JUDGMENT The plaintiff, the Coimbatore Cotton Mills Limited, who failed in the Courts below is the appellant. The plaintiff filed the suit questioning the legality and validity of the collection of a sum of Rs. 5,999 by the defendant, the Upplipalayam Panchayat, towards property tax and water-tax for the half year ending 36th January, 1960. The plaintiff is a limited company owning a cottonmill within the limits of the defendant-panchayat. The tax of the building was fixed in 1954 and for the half year ending 31st March, 1960, the plaintiff was assessed to a total tax of Rs. 4,110.14 nP. and the same has been collected by the Panchayat. In 1959, the panchayat with a view to improve the facilities for drainage, water supply, medical aid, education etc., passed a resolution, Exhibit B-2, dated nth August, 1959, increasing the property tax, the increase in the property tax to come into effect from 1st April, 1960. The resolution has fixed an enhancement of 10 per cent. over the then existing tax in respect of buildings where the assessment exceeded Rs. 1,000 per half year in the previous years. The panchayat also levied water tax of Rs. 1,974.46 nP. on a basis of 25 per cent. of the property tax levied under section 25 of the Madras Public Health Act. The Plaintiff paid in all a sum of Rs. 10,109.70 nP. and filed the suit for refund of Rs. 5,999.56 nP. questioning the enhancement of property tax and the levy of water tax. The trial Court while holding that this is a case in which the civil Court's jurisdiction is not ousted, awarded no relief to the plaintiff in the view that the levy of the additional tax was justified; The appellate Court made a short-work of the matter by holding that the civil Court's jurisdiction is ousted though in a superficial manner it has upheld the view of the trial Court and dismissed the appeal. At the outset, it is necessary to mention that it is not a general quinquennial enhancement or general revision but it is an enhancement of tax in the mid term based upon the resolution of the panchayat. At the outset, it is necessary to mention that it is not a general quinquennial enhancement or general revision but it is an enhancement of tax in the mid term based upon the resolution of the panchayat. The Panchayat passed a resolution on 11th August, 1959, that to provide facilities for drainage, housing scheme, medical, electricity, education etc., the Panchayat was increasing the property tax and to this resolution a list containing 20 items grading for enhancement. The list of 20 terns states: 1. Above Rs. 20 but below Rs. 30 Rs. 0-75 2. Above Rs. 30 but below Rs. 40 Rs. 1-00 3. Above Rs. 40 but below Rs. 60 Rs. 1-50 4. Above Rs. 60 but below Rs. 80 Rs. 2-00 5. Above Rs. 80 but below Rs. 100 Rs. 2-50 6. Above Rs. 100 but below Rs. 120 Rs. 3-00 7. Above Rs. 120 but below Rs. 140 Rs. 3-50 8. Above Rs. 140 but below Rs. 160 Rs. 4-00 9. Above Rs. 160 but below Rs. 180 Rs. 4-50 10. Above Rs. 180 but below Rs. 200 Rs. 5-00 11. Above Rs. 200 but below Rs. 240 Rs. 6-00 12. Above Rs. 240 but below Rs. 300 Rs. 7-50 13. Above Rs. 300 but below Rs. 400 Rs. 10-00 14. Above Rs. 400 but below Rs. 500 Rs. 15-00 15. Above Rs. 500 but below Rs. 600 Rs. 20-00 16. Above Rs. 600 but below Rs; 700 Rs. 25-00 17. Above Rs. 700 but below Rs. 800 Rs. 30-00 18. Above Rs. 800 but below Rs. 900 Rs. 40-00 19. Above Rs. 900 but below Rs. 1000 Rs. 50-00 20. Over Rs. 1,000 for every 100 and parts thereof to be calculated at 10 per cent. It will be noticed that the panchayat has merely fixed a progressive rate in the enhancement and admittedly thereof has been no re-valuation either with reference to the rental value or the capital value. Prior to Exhibit B-2, the appellant was paying 5 per cent. of the rental value and now it has been increased to 10 per cent. The evidence adduced on behalf of the Panchayat does not show how the value was fixed and in cross-examination D.W. 2, the Executive Officer of the Panchayat Board says that the basis adopted for the enhancement of the tax was the annual market value. of the rental value and now it has been increased to 10 per cent. The evidence adduced on behalf of the Panchayat does not show how the value was fixed and in cross-examination D.W. 2, the Executive Officer of the Panchayat Board says that the basis adopted for the enhancement of the tax was the annual market value. The Mill contains portions which are used for business purposes and some portions for residence and portions which are not let put at all. The complaint of the appellant is that even assuming that the Panchayat is entitled to adopt the progressive rate and increase 10 per cent. in cases where the annual rental value is over Rs. 1,000 the Panchayat can do so only after determining the value of the property as on the date of enhancement whether on the basis of rental value or on the basis of capital value. It simply took the value as was in 1954 when it levied the tax to Rs. 4,110-14 nP. and doubted it. The matter was adjourned repeatedly at the instance of learned Counsel for the Panchayat to explain and furnish data on the basis of which this enhancement of 10 per cent. was made and no particulars could be furnished. It was clear that what the Panchayat did was only to take the annual value made in 1954 and the property tax then levied and then double it. I am of the view that this is clearly wrong and the enhancement of the tax cannot be justified. Learned Counsel for the appellant urges that in the case of buildings, there is depreciation year after year and in fixing the value, allowance will have to be made for the depreciation. Further where the property in question is a business premises like a Mill, annual rental value does not increase and a hypothetical tenant would not pay any increased rent even if there should be increase in the rents of other buildings in the neighbourhood. The question of what rent a hypothetical tenant would pay to a building cannot be answered in the abstract and it would depend upon the particular building and where it forms part of a Mill a rough and ready method of doubling the tax cannot be justified. The question of what rent a hypothetical tenant would pay to a building cannot be answered in the abstract and it would depend upon the particular building and where it forms part of a Mill a rough and ready method of doubling the tax cannot be justified. The question is not whether the plaintiff's Mill which is a commercial concern can afford to pay the enhanced tax but whether the Panchayat has adopted the proper procedure and gathered the necessary data for fixing the value, whether it is capital value or rental value. The evidence shows that the Panchayat did nothing of the kind. Next is the legality of the levy of water tax calculated at 25 per cent. of the property tax. For this the Panchayat relied upon section 25 of the Madras Public Health Act, 1939, the relevant portion of that section being in these terms: “(1) Any local authority may with the previous sanction of the Government, and shall, if so directed by them, levy within its area or any part thereof, any tax which may be necessary for providing water supply in such area or part. (2) Any tax levied under sub- section (1) may be a new tax levied on such basis assessed and realized in such manner as may be sanctioned or directed by the Government, or may be a tax or additional tax levied under any head of taxation specified in any law for the time being in for. c governing the local authority concerned in which case all the provisions of such a law relating to the incidence assessment or realization of a tax under such head or in any manner connected therewith shall be applicable to the tax or additional tax, with such modifications and restrictions, if any, as may be prescribed. (3) (a). The rates at which any tax may be levied under this section shall be determined by the local authority with the previous sanction of the Government in case the tax is levied by the local authority of its own motion, and by the Government in case the tax is levied at their direction. (b). The local authority may with the previous sanction of the Government and shall, if so directed by them, alter the rates at which any such tax is to be levied. (b). The local authority may with the previous sanction of the Government and shall, if so directed by them, alter the rates at which any such tax is to be levied. (4) (a) Every local authority levying a tax under this section shall earmark the net revenue therefrom for expenditure on the execution, maintenance and improvement of works of water-supply in the local area or part thereof within which it is levied. (b). Such revenue shall be expended in accordance with such orders as may be issued by the Government in this behalf. (Sub- section (5) omitted). The sanction of the Government is Exhibit B-3, dated 21st March, 1960 which is at follows : ORDER “Under section 25 of the Madras Public Health Act, 1939 (Madras Act III of 1939) the Government accord sanction to the levy by the Upplipalayam Panchayat in Coimbatore, of a water tax at 25 per, cent. (Twenty five per cent.) of the house tax levied tax in the area, with effect from 1st April, 1960. (By order of the Governor) (Sd.) Subrahmanyam, Deputy Secretary to Government.” After securing the sanction of the Government, the Panchayat merely published a general notice under Exhibit A-4, dated 26th March, 1960 levying the water tax on the abovesaid basis. The plaintiff objected to the enhancement of the property tax and the levy of water tax and his appeal to the Panchayat was dismissed under Exhibit A-7, dated 16th January, 1961, in these terms; “The Panchayat in its resolution No. 265, dated 9th December, 1960 has confirmed the tax of Rs. 10,109-70 on the above assessments.” The plaintiff issued the notice, Exhibit A-8, dated the 17th February, 1961 questioning the legality of the enhancement of the property tax and the levy of the water tax. In paragraph 6 of Exhibit A-8, while questioning the levy of water tax it was specifically mentioned that that there was no scheme as such for the panchayat for water supply and that there was no water supply by the Panchayat to the Buildings in question. In paragraph 6 of Exhibit A-8, while questioning the levy of water tax it was specifically mentioned that that there was no scheme as such for the panchayat for water supply and that there was no water supply by the Panchayat to the Buildings in question. To this a cryptic reply was sent by the Panchayat, Exhibit A-9, dated 19th April, 1961 as follows: “I enclose herewith a copy of resolution No. 336, dated 27th February, 1961 of this Panchayat in which the Panchayat has resolved that the levy of house tax on the properties of Coimbatore Cotton Mills Ltd., and Coimbatore Cotton Jubilee Mills Limited, have been fixed according to the powers of Panchayat vested under the Madras Village Panchayats Act, 1950. Further the levy of water tax has been made on the orders of the Government in G.O.Ms. No. 903, Health, dated 21st March, 1960. In this connection I wish to bring to your kind notice that the annual rental value which was existing prior to 1st April, 1960 to the Mill buildings has not been enhanced. The Panchayat has revised the rate of house tax at 10 per cent. instead of 5 per cent. on the existing annual rental value of the buildings whose annual rental value is above Rs. 1,000. According to the revised schedule of rates the mill buildings have been assessed with effect from 1st April, 1960, without any rise made in the valuation to that of the previous valuation. In the above circumstances, I wish to inform you that the levy of house tax including water tax on mill buildings is in order.” So far as the levy of water tax is concerned, nothing was mentioned except merely to refer to Exhibit B-3, the sanction of the Government authorising the Panchayat to levy water tax under section 25. Whether there was any proposal or scheme for water supply, when it would materialise etc; nothing was stated and the statement in Exhibit A-8, that the plaintiff's premises did not receive any water supply was not denied. In paragraph 7 in the plaint it was specifically mentioned that there was no scheme as such by the defendant for any supply of water, that the defendant was not at all supplying any water to the plaintiff and that the plaintiff had made arrangements for water supply to their Mills at enormous cost of their, own. In paragraph 7 in the plaint it was specifically mentioned that there was no scheme as such by the defendant for any supply of water, that the defendant was not at all supplying any water to the plaintiff and that the plaintiff had made arrangements for water supply to their Mills at enormous cost of their, own. In paragraph 7 of the written statement, it is simply stated that “the Panchayat is contemplating taking up of water supply scheme and that it is not correct to say that water tax could not be levied without supplying water to the plaintiff.” The contention of the learned Counsel for the appellant is that the Government, under section 25 of the Madras Public Health Act can sanction the levy of property tax only for providing water Supply and that there should be a present existing scheme to implement which (though it may in future) finance may be requisred and the Panchayat authorised to levy water tax under section 25. Learned Counsel for the appellant did not take up the extreme contention that it is only after the scheme is actually worked out and only after water is supplied that tax can ‘be levied. But he advanced the limited contention that even when the Panchayat can be authorised to levy water tax for providing water supply, the Panchayat must have a scheme which it has considered and finally resolved upon and only then it can approach the Government for sanction under section 25. In other words,. the contention of Mr. M.S. Venkatarama Iyer, the learned Counsel for the appellant is that it is not competant 10 the panchayat 10 merely ask for sanction under section 25 with some vague general idea to provide a scheme for water-supply, There must be a concrete scheme which must have been considered by the Panchayat on its merits and then to implement that scheme and for finance the Panchayat approach the Government under section 25 even though the actual watersupply may be in future. On this aspect too, the hearing of the second appeal, was adjourned on several occasions to enable the Panchayat to place the records and furnish the materials on the basis of which the Government gave the sanction, Exhibit B-3, i.e., to show whether the Panchayat has any concrete scheme. It is clear that the Panchayat till now has no such scheme. It is clear that the Panchayat till now has no such scheme. In fact, Exhibit B-5, the communication of the Government to the Panchayat dated 27th December, 1961, shows that the matter is yet to commence and it is still in the stage of investigation of a water supply scheme and the Government had written that the estimated cost of Rs. 4,000 for the investigation of the scheme itself should be borne by the Panchayat. The Executive Officer who has been examined as D.W 2 had not thrown any light whatsoever on this aspect of the matter even though that is the main complaint of the plaintiff. My attention was not drawn to any decision in which the Government had acted under section 25 even before the Panchayat has investigated into the matter and has resolved upon a particular scheme to secure water supply. The decision in Municipal Council v. Prasadarayadu A.I.R. 1936 Mad. 857, is easily distinguishable as that dealt with a case under section 81 of the District Municipalities Act where the language is,” hereafter to be provided.” There is also the further fact that no data has been furnished by the Panchayat as to how water tax was fixed on the basis of 25 per cent. of the property tax and there is no material to indicate that the Government bestowed any thought in the matter in sanctioning at this percentage which is undoubtedly very stiff and high. A careful scrutiny of the sub- sections of section 25 of the Act shows that the Panchayat must have a concrete scheme, “must have an estimate of the actual expenses and the recurring expenses, etc. so that the total capital investment and the recurring expenses, may be recovered from the rate-payers in a phased programme. In my view, it is absolutely necessary that there must be a concrete scheme and an estimate and everything should be placed before the Government who is the ultimate authority to sanction the levy of the tax. Sub- section (4) indicates how the total sum collected by way of water tax should be dealt with; it shows that the tax collected will have to be earmarked. Sub- section (4) indicates how the total sum collected by way of water tax should be dealt with; it shows that the tax collected will have to be earmarked. section 25 does not permit levy and collection of water tax en-mass, merely to be kept by the Panchayat leaving it to the Panchayat and the Government later on to decide in what manner this accumulated fund should be utilised. It must be borne in mind that the tax levied in pursuance of section 25 of the Public Health Act is a separate tax for a definite purpose. It is unlike a general enhancement of tax for augmenting the revenues of the Panchayat when the general expenses are increasing. While it is necessary to invest the Panchayat with powers to levy the water tax after obtaining the requisite sanction from the Government under section 25, though it may not result in a present or. immediate prospect of supply of water, it is, however, essential that there should be a concrete scheme, a rough estimate, concerning the details of the scheme, when it is expected to materialise, what its recurring charges would be and the impact of the financial burden upon the rate-payers. In my view this is the minimum which is implicit under section 25 of the Act. Neither the Panchayat nor the Government had bestowed thought on this aspect. The levy of the tax in question is illegal and clearly without jurisdiction and a suit in a civil Court questioning the legality of the levy is undoubtedly competent. For all these reasons, the second appeal is allowed and the suit is decreed as prayed for with costs in all the three Courts. Leave refused. V.M.K. ----- Second Appeal allowed.