Harbanslal Malhotra & Sons Pvt. Ltd. Vs. Kolkata Municipal Corpn. and Ors. - (Supreme Court) (05 Sep 2017)

Machinery provision which enables the Assessee to avail concession or benefit conferred by substantive provision in the Act need to be construed liberally

MANU/SC/1082/2017

Municipal Tax

In facts of present case, The Appellant is the owner of the premises. It consists of two-storey building and some land appurtenant thereto ("the premises"). This premises is assessed to payment of tax under the provisions of the Calcutta Municipal Corporation Act, 1980/Act. By two orders, the Assessing Officer determined the valuation of the premises. The Appellants (Assessee), felt aggrieved of the orders of Assessing Officer, filed two appeals before the Tribunal. Tribunal allowed the appeal in part.

The Municipal Corporation, felt aggrieved of the order of the Tribunal, filed revision petition before the High Court. By impugned order, the High Court allowed the revision and remanded the case to the Tribunal to re-determine the annual value of the premises. The High Court held that, the Tribunal was not right in making an assessment of the premises by clubbing land and building. According to the High Court, it should have been done separately, i.e., building and land should have been assessed separately for determining their respective annual value under Section 174(1) and (2) of the Act. The owner (Assessee), felt aggrieved of the order of the High Court, filed this appeal by way of special leave before this Court.

Reading of Section 174 of Act shows that, it deals with two types of assessment for determining the annual value of land or building. One is in relation to the "land on which the building is built" and the other is in relation to the "open land", i.e., the "land on which no building is built". So far as former is concerned, i.e., land on which building is built, it is governed by Sub-section (1) of Section 174 whereas so far as the latter is concerned, i.e., open land on which no building is built, it is governed by Sub-section (2) of Section 174.

In the case of former, the Assessing Authority is required to take land and building as "single unit" for determination of its gross annual rent which is reasonably expected to fetch at the time of assessment from year to year. To illustrate, if the building has some appurtenant land which is exclusively used by the owner for garden or/and parking the vehicles, such building or/and land may fetch more rentals as compared to a building, which does not have these facilities or has very small land appurtenant to the building. In any case, such building and the land cannot be separated for determining their gross annual rent. Such case, therefore, would fall in Sub-section (1) of Section 174. The annual value and gross annual rent of such premises have to be, therefore, determined as per the procedure prescribed in Sub-section (1) of Section 174 of the Act. The proviso to Sub-section (1) of Section 174, deals with the cases of "transfer" of the building and land. In such case, the Assessing Officer is required to take the amount (sale consideration) mentioned in the transfer deed as the basis for determining its annual value and then to determine the gross annual rent of such premises as per the procedure prescribed in Sub-section (1) of Section 174 of the Act.

However, in a case where no amount is mentioned in the transfer deed, the proviso says that the Assessing Officer is required to take the estimated market value of such premises as the basis and then to determine its gross annual rental as per the procedure prescribed in Sub-section (1) of Section 174 of the Act. In a situation, where the gross annual rent of any land or building or any part thereof cannot be easily estimated for the purpose of Sub-section (1) of Section 174, then a procedure is prescribed in Sub-section (4A) of Section 174 as to how gross annual rent of such land or building is to be determined.

Supreme Court opined that, Section 174(1) and (2) operate in separate field. Both cannot be clubbed for determination of the gross annual rental value of land or building. In other words, both the Sections have to be applied independently depending upon the fact as to whether the premises is "building with land" or it is an "open land" and accordingly their gross annual rental value would be determined. When the Legislature itself has carved out two categories of cases namely, (1) "land or building" (2) "open land with no building thereon" and has accordingly provided different rates and different methods of assessment, it does not appear logical to club both the categories of cases.

It is a settled Rule of interpretation in relation to taxing laws that, a machinery provision which enables the Assessee to avail of a concession or benefit conferred by substantive provision in the Act, such provisions are required to be construed liberally. This Rule applies to the case on hand and hence, benefit of the interpretation must go to the Assessee rather than to the taxing man. It also serves the purpose for which Section 174 of Act, is enacted. The Tribunal followed proper procedure by applying Section 174(1) of Act, for determining the gross annual value. The impugned orders passed by High Court are set aside and the order of the Tribunal is restored.

Tags : VALUATION PREMISES TAX PAYMENT