Case: Bombay Municipal Corporation Vs. Life Insurance Corporation Of India, Bombay

in the definition. The expression "permitted increase" is defined by S. 5 (7) to mean an increase in rent permitted under the provisions of the Act. Section 5 (3) defines the word "landlord" as meaning any person who is for the time being receiving or entitled to receive rent in respect of any premises etc. Section 5 (11) gives the meaning of the word "tenant". According to that meaning a tenant would be any person by whom or on whose account rent is payable for any premises and includes such persons as are specifically mentioned in sub-cls. (a), (aa) and (b). Section 7 provides for increase in rent on account of improvements or structural alteration of the premises which have been made with the consent of the tenant and such increase is not to be deemed an increase for the purpose of S. 7. Under S. 10 a landlord can increase the rent on account of payment of rates, cess or taxes imposed and levied by a local authority. Such an increase again is not to be deemed to be an increase for the purpose of S. 7. Similarly under section 10AA the landlord can increase the rent on account of payment of enhanced rates etc. permitted after certain date in particular areas. Any increase in this section cannot be deemed to be an increase for the purpose of S. 7. 5. The High Court was alive to the fact that the mention of increase in Ss. 10, 10A and 10AA referred to increases in rent but it was felt that the section in express terms provided that such an increase shall not be deemed to be an increase in rent under Section 7. According to the High Court it followed that what was allowed to the landlord in addition to the standard rent was not an increase in the rent but a provision was made in a specified way for the transfer of the burden of the tax to the tenants because of the rigorous of the Rent Act:"The other factor which weighed with the High Court was that if the increase in rates was to be treated as a part of the rent which would enable the Municipal Corporation to increase the valuation on every occasion when there was increase in rates and taxes this would "land us again into a cycle of increments every year from figure to figure never intended by the framers either by the Rent Act or of the Municipal Act." 6. It is necessary to set out Section 7 of the Rent Act at this stage:-"Except where the rent is liable to periodical increment by virtue of an agreement entered into before the first day of September 1940, it shall not be lawful to claim or receive on account of rent for any premises any increase above the standard rent, unless the landlord was, before the coming into operation of this Act, entiled to recover such increase................ under the provisions of this Act." It is quite clear that Sec. 7 does not prohibit the recovery of the increase to which landlord may be entitled under the provisions of the Act in addition to the standard rent.The obvious implication of the definition of "permitted increase" in Section 5 (7) is that such an increase becomes a part of the rent.The language which has been employed in Sections 9, 10 and 10-AA seems to indicate that the Legislature treated the permitted increase as a part of the rent which the landlord would be entitled to receive from the tenant.In Corpn. of Calcutta v. Smt. Padma Devi, 1962-3 SCR 49 = (AIR 1962 SC 151 ) the question arose whether the Municipal Corporation had the power to fix the annual valuation on a figure higher than the standard rent. It was held that on a reading of the provisions of Section 127 (a) of the Calcutta Municipal Act 1923 the rental value could not be fixed higher than the standard rent under the Rent Control Act. It was further held that the words "gross annual rent at which the land or buildings might at the time of assessment reasonably be expected to let from year to year" in Section 127 (a) implied that the rent which the landlord might realize if the house was let was the basis for fixing the annual valuation of the buildings. Thus the criterion was the rent realizable by the landlord and not the valuation of the holding in the hands of the tenant.Even applying that criterion the rent realizable, in the present case, would be the standard rent together with the permitted increase on account of the levy of educational cess.As observed in Patel Gordhandas Hargovindas v. Municipal Commr., Ahmedabad, 1964-2 SCR 608 = (AIR 1963 SC 1742 ) there are three modes of determining the annual or rateable value of lands or buildings. The first is the actual rent fetched by the land or buildings where it is actually let. The second is rent based on hypothetical tenancy where it is not let and the third is by valuation based on capital value from which the annual value has to be found by applying a suitable percentage, where either of the first two modes is not available.In the present case admittedly the actual rent of the building in question which is being fetched comprises the standard rent and the permitted increase. The building can well be said to be reasonably expected to be let from year to year at the figure arrived at by adding the permitted increase to the standard rent. The valuation had, therefore, to be arrived at after taking into account the amount of educational cess which was levied by the Corporation. Even if such a conclusion leads to some kind of inconvenience of variation in valuation at frequent intervals that can be no consideration for not giving full effect and meaning to the provisions of the Act of 1888 and the Rent Act under consideration.

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

Explanation:
1[ds]It is quite clear that Sec. 7 does not prohibit the recovery of the increase to which landlord may be entitled under the provisions of the Act in addition to the standard rent.The obvious implication of the definition of "permitted increase" in Section 5 (7) is that such an increase becomes a part of the rent.The language which has been employed in Sections 9, 10 and 10-AA seems to indicate that the Legislature treated the permitted increase as a part of the rent which the landlord would be entitled to receive from the tenant.In Corpn. of Calcutta v. Smt. Padma Devi, 1962-3 SCR 49  = (AIR 1962 SC 151 ) the question arose whether the Municipal Corporation had the power to fix the annual valuation on a figure higher than the standard rent. It was held that on a reading of the provisions of Section 127 (a) of the Calcutta Municipal Act 1923 the rental value could not be fixed higher than the standard rent under the Rent Control Act. It was further held that the words "gross annual rent at which the land or buildings might at the time of assessment reasonably be expected to let from year to year" in Section 127 (a) implied that the rent which the landlord might realize if the house was let was the basis for fixing the annual valuation of the buildings. Thus the criterion was the rent realizable by the landlord and not the valuation of the holding in the hands of the tenant.Even applying that criterion the rent realizable, in the present case, would be the standard rent together with the permitted increase on account of the levy of educational cess.As observed in Patel Gordhandas Hargovindas v. Municipal Commr., Ahmedabad, 1964-2 SCR 608  = (AIR 1963 SC 1742 ) there are three modes of determining the annual or rateable value of lands or buildings. The first is the actual rent fetched by the land or buildings where it is actually let. The second is rent based on hypothetical tenancy where it is not let and the third is by valuation based on capital value from which the annual value has to be found by applying a suitable percentage, where either of the first two modes is not available.In the present case admittedly the actual rent of the building in question which is being fetched comprises the standard rent and the permitted increase. The building can well be said to be reasonably expected to be let from year to year at the figure arrived at by adding the permitted increase to the standard rent. The valuation had, therefore, to be arrived at after taking into account the amount of educational cess which was levied by the Corporation. Even if such a conclusion leads to some kind of inconvenience of variation in valuation at frequent intervals that can be no consideration for not giving full effect and meaning to the provisions of the Act of 1888 and the Rent Act under consideration.