# 8 S.C.R. 944 M.C.D. & ANR v. MIS. MEHRASONS JEWELLERS (P) LTD

- **Citation:** [2015] 8 S.C.R. 944
- **Court:** Supreme Court of India
- **Decided:** 2015-08-11
- **Case number:** Civil Appeal No. 6718 OF 2004
- **Bench:** A. K. Sikri, R. F. Nariman
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/8-s-c-r-944-m-c-d-anr-v-mis-mehrasons-jewellers-p-ltd-30830
- **Pages:** 35

## Headnote

Delhi Municipal Corporation Act, 1957:
s. 116- Determination of ratable value of lands and
buildings assessable to properly taxes -Assessment years
post 1994 - Municipal Corporation framing its own Bye-Laws
of 1994 whereby Delhi Municipal Corporation took upon itself
D determination of ratable value of lands and buildings
according to the principles laid down therein - Determination
of annual value - Held: Assessments made after the 1994
bye-laws came into existence, would be governed by these
bye- laws alone and the principles laid down in the two
E Supreme Courl judgments-Balbir Singh's case and P.R.
Chaudhary's case, would no longer apply since they were
applied in a situation where MCD did not itself lay down how
annual value was to be determined - Delhi Municipal
Corporation (Determination of Ratable Value) Bye-Laws,
F 1994.
ss. 169, 116G - Determination of annual value of
covered space of building and of vacant land -Assessment
years prior to 2003 - By 2003 amendment tax regime
G replaced by ss. 123A and 123B by self assessment
procedure based on unit area method - Pending appeals
on the date of 2003 amendments to be decided in
accordance.with the old substantive law or the new procedure
- Held: An assessment that has not been finalized in all cases
H where an appeal is pending before the District Judge as also
944
M.C.D. & ANR. v. M/S. MEHRASONS JEWELLERS (P)
945_ ·
LTD.
in all cases which have not become ''final" and after 2003 are A
remanded back for fresh determination, in respect of an
assessment of property tax prior to 2003, would all_be covered
by the language of s. 116G(2)- Thus, even at an appellate
stage, an assessee is empowered to ask for a decision on
the basis of the annual value of the property.
B
·Disposing of the appeals, the Court_ i ,..
HELD: 1.1 Having regard to the statement of law
that where the premises are not controlled by any rent c
control legislation, the annual rent can be taken as the
annual rateable value of the property for the assessment ·
of property tax, the municipal corporation 'is entitled to
revise the rateable value of the properties which have
been freed from rent control on the basis of annual rent D
actually received, unless the owner satisfies the
municipal corporation that there are other
considerations which have affected the quantum of rent,
the Division Bench ofthe High Court in *Daruwala's case
is not correctly decided for the simple reason that this E
appeal falls within the exception created by the Central
Bank judgment, namely, cases where the Municipal
Corporation of a particular State itself lays down as to
how annual value is to be determined. Therefore, for
assessments made after the 1994 bye-laws came into F
existence, such assessments shall be g.overned by these . •
bye-laws alone and the principles laid down in **Balbir
Singh's case and ***P.R. Chaudhary's case, would have
no relevance in such a situation. [Paras ~3,14] (962-GH; 963-B-D]
G .
2.1 The holding by the Division Bench of the Delhi
High Court in ****Major General lnderpal Singh Kahai's
case is that it is clear from the third proviso to Section
169(1) of the Delhi Municipal Corporation Act, 1957 that H
946
SUPREME COURT REPORTS
[2015] 8 S.C.R.
A even where an assessment is finalized, but an appeal is
pending, an assessee is entitled to ask for a decision in
the appeal on the annual value basis. In other words,
even at an appellate stage, an assessee is empowered
to ask for a decision on the basis of the annual value of
B the property, is the correct view of the law.[Para 21] (974F-H; 975-A]
2.2 Under Section 169 3rd proviso, appeals that
are pending before the Court of the District Judge are to
C be transferred to the Municipal Taxation Tribunal to be
set up under the 2003 Amendment for disposal, if
requested by the applicant, for the settlement thereof on
the basis of annual value. This proviso means that an
appeal pending before a District Judge is to be
D transferred compulsorily to the Taxation Tri

## Text

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A
B
c
(2015] 8 S.C.R. 944
M.C.D. & ANR.
v.
MIS. MEHRASONS JEWELLERS (P) LTD.
(Civil Appeal No. 6718 OF 2004)
AUGUST 11, 2015
[A. K. SIKRI AND R. F. NARIMAN, JJ.]
Delhi Municipal Corporation Act, 1957:
s. 116- Determination of ratable value of lands and
buildings assessable to properly taxes -Assessment years
post 1994 - Municipal Corporation framing its own Bye-Laws
of 1994 whereby Delhi Municipal Corporation took upon itself
D determination of ratable value of lands and buildings
according to the principles laid down therein - Determination
of annual value - Held: Assessments made after the 1994
bye-laws came into existence, would be governed by these
bye- laws alone and the principles laid down in the two
E Supreme Courl judgments-Balbir Singh's case and P.R.
Chaudhary's case, would no longer apply since they were
applied in a situation where MCD did not itself lay down how
annual value was to be determined - Delhi Municipal
Corporation (Determination of Ratable Value) Bye-Laws,
F 1994.
ss. 169, 116G - Determination of annual value of
covered space of building and of vacant land -Assessment
years prior to 2003 - By 2003 amendment tax regime
G replaced by ss. 123A and 123B by self assessment
procedure based on unit area method - Pending appeals
on the date of 2003 amendments to be decided in
accordance.with the old substantive law or the new procedure
- Held: An assessment that has not been finalized in all cases
H where an appeal is pending before the District Judge as also
944
M.C.D. & ANR. v. M/S. MEHRASONS JEWELLERS (P)
945_ ·
LTD.
in all cases which have not become ''final" and after 2003 are A
remanded back for fresh determination, in respect of an
assessment of property tax prior to 2003, would all_be covered
by the language of s. 116G(2)- Thus, even at an appellate
stage, an assessee is empowered to ask for a decision on
the basis of the annual value of the property.
B
·Disposing of the appeals, the Court_ i ,..
HELD: 1.1 Having regard to the statement of law
that where the premises are not controlled by any rent c
control legislation, the annual rent can be taken as the
annual rateable value of the property for the assessment ·
of property tax, the municipal corporation 'is entitled to
revise the rateable value of the properties which have
been freed from rent control on the basis of annual rent D
actually received, unless the owner satisfies the
municipal corporation that there are other
considerations which have affected the quantum of rent,
the Division Bench ofthe High Court in *Daruwala's case
is not correctly decided for the simple reason that this E
appeal falls within the exception created by the Central
Bank judgment, namely, cases where the Municipal
Corporation of a particular State itself lays down as to
how annual value is to be determined. Therefore, for
assessments made after the 1994 bye-laws came into F
existence, such assessments shall be g.overned by these . •
bye-laws alone and the principles laid down in **Balbir
Singh's case and ***P.R. Chaudhary's case, would have
no relevance in such a situation. [Paras ~3,14] (962-GH; 963-B-D]
G .
2.1 The holding by the Division Bench of the Delhi
High Court in ****Major General lnderpal Singh Kahai's
case is that it is clear from the third proviso to Section
169(1) of the Delhi Municipal Corporation Act, 1957 that H
946
SUPREME COURT REPORTS
[2015] 8 S.C.R.
A even where an assessment is finalized, but an appeal is
pending, an assessee is entitled to ask for a decision in
the appeal on the annual value basis. In other words,
even at an appellate stage, an assessee is empowered
to ask for a decision on the basis of the annual value of
B the property, is the correct view of the law.[Para 21] (974F-H; 975-A]
2.2 Under Section 169 3rd proviso, appeals that
are pending before the Court of the District Judge are to
C be transferred to the Municipal Taxation Tribunal to be
set up under the 2003 Amendment for disposal, if
requested by the applicant, for the settlement thereof on
the basis of annual value. This proviso means that an
appeal pending before a District Judge is to be
D transferred compulsorily to the Taxation Tribunal (after
it is set up) if an applicant requests for disposal of the
appeal on the basis of annual value. Obviously, the word
"settlement" would not in this context means a
consensual arrangement between both parties but
E would only mean a determination to be made by the
tribunal on the basis of annual value. Once this position
becomes clear, the impugned judgment cannot be
faulted. It is clear then that even at the appellate stage
F an applicant can opt to apply for the new unit area
method provided for in Section 116E so that his property
tax assessment may be decided in accordance with the
said method even though it pertains to an assessment
year prior to 2003. [Para 22] [977-D-G]
G
2.3 The second proviso to Section 16.9 would
apply in cases where, after the Taxation Tribunal is set
up, there is no request by any applicant to determine his
case on the basis of annual value. In such cases also,
H the Tribunal, once set up, may take up the appeal of such
person with the approval of the earlier appellate
M.C.D. & ANR. v. M/S. MEHRASONS JEWELLERS (P)
947
LTD.
authority, namely, the District Judge. Thus, it is clear that A
the logic of the Division Bench of the High Court cannot
be faulted. [Para 23] [977-H; 978-A-B]
2.4 An assessment that has not b~el\finalized in
all cases where an appeal is pending before the District B
Judge as also in all cases which have not become "final"
in the sense that the appellate authority or the High Court
or Supreme Court (after 200.3), in respect of an
assessment of property tax p;ior to 2003,,remands the
matter for fresh determination, would all be covered by C
the language of Section 116G(2). Therefore, the High
Court is correct [Para 24] [978-C-D]
3. In the appeal which dealt with the first question,
various other points were raised in the writ petition filed o
before the Delhi High Court which were not adjudicated
upon as Daruwala's case was followed. Having set aside
Daruwala's case, such other points that have been raised
by the petitioners in the writ petition filed before the Delhi
High Court may now be agitated by them before the High E
Court and a remand is made of this case for
determination of such questions by the High Court. [Para
25] [978-E-F]
•••• Municipal Corporation of Delhi v. Major General
lnderpal Singh Kahai &Anr. 169 DLT 352 (2010) (DB)
-approved.
**Dr. Balbir Singh & Ors. Etc. Etc. v. Municipal
Corporation, Delhi & Others 1985 (2) SCR 439: (1985)
1 SCC 167; ***Lt. Col. P.R. Chaudhary (Retd.) v.
Municipal Corporation of Delhi 2000 (3f sc·R 607 :
(2000) 4 SCC 577 - Held inapplicable. ,
*Municipal Corporation of Delhi v. Dhunishaw Framroz
Daruwala 100 DLT 679 (2002)- disapproved.
F
H
948
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SUPREME COURT REPORTS
(2015] 8 S.C.R.
Municipal Corporation of Delhi v. Delhi Urban House
Owners' Welfare Association 1997 (4) Suppl.
SCR 418:(1997) 8 SCC 335; The Corporation of
Calcutta v. Padma Debi & Others 1962 SCR (3) 49;
Municipal Corporation, Indore & Others v. Smt. Ratna
Prabha & Others 1996 (2) Suppl. SCR 295 : (1996) 4
SCC 622; Assistant General Manager, Central Bank of
India & Others v. Commissioner, Municipal Corporation
for the City of Ahmadabad & Others 1995 (1) Suppl.
SCR 63: (1995) 4 SCC 696; East India Commercial
Company Private Limited v. Corporation of Calcutta
1998 ( 2 ) SCR 543 :(1998) 4 sec 368; The
Commissionerv. Griha Yajamanula Samkhya & Others
2001 (3) SCR 392: (2001) 5 SCC 651; Government
Servant Cooperative House Building Society Limited
& Others v. Union of India & Others, 1998 (3) SCR
996 : (1998) 6 sec 381 - referred to.
Case Law Reference
1997 (4) Suppl. SCR 418
referred to.
Para 7
1962 SCR (3) 49
referred to.
Para 9
1996 (2) Suppl. SCR 295
referred to.
Para 10
1995 (1) Suppl. SCR 63
referred to.
Para 11,12, 14
1998 (2) SCR 543
referred to.
Para 11, 12
2001 (3) SCR 392
referred to.
Para 12
1998 (3) SCR 996
referred to.
Para 13
100 DL T 679 (2002)
disapproved. Para 14
1985 (2) SCR 439
held
inapplicable. Para 14
2000 (3) SCR 607
held
inapplicable. Para 14
169 DLT 352 (2010) (DB)
approved.
Para 22
M.C.D. & ANR. v. M/S. MEHRASONS JEWELLERS (P) , 949 .
LTD.
CIVILAPPELLATE JURISDICTION: Civil Appeal No.
A
6718 of2004
From the Judgment and Order dated 30.04.2003 of the
High Court of Delhi at New Delhi in CWP No. 1769 of 2001
WITH
C. A. Nos. 8340, 8341 and 8342 of 2011
C. A. Nos. 632 of 2013 and 6064 of 2015
Madhu Tiwatia, Ujjal Banerjee, P. Parmeswaran,
Praveen Swarup, Rakesh KumarfortheAppellants.
B
c
Kirti Uppal, Ch.irag M. Shroff, Swati Vaibhav, Bhaskar
Das, B. B. Jain, Balbir Singh Gupta, Shish Pal Laler, Abhay D
Jain, Abhay Kumar, Tenzing Tsering, Arun K. Sinha, Rakesh
Singh, Manjeet Chawla for the Respondent.
The Judgment of the Court was delivered by
R. F. NARIMAN, J. 1. Leave granted.
E
2. In this batch of appeals there appear to be two
distinct groups dealing with two separate questions that have
been raised by counsel for the Municipal Corporation of Delhi.
Civil Appeal No. 6718 of 2004 raises a question as to the F
correctness of the judgment of the Division Bench of the Delhi
High Court in Municipal Corporation of Delhi v. Dhunishaw
Framroz Daruwala, 100 DL T 679 (2002), decided on
23.7.2002, whereas the other appeals raise a question as to
the correctness of the judgment of the Division Bench of the G
Delhi High Court dated 21.4.2010 in Municipal Corporation
of Delhi v. Major General lnderpal Singh Kahai & Anr., 169
DLT 352 (2010) (DB).
3. The first question raised by counsel for the MCD in . H
950
SUPREME COURT REPORTS
(2015] 8 S.C.R.
A
the present appeals concerns itself with a post 1994 scenario
- that is after the Delhi Municipal Corporation came out with
the "Delhi Municipal Corporation (Determination of Rateable
Value) Bye- Laws, 1994" published in the gazette on
24.10.1994.
By these bye-laws, the Delhi Municipal
B Corporation has taken upon itself the determination of rateable
value of lands and buildings according to principles laid down
therein.
4. Under Section 116(1) of the Delhi Municipal
C
Corporation Act, 1957, the Corporation is to determine the
rateable value of any lands or buildings assessable to property
taxes at the annual rent at which such land or building might
reasonably be expected to let from year to year. The said
D
E
F
G
H
provision reads as follo~s:
"116. Determination of rateable value of lands and
buildings assessable to property taxes.
(1) The rateable value of any land or building assessable
to 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) 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, and
(b) the water tax or the scavenging tax or both, if the rent
is inclusive of either or both of the said taxes:
Provided that if the rent is inclusive of charges for water
supplied by measurement, then, for the purpose of this
section the rent shall be treated as inclusive of water tax
on rateable value and the deduction of the water tax shall
M.C.D. & ANR. v. MIS. MEHRASONS JEWELLERS (P)
951
LTD. [R. F. NARIMAN, J.]
be made as provided therein:
A
Provided further that in respect of any land or building
the standard rent of which has been fixed under the Delhi
·and Ajmer Rent Control Act, 1952 (38 of 1952), the
rateable value thereof shall not exceed the annual amount
B
of the standard rent so fixed.
Explanation.-The expression "water tax" and
"scavenging tax" shall mean such taxes of that nature as
may be levied by an appropriate authority."
c
5. The fleshing out of the skeleton contained in Section
116(1) is thereafter done by bye-law 3 of the 1994 bye-laws
which provides as under:-
"3. Determination of rateable value of lands and buildingsD
(1) For the purposes of sub-section (1) of Section 116 of
the Act, the annual rent shall be determined as under:
(a) where the premises are on rent, the rent actually
realised or realisable, unless the same is collusive or
E
concessional, shall be the annual rent. Where the tenancy
.commences on or after the 1st day of April, 1995 and
where the commissioner has reason to believe that the
declared rent does not represent the prevalent rent of
the year of letting and the difference between declared
F
rent and the prevalent rent is more than twenty five
percent of the declared rent; the annual rent shall be the
prevalent rent;
Explanation-For the purposes of this clause the prevalent
G
rents shall be determined by a Panel of Assessors to be ·
appointed by the Commissioner. ~uch. Panel shall
include a representative from the Government, a
representative of the Corporation, a representative of any
Taxation Department (other than the Corporation) or a
H
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SUPREME COURT REPORTS
[2015] 8 S.C.R.
Valuer and a representative of the property owners of
the zone of which the prevalent rents are to be
determined.
(b) in the case of the premises which are sub-let, the rent
paid or payable by the occupier shall be the annual rent.
Explanation-For the purposes of clause (a) and clause
(b ), it is immaterial whether the building and the fixtures
and fittings affixed to the building and the land let for use
and enjoyment therewith, are let by the same contract or
by different contracts, and if by different contracts, whether
made simultaneously or at different times;
(c) in case premises are used and occupied or are lying
vacant for use and occupation by the owner himself:
(i) where the building has been erected or land which is
on rent and no premium has been paid, the annual rent
or the building or part thereof shall be the aggregate of
the annual rent of the land paid or payable in the year or
assessment and an amount calculated at ten percent of
the cost of construction of the building, cost of fixtures
and fittings and cost of additions, alterations and
improvements;
ii) where the building or part thereof, is used or to be
used as a banquet hall, cinema hall, club, guest house,
hotel, nursing home or as house for marriages and such
other functions, the annual rent shall be the amount
calculated at ten percent of the market price of land in
the year of assessment and the cost of construction of
the building, cost of fixtures and fittings and cost of
additions, alterations and improvements, or the prevalent
rent, whichever is higher;
iii) where the premises are not covered by sub-clause (i)
M.C.D. & ANR. v. M/S. MEHRASONS JEWELLERS (P)
LTD. [R. F. NARIMAN, J.]
and (ii) above, the annual rent shall be the amount
. calculated atten percent of the cost of the premises upto
the year of assessment or the prevalent rent, whichever
is lower;
Provided that where the premises are used for residential
purposes and cost of the premises is determined under
Bye-law 2(1)(b)(iv), the annual rent of the portion of the
building completed upto the year 1993-94 shall not be
more than the annual rent determined forthe year 199394;
(d) where the building or part thereof, is lying vacant for
letting, the annual rent of such building or part thereof,
shall be ten percent of the cost of the premises;
(e) in respect of the properties in the unauthorised
colonies, regularised unauthorised colonies, on plot
allotted under Economically Weaker Section and Low
Income Group schemes and in respect of flats used for
residential purposes upto a covered area of 75 sq. mts.,
where the Commissioner feels that determination of value
of land, cost of construction or the prevalent rent is difficult,
he may determine the annual rent by Unit Area Method.
Explanation I-Where the premises has an illuminated or
non-illuminated advertisement on the walls, hoardings,
posts or structures affixed to the premises, the annual
rent of the premises shall include the rent from such
advertisement.
Explanation 11-Forthe purposes of this bye-law, the annual
rent of the premises includes the annual rent of the land ·
and building thereon, and such other fixtures and fittings
as are considered necessary for the use and enjoyment
of the land and building for the purpose for which they
953
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954
SUPREME COURT REPORTS
[2015) 8 S.C.R.
A
are intended to be used and shall include lifts, elevators,
storage tanks, pipelines, railways lines, runways,
underground cables, air-conditioning plant in centrally airconditioned bu_ildings, swimming pools, chairs and
screen in cinema halls, theatres and auditoria, cost of
B
insulations and racks in cold storage buildings, but, save
•
as aforesaid, no account shall be taken of the value of
any fixtures and fittings contained or situated in or upon
any land or building.
C
(2) Where the premises, as per prevalent practice, are
let or transferred by charging pugree or through some
other arrangement on nominal rents, the Commissioner
may estimate the annual rent of the premises after taking
into consideration the rents paid or payable by public
D
undertakings or the government organisations or the
premises let by such undertakings or organisations either
in the same locality or in the nearby similar locality.
(3) In the case of premises to which rent restriction
E
legislation is applicable, the annual rent determinable
under sub-bye-law (1) above, shall not be more than the
rent realised or realisable under the rent restriction
legislation.
F
(4) Where the annual rent of the building is determinable
under more than one clauses of sub-bye-law (1), the
annual rent of the building shall be the aggregate of the
annual rent determined under various clauses of that subG
bye-law.
(5) Where the premises have been provided with any
fixtures and fittings, the deduction for the maintenance of
such premises shall be fifteen per cent of the annual rent
and not ten per cent of the annual rent as provided under
H
sub-section ( 1) of Section 16 of the Act.
M.C.D. & ANR. v. M/S. MEHRASONS JEWELLERS (P)
955
LTD: [R. F. NARIMAN, J.]
(6) When any land is purchased or new building is erected
. A
or any building is rebuilt or enlarged or where there is
change in the ownership of the land or building, change
in tenancy or increase in rents, after the 31st of
December of the year the increase in the rateable value
shall be effective from the commencement of the
B
succeeding year."
6. In Daruwala's case (supra), a Division Bench of the
Delhi High Court following Dr. Balbir Singh & Ors. Etc. Etc.
v. Municipal Corporation, Delhi & Others, (1985) 1 SCC C
167, and Lt. Col. P.R. Chaudhary (Retd.) v. Municipal
Corporation of Delhi, (2000) 4 SCC 577 has held that
notwithstanding the advent of the 1994 bye-laws, "annual value"
has still to be determined on the principles laid down in these
two judgments. The bone of contention is that, according to D
learned counsel for the Municipal Corporation of Delhi, once
the MCD lays down its own bye-laws, principles laid down in
the two Supreme Courtjudg ments referred to no longer apply,
as they were applied in situations where the MCD did not itself
lay down how annual value was to be determined. Secondly, E
these judgments were confined to fact situations in which the
Delhi Rent Control Act, 1958 applied. Per contra, learned
counsel for the assessees contended that the impugned
judgment of the Delhi High Court was correct and that equitable F
principles had been laid down which are required to be followed
even after the Municipal Corporation's own bye-laws have been
framed by it.
7. It has been pointed out by learned counsel for the
Municipal Corporation that in Municipal Corporation of Delhi G
v. Delhi Urban House Owners' Welfare Association, (1997) ·
8 sec 335, the bye-laws as a whole have been upheld and
that, therefore, it is important that once these are framed they
are followed in letter and spirit.
H
956
SUPREME COURT REPORTS
[2015] 8 S.C.R.
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8. We are of the view that the counsel for the MCD
appears to be correct. Both Balbir Singh's case and P.R.
Chaudhary's case were judgments dealing with a situation
where the Delhi Rent Control Act applied to premises governed
by the said Act, and the context of both judgments was that the
B principle of parity evolved in Balbir Sing h's case would apply
only because annual rent in those cases had to be fixed regard
being had to the maximum that could possibly be fixed in a
situation where standard rent under the Delhi Rent Control Act
C would be the ceiling above which the amount fixed as per
parameters under the Delhi Rent Control Act could not be
exceeded. This becomes clear from the following paragraphs
in P.R. Chaudhary's case:-
D
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"4. We are concerned in these appeals with the law as it
existed prior to the amendment of the Rent Act in 1988.
By the Act 57 of 1988 the Rent Act was not to apply to
certain premises as provided in Section 3 of the Rent
Act.
5.
In Dr. Balbir Sing h's case this Court was concerned
with the determination of rateable value in respect of
properties situated in Delhi and governed by the
provisions of the Delhi Municipal Corporation Act, 1957
and the Punjab Municipal Act, 1911. The Court
considered four different categories of properties, namely
( 1) where the properties are self-occupied, that is,
occupied by the owners; (2) where the properties are
partly self-occupied and partly tenanted; (3) where the
land on which the property is constructed is leasehold
land with a restriction that the leasehold interest shall not
be transferable without the approval of the lessor; and
(4) where the property has been constructed in stages.
Under the provisions of the Delhi Municipal Corporation
Act as well as the Punjab Municipal Act, the criterion for
determining rateable value of the building is the annual
.. ;::.;
M.C.D. & ANR. v. MIS. MEHRASONS JEWELLERS (P)
957
LTD. [R. F. NARIMAN, J.]
rent at which such building be reasonably expected to let
A
from year to year. The word "reasonably" in the definition
is very important. What the owner 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 rateable value. Now what is
B
reasonable is a question of fact and it depends on the
facts and circumstances of a given situation: The Court
considered various provisions of the Delhi Municipal
Corporation Act and the Punjab MunicipalAct as well as
c
that of the Delhi Rent Control Act, 1958. Delhi Rent
Control Act was amended in 1988 when certain
properties were taken out of the purview of that Act. The
four categories have been considered at pages 461, 466,
468 and 473 of the Report. We quote the statement of
D
law laid down by this Court after considering various
statutory provisions made in respect of the first category:
(SCC pp. 186-187 para 11).
'•
"The rateable value of the premises, whether residential
E
or non-residential, cannot exceed the standard rent, but,
as already pointed out above, it may in a given case be
less than the standard rent. The annual rent which the
owner of the premises may reasonably expect fo get if
the premises are let out would depend on the size,
F
situation, locality and condition of the premises and the
amenities provided therein and all these and other
relevant factors would have to be evaluated in determining
the rateable value, keeping in mind the upper limit fixed
by the standard rent. If this basic principle is borne in
G
mind, it would avoid wide disparity between the rateable
value of similar premises situate in the same locality,
where some premises are old premises constructed
many years ago when the land prices were not high and
the cost of construction had not escalated and others
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are recently-constructed premises when the prices of land
have gone up almost 40 to 50 times and the cost of
construction has gone up almost 3 to 5 times in the last
20 years. The standard rent of the former category of
premises on the principles set out in sub-section
(1)(A)(2)(b) or (1)(8)(2)(b) of Section 6 would be
comparatively low, while in case of latter category of
premises, the standard rent determinable on these
principles would be unduly high. If the standard rent were
to be the measure of rateable value, there would be huge
disparity between the rateable value of old premises and
recently-constructed 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 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 selfoccupied residential and non-residential premises may
thus be stated as follows: the standard rent determinable
on the principles set out in sub-section (2)(a) or (2)(bj or
(1 )(A)(2)(b) or (1 )(B)(2)(b) of Section 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 authorities
would have to evaluate factors such as size, situation,
locality and condition of the premises and the amenities
M.C.D; & ANR. v. M/S. MEHRASONS JEWELLERS (P)
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therein provided. The assessing authorities would also
have to take into account the rent, which the owner of
similar premises constructed earlier and situate in the
same or adjoining locality, might reasonably expect to
receive from a hypothetical tenant and which would
necessarily be within the upper limit of the standard rent
of such premises, so that there is no wide disparity
between the rate of rent per square foot or square yard
which the owner might reasonably expect to get in case
of the two premises. Some disparity is bound to be there
on account of the size, situation, locality and condition of
the premises and the amenities provided therein. Bigger
size beyond a certain optimum would depress the rate .
of rent and so also would less favourable situation or
locality or lower quality of construction or unsatisfactory
condition of the premises or absence of necessary
amenities and similar other factors. But after taking into
accountthese varying factors, the disparity should not
be disproportionately large." (Paras 4 & 5).
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9. This Court has dealt with three different groups of E
cases that have come before it dealing with property tax
legislation in the various States of this country. Tfle"first group
is a group of cases where the Municipal Acts gf the States
define annual value to be the hypothetical rent that a landlord
could reasonably be expected to receive if hisproperty was F
let out to a hypothetical tenant. It is in this situation that this
'
I
Court held that such hypothetical rent could not exceed the
standard rent fixed or fixable under the rent control statute which
obtained in that State. This was laid down in The .~orporation G
of Calcutta v. Pad ma Debi & Others, 1962 SCR (3) 49 and
followed in a number of judgments, which include Balbir
Singh's case and P.R. Chaudhary's qase.
1 O. The second group of cases is where the language H
of the particular Municipal Corporation Act contains a non
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[2015) 8 S.C.R.
A obstante clause owing to which the standard rent under the
particular rent statute of that particuiar State could not be taken
to be the maximum rent which could possibly be fetched by~
hypothetical landlord from a hypothetical tenant. This clas:.. of
cases is contained in Municipal Corporation, Indore &
8 Others v. Smt. Ratna Prabha & Others (1996) 4 SCC 622
and the judgments that follow it.
11. Another group of cases is contained in the judgment
of this Court in Assistant General Manager, Central Bank
C of India & Others v. Commissioner, Municipal Corporation
for the City of Ahmedabad & Others, (1995) 4 SCC 696.
This was a case where the Ahmedabad Municipal Act itself
provided the mode of determination of the annual value, so
that it became unnecessary to go to the provisions of the Rent
D Act of that State. The law thus laid down by this Court is
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· summarized in East India Commercial Company Private
Limited v. Corporation of Calcutta, (1998) 4 SCC 368 as
follows:-
"17. From the aforesaid decisions, the principle which is
deducible is that when the Municipal Act requires the
determination of the annual value, thatAct has to be read
along with Rent Restriction Act which provides for the
determination of fair rent or standard rent Reading the
two Acts together the ratable value cannot be more than
the fair or standard rent which can be fixed under the
Rent Control Act. The exception to this rule is that
whenever any Municipal Act itself provides the mode of
determination of the annual letting value like the Central
Bank of India case relating toAhmedabad or contains a
non obstante clause as in Ratnaprabha case then the
determination of the annual letting value has to be
according to the terms of the Municipal Act." (at Para
17).
. M.C.D. & ANR. v. M/S. MEHRASONS JEWELLERS (P)
961
LTD. [R. F. NARIMAN, J.]
12. In The Commissioner v. Griha,Yajamanula A
Samkhya & Others, (2001) 5 SCC 651, this Court disposed
of a batch of writ petitions involving assessment of property
tax of buildings located within the limits of different Municipal
Corporations in the State of Andhra Pradesh. After referring
to various judgments of this Court including the judgment in B
the Central Bank case and East India Commercial
·Company's case, this Court held:-
"From the statutory provision& noted above, it is clear
that the Act provides that the tax shall be levied at such
percentages of the rateable value as may be fixed by the
Corporation. It further provides the method and manner
of determination of the rateable value. The determination
of the annual rental value which is the basis for calculation
of the rateable value is also provided in the Act and the
Rules. The Act mandates that the Commissioner shall
determine the tax to be paid by the person .concerned in
the manner prescribed under the statute and the rules. It
is our view that the Act and the Rules provide a complete
code for assessment of the property tax to be levied for
the buildings and lands within the municipal corporation.
There is no provision in the statute that the fair rent
determined under the Rent Control Act in respect of a
property is binding on the Commissioner. The legislature
has wisely not made such a provision because
determination of annual rental value under the Act
depends on several criteria. The criteria for such
determination provided under the Act may not be similar
to those prescribed under the Rent ControlAct. Further
the time when such determination was made is also a
relevant factor. If in a particular case the Commissioner
finds that there has b?.en a recent determination of the
fair rent of the property by the authority under the Rent
Control Act he may be persuaded to accept the amount
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as the basis for determining the annual rental value of
the property. But that is not to say that the Commissioner
is mandatorily required to follow the fair rent fixed by the
authority under the Rent Control Act. The High Court
therefore did not commit any error in holding that the
determination of fair rent under the Rent Control statute
will not be binding on the Commissioner for the purpose
of assessment of property tax under the Act." (at Para
35)
C
13. The present appeals before us refer to assessment
years post 1994 and are said to be in a factual scenario where
after the amendment of 1988 to the Delhi Rent Control Act, the
Delhi Rent Control Act does not apply either for the reason
that the rent fixed is more than Rs.3,500/- per month or that the
D property has been newly constructed and is exempt from its
provisions for a period of 10 years. In situations such as the
above, an instructive judgment of this Court is contained in
Government Servant Cooperative House Building
Society Limited & Others v. Union of India & Others, (1998)
E 6 SCC 381. In this judgment, this Court noticed the 1988
amendment to the Delhi Rent Control Act and various
judgments referred to hereinabove and concluded as under:
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"8. Therefore, the annual rent actually received by the
landlord, in the absence of any special circumstances,
would be a good guide to decide the rent which the
landlord might reasonably expect to receive from a
hypothetical tenant. Since the premises in the present
case are not controlled by any rent control legislation,
the annual rent received by the landlord is what a willing
lessee, uninfluenced by other circumstances, would pay
to a willing less.or. Hence, actual annual rent, in these
circumstances, can be taken as the annual rat~able value
of the property for the assessment of property tax. The
municipal corporation is, therefore, entitled to revise the
, M.C.D. & ANR. v. MIS. MEHRASONS JEWELLERS (P)
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rateable value of the properties which have been freed
A·
from rent control on the basis of annual rent actually
received unless the owner satisfies the,,municipal
corporation that there are other considerations which
have affected the quantum of rent." (at Para 8).
14. Having regard to the aforesaid statement of law,
we are of the opinion that the Division Bench of the Delhi High
Court in Oaruwala's case (supra), is not correctly decided
B
for the simple reason thatthis app=al falls within the exception
created by the Central Bank judgment, namely, cases where C
the Municipal Corporation of a particular State itself lays down
as to how annual value is to be determined. We, therefore,
hold that for assessments made after the 1994 bye-laws came
into existence, such assessments shall be governed .by these
bye- laws alone and the principles laid down in Balbir Sing h's · D
case and P.R. Chaudhary's case, would have no relevance
in such a situation. We answer question number 1 accordingly.
15. In order to determine the answer to question number
2, it is necessary to first extract two Section~
1
.of the Delhi
E
Municipal Corporation Act, both inserted with,_effect from
1.8.2003. Section 116G of the said Act reads as follows:
~· -
"116G. Transitory provisions.-Notwithstanding anything
contained in this Act, as amended by the Delhi Municipal
F
Corporation (Amendment) Act, 2003, a tax on vacant land
.,
or covered space of building or both, levied under this
Act immediately before the date of coming into force of
the Delhi Municipal Corporation (Amendment) Act, 2003,
shall, on the coming into force of the DelhiMunicipal
G
Corporation (Amendment) Act, 2003, be deemed to be
the tax on such vacant land or covered space of building
or both, levied under this Act as amended by the Delhi
Municipal Corporation (Amendment) Act, 2003, and shall
continue to be in force until such tax is revised in
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SUPREME COURT REPORTS
[2015] 8 S.C.R.
A
accordance with the provisions of this Act, as amended
by the Delhi Municipal Corporation (Amendment) Act,
2003.
(2) Notwithstanding anything contained in sub-section (1 ),
B
where assessment has not been finalized in respect of a
vacant land or covered space of a building or both, on
the date of the commencement of the Delhi Municipal
Corporation (Amendment) Act, 2003 the assessee may
have such land or building or both, as the case may be,
C
assessed on the basis of the annual value."
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Section 169 after the amendment of 2003 reads as
follows:
"169. Appeal against assessment, etc.-(1) An appeal
against the levy or assessment or revision of assessment
of any tax under this Act shall lie to the Municipal Taxation
Tribunal constituted under this section:
Provided that the full amount of the property tax shall be
paid before filing any appeal:
Provided further that the Municipal Taxation Tribunal may,
with the approval of the District Judge of Delhi, also take
up any case for which any appeal may be pending before
the court of such District Judge:
Provided also that any appeal pending before the court
of such District Judge shall be transferred to the Municipal
Taxation Tribunal for disposal, if requested by the
applicant for the settlement thereof on the basis of annual
value.
(2) (a) The Government shall constitute a Municipal
Taxation Tribunal consisting of a Chairperson and such
other members as the Government may determine:
M.C.D. & ANR. v. M/S. MEHRASONS JEWELLERS (P)
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Provided that on the recommendation of the Government,
· the Chairperson may constitute one or more separate
Benc~es, each Bench comprising two members, one of
whom shall be a member of the Higher Judicial Service
of a State or a Union territory and the other member from
the higher administrative service, and may transfer to any
such Bench any appeal for disposal or may withdraw from
any Bench any appeal before it is finally disposed of.
(b) The Chairperson, and not less than half of the other
members, of the Municipal Taxation Tribunal shall be
persons who are or have been the member of the Higher
Judicial Service of a State or a Union territory for a period
of not less than five years, and the remaining members,
if any, shall have such qualifications and experience as
the Government may by rules determine.
(c) The Chairperson and the other members of the
Municipal Taxation Tribunal shall be appointed by the
Government for a period of five years or till they attain
the age of sixty-five years, whichever is earlier.
(d) The other terms and conditions of service of the
Chairperson and the other members of the· Municipal
Taxation Tribunal, including salaries and allowances, shall
be such as may be determined by rules by the
Government.
(e) The salaries and allowances of the Chairperson and
the other members of the Municipal Taxation Tribunal shall
be paid from the Municipal Fund.
(3) In every appeal, the costs shall be in the discretion of
the Municipal Taxation Tribunal or the Bench thereof, if
any.
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A
(4) Costs awarded under this section to the Corporation
shall be recoverable by the Corporation as an arrear of
tax due from the appellant.
(5) If the Corporation fails to pay any costs awarded to
B
an appellant within ten days from the date of the order for
payment thereof, the Municipal Taxation Tribunal may
order the Commissioner to pay the costs to the appellant."
16. Assailing the Division Bench judgment of the Delhi
c High Court in Municipal Corporation of Delhi v. Major
General lnderpal Singh Kahai & Anr., learned counsel for
the Municipal Corporation referred us to these two Sections
and"argued that Section 116G is only a transitory provision
which is meant to tide over difficulties felt in enforcement of a
D new regime of property tax - what is called the unit area
method. Learned counsel argued that earlier, under Section
124 of the Delhi Municipal Corporation Act, the Corporation
could revise rateable value of any property after giving a notice
and hearing objections to the same.