be determined on the basis of the higher rent actually received by the landlord from the tenant. Even if the standard rent has not been fixed by the Controller, the landlord cannot reasonably expect to receive from a hypothetical tenant anything more than the standard rent determinable under the Act and this would be so equally whether the building has been let out to a tenant who has lost his right to apply for fixation of the standard rent or the building is self-occupied by the owner. The assessing authority would, in either case, have to arrive at its own figure of the standard rent by applying principles laid down in the Delhi Rent Control Act, 1958, for determination of standard rent and determine the annual value of the building on the basis of such figure of standard rent.”
11. The ratio of this authority is also helpful to me as the present controversy is squarely covered in the light of the citations referred to above. The counsel for the petitioners has also invited my attention to Vijay Kumar Dogra v. M.C. Ludhiana, 1986 LRS (Pb.) 663. It was held in this authority that while determining the annual value, the annual letting value of the building is to be determined on the basis of the fair rent for these buildings under the East Punjab Urban Rent Restriction Act. In case of a building governed by the East Punjab Urban Rent Restriction Act, 1949, the annual value of the building must be limited to the fair rent determinable under that Act. To this effect is also the authority reported as Kasturba Sewa Mandir Rajpura Distt. Patiala v. The Municipal Committee, Rajpura and Ors., 1986 LRS (Pb.) 536. The mode of assessment by the authorities by taking into consideration the value of the land, the nature of the construction was not in accordance with the provisions of the Rent Restriction Act and, therefore, the impugned orders are liable to be quashed.
12. Resultantly, the present writ petition is allowed. The orders Annexures P5 and P7 are hereby quashed along with the notice Annexure P-1 and directions are given to the Municipal Authorities to re-assess the annual value taking into consideration the guidelines-given above. The authorities would be at liberty to re-determine the area of the property, as held above. There shall be no order as to costs.