Full Judgment Text
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PETITIONER:
MUNICIPAL CORPORATION OF HYDERABAD
Vs.
RESPONDENT:
P.N. MURTHY & ORS.
DATE OF JUDGMENT30/01/1987
BENCH:
THAKKAR, M.P. (J)
BENCH:
THAKKAR, M.P. (J)
RAY, B.C. (J)
CITATION:
1987 AIR 802 1987 SCR (2) 107
1987 SCC (1) 568 JT 1987 (1) 285
1987 SCALE (1)213
ACT:
Hyderabad Municipal Corporation Act, 1955 Section 197,
199, 202 & 204--Municipal Corporation allotting building
under ’Low Income Housing Scheme’--Corporation whether
prohibited from levying and collecting ’property tax’ from
allottees.
HEADNOTE:
The appellant-Municipal Corporation of Hyderabad con-
structed houses under "Low Income Housing Scheme" and allot-
ted them to the respondents on hire purchase. The agreements
executed by the respondents in favour of the appellant
provided (1) that the houses would remain, till the payment
of the last instalment and execution of a conveyance in
favour of the respondents, as the property of the Corpora-
tion; and (ii) that all Municipal taxes, water taxes and
electricity charges would be borne by the allottees.
The appellant served demand notices on the respondents
to pay house tax in respect of their houses. By that time,
the instalments had not been fully paid. The respondents
challenged ’the levy of tax on the ground that s.202(1) of
the Hyderabad Municipal Corporation Act prohibits the levy
of general tax in respect of the aforesaid houses, since
they had not yet vested unto the allottees under the hire
purchase agreement. A Single Judge negatived the plea of the
respondents-allottees and upheld the validity of tax but the
Division Bench in a Letters Patent Appeal took a contrary
view. Hence this appeal by special leave.
Allowing the appeal,
HELD: (1) In order to attract s.202(1)(c) of the Hydera-
bad Municipal Corporation Act, a property must satisfy a
dual test. The property must not only owned by the Corpora-
tion, it must also be in the occupation of the Corporation
itself. It is in this sense that the word ’vesting’ has been
used. The expression ’vest’ employed in s.202(1)(c) under
the circumstances must of necessity be construed as vesting
both in title as well as in possession. [113G-H]
Fruit & Vegetable Merchants Union v. Delhi Improvement
Trust,
108
A.I.R. 1954 S.C.p. 344 and Richardson v. Robertson, [1862] 6
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L.T.p. 75, relied upon.
(2) The scheme underlying ss. 197, 199, 200 and 204 of
the Act has to be read and construed in a meaningful, pur-
poseful and rational manner. Section 197(1)(i) casts a legal
obligation on the Municipal Corporation to levy taxes on
lands and buildings. Section 199(1) makes it obligatory
subject to the exceptions, limitations and conditions to
levy a general tax, water tax, drainage tax, lighting
tax/conservancy tax on the buildings and lands in the City
of Hyderabad. Whilst the legislature makes it obligatory on
the Corporation to levy the aforesaid taxes, in so far as
general tax is concerned an exception is carved out under
s.202(1) and the Municipal Corporation is relieved from the
obligation of imposing taxes in respect of buildings which
are specified in clauses(a) to (d). The exception is made on
policy and principle. Not arbitrarily. Essentially the
properties which are used for public purposes or for pur-
poses of the community are exempted. Clause(d) makes it
abundantly clear that the exemption will not be extended to
properties belonging to the Central Government and State
Government if the same are used for purposes of profit and
not a public purpose. The user for the purposes of the
community is the rationale of the thread of principle which
runs through all these three clauses viz. clauses (a), (b)
and (d) for granting exemption. So far as clause(c), which
has given rise to the present controversy is concerned, a
different principle is at the bottom, different but no less
rational. The philosophy underlying the exemption is rooted
in pragmatism. In so far as buildings and lands which are
the properties of the Corporation and are used for its own
purposes it would be an exercise in futility to collect
taxes from itself in order to augment its own resources.
Surely the resources would not stand augmented when the
Municipal Corporation collects the taxes from itself. [111D;
112A-F]
3. Section 204(1) which is a part of the packet of
sections relating to this subject-matter clinches the issue
in favour of the Municipal Corporation of Hyderabad. It, in
terms, provides that property taxes shall be leviable pri-
marily from the actual occupier of the premises upon which
the said taxes are assessed, if such occupier holds the said
premises immediately from the Government or from the Corpo-
ration. If the property taxes were not to be levied in
respect of the property belonging to the Corporation which
is used and occupied by allottees or other occupiers, there
would be no point or purpose in making the provision in the
aforesaid manner. The provision in terms applies to a situa-
tion where the buildings or the premises are in actual
occupation of
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a person or body other than the Municipal Corporation it-
self. In such an event, the property taxes would be leviable
primarily from the said occupier as if the said occupier
holds the property from the Corporation itself. This leaves
no room for doubt that the Corporation is entitled to impose
taxes on the buildings which may be owned by itself but
which may be in occupation of others. Otherwise, the provi-
sion contained in s. 204(1) would be rendered aimless and
otiose. [113B-F]
JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 123(N)
of 1973.
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From the Judgment and Order dated 26. 10. 1972 of the
Andhra Pradesh High Court in Writ Appeal No. 444 of 1968.
B. Parthasarthy and G .N. Rao for the Appellant.
B. Kanta Rao for the Respondents.
The Judgment of the Court was delivered by
THAKKAR, J. Is the Municipal Corporation of Hyderabad
prohibited from levying Municipal taxes from persons induct-
ed by it in the property of its own ownership under the hire
purchase agreement? The validity of levy of Municipal taxes
by the Municipal Corporation of Hyderabad from allottees to
whom the Municipal Corporation had allotted buildings con-
structed under "Low Income Housing Scheme" launched by it
was questioned by the allottees. The learned Single Judge
upheld the validity but the Division Bench in. appeal, Under
Clause 15 of the Letters Patent. took a contrary view. The
Municipal Corporation has preferred the present appeal,
Appeal by Special Leave and has contended that the learned
Single Judge was right in upholding the levy and the Divi-
sion Bench was wrong in holding it invalid.
The facts giving rise to the writ petition instituted by
the 72 allottees to whom the houses were allotted need to be
stated briefly:--
The Hyderabad Municipal Corporation started a
scheme called Low Income Housing Scheme in
1957. In pursuance of that scheme, the Corpo-
ration constructed several houses in various
parts of the Hyderabad City including the
locality of Malakpet. After the houses at
Malakpet were completed, applications were
invited from persons belonging to
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that group for the purpose of allotting these
houses. The writ petitioners applied and the
Corporation allotted the houses to them. They
are occupying the houses since 1959. The writ
petitioners executed agreements in favour of
the Corporation. According to the terms of the
agreement, the allottees were put in posses-
sion of the houses allotted to them. The
allottees were to pay 20% of the sale price as
the first instalment and they were required to
pay the balance in monthly instalments. The
agreement specifically provides that the
houses would remain, till the payment of the
last instalment and execution of a conveyance
in favour of the writ petitioners, as the
property of the Corporation. The allottee has
been strictly prohibited from selling or mort-
gaging or otherwise disposing of the house or
even to sublet or part with possession of the
same. Even after the writ petitioners become
owners of the houses, they are precluded from
selling the same within five years of such
date. The agreement further provides that all
municipal taxes and water taxes and electrici-
ty charges would be borne by the allottees.
The writ petitioners were served with a demand
notice on 31-12-1964 asking them to pay house
taxes from 1-4-1961 onwards. The demand no-
tice, which the writ petitioners received on
16-4-1965, required the writ petitioners to
file objections, if any before 15 days of the
receipt of the notice. The writ petitioners
accordingly filed their objections on 29-4-
1965. The principal contention of the peti-
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tioners was that the houses are not liable to
be taxed as they vest in the Municipal Corpo-
ration, and as the writ petitioners are not
the owners of the houses, Negativing this
contention, the Municipal Corporation served a
notice dated 19-6-1966 demanding from the
petitioners taxes for the period commencing
from 1st April, 1961 to 31st March, 1965. It
is this demand notice which has given rise to
the writ petition, giving rise to the present
appeal.
The challenge to the levy of taxes is built on the
argument that inasmuch the houses under the hire purchase
agreement have not yet vested unto the allottees, the
property vests unto the Municipal Corporation and under the
circumstances Section 202(1) of the Hyderabad Municipal
Corporation Act (Act) prohibits the levy of the general tax
in respect of these houses.
111
In order to deal with the plea of the allottees which
was negatived by the learned Single Judge but sustained by
the learned Judges of the Division Bench, the relevant
provisions of the Act require to be noticed. They are:-
Sections 197(1)(i), 199(1), 202(1) and 204( 1)’
It is no doubt true that until all the instalments under
the hire purchase agreement were paid, the allottees would
not become the owners of the houses for the title would vest
unto them only upon the payment of all the instalments as
per the stipulation contained in the agreement. At the
relevant point of time the instalments had not yet been
fully paid. The title in regard to the houses therefore
continued to vest unto the Municipal Corporation at the
relevant time. The question then is whether Section
202(1)(c) makes it unlawful to levy general tax from the
allottees of these buildings. The scheme underlying the
aforesaid packet of provisions embodied in the Act deserves
to be analysed in this context. Section 197(1)(i) casts a
legal obligation on the Municipal Corporation to levy taxes
on lands and buildings. Section 199(1) makes it obligatory
subject to the exceptions, limitations
1. "Section 197(1)(i): For the purposes of this Act, the
Corporation shall impose the following taxes namely: (a)
taxes on lands and buildings; X X X X"
"199(1): The following taxes shall subject to exceptions,
limitations and conditions herein provided be levied on
buildings and lands in the City and shall hereinafter be
referred to as property taxes, namely:- (a) a general tax;
(b) a water tax; (c) a drainage tax; (d) a lighting tax; (e)
a conservancy tax;"
"202(1): The general tax shall be levied in respect of all
buildings and lands in the city except;
(a) buildings and lands solely used for purposes connected
with the disposal of the dead;
(b) buildings and lands or portions thereof solely occupied
and used for public worship or for a charitable or educa-
tional purpose;
(c) buildings and lands vesting in the corporation;
(d) buildings and lands vesting in the Central Government or
state Government used solely for public purposes and not
used or intended to be used for purposes of profit in re-
spect of which the said tax, if levied, would under the
provisions hereinafter contained be primarily leviable from
the Central Government or State Government as the case may
be."
"204(1): Property taxes shall be leviable primarily from the
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actual occupier of the premises upon which the said taxes
are assessed if such occupier holds the said premises imme-
diately from the Government or from the Corporation."
112
and conditions embodied in the relevant provisions, to levy
a general tax, water tax, drainage tax, lighting tax and
conservancy tax on the buildings and lands in the City of
Hyderabad. Whilst the legislature makes it obligatory on the
Corporation to levy the aforesaid taxes, in so far as gener-
al tax is concerned an exception is carved out under Section
202(1) and the Municipal Corporation is relieved from the
obligation of imposing taxes in respect of buildings which
are specified in clauses (a) to (d). Evidently the exception
is made on policy and principle. Not arbitrarily. Essential-
ly the properties which are used for public purposes or for
purposes of the community are exempted. For instance by
clause (a) buildings and lands which are used for purposes
connected with the disposal of the dead are exempted inas-
much as the entire community is interested in such a user.
The same principle is discernible in regard to clause (b)
which provides for exemption in regard to lands or buildings
solely occupied for public worship or for charitable or
educational purpose. The same philosophy is discernible in
the exemption accorded under clause (d) to properties be-
longing to Central or State Government which are used solely
for a public purpose. Be it realized that clause (d) makes
it abundantly clear that the exemption will not be extended
to properties belonging to the Central Government and State
Government if the same are used for purposes of profit and
not for a public purpose. The user for the purposes of the
community is the rationale of the thread of principle which
runs through all these three clauses (viz. clauses (a), (b)
and (d) for granting exemption. So far as clause (c) which
has given rise to the present controversy is concerned, a
different principle is at the bottom: different but no less
rational. The philosophy underlying the exemption is rooted
in pragmatism. In so far as buildings and lands which are
the properties of the Corporation and are used for its own
purposes, it would be an exercise in futility to collect
taxes from itself in order to augment its own resources.
Surely the resources would not stand augmented when the
Municipal Corporation collects the taxes from itself. How
would one benefit by taking money from one pocket and put-
ting it in another pocket of oneself? By transfering from
one drawer of one’s own cash box into another drawer of the
same cash box? The whole purpose of levying tax is to aug-
ment its resources and not merely to engage in an exercise
in accountancy, by crediting in one account and debiting in
another, which does not result in its resources being aug-
mented in reality. In fact a sizable staff would have to be
employed for making the valuation of the properties, for
making assessment of the properties, and for making credit
and debit entries in the relevant accounts. That is the
obvious reason why buildings and lands which vest in the
Corporation and which are in its own use and
113
occupation are sought to be exempted from the levy. Of
course clause (c) which provides for exemptions in respect
of "buildings and lands vesting in the Corporation" is not
very happily or perfectly worded. Had it been drafted with
the care and precision to be expected from a perfect drafts-
man (who exists only in theory and not in practice), there
would have been no scope for the controversy. But then if
the entire scheme is viewed in a common sense manner, so
that the scheme makes sense, the matter cannot present any
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serious problem. Section 204(1) which is a part of the
packet of sections relating to this subjectmatter clinches
the issue in favour of the Municipal Corporation of Hydera-
bad, the appellant herein. It in terms provides that proper-
ty taxes shall be leviable primarily from the actual occupi-
er of the premises upon which the said taxes are assessed,
if such occupier holds the said premises immediately from
the Government or from the Corporation. If the property
taxes were not to be levied in respect of the property
belonging to the Corporation which is used and occupied by
allottees or other occupiers there would be no point or
purpose in making the provision in the aforesaid manner. The
provision in terms applies to a situation where the build-
ings or the premises are in actual occupation of a person or
body other than the Municipal Corporation itself. 1n such an
event the property taxes would be leviable primarily from
the said occupier as if the said occupier holds the property
from the Corporation itself. This leaves no room for doubt
that the Corporation is entitled to impose taxes on the
buildings which may be owned by itself but which may be in
occupation of others. Otherwise, the provision contained in
Section 204(1) would be rendered aimless and otiose. Surely
the legislature was enacting a purposeful provision and not
a purposeless provision without aim or object.
For the aforesaid reasons we are of the opinion that the
learned Single Judge was right in taking the view that the
buildings and lands vesting unto the Corporation not only in
title but also in possession (as polarized from those vest-
ing in title only but not in possession) were exempted from
the obligation imposed by the legislature to levy the
property taxes. Buildings and lands which were merely owned
by the Corporation but were in actual possession or under
the actual use and occupation of some one else, that is to
say persons or bodies other than the Corporation itself are
not exempted. In order to attract Section 202(1)(c) a
property must satisfy a dual test. The property must not
only be owned by the Corporation, it must also be in the
occupation of the Corporation itself. It is in this sense
that the word ’vesting’ has been used. And the proposition
that the expression ’vest’ is capable of being used in this
sense, depending on the context in which it is emp-
114
loyed, is supported by the observations made by this Court
in Fruit & Vegetable Merchants Union v. Delhi Improvement
Trust, A.I.R. 1954 S.C.p. 344. It has been observed therein
that the word vest:
"is a word of variable import and a property must vest in
title or may vest in possession or it may vest in a limited
sense, as indicated in the context ..... "
Reliance has been placed in this context on a passage from
Richardson v. Robertson, [1862] 6 L.T.p. 75 wherein it is
stressed that the ’vesting’ often means ’vesting’ in posses-
sion.
The scheme of the relevant sections has to be read and
construed in a meaningful, purposeful and rational manner.
The expression ’vest’ employed in Section 202(1)(c), under
the circumstances must of necessity be construed as vesting
both in title as well as in possession. Be it realized that
there can be no principle in exempting the tenants inducted
by the Municipal Corporation in its property from payment of
taxes if the terms of the lease so provide. Just as the
tenants who occupy the properties belonging to private
citizens have to pay property taxes if the terms of the
agreement so provide, the tenants inducted by the Municipal
Corporation in buildings owned by itself have to pay the
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property taxes if the agreement so provides. There can be no
rational basis for exempting the tenants or persons inducted
by the Municipal Corporation in its own buildings from
payment of such taxes. The concerned provision therefore
cannot be read in the manner suggested by the respondents.
The learned Single Judge was perfectly justified in negativ-
ing their contentions and in dismissing their writ petition.
The learned Judges of the Division Bench were in error in
reversing the learned Single Judge. We, therefore, allow
this appeal, set aside the order passed by the Division
Bench, and restore the order passed by the learned Single
Judge dismissing the writ petition. There will be no order
as to costs.
M.L.A. Appeal
allowed.
115