Naaz Theatre vs Municipal Corporation of Jullundur and Others

D.V. Sehgal, J.—The petitioner firm owns a cinema, known as "Naaz Theatre at Jullundur. The Municipal Corporation, Jullundur, respondent No. 1, issued a notice to it u/s 103 of the Punjab Municipal Corporation Act, 1976 (for short "the Act"), proposing enhancement of annual rental value of the theatre building from Rs. 78,542 to Rs. 88,178 for the year 1977-78. The petitioner filed objections in response to this notice. The same were, however, rejected and the executive officer of respondent No. 1, vide order dated March 30, 1978, annexure P-1, approved the proposal of enhancement of the annual rental value of the theatre building for the purpose of house tax for the year 1977-78 at Rs. 88,178. The petitioner felt aggrieved by the aforesaid order and filed an appeal, annexure P-2, with the Commissioner, Jullundur Division, Jullundur, respondent No. 3, which, however, failed and was dismissed, vide order dated October 23, 1978, annexure P-3. The contention of the petitioner that the fair rent of the property should be considered as the reasonable letting value thereof and the assessment made on its basis was rejected by respondent No. 3. The orders, annexures P-1 and P-3, have been challenged by the petitioner through the present writ petition and a prayer is made for quashing the same and for a writ of mandamus directing respondents Nos. 1 and 2 not to enforce the said orders or to recover tax in pursuance thereof.

The petition has been opposed by respondents Nos. 1 and 2 and a written statement on their behalf has been filed by respondent No. 2. It is contended therein that the rateable value under the Punjab Municipal Act prior to the constitution of the Municipal Corporation was assessed on the basis of a formula agreed to between the petitioner and the erstwhile Municipal Committee which has been reproduced in annexure P-3 and is to the following effect :

"The annual rateable value of the cinema hall be reckoned on the basis of occupied seats. For this purpose, the net collection of the tickets sold or net entertainment tax be viewed and the higher figure of the two will be taken as the basis for calculation of the deductions. It was agreed upon that on 1/4th of the collection/entertainment, a rebate of 65% be allowed to the air-cooled cinema for the rental value of the hall and other leases would be considered in addition separately for the total rateable value. 3/4ths of the collection/entertainment tax was granted as the average share of the distribution in the proceeds while 65% off was given for maintenance and upkeep of the cinema hall including any other service provided or liability."

The above mutually agreed formula was adopted to work out the rateable value for the purpose of assessment of house tax for the year 1977-78 also. The petitioners, therefore, were estopped from challenging the same. It was thus urged that the orders, annexures P-1 and P-3, should be held to be valid and in accordance with law.

I have heard learned counsel. The contention of the petitioners is that respondents Nos. 1 and 2 assessed the rateable value on the basis of the number of occupied seats in the cinema hall, net collection on the tickets sold and by giving deduction of expenses of air-cooling and other overhead expenses. Thus, the assessment has been made on the basis of daily income from the cinema of different shows, the number of seats in different classes in the cinema hall and the rates of admission to those classes. This could not be the criteria for determining the rateable value for assessment of house tax u/s 93 of the Act. In fact, Clause (b) of Section 93 of the Act provides, in no uncertain terms, that the rateable value of a building assessable to tax specified in Section 91, shall be the gross annual rent which such building, together with its appurtenances and any furniture that may be let for use or enjoyment therewith may reasonably be expected to let and according to a catena of judgments, such reasonable letting value is the fair rent of the building when it is governed by the provisions of the East Punjab Urban Rent Restriction Act, 1949.

I find force in this submission. The formula adopted by respondents Nos. 1 and 2 for working out the letting value of the cinema building on the basis of number of seats, their occupation and income derived therefrom, has been held to be ultra vires the provision of Section 3(i) of the Punjab Municipal Act by R.N. Mittal J. in Phul Theatre v. Municipal Committee [1981] LLR 417. It is by now well-settled that the provisions of Clause (b) of Section 93 of the Act are pari materia with those of Section 3(i) of the Punjab Municipal Act. Admittedly, the cinema building of the petitioner is situate within the limits of the Municipal Corporation, Jullundur, and is governed by the provisions of the East Punjab Urban Rent Restriction Act, 1949. To work out its reasonable letting value, it is incumbent on respondents Nos. 1 and 2 to assess its fair rent according to the provisions of Section 4 of the East Punjab Urban Rent Restriction Act and then proceed to assess the tax payable on the same in accordance with law.

The contention of the respondents that the petitioner had agreed to the formula of seats occupancy for working out rateable value of the building has no force. Assessment of reasonable letting value on the basis of such a formula would clearly be ultra vires the provisions of Section 93 of the Act. The petitioner cannot be estopped from pleading that the said formula is against the statutory provisions of law. In fact, there can be no estoppel against a statute. I, therefore, reject this contention.

Consequently, I allow this writ petition ; quash the orders exibits P-1 and P-3 passed by respondents Nos. 1 and 3 and direct respondents Nos. 1 and 2 to assess the rateable value of the cinema building of the petitioner in accordance with law and in the light of the observations made above. The parties are, however, left to bear their own costs.