Civil Appeal No 1524 of 1978 A From the Judgment and order dated 29 6 1978 of the Kerala High Court in original Petition No 441177 CIVIL APPEALS NOS
2091 2092 OF 1978 From the Judgment and Order dated 26 6 1978 and 20 6 1978 of the Kerala High Court in OP Nos 390974 and 390275 CIVIL APPEAL NOS
2093 2103 OF 1979 From the Judgments and Orders dated 27 6 78 20 6 78 30 6 78 12 6 78 26 6 78 22 6 78 21 6 78 30 6 78 20 6 78 27 6 78 of the Kerala High Court in OP Nos
483375 100675 63578 and 474077 409674 182075 225876 20376 34678 349775 and 562075 respectively CIVIL APPEAL NOS
2136 OF 1978 From the Judgment and Order dated 12 6 78 of the Kerala High Court in OP No 393375 CIVIL APPEAL NO
6 OF 1979 From the Judgment and Order dated 23 6 78 of the Kerala High Court in OP No 444976 K ClVlL APPEAL NOS
27 31 OF 1978 From the Judgments and Orders dated 28 6 78 23 8 78 28 6 78 5 16 6 78 of the Kerala High Court in OP Nos
340177 466075 165877 392975 and 392575 respectively CIVIL APPEAL NOS
50 52 OF 1978 From the Judgments and orders dated 28 6 78 21 6 78 c 30 6 78 of the Kerala High Court in OP Nos 313077 E 547075 and 79978 respectively CIVIL APPEAL NOS
188 266 AND 303 OF 1979 From the Judgments and orders dated 29 6 78 1 6 78 and of the Kerala High Court in OP Nos
475875 15076 and 580078 respectively 810 CIVIL APPEAL NOS
309 311 OF 1979 From the Judgments and Orders dated 23 6 78 20 6 75 and 24 11 1978 of the Kerala High Court in OP Nos 360176 499175 and 461175 respectively CIVIL APPEAL Nos 472 473 OF 1979 From the Judgment and Order dated 29 6 78 of the Kerala High Court in OP Nos
428375 and 429077 CIVIL APPEAL NOS
1543 1546 OF 1978 From the Judgment and Order dated 12 6 1978 of the Kerala Court in OP Nos
3909 3970 252 and 425674 CIVIL APPEAL NOS
1689 1693 OF 1978 From the Judgments and Orders dated 20 6 1978 22 6 1978 23 6 78 22 6 78 296 78 21 6 78  22 6 78 of the Kerala High Court in OP Nos
85075 100075 496475 and 2576 174776 and 207676 and 54476 and 480475K and 592875N 188976G and 161576H respectively CIVIL APPEAL NOS
1556 OF 1978 From the Judgment and Order dated 12 6 1978 of the Kerala High Court in OP No 114775 CIVIL APPEAL NOS
1981 2004 OF 1978 From the Judgments and Orders dated 28 6 78 23 6 78 27 6 78 22 6 78 30 6 75 21 6 78 20 6 78 28 6 78 23 6 78 28 6 75 26 6 78 12 6 78 23 6 78 28 6 78 20 6 78 2 6 78 27 6 78 26 6 78 23 6 78 28 6 78 and 27 6 78 of the Kerala High Court in OP No 350777 362277 and 137576 and 796177 and 300576 and 56778 and 566975 112476 and 5173 and 350977 and 444576 and 350877 and 585276 and 423074 and 397876 and 361677 and 532875 and 241576 and 131077E and 581076G 94076D and 363476N and 138077L and 274276 respectively
ClVlL APPEAL NO
2105 OF 1978 From the Judgment and Order dated 20 6 78 of the Kerala High Court in OP No 517575 CIVIL APPEAL Nos 232 2351 2352 2353 AND 2354 OF 197 From the Judgments and orders dated 30 6 1978 23 6 78 811 26 6 78 and 20 6 78 of the Kerala High Court in OP Nos43878B 153576N and 144376E and 513475 respectively CIVIL APPEAL NOS
2415 2419 OF 1978 From the Judgments and Orders dated 21 6 1978 12 6 78 30 6 78 21 6 78 and 27 6 78 of the Kerala High Court in OP Nos
558175 524075 84978 275176 and 155277 respectively CIVIL APPEAL NO
2497 OF 1978 From the Judgment and Order dated 20 6 78 of the Kerala High Court in OP No 402875 CIVIL APPEAL NOS
258778 AND 67 7179 From the Judgments and Orders dated 30 6 1978 7 6 78 and 21 6 1978 of the Kerala High Court in OP Nos 335176N and 612775
615975
597275 462877 A  575575 respectively CIVIL APPEAL NOS 129 131 AND 19779 From the Judgments and Orders dated 21 6 78 20 6 78 of the Kerala High Court in OP Nos
567775 572375 and 526375 and 587775 respectively CIVIL APPEAL NOS 265 420 AND 544 545  580 OF 1979 From the Judgments and Orders dated 20 6 7921 6 7922 6 78 20 6 78 and 22 6 78 of the Kerala High Court in OP Nos
500475 552475 24876K 533575 and 296276G respectively CIVIL APPEAL NOS  1965 1967 AND 2203 2206 OF 1978 From the Judgments and Orders dated 25 7 78 28 6 78 4 7 78 3 7 78 22 6 78 27 6 78 and 29 6 78 of the Kerala High Court in OP Nos
25478 313277 F 464075 145978 F 75076 E 7047 A and 599575 respectively CIVIL APPEAL NOS 258378 179 7279 AND 16879 From the Judgments and Orders dated 23 6 7827 67823 6 78 and 29 6 78 of the Kerala High Court in OP Nos
26076 L 1863 77E 139876N and 449477B respectively 812 CIVIL APPEAL NOS 210478 240178 AND 235078 From the Judgments and Orders dated 12 6 78 26 6 78 30 6 78 of the Kerala High Court in OP Nos
450974 577076L and 115076 CIVIL APPEAL NOS 1860 1865 OF 1978 From the Judgments and Orders dated 12 4 78 28 6 78 29 6 78 23 6 78 26 6 78 of the Kerala High Court in OP Nos
418474 366574C 393277B 416576K and 581576H respectively CIVIL APPEAL NOS 2256 225778 33379 50079 From the Judgments and Orders dated 21 6 78 29 6 78 and 27 6 78 of the Kerala High Court in OP Nos
549475 471677 128575 and 302376 ClVlL APPEAL NO
2207 OF 1978 From the Judgment and Order dated 23 6 78 of the Kerala High Court in OP No 414076 H CIVIL APPEAL NO 169 OF 1979 From the Judgment and Order dated 28 6 77 of the Kerala High Court in OP No 311777 CIVIL APPEAL NOS 148 15079 304 30579 AND 40979 From the Judgments and Orders dated 27 6 78 28 6 78 20 6 78 27 6 78
Of the Kerala High Court in OP Nos
194177 190377 517678 104777G and 130677E CIVIL APPEAL NOS
2254 225578 AND 267 OF 1979 From the Judgments and Orders dated 27 6 78 21 6 78 and 27 6 78 of the Kerala High Court in OP No 9377 539675 and 227776 D respectively From the Judgments and Orders dated 21 6 78 and 30 6 78 of the Kerala High Court in OP Nos 541675 and 478277C WRIT PETITION NOS
4375 OF 1978  14379 Under Article 32 of the Constitution ClVlL APPEAL No 39 OF 1979 From the Judgment and Order dated 2 6 1978 of the Kerala High Court in OP No 404274 813 SPECIAL LEAVE PETITION CIVIL No 6298 OF 1978 From the Judgment and order dated 5 7 78 of the Kerala High Court in OP No 98376 SPECIAL LEAVE PETITION CIVIL NOS 1137 113879 From the Judgments and orders dated 7 8 78 and 27 6 78 of the Kerala High Court in OPI Nos
347477 and 195077 SPECIAL LEAVE PETITION CIVIL NOS 4861 4862  6154 5679 From the Judgments and orders dated 26 6 78 27 6 78 26 6 78 28 6 78 and 30 6 78 of the Kerala High Court in OP Nos 63877153077 548578 295077 and 88478 P Govindan Nair CAs
1524 2092 209578 27 29 303 310 and 31179 T C Raghavan CA 266 T L Anantha Sivan and N Sudhakaran for the Appellants in CAs
1524 2091 2092 2093 2103 213678 6 27 31 50 52 100 266 303 310 311 309 472 and 47379
Anil B Divan 1543 46 and 1556S B Saharya K V Kuriakose in all except 1995 1997 1998 29 31 197 500 and V B Sallarya for the Appellants in CAs
1543 46 1656 1689 99 1981 2004 2105 2324 2351 2352 2354 2415 2419 2497 2587178 67 71 129 131 197 265 420 544 545 and 50079
P A Francis 1966 K Sudhakaran 1967 P Paramesuaran 1966 67 A section Nambiar for the Appellants in 1965 1966 1967 2203 2204 2205 2206 2353 and 250378 1 72 and 168179 16579 206378 and for the Petitioner in WP 14379
P Kesava Pillai and section K Das Gupta for the Appellants in CAs
2104 2350 and 240178
P Govindan Nair and Mrs Saroja Gopalkrishnan for the Appellants in 1860 6478
section K Mehta P N Puri and EMS Anam for the Appellants in CA 2256 225778 333 and 50079 and 202679
section Balakrishnan for the Appellants in CA 220778 and for Petitioner in WP 437579
G B Pai 169 K J John and Manzal Kumar for the Appellants in CA 39 and 16979
P Govindan Nair Mrs Baby Krishnan and N Sudhakaran for the Appellants
CA 148 50304 305 and 40979 and for the Petitioners in SLP Nos
4062 4061 6298 5141 6154 615678
814 A T M Sampath and P N Ramalingam for the Appellants in CA 2254 and 225578 and 26779
K P P Pillai for the Appellants in CA 542 and 57179
N Sudhakaran for the petitioners in SLP 1137 113879
M M Abdul Khader and K M K Nair for the Respondents in all matters
The Judgment of the Court was delivered by SHINGHAL J
These cases relate to the validity of certain provisions of the Kerala Building Tax Act 1975 hereinafter referred to as the Act and are directed against the judgment of the Keral High Court dated June 12 1978 by which the validity of those provisions has been upheld
We have heard these cases together and shall deal with them in this judgment
In order to appreciate the controversy it will be convenient to make a brief mention of the background of the Act
The Legislature of the Kerala State wanted to impose a tax on buildings and passed the Kerala Building Tax Act 1961 which came into force on March 2 1961
Its validity was challenged and by his judgment dated November 20 1964 a learned Single Judge of the High Court held it to be invalid and unconstitutional
The division bench took the same view in its judgment dated July 7 1966 and dismissed the appeal of the State
The matter came to this Court and it also dismissed the appeal by its judgment dated August 13
1968 reported in State of Kerala vs Haji K Haji K Kutty Naha and others
This was so because the Legislature had adopted merely the floor area of the building as the basis of the tax irrespective of all other considerations
The intention to introduce a fresh Bill and to levy a non recurring tax on building was stated in the Finance Minister s budget speech of 1910 71
A Bill was published some time in June 1970 and it was stated there that the Act would be brought into force with effect from April 1 1970
The Bill was introduced in the Legislative Assembly on July S 1973 and was referred to a Select Committee
The Committee submitted its report on March 28 1974
It recommended that the Act may be brought into force from April 1 1973
As the Bill could not be taken up during the budget session the Government of the State promulgated the Kerala Building Tax ordinance 1974 on July 27 1974 to give effect to the provisions of the Bill as reported by the Select Committee
It was followed by another ordinance dated November 18 1974 on the lines of the 815 earlier ordinance
The Bill was passed soon after and the Governor gave his assent to it on April 2 1975
Several writ petitions were filed in the High Court to challenge its constitutional validity
and we have made a mention of the High Court s impugned judgment dated June 12 1978 from which the present cases have arisen
While four Hon ble Judges of the High Court have upheld the validity of the Act
a different views has been taken by Eradi J
The question which arises for consideration at the threshold is that relating to the competence of the State Legislature to enact the law on which considerable stress has been laid by Mr P A Francis
He has argued that the subject matter of the Act being a tax on buildings it is a tax on the capital value of the assets of an individual or company and falls within the scope of entry 86 of List I of the Seventh Schedule of the Constitution and not under entry 49 of List II so that it was beyond the legislative competence of State Legislature
The question is whether this is so
The word tax in its widest sense includes all money raised by taxation
It therefore includes taxes levied by the Central and the State Legislatures and also these known as rates  or other charges lavied by local authorities under statutory powers
Taxation has therefore been defined in clause 28 of article 366 of the Constitution to include the imposition of any tax or impost whether general or local or special and it has been directed that tax  shall be construed accordingly Chapter I of Part XI of the Constitution deals with the distribution of legislative powers
Article 246 of that chapter states inter alia the exclusive powers of the Parliament and the State Legislatures according as the matter is enumerated in List I or List II of the Seventh Schedule
Entry 86 of List I in which reliance has been placed by Mr Francis reads as follows 86
Taxes on the capital value of assets exclusive of agricultural land of individuals and companies taxes on the capital of companies
 Now the word assets has been defined in the Century Dictionary which is an encyclopedic lexicon of the English language as follows Property in general all that one owns considered as applicable to the payment of his debts 
As a singular
Any portion of one s property or effects so considered
 816 So if a tax is levied on all that one owns or his total assets it would fall within the purview of entry 86 of List I and would be outside the legislative competence of a State Legislature eg a tax on one s entire wealth
That entry would not authorise a tax imposed on any of the components of the assets of the assessee
A tax directly on one s lands and buildings will not therefore be a tax under entry 86
On the other hand entry 49 of List Ir is as follows 49
Taxes on lands and buildings
 If therefore a tax is directly imposed on buildings it will bear a direct relation to the buildings owned by their assessee
It may be that the building owned by an assessee may be a component of his total assets but a tax under entry 86 will not bear any direct or definable relation to his building
A tax on buildings is therefore a direct tax on the assessee s buildings as such and is not a personal tax without reference to any particular property
It has to be appreciated that in almost all cases a tax has two elements which have been precisely stated by Seervai in his Constitutional Law of India second edition volume 2 as follows at page 1258 Another principle for reconciling apparently conflicting tax entries follows from the fact that a tax has two elements the person thing or activity on which the tax is imposed and the amount of the tax
The amount may be measured in many ways but decided cases establish a clear distinction between the subject matter of a tax and the standard by which the amount of tax is measured
These two elements are described as the subject of a tax and the measure of a tax
 It may well be that one s building may imperceptibly be the subject matter of tax say the wealth tax as a component of his assets
under entry 86 List I and it may also be subjected to tax say a direct tax under entry 46 List II but as the two taxes are separate and distinct imposts they cannot be said to overlap other and would be within the competence of the Legislatures concerned
Reference in this connection may be made to Sudhir Chandra Nawn vs Wealth Tax officer Calcutta and others1 The petitioner there challenged the demand for the recovery of wealth tax on the ground inter alia that since the expression net wealth included the buildings of the assessee and tho power to levy tax on them was referred to the 817 State Legislature under entry 49 List II Parliament was not competent 4 to levy the tax under entry 86 of List I
This Court rejected the challenge and laid down the law as follows The tax which is imposed by entry 86 List I of the Seventh Schedule is not directly a tax on lands and buildings
It is a tax imposed on the Capital value of the assets of individuals and companies on the valuation date
The tax is not imposed on the components of the assets of the assessee it is imposed on the total assets which the assessee owns and in determining the net wealth not only the encumbrances specifically charged against any item of asset but the general liability of the assessee to pay his debts and to discharge his lawful obligations have to be taken into account
   
Tax on lands and buildings is directly imposed on lands and buildings and bears a definite relation to it
Tax on the capital value of assets bears no definable relation to lands and buildings which may form a component of the total D assets of the assessee
By legislation in exercise of power under entry 86 List I tax is contemplated to be levied on the value of the assets
For the purpose of levying tax under entry 49 List II the State Legislature may adopt for deter mining the incidence of tax the annual or the capital value of the lands and buildings
But the adoption of the annual or capital value of lands and buildings for determining tax liability will not in our judgment make the fields of legislation under the two entries overlapping
 The decision in Sudhir Chandra Nawn s case was followed by this Court in Assistant Commissioner of Urban Land Tax and others vs F The Buckingham and Carnatic Co Ltd Etc1 where the vires of the Madras Urban Land Tax Act 1966 was challenged with reference to entry 86 of List I of the Seventh Schedule
The legal position on that aspect of the controversy was reiterated as follows But in a normal case a tax on capital value of assets bears no definable relation to lands and buildings which may or may not form a component of the total assets of the assessee
But entry 49 of List II contemplates a levy of tax on lands and buildings or both as units
It is not concerned with the division of interest or ownership in the units of lands or buildings which are brought to tax
Tax on lands and buildings is directly imposed on lands and buildings 818 and bears a definite relation to it
Tax on the capital value of assets bears no definable relation to lands and buildings which may form a component of the total assets of the assessee
 There is therefore no force in the argument that the State Legislature was not competent to impose the tax on buildings under entry 49 of list II of the Seventh Schedule of the Constitution
We may as well put aside the other argument that the Act is unconstitutional as it was passed on April 2 1975 but has imposed a tax on buildings with retrospective effect from April 1 1973
Craies on Statute Law seventh edition has stated the meaning of retrospective at page 387 as follows A statute is to be deemed to be retrospective which takes away or impairs any vested right acquired under existing laws or creates a new obligation or imposes a new duty or attaches a new disability in respect of transactions or considerations already past
But a statute is not properly called a retrospective statute because a part of the requisites for its action is drawn from a time antecedent to it passing
 It has however not been shown how it could be said that the Act has taken away or impaired any vested right of the assessees before us which they had acquired under any existing law or what that vested right was
It may be that there was no liability to building tax until the promulgation of the Act earlier the ordinances but mere absence of an earlier taxing statue cannot be said to create a vested right under any existing law that it shall not be levied in future with effect from a date anterior to the passing of the Act
Nor can it be said that by imposing the building tax from an earlier date any new obligation or disability has been attached in respect of any earlier transaction ar consideration
The Act is not therefore retrospective in the strictly technical sense
What it does is to impose the building tax from April 1 1973
But as was held in Bradford Union vs Wilts1 if the language of the statute shows that the legislature thinks it expedient to authorise the making of retrospective rates it can fix the period as to which the rate may be retrospectively made
819 This Court had occasion to examine the validity of the retrospective levy of sales tax in The Tata Iron and Steel Co Ltd vs The State of Bihar1 and it was held that that was not beyond the legislative competence of the State Legislature
Nor can the choice of April 1 1973 as the date of imposition of the building tax be assailed as discriminatory with reference to article 14 of the Constitution
It will be enough for us to refer in this connection to the following passage from this Court s decision in Union of India and another vs Ms Parameshwaran Match Works Etc
Which was a case under the Central Excise and Salt Act 1944 The choice of a date as a basis for classification cannot always be dubbed as arbitrary even if no particular reason is forthcoming for the choice unless it is shown to be capricious or whimsical in the circumstances
When it is seen that a line or a point there must be and there is no mathematical or logical way of finding it precisely the decision of the legislature or its delegate must be accepted unless we can say that it is very wide of the reasonable mark
See Louisville Gas Co vs Alabama Power Co 240 US 30 at 32 1927 per Justice Holmes
 It has not been shown in this case how it could be said that the date April 1 1973 for the levy of the tax was wide of the reasonable mark
On the other hand it would appear from the brief narration of the historical background of the Act that the State Legislature had imposed the building tax under the Kerala Building Tax Act 1961 which came into force on March 2 1961 and when that Act was finally struck down as unconstitutional by this Court s decision dated Auglst 13 1968 the intention to introduce a fresh Bill for the levy was made clear in the budget speech of 1970 71
It will be recalled that the Bill was published in June 1973 and it was stated there that the Act would be brought into force from April 1 1970
The Bill was introduced in the Assembly on July S 1973
The Select Committee however recommended that it may be brought into force from April 1 1973
Two ordinances were promulgated to give effect to the provisions of the Bill
The Bill was passed soon after and received the Governor s assent on April 2 1975
It cannot therefore be said with any justification that in choosing April 1 1973 as the date for the levy of the tax the Legislature acted unreasonably or that it was wide of the reasonable mark
 820 The real controversy in this case is that relating to the nature of the tax for it has been vehemently argued before us that it is not merely a tax on buildings but it is a tax on the buildings as well as on the lands of those buildings
As has been mentioned what entry 49 of List II of the Seventh Schedule of the Constitution permits is the levy of taxes on lands and buildings
 It is therefore permissible to levy a taxes either on lands as well as buildings or on lands or on buildings
If the Legislature decides to impose a tax only on buildings the tax will be imposed on all that goes to make or constitute a building
The word  building has been defined in the oxford English Dictionary as follows That which is built a structure edifice now a structure of the nature of a house built where it is to stand
 Entry 49 therefore includes the site of the building as its component part
That if we may say so inheres in the concept or the ordinary meaning of the expression building
A somewhat similar point arose for consideration in Corporation of the City of Victoria vs Bishop of Vancouver Island1 with reference to the meaning of the word building occurring in section 1971 of the Statutes of British Columbia 1914
It was held that the word must receive its natural and ordinary meaning as including the fabric of which it is composed the ground upon which its walls stand and the ground embraced within those walls
 That appears to us to be the correct meaning of building The Act contains its own definition of what is meant by building and clause e of section 2 is to the following effect e building means a house out house garage or any other structure or part thereof whether of masonry bricks wood metal or other material but does not include any portable shelter or any shed constructed principally of mud bamboos leaves grass or thatch or a latrine which is not attached to the main structure
 There are two explanations to the clause but they are not relevant for the controversy before us
The definition therefore makes it quite clear that
as a house out house garage or any other structure cannot be erected without the ground on which it is to stand the expression building includes the fabric of which it is composed the ground 821 upon which its walls stand and the ground within those walls
It is A equally clear that the ground referred to above would not have a separate existence apart from the building and would not be lands  jointly stated with buildings as the subject matter of the tax in entry 49 of List II
In other words the ground referred to above would not be the subject matter of a separate tax apart from the tax on the building standing on it
It is true that sub section 4 of section 6 of the Act provides that in determining the annual value of a building under sub section 2 or sub section 3 the assessing authority shall among other factors have regard to the location of the building and the value of the land on which the building is constructed but that is necessary for fixing the annual value of the building and does not bear on the annual value of the ground of the building which as we have shown does not have an existence of its own apart from the building
Thus a building which is located in an important business area of a city will have a higher annual value than a building located in the outskirts of the city
But any such enhanced value is the value of the building and not of its ground for what is located in an important business area is not the ground of the building as such but the building itself
It may be that the value of the ground on which the building stands may be known or may be capable of being ascertained
That is why the other factor mentioned in sub section 4 of section 6 is tho value of that land
But here again as the land has no separate existence of its own the value of the ground inevitably goes to constitute the value of the building
Rule 4 of the Kerala Building Tax Rules 1974 provides that the return under sub section 1 or 3 of section 7 or section 8 of the Act shall be in Form II
Column 2 of that form makes a mention of the location of the building but not the location of its ground or land or the value thereof
It refers only to the annual value of the building in column 13 and its capital value in column 7 so that the location of the building as distinct from the location of its ground or the value of the ground as such do not go in for the determination of the annual or capital value of the building
It is therefore futile to contend that as factors a and f of sub section 4 of section 6 of the Act refer to the location of the building and the value of the land the law recognises the separate existence or entity of the ground on which the building stands so that tho tax imposed under it is a tax both on lands and buildings and both the entities should be separately recognised and determined and taxed as such
As has been stated the location or value of the land has 16 625 SCI79 822 importance of its own and contributes to the value of the building standing on it but that does not justify the argument that what the Act provides is a tax on lands and buildings and not merely on buildings
There is also the further fact that while the Act provides the method of arriving at the capital value of the building on the basis of the annual value it does not provide any method of assessing the annual or capital value of the ground on which the building stands
We shall next examine the other argument that the method of determining the capital value of a building on the basis of its annual value is hypothetical and arbitrary and should be struck down as unconstitutional
We have given our reasons for holding that the tax on buildings under the provision of the Act has been imposed by virtue of entry 49 of List II of the Seventh Schedule of the Constitution
So when the State Legislature had taken a decision to impose that tax it was open to it to decide how best to levy it
If the tax was to be annual one of the usual modes of levying it was to make provision for determining what is known as rate or annual value of the building
Rateable value is now in almost all cases the same as the net annual value of the building
But if the State Legislature decides as in the present case to levy a tax on buildings once for all or as was stated in the statement of subjects and Reasons of one of the Bills as a non recurring tax on buildings it had to go beyond the annual value and work out the capital value
This could be done in one of the various modes open to it eg
On the basis of the capital cost of construction of the building or its market value or on the basis of the rent arrived at by what has aptly been described by Channel J The Assessment Committee of the Brad Ford on Aven Union vs Write1 as the higgling of the market and multiplying it by a number which in the opinion of the Legislature would best serve the purpose of determining the value of the building and then to specify the rate of the tax on it
The value of a building is not merely the cost of its bricks and mortar or other building material
It is therefore difficult to ascertain that cost
It is also difficult to find out the market value of a building
Doing so would at any rate take time and may be open to manipulation or avoidable criticism and may not provide a ready or convenient basis of taxation
The Legislature cannot therefore be blamed if it decides to link the levy with the annual value of a building and prescribes a uniform formula for determining its capital value and 
calculating the tax
Annual value of a building has in fact played as 823 important a role in rating that in a converse case resort has some A times been taken to the capital value or cost of construction to work it out
As has been stated by Faraday on Rating fifth edition page 24 there are four recognised methods of arriving at the annual value of a building 1
The competitive or comparative method ie by finding out rents actually paid for the building andor others of a similar kind adjusting them to bring them into line with statutory conditions and thus arriving directly at an estimate of the rent
The profits basis or calculation by reference to receipts and expenditure usually applied to public utility undertakings
The contractor s method by which it is assumed in the absence of any other and better way of estimating the rent that the tenant would arrive at it by finding the figure for which a contractor would provide him with premises neither more nor less suitable for his purpose and the rate of interest on that cost which the contractor would charge him as rent
The unit method by which schools may be valued at so much a place hospitals at so much a bed or certain industrial premises at so much a furnace or other unit of output
There is nothing to prevent any of the four methods from being applied either singly or in combination as overall checks to the same building
The fundamental object in each of these methods is to find out the rent which a tenant might reasonably be expected to pay for a building
It is the expectation which is to be reasonable and not necessarily the rent for the reasonable expectation would exclude any so called black market rent
Halsbury Vol
23 p 119 third edition has in fact defined rate to mean a rate the proceeds of which are applicable to local purposes of a public nature and which is leviable on the basis of assessment in respect of the yearly value of property As has been stated in State and Local Taxation by J R Hellerstein page 684 increasing weight is being given to earnings as a weighty factor in real estate tax valuations
824 There is however no rule of law as to the method of valuation to be adopted for determining the annual value of a building
Where however the building has been let at what is plainly a rackrent that rent is the best evidence of value if it has been fixed by the higgling of the market
If therefore the Legislature selects that method to determine the annual value of a building there is neither reason nor authority for holding that it is hypothetical or arbitrary
What the Legislature has done under the Act is to make it clear that the tax is on buildings and not on the grounds on which they stand or on lands
It has defined in clause e of section 2 what a building means
It has also defined in clause a of section 2 what is meant by annual value of a building and clause i of the same section defines capital value
Section 6 prescribes the mode of determining the capital value of a building according to the formula of sixteen times the annual value prescribed in clause f of section 2
Having made these necessary provisions section S states that a tax referred to as building tax in the Act shall be charged at the rate specified in the Schedule etc
There are other ancillary provisions but it will be sufficient for us to say that taken together they contain the entire scheme for the levy and collection of the building tax on the capital value of the buildings
The expression capital value used in the Act is not however the cost of construction of the building or its market value as a wealth
It is a convenient or a working expression which may roughly be said to be the taxable value of the building and the State Legislature was quite competent to select that as the basis for assessing the building tax
Reference in this connection may be made to this Court s decision in Khandise Sham Bhat and others vs The Agricultural Income Tax officer1 where it has been held as follows at page 823 Where there is more than one method of assessing tax and the Legislature selects one out of them the court will not be justified to strike down the law on the ground that the Legislature should have adopted another method which in the opinion of the court
is more reasonable unless it is convinced that the method adopted is capricious fanciful arbitrary or clearly unjust
 It may be mentioned that this Court has held in Assistant Commissioner of Urban Land Taxsupra that for the purpose of Ievying tax under entry 49 List II the State Legislature may adopt for determining the incidence of tax the annual or the capital value of the lands and 825 buildings
 There is therefore no justification for the argument to the Contrary We may as well deal here with the ancillary argument that the building tax could not at any rate have been based on the gross annual rent of the building
Thus argument has arisen because clause a of section 2 of the Act defines annual value as follows 1 annual value of a building means the gross annual rent at which the building may at the time of completion be expected to let from month to month or from year to year
 It is therefore true that the expected gross annual rent has been made the annual value of a building but that by itself cannot be said to be open to objection for two reasons
Firstly there is nothing to prevent the Legislature from making the expected gross annual rent and thereby the annual value of a building from being the unit for multiplication by sixteen for arriving at its capital value for charging the tax under section 5
Secondly section 6 of the Act states that for determining the capital value for the purposes of the Act the annual value of a building shall be the annual value fixed for that building in the assessment books of the local authority within whose area the building is situate  and a cross reference to section 102 2 of the Kerala Municipal Corporation Rct 1961 shows that while the annual value of lands and buildings shall be deemed to be the gross annual rent at which they may at the time of assessment reasonably be expected to let from month to month or from year to year a deduction in the case of buildings of fifteen per cent of that portion of such annual rent which is attributable to the building alone apart from their sites and adjacent lands occupied as appurtenances thereto shall be made and that deduction shall be in lieu of all allowances for repairs or on any other account whatever
As by virtue of section 6 of the Act the same annual value forms the basis for determining the capital value of the building for purposes of the Act what really is taken as the annual value under the definition in clause a of section 2 is not their gross annual rent but the net rent after allowing for the cost of its repairs etc
A similar deduction has been provided under section 1002 of the Kerala Municipalities Act 1960
It has not been disputed before us that a provision exists in the law relating to Panchayats also for actually basing the tax on buildings at the prescribed percentage of the net annual rental value of the buildings
It is not therefore factually correct to contend that the annual value of buildings in Kerala is determined on the basis of their gross annual rent
without any deduction on account of repairs etc and there is 826 no force in the argument that determination of the capital value is arbitrary as it is arrived at by multiplying the gross annual rent by sixteen
But there is even otherwise no inherent illegality or vice if the gross income of the property were to be capitalised for the purpose of determining the value of the property
It has thus been stated in American Jurisprudence second edition in para 762 on which reliance has been placed by Mr Govindan Nair as follows A valuation of real property for taxation may be made by capitalizing gross income therefrom if the percentage used is sufficient to cover legitimate deductions and a fair net return to the owner
 Reference may also be made to Faraday on Rating which shows that the gross value of a building is often made the datum point by statue and there is nothing unusual or illegal about it particularly when there are statutable deductions from it as in the present case
Then it has been argued that under the Kerala Municipal Corporation Act 1961 the annual value is largely determined on the basis of the value of the land on which the building has been constructed and the land appurtenant thereto but it is not permissible to make it the basis of levying the tax on buildings under the Act as it purports to be a tax only on buildings and not on lands or on lands and buildings
Reference for this argument has been made to that part of section 1021 of the Kerala Municipal Corporation Act which provides that a building shall be assessed together with its site and other adjacent premises occupied as appurtenances thereto
We have given our reasons for taking the view that the site or ground on which the building stands is a part of the building
It has therefore to be taxed along with the fabric for the two of them constitute the building
There is therefore no occasion to tax the site separately or to ascertain its value and add it to the value of the fabric
This is also the position in the case of appurtenances
An appurtenance has been defined in the oxford English Dictionary as follows A thing that belongs to another belonging  a minor property right or privileges belonging to another more important and passing in possession with it an appendage An appurtenance thus belongs to the building concerned and has no existence of its own
This Court had occasion to examine the meaning 827 of appurtenance in Maharaj Singh vs State of Uttar Pradesh and others and has observed as follows at page 1085  Appurtenance in relation to a dwelling or to a school college includes all land occupied therewith and used for the purpose thereof Words and Phrases legally Defined Butterworths 2nd edn
The word appurtenances  has a distinct and definite meaning
Prima facie it imports nothing more than what is strictly appertaining to the subject matter of the devise or grant and which would in truth pass without being specially mentioned ordinarily what is necessary for the enjoyment and has been used for the purpose of the building such as easements alone will be appurtenant
Therefore what is necessary for the enjoyment of the building is alone covered by the expression appurtenance 
If some other purpose was being fulfilled by the building and the lands it is not possible to contend that those lands are covered by the expression appurtenances 
Indeed it is settled by the earliest authority repeated with out contradiction to the latest that land cannot be appur tenant to land
The word appurtenances  includes all the incorporeal hereditaments attached to the land granted or demised such as rights of way
Of common but it does not include lands in addition to that granted 
Words and Phrase supra
In short the touchstone of appurtenance  is dependence of the building on what appertains to it for its use as building So even if it is presumed as has been argued before us that there is some land as an appurtenance to a building then if the word appurtenance has been used in its true sense it is an integral part of the building to which it belongs while if the word has been used loosely it will have its separate existence quite apart from the building
In either case its value will not come in for addition to the annual value of the building
It would not matter therefore if under the Corporation Act the annual value of a building includes the value of the appurtenances
for that is really the true annual value of the building concerned
Another argument which has been advanced is that the multiple of 16 for ascertaining the capital value of a building on the basis of its annual value is unrealistic and arbitrary and should be held to be confiscatory
It has been pointed out that competing returns from 828 investments range from 12 to 18 per cent on long term bank deposits
It has also been argued that mere multiplication of the annual value would give an unrealistic value and is not a satisfactory method of arriving at the capital value
As has been pointed out earlier the Legislature has decided to impose a non recurring tax on buildings in the State
It had therefore necessarily to go beyond the ascertainment of the annual value and adopt one of the several ways of ascertaining the capital value of buildings
And if the Legislature chose to adopt the annual value as the base for working out the capital value with reference to it it cannot be blamed for it as besides other advantages it was readily available from the records of the local authorities and was quite a simple and reliable basis to work upon
The controversy really centres round the choice of the multiple to work out the capital value
The Legislature has thought it proper to define capital value of a building to mean the value arrived at by multiplying the annual value of a building by sixteen
There was nothing to prevent it from doing so for as has been pointed out it had legislative competence to impose the building tax
And it is by now well settled that the quantum of the tax levied by the taxing statute and the conditions subject to which it is levied are matters within the competence of the Legislature Rai Ramkrishna and others vs The State of Bihar1 It is also well settled that so long as the tax is not confiscatory or extortionate the reasonableness of the tax cannot be questioned in a court of law Kunnathat Thathuni Moopil Nair vs The State of Kerala and another and Assistant Commissioner of Urban Land Tax vs The Buckingham and Carnatic Co Ltd supra 
It has to be appreciated that investment in buildings is a conservative mode of raising income and even if it were presumed that it does not yield the same quick results as some other forms of investment it cannot be denied that it involves lesser risk
So even if it yields a return of not more than 625 per cent or so it cannot be denied that unlike most of the other dependable investments it has the considerable advantage of giving to the investor a far greater return in the form of a more or less continuous appreciation of the market value of the buildings
Our attention has been invited to certain modes of investment by way of fixed deposits or national savings certificates which we are told 829 yield income upto about 10 per cent per annum and would be higher than the conservative 625 per cent yield on real estate
But it cannot be forgotten that in fixed deposits and certificates the money and the interest of the investor remain locked up until the expiry of the term of the deposit or the certificate
The term of deposit is often quite long if it has to yield income at the rate of 10 per cent or so
If however the deposit is for a short period of say six months the income from interest may not be far in excess of 625 per cent which appears to be the basis for fixing the multiple at 16
Mr Dewan has invited our attention to a statement prepared by him showing building tax on gross annual rent and he has argued that in one of the cases before us while the cost of construction of the building was only Rs 27968620 its annual rental income is Rs 13440000 its capital value works to Rs 2150400
On and the building tax on it will amount to Rs 30461000
It has been urged that the building tax will thus be far in excess of the cost of construction and would be extortionate
But the argument misses the point that only the cost of construction of the structure cannot be the full capital value of the building
It also overlooks the fact that the entire cost of construction on Mr Dewan s own showing would be recovered in about two years because of the high rental income and if the owner has to pay a non recurring tax of Rs 30461000 that will be less than three years rental income so that thereafter his investment will be a source of a recurring income of Rs 13440000 for as long the building lasts
There is nothing unreasonable in determining the capital value of a building yielding so much annual rent without reference to its cost of construction
A tax of such a nature cannot be said to be arbitrary or confiscatory or extortionate
But even if it were assumed that the income from a building is no more than 61 per cent and the whole of it is denied to the owner for a period of 16 years to coincide with the multiple of 16 it cannot be gainsaid that after the expiry of that period the owner would at any rate be able to retain the whole of the income and in the meantime benefit from the appreciation of its market value as years go by
Such a taxing statute cannot be said to be colourable
It has in fact been held by this Court in Raja Jagannath Baksh Singh vs The State of Uttar Pradesh1 that 
the conclusion that a taxing statute is colourable would not and cannot normally be raised merely on the finding that the tax imposed by it is unreasonably high or 830 heavy because the reasonableness of the extent of the levy is always a matter within the competence of the Legislature
Such a conclusion can be reached where in passing the Act the Legislature has merely adopted a device and a cloak to confiscate the property of the citizen taxed
 Reference may also be made to section Kodar vs State of Kerala1 for the following observation Generally speaking the amount or rate of a tax is a matter exclusively within the legislative judgment and as long as a tax retains its avowed character and does not confiscate property to the State under the guise of a tax its reasonableness is outside the judicial ken
 As has been stated by AA Ring on the valuation of Real Estate second edition page 232 the most important and perhaps the most controversial and yet the least known phase of property valuation revolves about the procedure for the determination of a market rate of capitalisation through which estimated future net income can be converted into a sum of present value
 The author has dealt with various methods of property valuation and the mathematics thereof but they are approaches to a difficult problem and the fact remains that no one method is perfect or final or above criticism
As it is we are unable to think that the multiple of 16 suffer from any constitutional or legal infirmity
The legality of the building tax has however been challenged on the further ground that the Act does not provide any procedural machinery for the assessment of the annual value of buildings and is really a colourable exercise of legislative power
The argument has been advanced with reference to sub section 1 of section 5 and has been supported on the basis of this Court s decisions in Kunnathat Thathuni Moopil Nair vs The State of Kerala Raja Jagannath Baksh Singh vs The State of Uttar Pradesh and Rai Ramkrishna and others vs The States of Bihar  supra 
Sub section 1 of section 5 of the Act which is the charging section provides that the building tax shall be charged at the rate specified in the Schedule where its capital value exceeds Rs 20000 
Clause f of section 2 states that the capital value  of a building means the value arrived at by multiplying its annual value by 16
So if the annual value of a building can be ascertained with finality by any satisfactory procedure prescribed by law it would only require its 831 multiplication by 16 to determine its capital value and then to assess the building tax leviable on it would be a matter of simple arithmaticaI calculation according to the table given in the Schedule
Section 6 of the Act provides the mode of determining the capital value of a building
For purposes of the argument under consideration sub section 1 of that section alone arises for consideration because it is not disputed that sub section 2 which deals with a case where the annual value fixed in the assessment books of the local authority is held to be too low and sub section 3 which deals with a case where the capital has not been fixed at all are on a different footing
For them the factors for determining the annual value and the assessing and the appellate and revisional authorities etc
have all been provided by the Act and there is no grievance on that account
The question is whether determining capital value on the basis of the annual value recorded in the assessment books of the local authority concerned is arbitrary because of the absence of the necessary machinery for its determination
Sub section 1 of section 6 reads as follows 61
For determining the capital value for the purposes of this Act the annual value of a building shall be the annual value fixed for that building in the assessment books of the local authority within whose area the building is situate
 It therefore accepts the annual value fixed for a building in the books of the local authority as correct
But that would not justify the argument that doing so is illegal or unreasonable as long as it can be shown that what is entered to the assessment books of the local authority has been arrived at in accordance with a satisfactory procedure laid down for it in the statute concerned
Thus if it can be shown that the ANNUAL value in the case of a local authority has been determined according to the procedure laid down for it in the Act governing the constitution of the local authority and the assessment and fixation of the annual value of buildings situated within its local area and if that procedure is unexceptionable then there is nothing illegal or unconstitutional if another taxing statute provides that the annual value so fixed and recorded in the assessment books of the local authority shall be accepted as correct and form the basis for the calculation of any other tax or impost that may be permissible under the other statute
In such a case where the necessary machinery for determining the annual value has been provided in the Act andor the rules of the 832 local authority there is no reason or necessity for providing another machinery in the other Act and rules
Doing so would really mean making avoidable and unnecessary provision and may nave the disadvantage of creating confusion and inconsistency for no useful purpose
A case of the nature contemplated by sub section 2 of section 6 is on a different footing for there are reasons to take the view that the annual value fixed for the building by the local authority is too low
Everything therefore turns on the question whether the law governing the levy and fixation of annual value of buildings in the areas of the local authorities concerned provide the necessary procedure and the machinery for their assessment and final fixation
It is not disputed before us that the three Acts which bear on the question are the Kerala Municipal Corporation Act 1961 the Kerala Municipalities Act 1960 and the Kerala Panchayats Act 1960
We had occasion to refer to section 1022 of the Corporations Act earlier with specific reference to the annual value of buildings
Section 138 of that Act provides inter alia that the rules embodied in Schedule II of the Act shall be read as part of the chapter on Taxation
Rules 4 to 16 provide the procedure and the machinery for assessment of the property tax which is oased on the annual value including the procedure for moving the Commissioner by a revision petition to reduce the tax
Sub rule 22 of rule 22 provides for the hearing of such applications by the Commissioner and for their determination by him under sub rule 3
Rule 23 provides for the filing of appeal to the Standing Committee against the revisional order of the Commissioner
Then there is provision in rule 24 for the filing of appeal to the District Court and there is further provision in rule 26 to the effect that the Court may if it thinks fit state a case on any appeal for the decision of the High Court and shall do so whenever a question of law is involved if either the Commissioner or the appellant applies in writing in that behalf
Rule 27 provides for the disposal of the case by the District Court in conformity with the decision of the High Court
Moreover rule 28 provides for the correction of the assessment books according to the decision of the Standing Committee or the District Court
The Corporation Act thus provides all the necessary procedure and machinery for determining the annual value of buildings in a fair and reasonable manner
We have gone through the provisions of the Municipalities Act also in regard to the procedure and the machinery for determining the annual value of buildings
Chapter VI of Part III deals with 833 Taxation and Finance
Section 150 states that the rules and tables embodied in Schedule II shall be read as part of that Chapter
Rules 7 provides that the value of the building for purposes of the property tax including the annual value shall be determined by the Commissioner
Rule 12 provides for the filing of a revision petition and rule 13 provides for its disposal only after hearing the revision petitioner
Rule 24 provides for the filing of appeal to the Municipal Council against the Commissioner s assessment
Rule 30 provides for the appointment of Special officer to exercise the Councils appellate power
So the Municipal Act also provides the necessary procedure and the machinery for the proper fixation of the annual value of buildings
In the Panchayat Act also provision has been made in section 68 for ascertaining the annual rental value of buildings
Section 144 provides for appeals and revisions
Under sub section 1 of that section the appeal lies to the Panchayat and then under sub section 2 to the Deputy Director
Sub section 3 gives power to the State Government also to call for and examine the record and pass an appropriate order
Then there are the Kerala Panchayats Taxation and Appeal Rules 1963
That Act also thus provides the necessary procedure and machinery for determining the annual value of buildings in a satisfactory manner
It is therefore futile to contend that there is no adequate procedure or machinery in the three Acts mentioned above for the satisfactory and proper determination of the annual value of buildings
That value can therefore very well be made the basis for determining the capital value of a building and thereby fixing the building tax under the charging section
Moreover sections 9 to 16 of the Act contain the procedure and the machinery for the assessment of the building tax on the returns filed under sections 7 and 8
These provisions are adequate in all respects and are not open to challenge with reference to any of the cases cited by learned counsel It has next been argued that as the capital value of buildings is bound to differ according to their location the standard of their construction and the amenities and appurtenances etc
provided by them the provision in the Act for ascertaining their capital value by multiplying the annual value by 16 suffers from the vice of treating unequals as equals
That it has been urged is discriminatory and violative of article 14 of the Constitution
But the argument loses sight of the basic fact that the capital value of a building has to be arrived at by multiplying the annual 834 value by 16 and the Legislature has taken care to define annual value to mean the annual rent at which the building may be expected to let
So if a building is situated in an important locality or if its standard of construction is high or if it has attractive appurtenances etc
to it it would be expected to fetch a higher rent than a building which does not have those advantages
The definition therefore takes care of any possible criticism that the Act suffers from the vice of treating unequals as equals
It provides for the levy of a highest building tax on buildings on which such levy would be justified because the incidence of the levy is a matter to be decided on the basis of its capacity to fetch rent
The argument to the contrary is therefore quite untenable
Section 29 of the Act declares for the avoidance of doubt that in fixing the fair rent of a building under section 5 of the Kerala Buildings Lease and Rent Control Act 1965 the rent control court shall not take into consideration the building tax payable in respect of the building under the Act
That has given rise to the argument that the provision is extortionate as it prevents the owner from passing on the liability to the tenant
This argument can be answered in three ways
Firstly learned counsel could not point to any of the cases before us in which such a question could be said to have arisen
It cannot therefore he said to have arisen for consideration
Secondly the building tax being a non recurring tax payable by the owner once for all without any recurring liability the question of passing it on to the tenant by splitting it up in proportion to the number of years of the tenancy cannot be said to arise
Thirdly learned counsel have not been able to refer to any provision of the Kerala Buildings Lease and Rent Control Act 1965 under which the building tax could be taken into consideration in fixing the fair rent of the building and section 29 of the Act has prevented that being done
Lastly it has been argued that while section 18 of the Act provides that the tax may be paid in such instalments as may be prescribed the proviso to sub section 1 of section 11 which deals with appeals renders that provision negatory as it states that no such appeal shall lie unless the building tax has been paid
The concern of the learned counsel in advancing this argument is justified but if the aforesaid provisions of sections 11 and 18 are read harmoniously it would appear that if an assessee is entitled to pay the building tax in instalments under the prescription referred to in section 18 he will not be identified to file an appeal if he has paid those instalments 835 as and when they fall due
That is a fair and reasonable view to take of the relevant provisions of the Act and we hold accordingly
In the result we find no merit in these cases and they are all dismissed without any order as to the costs
We however think it proper in the circumstances in which all this controversy has arisen and uncertainty about the true effect of the provisions of the Act has been created to direct that in cases where the building tax has not been assessed so far the assessing authority may give the assessees an opportunity to produce evidence on which they may want to rely in support of their returns
In cases where the assessments have been made but the assessees could not or did not file their appeals within the period specified therefor we direct that they may be permitted to do so within a period of 30 days from the date of this judgment and the appellate authority may admit those appeals as the prosecution of these cases was sufficient cause for not presenting them earlier
It is clarified that if any matter is pending before the Government of Kerala under section 32 of the Act it will be permissible for that Government to dispose it of according to the law
So also in cases where the High Court has given an option or opportunity to any assessee to file fresh objections before the authority concerned under the provisions of the Act it will be permissible for him to do so
PBR Appeals dismissed


Summary:
The Kerala Building Tax Act 1975 passed by the State Legislature under Entry 49 of List II Taxes on lands and buildings is imposed as a non recurring tax on buildings constructed on or after April 1 1973 the capital value of which exceeds Rs 20000 
The term capital value is defined to mean the value arrived at by multiplying the annual value of a building by sixteen
Annual value means the gross annual rent on which the building may at the time of completion be expected to let from month to month or from year to year
Section 6 provides that the annual value of a building shall be the annual value fixed for that building in the assessment books of the local authority which includes a Municipal Corporation or a municipality and so on within whose area the building is situate
Section 64 provides that in determining the annual value of a building regard must be had to the location of the building the nature and quality of the structure of the building the capability of the building and so on
An assessee objecting to the assessment of building tax assessed or denying the liability may appeal to the Appellate Authority under section 11
But no appeal lies unless the building tax due has been paid
Although no appeal lies from the decision of the Appellate Authority provision is made for reference to the District Court on a question of law and the District Collector is given power to revise the order of the Appellate Authority and the Government has the power of revision against the order of the District Collector
Jurisdiction of Civil Court is barred by section 27 of the Act
The High Court having upheld the validity of the Act the appellants in their appeals impugned the view of the High Court
It was contended on behalf of the appellants that 1 the tax levied on buildings being a tax on the capital value of the assets falls within the scope of entry 86 of List I of the Seventh Schedule and therefore is beyond the legislative competence of the State Legislature 2 the Act was unconstitutional in that it imposed a tax on buildings retrospectively over a period of 2 years of its enactment 3 it was not merely a tax on buildings but a tax on the buildings and lands of those buildings 4 the method of determining the capital value of a building on the basis of its annual value is hypothetical and arbitrary and is therefore unconstitutional
 HELD 1 There is no force in the argument that the State Legislature was not competent to impose a tax on the buildings under entry 49 of List II
818 B a Article 36628 defines tax to include imposition of any tax whether general local or special
The word tax in its widest sense includes all money 805 raised by taxation and includes tax levied both by the Central and State Legislatures as well as rates and charges levied by local authorities 815 D E b The term assets referred to in entry 86 of List I means Property in general all that one owns
 If a tax is levied on all that one owns or his total assets it would fall within the purview of entry 86 and therefore would be outside the legislative competence of the State Legislature
On the other hand if a tax is directly imposed on buildings it will bear direct relation to the buildings owned by the assessee
Though the building owned by an assessee is a component of his total assets the tax under entry 86 will not bear any direct or definable relation to his building
A tax on buildings is therefore a direct tax on buildings as such
It is not a personal tax without reference to any particular property
815 H 816 A B c A tax has two elements the person thing or activity on which it is imposed and the amount of the tax
The amount of tax may be measured in many ways
There is a distinction between the subject matter of a tax and the standard by which the amount of tax is measured
Thus a building may be the subject matter of a tax like wealth tax entry 86 List I or it may also be the subject of a direct tax under entry 49 of List II
The two taxes being separate and distinct the do not over lap each other
Therefore the tax imposed in the instant case is well within the competence of the legislature
816 E Fl Sudhir Chandra Nawn vs Wealth Tax officer Calcutta  Ors   Assistant Commissioner of Urban Land Tax and ors
vs The Buckingham and Carnatic Co Ltd Etc  referred to
d It is settled law that the quantum of tax levied by the taxing statute and the conditions subject to which it is levied are matters within the competence of the legislature and so long as the tax is not confiscatory or extortionate the reasonableness of the tax cannot be questioned in a court of law
828 D E Rai Ramkrishan  Ors
vs The State of Bihar   Kunnathat Thathunni Moopil Nair vs The State of Kerala  Anr  referred 2a
The Act is not retrospective in the strictly technical sense of the term
A statute is deemed to be retrospective when it takes away or impairs any vested right acquired under existing laws or creates a new obligation in respect F  of the transactions or considerations already past
The Act though passed in April 1975 had imposed a tax on buildings with retrospective effect from April 1973
By so doing it has not taken away or impaired any vested right of the owner of the building acquired under any existing law
Absence of an earlier taxing statute cannot be said to create a vested right under any existing law
Nor has any new obligation or disability been attached in respect of any earlier tax transaction
If the language of the enactment shows that the legislature thought it expedient to authorise the making of retrospective rates it can fix the period as to which the rate may be retrospectively made
828 D H Bradford Union vs Wilts  The Tata Iron  Steel Co Ltd vs The State of Bihar  referred to
b The choice of the legislature to impose a tax on buildings with effect from April 1 1973 cannot be said to be discriminatory
The choice of a date as a basis for classification cannot be dubbed as arbitrary even if no particular reason is forthcoming unless it is shown that it was capricious or whimsical 15 625SCI79 806 Similarly unless it is shown that the fixing of the date is very wide of the reasonable mark the decision of the legislature must be accepted
819 C D In the instant case after the 1961 Act was struck down by this Court in 1968 the Government declared its intention to introduce a fresh Bill so as to bring a new Act into force from April 1970
After its introduction in the Assembly it was referred to a Select Committee which recommended that the Act should be brought into force from April 1 1973
Two ordinances giving effect to the provisions of the draft Bill were promulgated and eventually the Bill became an Act in April 1975
These facts would not show that the choice of the date of April 1 1973 was unreasonable or that it was wide of the reasonable mark
819 E G 3a
What entry 49 of List II permits is the levy of taxes on lands and buildings
 It is permissible Under this entry to levy a tax either on lands as well as buildings or on lands or on buildings if the legislature decides to impose a tax only on buildings the tax would be imposed on all that goes to make or constitute a building
820 B C b The word building means that which is built a structure
edifice The natural and ordinary meaning of a building is a a fabric of which it is composed the ground upon which its walls stand and the ground embraced within those walls
 Entry 49 includes the side of the building as its component part
820 C D c The definition of the term building in the Act makes it clear that a house outhouse garage or any other structure cannot be erected without the ground on which it is to stand
The expression building includes the fabric of which it is composed the ground upon which its walls stand and the ground within those walls because the ground would not have a separate existence apart from the building
The ground referred to in Entry 49 List II would not be the subject matter of a separate tax apart from the tax on the building standing on it
That being so there is no occasion to tax the site separately or to ascertain its value and add it to the value of the fabric
820 F G d This is also the position in the case of appurtenances
An appurtenance belongs to the building concerned and has no existence of its own
An appurtenance it its true sense is an integrated part of the building to which it belongs
826 F G e In the matter of fixing the annual value of the building under section 6 regard must be had to the location of the building and the value of the land on which the building constructed but it does not bear on the annual value of the ground of the building which does not have an existence of its own apart from the building
It is therefore futile to contend that as factors a and f of sub section 4 of section 6 refer to the location of the building and the value of the land the law recognises the separate existence or entity of the ground on which the buildings stands so that the tax imposed under it is a tax both on lands and buildings and both entities should be separately recognised and determined and taxed as such 821 C E 4a When the State Legislature had decided to impose a tax it was open to it to decide how best to levy it
One of the usual modes of levying tax is to make provision for determining the rate or annual value of the building
Rateable value is the same as the net annual value of the building
But 807 if the Legislature decides to levy a tax on buildings once for all or as a non recurring tax on buildings it has to go beyond the annual value and work out the capital value which could be done on the basis of capital cost of construction of the building or its market value or on the basis of rent arrived at by what is known as higgling of the market multiplying it by a number which would best serve the purpose of determining the value of the building and then to specify the rate of tax on it
822 C F b If the Legislature chose to adopt the annual value as the basis for working out the capital value it cannot be blamed for it because besides other advantages it is readily available from the records of local authorities and is a quite simple and reliable basis to work upon
828 B C c The various methods of properly valuation are the various facets to a difficult problem and no one method is perfect or final or above criticism
The multiple of sixteen adopted cannot be said to suffer from any constitutional or legal infirmity
830 G H d The capital value of a building is not merely the cost of its bricks and mortar
It may be difficult to provide a ready or convenient basis of taxation
There can be no objection if the Legislature decides to levy the annual value of a building and prescribes a uniform formula for determining its capital value
The four well accepted methods for arriving at the annual value of the building are I The competitive or comparative method   2 the profits basis 3 the contractor s method and 4 the unit method
These four methods can be applied either singly or in combination
823 B E e The fundamental object of each of these methods is to find out the rent which the tenant might reasonably be expected to pay for a building
It is the expectation which is to be reasonable and not necessarily the rent tor the reasonable expectation would exclude any so called black market rent
But there is no rule of law as to the method of valuation to be adopted for determining the annual value of a building
If the Legislature selects the method of determining the annual value on the basis of rent that is the best evidence of value
If it has been fixed by the higgling of the market there is neither reason nor authority for holding that it is hypothetical or arbitrary
823 G H 824 A B f The provisions of the Act taken together contain the entire scheme for the levy and collection of the building tax on the capital value of building
The expression capital value is not the cost of construction of the building or its market value as wealth but is only a working expression which roughly stated is the taxable value of the building
The State Legislature was quite competent to select that as the basis for assessing the building tax
824 D E g There is no inherent illegality if the gross income of the property were to be capitalised for the purpose of determining the value of the property
firstly because there is nothing to prevent the Legislature from making the expected gross annual rent and thereby the annual value of a building from being the unit for multiplication by sixteen for arriving at its capital value for charging tax under section 5
Secondly by virtue of section 6 the annual value forms the basis for determining the capital value of the building for the purposes of the Act
However what is really taken as the annual value under the determining in section 2a is not the gross annual rent but the net rent after allowing for the 808 cost of its repairs etc
It is not therefore factually correct to say that the annual value of the buildings in the State is determined on the basis of their gross annual rent without any deduction on account of repairs
Nor is it correct to say that the determination of the capital value was arbitrary as it was arrived at by multiplying the gross annual rent by sixteen
The gross value of a building is often made the datum point by statute and there is nothing unusual or illegal about it particularly when there are statutable deductions from it
825 C H h Section 61 accepts the annual value of a building in the books of the local authorities as correct
But that would not justify the argument that doing so is illegal or unreasonable as long as it can be shown that what is entered in the assessment books of the local authorities has been arrived at in accordance with a satisfactory procedure laid down for it in the statutes concerned
If the procedure prescribed in that Act is unexceptionable there is nothing illegal or unconstitutional if another taxing statute provides that the annual value fixed by it shall be accepted as correct and would From the basis for the calculation of any other tax permissible under another statute
such cases there is no necessity for providing another machinery in the other Act and Rules
Moreover sections 9 to 16 of the Act contain the procedure and the machinery for the assessment of the building tax on the returns filed under sections 7 and 8
These provisions are adequate in all respects and are not open to challenge
831 F H 832 A B 5
a The argument that the capital value of a building is bound to differ according to its location amenities and appurtenances etc
and that ascertainment of the capital value by multiplying the annual value by sixteen is discriminatory and violative of article 14 loses sight of the fact that the Legislature has defined the annual value to mean the annual rent at which a building may be expected to let
833 H 834 A B b A building in an important locality with attractive appurtenance is expected to fetch a higher rent than a building without those advantages
The definition capital value provides for the levy of a higher building tax on buildings on which such levy would be justified because the incidence of the levy would depend on the capacity of the building to fetch the rent
834 B C 6
There is no force in the argument that when section 29 says that in fixing the fair rent of a building under section S of the Rent Control Act the rent control court would not take into consideration the building tax payable under the Act and that this makes the provision extortionate because it prevents the owner from passing on the liability to the tenant
The tax being a non recurring tax the question of passing it on to the tenant by splitting it up in proportion to the number of years of the tenancy cannot arise
There is no provision in the Rent Control Act under which a building tax could be taken into consideration in fixing the fair rent
834 D F 7
Section 18 which provides that tax may be paid in certain prescribed number of instalments and the proviso to section 111 which deals with appeals should be read harmoniously
If an assessee is entitled to pay the building tax in instalments he would not be disentitled to file an appeal if he has paid those instalments as and when they fell due
834 G Hl 809