Full Judgment Text
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PETITIONER:
MUNICIPAL BOARD, SAHARANPUR
Vs.
RESPONDENT:
SHAHDARA (DELHI) SAHARANPUR LIGHT RAIL CO. LTD.
DATE OF JUDGMENT: 24/11/1998
BENCH:
S.B. MAJMUDAR, & M. JAGANNADHA RAO.
ACT:
HEADNOTE:
JUDGMENT:
JUDGMENT
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S.B. MAJMUDAR, J.
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Municipal Board, Saharanpur having obtained the
certificate of fitness to appel to this Court under Article
133 of the Constitution of India on 12th August, 1976, has
filed this appeal. While grating the certificate, the High
Court has observed that the concept and meaning of the words
"common compound" used in the Uttar Pradesh Municipalities
Act, 1916 (hereinafter referred to as ’the Act’) is required
to be decided in this appeal. This appeal raises the same
contentions which are raised in the Companion Appeal being
Civil Appeal No. 1218 of 1976 moved by the very same
appellant - Municipal Board, Saharanpur against Imperial
Tobacco of India Ltd. wherein the High Court has granted a
similar certificate of fitness. Even though the
certificates are granted by the High Court on the common
question in both these appeals and even though our decision
of even date in Civil Appeal No. 1218 of 1976 will govern
the present controversy, we deem it fit to highlight the
facts particular to the present respondent and the other
questions which were canvassed by the learned counsel for
the respective parties before us in this appeal.
BACKGROUND FACTS:
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The respondent railway company which has now become
defunct, had various immovable properties situated in one
complex within the Saharanpur town. The appellant Municipal
Board, duly constituted under the Act, sought to levy house
tax and water tax in connection with the buildings and lands
of respondent railway company during the relevant years.
The said taxes were sought to be levied under Section
128(1)(i). The respondent railway co., functioning since
1905, had several properties in a vast contiguous area
within the limits of the Municipal Board. They included the
railway station, a childerns park, a canteen, a dispensary,
administrative offices, rest-houses, out-houses, officers
bungalows etc. The appellant Board issued a notice to the
railway company in 1960, assessing the properties to tax on
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buildings and also to water-tax. The appellant Board
determined the annual value with reference to clause (a) of
Section 140 of the Act and in doing so it treated all the
buildings as one unit and all the land in the area as
appurtenant to the buildings. A number of objections were
raised by the respondent railway company but they were
rejected by the Executive Officer of the Municipal Board.
The railway company appealed against the order of the
Executive Officer to the District Magistrate under Section
160 of the Act, The District Magistrate remanded the case
back for proper calculation of the house tax and directed
that the general rate should not be applied to all the
buildings but the buildings should be divided in such a way
as to arrive at a fair rate. The respondent company, or
remand, had again submitted to the Executive Officer that
certain buildings and approach roads should be excluded in
calculating the area. It appears that there was some
agreement between the parties regarding the total area to be
[considered for the purpose of taxation. But leaving aside
that agreement, which no longer remains operative, several
objections on merits were raised by the respondent railway
company but they were all negatived. In further appeal, the
District Magistrate, confirmed the order of the Executive
Officer, subject to the modification that the cost of the
buildings for the purpose of calculating annual value be
reduced by 10 per cent by way of depreciation allowance.
The tax on buildings was accordingly fixed at Rs. 3,957.75
paise. As regards the water-tax, the Magistrate considered
that the Municipal Board was not entitled to levy water-tax
on the Railway Company. This was on the basis that there
was one hydrant within 600 feet from the railway area. But
it appeared that between the hydrant and the railway area
there lay some area of the Northern Railway surrounded by a
wall. According to this interference therefore, the
distance between the hydrant and the premises of the
respondent was more than 600 feet in a zigzag manner and
hence the water-tax could not be levied on this complex.
Against the said order of the District Magistrate,
the respondent railway company filed a Writ Petition being
3508 of 1965 in so far as it referred to house tax while
Writ Petition No. 3415 of 1965 was filed by the appellant
Municipal Board urging that the Railway Company was liable
to water-tax. Both these writ petitions were heard together
by a learned Single Judge of the Allahabad High Court, who
took the view that the lands of the railway company were
within the radius of 600 feet from the nearest water-stand
point and hence they had to be considered for imposing
water-tax on the buildings of the respondent railway company
situated in these lands. To that extent, the learned Single
Judge set aside the reasoning and finding of the District
Magistrate. However, the learned Single Judge took the view
that so far as the levy of water-tax was concerned, only
those buildings in the complex of the respondent which were
within the radius of 600 feet were liable to pay water-tax.
It was also held that the assessment of water-tax had to be
done building-wise and all the buildings should not be
treated as one unit for that purpose. The assessment also
had to be made as per Section 140 (a) of the Act. So far as
levy of house tax was concerned, it was felt that all the
buildings situated in the "common compound" could not be
treated as one unit in a "common compound" and had to be
taxed separately by computing the annual letting value of
such buildings and their appurtenants. Resultantly both the
writ petitions were partly allowed by the common order dated
27.2.1970. That gave rise to two special appeals moved by
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the respondent railway company being aggrieved by the common
order of the learned Single Judge, in so far as the same was
party against the respondent on both the writ petitions.
While thee appellant Board also filed a cross special appeal
being aggrieved by the decision of the learned Single Judge
regarding water-tax. All the three appeals were heard
together and were disposed of by a common judgment by a
Division Bench of the High Court of Judicature at Allahabad
dated 22nd July, 1974. Against the said dicision, as noted
earlier, on the grant of certificate of fitness under
Article 133 of the Constitution of India, the present appeal
is filed by the Board.
RIVAL CONTENTIONS:
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Shri D.K. Garg, learned counsel for the appellant Board
submitted that so far as levy of water-tax was concerned,
the Division Bench of the High Court had committed a patent
error in taking the view that even if the water stand pipe
of the Board was at a distance of 600 feet from one of the
building of the respondent company situated in the same
"common compound" all other buildings situated in the very
same "common compound" and belonging to the same respondent
could not be subjected to water-tax if such buildings were
more than 600 feet of radius from the nearest water stand
pipe. He, however, fairly stated that if it is held that
all these buildings in the "common compound" were liable to
water-tax by assessing water-tax, sections 140(a) and 140(b)
of the Act as applicable at relevant time had to be applied
and assessment had to be made on that basis. So far as the
house tax was concerned, it was submitted by Shri Garg in
support of this appeal that all the buildings situated
within the "common compound" which belong to the same owner
respondent should be treated as one unit for the purpose of
assessing water-tax and house tax. It was next contended
that in any case the 10 per cent depreciation granted by the
District Magistrate and as confirmed by the learned Single
Judge and the Division Bench on the total assessable value
of such buildings for the purpose of house tax was ultra
vires and beyond the scope of the Act and could not have
been sustained by the Division Bench. On the other hand,
learned counsel for the Liquidator, who is now in-charge of
the property of the respondent defunct private railway
company, which is in voluntary winding up, submitted that
water-tax could not be levied on all those buildings
belonging to the respondent company which were situated in
the "common compound", if such buildings were beyond the
distance of 600 feet radius from the nearest water stand
pipe and, accordingly, the Division Bench of the High Court
was right in taking this view. It was submitted that even
assuming that for the levy of water-tax, radius of 600 feet
from the water stand pipe for one of the buildings may
attract the levy of water-tax for the entire complex. So
far as the house tax is concerned each individual house with
appurtenant land was a unit by itself and all such buildings
cannot be treated as one unit as tried to be submitted by
learned counsel for the appellant. He also submitted that
the grant of 10 per cent depreciation of the assessment of
annual letting value for the purpose of levy of water tax
and house tax on all these buildings was legal and valid.
We may mention that learned counsel for the appellant also
submitted that the special appeals were not maintainable
against the decision of the learned Single Judge. However,
this contention cannot be countenanced for the simple reason
that even the appellant, aggrieved by the order of the
Single Judge, has also filed a special appeal and had sought
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the decision of the Division Bench of the High Court on
merits. The Board’s appeal was also heard with the
companion appeals of the respondent. Hence, this contention
which is self-destructive cannot be entrained. Even
otherwise if such contention is entertained, it will not
advance the case of the appellant, as the respondent would
be well entitled to bring in challenge the main order of the
learned Single Judge directly before us and the entire
period till date will get excluded under Section 14 of the
Limitation Act, Thus, this technical contention cannot be
countenanced.
In view of the aforesaid rival contentions on merits
of the appeal, the following points arise for our
consideration:
1) Whether the Division Bench of the High Court
was right when it held that only those buildings of
the respondent, which were situated within the
radius of 600 feet from the nearest water stand pipe
of the appellant, could be subjected to water-tax.
2) Whether for imposition of house tax, all the
buildings of respondent situated in the "common
compound" and forming part of one complex could be
treated as one unit for imposing house tax;
3) Whether 10 per cent depreciation allowed by
the learned District Magistrate and as confirmed in
the High Court both by learned Single Judge and the
Division Bench on the assessable annual letting
value of such buildings was justified in law; and
4) What final order?
We will deal with these contentions seriatim.
Point No.1:
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So far as the contention concerning this point is
concerned, by a detailed Judgement in the companion Civil
Appeal No.1218 of 1976 decided today we have negatived this
contention. For the reasons recorded therein, therefore,
this contention fails. Point No.1 is, therefore, answered in
the negative in favour of the appellant and against the
respondent.
Point No.2:
So far as this contention of the appellant that all
the buildings situated within the "common compound"
belonging to the respondent railway company should be
treated as one unit for the purpose of house tax is
concerned, it becomes necessary for us to have a look at the
relevant statutory scheme. Section 128 (1)(i) of the Act
provides as under:
"128. Taxes which may be imposed (1) Subject to any
general rules or special orders of the State
Government in this behalf, the taxes which a
municipality may impose in the whole or any part of
a municipality are".
(i) a tax on the annual value of buildings or lands
or of both."
In view of the aforesaid provision, therefore, it has to be
held that the appellant Board, subject to special orders of
the State Government, is entitled to impose tax on the
annual value of buildings or lands or of both. It,
therefore, becomes clear that in the complex belonging to
the respondent as number of buildings are situated in the
"common compound", house tax can be levied by the appellant
both on the buildings and also on the other open land in
which such buildings are situated. These open lands
surrounding the buildings if not appurtenant to such
buildings would be a separate subject of house tax while
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buildings with their appurtenant land would form another
subject of house tax. Charge of house tax will settle on
all these buildings and lands not comprised in these
building. This becomes clear if we view Section 2
sub-section (2) of the Act which defines "buildings". It
reads as under:
"(2) "Building" means a house, outhouse, stable,
shed, hut or other enclosure or structure whether of
masonry bricks, wood, mud, metal or any other
material whatsoever, whether used as a human
dwelling or otherwise, and includes any verandah,
platform, plinth, staircase, doorstep, wall
including compound wall other than a boundary wall
of the garden or agricultural land not appurtenant
to a house but does not include a tent or other such
portable temporary shelter."
The said definition has to be read with the
definition of the term "compound" under Section 2,
sub-section (5). The said term reads as under:
"5. "Compound" means land, whether enclosed or
not, which is the appurtenance of a building
or the common appurtenance of several
buildings".
On a conjoint reading of these provisions therefore, it
becomes clear that before the appellant Board can impose
house tax under Section 140(a) on any property situated
within its municipal limits if it is a "building" the unit
of tax would be the building concerned including its
compound wall and the compound wall would also cover within
it the land situated in the said compound provided it is
appurtenant to the building or a "compound" appurtenant to
the several buildings. It is, therefore, obvious that if
the "common compound" in which the housing complex belonging
to the common owner is situated is not an appurtenance to
several buildings within that complex, then the said land
cannot be said to be a part and parcel of the building for
the purpose of house tax. For imposing house tax on
buildings under Section 140(1)(a) it has to be shown that
the buildings with their common appurtenant land or the land
in common appurtenance to several buildings situated nearby
are available for imposing such a tax thereon. It is only
such appurtenant land which can form part of the buildings
for attracting house tax assessment proceedings. But if the
"common compound" in which such buildings with appurtenant
lands are situated also includes land which cannot be said
to be a common appurtenance to several buildings situated
therein or separately appurtenant to any given building,
such land would be outside the sweep of the term "building".
Such land, however, on its own could be legitimately made
the subject matter of separate levy of house tax as an
independent unit being open land. As seen from Section
140(1)(b) itself as the Board can impose the tax on annual
value of lands which may not be covered by the sweep of the
definition of the term "building". Once that conclusion is
reached, it becomes obvious that all the buildings situated
along with their appurtenant lands in one "common compound"
belonging to the same owner cannot be treated as one unit
for the purpose of imposing house tax under Section 128
(1)(i). The reasoning of the High Court in this connection
cannot be found fault with on the scheme of the Act. It is
pertinent to note that "common compound" which is relevant
for the water-tax as per Section 129 of the Act to which we
have made a detailed reference while deciding the companion
appeal No. 1218 of 1976 is conspicuously absent in
connection with imposition of house tax on the annual value
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of buildings or lands or both as found in Section 128
(1)(i). We, therefore, endorse the reasoning of the
Division Bench of the High Court which rejected this
contention of the appellant Board. Point No.2 is therefore
answered in the negative against the appellant and in favour
of the respondent.
Point No.3:
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That takes us to the last main point for
consideration. It has to be kept in view that house tax is
to be imposed under Section 128 (1) (i) on the annual value
of buildings or lands or of both. Assessment of annual
value has to be done according to the requirement of Section
140 sub-section (1) which defines "annual value" as under:
"(1) "Annual value" means
(a) in the case of railway stations, hotels,
colleges, schools, hospitals, factories and other
such buildings, a proportion not exceeding five per
centrum to be fixed by rule made in this behalf of
the sum obtained by adding the estimated present
cost of exacting the building to the estimated value
of the land appurtenant thereto, and
(b) in the case of a building or land not falling
within the provisions of clause (a), the gross
annual rent for which such building, exclusive of
furniture or machinery therein, or such land is
actually let, or where the building or land is not
let, or in the opinion of the municipality is let
for a sum less than its fair letting value, might
reasonably be expected to let from year to year."
It becomes obvious in the light of the aforesaid provision
that up to the limit of 5 per cent of the annual value, the
Board can impose house tax on immovable properties, like
railway stations, hotels, colleges, school, hospital etc.
mentioned in the said provision but for doing so the
estimated present cost of erected buildings concerned has to
be kept in view and also the estimated value of the land
appurtenant thereto is also to be taken into consideration.
Now, the phrase "estimated present cost of erecting the
building" is entirely differently worded as compared to the
phrase "estimated value of the land appurtenant thereto".
The value of the building as well as the land appurtenant
once arrived at will have to be added for computing 5 per
cent ceiling up to which by rules the Municipal Board can
impose house tax on the buildings concerned. It becomes at
once clear that when appurtenant land is to be valued it’s
valuation has to be made as per its market value obtaining
at the time of assessment. But so far as the value of the
building to which such land is appurtenant goes, the
computation has to be made on the estimated present cost of
erecting the building to be subject to the tax. Meaning
thereby, at the time of assessment the cost of construction
of such building in its existing state is to be kept in
view. Hence such cost must be arrived at by keeping in view
the then existing state of the building and the cost which
would be incurred for erecting such a building.
Consequently it becomes obvious that while estimating the
present cost of erecting the building concerned, the
assessing authority has to keep in view the life of the
building and also the fact as to when it was earlier
constructed and in what present state the building is and
what will be the cost of erecting a new building so as to
result into erection of such an old building keeping in view
its life and wear and tear from which it has suffered since
it was put up. It is obvious that if the building is an old
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one the present cost of erecting such a building would
necessary require further consideration to what would be the
depreciated value of such a buildings; if a new building is
erected at the time of assessment. Such cost, obviously,
has to be sliced down by giving due weight to the
depreciation so as to make estimation of present cost of the
new building to ultimately become equal to the erection cost
of the building concerned in its depreciated state.
Consequently, it cannot be said that 10 per cent
depreciation allowed by the District Magistrate and as
confirmed by the High Court on the total estimated cost of
the building for bringing it within the assessable tax net
of house tax was an exercise which was ultra vires
provisions of the Act or beyond the jurisdiction of the
assessing authority. On the facts governing the case, it is
seen that the railway station belonging to the respondent,
was as old as 1905, there may be other buildings within the
complex which might have seen the light of the day years
before the time of assessment. Naturally, they would not be
new buildings which could have said to have been put up only
at the time of assessment proceedings. They were obviously
old buildings. It is not the case of the appellant or any
of them that these buildings were new buildings recently
constructed when assessment proceedings were initiated.
Consequently, a flat rate of 10 per cent depreciation as
granted by the District Magistrate while computing the
annual value for house tax purposes, in the present case,
cannot said to be an unauthorised exercise. The third point
for determination, therefore, has to be answered in the
affirmative against the appellant and in favour of the
respondent.
Point No.4:
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As a result of the aforesaid discussion, this
appeal succeeds so far as the first point is concerned.
However, it stands rejected so far as the last two
contentions are concerned. The appeal is partly allowed
accordingly and the Judgment and Order of the Division Bench
will stand modified in terms of this judgment in favour of
the appellant Board. Before parting with this appeal, we may
mention that during the pendency of this appeal, by an
interim order dated 20th January, 1977, a three Judge Bench
of this Court, directed as under:
"There will be stay of restitution pending the
disposal of the appeal.
The appellant undertakes not to press the
demand for the recovery of the amount of Rs.
98,950/- and any future dues from the respondent
during the pendency of the appeal in this Court.
The hearing of the appeal is expedited and
the same shall be listed for hearing along with
C.A.1218/76."
It is obvious that the aforesaid order in so far as the
interim stay deals with the right of the appellant Board to
impose water-tax on all the respondent is concerned, now
there will remain no occasion for the appellant Board to
grant any restitution to the respondent so far as recovery
of water-tax for the relevant time in dispute is concerned.
It will also be open to the appellant Board to press for
payment of recovery of water-tax which has remained unpaid
by the respondent for the relevant year subject to
assessment of all buildings as separate units of taxation.
However, as the appellant fails on the question of levy of
house tax as decided against it while answering point no.2,
so far as house tax levy is concerned, it will abide by the
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result of this appeal which is partly decided against the
appellant and will be assessed accordingly for the relevant
years. The appeal is partly allowed as aforesaid. No costs.