IN THE HIGH COURT OF GUJARAT AT AHMEDABAD FIRST APPEALS Nos. 260, 337, 1428 of 1992 WITH FIRST APPEALS Nos. 2130 of 1996, 7616, 7722, 7737 to 7744 of 1999, WITH FIRST APPEALS Nos 3168 to 3170, 3176 to 3178, 3180, 3340, 3342 to 3344, 3346, 3348, 3350, 3351 and 3536 of 2000, WITH FIRST APPEALS Nos 461 to 465, 467, 468, 470, 844, 845, 848, 850, 852, 854, 857, 859, 861, 862, 995 to 1005, 1022, 1023, 1033, 1082, 1085 to 1087, 1089 to 1091, 1093, 1094, 1096 to 1101, 1106, 1110, 1112, 1521, 1525, 1526, 1667, 1669 to 1671, 1673 to 1675, 1738 to 1740, 1742, 1744, 1745, 1748, 1782, 1787, 1792, 1793, 1796 to 1809, 1842, 1858, 2329, 2331, 2423, 2431, 2576, 2837 to 2842, 2844 to 2849, 2914, 2916, 2918, 2933, 2937 to 2940, 2997, 3002 to 3004, 3006, 3008, 3010, 3013, 3014, 3055, 3056, 3058 to 3061, 3264, 3266, 3267, 3269, 3271, 3275, 3324 to 3327, 3330 to 3333, 3337, 3338, 3340, 3341, 3343 to 3345, 3347 to 3352, 3383 to 3389, 3391, 3393, 3394, 3398, 3401, 3409, 3414 to 3416, 3418 to 3421, 3432, 3434 to 3436, 3439, 3441 to 3445, 3470 to 3473, 3477, 3479 to 3481, 3483, 3485 to 3487, 3490 to 3492, 3509, 3510, 3556 to 3558, 3561, 3562, 3564, 3566 to 3568, 3570, 3573, 3574 to 3576, 3580, 3582, 3589 to 3592, 3594, 3595, 3597 to 3600, 3607 to 3610, 3612, 3615, 3617, 3620, 3623, 3625 of 2001. WITH CIVIL APPLICATIONS Nos 3763, 3765, 3771, 3773, 3775, 3777 of 1990 AND CIVIL APPLICATIONS Nos 13976, 14256, 14257, 14259 to 14262, 14264 and 14265 of 1999 AND CIVIL APPLICATIONS Nos 351, 5106, 6199, 7196, 7199, 7200, 7201, 7203 to 7205, 7207, 7208, 7210, 7211, 7212 to 7214, 8555, 8556, 8562, 8563, 8564, 8566, 8670, 8683, 8695, 8700, 10963, 11383, 11386, 11388, 11389, 11391, 11394, 11397, 11400, 11767 of 2000 AND CIVIL APPLICATIONS Nos. 817 to 821, 823, 2228, 2230, 2234, 2237, 2239, 2241, 2388, 2390, 2393, 2395, 2730 to 2740, 2802, 2803, 2869, 3679, 3684, 3685, 4103 to 4107, 4109, 4110, 4155 to 4157, 4160, 4163, 4165, 4168, 4320, 4325, 4330, 4331, 4334 to 4347, 4438, 4458, 5559, 5563, 5675, 5683, 5931, 6909 to 6914, 6916 to 6921, 7095, 7097, 7099, 7101, 7105, 7106, 7108, 7110, 7288, 7586, 7588, 7589, 7592, 7594, 7602, 7295, 7296, 8093, 8095, 8096, 8098, 8100, 8104, 8395 to 8398, 8401 to 8404, 8454, 8461, 8463, 8464, 8466 to 8468, 8470 to 8473, 8476, 8477, 8522 to 8528, 8530, 8532, 8533, 8537, 8540, 8573, 8584, 8585, 8586, 8589, 8590, 8592, 8593, 8659, 8661 to 8663, 8666, 8668 to 8672, 8698 to 8701, 8705, 8707 to 8709, 8711, 8713 to 8715, 8718 to 8720, 8783, 8785, 8862 to 8864, 8866, 8867, 8869, 8871 to 8874, 8877 to 8881, 8883, 8890 to 8893, 8895, 8896, 8898 to 8901, 8924 to 8927, 8929, 8932, 8934, 8937, 8940 and 8942 of 2001. For Approval and Signature: Hon'ble ACTING CHIEF JUSTICE MR.JN BHATT and Hon'ble MR.JUSTICE AKSHAY H.MEHTA ============================================================ 1. Whether Reporters of Local Papers may be allowed : YES to see the judgements? 2. To be referred to the Reporter or not? : YES 3. Whether Their Lordships wish to see the fair copy : NO of the judgement? 4. Whether this case involves a substantial question : NO of law as to the interpretation of the Constitution of India, 1950 of any Order made thereunder? 5. Whether it is to be circulated to the concerned : NO Magistrate/Magistrates,Judge/Judges,Tribunal/Tribunals? -------------------------------------------------------------- A'BAD MUNICIPAL CORPORATION Versus DENA BANK -------------------------------------------------------------- Appearance: 1. First Appeals and Civil Applns. for stay M/S MAULIN R RAVAL, KS JHAVERI, MG NAGARKAR, KIRIT I PATEL and Ms ANU S VERMA for Petitioners M/S PRAFULL K PATHAK, NISHITH P. THAKKER, HIMATLAL H. MEHTA, DHIRAJ M. PATEL, D.D. CHUDASAMA, SAMIR J. DAVE, V.M. DHOTRE, NM KAPADIA, YF MEHTA, AC GANDHI, SUNIT S SHAH, MAHENDRA K. PATEL, EJAZ M. SHAIKH, ASHOK K. PADIA, MB GANDHI, KB PANERI, HJ NANAVATI, SUDHA R. GANGWAR, PH GOHIL, MUKESH A PATEL, AV PRAJAPATI, NAYNA V PANCHAL, PARESH M DAVE, CB DASTOOR, HS MULIA, BA VAISHNAV, MINOO A SHAH, MR SAHANI, GM JOSHI, AI SURTI, IM BENGALI, MAHESH BHAVSAR, MRUGESH JANI, GN SHAH, UM SHASTRI, KV SHELAT, TARESH J BHATT, PANKAJ KAPADIA and AG VYAS for respondents. -------------------------------------------------------------- CORAM : ACTING CHIEF JUSTICE MR.JN BHATT and MR.JUSTICE AKSHAY H.MEHTA Date of decision: 31/03/2003 CAV COMMON JUDGEMENT (Per : MR.JUSTICE AKSHAY H.MEHTA) 1. This group of appeals has been filed by the Ahmedabad Municipal Corporation under Section 411 of the Bombay Provincial Municipal Corporations Act, 1949 (hereinafter referred to as 'the Act') challenging the judgments and the assessments of the GRV of the concerned properties made by the Small Causes Court at Ahmedabad. The Small Causes Court in the Municipal Valuation Appeals filed before it, has upset the valuation done by the Assessment Officer of the appellant and instead has fixed its own, which is not acceptable to the appellant herein. Since they involve common questions of facts and law, they are disposed of by this common judgment. 2. The concerned properties are situated within the areas of Ahmedabad City which are subjected to imposition of property tax. For this purpose, appellant has made the assessment of the tax of the said properties, which according to it, is done in consonance with the provisions relating to the property tax as contained in the Act and the Taxation Rules. The respondents i.e. the owners/occupiers of the properties, however, were not satisfied with these assessment orders and the tax required to be paid by them to the appellant and hence they approached the Court of Small Causes under the provisions of Section 406 of the Act by way of Municipal Valuation Appeals. Before the Court of Small Causes the present respondents who were appellants before it, produced certain material in the form of document regarding agreement to sell, sale-deed of the property, valuation report prepared by the valuer or the certificate issued by the respective societies wherein the premises are situated, tax receipts, etc. to indicate the financial value of the property in question and on the basis of the same, the Court of Small Causes has arrived at its own assessment of the GRV. In these appeals the GRV arrived at by the Court of Small Causes is lesser than the assessment thereof made by the appellant and hence it has approached this Court as stated above. 3. The grievances, by and large, that have been, made in these appeals by the appellant are that the Court of Small Causes has not followed the proper procedure as envisaged under the Act and the Taxation Rules as contained in the Chapter VIII of the Act and also the provisions of the Code of Civil Procedure as well as the Evidence Act and has based its judgment and order solely on the basis of the documents which have been produced by the present respondents purported to be indicative of value of the property and has determined the annual letting value of the same on the strength of such documents. According to the appellant, these documents were never produced before the Assessment Officer of the appellant at the time when the respondents were given the opportunity of hearing for determining the value of the property and they have produced them at a belated stage i.e. at the stage of the appeal before the Court of Small Causes and that too without examining the author of such documents. It is further contended by the appellant that the Court of Small Causes has committed grave error by taking on record and exhibiting these documents without following the proper procedure. It is the say of the appellant that there is no material on record to show what was the source of these documents and how the valuation indicated in these documents of the property in question was done. It is the grievance of the appellant that by not examining the author of such documents, the appellant has been deprived of its valuable right to cross-examine such person and to elicit correct position with regard to financial worth of the property in question. It is further submitted that the formula prescribed under the provisions of the Act and the Rules for determining the annual letting value is totally ignored by the Court of Small Causes in as much as it has arrived at its own assessment without there being any cogent evidence with regard to the cost of construction, the cost of land, the locality in which the premises in question are situated, the use to which the property in question is put, the age of the property, the quality of construction, etc. According to the appellant, such assessment; solely based on the valuers' reports, agreements to sell, unautheticated sale deeds or certificates or notes, etc. cannot be the basis for arriving at the annual letting value and the resultant rateable value of the property in question. It is the say of the appellant that the Court of Small Causes has merely acted in a mechanical fashion by keeping in view the value of the property indicated in the aforesaid documents and the GRV has been fixed on different percentage ranging from 7% to 10% or even 11% by following the case law laid down by this Court as well as the Apex Court. It has also contended that while disposing of the appeals the Court of Small Causes has not taken into consideration the principles laid down by the Apex Court and this Court in their various judgments and it has mechanically followed the ratio laid down in Rajnikant Jesingbhai Sheth v/s. Rameshchandra Kantilal reported in 1982 (1) G.L.R. page 71 for applying the different percentage. According to the appellant, the assessment made by the Court of Small Causes is therefore, not proper and it is required to be quashed and set aside. 3.1. As against that, the counsels for the respondents have urged that no error has been committed by the Court of Small Causes and it is the appellant which had committed grave error in arbitrarily determining the GRV of the properties in question and has imposed tax on the basis of the same which has caused undue hardship to the citizens of the Ahmedabad City. It is the say of the respondents that the assessment made by the appellant is totally based on whims of the concerned officer and no proper procedure, as envisaged under the Act as well as the Taxation Rules, has been followed while determining the GRV. Not only that but the Officers of the appellant have not even cared to ascertain the correct value of the property by taking into consideration the various relevant factors and they have arrived at their own arbitrary figure which cannot be sustained in law. The grievance of the respondents is that the appellant has totally ignored the relevant factors such as the quality of construction, the cost of construction, the value of land, the locality, etc. and it has evolved its own omnibus formula taking in its sweep the properties liable to be taxed and thereby it has arrived at the GRV which is very much on higher side resulting into undue financial burden on the owners/occupants thereof. The respondents have contended that the arbitrariness of the appellant is writ large on the record of the case in as much as even when for the earlier period the GRV fixed either by the appellant itself or the Court of Small Causes for the subsequent year it has been substantially increased without there being change of any kind in the said properties. They have also pointed out such cases wherein the GRV fixed for the previous years is very less; whereas for the concerned year i.e. for the immediately subsequent year the GRV is substantially increased and no reasons for such increase has been given by the appellant. It is also contended by the respondents that at the relevant time, before the Assessment Officer, they had produced material indicating the value of the property. However, the same had been not taken into consideration by them. They have also contended that even before the Court of Small Causes when the additional evidence either in the form of documentary evidence or oral evidence had been adduced, no objection from the side of the appellant was ever taken even when it was being amply represented by its counsels. In absence of any resistance or objection from the appellant, it was absolutely legal and proper for the Court of Small Causes to accept the evidence of the respondents and to decide the annual letting value of the property in question on the strength of such documents or oral evidence. According to the respondents, now the appellant has no right to make any grievance before this Court that the Court of Small Causes has not followed the proper procedure. Apart from this, the respondents have made serious grievance that in the cases where they property is let but no standard rent is fixed and where the property is not given on rent and hypothetical rent is required to be determined for the purpose of deciding the annual letting value of such property the principles and the guidelines laid down by the Apex Court in its various decisions and in particular the decisions rendered in the cases of Devan Daulat Rai Kapoor v/s. New Delhi Municipal Committee reported in AIR 1980 S.C. at page 541 and Dr. Balbir Singh v/s. M/s. M.C.D. and ors. reported in AIR 1985 S.C. p. 339 have not been followed and that has caused grave prejudice to the tax payers. At the time of hearing of the appeals certain respondents have also produced affidavits to substantiate their cases and the counsels have also filed written submissions. Needless to say that we have taken into consideration all these documents and have also considered oral submissions made by counsels of both the sides including the Advocate General Mr. S.N. Shelat for the appellant. 4. The issues that have been raised in these appeals have already come under consideration of the Apex Court and this Court and also the other High Courts on number of occasions. With the passage of time the law has been crystalised on these issues and proper guidelines have also been framed to arrive at just, proper and legal rateable value of the property, the annual letting value and the property tax that can be imposed on such property. However, these issues have been extensively argued by the counsels for the parties and further the issue 'Whether procedure followed by the lower appellate Court, while determining the annual letting value of the properties being the subject matters of the appeals before it, is proper and if the answer is in negative what is the correct procedure ?' requiring us to examine them again. For resolving these controversies, we may first turn our attention to the provisions relating to imposition of property tax and the provisions defined in the procedure of the litigation that may arise in relation to imposition of the property tax by the municipal authority. 5. To start with, the definitions of certain terms which have great bearing on the provisions relating to the property tax can be referred to. Section 2 of the Act relates to the definitions of subsection (1-A) of section 2 defines 'annual letting value', which reads as under :- [(1-A) "annual letting value" means (i) in relation to any period prior to 1st April, 1970, the annual rent for which any building or land or premises, exclusive of furniture or machinery contained or situate therein or thereon, might, if the Bombay Rents, Hotel and Lodging House Rates Control Act, 1947 (Bom. LVII of 1947.) were not in force, reasonably be expected to let from year to year with reference to its use; (ii) in relation to any other period, the annual rent for which any building or land or premises, exclusive of furniture or machinery contained or situate therein or thereon, might reasonably be expected to let from year to year with reference to its use; and shall include all payments made or agreed to be made to the owner by person (other than the owner) occupying the building or land or premises on account of occupation, taxes, insurance or other charges incidental thereto: Provided that, for the purpose of sub-clause (ii),- (a) in respect of any building or land or premises the standard rent of which has been fixed under Section 11 of the Bombay Rents, Hotel and Lodging House Rates Control Act, 1947, (Bom.. LVII of 1947) the annual Rent thereof shall not exceed the annual amount of the standard rent so fixed; [(aa) in respect of any building or land or premises, the standard rent of which is not fixed under Section 11 of the Bombay Rents, Hotel and Lodging House Rates Control Act, 1947, (Bom.. LVII of 1947.) the annual rent received by the owner in respect of such building or land or premies shall, notwithstanding anything contained in any other law for the time being in force, be deemed to be the annual rent for which such building or land or premises reasonably be expected to let from year to year with reference to its use; (aaa) Clause (aa) shall not apply to a case where the annual rent received by the owner in respect of such building or land or premises is in the opinion of the Commissioner less than the annual rent for which such building or land or premises might, notwithstanding anything contained in any other law for the time being in force, reasonably be expected to let from year to year with reference to its use;] (b) in the case of any land of a class not ordinarily let the annual rent of which cannot in the opinion of the Commissioner be easily estimated, the annual rent shall be deemed to be six per cent of the estimated market value of the land at the time of assessment; (c) in the case of any building of a class not ordinarily let, or in the case of any industrial or other premises of a class not ordinarily let, or in the case of a class of such premises the building or buildings in which are not ordinarily let, if the annual rent thereof cannot in the opinion of the Commissioner be easily estimated, the annual rent shall be deemed to be six per cent, of the total of the estimated market value, at the time of the assessment, of the land on which such building or buildings stand or, as the case may be, of the land which is comprised in such premises, and the estimated cost, at the time of the assessment, or erecting the building or, as the case may be, the building or buildings comprised in such premises;] Subsection (5) of section 2 defines 'building', which reads as under :- "Building" includes a house, out-house, stable, shed, hut and other enclosure of structure whether of masonry, bricks, wood, mud, metal or any other material whatever, whether used as a human dwelling or otherwise, and also includes verandahs, fixed platforms, plinths, doorsteps, walls including compound walls and fencing and the like; Subsection (6-A) of section 2 defines 'Carpet area', which reads as under :- "Carpet area" means the floor area of a building excluding the area over which a wall whether outer or inner is erected". Subsection (30) of section 2 defines "Land", which reads as under :- "Land" includes land which is being built upon or is built upon or covered with water, benefits to arise out of land, things attached to the earth or permanently fastened to anything attached to the earth and rights created by legislative enactment over any street." Subsection (54) of section 2 defines "Rateable Value", which reads as under :- "Rateable value" means the value of any building or land fixed whether with reference to any given premises or otherwise, in accordance with the provisions of this Act and the rules for the purpose of assessment to property taxes." So far as the provisions with regard to the property tax are concerned, they are contained in Chapter XI of the Act under the Heading 'Municipal Taxation'. Section 127 (1)(a) envisages imposition of property taxes by the Corporation. Section 129 onwards deal with property tax that may be levied by the Corporation. Section 141-B deals with the rate at which the property tax is leviable. It is essential to reproduce the text of said section here - "141-B. Property tax at what rate leviable (1) For the purpose of subsection (1) of section 127, property tax shall, subject to such exceptions and conditions hereinafter provided, be levied annually on building and lands in the city at such rate per square meter of the carpet area of building and of the area of lands (hereinafter to as "the rate of tax) as the corporation may determine. (2) For the purpose of levy of tax on buildings in the city under subsection (1) (a) the buildings be classified into residential buildings and buildings other than residential; and (b) the corporation may determine one rate of tax for residential buildings and other rate of tax for building other than residential; Provided that it shall be lawful for the corporation to determine for residential buildings, the carpet area of which does not exceed forty square meters, such rate of tax as is lower than the rate of tax determined for residential buildings generally under this subsection. (3) The rate of tax determined under subsection (1) read with subsection (2) shall not- (a) in respect of residential buildings, be less than ten rupees per square metre of carpet area and more than forty rupees per square metre, such rate of tax as is lower than the rate of tax determined for residential buildings generally under this subsection. (b) in respect of buildings other than residential, be not less than twenty rupees per square metre of carpet area and more than eighty rupees per square metre of carpet area. (4) The Corporation may, subject to rules, increase or decrease or neither increase nor decrease the rate of tax determined under subsection (1) read with subsection (2) and (3), (a) in the case of residential buildings, having regard to the following factors, namely :- (i) in market value of the land in the area of the city in which the buildings are situate, (ii) the length of the time of the existence of the buildings, (iii) the type of the buildings, and (iv) whether the buildings are occupied by owners or tenants, (b) in the case of buildings other than residential, having regard to the following factors, namely :- (i) The market value of the land in the area of the city in which the buildings are situate, (ii) the length of the time of the existence of the buildings, (iii) the purpose for which the buildings are used, and (iv) whether the buildings are occupied by owners or tenants. (5) In lieu of the property tax leviable under subsection (1) read with subsection (2) and (3), there shall be levied annually on,- (a) residential huts, and (b) residential tenements in a Chawl, each such tenement having carpet area not exceeding twenty five square meters, Such amount of tax as the Corporation may determine : Provided that the amount so determined shall not be less than such amount as the State Government may, by notification in the Official Gazette, specify Explanation : For the purpose of levy of tax under this section, where an addition is made to an existing building whereby the Carpet area of that building is increased, such addition shall be treated as a separate building and the length of the time of its existence shall be computed from the year in which the addition