Case: East India Commercial Company Private Limited V. Corporation Of Calcutta Vs.

Municipal Act is different from the M.P. Municipal Act, 1956. Section 168 of the Municipal Act is similar to the corresponding provisions in Delhi and in Andhra Pradesh and therefore it is the ratio of the decisions in the case of Padma Debi, Dewan Daulat Rai and Guntur Municipal Council which should apply. 16. There is one more decision to which reference need be made, i.e., the case of Asstt. G.M., Central Bank of India v. Commr., Municipal Corpn. for the City of Ahmedabad. Here again the question arose with regard to the determination of the annual letting value of the property. It was contended that the principles of Dewan Daulat Rai case should be followed but this contention was repelled in view of the fact that the Municipal Corporation Act applicable in Ahmedabad after its amendment itself defined what the annual letting value was to be. This provision also contained a non obstante clause similar to one which was in the M.P. Municipal Corporation Act and as a reason thereof, the rateable value was determined according to the principles contained in the Municipal Corporation Act and not as per the fair rent or the standard rent determinable under the Rent Restriction Act. 17. From the aforesaid decisions, the principle which is deducible is that when the Municipal Act requires the determination of the annual value, that Act has to be read along with Rent Restriction Act which provides for the determination of fair rent or standard rent. Reading the two Acts together the rateable value cannot be more than the fair or standard rent which can be fixed under the Rent Control Act. The exception to this rule is that whenever a any Municipal Act itself provides the mode of determination of the annual letting value like the Central Bank of India case relating to Ahmedabad or contains a non obstante clause as in Ratnaprabha case then the determination of the annual letting value has to be according to the terms of the Municipal Act. In the present case, Section 168 of the Municipal Act does not contain any non obstante clause so as to make the Tenancy Act inapplicable and nor does the Act itself provide the method or basis for determining the annual value. This Act has, therefore, to be read along with Tenancy Act of 1956 and it is the fair rent determinable under Section 8(1)(a) which alone can be the annual value for the purpose of property tax. 18. For the aforesaid reasons, we are of the view that the decision of the Calcutta High Court, under appeal, cannot be sustained. The annual value under Section 168 of the Municipal Act has to be fixed on the basis of fair rent determinable under Section 8 of the Tenancy Act. 19. We, however, find that the proviso to Section 8(1)(a) of the Tenancy Act has not been considered so far in dealing with the question with regard to the fixation of the annual value. The decisions of this Court referred to hereinabove clearly bring out that the annual value cannot be more than the "fair rent" or "standard rent" (whatever may be the nomenclature in the relevant law of the State) which is determinable under the Rent Restriction Act. The proviso to Section 8(1)(a) of the Tenancy Act regards the contractual rent for a period of 8 years when the premises was first let out to be the "fair rent". When, therefore, the rateable value or the annual value for the purpose of determining the municipal tax has to be the "fair rent" determinable under the Tenancy Act then, because of the proviso, it is the agreed rent for a period of eight years which is the "fair rent" and has to be taken into consideration in determining the property tax. Because of the proviso the annual value of the building for the period of eight years from the first letting has to be fixed on the basis of contractual rent and thereafter the annual value will have to be revised and fixed as per the formula contained in Section 8(1)(a) of the Tenancy Act namely 6 3/4 per cent per annum on the aggregate amount of the actual cost of construction and the market price of the land on the date of commencement of construction as provided in that provision. To put it differently, it is only the "fair rent" which can be taken into consideration for the purpose of fixing the annual value under the Municipal Act. Because of the fiction created by the proviso to Section 8(1)(d) of the Tenancy Act, the contractual rent is regarded as the "fair rent" for a period of eight years from the date the premises was first let out. It is for that reason that this figure of "fair rent" will be the annual value which will have to be revised after eight years when the proviso will no longer be applicable and the "fair rent" will have to be determined on the basis of the formula contained in the said provision. 20. In the present case, it is not known as to when the property was first let out and when does the period of eight years come to an end. It is no doubt true that in special leave petition, it has been stated that the premises were constructed after 1964 and they were let out only in 1966 but the assessing authority has not examined the question by taking into consideration the effect of the proviso to Section 8(1)(a) of the Tenancy Act. It would, therefore, be necessary to determine as to when the property was first let out so that for a period of eight years during the subsistence of tenancy, the contractual rent being the "fair rent" will be regarded as the basis for fixing the annual value under Section 168 of the Municipal Act. Thereafter the annual value has to be determined in accordance with Section 8(1)(a) of the Tenancy Act.

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

Explanation:
1[ds]14. The principle, namely, that the annual value for the purpose of the Municipal Act could not be in excess of the standard rent even if the landlord was entitled to receive the contractual rent in respect of a building to which the rent restriction law applies has been elaborately discussed in Dewan Daulat Rai case. It was sought to be contended on behalf of the New Delhi Municipal Committee that till the fixation of the standard rent, the landlord could legally receive the contractual rent, more so when the tenants right to get the standard rent had come to an end with a limitation for moving such an application having expired, therefore, the annual value should be the actual rent which was legally received by the landlord. Rejecting this contention, this Court applied and followed the decision in Padma Debi case and also the decision in Corpn. of Calcutta v. LIC of India where Padma Debi case and Guntur Municipal Council case had been followed18. For the aforesaid reasons, we are of the view that the decision of the Calcutta High Court, under appeal, cannot be sustained. The annual value under Section 168 of the Municipal Act has to be fixed on the basis of fair rent determinable under Section 8 of the Tenancy Act19. We, however, find that the proviso to Section 8(1)(a) of the Tenancy Act has not been considered so far in dealing with the question with regard to the fixation of the annual value. The decisions of this Court referred to hereinabove clearly bring out that the annual value cannot be more than the "fair rent" or "standard rent" (whatever may be the nomenclature in the relevant law of the State) which is determinable under the Rent Restriction Act. The proviso to Section 8(1)(a) of the Tenancy Act regards the contractual rent for a period of 8 years when the premises was first let out to be the "fair rent". When, therefore, the rateable value or the annual value for the purpose of determining the municipal tax has to be the "fair rent" determinable under the Tenancy Act then, because of the proviso, it is the agreed rent for a period of eight years which is the "fair rent" and has to be taken into consideration in determining the property tax. Because of the proviso the annual value of the building for the period of eight years from the first letting has to be fixed on the basis of contractual rent and thereafter the annual value will have to be revised and fixed as per the formula contained in Section 8(1)(a) of the Tenancy Act namely 6 3/4 per cent per annum on the aggregate amount of the actual cost of construction and the market price of the land on the date of commencement of construction as provided in that provision. To put it differently, it is only the "fair rent" which can be taken into consideration for the purpose of fixing the annual value under the Municipal Act. Because of the fiction created by the proviso to Section 8(1)(d) of the Tenancy Act, the contractual rent is regarded as the "fair rent" for a period of eight years from the date the premises was first let out. It is for that reason that this figure of "fair rent" will be the annual value which will have to be revised after eight years when the proviso will no longer be applicable and the "fair rent" will have to be determined on the basis of the formula contained in the said provision20. In the present case, it is not known as to when the property was first let out and when does the period of eight years come to an end. It is no doubt true that in special leave petition, it has been stated that the premises were constructed after 1964 and they were let out only in 1966 but the assessing authority has not examined the question by taking into consideration the effect of the proviso to Section 8(1)(a) of the Tenancy Act. It would, therefore, be necessary to determine as to when the property was first let out so that for a period of eight years during the subsistence of tenancy, the contractual rent being the "fair rent" will be regarded as the basis for fixing the annual value under Section 168 of the Municipal Act. Thereafter the annual value has to be determined in accordance with Section 8(1)(a) of the Tenancy Act