Full Judgment Text
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PETITIONER:
NEW MANEK CHOWK SPINNING AND WEAVINGMILLS CO. LTD. AND ORS
Vs.
RESPONDENT:
MUNICIPAL CORPORATION OF THE CITY OFAHMEDABAD AND ORS.
DATE OF JUDGMENT:
21/02/1967
BENCH:
MITTER, G.K.
BENCH:
MITTER, G.K.
RAO, K. SUBBA (CJ)
SHAH, J.C.
SHELAT, J.M.
BHARGAVA, VISHISHTHA
CITATION:
1967 AIR 1801 1967 SCR (2) 679
CITATOR INFO :
F 1967 SC1916 (3)
R 1969 SC 378 (5)
F 1970 SC1133 (13)
F 1970 SC1292 (2,3)
F 1972 SC 828 (23,26)
R 1972 SC 845 (30)
F 1975 SC1234 (2,3,6,9,10)
F 1980 SC1789 (36)
R 1983 SC 762 (14,16)
D 1988 SC 322 (1)
R 1990 SC 85 (22)
ACT:
Bombay Provincial Municipal Corporation Act (49 of 1949)-
Levy of proper tax on textile factories at flat rate per 100
sq. ft. of floor areass-Method whether permissible under
Act-Whether violative of Constitution of India, Art. 14-
Machinery specified by Commissioner to be included in the
term ’land’ for the purpose of taxation-Rules 7(2) and (3)
giving power to Commissioner to specify such machinery
without giving guidance-Rules whether suffer from excessive
delegation.
HEADNOTE:
The petitioners were certain textile mills of Ahmedabad.
They filed writ petitions under Art. 32 of the Constitution
against assessment to proper tax by the Corporation of the
City of Ahmedabad under the provisions of the Bombay
Provincial Municipal Corporation Act, 1949. The following
contentions fell for consideration : (i) The method of
adopting a flat rate for a floor area for determining the
annual value adopted by the Corporation was against the
provisions of the Act, as well as against all recognised
principles of valuation for the purpose of rating; it was
also violative of Art. 14; (ii) Rules 7(2) and (3) made
under the Act gave unguided power to the Commissioner to
specify machinery to be treated as part of the ’land’ for
the purpose of taxation and therefore were bad due to
excessive delegation. They also fell beyond the ambit of
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Entry 49 of List 11 of the Seventh Schedule.
HELD : (i) The method of levy of tax on the basis of floor
area was against the provisions of the Act and the Rules
made thereunder. The latter clearly laid down that the
rateable value of the property must be assessed after
determining the rack rent or the annual rental value in
respect of each premises which is to be computed on the
basis of the annual rent for which the property might
reasonably be expected to let from year to year. It did not
lie in the mouth of the municipality to say that the
irregularity was open to correction. [693 G-H; 694 A-B; 684
G-H]
(ii) It had not been established that condition prerequisite
for determination of annual value of textile factories at
Ahmedabad on the basis of the rental value per foot super of
floor area existed at the relevant time, nor had it been
shown that the so-called contractor’s method was adopted by
the Municipal authorities of Ahmedabad. The method was also
not one which is generally recognised by authorities on
rating. [693E]
(iii) Applied indiscriminately-as it appeared to have
been done in the present case-the method of taxation on the
basis of floor area was sure to give rise to inequalities as
there had been no classification of factories on any
rational basis. Further there did not seem to be any basis
for diving the factories and the buildings thereof under two
general classes as buildings for processing and buildings
for non-processing purposes Article 14 was therefore clearly
violated. [693 F-G]
680
Lokmanya Mills v. The Barsi Borough Municipality, [1962] 1
S.C.R. 306, relied on.
Bhuvaneswariah v. State, A.I.R. 1950 Mys. 170 and N. Kunhali
Haji v. State of Kerala, A.I.R. 1966 Ker. 14, referred to.
(iv) Rules 7(2) and (3) were invalid on account of excessive
delegation of powers by the Legislature. Under these rules
the specification of the classes of machinery for the
purpose of taxation is done by the Commissioner with the
approval of the Corporation irrespective of the question as
to where they are to be found. It therefore depends on the
arbitrary will of the Commissioner as to what machinery he
would specify and what he would not. Moreover, he is the
only person who can examine this question as there is no
right of appeal. [701 D-F]
(v) Entry 49 in List II of the Seventh Schedule only
permitted levy of tax on land and buildings. It did not
permit the levy of tax on machinery contained in or situate
on the building even though the machinery was there for the
use of the building for a particular purpose. Rule 7(2)
which levied such a tax was therefore beyond the legislative
competence of the State. [701 A-C]
In re. The Central Provinces and Berar Act No. XIV of 1938,
[1939] F.C.R. 18, Diamond Sugar Mills Ltd. & Anr,. v. State
of Uttar Pradesh & Anr. [1961] 3 S.C.R. 242, Ralla Ram v.
The Province of East Punjab, [1948] F.C.R. 207, R. v. St.
Nicholas, Gloucester, [1783] I.T.R. 723, Kirby v. Hunslet
Union [1906] A.C. 43 and Smith v. Willesden Union, [1919] 89
L.J.K.B. 137, considered.
JUDGMENT:
ORIGINAL JURISDICTION: Writ Petitions Nos. 133, 156 & 157,
159-171, 178, 184, 206-210 and 234 of 1966.
Writ Petitions under Art. 32 of the Constitution of India
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for enforcement of fundamental rights.
S. T. Desai, K. M. Desai, and Ravinder Narain, for the
petitioners (in all the petitions).
M. C. Setalvad, Purshottam Trikamdas, Vithal Bhai B. Patel
and L N. Shroff, for respondents Nos. 1 and 2 (in W.P. No.
133 of 1966.
Purshottam Trikamdas Vithalbhai B. Patel and L N. Shroff,
correspondents Nos. 1 and 2 (in W. Ps. Nos. 156 and 206 of
1966).
Vithalbhai B. Patel and I.N. Shroff, for respondents 1 Nos.
1 and 2 (in W.P. Nos. 157, 159-171, 178, 184, 207-210 and
234 of 1966.
B. Sen and R. H. Dhebar, for respondent No. 3 (in all the
petitions).
The Judgment of the Court was delivered by
Mitter, J. This is a group of Writ Petitions under Art. 32
of the Constitution challenging the validity of the
assessment book relating to special Property section
prepared and published by the Municipal Corporation of the
City of Ahmedabad by which the
681
Municipality seeks to impose or has imposed property tax on
properties described as Special Properties like textile
mills, factories, buildings of the universities, etc. on the
basis of a flat rate per 100 sq. ft. of the floor area of
the property situate within the municipal limits of the
city. In Writ Petitions Nos. 133, 156-157, 159-171, 178,
184 and 234 of 1966, the challenge relates to the validity
of the assessment book relating to the year 1966-67; in Writ
Petitions No. 206 and 210 of 1966 the challenge relates to
the years 1964-65 and 1965-66 while in W.P. Nos. 207, 208
and 209 of 1966 the challenge relates only to the year 1965-
66. The difference lies in this So, far as the assessments
for the year 1966-67 are concerned, there has been no
authentication of the assessment book after the disposal of
all complaints relating to the entries made in the book,
while the challenge relating to the years 1964-65 and 1965-
66 is made at a stage after such authentication and in
respect of which attachments of property belonging to the
assessees have already been levied. In W. P. No. 234 of
1966 filed in October 1966, the issue of a distress warrant
and the levy of attachment are also challenged. Several
textile mills in the city of Ahmedabad are before this Court
in these petitions and they have a common complaint against
the assessments.
To appreciate the points raised in these petitions, it is
necessary to take a bird’s eye view of the relevant
provisions of the Bombay Provincial Municipal Corporations
Act (LIX of 1949) under which the assessments were purported
to be made. Section 127(1) of the Act makes it obligatory
on the Corporation of the City of Ahmedabad to impose, among
other taxes, a property tax. Sub-s. (3) of the section
provides that municipal taxes shall be assessed and levied
in accordance with the provisions of the Act and the rules
and sub-s. (4) lays down that nothing in this section shall
authorise the imposition of any tax which the State
Legislature has no power to impose in the State under the
Constitution; (it is needless to add that the Act has been
amended after the Constitution came into force). Section
128 empowers the Corporation to recover the tax by the
processes laid down in the section in the manner prescribed
by rules. These are inter alia (1) by presenting a bill;
(2) by serving a written notice of demand; (3) by distraint
and sale of the defaulter’s movable property; and (4) by the
attachment and sale of a defaulter’s immovable property.
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Section 129 lays down that for the purposes of sub-s. (1) of
s. 127 property taxes shall comprise the taxes mentioned
which shall, subject to the exceptions, limitations and
conditions provided, be levied on buildings and lands in the
city. One of these mentioned in cl. (c) is a general tax of
not less than 12 per cent of their rateable value which may
be levied, if the Corporation so determines, on a graduated
scale. A building has been defined in s. 2 sub-s. (5) and
land in S. 2 sub-s. (30). ’Land’ under this definition
includes land which is being built upon or is built upon or
covered
682
with water, benefits to arise out of land, things attached
to the earth or permanently fastened to anything attached to
the earth and rights created by legislative enactment over
any street. Under s. 2 (49) ’property tax’ means a tax on
buildings and lands in the city. Section 2(53) defines
’rack rent’ as the amount of the annual rent for which the
premises with reference to which the term is used might
reasonably be expected to let from year to year as
ascertained for the purpose of fixing the rateable value of
such premises and under s. 2(54) ’rateable value’ means the
value of any building or land fixed in accordance with the
provisions of the Act and the rules for the purpose of
assessment to property taxes. Under s. 453 the rules in the
Schedule as amended from time to time shall be deemed to be
part of the Act. The relevant taxation rules are to be
found in Chapter VIII of the rules. Rule 7(1) provides that
"In order to fix the rateable value of any
building or land assessable to a property tax
there shall be deducted from the amount of the
annual rent for which such land or building
might reasonably be expected to let from year
to year a sum equal to ten per cent of the
said annual rent, and the said deduction shall
be in lieu of all allowances for repairs or on
any other account whatever."
Under r. 7(2) all plant and machinery contained’ or situate
in or upon any building or land and belonging to any of the
classes specified from time to time by public notice by the
Commissioner, with the approval of the Corporation, shall be
deemed to form part of such building or land for the purpose
of fixing the rateable value thereof under sub-r. (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 building or land. Rule 7(3) runs:
"A statement setting out clearly the classes
of plant and machinery specified from time to
time by the Commissioner under sub-rule (2)
and describing in detail what plant and
machinery falls within each such class shall
be prepared by the Commissioner under the
directions of the Standing Committee and shall
be open to inspection at all reasonable hours
by members of the public at the chief
municipal office."
Rule 9 provides inter alia:
"The Commissioner shall keep a book, to be
called "the assessment-book", in which shall
be entered every official year-
(a) a list of all buildings and lands in the
city. distinguishing each either by name or
number as he shall think fit, and containing
such particulars regarding the location or
nature of each as will, in his opinion, be
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sufficient for identification;
683
(b) the rateable value of each such building
and land determined in accordance with the
provisions of this Act and the rules;
(c) the name of the person primarily liable
for the payment of the property taxes, if any,
leviable on each such building or land;
(d) if any such building or land is not
liable to be assessed to the general tax, the
reason of such non-liability;
(e) when the rates of the property-taxes to
be levied for the year have been daily fixed
by the Corporation and the period fixed by
public notice, as hereinafter provided, or the
receipt of complaints against the amount of
rateable value entered in any portion of the
assessment book has expired, and in the case
of any such entry which is complained against,
when such complaint has been disposed of in
accordance with the provisions hereinafter
contained, the amount at which each building
or land entered in such portion of the
assessment book is assessed to each of the
property-taxes, if any, leviable thereon;
Rule 10 provides for preparation of ward. assessment books
for each of the wards into which the city is for the time
being divided for the purpose of election and the ward
assessment books and their respective parts shall
collectively constitute the assessment book. Under r. 13(1)
when the entries required by cls. (a), (b), (c) and (d) of
rule 9 have been completed, as far as practicable, in any
ward assessment book, the Commissioner shall give public
notice thereof and of the place where the ward assessment
book or a copy of it may be inspected. Under r. 15(i) the
Commissioner must, at the time and in the manner prescribed
in r. 13, give public notice of a day, not being less than
15 days from the publication of such notice, on or before
which complaints against the amount of any rateable value
entered in the ward assessment book will be received in hit
office. Rule 16 provides for the time and manner of filing
complaints against valuation. Rule 17 lays down that the
Commissioner must give notice to each complainant of the
time and place when his complaint will be investigated.
Rule 18 prescribes for the investigation and disposal of the
complaint in the presence of the complainant by the
Commissioner. Under r. 19(1) when all such complaints, if
any, have been disposed of and the entries required by cl.
(e) of r. 9 have been completed in the ward assessment book
the said book shall be authenticated by the Commissioner who
shall
684
certify under his signature that except in the cases, if
any, in which amendments have been made as shown therein, no
valid objection had been made to the rateable value entered
in the said book. Under sub-r. (2) of the said rule, the
ward assessment book shall thereupon, subject to such
alterations as may be made under the provisions of r. 20, be
accepted as conclusive evidence of the amount of each
property tax leviable on each building and land in the ward
in the official year to which the book relates. Rule 21(1)
lays down that it shall not be necessary to prepare a new
assessment book every official year and that subject to the
provisions of sub-r. (2) the Commissioner may adopt the
entries in the last preceding year’s book with such
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alterations as he thinks fit, as the entries for each new
year. Under sub-r. (2) a new assessment book has to be pre-
pared at least once in every four years.
The writ petition of which the papers were placed in detail
before the Court is No. 133 of 1966 preferred by the New
Manek Chowk Spinning and Weaving Mills Ltd. The respondents
are: (1) the Municipal Corporation of the City of Ahmedabad,
(2) the Deputy Municipal Commissioner of the same city and
(3) the State of Gujarat. The challenge in this case
relates to the validity of the assessment book for the year
1966-67. The complaint is that respondent No. 1 by the said
book imposed property tax on the petitioner on the basis of
a flat rate per 100 sq. ft. of the floor area of the
petitioners’ property as also of all other textile mills,
factories, university buildings etc. under r. 9 of the
Taxation Rules. Annexure ’A’ to the petition gives a
synopsis of the entries relating to the year of assessment
1966-67. It is divided into three parts, the first being
headed ’buildings’, the second ’additional land’ and the
third ’machinery’. So far as ’buildings’ are concerned,
there are three columns, the first being the area of the
building in square feet, the second monthly rental per 100
sq. ft. and the third the annual rental. The building is
again divided into two classes, one for processing and the
other non-processing. The monthly rental for the processing
part of the building is taken at Rs. 6-10-0 per 100 sq. ft.
while that for the non-processing portion is Rs. 5-4-0 per
100 sq. ft. With regard to the additional land, the
valuation is on the basis of the market rate per sq. ft. of
land and as regards machinery the valuation is taken to be
effective value of which the annual rental at 71 % is taken
as the annual value. The petitioner’s complaint is that
while under the provisions of the Act and the rules made
thereunder it was clear that the rateable value of the
property must be arrived at after determining the rack rent
or the annual rental value in respect of each premises which
is to be computed on the basis of the annual rent for which
the property might reasonably be expected to let from year
to year, the municipal corporation of Ahmedabad had adopted
the method of determining the annual rent on a flat rate
method according to the floor area,
685
irrespective of the locality, quality, age and nature of the
property which was not a recognised method and was not
permissible in law. According to the petition, a formula on
the flat rate method of a fixed amount per 100 sq. ft. for
arriving at the rental was not only against the express
provisions of the Act but was also against the recognised
concepts of valuation in the Law of Rating. The method
adopted by respondent No. 1 in this case was arbitrary and
repugnant to the petitioner’s right guaranteed under Art. 14
of’ the Constitution. It was said that the buildings of the
textile mills. were situate in different localities some of
which were in the heart of the city and some on its
outskirts. There was no uniformity in the floor area of the
mills concerned nor was the age of the buildings in all
cases the same. It was further complained that buildings in
respect of the properties covered by the special property
section included textile mills taxed on the fixed rate
method whereas. buildings other than those of textile mills
were taxed on the basis of annual rent for which such
premises were reasonably expected to let from year to year.
A further complaint was made that respondent No. 1 had
assessed the property tax apart from buildings and lands on
the plant and machinery of the petitioner. It was submitted
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that the imposition of property tax on plant and machinery
was beyond the legislative competence of the State. Sub-r.
(3) of r. 7 was challenged as giving the Commissioner
arbitrary and unguided power to set out the classes of plant
and machinery and to describe what plant and machinery fell
within each such class. for the purpose of assessment of
property tax. Moreover, such classification by the
Commissioner was made final and binding and no right was
given to any person affected thereby to object to the same
nor was any right of appeal against such decision of the
Commissioner provided. A complaint was also made that
respondent No. 1 had not prepared any ward assessment books
for the year 1966-67. It is the petitioner’s case that the
figures in the assessment book for the year 1966-67 were
adopted from those of the previous year 1965-66, under r. 21
of the Taxation Rules. It was submitted that such adoption
was invalid and improper inasmuch as the assessment books
for the previous years were bad in law. The assessment
books for the previous years were also bad in law inasmuch
as the same were authenticated under r. 19 by the Deputy
Municipal Commissioner and not by the Commissioner as
contemplated in the said rule. The complaints were not
considered by the Municipal Commissioner him self. It was
said that the action of the Deputy Municipal Commissioner
under a purported delegation of power by order dated
November 20, 1964 was invalid as a quasi-judicial function
could not be delegated. In this connection, reference was.
made to s. 49(i) of the Act. It was further contended that
even in the year 1966-67 the power of conducting proceedings
under rr.13,. 15, 16, 17, 18 and 19 of the Taxation Rules
had been deputed by the Municipal Commissioner in favour of
the Deputy Municipal
686
Commissioner and as such deputation was bad in law.
Finally, the petition proceeded on the basis that the
imposition of property tax on the flat rate method on
textile mills as under the special property section was
ultra vires the Act and the rules made therein and was
violative of the fundamental rights of the petitioner
guaranteed under Arts. 14, 31(i) and 19 of the Constitution
and the procedure adopted in preparing the assessment book
was ultra wires the procedure laid down by the Act and the
rules. The grounds of challenge are formulated in paragraph
35 of the petition. Among the prayers are a writ of
mandamus or any similar writ directing respondent No. 1 to
forbear from taking any steps for the imposition and
realisation of the property tax pursuant to the preparation
of the assessment book for the year 1966-67 relating to the
Special Property section; a writ of certiorari or other
similar writ to quash the assessment book for the said year;
a writ of prohibition or other order restraining respondent
No. 2, the Deputy Municipal Commissioner from acting under
deputation under s. 49 (1) and. other reliefs.
The points raised in the counter affidavit are as follows:-
(1) The tax being based on the amount of rent for which the
property is or may be let from year to year, such rent has
got to be ascertained from either the actual or the
hypothetical rent for which the property along with all the
equipment like plant and machinery and amenities that it
contains, is or may be let and such annual rent where the
property is let as a factory equipped as a factory would be
the rent that it would fetch as a factory and not as a bare
building. (2) Rule 7(2) only gives power to the Corporation
to include such plant and machinery as it may determine from
time to time taking into consideration various factors like
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the situation of the city, its facilities for transport to
other parts of the State and the country, whether the
industry is well established or is just being developed etc.
(3) Although under r. 9(b) the amount of the rateable value
of the property in the previous year is to be entered, it is
open to the Corporation to take any fresh circumstances into
consideration before adopting the entry from the earlier
year. Entry in col. (b) is neither the imposition of the
tax nor the final amount on the basis whereof the tax is
leviable. It is in the nature of a proposal by the
Corporation and is subject to objection by the assessee and
the tax becomes leviable after the objections have been
disposed of and the amount is entered in column (e). (4)
After the tax has become leviable under the Rules, the
assessee is entitled, if he so desires, to file an appeal
under s. 406 against either the rateable value or the tax
fixed or charged under the Act. The Court of Small Causes
can hear and determine the appeal. Under s. 4 10 there is a
provision for a reference to the District Court and s. 411
provides for an appeal to it. The High Court would have the
power of revision of the order of the District Judge. (5)
The fixing of the rateable value on
687
floor area basis is in accordance with the accepted
principles and methods in the Law of Rating. In various
cities it is common to let out premises on the basis of the
floor area. The computation of rateable value by this means
depends on the estimate of the annual, rent at which the
property may be reasonably expected to let from year to
year. The situation of the building, The age of the
building, the material used for the building are not
relevant for, if the mill containing all plant and machinery
and other equipment is let, it is let as a factory for
carrying on a business of manufacture of textiles. The
grievance of the petitioner is open to redress under s. 406
and the other sections mentioned. (6) It is not incumbent on
respondent No. 1 to maintain any ward assessment books, and
(7) under s. 49(1) the power to dispose of complaints
against the fixing of rateable value was duty deputed to the
Deputy Commissioner and there was nothing illegal about it.
The points formulated by Mr. S. T. Desai are as follows:-(1)
The method of adopting a flat rate for a floor area for
determining the annual value adopted by the Municipal
Corporation of Ahmedabad was against the express provisions
of the Act. (2) The method was also in violation of all
recognised concepts and principles of valuation for the
purpose of rating. (3) The imposition of tax on a flat rate
method was violative of Art. 14 of the Constitution. (4)
Rule 7(2) and r. 7(3) were ultra vires the Constitution as
beyond the legislative competence and entry 49 of List 11.
(5) The delegation of powers of the Commissioner to the
Deputy Commissioner was. bad as it involved the delegation
of quasi-judicial power, and (6) Rule 7(3) suffered from
excessive delegation and was violative of’ Art. 14 of the
Constitution.
The first, second and third points may be taken together.
In the forefront of his argument Mr. Desai relied on a
decision of this Court in The Lokmanya Mills v. The Barsi
Borough Municipality.(1) There the common question in the
appeals related to the validity of r. 2C framed under the
Bombay Municipal Boroughs Act, 1925. Under s. 73 of the Act
the Municipality was entitled to levy a rate on lands and
buildings. In 1947 new rules were made after obtaining the
approval of the Government of Bombay for the purpose of
enhancing the assessment of lands and buildings within the
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area of the Municipality. Rule 2C of the new rules
provided that:
"As regards Mills, factories and buildings
relating thereto, the annual letting value
shall be fixed at Rs. 40/per 100 square feet
or part thereof for every floor, ground floor
or cellar and the tax shall be assessed on the
said annual letting value, at the ordinary
rate.
(1) [1962] 1 S.C.R. 306.
688
The Municipality prepared an assessment list under the new
scheme of taxation in respect of factories and buildings
relating thereto and issued notices of demand calling upon
the appellants to pay house tax and water tax so assessed.
The question before this ,Court was whether rule 2C was
ultra vires. This Court examined the provisions of the Act
under which the rate could be levied on lands and buildings’
assessed on the valuation thereof based on annual letting
value. It was said:
"If the rate is to be levied on the basis of
capital value, the building to be taxed must
be valued according to some recognised method
of valuation: if the rate is to be levied on
the basis of the annual letting value, the
building must be valued at the annual rental
which a hypothetical tenant may pay in respect
of the building. The Municipality ignored
both the methods of valuation and adopted a
method not sanctioned by the Act. By
prescribing valuation computed on the area of
the factory building, the Municipality not
only fixed arbitrarily the annual letting
value which bore no relation to the rental
which a tenant may reasonably pay, but
rendered the statutory right of the tax-payer
to challenge the valuation illusory. An
assessment list prepared under s. 78, before
it is authenticated and finalised, must be
published and the taxpayers must be given an
opportunity to object to the valuation. By
the assessment list in which the valuation is
not based upon the capital value of the
building or the rental which the building may
fetch, but on the floor area, the objection
which the tax-payers may raise is in substance
restricted to the area and not to the
valuation."
It was further observed that if the Municipality had adopted
any of the recognised methods of valuation for assessing the
annual letting value, the tax would not be open to
challenge. The Court further noted:
"In any event, there is no evidence on the
record of this case that the factories and
"buildings relating thereto" such as
warehouses, godowns and shops of the Mills
situate in the compound of the mills, may be
separately let at the uniform rate prescribed
by the Municipality. The vice of the rule
lies in an assumed uniformity of return per
square foot which structures of different
classes which are in their nature not similar,
may reasonably fetch if let out to tenants and
in the virtual deprivation to the rate-payer
of his statutory right to object to the
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valuation."
It may be interesting to note that an Act was passed to
validate the said imposition. On a Writ Petition No. 1476
of 1966 the Bombay High Court held the Validating Act to be
ultra vires. The
689
contention put forward before the Bombay High Court was
inter alia that the levy of a tax on buildings and lands on
the basis of floor area was necessarily arbitrary and
capricious in that the valuation of buildings and lands so
arrived at could have no relation to their actual value, for
the value of buildings depended, among other things, upon
location, age, mode of construction, material used etc. A
uniform rate on buildings and lands of widely differing
values was clearly discriminatory because of lack of
classification leading to inequality. It was further argued
that there was violation of Art. 14 in that the owners of
mills and factories were discriminated against as compared
to the owners of other buildings and lands. These grounds
were upheld by the Bombay High Court.
Reference was made by Mr. Desai to decisions of other High
Courts wherein similar observations were made. In Bhuvanes-
wariah v. State(1), the Mysore Buildings Tax Act, 1963 and
Schedule 11 thereto were challenged before the High Court of
Mysore. It was pointed out that under the scheme of the Act
a cow-shed and an ultra modern cinema house in the best
locality would be charged with the same amount of tax if the
extent of floorage of both were the same. The High Court
held that the Act suffered from lack of rational
classification because:
"The floorage basis is not only unscientific,
it is something arbitrary and mechanical. It
does not conform to any of the known
principles of taxation. In the very nature of
things, under that basis the incidence of tax
must fall unevenly on things similar."
N. Kunhali Haji v. State of Kerala(2) was a case where
under the Kerala Buildings Tax Act, 1961 (19 of 1961) tax
was sought to be imposed not on the basis of letting value
but on the floor area of buildings. It was held that the
lack of classification had resulted in inequality with the
result that the provisions of the Act were held to be
invalid. Relying on the above decisions, Mr. Desai argued
that the method adopted by the Municipal Corporation of
Abmedabad was against all known principles of rating and was
violative of Art. 14 of the Constitution. He submitted that
there were a number of textile mills situated in different
parts of the city some of which were old and some were of
fairly recent origin. Their method of construction was not
the same, some being more permanent in the nature of things
than others. Apart from the question of the valuation of
plant and machinery, Mr. Desai argued, it was impossible to
suggest that a hypothetical tenant would be agreeable to
take on rent the building of a mill which was well-built and
of recent origin as another which was fairly old and not
constructed with the same kind of material. Mr. Desai
further argued that the situation of the mill was another
factor which any tenant would
(1) A.I.R. 1965 Mysore page 170.
(2) A.I.R. 1966 Kerala 14.
690
take into consideration and even if the buildings of the two
mills were otherwise similar, a tenant would not agree to
pay for one situated on the outskirts of the city the same
rent as he would be willing to pay for the one in the heart
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of it. In these circumstances, he argued it was wholly
unreasonable to think that a tenant would be willing to pay
Rs. 6-10-0 per 100 sq. R. of the floor area whether it was
in the heart of the city or in the outskirts of it, whether
the building was old or whether it was new and whether it
was well constructed or ill-constructed.
Mr. Setalvad tried to argue that such a method of valuation
was not unknown and in any event a person who wanted to take
on rent a textile factory would only be concerned with what
profits he could make out of it and that it did not matter
to him as to where it was situate, in the city, whether the
building was old or whether it was new. or whether it was
constructed properly with first class material or not.
According to Mr. Setalvad, the tenant would only go by the
use to which the building could be put. So far as the
methods of valuation are concerned, we may refer to certain
well known n textbook,, on the subject. Halsbury in Vol. 32
(page 76, Art. 106-Third Edition) points out:
"Except in the case of public utility
undertakings which, in the absence of special
circumstances, must as a matter of law be
valued on the profits basis, there is no rule
of law as to the method of valuation to be
adopted for rating."
This does not however mean that it is open to municipal
authorities to fix upon any scale and say that they will
adopt it. They must show, if challenged, that the scale
adopted by them allows the fixing of an annual value and
provides a basis for determination of the same as that which
a hypothetical tenant might be expected to pay for the
building. All the textbooks lay down certain methods of
valuation. As Halsbury points out at page 77, Art. 108:
"In the absence of rental evidence of value,
the accounts, receipts or profits of the
occupier of the hereditament may be relevant.
The profits themselves are not rateable but
they may serve to indicate the rent at which
the hereditament might reasonably be expected
to let, particularly whether profit is the
motive of the hypothetical tenant in taking
the hereditament, or where, the trade can only
be carried on upon that hereditament."
In Article 109, the learned author points out
"Where neither actual rents nor the profits of
trade afford evidence of annual rental value,
a percentage of the cost of construction of
structural value of the hereditament, or of a
suitable hereditament, is sometimes taken as
evidence."
691
This is referred to loosely as "the contractor’s method".
The value taken is sometimes called the "effective" capital
value, that is to say, the capital value leaving out of
account expenditure on unnecessary ornamentation, or
accommodation surplus to requirements and after allowing, if
necessary, for age and obsolescence. The percentage to be
applied to capital value is that prevailing in the market,
and not necessarily that at which the actual occupier can
borrow or obtain money. Mr. Setalvad placed reliance on
Faraday on Rating (5th Edition) where the learned author
gives four recognised methods of arriving at the annual
value of a hereditament at page 24 of the book, these being-
1. The "competitive or comparative method"
i.e. by finding out rents actually paid for
the hereditament in question and/or others of
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a similar kind, adjusting them to bring into
line with the statutory conditions, and thus
arriving directly at an estimate of the
rent..........
2. The "profits basis," or calculation by
reference to receipts and expenditure, which
is now required to be applied to certain
public utility undertakings, and may properly
be applied to any other hereditament on which
a business is carried on which enjoys
privileges in the nature of a
monopoly............
3. The "contractor’s method," by which it
is assumed, in the absence of any other better
way of estimating the rent, that the tenant
would arrive at it by finding-the figure for
which a contractor would provide him with
premises neither more nor less suitable for
his purpose, and the rate of interest on that
cost which the contractor would charge him as
rent.
4. The "unit method" by which schools may
be valued at so much a place, hospitals at so
much a bed, or certain industrial premises at
so much a furnace, or other unit of output.
Mr. Setalvad laid particular stress on a
passage at page 164 reading :
"Modern factories are frequently found in
groups due to Town Planning or in some cases
because Trading Estates have been developed.
Under these conditions it is often possible to
arrive at the rental value per foot super of
floor area by applying the contractor’s basis
to typical factories or because there are
sufficient rents or by a combination of the
two methods."
This is followed by an illustration of a bakery and
warehouse which goes to show that different portions of the
building which were of different nature were measured and
valued differently and then
M2Sup.CI/67-15
692
on the valuation of the total the floor area method was
adopted for the purpose of similar buildings. As the
learned author-himself.-points out at page 1 5:
"The floor area method of valuation is usually
used’ where there are numerous factories in an
area mostly similar and used for the same
trade. In the North mills, are frequently
valued on this method."
The learned author also stresses that great care must be
taken in applying the price per square foot which will vary
according to the character of the factory or mill. Lower
down in the same page, the learned author points out that a
factory put up years ago may contain machinery which has
become old fashioned and modern machines for the same
purpose might occupy far more or less space, and therefore,
require larger or smaller buildings, and probably reduce the
wages bill and effect other economies whilst at the same
time giving more output than the old cumbersome undertaking.
According to the author, the value of the old factory, from
a rental point of view, would be less than that of a new one
with the same power of production, since it would be
impossible to find a tenant who would give the same rent for
both concerns in as much as he could obviously operate in
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the new buildings more economically than in the old one.
There is nothing in the counter affidavit to show that
conditions in the City of Ahmedabad with regard to textiles
mills are such, as would make the method laid down at p. 164
of Faraday’s. book applicable. The affidavit does not
purport to show that the factories were: constructed at or
about the same time or in groups or were so similar in their
operation that their rental value could be determined at per
foot super of floor area applying the contractor’s There is
nothing, to show that any textile factory was, valued on the
contractor’s basis and that from the figures of valuation
go worked out, the rental value per foot super of floor area
wag determined On, the other hand, the affidavit suggests
that because ’in various cities it was common to let out
premises on the basis ,of floor area, the municipal
authorities of Ahmedabad had resorted to this method for
fixing the rateable value. We can take-judicial notice of
the-fact that sometimes godowns or buildings constructed for
office purposes are let out on the basis of floor area but-
even then, the rate would vary according to the nature of
the building and according to the site of the building in
the city. It would also depend upon the age of the building
and the amenities provided therein. It would be impossible
to say that in the City of Ahmedabad a tenant would be
willing to pay at the same rate of rent for factory
accommodation, no matter where the building was situate or
when it was put up or how it was constructed.
693
Our attention was also drawn to other well known books on
Rating like Ryde on Rating, Bean and Lockwood on Rating an
Graham Eyre on Rating. Incidentally, we may refer to Witton
Booth on Valuations for Rating (Fourth Edition) at page 125
wherein the learned author states
"Reductions of floor areas to units, as
Already described, are necessary to effect
reliable comparisons, but it is merely a
mechanical process used in preparing material
for the valuation, the actual valuation being
the decision and application of the
appropriate rate or rental value per unit of
area. This may be exactly to a standard, and,
indeed, it probably will be to the majority of
properties where these are so nearly alike in
character as to be regarded for rating
purposes as identical. Where, however, rates
or rental values per unit of area ale applied
indiscriminately, without discernment- on the
wholesale, as it were-inequalities are certain
to arise, and these give rise to the whole
method being caustically Preferred to as
"valuations by the foot-rule."
The above comment is sufficient to show that this method can
only be applied Where the majority of properties are so
nearly Alike in character as to be regarded identical for
rating purposes. There is no such statement in the
affidavit.
We are therefore not satisfied that conditions prerequisite
for determination of annual value of textiles factories in
Ahmedabad on the basis of rental value per foot super of
floor area existed at the relevant time nor has. it been
shown to us that- the. so-called contractor’s basis was
adopted by the municipal authorities. of Ahmedabad. The
method is not. also one which is generally recognise by
authorities on rating. Applied indiscriminately as it
appears to have been done in this case-it is sure to give
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rise to, inequalities,: as there has been no classification
of the factories on any rational basis. Further, there does
not seem to be any basis for dividing the factories and the
buildings thereof under two general classes as
buildings.used for processing and buildings for
Reprocessing. purposes. What was said by this Court in The
Lokmanya Mills’ case(1) applies with equal force to what has
been done here and- we must hold that the municipality did
not observe the law and failed in its duty to determine the
rateable value of each building and land, comprised in each
of the textile factories in terms of r. 9(b) of the- rules
under the Bombay Provincial Municipal Corporations Act, 1949
so tar as the assessment book for the year 1966-67 is
concerned.
Mr. Setalvad argued that at that stage there is only a
proposal and even if the municipality had acted arbitrarily
it was open to the
(1) [1962] 1 S. C. R. 306.
694
assessees to take objection thereto and have proper
valuations made and the assessment book prepared properly.
We cannot accept this argument. If the municipality fails
in its initial duty to act in terms of r. 9(b) it does not
lie in its mouth to say that any irregularity, however
patent on the face of it, is open to correction. Moreover,
the methods of correction in this regard are really
illusory. The Small Causes Court cannot decide the
applicability of Art. 14 of the Constitution and according
to the judgment of the Bombay High Court in Balkrishna v.
Poona Municipal Corporation(1) (by which the District Judge
would be bound).
"...... the words used in s. 406(1) of the
Act,. do not cover the vires of the tax or the
legality of the tax which is sought to be
levied."
Earlier, the learned Judges had pointed out
after noting ss, 406 to 413 that :
"the decision of Judge aforesaid upon any
appeal against any such value or tax if no
appeal is made therefrom under s. 411 and if
such appeal is made the decision of the
District Court in such appeal shall be final."
From this it follows that it would be useless for the
assessee to take objections or file appeals against the
decisions on rateable value to the authorities prescribed by
the Act if he was challenging the determination of the
rateable value as being violative of Art. 14 of the
Constitution. It is no answer to such a charge to say that
the rateable value could be determined properly by the
municipal authorities acting under the Act and the rules
thereunder when they do not resort to any of the well known-
methods of valuation and cannot justify their arbitrary
method.
With regard to the writ petitions questioning the annual
values appearing in the assessment books for the years 1964-
65 and 1965-66 which,were similarly prepared, a point of res
judicata was taken in that some of these mills which have
filed writ petitions before this court had challenged the
assessment book in Writ petitions under Art. 226 of the
Constitution before the Gujarat High Court and our attention
was drawn to the judgment of the Gujarat High Court in W.P.
No. 1365 of 1965 decided by that court very recently. The
decision in that case cannot operate as res judicata for the
simple reason that the learned Judges pointed out at page
141 of the transcript of the judgment made over to us that
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there were not sufficient averments with regard to the plea
of discrimination and violation of Art. 14 and the
submission based on these grounds was therefore rejected and
not gone into. To quote from the judgment:
"In the absence of any specific averment to
the aforesaid effect, it is quite clear that
the aforesaid plea cannot be
(1) 65 D. L. R. 119.
6 9 5
said to have been properly pleaded.
Therefore, we reject that submission on that
ground."
Moreover, it appears to us that the right of appeal in a
case where the rateable value is challenged on- the ground
of Art. 14 is hardly of any use to the assessee. As already
noted, s. 128 of the Act shows that a municipal tax may be
recovered by presenting a bill or by serving a written
notice of demand or by attachment and sale of the
defaulter’s immovable property etc. As the Commissioner is
not likely to pay heed to any complaint against the
determination of any rateable value based on Art. 14 of the
Constitution, he is bound to authenticate the assessment
book under r. 19 and can under r. 39 cause to be presented
to the assessee a bill for the amount of the tax due. Under
r. 41 he can serve upon the person liable for the payment of
the tax a notice of demand in form if the amount of-the tax
has not been paid into the municipal office or deposited
with him as required by sub-s. (2) of s. 406 within 15 days
from the service of the bill. Rule 42(1) lAys down that if
the person to whom the notice of demand has been served
under r. 41 does not within 15 days from the said service
pay the sum demanded or show sufficient cause for non-
payment of the same to the satisfaction of the Commissioner
and if no appeal is preferred against the said tax, such sum
with costs of recovery may be levied under a warrant in form
to be issued by the Commissioner by distress and sale of
movable property of the defaulter or the attachment and sale
of immovable property of the defaulter etc. Section 406(1)
provides for appeals against any rateable value or tax fixed
or charged under the Act. Section 406(2) provides inter
alia as follows:-
"No such appeal shall be heard unless-
(a) it is brought within fifteen days after
the accrual of the cause of complaint;
(b) in the case of an appeal against a
rateable value a complaint has previously been
made to the Commissioner as provided under
this Act and such complaint has been disposed
of;
(e) in the case of an appeal against a tax,
or in the case of an appeal made against a
rateable value after; a bill for any property
tax assessed upon such value has been pre-
sented to the appellant, the amount claimed
from the appellant has been deposited by him
with the Commissioner."
The net result of all this is that unless the assessee pays
the amount of tax demanded, his appeal cannot be heard so
that if he questions the rateable value or the levy of the
tax, he must in any event, deposit the amount demanded. In
effect, the Act and the appeal rules do not make any
provision for relief to an assessee
696
who complains that the assessment book has been prepared in
violation of the law. This may be illustrated from what
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happened in the case of the Ahmedabad Laxmi Cotton Mills Co.
Ltd. who have preferred Writ Petition No. 207 of 1966. In
this case, the municipality prepared the assessment book for
the year 1965-66 adopting the figure from the previous year
under. 21. The Mills finally-complained on July 3, 1965
raising various objections regarding the jurisdiction and
the validity of the imposition of property tax on the floor
area method. These were over-ruled and the assessment was
finalised by an order dated September 15, 1965. On
September 17, 1965 the municipality issued a bill in respect
of the assessment. The Mills filed a tax appeal on
September 27, 1965. On October 7, 1965 a notice of demand
under r. 4 1 (1) of the Taxation Rules was made on the
Mills. A Writ Petition was filed in the Gujarat High Court
being Special Civil Application No. 1155 of 1965 on October
16, 1965. This petition along with various other petitions
filed by other textile mills was dismissed by a common
judgment in Application No. 1365 of 1966 on May 5, 1966. On
May 7, 1966 the municipality issued an order of attachment
under r. 45(1) of the rules. The Mills filed another Writ
Petition in the Gujarat High Court against the issue of the
order of attachment, but this was dismissed in limine on
July 18, 1966. It may be noted that the Mills in common
with other Mills had preferred an application for grant of a
certificate under Arts. 132 and 133 of the Constitution
against the dismissal of the Writ Petition on May 5, 1966
and such certificate was granted on June 20, 1966.
Mr. Desai’s next challenge was directed against sub-rr. (2)
and (3) of r. 7. According to him, it was beyond the
legislative competence of the State to levy a property tax
on plant and machinery The relevant entry in List II of the
7th Schedule is item 49, namely, ’Taxes on land and
buildings’. The corresponding entry in List 11 under the
Government of India Act, 1935 was taxes on "lands,
buildings, hearths and windows." Mr. Desai contended that
the legislature was not competent by the definition of
’land’ in s. 2(3) of the Act to include plant and machinery
even if they were attached to the earth or permanently
fastened to anything attached to the earth. Mr. Desai
argued that it may be that the definition of ’land" in
certain Acts embraces plant and machinery but when the
legislature rates to impose a tax on plant and machinery in
the garb of land it travels beyond its powers. He argued
that apart from the definition in certain Acts and deeming
provisions contained therein, plant and machinery can never
be said to form part of the land or included in land or
building. Counsel conceded that entries in legislative
lists were certainly to be construed very widely but even
then no artificial meaning or arbitrary extension of the
meaning of the words in an entry could be allowed.
In this connection, our attention was drawn to the
observations
697
of Gwyer, C.J. in re. The Central Provinces and Berar Act
No. XIV of 1938(1) that
"....a broad and liberal spirit should inspire
those,. whose duty it is to interpret it, but.
I do not imply by this that they are free to
stretch or pervert the language of the
enactment in the interests of any legal or
constitutional theory, or even for the purpose
of supplying omissions or of correcting
supposed errors."
In Diamond Sugar Mills Ltd. & Anr. v. The State of Uttar
Pradesh & Anr.(2) the question was, whether entry 52 of,
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List 11 of the’ Seventh Schedule which empowered State
Legislatures to make ii law relating to "taxes on the entry
of goods Into a local area for consumption, use or sale
therein,," sanctioned the passing of the U.P. Sugarcane Cess
Act, 1960 authorising the State Government to impose ,a on
the entry of sugarcane in the premises of a factory for I
consumption or sale therein. It Was contended by the appel-
lant that the premises of a factory was not a "local area"
within the meaning of the said Entry. The majority of
Judges in that case held the impugned legislation to be
beyond the competence-of the State Legislature and observed:
"In considering the meaning of the words
"local area" in entry 52 we have, on the one
hand to bear in mind the salutary rule that
the words conferring the right of legislation
should be interpreted liberally and the powers
conferred should be given the widest
amplitude;: on the other hand, we have to
guard ourselves against extending the meaning
of the words beyond their reasonable
connotation, in an anxiety to preserve the
power of the legislature."
In this case, counsel argued the language was clear. and
unambiguous and therefore it was not open to resort to any
artificial definition. He also referred to Legislative
Practice in India on this point and contended that the same
was against giving an extended meaning to the expression
’land and buildings’ so as to include plant and machinery.
In re. The Central Provinces and Berar Act No. XIV of
1938(3), the question was whether a tax on retail sales of
’motor spirit and lubricants was ultra vires the Provincial
Legislature being a duty of excise within the meaning of
entry No. 45 in List 1 of the 7th Schedule to the Government
of India Act, 1935 and not within entry No’ 48 of List 11 of
that Schedule. There Gwyer, C. J. referred to the
legislative practice preceding the Constitution Act and said
at.p. 53
"Lastly, I am entitled to look at the manner
in which Indian Legislation preceding the
Constitution Act had
(1) [1939] F. C. R. 18 at 37.
(2) [1961] 3 S. C.R.- 242.@ 248.
(3) [1939] F. C. R. 18.
698
been accustomed to provide for the collection
of excise duties;............ In all the Acts
by which these duties were imposed it is
provided (and substantially by the same words)
that the duty is to be paid by the
manufacturer or producer, and on the issue of
the excisable article from the place of
manufacture or production."
In the same case, Sulaiman, J. observed:
"Our attention has not been drawn to any
provincial enactment, which might have imposed
any excise duty on the retail sale of motor
spirit and lubricants, or for that matter on
the retail sale of any other goods."
That courts can look into the legislative practice was again
adverted to in Ralla Ram v. The Province of East Punjab(1)
where the question related to the vires of a Punjab Act
taxing the owner of buildings and lands on their annual
value. There the contention was that the tax was really one
on income and as such beyond the competence of the
Provincial Legislature. The Court referred to the Central
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Provinces and Berar Act’s case and examined the legislative
practice in India. Mr. Desai referred us to a large number
of Municipal Acts passed by different Provincial and State
Legislatures in India both before and after 1935 to show
that plant and machinery were expressly excluded from the
purview of such taxes. We may refer to a few only of them
which are : Punjab Municipal Act, 1911, s. 3(1); The Madras
Act IV of 1884 s. 65(2); Madras District Municipalities Act,
1920 s. 82(2) proviso (b); The Patna Municipal Corporation
Act, 1951, s. 130(3); The Bombay District Municipalities
Act, 1911, s’ 3(11); The Bombay Municipal Boroughs Act s.
3(1); The Bombay Municipal Corporations Act, 1988, s.
154(2); The Calcutta Municipal Act, 1899, s. 151 proviso
(2); North West Province and Oudh Municipal Act, S. 3(1)
proviso; The Central Provinces Municipalities Act of 1903 s.
36 proviso; and The Central Provinces and Berar
Municipalities Act, 1922 s. 73 proviso. Mr. Desai also drew
our attention to the English Rating and Valuation Act, 1925.
Therein s. 2(1) gives the power to levy a consolidated rate
and sub-s. (3) states that the rate shall be at a uniform
amount, per pound on the rateable value of each hereditament
in that area. Section 24(1) of that Act provides that plant
and machinery in or on the hereditament as belongs to any of
the classes specified in the Third Schedule to the Act shall
be deemed to be a part of the hereditament.
This according to Mr. Desai went to show that even in
England plants and machinery were not considered part of the
hereditament and were made so by a sort of fiction. It was
argued that
(1) (19481) F.C.R. 207.
699
by a deeming provision the meaning of a word may be
extended, but when the language was clear, no such extension
by way of interpretation was possible.
Our attention was also drawn to a number of sections in the
Bombay Act of 1949 which on the face of it, went to show
that land in those sections was clearly not meant to include
the plant and machinery situate therein.
On this question, Mr. Setalvad relied on the principles of
rating of plant and machinery in England. We have already
noted the provisions of the Rating and Valuation Act, 1925.
It is pointed out in Ryde on Rating (Eleventh Edition) at p.
399 :
"From towards the end of the eighteenth
century to the passing of the Rating and
Valuation Act, 1925, there has been
controversy as to the inclusion in valuation
of machinery and plant, and as to the extent
to which (if machinery and plant were
included) the valuation was to be affected.
The series of judicial authorities on this
subject extends from R. v. St. Nicholas,
Gloucester, decided in 1783(1) to Kirby v.
Hunslet Union (2) and Smith v. Willesden
Union(3), decided in 1906 and 1919. The
effect of the decision of the House of Lords
in Kirby v. Hunslet Union(2) was to sweep away
the principles- on which a discrimination had
previously been made between machinery and
plant which was to be "taken into account" in
valuation, and that which was not-such as
physical annexation to the hereditament, or
legal annexation in the sense that the thing
in question would pass to the tenant at
landlord’s fixtures on a demise....... ; and
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practically to direct the rating authority to
value the hereditament equipped with Machinery
and plant as it appears to the eye.11
The matter is thus put in Witton Booth on
Valuations for Rating (Fourth Edition) at p.
575 :
"The rateability of plant and machinery under
the law which applied universally before 1925,
and which still applies to hereditaments
valued by reference to the profits ’earned
therein depends on legal decisions on what is
comprehended by the term "land". These
decisions were based on principles applicable
to fixtures generally, of which rateable plant
and machinery were one kind."
It will therefore be noticed that the rateability of plant
and machinery depended on judicial decisions as to the
meaning of the
(1) [1783] I.T.R. 723.
(3) [1919] 89 L.J.K.B. 137.
(2) [1906] A.C. 43.
700
word "land". There is no reason why we should accept those
decisions as to what was comprehended by the term "land"
when we find in our statutes plant and machinery being
excluded therefrom.
In Kirby v. Hunslet Union (1) Lord Halsbury expressed; him-
self thus at p. 49
"......decline myself to enter into what I
may call the original equities which might
have guided this matter. It is, enough for me
that a long series of decisions, for certainly
half a century, have established the bald
proposition, which is all I am insisting upon,
namely’. that although the machinery may not
be part of the freehold, it yet is to be taken
into account, and in saying that, I do not
want to muffle it in a phrase, but what I mean
by that is, that to increase the amount of the
rate which is exacted from the tenant you may
enter into that question and form a judgment
upon it, although, as a matter of fact, the
machinery may hot be attached to the free-
hold."
There, the Act in question was Parochial Assessment. Act,
1836 under which the assessment of hereditaments was
regulated on the principle that the rateable value was the
rent which might be expected to be given for the
hereditament alone. The contention on behalf of the
appellant before the House of Lords was that machinery
affixed to the soil so as to become a part of the freehold
must be taken into account in assessing the rateable value
but no other machinery. Delivering judgment, Lord Halsbury
pointed out that :
"The overseer had a comparatively simple
problem to solve, although it is difficult
enough sometimes; he sees the place being
conducted as a brewery, or an iron foundry, or
what not., he looks at the premises, he looks
at the furniture which is necessary for
carrying on the business as a brewery or
foundry; he does not in his own mind analyze,
and to my mind he ought ’not to analyze, what
would be likely to be the initial arrangements
between the intended brewer and the owner of
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the freehold, to see who should provide this
or that engine, or what not, but he looks at
the premises as they are, as they are being
occupied, and as they are being used, and he
says to himself, "Well, looking at the whole
of the place, such and such is the rent which
would probably be paid by a tenant from year
to year for such an establishment as this."
(1) [1906] A.C. 43
701
.rm60
The problem in our case is not quite. the same. The
hypothetical tenant would certainly take, into Consideration
the machinery in the building if he was going to rent it for
the purpose of running a textile factory. But if the
State Legislature had power to levy a tax only on land and
buildings, we do not see how the same could be levied on
machinery contained in or situate on the building even
though the machinery was there for the use of the building
for a particular purpose.
It therefore appears to us that r. 7(2) of the rules framed
under the Bombay Act of 1949 was beyond the legislative
competence of the State. The rule also suffers from another
defect, namely, that it does not lay down any principle on
which machinery is to be specified by public notice by the
Commissioner to be deemed to form part of such building for
the purpose of fixing the, rateable value. To this, Mr.
Setalvad argued that if the building was equipped with
machinery for the purpose of running a textile mill,
whatever machinery was there for the purpose would be
valued. According to him, the question would be, which of
the machinery would help in the enjoyment of the property
and thereby add to its rateable value. Unfortunately, the
specification of the classes is done from time to time by
the Commissioner with the approval of the Corporation
irrespective of the question as to where they are to be
found. It therefore depends on the arbitrary will of the
Commissioner as to what machinery he would specify and what
he would not. Moreover, he is the only person who can
examine this question. There is no right of appeal from any
specification made under sub-r. (3) of r. 7 except that the
Commissioner is to act under the directions of the Standing
Committee. Rule 7(2) shows that all plant and machinery may
not be taken into account for the purpose of valuation and
any such plant or machinery which is not included in the
classification may escape rateability however much they may
be prized by the tenant who takes the premises on rent. It
seems to us, therefore, that r. 7(2) is beyond the
legislative competence of the State Legislature and sub-r.
(3) of r. 7 is also invalid on account of excessive dele-
gation of powers by the Legislature.
In view of the above, it is not necessary to go into the
question as to whether the Deputy Municipal Commissioner
could exercise quasi-judicial powers of the Commissioner as
regards the determination of the rateable value under s.
49(1) of the Act and we express no opinion thereon.
In the result, the petitions are allowed. A writ of
mandamus will issue in each case directing the respondent
No. 1, Municipality, to treat the relevant entries in the
assessment book for the years 1964-65. 1965-66 and 1966-67
relating to special property
702
section questioned in these petitions as invalid and
cancelled; and directing respondent No. 1 to prepare fresh
assessment lists for the said years relating to the textile
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mills and other properties dealt within the said special
property section. The petitioners are entitled to costs of
these applications. One set of hearing fee.
G.C. Petitions allowed.
703