Full Judgment Text
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 7
PETITIONER:
MUNICIPAL CORPORATION, INDORE
Vs.
RESPONDENT:
RAI BAHADUR SETH HIRALAL & OTHERS
DATE OF JUDGMENT:
31/10/1967
BENCH:
SHELAT, J.M.
BENCH:
SHELAT, J.M.
SHAH, J.C.
SIKRI, S.M.
CITATION:
1968 AIR 642 1968 SCR (2) 125
CITATOR INFO :
D 1970 SC 417 (10)
ACT:
Madhya Bharat Municipalities Act (Act 1 of 1954) repealing
Indore City Municipal Act 4 of 1909--S. 79 of new Act
permitting an assessment list for taxes on houses and lands
being prepared once in 4 years-Assessment list under old Act
adopted for period covered by new Act-House tax levied on
gross annual letting nature of houses as under old Act--New
Act requiring tax to be levied on net value after giving
statutory allowance of 10%--S. 2(c) how far saves old basis
of taxation.
HEADNOTE:
The Madhya Bharat Municipalities Act 1954 came into force
January 26, 1954. The Indore City Municipal Act, 1909 which
had till then governed the Indore Municipality was thereby
repealed. Under the repealed Act the Indore Municipality
used to levy and collect house tax at the rate of 7% of the
gross annual letting value. Under s. 73(2) of the 1954
Act house tax was to be assessed on the basis of the gross
annual letting value less 10% statutory allowance for
repairs etc. However, even for the period after the passing
of the new Act, the Municipal Corporation, purporting to act
under s. 79’(1) of the 1954 Act. adopted ,the latest
assessment list prepared under the old Act and levied house
tax at the old rate of 7% of the gross. annual letting
value. The respondents who were trustees of certain house
property filed a suit challenging the levy on the basis of
the gross annual letting value when s. 73(2) of the 1954 Act
required the tax to be assessed on the net value after
deduction of the statutory allowance. The suit was decreed
by the ’Trial Court and the appeals filed by the Corporation
before the District judge and the High Court were dismissed.
The Corporation by special leave, came to this Court and
urged: (i) that the levy at 7% of the gross annual letting
value prescribed under the rules of the Indore Act was saved
by s. 2(c) of the 1954 Act; (ii) that under s. 79(1) the
Corporation was required to prepare a fresh assessment list
only once in four years, that it was therefore entitled to
adopt for the years in question the latest assessment list
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 7
prepared under the old Act. and the said assessment list
having been so adopted was conclusive evidence as to the
annual rental value of houses and the house tax imposed
thereon.
HELD: (i) While section 2(c) saves the rules and taxes.
imposed under the old Act it saves them only to the extent
that they are consistent with the new Act. The saving and
deeming provisions of s. 2(c) can only apply if the tax is
assessed in the manner consistent with the provisions of s.
73, that is, if it is assessed on the net and not the gross
annual letting value after deducting 10% statutory
allowance. The Corporation could not be allowed to go on
imposing the tax on the basis of the gross annual letting
value for ever despite the express provision in s. 73. The
tax imposed by the Corporation at the rate of 7% of the
gross annual letting value was not therefore saved by s.
2(c). [129E-H]
(ii) Ordinarily the Municipal Corporation has to prepare
a fresh assessment list every year. The legislature has
however by s. 79(1) empowered the Corporation to adopt the
valuation and assessment contained in the assessment list
prepared in an earlier year provided, however, that it
prepares a fresh list once in every 4 years. But sub-s. (2)
126
of s. 79 provides expressly that when such a previous list
is adopted for a particular official year it can be done
subject to the provisions ss. 75 and 76. The list so
adopted has therefore to be published, has to invite
objections and has to be authenticated in the manner
prescribed by s. 76(6) after disposing of the objections if
any and it is then only that it becomes conclusive evidence
of the valuation and the tax assessed thereon for that
particular official year. If it were otherwise a house-
owner would have no opportunity to object to the assessment
for four years even though the value of his house may have
decreased for some reason or the other. Section 79 has
therefore to be construed to mean that though a Municipality
need not prepare a fresh assessment list every year and need
prepare such list once in every 4 ),ears and can adopt an
earlier assessment list such an adopted list becomes the
assessment list for that particular year as if it was a new
list and to which ss. 75 and 76 apply. [130E-131C]
Accordingly, the Corporation was entitled to adopt for the
official years in question the latest list prepared under
the old Act, and under s. 79 that list would become the
assessment list for the said years provided that the
provisions of ss. 75 and 76 are followed. Even then the
appellant Corporation would not be. entitled to impose house
tax on the basis of the gross annual letting value as such
imposition would be inconsistent with s. 73 under which the
annual letting value would be the gross annual letting value
less 10% statutory allowance. [131D]
Even on the footing that the resolution passed by the Indore
Municipality to levy the tax at 7% of the gross annual
letting value and on the basis of which the last list under
the ,old Act was prepared was saved and was deemed to have
been made under the 1954- Act it could be deemed to have
been so made in so far as it was consistent with the
provisions of the Act. Therefore to the extent that it was
inconsistent with s. 73 it was neither saved nor deemed to
have been made under the Act and had to be adjusted in the
light of the provisions of s. 73(2). [131G-H]
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 7
JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 141 of 1965.
Appeal by special leave from the judgment and order
dated December 7, 1963 of ’the Madhya Pradesh High Court,
Indore Bench in Second Appeal No. 378 of 1961.
B.P. Jhandharia, P.C. Bhartari, J.B. Dadachanji and O.C.
Mathur, for the appellant.
W.S. Barlingay, V.G. Tambvekar and A.G. Ratnaparkhi, for
respondents Nos. 1, 2 and 4 to 7.
The Judgment of the Court was delivered by
Shelat, J. This appeal by special leave is directed
against the judgment and order of the High Court of Madhya
Pradesh in Second Appeal No. 378 of 1961.
The respondents as trustees of a charitable trust are
the owners of certain houses situate in Indore City. Prior
to January 26, 1954 the Indore Municipality was governed by
the Indore City Municipal Act, 4 of 1909. By virtue of the
power conferred on it by that Act the Municipality used to
levy and collect house tax
127
at the rate of 7% of the gross annual letting value of these
houses and the trustees duly paid such tax. After the
formation of the State of Madhya Bharat, the legislature of
that State passed the Madhya Bharat Municipalities Act, 1954
which came into force on January 26, 1954. The 1954 Act
repealed amongst other Acts the Indore City Municipal Act,
1909. The Indore Municipality however purported to levy the
house tax on the basis of the gross annual letting value at
the rate of 7% of such value for the financial years 1953-54
and 1954-55. This was objected to by the respondents on the
ground that under the 1954 Act the tax could be assessed on
the basis of gross annual letting value less 10% statutory
allowance in. lieu of costs of repairs or on any other
account whatsoever. The difference came to Rs. 1,461, and
of this the trustees claimed refund on the ground that the
Municipality had collected the excess from them under pain
of distress The Municipality having refused to refund the
excess the respondents filed the suit to recover it on the
ground that the excess amount was illegally recovered. The
Trial Court decreed the suit and the appeals filed by the
Corporation in the District Court and the High Court were
dismissed.
To appreciate the stand taken by the appellant
Corporation it is necessary to examine some of the
provisions of the two Acts Sec. 21 of the Indore City
Municipal Act authorised the Municipal Council to impose tax
on houses, buildings or lands within the municipal limits at
a rate not exceeding 12-1/2% of the gross annual letting
value. As aforesaid, this Act amongst other Acts was
repealed by the Madhya Bharat Municipalities Act, 1954.
Sec. 2 of the 1954 Act which contains both a repealing and
saving provisions repealed the several Acts set out therein.
Clause (a) however provides that such repeal shall not
affect the validity or invalidity of anything already done
under any of the said enactments. Clause (c) of sec. 2
provides that all rules, orders, byelaws, notifications and
notices, taxes and rates, made, passed, framed, issued or
imposed or deemed to have been made, passed, framed, issued
or imposed, shall so far as they are not inconsistent with
this Act, be deemed to have been made, passed, framed,
issued or imposed, as the case may be, under this Act. See.
69 authorises a Municipality to impose the several taxes set
out therein including the tax on houses, buildings or lands
or both. Sec. 70 lays down the procedure which the
municipality would have to follow before it imposes any one
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 7
of those taxes. Sec. 73 provides that when a tax on
buildings or lands or both is imposed, the Chief Executive
Officer shall cause an assessment list of all buildings or
lands in the municipality to be prepared containing the
particulars therein set out. Amongst such particulars are
the valuation based on capital or annual letting value as
the case may be on which the property is assessed. Sub-sec.
2 provides that in
128
assessing the tax on buildings or lands, where the valuation
determined under clause (d) of sub-section 1 is the annual
letting value, a sum equal to 10% of such valuation shall be
deducted therefrom in lieu of allowance for costs of repairs
or on any account whatsoever. Sec. 75 provides for the
publication of the assessment list and the. right of the
owner or occupier of properties included in the list to take
inspection thereof and to make extracts therefrom. Sec. 76
provides for a public notice of time fixed for lodging
objections to such assessment list and the hearing of such
objections. Sub-sec. 4 of sec. 76 provides for the
authentication of the list. Sub-section 6 lays down that
subject to such alterations as may be made therein under
sec. 77 and to the result of any appeal or revision made
under sec. 190 in the case of City Municipality and. under
sec. 90 in the case of other municipalities, the entries in
the assessment list so authenticated shall be accepted as
conclusive evidence for the purposes of all municipal taxes
of the valuation or annual letting value of buildings. and
lands to which such entries respectively refer and for the
purposes of the tax for which such assessment list has been
prepared of the amount of tax leviable on such buildings or
lands "in any official year in which such list is in force."
Sec. 79(1) provides that it would not be necessary for a
Municipality to prepare a new assessment list for every
year. It further provides that subject to the condition
that such assessment list shall be completely revised not
less than once in every 4 years the Municipality may adopt
the valuation and assessment contained in the list for any
year with such alterations as may be necessary for the year
immediately following. But sub-section 2 lays down that the
provisions of s. 75 and s. 76 shall be applicable every year
as if a new assessment list has been completed at the
commencement of the official year.
These provisions show that though by sec. 2 the new Act
repealed the Indore City Municipal Act, 1909 along with
other Acts, the legislature by sec. 2(c) saved certain
things done under the repealed Acts, viz., rules bye-laws,
orders, notifications and notices, taxes and rates made,
framed, passed, or imposed or deemed to have been made,
framed, passed or imposed under the repealed Acts and added
a fiction that so far as they are not inconsistent with the
new Act they shall be deemed as if they were made, framed,
passed or imposed as the case may be under this Act. We are
informed by Counsel that under the rules made under the
repealed Indore City Municipal Act, 1909 the Municipality
had imposed the tax on houses at the rate of 7% of their
gross annual letting value, that an assessment list on that
basis was prepared for the year 1952-53 and that the
Municipality has been levying tax at the said rate on the
basis of the said assessment list for the two subsequent
years.
129
Counsel for the appellant Corporation argued that the
Corporation was entitled to levy the house tax at the rate
of 7% of the gross annual letting value and that it was not
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 7
bound to deduct the 10% allowance provided by sec. 73(2)
from such gross annual letting value. The argument was,
firstly, that the appellant Corporation could do so because
the rules made under the Indore Act are saved by sec. 2(c)
and therefore the rate of 7% of the gross annual letting
value at which the tax was levied also has been saved and
secondly, that under sec. 79(1) of the 1954 Act the
Corporation need not prepare a fresh assessment list every
year, that it has to prepare a fresh assessment list only
once in every 4 years, that the Corporation therefore can
and in fact has adopted the said list for the two years in
question and that being so, the list so adopted was. in
force during the years in question and has to be accepted
under s. 76(6) as conclusive evidence of the annual letting
value as also for the amount of tax leviable on the
buildings or lands or both. He contended that being’ the
position the respondents were debarred from objecting to the
annual letting value and the quantum of tax based on it as
entered against the respondents’ properties in the said
assessment list.
We are not impressed with these contentions as in our
view they are not warranted on the true construction of the
provisions of the Act. The Indore Municipal Act being no
longer in force as from January 26, 1954, obviously no tax
could be levied or imposed thereunder after that date. The
rules made and the taxes imposed under the repealed Act are
no doubt amongst other things saved and are deemed to have
been made, framed, passed or imposed under the new Act but
cl. (c) of sec. 2, it must not be forgotten, lays down an
important qualification that they are to be deemed to have
been made, or imposed etc., under the new Act to the extent
that they are consistent with the provisions of the Act.
Sec. 73 read with sec. 69 provides that a tax on houses or
buildings shall be levied on the annual letting value and
that in assessing such tax a sum equal to 10% of such
letting value shall be deducted therefrom. The tax levied
under the old Act and the rules framed thereunder on the
basis of the gross annual letting value is obviously
inconsistent with the provisions of s. 73 of the Act. The
saving and the deeming provisions in s. 2(c) can only apply
if the tax is assessed in the manner consistent with the
provisions of s. 73, that is, if it is assessed-on the net
and not the gross annual letting value after deducting 10%
statutory allowance in lieu of the costs of repairs or any
other account whatsoever. If the construction of sec. 2(c)
as suggested by Counsel were to.be accepted it would render
sec. 73 (2) nugatory, for, the Municipal Corporation in that
case can go on imposing the tax on the basis of the gross
annual letting value for ever despite the express provision
for levying tax on the basis of net annual
130
letting value, i.e., the value arrived at after deducting
10% of the gross annual letting value.
The second part of the contention is equally
unacceptable because, if accepted, it will be contrary to
the provisions of sections 75,76 and 79 of the Act. After
going through the procedure laid down in ss. 70, 71 and 72
sec. 73. enjoins upon the Chief Executive Officer to have an
assessment list made containing inter alia valuation or
annual letting value at which the property is assessed and
the amount of tax assessed on the basis of such valuation or
annual letting value. Under ss. 75 and 76 when the
assessment list is prepared in accordance with the
provisions of sec. 73 it has to be published and time has to
be fixed for lodging objections against the entries
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 7
therein. After such objections are heard and disposed of
the assessment list has to be authenticated as provided by
sec. 76(6). Sub-sec. 6 of sec. 76 lays down that such
assessment list when authenticated becomes conclusive
evidence for purposes of all taxes. of the valuation or
annual letting value and of the amount of tax leviable on
such buildings or lands or both in any official year in
which such list is in force. The Municipal tax is an annual
tax leviable for a particular official year and the
assessment list on the basis of which the tax is assessed is
for each such official year. This is supported by the words
"such assessment list" and "of the amount of tax leviable in
any official year in which such list is in force" in sec.
76(6).
Ordinarily therefore the Municipal Corporation has to
prepare a fresh assessment list every year. The legislature
however has empowered by sec. 79, as other State
legislatures have similarly done in several Municipal Acts,
to adopt the valuation and assessment contained in the
assessment list prepared in an earlier year provided,
however, that it prepares a fresh list once:in every 4
years. But sub-sec. 2 of sec. 79 provides expressly that
when such a previous list is adopted for a particular
official year it can be done subject to the provisions of
sections 75 and 76. In other words, an assessment list being
for a particular official year even when an assessment list
prepared in an earlier year is adopted it becomes the list
for such subsequent year subject to the procedure laid down
in secs. 75 and 76. The list so adopted has therefore to
be published, has to invite objections and has to be
authenticated in the manner prescribed by sec. 76 (6) after
disposing of the objections if any and it is then only that
it becomes conclusive evidence of the valuation and the tax
assessed thereon for that particular official year. If it
were otherwise, the annual letting value or the value
estimated on a particular building or house would be static
for 4 years during which the Corporation can go on adopting
the assessment list prepared in an earlier year and the
owner or the occupier of the building would
131
be deprived of the right to object to the valuation or the
annual letting value or the tax assessed thereon for at
least 4 years even though the valuation or the annual
letting value thereof may have decreased for one reason or
the other. In order to prevent such a result the
legislature has provided by sub-section 2 of sec. 79 that
where a municipality adopts a previously prepared list for
any subsequent year the provisions of ss. 75 and 76 shall
be applicable as if a new assessment list has been completed
at the commencement of that particular official year. The
word, "if" appearing in sub-sec. 2 of sec. 79 is obviously a
mistake and must be read as "as if" because the word "if"
standing by itself makes no sense at all. Sec. 79 therefore
has to be construed to mean that though a Municipality need
not prepare a fresh assessment list every year and need
prepare such list once in every 4 years and can adopt an
earlier assessment list such an adopted list becomes the
assessment list for that particular year as if it was a new
list and ’to which ss. 75 and 76 apply.
The result of the foregoing discussion is that the appellant
Corporation was entitled to adopt the assessment list
prepared for the year 1952-53 for the two assessment years,
1953-54 and 1954-55, under sec. 79 and therefore that list
became the assessment list for each of the 2 years in
question. That fact however does not entitle the appellant
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 7 of 7
Corporation to impose the house tax on the basis of the
gross annual letting value as such imposition is
inconsistent with sec. 73 under which the annual letting
value would be the gross annual letting value less 10%
statutory allowance.
But the contention was that the tax imposed on the basis
of’ the gross annual letting value was saved by sec. 2(c)
and that saving coupled with the fact that the assessment
list prepared for 1952-53 was adopted for the years in
question made the entries in the assessment list so adopted
conclusive evidence of the annual letting value and the
amount of tax assessed thereon and entitled the Corporation
to collect the tax assessed on the gross annual letting
value. Therefore, it’ was argued, both the annual letting
value and the amount of tax shown in that list were
conclusive evidence and could not be assailed. Counsel
however forgets that even on the footing that the resolution
passed by the Indore Municipality to levy the tax at 7% of
the gross annual letting value and on the strength of which
the list for 1952-53 was prepared was saved and was deemed
to have been made under the 1954 Act it can be deemed to
have been so made in so far as it is consistent with the
provisions of the Act. Therefore, to the extent that it is
inconsistent with sec. 73 it is neither saved nor deemed to
have been made under the Act and has to be adjusted in the
light of the provisions of sec. 73(2). It follows that the
appellant-Corporation was not entitled to demand the tax
assessed
132
on the gross annual letting value. The High Court therefore
was right in decreeing the suit and to order refund of the.
said excess amount against the appellant Corporation.
The appeal fails and is dismissed with costs. The costs
of this appeal as also those in the next appeal No. 383 of
1965 are to be taxed on the footing of one hearing fee.
G.C. Appeal dismissed.
133