Case: Godhra Borough Municipality Vs. Godhra Electricity Co. Ltd

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 contractors 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 ineffective i. e., 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 Gordhandass case 1964-2 SCR 608 = (AIR 1963 SC 1742 ) (supra) 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 conclusion 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 (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. S. 3 (b). 9. 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 Gordhandass case, (1964) 2 SCR 608 = (AIR 1963 SC 1742 ) (supra) by adopting the contractors method. What that method is has been explained in Ryde on Rating (Eleventh Edition) Chapter 20. In R. v. School Board for London, (1885) 55 LJMC 33 on appeal (1886) 17 QBD 733 Cave, J. applied the contractors test to schools. Ryde points out that it was tacitly recognised as applicable in various other cases. The principle on which the contractors basis rests are given by the author at page 439 and the method of its applications is given at page 442. The learned author notes that in "applying the contractors 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 replacing the actual building as it is, or the 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 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 consider 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. 10. 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 value. 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 and buildings within the jurisdiction of Godhra municipality. This clearly is fallacious as under Section 211 of the Companies Act, 1956 the balance sheet of a company has to be drawn up in the form prescribed by Schedule VI. Under the said Schedule, Part 1, 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 therefore 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.

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

Explanation:
1[ds]Under Rule 4 (l) (b) above, the buildings of the respondent had to be valued on the capital basis. Under Rule 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 Rs.41,541-12-9. He sought to rely on the balance sheets and the 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 Tewan the life of the office buildings was 50 years white 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 1956-57 and taking into consideration the properties were over 40 years old, the Magistrate assessed the capital value at Rs. 90.0005. The said figures 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. 1,85,265 included at least Rs. 1,00,000 as the cost up to 51st 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 municipalitys contention that the cost of construction of buildings had gone up five times since 1920. Considering the rival contentions he fixed the capital value at three times the figure shown by the company, viz. Rs. 41,541 and rounded the same off to Rs. 1,25,0007. 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 meaning10. 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 value. 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 and buildings within the jurisdiction of Godhra municipality. This clearly is fallacious as under Section 211 ofthe Companies Act, 1956 the balance sheet of a company has to be drawn up in the form prescribed by Schedule VI. Under the said Schedule, Part 1, 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 therefore 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.