Bombay Municipal Corporation v. Life Insurance Corporation of India, Bombay

A B ### c D E F **'G** **H** 335 **BOMBAY** MUNICIPAL CORPOUTION v. **LIFE** INSURANCE CORPORATION OF INDIA, BOMBAY _April_ 21, 1970 [J. C. SHAH, K. S. HEGDE AND A. N. GROVER, JJ.] _Bombay Municipal Corporation Act,_ 1888, _s._ 154(1) _uni/_ _Bombay_ _Hotel and Lodging Houses Rates_ _Act_ (57 _of_ 1947), _ss._ 5(7), 5(10). 7, 10, lOA _and IOAA-Educational cess permitted_ _to_ _be_ _received from_ _tenant_ _by_ _landlord and added,to_ _standard_ _rent-If_ _can_ _be_ _induded for_ _fixation_ _of annual value_ _of_ _buildings._ Section 154(1) of the Bombay Municipal Corporation Act, 1888, provides that the annual rent for which a building might reasonably be expected to be let from year to year shall be the basis for fixing the rateable value of the building. Section 5( 10) of the Bombay Rents, Hotel a;1d Lodging House Rates Act, 1947 ·(the Rent Act) defines standard rent and s. 5(7) of the Rent Act defines 'permitted increase' to mean an increase in rent permitted under the pro·faions of the Rent Act. Under ss. 10, lOA and lOAA of the Rent Act, a landlord can increase the rent on account of payment o'f rates, cesses or laxes imposed or levied by a .local authority. The appellant imposed a .tax known as educational cess on all the properties within its limits and the respondent increased the rents payable by its tenants _to_ the extent of the educational cess under s. IOAA of t~e Rent Act. The appellant increased the rateable value on the ground that rhe educational cess should be deemed to be a part of the annual rent for which the building might reasonably be expected to be let from year to year. The High Court held that under s. 7 of. the Rent Act the increase shall not be deemed to be an increase in rent and that therefore the rateable. value could be fixed only on· the basis of the · standard rent fixed under the Rent Act. Jn, appeal _to_ this Court, HELD : Section 7 _df_ the Rent Act provides that it shall nol be lawful for the· landlord to claim on account of rent any increase above the standard rent, but it does not prohibit the· recovery of the increase to which a landlord . may be entitled under the provisions of the Act, in addition to the standard rent. The definition in s. _5_ (7) and the langUage · and ss. 10, lOA and !OAA indicate that the Legislature treated the permitted increase as a pa·rt of the rent which the landlord would he entitled to receive from the tenant. That is, the building can well said to he reasonably expected to be let from year to year at the figUre arrived at by adding the permitted increase to the standard rent. Therefore, in the present case, the valuation had to be aTrived at after taking into account the amount o·f educational cess. levied by the appellant, even if i.t leads to . some inconveeience by varying the valuation at frequent intervals. . f33TF-H; 338 D-F; 339 B-D] _Tire_ _Corpoflltion_ _of Ca/cuua_ v. _S1111._ _Padma Devi,_ [1962) 3 S.C.R. 49 and _Patel Gordlrandas Hargqvindas_ v. _Municipal Commissioner. Ahmeda-_ _baJ,_ [1964] 2 S.C.R. 608, referred to. CIVIL APPELLATE JURISDICTION : Civil Appeal No. 402 of 1967. 336 SUPREME COURT REPORTS [1971] l $.C.R. Appeal from the judgment and decree dated November 10. 1964 of the Bombay High Court in Appeal No. 148 of 1962 from Original Decree. · _Niren_ _De,_ _Attorne,v-Genera/,_ _R._ _N. Banerjee_ and _Ravinder_ _Narain,_ for the appellant. _S. V. Gupte, K. L Hath!_ and _J._ _L._ _Hathi,_ for the respondent. Judgement of the Court was dellvered by Grover, J. This is an appeal from a judgement of the. Bombay High Court in the matter of valuation of the premises belonging to the respondent made under the provisions of the Bombay Muriicipal Corporation Act 1888, hereinafter called "the Act of I 888". For the years 1957,58 and 1958-59 the rateabl9 valuation of the building was fixed by the Municipal Corporation at Rs. I,66,410. On April 1, ?958 an additional tax known as educational cess was imposed by the Municipai Corporation at the rate ###### of 1 !% of the rateable value on all properties within its limits. This was done under s. 140 of the Act of 1888. As the landlord became entitled to increase •the rent recoverable from the tenant to tho extent of the increase in the tax payable to the Corporation under the provisions of s.10-AA of the Bombay Rents, Hotel and Lodging House Rates 1947 (Act No. LVII of 1947) hereinafter c11!2ed the Rent Act, the Assessor 11nd Collector of the Corporation served a notice on the respondent proposing to increase the rateable value of the building in question to Rs. 1,68,585. The rospqndent objected to the above increase. The Assessor and the Colfector, however, raised the rateable value to Rs. 1,66,180. The amount thus fixed was at lesser figure than the one for the. year 1958-.59 but that was by reas<'n of certain other deductions which had been · claimed by the respondent and which. were allowed. The claim of respondent for non-inclusion .of the amount of educational cess in the rent was disallowed. The matter was taken in appeal to the Court of Small Causes at Bombay which was dismissed. The respondent preferred an appeal to the High Court. The High Court held that the rateable value could be fixed only on the basis of the standard rent provided by the Rent Act and the amount of permitted increases could not be included in rent for the purposes of valuation. It was not disputed by the respondent before the High Court that the rents of the tenants had been increased by it to the extent of the educational cess but the contention that was put forward and which prevailed was that the same was not being recovered as a part of the rent. A R ##### c D F G H BOMBAY MUNCPL.· CORPN. I'. L.I.C. _(Grover,_ J.) 3J7 The controversy between the parties is a narrow one. According to the appellant the amount of educational cess which is recoverable by the landlord under the Rent Act from tenants sh0uld be deemed to be a part of the annual rent for which the building might reasonably be expected to be let from year to year within the meaning of s. 154(1) of the Act of 1888. On the other hand the respondent has maintained throughout that the education cess levied under s. 40 of the aforesaid Act cannot be included for the purpose of valuation under s. 154 ( l ) in the annual rent. We may now notice the relevant provisions of the Act of 1888 and the Rent Act., ·Section 140 of the Act of 1888 provides for illlposition of property tax on buildings and lands in Grea1er Bombay. Section 154(1) provides that in order to fix the rateable value of any building or land assessable to property tax there shall be deducted from the amount of the annual rent for which such land or building might reasonably be expected to be let from year to year a sum equal to ten per ccntum of the said annual rent and the said deduction shall be in lieu of all allowances for repairs on or any other account whatever. Section _5_ (I 0) of the Rent Act gives the definition of "standard rent". . There is no ref.erence or mention of any permitted increase in the definition. Tiie expression "permitted increase" is defined by s. _5_ (7) to mean an increase in rent permitted under the provisions of the Act. Section _5_ ( 3) defin~s the word "landlord" as meaning any person who is for the time being receiving or entitled to receive rent· in respect of' any premises etc. Section _5_ (11) gives the meaning-tlf the word "tenant". According to that meaning a tenant would be any person by whom or on whose account rent is payable for any premises and includes such persons as are specifically mentioned in sub-els. (a), (aa) and (b). Section 9 provides foi: increa>e in rent on account of improvements or structural alteration of th~ premises which have been made with the consent of the tenant and such increase is not to be deemed an increase for the purpose of s. /. Under s. 10 a landlord can increase the rent on account of payment of rates, cess or taxes imposed and levied by a local authority. Such an increase again is not to be deemed to. be an increase for. the purpose of s. 7. Similarly under s. 1 OAA the landlord can increase the rent on account of payment of enhanced rates etc. permitted after certain date in particular areas. Any increase in this section cannot be deemed to be an increase for the purpose of s. 7. The High Court was alive to the fact that the mentioa of increase in ss. 10, lOA and 1 OAA referred to increases in rent but it was felt that the section ·in. express terms provided that such an increase shall not. be deemed to be an increase in rent under s. 7. According to the High Court it followed that what was allowed to # I A #### c I.) E F G H 338 SUPREME COURT REPORTS (1971] l S.C.R. the landlord in additidn to the standard_rent was not an increase in the rent but a provision was made in a specified way for _the transfer of the burden of the tax to the tenants because of the rigours of the Rent Act. The other factor which weighed J.Vith the High Court was that if the increase in rates was to be treated as a part of the rent which would enabie the Municipal Corporation to increase the valuation on every occasion when there was increase in rates and taxes this would "land us again into a cycle of increments every year from figure to figure never intended by the framers either of the Rent Act or of the Municipal Act". It is necessary to set out s .. 7 of the Rent Act at this stage : "Except where the rent is liable to periodical incre·ment by virtue of an agree!Ilent entered into before the first day of September 1940, it shall not be lawful to claim or receive on account of rent for any preinises any increase above the standard rent, unless the landlord was, before the coming int.:> operation of this Act, entitled to recover such increase ............•....... under the provisions of this Act." It_is quite clear that s. 7 does not prohibit the recovery of the increase to which landlord may be entitled under the provisions· of the Act in additipn to the standard rent. The obvious implication of the definition" of "permitted increase" ins. _5_ (7) is that such an increase becomes a part of the rent. '.fhe language which has been employed in ss·. 9, 10 and 10-AA seems to indicate ·that the legislature treated the permitted increase as a part of the rent which the landlord would be entitled to receive from the tenant. ln _The Corporation_ _of Calcutta_ v. _Sm_t.Padina Devi(')_ the questio4 arose whether the Municipal Corporation ha.d the power to fix the annual valuation on a figure higher than the standard rent. It was held that on a reading of the provisions of s. 127 (a) of the Calcutta Municipal Act 1923 the rental value could not be fixed higher than the standard rent llllder the Rent Control Act. It was further held that the words "gross animal rent at which the land or building might.at the time of assessment reasonably be expected to let from year to year" in s. 127 (a) impliefd that the rent which· the bmdlof\1 might realize if the house. was let was the basis for fixing the ·annual valuation of the building. Thus· the criterion was the rent realizal>le by the landlord and not the valuation of 1he holding in the hands o,f the tenant. Even applying that criterion the rent realizable, in-the present case, would be the stan<tard .rent together -,._,with lhe permitted increase on account of the levy of ellu~nal ###### eess. As -observed in Patel Gordhandas Hargovindas v. Munici _pal Commissioner, Ahmedabad(')_ there· are· three modes o.f (I) (1962] 3 S.C.R. 49. (2) (1964)? S.C.R. 608. B #### c D E F G H ## ' BOMBAY MUNCPL. CORPN. v. L.I.C. (Grover, !.) 339· A B #### c D determining the annual or rateable value of lands or buildings. ·· The first is the actual rent fetched by the land or building where it is actually. Jet. The second is rent based on hypothetical tenancy where it is not let and the third is by valuation based on Cllpital· · .. value from which the annual value has to be fqund by applying a suitable percentage, where either of the first two modes is not available. In the present case admittedly the actual rent of the building in question which is being fetched comprises the stap.di1rd rent and the permitted increase. The building can well be said to be· reasonably expected to be let from year to year at the figure arrived at by adding' the permitted increase to the standard rent. The valuation had, therefore, to be arrived at after taking into account the amount of educational cess which was levied by the Corporation. Even if such a conclusion leads to some kind of inconveni· In the Te&&jJ the. J!ppeal is allowed and. the judgement of~. High Qiurt is se(asi~~.ihat of the Court of the Small Causes~ is restol'ed with costs. . ###### v.P-.s. Appeat=Mtow~-- _ ence of variation in valuation at frequent intervals that can be rio consideration for not gi\'l_ng full effect and meaning to the provi sions of the Act of 1888 and the Rent Act under consi~eration.