# CALCUIT A GUJRA TI EDUCATION SOCIETY AND ANR v. CALCUITA MUNICIPAL CORPORATION AND ORS

- **Citation:** [2003] Supp. 2 S.C.R. 915
- **Court:** Supreme Court of India
- **Decided:** 2003-08-25
- **Case number:** Civil Appeal No. 5203 of2000
- **Bench:** M.B. Shah, D.M. Dharmadhikari
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/calcuit-a-gujra-ti-education-society-and-anr-v-calcuita-municipal-corporation-19359
- **Pages:** 33

## Headnote

B
Calcutta Municipal Corporation Act, 1980:
Section 194 read with section 230 and sections 181, 184, 186Consolidated rate-Determination of-Process of valuation, assessment, C
revision or amendment of assessment-Participation of tenants, sub-tenants
and occupiers-Held: Tenants, sub-tenants and occupiers share appreciable
extent of burden of tax, thus entitled to an opportunity to participate in the
process-They are entitled to public and written notices-However nonissuance or non-service of notices to persons primarily liable does not D
invalidate the proceedings unless serious prejudice is caused to the persons
aggrieved.
----~>
Section I 95-Providingfor recovery of consolidated rate from occupiers
by attaching rent payable by them on failure to recover the same from person
primarily liable-Tenant pleading that the Corporation would collect E
whatever landlord declares to be the rent-Held: If there is a dispute between
landlord and tenant regarding rent, tenant can raise it before the competent
authority-However, the finalisation of assessment cannot be made to wait
till then.
'
Sections 184, 186 and 17 4-/ncrease of tax based on market valuation- F
Hearing for assessment-Non-participation of owner/landlord-Effect ofHeld: Even though the landlord remains inactive by not contesting the
assessment proposed, tenant or occupier bearing the burden of tax has to be
vigilant and has right to raise objections pursuant to notices.
Section I 89(5) and (6)-Right of appeal-Grant of-Held: Tenant, G
sub-tenant or occupier share burden of an appreciable portion of consolidated
rate on the property-Hence, have right of appeal on pre-deposit of portion
of tax levied and made recoverable from them-To demand deposit of whole
consolidated rate for the entire building for maintaining tenant's appeal is
915
H
916
SUPREME COURT REPORTS [2003) SUPP. 2 S.C.R.
A unreasonable-Interpretation of statutes.
Section 178(6)-Municipal assessment code-Furnishing of necessary
information regarding apportionment of consolidated rate on land or building
by authorities to parties liable to pay' tax-Whether obligatory-Held: On
payment of the requisite fee, authorities are under statutory obligation to
B provide necessary information otherwise parties can take recourse to remedies
in law.
Section 231-Mode of recovery-Portion of tax payable by the ownerRecovery from the occupier as rent-Justification of-Held: The provision
creates a legal fiction by which the tax apportioned on the tenant would be
C treated as rent and would be recoverable as such-Further, there is no
conflict between Act of 1980 and the Tenancy Act-Both are to be applied
harmoniously-Interpretation of statutes-West Bengal Premises (Tenancy)
Act, 1956.
D
Section 171-Consolidated rate on lands and buildings-Whether tax
liability higher on tenants, sub-tenants or occupants than on landlordsHeld: Tax liability not disproportionately higher.
Sections 230 and 231-Apportionment and mode of recovery of taxTenants of rented premises covered by Tenancy Act, and others not covered-
£
Whether treatment discriminatory-Held: Act does not make any
discrimination -West Bengal Premises (Tenancy) Act, 1956.
Calcutta Municipal Act, 1951 levied equal tax on owner and occupier
of the lands and buildings within the municipal area. Occupant's share of tax
was collected from the tenant. However, in the case of premises having more
F than one occupier, the taxes would be paid by the owner, but in turn, he was
competent to ·collect half of the total taxes paid i.e. occupier's share
proportionately from each occupier. The taxes were charged on the rent payable
and the rate was also low. This resulted in development of a system where the
occupier's share of tax was included in the rent by the owner and both the
shares were paid by the owner to the municipality instead of owner paying
G the taxes and then pursuing remedies against the' tenants for collection of
the portion of tax imposed by the Act on the tenant or occupier. Th

## Text

_Characters 0–39,852 of 84,971. This is a partial read: ask again with offset=39852 for what follows._

CALCUIT A GUJRA TI EDUCATION SOCIETY AND ANR.
A
v.
CALCUITA MUNICIPAL CORPORATION AND ORS.
AUGUST 25, 2003
[M.B. SHAH AND D.M. DHARMADHIKARI, JJ.]
B
Calcutta Municipal Corporation Act, 1980:
Section 194 read with section 230 and sections 181, 184, 186Consolidated rate-Determination of-Process of valuation, assessment, C
revision or amendment of assessment-Participation of tenants, sub-tenants
and occupiers-Held: Tenants, sub-tenants and occupiers share appreciable
extent of burden of tax, thus entitled to an opportunity to participate in the
process-They are entitled to public and written notices-However nonissuance or non-service of notices to persons primarily liable does not D
invalidate the proceedings unless serious prejudice is caused to the persons
aggrieved.
----~>
Section I 95-Providingfor recovery of consolidated rate from occupiers
by attaching rent payable by them on failure to recover the same from person
primarily liable-Tenant pleading that the Corporation would collect E
whatever landlord declares to be the rent-Held: If there is a dispute between
landlord and tenant regarding rent, tenant can raise it before the competent
authority-However, the finalisation of assessment cannot be made to wait
till then.
'
Sections 184, 186 and 17 4-/ncrease of tax based on market valuation- F
Hearing for assessment-Non-participation of owner/landlord-Effect ofHeld: Even though the landlord remains inactive by not contesting the
assessment proposed, tenant or occupier bearing the burden of tax has to be
vigilant and has right to raise objections pursuant to notices.
Section I 89(5) and (6)-Right of appeal-Grant of-Held: Tenant, G
sub-tenant or occupier share burden of an appreciable portion of consolidated
rate on the property-Hence, have right of appeal on pre-deposit of portion
of tax levied and made recoverable from them-To demand deposit of whole
consolidated rate for the entire building for maintaining tenant's appeal is
915
H
916
SUPREME COURT REPORTS [2003) SUPP. 2 S.C.R.
A unreasonable-Interpretation of statutes.
Section 178(6)-Municipal assessment code-Furnishing of necessary
information regarding apportionment of consolidated rate on land or building
by authorities to parties liable to pay' tax-Whether obligatory-Held: On
payment of the requisite fee, authorities are under statutory obligation to
B provide necessary information otherwise parties can take recourse to remedies
in law.
Section 231-Mode of recovery-Portion of tax payable by the ownerRecovery from the occupier as rent-Justification of-Held: The provision
creates a legal fiction by which the tax apportioned on the tenant would be
C treated as rent and would be recoverable as such-Further, there is no
conflict between Act of 1980 and the Tenancy Act-Both are to be applied
harmoniously-Interpretation of statutes-West Bengal Premises (Tenancy)
Act, 1956.
D
Section 171-Consolidated rate on lands and buildings-Whether tax
liability higher on tenants, sub-tenants or occupants than on landlordsHeld: Tax liability not disproportionately higher.
Sections 230 and 231-Apportionment and mode of recovery of taxTenants of rented premises covered by Tenancy Act, and others not covered-
£
Whether treatment discriminatory-Held: Act does not make any
discrimination -West Bengal Premises (Tenancy) Act, 1956.
Calcutta Municipal Act, 1951 levied equal tax on owner and occupier
of the lands and buildings within the municipal area. Occupant's share of tax
was collected from the tenant. However, in the case of premises having more
F than one occupier, the taxes would be paid by the owner, but in turn, he was
competent to ·collect half of the total taxes paid i.e. occupier's share
proportionately from each occupier. The taxes were charged on the rent payable
and the rate was also low. This resulted in development of a system where the
occupier's share of tax was included in the rent by the owner and both the
shares were paid by the owner to the municipality instead of owner paying
G the taxes and then pursuing remedies against the' tenants for collection of
the portion of tax imposed by the Act on the tenant or occupier. The revenue
collected through property tax was limited by the fair rent fixed under the
tenancy law. With the ever-increasing population of Calcutta, requirement
was felt for increasing and improving the civic.amenities for which it is found
H necessary to increase property tax particularly on lands and buildings which
CALClITTA GUJRATI EDUCATION SOCY. 1•. CALClfITA MUNICIPAL CORPN.
917
are being put to use within the municipal area for non-residential and A
commercial purposes. To augment revenueofthe Corporation for increasing
and maintaining the civic amenities it was felt necessary that a separate
'Surcharge' should be levied on properties occupied for non-residential or
commercial purposes. The Calcutta Municipal Corporation Act, J 980 provided
for valuation on the basis of market rate of rent and higher rate of tax by
introducing a consolidated rate of tax combining the tax on owners and tax on
occupiers. Surcharge .·leviable on the occupiers of properties for nonresidential/commercial use was included in the consolidated rate. It provides
for collection of the entire tax named as consolidated rate inclusive of owner's
and occupier's share from the owner with the right being given to the owner
B,
to make recovery of unpaid surcharge from the occupier or the tenant as rent C
Writ petitions were filed in the High Court challenging the validity and
interpretation of the provisions of the 1980 Act relating to taxes on property.
The order of High Court is challenged by the tenants, sub-tenants and the
landlords in the present appeals.
Appellants contended that although, a major portion of the tax is D
actually levied on the tenants, sub-tenants and the occupants, they are denied
opportunity in the method of valuation and assessment; that ifthe landlord
does not pay the consolidated rate or surcharge, it is recoverable under Section
195 from the tenants by attaching rents payable by them and in tile event of
any dispute regarding the rent, the tenant is helpless because the Corporation E
will collect from the tenant what the landlord declares to be the rent; that if
the actual rent realised does not suffer any change, the entire increase of tax
based on market valuation is to be borne by the tenant and the owner not being
affected at all may choose not to attend the hearing at the time of assessment;
that the pre-condition of maintaining the appeal by the tenant is to deposit the
entire consolidated rate demanded for the property even though he is occupying F
only a portion of the building; that the tenant is liable to pay only a portion of
tax leviable on him to the owner for which he receives neither bills nor demand
notices and so the right of appeal is available only to the owner/lessor as the
'person primarily liable'; that the tenants, sub-tenants and occupiers even on
formal demand on payment of fees are not being supplied the neces:.ary details
of tax and its apportionment for filing returns, raising objections and filing G
appeals; that section 231 which deems 'tax' as 'rent' for the purpose of
recovery by the landlord where he has already paid the whole amount of tax,
creates a situation whereby although the apportionment and quantum of
demand is disputed by the tenant, he has to face proceedings for recovery of
tax as 'rent' and face the danger of eviction under the Tenancy Act; that the H
918
SUPREME COURT REPORTS [2003) SUPP. 2 S.C.R.
A tax structure under section 171 has been made in such a manner that although
a tenant may be occupying a small portion of rented premises with normal
rent but on valuation in relation to the entire building fetching rent exceeding
Rs. 18,000 for the purpose of determination of tax, the resultant liability
works out higher on the tenant compared to the landlord; and that the
B provisions of the Act create a discriminatory situation between tenants paying
rent less than Rs. 3,000 per month, covered by Tenancy Act and tenants paying
more than 3000 per month, not covered by Tenancy Act.
Respondent-Corporation contended that it is impractical in a
metropolitan city like Calcutta where there are several multi-storeyed
C buildings to grant opportunity of participation in determination of valuation
and assessment of 'consolidated rate' to all and at every stage; that the
provisions of the ~ct do provide a reasonable safeguard to the tenants, subtenants or occupiers to object to the assessment or revised assessment, having
right to file return, file objections and prefer appeals; that the right of appeal
to tenlfnts, sub-tenants or occupiers on pre-deposit of tax for the entire
D property or premises is not inequitable and not virtual denial of the right;
that the lands and buildings in metropolitan town of Calcutta are mostly
occupied on meagre rents from the landlords, yet, in those tenanted premises
commercial and non-residential activities are going on a scale which requires
more and more civic amenities to be provided by the Corporation and so a tax
E structure under section 171 is justified.
Dismissing the appeals, the Court
HELD: 1. In view of specific provisions of the Calcutta Municipal
Corporation Act, 1980 the burden of tax to an appreciable extent is imposed
F on the tenant, sub-tenant and occupiers and the tax is liable to be recovered
from them through the landlord or directly by attachment of rent or other
coercive modes. Therefore, the tenants, sub-tenants and occupants are entitled
to an opportunity to participate in the process of valuation and assessment.
They are entitled to written notices apart from public notice for assessment,
revision of assessment or amendment of assessment of the 'consoiidated rate'
G or tax. Pursuant to the public notice or written notice, the returns submitted
by the tenant, sub-tenant or occupier, with regard t~ determination of annual
value, would be considered by the Corporation. The same procedure would be
followed in revision of the annual valuation. Non-issuance of public notice or
notices and /or non-service of written notices to the 'persons primarily liable'
H would not necessarily invalidate the proceedings of assessment or
CALCUTIA GUJRATI EDUCATION SOCY. v. CALCUTIA MUNICIPAL CORPN.
919
reassessment or amendment of the valuation for consolidated rate unless it A
is established by the party aggrieved that a serious prejudice was caused to it
for want of notice. [945-H; 946-A-D]
India Automobiles Ltd. v. Calcutta Municipal Corporation, (20021 3
SCC 388 and Assistant General Manager, Central Bank of India v.
Commissioner Municipal Corporation, (1995) 4 sec 696 - referred to.
B
2. If there is dispute about rent, the tenant is entitled to raise that dispute
before the competent authority under the provisions of the Act for its decision
in the course of valuation and assessment of consolidated rate and also get
its adjudication through the competent court. Merely because there is a
dispute regarding rent, the Municipal authorities cannot in law be made to c;
wait for finalising assessment till the dispute of rent is decided by some other
forum. (935-B, CJ
3. It is true that burden of tax based on valuation in the assessment is
to be borne by the tenant or occupier, even though the landlord remains D
inactive by not contesting the assessment proposed. Therefore, the tenants
or occupants who shoulder major portion of the tax burden have to be vigilant
and raise objections pursuant to public and written notices and contest the
assessments on valid grounds in their own interest. (935-F, G)
4.1. Under section 189(5) and (6) of the Act since the tenant, sub-tenant E
or occupier have to share burden of an appreciable portion of "consolidated
rate" exclusive or inclusive of 'surcharge' in relation to the properties used
for non-residential and commercial purposes and as the Act provides for
opportunity of participation to them pursuant to a public notice and written
notice in assessment and reassessment of tax, they have a right of appeal
provided under the Act It is made clear that tenant, sub-tenant and occupiers F '
held liable for payment of a portion of tax have a right of appeal on pre-deposit
of portion of tax levied and made recoverable from them. Any other
interpretation would frustrate the very object of providing right of appeal to'
'person liable' with the 'person primarily liable'. This is how.the provision
has to be reasonably interpreted and read down. The submission that where G
the tenant is occupying only a portion of the building and his liability towards
'consolidated rate' or 'surcharge' is proportionately restricted to that portion,
for exercising right of appeal, to make it compulsory for him to deposit the
entire consolidated rate assessed and levied on the whole building, is
inequitable. If the right of appeal is available to them on payment of the entire
H
920
SUPREME COURT REP.ORTS [2003] SUPP. 2 S.C.R.
A tax levied on the whole building even though they occupy only a portion of it,
the remedy of appeal would be highly onerous and virtually denied.
B
(936-C, D; 936-Hl
Assistant General Manager, Central Bank of India v. Commissioner,
Municipal Corporation, (19951 4 SCC 696, distinguished.
4.2. The rule of "reading down" a provision of law is now well
recognized. It is a rule of harmonious construction in a different name. It is
resorted to smoothen the crudities or ironing the creases found in a statute
to make it workable. In the garb of 'reading down', however, it is not open to
read words and expressions not found in it and thus venture into a kind of
C judicial legislation. The rule of reading down is to be used for the limited
purpose of making a particular provision workable and to bring it in harmony
with other provisions of the statute. It is to be used keeping in view the scheme
of the statute and to fulfil its purposes. 1437-C, DI
D
BR Enterprises v. State of UP, (1999) 9 SCC 700, referred to.
5. To enable the tenant, sub-tenant or occupier as 'person liable' to pay
'consolidated rate' they have a right to obtain necessary information on
assessment and apportionment of tax on payment of requisite fee in accordance
with Section 178 and Corporation authorities are legally bound to furnish
E such requisite information, otherwise the aggrieved parties can take recourse
to the remedies provided in law. (946-G; 941-F, GJ
6. A large number of properties in the metropolitan city of Calcutta
are in occupation of tenants, sub-tenants or occupants on a comparatively small
amount of rent or lease money. In such situation to impose entire burden of
F tax on the owner or lessor, would be inequitable, more so when the tenancy
law does not allow increase in rent beyond a particular limit and the right of
eviction of the landlord is restricted to the grounds under the Tenancy Act.
Under section 231 of the Act, the legislature has thought of apportioning the
tax burden between owner or the lessor as one party and the tenant, sub-tenant
G or occupier as the other parties. The whole amount of tax is recoverable from
the lessor and may also be recovered from the tenant or sub-tenant through
attachment of' the rent. Therefore, Section 231 creates fiction that the 'tax'
apportioned on the tenant would be treated a~. 'rent' and would be recoverable
as such. This is necessitated because in the absence of such a fiction in Section
231, the landlord would be compelled to pay the whole amount of tax which is
H recoverable from him under the Act and would be left to an expensive and
CALCUTIA GUJRATI EDUCATION SOCY.1" CALCUTIA MUNICIPALCORPN.
921
cumbersome remedy of filing a civil suit for recovery of such tax paid on behalf A
of the tenant, sub-tenant or occupant. Further such a fiction is required
because a private party cannot recover tax. The fiction created by the
legislation has to be taken to its logical conclusion. The Act of 1980 and the
Tenancy Act both are State legislations. No question arises of legislative
incompetence. There does not appear any inter se conflict between the two
Act!'. Both have to be read and applied harmoniously to achieve the legislative B
intent in the two enactments. [942-H; 943-A, B, C; F-H)
Puspa Sen Gupta vs. Susma Ghose, (19901 2 SCC 651, referred to.
7. Since the landlords are getting only small rents and the occupants
are actually putting the premises to more beneficial use sometimes generating C
huge incomes, a just tax structure should put lesser burden of tax on the
landlord than on the tenants who are in actual occupation. Therefore, the
submission that the tax burden is much higher on the tenants, sub-tenants or
occupants than on landlords is not legitimate and is no ground to assail section
171 of the Act. (944-E, F)
0
8. In apportioning the burden of tax on landlord and tenant a tax
structure has been evolved under the Act on the basis of actual and notional
rental value of the premises. The liability of the landlord towards tax is limited
to the valuation based on actual rent received and the assessment made of the
tax based on letting value of the premises is the liability of the tenant/sub- E
tenant or occupier. Merely because Tenancy Act is attracted to
accommodations with rent less than Rs.3,000 per month and not to other
accommodations having higher rent, does not create any dissimilar situation
in application of the Act to various categories of tenants paying rent more or
less than Rs. 3,000. The portion of tax liable to be paid by the occupant or f
tenant is not directly recovered by the Corporation from them but is
recoverable through the landlord and the landlord has been given rigllt of
reimbursement by demanding it from the tenant, sub-tenant or the occupant.
For recovering such portion the tax payable by the tenant, sub-tenant or
occupant, which has been paid by the landlord, is deemed to be "rent" only
for the limited purpose of its recovery. The modes of recovery are by a demand G
notice under the Tenancy Act and if necessary by filing an eviction suit. Resort
to remedy before the regular court is also not prohibited. On this aspect of
apportionment of tax and mode of recovery of tax, the Act does not make any
discrimination between tenants of premises covered by the Tenancy Act and
others not covered by the Act. (945-C-Fl
922
SUPREME COURT REPORTS [2003) SUPP. 2 S.C.R.
A
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 5203 of2000.
From the Judgment and Order dated 13.10.99 of the Calcutta High Court
in Matter No. 5410 of 1987.
WITH
B
C.A.Nos. 5204, 5960/2000, 1572 and 2212 of200l.
P.N. Mishra, Ranjit Kumar, Bhaskar P. Gupta, Mahendra Anand, Tapash
Ray, Abhijit Sengupta, Anand, D. Bharat Kumar, Rana Mukherjee, Siddharth
Goutam, Goodwill Indeevar, Rana Mukherjee, A. Kiran, Ms. Sumita Mukherjee,
Ms. Sonat Tripathi, Ms. Sumita Mukherjee, Ashok Dasadhikari, L.C. Agarwala,
C Pankaj Agarwal, Avijit Bhattacharjee, Atanu Saikia and Ms. Madhumita
Bhattacharjee for the appearing parties.
The Judgment of the Court was delivered by
DHARMADHIKARI, J.The present appeal along with other connected
D appeals is on the question of validity and proper interpretation of impugned
provisions of Calcutta Municipal Corporation Act I 980 (hereinafter referred
to as the 'Act' for short), which are contained in Part IV Chapter XII under
the Heading ."Powers of Taxation and Fixation of Consolidated Rates .
. The three Judges' s·pecial Bench of the High Court of Calcutta on a
E reference made by the Division Bench of the said Court, on the validity and·
interpretation o~ the impugned provisions of the Act relating to taxes on
property has delivered a common judgment in different Writ Petitions, which
has been assailed by tenants, sub-tenants and_ landlords by separate appeals
which are being decided by this common judgment. It is not in dispute that
the State Legislattire is comp~tent to make a law conferring authoritY on the
F · local bodies to impose property tax to generate revenue for providing civic
amenities like supply of water, drainage, sewerage, collection, removal and
disposal of solid waste, fire prevention and fire safety, maintenance o.f streets
a~d public places and other allied services in the municipal areas where lands
or buildings are situated. A bri.ef survey of the history of the legislation is
G necessary.
The repealed Act Le. Calcutta Municipal Act of 1951 levied equal tax
on owner and occupier of the lands and buildings within the municipal area.
It provided for issuance of two separate Bills where the premises are occupied
only by one tenant. The occupant's share of tax was collected from the tenant
H as the occupier's Bill. However, in the case of premises having more than one
CALCUTTAGUJRATIEDUCATIONSOCY.1•.CALCl.ITTAMUNICIPALCORPN.[DHARMADHIKARl,J.]923
occupier, the 1951 Act had provided that the taxes under both the Bills i.e. A
the owner's and the occupier's Bill, would be paid by the owner, but in turn,
he was competent to collect half of the total taxes paid i.e. occupier's share
proportionately from each occupier. The taxes were charged on the rent
payable and the rate was also low. The working of the above provision of the '
Act of 1951 resulted in development of a system where the occupier's share B
of tax was included in the rent by the owner and both the shares were paid
by the owner to the municipality instead of owner paying the taxes and then
pursuing remedies against the tenants for collection of the portion of tax
imposed by the Act on the tenant or occupier.
In conformity with the above mentioned provisions of the Municipal C
Act 1951, the West Bengal Premises Tenancy Act 1956 (shortly referred to as
'Tenancy Act') provides that 50% of the total property tax can be included
in the "Fair rent."
According to the Corporation, with the ever-increasing population of
Calcutta and requirement felt of increasing and improving the civic amenities, D
it is found necessary to increase property tax particularly on lands and
buildings which are being put to use within the municipal area for nonresidential and commercial purposes. The earlier system which existed under
the Municipal Act of 1951, the revenue collected through property tax was
limited by the "Fair rent" fixed under the tenancy law. To augment revenue
of the Corporation for increasing and maintaining the civic amenities it was ~
felt necessary that a separate 'Surcharge' should be levied on properties
occupied for non-residential or commercial purposes.
The present Act was enacted in 1980 providing for valuation on the
basis of market rate of rent and higher rate of tax by introducing a consolidated F
rate of tax combining the tax on owners and tax on occupiers. The 'surcharge'
leviable on the occupiers of properties for non-residential/commercial use was
included in the "consolidated rate." The present Act by the impugned
provisions provides for collection of the entire tax named as "consolidated
rate" inclusive of owner's and occupier's share from the owner with the right
being given to the owner to make recovery of unpaid 'surcharge' from the G
occupier or the tenant as 'rent'.
For appreciating the nature of various challenges made to specific
provisions of the Act, it would be necessary to examine generally the scheme
of the Act under Chapter XII on subject of Power of taxation and fixation
H
924
SUPREME COURT REPORTS [2003) SUPP. 2 S.C.R.
A of "consolidated rates." Under Section 2(60) the word "Occupier" is defined
to include an owner living in or otherwise u·sing his building and a tenant or
any person for the time being paying or liable to pay to the owner the 'rent'
or any portion of the rent. Section 2(62) defines the word 'owner' to include
person for the time being receiving the rent of the property on his own
account or as agent or trustee. Section 170 is a charging section which
B empowers the Corporation amongst other taxes to levy tax on consolidated
rate on lands and buildings. Section 171 and 171 (2) provide that such
consolidated rate shall be 11 % where the annual value of the property does
not exceed Rs. 600. Where the annual value exceeds Rs. 600 but does not
exceed Rs. 18,000 the percentage or annual value is worked out on a
C mathematical formula which is specified thus "by dividing the annual value
by 600 and then adding l 0 to the quotient. The sum thus worked out being
rounded off to the nearest first place of the decimal." Where the annual value
exceeds Rs. 18,000 the consolidated rate would be 40% of the annual value."
Sub-section (4) of Section 171 which is mainly attacked by the appellants
D provides that "where any land and building or hut or portion thereof is used
for commercial or non-residential purpose, the Corporation may levy a
surcharge on the consolidated rate on such land or building or hut or
portion thereof at such rate not exceeding 50% of the consolidated rate as
the Corporation may from time to time determine." It further provides that
E "where only a portion of the land or building or hut is used for such purposes
i.e. other than residence, the amount of the consolidated rate payable in
respect of the said portion shall be separately calculated while fixing the
consolidated rate."
Section 174 lays down the method of determination of 'annual valuation.'
p The said section provides that for the purpose of assessment of consolidated
rate the annual value of any land or building shall be deemed to be the gross
annual rent including service charges, if any, at which such land or building
might, at the time of assessment, be reasonably expected to let from year to
year, less an amount of 10% for the cost of repairs and other expenses
necessary to maintain such land or building in a state to command such
G 'gross rent.'
Sub-section 4A of Section 171 lays down an alternative mode of
determination of annual valuation for consolidated rate where this gross
annual value on the basis of rent, likely to be fetched, is unascertainable. By
H the alternative mode 'gross annual rent of such land or building shall be
CALCUTT A GUJRA TI EDUCATION SOCY. '" CALCUTTAMUNICIPALCORPN. [DHARMADHIKARI, J.J925
deemed to be 7.5% of the value of the building obtained by adding the A
estimated cost of erecting building at the time of assessment less a reasonable
amount to be deducted on account of depreciation to the estimated present
market value of the land.' Section 178 enables State Government to frame rules
for determining value of any land and building in Calcutta and the rules so
framed and regulations thereunder are to constitute the Municipal Assessment B
Code.
This Court in the case of India Automobiles ltd v. Calcutta Municipal
Corporation, [2002] 3 SCC 388 dealing with the provisions of the Act, has
indicated all relevant factors which have to be taken into account for
determination of annual letting value and assessment of tax on properties. In C
such determination, the relevant circumstances are amongst others actual rent
received, hypothetical standard rent, the rent paid by sub-tenant, if any, the
prevalent rate of rent of lands and building in the vicinity of the property
being assessed. The relevant observations of this Court in the case of India
Automobiles Ltd, (Supra) reads thus :-
"The argument that the rent actually received by the owner should
always be deemed to be reasonable rent in the absence of fraud,
collusion and other extraneous consideratbns is too general and
broad proposition of law which cannot be accepted for the purpose
D
of determining the annual value of the property for the purposes of
Section 174 of the 1980 Act. In the light of clear and unambiguous E
provisions of Section 174 of the 1980 Act, it cannot be held that the
amount realised by a tenant from a sub-tenant cannot, at all be taken
into consideration for the purposes of determining the gross annual
rent in the absence of extraneous considerations. There is no substance
in the submission of the learned counsel appearing for the appellant F
that allowing the municipal corporations to assess the annual rateable
value on the basis of the income of a tenant from the property would
be grossly unfair and would have the effect of rendering the rate
provisions of the Act unreasonable, arbitrary and unconstitutional.
The Act itself has taken care by making sufficient provision in Sections
193 and 194 regarding the liability to pay the rent and apportionment G
of such liability when the premises are assessed, let or sub-let. On
proof of creation of sub-tenancy, the owner of the building may also
be entitled to seek eviction of their tenants under the relevant
provisions of the Rent Acts applicable in the State where the land or
property is located. We find some substance in the submission of the H
926
SUPREME COURT REPORTS (2003] SUPP. 2 S.C.R.
A
learned counsel for the appellant that permitting the· municipal
authorities to assess the annual value only on the basis of the rent
paid by the sub-tenant to the tenant and fixing its liability on the
I
owner may adversely affect the owners of the buildings who have let
~
their premises at a time when rents were meagre and who under the
B
rent control statutes are deprived of getting possession back of the
lands and buildings from their tenants. The I 980 Act, therefore, requires
application of mind by the municipal authorities to determine the rents
on the basis of reasonableness by keeping into account all relevant
circumstances including the actual rent received by the owner,
h~pothetical standard rent, the rent being received by the tenant from
c
his sub-tenant and other relevant consideration, such as prevaient
rate of rent of lands and building in the vicinity of the property being
assessed. Only because the owner of the building is not getting the
same rent which the sub-tenant is paying to his lessor, cannot be
made a basis to deprive the corporations from determining the annual
D
valuation and taxing the land or building on th~t basis. If such a plea
is accepted, it would be against the provisions of the statute which
has been enacted to provide civic services in the form of water,
drainage, sewerage, collection, removal and disposal of solid waste,
fire prevention and fire safety maintenance of street and public places
etc., in the municipal area where such land or building is situate.
E
.................. We are of the view that the basis for determination of
annual rent value has to be the standard rent where the Rent Control
Act is applicable and in all other cases reasonable determination of
such rent by the municipal authorities keeping in view various factors
as indicated herein earlier, including the rent which the tenant is
F
getting from his sub-tenant. In appropriate cases the owner of the
property may be in a position to satisfy the authorities that the gross
annual rent of the building of which the annual valuation was being
determined cannot be more than the actual rent received by such
owner from his tenant. The municipal authorities shall keep in mind
G
the various pronouncements of this Court, the statutory provisions
made in the specified Municipal Acts, keeping in mind the applicability
or non-applicability of the Rent Act and the peculiar circumstances of
each case, to find out the gross annual rent of the building including
service charges, if any, at which such land or building might, at the
Itime of assessment, be reasonably expected to let from year to year
H
in terms of Section 174 of the 1980 Act".
CALCUITAGUJRA TI EDUCATION SOCY. 1·. CALClJIT AMUNICIPALCORPN. [DHARMADHIKARI,J.)927
Further, sub-section (6) of section 178 obligates the Municipal A
Commissioner to supply on payment necessary information to owner, lessee
or occupier about the apportionment of the "consolidated rate" of such
property among several occupiers of such land or building. Furnishing of
such information, however, does not preclude the Corporation from recovering
I
the dues from any of such persons owning or occupying land or building.
Section 180 provides for revision of the assessment of valuation for
consolidated rate and enables owners and occupiers of the property to submit
returns pursuant to public notice for revision of assessment of annual value.
Section 182 obligates the owner or occupier to submit returns in the prescribed
time. The assessment list or the revised assessment list is open to inspection
B'
and a public notice for that purpose shall be issued in accordance with C
Section 184. Before revising the annual valuation, public notices as also
written notices will be given to the owners and occupiers and they will be
heard by the Municipal Commissioner. This is the requirement of sub-section
(I) to ( 4) of Section 184. Where the assessments are amended, a fresh notice
is required to be issued to owners, lessees and occupiers for consideration
of the proposed amendment. Section 186 gives a right of filing objections D
against valuation or assessment, to the owner as also to any person liable
to pay the consolidated rate. Under Section 188, the objector will have an
opportunity of hearing on his objection before the competent authority.
Section 189 provides for an appeal against the assessment to Assessment
Tribunal. The appeal can be preferred by the owner or person liable to pay E
consolidated rate. The pre-condition of hearing of the appeal is deposit of
consolidated rate determined. Section 193 specifies the persons on whom
'primarily' consolidated rate is leviable. The persons specified include the
'lessor,' where the land or building is let; the 'superior lessor,' where the land
or building is sub-let and 'owner' or the person in whom the right to let such
land. or building vests, where the land or building is unlet.
F
The most controversial provision the validity of which is questioned
by the appellant is Section 194 providing for apportionment of liability or
"consolidated rate" between owner, tenant, sub-tenant or occupier. Subsection (I) of Section 194 lays down that where annual valuation exceeds the G'
amount calculated on the basis of actual rent the person on whom the
"consolidated rate" is 'primarily' leviable shall be entitled to receive from the
tenant the difference between the amount of the consolidated rate and amount
which would be leviable if the "consolidated rate" were calculated on the
basis of the 'rent' payable to him. The object of this provision is that
consolidated rate calculated on the basis of rent fetchable from the premises H
928
SUPREME COURT REPORTS [2003] SUPP. 2 S.C.R.
A should not be a sole burden on the lessor or the owner. His burden of tax
is limited to the consolidated rate to be calculated on the basis of actual
rent received by him. The additional burden of "consolidated rate" is shared
by the tenant or occupier including 'surcharge' where the property is being
used· for non-residential/commercial purposes. The same method is to be
adopted in accordance with sub-section (2) of Section 194 where the
B accommodation is sub-let. In that eventuality, the burden of tax on tenant
would be proportionate to consolidated rate calculable on the basis of actual
rent received by him and the remaining which is to b.e calculated on the basis
of likely rent would be shared by the sub-tenant.
C
Section 195 of the Act lays down the mode of recovery of the
'consolidated rate'. Under sub-section ( 1) of the said section, the primary
liability would be of the 'lessor,' 'superior lessor' or 'the owner.' If the 'person
primarily liable' to pay the "consolidated rate," fails to pay, it will be recoverable
from the occupier by attachment of his rent in proportion to the sum due
against him. On such recovery from the occupier, the occupier would be liable
D to adjustment of his dues to the lessor, superior lessor or the owner. Apart
from the above, there are other modes of recovery by a service of Bill and
notice of demand and coercive method under Bengal Public Demands
Recovery Act, 1913. On failure of the person to pay the tax on demand under
section 219, recovery can be made by distress and sale of his movable
E property. Section 225 empowers the Municipal Commissioner to recover the
consolidated rate from the occupier by attachment of his rent. 9n failure of
occupier to pay such rent, the amount will be recovered as arrears for tax.
The other controversial provision, which is forcefully attacked by the
appellant, is contained in Section 230 providing for apportionment of
F "consolidated rate" by the 'person primarily liable to pay' i.e. the lessor,
superior lessor or the owner of the land or building. This provision empowers
'the person primarily liable' to recover the consolidated rate to the extent of
half from the occupier, if there is only one occupier of the property. If there
are more than one occupier, he can recover from each occupier 'half of such
sum as bears to the entire amount of rate so paid by the owner-the same
G proportion as the value of the portion of the land or building in the occupation
of such occupier bears to the entire value of such land or building.' It further
provides that if there are more than one occupier 'such half of the amount
may be apportioned and recovered from each occupier in such proportion as
the annual value of the portion occupied by him bears to the total annual
H v.alue of such land or building.'
CALCUITAGUJRATIEDUCATIONSOCY.1•.CALCUITAMUNICIPALCORPN.(DHARMADHIKARI,J.)929
With regard to the 'surcharge' included in the 'consolidate rate' which A
is levied on properties used for non-residential/commercial purposes, clause
(b) of Section 230 empowers the 'person primarily liable' to recover entire
amount of surcharge from the occupier and if there are more than one such
occupier, the surcharge is to be apportioned and recovered in such proportion
as the annual value of the portion occupied by him bears to the total annual
value of such property.
B
Section 231 is also a provision to which serious exception has been
taken by the appellant. It provides that the 'person primarily liable' to pay any
consolidated rate is entitled to recover portion of the consolidated rate
including surcharge from the occupier of the property and for that purpose C '
'the person primarily liable' shall have the same rights and remedies as if such
sum were 'rent' payable to him by the person from whom he is entitled to
recover such sum.
The learned counsel appearing for the appellant in this batch of petitions
in their own way and different status of their clients, have mainly challenged D
the provisions of sections 184, 189, 194, 230, 23 l and 234A. It is contended
in common that they are unworkable, impractical and hence unconstitutional.
It is submitted that although, a major portion of the tax is actually levied on
the tenants, sub-tenants and the occupants, there is no proper machinery,
method and mode of assessment by involving this class of persons. They are,
thus, denied opportunity in the method of valuation and assessment. There E
are no legal and constitutional safeguards against illegal determination of
consolidated rate before effecting recovery by coercive action of attachment
of rent or distress and sale of the property on which tax is imposed.
We have also heard learned counsel appearing for the respondent- F
Corporation, who has taken us through the various provisions of the Act. He
strenuously urged that the alleged ground of unworkability of the provisions
is a total misconception of the provisions and their misinterpretation. It is
submitted that primary liability to pay tax is on the owner of the property but
in cases where the property has been let or sublet, the burden of tax is
apportioned between the owner as lessor and the lessee or sub-lessee as the G
1
occupants.