# FOOD CORPORATION OF INDIA v. BRIHANMUMBAI MAHANAGAR PALIKA & ORS

- **Citation:** [2020] 4 S.C.R. 1075
- **Court:** Supreme Court of India
- **Decided:** 2020-03-19
- **Case number:** Civil Appeal Nos. 9350-9351 of 2019
- **Bench:** Ashok Bhushan, M. R. Shah
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/food-corporation-of-india-v-brihanmumbai-mahanagar-palika-ors-34403
- **Pages:** 37

## Headnote

Constitution of India: Art.285(1) and (2) - Exemption of
property of Union from State Taxation - The Government of
Bombay acquired certain land for Government of India prior to
the year 1964 - Upon completion of the acquisition proceedings,
the lands vested in the Government of India and it constructed
godowns and silos on the acquired land for storage of food grains
and when the FCI came into being in 1965, these godowns
alongwith other godowns of the Government were transferred to
FCI for the purpose of undertaking the purchase, storage,
movement, transport, distribution and sale of food grains and other
food stuff - Demand by Municipal Corporation for property tax
from FCI in respect of these godowns - FCI claimed exemption from
payment of property tax as per Art.285, the property being owned
by the Central Government - High Court in the impugned judgment
primarily relied on s.146 of the Mumbai Municipal Corporation
Act, 1888 in rejecting the claim of exemption u/Art.285 - Hence
the instant appeal - Held: The law is clear that exemption from
payment of taxes on the properties of Central Government as
available under clause (1) of Art.285 can be denied only when
the property in question was exigible to the Municipal Tax prior
to the commencement of the Constitution or any Parliamentary law
provides for properties to be exigible to pay tax to the Municipality
- For the applicability of clause (2) of Art.285, the property on
which tax is sought to be proposed ought to have been subject to
property tax before the commencement of the Constitution - In the
instant case, the constructions on which the property tax is sought
to be imposed by Municipal Corporation came into existence only
after 1964 and were not subject to property tax prior to the
commencement of the Constitution, hence condition for applicability
of Art.285(2) is not satisfied - Resultantly, the Municipal
Corporation is not competent to impose property tax denying the
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exemption u/Art.285(1) of the Constitution - Plea of Municipal
Corporation that appellant being occupier is liable to pay property
tax in view of s.146 of the 1888 Act is not tenable - The heading
of s.146 is "Primary responsibility for property taxes on whom to
rest" - When there is a claim of exemption from payment of
property tax with regard to property owned by the Government of
India, the question of primary responsibility or secondary
responsibility loses its importance - The statutory provision, may
it be s.146 of 1888 Act, cannot be read in a manner so as to run
contrary to a Constitutional provision - In the event the claim of
Municipality/Corporation to levy property tax is not covered by
sub-clause (2) of Art.285, it cannot be allowed to take recourse
to any statutory provision or device to make exemption u/Art.285(1)
nugatory - Both the premises and building therein were entitled
for exemption from payment of property tax u/Art.285(1) - Mumbai
Municipal Corporation Act, 1888 - s.146 - Government of India
Act, 1935.
Constitution of India: Art.285(2) - Levy of tax on any
property of Union - Object of Art.285(2) - Held: Object of
Art.285(2) is to continue the levy of the such tax which local
authority was enjoying prior to the commencement of the
Constitution so as to maintain the status quo regarding the financial
resources of Municipal Corporation to avoid the complete
exemption from property of Central Government as provided under
Art.285(1) - Tax/Taxation.
Allowing the appeals, the Court
HELD: 1. The Government of India Act, 1935 for the first
time provided for exemption of certain public property from
taxation. Section 154 of the Act, 1935 provided for exemption
from all taxes imposed by, or by any authority within, a Province
or Federated State all the properties vested in His Majesty
whereas Section 155 contained exemption of Provincial
Governments and Rulers of Federated States in respect of
Fede

## Text

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FOOD CORPORATION OF INDIA
v.
BRIHANMUMBAI MAHANAGAR PALIKA & ORS.
(Civil Appeal Nos. 9350-9351 of 2019)
MARCH 19, 2020
[ASHOK BHUSHAN AND M. R. SHAH, JJ.]
Constitution of India: Art.285(1) and (2) - Exemption of
property of Union from State Taxation - The Government of
Bombay acquired certain land for Government of India prior to
the year 1964 - Upon completion of the acquisition proceedings,
the lands vested in the Government of India and it constructed
godowns and silos on the acquired land for storage of food grains
and when the FCI came into being in 1965, these godowns
alongwith other godowns of the Government were transferred to
FCI for the purpose of undertaking the purchase, storage,
movement, transport, distribution and sale of food grains and other
food stuff - Demand by Municipal Corporation for property tax
from FCI in respect of these godowns - FCI claimed exemption from
payment of property tax as per Art.285, the property being owned
by the Central Government - High Court in the impugned judgment
primarily relied on s.146 of the Mumbai Municipal Corporation
Act, 1888 in rejecting the claim of exemption u/Art.285 - Hence
the instant appeal - Held: The law is clear that exemption from
payment of taxes on the properties of Central Government as
available under clause (1) of Art.285 can be denied only when
the property in question was exigible to the Municipal Tax prior
to the commencement of the Constitution or any Parliamentary law
provides for properties to be exigible to pay tax to the Municipality
- For the applicability of clause (2) of Art.285, the property on
which tax is sought to be proposed ought to have been subject to
property tax before the commencement of the Constitution - In the
instant case, the constructions on which the property tax is sought
to be imposed by Municipal Corporation came into existence only
after 1964 and were not subject to property tax prior to the
commencement of the Constitution, hence condition for applicability
of Art.285(2) is not satisfied - Resultantly, the Municipal
Corporation is not competent to impose property tax denying the
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exemption u/Art.285(1) of the Constitution - Plea of Municipal
Corporation that appellant being occupier is liable to pay property
tax in view of s.146 of the 1888 Act is not tenable - The heading
of s.146 is "Primary responsibility for property taxes on whom to
rest" - When there is a claim of exemption from payment of
property tax with regard to property owned by the Government of
India, the question of primary responsibility or secondary
responsibility loses its importance - The statutory provision, may
it be s.146 of 1888 Act, cannot be read in a manner so as to run
contrary to a Constitutional provision - In the event the claim of
Municipality/Corporation to levy property tax is not covered by
sub-clause (2) of Art.285, it cannot be allowed to take recourse
to any statutory provision or device to make exemption u/Art.285(1)
nugatory - Both the premises and building therein were entitled
for exemption from payment of property tax u/Art.285(1) - Mumbai
Municipal Corporation Act, 1888 - s.146 - Government of India
Act, 1935.
Constitution of India: Art.285(2) - Levy of tax on any
property of Union - Object of Art.285(2) - Held: Object of
Art.285(2) is to continue the levy of the such tax which local
authority was enjoying prior to the commencement of the
Constitution so as to maintain the status quo regarding the financial
resources of Municipal Corporation to avoid the complete
exemption from property of Central Government as provided under
Art.285(1) - Tax/Taxation.
Allowing the appeals, the Court
HELD: 1. The Government of India Act, 1935 for the first
time provided for exemption of certain public property from
taxation. Section 154 of the Act, 1935 provided for exemption
from all taxes imposed by, or by any authority within, a Province
or Federated State all the properties vested in His Majesty
whereas Section 155 contained exemption of Provincial
Governments and Rulers of Federated States in respect of
Federal taxation. The main provision of Section 154 although
exempted properties vested in His Majesty from all taxes
imposed by a Province or Federated State or any authority within
but proviso contains an exception to the main provision, which
provided that any property so vested which was immediately
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before the commencement of Part III of the Government of India
Act, 1935 was liable, or treated as liable, to any such tax, shall
continue to be liable, or to be treated as liable, thereto so long
as that tax continues. The commencement of the Part III of the
Government of India Act, 1935 was w.e.f. 01.04.1937. The
Constitution of India continued the exemption of taxation of the
properties of Central Government from the taxation by State or
any authority as well as the State property from Central taxation
under Article 285 and Article 289. The proviso to Section 154
was retained as sub-article (2) of Article 285. [Paras 10, 11]
[1088-F-G; 1089-G-H; 1090-A-B]
2. The law is clear that exemption from payment of taxes
on the properties of Central Government as available under
clause (1) of Article 285 can be denied only when the property
in question was exigible to the Municipal Tax prior to the
commencement of the Constitution or any Parliamentary law
provides for properties to be exigible to pay tax to the
Municipality. For the applicability of clause (2) of Article 285,
the property on which tax is sought to be proposed ought to have
been subject to property tax before the commencement of the
Constitution. In the present case the constructions on which the
property tax is sought to be imposed by Municipal Corporation
came into existence only after 1964 and were not subject to
property tax prior to the commencement of the Constitution,
hence condition for applicability of Article 285(2) is not satisfied.
Resultantly the Municipal Corporation is not competent to
impose property tax denying the exemption under Article 285(1)
of the Constitution. [Paras 27, 31] [1100-G-H; 1103-C-E]
3. Article 285 does not apply when the property that is to
be taxed is not of the Union of India but a distinct and separate
legal entity. The heading of Section 146 is "Primary responsibility
for property taxes from whom to rest". When there is a claim of
exemption from payment of property tax with regard to property
owned by the Government of India, the question of primary
responsibility or secondary responsibility loses its importance.
When payment of property tax is exempt under Article 285(1)
to tax the occupier runs counter to the very claim of exemption
as delineated by Article 285. Section 146 of 1888 Act as it exists
now has to be construed in a manner so as to give effect to the
FOOD CORPORATION OF INDIA v.
BRIHANMUMBAI MAHANAGAR PALIKA
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meaning and purpose of Constitutional protection granted under
Article 285. The statutory provision, may it be Section 146 of
1888 Act, cannot be read in a manner so as to run contrary to a
Constitutional provision. [Paras 34, 36] [1104-F; 1105-C-E]
4. In the event the claim of Municipality/Corporation to
levy property tax is not covered by sub-clause (2) of Article 285,
it cannot be allowed to take recourse to any statutory provision
or device to make exemption under Article 285(1) nugatory.
Thus, submission that since the appellant is occupier of premises
owned by Union of India, is liable to pay property tax under
Section 146(1) of 1888 Act, in not tenable. Both the premises
and building therein are entitled for exemption from payment
of property tax under Article 285(1). At this stage, it is required
to be noted that the FCI is not in occupation of the godowns
owned by the Government of India as a lessee. Nothing is on
record and it is also not the case on behalf of the Corporation
that any rent/lease amount is being recovered from the FCI.
[Para 37] [1105-F-G]
5. The appellant has not denied its liability to pay services
charges and direction was sought to respondents to conduct an
enquiry in accordance with the provisions of the Mumbai
Municipal Corporation Act, 1888 and decide the ratable value
of the properties on which taxes were to be paid. Even though
appellant is exempted from payment of property tax by virtue
of Article 285 of the Constitution then liability to pay services
charges for services rendered by the Corporation cannot be
denied. [Paras 45, 47] [1110-C; 111-E-F]
Food Corporation of India v. Municipal Committee,
Jalalabad and Another (1999) 6 SCC 74 ; Electronics
Corporation of India Ltd. and Others v. Secretary
Revenue Department, Govt. of Andhra Pradesh and
Others (1999) 4 SCC 458 : [1999] 2 SCR 1078 ; F.C.I.
v. Gandhidham Municipality (2002) 43(2) GLR 1845
- held inapplicable.
Governor-General of India in Council v. Corporation
of Calcutta AIR (1948) Cal. 117 ; The Corporation of
Calcutta v. The Governors of St. Thomas School,
Calcutta AIR 1949 F.C. 121 ; The Corporation of
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Calcutta v. Union of India AIR 1957 Calcutta 548 ;
Union of India owner of the Eastern Railway v. The
Commissioner of Sahibganj Municipality (1973) 1 SCC
676 ; Union of India v. City Municipal Council, Bellary
(1979) 2 SCC 1 : [1979] 1 SCR 573 ; GovernorGeneral of India in Council v. Corporation of Calcutta
AIR (1948) Cal 116(2) ; Ahmedabad Aviation &
Aeronautics Limited v. Govt. of Gujarat 2014 SCC
online Guj 15505 ; Union of India and Others v. State
of Uttar Pradesh and Others (2007) 11 SCC 324 :
[2007] 11 SCR 792 - referred to.
Case Law Reference
(1999) 6 SCC 74
held inapplicable
Para 2.6
(1973) 1 SCC 676
referred to
Para 24
[1979] 1 SCR 573
referred to
Para 28
(1999) 6 SCC 74
referred to
Para 32
[1999] 2 SCR 1078
held inapplicable
Para 33
[2007] 11 SCR 792
referred to
Para 46
CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 93509351 of 2019.
From the Judgment and Order dated 05.05.2016 and 11.09.2018
of the High Court of Judicature at Bombay in Writ Petition No. 2672
of 2002 and in Review Petition No. 37 of 2016 respectively.
Neeraj Kishan Kaul, Sr. Adv., Ajit Pudussery, Vijayan K., Ajeet
Singh Verma, Ramchandra Madan and Divyanshu Srivastava, Advs.
for the Appellant.
Pallav Shishodia, Sr. Adv., Ms. Asha Gopalan Nair, Ms. Aruna
S., Ms. Priti Purandare and Ms. Nivedita Nair, Advs. for the
Respondents.
The Judgment of the Court was delivered by
ASHOK BHUSHAN, J.
1. This appeal has been filed by the Food Corporation of India
challenging the judgment dated 05.05.2016 of Division Bench of Bombay
High Court in Writ Petition No. 2672 of 2001 by which judgment the
FOOD CORPORATION OF INDIA v. BRIHANMUMBAI
MAHANAGAR PALIKA
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writ petition filed by the Food Corporation of India (hereinafter referred
to as "FCI") challenging the demand made by Municipal Corporation
of Greater Mumbai of property tax has been dismissed.
2. The brief facts necessary to be noted for deciding this appeal
are: -
2.1 The Government of Bombay acquired land at Village Poisar
and at Village Magathane, Borivali for Government of India prior to
the year 1964. Upon completion of the acquisition proceedings, the
lands vested in the Government of India and the Government of India
constructed the godowns and silos on the acquired land for storage of
food grains.
2.2 FCI was set up under the Food Corporations Act, 1964 with
the purpose of undertaking the purchase, storage, movement, transport,
distribution and sale of food grains and other food stuff.
2.3 On 28.10.1988, a notice demanding non-agricultural tax was
issued to the FCI and the FCI protested against the levy of nonagricultural tax and filed a writ petition, which was dismissed by learned
Single Judge on 10.11.1988. A Letter Patent Appeal No.259 of 1989
was filed by the FCI, which was allowed by the Division Bench vide
its judgment dated 03.12.1992 holding that land vested in Central
Government on which godowns were constructed, hence, Central
Government was not liable to pay taxes for non-agricultural use of land
as per Article 285 of the Constitution of India.
2.4 The Government of India wrote a letter dated 17.02.1992 to
FCI, New Delhi stating that the land for godowns was acquired by the
erstwhile Government of Bombay for Government of India on which
godowns were constructed by the Government of India and when the
FCI came into being in 1965, these godowns alongwith other godowns
of the Government were transferred to FCI during the period from 1966
to 1969. The Government of India, however, has not executed any
conveyance deeds for these godowns with the FCI and legal ownership
of these godowns still vests in the Government, the Status of FCI,
therefore, is that of an occupier.
2.5 Letters and demands were issued by Municipal Corporation
of Greater Bombay (hereinafter referred to as "Corporation")
demanding property tax in respect of property situate in Dattapada Road,
Borivali owned by FCI. A demand notice dated 04.09.2001 was issued
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by the Corporation asking to make payment for the period from
01.03.1969 to 31.03.1997 and taxes from 01.04.1997 onwards. The
FCI protested the demand claiming exemption from payment of property
tax as per Article 285 of the Constitution of India, the property being
owned by the Central Government. The plea of the appellant was not
accepted and a further notice dated 24.09.2001 was issued asking for
payment of property tax. The properties were also attached.
2.6 A Writ Petition No. 2672 of 2001 was filed by the FCI, in
which FCI has prayed to declare the demand for payment of property
tax as illegal. Prayer was also made to issue a writ of prohibition
prohibiting the respondents, their servants and agents in pursuance of
letter dated 04.09.2001 and 24.09.2001. The Corporation decided the
claim of the FCI. A Division Bench of the Bombay High Court relying
on the judgment of this Court in Food Corporation of India Vs.
Municipal Committee, Jalalabad and Another, (1999) 6 SCC 74
dismissed the writ petition vide judgment dated 02.02.2002. A review
petition was filed by FCI to review the judgment, which too was
dismissed on 04.10.2002. The FCI filed a special leave petition against
the judgment dated 02.02.2002 as well as against the order dated
04.10.2002 in review petition. It was contended before this Court that
High Court erred in relying on the judgment of the Court in Food
Corporation of India Vs. Municipal Committee, Jalalabad (supra)
without referring to the earlier Division Bench judgment of Bombay
High Court in Civil Appeal No. 259 of 1999 dated 03.10.1992 wherein
the Division Bench had held that properties in dispute in the present
case is owned by the Central Government and not by FCI. This Court
after noticing the submissions of both the parties allowed the appeals,
set aside the impugned judgment of the High Court observing that since
the High Court has not gone into these questions, the matter is remitted
back to the High Court for fresh decision in accordance with law. All
the contentions were left open.
2.7 After the above judgment of this Court dated 26.07.2006, the
Division Bench of the Bombay High Court by judgment dated
05.05.2016 again dismissed the Writ Petition No.2672 of 2001. Special
Leave Petition No. 24251 of 2016 was filed questioning the judgment
dated 05.05.2016. This Court noticed the submissions made by FCI
and by order dated 26.08.2016 observed that it would be more
appropriate for the petitioner (FCI) to approach the High Court by filing
a review petition. After the judgment of this Court dated 26.08.2016,
FOOD CORPORATION OF INDIA v. BRIHANMUMBAI
MAHANAGAR PALIKA [ASHOK BHUSHAN, J.]
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review petition was filed, which too was dismissed by non-speaking
order dated 11.09.2018 by the Division Bench of the Bombay High
Court.
2.8 These appeals have been filed against the Division Bench
judgment dated 05.05.2016 dismissing the writ petition and order dated
11.09.2018 dismissing the review petition.
3. We have heard Shri Neeraj Kishan Kaul, learned senior
counsel appearing for the appellant and Shri Pallav Shishodia, learned
senior counsel appearing for the Corporation.
4. Shri Neeraj Kishan Kaul, learned senior counsel submits that
demand of property tax is exempted by virtue of Article 285 of the
Constitution of India. It is submitted that the property (godowns) with
regard to which property tax has been demanded is owned by Central
Government, hence, the payment of tax is exempted. It is submitted
that a Division Bench of the Bombay High Court in its judgment dated
03.12.1992 by quashing the demand of non-agricultural assessment tax
by the State Government has categorically held that the property is
owned by the Central Government. The Division Bench in the
impugned judgment has not considered the effect of the Division Bench
judgment dated 03.12.1992. It is further submitted that even when this
Court granted liberty to the appellant to file a review petition against
the judgment dated 05.05.2016, after noticing the submissions of the
appellant, the review petition too was dismissed by non-speaking order
without considering any of the submissions of the appellant. It is
submitted that to be entitled to levy tax under Article 285(2), the
Corporation must establish three things, firstly that the property in
question is liable to tax prior to commencement of the constitution;
secondly, that the tax has been continuously collected by the State on
that property; and thirdly that the State in which the authority collected
the tax was collecting the same pre and post Constitution. It is
submitted that property tax was never levied by the Corporation prior
to the commencement of the Constitution of India and it was only after
decision dated 17.01.1997 of the arbitrator appointed under Section
144(2) of Mumbai Municipal Corporation Act, 1888 that the properties
belong to the FCI, the Corporation started demanding property tax from
the appellant. It is submitted that jurisdiction of the arbitrator appointed
under Section 144(2) is limited to fixing the rateable value of Government
owned properties and he had no jurisdiction to decide the question
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whether the properties were to be excluded from the Government list.
Learned senior counsel further submits that Corporation has erroneously
relied on judgment of this Court in the case of Food Corporation of
India Vs. Municipal Committee, Jalalabad (supra), which was a
case dealing with the properties owned by the FCI and has no
application in the facts of the present case. It is submitted that property
being property of Central Government was clearly exempted from
payment of property tax.
5. Shri PallavShishodia, learned senior counsel appearing for the
respondents refuting the submissions of the learned senior counsel for
the appellant contends that the appellant is liable to pay property tax.
He submits that as per Section 146 of the Mumbai Municipal
Corporation Act [Bom. III of 1888], the levy is on actual occupier and
the appellant being actual occupier of the premises is, thus, clearly liable
to pay the property tax. For the purpose of liability to pay the property
taxes what is required is that the concerned person who holds the
property immediately from the Government is in occupation and use of
the property in question. It is immaterial in what capacity such person
is in occupation of the property exigible to taxes. It is submitted that
the appellant cannot claim exemption from taxes under Article 285 as
the FCI is distinct entity from Central Government and the so-called
ownership of Central Government with respect to the property in
question occupied by FCI is of no consequence as far as the tax liability
is concerned. Section 143(1)(b) of the Act, 1888 is not attracted. The
levy under Act, 1888 is a pre-Constitution levy and, therefore, Article
285(2) of the Constitution of India applies. Article 285(2) carves out
an exception to clause (1) and saves the levy which any authority within
the State was levying on the property of the Union to which such
property immediately before the commencement of the Constitution was
liable. Under the Act, 1888, the premises vesting in the Central
Government were liable for property tax on the date of commencement
of the Constitution. There is no law enacted by the Parliament after
coming into force of the Constitution, which prevent the respondent -
Municipal Corporation from levying the tax on the premises vesting in
the Government.
6. Shri Kaul in rejoinder submits that ownership still vests in the
Central Government when the owner is not liable, occupier cannot be
held to be liable to pay property taxes. The judgment of this Court in
Food Corporation of India Vs. Municipal Committee, Jalalabad
FOOD CORPORATION OF INDIA v. BRIHANMUMBAI
MAHANAGAR PALIKA [ASHOK BHUSHAN, J.]
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(supra) was a case where FCI was the owner of the property, hence
the said case has no applicability in the facts of the present case. The
arbitrator appointed under Section 144(2) went wrong in holding that
FCI owns the property. His jurisdiction was only to determine the
rateable value insofar as services rendered by the Corporation namely
water charges etc., which the appellant is willing to pay. He further
submits that the appellant is also willing to pay the amount in lieu of
general tax to be determined in accordance with Section 144 of Act,
1888.
7. We have considered the submissions of the learned counsel
for the parties and have perused the records.
8. The main question to be determined in this appeal is as to
whether the property in question is exempted from payment of property
tax by virtue of Article 285 of the Constitution of India. The High Court
in the impugned judgment has primarily relied on Section 146 of the
Act, 1888 in rejecting the claim of exemption under Article 285 of the
Constitution of India. According to the High Court, the appellant being
occupier of the godowns will be primarily liable to pay the property taxes.
The main reasons of the High Court in rejecting the claim of the
appellant are contained in paragraphs 12 and 15, which are as follows:-
"12. The contention of the petitioner is that in view of clause 1
of Article 285, since the lands and godowns in respect of which
property taxes are levied are the properties of the Government
of India, the same are exempted from taxes imposed by a State
or any other Authority within the State. Clause 2 of Article 285
carves out an exception to clause 1. If any Authority within the
State was levying any taxes on the property of the Union of India
to which such property was immediately before the
commencement of the Constitution of India liable or treated as
liable, the taxes can continue to be levied till the Parliament by a
law otherwise provides. Under the said Act of 1888, the premises
vesting in the Government of India were liable for property taxes
on the date of commencement of the Constitution of India. The
words "Government" appearing in sub-section 1 of section 146
was substituted for the words "the Crown" by the Adaptation
of Indian Laws Order in Council. Thus, as per the provisions of
the said Act of 1888, the property of the Union of India within
the jurisdiction of the said Corporation was liable for levy of
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property taxes immediately before the commencement of the
Constitution of India. There is no law enacted by the Parliament
after coming into force the Constitution of India which prevents
the said Municipal Corporation from levying the taxes on the
premises vesting in the Government. Therefore, Article 285 is
of no help to the petitioner in view of applicability of clause 2 of
Article 285 of the Constitution of India.
15. In view of the provisions of the said Act of 1888, the petitioner
will not be entitled to the benefit of clause 1 of Article 285 and
in view of sub-section (1) of section 146 of the said Act of 1888,
the petitioner being the occupier of the godowns will be primarily
liable to pay property taxes."
9. For considering the respective submissions of counsel for the
parties, we first need to look into the statutory provisions pertaining to
the assessment of property tax as well as the provisions of exemption
from payment of tax on the property belonging to Central Government.
Chapter VIII of the Act, 1888 deals with "Municipal Taxation". Section
139 provides that "for the purposes of this Act, taxations to be imposed
shall consist property taxes and other taxes. Sections 143, 144 and
146, which are relevant for the present case are as follows:-
"143. General tax on what premises to be levied.
(1) The general tax shall be levied in respect of all buildings and
lands in Brihan Mumbai except-
(a) buildings and lands or portions thereof exclusively
occupied for public worship or for charitable purposes;
(b) buildings and lands vesting in Brihan Mumbai used solely
for public purposes and not used or intended to be used
for purposes of profit or in the Corporation, in respect
of which the said tax, if levied, would under the
provisions hereinafter contained be primarily leviable
from the Government or, the corporation respectively;
(c) such buildings and lands vesting in, or in the occupation
of, any consul de carriers, whether called as a consul
general, consul, vice-consul, consular agent, pro-consul
or by any other name of a foreign State recognised as
such by the Government of India, or of any members
FOOD CORPORATION OF INDIA v. BRIHANMUMBAI
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(not being citizens of India) of staff of such officials,
and such buildings and lands or parts thereof which are
used or intended to be used for any purpose other than
for the purpose of profit.
(2) The following buildings and lands or portions thereof shall not
be deemed to be exclusively occupied for public worship or for
charitable purposes within the meaning of clause (a), namely: -
(c) those in which any trade or business is carried on; and
(d) those in respect of which rent is derived whether such
rent is or is not applied exclusively to religious or
charitable purposes.
(3) Where any portion of any building or land is exempt from
the general tax by reason of its being exclusively occupied for
public worship or for charitable purpose, such portion shall be
deemed to be a separate property for the purpose of municipal
taxation.
144. Payment to be made to the Corporation in lieu of the
general tax by the Central Government or the State
Government as the case may be.
(1) The Central Government or the State Government, as
the case may be, shall pay to the corporation annually,
in lieu of the general tax from which buildings and lands
vesting in Government are exempted by clause (b) of
section 143, a sum ascertained in the manner provided
in sub-sections (2) and (3).
(2) The rateable value of the buildings and lands in Brihan
Mumbai vesting in Government and beneficially
occupied, in respect of which but for the said exemption,
general tax would be leviable from the Central
Government or the State Government, as the case may
be, shall be fixed by a person from time to time appointed
in this behalf by the State Government with the
concurrence of the corporation. The said value shall be
fixed by the said person, with ageneral regard to the
provisions hereinafter contained concerning the
valuation of property assessable to property-taxes, at
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such amount as he shall deem to be fair reasonable. The
decision of the person so appointed shall hold good for
a term of five years, subject only to proportionate
variation, if in the meantime the number or extent of the
building and lands vesting in Government in Brihan
Mumbai materially increases or decreases.
(2A) Where the Corporation has adopted the levy of property
tax on capital value of buildings and lands, the capital value of
buildings and lands in Brihan Mumbai vesting in Government and
beneficially occupied, in respect of which but for the said
exemption, general tax would be leviable from the Central
Government or the State Government, as the case may be, shall
be the book value of such buildings or lands in Government
records and such capital value shall hold good for a term of five
years, subject only to proportionate variation, if in the meantime
the number or extent of the buildings and lands vesting in
Government in Brihan Mumbai materially increases or decreases.
(3) The sum to be paid annually to the corporation by the Central
Government or the State Government, as the case may be, shall
be eight-tenth of the amount which would be payable by an
ordinary owner or buildings or lands in Brihan Mumbai, on
account of the general tax, on a rateable value or on capital
value, as the case may be, of the same amount as that fixed under
sub-section (2), or sub-section (2A), as the case may be.
146. Primary responsibility for property taxes on whom
to rest.
(1) Property-taxes shall be leviable primarily from the actual
occupier of the premises upon which the said taxes are assessed,
if such occupier holds the said premises immediately from the
Government or from the corporation or from a fazendar.
Provided that the property-taxes due in respect of any premises
owned by or vested in the Government and occupied by a
Government servant or any other person on behalf of the
Government for residential purposes shall be leviable primarily
from the Government and not the occupier thereof.
(2) Otherwise the said taxes shall be primarily leviable as follows,
namely:-
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(a) if the premises are let, from the lessor;
(b) if the premises are sub-let, from the superior lessor;
(c) if the premises are unlet, from the person in whom the
right to let the same vests;
(d) if the premises are held or occupied by a person who is
not the owner and the whereabouts of the owner of the
premises cannot be ascertained, from the holder or
occupier; and
(e) if the premises are held or developed by a developer or
an attorney or any person in whatever capacity, such
person may be holding the premises and in each of whom
the right to sell the same exists or is acquired, from such
holder, developer, attorney or person, as the case may
be:
Provided that, such holder, developer, attorney or person shall be
liable until actual sale is effected.
(3) But if any land has been let for any term exceeding one year
to a tenant, and such tenant or any person deriving title
howsoever from such tenant has built upon the land, the property
taxes assessed upon the said land and upon the building erected
thereon shall be leviable primarily from the said tenant or such
person, whether or not the premises be in the occupation of the
said tenant or such person."
10. In British India, prior to the passing of the Government of
India Act, 1935, the question of exemption of Crown property from
taxation was not definitely settled. Different High Courts have
expressed divergent views. The Government of India Act, 1935 for
the first time provided for exemption of certain public property from
taxation. Section 154 of the Act, 1935 provided for exemption from all
taxes imposed by, or by any authority within, a Province or Federated
State all the properties vested in His Majesty whereas Section 155
contained exemption of Provincial Governments and Rulers of Federated
States in respect of Federal taxation. Sections 154 and 155 are as
follows:-
"154.Exemption of certain public property from taxation.-
Property vested in His Majesty for purposes of the government
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of the Federation shall, save in so far as any Federal law may
otherwise provide, be exempt from all taxes imposed by, or by
any authority within, a Province or Federated State:
Provided that, until any Federal law otherwise provides, any
property so vested which was immediately before the
commencement of Part III of this Act liable, or treated as liable,
to any such tax, shall, so long as that tax continues, continue to
be liable, or to be treated as liable, thereto.
155. Exemption of Provincial Governments and Rulers of
Federated States in respect of Federal taxation-(1) Subject
as hereinafter provided, the Government of a Province and the
Ruler of a Federated State shall not be liable to Federal taxation
in respect of lands or buildings situate in British India or income
accruing, arising or received in British India;
Provided that-
(a) where a trade or business of any kind is carried on by
or on behalf of the Government of a Province in any
part of British India outside that Province or by a Ruler
in any part of British India, nothing in this subsection
shall exempt that Government or Ruler from any
Federal taxation in respect of that trade or business, or
any operations connected therewith, or any income
arising in connection therewith, or any property occupied
for the purposes thereof;
(b) nothing in this subsection shall exempt a Ruler from any
Federal taxation in respect of any lands, buildings or
income being his personal property or personal income.
(2) Nothing in this Act affects any exemption from taxation
enjoyed as of right at the passing of this Act by the Ruler of an
Indian State in respect of any Indian Government securities issued
before that date."
11. The main provision of Section 154 although exempted
properties vested in His Majesty from all taxes imposed by a Province
or Federated State or any authority within but proviso contains an
exception to the main provision, which provided that any property so
vested which was immediately before the commencement of Part III
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of the Government of India Act, 1935 was liable, or treated as liable,
to any such tax,shall continue to be liable, or to be treated as liable,
thereto so long as that tax continues. The commencement of the Part
III of the Government of India Act, 1935 was w.e.f. 01.04.1937. The
Constitution of India continued the exemption of taxation of the
properties of Central Government from the taxation by State or any
authority as well as the State property from Central taxation under
Article 285 and Article 289. The proviso to Section 154 was retained
as sub-article(2) of Article 285. Article 285 and Article 289 of the
Constitution are as follows:-
"285. Exemption of property of the Union from State
taxation.- (1) The property of the Union shall, save in so far
as Parliament may by law otherwise provide, be exempt from
all taxes imposed by a State or by any authority within a State.
(2) Nothing in clause (1) shall, until Parliament by law otherwise
provides, prevent any authority within a State from levying any
tax on any property of the Union to which such property was
immediately before the commencement of this Constitution liable
or treated as liable, so long as that tax continues to be levied in
that State.
289.Exemption of property and income of a State from
Union taxation.-(1) The property and income of a State shall
be exempt from Union taxation.
(2) Nothing in clause (1) shall prevent the Union from
imposing, or authorising the imposition of, any tax to such
extent, if any, as Parliament may by law provide in
respect of a trade or business of any kind carried on
by, or on behalf of, the Government of a State, or any
operations connected therewith, or any property used
or occupied for the purposes of such trade or business,
or any income accruing or arising in connection
therewith.
(3) Nothing in clause (2) shall apply to any trade or
business, or to any class of trade or business, which
Parliament may by law declare to be incidental to the
ordinary functions of Government."
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12. The provisions of Articles 285 and 289 are complimentary
to each other. Section 154 of Government of India Act, 1935 came
for consideration before Calcutta High Court in Governor-General
of India in Council Vs. Corporation of Calcutta, AIR (1948) Cal.
117. Justice B.K. Mukherjea (as he then was) allowed the appeal of
Governor-General in Council holding that the property in question was
exempted from municipal taxes, with which opinion, Ormond, J. while
writing a separate opinion agreed. In the above case, the Calcutta
Corporation assessed the premises in the year 1937 on account of
substantial additions to and alteration of the premises in the year 1941
and 1942. Objection was taken to the valuation by the Governor General
of India in Council on the ground that under Section 154 of Government
of India Act, all buildings which were not in existence prior to 01.04.1937
when Part III of Government of India Act, 1935 came into operation,
and which were consequently not subjected to any assessment before
April, 1937 were exempted from all taxes, and could not be assessed
to municipal rates. The contention was not accepted by the Executive
Officer of the Calcutta Corporation and an appeal was filed by the
appellant to the Small Cause Court Judge, which was also dismissed.
An appeal was filed in the High Court against the above judgment.
Justice B.K. Mukherjea while interpreting Section 154 laid down
following in paragraphs 10 and 13:-
"10. ...............Whatever is property for purposes of taxation
under a particular statute and is vested in His Majesty for
purposes of Federation would be exempted from taxation under
Section 154, Government of India Act, unless it was liable to tax
on 31-3-1937, and ex hypothesi, a property which was not in
existence on 31-3-1937, cannot be said to be liable to tax on that
date........................"
13. Our conclusion therefore is that the additional buildings raised
on premises No. 7, Gun Foundry Road after 31-3-1937 are
exempted from payment of consolidated rates under the Calcutta
Municipal Act and the present assessment is to be made on the
basis of the land and buildings as they existed on 31-3-1937,
excluding all additions made subsequent to that date."
13. Ormand, J. in paragraphs 28 and 29 laid down following:-
"28. The sole question in this appeal is the narrow one whether,
firstly, new buildings on the same land and secondly, alterations,
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additions and improvements made in a building which existed
before 1-4-1937, are properties which were "immediately before
1-4-1937 liable or treated as liable to the tax." Now for property
to have been liable to the tax before 1-4-1937, it is self-evident
that that property must have been in existence before 1-4-1937.
Equally, I think, this must be so for property "treated as liable"
to the tax. There could have been no liability attached to a nonexistent thing; nor could there have been any treatment of a nonexistent thing. It is outside the power of comprehension to
conceive of any property which could have been "treated as liable
to tax" if that property was not in a state of physical existence
at the time.
29. This being so, it follows that the only taxable property brought
within the exception contained in the proviso is property which
was in physical existence before 1-4-1937.