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2005 DIGILAW 1722 (RAJ)

JCT Limited, Sriganganagar v. State of Rajasthan

2005-07-06

GOVIND MATHUR

body2005
Honble MATHUR, J.–The petitioner a public limited company registered under the Companies Act submitted a return in the prescribed form on 30.6.1973 as required under the Rajasthan Land and Building Tax Act, 1964 (hereinafter referred as the Act of 1964) for the purpose of assessment of land and building tax. (2). The assessing authority i.e., the Assistant Director, Land and Building Tax Department, Sriganganagar passed an order of assessment on 28.2.1977, validity of which was challenged by the petitioner by way of filing a writ petition before this Court. The writ petition preferred by the petitioner (S.B. Civil Writ Petition No. 894/1979) came to be disposed of by the judgment dated 14.8.1980 alongwith 64 other similar writ petitions in light of Division Benchs judgment of this Court rendered in the case of SMS Investment Corporation Pvt. Ltd. vs. State of Rajasthan and Ors., reported in 1980 RRD 488. (3). The Division Bench of this Court in the case of SMS Investment Corporation Pvt. Ltd. (supra), examined the validity of the provisions of Section 3, 3(1-A) and 4 of the Act of 1964 as amended by the Act No. 15 of 1973 and Act No. 18 of 1973. The challenge to the provisions referred above was given alleging the enactment of the provisions concerned beyond the legislative competence of the Rajasthan State Legislature and also being ultra vires to the provisions of Article 14 of the Constitution of India because of vagueness in respect of unit of taxation. The Division Bench also examined the validity of the circulars dated 27.12.1974 and 16.12.1974 issued by the Director, Land and Building Tax Department and by the Deputy Director, Land and Building Tax Department respectively. The challenge to the aforesaid circulars was given being contrary to the provisions of charging Section 3 of he Act of 1964. (4). The Division Bench in the case of SMS Investment Corporation Pvt. Ltd., while holding the impugned provisions of the Act of 1964 valid, quashed the circulars dated 27.12.1974 and 16.12.1974 issued by the Director and Deputy Director of the Land and Building Tax Department being not in consonance to the correct interpretation of the provisions of Section 3 and 4 of the Act of 1964. (5). The Division Bench while adjudicating validity of the circulars impugned held as under:- ``47. (5). The Division Bench while adjudicating validity of the circulars impugned held as under:- ``47. Lastly, reference has been made to a circular issued by the Deputy Director, Lands and Buildings Tax Department Rajasthan, Jaipur dated December 16, 1974 and another circular issued by the Director of Lands and Buildings Tax Department, Rajasthan, Jaipur dated December 27, 1974 for the purposes of clarifying the meaning of the word `unit as used in Sub-section (1-A) of Section 3 of the Act. The Deputy Director was of the view that the value of the land appurtenant to a building is to be taken into consideration both for determining the value of the unit and tax while he Director expressed the opinion that where there is one piece of land and all buildings are within the same curtilage and which have been constructed, or are being used for achieving the common functional purpose of the industrial complex or the campus of the educational institution, the land and buildings taken together should constitute one unit. Thus, according to him, if there are number of buildings on the same piece of hand and within the same curtilage and within the same campus or industrial complex, the entire campus or industrial complex must be taken as forming one unit provided there is a common functional purpose. We have already observed above that unit for assessment of tax on building constitutes the structure together with its site and other adjacent ground or ground occupied as land appurtenant thereto. The site or ground on which building stands or is enclosed within it as well as the land appurtenant thereto formed an integral part of such building. Thus, what is to be taxed alongwith the structure is the site or the land on which the building stands or is enclosed within it as well as the round appurtenant thereto because all of them together constitute a building. But the site on which the building is situated cannot be taxed separately. The law provides for ascertaining the market value of the entire building, includeds its site, super-structure and the land appurtenant thereto altogether as they jointly constitute one unit. But the site on which the building is situated cannot be taxed separately. The law provides for ascertaining the market value of the entire building, includeds its site, super-structure and the land appurtenant thereto altogether as they jointly constitute one unit. It may be observed that land left for passage or chowk, lawns or ground falling within or adjacent to the main building as also, the servant quarters, garages, playgrounds etc., are necessary for the enjoyment of the building and are normally provided for while constructing the building so that the same may be properly utilized and, therefore, they constitute appurtenances to the building. As held by their Lordships of the Supreme Court in D.G. Gouses case (10) the touch-stone of `appurtenance is dependence of the building on what appertains to it for its use as a building. But then some small pieces of land left for passages, lawns or other grounds cannot be taxed as land separately nor the value of such land may be ascertained and added to the value of the building in a similar manner as the value of the land enclosed within the building cannot be ascertained and separately added to the value of the super structure. Of course the situation of the building as also higher cost of land in the locality would necessarily go to enhance the market value of the building. Section 4 provides for ascertainment of the market value of the building, including the superstructure, land- underneath it and the land appurtenant thereto. It follows that the assessing authority is required to find out the value which the building, including the super-structure and the land underneath and appurtenant to the building would fetch if the same is sold as one unit in the open market. In our view, where a number of buildings are situated within the same compound of the buildings are constructed without any compound, the unit must have nexus to the object of taxation, which as we have already observed above, is land alone or a building alone or land and building both forming one unit. Building or land has to be taxed separately and only with a building, which is either enclosed within it or is appurtenant thereto such land can be aggregated so as to constitute an integral part of the said building, forming one unit. Building or land has to be taxed separately and only with a building, which is either enclosed within it or is appurtenant thereto such land can be aggregated so as to constitute an integral part of the said building, forming one unit. This is the crux of the decision of their Lordships of the Supreme Court in D.G. Gouses case (10) and we hold that the same principle is fully applicable to the act before us, particularly in view of the explanatory provision incorporated in Sub-section (1-A) of Section 3 of the Act. We are, therefore, unable to accept the interpretation sought to be placed both by the Director as well as by the Deputy Director of the Lands and Buildings Department, in their aforesaid circulars, as the said circulars do not correctly interpret the provisions of Section 3 of the Act. 51. We are, however, unable to agree with the learned Single Judge in respect of the validity of Sub-section (1-A) of Section 3 as introduced by the Amending Act No. 18 of 1973 and hold that Sub-section (1-A) of Section 3 is valid and is within the legislative competence of the State Legislature under Entry 49 of List II. We further hold that Sub-section (1-A) of Section 3 of the Act is not violative of the provisions of Article 14 of the Constitution. We are also unable to agree with the view expressed by the learned Single Judge that only the land required to be kept open by the rules or bye-laws of a local authority should be treated as part of the building in making one unit and the additional land should be treated as a separate unit. We hold that under the Act, tax can be levied separately on land alone or on building alone or on land and building both constituting one unit inclusive of the fabric and the ground on which the walls of the structure stand and the land enclosed within such walls and the land appurtenant thereto so as to form an integral part thereof and an artificial delimitation in accordance with the municipal by-laws or rules or bye-laws of other local authorities cannot be utilised for demarcating portions of land appurtenant to a building in two separate units. The assessing authority shall have to investigate in each case as to how much of the land is appurtenant to the building so as to constitute one unit. The circulars issued by the Director and the Deputy Director of the Lands and Buildings Department, Rajasthan, Jaipur referred to above are quashed. (6). As stated above the writ petition preferred by the petitioner bearing No. 894/1979 was disposed of in light of the Division Bench judgment of this Court in the case of SMS Investment Corporation Pvt. Ltd., by the judgment dated 14.8.1980. The operative portion of the judgment dated 14.8.1980, reported in 1981 WLN UC 535 reads as under:- ``15. It is, therefore, directed that all the assessing authorities in all these 65 cases would be required to reconsider the cases of the petitioners, make an application to the concerned assessing authority within a period of three months from today mentioning all the objections which arise in their individual cases on account of the principles enunciated by the Division Bench and in order to give effect to that judgment. The assessing authorities, if such an application is made should provide an opportunity of hearing and after giving reasonable opportunity of hearing to the assessee, decide those objections of the assessee afresh and while doing so fully apply the principles laid down by the Division Bench in this respect only the principles which have been extracted above provide guidance to the assessing authorities but the entire judgment of the Division Bench would be the authentic version of the principles laid down by the Division Bench and the assessing authorities should fully apply that judgment as a whole. 16. It is made clear that the assessing authorities will be entitled to reopen only those cases in which as per the principles, laid down in the judgment of the Division Bench, any alteration, amendment or change in the assessment order is prima facie required. It is also made clear as has been done by the Division Bench that other objections if any, made by the petitioners, except those relating to the question of validity of the Act are left open and it would be open to the writ petitioners to raise all such objections before the concerning authorities in any pending or future proceedings. 17. In the result all these writ petitions are disposed of as indicated above. 17. In the result all these writ petitions are disposed of as indicated above. There will be no order as to costs. (7). This Court while disposing of the writ petition preferred by the petitioner directed the assessing authorities to reconsider the case of the petitioner and make fresh orders of assessment in the event of submission of an application to the concerned assessing authorities mentioning all the objections related to the particular case. The assessment orders were ordered to be passed in view of the principles enunciated by the Division Bench in the case of SMS Investment Corporation Pvt. Ltd., after affording an opportunity of hearing and after giving reasonable opportunity of hearing to the assessee. A specific direction was given to the assessing authorities to decide those objections of the assessee afresh by applying principles laid down by the Division Bench by the judgment dated 14.8.1980. (8). In view of the directions above the petitioner submitted an application stating objections inter alia about the units before the assessing authority i.e., the Assistant Director, Sriganganagar. The petitioner also filed detailed statement including the site plan showing units claimed on reopening of the petitioners case by the assessing authority. The petitioner also submitted a report of an authorised valuer with regard to the units claimed. (9). The assessing authority passed an order of assessment on 19.8.1982. Accordingly, a notice for demand was served upon the petitioner. The assessing authority passed the order of assessment under the directions given by the Deputy Director (Valuation) vide communication dated 8.7.1982 for not making any amendment in the earlier assessment order. The market value of the land building in question as on 1.4.1973 and on 1.4.1974 was assessed as Rs. 82,47,246/- and Rs. 85,76,159/- respectively. The tax too was determined accordingly. The order dated 19.8.1982 passed by the assessing authority i.e., the Assistant Director, Land and Building Tax Department, Sriganganagar reads as under:- (10). The petitioner being aggrieved by the order of assessment dated 19.8.1982 preferred a writ petition before this Court and the same was registered as S.B. Civil Writ Petition No. 1741/1982. The petitioner at the same time also filed an appeal before the appellate authority against the said order of assessment. The petitioner being aggrieved by the order of assessment dated 19.8.1982 preferred a writ petition before this Court and the same was registered as S.B. Civil Writ Petition No. 1741/1982. The petitioner at the same time also filed an appeal before the appellate authority against the said order of assessment. The writ petition preferred by the petitioner was dismissed by this Court with a direction to the appellate authority to decide the appeal preferred by the petitioner on merits within a period of one month. The appellate authority accordingly by its judgment dated 4.6.1986 decided the appeal and accepted the same in part. The appellate authority on 15.4.1986 inspected the site and thereafter by the judgment dated 4.6.1986 held that the petitioner was having 16 functional units as under: 1. Administrative Unit 2. Cotton waste Department 3. Dying and bleaching block 4. Club Building block 5. Weaving preparatory block 6. Loom shed block 7. Folding block 8. Spinning shed block 9. Roving block 10. Record room block 11. Staff bunglow, staff quarter and labour quarters 12. General stores block 13. Guest House block 14. Dispensary block 15. Cloth godown and waste godown 16. Ginning factory shed. (11). The appellate authority held that all the above 16 units are independent units and they cannot be clubbed to determine the tax. The appellate authority accordingly remanded the matter to the assessing authority to make re-assessment by treating the 16 units independent functional units as referred above. (12). The Assistant Director, Land and Building Tax Department, Sriganganagar being aggrieved by the judgment dated 4.6.1986 preferred a revision petition under Section 19 of the Rajasthan Land and Building Tax Act, 1964 before the revisional authority i.e., the Divisional Commissioner, Bikaner. The Divisional Commissioner, Bikaner by the judgment dated 19.11.1991 accepted the revision petition and set aside the judgment of the appellate authority dated 4.6.1986. Accordingly, the order of assessing authority dated 28.2.1977 and 19.8.1982 were upheld. The revisional authority held that all the buildings located in the campus directly relates to the purpose of the mill and, therefore, they cannot be treated independent of each other. Accordingly, the order of assessing authority dated 28.2.1977 and 19.8.1982 were upheld. The revisional authority held that all the buildings located in the campus directly relates to the purpose of the mill and, therefore, they cannot be treated independent of each other. The relevant portion of the judgment passed by the revisional authority reads as under: ``A perusal of the available record and even the valuation report or the authorised valuer makes it clear that all the buildings located in the campus are directly related to the purposes of the Mill i.e., spinning and weaving of cloth. They are not independent of each other and all the building includings residences etc., are a part of the whole. Hence, in view of the principles laid down in RRD 1980 page 488 and later reiterated by the High Court in its judgment dated 14.8.1980, the Jagjeet Cotton Mills is integrally one unit and the assessing authority has correctly assessed it so. The appellate authority has apparently mis-interpretated the law by treating various buildings as separate functional units, though in fact, they are all part of the same fabric. (13). Being aggrieved by the order passed by the revisional authority and also the order of assessing authority the present writ petition is preferred by the petitioner under Articles 226 and 227 of the Constitution of India. (14). A reply to the writ petition has been filed supporting the order of assessment and also the order passed by the revisional authority. (15). Heard the Counsel for the parties. The contention of the Counsel for the petitioner is that the assessing authority failed to discharge its duty while deciding the objections by the order dated 19.8.1982 as the assessing authority without application of its mind passed the order of assessment under the directions given by the Deputy Director (Valuation) vide the communication dated 8.7.1982. It is contended by the Counsel for the petitioner that this Court by its judgment dated 14.8.1980 directed the assessing authority to provide an opportunity of hearing to the assessee and to decide each and every objection raised by the assessee. Meaning thereby it was obligatory upon the assessing authority to give reasons while deciding the objections. According to Counsel for the petitioner it is a clear case where the Deputy Director (Valuation) abducted the powers of the assessing authority. Meaning thereby it was obligatory upon the assessing authority to give reasons while deciding the objections. According to Counsel for the petitioner it is a clear case where the Deputy Director (Valuation) abducted the powers of the assessing authority. However, the Counsel for the petitioner without giving much stress to the contention above urged that the appellate authority rectified the error by the judgment dated 4.6.1986 while treating 16 different functional independent units and therefore, the matter was rightly remanded for re-assessment of tax but the revisional authority in contravention of the law laid down by the Division Bench of this Court in the case of SMS Investment Corporation Pvt. Ltd., restored the order passed by the assessing authority by holding that the 16 units could not be treated independent units being related to mill operated by petitioner company. (16). The order passed by the assessing authority as reproduced in preceding paras clearly shows that the assessing authority without application of his own mind decided the entire issue under the directions given by the Deputy Director (Valuation) Land and Building Tax Department vide the communication dated 8.7.1982. This Court by the judgment dated 14.8.1980 directed the assessing authority to provide an opportunity of hearing to the assesses and decide the objections raised by the assessee afresh in accordance with the principles laid down by the Division Bench of this Court in the case of SMS Investment Corporation Pvt. Ltd. These directions clearly show that it was obligatory for the assessing authority to apply its mind and to decide the objections with reasons in accordance with the law laid down by the Division Bench of this Court. The assessing authority instead of acting in accordance with the directions given by this Court and as required by a quasi judicial authority acted in most casual manner and decided the entire matter according to the directions given by the Deputy Director (Valuation) under the communication dated 8.7.1982. The order of assessment suffers from an incurable lacuna being an order passed without application of mind and that too under the instructions of the higher authority. I am having no doubt in saying that in fact it is a clear case of abdication of powers and therefore, the order passed by the assessing authority dated 19.8.1982 is an order nonest in the eye of law. (17). I am having no doubt in saying that in fact it is a clear case of abdication of powers and therefore, the order passed by the assessing authority dated 19.8.1982 is an order nonest in the eye of law. (17). The appellate authority too erred in entering into the merits of the case. This Court while deciding the writ petitions directed the appellate authority to decide the appeal on merits but it did not mean to decide the questions which were not part of the order impugned. The Court meant by the direction above to decide the appeal by ignoring the delay in filing the appeal. In my considered opinion the appellate authority erred while acting as an assessing authority. The appellate authority was to examine validity of the order under appeal. The order under appeal was totally a non-speaking and unreasoned order, therefore, the only course before the appellate authority was to set aside the order dated 19.8.1982 with a direction to pass an order of assessment afresh with reasons. (18). It is pertinent to note that the appellate authority without having sufficient material available on record gave a finding that the petitioner company is having 16 independent functional units and these units could not be clubbed to determine and assess tax liability. In the case of SMS investment Corporation Pvt. Ltd., Division Bench of this Court in quite unambiguous terms held that if there are number of building on the same piece of land and within the same curtilage and which had been constructed or being used for achieving the common functional purpose of the industrial complex, the land buildings taken together should constitute one unit. From reading of the order passed by the appellate authority I failed to gather any reason based on sufficient evidence to treat 16 different units. The revisional authority also committed the same error by entering into, the merits of the case though the original order i.e., the order dated 19.8.1982 is not a speaking and reasoned order. The lacuna in original order of assessment dated 19.8.1982 is incurable and it could have not been cured by the appellate authority as well as by the revisional authority. In view of it, in my considered opinion the orders of the appellate authority as well as revisional authority are also bad in the eye of law. (19). The lacuna in original order of assessment dated 19.8.1982 is incurable and it could have not been cured by the appellate authority as well as by the revisional authority. In view of it, in my considered opinion the orders of the appellate authority as well as revisional authority are also bad in the eye of law. (19). In view of whatever discussed above the order dated 19.8.1982 passed by the assessing authority, the order dated 4.6.1986 passed by the appellate authority and the order dated 19.11.1991 passed by the revisional authority i.e., the Divisional Commissioner, Bikaner all deserve to be quashed and set aside. (20). The writ petition is accordingly disposed of with a direction to the assessing authority to pass a fresh order of assessment in accordance with the directions given by this Court under the judgment dated 14.8.1980. The assessing authority shall decide all the objections raised by the petitioner in light of law laid down by Division Bench of this Court in the case of SMS Investment Corporation Pvt. Ltd. A fresh order of assessment shall be passed by the assessing authority within a period of six months from today. (21). No orders as to costs.