REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL No.3337 OF 2007

Harbanslal Malhotra & Sons  Pvt.Ltd. ….Appellant(s)

VERSUS

Kolkata Municipal Corpn. & Anr.     …Respondent(s)

J U D G M E N T

Abhay Manohar Sapre, J.

1) This appeal is filed against the final judgment

and orders dated 28.06.2004 passed by the High

Court of Kolkata in C.O. No.368 of 2004 whereby

the  Single  Judge  of  the  High  Court  allowed  the

revision filed by the respondents herein, set aside

the  judgment/order  dated  18.11.2002  passed  by

the  Municipal  Assessment  Tribunal  (hereinafter

referred  to  as  “the  Tribunal”),  Kolkata  in  M.A.A.

No.1701  of  1996  and  remanded  the  case  to  the

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Tribunal  to re-determine the  annual  value  of  the

premises  and  also  against  an  order  dated

17.08.2005  passed  in  Review  Application  being

Review  Application  No.  2963  of  2004  in  C.O.

No.368  of  2004  arising  out  of  order  dated

28.06.2004 passed in C.O. No.368 of 2004.  

2) The issue involved in the appeal lies in narrow

compass. However, in order to appreciate the short

controversy, few relevant facts need mention infra.

3) The  appellant  is  the  owner  of  the  premises

bearing  No.  226/2  situated  at  A.J.C.  Bose  Road,

Kolkata- 700020.  It consists of two-storey building

and  some  land  appurtenant  thereto  (hereinafter

referred  to  as  "the  premises”).  This  premises  is

assessed to payment of tax under the provisions of

the  Calcutta  Municipal  Corporation  Act,  1980

(hereinafter referred to as “the Act”).

4) The question arose while making assessment

of the premises for the Assessment Years 1988-89

(3rd quarter) and 1994-95 (3rd quarter) before the

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Assessing Authority (Hearing Officer), as to what is

the  proper  annual  value  of  the  premises  and

secondly,  how  it  should  be  determined  under

Section 174 of  the Act  for  payment of  tax on the

premises.

5) By two orders dated 22.06.1996, the Assessing

Officer (Hearing Officer) determined the valuation of

the premises.   So far  as annual valuation for  the

Assessment  Year  (1988-89)  (3rd quarter)  is

concerned, it was done at Rs.59,400/-, whereas so

far as it was for the Assessment Year (1994-95) (3rd

quarter)  is  concerned,  the  same  was  done  at

Rs.4,25,600/-.     

6) The appellants (assessee), felt aggrieved of the

orders of Assessing Officer, filed two appeals before

the Tribunal. So far as the order pertaining to the

period  (1988-89),  valuing  the  premises  at

Rs.59,400/-  was  concerned,  the  appellant  filed

appeal being M.A.A. No. 1702 of 1996 whereas so

far as the order relating to period (1994-95), valuing

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the premises at Rs.4,25,600/- was concerned, the

appellant filed appeal being M.A.A. 1701 of 1996.  

7) Both the  appeals  were  heard analogously  by

the Tribunal and were disposed of by common order

dated 18.11.2002.   So far as M.A.A. No. 1702/96 is

concerned,  it  was  dismissed  by  upholding  the

valuation whereas M.A.A. No. 1701/96, was allowed

in  part  wherein  the  Tribunal  reduced the  annual

valuation  made  by  the  Assessing  Officer,  from

Rs.4,25,000/-  to  Rs.75,400/-.  The  Tribunal  held

that  the  annual  valuation  of  the  premises  which

was  made  at  Rs.4,25,000/-  by  the  Assessing

Authority was wrong and should have been done at

Rs.75,400/-  in  accordance  with  the  procedure

prescribed in Section 174 (1).    

8) 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

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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.  

9) The  owner  (assessee),  felt  aggrieved  of  the

order of the High Court, filed this  appeal by way of

special leave before this Court.  

10) Heard Mr. Amit Sibal, learned senior counsel

for  the appellants and Mr.  L.C. Agrawala,  learned

counsel for the respondents.

11) Having  heard  the  learned  counsel  for  the

parties and on perusal of the record of the case, we

are  inclined  to  allow  the  appeal,  set  aside  the

impugned order and restore that of the Tribunal.

12)  Part-IV of  the  Act  deals with the  subject  of

"Taxation".   Chapter-XII  therein  deals  with  the

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powers of Taxation and Consolidated Rates. Clause

C provides the method as to how the determination

of Annual Valuation of any land or/and building is

done. Sections 174 and 178 of the Act are relevant

for the disposal of the appeal.  They need mention

infra:

Section 174 “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 per  cent,  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 where 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

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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, but 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.

(2) The annual value of any land which is not built upon shall be fixed at seven per cent of the estimated market value of the land.

(3)  If  the gross annual  rent of  any class or classes of land or buildings used exclusively for  hospital  or  educational  purposes  or  for the  purposes  of  sports  or  as  a  place  of worship or as a place for disposal of the dead cannot be easily estimated, the gross annual rent of such building shall be deemed to be five  per  cent  of  the  value  of  the  building obtained  by  adding  the  estimated  cost  of erecting  the  building  at  the  time  of assessment  less  a  reasonable  amount to  be deducted on account of depreciation, if any, to the estimated present market value of the

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land valued with the building as part of the same premises.

(4) In the case of any land or building or part thereof  used  for  public  cinema  shows  or theatrical  performances  or  as  a  place  of similar  public  recreation,  amusement  or entertainment, the gross annual rent of such land or building or part thereof, as the case may be, shall be deemed to be seven and a half per cent of the gross annual receipts in respect  of  such cinema shows or  theatrical performances  or  place  of  public  recreation, amusement  or  entertainment,  including receipts  from  rent  and  advertisements  and sale of admission tickets but excluding taxes on the same of such tickets:

Provided  that  the  provisions  of  this sub-section  shall  not  apply  in  the  case  of temporary  fairs,  circuses,  and casual  shows or performances.

(4A) If the gross annual rent of any land or building  or  part  thereof  cannot  be  easily estimated, the gross annual rent of such land or building for the purposes of sub-section (1) shall be deemed to be seven and half per cent of  the  value  of  the  building  obtained  by adding the estimated present cost of erecting the building at the time of assessment less a reasonable  amount  to  be  deducted  on account  of  depreciation,  if  any,  to  the estimated present market value of the land: Provided  that  the  estimated  present  cost shall  not  include  the  cost  of  any  plant  or machinery,  excepting  those  enumerated  in Schedule VIII, on the land or the building as aforesaid.

(5)  The  annual  value  as  determined  under this  Chapter  shall  be  rounded  off  to  the nearest ten rupees."

Section 178

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178.  Municipal  Assessment  Code-(1)  The State Government may by rules provide for the detailed procedure for determination of the  annual  value  of  lands  or  buildings  in Calcutta  and  for  other  matters  connected therewith and such rules together with any regulations  made  under  this  Act  shall constitute the Municipal Assessment Code. (2) Under the rules as aforesaid-

(i) every  building  together  with  the  site and the land appurtenant thereto shall be assessed as a single unit:

Provided  that  where  portions  of  any building together with the site and the land appurtenant  thereto  are  vertically  divisible and are separately owned so as to be entirely independent  and  capable  of  separate enjoyment  notwithstanding  the  fact  the access  to  such  separate  portions  is  made through  a  common  passage  or  a  common staircase,  such  separately  owned  portions may be assessed separately:

Provided further that the right of such access  is  protected by a  registered  deed of agreement:

(ii) all  lands  and  buildings  to  the  extent these are contiguous or are within the same  cartilage  or  are  on  the  same foundation and are owned by the same owner  or  co-owners  as  an  undivided property,  shall  be  treated as one unit for  the  purpose  of  assessment  under this Act:

Provided that if such land or building is sub-divided  into  separate  shares  which  are not  entirely  independent  and  capable  of separate  enjoyment,  the  Municipal Commissioner  on  application  from  the owners  or  co-owners  may  apportion  the valuation  and  assessment  among  the co-owners  according  to  the  value  of  their respective shares treating the entire land or building as  a single unit:

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(iii) each  residential  unit  with  its percentage of the undivided interest in the  common  areas  and  facilities constructed or purchased and owned by or  under  the  control  of  any  housing co-operative  society  registered  under the West Bengal Co-operative Societies Act,  1973  (West  Ben.  Act  XXXVIII  of 1973), shall be assessed separately:

(iv) each  apartment  and  its  percentage  of the undivided interest in the common areas  and  the  facilities  in  a  building within the meaning of the West Bengal Apartment Ownership Act,  1972 (West Ben. Act XVI of 1972), a declaration in respect  of  which  has  been  duly executed  and  registered  under  the provisions of that Act, shall be assessed separately:

(v) every  land  comprised  in  a  thika tenancy  with  hut  or  building  made thereon,  either  in  a  bustee  or otherwise, shall be assessed separately as a single unit:

(vi) every  land,  which  is  not  build  upon, comprised in a thika tenancy, either in a bustee or otherwise shall be assessed separately as a single unit.

(3) Notwithstanding  the  assessment  made before the commencement of this Act, the Municipal Commissioner on his own may  amalgamate  or  separate  or continue to assess as such, as the case may be, lands or buildings or portions thereof so as to ensure conformity with the provisions of this section.

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(4) If the ownership of any land or building or a portion thereof is sub-divided into separate  shares  or  if  more  than  one land or building or portions thereof by amalgamation  come  under  one ownership, the Municipal Commissioner may on an application from the owners or co-owners,  separate or amalgamate, as  the  case  may  be,  such  lands  or buildings  or  portions  thereof  so  as  to ensure conformity with the provisions of this section.

(5) A  newly  constructed  building  shall become  assessable  from  the  quarter following  the  date  of  issue  of  the occupancy  certificate  under  the provisions of this Act:

Provided  that  is  such  building  is occupied before the issue of  the occupancy certificate in contravention of the provisions of this Act, such building shall be liable for assessment  from  the  quarter  following  the date  of  its  occupation  and notwithstanding any  other  action  that  may  be  taken  under this  Act,  such  building  shall  not  get  the benefit of the rebate in the consolidate rate under sub-section(5) of section 171.

(6) The  Municipal  Commissioner  shall, upon an application made in this behalf by  an  owner,  lessee  or  sub-lessee  or occupier  of  any  land  or  building  and upon payment of such fees as may be determined  by  the  Corporation  by regulations, furnish information to such person  regarding  the  appointment  of the  consolidated  rate  of  such  land  or building  among  the  several  occupiers within  such  land  or  building  for  the current  period  or  the  period immediately preceding:

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Provided  that  nothing  in  this sub-section  shall  prevent  the  Corporation from  recovering  the  dues  form  any  such person.”

13) Reading  of  Section  174  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.  

14) 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

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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.

15) 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.  

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16) 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.

17) 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.

18) In all the situations set out above, the land or

the building or any part thereof would be taken as

“single unit” and not separate for determining the

gross  annual  rental  value.  It  is  also  clear  from

Section 178(2)(i) and (ii), which provides that every

building  together  with  the  site  and  the  land

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appurtenant thereto shall be assessed as a “single

unit”.  

19) However,  the  three  provisos  appended  to

clause(i) of Section 178 (2) also relates to building

and the land but with different class of cases due to

building's  peculiar structure, its ownership and the

manner in which such building or land is used by

the owner.  

20) If  the  factors  set  out  in  any  of  the  three

provisos were found present in any building or land,

the assessment of such building and land has to be

done  as  per  the  procedure  prescribed  in  the

provisos read with Section 174(1) of the Act.

21)   Now coming to the later category of the cases,

i.e.,  "open land" or  "land on which no building is

built",  it  falls  in  sub-section(2)  of  Section  174.  It

says that the annual market value of  “open land”

would  be  fixed  at  seven percent  of  the  estimated

market value of the open land.  

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22) We  are,  therefore,  of  the  considered  opinion

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.  

23) 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.

24) 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

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liberally. (See G.P Singh -Principles of Interpretation

of Statutory Interpretation 13th  Edition page 856).

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 is enacted.     

25)  Coming now to the facts of the case, we find

that  the  High  Court  while  remanding  the  case

directed the Tribunal to treat land and building of

the premises as separate unit and then to determine

the gross annual value of the premises by applying

Section 174 (1) and (2) of the Act.   

26) The  view  taken  by  the  High  Court  does  not

command its acceptance to us in the light of what

we  have  held  above.  We,  however,  find  that  the

Tribunal  followed  proper  procedure  by  applying

Section  174(1)  for  determining  the  gross  annual

value.  The Tribunal’s order, therefore, deserves to

be restored.

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27) In  the  result,  the  appeal  succeeds  and  is

allowed. The impugned orders dated 28.06.2004 in

C.O.  No.368  of  2004  and  dated  17.08.2005  in

Review Application No. 2963 of 2004 in C.O. No.368

of 2004 are set aside and the order of the Tribunal

dated 18.11.2002 is  restored.

               ………...................................J.

[R.K. AGRAWAL]             

  ……..................................J.          [ABHAY MANOHAR SAPRE]

New Delhi; September 05, 2017  

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