BEFORE THE MADURAI BENCH OF MADRAS HIGH COURT
DATED: 16/11/2010
CORAM
THE HONOURABLE MR. JUSTICE S. NAGAMUTHU
W.P.(MD)No.3997 of 2006
and
W.P.M.P.(MD)Nos.4194 and 4195 of 2006
T. Dhanasekaran,
C/24, Fort Station Road,
Thillai Nagar,
Tiruchirappalli. ...... Petitioner
Vs
1. Government of Tamil Nadu,
Rep. by Secretary to Government,
Revenue Department,
Fort. St. George, Chennai - 600 009.
2. Secretary to Government,
Government of Tamil Nadu,
Municipal Administration and
Water Supply Department,
Fort. St. George, Chennai - 600 009.
3. Director of Municipal Administration,
Chepauk, Chennai - 600 005.
4. Commissioner,
Tiruchirapalli City Municipal Corporation,
Tiruchirapalli.
5. The Assistant Commissioner,
K.Abishekapuram,
Trichy Municipal Corporation,
Tiruchirapalli.
6. Member Secretary / Joint Director of Town
and Country Planning,
Tiruchirapalli Local Planning Authority,
Tiruchirapalli. ...... Respondents
Writ Petition filed under Article 226 of the Constitution of India
praying for a Writ of Declaration, declaring Section 121 (4)(a) of the
Tiruchirapalli City Municipal Corporation Act and the consequential Notification
of the fourth respondent dated 23.09.1994 published in the Trichy District
Gazette as unconstitutional ultra vires, illegal and void.
!For Petitioner ... Mrs. N. Krishnaveni
^For Respondents ... Mr. D. Sasikumar for R-1 to R-3
Government Advocate
Mr. P. Srinivas for R-5
- - - - - - -
:ORDER
The Constitutionality of Section 121(4)(a) of the Coimbatore City
Municipal Corporation Act, which is applicable to the Tiruchirappalli Municipal
Corporation and the consequential order, levying property tax are under
challenge in this writ petition.
2. The facts leading to the filing of this writ petition are as
follows:-
The land comprised in S.No.17/2 at Block No.36 Ward No.D,
K.Abishekapuram, Tiruchirapalli Municipal Corporation was originally owned by
one S.Krishna Veni and S.Narayanan. There was a building on the said property
and for the same, property tax was imposed by the Tiruchirappalli Municipal
Corporation. While so, the original owners of the property appointed the
petitioner as a Power Agent by means of a necessary deed of Power of Attorney.
The building was thereafter demolished and in its place a multi-storied new
building was constructed as per an approved building plan. While so, the
fifth respondent / the Assistant Commissioner, Tiruchirappalli Municipal
Corporation by his proceedings in Na.Ka.No.9707/05/A5 (Co-op) dated 21.03.2006
levied a sum of Rs.61,762/- as vacant land tax under Section 121(4)(a) of the
Coimbatore City Municipal Corporation Act (hereinafter referred to as “the
Act”), applicable to Tiruchirappalli municipal Corporation for the period
between 2005 and 2006. Aggrieved over the same, the petitioner is before this
Court with this writ petition.
3. It is contended by the petitioner that the impugned provision
viz., Section 121(4)(a) of the Act, empowers the Municipal Corporation to impose
tax on the capital value and so the same is beyond the legislative competence of
the State Legislature. According to the petitioner, taxes on capital value of
asset falls within Entry 86 of List I of Schedule VII of the Constitution of
India, whereas the property tax leviable under authority of State Legislature is
traceable to Entry 49 of List II of Schedule VII of the Constitution of India.
It is further contended that what is imposed under Section 121(4)(a) of the Act
is tax on capital value of assets and not tax on land and building. Thus,
according to the petitioner, the impugned provision lacks legislative competence
on the part of the State Legislature and therefore, the same is
unconstitutional.
4. It is contended by the respondent that the impugned provision
empowers the Municipal Corporation only to impose tax on vacant land and it
cannot be stated that it is a tax on capital value of assets. It is further
contended that for the purpose of assessing the value of the property for the
purpose of determination of the vacant land tax, the capital value of the
property is taken into account as per the impugned provision and thus, the said
provision does not impose any tax on capital value of the assets.
5. I have considered the above submissions.
6. Before going into the discussion on the subject, let us have a
glance through the impugned provision viz., Section 121(4)(a) of the Act, which
reads as follows:-
“Save as otherwise provided in clause (b), the council shall, in the
case of lands which are not used exclusively for agricultural purposes and are
not occupied by, or adjacent and appurtenant to buildings, levy the property tax
on the capital value of such lands at such percentages as it may fix which shall
not exceed six percent of their capital value”.
7. A close reading of the said provision would make it ipso facto
clear that there is no levy of tax imposed on capital value of the asset. But,
as rightly pointed out by the learned counsel for the respondent, the capital
value of the land is taken only for the purpose of determining the tax to be
levied for the said land. The said provision states that the property tax shall
not exceed 6% of the capital value. This would only indicate that the capital
value of the property is only taken for the purpose of determining the quantum
of property tax and no tax is levied on the said capital value. Thus, the tax
imposed under the impugned provision is only on the land and not on the capital
asset as it is contended by the petitioner.
8. In this regard, I may refer to the Constitution Bench Judgment of
the Hon’ble Supreme Court in ASSISTANT COMMISSIONER OF URBAN LAND TAX MADRAS AND
OTHERS ETC., ..VS.. BUCKINGHAM AND CARNATIC CO., LTD., ETC., (A.I.R. 1970 S.C.
169) wherein the Hon’ble Supreme Court had to consider a similar challenge made
to an analogous provision in Madras Urban Land Tax Act. In the said case also it
was contended that urban land tax is levied on capital value of lands which fall
squarely within Entry 86 of List I. It was further contended that Entry 86 and
87 specifically exclude the State Legislature from taxing capital value of the
land and buildings under Entry 49 of List II. Negativing the said contention,
the Hon’ble Supreme Court has held as follows:-
“5. ……….. The tax under Entry 86 proceeds on the principle of
aggregation and is imposed on the totality of the value of all the assets. It is
imposed on the total assets which the assessee owns and in determining the not
wealth not only the incumbrances specifically charged against any item of asset,
but the general liability of the assessee to pay his debts and to discharge his
lawful obligations have to be taken into account. In certain exceptional cases,
where a person owes no debts and is under no enforceable obligation to discharge
any liability out of his assets it may be possible to break up the tax which is
leviable on the total assets into components and attribute a component to lands
and buildings owned by an assessee. In such a case, the component out of the
total tax attributable to lands and buildings may in the matter of computation
bear similarity to a tax on lands and buildings levied on the capital or annual
value under Entry 49, List II. But in a normal case a tax on capital value of
assets bears no definable relation to lands and buildings which may or may not
form a component of the total assets of the assessee. But Entry 49 of List II,
contemplates a levy of tax on lands and buildings on both as units. It is not
concerned with the division of interest or ownership in the units of lands or
buildings which are brought to tax. Tax on lands and buildings is directly
imposed on lands and buildings, and bears a definite relation to it. Tax on the
capital value of assets bears no definable relation to lands and buildings which
may form a component of the total assets of the assessee. By legislation in
exercise of power under Entry 86, List I tax is contemplated to be levied on the
value of the assets. For the purpose of levying tax under Entry 49, List II the
State Legislature may adopt for determining the incidence of tax the annual or
the capital value of the lands and buildings. But the adoption of the annual or
capital value of lands and buildings for determining tax liability will not make
the fields of legislation under the two entries overlapping. The two taxes are
entirely different in their basic concept and fall on different subject-
matters.”(Emphasis supplied)
The law laid down by the Hon’ble Supreme Court in the above said Judgment is
squarely applicable to Section 121(4)(a) of the Act, which is impugned in this
writ petition. As I have already concluded and as held by the Hon’ble Supreme
Court, the vacant land tax is imposed only on the vacant land and not on the
capital value of the asset and therefore the contention that the said provision
lacks legislative competence of the State Legislature must fail. I hold that
the impugned provision is Constitutional and therefore, the same does not
require any interference.
9. Now, coming to the challenge to the impugned demand notice, in my
considered opinion, the petitioner has got to fail in this writ petition because
there is a disputed question of fact. According to the impugned order of the
respondent dated 21.03.2006, after demolishing the existing building, the land
was kept vacant for the period between 2005 and 2006 and therefore for the said
period during which the land was vacant, the impugned order levying tax was
issued. It is contended by the petitioner that factually it is not correct.
According to him, during the said period, the old building was in existence for
which the property tax was collected by the Municipal Corporation. The learned
counsel for the petitioner would submit that having collected the property tax
for the building and the land, it is not legal to impose tax on vacant land. In
my considered opinion, this disputed question of fact cannot be resolved in this
writ petition. Whether, during the relevant period, the land was kept vacant or
there was a building in existence, whether tax was imposed for the building
together with the land for the said period are all disputed questions of fact,
which can be resolved by the petitioner elsewhere by working out his remedies
under the provisions of the Act or by making a representation to the Municipal
Corporation raising objection. Therefore, the challenge to the impugned demand
notice also has to fail in this writ petition.
10. In the result, this Writ Petition is dismissed, however, with
liberty to the petitioner to work out his remedies to challenge the correctness
of the demand of the vacant land tax in the manner known to law. However, there
will be no order as to costs. The petitioner is also at liberty to make a
representation to the Thiruchirapalli Municipal Corporation in this regard
within a period of two weeks from the date of receipt of a copy of this order
and if any such representation is made, having regard to the relevant Government
Orders and the provisions of
the Act the Thiruchirapalli Municipal Corporation shall consider and dispose of
the same on merits and in accordance with law, within a period of six months
from the date of receipt of a copy of the representation from the petitioner.
Dpn/-
To
1. Secretary to Government,
Revenue Department,
Government of Tamil Nadu,
Fort. St. George, Chennai – 600 009.
2. Secretary to Government,
Government of Tamil Nadu,
Municipal Administration and
Water Supply Department,
Fort. St. George, Chennai – 600 009.
3. Director of Municipal Administration,
Chepauk, Chennai – 600 005.