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J&K High Court · body

2001 DIGILAW 311 (JK)

Vidya Rattan Sharma v. State Of J. &K.

2001-11-29

T.S.DOABIA

body2001
1. The Jammu and Kashmir Urban moveable Property Tax Act of 1962 stands need by Jammu and Kashmir Taxation Laws (Amendment) Act of 1997. In terms of section 6 this Amendment Act, a third proviso has been added. Still later on 19/06/1998, SRO 193 was issued. By this notification, rate of tax per annum is to depend upon the covered area of a unit. The covered area in square feet has to be taken note of. It is the proviso added by way of amendment and notification SRO 193 which is subject matter of challenge in this petition. 2. Before dealing with the various factual submissions made in this petition, it would be apt to notice section 3 of the Jammu and Kashmir Urban Immoveable Property Tax Act, 1992 (hereinafter referred to as the Act). Section 3 as amended reads as under:- 3. Levy of Tax - (1) Subject to the provisions of this Act, the tax shall be payable by an owner in respect of annual value of property or aggregate annual value of properties owned by him in a rating area at such rate not exceeding 25 percent of the annual value as the Government may by notification in the Government Gazette from time to time, direct in respect of a rating area. If a unit of property is owned by two or more persons as joint owners, tax shall be payable by the owners in respect of such property as a unit and they shall be jointly and severally liable for the payment of tax and other sum payable under the Act. Provided that where the tax calculated on the annual value exceeds the difference between the said annual value and exemption limit, as referred to in clause (c) of sub-section (1), or as fixed by the government under sub-section (2), of section4, the tax leviable shall be equal to the said difference. Provided further that the government may fix graduated rates of tax on different slabs of annual value of such lands and buildings subject to maximum specified in this section. Provided also the government may, by notification in the government gazette, levy tax on a unit of property on lump sum basis in any specified rating area and such tax also shall not exceed 25% of 6.25% current cost of property. (2) Omitted. Provided also the government may, by notification in the government gazette, levy tax on a unit of property on lump sum basis in any specified rating area and such tax also shall not exceed 25% of 6.25% current cost of property. (2) Omitted. (3) If the property in respect of which tax is payable is transferred to any other person, whether by sale, gift, exchange, mortgage, inheritance or otherwise, the transferee shall be liable to pay tax or any other sum payable under this Act in respect of the property so transferred for the period prior to the date of transfer and the notice of demand, if any, issued to the transferor shall be deemed to have been issued to transferee; provided that a duplicate copy of such notice of demand shall be served on the transferee. Explanation:- For the removal of doubt it is hereby clarified that if a property is owned by two or more persons in definite and specific portions as co-owners, the tax shall be payable by each co-owner in respect of the annual value of the portion owned by him.� 3. SRO 193 issued on 19/06/1998 be also noticed. This is annexure B� with the petition. For facility of reference this is also being reproduced below:- SRO 193 - In exercise of the powers conferred by the third proviso to sub section (1) of section 3 of the Jammu and Kashmir Urban Immoveable Property Tax Act, 1962 (Act No. XXII of 1962), the government hereby direct that the tax in respect of building exclusively used by the owner or any member of his family in the areas specified in the annexure appended herewith shall be levied at the following rates :- Covered Area in Sft. Rate of tax P.A. 1. Upto 1000 sft. Nil 2. 1001 to 1500 sft. Rs. 500/- 3. 1501 to 2000 sft. Rs. 1000/- 4. 2001 to 2500 sft. Rs. 1500/- 5. 2500 sft above Rs. 2500/- The owner of the properties liable to tax under this notification, shall file a return as may be prescribed by the Commissioner, Sales Tax upto 31st August 1998 together with the tax which may be assessed by the owners themselves on the basis of the rates herein before indicated. The assesses shall have to pay tax for the whole year in lump sum basis. The assesses shall have to pay tax for the whole year in lump sum basis. The officer charged with the responsibility of assessment and collection of property tax, shall scrutinize at least 30% of the returns and tax assessed by such owners is every financial year. Exemption given to self occupied properties under SRO 96 dated 2nd March, 1989 shall not be applicable to the areas specified in the annexure appended with this notification. By order of the Government of Jammu and Kashmir.� 4. The petitioners are residing within the town area limit of Kathua Town. They are owners of residential accommodations in Krishna colony, Shiv Nagar and Patel Nagar. They are covered by the Schedule forming part of the Act i.e. Rating area for the purpose of section 3. The grievance of the petitioners is that after issuing SRO 193, a policy of pick and choose has been adopted. It is submitted that vide SRO 353 issued on 22/07/1974, some exemptions were given. Portion of building and land used exclusively for residential purposes by the owners or members of the family were exempted from the operation of the Act, 1962. This notification is annexure C� with the petition. This is also being reproduced below :- Finance Department Notification SRO-353 dated 22nd July, 1974. -In exercise of the powers conferred by sub-section (2) of section 4 of the Jammu and Kashmir Urban Immoveable Property Tax Act, 1962, the Government hereby exempt- a) portions of buildings and lands used exclusively for residential purposes by the owners or members of their families, and b) building and lands or portions thereof as are not let out or are otherwise vacant for the period for which these are not let out or remain vacant (Sic) from the to tax leviable under the said Act. This notification shall be deemed to have come into force from 1-4-1974.� 5. It is the case of the petitioners that the respondents have called upon the petitioners to file returns. This direction has been given in terms of SRO 193. Failure to do the needful as per the petitioners would attract interest at the rate of 24% per annum on the tax assessed. This notice makes mention of the fact that the owners of the property liable to tax under notification SRO 193 are supposed to file returns by 31/08/ 1998. Failure to do the needful as per the petitioners would attract interest at the rate of 24% per annum on the tax assessed. This notice makes mention of the fact that the owners of the property liable to tax under notification SRO 193 are supposed to file returns by 31/08/ 1998. It is this factor which has lead the petitioners to approach this court. It is submitted the SRO 193 is in breach of section 3 of the Act. The grounds on which this assertion is being made are being noticed. According to the petitioners the tax has to be in terms of section 3. This is the charging section. It is submitted that the tax in question payable by an owner in respect of annual value or property of aggregate annual value of property owned by him in a rating area is not to exceed 25% of the annual value as the Government may by notification in government gazette from time to time direct in respect of a rating area. It is submitted that by the method which has now been adopted i.e. lump-sum basis the tax in question would exceed this limit of 25% of the annual value i.e. What has been stated in section 3(1) of the Act. It is submitted that third proviso which has been incorporated gives arbitrary and discretionary powers to the State Government to levy tax in respect of any specified rating area on the basis of current cost of property and this is in direct conflict with other provisions. It is submitted that this would also be in conflict with the decision given by this court in a case reported as "Smt. Parkasho Devi vs. Assessing Authority and others 1985 KLJ 239. It is submitted that the Act of 1962 was made applicable to the State on 21-07-1962. The grievance is that vide SRO 193, State has picked up parts of rating area for levying tax leaving the other parts exempt from the same. It is submitted that small colonies in Kathua town area have been picked up. This has been done arbitrarily. It is submitted that under section 5 of the Act, tax can be levied on annual value. Under proviso third to section 3 tax can be levied on the basis of capital value. It is submitted that small colonies in Kathua town area have been picked up. This has been done arbitrarily. It is submitted that under section 5 of the Act, tax can be levied on annual value. Under proviso third to section 3 tax can be levied on the basis of capital value. The concept of carpet area introduced vide SRO 193 as per the petitioner is not covered by Section 3 or Section 5 of the Act. 6. A perusal of Section 3 of the Act, 1962, makes it apparent:- i) that in terms of sub-section (1) a tax is payable by an owner in respect of annual value of property or aggregate value of property owned by him in a rating area; ii) such tax is not to exceed 25% of the annual value; and iii) where the tax calculated on annual value exceed the difference between the said annual value and exemption limit as indicated in Section 4(2) or sub-section (1) (c) of section 4, the tax which is ultimately leviable is equal to the said difference. This is provided in proviso. The second proviso enables the government to fix graduated rates of tax on different slabs of annual value of such land and buildings subject to the maximum specified in section 3(1). The third proviso which has been added makes it apparent that on a unit of property tax on lump sum can be levied so that this does not exceed 25% of 6.25% of current cost of property. 7. It may be further seen that under section 4 exemptions can be allowed by the Government. As to how annual value has to be determined is subject matter of section 5. If a property has been let out then the rent which is actually charged would be applicable. In case of any other property, the rent which it is likely to fetch, if it is rented out would be determined by taking into consideration the rental value of such property which are in the neighbourhood. 8. Sections 4 and 5 of the Act are also relevant. These may also be noticed:- 4. In case of any other property, the rent which it is likely to fetch, if it is rented out would be determined by taking into consideration the rental value of such property which are in the neighbourhood. 8. Sections 4 and 5 of the Act are also relevant. These may also be noticed:- 4. Exemptions:- (1) The tax shall not be leviable in respect of the following properties, namely; (a) building and lands vesting in the Central Government; (b) any property vesting in or owned by the Government or a local authority; (c) any property unit or properties in a rating area owned by a person, the annual value or the aggregate annual value whereof does not exceed Rs. 3000/-; (d) property held in trust wholly for charitable or religious purposes; provided that the income derived there from is exclusively applied to such purposes; (e) (a) property exclusively used for charitable or religious purposes and the property owned by a charitable or religious institution or place at the disposal of any such institution for charitable or religious purpose free of rent or any other consideration in lieu thereof, or (b) in respect of which rent or any other income is derived and such rent or income is exclusively applied for religious or charitable purposes or religious institutions as may be prescribed; (f) nothing in clauses (d) and (e) shall apply to the property which is used as premises of educational, medical or any other institutions carrying on an activity for earning income which is not exclusively applied to religious or charitable purposes; Explanation:- (i) Charitable purposes� includes relief of the poor education, medical relief and advancement of any other subject of general public utility; (ii) property� includes a portion of a unit of property� (g) such buildings and lands used for the purposes of a factory as may be prescribed; and (h) building valuing less than rupees one lac which are exclusively used for residential purposes by the owner or any member of his family; (2) The Government may, by a notification in the Government Gazette, exempt in whole or in part from payment of the tax any person or class of persons or any property or description of property for such period as it may think fit, and may renew such exemption as often as it may consider to be necessary. 5. 5. Ascertainment of annual value:- (1) Subject to the deduction specified in subsection (2), the annual value of the property shall be deemed to be:- (a) in the case of property let on rent to the tenant, the rent actually charged; and (b) in the case of any other property, the rent which it shall fetch, if let, considering the rental value of such properties in the vicinity thereof. Provided that if any property has been let along with any machinery or plant, the rent of such machinery or plant shall be excluded in determining the annual value. Provided further that where the property is in the occupation of a tenant and under the rental agreement the owner is liable to pay any amount of rent, rate or tax which, but for such agreement, was payable by the tenant, the said amount shall be deducted from the rent received or receivable in determining the annual value of the property. (2) (a) When the property is let out to a tenant along with furniture other than fixture an allowance to the extent of rent actually received or receivable in respect of such furniture and if it is not apparently fixed. Such sum as the Assessing Authority may consider reasonable rent for such furniture but not exceeding twenty per centum of the annual value of the property; (b) an allowance for the expenses incurred on the repairs and maintenance of the building but not exceeding ten per centum of the annual value of each building; (c) sum paid as land revenue and as premium to insure against the risk or damage to the property.� 9. The main argument which has been raised is that the third proviso by which tax is to be levied on the basis of capital value runs counter to Sub-Section (1) and if this is to operate, then the Section 3 to which this proviso has been added would become in-applicable. It is submitted that by a proviso the scope of the main provision cannot be nullified. The normal function of a proviso is to except something out of the enactment or to qualify something enacted therein which but for the proviso would be within the purview of the enactment. It is submitted that by a proviso the scope of the main provision cannot be nullified. The normal function of a proviso is to except something out of the enactment or to qualify something enacted therein which but for the proviso would be within the purview of the enactment. As stated by LUSH, J...� When one finds a proviso to a Section the nature of presumption is that, but for the proviso, the enacting part of the section would have included the subject matter of the proviso. SEE Mullins Vs. Treasurer of Survey (1880) 5 QBD 170. The proviso, may as LORD MACHAGHTEN, laid down, be a qualification of the preceding enactment which is expressed in terms of too general to be quite accurate�, Local Govt. Board Vs. South Stoneham Union. (1909) AC 57 (HL) 62. The general rule has been stated in Shah Bhorjraj Kuverji Oil Mills and Ginning Factory Vs. Subhash Chander Yograj Sinha, AIR 1961 SC 1596 by HIDAYATULLAH, J... in the following words: As a general rule, a proviso is added to an enactment to qualify or create an exception to what is in the enactment and ordinarily, a proviso is not interpreted as stating a general rule.� And in the words of KAPUR, J... in CIT, Mysore etc. Vs. Indo Mercantile Bank Ltd. AIR 1959 SC 713, p. 717.� The proper function of a proviso is that it qualifies the generality of the main enactment by providing an exception and taking out as it were, from the main enactment by providing an excepting and taking out as it were, from the main enactment, a portion which, but for the proviso would fall within the main enactment. Ordinarily it is foreign to the proper function of the proviso to read it as providing something by way of an addendum or dealing with a subject which is foreign to the main enactment.� 10. In this regard, reference may also be made to what was said by the Privy Council in the case reported as Madras & Southern Maharatta Rly. Co. Ltd. Vs. Bezwara Municipality, AIR 1944 PC 71. In this regard, reference may also be made to what was said by the Privy Council in the case reported as Madras & Southern Maharatta Rly. Co. Ltd. Vs. Bezwara Municipality, AIR 1944 PC 71. Lord Macmillan in the above case observed that 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 the language of the main enactment is clear and unambiguous, a proviso can have no repercussions on the interpretation of the main enactment, so as to exclude from it by implication, what clearly falls within its express terms. In this case, the proviso to Section 82 (2) of the Madras District Municipalities Act (5 of 1920) was being interpreted. Section 82(2) of the Madras District Municipalities Act was worded in the same manner as the J&K Act which is being interpreted in the present case. The proviso which is being interpreted was also in the same words. The question arose as to whether the method arrived at for creating tax liability is to be registered by the proviso or by the main provision, to which the main proviso had been added. In this regard, following observations were made: It will be observed that under Section 81(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-Section (3) otherwise provides in as much as it permits, but does not enjoying, 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 or 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 subsection (8) 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. If either of the alternative methods permitted by subsection (8) 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. Section 82(2) prescribed how the annual value of the lands and buildings is to be ascertained. It is to be deemed to be the annual rent at which they may reasonably be expected to let from month to month from year to year, less 10%, in the case of buildings. The spectre of the hypothetical tenant, so familiar an apportion in English rating law is here invoked. Thus appellants did not dispute that, if this subsection 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 with a hypothetical tenant might reasonable be expected to pay for the lands in questions, including the method of taking a percentage of the 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. The respondents contest this reading and maintain that the proviso does not impliedly prohibit resort to capital value as a means of getting an 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 6%, which it contains. Their lordships cannot accept the appellants argument which in their opinion involves a mis-interpretation 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 to be utilized only in the case of the classes of buildings to which the proviso applies. Their lordships cannot accept the appellants argument which in their opinion involves a mis-interpretation 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 to be utilized only in the case of the classes of buildings to which the proviso applies. It leaves the generally of the substantive enactment in the subsection 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. Whereas, in the present case, the language of the main enactment is clear and un-ambiguous a proviso can have not repercussion on the interpretation of the main enactment, so as to exclude from it by implication that 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....� 11. The aforementioned decision directly covers the issue in question. Therefore the respondents are well within their rights to levy tax by taking into consideration the capital value as contained in the proviso referred to above. 12. So far as assessment by taking capital value or for that matter, carpet area into consideration for determining property tax is concerned, this is permissible and recognized by judicial precedents. In case reported as State of Bihar Vs. Sachidanand Prasad Sinha 1995 SCC 88, the rules classified the holding on the basis of such type of constructions. It was observed that treating at par kacha buildings with RCC constructions as one class and subjecting them to uniform rate of tax subject of course to the location and nature of user cannot be said to mean to hostile discrimination, so as to offend Article 14. It was observed that the classification made on the above basis cannot be challenged. 13. It was observed that the classification made on the above basis cannot be challenged. 13. As indicated above, the view expressed by the Privy Council deals directly with a situation which has arisen in this case. Therefore, on the basis of the privy Council decision, it can safely be concluded that notwithstanding what is contained in the main provision, tax liability can be created under the proviso, and in doing so, and in carving out this classification, the respondents by issuance of the Notification have not committed any illegality. So far as exemptions granted under Section 4 are concerned, these exemptions have not been touched by respondents. In case that Notification still exists and if a particular property answers the descriptions of that property which is exempt, then that exemption would be available. In view of the above, this petition is found to be without merit and is dismissed.