JUDGMENT
D.P. Wadhwa, J.
(1) By this petition filed under Article 226 of the Constitution, the petitioners mainly seek the following reliefs:-
1.Writ in the nature of certiorari quashing the notices issued by the Municipal Corporation of Delhi (‘MCD’ for short) under section 126 of the Delhi Municipal Corporation Act, 1957 (for short ‘DMC Act’) and those issued by the New Delhi Municipal Committee (‘NDMC’ for short) under section 67 of the Punjab Municipal Act (‘PM Act’ for short) as extended to Delhi, on the properties situated within their respective areas;
2.A writ in the nature of direction or order declaring that the words “be precluded from objecting to any assessment made by the Commissioner in respect of such land or building of which he is the owner or occupier” appearinginsub-section(3)ofsection 131 of the Dmc Act are unconstitutional, arbitrary and against the principles of natural justice; and
3.A writ in the nature of mandamus directing the municipal authorities (MCD and NDMC) to continue to determine the rateable value of the properties of the members of the first petitioner society and other petitioners on the basis of reasonable letting value as provided under sub-section ( 1 ) of section 116 of the Dmc Act and section 3(1) (b)(c) of the Pm Act and in terms of the judgments of the Supreme Court in Dewan Daulat Raj Kapoor’s case andDr.BalbirSingh’scase .
(2) All these challenges, in effect, have been made to contend that amendment made in 1988 to the Delhi Rent Control Act has no bearing for arriving at the rateable value/ annual value of the properties as he thertofore done and principles laid down by the two judgments of the Supreme Court continue to be applicable.
(3) A subsidiary point has also been raised that if the assessment of the property tax is to be made on the basis of actual rent received then the relevant provisions under the Dmc Act and Pm Act would be unconstitutional as that would amount to tax on the income which has to be distributed among the States as per provisions of the Constitution. It is, thus, contended that legislature cannot introduce a parallel income-tax in the garb of property tax.
(4) The petition was filed by eight petitioners. Firstpetitioner,as the name suggests, is the Cooperative Society performing its functions under the Delhi Cooperative Societies Act, 1972. Seven other petitioners are owners of properties all situated in the cottony Vasant Vihar which had been developed by the first petitioner society. There are six respondents. First respondent is the Union of India through the Secretary in the Ministry of Home Affairs; second is the Lt. Governor of Delhi; third is Delhi Administration through its Chief Secretary; fourth is the MCD; fifth is the Assessor & Collector of the MCD; and sixth is the Administrator, NDMC.
(5) This petition wasfiledon21 August 1991. Along with this anapplication(C.M. 4422/91 ) was also filed seeking a restraint on the Mcd and Ndmc from proceeding with the notices under sections 126 and 131 of the Dmc Act and 67 of the Pm Act to enhance the rateable value of the properties in their respective jurisdictional areas in pursuance of the amendment to Delhi Rent Control Act. Then an application (CM 3041 /92) was filed by Common Cause through its Director, Mr. H.D. Shourie, seeking to be imp leaded as a party to the writ petition. This was allowed by orderdated29May 1992. On 11 May 1992 petitioners filed yet another application (CM 3558/92) for stay of notices issued by the Mcd and Ndmc under aforesaid provisions of the two Acts for the year commending from I April 1988. On this, while issuing notice the court passed an order that no coercive steps in the meanwhile be taken to realise tax from the petitioners in excess of the admitted amount which was being paid by the petitioners earlier to the issue of the notices. On 20 August 1992, 105 applicants filed an application (CM 5487/92) also seeking to be imp leaded as petitioners. With this these applicants also sought stay of the noties. By order dated 24 August 1992 earlier order dated 29 May 1992 was also extended to these applicants. Yet another 19 applicants moved a joint application (CM 7319/92) on 21October 1992 again to be imp leaded as petitioners and with that also sought interim orders. Again the benefit of interim orders made earlier were extended to them as well. Yet again 7 applicants filed a joint application (CM 7666/92) on I December 1992 to be imp leaded as petitioners and interim orders were also made applicable to them as well. There were two more applications (C.Ms. 5487/92 and 5486/92) filed under Order I Rule10 and section. 151 of the Code and for seeking of stay against an order passed after notice under section 126 of the Dmc Act in the case of one Mr. M.C. Maniktala wherein also this Court stayed the recovery of tax saying that no coercive steps be taken. If we see the amended memo of parties names there would be as many as 139 petitioners in this case. There is however, no order of the court allowing any of the applications for addition of parties. Then on 25 January 1993 Mcd filed an application (CM 792/93) praying for vacation of the order dated 29 May 1992 and seeking certain clarifications. Mcd sought clarification that the order dated 29 May 1992 would not come in the way of the Mcd from seeking information from the tax payers under section 131 of the Act and that in the absence of any such information being given by the tax payers Mcd would be entitled to finalise the assessment ex parte and the tax payers in that eventuality would be prohibited from challenging the assessments.
(6) Along with the petition, the petitioners also filed an application (CM 4423/91) under order I Rules 8 and 8A and section 151 of the Code of Civil Procedure to treat the present petition as a public interest litigation and also as a representative writ petition representing the members of the first petitioner society. No orders have been passed on this application. It would not be maintainable in view of the judgment of this Court in Common Cause v. Commissioner, M.C.D. and another where this Court following its earlier decision in Common Cause v. Assessor & Collector, Mcd, and others (CWP No. 2001/88) held that judicial and quasi judicial matters should not be challenged by Way of public interest litigation in a writ petition. After this judgment in Common Cause case which was delivered on 17July 1991 this petition was instituted on August 19, 1991.
(7) We would have thought with the two judgments of this Court in Common Cause v. Commissioner, M.C.D. and another, 1991 (3) Delhi Lawyer 118, and Delhi Paints and Chemicals v. N.D.M.C. and another,1993 (25) Drj 561 1993 (2) Delhi Lawyer 18, it would be quite clear as to what were the effects of amendment to the Delhi Rent Control Act (for short ‘DRC Act’) vis-a-vis arriving at the rateable value of the properties in Delhi for the purpose of levy of property tax. There is, however, no end to controversy, and again arguments in detail have been addressed on the plea that various observations in the two judgments of the Supreme Court in Dewan Daulat Rai Kapoor’s case and Dr.Balbir Singh’s case were not brought to the notice of this Court and also certain other material not referred to while giving the two judgments of this Court mentioned above. Various portions of the judgments of the Supreme Court in Dewan Dault Rai Kapoor and Dr. Balbir Singh’s cases have been read and re-read to us. It is true that in our judgment in Delhi Paints and Chemicals case we did not reproduce the observations of the Supreme Court in these two cases in extenso, but that was perhaps not necessary and on that basis it could not be said that we have not gone through these two judgments of the Supreme Court in fuller detail or examined the same in their proper perspective.
(8) Let us set out the relevant provisions on which arguments had been addressed. .DELHI Municipal Corporation Act, 1957:Section 113. Taxes to be imposed by the Corporation under this Act:-
(1)THECorporationshall,forthepurposesofthis Act, levy the following taxes, namely:-
(A)property taxes; xx xx xx xx
(2)In addition to….
(3)The taxes specified in sub-section (1) and sub-section (2) shall be levied, assessed and collected in accordance with the provisions of this Act and the bye-laws made there under.
SEC.114. Components and rates of property taxes,
(1)Save as otherwise provided in this Act, the property taxes shall be levied on lands and buildings in Delhi and shall consist of the following, namely:- xx xx xx
(D)a general tax –
(I)of not less than and not more than thirty per cent of the readable value of lands and buildings within the urban areas, and
(II)on lands and buildings within the rural areas at such lower rates and with effect from such date as may be determined by the Corporation: Provided that……
PROVIDED further that the general tax may be levied on a graduated scale, if the Corporation so determines.
EXPLANATION-Where any portion of a land or building is liable to a higher rate of the general tax such portion shall be deemed to be a separate property for the purpose of municipal taxation.
(2)The Corporation may exempt from the general tax lands and buildings of which the rateable value does not exceed one hundred rupees.
SEC.116. Determination of rateable value of lands and buildings assessable to property taxes
(1)The rateable value of any land or building assessable to property taxes shall be the annual rent at which such land or building might reasonable by expected to let from year to year less –
(A)a sum equal to ten per cent, of the said annual rent which shall be in lieu of all allowances for costs of repairs and insurance, and other expenses, if any, necessary to maintain the land or building in a state to command that rent, and
(B)the water tax or the scavenging tax or both, if the rent is inclusive of either or both of the said taxes: Provided that if the rent is inclusive of charges for water supplied by measurement, then, for the purpose of this section the rent shall be treated as inclusive of water tax on rateable value and the deduction of the water tax shall be made as provided therein: Provided further that in respect of any land, or building the standard rent of which has been fixed under the Delhi and Ajmer Rent Control Act, 1952 (38 of 1952), the rateable value thereof shall not exceed the annual amount of the standard rent so fixed.
(2)The rateable value of any land which is not built upon but is capable of being built upon and of any land on which a building is in process of erection shall be fixed at five percent of the estimated capital value of such land.
(3)All plant and machinery contained or situate in or upon any land or building and belonging to any of the classes specified from time to time by public notice by the Commissioner with the approval of the Standing Committee, shall be deemed to form part of such land or building for the purpose of determining the rateable value thereof under sub-section (1) but save as aforesaid no account shall be taken of the value of any plant or machinery contained or situated in or upon any such land or building.
124.Assessment List
(1)Save as otherwise provided in this Act, the Corporation shall cause an assessment list of all lands and buildings in Delhi to be prepared in such form and manner and containing such particulars with respect to each land and building as may be prescribed by bye-laws.
(2)When the assessment list has been prepared the Commissioner shall give public notice thereof and of the place where the list or a copy thereof may be inspected, and every person claiming to be the owner, lessee or occupier of any land or building included in the list and any authorised agent of such person, shall be at liberty to inspect the list and to take extracts there from free of charge.
(3)The Commissioner shall, at the same time, give public notice of a date, not less than one month thereafter, when he will proceed to consider the rateable values of lands and buildings entered in the assessment list; and in all cases in which any land or building is for the first time assessed, or the readable value of any land or building is increased, he shall also give written notice thereof to the owner or to any lessee or occupier of the land or building.
(4)Any objection to a rateable value or any other matter as entered in the assessment list shall be made in writing to the Commissioner before the date fixed in the notice and shall state in what respect the rateable value, or other matter is disputed, and all objections so made shall be recorded in a register to be kept for the purpose.
(5)The objections shall be inquired into and investigated, and the persons making them shall be allowed an opportunity of being heard either in person or by authorised agent, by the Commissioner or by any officer of the Corporation authorised in this behalf by the Commissioner.
(6)When all objections have been disposed of, and the revision of the rateable value has been completed, the assessment list shall be authenticated by the signature of the Commissioner or, as the case may be, the officer authorised by him in this behalf, who shall certify that except in the cases, if any, in which amendments have been made as shown therein no valid objection has been made to the rateable values or any other matters entered in the said lid.
(7)The assessment list so authenticated shall be deposited in the office of the Corporation and shall be open, free of charge during office hours to all owners, lessees and occupiers of lands and buildings comprised therein or the authorised agents of such persons, and a public notice that it is so open shall forthwith be published.
SEC.126. Amendment of assessment list
(II)The Commissioner may, at any time, amend the assessment list- xx xx xx
(D)by increasing or reducing for adequate reasons the amount of any rateable value and of the assessment thereupon; or xx xx xx
(G)by inserting or altering an entry in respect of any building erected, re-erected, altered or added to, after the preparation of the assessment list:
PROVIDED that no person shall by reason of any such amendment become liable to pay any tax or increase of tax in respect of any period prior to the commencement of the year [in which the notice under sub-section (2) is given.]
(2)Before making any amendment under sub-section (1) the Commissioner shall give to any person affected by the amendment, notice Of not less than one month that he proposes to make the amendment and consider any objections which may be made by such person.
[(3)Notwithstanding anything contained in the proviso to sub-section (1) and sub-section (2) before making any amendment to the assessment list for the years commencing ** commencing on the 1st day of April, ‘ 1988, the 1st day of April. 1989 and the 1st day of April, 1990undersub- section (1), the Commissioner shall give to any person affected by the amendment, notice of not less than one month at any time before the 1st day of April 1992,] that he proposes to make the amendment and consider any objections which may be made by such person.
(4)No amendment under sub-section (1) shall be made in the assessment list in relation to –
(A)any year prior to the year commencing on the 1st day of April, 1988 after the 31 st day of March, 1991;
(B)the year commencing on the 1st day of April 1988, or any other year thereafter, after the expiry of three years from the end of the year in which the notice is given under sub-section (2) or sub-section (3), as the case may be: Provided that nothing contained in this sub-section shall apply to a case where the Commissioner has to amend the assessment list in consequence of or to give effect to any direction or order of any court.
EXPLANATION- In computing the period referred to in clause (a) or (b) any period or periods during which the proceedings for the assessment were held up on account of any stay or injunction by the order of any court, or the period of any delay attributable to the person to whom the notice has been given under sub-section (2) or sub-section (3), as the case may be, shall be excluded.]
SEC.129. Notice of erection of building, etc. When any new building is erected or when any building is rebuilt or enlarged or when any building which has been vacant is reoccupied, the person primarily liable for the property taxes assessed on the building shall give notice thereof in writing to the Commissioner within Fifteen days from the date of its competition or occupation which ever first occurs or as the case maybe, from the date of its enlargement or re-occupation; and property taxes shall be assessable on the building from the said date. Section 131. Power of Commissioner to call for information and returns and to enter and inspect premises
(1)To enable him to determine the rateable value of any land or building and the person primarily liable for the payment of any property taxes leviable in respect thereof, the Commissioner may require the owner or occupier of such land or building, or of any portion thereof to furnish him within such reasonable period as the Commissioner fixes in this behalf, with information or with a written return signed by such occupier or occupier –
(A)as to the name and place of residence of the owner or occupier, or of both the owner and occupier of such land or buildings;
(B)as to the measurements or dimensions of such land or building or of any portion thereof and the rent, if any, obtained for such land or building or any portion thereof; and
(C)as to the actual cost or other specified details connected with the determination of the value of such land or building.
(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)Whoever omits to comply with any such requisition or fails to give true information or to make a true return to the best of his knowledge or belief, shall, in addition to any penalty to which he may be liable, be precluded from objecting to any assessment made by the Commission in respect of such land or building of which he is the owner or occupier. Delhi Rent Control Act, 1958:
SEC.1. Short title, extent and commencement. – (1)…….. (2) It extends to the areas included within the limits of the New Delhi Municipal Committee and the Delhi Cantonment Board and to such urban areas within the limits of the Municipal Corporation of Delhi as are specified in the First Schedule: Provided that the Central Government may, by notification in the Official Gazette, extend this Act or any provision thereof, to -any other urban area included within the limits of the Municipal Corporation of Delhi or exclude any area from the operation of this Act or any provision thereof. xx xx xx Section 2. Definitions. – In this Act, unless the context otherwise requires – xx xx xx (k) “standard rent”, in relation to any premises, means the standard rent referred to in Section 6 or where the standard rent has been increased under Section 7, such increased rent; xx xx xx Sec.3. Act not to apply to certain premises. – Nothing in this Act shall apply; xx xx xx (c) to any premises, whether residential or not, whose monthly rent exceeds three thousand and five hundred rupees; or (d) to any premises constructed on or after the commencement of the Delhi Rent Control (Amendment) Act, 1988, for a period of ten years from the date of completion of such construction, [inserted by Amendment Act of 1988] Section 6-A. Revision of rent. – Notwithstanding anything contained in this Act, the standard rent, or, where no standard rent is fixed under the provisions of this Act in respect of any premises, the rent agreed upon between the landlord and the tenant, may be increased by ten per cent every three years, [inserted by Amendment Act of 1988] The Punjab Municipal Act, 1911: Section 3- Definitions – In this Act, unless there is something repugnant in the subject or context, – (1) “annual value” means – xx xx xx (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 furniture 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 this 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 expenditure, 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 purposes 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 or 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 therein; (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, a lower percentage may be taken. 67A. Time limit for issuing notices for further amendment of assessment
(9) Chapter V of the Pm Act deals with taxation and sections 67 to 68 deal with procedure for assessing any property. Section 67A was inserted .w.e.f. 1 April 1988.
(10) After the amendments to the Delhi Rent Control Act, Dmc Act and Pm Act as applicable to Delhi, the municipal authorities, namely, Mcd and Ndmc, issued notices for revision of rateable value, or annual value, as the case may be, to various persons including the petitioners liable to pay property taxes.
(11) After examining these various provisions, this Court in two judgments in the cases of Common Cause and Delhi Paints and Chemicals held as under :-
(1)That the concept of standard rent as the reasonable rent as understood earlier was no longer applicable to the premises falling under clauses (c) and (d) of section 3 of the Drc Act.
(2)In the two Supreme Court cases mentioned above it was held with reference to section 3( I )(b) of the Pm Act that where the building was subject to rent control legislation annual value could not exceed the standard rent. Even where the standard rent had not been Fixed under the provisions of the Drc Act the assessing authority would nevertheless have to arrive at its own figure of standard rent by applying the principles laid down in the Drc Act for determination of standard rent and determining the annual value of the building on the basis of such figure of standard rent. With reference to section 116 of the Mcd Act the court held that standard rent chargeable was the upper limit though the agreed rent could even be less than the standard rent.
(3)This Court in Delhi Paints and Chemicals case after examining the relevant provisions of the Pm Act and the two judgments of the Supreme Court said as under:-
“CLAUSE(k) of section 2 of Drc Act defines ‘standard rent’ which, in relation to any premises, means the standard rent referred to in section 6 or where the standard rent had been increased under section 7, such increased rent. Section 6 of this Act provides for fixation of standard rent of the premises, both residential and non-residential. Section 9 of this Act provides as to how the Rent Controller under this Act is to fix the standard rent, etc., and under sub-section (4) of section 9 where for any reason it is not possible to determine the standard rent of any premises on the principles set forth under section 6, the Rent Controller may fix such rent as would be reasonable having regard to the situation, locality and condition of the premises and the amenities provided therein and where there are similar or nearly similar premises in the locality, having regard also to the standard rent payable in respect of such premises. Under section 5 of the Drc Act, subject to certain provisions of this Act, no person shall claim or receive any rent in excess of the standard rent, notwithstanding any agreement to the contrary. Section 3 of the Drc Act before its amendment specified the premises to which this Act was not applicable. Clauses (c) and (d) were added by the Amendment Act of 1988 which are relevant for our purposes and may be set out as under:- (c) to any premies, whether residential or not, whose monthly rent exceeds three thousand and five hundred rupees; or (d) to any premises constructed on or after the commencement of the Delhi Rent Control (Amendment) Act, 1988, for a period often years from the date of completion of such construction.
(12) We are concerned here with addition of clause (c). Thus, nothing in the Drc Act shall apply to any premises, whether residential or not, whose monthly rent exceeds three thousand and five hundred rupees. This clause (c) envisages actual letting and Drc Act would not apply to the premises which have been let out for a monthly rent exceeding Rs.3,500.00 . This clause does not talk of any notional monthly rent. It has to be actual monthly rent when there is letting. When there is no letting the question of monthly rent exceeding Rs.3,500.00 would notarise. In that case provisions of sections 6,7 and 9(4) of the Drc Act would continue to apply, and so also the principles laid down in the aforesaid two decisions of the Supreme Court in Daulat Rai Kapoor and Dr. Balbir Singh cases. Section 6-A was inserted in the Drc Act by the Amendment Act of 1988. This section 6- A is as under :- “REVISION of rent. – Notwithstanding anything contained in this Act, the standard rent, or, where no standard rent is fixed under the provisions of this Act in respect of any premises, the rent agreed upon between the landlord and the tenant, may be increased by ten per cent every three years. ” This section 6-A-A will also not apply where there has been no letting. Where premises which are self occupied concept of any monthly rent cannot be introduced and for arriving at annual value as defined in the Act one has to fall back on the provisions of the Drc Act as amended and the principles as laid down by the Supreme Court. Where, however, there is actual letting those premises are taken out of the purview of the Drc Act as in the present case. If so, section 6-A of the Drc Act can also not apply. N.D.M.C. on the one hand says that Drc Act as amended is not applicable, yet it is invoking the provisions of section 6-A of this Act which is impermissible. Addition of the annual value on the basis of section 6-A of the Drc Act has, therefore, to be struck down. N.D.M.C. cannot demand 10% increase in rent under the provisions of section 6-A-A of the Drc Act. We cannot agree with interpretation put by the petitioner that irrespective of the fact that Drc Act is not applicable to the premises in question the annual value has to be arrived at on the basis of the provisions of the Drc Act and the principles laid down by the Supreme Court. We also cannot accept the other contention of the petitioner that since the flat in question was in existence prior to coming into force the amended Drc Act, the annual value would continue to be the same and that the amended Act is prospective in nature meaning thereby it would apply to the properties constructed after 1 December 1988″ (4) In the case of Common Cause v. Commissioner, Mcd and another this Court observed as under:- “The Delhi Rent Control Act, 1958, was amended by the Amending Act, 57 of 1988. Clause (c) of Section 3 of this Act as amended states that nothing in this Act, shall apply to any premises, whether residential or not, whose monthly rent exceeds three thousand and five hundred rupees. The concept of standard rent as he theretofore understood under 156 the Delhi Rent Control Act is, therefore, no longer applicable to such premises. Constitutional validity of the amendment has been upheld by this Court. Under Section 116 of the Delhi Municipal Corporation Act readable value of a building is to be assessed and under sub-section (1) the rateable value of any land or building assessable to property taxes shall be annual rent at which such land or building might reasonably be expected to let from year to year. Then there are certain deductions. Then there is a proviso to this sub-section which says tht with respect to any land or building the standard rent of which has been fixed under the Delhi and Ajmer Rent Control Act, 1952, rateable value thereof shall not exceed the annual amount of the standard rent so fixed. The necessary consequence of the amendment of the Delhi Rent Control Act would prima facie be that the premises which are outside the purview of that Act its rateable value might have to be revised. ”
(13) Apart from the judgments of the Supreme Court in Dewan Daulat Rai Kapoor and also Dr. Balbir Singh’s cases we have been referred to, during course of arguments, the judgments of the Supreme Court in (1)Patel Gordhandas Hargovindas and others v. The Municipal Commissioner, Ahmedabad and another . (2) New Delhi Municipal Committee v. M.N. Soi and another (AIR 1977 Supreme Court 302), (3) The Corporation of Calcutta v. Smt. Padma Debi and others , (4) Motich and Hirachand and others v. Bombay Municipal Corporation , (5) Morvi Municipality v. State of Gujarat and others, , (6) Assistant Commissioner of Urban Land Tax Madras and others, etc. v. Buckingham and Carnatic Co. Ltd. etc. .
(14) It is again unnecessary for us to quote in detail these judgments as the principle laid down is the same that in respect of a building subject to rent control legislation, the landlord cannot claim to recover from the tenant anything more than the standard rent and his reasonable expectation must, therefore, be limited by the measure of the standard rent recoverable by him. However, in respect of a building not subject to any such rent control legislation the actual rent payable by a tenant to the landlord would afford reliable evidence of what the landlord reasonably expect to get from a hypothetical tenant, unless the rent is inflated or depressed by reason of extraneous considerations, such as, relationship, expectation of some other benefit and the like. 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 a hypothetical tenant.
(15) The Supreme Court in Patel Gordhandas Hargoindas’s case after examining various municipal Acts and also the law on the subject in England said that annual value or rateable value of land or building is arrived at by one of the three modes, namely, (i) actual rent fetched by land or building where it is actually let, (ii) where it is not let, rent based on hypothetical tenancy, particularly in the case of buildings, and (iii) where either of these two modes is notavailable, by valuation based on capital value from which annual value has to be found by applying a suitable percentage.
(16) The question then arises, what the word “reasonably” means. The word “reasonably” is not word of art. It is commonly used in daily conversation and one need not go to any dictionary to find out the meaning of the word “reasonably”. What should be the rent of this building, a question whose answer would be that it could be reasonably let out at a particular rate. That take into consideration everything to know the reasonable rent a building will fetch which will include the nature of the construction, the age of the building, its location, the amenities available, and the like. To arrive at the figure of the rent which can reasonably be fetched one need not merely go for the cost of construction or the land price when the construction started. The word “reasonably”, it appears to us, has never presented any difficulty. The difficulty, if any, is now created by the owners of the buildings who get ex habitant rents due to escalation of the rent and they have to pay property tax accordingly and which buildings were earlier under the protection of the Drc Act till its amendment in 1988. In Ralla Ram v. The Province of East Punjab, Air (36) 1949 F.C. 81, the Federal Court said that where the words used in the Act were clear and unambiguous, and they were not unfamiliar or uncommon words or such words as might be apply described as terms or art, it was unnecessary to travel beyond the Act for the purpose of construing them.
(17) In the Corporation of Calcutta v. Smt. Padma Debi and others, , the Supreme Court was concerned with the question of interpretation of provision of section 127 (a) of the Calcutta Municipal Act, 1923, which section read as under:- “THE annual value of land, and the annual value of any building erected for letting purposes of ordinarily let, shall be deemed to be the gross annual rent at which the land or building might at the time of assessment reasonably be expected to let from year to year, less, in the case of a building, an allowance of ten per cent for the cost of repairs and for all other expenses necessary to maintain the building in a state to command such gross rent. ”
The court observed that the crucial words were “gross annual rent at which the land or building might at the time of assessment reasonably be expected to let from year to year”. The court said that the word “reasonably” signifies “in accordance with reason” and in the ultimate analysis it was the question of fact. The court observed : “WHETHER a particular act is reasonable or not depends on the circumstances in a given situation. A bargain between a willing Lesser and a willing lessee uninfluenced by any extraneous circumstances may afford a guiding test of reasonableness. An inflated or deflated rate of rent based upon fraud, emergency, relationship, and such other considerations may take it out of the bounds of reasonableness. Equally it would be incongruous to consider fixation of rent beyond the limits fixed by penal legislation as reasonable.”.
(18) After examining all these judgments and the provisions of law we have only to reaffirm our judgments in Common Cause and Delhi Paints and Chemicals cases.
(19) In spite of all this we had to hear unduly protracted arguments on the issue again raised before us. Reference was also made to the provisions of the Income-tax Act, 1961, relating to income from house property, particularly section 23 thereof, which prescribes how the annual value has to be determined. We are told after decision of the Supreme Court in the cause Amolak Ram Khosla v. C.I.T. Delhi-11 section 23 was amended to tax the rental income which was in excess of the standard rent. Relevant portion of section 23 as originally enacted was – “23.(1) For the purposes of section 22, the annual value of any property shall be deemed to be the sum for which the property might reasonably be expected to let from year to year: xx xx xx”
and now after its amendment reads as under :- “23( 1 ) For the purposes of section 22, the annual value of any property shall be deemed to be – (a) the sum for which the property might reasonably be expected to let from year to year; or (b) where the property is let and the annual rent received or receivable by the owner in respect thereof is in excess of the sum referred to in clause (a), the amount so received or receivable: xx xx xx” In Amolak Ram Khosla’s case the Supreme Court was interpreting section 22 of the Income-tax Act, 1961, as to how the annual value of the building is to be determined and said that even where the standard rent of a building had not been fixed by the Controller under section 9 of the Drc Act and the period of limitation prescribed by section 12 of that Act for making an application for fixation of standard rent having expired, the landlord was entitled to recover the agreed rent from the tenant, the annual value of the building must be taken to be the standard rent of the building determinable under .the provisions of the Drc Act and not the actual rent received by the assessed from the tenant.
(20) Reference was also made to Bill (Bill No. 148 of 1980) which was introduced in the Parliament and lapsed. This Bill was called “The Delhi Municipal Laws (Amendment and Validation) Bill, 1980. The amendment to the Dmc Act and Pm Act was sought in this Bill on the ground because of the decision of the Supreme Court in Devan Daulat Rai Kapur’ s case as the Statement of Objects and Reasons would show. It is contended by the petitioners that in this Bill section 116oftheDMCActandclause(b)of sub-section(1)of section 3 of the Pm Act were sought to be amended by adding explanations or provisos thereto to get away the effect of the decision of the Supreme Court in Devan Daulat Rai Kapur’s case. The argument is that even as of today since clause (b) of sub-section (1) of section 3 of the Pm Act and section 116 of the Dmc Act are same as originally enacted, the law laid by the Supreme Court in Devan Daulat Rai Kapur’s case will still beapplicable. We are at loss to understand such type of reasoning. When judgment in Devan Daulat Rai Kapur’s case was delivered provisions of Drc Act were applicable which is not so now. Where language of statute is clear it has to be given effect to. The court cannot start probing the mind of the legislature to hold that it meant or intended something different than what the words actually used in the statute would convey. Reference to the provisions of the Income-tax Act, 1961 is, to our mind, also irrelevant.
(21) It was also submitted that if rateable value or annual value of a property is to be arrived at on the basis of actual rent received and property tax is levied on that, it would, in effect, be a tax on income, and legislation would not fall in Entry 49 (tax on income other than agricultural income) of List Ii (State List) of Seventh Schedule of the Constitution and it would in fact be falling in Entry 42 (tax on lands and buildings) of List I (Union List). For one thing this argument is of no consequence when we are concerned with the laws made by the Parliament for the Union Territory of Delhi. Three Lists in Schedule Seven of the Constitution have no relevance for the Union Territory of Delhi and Parliament can make law respecting all the entries in all the three Lists. Moreover, in Ralla Ram’s case the question was about the validity of the provisions of the Punjab Urban Immovable Property Tax Act, 1940, under which it was provided that there shall be charged, levied and paid an annual rent on buildings and lands and it was also provided that annual value of any land and building shall be ascertained by estimating the gross annual rent at which such land and building might reasonably be expected to let from year to year less certain allowances. It was contended that since the basis of the property tax was the annual value of the building and since the same basis were used in the Income-tax Act for determining the income from property, and generally speaking the annual value was the fairest standard for measuring income and, in many cases, was indistinguishable from it, the tax levied by the Punjab Act was in substance a tax on the income. The Federal Court upheld the Provincial Legislature which imposed a property tax assessed on the annual value of the property and rejected the contention that such a tax was really a tax on the income which only the Centre could impose under Entry 54 of List I under the Government of India Act, 1935. We would, therefore, repel this argument.
(22) The petitioners did not bring on record any notice issued to any one of them under section 131 (3) of the Dmc Act. When the Mcd filed an application (CM 792/93) for vacation of stay etc., in reply to that the petitioners did file a proforma reply which they said was sent by each one of them to the Dmc in reply to notices under section 131 (3) of the Dmc Act. There are no proper pleadings on that. Mr. Nandrajog said that it may be taken that as far as this case was concerned no notice under section 131 (3) was sent to any of the petitioners or in any case if sent the replies furnished by the petitioners would be taken as sufficient compliance and provision of sub-section (3) of section 131 could not be invoked. That being so, Mr. Rathee, learned counsel for the petitioners, said that he would not press his challenge to the latter portion of sub-section (3) of section 131 of the Dmc Act. ltis,therefore,notnecessaryforus to consider the arguments on the constitutional validity of the provisions of this sub-section. However, we may note that a Single Judge of the Bombay High Court in The Sholapur Municipal Corporation v. Umakant Shankarrao Bhagwat upheld a similar statutory rule which was as under :- “WHOEVER omits to comply with any such requisition or fails to give true information or to make a true return to the best of his knowledge or belief shall, in addition to any penalty to which he may be liable; be precluded from objecting to any assessment made by the Commissioner in respect of such building or land of which he is the owner or occupier. ”
(23) Also it does appear odd to us that finality should attach to a quasi judicial order and the petitioner who is aggrieved is debarred from even filing an appeal. That way if remedies under the statute are barred the petitioner may well invoke the jurisdiction of this Court under Article 226 or Article 227 of the Constitution and that too without depositing the/tax demand. We may also note the provision of section 144 of the Income-tax Act declaing with best judgment assessment. But then since the argument on the validity of section 131 (3) of the Dmc Act has not been pressed we leave the matter at that.
(24) We may now refer to notices issued under section 126 of the Dmc Act to the seven petitioners who are petitioners 2 to 8 .In the notices issued to them against the column reasons in brief for amendment in the assessment list’ the following reasons are respectively given :-
PETITIONERNo.2 – Additions/alterations/erroneously valued/increase in rateable value/including giving effect to amendments in the Drc Act, 1988.
PETITIONERNo.3 – Increase in R.V. due to Drc Act.
PETITIONERNo.4 – Increase in R.V. due to amendment in Drc Act.
PETITIONERNo.5-Increase in R.V. due to amendments in Drc Act.
PETITIONERNo.7 – Increase in R.V. due to amendment in Drc Act.
PETITIONERNo.8 – The property is fetching rent of (notice u/s 67-A more than Rs.3,500.00 per month, of the Pm Act) therefore protection of Delhi Rent Control Act 59 of 1958 is taken away in respect of your premises and ratio of Computing rateable value as pronounced by Supreme Court in Dr. Balbir Singh case is not available in r/o above said premises. The assessment now is proposed to be made at the annual actual rent/market rent which the premises is fetching.
(25) We do not find notice under section 126 of the Dmc Act issued to petitioner No.6 on record.
(26) We need not go into similar notices issued to other applicants who are not parties in the writ petition. The reasons for amendment in the assessment list are quite sufficient and they put the petitioners on notice as to why rateable value is sought to be increased. Petitioners also very well know this and as a matter of fact if we refer to their reply in the form of objections to notice under section 126 of the Dmc Act they know what is required of them. Their grievance that notices are vague has no basis. They appeared to have all acted in concert in objecting to the proposed increase in rateable value on account of amendment to the Drc Act raising all these objections. We uphold the validity of notices sent to the petitioners.
(27) Mr. Shourie for the Common Cause had some other points to raise. He said there were various anomalies in arriving at the rateable value of the properties and said the whole thing has to be rationalised so that there are no distortions. To illustrate his point he said that if two adjacent houses of similar size are taken which are self occupied and though within the purview of the Drc Act, their rateable value would be vastly different. In one case, the house which was constructed about 20 years back, its cost of construction will be far less than the newly constructed house. Mr. Shourie said there could be no reason to have two different rateable values/annual values of these two houses similarly situated. Mr. Shourie gave other illustrations as well and those clearly show various anomalies in the working of the rateable value/annual value of the properties. That would appear to be so, but for that legislation is remedy. The Government can consult various expert bodies and citizens in order to rationalise levy of property tax in Delhi. Mr. Shourie then said that there was rampant corruption in the house tax department in both the N.D.M.C. and M.C.D. He said hundreds and thousands of owners of houses were feeling exasperated at the notice threatening vast increase in property tax. They per force had to file objections and then file an appeal in the court of the District Judge, but before appeal could be heard they had to deposit property tax as levied by the assessing authority. Since stakes were high because of enormous increase in rent value, corruption also increased and amounts demanded and offered ran into tens and thousands of rupees. That certainly is an unfortunate fall out of all this and we are of the view that disciplinary proceedings be initiated all down the line incase ultimately rateable value/annual value fixed is far below than what it was proposed or even assessed by the assessing authority. We suggest no action if the difference is 10% or less. Today this is merely our view, but if circumstances of a particular case would demand, this Court will not hesitate in issuing directions for initiating disciplinary proceedings.
(28) Then Mr. Shourie submitted that proper grounds were not stated in the notices sent under section 126 of the Dmc Act if the Commissioner proposed to make any amendment in the assessment list. To that objection can be raised before the assessing authority. But then we may also note that under section 131, Commissioner has power to call for information and returns and to enter and inspect premises. The information which the Commissioner would be seeking under this section is something within the knowledge of the owner of the building. It is as much his duty to furnish proper information and he should comply with the requirements of notice under section 131. In default of giving information there is a penal clause. Even if the penal clause is not invoked it is difficult to imagine how an owner of a building can complain about the vagueness of the notice under section 126 when he himself has not complied with the requirements of section 131 of the Dmc Act. We, however, need not well on this question as validity of notice would depend upon case to case. Mr. Shourie also suggested that there are lowering of the incidences of the property in order to collect more revenues. He said the higher the incidence of tax there is more chance of its evasion. Lastly, Mr. Shourie very fairly said that he would not agree with the petitioners that property tax was in the nature of income-tax and he said he was always of the firm belief that property owners should pay their taxes in time as per law.
(29) We may also note that enormous difficulty for owners of buildings has manifested from the very high rate of property tax levied by the M.C.D. in comparison to N.D.M.C. We would like to point out that areas wherein N.D.M.C. has jurisdiction and properties are situated even in posh colonies, the incidence of property tax is only 12-1/2%, whereas in the colonies falling within the jurisdiction of M.C.D.the rate of property tax goes as high as 25% to 28%. This anomaly when pointed out, Mr. Sen, Senior Advocate appearing for the M.C.D., submitted earlier the M.C.D. was contemplating to lower the incidence of property tax and perhaps it would be reduced between 15% to 18%. It was also stated that after giving rebate for self occupied properties, incidence of property tax becomes some what lower. We are, however, of the opinion that for efficiency and collection of tax and to reduce favoritism and corruption, as is alleged, the M.C.D. will take urgent steps in this regard so as to mitigate the general difficulties of the owners of the properties living in its jurisdiction.
(30) With these observations, this petition and all the applications are dismissed.