1987 (8) TMI 38 - HC - Income Tax

Summary

Issues Involved:
1. Prima facie case for ad interim injunction.
2. Balance of convenience.
3. Irreparable injury.
4. Legality of property tax assessment and revision.
5. Inclusion of machinery and other costs in rateable value.
6. Plaintiff's compliance with court orders and payments.
7. Validity of defendant's actions under the D.M.C. Act.

Detailed Analysis:

1. Prima Facie Case for Ad Interim Injunction:
To be entitled to the ad interim injunction, the plaintiff must establish a prima facie case, balance of convenience, and potential irreparable injury. The plaintiff argued that the occupancy certificate was issued on September 11, 1986, indicating that the building was not complete for occupation before that date, thus precluding any revision of assessment prior to September 11, 1986. The plaintiff cited various stay orders from different courts, which had stayed the recovery of impugned tax demands for previous years upon partial deposits. The defendant admitted these deposits and the stay orders. The plaintiff contended that the defendant failed to give credit for payments already made, and the assessment order included costs of machinery and furnishings, contrary to legal provisions.

2. Balance of Convenience:
Once a prima facie case is established, the balance of convenience favors granting the ad interim injunction. The plaintiff argued that the substantial mischief, damage, and injury likely to be caused if the injunction is refused would be much greater than if it is granted, especially since the plaintiff had already made significant payments under various court orders. The court agreed, noting that the balance of convenience lies in favor of granting the injunction to prevent unnecessary hardship to the plaintiff.

3. Irreparable Injury:
The court concluded that non-grant of the ad interim injunction would cause irreparable injury to the plaintiff. The demand of over three crores of rupees, if enforced, would cause substantial hardship to the plaintiff. The court emphasized that irreparable injury does not mean an injury that cannot be repaired but one that is material by itself. The court noted the plaintiff's compliance with past court orders and payments made, indicating that the plaintiff would suffer undue hardship without the injunction.

4. Legality of Property Tax Assessment and Revision:
The court considered whether it was open to the defendant to revise the property tax and rateable value for years that had already become final. The plaintiff argued that the defendant's actions were illegal and unjustifiable, as the assessment orders included costs of machinery and furnishings, contrary to legal provisions. The court noted that the plaintiff had raised serious and substantial questions regarding the legality of the defendant's actions, which needed to be investigated and decided.

5. Inclusion of Machinery and Other Costs in Rateable Value:
The plaintiff contended that the defendant had wrongly included the cost of machinery, air-conditioning, electrical equipment, interior decorations, and special furnishings in the rateable value, contrary to the law. The court recognized this as a substantial question that needed to be addressed, indicating that the plaintiff had raised bona fide contentions requiring investigation.

6. Plaintiff's Compliance with Court Orders and Payments:
The plaintiff demonstrated compliance with various court orders by making significant payments towards the impugned tax demands. The court noted that the defendant admitted these payments and that the plaintiff had deposited roughly 40% of the demand money. The court emphasized that the defendant should have given credit for these payments and that the plaintiff was entitled to a rebate to that extent.

7. Validity of Defendant's Actions under the D.M.C. Act:
The court considered whether the defendant's actions were in accordance with the D.M.C. Act. The plaintiff argued that the defendant's assessment and demand notices were illegal and contrary to the mandatory provisions of the D.M.C. Act. The court noted that these contentions raised serious and substantial questions that needed to be tried and decided, establishing a prima facie case for the plaintiff.

Conclusion:
The court concluded that the plaintiff had established a prima facie case for the grant of an ad interim injunction. The balance of convenience favored the plaintiff, and non-grant of the injunction would cause irreparable injury. The court extended the ad interim injunction until the decision of the suit, provided the plaintiff deposits an additional sum of Rs. 35 lakhs within four weeks. Failure to deposit this amount would result in the vacation of the injunction. The court clarified that the observations made in this order would not affect the merits of the case, which would be considered after evidence is led.