.ÐITEM NO.101 COURT NO.

4 SECTION IIIA
Part-heard
S U P R E M E C O U R T O F I N D I A
RECORD OF PROCEEDINGS

C.A. NO. 3950 of 2001

Calcutta Municipal Corporation Appell

ant(s)

VERSUS

Motilal Naresh Kumar

Respondent(s)

(with office report)

Date: 30/11/2006 This/these matter(s) was/were called on for hearing today.

CORAM :
HON’BLE MR. JUSTICE ASHOK BHAN
HON’BLE MR. JUSTICE DALVEER BHANDARI

For Appellant(s) Mr. Tapash Ray, Sr. Adv.

Mr. L.C. Agrawala, Adv.
Mr. Bijan Ghosh, Adv.

For Respondent(s) Mr.P.K. Ghosh, Sr. Adv.

Mr. Rajindra Singhvi, Adv.
Mr. K.K.L. Gautam, Adv. for
Mr. Ashok K. Singh, Adv.

UPON hearing counsel the Court made the following

O R D E R

The Appeal is disposed of.

(Parveen Kr. Chawla) (Kanwal Singh)

Court Master Court Master

[Signed Order is placed on the File]

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.3950 OF 2001

Calcutta Municipal Corporation Appellant (s)

 Versus

Motilal Naresh Kumar Respondent (s)

O R D E R

Calcutta Municipal Corporation (for short ’ the Corporation’),

appellant herein, has filed this appeal with the leave of the Court against

the decision of the High Court at Calcutta in C.O. No. 1889 of 1995

dated 5.2.1999 whereby and whereunder the High Court has reversed

the order passed by the Municipal Assessment Tribunal (for short ’the

Tribunal’) in M.A.Appeal No. 149 of 1991 and re-determined the annual

letting value of the property and the consequent tax liability of the

owner, respondent herein.

Facts:

Respondent is a registered partnership firm and was the owner

of a space measuring about 6053 sq. ft. on the first floor (eastern block)

in premises No.1, Crooked Lane, Calcutta (hereinafter referred to as the

’premises’) which is a two storied building. Respondent inducted Bank

of India as a tenant in respect of the aforesaid space of said premises at

a monthly rent of Rs.60,510/-. This amount included the occupier’s

share of tax and commercial surcharge. The said apportioned share of

the said premises became the subject matter of intermediate re-

valuation under section 180(2) of the Calcutta Municipal Corporation

Act, 1980 (for short ’the Act’) for the period commencing from the
fourth quarter of 1986-87.

The Hearing Officer in his order dated 10th March, 1988 fixed

the annual value of the premises at Rs.6,53,720/- (Gross annual rent

Rs.60,510/- x 12 = Rs.7,26,120/- (-) 10% statutory deduction under

Section 174(1) of the Act), whereas the exact figure would be

Rs.6,53,508/- instead of Rs.6,53,720/-.

Respondent, being aggrieved, filed M.A.Appeal No. 149/91

before the Municipal Assessment Tribunal, Calcutta (for short ’the

Tribunal’). Respondent had claimed the following deductions:

i) Commercial surcharge Rs.1,30,744/-

ii) Half of the total rate on
a/c. of occupier’s share Rs.1,32,378/-
iii) Maintenance charges Rs. 13,693/-
iv) Electricity charges for
common areas Rs. 2,967/-

____________
Rs.2,79,782/-

The Tribunal upheld the order of the hearing Officer and

dismissed the appeal, inter alia, on the following grounds:

"i) U/s. 2 (20) of the CMC Act, 1980,

consolidated rate (now called property Tax) includes
surcharge levied on the consolidated rate;

ii) Commercial surcharge is leviable under sub-

section 4 of Section 171 where the building or portion
thereof is used for commercial or non-residential
purpose at such rate not exceeding 50% of the
consolidated rate as the corporation may from time to
time determine;

iii) U/s. 193 of the Act, the Consolidated rate is

primarily leviable if the land or building is leased,
upon the lessor. So, in the instant case, the
consolidated rate including the commercial surcharge
is payable by the respondent, the lessor.

iv) U/s. 230 (a) of the Act, the person primarily

 liable may recover from the occupier half of the rate
so paid and under sub-sec. (b) to sec. 230 the entire
amount of surcharge on the property tax from the
occupier who uses it for commercial purpose.

v) So the statute has provided for recovery of a

sum of Rs.1,30,744/- on a/c. of commercial surcharge
and Rs.1,32,378/- being half of the total due on
occupier’s share, by the respondent from its tenant;

vi) Maintenance charges of Rs.13,693/- was

found to be payable by the respondent to the
promoters irrespective of letting out as also electricity
charges of Rs.2,967/-."

Being aggrieved by the judgment and order of the Tribunal,

respondent filed a petition under Article 227 of the Constitution of India

which has been accepted by the impugned order. The High Court has

set aside the judgment and order of the Tribunal and determined the

annual value of the premises in question as per calculations given

below:

Rent Rs. 60,510 x 12 = Rs.7,26,120.00

Less:
(i) Rates paid for the tenant as per tenancy Agreement
a) Commercial Surcharge Rs.1,30,744.00
b) Rates - Half of total rates due on
Occupier’s share Rs.1,32,372.00

(ii) Maintenance expenses Rs. 13,693.00

(iii) Electricity charges for areas
occupied by the tenant and for
the common areas Rs. 2,967.00
Rs.2,79,782.00

Annual Valuation should be

Rs.4,45,338.00
Less Rs. 44,634.00
Rs.4,01,704.00

So far as maintenance expenses for areas occupied by the

tenant and electricity charges for areas for the common areas are

concerned, counsel appearing for the respondent has conceded that

respondent is not claiming deduction for determination of the annual

value of the premises. To that extent the order passed by the High Court

needs to be revised.

The High Court, by a detailed order, came to the conclusion

that the occupier’s share of tax and commercial surcharge have to be

excluded while determining the annual value of the premises.

Chapter XII of the Act beginning with Section 170 and ending

with Section 197 and Chapter XVI beginning with Section 214 and

ending with Section 232 of the Act are self-contained code for the

purposes of levy, assessment and calculation of property tax on lands

and buildings including commercial surcharge. Section 171 authorises

the Corporation to impose property tax on the annual value. Relevant

portion of Section 171, at the relevant time, read as under:

"171. Consolidated rate on lands and buildings--(1)

For the purposes of this Act, a consolidated rate on the
annual value, determined under this Chapter, of lands
and buildings in Calcutta shall be imposed by the
Corporation.

(2) Such consolidated rate shall be --

(a) Where the annual value does not exceed

six hundred rupees, eleven per cent of the
annual value;

(b) Where the annual value exceeds six

hundred rupees but does not exceed eighteen
thousand rupees, such percentage of the
annual value as is worked out by dividing the
annual value by six hundred and adding ten
to the quotient, the sum thus worked out
being rounded off to the nearest first place of
decimal;

(c) where the annual fee exceeds eighteen

thousand rupees, forty percent of the annual
value.
(3) In calculating the gross amount of
consolidated rate including tax under the Howrah
Bridge Act, 1926 (Ben. Act IV of 1926) that may be
imposed on lands and buildings (including huts) per
quarter and the net amount payable per quarter after
allowing rebate under sub-section (2) of section 215,
the fraction of a rupee shall be rounded off to the
nearest rupee, fifty paise being treated as rupee one.

(4) Notwithstanding the provisions of sub-

section (2) [and sub-section (9)], the Corporation may,
where any land and building [or hut] or portion
thereof is used for commercial or non-residential
purpose, levy a surcharge on the consolidated rate on
such land or building [or hut] or portion thereof at
such rate not exceeding fifty per cent of the
consolidated rate as the Corporation may from time to
time determine:

Provided that where any portion of any land

or building [or hut] is used for commercial or non-
residential purpose, the amount of the consolidated
rate payable in respect of such portion shall, while
fixing the consolidated rate for the entire land or
building [or hut], be separately calculated:

Provided further that subject to such rules as

may be made by the State Government in this behalf
for the grant of exemption from surcharge in respect
of any class or classes of lands or buildings [or huts]
used for educational, medical, public health or cultural
purposes or for purposes of sports, the Corporation
may exempt any such land or building [or hut] from
payment of the surcharge:
Provided also that such exemption shall in
no case exceed seventy-five percent of the surcharge.

(5) xx xx xx xx

(6) xx xx xx xx

(7) xx xx xx xx

(8) xx xx xx xx

(9) xx xx xx xx

Section 174, at the relevant time, read as under:

"174. Determination of annual valuation-- (1)

Notwithstanding anything contained in the West
Bengal Premises Tenancy Act, 1956 (West Ben. Act
XII of 1956) or in any other law for the time being in
force, for the purpose of assessment to the
consolidated rate, the annual value of any land or
building shall be deemed to be the gross annual rent
including service charges, if any, at which such land
or building might at the time of assessment be
reasonably expected to let from year to year, less an
allowance of ten percent,for the cost of repairs and
other expenses necessary to maintain such land or
building in a state to command such gross rent:

Provided that there is a transfer, inter vivos,

of ownership of any land or building since the last
preceding periodical assessment under section 179,
the annual value of such land or building shall be
fixed at seven and a half per cent of the amount stated
in the deed of transfer as consideration for such
transfer or, if no consideration is stated in such deed
of transfer, at seven and a half per cent of the
estimated market value thereof:

Provided further that while determining the

annual value in the case of any land or building or
portion thereof exclusively used by the owner for his
residential purpose, the gross annual rent of such land
or building or portion, as the case may be, shall be
reduced,--

(a) where the gross annual rent does

not exceed six hundred rupees, by thirty per
cent;

(b) where the gross annual rent

exceeds six hundred rupees but does not exceed
eighteen thousand rupees, by such percentage of the
gross annual rent as is worked out by dividing the
gross annual rent by six hundred and subtracting the
quotient from thirty-one, the difference being rounded
off to the nearest place of decimal:

Provided also that no such reduction in gross annual

rent shall be made--

(a) in case the total covered area in

any land or building under occupation for
residential purpose by the owner exceeds
one hundred and fifty square metres, or

(b) where a person owns or occupies

for residential purpose more than one plot
of land or building or portions thereof within
the municipal limit of Calcutta.

xxx xxxx xxxx"

As per this provision, for the purposes of assessment of the

property tax, annual value of the land or building is deemed to be the

gross annual rent including service charges, if any, at which such land or

building may at the time of assessment be reasonably expected to let

from year to year, minus ten percent towards the cost of repairs and

other expenses necessary to maintain such land or building.

Section 193 of the Act deals with the incidence and payment of

the property tax on lands and buildings. Under this provision, primary

responsibility to pay the tax on the land and building is of the lessor.

Section 194 of the Act provides for apportionment of liability for the

property tax on land and building between the lessor and the lessee.

Section 230 of the Act provides for apportionment of

consolidated rate by person primarily liable to pay to the corporation.

The same reads as under:

"230. Apportionment of consolidated rate by the

person primarily liable to pay - Save as otherwise
provided in this Act, the person primarily liable to pay
the consolidated rate in respect of any land or building
may recover--

(a) if there be but one occupier of the

land or building, from such occupier half of
the rate so paid, any may, if there be more
than one occupier, recover from each
occupier half of such sum as bears to the
entire amount of rate so paid by the owner
the same proportion as the value of the portion
of the land or building in the occupation of such
occupier bears to the entire value of such
land or building:

Provided that if there be more than one

occupier, such half of the amount may be apportioned
and recovered from each occupier in such proportion
as the annual value of the portion occupied by him
bears to the total annual value of such land or
building;

(b) the entire amount of the surcharge

on the consolidated rate on any land or

building from the occupier of such land or

building who uses it for commercial or non-
residential purposes:

Provided that if there is more than one such

 occupier, the amount of surcharge on the consolidated
rate may be apportioned and recovered from each such
occupier in such proportion as the annual value of the
portion occupied by him bears to the total annual
value of such land or building."

Under this provision, the occupier is made liable to pay half of

the tax. Occupier is also burdened with the payment of commercial

surcharge on the property tax as mentioned in that section.

Section 231 deals with the mode of recovery. The same reads

as under:

"Mode of recovery-- If any person primarily liable to

pay any consolidated rate on any land or building and
is entitled to recover any sum from an occupier of
such land or building, he shall have, for recovery
thereof, the same rights and remedies as if such sum
were rent payable to him by the person from whom he
is entitled to recover such sum."

Under the provisions of the Act, out of the total tax liability,

occupier has been made liable to pay 50% of the tax. Occupier is further

made liable to pay the entire commercial surcharge. The primary

responsibility to pay the property tax is of the owner. Section 231

provides the mode of recovery of the occupier’s share of tax and

commercial surcharge by the owner who is primarily responsible for

making the payment of the property tax to the corporation from the

occupier.

The rent of Rs.60,510/- which the owner was charging from the

occupier by an agreement included the occupier’s share of all the

existing taxes to be borne by the owner. The High Court came to the

conclusion that the occupier’s share of tax and commercial surcharge

included in the gross amount charged by the owner from the occupier

had to be excluded for determining the annual value of the premises. To

that extent we agree with the finding recorded by the High Court.

The calculations made by the High Court needs to be modified,

as, in our view, the tax element of the occupier’s share of tax determined

by the High Court is not correct. The High Court has calculated the

annual value taking the gross monthly amount paid by the occupier to

the owner whereas the annual value had to be determined after

deducting the occupier’s share of tax.

It is neither easy nor possible to arrive at the exact figure of the

tax element of the occupier’s share.

In the Calcutta Municipal Act, 1923 and Calcutta Municipal

Act, 1951, predecessors of the present Act, had a provision similar to the

one existing in the present Act except that under the 1923 Act, there was

no provision for levy of commercial surcharge and it was introduced for

the first time in the 1951 Act.

In ’Principles and Practice of Valuations (Land and Houses)’ by

John A. Parks, 4th Edition, 1970, the author has given the following

formula for determining the annual value. The same reads as under:

"For the purpose of assessing land and buildings to

the consolidated rate:--

(a) the annual value of land, and the

annual valuation of any building erected for letting
purposes or ordinarily let, shall be deemed to be the
gross annual rent at which the land or building might
at the time of assessment reasonably be expected to let
 from year to year, less, in the case of a building an
allowance of ten percent for the cost of repairs and for
all other expenses necessary to maintain the building
in a state to command such gross rent.

To give an illustration , suppose a building

was let for Rs.100 per month inclusive of tenants’
rates, then the annual value would be :--

Monthly Rent inclusive of tax Rs. 100/-

Annual Rent inclusive of tax Rs.1,200/-
Deduct 10 per cent for repairs,etc. Rs. 120/-
__________
Rs.1,080/-
Deduct 10 per cent for occupiers’
share of taxes Rs. 108/-
_________
Annual value Rs. 972/-

Under the 1923 & 1951 Acts, the rate of tax was 23 per cent at

the maximum whereas now it is 40 per cent for the lands and buildings,

provided the rent is above eighteen thousand. The commercial

surcharge was also not there at that time. The Corporation and the

owners’ of buildings have been and are litigating in petty cases where

the rent paid by the occupier to the owner includes the occupier’s share

of tax as well.

The learned counsel appearing for the parties prayed that this

Court may put an end to this litigation by pragmatically calculating the

owner’s and occupier’s share of taxes according to the scheme of the

Act. The request seems to be reasonable and in order to put quietus to

this litigation and such other similar cases, while exercising our

jurisdiction under Article 142 of the Constitution, we deem it

appropriate to provide method of calculating the tax according to the

scheme of the Act in the succeeding paragraphs of this judgment.

 In the Parks’ book, the occupier share has been taken at

10 per cent when the maximum tax payable was 23 per cent whereas

under the present Act, the tax is forty per cent of the annual value out of

which 20 per cent has to be paid by the occupier and 20 per cent has to

be paid by the owner. Over and above this, there is a commercial

surcharge to the extent of 50 per cent of the tax which is to be paid by

the occupier. The total tax payable comes to 60 per cent of the annual

value out of which 40% including commercial surcharge has to be paid

by the occupier and 20 per cent has to be paid by the owner.

The figure of 10 per cent given in Parks’ book for deduction of

occupier’s share is increased to 28 per cent where the property is used

for commercial purpose, which will roughly come out to 2/3rd of tax

being paid by the occupier and 1/3rd of the tax being paid by the owner,

which is contemplated under the provisions of the Act. We have given

this formula in order to avoid frivolous litigation over small amounts

between the corporation and the owners. The tax payable by the owner

in the present case works out to:

Rs. 60510 x 12 = Rs.7,26,120.00

(Less) 10% for repairs = Rs. 72,612.00

Rs.6,53,508.00
(Less) 28% for occupiers’
share of taxes = Rs.1,82,982.24
Rs.4,70,525.76
rounded off = Rs.4,70,526.00

40% tax on annual value = Rs.1,88,210.40

[20% has to be paid by the

owner] = Rs. 94,105.00
 The assessments which have already been finalised need not be

re-opened. The pending assessments or the cases in which appeals or

revisions are pending, shall be disposed of by applying the aforesaid

formula for determining the share of the occupier’s tax and the share of

the owner.

Appeal is disposed of in the above terms.

..........................................J.
[ASHOK BHAN]

NEW DELHI ..........................................J.

NOVEMBER 30, 2006 [DALVEER BHANDARI]