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2022 (11) TMI 1477 - SUPREME COURTAlleged contemnor for disobedience of orders of the Court - validity of computation and levy of property tax based on capital value system - vires of Capital Value Rules of 2010 on retrospective operation and Capital Value Rules of 2015 - amendment effected to the MMC Act pertaining to the implementation of the Capital Value System for computing and assessing property tax - Rule 20 of the Capital Value Rules of 2010 was held to be ultra vires the provisions of Sub-section (1A) and (1B) of Section 154 of the MMC Act. HELD THAT:- Sections 123 to 128 of the MMC Act deal with accounts and annual budget estimates. With the fixed parameters and scope of taxation, as well as, the elements that can be covered by levy of such taxes, depending upon the annual budget estimates, the rates of municipal taxes, fares and charges can certainly be fixed in terms of Section 128 of the MMC Act. In such cases, the width of the tax regime is already decided and the rates of taxes would be dependent upon the annual estimates. What the present amendments seek to achieve is to change the methodology on the basis of which property tax can be levied. Instead of rateable value, the property tax can now be levied going by the capital value. Such exercise could not have been undertaken through the process of annual estimates and in terms of Sections 120, 123, 125 and 128 of the MMC Act. Section 154(1A) of the MMC Act is the crucial provision for the present discussion. The opening part of Sub-section (1A) states that in order to fix the capital value of any building or land assessable to property tax, regard shall be had to the value of any building or land as indicated in the SDRR for the time being in force. The value so indicated in SDRR is to be the base value to which certain factors delineated in Clauses (a) to (e) of Sub-section (1A) are to be applied while fixing the capital value. Clauses (a) to (d) are physical features or attributes of the land or building which are in existence when the value is to be reckoned. In essence, as submitted by Mr. Khambata, learned Senior Counsel, these attributes are situations "in praesenti". The buildable potential of the land in future is not an attribute "in praesenti" but is in the nature of likelihood of user or exploitation of the asset "in futuro". Whether such potential of the land or the likelihood of exploitation in future can also be taken into consideration while fixing the capital value in terms of Sub-section (1A), especially when none of the factors delineated in Clauses (a), (b), (c) and (d) speaks of future prospects or such likelihood? - HELD THAT:- Reliance placed in the decisions of Both the decisions were rendered in the regime when the property tax could be levied on rateable value. In the first decision, it was found that fixing of the rate at a percentage of the capital value was not a modality permitted by the Act and, therefore, Rules 350-A read with Rule 243, which permitted such exercise, were struck down. Therefore, to the extent the Rules went beyond the statutory import and extent, the transgression was not accepted by this Court. In the second decision, it was held that so long as the building was not completed and ready for occupation, the land in question for the purposes of rating must be equated with and treated as "vacant land". In the second decision, the construction was actually going on but the building was not ready. The conclusion from the second decision is quite clear that unless and until the building was ready to be occupied, the land must be treated as vacant land. The empowerment in terms of Clauses (a) to (e) read with Sub-section (1B) or the conferral of rule-making power would not permit the Corporation to determine the capital value beyond the scope of said Clauses (a) to (e). Thus, for the purpose of determining capital value, only the present physical attributes and status of the land and building can be considered and not the future prospects of the land - The High Court was, therefore, right in concluding that Rule 20 of the Capital Value Rules of 2010 and the Capital Value Rules of 2015 would be ultra vires the provisions of Sub-sections (1A) and (1B) of Section 154 of the MMC Act. Retrospectivity of the Capital Value Rules of 2010 - HELD THAT:- The factual narration relied upon by the learned Counsel for the Corporation does show that the preparatory steps were being undertaken since 2010 with the appointment of an expert committee and publication of draft rules. It appears that the Corporation had to collect voluminous data. But in order to enable the Corporation to compute or levy property tax based on capital value, the concerned Rules had to be in force. There being no empowerment to compute and/or levy property tax with retrospective effect by the statute itself, the Rule making power, in any view of the matter, could not have created a liability pertaining to the period well before the Rules came into effect - the Rules having come into force on 20.3.2012, the levy and computation of property tax on capital value would be available and possible on and with effect from 20.3.2012 and not with any retrospective operation. Scope and extent of the present property tax regime - HELD THAT:- The statute certainly empowers and contemplates imposition of property tax on the capital value. However, the capital value must be one which answers the postulates in Sub-clauses (a) to (e) of Sub-section (1A) read with Sub-section (1B) of Section 154. Since the statutory provisions do not contemplate any likelihood of exploitation of capacity in future, the capital value of the land and building must be based on situation "in praesenti". It must be clarified here that in projects which are in progress, the value addition to the property would be ongoing feature. However, considering Clauses (a) to (d), it would mean that the governing principle must be the actual use and not the intended use in future - the challenge raised by the Corporation must fail. Appeal disposed off.
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