# DR. BALBIR SINGH AND ORS. ETC. ETC v. MUNICIPAL CORPORATION, DELHI AND ORS

- **Citation:** [1985] 2 S.C.R. 439
- **Court:** Supreme Court of India
- **Decided:** 1984-12-12
- **Bench:** P.N. Bhagwati, R.S. Pathak, Amarendra Nath Sen
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/dr-balbir-singh-and-ors-etc-etc-v-municipal-corporation-delhi-and-ors-8911
- **Pages:** 37

## Headnote

Deihl Municipal Corporation Act, 1957 and Punjab Municipal Act 1911
-Assessment of property tax-Different categories of properties enumerated
-Rateable value-How to be determined-Criteria for calculating arrn1.al rent
not lo be higher than standard rent-May be even lower lhon standard rent.
Delhi Rent Control Act J9j8, s. 6-Determinatlon of Standard RentPrlncipleJ explained-Sel!, 9 prescribts only procedure for fixation of standard
r•nl.
Section 2, sub-section (47) of Delhi Municipal Corporation Act, 19S1
defines ~rateable value' to mean "the value of any land or building fixed in
accordance with the provisions of this Act and the bye .. Jaws made there·
under for the purpese of assessment to property taxes.
Sub-secti00 (1) of
Section 116 lays down that the rateable value of any land or building
assessable to property taxes shall be the annual rent at which such Jaud or
building may reasonable be expected to be let from year to year, less a sum
equal to 10% of such annual rent.
Sub-section 3 of sec. 120 provides that
'"the liability of the several owners of any building which is, or purports to
be. severally owned in parts or Oats or rooms, for payment of property taxes
or any instalment thereof payable during the period of such ownership shall
be joint and several.,.
The appellants and petitioners chal1onged in the High Court of Delhi
the assessmoats with regard to property tax made by the Municipal Cor•
poration under the Delhi Municipal Corporation Act, 19S7 and the Punjab
Municipal Act 1911 in respect of four categories of properties situated in
Delhi and New Delhi areas.
The municipal authorities contended that tho
ratio of the decision in Dewan Dau/at Ram v. NDMC [1982] 2 S.C.R. 607
was that whatever be the figure of the standard rent whether determined by
the Controller under Section 9 of the Rent Act or arrived at by the assessing
authority by applying the principles laid down in the Rent Act, must be
taken as the measure of rateable value of the building for the purpose of
assessability to property tu, irrespective of any other considerations i (2)
that wberc any premises construoted on or after 9th June 1955 have not
been let out at any time and have throughout been self-occupied, tho
standard rent of such promises would be determinable under the provisions
of 1ab 0 section (2) (b) of Section 6 of the Dolbi llool Control Ao1 19S8 and
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440
SUPREME C0t1RT REPORTS
(1985) 2 s.c.a.
any rent which. could be agreed upon between the landlord and the tenant
if the premises were Jet out to a hypothetiCat tenant would be deemed to
be the standard rent of tho premises and the formulae set out in sub.
section (I) (B) (2) (b) of Section 6 would not bo applicable for determining
the standard rent by reason of non·obstante clause contained in the opening
part of sub-seotion (2) of Section 6 ; and (3) that since in some. of the
cases the plot of land on which the premises s:tands, cannot be transferred
without the previous ,consent of the Government, it· bas no market value
and its market price cannot be ascertained and hence tha standard rent of
the premises cannot be determined on the principles set out in sub-sectioDs
(I) (A) (2) (b) or (1) (Bl (2) (b) of Section 6 and consequnetly, the miduuy
provision in sub-section (4) of Section 9 Would apply and the standard rent
would have· to b(: fixed io accordance with the principles laid down in that
provision.
On the questfon of determination of rateable value for four categories
of properties for the purpose of assessability to property ta:ii:, the Court,
HELD : 1.1 ~fhc relevant provisions of Delhi Municipal Corporation· Act~
1957 and the Punjab Municipal Act, 1911 in respect of determination of
rateable value 'for the purp0se or assesSability to property talli:"are almost
identical as· ob~erved by Suvrem1 Court in Diw•n Dau/at Ram v. NDMC
(1980] 2 S.C.R. SOY and it vrould tberofor bo •ulloiont te refer t0

## Text

_Characters 0–39,534 of 108,531. This is a partial read: ask again with offset=39534 for what follows._

._.
439
DR. BALBIR SINGH AND ORS. ETC. ETC.
v.
MUNICIPAL CORPORATION, DELHI AND ORS.
December 12, 1984
[P.N. BHAGWATI, R.S. PATHAK AND AMARENDRA NATH SEN, JJ.]
Deihl Municipal Corporation Act, 1957 and Punjab Municipal Act 1911
-Assessment of property tax-Different categories of properties enumerated
-Rateable value-How to be determined-Criteria for calculating arrn1.al rent
not lo be higher than standard rent-May be even lower lhon standard rent.
Delhi Rent Control Act J9j8, s. 6-Determinatlon of Standard RentPrlncipleJ explained-Sel!, 9 prescribts only procedure for fixation of standard
r•nl.
Section 2, sub-section (47) of Delhi Municipal Corporation Act, 19S1
defines ~rateable value' to mean "the value of any land or building fixed in
accordance with the provisions of this Act and the bye .. Jaws made there·
under for the purpese of assessment to property taxes.
Sub-secti00 (1) of
Section 116 lays down that the rateable value of any land or building
assessable to property taxes shall be the annual rent at which such Jaud or
building may reasonable be expected to be let from year to year, less a sum
equal to 10% of such annual rent.
Sub-section 3 of sec. 120 provides that
'"the liability of the several owners of any building which is, or purports to
be. severally owned in parts or Oats or rooms, for payment of property taxes
or any instalment thereof payable during the period of such ownership shall
be joint and several.,.
The appellants and petitioners chal1onged in the High Court of Delhi
the assessmoats with regard to property tax made by the Municipal Cor•
poration under the Delhi Municipal Corporation Act, 19S7 and the Punjab
Municipal Act 1911 in respect of four categories of properties situated in
Delhi and New Delhi areas.
The municipal authorities contended that tho
ratio of the decision in Dewan Dau/at Ram v. NDMC [1982] 2 S.C.R. 607
was that whatever be the figure of the standard rent whether determined by
the Controller under Section 9 of the Rent Act or arrived at by the assessing
authority by applying the principles laid down in the Rent Act, must be
taken as the measure of rateable value of the building for the purpose of
assessability to property tu, irrespective of any other considerations i (2)
that wberc any premises construoted on or after 9th June 1955 have not
been let out at any time and have throughout been self-occupied, tho
standard rent of such promises would be determinable under the provisions
of 1ab 0 section (2) (b) of Section 6 of the Dolbi llool Control Ao1 19S8 and
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440
SUPREME C0t1RT REPORTS
(1985) 2 s.c.a.
any rent which. could be agreed upon between the landlord and the tenant
if the premises were Jet out to a hypothetiCat tenant would be deemed to
be the standard rent of tho premises and the formulae set out in sub.
section (I) (B) (2) (b) of Section 6 would not bo applicable for determining
the standard rent by reason of non·obstante clause contained in the opening
part of sub-seotion (2) of Section 6 ; and (3) that since in some. of the
cases the plot of land on which the premises s:tands, cannot be transferred
without the previous ,consent of the Government, it· bas no market value
and its market price cannot be ascertained and hence tha standard rent of
the premises cannot be determined on the principles set out in sub-sectioDs
(I) (A) (2) (b) or (1) (Bl (2) (b) of Section 6 and consequnetly, the miduuy
provision in sub-section (4) of Section 9 Would apply and the standard rent
would have· to b(: fixed io accordance with the principles laid down in that
provision.
On the questfon of determination of rateable value for four categories
of properties for the purpose of assessability to property ta:ii:, the Court,
HELD : 1.1 ~fhc relevant provisions of Delhi Municipal Corporation· Act~
1957 and the Punjab Municipal Act, 1911 in respect of determination of
rateable value 'for the purp0se or assesSability to property talli:"are almost
identical as· ob~erved by Suvrem1 Court in Diw•n Dau/at Ram v. NDMC
(1980] 2 S.C.R. SOY and it vrould tberofor bo •ulloiont te refer t0 · tlu
provisions of the· Delhi Municipal Corporation Act, 1957 (for short, the
Act). [453E]
It would appear from the provisions of ss. 114 and 1 t S and the Act
'that the general tax is t'eviable on land and building as a whole and separate
pOrtions of large and bu!ldings are not assessable ti> general tax as distinct
alld independent units save and except where aoy portion of the land or
building is liable tO a higher rate of general tax under the, proviso to clause
(di of sub.section (I) of Soctioo 114 or is exempt from tho general ta• by
reasori of its being exclusively occupied or used , for public worship or for· a
cbarit:ible· .Pufposo under. sub-section (4) of Section 1.15 io which case such
poition· of the '13.nd of b.Uilding is deemed to be a separate property for the
purpose of municipal taxation. [ 45 l A-Bl
1.2.
The basic assumption underlying sec. 120 (3) of the Act is
that the buildirig'as·a whole is to be assessed to the property taxes and not
each separate part or flat or room belonging to a separate· owner and tb'e
liability or the se~eral oWners for payment of the- amount of property taxes
assessed' on the building is to be joitit and seVcral so that each of thChi
would be liable to pay the whole amount of the property taxes assessed on
the·· building· vis~a·vis the Corporation.
The amOunt of property taxes
assessed on the
bllilding't~ would, of course, be liable to be divided amongst
the several owners in the proportion·. of the area comprised in the pirt·or
68.t or room belCJ•nging -- to ea;;:h owner, but· so far as the Corporatiori is
concerned the liability of1tbe ·several owners ·will be joint and 1several.
[452B-C]
1.3.
UndCi' 'tbC provisions of, the A'Ct, criteria for determining ratCw
able v:itU.ClOf' a buildiii8 ·..is the annua_I · reni · at .whiCh- such bUilding miSlit
rCilSCni8bJC''be" e:ip6i:tCd tCi'bC let ffom year to year'. less certain deductions .
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BALBIR SiNGH v. M.C.D.
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Tho word
1reasonably
1 in the definition of rateable value ins. llt:i (1) is
very important.
What the owner might reasonably expect to get from a
hypothetical tenant, if the building were let from year to year, afford.~ the
statutory yardstick for determining the rateable value.
Now, wiat is
reasonable is a question of fact and it depends on the facts and circumstances
of a given situation.
Ordinarily,
~ b'lrgain between a willing lessor aad
a willing le'lsee uninfluenced by any ex.:.ran\l'ous circumstance'i may aff<>rd a
guiding test of reasonableness and in no£mal circumstances, the actual rent
payable by a tenant to the landlord would afford reliablo evidence of what
the landlord may reasonably expect to get from the hypothetical teoant,
unless the rent is inflated or depress~d by reason of extraneous consider,·,tions
sach as relationship, expectation of some other benefit.
There would
ordinarily be a close approximation bL:tween the actual rent received by the
landlord and the rent which he might reasonably expect to receive from a
hypothetical tenant.
But in case or a building subject to rent control
legislation this approximation may and often does get dispiaced, because
under rent control legislation the landlord cannot claim to recover from the
tenant anything more than the standard rent and his reasonable expectation
must, therefore, be limited by the measure of the standard rent lawfully
recoverable by him. [452E-H; 453A]
(I) The '1:oliiltrovcr1y ia Dewan D81tlat Ram's case \supra) was not
whether the figure of standard rent of a building should be taken as its
rateable value even where the rent which the owner reasonably expects to
got from a hypothetical tenant is less than the figure of the standard rent
but whether the contractual rent receivable by the landlord from the tenant
should be taken to be the rateable value even if it be higher than the
standard rent determinable under the J)rovisions of the Rent Act. The Court
held (i) that even if the stand:trd rent of a building bas not been fixed by
tho Court under Section 9 of the Rent Act, the landlord cannot reasonably
expect to receive from a hypothetical tenant anything more than the standard
rent determinible under the provisions of the Rent Act and this would be
so equally whether the building has been let out to a teaan t who has lost
bis right to apply for fixation of the rent by reason of expiration on the
period of limitation prescribed by Section 12 of the Rent Act or the bui!dina:
is self occupied by the owoer arid therefore, in either case, the stand~rd rent
determinable under the provisions of the Rent Act and not the actual rent
received by the landlord from the tenant, would constitute the correct
measure of the rateable value of the building; (ii) that in each case the
a3Stssing authority would have to arriva at its own figure of the standard
rent by applying the principles laid down in the Rent Act for determination
or the Standard Rent and determine the rateable value of the building OD
the basis of the actual rent received by the landlord and that the rateable
valoe of the building must be held to be limited by the moasure of the
standard rent determinable on the principl~s laid down in the Rent Act, and
it would oot exceed such measure of the standard rent,
(iii) that even if
the 1 andlord was lawfully entitled to receive the contractual rent from the
tenant, such contractual rent could not be taken to be the rateable value of
the building, because the reasonable expectation of the landlord to receive
the contractual rent from hypothetical tenant could not possibly exceed the
standard rent determinable in accordance with the provisions laid down io
tho Rent Act and (iv) that tho rateable value of a building cannot exceed tho
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442
SllPIU!ME COURT Rl!PORTS
[1985) 2 s.c.a.
~casure of stands.rd ren.t; whether determined by the Controller under Sec •
. t100 9. of. the :Fte?t 1ct o~ arrived at by the assessing authority by applyins
the pnnc1ples .laid. down 10 .the Rent Act, but it may in a given case ho 1011
than the standa.rd rent having regard to various attendant circumstances Sod
1onsiderations.[455C·D; 454C-H; 455A]
.
3.1. The definition of "standard rent" in S. 2 (kl of Delhi Rent
Control Act, 1958 (for short, the Rent Act) is not an inclusive but an
exhaustive definition· and it defines the standard rent to mean either the
s-tandard rent r1~ferred to in Section G or the increased standard rent" under
Section 7.
It is significant to note that it docs not contain any reference
to Section 9, Sub·sectioo (4). Whenever, therefore any referrence is made to
standard rent it1 any Pi:ovisioo of the Rent Act, it must mean standard rent
as laid down in SeatiOn 6 or incfeased standard rent as provided in Section 7
and nothing more.
Section 6 lays down the principles for determination of
staOdal'd rent in almost all conceivable classes of causes and Section 7 provi·
des for .increase in ihC standard rent where the landlord has in.curred expen ..
,i'iture for any i1oprovCinent, addition or structural alteration in the premises.
(460C-E]
3.2. Section 9, -a~ the definition in sec. 2 (k) clearly suggests and
the
marginal note definitely indicates does not define what is standard rent but
merely lays. down the procedure fof fi11:ation of standard rent.
The Coatrel·
ler
is entrusted. bJ sub-sections ( 1) and (l) of 11ction 9 with th• ta•k of
fiaigg the standard rCDt of any prelnises having regard to the principles set
Out in section 6 or . the p"rovisions of Section 7 and any other relevant
cfrcumstance~ of the caSC~· The words having regard to ••• '"the circumstances
of ine case" undoub'iedly leave a certain measure of discretion to the Controller in fixing be standard rent.
But this discretion is not such an unfet..;.
tered and unguided discretion as to enabJe the Controller to fillj
any
st&ndard rent which he considers reasonable.
He is required to fiz the
standard rent in accordanCe with the formula laid down in Section 6 or
Section 7 and he caHnOt ignOre that formula by saying that in the circum ..
staoceS of the case he considers it reasonable to do so.
The only ,discretion
given to him is to make .adjustments in the result arrived at on the . appJi·
cation of the relevan·t formula, where it is necessary to do so by reason of
the fact that the Jandlord mighi have made som.e alteration or improvement
in the building or circumstances might have transpired affecting the condition Or utility of the building or some such circumstances of similar character·
The compulsive fi3rce of tbti formula laid down 'in Section 6 for the deter·
minatiOn of standard rent and the provisions of Section· 7 for increase in
staOdard reOt ia not iO 8Dy way .whittled down by sub·section (2) of '-Section
9. ·but a marginal discretion is given to the Con tr Oller to mitigate the rigour
of the forfuulae Vl'heie ihe circumstances of the case ·so require.
HOweverJ
in· .case if it is not possible to determine the standard rent of any premises
on the prinCiples set fof"th in Section 6, then Section 9(4) provides that ·in
sUch a situation the ·"Controller may fix such rent as would be reasonable
having re.gar.cf co ·the situaiion, locality and condition of the premises and
tlio ameD.itiCS provided therein and where there are similar or nearly similar
pI-Cmises in the locali1y, having regard atso to fhe standard rent payable: in
rCspcct Of such pr.cmises:
But 'the basic coOdition for the applicability ·'·or
sllb~scclion .(4) of SectiOn 9 is'that it should not be possible to determilie
the standard'rent ori tbe."Principles set out in Section •·
But :eveii while
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BALBIR SINGH V. M.C.D.
443
fixing such rent, the Controller does not enjoy unfettered discretion to do
what be likes and he is bound to take into account the standard root payable in respect of similar or nearly similar premises in the locality.
The
standard rent determinable on the principles set out in section 6, therefore,
again becomes a governing consideration. [460E; G·H; 46IA·C; E·F; G]
The Court laid down the following principles for determining rateable
\'alue in respect of four categories of properties involved in these appeals
and writ potitions. [4520]
(A) Where the properties are setf-occupied i.e. occupied by the owners:
4. 1. Where the premises are self-occupied and have not been let out
to any tenant, it would still be possible to determine the standard rent of
the premises on the basis of hypothetical tenancy.
Tho question in such a
case would be as to what would be the standard rent of tho premises if they
were let out to a tenant.
Obvioubly, in such an eventuality the standard
rent would be determinable on the principles set out in sub-section (1) (A)
(2) lb) of Section 6 of tho Rent Act.
Tho standard rent would be tho rent
calculated on tho buis of 7t per cent or 8.1/4 per cent per annum of tho
aggregate amount of tho reasonable cost of construction and the market
price of the land comprised in the premises on the date of commencement
of tho construction. [462H; 463A)
4. 2. It is difficult to soo ho'IV tho provision enacted in sub-section (2)
(') ef Section 6 a:an be applied for determining tho stand'ird rent of the
premi1es whoo the premises have not been actually let out at any time.
Su.b-1ection (2) (b) of Section d clearly contemplates a case where there is
actual letting out of tho promises as distinct from hypothetical letting out,
because under this provision, the annual rent agreed upon between the land ..
lord and tho tenant at the time of first letting out is deemed to be the
rent for a period of five years from the date of such letting ou: and it is
impossible to imagine how the concept of first letting out can fit in with
anythioa except actual letting out aed how the period of five years can be
computed from" the date of any hypothetical letting out.
It is only from
tno date or /frst actual letting out that the period of five years can begin to
run and for this period of five years, the annual rent agreed upon between
tho landlord and the tenant at the time of first actual letting out would be
deemed to be the standard rent.
Sub-section (2) (b) of Section 6 can have
no application where there is no actual letting out and hence in case of
premises which are constructed on or after 9th June, 19SS and which have
never been let out at any time, the standard rent would be determinable on
the principles laid down in sub·1oction (I) (A) (2) (b) of Section 6.
So
also in case r premises which have been constructed before 9th June, 19SS
but after 2nd June, 1951 the standard rent would, for like reasons, be
determinable under the provisions of sub-section (1) (A) (2) (b) of Section
6 if they have not been actually let out at any time since their construction.
But
if these
two
categories of premises
have been actually
let
out at some point of time in the past, then in the case of former category,
the annual rent agreed upon between the landlord and the tenant when the
premises were first actually let out shall be deemed tc be the standard rent
for a period of five years from the date of such letting out and iq the caso
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SUPRBMB COURT,RBORTS
(1985] 2 S.C.R.
of the latter category, the annual rent calculated with reference to .the rent
at which tllie, premises were actual/_,· let for the month of March t 95s or if
they were not so let, with reference to the rent at which they were .last
actually let out shall be deemed to be the staudard rent for a period of
seven years from the date of completion of the construction of the. premises.
However, even in the case of these two categories of premises the standard
rent after the .expiration of the period of five years or seven years as the
case may be, would be determinable on the principles set _out. in
s_ub~sectioo
(1) (A) (2) (b) of Section 6.
Thus in the case of self-occupied residential
premises, the standard rent determinable under the provisions of su'b .. sectioo
(2) (a) or (2) (b) ofcSecti(>n 6.in cases falling witbiq tho scope, and ambit of
those proVis"i,oos., S:nd iO other cases, the standard rent determi.nabtC under
tbo. provision:; or sub-section (I) (A) (2) (b) of Section 9 would constitute
the ui;>per limit (If the rateable· value of, the premises.
Similarly, .on an
analogous prtlcess of. r_e_asooing, the standard rent determinable under -the
provisions of sub,;ection (2) (al .or (2) (b) of Section 6 in cases falling
wi.thin. the sc1Jpe and ambit of those prov is_ ions and in other cases, . the
standard .. rent determinable under the provisions of sub-section (II. (Al (2)
(b) of Section 6 _would constitute .the upper limit of the rateable value so
far as self-occupied non.residential premises are concer_ned.
The iateab.le
value of the premiS:es, wbe'.tbef residential or_ non-residential, cannot. ·exceed
the standard rent, but, it _may in a given cas~ be less than the ~ianda~d rerit.
[463E·H; 464A·F]
(B) Where the properties are partly self-occupied and partly tenanted :
. . .
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S.1. It -is the. premises as a whole· which is li1ble to be assc1sed to
property taJi and not different parts of the. premises as distinct and separate
units.
But whiJe 3.ssessing the rateable value of the premises on the __ basis
or the rent which the owner may reasonably expect to get. if the premises
are let out, it cannot be overlooked that where the premises consist .of
different parts which are intended to be occupied as distinct and separate
units the hyti•othetical. tenancy which would have to be considered would be
the hypothf.ltical tenancy of each part as a distinct and separate unit or
occupation and the. sum total of the rent reasonably expected ~rom a.
hypothetical tenr!nt in respect of each distinct and separate unit cannot
obviously ex1!eed the standard rent of such unit and the assessing authorities
would ther.efore have to determine the standard rent with a view to. fixing
the upper lirnit of the tent which can reasonably be expected by ,the. owner
on Jetting out such unit to a hypothetical tenant.
[466D-F]
5.2. Where ,the case f~lls within. sub-section (2) (a) or (2) (b) of
Section 6, no problem .- arises, because
~hetber the distinct and separate
unit of ~bich the standard rent . is to be determined is , S~lf-occupied or
G.
.enanted mnkes_no difference, for in either case, the standard rent woUld be
governed _by one o~ the other of these two , provisions.
So also in cases
falling outside. sub-section .(2) (a) .aod (2) (BJ of Section 6, it would make
00: .differen_ce; ':Vhei~_er .the distinct and separate unit . of . which the _standard
rent is to, be determined is self-occupied or tenanted; for in either caSe, the
standard rent would be determinable under the provisions of sub-sectiOn (J)
(A) (2) (b) or (I) (B) (2) (b) of Section 6.
But the.question is, bow is,tbo
formula set out in sub-section (I) (A) (2) (b) or (!) (B) (2) (b) of Section
JI..
6 to be
a~plied1;. 01>viouslr , there wo11ld be no 4itljc11Itr in appiyin• tb9
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BALBIR SINGH v. M.C.D.
445
formula, if the premises cf which the standard rent is to be determined
consist of the entire building.
Then the reasonable cost of construction of
the building can be taken and it can be aggregated with tbe market price
of the land comprised in the building on the date of commencement of
construction of the building and 7f per cent of such aggregate amount
would reprl!sent the standard rent of the building.
But where the building
consists of more than one distinct and separate unit!> and the standard rent
to be determined is that of any particular unit, the formula may present
some difficulty of application ir it is sought to be applied literally in rela ..
tion to that particular unit alone and by itself, because even if the reason.
able cost of construction of that particular unit can be ascertained, it would
not be possible to determine "the market price of the land comprised in the
piemi11es on the date of the commencement of construction" since the entire
building and not merely that partiaular unit would be standing on the land
and the land on which the buiiding is standing would be land comprised in
the building and it would be irrational and absurd to speak of it as land
comprised in that particular unit.
The formula can, however, be applied
for determining the standard rent of a particular unit by computing tho
standard rent of the building in accordance with the formula and then
apportioning the standard rent so computed amongst the different units or
occupation comprised in the building on the basis of floor area, taking into
consideration differences, if any, on account of the situation and condition
of the various units and the amenities provided in such unit.
This would
be the most rational way in which the market price of the land com prised
in the building on the date of commencement of construction can be spread
ever amongst tilt dif'ernt anit1 er ••ea•ation comprised in the building.
The standard rent of each unit would have to be determined on the
princi~les set out above and within tho upper limit fixed by the standard
rent, the assessing autboritses would have to determine the rent which the
owner may reasonable expect to get if such unit were let out to a bypothe.
tical tenant and in arriving at this determination, the assessing authorities
to take into account the same factors which have :1lready been discussed in
this judgment while dealing with the question of assessment of selfoccupied
properties.
The sum total of the rent which th°' owner may reasonably
expect to get from a hypothetical tenant in respect of each distinct and
separate unit of occupation calculated in the manner aforesaid, would repre·
sent the rateable value of the building.
This formula for determination of
rateable value would apply irrespective of whetner any of the distinct and
separate units of occupation comprised in the building arc self occupied or
tenanted. 466G-H; 467A-H; 468A-B]
( C) Where the land on which the property is constructed Is lease hold
land with a ,estriction that the leaJe·hold interest shall not be transferable
without the approval of t'ie lessor :
6.1. Some ef these writ petitions and appeals arc concerned with
cases where premises have been constructed by the owners on land taken on
1ub·lcaao from a Cooperative House
Building
Society
which
bas
in its tum taken a lease from the Government.
One of the clauses in
the sub-lease executed by the Cooperative House Building Society in favour
of ea<:h of its members provided tbat t1-c:: owner who bas cou1tructed preA
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SUPREMB COURT RBORTS
[1!185] 2 s.c.a.
mises on the Plot of land sub-leased to him cannot sell, transfer or assign
his 1ease-bo1d interest in the plot or land to any one except a member of
the Cooperativci HouSe Building Society and even so far as sale, transfer or
assignment to a member of the Cooperative House Building Society is .. concf::Tned, 1t· cannot be made except witb the previous consent in writing of
the Govern.meat which the Government may give or refuse in . its absolute
discretion, and in case the Government choose to give -its consent, the
Government wc1uld be entitled to claim 50% of the unearned increase in
the . value or 'the land at the time or such sale, transfer or assignment. and
moreover, if th1;, Government so desires, it would have a pre-emptive right
to purchase tbe plot of land after deducting SO per cent of the unearned
increase in the value of toe plot of land.
This co-tenant in the' sub-lease is
clearly a cove:tant running with the land and even where sale, transfer or
assignment of the plot' of land has taken place with the previous consent in
writing of the Government this covenant would continue to bind the purchaser, transferoe or assignee. [469F-H]
Commissioner of Wealth Tax v. P. N. Slkand (197f] 2 SCC' 798
referred to.
i
6.2.
Morely because the plot of land on which the premises 'Bro
constructed cannot be sold, transferred or assigned except to a member of
Cooperative House ,Building Society and without the prior consent of thciOovernment, it does not necessarily mean that there can be no market priCe
for the plot of 1and.
It ia not aa if there it total prohibition on the sale,
transfer or assignment of the plot of land, so that in no conceivable ciraum.
stance, it can be sold, transferred or assigned.
The plot of land can be
sold, transferred or assigned but only tO one from amongst ,a limited class
of persons; namely, those who are membCrs of the Cooperative H'JuSc
Building Society and subject to the Rules and Regulations, any eligible
person can be admitted t.o the . membership of the Cooperative House·
Building Society.
There is also a further restriction, namely that tbC sale,·
transfer or asE:ignment can tak"e place only with tho prior consent of the
Government.-
'lBut·subject to these restrictions, the sale; transfer or assign-,
ment can tAke place. · It cannot, therefore be said that the market price of
the plot .of land. cannot be ascertained. [470G-H; 471A-B]
6.3.
To determine what would be the market price of the plot of
land on the date of commencement of construction· of the premiSes, ·one
must proceed o.a the ·hypothesis that the prior consent of the Government
has becn .. given and the plot of land is ay.ailablo for sale, transfer or assis:n·
ment and on that footing, ascertain·. what price it would fetch on such sale,
transfer or assignment.
Of course, when the class of potential buyers;
transferees or assignees is restricted, the m6rkct price would tend to bo
depresse'd.
But even. so, it can be ascertained and it would not ha correat
to say thafit is·-incapable of determination.
There is aho one other:factor
which would g<J1 to depress the market price aad that stems from the clau11 .·
in the eub~lease which provides that on sale, transfer or assianment of ·the"
plot or ''land,+ thC 9overnmeot shan be entitled to .claim" SO% ~or th• I
unearned increment Jo the value 'Of tho plot of land and the Govemmoot:
sha)! also be entitlc4 to purchase tho plol of land at tho price roaliublo'
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BALBIR SINGH v. M.C.D.
447
in the market after deducting therefrom 50% of tho unearned increment.
Since the leasehold interest of the sub-lease in the plot of land is cut down
by this burden or restriction, the market price of the plot of land cannot
be determined as if the leasehold interest were free from this burden or
restriction.
This burden or limitation attaching to the leasehold interest
must be taken into account in arriving at the market price of the plot of
land, because any member of the Cooperative House Building Society who
takes the plot of land by way of sale. transfer or assignment would be
bound by this burden or restriction which runs with the land and that would
necessarily have the effect of depressing the market price which he would be
inclined to pay for the plot or land.
This mode of determination of the
market price has the sanction of the decision or this Court in N.S. Sikand's
Case (Supra). [471C-H]
In the instant case, therefore, the market price of the plot of land at
the date of commencement of construction of the premises was ascertainable
on the basis of the formula indicated above notwithstanding the restriction
on transferability contained in the sub·lease and the standard rent of the
premises constructed on the plot of land was determinable under t be pro·
visions of sub·section (I) (A) (2) (b) or (I) (B) (2J (bl of Section 6. The
arsumeot of the Delhi Municipal Corporation that in all such cases resort
bas to be made to the provi_slons of sub-section (4) of Section 9 for deter ..
mination of the santdard rent of the premises must be rejected. [472C-D]
(D) Where the property has been constructed In stages--
(7)
When any addition is made to the premises at a subsequent
staee, three different situo.tions may arise.
Firstly, the addition may not
be of a distinct and separate unit of occupation but may be merely by
way of extension of tbe existing preinises which arc self-occupied. In such a
case the original premises together with the additional structure wouJd have
to be treated as a siagl'e unit for the purpose of assessment and its rateable
value would have to be determined on tho basis of the rent which the owner
may reasonably expect to get, if the premises as a whole are let out, subject
to the upper limit of tho standard rent determinable under the provisions
of sub-section (11 (A) (2) (b) of Section 6.
Secondly, the existing premises
before the addition might be tenanted and the addition might be to the
tenanted premises so that the additional structure also forms part of the
same tenancy.
Where such is the case, the stand3rd rent of the premises
as a whole and within the upper limit fi:111ed by such standard rent the
assessing authority would have to determine tho rent which tho owner may
reasonably expect to get if the premises as a whole are let out as a single
unit to a hypothetical tenant and in aach a case, the actual rent received
would be a fair measure of the rent which the owner may reasonably expect
to receive from such hypothetical tenant unless it is influenced by e1tracommercial consjderations.
Lastly, tho addition may be of a distinct and
separate unit of occupation and in such a case, the rateable value of the
premises would have to be determined on the basis of the formula laid down
for assessing the rateable value of premises which are partly self-occupied
and partly tenanted.
The same principles for determining of rateable value
would obviously apply in case of subsequent additions to the existing premises. [474C-G)
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SUPREME COURT .REPORTS
(1985) 2 S.C.R·
(8).The formula set out in sub-section (I) (A) (2) (b) and (I) (B) (2) (b)
· of Section 6 •cannot. be applied for determining the standard rent of an
t8ddition,·as if that addition was the only structure standing.on the.land.
'·The·assessing authorities cannot determine the standard rent ofJhe add
:structure 'bY
tatin~ the reasonable cost of construction· in the additional
(structure and adding.to it the market.price the land and applying .the statu-
' tory .-percentrige· Of.·7! to the aggregate amount.
The market price. of the
land cannot·bo added twice over, once while determining the standard rent
of the origiral structure and again ·while determining the standard rent of
: thC additional structure.
Once the addition is made, the formula set out in
sub-section (I) (A) (2) (b) and Ul (B) (2) (b) of Section 6 . can be applied
Only.in relatio11 to the premises as a whole and where the additional stCucture
consists of a distinct and separate unit of occupation, the ·standard- rent
would have to be apportioned in the manner indicated in the earlier part of
the Judgment.' [475A _;q
9.
Merely :because the owner.does not produce satisfactory .evidence
·Maowing what was·the reasonable cost of-construction of the,premises,.or the
market price ·of. the~.Jand ar.the date ,of commencement of the constructionJ
it Cannot•be:sald 'that it is .not possible to determine the standard rent on
\be principles' 'set :out in
sub-section (I) (A) (2) (b) or(!) (B) (2) (b) of
Section'.6.' [473D]
IO.
The Court suggested that 20 % self-occupancy rebaie which
was allowed pr.ior .. to ,1980 but was later discontinued should be resumed
and said that self-occupied residential premises shoald be treated oO a more
favourable· basis than tenanted premises for the purpose of assessability to
property tax. [ 466B- CJ
ORIGiNAL JURISDICTION : WP. Nos. 483-86, 471 of 1980 .. etc.
(Under Article 32. of the Constitution)
·S. Rangarajan, S.C. Misra, M.S. Batta, Miss .Kai/ash Mehta,
Mrs. 'M. Quamruddin, 'B.B. Tawak/ey, Shrinath
Singh, Mohan
Pandey, R~jiv 'Datta, Miss Renu Gupta, Ii K Garg, 'Mr. S;R. Shrivastava, ·D.R. iJJpta, B:R. 'Kapoor, 'B:P. Maheshwari, R.B. 'Dattar,
KB .. Rohtagi and,A. Subba Rao for \he petitioners.
L.N. Sinha, Attorney General of India, B.P. Maheshwari,
R'B.'' Dattar ·and Miss Sieta Vaidlingam, for the respondents.
S.K. Mehta for Municipal. Corporation, Ludhiana,.
The Judgment of the Court,was deivered by
'BHJ\GWATI, J. This gronp'Of ·writ petitions and appeals.raise
interesting questions of law in regard to 'determination, of•rateable
value of.~ectai11 eategories ofpr9perties situate in the Unioii'Territory of Delhi. The questions are of great importance since. they
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BALB1R SINGH V. M.C.D. (Bhagwati, /,)
449
affect the liability of a large number of property owners in the Union
territory of Delhi to pay property tax under lhe Delhi Mnnicipal
Corporation Act 1957 and the Punjab Municipal Act, 1911. The
appeals before us arise out of writ petitions filed in the High Court
of Delhi challenging assessments made by the Municipal Corporation
while the writ petitions fall broadly into two categories-one category consisting of writ petitions which were originally filed in the
High Court of Delhi but were subsequently transferred to this Court,
while the other consisting of writ petitions which were filed directly
in this Court. We are definitely of the view that the writ petitions
filed directly in this Court are not maintainable under Article 32 of
the Constitution since none of them complains of violation of any
fundamental right and ordinarily we would have rejected them
straight way without going into the merits, but the parties before us
agreed that in view of the fact that these writ petitions involve identical questions as the appeals and the other writ petitions transferred
to this Court and those questions would in any event have to be
determined by us, we should not dismiss these writ petitions on the
ground of non-maintainability but should proceed to dispose them of
on merits on the assumption that they are maintainable.
We are concerned in these appeals and writ petitions with four
different categories of properties namely (I) where the properties
are self-occupied, that is, occupied by the owners (ii) where the
properties are partly self-occupied and partly tenanted ; (iii) where
the land on which the property is constucted is leased bold land
with a restriction that the lease bold interest shall not be transferable
without the approval of the lessor and (iv) where the property bas
been constructed in stages. The question is as to bow the rateaD!e
value is to be determined in respect of those four ·categories of
properties. So far as properties situate in the Union Territory of
Delhi except New Delhi are concerned, the determination of rateable value for tho purpose of assessability to property tax
is
governed by the Delhi Municipal Corporation Act, 1957 while the
determination of rateable value for the purpose of assessability to
property tax in respect of properties situate in New Delhi is
governed by the Punjab Municipal Act, 191 !. 1 be relevant provisions
of both these statutes in respect of determination of rateable value
for the purpose of assessability to property tax are almost idontic:al
as observed by this Court in Dewan Dau/at Ram v. New
Delhi Municipal Committeel and it would therefore be sufficient
if we refer to the provisions of the Delhi Municipal Corporation Act, 1957. Whatever we say in regard to determination of
~able value under the provisions of the Delhi Municipal Corporoi1. (1980] 2 SCR 607
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SUPIDlll 00 UIT lEPOll.TS
[1985] 2 S.CR.
tion Act, 1957 would apply euqually in relation to determination of
rateable value under the provisions of the Punjab Municipal Act
1911.
The definitions of the expressions used in the Delhi Municipal
Corporation Act, 1957 are to be found in Section 2 of that Act. Subsection (3) of Section 2 defines building to mean "a house, outhouse, stable,, latrine, urinal, shed, hut, wall (other than a boundary
wall) or any other structure, whether of masonary, bricks, wood,
mud, ·metal or other material but does not include any portable
shelter". 'Rateable Value' is defined in Section 2 sub-section (47)
to mean "the value of any land or building fixed in accordance with
the provisions of this Act and the bye-laws made thereunder for the
purpose of assessment to. property taxes". Chapter VIII of the Act
deals with th<l 'sub·ject of taxation and it comprises Sections 113 io
184.
Clause (a) of sub-section (I) of Section 113 provides that the
Corporation shall, for the purposes of the Act, levy property taxes.
The subject of property taxes is then dealt with in Sections 114 to
135. Section I l4 sub-section (1) lays down that property taxes shall
be levied on lands and buildings in Delhi and shall consist inter a/ia
of.a general tax of not less than 10 and not more than 30 per cent
of the rateable value of lands and buildings within the urban areas.
There is a proviso to sub-section (I) of Section J 14 which says that
the Corporation may, when fixing · the rate at which the general tax
shall be levied during any year, determine that the rate leviable in
respect of lands and buildings or portions of lands and buildings in
which a particular class of trade or business is carried on, shall be
higher than the ~ate determined in respect of other lands and
buildings or portions of other lands and buildings by an amount not
exceeding orni half of the rate so fixed.