Case: Municipal Corporation, Indore Vs. Rai Bahadur Seth Hiralal &amp; Others

2. The respondents as trustees of, a charitable trust are the owners of certain houses situate in Indore City. Prior to January 26, 1954 the Indore Municipality was governed by the Indore City Municipal Act, 4 of 1909. By virtue of the power conferred on it by that Act the Municipa1ity used to levy and collect house tax at the rate 7 per cent of the gross annual letting value of these houses and the trustees duty paid such tax. After the formation of the State of Madhya Bharat, the legislature of that State passed the Madhya Bharat Municipalities Act, 1954 which came into force on January 26, 1954. The 1954 Act repealed amongst other Acts the Indore City Municipal Act, 1909. The Indore Municipality however purported to levy the house tax on the basis of the gross annual letting value at the rate of 7 per cent of such value for the financial years 1953-54 and 1904-55. This was objected to by the respondents on the ground that under the 1954 Act the tax could be assessed on the basis of gross annual letting value less 10 per cent statutory allowance in lieu of costs of repairs or on any other account whatsoever. The difference came to Rs. 1,461 and of this the trustees claimed refund on the ground that the Municipality had collected the excess from them under pain of distress. The Municipality having refused to refund the excess the respondents filed the suit to recover it on the ground that the excess, amount was illegally recovered. The Trial Court decreed the suit and the appeals filed by the Corporation in the District Court and the High Court were dismissed.

Court's reasoning:
4. These provisions show that though by Section 2 the new Act repealed the Indore City Municipal Act, 1908 along with other Acts, the legislature by Section 2 (c) saved certain things done under the repealed Acts, viz., rules. bye-laws, orders notifications and notices, taxes and rates made framed, passed, or imposed or deemed to have been made, framed, passed or imposed under the repealed Acts and added a fiction that so far as they are not inconsistent with the new Act they shall be deemed as if they were made, framed, passed or imposed as the case may be under this Act6. We are not impressed with these contentions as in our view they are not warranted on the true construction of the provisions of the Act.The Indore Municipal Act being no longer in force as from January 26 1954, obviously no tax could be levied or imposed thereunder after that date. The rules made and the taxes imposed under the repealed Act are no doubt amongst other things saved and are deemed to have been made, framed, passed or imposed under the new Act but Clause (c) of Section 2, it must not be forgotten, lays down an important qualification that they are to be deemed to have been made, or imposed etc., under the new Act to the extent that they are consistent with the provisions of the Act. Section 73 read with Section 69 provides that a tax on houses or buildings shall be levied on the annual letting value and that in assessing such tax a sum equal to 10 per cent of such letting value shall be deducted therefrom. The tax levied under the old Act and the rules framed thereunder on the basis of the gross annual letting value is obviously inconsistent with the provisions of Section 73 of the Act. The saving and the deeming provisions in Section 2 (c) can only apply if the tax is assessed in the manner consistent with the provisions of Section 73, that is, if it is assessed on the net and not the gross annual letting value after deducting 10 per cent statutory allowance in lieu of the casts of repairs or any other account whatsoever.If the construction of section 2 (c) as suggested by Counsel were to be accepted it would render section 73 (2) nugatory, for, the Municipal Corporation in that case can go on imposing the tax on the basis of the gross annual letting value forever despite the express provision for levying tax on the basis of net annual letting value, i. e., the value arrived at after deducting 10 per cent of the gross annual letting value7. The second part of the contention is equally unacceptable because, if accepted it will be contrary to the provisions of sections 75, 76 and 79 of the Act. After going through the procedure laid down in sections 70, 71 and 72 section 73 enjoins upon the Chief Executive Officer to have an assessment list made containing inter alla valuation or annual letting value at which the property is assessed and the amount of tax assessed on the basis of such valuation or annual letting value. Under Sections 75 and 76 when the assessment list is prepared in accordance with the provisions of section 73 it has to be published and time has- to be fixed for lodging objections against the entries therein. After such objections are heard and disposed of the assessment list has to be authenticated as provided by section 76 (6). Sub-s (6) of section 76 lays down that such assessment list when authenticated becomes conclusive evidence for purposes of all taxes, of the valuation or annual letting value and of the amount of tax leviable on such buildings or lands or both in any official year in which such list is in force. The Municipal Tax is an annual tax leviable for a particular official year and the assessment list on the basis of which the tax is assessed is for each such official year. This is supported by the words "such assessment list" and "of the amount of tax leviable........in any official year in which such list is in force" in section 76 (6)8. Ordinarily, therefore, the Municipal Corporation has to prepare a fresh assessment list every year. The legislature however has empowered by section 79, as other State legislatures have similarly done in several Municipal Acts, to adopt the valuation and assessment contained in the assessment list prepared in an earlier year provided, however, tint it prepares a fresh list once in every 4 years. But sub-section (2) of section 79 provides expressly that when such a previous list is adopted for a particular official year it can be done subject to the provisions of Secs. 75 and 76. In other words, an assessment list being for a particular official year even when an assessment list prepared in an earlier year is adopted it becomes the list for, such subsequent year subject to the procedure laid down in sections 75 and 76. The list so adopted has therefore to be published, has to invite objections and has to be authenticated in the manner prescribed by section 76 (6) after disposing of the objections if any and it is then only that it becomes conclusive evidence of the valuation and the tax assessed thereon for that particular official year.If it were otherwise, the annual letting value or the value estimated on a particular building or house would be static for 4 years during which the Corporation can go on adopting the assessment list prepared in an earlier year and the owner or the occupier of the building would be deprived of the right to object to the valuation or the annual betting value or the tax assessed thereon for at least 4 years even though the valuation or the annual letting value thereof may, have decreased for one reason, or the other. In order to prevent such a result the legislature has provided by sub-section (2) of section 79 that where a municipality adopts a previously prepared list for any subsequent year the provisions of sections 75 and 76 shall be applicable as if a new assessment list has been completed at the commencement of that particular official year.The word, "if" appearing in sub-section (2) of section 79 is obviously a mistake and must be read as "as if" because the word "if" standing by itself makes no sense at all. Section 79 therefore has to be construed to mean that though a Municipality need not prepare a fresh assessment list every year and need prepare such list once in every 4 years and can adopt an earlier assessment list such an adopted list becomes the assessment list for that particular year as if it was a new list and to which section" 75 and 76 apply9. The result of the foregoing discussion is that the appellant Corporation was entitled to adopt the assesment list prepared for the year 1952-53 for the two assessment years,4 and1954-55, under Sec. 79 and therefore that list became the assessment list for each of the 2 years in question. That fact however does not entitle the appellant Corporation to impose the house tax on the basis of the gross annual letting value as such imposition is inconsistent with section 78 under which the annual letting value would be the gross annual letting value less 10 per cent statutory allowanceCounsel however forgets that even on the footing that the resolution passed by the Indore Municipality to levy the tax at 7 per cent of the gross annual letting value and on the strength of which the list for 1952-53 was prepared was saved and was deemed to have been made under the 1954 Act it can be deemed to have been so made in so far as it is consistent with the provisions of the Act. Therefore, to the extent that it is inconsistent with Section 73 it is neither saved nor deemed to have been made under the Act and has to be adjusted in the light of the provisions of Section 73(2). It follows that the appellant-Corporation was not entitled to demand the tax assessed on the gross annual letting value. The High Court therefore was right in decreeing the suit and to order refund of the said excess amount against the appellant Corporation.