TMI Blog2022 (11) TMI 1477X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 attribute ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... temnor for disobedience of orders dated 29.7.2019, 21.10.2019 and 22.11.2019 passed by this Court in the appeal arising out of said SLP(C) No. 17009 of 2019. For the present purposes, said Contempt Petition is segregated with a direction to list the same before an appropriate Court after six weeks. 3. The Mumbai Municipal Corporation Act, 1888 MMC Act , for short has been enacted by the State Government to consolidate and amend various Municipal Acts which were in force relating to the Municipal administration of the city of Mumbai. The Municipal Corporation of Greater Mumbai ( the Corporation for short) has been established and discharging its duties under the MMC Act. 4. The MMC Act authorizes the Corporation to impose property tax on lands and buildings. Importantly, property tax is one of the main sources of revenue for the Corporation, specifically after abolition of Octroi. The MMC Act earlier provided for levy of property tax on the basis of certain percentage of rateable value of the buildings or lands. The basis of determination of rateable value as provided in the MMC Act was the annual rent for which such buildings or lands might reasonably be expected to be let from yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... own to the standard rent of any buildings or lands according to the provisions of the Rent Control Acts. In so far as the area of the Municipal Corporation of Brihan Mumbai is concerned, the Rent Control Act, which provided for standard rent for the first time, was the Bombay Rent Restriction Act. 1939 (Bom. XVI of 1939). This Act was repealed by the Bombay Rents, Hotel Rates and Lodging House Rates (Control) Act, 1944 (Bom.VII of 1944), which had been replaced by the Bombay Rents, Hotel and Lodging House Rates Control Act, 1947 (Bom. LVII of 1947), which has also been now repealed by the Maharashtra Rent Control Act, 1999 (Mah. XVIII of 2000) which came into force on the 31st day of March 2000 and is at present in operation. Thus the Rent Control Act has been in operation in the Mumbai Municipal Corporation area for over 65 years. In effect, therefore, the property tax has to be determined on the basis of rateable value fixed considering the annual rent, being the fair rent (standard rent) alone, regardless of the actual rent received. Fair rent very often means the rent prevailing prior for the year 1940 with some marginal modifications and additions. Because of the limitations o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ep pace with inflation and cost of living. 5. The highlights of the system recommended by the Tata Institute of Social Sciences is the shift from Annual Rental Value to Capital Value as the base for the purpose of levy of property taxes at a certain rate which may be determined by the Corporation and such value is proposed to be adopted as the value of any buildings or lands as is indicated in the Stamp Duty Ready Reckoner for the time being in force as prepared under the Bombay Stamp (Determination of True Market Value of Property) Rules, 1995 and the capital value of the property could then be computed by applying thereto factors such as location, carpet area, type of construction, age of property and user thereof. In this system properties which are old or of semi-permanent structures including chawls, will be given due consideration and concession. Care is also taken to provide for an appropriate cap on the increase on property tax on account of switching over to the capital value base of levy. 6. It is a modest attempt to enable the Corporation to augment its revenue so as to meet the ever-rising expenditure in providing appropriate an adequate infrastructure for rendering civ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from time to time determine. xxx xxx xxx 123. Accounts to be kept in forms prescribed by Standing Committee. Subject to the provisions of Chapter XVI-A of this Act accounts of the receipts and expenditure of the corporation shall be kept in such manner and in such forms as the Standing Committee shall from time to time prescribe: Provided that, the accounts of the Water and Sewage Fund and the Consolidated Water Supply and Sewage Disposal Loan Fund shall be maintained on the accrual basis, unless otherwise prescribed by the Standing Committee. xxx xxx xxx 125. Estimates of expenditure and income to be prepared annually by Commissioner. The Commissioner shall on or before each fifth day of February, have prepared and lay before the Standing Committee, in such form as the said Committee shall from time to time approve,-- (1)(a) an estimate of the expenditure which must or should, in his opinion be incurred by the corporation in the next ensuing Official Year, other than-- ***** (ii) expenditure to be incurred by reason of the obligations imposed on the corporation arising out of the transfer to the corporation of the powers, duties, assets and liabilities of the Board of Trustees fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in whole or part of the capital of loans granted by the corporation and secured on the aforesaid immovable property; (d) an estimate of three times the amount of the net estimated realisations of the corporation in the then current financial year under the head of general tax (including arrears and payments in advance) divided by the rate fixed for general tax for the then current financial year; xxx xxx xxx Provided further that, with effect from the financial year 1974-75, this subclause shall have effect as if for the words three-times the word twice were substituted; (e) an estimate of the Corporation's receipts and income, other than receipts and income referred to in other clauses of this Sub-section arising from or relating to, transaction connected with the obligations imposed upon the Corporation by the transfer to the Corporation of the powers, duties, assets and liabilities of the said Board of Trustees or with the exercise of the powers and duties conferred or imposed upon the Corporation by Chapter XII-A including grants from the State Government. xxx xxx xxx 128. Fixing rates, of municipal taxes and of fares and charges of Brihan Mumbai Electric Supply and Trans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... value of buildings and lands until the Corporation adopts levy of any or all the property taxes on such buildings and lands on the capital value thereof Under Section 140A. 140. Property taxes leviable on rateable value, or capital value as the case may be, and at what rate. (1) The following property taxes shall be levied on building and lands in Brihan Mumbai, namely: (a)(i) the water tax of so many per centum of their rateable value, or their capital value, as the case may be, as the Standing Committee may consider necessary for providing water supply; (ii) an additional water tax which shall be called 'the water benefit tax' of so many per centum of their rateable value, or their capital value, as the case may be, as the Standing Committee may consider necessary for meeting the whole or part of the expenditure incurred or to be incurred on capital works for making and improving the facilities of water-supply and for maintaining and operating such works; Provided that all or any of the property taxes may be imposed on a graduated scale. (b)(i) the sewerage tax of so many per centum of their rateable value, or their capital value, as the case may be, as the Standing Commi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es, three times, and (b) where the tax so levied on any building or land, whether used for residential or for non-residential purposes, gets reduced, be less than half of the amount of the property tax leviable in respect thereof in the year immediately preceding such date: shall not exceed,- (i) in respect of building used for residential purposes, two times, and (ii) in respect of building or land used for non-residential purposes, three times, the amount of the property tax leviable in respect thereof in the year immediately preceding such date: Provided further that, where the property taxes levied in respect of any residential or non-residential building or portion thereof were on the basis of annual letting value arrived at considering the leave and licence charges, by whatever name called, then for the purposes of the first proviso it shall be lawful for the Commissioner to ascertain such tax leviable during such immediately preceding year, as if such building or portion thereof were self-occupied and had been so entered in the assessment book: Provided also that, the property tax levied on the basis of capital value of any building or land on revision made Under Sub-section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gs and lands, final bill of assessment of property taxes on the basis of capital value may then be issued for each such year as aforesaid. After such final assessment, if it is found that the Assessee has paid excess amount, such excess shall, notwithstanding anything contained in Section 179, be refunded within three months from the date of issuing the final bill, along with interest from such date as provided in the first proviso to Sub-section (5) of Section 217, or after obtaining the consent of the Assessee, shall be adjusted towards payment of property tax due, if any, for the subsequent years; and if the amount of taxes on final assessment is more than the amount of tax already paid by the Assessee, the difference shall be recovered from the Assessee. (2A) Notwithstanding anything contained in Sub-section (1) or (2) or any other provisions of this Act, the tax on buildings and lands, which are liable to be assessed for the first time on or after the 1st April 2010, shall provisionally be equal to the amount of tax, as if such buildings and lands are liable to be assessed in the year 2009-2010; and on ascertainment of the capital value of such 'buildings and lands, the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or land in respect of which capital value is required to be determined is situate, or in case such Stamp Duty Ready Reckoner does not exist, then the Commissioner may fix the capital value of any building or land taking into consideration the market value of such building or land, as a base value. The Commissioner while fixing the capital value as aforesaid, shall have regard The expressions were added/substituted by 2010 Amendment. The erstwhile subsection (1A) introduced by Maharashtra Act No. XI of 2009 was: (1A) In order to fix the capital value of any building or land assessable to a property tax the Commissioner shall have regard to the value of any building or land as indicated in the Stamp Duty Ready Reckoner for the time being in force as prepared under the Bombay Stamp (Determination of True Market Value of Property) Rules, 1995, framed under the provisions of the Bombay Stamp Act, 1958, or where the Stamp Duty Ready Reckoner does not indicate value of any properties in any particular area wherein a building or land in respect of which capital value is required to be determined is situate, or in case such Stamp Duty Ready Reckoner does not exist, then the Commissioner ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... operty tax bill for any building or land shall be the same as is for the year 2019-20; (iii) the capital value of any building or land fixed Under Sub-section (1A) shall be revised in the year 2022-23, as if the Clause (i) is not applicable for the year 2020-21 and the year 2021-22. (b) Subject to the proviso to Sub-section (1C), the next revision shall be in the year 2025-26, and, thereafter, the revision of capital value of any building or land, shall be in accordance with the provisions of Sub-section (1C). (2) The value of any machinery contained or situate in or upon any building or land shall not be included in the rateable value or the capital value, as the case may be, of such building or land. 154A. Provisional fixation of capital value in certain cases. Notwithstanding anything contained in Section 154, the rateable value of any building or land or part thereof, for the official year 2009-2010, shall be the provisional capital value of such building and lands in respect of the official years 2010-2011, 2011-2012 and 2012-2013, and such provisional capital value shall be deemed to be the capital value validly and legally fixed under the provisions of this Act, pending fixi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ital value, as the case may be, of each such building and land determined in accordance with the foregoing provisions of this Act; (c) the name of the person primarily liable for the payment of the property taxes, if any, leviable on each such building or land; (d) if any such building or land is not liable to be assessed to the general tax or is exempt from payment of property tax either in whole or in part, as the case may be, the reason of such non-liability or exemption, as the case may be; (e) when the rates of the property taxes to be levied for the year have been duly fixed by the corporation and the period fixed by public notice, as hereinafter provided, for the receipt of complaints against the amount of rateable value or the capital value, as the case may be, entered in any portion of the assessment book, has expired, and in the case of any such entry which is complained against, when such complaint has been disposed of in accordance with the provisions hereinafter contained, the amount at which each building or land entered in such portion of the assessment book is assessed to each of the property taxes, if any, leviable thereon; (f) if Under Section 169, a charge is mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elative base value, to be respectively assigned thereto for the purpose of fixing capital value, shall be as in column (3) of each of the said Parts II, III and IV of Schedule 'A'. 6. The nature and type of building and the weightage by multiplication to be assigned thereto:The nature and type of a building shall be as specified in column (2) of Schedule 'B' and the weightages my multiplication to be assigned thereto for the purpose of fixing capital value, shall be shown in column (3) of the said Schedule 'B'. 7. The weightage by multiplication to be assigned to a building on account of the age thereof:The weightage by multiplication to be assigned to a building on account of age factor, for the purpose of fixing capital value, shall be according to the age of the building as shown in column (2) of Schedule 'C' and the weightage by multiplication be assigned thereto shall be as shown in column (3) of the said Schedule 'C'. 8. The weightage by multiplication on account of floor factor to be assigned to RCC building with lift:Weightage by multiplication on account of floor factor to be assigned to a RCC building with lift, for the purpose of f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , Sub-rule (2), unless already reckoned in such carpet area. 11. Fixation of capital value of a flat or building or part thereof.- (1) While fixing the capital value of a flat, the capital value of any one or more of the relevant items specified in Sub-rule (1) of Rule 10, as fixed in accordance with the provisions of Rules 14, 15, or Sub-rule(1) of Rule 16, as the case may be, shall be added to the capital value of the flat. (2) While fixing the capital value of a building or part thereof, the capital value of any of the one or more of the relevant items specified in Sub-rule (2) of Rule 10 as fixed in accordance with the provisions of Sub-rule (2) or, as the case may be, (3) of Rule 16, shall be added to the capital value of the building or part thereof. 12. Fixation of capital value of a building where there are tenants:The capital value of a building or part thereof which is occupied by a tenant shall be fixed at 75% of the capital value of such building or part thereof; fixed in accordance with the provisions of Sub-rule (1), or, as the case may be, Sub-rule (2) of Rule 11. Explanation.-For the removal of doubts, it is hereby declared that the provisions of this Rule shall not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... capital value of dry balcony and niches shall be fixed at 25% of the relative rate of base value of the flat, if any one of these items are part of the flat; and by applying the relevant weightages by multiplication provided for in these rules. (2) The capital value of any one or more of the following items, namely: (i) porch, (ii) air-conditioning plant room, (iii) air-handling room, (iv) structure for an effluent plant, (v) watchman cabin and (vi) refuge area, shall be fixed at 25% of the relative rate of base value of the building or part thereof, if any one or more of these items are part of the building or part thereof; and by applying the relevant weightages by multiplication provided for in these rules. (3) The capital value of any one or more of the following items, namely: (i) service floor, (ii) entrance lobby and (iii) lounge, shall be fixed at the relative rate of base value of the building or part thereof, if any of these items are part of the building or part thereof; and by applying the relevant weightages by multiplication provided for in these rules. 17. Fixation of capital value in respect of demolished building: (1) Where a building is fully demolished, or has fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... = total of items (a) and (b). 19. Capital value of amenities of luxurious RCC building not to be separately fixed again.-Where the capital value of a luxurious RCC building is fixed under these rules, then no capital value of the amenities specified in the definition of the expression 'luxurious RCC building' shall be separately fixed for the purpose of levy of property tax. 20. Valuation of open land capable of utilising more than 1 floor space index (F.S.I.) or transfer of development right (T.D.R.)-As the Ready Reckoner provides for the rate of base value of open land with 1 floor space index, open land which is capable of utilizing more than 1 floor space index or any transfer of development right shall be valued at an increased rate in proportion to the higher floor space index or transfer of development right proposed to be utilized and approved under the building plan submitted to the Corporation for approval. 21. Capital value of open land or building or part thereof.-Capital value of open land or building shall be fixed under the provisions of the Act and these Rules in the following manner, namely: (1) Capital value (CV) of open land Rate of base value (BV) of a o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... advertisements, erected on poles, on the ground or on a building; xxx xxx xxx (g) open land includes land not built upon or land being built upon, but does not include land appurtenant to a building; (h) Ready Reckoner means the Stamp Duty Ready Reckoner, for the time being in force, referred to in subsection (1A) of Section 154 of the Act; xxx xxx xxx 3. Capital value of open land:Save otherwise provided in these rules, where, within the precincts of a building there is vacant land other than the land appurtenant to the building, such land shall be treated as open land and the capital value thereof shall be fixed accordingly, as provided for in Rule 21. 4. User categories of open land and weightages by multiplication to be assigned thereto:User categories of open land shall be as specified in column (2) of Part 1 of Schedule 'A' and the weightages by multiplication to base value, to be respectively assigned thereto the purpose of fixing capital value, shall be as shown in column (3) of the said Part I of Schedule 'A'. 5. User categories of buildings or part thereof and weightages by multiplication to be assigned thereto:User categories of buildings or part thereof ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e flats in the building computed in accordance with Sub-rule (1), (ii) basement, (iii) stilt, (iv) porch, (v) podium, (vi) service floor, (vii) refuge area, (viii) entrance lobby, (ix) lounge, (x) air-conditioning plant room, (xi) air handling room, (xii) the structure for an effluent treatment plant room and (xiii) watchman cabin (xix) sewerage treatment plant room (xv) water treatment plant room (3) The carpet area of any of the following items shall not be reckoned while computing the carpet area of a building or part thereof, namely: (i) lift room above topmost storey, (ii) lift well, (iii) stair-case and passage thereto including staircase room, (iv) chimney and elevated tank, (v) meter room, (vi) pump room, (vii) underground and overhead water tank, (viii) septic tank, (ix) flower-bed and (x) loft in residential flat, (xi) entrance lobby of residential building (4) deleted 11. Fixation of capital value of a flat or building or part thereof.- (1) While fixing the capital value of a flat, the capital value of any one or more of the relevant items specified in Sub-rule (1) of Rule 10, as fixed in accordance with the provisions of Rules 14, 15, or Sub-rule (1) of Rule 16, as the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alue; and by applying the relevant weightages by multiplication provided for in these rules. 16. deleted 17. Fixation of capital value in respect of demolished building: (1) Where a building is fully demolished, or has fully collapsed, the land beneath it shall be deemed to be open land and the capital value thereof shall be fixed accordingly, as provided for in Rule 21. Explanation- deleted (2) Where only part of a building is demolished or has partly collapsed and the remaining part is yet occupied by occupiers, land beneath the portion of the building which is demolished or has collapsed shall be deemed to be open land and the portion of the structure which is occupied shall be treated as a building, for the purpose of fixing the capital value thereof. (3) deleted 18. deleted 19. deleted . 19. A Assessment of Amenities in Luxurious RCC bldg Where Property tax in respect of amenities of luxurious RCC building was not levied since 1st April 2010 as per Rule 19, while determining the property tax leviable from 1st April 2015, subject to capping as provided for in Section 140A such tax shall be considered which would have been continued to levy from 1st April 2010. 20. Valuation of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ea 80 sq. mtr. not applicable CV = BV X UC X FSI X LA = 36400 X 1.00 X 2.50 X 80 C.V.= Rs. 72,80,000 (13) OPEN LAND IN SUBURBAN AREA Weightage Rate of base value Rs.33,200 not applicable User Category Residential 1.00 Nature and Type of Building not applicable not applicable Age of Building not applicable not applicable F.S.I. Factor 1.00 1.00 Land Area 80 sq. mtr. not applicable CV = BV X UC X FSI X LA = 33200 X 1.00 X 1.00 X 80 C.V. = Rs. 26,56,000 13. Number of petitions were filed challenging the validity of computation and levy of property tax based on capital value system. The petitions also challenged the vires of Capital Value Rules of 2010 and Capital Value Rules of 2015. Some of the petitions also challenged the amendment effected to the MMC Act pertaining to the implementation of the Capital Value System for computing and assessing property tax. During the pendency of these matters before the High Court interim orders were passed by the High Court on or about 29.01.2014 which were thereafter modified by subsequent order dated 24.02.2014. The operative part of the order dated 24.02.2014 was as under: 5. In the meantime the Petitioners shall pay municipal taxes at the pre- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntry-86 of List-I of Seventh Schedule. .... (b) Challenge to the validity of Sub-sections (1)(a) and (1)(b) of Section 140 regarding water tax and sewerage tax. The submissions were rejected with following observations: 158. ..... A tax is a compulsory exaction as a part of common burden without promise of any special advantages to classes of taxpayers, whereas a fee is a payment for services rendered, benefit provided or privilege conferred. Coming back to Sub-sections (1)(a) and (1)(b) of Section 140, the same provide for levy of such water tax as the Standing Committee may consider necessary for providing water supply. The imposition of this tax does not depend on whether the water is being supplied to the premises or property in respect of which water tax is demanded. Similarly, in case of additional water tax, the expenditure incurred or to be incurred for capital works for making or improving the facilities of water supply may not be for a direct benefit to the premises or property subject matter of levy of tax. The Municipal Corporation may not be providing water supply to a particular premises or land at a particular point of time but it may be providing it to other propert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bmission that the aforesaid provisions are ultra vires the provisions of the Constitution of India. The argument whether education cess can be levied on the basis of capital value is dealt with separately. (d) Similarly, the argument with regard to Sub-section (1)(d) of Section 140 dealing with levy of Betterment Charges was rejected with following observations: 162. In none of the Petitions in this group, it is demonstrated that a demand is made from the Petitioners for payment Betterment Charge. Elaborate procedure for determination thereof is laid down. The Authority which has power to determine the charge is the Improvement Committee. As per Section 49B of the BMC Act, the said Committee consists of 26 elected councilors of BMC. Moreover, the betterment charge is not payable on the basis of the capital value. Hence, the main ground of attack in these petitions about the levy of property taxes based on capital value has no relevance to levy of Betterment charges. (e) Consideration of challenge on the basis of violation of provisions of Chapter IXA and in particular, Article 243-X of the Constitution of India. The substratum of the challenge was that the levy and collection as pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection (1) of Section 140A does not expressly lay down any specific conditions for exercise of the option. The provisions which confer power on the Standing Committee to fix the rates of taxes contain sufficient guidelines. Even the provision of Sub-section (1A) of Section 154 which confer power on the Commissioner to determine capital value contains more than sufficient guidelines. We see no violation of Article 243-X or any other provisions of Part-IX-A. 182. If we accept the submissions canvassed across the bar by the Petitioners, not only the decision to adopt capital value system but the job of fixing rates in case of all categories of property taxes, determination of capital value of all properties liable to taxes, process of serving notices Under Section 162, giving hearing on complaints and deciding the complaints will have to be done by the Corporation consisting of elected councillors and nominated councillors and by no one else. Such interpretation put to Clauses (a) and (b) of Article 243-X will lead to absurdity and the provisions will become unworkable. Such interpretation will defeat the object of 74th Amendment to the Constitution and, therefore, the challenge on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted by the High Court after making following observations: 205. The liability to pay property taxes was always provided in the BMC Act. By the impugned amendments, only the basis of computing property taxes has undergone a change. Assuming that there is any retrospective operation, it is no facilitate transition form one regime to another. As per the amendments, the final assessment for the years 2010-11, 2011-12 and 2012-13 can be made after expiry of the respective years. But provisional assessment has to be made during the respective three years. The impugned provisions do not take away or affect any vested right as only the procedure/method of computing the property taxes has undergone a change. By virtue of the impugned amendments, a property in respect of which taxes were not payable earlier does not become subject to taxes. It cannot be said that by the impugned amendment, from an earlier date, any new obligation or disability has been attached in respect of any earlier transactions. The impugned amendments will affect the properties which even under the unamended Act, were subject to payment of property tax. The impugned provisions do not bring about any unreasonable or arb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssible or approved FSI multiplied by area of the land. Once the base value is determined as per SDRR, it is obvious that the said value is fixed taking into consideration potential of the land. The rates in SDRR are fixed after taking into consideration all the aspects of market value. The capital value has to be decided in accordance with the base value which has to be taken as per SDRR. Clause (1) of Rule 21 provides for weightage by multiplication as per user category. It also provides that the rate of base value shall be multiplied by permissible FSI for determining the capital value of the land. There is no provision under the BMC Act to take into consideration development potential of vacant land for determining its capital value. When the substantive provision i.e. Sub-section (1A) of Section 154 lays down that the base value has to be in terms of SDRR rates, the subordinate legislation cannot provide for adding additional value to SDRR rates on account of availability of FSI. Thus, the provision of multiplying base value with permissible or approved FSI is ultra vires the provisions of the BMC Act. Moreover, the Rule making power does not permit the Commissioner to frame th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ose of property taxes, not only a vacant land but even a land under construction will have to be treated as a vacant land. Wherever SDRR is applicable, in view of Sub-section (1A) of Section 154, the base value has to be as per SDRR rate for vacant land. Rule 20 provides for taking into consideration potential for development. It is completely contrary to the provisions of the BMC Act as interpreted in the case of Polychem Limited (supra) which requires even the land under construction to be treated as a vacant land. Moreover, Rule 20 purports to lay down how valuation of the land has to be made. The Rule making power Under Sub-section (1B) or Clause (e) of Sub-section (1A) of Section 154 does not confer any such power. Moreover, if Rule 20 is implemented, capital value which is higher than SDRR rate will have to be fixed which will be in violation of Sub-section (1A) of Section 154 which mandates that the Commissioner will take into consideration SDRR rate while finalizing capital value. Thus, Rule 20 is ultra vires the provisions of subsections (1A) and (1B) of Section 154 of the BMC Act. There is no difference in Rule 20 of the Capital Value Rules of 2010 and 2015. 19. In the en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ence, no relief can be extended to the properties of the said members save and except the properties subject matter of bills and notices which are expressly challenged. (vi) This judgment will not affect the final bills which are accepted by the concerned owners. 230. We record our appreciation for the valuable assistance rendered by the learned Counsel appearing for various parties. We dispose of the petitions by passing the following order: ORDER (i) We reject the prayers made for challenging the constitutional validity of various provisions of the Mumbai Municipal Corporation Act, 1888 as prayed in the writ petition/PIL. We hold that Rules 20, 21 and 22 of the Capital Value Rules of the years 2010 and 2015 are ultra vires the provisions of the Mumbai Municipal Corporation Act, 1888 and, therefore, the same are struck down; (ii) We quash and set aside the special assessment notices and final bills based on final capital value fixed which are specifically the subject matter of challenge in this group of petitions. The demand of provisional taxes is not disturbed. The orders specifically impugned which are passed on the complaints do not survive. We direct the Mumbai Municipal Corp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... who were aggrieved by the rejection of their submissions challenging the validity of the various provisions of MMC Act and other issues which were answered against them also preferred Special Leave Petitions. 21. Mr. K.K. Venugopal, learned Attorney General for India and Mr. V. Sreedharan, learned Senior Advocate appearing on behalf of the Corporation initially advanced submissions on the issues which were answered against the Corporation. However, after the submissions were advanced on behalf of various impleading applicants and other parties including substantive petitions challenging the correctness of the decision of the High Court, submissions were also advanced in response. 22. The factual aspects regarding framing of the Capital Value Rules of 2010 and 2015, as well as the background for some of the amendments effected to the MMC Act, have been dealt with in the written submissions of the Corporation, as under: 2. The amendment to the MMC Act introducing the capital value system was brought about in 2009 (Act No. XI of 2009 on Pg 24-39 in Compilation of Corporation-Vol 4). Pursuant to the same, the Corporation passed resolution dated 27.01.2010 for adoption of capital value ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g 19 of consolidated counter affidavit on behalf of Respondents 2 to 4) 7. In light of the same, the State Legislature stepped in and introduced L.A. Bill No. LXXIV of 2010 whereby inserting Sub-section (2) in Section 140A to enable the Corporation to issue provisional bills for the year 2010-11 and treat the rateable value of the building or land as provisional capital value. (Statement of object and reasons on Pg 48 and 49 in Compilation of Corporation-Vol 4). The said bill culminated into Act No. XXVII of 2010 (Pg 51 to 58 in Compilation of Corporation-Vol 4). 8. The amendments to the MMC Act provided that once the capital value was fixed, final bills would be issued. If the final bill was lower than the provisional bill, the MCGM would refund the excess payment made with interest at the rate of 6.25% p.a., or with the consent of the tax payer, adjust the excess amount against future bills (Section 140A(2). (Para 32, Pg 19 of consolidated counter affidavit on behalf of Respondents 2 to 4) 9. Pursuant to the same, the Corporation started implementation of the capital value system by issuing provisional property tax bills. 10. In March 2011, the State Legislature observed that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atement of object and reasons on Pg 155 and 156 in Compilation of Corporation-Vol 4). The said ordinance culminated into Act No. VI of 2012 (Pg 157 to 162 in Compilation of Corporation-Vol 4). 14. It is submitted that, in present case there is no retrospective levy of tax. The Section for imposition of tax on capital value was already in force from 01.04.2010. Draft Rules were already published in October, 2010. The levy is broadly speaking on assesses who were paying tax under earlier regime also. 15. The statute provided for transitionary arrangement pursuant to which provisional bills were issued as per Section 140A(2) read with Section 154A of the MMC Act from official year 2010-2011 (under the capital value system), 2011-2012 and till 2012-2013. Refunds are granted, or shortfall recovered after the capital values are fixed. 16. It is submitted that, time taken in assessment can never make the levy retrospective when the Section imposing a tax is already in force. In case contention raised by assesses is accepted, it would amount to imposition of tax on rateable value even when the statute provides for imposition of tax on capital value w.e.f. 01.04.2010. Law laid down in Chhot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt in The Municipal Corporation of Greater Bombay v. Polychem Ltd. (1974) 2 SCC 198, it was submitted that till the potential of the property was translated into a habitable building, the land must be treated and taxed only as land and not going by its buildable potential. It was further submitted that the process of fixing and/or changing the value, must be done in the same financial year. (C) Mr. Shekhar Naphade, learned Senior Advocate appearing for intervenors in IA Nos. 110998 and 158888 of 2019 submitted that the existing buildings having been demolished, the property could be taxed only as land and not going by the projected or contemplated developments as a shopping centre or a mall. (D) Mr. H. Devarajan, learned Advocate who appeared for the Property Owners Association submitted that in terms of Article 243Y(1)(b) of the Constitution the matter ought to have come through the suggestions of the Finance Commission. But the entire process was initiated as a result of the suggestions made by the TISS. It was also submitted that the exercise adopted in the instant case was in violation of Article 243-X of the Constitution. Reliance was placed on the decision of this Court in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons of Dr. Sathe and Mr. Khambata, learned Senior Counsel. 24. Mr. V. Sreedharan, learned Senior Counsel for the Corporation made submissions in rejoinder. He also submitted that the overall tax demand of the Corporation under the capital value assessment actually decreased by 12% to Rs. 2908 crores as compared to Rs. 3308 crores under the Relatable Value System. The tax demand for residential units got reduced from Rs. 1030 crores to Rs. 949 crores while that for the Offices and Banks was reduced from Rs. 979 crores to Rs. 65 crores and from Rs. 342 crores to Rs. 222 crores respectively. Thus, according to the Corporation, under the new system only 32.20% units suffered an increase while 21.95 % of the units actually got benefitted as a result of reduction in the property taxes. 25. We will first deal with the submission that any proposal for change or modification in the methodology adopted for levy of property tax ought to have been initiated through the Finance Commission alone. Article 243Y of the Constitution deals with constitution of Finance Commission whose principal duty is to review the financial position of the municipalities and to make recommendations to the Governor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 243X of the Constitution states that the Legislature of a State may by law authorize a municipality to levy, collect and appropriate such taxes etc. in accordance with such procedure and subject to such limits as may be specified in law. The exercise undertaken by the Legislature in the instant case is completely consistent with the empowerment relatable to Article 243X of the Constitution and does not in any way go counter to said empowerment. 28. Coming to the effect and scope of the statutory provisions, it must be stated 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 . 31. The crucial question is: 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? 32. At this stage, we may deal with two decisions of this Court having bearing on the controversy before us. (A) It was observed in Patel Gordhandas AIR 1963 SC 1742 that the statutory provisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... land which is either being built upon or has been built upon. Nevertheless, a reference to the provisions of the Act shows that, after a building has been completed, the letting value of the building, which becomes part of land, will be the primary or determining factor in fixing the annual rent for which the land which has been built upon might reasonably be expected to be let from year to year . All that Section 154 seems to contemplate, by mentioning land or building , is that land which is vacant or which has not been built upon may be treated, for purposes of valuation, on a different footing from land which has actually been built upon. But, relevant provisions of the Act do not mention and seem to take no account, for purposes of rating, of any building which is only in the course of being constructed although Section 3(r) of the Act makes it clear that land which is being built upon is also land . Hence, so long as a building is not completed or constructed to such an extent that atleast a partial completion notice can be given so that the completed portion can be occupied and let, the land can, for purposes of rating, be equated with or treated as vacant land. It is only w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. In the first case, said Clause can be read ejusdem generis along with Sub-clauses (a) to (d), in which event the scope of any Rules to be made in terms of power granted by Sub-clause (e) read with Sub-section (1B), would be relatable to the factors actually in existence and not as something contemplated in future. On the other hand, if the Clause is read independently, there is nothing in Clause (e) or in the language of Sub-section (1B) that the future prospects of the land in question could be reckoned or noted for arriving at the capital value. The conclusion is thus quite clear that the width of Clauses (a) to (e) read with Sub-section (1B) do not by any stretch of imagination contemplate taking into account the future prospects of the land in question. 36. Viewed thus, the conclusion arrived at by the High Court on the second and third grounds, as stated in paragraph 15 (supra) are quite correct. We, therefore, hold that 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... period well before the Rules came into effect. The first ground as set out in paragraph 15 (supra) was, therefore, rightly answered by the High Court against the Corporation. Logically, 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. 40. The question then arises as to what would be the scope and extent of the present property tax regime. It is quite clear that with the amendment to Section 154 and other provisions, the property tax can be levied on the basis of capital value of the land or building. To that extent, there would be departure from the regime which was in existence when Patel Gordhandas AIR 1963 SC 1742 and Polychem Ltd. (1974) 2 SCC 198 were decided by this Court. Now, 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. At the cost of repetition, we may say that since the statutory provisions do not contemp ..... X X X X Extracts X X X X X X X X Extracts X X X X
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