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

3. The appellant constructed a multi-storey building in Calcutta after the year 1956. By notice dated 10-10-1966 issued under Section 180 of the Calcutta Municipal Act, 1951 (hereinafter referred to as "the Municipal Act"), the respondent assessed the annual value of the said building at Rs. 63, 365 with effect from 3rd quarter of 1966-67. The appellant filed objections to the aforesaid valuation. While disposing of the objections the Special Officer reduced the value to Rs. 49, 368. The appellant filed an appeal against the said order before the Court of Small Causes, Calcutta. The appeals for subsequent years for similar orders passed by the Special Officer were also filed by the appellant. The main contention of the appellant in the said appeal was that the annual valuation of the property ought to be fixed on the basis of fair rent as contemplated under the Municipal Act read along with the provisions of Section 8(1)(a) ofthe West Bengal Premises Tenancy Act, 1956 (hereinafter referred to as "the Tenancy Act") and not on the basis of the actual rent being realised by the appellant4. In order to lead evidence relating to the actual cost of construction of the building, the appellant moved an application before the Small Cause Court for permission to examine an expert valuer as a witness to prove the cost of construction of the said building. The Chief Judge of the Small Cause Court rejected the said application on the ground that such evidence was neither necessary nor relevant for examining the correctness or otherwise of the determination of the annual valuation under Section 168(1) of the Municipal Act. A revision petition filed against the said order was rejected by the High Court of Calcutta. After the decision of this Court in the case of Dewan Daulat Rai Kapoor v. New Delhi Municipal Committee wherein it was inter alia held that a building is governed by the provisions of the rent control legislation and the landlord cannot reasonably be expected to receive anything more than the standard rent, the appellant once again applied to the Small Cause Court for recalling its earlier order and for permitting the appellant to lead evidence for the purpose of determination of the actual cost of construction. The application was allowed as the Chief Judge of the Small Case Court was of the opinion that in view of the decision of this Court in Dewan Daulat Rai case the assessing authority has to follow the principle laid down in the Tenancy Act for determining the fair rent as the building had been constructed after 1956. It accordingly recalled its earlier order dated 7-6-1974 and allowed the appellants prayer for examining his expert valuer in order to arrive at the fair rent of the premises in accordance with the provisions of the Tenancy Act

Court's reasoning:
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