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PETITIONER: GUNTUR MUNICIPAL COUNCIL

       Vs.

RESPONDENT: GUNTUR TOWN RATE PAYERS’ ASSOCIATION

DATE OF JUDGMENT: 18/09/1970

BENCH: GROVER, A.N. BENCH: GROVER, A.N. SHAH, J.C.

CITATION:  1971 AIR  353            1971 SCR  (2) 423  1970 SCC  (2) 803  CITATOR INFO :  D          1974 SC1779  (20)  RF         1977 SC 308  (4,8)  R          1980 SC 541  (5,6,8,9,10)

ACT: Madras  District  Municipalities Act (5 of 1920),  s.  82(2) Rent at which buildings may reasonably be expected to be let from month to month-How determined.

HEADNOTE: The appellant Municipal Council effected (a general revision of  the  rental  values  of  houses  and  buildings  in  the municipality,   under  s.  82(2)  of  the  Madras   District Municipalities  Act, 1920, for the purpose of assessment  of tax. On the question whether the appellant was bound to make  the assessment  in  the  light of the  provisions  of  the  Rent Control Act, HELD:(a)  Under  s.  82(2) the test is  what  rent  the premises  can lawfully fetch if let out to  a  ’hypothetical tenant.   The  municipality  is  not  free  to  assess   any arbitrary  annual value but has to look to and is  bound  by the  fair  or the standard rent which would be  payable  for particular  premises  under the Rent Control  Act  in  force during the year of assessments [425 A-B] Corporation  of Calcutta v. Sm.  Padma Debi & Ors  [1962]  3 S.C.R. 49, followed. (b)No  distinction can be made between buildings the  fair rent of which has been actually fixed by the Controller  and those  in  respect  of which no such rent  has  been  fixed. Where  the  Controller  has  not fixed  the  fair  rent  the municipal  authorities will have to arrive at the fair  rent according  to the principles laid down in S. 4 of  the  Rent Control Act for the determination of fair rent. [425 F-G] (c)Under the rules contained in the Fourth Schedule to the Municipalities Act. the assessment books have to be  revised once  in every 5 years and the quinquennial assessment  thus made  enures  for  that period.  But a  procedure  has  been prescribed in the rules for changing the assessment whenever a case is made out for doing so.  Therefore, the  assessment of  valuation  for  the purpose of tax must  be  ’  made  in

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accordance  with and in the light of the provisions  of  the Rent  Control Act which would be in force during the  period of assessment.[426 B-C]

JUDGMENT: CIVIL  APPELLATE JURISDICTION : Civil Appeals Nos.  1650  to 1652 of 1966.  Appeals by special leave from the judgment and decree dated December 3, 1965 of the Andhra Pradesh High Court in  Second Appeals Nos. 367, 368 and 369 of 1962. B. V. Subrahmanyam and A. V. Rangam, for the appellant      (in all the appeals). M.Natesan  and K.  Jayaram, for the respondents  (in  all the appeals). 424 The Judgment of the Court was delivered by Grover, J. These appeals have been brought by special leave from a judgment of the Andhra Pradesh High Court. Three  suits,  namely, O.S. Nos. 222, 223 and 4 66  of  1960 were  filed in the Guntur court in which the relief  claimed was  for  a  declaration that the general  revision  of  the rental  values of the houses and buildings effected  by  the Guntur  Municipality  in the year 1960 for  the  purpose  of assessment  of  tax was ultra vires ,and illegal and  for  a consequential  relief of a permanent injunction  restraining the  municipality from acting on the special notices  issued to the tax payers. Section  81 of the Madras District Municipalites  Act  1920, hereinafter  called  the  "Municipalities  Act"  gives   the description  and  classes of property tax  and  other  taxes leviable  by the municipality.  Section 82 gives the  method of assessment.  It is provided by sub-s. (2) of that section that the annual value of lands and buildings shall be deemed to be the gross annual rent at which they may reasonably  be expected to be let from month to month or from year to  year less  certain deductions.  The District Munsif by  a  common judgment  delivered in the three suits held that the  annual value had to be computed in the context of the rent that was payable under the Rent Control legislation.  The suits  were decreed  and  a  declaration was granted  that  the  general revision  made  by  the  Guntur  Municipality  in  1960   by increasing  the  rental  value of houses to  more  than  the rental  value which prevailed on the dates provided  in  the Rent Control Acts in force prior to 1960 was ultra vires and illegal  and permanent injunctions were granted  restraining the municipality from acting upon the special demand notices issued  to the rate-payers and from collecting the  enhanced tax.   Appeals  were  filed and the  first  appellate  court substantially upheld the judgment of the trial court  though certain  modifications  were made in the decrees  passed  by that,  court.  Appeals were taken to the High Court but  the same were dismissed. The only point which we are called upon to decide is whether before  the  fixation  of a fair rent of  any  premises  the municipality  was bound to make assessment in the  light  of the  provisions  contained in the Rent Acts.   A  subsidiary question  has  also arisen whether the  courts  below  were justified in referring to and passing the decrees keeping in view  the  Rent Acts  which were in  force  prior  to  the enactment  of the Andhra Pradesh Buildings (Lease  Rent  and Eviction)  Control Act, 1960 hereafter called the "Act"  Now S.  82(2) of the Municipalites Act, as stated before,  makes Provision for the fixation- of annual value according to the

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rent’  at  which  lands  and  buildings  may  reasonably  be expected to be 425 let  from  month  to month or from year  to  year  less  the specified deduction.  The test essentially is what rent  the premises  can law,fully fetch if let out to  a  hypothetical tenant.   The  municipality is thus not free to  assess  any arbitrary  annual value and has to look to, and is bound  by the fair or the standard rent which. would be payable for a particular premises under the Rent Act in force during  the year of assessment.  In The Corporation of ,,Calcutta v. Sm. Padma Debi & Ors. (1) it was held that on a fair reading  of the  express  provisions  of S. 127 (a)   of  the  calcutta Municipal Act 1923 the annual rent could not be fixed higher than  the standard rent under the Rent Control  Act.   There them  Rent  Control Act of 1950 came into force  before  the assessment was finally determined and it was observed  that the  Corporation had no power to fix the annual  ’,valuation of  the  premises higher than the standard rent  under  that Act.  The learned counsel for the appellant has not made any attempt nor indeed he could do so to contest the above view. What has been stressed _by him is that s. 7 of the Act makes it clear that it is only after the fixation of the fair rent of a building that the landlord is debarred from claiming or receiving the payment of any amount ,in excess of such  fair rent.   It  is  urged that so long as the fair  rent of  a building  or  prenuses  is  not  fixed  the  assessment   of valuation a municipality need not be limited or governed  by the,  measure  :provided by the provisions of the  Act,  for determination  of  fair rent.  Logically such  buildings  or premises as are not let out to a tenant and are in the  self occupation of the landlords would also fall within the  same principle if no fair rent has even been fixed in respect  of them. We  are unable to agree that on the language of s. 82(2)  of the  Municipalities Act any distinction can be made  between buildings the fair rent of which has been actually fixed  by the  Controller and those, in respect of which no such  rent has  been  fixed.  It is perfectly clear that  the  landlord cannot  lawfully expect to get more rent than the fair  rent which is payable in accordance with the principles laid down in  the  Act.  The assessment of valuation  must  take  into account  the measure of fair rent as determinable under  the Act.  It may be that where the Controller has not fixed  the fair  rent the municipal authorities will have to arrive  at their  own figure of fair rent but that can be done  without any  difficulty by keeping in view the principles laid  down in  s.  4 of the Act for determination of fair  rent.   This would  of  course  be  with  regard  to  the  assessment  of valuation for the period subsequent to the coming into force of  the Act.  For the prior period it would be the Rent  Act in force during the year of assessment in the light (1)  [1962] 3 S. C. R. 49. 426 of the provisions of which the figure of the fair rent would have to be determined and assessment made accordingly. There  is a good deal of confusion in the judgments  of  the trial court and the first appellate court with regard to the Rent  Acts the provisions of which would have to be kept  in view  for the assessment of valuation for the purpose of  S. 82  (2) of the Municipalities Act.  The decrees  which  have been  granted suffer from the same infirmity.  It  has  been pointed out by the learned counsel for the respondents  that according  to the rules contained in the fourth schedule  to the  Municipalites  Act the I assessment books  have  to  be

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revised  once  in  every five  years  and  the  quinquennial assessment thus made enures for that period.  But it appears from  the  rules that a procedure has  been  prescribed  for changing  the  assessment whenever a case is  made  out  for doing  so.   We  are  not  concerned  with  the   procedural difficulties  which may be experienced; we have  to  declare what  the  law  is and as appears to be  well  settled.  the assessment of valuation for the purpose of tax must be  made in accordance with and in the light of the provisions of the Rent  Act  which  would be in force  during  the  period  of assessment. In  the  result  the decrees which ’have  been  granted  are hereby modified by declaring that the general revision  made by   the  Guntur  Municipality  by  increasing  the   rental valuation  of  houses  and buildings beyond  the  fair  rent determinable  under the Rent Act in force for the period  of assessment shall be illegal and ultra vires and a  permanent injunction.  shall issue restraining the  municipality  from realizing  any  amount in excess of such tax  which  may  be found due on the valuation fixed according to the principles laid   down  in  our  judgment.   In  view  of  the   entire circumstances  the parties are left to bear their own  costs in this Court. V.P.S. 427