# 1 S.CR. 492 STATE TRADING CORPN. INDIA LTD v. NEW DELHI MUNICIPAL COUNCIL

- **Citation:** [2016] 1 S.C.R. 492
- **Court:** Supreme Court of India
- **Decided:** 2016-02-03
- **Case number:** Civil Appeal No. 2772 of2009
- **Bench:** Kurian Joseph, ROHINTON FALi NARIMAN
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/1-s-cr-492-state-trading-corpn-india-ltd-v-new-delhi-municipal-council-31014
- **Pages:** 7

## Headnote

New Delhi Municipal Corporation Act. 1994 - s. 63 -
Determination of rateable value of lands and buildings assessable
to property tax -- Held: The only basis for fixation of rateable value
is the annual rent at which the land or building might reasonably
be expected to be let from year to year. subject to the deductions
provided under the Act -· Jn cases of self-occupied building the
annual rent would be fixed on the basis of what the landlord might
expect to get from hypothetical tenant - Jn cases of sub-let building
with the permission of the Govemment, the rateable value has to be
fixed only on the basis of 75% of the rent received from the sublessee.
Ne11• Delhi Municipal Committee Bye-laws - Bye-law 12 -
Reliance on - For calculation of annual rent for the purpose of
s.63 of NDMC Act - Permissibility - Held: Since !here is provision
and procedure u!s. 63 of NDA1C Act for calculating !he ann11al
rent, Bye-laws have not to be relied 11po11 for tho! pw11ose · New
Delhi Municipal Corporation Act. 1994 - s.63.
Allowing the ;ippeal, the Court
HELD: 1. The only basis for fixation of rateable value is
the annual rent :it which the land or building might reasonably be
expected to be let from year to year, subject to the deductions
provided under the New Delhi Municipal Corporation Act (NDMC
Act). The High Court's decision that since there was already a
payment of rent by the sub-lessee, there need not be any other
exercise for assessment of the reasonable rent, was based on
bye-law 12 of the New Delhi Municipal Committee Byelaws
framed under the Punjab Municipal Act, 1911. The 1911 Act has
been repealed and as per Section 416(2) of the NDMC Act what
492
STATE TRADING CORPN. INDIA LTD. v. NEW DELHI
493
MUNICIPAL COUNCIL
is saved is only the provisions under the bye-laws which are not
otherwise inconsistent with the provisions of the NDMC Act.
Since there is a provision and procedure under Section 63 the
NDMC Act for calculating the annual rent, one need not refer at
all to the bye-laws since they are apparently inconsistent with
the p,rovisions of the NDMC Act. It is impermissible to refer to
the bye-laws framed under the Punjab Act in view of specific
provisions made under the NDMC Act providing for the levy,
assessment and collection of property tax. (Paras 5, 6 and 7)
[495-F-G; 496-B-D)
2. Where the building is self-occupied and where there is
no sub-lease, the annual rent will have to be fixed on the basis
what the landlord might reasonably expect to
get from a
hypothetical tenant. Such fixation has to be made only as per the
NDMC Act. (Para 11] (498-B-C]
3. So far as the building sub-let with the permission of
Government is concerned, having regard to the agreement with
the Government of India for payment of 25% of the gross rent
fetched from the sub-lessee, the 25% that is being paid to the
Government by the lessee out of the rent collected from the sublessee is inflated to include the extra 25% since the rent actually
available to the lessee is only 75% of the amount actually paid by
the sub-lessee to the lessee. Therefore,the rateable value under
section 63 of the NDMC Act, in the case of the appellants coming
under the second category has to be fixed on the basis of 75% of
the amount received from the sub-lessee by the appellants. (Para
10) (497-F-H]
Dewan Dau/at Rai Kapoor and Others Vs. New Delhi
Municipal Committee and Ors. (1980) 1 SCC 685; Ind;a
Automobiles Ltd. Vs. Calcutta Municipal Corporation
and Anr. (2002) 3 SCC 388:1980 (2) SCR 607 - relied
on.
Raghunandan Saran Ashok Saran (HUF) Vs. Union of
India & Ors. 95 DLT 508 (2002) (DB) - referred to.
CASE LAW REFERENCE
95 DLT 508(2002) (DB)
referred to.
Para3
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494
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SUPREME COURT REPORTS
(1980) i sec 685
1980 (2) SCR 607
relied on.
relied on.
[2016] I S.C.R.
Para 9, 10
Para 11

## Text

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(2016) 1 S.CR. 492
STATE TRADING CORPN. INDIA LTD.
v.
NEW DELHI MUNICIPAL COUNCIL
(Civil Appeal No. 2772 of2009)
FEBRUARY 03, 2016
[KURIAN JOSEPH AND ROHINTON
FALi NARIMAN, JJ.]
New Delhi Municipal Corporation Act. 1994 - s. 63 -
Determination of rateable value of lands and buildings assessable
to property tax -- Held: The only basis for fixation of rateable value
is the annual rent at which the land or building might reasonably
be expected to be let from year to year. subject to the deductions
provided under the Act -· Jn cases of self-occupied building the
annual rent would be fixed on the basis of what the landlord might
expect to get from hypothetical tenant - Jn cases of sub-let building
with the permission of the Govemment, the rateable value has to be
fixed only on the basis of 75% of the rent received from the sublessee.
Ne11• Delhi Municipal Committee Bye-laws - Bye-law 12 -
Reliance on - For calculation of annual rent for the purpose of
s.63 of NDMC Act - Permissibility - Held: Since !here is provision
and procedure u!s. 63 of NDA1C Act for calculating !he ann11al
rent, Bye-laws have not to be relied 11po11 for tho! pw11ose · New
Delhi Municipal Corporation Act. 1994 - s.63.
Allowing the ;ippeal, the Court
HELD: 1. The only basis for fixation of rateable value is
the annual rent :it which the land or building might reasonably be
expected to be let from year to year, subject to the deductions
provided under the New Delhi Municipal Corporation Act (NDMC
Act). The High Court's decision that since there was already a
payment of rent by the sub-lessee, there need not be any other
exercise for assessment of the reasonable rent, was based on
bye-law 12 of the New Delhi Municipal Committee Byelaws
framed under the Punjab Municipal Act, 1911. The 1911 Act has
been repealed and as per Section 416(2) of the NDMC Act what
492
STATE TRADING CORPN. INDIA LTD. v. NEW DELHI
493
MUNICIPAL COUNCIL
is saved is only the provisions under the bye-laws which are not
otherwise inconsistent with the provisions of the NDMC Act.
Since there is a provision and procedure under Section 63 the
NDMC Act for calculating the annual rent, one need not refer at
all to the bye-laws since they are apparently inconsistent with
the p,rovisions of the NDMC Act. It is impermissible to refer to
the bye-laws framed under the Punjab Act in view of specific
provisions made under the NDMC Act providing for the levy,
assessment and collection of property tax. (Paras 5, 6 and 7)
[495-F-G; 496-B-D)
2. Where the building is self-occupied and where there is
no sub-lease, the annual rent will have to be fixed on the basis
what the landlord might reasonably expect to
get from a
hypothetical tenant. Such fixation has to be made only as per the
NDMC Act. (Para 11] (498-B-C]
3. So far as the building sub-let with the permission of
Government is concerned, having regard to the agreement with
the Government of India for payment of 25% of the gross rent
fetched from the sub-lessee, the 25% that is being paid to the
Government by the lessee out of the rent collected from the sublessee is inflated to include the extra 25% since the rent actually
available to the lessee is only 75% of the amount actually paid by
the sub-lessee to the lessee. Therefore,the rateable value under
section 63 of the NDMC Act, in the case of the appellants coming
under the second category has to be fixed on the basis of 75% of
the amount received from the sub-lessee by the appellants. (Para
10) (497-F-H]
Dewan Dau/at Rai Kapoor and Others Vs. New Delhi
Municipal Committee and Ors. (1980) 1 SCC 685; Ind;a
Automobiles Ltd. Vs. Calcutta Municipal Corporation
and Anr. (2002) 3 SCC 388:1980 (2) SCR 607 - relied
on.
Raghunandan Saran Ashok Saran (HUF) Vs. Union of
India & Ors. 95 DLT 508 (2002) (DB) - referred to.
CASE LAW REFERENCE
95 DLT 508(2002) (DB)
referred to.
Para3
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494
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SUPREME COURT REPORTS
(1980) i sec 685
1980 (2) SCR 607
relied on.
relied on.
[2016] I S.C.R.
Para 9, 10
Para 11
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 2772
of2009
From the Judgment and Order dated 15.12.2005 and 14.02.2006
of the High Court of Delhi at New Delhi in LPA No. 413 of 2003 and
Review Petition No. RP 73 of2006
WITH
C
C. A. NO. 787 OF 2016
C. A. NOS. 2773, 2774, 2775, 2777, 2778, 2779, 2780, 278! OF
2009
P. P. Malhotra, V. Giri, R. P. Shanna, Yasir Rauf, Indra Sawhney,
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S. Udaya Kumar Sagar, Bina Madhavan, Akanksha Mehra, J. N. S.
Tyagi, (For Mis. Lawyer S. Knit & Co.) for the Appellant.
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Rakesh Kr. Khanna, Surya Kant, Pranav Vyas, Vandita Nain, for
the Respondent.
The Judgment of the Court was delivered by
KURIAN, J. I. Leave granted in SLP (C) No. 18110/2006.
2. The basis of assessment of property tax under the New Delhi
Municipal Council Act, 1994 (in short the "NDMC Act") is the subject
matter o!'these appeals. In Chapter VIII of Taxation, Section 60 of the
NDMC Act has dealt with the subject. Under Section 60(l)(a), the
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Municipal Council is entitled to levy the property tax. Under sub-section
(3) the property tax shall be levied, assessed and collected in accordance
with the provisions of the Act and the bye-laws made thereunder. Section
61 of the NDMC Act speaks about the rates of property tax and it is
provided that unless otherwise specified under the Act, the property tax
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shall not be less than 10% and not more than 30% of the rateable value
of lands and buildings. Section 63 of the NDMC Act deals with the
detennination of rateable value of lands and buildings. The provision
reads as follows:
"63. Determination of rateable value of lands and buildings
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assessable to property tax.-(Jj The rateable value of any lar.ds or
STATE TRADING CORPN. INDIA LTD. v. NEW DELHI
495
MUNICIPAL COUNCIL [KURIAN JOSEPH, J.]
building assessable to any property taxes shall be the annual rent
at which such land or building might reasonably be expected to let
from year to year less a sum equal to ten per cent of the said
annual rent which shall be in lieu of all allowances for costs of
repairs and insurance, and other expenses, if any, necessary to
maintain the land or building in a state to command that rent:
Provided that in respect of any land or building the standard rent
of which has been fixed under the Delhi Rent Control Act, 1958
(59of1958) the rateable value thereof shall not exceed the annual
amount of the standard rent so fixed."
3. T\lough the learned senior counsel appearing for the appellants
sought to place reliance on the proviso under section 63( 1) of the NDMC
Act, 'Ne are afraid the contention cannot be appreciated. The concept
of standard rent is no more available under the Delhi Rent Control Act,
I 958, since the said provision has been struck down in the case of
Raghunandan Saran Ashok Saran (HUF) Vs. Union of India & Others
reported in 95 Delhi Law Times 508 (2002)(DB). Additionally, it is also
to be noted that the standard rent in the case of the appellants has never
been fixed under the Delhi Rent Control Act, 1958.
4. In the cases before us there are two categories of buildings
1 )self-occupied and 2) out of the leased premises a portion which is self
occupied and the rest let out on sub-lease under due permission ;rom the
Government oflndia. In case the premises is sub-let, there is a condition
that the lessee should pay to the Government 25% of the gross rent
fetched out of the sub-lease.
5. In the impugned judgments, the High Court has taken the view
that since there is already a payment of rent by the sub-lessee, there
need not be any other exercise for assessment of the reasonable rent.
The High Court has based its decision under bye-law 12 of the New
Delhi Municipal Committee Byelaws Relating to the Assessment and
Collection of House Tax. For the purpose of reference, we may extract
the provision of bye-law 12:
"12. The annual value ofa building or house which is in the owner's
own occupation either for residential purposes or for commercial
purposes and the standard rent of which has not so far been fixed
by a competent authority may be calculated under section 8( I )(b)
on the basis ofrents of simi Jar accommodation prevale11t in the
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496
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SUPREME COURT REPORTS
(2016) I S.C.R.
lo~ality and in the event of the Committee being of the opinion
that the same is not feasible, the annual value may be calculated
under section 3(l)(c)."
6. However, it is pointed out that the Punjab Municipal Act, 1911
has been repealed and as per Section 416(2) of the NDMC Act what is
saved is only the provisions under the bye-laws which are not otherwise
inconsistent with the provisions of the NDMC Act. Since there is a
provision and procedure under Section 63 theNDMC Act for calculating
the annual rent, one need not refer at all to the bye-laws as quoted
above since they are apparently inconsistent with the provisions of the
NDMC Act. In short, it is impermissible to refer to the bye-laws framed
under the Punjab Act in view of specific provisions made under the
NDMC Act providing for the levy, assessment and collection of property
tax.
7. Therefore, the only basis for fixation of rateable value is the
annual rent at which the land or building might reasonably be expected
to be let from year to year, subject to the deductions provided under the
Act.
8. The basis of the impugned judgments which was wholly based
on the bye-laws having been thus knocked down, we have to get back
to the provisions under the NDMC Act for the purposes of the fixation
of the rateable value which is based on the rent which can be reasonably
fetched by letting out the premises.
9. Our attention has been invited to a three Judge Bench decision
of this Court in Dewan Daulat Rai Kapoor and Others Vs. New Delhi
Municipal Committee and Others reported in ( 1980) I SCC 685 wherein
this Court has dealt with in detail as to what is the scope of the expression
"reasonably be expected to let from year to year". The whole
consideration is available in paragraph 2 of the Judgment which reads as
under:
"2. It is obvious from this definition that unlike the English Law
where the value of occupation by a tenant is the criterion for
fixing annual value of the building for rating purposes, here it is
th~ value of the property to the owner which is taken as the
standard for making assessment of annual value. The criterion is
the rent realisable by the landlord and not the value of the holding
in the hands the tenant. The rent which the landlord might realise
STATE TRADING CORPN. JNDJA LTD. v. NEW DELHI
MUNICIPAL COUNCIL [KURIAN JOSEPH, J.)
if the building were Jet is made the basis for fixing the annual
value of the building. The word "reasonably" in the definition is
very important. What the landlord might reasonably expect to get
from a hypothetical tenant, if the building were let from year to
year, affords the statutory yardstick for determining the annual
value. Now, what is reasonable is a question offaet and it would
depend on the facts and circumstances of a given situation.
Ordinarily, as pointed out by Subba Rao, J ., speaking on behalf of
the Court in Corporation of Calcutta v. Padma Devi( I): "a bargain
between a willing lessor and a willing lessee uninfluenced by any
extraneous circumstances may afford a guiding test of
reasonableness. An inflated or deflated rate of rent based upon
fraud. emergency, relationship and such other considerations may
take it out of the bounds of reasonableness". The actual rent
payable by a tenant to the landlord wou Id in normal circumstances
afford relia.ble evidence of what the landlord might reasonably
expect to get from a hypothetical tenant, unless the rent is inflated
or depressed by reason of extraneous considerations such as
relationship, expectation of some other benefit etc. There would
ordinarily be in a free market close approximation between the
actual rent received by the landlord and the rent which he might
reasonably expect to receive from a hypothetical tenant.. .. "
10. In the second category of cases before us the actual rent
payable by a tenant to the landlord is available for verification by the
assessing officer. But the question is whether that rent paid by the soblessee is in normal circumstances and whether it is either inflated or
depressed by reason of any other consideration or relationship. Having
regard to the agreement with the Government of India for payment of
25% of the gross rent fetched from the sub-lessee, we are inclined to
hold that the 25% that is being paid to the Government of India by the
lessee out of the rent collected from the sub-lessee is inflated to include
the extra 25% since the rent actually available to the lessee is only 75%
of the amount actually paid by the sub-lessee to the lessee. Therefore,
going by the principle settled by this Court in the case of Dewan Dau lat
Rai Kapoor (supra), the rateable value under section 63 of the NDMC
Act, in the case of the appellants coming under the second category has
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to be fixed on the basis of 75% of the amount received from the sublessee by the appellants. On that basis, the rateable value of the premises
both tenanted and self-occupied will be fixed by the assessing officer. . H
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SUPREME COURT REPORTS
[2016 J I S.C.R.
This is however, subject to the production of proof of payment/adjustment/
appropriation of the 25% by the lessee with the Government of India.
I I. As for the first category, where the building is self-occupied
and where there is no sub-lease, the annual rent will have to be fixed as
held by this Court in the case of Dewan Dau lat Rai Kapoor (supra) and
in the case oflndiaAutomobiles Ltd. Vs. Calcutta Municipal Corporation
and Another reported in (2002) 3 SCC 388 on the basis what the landlord
might re!lsonably expect to get from a hypothetical tenant. Such
fixation has to be made only as per the NDMC Act.
It is for the
assessing officer to make the fixation in accordance with law. The
assessment for the disputed period shall be completed within three months
from today.
12. The impugned judgments are hence set aside. The appeals
are allowed as above with no order as to costs.
Kalpana K Tripathy
Appeal all011 ed.