Case: Motichand Hirachand &amp; Ors Vs. Bombay Municipal Corporation

the owner of the building cannot charge rent over and above that which is permissible under the provisions of the Rent Act, there is nothing in that Act which prohibits him from charging an amount from an advertiser in consideration of the privilege of displaying his advertisement. A hypothetical tenant therefore, would take into consideration such extra income arising from the special advantage attached to the building and would be prepared to pay over and above the actual rent something in respect of such an additional advantage. 6. Counsel for the appellants relied upon certain decisions which we may now examine. Taylor v. Overseers of Pendleton, (1887) 19 QBD 288 is a case where the question was whether the advertising agent was a tenant or a licensee. If he was a licensee it would be the owner who would be the occupier, if a tenant it would be the advertising agent who would be the occupier. Since under the English law it is the occupier and not the owner who is liable for rates it was held that the agent being the tenant was the occupier and it was he and not the owner who was liable to pay rates. In Wilson v. Tavener, 1901-1 Ch 578 the defendant agreed by an agreement to let the plaintiff erect a hoarding upon the forecourt of a cottage and to allow him the use of a gable end for a bill posting station at yearly rent. It was held that the agreement did not amount to tenancy from year to year but was a licence and a quarters notice terminating at the end of the year of the currency of the agreement was a reasonable notice. These decisions cannot be appropriately brought to aid by the appellants as under the English law it is the occupier who is liable for the tax and it is for that reason that the court had to determine in each case whether the agreement in question created a demise or a licence. But whether the advertiser was a lessee or a mere licensee, the income arising from advertisement hoarding has always been rated irrespective of the question as to who was liable to pay the tax. Reliance was placed both before the High Court and also before us on the decision in Corporation of Calcutta v. Anil Prokash Basu AIR 1958 Cal 423 . The building there was let out to the tenant at Rs. 64-14-0 per month. On the roof of it, however, the Calcutta Street Advertising Company had displayed a neon-sign board of Capstain cigarette for which the owner was paid Rs. 125 per month. The question was whether the Calcutta Corporation was right in treating this income as rent within the meaning of Section 127 (a) of the Calcutta Municipal Act, 1923 and take it into account while determining the annual letting value of the building. Section 127 (a) is as follows:-"For the purpose of assessing land and building to the consolidated rate the annual value of land and the annual value of any building erected for letting purposes or ordinarily let shall be deemed to be the gross annual rent at which the land or building might at the time of assessment reasonably be expected to let from year to year less in the case of a building an allowance of 10 per cent for the cost of repairs and for all other expenses necessary to maintain the building in a state to command such gross rent." The High Court held that the roof of the building on which the sign board was put up could not be said to have been demised, that the amount paid to the owner by the advertising agency was therefore not rent and that the use of the roof for putting up the sign board amounted to a licence and therefore could not be treated as rent for the purpose of assessing the annual value of the building The High Court relied on certain English decisions and also on its own earlier decisions for deciding whether the agreement between the owner and the advertising agency amounted to a lease or licence. Having held that the agreement amounted to a licence and not lease and the income was licence fee and not rent it rejected the contention of the Municipal Corporation that it was entitled to treat the amount of Rs. 125 a month as rent over and above the actual rent of the building. It may be observed that it was never argued before the High Court that the agreement whether the said amount was rent or licence fee, added to the beneficial value of the building, that though the roof on the terms of that agreement could not be said to have been demised, what had to be considered under Section 127 (a) for assessing the annual rent of the building was the rent which a hypothetical tenant was expected to pay and not the actual rent, and whether such hypothetical tenant would or would not take into consideration the extra income de rived from the use of the roof for the advertising hoarding over and above the actual rent while deciding what rent he can profitably offer for the building. Such a question not having been raised or decided this decision also cannot assist the appellants. 7. In our view if the building or a part of it yields an extra income over and above the actual rent derived from it such income on the terms of S. 154 (1) of the Act can legitimately be taken into consideration by the assessing authority while determining the annual rent on the ground that a hypothetical tenant would take such extra income into account while considering what rent he can afford to offer for such building. That being the correct position under S. 154 (1) of the Act, High Court was right in confirming the enhancement of the annual rent from Rs. 44,320 to Rs. 59.600.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]The measure for purposes of rating is therefore the rent which hypothetical tenant, looking at the building as it is, would estimate that which he would offer as rent is not hypothetical but concrete. While estimating the rent which he would be prepared to pay he would naturally take into consideration all the advantages, together with the disadvantages attached to the property, that, is the maximum beneficial use to which he would be able to put the property.In doing so he is bound to take into consideration the tact of the property being situated at an unique place as the instant property undoubtedly is, viz., at the juncture of two of the most prominent roads with the additional advantage of Chowpatty Sea Face being opposite to it where in the evenings and on week-ends, it cannot be questioned, large crowds usually gather. Coupled with this would be the advantage that a neon-sign advertisement can be vividly seen if fixed on the top of the building by people pedestrians and those in vehicles, from fairly tong distances in all directions, especially as the advertisement happens to be a rotating one. There can therefore be no doubt that if a property possesses such an amenity, such amenity is bound to add to its beneficial value and the tenant who desires to take it on lease is bound to take into consideration while making up his mind to the rent which he can profitably offer as to how much income he would be able to derive from exploiting" such an amenity. The measure of the hypothetical rent which such a tenant would offer would thus be the extent of the beneficial use to which he would be able to put the property on its being demised to him4. That being so it seems to us that the question whether an agreement under which such a tenant would be able to exploit the advantageous situation in which the property is situate amounts to a lease or license is totally irrelevant for the purpose of assessing the rateable value. Equally irrelevant is the question whether the income arising from such an agreement is rent or licence fee. To consider such income as irrelevant in the process of rating on the ground that it does not amount to rent but to licence fee is to misconstrue the true measure of the rent expected from the prospective tenantThe tenant would not only take into consideration the actual rent derived from the property but also such other income which he would be able to extract from the situation of the property by exploiting as best as he can the beneficial use to which the property is capable of being put. Therefore, the mere fact that the income from the agreement is not rent but licence fee and therefore Cannot be added to the actual rent fetched by the property does not justify on any principle of rating or any construction of section 154 of the Act, disregard of it while estimating the rent which the property would be expected to fetch5. It is true that the rating was so far made including the year in question on the basis of the actual rent derived from the property. That appears to have been done because of the restrictions under the Bombay Rent Act by reason of which the property cannot be leased at rent higher than the standard rent allowed under the provisions of that Act. Since no hypothetical tenant would pay rent higher than such standard rent the actual rent would ordinarily be the rent expected from a hypothetical tenant. It istrue, as observed earlier, that the hypothetical rent cannot be in view of the rent restrictions higher than the actual rent. But the income arising under the said agreement is not rent realised from letting out any part of the property to the Company but is in consideration of the exclusive privilege granted to it of displaying its neon signadvertisement.It ismanifest that the user thereunder of part of the terrace adds, to the beneficial value of the building. For such user the owner can legitimately expect something extra over and above the standard rent of the building. Though the owner of the building cannot charge rent over and above that which is permissible under the provisions of the Rent Act, there is nothing in that Act which prohibits him from charging an amount from an advertiser in consideration of the privilege of displaying hisadvertisement.A hypothetical tenant therefore, would take into consideration such extra income arising from the special advantage attached to the building and would be prepared to pay over and above the actual rent something in respect of such an additional advantageIt may be observed that it was never argued before the High Court that the agreement whether the said amount was rent or licence fee, added to the beneficial value of the building, that though the roof on the terms of that agreement could not be said to have been demised, what had to be considered under Section 127 (a) for assessing the annual rent of the building was the rent which a hypothetical tenant was expected to pay and not the actual rent, and whether such hypothetical tenant would or would not take into consideration the extra income de rived from the use of the roof for the advertising hoarding over and above the actual rent while deciding what rent he can profitably offer for the building. Such a question not having been raised or decided this decision also cannot assist the appellants7. In our view if the building or a part of it yields an extra income over and above the actual rent derived from it such income on the terms of S. 154 (1) of the Act can legitimately be taken into consideration by the assessing authority while determining the annual rent on the ground that a hypothetical tenant would take such extra income into account while considering what rent he can afford to offer for such building. That being the correct position under S. 154 (1) of the Act, High Court was right in confirming the enhancement of the annual rent from Rs. 44,320 to Rs. 59.600.