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1996 DIGILAW 371 (KER)

Ejman v. Kasaragod Municipality

1996-08-23

B.N.PATNAIK, T.V.RAMAKRISHNAN

body1996
Judgment :- Patnaik, J. Both the cases were heard together as common questions of law are raised, as also the parties are same. This common judgment is being passed in both the cases. 2. In O.P.No. 6846 of 1988, the petitioners prayed for issue of a direction to quash Exts. P7 and P11 orders of respondents 1 and 2, who are respectively the Kasaragod Municipality represented by its Commissioner and the Kasaragod Municipal Council, represented by its Chairman. By Ext. P7 order, the respondents assessed five buildings to property tax. By Ext. P11 order, the appeal committee of the Municipal Council, Kasaragod dismissed the appeal filed by the petitioner against Ext. P7 assessment order. In O.P. No. 7564 of 1988, the petitioners prayed for issue of a direction to quash Exts. P1, P2, P4 and P6 notices issued by the same respondents by which two buildings belonging to the petitioners were assessed to property tax. The petitioners have contented that although they have completed the construction of the buildings in question, yet before it was occupied or let out to tenants, the respondents levied the tax illegally. 3. When the above two Original Petitions came up before a learned single judge, the petitioners contended that even when the construction of the building is over it is not liable to be assessed for property tax until it is occupied. The demand of property tax for the period before its occupation is without any authority of law. In support of their contentions reliance was placed on a decision of a learned single judge of this Court in M.C. George v. Moovattupuzha Municipality (1975 KLT 380). In paragraph 7 of the judgment, the learned single judge held as follows: "In the case of a building which is not completed and not occupied, there cannot be an annual value because it is not rateable. Moreover, the tax is levied on a building, which is occupied. There is provision in S.105 of the Act (Kerala Municipalities Act, 1960) to give remission of tax in respect of a building already assessed to property tax when it falls vacant and unlet for thirty or more consecutive days in any half year. So. occupation is an essential pre-requisite for a building to attract tax under S.100. But once assessed, that will continue and only S.105 will be available. It is also admitted in Ext. So. occupation is an essential pre-requisite for a building to attract tax under S.100. But once assessed, that will continue and only S.105 will be available. It is also admitted in Ext. P5 that the building was not occupied. So, the assessment in question cannot be sustained". After considering various provisions of the law on the point, the learned single judge held that going by the provisions contained in S.99 of the Kerala Municipalities Act (for short'the act), it is possible to contend that even a building, which was not occupied, is liable to be taxed. The learned single judge, therefore, referred the question raised in these O.Ps. namely, whether the Municipality is entitled to levy or collect property tax in respect of an unoccupied building, for a decision by a Division Bench. This is how the matters came up before us. 4. In the counter-affidavit filed by the respondents. It is contended that it is only after the petitioners gave the completion notice regarding the buildings; the respondents levied property tax as per the provisions of the Municipalities Act. It is further contended that the position regarding the assessment of newly completed buildings which are ready and fit for occupation, but which have not yet been occupied or let out yet has been dealt with exhaustively in the decision reported in Nataraja Gowder v. Municipal Council, Palghat (1976 KLT 251). It has been held that in such cases, the Municipality is competent to assess property tax taking into account the gross rental value, which the landlord may realise if the building had been let out at the time of assessment. The case reported in George's case (1975 KLT 380) has no application in these cases, as the building involved in that case was not completed nor fit to be occupied when the tax was assessed. Thus, the contention of the respondents is that as soon as the construction of the building is completed, property tax shall be levied on it under S.100 of the Act. 5. Admittedly, in this case, construction of the building has been completed. Property tax was assessed before it was let out to tenants and during the period when it remained unlet. There is also no dispute that the buildings are located within the limits of Kasaragod Municipality and they are liable to be taxed under the Municipalities Act. 5. Admittedly, in this case, construction of the building has been completed. Property tax was assessed before it was let out to tenants and during the period when it remained unlet. There is also no dispute that the buildings are located within the limits of Kasaragod Municipality and they are liable to be taxed under the Municipalities Act. As said above, the only question that arises for consideration is whether the buildings are deemed to have been unoccupied if they are not let out or if the owner himself does not live in it. 6. It is necessary to refer to some relevant and salient provisions of the Kerala Municipalities Act, 1960. In S.3(3) of the Act, "building" has been defined; in S.3(22) "occupier" has been defined and in S.3(23) "ordinary vacancy" has been defined and in S.3(24) "owner" has been defined. They are as follows: "3(3) "building" includes a house, out-house, stable, latrine, shed, but wall (other than a boundary wall not exceeding eight feet in height) and any other such structure whether of masonry, wood, brick, mud, metal or any other material what soever ; 3(22) "Occupier" includes - (a) any person who for the time being is paying or is liable to pay to the owner the rent or any portion of the rent of the land or building in respect of which such rent is paid or is payable; (b) any owner in occupation of or otherwise using his land or building; (c) a rent-free tenant of any land or building ; (d) a licensee in occupation of any land or building; and (e) any person who is liable to pay the owner damages for the use and occupation of any land or building. 3(23) "Ordinary vacancy" means a vacancy occurring by efflux of time and "ordinary election" means an election held on the occurrence of an ordinary vacancy; 3(24) "owner" includes - (a) a person who for the time being is receiving, or is entitled to receive the rent of any land or building whether on his own account or on account of himself and others or as an agent, trustee, guardian or receiver for any other person or who should so receive the rent or be entitled to receive it if the land or building or part thereof were let to a tenant, and (b) the person for the time being in charge of the animal, vessel, or vehicle in connection with which the word is used". Section 99 of the Act reads as follows: "99. Description and classes of property tax - (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 the 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; and (b) a service tax The service tax may comprise - (i) a water and drainage tax to provide for expenses connected with the construction, maintenance, repair, extension or improvement of water or drainage work hereto for provided or hereafter to be provided. (ii) a lighting tax to provide for expenses connected with the lighting of the Municipality by gas or electricity; (iii) a sanitary tax to provide for expenses connected with the general sanitation of the Municipality and the removal of rubbish, filth or car cases of animals from private premises. (ii) a lighting tax to provide for expenses connected with the lighting of the Municipality by gas or electricity; (iii) a sanitary tax to provide for expenses connected with the general sanitation of the Municipality and the removal of rubbish, filth or car cases of animals from private premises. S.100 of the Act reads as follows: "Method of assessment of property: - Every building shall be assessed together with is 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 buildings and lands which are occupied by, or adjacent and appurtenant to 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 of fifteen percent of that portion of such annual rent which is attributable to the buildings alone apart from their sites and the adjacent lands occupied as a appurtenance thereto: S.105, which deals with vacancy remission, reads as follows: "Vacancy remission:- (1) When any building whether ordinarily let or occupied by the owner himself has been vacant and unlet for thirty or more consecutive days in any half year, the Commissioner shall remit so much not exceeding one half of such portion of the tax as relates to the building only, as is proportionate to the number of days during which the building was vacant and unlet in the half year. (2) Every demand for remission under Sub-s.(1) shall be made during the half-year in respect of which the remission is sought or in the following half year and not afterwards. 7. Though the word "occupier" has been defined in the Act, the word "occupation" has not been defined in it. The legislature did not give any special connotation to that word. Hence, that word is to be interpreted in its plain grammatical meaning. One of the meanings of the word "occupation" is "possession" (vide Chambers 20th Century Dictionary, New Edition 1983). This meaning is more appropriate in the context of the provisions of the Act because if a building remains unoccupied or unlet it cannot be said that the owner does not possess it. One of the meanings of the word "occupation" is "possession" (vide Chambers 20th Century Dictionary, New Edition 1983). This meaning is more appropriate in the context of the provisions of the Act because if a building remains unoccupied or unlet it cannot be said that the owner does not possess it. Even if the owner does not live in it and even if it has not been let out to a tenant, the owner continues to have dominion over the building. In our opinion, it is in this sense that the word "occupation" has to be understood. 8. It appears that S.99 of the Act consists of two parts. It lays down that a property tax may comprise (a) a tax for general purposes; and (b) a service tax. The service of the Municipally for which tax is leviable has been enumerated in sub-clauses (i) to (iii) of clause (b) of sub-s.(1) of S.99. On a plain reading of the provisions, it appears that if a building is complete in terms of S.3(3) of the Act, the property tax shall be levied for general purposes. But the property tax for the service rendered by the Municipality can be levied only if service is provided as contemplated in sub-clauses (i) to (iii) of clause (b) of sub-s.(1) of S.99 of the Act. Since service tax is leviable only when service is provided, there is scope to raise a contention that levy of tax under clause (b) of sub-s.(1) of S.99 in the absence of service being provided to the building is not permissible, inasmuch as the tax is specifically co-related with the service as enumerated in the sub-clauses therein. But there is no such limitation for levy of tax for general purpose under clause (a) of sub-s.(1) of S.99 of the Act. 9. It is pointed out that unless the building is let out to a tenant no gross annual rent can be calculated and as such the Municipality cannot assess the property tax on surmises or probabilities of gross annual rent. 9. It is pointed out that unless the building is let out to a tenant no gross annual rent can be calculated and as such the Municipality cannot assess the property tax on surmises or probabilities of gross annual rent. In Nataraja Gowder v. Municipal Council, Palghat (1976 KLT 251) a learned single judge of this Court, while considering the ambit of the provision of S.100 of the Act, laid down as follows: "The words "gross annual rent at which the land or building might at the time of assessment reasonably be expected to let from year to year" imply that the rent which the landlord might realise if the house was let is the basis for fixing the annual value of the building. The criterion is the rent realised by the landlord and not the value of the holding in the hands of the tenant. The value of the property to the owner is the standard in making the assessment. It is only the rental value of the building to the owner that is material. That value would be what the owner might receive from the tenant or the owner could expect to receive by invoking the provisions of statutes enabling him to seek fair rent where what is being received is less than fair rent". 10. It may be noted here that S.5 of the Kerala Buildings (Lease and Rent Control) Act has been struck down and it is no longer open to the Rent Controller or any authority thereunder to assess the fair rent of the building. What is contemplated in S.100 is the possible gross rent, which the owner would get if the building is let out. It is no where 1 aid down in that provision that if the building i s not let out the Municipality i s precluded from assessing the gross annual rent by resorting to the method that are prescribed for fixation of fair rent under S.5 of the Rent Control Act. 11. There is nothing in the Act to show that if the building is not let out to a tenant, it is totally exempt from levy of tax. 11. There is nothing in the Act to show that if the building is not let out to a tenant, it is totally exempt from levy of tax. On a reading of S.105, it becomes crystal clear that the Commissioner shall remit so much not exceeding one-half of such portion of the tax as relates to the building only, as is proportionate to the number of days during which the building was vacant and unlet in the half year. Thus, when the building remains vacant and unlet all that the owner can claim is remission of a part of the property tax and not the whole of it. 12. S.107(r)(a) of the Act clearly lays down that if any building in a Municipality is constructed or reconstructed the owner shall give notice thereof to the Commissioner within fifteen days from the date of completion or occupation of the building whichever is earlier, (emphasis supplied). The word "or" cannot be substituted by the word "and". In our view, as soon as the notice of completion of the building is given to the Municipality, the building becomes liable to property tax, even if it is not occupied in the sense that neither the owner nor a tenant lives in it. 13. The facts in George's case (1975 KLT 380) are distinguishable from the facts of this case. In that case, the building was incomplete and no notice of completion was given by the owner to the Municipality before tax was levied. But, in the present case, there is no dispute that the tax was levied after the completion of the building. We also find that the proposition stated in that case to the effect that occupation is an essential pre-requisite for a building to attract tax under S.100 of the Act cannot be construed to mean as occupation of the building only by a tenant. The learned single judge while coming to such a conclusion relied on the decision of the Bombay High Court in PolychemLtd. v. Municipal Corporation of Greater Bombay (ILR 1970Bombay 102). In that case, the question that arose was as to whether the land situated within the Municipal Corporation of Greater Bombay is liable to be assessed to property tax under the Bombay Act. In that case, the question that arose was as to whether the land situated within the Municipal Corporation of Greater Bombay is liable to be assessed to property tax under the Bombay Act. It has been observed in that case that if there is no tenant who would be prepared to take the property from year to year in its then condition, evidently there can be no tax on the same. It also extracted a passage from Ryde on Rating as follows : "It has already been accepted that buildings and works in course of construction or alteration are not rateable, because there is no occupier of them within the meaning of the Poor Relief Act, 1601". It further said that the fundamental principle that there must be a tenant who would take the property in the condition in which it is from year to year exists in our statutes as much as in English Statutes. If therefore, there can be no tenant who would be prepared to take the property in that condition evidently the rateable value would be null and consequently the tax also null. But, in our opinion, the learned single judge in that case made such a sweeping generalisation on the premise that an incomplete building cannot be occupied either by a tenant or by the owner. 14. In this connection, it is worthwhile referring to the observation made by the Supreme Court in Dewan Daulat Rai Kapoor v. New Delhi Municipal Committee (1980 (1) SCC 685) relating to the interpretation of certain provisions of the Delhi Municipal Corporation Act and Delhi Rent Control Act, 1958. There also the meaning of the expression "annual value" arose for consideration. The Act defined it to mean in the case of any house or building the gross annual rent at which such bouse or building may reasonably be expected to let from year to year. The Supreme Court held that it is obvious from this definition that unlike the English law where the value of occupation by a tenant is the criterion for fixing annual value of the building for rating purposes, here it is the value of the property to the owner, which is taken as the standard for making assessment of annual value. The criterion is the rent realisable by the landlord and not the value of the holding in the hands of the tenant. The criterion is the rent realisable by the landlord and not the value of the holding in the hands of the tenant. The rent, which the landlord might realise if the building were let, is made the basis for fixing the annual value of the building. The word "reasonably" in the definition is very important. What is "reasonable" is a question of fact and it would depend upon the facts and circumstances of a given situation. In Corporation of Calcutta v. Padma Debi (1962 (3) SCR 49 = AIR 1962 SC 151) the Supreme Court said that a bargain between a willing lessor and a willing lessee uninfluenced by any extraneous circumstances may afford a guiding test of reasonableness. An inflated or deflated rate of rent based upon fraud, emergency, relationship and such other considerations may take it out of the bounds of reasonableness. The actual rent payable by a tenant to the landlord would in normal circumstances afford reliable evidence of what the landlord might reasonably expect to get from a hypothetical tenant, unless the rent is inflated or depressed by reason of extraneous considerations such as relationship, expectation of some other benefit etc. There would ordinarily be in a free market close approximation between the actual rent received by the landlord and the rent, which he might reasonably expect to receive from a hypothetical tenant. But where the rent of the building is subject to rent control legislation, this approximation may and often does not get displaced. It further laid down as follows: "The landlord cannot reasonably expect to get more rent than the standard rent payable in accordance with the principles laid down in the Delhi Rent Control Act. It is true that the standard rent of the building not having been fixed by the Controller, the assessing authority would have to arrive at its own figure of standard rent by applying the principles laid down in the said Rent Act. It is true that the standard rent of the building not having been fixed by the Controller, the assessing authority would have to arrive at its own figure of standard rent by applying the principles laid down in the said Rent Act. That is a task which the assessing authority would have to perform as part of the process of assessment and in doing so it does not usurp the function of the Rent Controller, because it does not fix the standard rent, which would be binding between landlord and tenant, but merely arrives at an estimate of standard rent for the purpose of determining the annual value of the building." The learned single judge in George's case (1975 KLT 380) while relying on the Bombay decision obviously had in his mind the provisions of the Poor Relief Act, 1601 of the United Kingdom. It has been pointed out by the Supreme Court in the aforesaid decision that the connotation of the expression "annual value" of a building in the English law differs from the Indian law. The Bombay decision-proceeded on the basis of the English law. As it has been pointed out by the Supreme Court that the English law on the subject differs from the Indian law, the concepts of English law cannot be imported into Kerala Municipalities Act 15. For the reasons stated above, we find that in order to attract the application of S.100 of the Act, it is not necessary that the owner should live in the building or that it should be under the occupation of a tenant. As soon as the notice of completion of the building reaches the Municipal Office, the Municipal authorities are empowered under the Act to levy property tax as contemplated in Ss.99 and 100 of the Act. Hence, the contention of the learned counsel for the petitioners, that the Municipal authorities cannot levy any property tax if it is not occupied by a tenant or if the owner does not live in it, is without any substance. 16. In the result, the writ petitions are found to be without any merit. Hence, the contention of the learned counsel for the petitioners, that the Municipal authorities cannot levy any property tax if it is not occupied by a tenant or if the owner does not live in it, is without any substance. 16. In the result, the writ petitions are found to be without any merit. However, we would make it clear that we have not considered in this judgment the question whether the petitioners are entitled to claim vacancy remission under S.105 of the Act in respect of the buildings in question on the ground that they were lying vacant for a considerably long period even after service of completion of notice. It would be open to the petitioners to take appropriate action for claiming vacancy remission in accordance with law. If any such claim for vacancy remission is made, the same shall be considered and disposed of by the first respondent in accordance with law. Writ petitions will stand dismissed subject to the above observations. No costs.