Case: Lokmanya Mills Barsi Ltd Vs. Barsi Borough Municipality

of the tax-payer to challenge the valuation illusory. An assessment list prepared under S. 78, before it is authenticated and finalised, must be published and the taxpayers must be given an opportunity to object to the valuation. By the assessment list in which the valuation is not based upon the capital value of the building or the rental which the building may fetch, but on the floor area, the objection which the tax-payers may raise is in substance restricted to the area and not to the valuation.6. Counsel for the Municipality sought to rely upon M. and S. M. Rly. Co., Ltd. v. Bezwada Municipality. ILR 1945 Mad 1: (AIR 1944 PC 71 ) decided by the Judicial Committee of the Privy Council, in support of the plea that the rate based on valuation in proportion to the floor area is validly levied. By S. 81 sub-sec. (2) of the Madras District Municipalities Act, 1920, a tax for general purposes and a water and drainage tax were to be levied at such fractions of the annual value of lands or buildings or both as may be fixed by the Municipal Council. By S. 82 sub-sec. (2) of that Act, the annual value of lands and buildings was to be the gross annual rent at which they may reasonably be expected to let, but the proviso, it was enacted that in the case of any Government or Railway building, the annual value of the premises shall be deemed to be 6 per cent of the total of the estimated value of the land and the estimated present cost of erecting the building subject to certain deductions. The Municipality of Bezwada levied property tax on a piece of vacant land belonging to the Madras and Southern Mahratta Railway Company on the annual value computed at 6 per cent of its capital value. This method of taxation was challenged by the Railway Company on the contention that all methods of valuation other than the method prescribed by the proviso to S. 82(2) were by necessary implication prohibited. This contention was rejected because reality of the substantive enactment was left unqualified except in so far as it concerned the particular subjects to which the proviso related. Open lands were not covered by the proviso and it was competent to the municipality to levy the tax under S. 82(2) on the annual value and that value could be determined by any of the recognised methods of arriving at the rent which a hypothetical tenant may reasonably be expected to pay for the lands in question. This case has in our judgment no relevance to the present case.7. If the Municipality of Barsi had adopted any of the recognised methods of valuation for assessing the annual letting value, the tax would not be open to challenge, but the method adopted was not a recognised method of levying the rate.8. The High Court relied upon its earlier judgment in Borough Municipality, Amalner v. Pratap Spinning Weaving and Manufacturing Co., Ltd., Amalner, ILR (1952) Bom 918: (AIR 1952 Bom 401 ). In that case, the court negatived the challenge to the validity of the rules similar to those impugned in these appeals. The Amalner Municipality had by rules framed under the Bombay Municipal Boroughs Act sought to levy a rate equal to a percentage of the annual letting value which was computed on the floor area of "mills and factories." The court held that the method of taxation adopted by the Municipality had remained unchallenged for a long time, that the rules had been sanctioned by the Government and they were not shown to be "capricious, arbitrary and unreasonable" and that the valuation of the property by reference to the floor area was not altogether unknown to the law of rating. The High Court also observed that in assessing the rent which a hypothetical tenant may pay, several methods are open to the Municipality and if on examining the cases of all the factory buildings within their jurisdiction, the Municipality concluded that the rent with the hypothetical tenant may reasonably be expected to pay for those buildings fits in with the rent which they had fixed by adopting the flat and uniform rate, the principle of fixing the annual letting value on the basis of the floor area would not be open to challenge. It was assumed in that case that all factory buildings within the area of the Amalner Municipality were alike in essential features and were intended to be used for purposes which were alike, and that probably the Municipality may have been satisfied that the principle enunciated in the rule impugned worked out on the whole as a fair basis for determining the valuation of the building in question. In our view, this approach to a rating problem arising under the Act is not permissible. In any event, there is no evidence on the record of this case that the factories and "buildings relating thereto" such as ware-houses, godowns and shops of the mills situate in the compound of the mills, may be separately let at the uniform rate prescribed by the Municipality. The vice of the rule lies in an assumed uniformity of return per square foot which structures of different classes which are in their nature not similar, may reasonable fetch if let out to tenants and in the virtual deprivation to the rate-payer of his statutory right to object to the valuation.9. Another judgment of the Bombay High Court in Motiram Keshavdas v. Ahmedabad Municipal Borough, 44 Bom LR 280 : (AIR 1942 Bom 177 ) calls for reference. It was held in Motirams case that a water tax imposed by the Ahmedabad Municipality as a rate not depending upon the value of the property assessed but in lump sum was not a rate for the purpose of S. 73(x) of the Bombay Municipal Boroughs act, 1925, and the rule which authorised the levy of such a lump sum was ultra vires.

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

Explanation:
1[ds]By S, 73, the Municipality is authorised subject to any general or special orders which the State Government may make in that behalf and to the provisions of Ss. 75 and 76, to impose for the purposes of the Act any one or more of the classes of taxes, amongst which are included a rate on buildings or lands or both situate within the municipal borough and general water-rate which may be imposed in the form of a rate assessed on buildings or lands or in any other form. Section 75 prescribes the procedure preliminary to imposing a tax. The procedure for assessing the liability to rates on lands and buildings is prescribed by Ss. 78 to 84 of the Act which provide for preparation of the assessment list, its authentication and amendment. When a rate on building or lands or both is imposed, the Chief Officer causes an assessment-list of all buildings or land or both is imposed, the Chief Officer causes an assessment-list of all buildings or lands or lands and buildings in the municipal borough to be prepared containing inter alia the names of the owner, the valuation based on capital or annual letting value as the case may be on which the property is assessed and the amount of tax assessed thereon. The expression "Annual letting value" is defined in S. 3(1) of the Act as meaning the annual rent for which any building or land, exclusive of furniture or machinery contained or situate therein or thereon might reasonably be expected to let from year to year, and shall include all payments made or agreed to be made by a tenant to the owner of the building or land on account of occupation, taxes, insurance or other charges incidental to his tenancy.