Case Note & Summary
This judgment is a reference to a third judge following a difference of opinion in an appeal against a Single Judge's decision in a writ petition concerning property tax assessment under the Mumbai Municipal Corporation Act, 1888. The Municipal Corporation of Greater Mumbai and Dalamal Tower Premises Co-operative Society Limited were the contesting parties. The core dispute related to the determination of ratable value for premises exempt from the provisions of the Maharashtra Rent Control Act, 1999. Under Section 154(1) of the Municipal Corporation Act, ratable value is based on the annual rent for which a building might reasonably be expected to let. Historically, where rent control legislation applies, the Supreme Court has held that the standard rent under that legislation forms the upper limit. The Maharashtra Rent Control Act, 1999, under Section 3(1)(b), exempts certain categories of premises, such as those let to banks, public sector undertakings, and companies with paid-up capital exceeding Rs. 1 crore. The Municipal Corporation contended that once premises are exempt, the contractual rent is no longer restricted by standard rent, and actual rent received should guide valuation. The property owners argued that the very existence of rent control legislation in the area compels adherence to the standard rent principle, irrespective of exemption, to avoid discrimination and maintain the nature of the tax as one on property rather than income. Counsel for the intervenor supported the Corporation's position. The reference was made because the two judges on the Division Bench held divergent views on this issue, and the third judge was tasked with resolving the legal question. However, the extracted portion of the judgment does not contain the final decision or reasoning on the merits.
Headnote
A) Municipal Tax - Determination of Ratable Value - Effect of Exemption under Rent Control Legislation - Mumbai Municipal Corporation Act, 1888 (Section 154(1)), Maharashtra Rent Control Act, 1999 (Section 3(1)(b)) - The reference arose from a difference of opinion between judges of the Division Bench regarding whether, for premises exempt under the Maharashtra Rent Control Act, 1999, the municipal corporation could consider actual rent received rather than standard rent for computing annual letting value. Arguments were advanced on both sides; the third judge was required to resolve the legal question. (Paras 1-7).
Issue of Consideration
Whether, for premises exempt from the provisions of the Maharashtra Rent Control Act, 1999, the Bombay Municipal Corporation is justified in considering the actual rent received/receivable for determining the annual letting value under Section 154(1) of the Mumbai Municipal Corporation Act, 1888, or whether the standard rent principle continues to apply.
Law Points
- Ratable value is annual rent reasonably expected to let under Section 154(1) of Mumbai Municipal Corporation Act
- 1888
- Standard rent is upper limit where rent control legislation applies
- Exemption from rent control implies no statutory cap on rent
- Tax on land and building is distinct from tax on income
- Measure of tax may be annual value or capital value
- Differential treatment of exempt premises permissible if intelligible classification exists
Case Details
2012 LawText (BOM) (09) 48
O.O.C.J. Appeal No.801 of 2004 in Writ Petition No.2120 of 2004
A.Y. Sakhare, S.S. Pakale, G. Joglekar, N. Trivedi for Appellants; Milind Sathe, A. Doctor for Respondents 1-2; A.B. Ketkar for Respondent 3; Janak Dwarkadas, S. Jagtiani, G. Mehta for Intervenor
The Municipal Corporation of Greater Mumbai & Ors.
Dalamal Tower Premises Co-operative Society Limited & Anr.
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Nature of Litigation
Reference to third judge on difference of opinion in appeal arising from writ petition challenging property tax assessment under Mumbai Municipal Corporation Act, 1888.
Remedy Sought
Determination of the correct measure for computing ratable value of premises exempt under the Maharashtra Rent Control Act, 1999 for property tax levy.
Filing Reason
Differing views between judges of the Division Bench on whether actual rent or standard rent should be considered for exempt premises.
Previous Decisions
Single Judge decision in WP 2120/2004; appeal to Division Bench resulted in difference of opinion between Deshmukh J. and Ketkar J., leading to present reference.
Issues
Whether, for premises exempt from the Maharashtra Rent Control Act, 1999, the Municipal Corporation is justified in considering actual rent received/receivable for determining annual letting value under Section 154(1) of the Mumbai Municipal Corporation Act, 1888, or whether the standard rent principle applies.
Submissions/Arguments
Municipal Corporation contended that exemption removes the standard rent cap, and actual rent becomes the reasonable basis for valuation.
Property owners argued that the existence of rent control legislation in the area mandates adherence to standard rent, irrespective of exemption, to avoid discrimination and maintain the nature of the tax as on property rather than income.
Intervenor supported the Corporation's position that exemption permits consideration of actual rent.
Judgment Excerpts
In view of the repeal of the Bombay Rent Act and enactment of the Maharashtra Rent Control Act, is the Bombay Municipal Corporation justified in taking into consideration the actual amount of rent received or receivable by the landlord in relation to the units which are let out, but where the lease is exempted from the provisions of the Rent Act for determination of annual letting value with effect from 1 April 2000?
Section 154(1) requires that the rateable value of any building or land assessable to property tax has to be computed on the basis of the annual rent for which such land or building might reasonably be expected to let from year to year.
Where the Rent Control Act does not apply to certain premises, the Supreme Court has held that the annual rent actually received by the landlord in the absence of special circumstances would be a good guide to assess the rent which the landlord might reasonably expect from a hypothetical tenant since the premises are not controlled by the Rent Act.
The expression, 'annual rent for which such land or building might reasonably be expected to let from year to year' has been interpreted in a series of decisions of the Supreme Court holding that in areas where rent control legislation is in force, the standard rent and not the actual rent is the appropriate measure of taxation.
Procedural History
Originally, Writ Petition No. 2120 of 2004 was decided by a Single Judge. An appeal, O.O.C.J. Appeal No. 801 of 2004, was preferred before a Division Bench comprising Justices D.K. Deshmukh and R.G. Ketkar. Owing to a difference of opinion, the question of law was referred to a third judge. The present judgment was delivered by Dr. D.Y. Chandrachud, J., sitting as the third judge.
Acts & Sections
- Mumbai Municipal Corporation Act, 1888: 140, 139A, 154(1), 3(r), 3(s), 3(gg)
- Maharashtra Rent Control Act, 1999: 2(1), 3(1)(b)
- Bombay Rents, Hotel and Lodging House Rates Control Act, 1947: 4
