Appeals Nos 631 and 632 of 1965
Appeals by special leave from the judgment and order dated January 7 8 1963 of the Gujarat High court in Civil Revision Applications Nos 116 117 173 and 174 of 1961
Purshottam Trikamadas and I N Shrojj for the appellant in both the appeals
section section Shukla for the respondent in both the appeals
The Judgment of the Court was delivered by Mitter J
These are two appeals by special leave against the judgment and order dated January 8 1963 of the Gujarat High Court dismissing Civil Revision Applications 116 and 117 of 1961 filed by the appellant and all owing similar applications Nos 173 and 174 of 1961 filed by the respondent against the common judgment dated December 1 1960 passed by the District and Sessions Judge of Panchmahals
The matter arises out of assessments made by the appellant constituted under the Bombay Municipal Boroughs Act 1925 on the respondent under section 73 of the Act
The respondents are an electricity company owning inter alia properties bearing several numbers in the municipal borough of Godhra
For the years 1956 57 and 1957 58 the appellant had fixed the valuation of the properties belonging to the respondent at Rs 325000 
On appeal by the respondent the Judicial Magistrate fixed the valuation of the properties at Rs 90000 
On the appellant going in revision the Sessions Judge fixed the valuation at Rs 125000 
As a result of the High Court s decision the valuation stood reduced to Rs 90000 
The present appeals are by the Municipality
Under section 731 of the Bombay Municipal Boroughs Act 1925 hereinafter referred to as the Act  Subject to any general or special orders which the State Government may make in this behalf and to the provisions of sections 75 and 76 a municipality may impose for the purposes of this Act any of the following taxes namely 483 i a rate on buildings or lands or both situate within the municipal borough
 The procedure preliminary to imposing tax is laid down in section 75 and section 78 deals with the preparation of an assessment list
Section 58 empowers the municipality to make rules prescribing the taxes to be levied in a municipal brought for municipal purposes etc
Rules 4 5 and 7 relevant for our purpose read as follows 4
Modes of valuation 1 For the purpose of detennining tax the following properties shall be valued on the capital basis  a All open lands buildings and yards belonging to the Railway Administration
b All buildings and lands other than those which are actually used for residential purposes belonging to Mills and Factories to which the Indian Factories Act is applied
2 All properties other than those mentioned above shall be valued on the basis of the annual letting value as defined in section 31 of the Act
Mode of determining capital value The capital value of properties mentioned in rule 41 shall in each case be determined on such reliable data as the Railway Authorities and the Agents of the mills and the factories may furnish when called upon from time to time to do so and in the absence of any such trust worthy reliable data it shall be determined by the Chief Officer or by expert valuers employed by the municipality for that purpose
6     7
Amount of tax  1 in case of properties which as stated above are valued on the capital basis the tax to be levied shall be assessed at Rs 0 8 0 per cent of the capital value and it shall be a direct tax thereon provided however that any fraction of hundred in excess of fifty rupees shall be taken as the next higher hundred and any fraction of fifty rupees or less be taken as the lower hundred
2 In case of properties which as stated above are valued on the annual letting value the tax to be levied shall be assessed as shown in the appendix annexed hereto
 484 Under rule 41 b above the buildings of the respondent had to be valued on the capital basis
Under r 5 the capital value of properties had to be determined on such reliable data as the respondent might furnish and in the absence thereof it would be the duty of the Chief Officer to determine the same
Before the Judicial Magistrate one R R Tewari an Assistant Secretary of the respondent who had affirmed an affidavit showing that the approximate value of the seven items of property on which tax was sought to be imposed as per the books of the company was Rs 41541 12 9
He sought to rely on the balance sheets and accounts of the company audited under the Companies Act for the purpose
The Judicial Magistrate observed that the properties were 40 years old and according to Tewari the life of the office buildings was 50 years while that of others was only 30 years
Acting on the admission of Tewari that the price of building materials had increased three times the original figures in 195657 and taking into Consideration the properties were over 40 years old the Magistrate assessed the capital value at Rs 90000 
The Sessions Judge dealt with the matter in greater detail and noted that neither party had given him real assistance in determining what should be the proper assessment
According to him the assessment papers preceding the bills had not been produced and neither party had led any evidence as to how the capital value was to be arrived at
He however felt that the capital value could not mean merely the book value shown in the books of account of the assessee
He noted that according to the balance sheet for 1955 56 the property and assets under the headbuildings was shown as below Buildings
Cost up to 31st March 1955 Rs 172866 5 11 Additions during the year 12398 10 3 Total Rs 185265 0 2 The said figure included the value of all the buildings of the company but those which were to be assessed were only seven out of which two residential bungalows and servants quarters  were to be assessed on the rental value
The Sessions Judge therefore inferred from the above figures that Rs 185265 included at least Rs 100000 as the cost up to 31st March 1955 of the factory buildings in question
The Sessions Judge found himself unable to accept the contention that the depreciated selling value of the property was the capital value for the purpose of assessment of house tax
He also did not accept the municipality s contention that the cost of construction of buildings had gone up 485 five times since 1920
Considering the rival contentions he fixed the capital value at three times the figure shown by the company viz Rs 41541 and rounded the same off to Rs 125000 
Taking the view that it was not open to a Judge in India to base his judgment as a whole or in part or his conclusion upon either Halsbury s Laws of England or Bean and Lock wood s book on Rating Valuation Practice on the ground that these books were irrelevant under the Indian Evidence Act the learned Judge of the High Court held that capital value in night possibly bear four different meanings but the meaning given to the expression in Halsbury s Laws of England was not appropriate in the context of the Indian enactment and the Indian Rules
Referring to the rules made by Godhra Municipality he observed that it could not be said that the municipality had adopted the capital value as one of the methods of ascertaining the rental value or that the municipality had adopted the rental value as one of the methods of ascertaining the capital value
According to the learned Judge capital value  has to be treated as meaning the value of the building treated as capital at the time of the assessment in other words the original cost of construction minus the depreciation or at the most the original cost of construction without depreciation
 Accepting the figure of Rs 41541 12 9 as the cost of construction of the building in 1920 as found by the courts below he observed that the capital value should be either Rs 41541 12 9 or something less after deducting depreciation According to him the assessee has not come in revision against the order of the Magistrate fixing the value at Rs 90000 
Both the courts have erred in considering the probable cost of construction of a new building
 He therefore held that the courts below had committed a material mistake in the exercise of jurisdiction in relying upon the probable cost of constructing a new building of a similar type in order to estimate the capital value as contemplated by Godhra Municipality and accordingly reduced the capital value fixed by the Sessions Judge to Rs 90000 
We find ourselves unable to accept the views expressed or the reasoning given in the judgment of the High Court
Section 73 empowered the municipality to impose a rate on buildings or lands
Now the word rate  had not been defined in the Act but it has a well known meaning
As observed in Patel Gordhandas Hargovindas vs Municipal Commissioner Ahmedabad  the word has come to our country for the purpose of local taxation from England
 In that case this Court examined Various statutes bearing on the English Rating Law and held that the word  rate  was 1 1964 2 SCR608 at 616
486 used with respect to a tax which was levied on the net annual value or rateable value of lands and buildings and not on their capital value
It would therefore not be wrong to say that in the legislative history and practice in England up to 1925 rate for the purpose of local taxation meant a tax on the annual value of lands and buildings liable to such taxation
 The Court went on to examine the methods in use for the purpose of ascertaining the rateable value which were generally three
It was said  Where the land or building was actually let the valuation was based on the rent at which it was let
Where however the land or building was not let two methods were evolved for the purpose of finding out the rateable value
The first was to assume a hypothetical tenancy such as where the same person is the owner and occupier and find out the rent at which the premises would be let
The second was based on the capital value of the premises
But the tax was not levied on the capital value itself
 the capital value was determined on the structural value of the building to be assessed by what was known to be contractors method or contractor s test in addition to the market value of the land
Sometimes the words effective capital value were also used since in most cases the actual capital cost of the building plus the market value of land might for some reason or the other be in effective ie it might not be rent producing
Having arrived at the effective capital value it was necessary to apply percentages thereto in order to arrive at the annual value
 When legislatures in this country enact statutes which closely resemble statutes in England and have the same purpose and object in view then unless the expressions used in the Indian Statutes are defined courts of law cannot go wrong in interpreting them in the way English Judges have done
Further the words which have acquired a particular shade of meaning in England may be given the same meaning unless there is anything in the statute itself which would be contra indicative
In Patel Gordhandas s case  the statute which this Court had to interpret was the same Act which is before us in this case
Consequently that decision affords us a good guide in forming our own conclusions in this case
Section 75 of the Act has an Explanation introduced in 1966 which reads as follows  Explanation For the purposes of a rate on buildings or lands the basis of valuation may be i the annual letting value 1  487 ii the annual value iii the floor area in the case of Mills Factories and buildings and lands connected therewith iv the capital value in the case of vacant lands
 The Explanation is deemed always to have been substituted for the original by Maharashtra Act 3 of 1966 section 3b
Rule 4 of Godhra Municipal Rules shows what properties are to be valued on the capital basis
What the capital basis is not defined
The capital value however can be determined in the way laid down in Patel Gordhandas s case  by adopting the contractor s method
What that method is has been explained in Ryde on Rating Eleventh Edition Chapter 20
In R vs School Board for London  Cave J applied the contractor s test to schools
Ryde points out that it was tacitly recognised as applicable in various other cases
The principle on which the contractor s basis rests are given by the author at page 439 and the method of its application is given at page 442
The learned author notes that in applying the contractor s basis it is possible to discern five stages
The first stage is the estimation of the cost of construction of the building
 There is a difference of view as to whether it is better to take the cost of relacing the actual building
as it is orthe cost of a substitute building on the same plan as the actual building but otherwise in an up to date form
The second stage is to make deductions from the cost of construction to allow for age obsolescence and any other factors necessary to arrive at the I effective capital value
The third stage is to estimate the cost of the land
The fourth stage is to apply the market rate or rates at which money can be borrowed or invested to the effective capital value of the building and the land
The fifth stage is to con sider whether the result of the fourth stage really represents what the hypothetical tenant would pay for the annual tenancy on the statutory terms and to make any adjustments necessary to ensure that no higher rent is fixed as the basis of assessments than that which it is believed the owner would really be willing to pay for the occupation of the premises
Rule 5 of the Godhra Municipal Rules lays down that the capital value is to be determined in each case on reliable data furnished by the Mills and the Factories when called upon to do so and in the absence thereof is to be determined by the Chief Officer or expert valuer
The learned counsel for the respondent contended that here there were reliable data in that the balance sheet of the company showing the value of these properties for the purpose of the Companies Act and there was no reason why the same figures should not be adopted as the capital value of the lands 1  2 1885 55 LJMC 33 CA 488 and buildings within the jurisdiction of Godhra municipality
This clearly is fallacious as under section 211 of the the balance sheet of a company has to be drawn up in the form prescribed by Schedule VI
Under the said Schedule  the value of fixed assets has to be shown distinguishing as far as possible between expenditure upon a good will b land c buildings d leaseholds e railway sidings f plant and machinery g furniture and fittings 
h development of property etc
The fourth column of the form which gives the instructions in accordance with which assets should be made out shows under each head the original cost and  the additions thereto and deductions therefrom during the year and the total depreciation written off or provided up to the end of the year is to be stated
 It will there fore be noticed that the figures given in the balance sheet are merely statements in terms of the form given in Schedule VI
They have no relevance in determining the capital value of property for the purpose of assessment to a rate
It appears to us therefore that the true method of determination of the capital value was not adopted in the courts below
We therefore set aside the judgment and order of the High Court and remand the matter back to the District Judge for him to determine the capital value in the light of the observations made by us after giving an opportunity to the parties to adduce evidence on the subject
The costs will abide by the decision of the District Judge
GC Appeal allowed and case remanded


Summary:
Under section 73 of the Bombay Municipal Boroughs Act 1925 read with rr
41 and 5 made thereunder a rate on nonresidential buildings belonging to factories and mills was leviable on a capital basis and the capital value for this purpose was to be worked out if reliable data  were furnished by the assessee on the basis of such data
The respondent company owned certain buildings on which rat was leviable under r 41 on the basis of capital value
The respondent company claimed that the actual cost of construction of the buildings in 1920 ought to be taken as the capital value
The Municipality of Godhra however made its own estimate of the capital value
Thereafter the Judicial Magistrate and the Sessions Judge made valuations taking into account the rise in the cost of building materials since 1920
The High Court in revision upheld the view that the actual cost minus depreciation thereon should be the capital value it observed that the English law and practice as to levy of rates was not relevant in the Indian context
The Municipality appealed
HELD i When legislatures in this country enact statutes which closely resemble statutes in England and have the same purpose and object in view then unless the expressions used in the Indian Statutes are defined courts of law cannot go wrong in interpreting them in the way English judges have done
Further the words which have acquired a particular shade of meaning in England may be given the same meaning unless there is anything in the statute its If which would be contraindicative
486 F G ii Section 73 empowered the municipality to impose a rate on buildings or lands
The word rate  had not been defined in the Act but it has a well known meaning
In Patel Gordhandass case this Court examined various statutes bearing on the English rating law and held that the word rate  was used with respect to a tax which was levied on the net annual value or rateable value of lands and buildings and not on their capital value but capital value could be adopted as the basis for working out the annual value
485G 486E iii Rule 4 of the Godhra Municipal Rules shows what properties are to be valued on capital basis
What the capital basis is not defined
The capital value however can be determined in the way laid down in Patel Gordhandasg case by adopting the contractor s method
487B
iv The figures given in the balance sheet of the company could not be regarded as reliable data  for the purpose of r 5
The figures given in the balance sheet are merely statements in terms of the form given in 482 Schedule VI
They have no relevance in determining the capital value of property for the purpose of assessment to a rate
488 B C Case remanded to District Judge for determining capital value by adopting contractors method in the light of the observations made by this Court Patel Gordhandas Hargovindas vs Municipal Commissioner Ahmedabad   relied on
R vs School Board for London 1885 55 LJMC 33 referred to