WP(C) Nos. 12758/2005 & 8219/2006 Page No.1 REPORTABLE *IN THE HIGH COURT OF DELHI AT NEW DELHI + WRIT PETITION (CIVIL) NOS. 12758/2005 AND 8219/2006 Date of decision : August 1, 2008 RITU SENGUPTA...Petitioner in WPC 12758/2005. ASHISH GOYLE ..... Petitioner in WPC 8219/2006. Through Mr. Bharat Bhushan Jain with Mr.Vikram Nandrajog, Advocates. versus MUNICIPAL CORPORATION OF DELHI ..... Respondent. Through Ms. Amita Gupta and Naveen Gupta, Advocates. CORAM: HON'BLE MR. JUSTICE SANJIV KHANNA 1. Whether Reporters of local papers may be allowed to see the judgment? 2. To be referred to the Reporter or not ? YES. 3. Whether the judgment should be reported in the Digest ? YES. SANJIV KHANNA, J.: 1. Arguments on the above two writ petitions were heard together and as similar legal issues arise for consideration, they are being disposed of by this common judgment. 2. The property involved in Writ Petition(Civil) No. 8219/2006 is HS-11, Panchsheel Park, New Delhi (hereinafter referred to as the Panchsheel Property, for short) and the property involved in WP(C) Nos. 12758/2005 & 8219/2006 Page No.2 Writ Petition (Civil) No. 12758/2005 is C-6/5, Vasant Vihar, New Delhi (hereinafter referred to as the Vasant Vihar Property, for short). 3. By assessment order dated 1st July, 1999, annual rateable value of the Panchsheel Property was fixed at Rs.17,14,580/- . Similarly, by assessment order dated 1st April, 2002, annual rateable value of Vasant Vihar Property was fixed at Rs.6,12,000/- with effect from 1st April, 1998, Rs.10,45,500/- with effect from 1st April, 1999, Rs.11,22,000/- from 10th October, 1999 and Rs.11,31,300/- from 10th April, 2000. It is admitted by the petitioners that the rateable value so fixed were in accordance with the Delhi Municipal Corporation Act, 1957(Act for short) and the by-laws then applicable. The petitioners have accepted the said rateable values and have not challenge the same. It is not the contention of the petitioners that the rateable values were wrongly fixed. 4. In respect of Panchsheel Property, respondent-MCD had issued a notice under Section 126 of the Act for enhancement of rateable value from Rs.17,14,580/- to Rs.30,00,000/- with effect from 1st April, 2001. In the case of Vasant Vihar Property, a notice for enhancement of rateable value with effect from 1st April, 2001 to Rs.25,00,000/- was issued under Section 126 of the Act. WP(C) Nos. 12758/2005 & 8219/2006 Page No.3 5. While the two proposals for enhancement were pending, provisions of the Act relating to property tax underwent amendments by the Delhi Municipal Corporation (Amendment) Act, 2003. The amendments resulted in change in the very basis, mode and method of computing property tax. Under the pre- amended provisions, property tax was payable on annual rateable value, which required determination of annual rent at which land or building might be reasonably accepted to be let out from year to year. In terms of the Act and the then applicable by- laws, annual rateable value was determined either on the basis of notional rent payable under the rent legislation depending upon cost of construction and cost of land at the time of construction or the purchase price or on the basis of annual rent received. Under the amended provisions, a new method, commonly known as Unit Area Method was introduced. Under this new method, annual value of the property is calculated on the basis of location and size of the property and by applying multipliers depending upon user, date of construction etc. 6. The Delhi Municipal Corporation (Amendment) Act, 2003 was applicable with effect from 1st April, 2004 onwards. However, the Act also provides transitory provisions in Section 116G of the Act, which reads as under:- “116G. Transitory provisions.- Notwithstanding anything contained in this WP(C) Nos. 12758/2005 & 8219/2006 Page No.4 Act, as amended by the Delhi Municipal Corporation (Amendment) Act, 2003, a tax on vacant land or covered space of building or both, levied under this Act immediately before the date of coming into force of the Delhi Municipal Corporation (Amendment) Act, 2003, shall, on the coming into force of the Delhi Municipal Corporation (Amendment) Act, 2003, be deemed to be the tax on such vacant land or covered space of building or both, levied under this Act as amended by the Delhi Municipal Corporation (Amendment) Act, 2003, and shall continue to be in force until such tax is revised in accordance with the provisions of this Act, as amended by the Delhi Municipal Corporation (Amendment) Act, 2003. (2) Notwithstanding anything contained in sub-section (1), where assessment has not been finalized in respect of a vacant land or covered space of a building or both, on the date of the commencement of the Delhi Municipal Corporation (Amendment) Act, 2003 the assesse may have such land or building or both, as the case may be, assessed on the basis of the annual value.‖ 7. It is an admitted case of the parties that the petitioners in both cases had exercised their option under Section 116G(2) to be assessed on the basis of annual value under Unit Area Method in respect of proposals for enhancement from Rs.17,14,580/- to Rs.30,00,000/- with effect from 1st April, 2001 in respect of Panchsheel Property and Rs.11,31,300/- to Rs.25,00,000/- with effect from 1st April, 2001 in the case of Vasant Vihar Property. WP(C) Nos. 12758/2005 & 8219/2006 Page No.5 8. The Joint Assessor and Collector disposed of the proposal in the case of Panchsheel property by assessment order dated 22nd February, 2005 fixing annual value at Rs.8,03,099.88 with effect from 1st April, 2001 and in the case of Vasant Vihar property by order dated 13th January, 2005 fixing annual value at Rs.5,03,067/- with effect from 1st April, 2001. Thus, in both cases, as a result of the two assessment orders, the annual value of the property was fixed at Rs.8,03,099.88 and Rs.5,03,067/-, instead of the earlier annual rateable values of Rs.17,14,580/- and Rs.11,31,300/- . Instead of enhancement, the annual values so fixed were much lower than the annual rateable values already fixed. Appropriate remedy or course available to the respondent- MCD was to drop the proposal for enhancement from Rs.17,14,580/- to Rs.30,00,000/- in the case of Panchsheel Property and from Rs.11,31,300/- to Rs.25,00,000/- in the case of Vasant Vihar Property. Strangely, the Joint Assessor and Collector did not do so and she went on and finalized the assessment on the basis of proposal for enhancement and fixed annual value of both properties at figures which were much lower than the annual rateable values of the properties already fixed. Why these orders were passed or why no remedial steps were taken has not been answered by the respondent-MCD. This court is not examining or answering questions whether any remedial WP(C) Nos. 12758/2005 & 8219/2006 Page No.6 steps can be taken and whether limitation or laches bars remedy, if any. These questions are left open. 9. The two petitioners had continued to voluntarily pay property tax for the period from 1st April, 2001 onwards till Joint Assessor and Collector had passed Assessment Orders dated 22nd February, 2005 and 13th January, 2005 in Writ Petition (Civil) Nos. 2819/2006 and 12758/2005 respectively. These payments were made on the annual rateable value of Rs.17,14,580/- and Rs.11,31,300/- for the property in Panchsheel and Vasant Vihar. As a result of the new annual values fixed with retrospective effect from 1st April, 2001, the petitioners claim that they are entitled to refund as the annual value now fixed was much lower than the annual rateable value on which they had paid taxes. 10. Respondent-MCD made computation and raised bills after the Assessment Orders dated 22nd February, 2005 and 13th January, 2005 were passed. In the bills raised, amount of Rs.8,23,060/- was shown as excess payment made in the case of Panchsheel property. The respondent-MCD has been adjusting this excess payment from the property tax payable for Panchsheel property for the future years. Partial adjustment has been made but some amount is still ―refundable‖. In the case of Vasant Vihar property, the amount refundable was Rs.3,01,552/-. WP(C) Nos. 12758/2005 & 8219/2006 Page No.7 The said refundable amount has been adjusted towards property tax payable for future years. The adjustment is recorded in the Order dated 8th February, 2007. Learned counsel for the petitioners had stated before the Court that adjustment of excess payment paid earlier had been made and the only question that required consideration is the rate of tax. 11. The three questions which have been raised by the petitioners are: (i) Whether the petitioners/assesses are entitled to refund in case they have made excess payment of property tax; (ii) whether the respondent-MCD is liable to pay interest on the excess amount retained by them and (iii) in a case where assessment had been done on annual value under Section 116G(2) what rate of tax is applicable. Refund: 12. Learned counsel for the petitioners had drawn my attention to Section 123B(9) of the Act which stipulates that after finalization of assessment, if it is found that excess payment had been made, such excess amount should be refunded. The Section 123B of the Act, reads as under :- ―Self-assessment and submission of return.- (1) After the coming into force of the Delhi Municipal Corporation ( Amendment) Act, 2003, any owner of any vacant land or covered space of building or any other person liable to pay the property tax or any occupier in the WP(C) Nos. 12758/2005 & 8219/2006 Page No.8 absence of such owner or person, shall file a return of self assessment within sixty days of the coming into force of the aforesaid Act. (2) Such owner or other person or occupier, as the case may be, shall, thereafter, file the annual return only in those cases whether there is a change in the position as compared to the previous return, within three months after the end of the financial year in which the change in position has occurred. (3) Any owner of any covered space of building or vacant land or any other person liable to pay the property tax, or any occupier in the absence of such owner or person shall compute the tax due under section 114A or section 114C, as the case may be, and pay the same in equated quarterly installment by the 30th day of June, 30th day of September, 31st day of December and 31st day of March of the financial year for which tax is to be paid. In the event of tax being paid in one lump sum for the financial year by the 30th day of June of the financial year, rebate of such percentage not exceeding fifteen per cent. as may be notified by the Corporation, of the total tax amount due shall be allowed. (4) Any owner of any vacant land or covered space of building or any other person liable to pay the property tax or any occupier in the absence of such owner or person, who computes such property tax under this section, shall, on such computation, pay the property tax on such vacant land or covered space of building, as the case may be, together with interest, if any, payable under the provisions of this Act on— (a) any new building or existing building which has not been assessed; or WP(C) Nos. 12758/2005 & 8219/2006 Page No.9 (b) any existing building which has been redeveloped or substantially altered or improved after the last assessment, but has not been subjected to revision of assessment consequent upon such redevelopment or alteration or improvement, as the case may be. (5) Such owner or person, as the case may be, shall furnish to the Commissioner a return of self-assessment in such form, and in such manner, as may be specified in the by-laws and every such return shall be accompanied by proof of payment of property tax and interest, if any. (6) In the case of any new building for which an occupancy certificate has been granted, or which has been occupied, after the coming into force of the Delhi Municipal Corporation (Amendment) Act, 2003, such payment shall be made, and such return shall be furnished, within thirty days of the expiry of the quarter in which such occupancy certificate is granted or such building is occupied, whichever is earlier. Explanation:- For the removal of doubt, it is hereby declared that occupancy certificate may be provisional or final and may be for the whole or any part of the building and occupancy may be of the whole or any part of the building. (7) After the determination of the annual value of vacant land or covered space of building under section 116E or section 116F or revision thereof under section 123C has been made, any amount paid on self-assessment under this section shall be deemed to have been paid on account of such determination under this Act as amended by the Delhi Municipal Corporation (Amendment) Act, 2003. (8) If any owner or other person as aforesaid, liable to pay the property tax under this Act, fails to pay the same WP(C) Nos. 12758/2005 & 8219/2006 Page No.10 together with interest thereon, if any, in accordance with the provisions of this section, he shall, without prejudice to any other action to which he may be subject, be deemed to be a defaulter in respect of such property tax, or interest, or both, remaining unpaid, and all the provisions of this act applicable to such defaulter shall apply to him accordingly. (9) If after the assessment of the annual value of any land or covered space of building finally made under this Act, the payment on self-assessment under this section is found to be less that than of the amount payable by the assessee, the assessee shall pay the difference within two months from the date of final assessment, failing which recovery shall be made in accordance with the provisions of this Act, but, after the final assessment, if it is found that the assessee has paid excess amount, such excess amount shall be refunded: Provided that in any case where the amount of tax determined in the final assessment is more than the amount of tax paid under self-assessment, and the difference in the amount of tax is, in the opinion of the Commissioner, the result of willful suppression of facts as defined in the bye-laws, the Commissioner may levy a penalty not exceeding thirty per cent. of such difference in the tax besides the interest thereon: Provided further that the levy of such penalty shall be in addition to any other punishment provided for under this Act: Provided also that the procedure for sending of notice, hearing of objection and determination of tax and penalties shall be such as may be specified in the bye-laws. (10) Where no notice is sent by the Commissioner under section 123C within WP(C) Nos. 12758/2005 & 8219/2006 Page No.11 twelve months after the year to which such self-assessment relates, such self assessment shall be regarded as assessment made under this Act: Provided that in any case, where there has been willful suppression of facts, penalty upto thirty per cent. of the tax due may be imposed: Provided further that the procedure for sending of notice, hearing of objection and determination of tax and penalties shall be such as may be specified in the bye-laws. 13. Section 123B(9) relates to computation made on the basis of annual value i.e. Unit Area Method. Admittedly, the two Assessment Orders passed are on the annual value or Unit Area Method. Under section 123B(9) of the Act, the respondent-MCD is liable to refund and should have refunded the excess tax paid. The respondent-MCD should not have retained the excess payment after having computed the amount refundable. The respondent MCD has acted contrary to the express language of section 123B(9) of the Act. In view of the express statutory provision, I am not examining common law rights, right to restitution under section 72 of the Contract Act,1872 or under the Doctrine of unjust-enrichment. To be fair to the petitioners these contentions were not raised by the respondent-MCD but were put to the petitioners by the court. WP(C) Nos. 12758/2005 & 8219/2006 Page No.12 14. In the case of Vasant Vihar property, the excess amount paid has already been adjusted and therefore no order of refund is required to be passed in the said case. In the case of Panchsheel property, some amount is refundable and the respondent-MCD will compute the same and refund the excess payment due and payable. Interest 15. The question relating to interest can be divided into two periods viz., period prior to filing of the present Writ Petitions and pendente lite and future interest. To decide this question, it may be relevant to refer to Section 123B and 152 of the Act. Section 123B has been quoted above and section 152 of the Act, reads as under:- ―152. Time and manner of payment of taxes.-(1) Save as otherwise provided in this Act, any tax levied under this Act shall be payable on such dates, in such number of instalments as in such manner as may be determined by bye- laws made in this behalf: Provided that if, on the coming into force of the Delhi Municipal Corporation (Amendment) Act, 2003, there is any increase in the amount of property tax which was being paid or was payable immediately before the coming into force of the Delhi Municipal Corporation (Amendment) Act, 2003, the difference in the amount of property tax in excess of fifty per cent, above the tax being paid or being payable, shall be given effect to by stages covering a period of three years by WP(C) Nos. 12758/2005 & 8219/2006 Page No.13 dividing the amount of such increase in the property tax by three, the quotient being added to the amount of property tax which was payable immediately before the coming into force of the Delhi Municipal Corporation (Amendment) Act, 2003, and to the amount of property tax which shall be payable respectively in each of the remaining two successive years after such addition. (2) Where any person liable for the payment of property tax under this Act has failed to pay- (a) such tax by the date as specified in sub-section (3) of section 123B; or (b) the arrear of tax, interest and penalty, if any, and any other sum in the nature of tax up to the 31st March of the preceding financial year; He shall be liable to pay simple interest at the rate of one per cent. for every month or part of the month comprising the period from the expiry of the due date, till the amount is actually paid.‖ 16. The provisions mentioned above do not provide for payment of interest to assessee on refund. Section 123B(9) of the Act provides for refund of excess payment made but does not stipulate that any interest will be paid on the excess Tax paid by assessee. On the other hand, under certain circumstances an assessee may be liable to pay interest as per the provisions of Section 152 of the Act. We are not concerned with the validity of the said Sections. I am merely interpreting the provisions as they WP(C) Nos. 12758/2005 & 8219/2006 Page No.14 exist and whether under the said provisions, the respondent-MCD is liable to pay interest for the two periods. 17. A tax payer is not entitled to interest on tax if a statute does not provide for payment of such interest. In the case of Modi Industries Ltd versus CIT reported in 1995 (216) ITR 759, the Supreme Court examined the term ―Regular Assessment‖ and the question whether an assessee is entitled to interest on self- assessment tax, advance tax and tax deducted at source on the basis of an appellate order whereby additions made by the Assessing Officer were set aside. After examining the provisions of the Income Tax Act, 1961, the Supreme Court held that interest can be paid only if the statute provides for the payment of the same and it was observed that interest is not payable in equity. It was held: 58. The argument, which was upheld in some of the cases now under appeal, is that it will be inequitable if the assessee does not get interest on the amount of advance tax paid, when the amount paid in advance is refunded pursuant to an appellate order. This is not a question of equity. There is no right to get interest on refund except as provided by the statute. The interest on excess amount of advance tax under Section 214 is not paid from the date of payment of the tax. Nor is it paid till the date of refund. It is paid only up to the date of the regular assessment. No interest is at all paid on excess amount of tax collected by deduction at source. Before introduction of Section 244(1-A) the assessee was not entitled to get any WP(C) Nos. 12758/2005 & 8219/2006 Page No.15 interest from the date of payment of tax up to the date of the order as a result of which excess realisation of tax became refundable. Interest under Section 243 or Section 244 was payable only when the refund was not made within the stipulated period up to the date of refund. But, if the assessment order was reduced in appeal, no interest was payable from the date of payment of tax pursuant to the assessment order to the date of the appellate order. 59. Therefore, interpretation of Section 214 or any other section of the Act should not be made on the assumption that interest has to be paid whenever an amount which has been retained by the tax authority in exercise of statutory power becomes refundable as a result of any subsequent proceeding.‖ 18. In Ferro Alloys Corporation Limited versus A.P. State Electricity Board and another reported in AIR 1993 SC 2005, the Supreme Court examined whether interest can be claimed on the basis of the Interest Act, 1978, equity or common law on deposits made with the Electricity Board. It was observed that strictly speaking interest would be payable only in cases where there is a relationship of a debtor and a creditor and the lender of the money allows the borrower to use certain funds thereby depriving himself of the use of the said funds. Interest is a kind of rent for use of the said funds. Halsbury‘s Law of England was referred to, wherein it has been observed that interest is payable in Common Law when there is an express agreement or an implied agreement to pay which can be inferred from the WP(C) Nos. 12758/2005 & 8219/2006 Page No.16 course of dealing between the parties, from the nature of transaction, custom or usage or by way of damages for breach of contract. On the question of equitable right of interest, it was observed as under: “128. If this be the position, could interest be claimed either on equity or common law? The argument on behalf of the consumers is, if money belonging to any person is used by someone else he is obliged to pay interest for the period of its user. Halsbury, Volume 32 (page 53, para 106) defines ―interest‖ as ―the return or compensation for the use or retention by one person of a sum of money belonging or owed to another.... 129. Strictly speaking, the word ―interest‖ would apply only to two cases where there is a relationship of debtor and creditor. A lender of money who allows the borrower to use certain funds deprives himself of the use of those funds. He does so because he charges interest which may be described as a kind of rent for the use of the funds. For example, a bank or a lender lending out money on payment of interest. In this case, as already noted, there is no relationship of debtor and creditor. 130. We may now refer to Halsbury, 4th Edn., Vol. 32, para 108: ―108. When