Judgement Consolidated Appeals (Nos. 7 and 8 of 1943) from a judgment and two decrees of the High Court (January 29, 1941), which had affirmed a judgment and two decrees of the Subordinate Judge of Law. Rep. 71 Ind. App. 113 ( 1943- 1944) Madras and Southern Mahratta v. Bezwada Municipality 29 Bezwada (March 31, 1937). These appeals arose out of two suits brought by the appellants, the Madras and Southern Mahratta Railway Co., Ld., for a refund of property tax levied by the respondents, the Municipal Council, Bezwada, under the Madras District Municipalities Act, 1920, as amended to 1933, for the quinquennium beginning 1931-32 on vacant lands belonging to the appellants in the respondent municipality. The question was whether the provisions of the Act had been complied with in substance and effect by the respondents in levying the tax in question. On March 15, 1929, the local self-government department of the government of Madras issued a notification regarding instructions for the assessment of railway buildings and land with effect from 1929-30, and which provided, inter alia, that " with the concurrence of the government of India, the local “ government are pleased to issue the following instructions " for the assessment of railway buildings and lands to property " tax in municipalities .... (1.) The annual value of " buildings of a class not ordinarily let shall be deemed to be " six per cent, of their book value for a period of five years " after their first constructions. (2.) In the case of other “buildings and lands after a period of five years after construction in the case of buildings mentioned in sub-para. (1.) " above, the annual value shall be fixed once in every five " years in accordance with s. 82 of the Madras District " Municipalities Act, 1920 . . . ." On February 8, 1930, the respondents wrote to the appellants calling on them to pay Rs. 17,558-6-0 as the tax on the appellants vacant lands for the year 1929-30 only. The appellants objected to the assessment, and on March 12, 1932, the respondents wrote to the appellants convening a valuation committee, which included a representative of the appellants, for fixing the valuation of vacant sites belonging to the appellants at Bezwada for the quinquennium 1931-36. 17,558-6-0 as the tax on the appellants vacant lands for the year 1929-30 only. The appellants objected to the assessment, and on March 12, 1932, the respondents wrote to the appellants convening a valuation committee, which included a representative of the appellants, for fixing the valuation of vacant sites belonging to the appellants at Bezwada for the quinquennium 1931-36. The valuation committee met on March 19, 1932, and arrived at the capital value of the vacant sites and calculated the annual value thereon at six per cent, of the capital value for the quinquennium beginning April 1, 1931, and ending on March 31, 1936. In accordance with that valuation the respondents levied Rs. 20,508-12-0 as the land tax due on the appellants vacant sites for the first year, 1931-32, calculated at 16J per cent, per annum of the annual value arrived at by the committee, and called on the appellants to pay that tax. Similar demand notices were issued for the successive years of the quinquennium 1931-36, based on the valuation adopted for the first year. The appellants, aggrieved by the decision of the valuation committee, applied to the Collector of the Kistna District on January 26, 1933, for his ruling, and on February 12, 1933, the Collector decided that no appeal in the ordinary sense of the term had been filed against the decision of the valuation committee, and so the valuation of the valuation committee held good. Between March 16, 1933, and January 12, 1935, the appellants paid a total sum of Rs. 71,637-12-4 for the years 1932-33, 1933-34 and 1934-35. The payments were made under protest and without prejudice to any claim for refund. The appellants having failed in further representations to the government of Madras and to the railway board of the government of India thereupon instituted the suits out of which these appeals arose, the first on March 28, 1935, for the refund of the tax levied for the year 1931-32 ; the second on July 4, 1935, for the refund of the tax levied for the three years 1932-33, 1933-34 and 1934-35. The Subordinate Judge tried both suits together, and held that the provisions of the District Municipalities Act, 1920, had been in effect complied with, and that therefore no suit could be brought in any court to recover any sum of money collected under the authority of the Act as provided by s. 354 of the Act. On appeal, the High Court (Pandrang Row and Somayya JJ.), in a judgment delivered by Somayya J., inter alia, rejected the appellants contention that the respondents had violated the express provisions of sub-s. 2 of s. 82 of the Act and had made no attempt to find out the gross annual rent at which the appellants lands might reasonably be expected to let, but had followed the procedure Law. Rep. 71 Ind. App. 113 ( 1943- 1944) Madras and Southern Mahratta v. Bezwada Municipality 30 fixed for another class of property, namely, buildings belonging to government or a railway company or of a class not ordinarily let, and in the result the High Court dismissed the appeal. By the Madras District Municipalities Act, 1920, as amended to 1933 — “81.—(1.) If the council by a resolution determines that " a property tax shall be levied, such tax shall be levied on " all buildings and lands within municipal limits save those " exempted by or under this Act or any other law. The " property tax may comprise— " (a) a tax for general purposes ; " (b) a water and drainage tax .... * * * * " (2.) Save as otherwise provided in this Act, these taxes " shall be levied at such percentages of the annual value of "lands or buildings or both as may be fixed by the municipal " council, subject to the provisions of s. 78. * * * * " (2.) Save as otherwise provided in this Act, these taxes " shall be levied at such percentages of the annual value of "lands or buildings or both as may be fixed by the municipal " council, subject to the provisions of s. 78. " (3.) The municipal council may, in the case of lands which " are not used exclusively for agricultural purposes and are " not occupied by, or adjacent and appurtenant to, buildings, " levy these taxes at such percentages of the capital value of " such lands or at such rates with reference to the extent of " of such lands, as it may fix " Provided that such percentages or rates shall not exceed " the maxima, if any, fixed by the Local Government and " that the capital value of such lands shall be determined in " such manner as may be prescribed. " (4.) (a) The municipal council may, in the case of lands " used exclusively for agricultural purposes, levy these taxes " at such proportions as it may fix of the annual value of such " lands as calculated in accordance with the provisions of " s. 79 of the Madras Local Boards Act, 1920." * * * * * "82.—(1.) Every building shall be assessed together with " its site and other adjacent premises occupied as an appurtenance thereto unless the owner of the building is a different " person from the owner of such site or premises. "(2.) The annual value of k ids and buildings shall be " deemed to be the gross annual rent at which they may " reasonably be expected to let from month to month or " from year to year less a deduction, in the case of buildings " only, of ten per centum of such annual rent and the said " deduction shall be in lieu of all allowance for repairs or on " any other account whatever " Provided that— " (a) in the case of— " (i.) any Government or railway building or " (ii.) any building of a class not ordinarily let the " gross annual rent of which cannot, in the opinion of the " executive authority, be estimated, " the annual value of the premises shall be deemed to be " six per cent, of the total of the estimated value of the land “and the estimated present cost of erecting the building " after deducting for depreciation a reasonable amount “which shall in no case be lessthan ten per centum of such "cost; ..." Law. Rep. 71 Ind. App. 113 ( 1943- 1944) Madras and Southern Mahratta v. Bezwada Municipality 31 1944. Feb. 1, 2, 3. Tucker K.C. and Handoo for the appellants. The respondents say that they are not able to state in the case of the appellants vacant lands, which are not ordinarily let, what is the rent at which they might reasonably be expected to be let, and they therefore take the capital value and take six per cent, of that as the annual value. Under English law, if it is difficult to compare a hereditament with similar hereditaments for the purpose of arriving at the rent which a hypothetical tenant would pay, there are two methods of procedure, (a) the profits basis, and (b) the contractors basis—percentage of cost less depreciation. Under the Valuation (Metropolis) Act, 1869, you are directed to find the annual value according to the rent which a tenant would pay, and the words of the Rating and Valuation Act, 1925, are almost the same. In India under the Act of 1920, by s. 81, sub-s. 3, you may levy tax on a percentage of the capital value, or it can be assessed on so much per eighty square yards, in other words, an extent basis. In India under the Act of 1920, by s. 81, sub-s. 3, you may levy tax on a percentage of the capital value, or it can be assessed on so much per eighty square yards, in other words, an extent basis. Under s. 81, sub-s. 3, the capital value is not left entirely to the discretion of the municipality, and the method of determining it must conform to the rules laid down by the local government. There is no such provision under s. 82, sub-s. 2, for the purpose of getting annual value, which gives the local government control for calculating the capital value. Here the municipality cannot proceed under s. 81, sub-s. 3, to arrive at capital value because no rules have been made. Under s. 81, sub-s. 2, the property tax must be levied at a percentage of the annual value save in cases otherwise provided for, and the only case where there is provision to the contrary is s. 81, sub-s. 3, which, as stated, is ineffective in the absence of rules. The respondents, proceeding under sub-s. 2 of s. 82, have applied a method of ascertaining the annual value which is impliedly forbidden by the wording of the sub-section. They cannot rely on the fact that if they had been able to tax under s. 81, sub-s. 3, they could rightly have done so, because there is no power to assess under that sub-section in the absence of rules ; the word " may " therein means that the local government " are " to make rules. On the true construction of ss. 81 and 82 of the Act of 1920, as amended, the Act directs that the only basis of ascertaining the annual value of the appellants vacant lands for the purposes of assessment to property tax is the " rental basis," i.e., by taking the annual value as the gross annual rent at which such lands might reasonably be expected to let from month to month or from year to year, and not by the capital value method adopted by the respondents. On such construction, the Act impliedly forbids the adoption of the " contractors " or percentage of capital value basis in respect of vacant lands, except in the case of lands of the class described in s. 81, sub-s. 3, of the Act. On such construction, the Act impliedly forbids the adoption of the " contractors " or percentage of capital value basis in respect of vacant lands, except in the case of lands of the class described in s. 81, sub-s. 3, of the Act. It is a condition precedent of the municipalitys right to assess the value of any lands under s. 81, sub-s. 3, that the local government shall have prescribed the manner in which capital value of the lands in question shall be determined, and in the present case no such manner has been so prescribed. Craig Henderson K.C. and Khambatta for the respondents. The whole question is whether the respondents committed any illegality in fixing the assessment as they did. It is a wrong view that the respondents cannot carry out s. 81, sub-s. 3, because no rules have been made. The definition in s. 82, sub-s. 2, must be read into s. 81, sub-s. 2. The question here is precisely similar in principle to what has been dealt with in the English authorities ; it is for the tribunal of assessment to deal with it as a question of fact—to find the rent a hypothetical tenant would have to pay. There is no evidence to contradict the statement of the chairman that he and also his advisory committee found no other way possible of arriving at annual value than by taking a percentage of the capital value of the lands. That method is one which on general principle they can lawfully adopt. If they cannot adopt this method there is no method by which they can fulfil their duty of ascertaining annual value. Two things would then happen, either they must give up the attempt, and they cannot levy the tax under s. 81, sub-s. 2, or they must make a guess. Either of those aspects would be obnoxious, and an interpretation which leads to that should not be accepted. There is an alternative, of course, only for the particular cases under s. 81, sub-s. 3. The profits basis cannot be applied in this case because this is a tax on vacant lands. Under s. 81, sub-s. 2, taking it generally, there is nothing to prevent the respondents from Law. Rep. 71 Ind. App. There is an alternative, of course, only for the particular cases under s. 81, sub-s. 3. The profits basis cannot be applied in this case because this is a tax on vacant lands. Under s. 81, sub-s. 2, taking it generally, there is nothing to prevent the respondents from Law. Rep. 71 Ind. App. 113 ( 1943- 1944) Madras and Southern Mahratta v. Bezwada Municipality 32 valuing on capital value, and in this particular case there has been such a valuation. Under s. 82, sub-s. 3, they can assess in a particular way if they chose, and absence of rules cannot relieve the council of their duty of levying taxes in accordance with a valid resolution. Justices of Middlesex v. The Queen (( 1884) 9 App. Cas. 757, 769 et seq.) is the same in this respect, that if the absence of rules is bad, then the whole effect of the amended act is barred to the taxing authority. [Reference was also made to Caldow v. Pixell (( 1877) 2 C. P. D. 562, 566.), where the section in question was " to be construed " as directory and not as imperative."] Here " may " should be read as directory. The appellants two arguments, taken together, are that in a case where there is no evidence of letting value, and there is therefore no other way of finding annual value than by using the capital value basis, you are debarred from s. 81, sub-s. 2, entirely, and also from s. 81, sub-s. 3, because of absence of rules. That argument makes the whole Act inoperative. The appellants main argument is on the proviso to sub-s. 2 of s. 82 ; the proviso, they say, relates expressly only to buildings, and does not touch lands. This proviso has been misconstrued by the appellants ; its true construction is not to restrict to the case of the buildings mentioned in the proviso the method of valuation by capital value, it recognizes that in the cases there mentioned the only method is valuation by capital value. The importance and object of the proviso is to be found in the words " six " per cent.," the object being to fix by legislation what is to be taken to be the annual value, not leaving it to the assessing authority to determine. The importance and object of the proviso is to be found in the words " six " per cent.," the object being to fix by legislation what is to be taken to be the annual value, not leaving it to the assessing authority to determine. The interpretation of provisos was dealt with by Lord Watson in West Derby Union v. Metropolitan Life Assurance Society ([ 1897] A. C. 647, 652.). There is nothing to be found in s. 82 which hampers the respondents in the exercise of the capital value under s. 81, sub-s. 2. The respondents have complied strictly with all that they were required to do under s. 78. Tucker K.C. replied. So far from it being impossible on the evidence to ascertain the rental value the contrary is the case. It cannot be said that the failure to prescribe rules will defeat the object of the Act, which is to raise a property tax. [On the construction of the proviso to sub-s. 2 of s. 82 reference was made to Guardians of West Derby Union v. Metropolitan Life Assurance Society ([ 1897] 1 Ch. 335, 347.), and to Halsburys Laws of England, 2nd ed., vol. 31, p. 484, para. 605.] It is not so much a question of implication as of construction, whether within the meaning of s. 82, sub-s. 2, the annual value can be ascertained by a method which is only applicable to annual value of a particular class. March 30. The judgment of their Lordships was delivered by Lord Macmillan. The appellants, the Madras and Southern Mahratta Railway Co., Ld., own certain vacant lands within the municipality of Bezwada. These lands are admittedly subject to the property tax which the respondents, the Bezwada Municipality, are empowered to levy. The question for decision in these consolidated appeals is whether the respondents acted within their statutory powers in ascertaining the annual value of the lands for the purpose of imposing the tax. The method which the respondents adopted to arrive at the annual value of the lands was first to ascertain their capital value, which they did by reckoning them at so much per square yard, and they then took six per cent, of the capital value as representing the annual value. On the annual value so calculated they imposed property tax at the rate of 16J per cent, per annum. On the annual value so calculated they imposed property tax at the rate of 16J per cent, per annum. The appellants under protest paid the assessments made on them in each of the four financial years ending on March 31 in 1932, 1933, 1934 and 1935. They now seek to have these payments refunded as having been illegally exacted. In this they have been unsuccessful in both the courts in India. Many points were raised and many topics were discussed in the course of the proceedings in India, but before their Lordships the appellants both in their printed case and in their arguments at the bar concentrated on one main ground of attack, namely, that on a sound construction of the respondents statutory powers the method adopted by the respondents of fixing the annual value of the lands in question was not permissible. If they failed to make good this point the appellants did not contend that they could otherwise succeed. The taxing powers of the respondents are conferred on them by the Madras District Municipalities Law. Rep. 71 Ind. App. 113 ( 1943- 1944) Madras and Southern Mahratta v. Bezwada Municipality 33 Act, 1920, as amended by subsequent legislation. Their Lordships take the Act as it stood at the relevant period. By s. 78 every municipal council is empowered to levy, inter alia, a property tax, and any resolution of a municipal council determining to levy a tax is required to specify the rate at which, and the date from which, it shall be levied. Sects. 81 and 82 deal with the levying and assessment of property tax, and the argument turned on the interpretation of these sections. [His Lordship read the material provisions of ss. 81 and 82 (set out above) and continued ] By a resolution dated January 29, 1932, the respondents resolved to levy property tax within their municipality at certain specified rates. The terms of this resolution give rise to some questions, but the assessment on the appellants was not challenged by them before their Lordships on the ground that there had been no effective resolution to levy property tax. It will be observed that under s. 81, sub-s. 2, the property tax, save as otherwise provided in the Act, is to be levied at a percentage of " the " annual value of lands or buildings or both." Sub-sect. It will be observed that under s. 81, sub-s. 2, the property tax, save as otherwise provided in the Act, is to be levied at a percentage of " the " annual value of lands or buildings or both." Sub-sect. 3 otherwise provides, inasmuch as it permits, but does not enjoin, the levying of the tax " in the case of lands which are not used " exclusively for agricultural purposes and are not occupied " by, or adjacent and appurtenant to, buildings" either at a percentage of the capital value of such lands or at such rates with reference to the extent of such lands as the municipal council may fix, subject to compliance with the proviso to the sub-section. If either of the alternative methods permitted by sub-s. 3 is adopted the assessment is not on annual value. Appropriate as this sub-section was to the case of the appellants lands the respondents did not in fact avail themselves of it in making the assessment complained of. In particular, they did not levy the tax at a percentage of the capital value of the appellants lands ; they levied it at a percentage on their annual value. Sect. 82, sub-s. 2, prescribes how the annual value of lands and buildings is to be ascertained. It is to be deemed to be the gross annual rent at which they may reasonably be expected to let from month to month or from year to year, less ten per cent, in the case of buildings. The spectre of the hypothetical tenant, so familiar an apparition in English rating law, is here invoked. The appellants did not dispute that, if this sub-section had not had a proviso appended to it, it would have been open to the respondents to resort to any of the recognized methods of arriving at the rent which a hypothetical tenant might reasonably be expected to pay for the lands in question, including the method of taking a percentage of their capital value. But the proviso, they say, makes all the difference. It expressly enjoins resort to this last-mentioned method of arriving at annual value in the case of two specified classes of buildings. Therefore, they say, resort to this method is by necessary implication prohibited in every other case, and in particular in the case of their lands. But the proviso, they say, makes all the difference. It expressly enjoins resort to this last-mentioned method of arriving at annual value in the case of two specified classes of buildings. Therefore, they say, resort to this method is by necessary implication prohibited in every other case, and in particular in the case of their lands. The respondents contest this reading, and maintain that the proviso does not impliedly prohibit resort to capital value as a means of getting at annual value in every case not covered by the proviso, and that the chief purpose of the proviso is to be found in the limitation to six per cent which it contains. Their Lordships cannot accept the appellants argument, which, in their opinion, involves a misinterpretation of the effect of the proviso. The proviso does not say that the method of arriving at annual value by taking a percentage of capital value is be to utilized only in the case of the classes of buildings to which the proviso applies. It leaves the generality of the substantive enactment in the sub-section unqualified except in so far as concerns the particular subjects to which the proviso relates. The proper function of a proviso is to except and deal with a case which would otherwise fall within the general language of the main enactment, and its effect is confined to that case. Where, as in the present case, the language of the main enactment is clear and unambiguous, a proviso can have no repercussion on the interpretation of the main enactment, so as to exclude from it by implication what clearly falls within its express terms. It follows that in their Lordships opinion the respondents were not precluded from adopting a percentage of the capital value of the appellants lands as a method of ascertaining their annual value for the purpose of the imposition of property tax merely by reason of the fact that this method is specifically enjoined in the particular instances mentioned in the proviso and that their lands are not included in these instances. Law. Rep. 71 Ind. App. 113 ( 1943- 1944) Madras and Southern Mahratta v. Bezwada Municipality 34 This is sufficient for the disposal of the case as presented before their Lordships. Before taking leave of it, however, they think it right to advert to certain matters which were incidentally brought to their notice. Law. Rep. 71 Ind. App. 113 ( 1943- 1944) Madras and Southern Mahratta v. Bezwada Municipality 34 This is sufficient for the disposal of the case as presented before their Lordships. Before taking leave of it, however, they think it right to advert to certain matters which were incidentally brought to their notice. The resolution, already referred to, by which the respondents resolved to levy property tax consists of two paragraphs. The first imposes property tax in general under s. 81 at a percentage of annual value for each component of the tax ; the second imposes what it calls M land tax," presumably a species of property tax, (i.) on agricultural lands at six per cent, per half year, and (2.) " on " other lands which fall under the category specified in s. 81, " sub-s. 3, at 1/2 per cent, of the capital value per half year." From this it would appear that the respondents were originally minded to exercise the option conferred on them by s. 81, sub-s. 3, and to assess lands such as those of the appellants not on annual value but on capital value. The local self-government department, however, took exception to this part of the resolution on the ground that the proviso to s. 81, sub-s. 3, required capital value to be " determined in such "manner as may be prescribed " ; that " prescribed " by s. 3, sub-s. 19, meant " prescribed by the local government by " rules made under this Act " ; that no such rules had been made ; and that consequently the portion of the resolution in question was unwarranted and could not receive effect. Before their Lordships the appellants supported this view. The respondents, on the other hand, maintained that if no rules were made they were nevertheless entitled to avail themselves of the capital method of valuation under s. 81, sub-s. 3, unfettered as to the manner in which they might determine capital value. In this they have the support of the judgment of the High Court. It seems that rules have now been made but railway lands are expressly excluded from their operation. The respondents do not appear to have rescinded the part of their resolution alleged by the department to be incompetent, or to have passed any amending resolution. In this they have the support of the judgment of the High Court. It seems that rules have now been made but railway lands are expressly excluded from their operation. The respondents do not appear to have rescinded the part of their resolution alleged by the department to be incompetent, or to have passed any amending resolution. So far as the appellants lands are concerned they seem simply to have ignored it, and to have invoked instead s. 82, sub-s. 2. They submitted an argument to the effect that the resolution did no more than fix the rates of the tax to be levied but did not commit the respondents to assessing any particular class of subjects in any particular way. The appellants not unnaturally do not seem to have objected to a departure from the capital value method under s. 81, sub-s. 3, for one per cent, per annum on capital value is more than 16 1/2 per cent, on annual value calculated at six per cent, on capital value. It is manifest that these topics are eminently debatable. As, however, the respondents did not in point of fact proceed under s. 81, sub-s. 3 ; as the appellants, so far from saying that they should have done so, maintained that the respondents could not lawfully have done so ; and as the controversy before their Lordships was confined to the mode of ascertaining annual value under s. 82, sub-s. 2, their Lordships, while mentioning those other topics, do not feel called on to make any pronouncement on them, and confine themselves to the matter which alone was directly raised before them and on which they have already expressed an opinion adverse to the appellants. There having, in their Lordships view, been compliance in substance and effect with the provisions of the Act, within the meaning of s. 354, sub-s. 2, the appellants cannot recover the assessments which they have paid. Their Lordships will accordingly humbly advise His Majesty that the consolidated appeals be dismissed. The appellants will pay the respondents costs of the appeals.