Case: Harbanslal Malhotra And Sons Pvt. Ltd Vs. Kolkata Municipal Corpn

2. The issue involved in the appeal lies in narrow compass. However, in order to appreciate the short controversy, few relevant facts need mention infra.      3. The appellant is the owner of the premises bearing No. 226/2 situated at A.J.C. Bose Road, Kolkata700020. It consists ofy building and some land appurtenant thereto (hereinafter referred to as the premises). This premises is assessed to payment of tax under the provisions of the Calcutta Municipal Corporation Act, 1980 (hereinafter referred to as the Act).      4. The question arose while making assessment of the premises for the Assessment Years5 (3rd quarter) before the Assessing Authority (Hearing Officer), as to what is the proper annual value of the premises and secondly, how it should be determined under Section 174 of the Act for payment of tax on the premises.      5. By two orders dated 22.06.1996, the Assessing Officer (Hearing Officer) determined the valuation of the premises. So far as annual valuation for the Assessment Year) (3rd quarter) is concerned, it was done at Rs., whereas so far as it was for the Assessment Year) (3rd quarter) is concerned, the same was done at Rs. 4,25,600/6. The appellants (assessee), felt aggrieved of the orders of Assessing Officer, filed two appeals before the Tribunal. So far as the order pertaining to the period, valuing the premises at Rs. 59,400/was concerned, the appellant filed appeal being M.A.A. No. 1702 of 1996 whereas so far as the order relating to period, valuing the premises at Rs. 4,25,600/was concerned, the appellant filed appeal being M.A.A. 1701 of 1996.      7. Both the appeals were heard analogously by the Tribunal and were disposed of by common order dated 18.11.2002. So far as M.A.A. No. 1702/96 is concerned, it was dismissed by upholding the valuation whereas M.A.A. No. 1701/96, was allowed in part wherein the Tribunal reduced the annual valuation made by the Assessing Officer, from Rs. 4,25,000/. The Tribunal held that the annual valuation of the premises which was made at Rs. 4,25,000/by the Assessing Authority was wrong and should have been done at Rs. 75,400/in accordance with the procedure prescribed in Section 174 (1).      8. The Municipal Corporation, felt aggrieved of the order of the Tribunal, filed revision petition before the High Court. By impugned order, the High Court allowed the revision and remanded the case to the Tribunal toe the annual value of the premises. The High Court held that the Tribunal was not right in making an assessment of the premises by clubbing land and building. According to the High Court, it should have been done separately, i.e., building and land should have been assessed separately for determining their respective annual value under Section 174(1) and (2) of the Act.      9. The owner (assessee), felt aggrieved of the order of the High Court, filed this appeal by way of special leave before this Court.

Reasoning:
11. Having heard the learned counsel for the parties and on perusal of the record of the case, we are inclined to allow the appeal, set aside the impugned order and restore that of the Tribunal14. In the case of former, the assessing authority is required to take land and building as single unit for determination of its gross annual rent which is reasonably expected to fetch at the time of assessment from year to year. To illustrate, if the building has some appurtenant land which is exclusively used by the owner for garden or/and parking the vehicles, such building or/and land may fetch more rentals as compared to a building, which does not have these facilities or has very small land appurtenant to the building. In any case, such building and the land cannot be separated for determining their gross annual rent. Such case, therefore, would fall inn (1) of Section 174. The annual value and gross annual rent of such premises have to be, therefore, determined as per the procedure prescribed inn (1) of Section 174 of the Act) of Section 174, deals with the cases of transfer of the building and land. In such case, the Assessing Officer is required to take the amount (sale consideration) mentioned in the transfer deed as the basis for determining its annual value and then to determine the gross annual rent of such premises as per the procedure prescribed in) of Section 174 of the Act16. However, in a case where no amount is mentioned in the transfer deed, the proviso says that the Assessing Officer is required to take the estimated market value of such premises as the basis and then to determine its gross annual rental as per the procedure prescribed in) of Section 174 of the Act17. In a situation, where the gross annual rent of any land or building or any part thereof cannot be easily estimated for the purpose of) of Section 174, then a procedure is prescribed in) of Section 174 as to how gross annual rent of such land or building is to be determined18. In all the situations set out above, the land or the building or any part thereof would be taken as single unit and not separate for determining the gross annual rental value. It is also clear from Section 178(2)(i) and (ii), which provides that every building together with the site and the land appurtenant thereto shall be assessed as a single unit19. However, the three provisos appended to clause(i) of Section 178 (2) also relates to building and the land but with different class of cases due to buildings peculiar structure, its ownership and the manner in which such building or land is used by the owner20. If the factors set out in any of the three provisos were found present in any building or land, the assessment of such building and land has to be done as per the procedure prescribed in the provisos read with Section 174(1) of the Act21. Now coming to the later category of the cases, i.e., open land or land on which no building is built, it falls in) of Section 174. It says that the annual market value of open land would be fixed at seven percent of the estimated market value of the open land22. We are, therefore, of the considered opinion that Section 174(1) and (2) operate in separate field. Both cannot be clubbed for determination of the gross annual rental value of land or building. In other words, both the Sections have to be applied independently depending upon the fact as to whether the premises is building with land or it is an open land and accordingly their gross annual rental value would be determined23. When the Legislature itself has carved out two categories of cases namely, (1) land or building (2) open land with no building thereon and has accordingly provided different rates and different methods of assessment, it does not appear logical to club both the categories of cases24. It is a settled rule of interpretation in relation to taxing laws that a machinery provision which enables the assessee to avail of a concession or benefit conferred by substantive provision in the Act, such provisions are required to be construed liberally. (See G.P SinghPrinciples of Interpretation of Statutory Interpretation 13th Edition page 856). This rule applies to the case on hand and hence, benefit of the interpretation must go to the assessee rather than to the taxing man. It also serves the purpose for which Section 174 is enacted25. Coming now to the facts of the case, we find that the High Court while remanding the case directed the Tribunal to treat land and building of the premises as separate unit and then to determine the gross annual value of the premises by applying Section 174 (1) and (2) of the Act.