# GODHRA BOROUGH MUNICIPALITY v. GODHRA ELECTRICITY CO. LTD

- **Citation:** [1968] 3 S.C.R. 481
- **Court:** Supreme Court of India
- **Decided:** 1968-03-20
- **Bench:** J. C. Shah, G. K. Mitter
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/godhra-borough-municipality-v-godhra-electricity-co-ltd-4433
- **Pages:** 8

## Headnote

The Bombay Municipal Boroughs Act, 1925, s. 13-Rules 4 and 5-
'Rate' /eviable 11nder s. 13 on lands and buildings-Certain lands and
buildings to be taxed under r. 4(1) on capital basis-Method of evaJUQo
tion of capital value-E'nglish. laW relating to 'rates'. relevance . of-Con·
tractors' method of evaluation recommended-Data in company's balance
sheet whether 'reliable data' for purpose of r, S.
Unde'r s. 73 of the Bombay Municipal Boroughs Act, 1925 read with
rr. 4( 1) and 5 made thereunder a rate on non-residential buildings belonging to factories and mills was leviable on a capital basis, and the capital
value for this purpose was to be work<!d out, if 'reliable data' were furnished by the assessee, on the basis of such data. The respondent company owned certain buildings on which rate was leviable under r. 4(1)
on the basis of capital value. The respondent company claimed that the
actual cost of construction of the buildings in 1920 ought to be taken as
the capital value. The Municipality of Godhra however made its own
estimate of the capital value. Thereafter the Judicial Magistrate and the
Sessions Judge made va1ua~ions taking into account the rise in the cost
of building materials since 1920. The High Court In revision upheld the
view that the actual cost minus depreciation thereon should be tho capital
value; it observed that the English law and practice as to levy of rates
was not relevant in the Indian context. The Municipality appealed.
HELD : (i) When legislaturea in this country enact statutes which
clooely resemble statutes in England and have the same purpose and
object in view, then unless tho expressions used in the Indian Statutes are
defined courts of law cannot go wrong in interpreting them in the way
English judges have done.
Further, the words which have acquired a
particular shade of meaning in England may be given the same meaning
unless there is anything in the statute itself which
would be contraindicative. [486-F-OJ
(ii) Section 73 empowered the municipality to impose a rate on
buildings or lands. The word 'rate' ·had not been ·defined in the Act but .
it has a well known meaning. In Patti Gordhandar's case this . Court
examined various statutes bearing on the English rating law and held that
the word 'rate' was used .with respect to a tax which- was levied on the net
annual value or rateable value of lands and buildings and not on their
capital value, but capital value could be· adopted as the basis for working
out the annual value. [4850486E]
(iii) Rule 4 of the Godhra Municipal Rules shows what properties
are to be valued on capital basis. What the capital. basis is not defined.
The capital value however can be determined in the way laid down in
Patel Gordhandas'• case by adopting the contractor'& method. (487B].
(iv) The figures given in the balance sheet of the company could not
be regarded as 'reliable data' for the purpose of r. 5. The figures given
in tho balance sheet are merely statements in .terms of the form given in
482
SUPRBMB COURT REPORTS
(1968] 3 S.C.R.
Schedule VI. They have no relevance in determining tbe capital value of
A
property for the purpose of B&'eSsment to a rate. [488 B.q
[Case remanded to District Judge for determining capital value by
adopting contractors' method in the light of the observations made by
this Court.]
Patel Gordhandas Haraovindas v. hfunicipal Cornn11"ssioner1 Ah1nedav
bad, [1964] 2 S.C.R. 608, relied on.
B
R. v. School Board for London, (1885) SS L.J.M.C, 33, referred to.
CIVIL APPELLATE JUIUSDICTION: Civil Appeals Nos. 631 and
632 of 1965.
Appeals by special leave from the judgment and order dated
January 7, 8, 1963 of the Gujarat High Court in Civil Revision
C
Applicntions Nos. 116, 117, 173 and 174 of 1961.
Purshottam Trikamadas and I. N. Shroff, for the appellant (in
both the appeals).
S. S. Shukla, for the respondent (in both the appeals),

## Text

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GODHRA BOROUGH MUNICIPALITY
v.
GODHRA ELECTRICITY CO. LTD.
March 20, 1968
[J. C. SHAH AND G. K. MITTER, JJ.]
The Bombay Municipal Boroughs Act, 1925, s. 13-Rules 4 and 5-
'Rate' /eviable 11nder s. 13 on lands and buildings-Certain lands and
buildings to be taxed under r. 4(1) on capital basis-Method of evaJUQo
tion of capital value-E'nglish. laW relating to 'rates'. relevance . of-Con·
tractors' method of evaluation recommended-Data in company's balance
sheet whether 'reliable data' for purpose of r, S.
Unde'r s. 73 of the Bombay Municipal Boroughs Act, 1925 read with
rr. 4( 1) and 5 made thereunder a rate on non-residential buildings belonging to factories and mills was leviable on a capital basis, and the capital
value for this purpose was to be work<!d out, if 'reliable data' were furnished by the assessee, on the basis of such data. The respondent company owned certain buildings on which rate was leviable under r. 4(1)
on the basis of capital value. The respondent company claimed that the
actual cost of construction of the buildings in 1920 ought to be taken as
the capital value. The Municipality of Godhra however made its own
estimate of the capital value. Thereafter the Judicial Magistrate and the
Sessions Judge made va1ua~ions taking into account the rise in the cost
of building materials since 1920. The High Court In revision upheld the
view that the actual cost minus depreciation thereon should be tho capital
value; it observed that the English law and practice as to levy of rates
was not relevant in the Indian context. The Municipality appealed.
HELD : (i) When legislaturea in this country enact statutes which
clooely resemble statutes in England and have the same purpose and
object in view, then unless tho expressions used in the Indian Statutes are
defined courts of law cannot go wrong in interpreting them in the way
English judges have done.
Further, the words which have acquired a
particular shade of meaning in England may be given the same meaning
unless there is anything in the statute itself which
would be contraindicative. [486-F-OJ
(ii) Section 73 empowered the municipality to impose a rate on
buildings or lands. The word 'rate' ·had not been ·defined in the Act but .
it has a well known meaning. In Patti Gordhandar's case this . Court
examined various statutes bearing on the English rating law and held that
the word 'rate' was used .with respect to a tax which- was levied on the net
annual value or rateable value of lands and buildings and not on their
capital value, but capital value could be· adopted as the basis for working
out the annual value. [4850486E]
(iii) Rule 4 of the Godhra Municipal Rules shows what properties
are to be valued on capital basis. What the capital. basis is not defined.
The capital value however can be determined in the way laid down in
Patel Gordhandas'• case by adopting the contractor'& method. (487B].
(iv) The figures given in the balance sheet of the company could not
be regarded as 'reliable data' for the purpose of r. 5. The figures given
in tho balance sheet are merely statements in .terms of the form given in
482
SUPRBMB COURT REPORTS
(1968] 3 S.C.R.
Schedule VI. They have no relevance in determining tbe capital value of
A
property for the purpose of B&'eSsment to a rate. [488 B.q
[Case remanded to District Judge for determining capital value by
adopting contractors' method in the light of the observations made by
this Court.]
Patel Gordhandas Haraovindas v. hfunicipal Cornn11"ssioner1 Ah1nedav
bad, [1964] 2 S.C.R. 608, relied on.
B
R. v. School Board for London, (1885) SS L.J.M.C, 33, referred to.
CIVIL APPELLATE JUIUSDICTION: Civil Appeals Nos. 631 and
632 of 1965.
Appeals by special leave from the judgment and order dated
January 7, 8, 1963 of the Gujarat High Court in Civil Revision
C
Applicntions Nos. 116, 117, 173 and 174 of 1961.
Purshottam Trikamadas and I. N. Shroff, for the appellant (in
both the appeals).
S. S. Shukla, for the respondent (in both the appeals),
The Judgment of the Court was delivered by
Mitter, J.
These are two appeals by special leave against the
judgment and order dated January 8, 1963 of the Gujarat High
Court dismissing Civil Revision Applications 116 and 117 of
1961 filed by the appe!Jant and allowing similar applications Nos.
173. and 174 of l 961 filed by the respondent against the com·
mon judgment dated December 1, 1960 passed by the District and
Sessions Judge of Panchmahals.
The. matter arises out of assessments made by the appellant
constituted under the Bombay Municipal Boroughs Act, 1925 on
the respondent under section 73 of the Act. The respondents are
an electricity company ownini inter alia properties bearing several
numbers in the municipal borough of Godhra.
For the years
1956-57 and 1957-58 the appellan_t had fixed the Yaluation of the
properties belonging to the respondent at Rs. 3,25,000/ -.
On
appeal by t])e respoμdent, the Judicial Magistrate fixed the valuation of the properties at Rs. 90,000/-. On the appellant going in
revision, the Sessions Judge fixed the valuation at Rs. 1.25,000/-.
As a result of the High Court's decision the valuation stood reduced to Rs. 90,000/-. The present appeals are by the Municipality.
Under s. 73(1) of the Bombay Municipal Boroughs Act, 1925
(hereinafter referred to as the 'Act') :
"Subject to any general or special orders which the
State Government may make in this behalf and to the
provisions of sections 75 and 76, a municipality may impose for the purposes of this Act any of the following
taxes, namelyD
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GODHP.t. MUNIC. v. GODHRA ELEC. co. (Mitter, J.)
483
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(i) a rate on buildings or lands or both situate with- .
in the municipal borough."
"
The procedure preliminary to imposing tax is laid down in s . . 15
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and s. 78 deals with the preparation of an assessment list. Section
5 8 empowers the municipality to make rules prescribing the taxes
to be levied in a municipal borough for municipal purposes etc.
Rules 4, 5 and 7 relevant for our purpose read as follows :
· "4. Modes of valuation : (1) For the purpose of determining tax the following properties shall be valued
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on the capital basis :-
(a) All open lands, buildings and yards belonging
to the Railway Administration.
(b) All buildings and lands other than those which
are actually used for residential purposes belonging to
Mills and Factories to which the Indian Factories Act,
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is applied.
(Z) All properties other than those mentioned above
shall be valuesJ on the basis of the annual letting value
as defined in section 3(1) of the Act.
5. Mode of determining capital value : The capiE
tal value of properties mentioned in rule 4(1) shall, in
each case, be determined on such reliable data as the
Railway Authorities and the Agents of the mills and the
factories may furnish when called upon from thne io
time to do so and in the absence of any such trustworthy reliable data, it shall be determined by the Chief
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Officer or by expert valuers employed by the municipality for that purpose.
6.
7. Amount of tax: (1) in case of properties which
as stated above, are valued on the .capital basis the tax
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to be levied shall be assessed at Rs. 0-8-0 per cent
of the capital value and it shall be a direct tax thereon
provided however that any fraction of hundred in excess of fifty rupees shall be taken as the next higher
hundred and any fraction of fifty rupees or less be taken
as the lower hundred.
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(2) · In case of properties which, as stated above,
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are. valued on the annual letting value the tax to be
levied shall be assessed as shown in the appendix an-
.i
nexed hereto."
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SUPRBMB COURT REPORTS
[1968) 3 S.C.R
Under rule 4(1) (b) above, the buildings of the respondent had to
be valued on the capital basis. Under r. 5 the capital value of
propt:rti~• had tc be· determined on such reliable data as the respondent might furnish and in the absence thereof, it would be the
duty of the Chief Officer to determine the same.
Before the
Judicial Magistrate, one R. R._ Tewari, an Assistant Secretary of
the respondent who had affirmed an affidavit showing that the approximate value of the seven items of property on which tax was
sought to be imposed as per the books of the company was
Rs. 41,541-12-9.
He sought
to rely on the balance sheets
and accounts of the company audited under the Companies Act
for the purpose. The Judicial Magistrate observed that the properties were 40 years old and according to Tewari the life of the
office buildings was 50 years while that of others was only 30
_years. Acting on the admission of Tewari that the price of building materials had increased three times the original figures in 195657 and taking into consideration the properties were over 40
years old, the Magistrate assessed the capital value at Rs. 90,000/-.
The Sessions Judge dealt with the matter in greater detail and
noted that neither party· had given him real assistance in determining what should be the proper assessment. According to him
the assessment papers preceding the bills had not been produced
and neither party had led any evidence as to how the capital value
was to be arrived at. He however felt that the capital value could
not mean merely the book value shown in the books of account
oi the assesste. He noted that according to the balance sheet for
1955-56 the property and assets under the head "buildings" was
shown as below :
Buildings.
Cost up to 31st March 1955
Additions during the year
Rs. 1,72,866-5-11
12,398-10- 3
Total
Rs. 1,85,265-0-2
The said figure included the value of all the buildings of the
company but those which were to be assessed were only seven
out of which two residential bungalows and servants quarters
were to be assessed on the rental value. . The Sessions Judge
therefore inferred from the above figures that Rs. 1,85,265/- inch1ded at !east Rs. l,00.000/- as the cost up to 31st March, 1955
of the factory buildiitgi in question. The Sessions 1 udge found
himself unable to accept the contention that the depreciated selling
value of the property was the capital value for the purpose of assessment of house tax. He also did nof accept the municipality's
contention that the cost of construction of buildings had gone up
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GODHRA MUNIC. v. GODHRA ELEC. co. (Mitter, 1.)
485
five times since 1920. Considering the rival contentions he fixed
the capital value at three times the figure shown by the company,
viz., Rs. 41,541/· and rounded the same off to Rs. 1,25,000/·.
Taking the view that it was not open to "a Judge in India
to base his judgment as a whole or in part or his conclusion upon
either Halsbury's Laws of England or Bean and Lockwood's book
on Rating Valuation Practice" on the ground that these books
were irrelevant under the Indian Evidence Act, the learned Judge
of the High Court held that "capital value" might possibly bear
four different meanings but the meaning given to the expression
in Halsbury's Laws of England was '.'not appropriate in the context of the Indian enactment and the Indian Rules". Referring
to the rules made by Godhra Municipality he observed that it
could not be said that the municipality had adopted the capital
value as one of the methods of ascertaining the rental value or
that the municipality had adopted the rental value as one of the
methods of ascertaining the capital value.
According to the
learned Judge,
" 'capital value' has to be treated as meaning the
value of the building treated as capital at the time of
the assessment; in other words, the original cost of construction minus the depreciation or at the most the original cost of construction without depreciation."
Accepting the figure of Rs. 41,541-12-9 as the cost of construction
of the building in 1920 as found by the courts below, he observed
that the capital value should be "either Rs. 41,541-12-9 or something less after deducting depreciation." According to him "the
assessee has not c. ome in revision against the order of the Magistrate fixing the value at Rs. 90,000/-. Both the courts have erred
in considering the probable cost of construction of a new building." He therefore held that the courts below had committed a
material mistake in the exercise of jurisdiction in relying upon the
probable cost of constructing a new building of a similar type
in order to estimate the capital value as contemplated by Godhra
Municipality and accordingly reduced the capital value fixed by
the Sessions Judge to Rs. 90,000/-.
We find ourselves unable to accept the views expressed or the
reasoning given in the judgment of the High Court. Section 73
empowered the municipality to impose a rate on buildings or lands.
Now the word 'rate' had not been defined in the Act but it has a.
well known meaning:-As observed in Patel Gordhandas Har.'
govindas v. Municipal Commissioner, Ahmedabad(') the word
"has come to our country for the purpose of local taxation from
England." In that case this Court examined various statutes bearing on the English Rating Law and held that the word " 'rate' was
(I) (196412 S.C.R. 608 at 616 ..
,. .
486
SUPllEMB COUllT llEPOllTS
[1968] 3 s.c.R.
used with respect . to a tax which was levied on the net annual
value or rateable value of lands and buildings and not on !hair
capital value; It would therefore not be wrong to say that in the
legislative history and practice in England up to 1925, 'rate' for
the purpose of local taxation meant a tax on the . annual value
of lands and buildings liable to such taxation."
The Court werit on to examine the methods in use for the
purpose of ascertaining the rateable value which were generally
three. It was said :
"Where the land or building was actually let, the
valuation was based on the rent at which it was let.
Where, however, the .land or building was not let, two
methods were evolved for the purpose of finding out
the rateable value. The first was to assume a hypothetical tenancy (such as where the same person is the
owner and occupier) and find out the rent at which the
premises ·would be let. The second was based on the
capital value of the premises. But the tax was not levied
on the capital value itself; the capital value was determined on the structural value of the building to bci assessed by what was known to be contractor's method or
contractor's .test in addition to the market value of the
land.
Sometimes the words "effective capital value"
were also used since in. most cases the actual capital cost
of the building plus the market value of land might for
some reason or the other be ineffective IA., it might not
be rent producing. Having arrived at the effective capital value it was necessary to apply percentages thereto
in order to arrive at the annual value."
When legislatures in this country enact statutes which closely resemble statutes in England and have the same purpose and object
in view, then unless .the expressions used in the Indian Statutes
are defined, courts of law cannot go \\TOng in interpreting them
in the way English Judges have done. Further, the words which
have acquired a particular shade of meaning in England may be
given the same meaning unless there is anything in the statute
itself which would be contra indicative.
In Patel Gordhandas' s
case(') the statute which this Court had to interpret was
the same Act which is before us in this case. Consequently, that
decision affords us a good guide in forming our own conclustons in
this case. Section 7 5 of the Act has an Explanation introduced
in 1966 which reads as follows :
"Explanation-For the purposes of a rate on buildings .or lands, the basis· of valuafion may be-
(i) ·the annual letting value;
(I) [196412 S.C.Jl. 608.
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30DHRA MUNIC. v. GODHRA ELEC. co. (Mitter, J.)
487
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(ii) the annual value;
(iii) the floor area, in the case of Mills, Factories
and buildings and lands connected therewith;
(iv) the capital value, in the case of vacant lands."
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The Explanation is deei,ned always to have been substituted for
the original by Maharashtra Act 3 of 1966, s. 3(b).
Rule 4 of Godhra Municipal Rules· shows what properties are
to be valued on the capital basis. What the capital basis is is not
defined.
The capital value however can be determined in the
way laid down iri Patel Gordhandas's case(') by adopting the
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contractor's method. What that method is has been explained in
Ryde on Rating (Eleventh Edition) Chapter 20. In R. v. School
Board for London(') Cave, J. applied the contractor~s test to
schools. Ryde points out that it was tacitly r~ognised as applicable in various other cases. The principle on which the contractor's basis rests lire given by the author at page 439 and the method
of its application •is given at page 442. The learned author notes
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that in. "applying the contractor's basis it is possible to discern five
stages.
The first stage is· the estimation of the cost. of construction of the ·building." There is a difference of view as to whether
it is better to take the cost of replacing the actual building as it is,
or the cost of a substitute building on the same plan as the actual
building but otherwise in ari up-to-date form. The second stage is
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"to make deductions from the cost of construction to allow for
age, obsolescence and any other factors necessary to. arrive at the
'effective capital value'.
''The third stage is to estimate the cost
of the ll)lld. The fourth stage is to apply the market rate or rates
at which money can be 1l9rrowed or invested to the effective capi•
tal value of the building and the land. The fifth stage is to. conF
shider whether the result of the fourth stage really repr~sents what
t e hypothetical tenant would pay for the annual tenancy on the
statutory terms, and to make any adjustments necessary to ensure
that no higher rent is fixed as the basis of assessments than that
which it is believed the owner would really be willing to pay for
the occupation of the premises.
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·Rule S of the Godhra Municipal Rules lays down that the capital value is to be determined in each case on reliable data furnished
by the Mills and the Factories when called upon to do so and in
the absence thereof js to be determined by the Chief Officer· or
expert valuer.. The learned counsel for the respondent contended
that here there were reliable data in that the balance sheet of the
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company showing the value of these properties for the purpose
of the Companies Act and there was no reason why the same
figures should not be adopted as the capital value of the lands
11)(1964) 2 S.C.R. lioll.
(2)
{18~S) 55 L.J.M.C. 33; 17 Q.ll.D. 738 C.A.
488
SUPJU!llB COURT lU!POllTS
[1968) 3 S.C.R.
and buildings within the jurisdiction of Godhra municipality. This
clearly is fallacious as under section 211 of the Companies Act,
1956 the balance sheet of a company has to be drawn up in the
form prescribed by Schedule VI.
Under the said SChedule, Part
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as possible between expenditure upon (a) go<id-will, (b) land, (c)
buildings, (d) leaseholds, (e) railway sidings, (f) plant and machiB
nery, (g) furniture and fittings, (h) development of property etc. The
fourth column of the form which gives the instructions in accordance with which assets should be made out shows under each head
"the original cost and the additions thereto and deductions therefrom during the year, and the total depreciation written off or
provided up to the eQd of the year is to be stated." It will therefore be noticed that the. figures given in the balance sheet are
merely statements in terms of the form given in SChedule
VI.
They have no relevance in determining the capital value of property for the purpose of assessment to a rate.
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It appears to us therefore that the true method of determination of the capital value was not adopted in the courts below. We
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therefore set aside the judgment and order of the High Court and
remand the matter back to the District Judge for him to determine the capital value in the light of the observations made by us
after giving an opportunity to the parties to adduce evidence on
the subject. The costs will abide by the decision of the Disrtict
Judge.
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Appeal allowed and case remanded.