Case: Spencer &amp; Co Vs. State Of Mysore &amp; Others

5. The appellant company are the proprietors of the West End Hotel. Race Course Road. Bangalore. The premises of the hotel comprises a total extent of 1943 acres or 11,19,168 sq. ft. out of which the building area is 1,05.683 sq. ft. The entire vacant land, excluding the built area and appurtenant thereof is being made use of for the beneficial enjoyment of the building in the area as garden and lawns. Pursuant to the powers conferred upon the Municipal Corporation of Bangalore under the Corporation Act, as amended by the 1964 Act. to levy tax on the basis of estimated market value of land a notice was issued to the appellant on March 30 1966 demanding a sum of Rs. 35,717.20 as tax on vacant land. It was stated in the notice that the vacant land, over and above the limit, measuring 89,293 sq. yds. is assessed at 0.4% of the market value plus Education Cess, plus Health Cess with effect from April 1, 1965. Property tax was also demanded on the building of the hotel but no question arises in this case as to its validity. The High Court expressly stated that they were excluding from consideration in this case all contentions of the appellant relating to property tax on buildings, and the appellant was left to pursue his normal remedies under the Corporation Act regarding the property tax on buildings6. Objections were filed on behalf of the appellant before the Commissioner. The appellant also filed a writ petition under Article 226 of the Constitution challenging Section 99 (2) (b) of the Corporation Act, as amended by the 1964 Act, as unconstitutional and void, and prayed for other consequential reliefs.

Court's reasoning:
13. We are unable to hold that the impugned Act is discriminatory. The scheme of the Act is that the market value of the land is first ascertained and then tax at 0.4 per cant is levied. Under sub-section (3) of Section 99 the Commissioner has to determine the market value of the land and sub-section (3) of Section 101 gives guidance as to how to determine the market value of the land. It was urged by the learned counsel that the expression "estimated value" and the word "area" are very vague. We are unable to agree with him in this respect. In the context of determining the market value of the land, which has a well-known connotation the Commissioner is directed to look at the lands in the area of the land which is being assessed. In the context he can only look at the lands which are similarly situate, and are similar in nature to the lands being assessed and the area must mean the locality in which the land being assessed is situate and the extent of the locality would be determined by the well-known characteristics such as commercial area, residential area or factory area, etc. In other words the sub-section is drawing the attention of the Commissioner to the well-known principle, which is followed in assessing the market value, that lands similarly situate and of similar potentiality should be taken as examplesWe are unable to see how this is discriminatory. This Court has held that the State legislatures have power to levy property tax by assessing the market value of it and levying a percentage on it. If all lands are assessed to the same rate of taxation we are unable to see how there is per se any discrimination. The facts in (1961) 3 SCR 77  = (AIR 1961 SC 552 ) were quite different. There no attention was paid at all to the income of the land. Here it is true that income of the land is not taken into consideration and instead market value is the basis of taxation. But market value of land always bears a definite relationship to the actual or potential income being derived or derivable from the land and there cannot be any objection to a levy at uniform rate on the market value15. Reference was made to the decision of this Court on State of Kerala v. Haji K. Kutty. (1969) 1 SCR 645  = (AIR 1969 SC 378 ). There the facts were again quite different. The legislature adopted the floor-area of the building as the basis of tax irrespective of all other considerations. The market value of the property stands on a different footing because, like income, the market value of property is one of the indices of the benefit which the owner derives or can derive from it and the very concept of market value takes into account the present or the potential Income and other relevant considerations16. It was next contended that the classification of vacant land is discriminatory. While land appurtenant to a building used as garden and as grounds for the more beneficial enjoyment of such building, not exceeding thrice the area occupied by such building, has been treated as a part of the building and taxed as such, land in excess of thrice the area of a building and other lands not appurtenant to buildings have been classified separately. The learned counsel said that the distinction is artificial as the land in excess, of thrice the area of a building is also being used for the same beneficial enjoyment of the building. It seems to us that in cities like Bangalore, where land is scarce. excessive use of land as gardens and grounds is not in the public interest and the legislature can validly tax the excess land on a different and higher basis. It may in a particular case cause hardship but the legislature cannot be denied the right to classify the lands in such a manner. Three times the area occupied by a building is not a small area and we are unable to hold that this figure is not reasonable17. It was said that the Act did not give any indication as to which land would be treated as surplus but in our view it is not necessary to specify the lands because the idea is to tax the excess land being used for a particular building and as this land would be located in a block it was not necessary to specify the land18. The last point urged before us was that this was a new tax and the procedure prescribed in Section 98 should have been followed. We are unable to hold that it is a new tax. Tax was being levied before the 1964 Act. The lands were being assessed to property tax even before the 1964, Act, either separately or as part of the building. We cannot say that this tax is being imposed for the first time within the meaning of Section 98.