Case: New Manek Chowk Spinning And Weavingmills Co. Ltd. And O Vs. Municipal Corporation Of The City Ofahmedabad And Ors

1. This is a group of Writ Petitions under Art. 32 of the Constitution challenging the validity of the assessment book relating to Special Property section prepared and published by the Municipal Corporation of the City of Ahmedabad by which the Municipality seeks to impose or has imposed property tax on properties described as Special Properties like textile mills, factories, buildings of the universities etc., on the basis of a flat rate per 100 sq. ft. of the floor area of the property situate within the municipal limits of the city. In Writ Petitions Nos. 133, 156-157 159-171, 178, 184 and 234 of 1966. the challenge relates to the validity of the assessment book relating to the year 1966-67: in Writ Petitions Nos. 206 and 210 of 1966. the challenge relates to the years 1964-65 and 1965-66 while in W. Ps. Nos. 207, 208 and 209 of 1966 the challenge relates only to the year 1965-66. The difference lies in this. So far as the assessments for the year 1966-67 and concerned. there has been no authentication of the assessment book after the disposal of all complaints relating to the entries made in the book while the challenge relating to the years l964-65 and 1965-66 is made at a statue after such authentication and in respect of which attachments of property belonging to the assessees have already been levied. in W. P. No. 234 of 1966 filed in October 1966, the issue of a distress warrant and the levy of attachment are also challenged. Several textile mills in the city of Ahmedabad are before this Court in these petitions and they have a common complaint against the assessments3. TheWrit Petition of which the papers were placed in detail before the Court is No. l33 of 1966 preferred by the New Manek Chowk Spinning and Weaving Mills Ltd. The respondents are: (l) the Municipal Corporation of the City of Ahmedabad, (2) the Deputy Municipal Commissioner of the same city and (3) the State of Gujarat. The challenge in this case relates to the validity of the assessment book for the year l966-67. The complaint is that respondent No. 1 by the said book imposed property tax on the petitioner on the basis of a flat rate per 100 sq. ft. of the floor area of the petitioners property as also of all other textile mills, factories, university buildings. etc., under R. 9 of the Taxation Rules. Annexure A to the petition gives a synopsis of the entries relating to the year of assessment 1966-67. It is divided into three parts, the first being headed buildings, the second additional land and the third machinery. So far as buildings are concerned, there are three columns, the first being the area of the building in square feet, the second monthly rental per 100 sq. ft. and the third the annual rental. The building is again divided into two classes, one for processing and the other non-processing. The monthly rental for the processing part of the building is taken at Rs. 6-10-0 per 100 sq. ft. while that for the non-processing portion is Rs. 5-4-0 per 100 sq. ft. With regard to the additional land, the valuation is on the basis of the market rate per sq. ft. of land and as regards machinery the valuation is taken to be effective value of which the annual rental at 71/2per cent, is taken as the annual value.The petitioners complaint is that while under the provisions of the Act and the rules made thereunder it was clear that the rateable value of the property must be arrived at after determining the rack rent or the annual rental value in respect of each premises which is to be computed on the basis of the annual rent for which the property might reasonably be expected to let from year to year, the municipal corporation of Ahmedabad had adopted the method of determining the annual rent on a flat rate method according to the floor area, irrespective of the locality, quality, age and nature of the property which was not a recognised method and was not permissible in law. According to the petition, a formula on the flat rate method of a fixed amount per 100 sq. ft. for arriving at the rental was not only against the express provisions of the Act but was also against the recognised concepts of valuation in the Law of Rating. The method adopted by respondent No. 1 in this case was arbitrary and repugnant to the petitioners right guaranteed under Art. 14 of the Constitution. It was said that the buildings of the textile mills were situate in different localities some of which were in the heart of the city and some on its out-skirts. There was no uniformity in the floor area of the mills concerned nor was the age of the buildings in all cases the same. It was further complained that buildings in respect of the properties covered by the special property section included textile mills taxed on the fixed rate method whereas buildings other than those of textile mills were taxed on the basis of annual rent for which such premises were reasonably expected to let from year to year. A further complaint was made that respondent No. 1 had assessed the property tax apart from buildings and lands on the plant and machinery of the petitioner. It was submitted that the imposition of property tax on plant and machinery was beyond the legislative competence of the State. Sub-r. (3) of R. 7 was challenged as giving the Commissioner arbitrary and unguided power to set out the classes of plant and machinery and to describe what plant and machinery fell within each such class for the purpose of assessment of property tax. Moreover, such classification by the Commissioner was made final and binding and no right was given to any person affected thereby to object to the same nor was any right of appeal against such decision of the Commissioner provided. A complaint was also made that respondent No. 1 had not prepared any ward assessment books for the year 1966-67. It is the petitioners case that the figures in the assessment book for the year 1966-67 were adopted from those of the previous year 1965-66, under R. 21 of the Taxation Rules. It was submitted that such adoption was invalid and improper inasmuch as the assessment books for the previous years were bad in low. The assessment books for the previous years were also bad in law inasmuch as the same were authenticated under R. 19 by the Deputy Municipal Commissioner and not by the Commissioner as contemplated in the said rule. The complaints were not considered by the Municipal Commissioner himself. It was said that the action of the Deputy Municipal Commissioner under a purported delegation of power by order dated November 20, 1964 was invalid as a quasi judicial function could not be delegated. In this connection, reference was made to S. 49 (1) of the Act. It was further contended that even in the Year 1966-67 the power of conducting proceedings under Rr. 13, 15, 16, 17, 18 and 19 of the Taxation Rules had been deputed by the Municipal Commissioner in favour of the Deputy Municipal Commissioner and as such, such deputation was bad in law. Finally, the petition proceeded on the basis that the imposition of property tax on the flat rate method on textile mills as under the special property section was ultra vires the Act and the rules made therein and was violative of the fundamental rights of the petitioner guaranteed under Arts. 14, 31 (1) and 19 of the Constitution and the procedure adopted in preparing the assessment book was ultra vires the procedure laid down by the Act and the rules. The grounds of challenge are formulated in paragraph 35 of the petition. Among the prayers are a writ of mandamus or any similar write directing respondent No. l to forbear from taking any steps for to imposition and realisation of the property tax pursuant to the preparation of the assessment book for the year 1966-67 relating, to the Special Property section, a writ of certiorari or other similar writ to quash the assessment book for the said year; a writ of prohibition or other order restraining respondent No. 2, the Deputy Municipal Commissioner from acting under deputation under S. 49 (1) and other reliefs4. Thepoints raised in the counter affidavit are as follows:-(1) the tax being based on the amount of rent for which the property is or may be let from year to year, such rent has got to be ascertained from either the actual or the hypothetical rent for which the property along with all the equipment like plant and machinery and amenities that it contains, is or may be let and such annual rent where the property is let as a factory equipped as a factory would be the rent that it would fetch as a factory and not as a bare building. (2) R. 7 (2) only gives power to the Corporation to include such plant and machinery as it may determine from time to time taking into consideration various factors like the situation of the city, its facilities for transport to other parts of the State and the country, whether the industry is well established or is just being developed etc. (3) Although under R. 9 (b) the amount of the rateable value of the property in the previous year is to be entered, it is open to the Corporation to take any fresh circumstances into consideration before adopting the entry from the earlier year. Entry in col. (b) is neither the imposition of the tax nor the final amount on the basis whereof the tax is leviable. It is in the nature of a proposal by the Corporation and is subject to objection by the assessee and the tax becomes leviable after the objections have been disposed of and the amount is entered in column (e). (4) After the tax has become leviable under the Rules, the assessee is entitled, if he so desires, to file an appeal under S. 406 against either the rateable value or the tax fixed or charged under the Act. The Court of Small Causes can hear and determine the appeal. Under S. 410 there is a provision for a reference to the District Court and S. 411 provides for an appeal to it. The High Court would have the power of revision of the order of the District Judge. (5) The fixing of the rateable value on floor area basis is in accordance with the accepted principles and methods in the Law of Rating. In various cities it is common to let out premises on the basis of the floor area. The computation of rateable value by this means depends on the estimate of the annual rent at which the property may be reasonably expected to let from year to year. The situation of the building, the age of the building, the material used for the building are not relevant for, if the mill containing all plant and machinery and other equipment is let, it is let as a factory for carrying on a business of manufacture of textiles. The grievance of the petitioner is open to redress under S. 406 and the other sections mentioned. (6) It is not incumbent on respondent No. 1 to maintain any ward assessment books, and (7) under S. 49 (1) the power to dispose of complaints against the fixing of rateable value was duly deputed to the Deputy Commissioner and there was nothing illegal about it.

Court's reasoning:
There is nothing in the counter affidavit to show that conditions in the City of Ahmedabad with regard to textile mills are such as would make the method laid down at p. 164 of Faradays book applicable. The affidavit does not purport to show that the factories were constructed at or about the same time or in groups or were so similar in their operation that their rental value could be determined at per foot super of floor area applying the contractors basis. There is nothing to show that any textile factory was valued on the contractors basis and that from the figures of valuation so worked out, the rental value per foot super of floor area was determined. On the other hand, the affidavit suggests that because in various cities it was common to let out premises on the basis of floor area, the municipal authorities of Ahmedabad had resorted to this method for fixing the rateable valueWe can take judicial notice of the fact that sometimes godowns or buildings constructed for office purposes are let out on the basis of floor area, but even then, the rate would vary according to the nature of the building and according to the site of the building in the city. It would also depend upon the age of the building and the amenities provided therein. It would be impossible to say that in the City of Ahmedabad a tenant would be willing to pay at the same rate of read for factory accommodation, no matter where the building was situate or when it was put up or how it was constructedWe are, therefore, not satisfied that conditions prerequisite for determination of annual value of textile factories in Ahmedabad on the basis of rental value per foot super of floor area existed at the relevant time nor has it been shown to us that the so-called contractors basis was adopted by the municipal authorities of Ahmedabad. The method is not also one which is generally recognised by authorities on rating. Applied indiscriminately-as it appears to have been done in this case-it is sure to give rise to inequalities as there has been no classification of the factories on any rational basis. Further, there does not seem to be any basis for dividing the factories and the buildings thereof under two general classes as buildings used for processing and buildings for non-processing purposes. What was said by this Court in Lokmanya Mills case, 1962-1 SCR 306  =(AIR 1961 SC 1358  ) (Supra) applies with equal force to what has been done here and we must hold that the municipality did not observe the law and failed in its duty to determine the rateable value of each building and land comprised in each of the textile factories in terms of R. 9 (b) of the rules under the Bombay Provincial Municipal Corporations Act, 1949 so far as the assessment book for the year 1966-67 is concernedIt, therefore, appears to us that R. 7 (2) of the rules framed under the Bombay Act of 1949 was beyond the legislative competence of the State. The rule also suffers from another defect. namely, that it does not lay down any principle on which machinery is to be specified by public notice by the Commissioner to be deemed to form part of such building for the purpose of fixing the rateable value, to this, Mr. Setalvad argued that if the building was equipped with machinery for the purpose of running a textile mill, whatever machinery was there for the purpose would be valued. According to him the question would be which of the machinery would help in the enjoyment of the property and thereby add to its rateable value. Unfortunately, the specification of the classes is done from time to time by the Commissioner with the approval of the Corporation irrespective of the question as to where they are to be found.It, therefore, depends on the arbitrary will of the Commissioner as to what machinery he would specify and what he would not Moreover, he is the only person who can examine this question. There is no right of appeal from any specification made under sub-r. (3) of R. 7 except that the Commissioner is to act under the directions of the Standing Committee. Rule 7 (2) shows the all plant and. machinery may not be taken into account for the purpose of valuation and any such plant or machinery which is not included in the classification may escape rateability, however, much they may be prized by the tenant who takes the premises on rent. It seems to us, therefore, that R. 7 (2) is beyond the legislative competence of the State Legislature and sub-r. (3) of R. 7 is also invalid on account of excessive delegation of powers by the LegislatureIn view of the above, it is not necessary to go into the question as to whether the Deputy Municipal Commissioner could exercise quasi judicial powers of the Commissioner as regards the determination of the rateable value under S. 49 (I) of the Act and we express no opinion thereon.