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TMI Blog1984 (12) TMI 64X X X X Extracts X X X X X X X X Extracts X X X X ..... but were subsequently transferred to this court, and the other consisting of writ petitions which were filed directly in this court. We are definitely of the view that the writ petitions filed directly in this court are not maintainable under article 32 of the Constitution, since none of them complains of violation of any fundamental right and ordinarily we would have rejected them straightway without going into the merits, but the parties before us agreed that in view of the fact that these writ petitions involve identical questions as the appeals and the other writ petitions transferred to this court and those questions would, in any event, have to be determined by us, we should not dismiss these writ petitions on the ground of non-maintainability but should proceed to dispose them of on merits on the assumption that they are maintainable. We are concerned in these appeals and writ petitions with four different categories of properties, namely, (i) where the properties are self-occupied, that is, occupied by the owners : (ii) where the properties are partly self-occupied and partly tenanted; (iii) where the land on which the property is constructed is leasehold land with a rest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eral tax of not less than 10 and not more than 30 per cent. of the rateable value of lands and buildings within urban areas. There is a proviso to sub-s. (1) of s. 114 which says that the Corporation may, when fixing the rate at which the general tax shall be levied during any year, determine that the rate leviable in respect of lands and buildings or portions of lands and buildings in which a particular class of trade or business is carried on, shall be higher than the rate determined in respect of other lands and buildings or portions, of other lands and buildings by an amount not exceeding one half of the rate so fixed. Then follows an Explanation which provides that where any portion of a land or building is liable to a higher rate of general tax, such portion shall be deemed to be separate property for the purpose of municipal taxation. Section II 5, subs. (4), lays down that save as otherwise provided in the Act, the general tax shall be levied in respect of all lands and buildings in Delhi, except lands and buildings or portions of lands and buildings exclusive and used for public worship by a society or body for a charitable purpose and two other categories of lands and bui ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion provides that the property taxes shall be primarily leviable upon the tenant. Sub-section (3) of s. 120 is an important provision and we may, therefore, reproduce it in extension " The liability of the several owners of any building which is, or purports to be, severally owned in parts or flats or rooms, for payment of property taxes or any instalment thereof payable during the period of such ownership shall be joint and several. " This provision contemplates a case where there are several owners of a building which is or which purports to be severally owned in parts or flats or rooms, so that each part or flat or room in the building is owned by separate owner and the question arises as to how the property taxes are to be assessed and who is to be held liable to pay the same. The basic assumption underlying this provision is that the building as a whole is to be assessed to property taxes and not each separate part or flat or room belonging to a separate owner and the liability of the several owners for payment of the amount of property taxes assessed on the building is to be joint and several so that each of them would be liable to pay the whole amount of the property taxes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by this court and the latest amongst such decisions is that in Dewan Daulat Rai v. New Delhi Municipal Committee [1980] 122 ITR 700 (SC). This decision has reviewed all the earlier decisions given by this court and as of date has spoken the last word on the subject so far as this court is concerned and, hence, it would be instructive and helpful to refer to it in some detail. There were three appeals decided by a common judgment in Dewan Daulat Rai's case [1980] 122 ITR 700 (SC), and the question which arose for determination in those appeals was as to how the rateable value of building should be determined for levy of property tax where the building is governed by the provisions of the Delhi Rent Control Act, 1958 (hereinafter referred to as " the Rent Act "), but the standard rent has not yet been fixed. One of these appeals related to a case where the building was situate within the jurisdiction of the New Delhi Municipal Committee and was liable to be assessed to property tax under the Punjab Municipal Act, 1911, as is the case in many of the appeals and writ petitions before us, while the other two related to cases where the buildings were situate within the limits of the Cor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as been let out to a tenant who has lost his right to apply for fixation of the rent by reason of expiration of the period of limitation prescribed by s. 12 of the Rent Act or the building is self-occupied by the owner. Therefore, the court held that in either case, according to the definition of If rateable value " given in both statutes, the standard rent determinable under the provisions of the Rent Act and not the actual rent received by the landlord from the tenant, would constitute the correct measure of the rateable value of the building. The court pointed out that, in each case, the assessing authority would have to arrive at its own figure of the standard rent by applying the principles laid down in the Rent Act for determination of the standard rent and determine the rateable value of the building on the basis of the actual rent received by the landlord and observed that the rateable value of the building must be held to be limited by the measure of the standard rent determinable on the principles laid down in the Rent Act, and it would not exceed such measure of the standard rent. This decision is, therefore, clearly an authority for the proposition that the rateable val ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... use the question had to be judged not with reference to the actual tenant but with reference to a hypothetical tenant and the yardstick provided by the statute for determination of the rateable value was as to what rent the owner of the building might reasonably expect to get from a hypothetical tenant, if the building were let from year to year and the hypothetical tenant could not be assumed to be willing to pay anything more than the standard rent, because after taking the hypothetical tenancy, he could immediately make an application for fixation of the standard rent. The court, therefore, reached the conclusion that even if the landlord was lawfully entitled to receive the contractual rent from the tenant, such contractual rent could not be taken to be the rateable value of the building, because the reasonable expectation of the landlord to receive rent from a hypothetical tenant could not possibly exceed the standard rent determinable in accordance with the provisions laid down in the Rent Act. The standard rent determinable on the principles set out in the Rent Act was laid down by the court as the upper limit of the rent which the landlord may expect to receive from a hypot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to pay the huge amount of rent which the standard rent is bound to be if determined on the principles laid down in the Rent Act and having regard to the extreme smallness of the number of possible tenants of such a building, the rent which the owner may reasonably expect to receive from a hypothetical tenant may be very much less than the standard rent. The test, therefore, is not what is the standard rent of the building but what is the rent which the owner reasonably expects to receive from a hypothetical tenant and such reasonable expectation can in no event exceed the standard rent of the building determinable in accordance with the principles laid down in the Rent Act, though it may, in a given case, be lower than such standard rent. We may now turn to the relevant provisions of the Rent Act which have been in force since February 9, 1959, the law in force relating to control of rent of buildings situate within the jurisdiction of the Delhi Municipal Corporation and the New Delhi Municipal Committee. Section 2(k) defines " standard rent " in relation to any premises to mean " the standard rent referred to in s. 6 or " where the standard rent has been increased under s. 7, suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and in respect of which rent has not been fixed under the Delhi and Ajmer-Merwara Rent Control Act, 1947, or the Delhi and Ajmer Rent Control Act, 1952, standard rent is required to be calculated on the same basis as set out in sub-s. (1)(AX2)(b) of s. 6 with only this difference that instead of the rent being calculated at the rate of 8 1/4th per cent. as laid down in that provision, it is required to be calculated at the rate of 85/8ths per cent. Sub-section 2 of s. 6 has also considerable bearing on the controversy between the parties and it may, therefore, be set out in full : "(2) Notwithstanding anything contained in sub-section (1) (a) in the case of any premises, whether residential or not, constructed on or after the 2nd day of June, 1951, but before the 9th day of June, 1955, the annual rent calculated with reference to the rent at which the premises were let for the month of March, 1958, or if they were not so let, with reference to the rent at which they were last let out, shall be deemed to be the standard rent for a period of seven years from the date of the completion of the construction of such premises ; and (b) in the case of any premises, whether residential o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the Rent Act which are relevant for the determination of the controversy which arises in the present appeals and writ petitions. It is clear from the definition of " standard rent " contained in s. 2(k) that the standard rent of a building means the standard rent referred to in s. 6 or where the standard rent has been increased under s. 7, such increased rent. This definition is not an inclusive one but an exhaustive definition and it defines the standard rent to mean either the standard rent referred to in s. 6 or the increased standard rent under s. 7. It is significant to note that it does not contain any reference to s. 9, sub-s. (4). Whenever, therefore, any reference is made to standard rent in any provision of the Rent Act, it must mean standard rent as laid down in s. 6 or increased standard rent as provided in s. 7 and nothing more. Section 6 lays down the principles for determination of the standard rent in almost all conceivable classes of cases and s. 7 provides for increase in the standard rent where the landlord has incurred expenditure for any improvement, addition or structural alteration in the premises. Section 9, as the definition in s. 2(k) clearly suggest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6. The machinery set out in sub-sections (1) and (2) of s. 9 would then fail of application, because it would not be possible for the Controller to fix the standard rent having regard to the provisions of s. 6. This contingency is taken care of by sub-s. (4) of s. 9 which provides that, in such a situation, the Controller may fix such rent as would be reasonable having regard to the situation, locality and condition of the premises and the amenities provided therein and where there are similar or nearly similar premises in the locality, having regard also to the standard rent payable in respect of such premises. But the basic condition for the applicability of sub-s. (4) of s. 9 is that it should not be possible to determine the standard rent on the principles set out in s. 6. Where such is the case, the Controller is empowered to fix such rent as would be reasonable having regard to the situation, locality and condition of the premises and the amenities provided therein. But even while fixing such rent, the Controller does not enjoy unfettered discretion to do what he likes and he is bound to take into account the standard rent payable in respect of similar or nearly similar prem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he owner. We will first consider the case of residential premises. It is clear from the above discussion that the rateable value of the premises would be the annual rent at which the premises might reasonably be expected to be let to a hypothetical tenant and such reasonable expectation cannot in any event exceed the standard rent of the premises, though in a given situation it may be less than the standard rent. The standard rent of the premises would constitute the upper limit of the annual rent which the owner might reasonably expect to get from a hypothetical tenant if he were to let out the premises. Even where the premises are self-occupied and have not been let out to any tenant, it would still be possible to determine the standard rent of the premises on the basis of hypothetical tenancy. The question in such case would be as to what would be the standard rent of the premises if they were let out to a tenant. Obviously, in such an eventuality, the standard rent would be determinable on the principles set out in sub-s. (1)(A)(2)(b) of s. 6 of the Rent Act. The standard rent would be the rent calculated on the basis of 7 1/2 per cent. or 8 1/4 per cent. per annum of the aggre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so in the case of premises which have been constructed before June 9, 1955, but after June 2, 1951, the standard rent would, for like reasons, be determinable under the provisions of sub-s. (1)(A)(2)(b) of s. 6, if they have not been actually let out at any time since their construction. But if these two categories of premises have been actually let out at some point of time in the past, then in the case of the former category, the annual rent agreed upon between the landlord and the, tenant when the premises were first actually let out shall be deemed to be the standard rent for a period of five years from the date of such letting out and in the case of the latter category, the annual rent calculated with reference to the rent at which the premises were actually let for the month of March, 1958, or if they were not so let, with reference to the rent at which they were last actually let out shall be deemed to be the standard rent for a period of seven years from the date of completion of the construction of the premises. However, even in the case of these two categories of premises, the standard rent after the expiration of the period of five years, or seven years, as the case may ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... premises, though they may be similar and situate in the same or adjoining locality. That would be wholly illogical and irrational. Therefore, what is required to be considered for determining rateable value in the case of recently constructed premises is as to what is the rent which the owner might reasonably expect to get if the premises are let out and that is bound to be influenced by the rent which is obtainable for similar premises constructed earlier and situate in the same or adjoining locality and which would necessarily be limited by the standard rent of such premises. The position in regard to the determination of rateable value of self-occupied residential and non-residential premises may thus be stated as follows : The standard rent determinable on the principles set out in sub-s. (2)(a) or (2)(b) or (1)(A)(2)(b) or (1)(B)(2Xb) of s. 6, as may be applicable, would fix the upper limit of the rateable value of the premises and within such upper limit, the assessing authorities would have to determine as to what is the rent which the owner may reasonably expect to get if the premises are let to a hypothetical tenant and for the purpose of such determination, the assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at where the premises consist of different parts which are intended to be occupied as distinct and separate units, the hypothetical tenancy which would have to be considered would be the hypothetical tenancy of each part as a distinct and separate unit of occupation and the sum total of the rent reasonably expected from a hypothetical tenant in respect of each distinct and separate unit would represent the rateable value of the premises. Now obviously the rent which the owner of the premises may reasonably expect to receive in respect of each distinct and separate unit cannot obviously exceed the standard rent of such unit and the assessing authorities would therefore have to determine the standard rent with a view to fixing the upper limit of the rent which can reasonably be expected by the owner on letting out such unit to hypothetical tenant. How is this to be done ? Where the case falls within sub-s. (2)(a) or (2)(b) of s. 6, no problem arises, because whether the distinct and separate unit of which the standard rent is to be determined is self-occupied or tenanted makes no difference, for in either case, the standard rent would be governed by one or the other of these two pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erent units of occupation comprised in the building. It would, therefore, seem that when the rateable value of a building consisting of distinct and separate units of occupation is to be assessed, the standard rent of each unit would have to be determined on the principles set out above and within the upper limit fixed by the standard rent, the assessing authorities would have to determine the rent which the owner may reasonably expect to get if such unit were let out to a hypothetical tenant and in arriving at this determination, the assessing authorities would have to take into account the same factors which we have already discussed in the preceding paragraphs of this judgment while dealing with the question of assessment of self-occupied properties. The sum total of the rent which the owner may reasonably expect to get from a hypothetical tenant in respect of each distinct and separate unit of occupation calculated in the manner aforesaid, would represent the rateable value of the building. We may point out that this formula for determination of the rateable value would apply, irrespective of whether any of the distinct and separate units of occupation comprised in the building ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to claim and recover a portion of the unearned increase in the value (i.e., the difference between the premium paid and the market value) of the residential plot at the time of sale, transfer, assignment, or parting with the possession, the amount to be recovered being fifty per cent. of the unearned increase and the decision of the lessor in respect of the market value shall be final and binding: Provided further that the lessor shall have the pre-emptive right to purchase the property after deducting fifty per cent. of the unearned increase as aforesaid." It is obvious that by reason of this clause in the sub-lease, the owner who has constructed premises on the plot of land sub-leased to him, cannot sell, transfer or assign his leasehold interest in the plot of land to any one except a member of the co-operative house building society and even so far as sale, transfer or assignment to a member of the co-operative house building society is concerned, it cannot be made except with the previous consent in writing of the Government which the Government may give or refuse in its absolute discretion, and in case the Government chooses to give its consent, the Government would be en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... holly unfounded. Merely because the plot of land on which the premises are constructed cannot be sold, transferred or assigned except to a member of the co- operative house building society and without the prior consent of the Government, it does not necessarily mean that there can be no market price for the plot of land. It is not as if there is total prohibition on the sale, transfer or assignment of the plot of land, so that in no conceivable circumstance, it can be sold, transferred or assigned. The plot of land can be sold, transferred or assigned but only to one from amongst a limited class of persons, namely, those who are members of the co-operative house building society and subject to the rules and regulations, any eligible person can be admitted to the membership of the co-operative house building society. There is also a further restriction, namely, that the sale, transfer or assignment can take place only with the prior consent of the Government. But subject to these restrictions, the sale, transfer or assignment can take place. It cannot, therefore, be said that the market price of the plot of land cannot be ascertained. When we have to determine what would be the mar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... think that the assessing authorities were right in taking the view that because the plot of land could not be sold, transferred or assigned except to a member of the co-operative house building society and without the prior consent of the Government, its market price was unascertainable and, hence, the standard rent of the premises could not be determined under sub-ss. (1)(A)(2)(b) or (1)(B)(2)(b) of s. 6 and had to be assessed only under sub-s. (4) of s. 9. We are firmly of the view that the market price of the plot of land at the date of the commencement of construction of the premises was ascertainable on the basis of the formula we have indicated, notwithstanding the restriction on transferability contained in the sub-lease and the standard rent of the premises constructed on the plot of land was determinable under the provisions of sub-s. (1)(A)(2)(b) or (1)(B)(2)(b) of s. 6. The argument of the Delhi Municipal Corporation that in all such cases resort has to be made to the provisions of sub-s. (4) of s. 9 for determination of the standard rent of the premises must be rejected. We may also in this connection refer to the statement made by the Minister of State for Home Affair ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ommencement of the construction, it cannot be said that it is not possible to determine the standard rent on the principles set out in sub s. (1)(A)(2)(b) or (1)(B)(2)(b) of s. 6. Take for example, a case where the owner produces evidence which is found to be incorrect or which does not appear to be satisfactory : Can the assessing authorities in such a case resort to subs. (4) of s. 9 stating that it is not possible to determine the standard rent on the principles set out in sub-s. (1)(A)(2)(b) or (1)(B)(2)(b) of s. 6 ? The assessing authorities would obviously have to estimate for themselves, on the basis of such material as may be gathered by them, the reasonable cost of construction and the market price of the land and arrive at their own determination of the standard rent. This is an exercise with which the assessing authorities are quite familiar and it is not something unusual for them or beyond their competence and capability. It may be noted that even while fixing standard rent under sub-s. (4) of s. 9, the assessing authorities have to rely on such material as may be available with them and determine the standard rent on the basis of such material by a process of estimati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... extra-commercial considerations. Lastly, the addition may be of a distinct and separate unit of occupation and in such a case, the rateable value of the premises would have to be determined on the basis of the formula laid down by us for assessing the rateable value of premises which are partly self-occupied and partly tenanted. The same principles for determination of rateable value would obviously apply in the case of subsequent additions to the existing premises. The basic point to be noted in all these cases is and this is what we have already emphasised earlier that the formula set out in sub-ss. (1)(A)(2)(b) and (1)(B)(2)(b) of s. 6 cannot be applied for determining the standard rent of an addition, as if that addition was the only structure standing on the land. The assessing authorities cannot determine the standard rent of the additional structure by taking the reasonable cost of construction of the additional structure and adding to it the market price of the land and applying the statutory percentage of 71 to the aggregate amount. The market price of the land cannot be added twice over, once while determining the standard rent of the original structure and again while de ..... X X X X Extracts X X X X X X X X Extracts X X X X
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