Case: Bombay Municipal Corporation Vs. Life Insurance Corporation Of India, Bombay

1. This is an appeal from a judgment of the Bombay High Court in the matter of valuation of the premises belonging to the respondent made under the provisions of the Bombay Municipal Corporation Act 1888, hereinafter called "the Act of 1888."2. For the years 1957-58 and 1958-59 the rateable valuation of the building was fixed by the Municipal Corporation at Rs. 1,66,410. On April 1, 1958 an additional tax known as educational cess was imposed by the Municipal Corporation at the rate of 11/2 per cent of the rateable value on all properties within its limits. This was done under Section 140 of the Act of 1888. As the landlord became entitled to increase the rent recoverable from the tenant to the extent of the increase in the tax payable to the Corporation under the provisions of Section 10-AA ofthe Bombay Rents, Hotel and Lodging House Rates Control Act, 1947 (Act No. LVII of 1947) hereinafter called the Rent Act, the Assessor and Collector of the Corporation served a notice on the respondent proposing to increase the rateable value of the building in question to Rs. 1,68,585. The respondent objected to the above increase. The Assessor and the Collector, however, raised the rateable value of Rs.1,66,180. The amount thus fixed was at a lesser figure than the one for the year 1958-59 but that was by reason of certain other deductions which had been claimed by the respondent and which were allowed. The claim of the respondent for non-inclusion of the amount of educational cess in the rent was disallowed. The matter was taken in appeal to the court of Small Causes at Bombay which was dismissed. The respondent preferred an appeal to the High Court. The High Court held that the rateable value could be fixed only on the basis of the standard rent provided by the Rent Act and the amount of permitted increases could not be included in rent for the purposes of valuation. It was not disputed by the respondent before the High Court that the rents of the tenants had been increased by it to the extent of the educational cess but the contention that was put forward and which prevailed was that the same was not being recovered as a part of the rent.

Court's reasoning:
It is quite clear that Sec. 7 does not prohibit the recovery of the increase to which landlord may be entitled under the provisions of the Act in addition to the standard rent.The obvious implication of the definition of "permitted increase" in Section 5 (7) is that such an increase becomes a part of the rent.The language which has been employed in Sections 9, 10 and 10-AA seems to indicate that the Legislature treated the permitted increase as a part of the rent which the landlord would be entitled to receive from the tenant.In Corpn. of Calcutta v. Smt. Padma Devi, 1962-3 SCR 49  = (AIR 1962 SC 151 ) the question arose whether the Municipal Corporation had the power to fix the annual valuation on a figure higher than the standard rent. It was held that on a reading of the provisions of Section 127 (a) of the Calcutta Municipal Act 1923 the rental value could not be fixed higher than the standard rent under the Rent Control Act. It was further held that the words "gross annual rent at which the land or buildings might at the time of assessment reasonably be expected to let from year to year" in Section 127 (a) implied that the rent which the landlord might realize if the house was let was the basis for fixing the annual valuation of the buildings. Thus the criterion was the rent realizable by the landlord and not the valuation of the holding in the hands of the tenant.Even applying that criterion the rent realizable, in the present case, would be the standard rent together with the permitted increase on account of the levy of educational cess.As observed in Patel Gordhandas Hargovindas v. Municipal Commr., Ahmedabad, 1964-2 SCR 608  = (AIR 1963 SC 1742 ) there are three modes of determining the annual or rateable value of lands or buildings. The first is the actual rent fetched by the land or buildings where it is actually let. The second is rent based on hypothetical tenancy where it is not let and the third is by valuation based on capital value from which the annual value has to be found by applying a suitable percentage, where either of the first two modes is not available.In the present case admittedly the actual rent of the building in question which is being fetched comprises the standard rent and the permitted increase. The building can well be said to be reasonably expected to be let from year to year at the figure arrived at by adding the permitted increase to the standard rent. The valuation had, therefore, to be arrived at after taking into account the amount of educational cess which was levied by the Corporation. Even if such a conclusion leads to some kind of inconvenience of variation in valuation at frequent intervals that can be no consideration for not giving full effect and meaning to the provisions of the Act of 1888 and the Rent Act under consideration.