Case: Lokmanya Mills Barsi Ltd Vs. Barsi Borough Municipality

The Lokmanya Mills- hereinafter called the appellants-are a company registered under the Indian Companies Act holding an extensive area of land City Survey No. 2554 within the Municipal Borough on which are constructed buildings of the factory, warehouses, bungalows and other structures appurtenant to the factory. The respondent, a Borough Municipality constituted under the Act is by S. 73, entitled to levy a rate on lands and buildings and also a water-rate. Under the rules framed by the Municipality, house-tax and water-tax were levied on buildings and non-agricultural lands on their annual letting value at uniform rates whether the purpose was residential, business or manufacturing.2. In 1944, the Municipality resolved to enhance the assessment of lands and buildings within its area. After some correspondence with the Commissioner Central Division, the General Body of the Municipality resolved that the rental value for levying rates on mills and factories within its limits be fixed at Rs. 40/- for every100 square feet. Notices of this resolution under S. 75(b) of the Act were issued and objections to the proposed enhancement were invited from the tax-payers, and after obtaining the approval of the Government of Bombay, the new rules were made operative from April 1, 1947.The Municipality prepared an assessment list under the new scheme of taxation in respect of factory buildings and buildings relating thereto and issued notices of demand calling upon the appellants to pay house-tax and water-tax newly assessed thereon. The appellants paid under protest the tax demanded, and filed five suits in the court of the Civil Judge, Junior Division of Barsi, to recover the amounts levied by the Municipality in excess of the amounts due under the old scheme. In all these suits, the principal issue raised was about the validity of R. 2C framed by the Municipality for levy of rates "on Mills. Factories and other buildings relating thereto." The trial court held that R. 2C was valid and within the competence of the Municipality and dismissed the suits for refund of house-tax and water-tax.The District Court at Sholapur in appeal declared R. 2C "illegal and ultra vires and by injunction restrained the Municipality from making any claim or demand for house-tax and other taxes from the appellants on the basis of that rule. The High Court of Judicature at Bombay set aside the decree of the District Court disagreeing with the view that R. 2C was ultra vires.

Reasoning: 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.