Burn and Co. Ltd. vs Municipal Commissioners of Howrah Municipality.

Banerjee, J.—The Appellant, Burn and Co. Ltd., is the owner of premises Nos. 20. 21 and 22, Nityadhan Mukherjee Road, within the limits of Howrah Municipality.

At the quinquennial general revision of assessment, to take effect from the third quarter 1954-55, the Respondent Municipality assessed the Appellant''s aforesaid premises at an annual value of Rs. 5,162,007. The re-assessment increased the annual value by Rs. 1,35,712 over the previous valuation.

On objection by the Appellant, the Additional Administrator of the Municipality reduced the valuation from Rs. 5,62,007 to Rs. 4,89,631.

Dissatisfied with the order, the Assessee Appellant preferred an appeal to the Subordinate Judge of Howrah, u/s 141 of the Calcutta Municipal Act, 1923, as extended to the Municipality of Howrah (hereinafter referred to as "The Act").

In its petition of appeal the Assessee Appellant took a number of objections but at the hearing urged two, out of the same, for consideration, namely,

(a) Was the method of assessment adopted by the Municipality a wrong one?

(6) Was the depreciation allowed by the Municipality inadequate, improper and illegal ?

The re-assessment of the annual value was made under the provision of Section 127(6) of the Act. The learned Subordinate Judge answered the first point in the negative. The learned Advocate for the Appellant conceded before us that the point was correctly decided.

So far as the other point is concerned, the learned Subordinate Judge decided the same also against the Assessee Appellant. The Assessee Appellant feels aggrieved by this part of the decision and the scope of the present appeal is limited to this point only.

In order to understand the objection of the Appellant in this respect, it is necessary for us to refer to the material portion of Section 127(6) of the Act, which we set out below:

Section 127(6):

The annual value of any building not erected for letting purposes and not ordinarily let shall be deemed to be five per cent. on the sum obtained by adding the estimated present cost of erecting the building, less a reasonable amount to be deducted on account of depreciation (if any), to the estimated present value of the land valued with the building as part of the same premises.

The scheme of assessment under the aforementioned Sub-section is to estimate, the present value of the land of the premises under assessment and to add thereto the estimated present cost of erecting the building, less a reasonable amount to be subtracted on account of depreciation. Five per cent, of the sum total is to be taken as the annual value for the purposes of the aforesaid Sub-section.

In plain English depreciation means the falling of value. This falling of value of a building may be either due to its ago or due to wear and tear caused by user or due to ravages of nature. Nothing is eternal in this world of ours. Buildings, however, solidly constructed, have only a limited expectation of life. The older the building, the lesser its expectation of life.

The larger the wear and tear or the ravishment by nature, the shorter its expected existence.

What was contended in the court below, on behalf of the Appellant, was not that no depreciation had been allowed in the instant case but that what was allowed was not fit and proper, inasmuch as the factor of obsolescence had not been taken into consideration by the Municipality. This argument has more cleverness than substance in it. The learned Subordinate Judge added colouring material to the cleverness, when he understood "obsolescence" to mean "decrease in the functional value of the "building on account of the changing utility condition "due to two factors, namely, internal and external". The learned Subordinate Judge thought that he had the authority of American text books (not referred to in the judgment) behind his understanding of the meaning of the word "obsolescence" The learned Subordinate Judge, although himself convinced that, obsolescence was a factor in the decrease of the value of the buildings, did not allow any such allowance because he was of the opinion that there was no provision in the Act so to do.

In our opinion, the use of the word "obsolescence" as part of the argument was not very helpful in the present context.

The learned Counsel for the Assessee Appellant attempted to. salvage the argument by contending before us that the idea of obsolescence allowance was inherent in the reasonable depreciation to be allowed u/s 127(6) of the Act. It was contended that the premises under assessment was mostly being used for the purpose of a factory, working heavy machine. Such user: presaged quick deterioration of the buildings, considerably diminished their nature expectancy of useful life and was likely sooner to make them obsolete for use as factory premises. It was further contended that factories are liable to be modernised. The likelihood of such modernisation, it was contended, was all the more greater in the present age of industrial and Scientific revolution. In the process of such modernisation old types of factory buildings may become obsolete and new type of'' structures need be constructed to meet new needs. Old structures, which would have otherwise stood the normal duration of life, Tan the peril of earlier demolition or renovation to meet modern needs. From the industrial point of view, it was contended, this was no luxury but a necessity because no industry can survive unless it keeps pace with modern times. It was, therefore, contended that in calculating the percentage of reasonable depreciation the Respondent Municipality should have taken into consideration the above perils to which the buildings were exposed.

We are hot inclined to accept this argument in its totality. The depreciation contemplated in Section 127(6) of the Act is the state of depreciation existing at the date of the assessment. This appears to be so from the language of the Sub-section, namely, "depreciation (if any)" meaning depreciation, if any, existing at the time of the assessment patent or latent.

In calculating what depreciation should be allowed, it may be reasonable to take into consideration the deleterious user to which the premises were being put. The life of a building subjected to a safer user is in all likelihood to be more than the value of a building subjected to dangerous or hurtful user. Since the object of giving depreciation allowance is to devalue the present cost of construction so as to equate the present cost of construction to the reasonable present value of the building, under assessment, and since the expectation of the life of a building is a factor in arriving at its value and since the life of a building, to an extent, depends on the nature of its user, beneficent or hurtful, the user of the building may become a relevant consideration in calculating the reasonable depreciation to be allowed in a particular case.

But the peril of an existing building becoming obsolete, on account of the need for reorientation of the structure to meet needs of the future, is a futurism which should better be ignored in the matter of calculating depreciation allowance, u/s 127(6) of the Act. This consideration is so problematic and so uncertain that it may be impossible to reduce the same in figures of percentage. Nobody knows how soon such need may arise and what may be the changes, necessary to be made, to the existing structures, because of that.

The judgment of the learned Subordinate Judge suffers from this infirmity that he proceeded on theories instead of deciding the case on the evidence on record, concerning depreciation.

That is so because the argument advanced before him was in nature more theoretical than practical or factual. Because of that infirmity we set aside the judgment of the court below. We remand the case to the learned Subordinate Judge to rehear the matter on the evidence on the record, bearing in mind the observations made in this judgment.

Costs of this hearing will1 abide the final result.

Hearing fee is assessed at five gold mohurs.

Niyogi, J.

I agree.