TMI Blog1971 (11) TMI 160X X X X Extracts X X X X X X X X Extracts X X X X ..... received by Government in response to the proposals made by it and its conclusion after considering them as to the necessity for establishing a Board to deal with the said problems by carrying out structural repairs to dangerous buildings, by acquiring and reconstructing buildings which are beyond repair and by providing for the rehousing of occupiers, who, because of such repairs would be dishoused, and to provide for the temporary levy of an additional cess on buildings and lands to meet the expenditure for the aforesaid purposes. The Act was brought into force on October 1, 1969 and the cess payable thereunder became operative as from November 1, 1970. The Act by s. 1(4) is declared to be a temporary one and would expire on December 31, 1979. Structural repairs are defined by s. 2 (s) as meaning repairs or replacement of decayed, cracked, or out of plumb structural components of a building or any substantial part thereof or any part to which the occupiers have common access, by new ones of the like materials, or of different materials including change in the mode of construction such as converting load bearing wall type or timber framed structure to an R.C.C. one, which repa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the provisions of the Transfer of Property Act, 1882 relating thereto shall apply. Counsel for the petitioners challenged the validity of the Act principally under three heads : (1) that in the context of the ,existing legislation, i.e., the Bombay Municipal Corporation Act, III of 1888 and the Bombay Rent Control Act, 1947, the imposition of a cess on residential buildings, which are in sound and good condition, and which would not require structural repairs for the entire period of the Act, amounts to an unreasonable restriction, and therefore, violates Art. 19(1)(f) of the Constitution; (2) that the Act is also violative of Art. 14, in that, it fails to recognise the material differences between various buildings with regard to their physical conditions and treats unequals as equals; and (3) that the exemption provided by S. 28 are arbitrary and without any principle, and therefore, violate Art. 14. Counsel argued that by subjecting residential buildings in sound condition to the cess, the Act in substance and effect provides bounties for those owners who have been neglectful of their buildings and have infringed requisitions issued to them by the Municipal Corporation. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stently taken care of than the one built later but not taken care of, yet such a building, only because it was built earlier, is subjected to a higher rate of tax. Sec. 27 and the Schedule created discrimination between properties (a) interse in the same category, (b) between buildings in different categories, and (c) in imposing the same percentage, on buildings in the same category though their actual conditions are totally different and also between buildings in different ,categories. Thus, buildings in category A, built say in 1900 and those built in 1939 are treated as equals. Even buildings erected ,at about the same time need not be equal in condition, as, in the ,case of one tenantable repairs might have been consistently carried ,out or structural repairs might have recently been carried out than the one in which no such repairs, tenantable or structural, have so far been carried out. Even if such a tax was necessary, its levy should have been made dependable on the actual conditions of the buildings and after a survey of the necessity and the extent of structural repairs required. Further, buildings in sound condition and not needing structural repairs ought to have been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Rent Control Act which froze the rent at the pre-war level and gave security to the tenants by conferring on them the status of irremovability. The building materials in the meantime became scarce, and consequently, with the freezing of rents and the rising costs of materials, the incentive to maintain properties in good repair gradually vanished. As the gap between demand and supply of accommodation grew wider, the pressure on the existing premises substantially increased. The situation got worsened by reason of the reluctance of the owners of the buildings to maintain their properties in tenantable repairs as they found carrying out the repairs uneconomical. A more comprehensive Rent Control Act then replaced in 1947 the existing 1939 Act which had by them, been found inadequate. But while it guaranteed to the tenants security of tenancy rights it generated an increasing reluctance on the part of the owners to invest any more capital on their buildings as that type of investment was found to be less and less attractive. One of the features of the city is that a large percentage of the existing residential buildings in it had been constructed several years ago. Being almost a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of families living in buildings which imminently required substantial repairs, if they were to survive, came to 1,04,270, 80% of whom were occupying one room tenements. The Report on the development plan for Greater Bombay, submitted to the State Government in 1964, stated that out of about seven lacs tenements in Greater Bombay as on March 31, 1961, 23% of them containing 18,000 buildings would need extensive repairs in the next fifteen years and about 1,000 of them would have to be immediately demolished. 10,000 buildings would have a life of about ten years, and 7,000 a life of fifteen years. With such a situation it was no wonder that collapses of buildings became almost an annual occurrence particularly during rainy seasons. In 1965, the State Government appointed the Bedekar Committee to examine the problem. The Committee reported the following principal causes of collapses; 1. Indifference of owners to repair due to the freezing of rents, on the one hand, and the rise in the cost of building materials, on the other; 2. Resulting leakages in sanitary blocks; 3. Failure to demolish buildings even where they were incapable of being sustained with repairs only; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns, suggestions and objections received by the Government that the impugned Act was brought before the Legislature. The Act was confined to the problem of residential houses only. That was not because there was no danger of collapses of non-residential buildings, but because it was considered feasible to deal with a limited problem, namely, that of residential Premises in respect of which the distress was accuter As the Minister for Housing said during the Passage of the bill. the intention of the Government was to bit the evil where it is greatest . It is also clear that following the reports, such as the survey report, and the report of Bedekar Committee, the Act placed the residential buildings into three categories according to the periods during which they were constructed and the construction in vogue during those periods. The date, September 1, 1940, in respect of category A was chosen as it was from that date that the rents were frozen under the Rent Control Act. The life of the Act upto 1979 only, restricting it to residential buildings only, their division into three categories, the raising of the fund for implementing the purposes of the Act from three agencies immediat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Agricultural Income Tax Officer( [1963] 3 S.C.R. 809) It is well recognised that a Legislature does not have to tax everything in order to tax something. It can pick and choose districts, objects, persons, methods and even rates of taxation as long as it does so reasonably( Willis, Constitutional Law of the United States, 587). A taxing statute is not invalid on the ground of discrimination merely because other objects could have been, but are not taxed by the legislature.(Ravi Varma v. Union of India ([1969] 3 S.C.R. 827.)]. When a statute divides the objects of tax into groups or categories, so long as there is equality and uniformity within each group, the tax cannot be attacked on the ground of its being discriminatory, although due to fortuitous circumstances or a particular situation some included in a class or group may get some advantage over others, provided ofcourse they are not sought out for special treatment. Khandige Sham Bhatt v. Agricultural Income Tax Officer(1). Likewise, the name fact that a tax falls more heavily on some in the same group or category is by itself not a ground for its invalidity, for then hardly any tax, for instance, sales tax and excise tax, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le value of the buildings is charged as a basic levy and at a higher rate where any such building is structurally repaired. The three categories are formulated on two principles, the age of the buildings and the type of construction in vogue during the periods when they were constructed. These principles appear to have been adopted from the earlier studies made at the instance of the Government and the Corporation. The amount recovered under this levy is to be first credited to the Consolidated Fund of the State, and thereafter to be transferred by a suitable appropriation to the fund designated as the Bombay Building Repairs and Reconstruction Fund. (S. 31). For providing initial expenditure of the Board, the Government and the Corporation have been empowered to make advances. (s. 48). The Act also provides that the Government may and the Corporation shall make an annual grant of ₹ 1,00,00,000/- each. Two further provisions in this connection need be noted. The first is S. 27(4) under which an owner who is required to pay the cess pays only 10% of the rateable value of his building and is entitled to recover the balance from the tenant by making a corresponding increase i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd that therefore, the purpose of the tax is to serve a private and not a public purpose, and therefore, violative of Art. 19 (1) (f) ? The rule, no doubt, is that taxes can be levied for public purposes and indirect and incidental benefits which may result to the public do not make a public purpose, where the object is directly private. But the purpose of a tax would not be regarded as private merely because some persons might receive more benefits from the use of its proceeds than others or is imposed for a purpose other than revenue, such as tarff duties for encouragement of manufactures or licence fees with a view to regulate a particular trade or industry. A law, not only exempting from taxation the limited means of poor and afflicted persons but providing public funds to ameliorate their conditions, is undoubtedly one for public purpose. A clear example of such a tax is the provision for hospitals and asylums where medical and other aid is given to the poor and the dependent free of any charge. A tax in aid of private enterprises would undoubtedly be regarded as loading the table of the few with bounty that the many may partake of the crumbs that fall therefrom , unless s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der an appropriation duly made after deducting the cost of collection the balance is to be transferred to the Repairs and Reconstruction (1) Cooley on Taxation, (4th ed.). vol. 1, Ch. 4, Arts, 174 to 221 ; and American Jurisprudence vol. 51, paras 321 and fund. (2) Ibid, Para 330, at P. 381; and Carmichael v. Sourthern Coal Coke Co., 81 Law. ed., 1245. (3) American Jurisprudence, Taxation, vol. 51, Para 353, at The doctrine of benefits cannot apply to such a case, firstly, because the cess goes directly to the Consolidated Fund in augmentation of that fund and not to a specific fund, and secondly, because the legislature has the power to authorise expenditure out of the Consolidated Fund on any public purpose which it thinks necessary and proper(1). Both the purpose of the cess and its use are without doubt for public purpose. The purpose is to prevent collapses and the suffering they must cause including rendering several persons homeless, a condition accentuated by the demand for accommodation outrunning the supply. The use is for preservation and prolonging the life of the buildings existing at the date of the enactment of the Act by carrying out structural repairs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... To such a classification, the challenge, firstly was that there was no rationale in dividing the residential and the non-residential buildings as a number of buildings falling in both the groups had been found to be in imminent dangerous condition, and posed the problem of danger to human lives and of collapse. It was said, therefore, that both the kinds ought to have been subject to the provisions of the Act. The second challenge was to the equality of the percentum of the rate to buildings falling in any on of the three categories without regard to their actual physical conditions. Counsel sought to work out several permutations and combinations to show that such equal treatment to buildings in each one of the three categories created inequality by reason of disregard to their unequal conditions. Thus, a building built in 1900 was treated equal with one built in 1939 and both bore the tax at the same rate. Similarly, a building totally neglected by the owner, and therefore, needing structural repairs was treated on equal footing with another in the same category, but on which the owner has recently carried out full structural repairs and was therefore in a sounder condition t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e danger was graver and more imminent, no challenge to the division between residential and non-residential premises can be sustainable particularly when dealing with a part of the problem and confining its treatment to residential premises only was considered feasible. From the studies undertaken by the Government and the Corporation earlier referred to, it appears that there were two alternatives. the first was reconstruction of large sections of the city and replacing new buildings in place of the old, and the second was the preservation and prolonging the life of the existing structures by carrying out structural repairs and alterations therein. The first obviously would have raised numerous problems, legal and economic. The second would create lesser number of them. If the Legislature thought it best in lie circumstances to choose the second instead of the first and confined its attention to the existing structures no challenges on the ground of discrimination or arbitrariness can legitimately be made. The classification of residential premises from the rest and that between those existing at the time when the Act was brought into force from the new ones which might be built ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lroad Retirement Board v. Alton Railroad Co., (79 Law. Ed. 1468.) leaned heavily by counsel, disapproving a provision establishing a compulsory bonus system of employees on all carriers treating them all as a single employer, on the around that in imposed upon solvent carriers the burden of furnishing money necessary to meet the demands of the system upon insolvent carriers. cannot apply as the decision turned on due process clause, a clause not available in our Constitution. The levy of the cess under s. 27 of the Act is not based on the principle of qid pro quo. Its object is not to repair all residential premises, but to preserve and prolong their lives in order to avert the dilema caused by the acute shortage of residential accommodation on the one hand, and the reluctance and/or inability of the owners to carry out repairs resulting from the Rent Act, on the other, and to establish an agency so that structural repairs to buildings in dangerous or ruinous conditions can be carried out. The finances for these objects are provided from. a fund from the impugned cess and contributions by the State and the Corporation. The contention that some of the buildings falling in cate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ieties and their expenditure and an overall supervision over their affairs. The Bedekar Committee;, no doubt, sounded a warning in respect of some of the buildings put up by some of such societies. But these are exceptions and the Legislature could not have carved out a sub-clause in respect of them. The Committee, however, had observed that these societies in the present state of the property market were the only real instrumentalities through which an increase in the residential accommodation can at present be achieved, and therefore, should be encouraged. Likewise, the relations between the owners and persons occupying their buildings under leave and licence cannot be equated with relations between landlords and tenants. The circumstances which led to the imposition of the cess do not apply to premises in the occupation of licensees because such licensees have no rights such as the tenants have, namely, irremoveability and. the freezing of rents, and the consequential reluctance or inability of the landlords to maintain their premises in tenantable repairs. There is no such statutory control over compensation paid by them as there is in the case of standard rent. Considerations ..... X X X X Extracts X X X X X X X X Extracts X X X X
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