Union of India (UOI) vs Corporation of Calcutta

Mookerjee, J.—Premises No. 4, Dum Dum Road, was assessed by the Corporation of Calcutta under Clause (b) of Section 127 of the Calcutta Municipal Act, 1923, with effect from the first quarter of 1938-39. Objections were raised on behalf of the Central Government, as the owner of the property, and ultimately this Court decided in 1947 in Governor-General of India v. Corporation of Calcutta ILR [1948] 1 Cal. 63 that these premises should be assessed under of (a) of Section 127 of the said Act. Although the period for which the assessment had been made which was the subject-matter of the appeal to this Court had expired in 1944, a notice was issued by the Corporation on July 6, 1948, purporting to be one under i. 136 of the Act on the Assessee to submit a return. The return was submitted (Ex. 1) on January 3, 1949.

The premises in question cover a large area and include 43 different units of quarters. They have been classified by the Union of India into different classes of quarters dependent upon the rent which is payable by the officers or other occupiers who are allowed to reside therein. One of the structures is a hostel wherein are included a number of smaller units of quarters. In addition to the above, there are one club house, playgrounds and certain other open areas which are used by the occupants jointly. The quarters are let out mainly to the employees of the Gun and shell Factory, an undertaking run by the Union of India. The occupants are charged at 10 per cent, of their pay or the standard rent, whichever is lower. The occupiers are not required to pay any share of the municipal rates for the premises. The Government pays both the owner''s as also the occupier''s shares of taxes.

In the return (Ex. 1), it was claimed on behalf of the Central Government that taking the standard rent fixed for each of the quarters, being the maximum amount leviable for the quarters, and a lump sum of Rs. 500 per month as the rent of the club house, playground, etc., the total annual rent was Rs. 65,400.

On behalf of the Assessee Government it was claimed that deductions therefrom should be made of "the usual three 10 per "cents." for arriving at the taxable annual value.

From the certified copy of the inspection book maintained by the Assessment Department of the Corporation (Ex. B) it appears that the department proposed a 50 per cent, increase of the standard rent as charged by the Central Government to be "the "gross annual value at which the building may at the time of "the assessment reasonably be expected to let from year to year," as u/s 127(a) of the Calcutta Municipal Act. The rental for the club house, playground and open spaces, etc., was accepted at the same rate as proposed on behalf of the Assessee. From the gross amount a deduction of two 10 per cents, was proposed by the Assessor of the Corporation. Notice was, thereupon, issued of the new assessment as proposed. Objections were filed and the Deputy Executive Officer reduced Rs. 7,925, as proposed by the department to be the gross annual rental, to Rs. 6,500. From that amount deductions of two 10 per cents. were allowed. Against the decision of the Deputy Executive Officer, an appeal was taken on behalf of the Assessee u/s 141 of the Calcutta Municipal Act. The only substantial point raised in the appeal was that in determining the net annual value under Clause (a) of Section 127 of the Calcutta Municipal Act, the Corporation ought to allow a deduction of three 10 per cents, from the gross amount of rent determined. The learned Judge has overruled this objection and affirmed the valuation as fixed by the Deputy Executive Officer.

The only point for consideration in these two appeals is whether the Assessee is entitled to a further deduction of 10 per cent., or any other deduction, from the annual rental over and above what has been allowed by the Deputy Executive Officer.

In Clause (a) of Section 127 of the Act the Corporation has to determine-

the gross annual rent at which the land or building might at the time of assessment reasonably be expected to let from year to year.

From the gross amount so determined the Assessee is entitled to a statutory-

allowance of ten per cent, for the cost of repairs and for all other expenses accessory to maintain the building in a state to command such gross rent.

An Assessee is thus entitled to an allowance of 10 per cent. under the statutory provisions to cover cost of repairs, etc. No evidence was adduced in the present case to explain why the second ten per cent, deduction had been allowed by the Corporation. It is explained before us, both on behalf of the Corporation as also the Assessee, that a second ten per cent allowance is allowed by the Corporation when it is shown that the occupier''s share of taxes is paid by the owner and not by the occupier. A moiety share of the rates for a premises being the owner''s share is payable by the owner and the other moiety share is ordinarily payable by the occupier. On the basis of the agreed statement of facts as aforesaid we accept the same and proceed on that footing.

On behalf of the Assessee, it is claimed that as the premises in question consist of a large number of tenements occupied by different tenants, a third 10 per cent, should be allowed as a further allowance from the gross annual rent and that for the purpose of meeting the possible contingency of vacancies of particular tenement or tenements.

In the first place, reliance has been placed on certain provisions contained in the Assessment Manual, issued by the Corporation. A copy of the Assessment and Collection Manual published in 1917 was placed before us. Article 71 which relates to huts provides that if a premises contains a large number of huts deduction from the gross annual rent is to be allowed to provide for eventual vacancies of some of the huts. u/s 2(7) of the Calcutta Municipal Act a "building'' includes a hut. On the strength of this entry in the Manual, it is contended that the Corporation has been allowing the same allowance in the case of all kinds of buildings. A ten per cent, deduction is generally allowed by the Corporation if the premises contain a large number of separate tenement''s occupied by different tenants.

To prove that the Corporation generally allows three ten per cent, deductions from the gross annual rental, copies of orders issued by the Corporation in respect of different premises were filed, Exs. 3 to 3(c).

As already stated, the Corporation of Calcutta chose not to adduce any evidence. No attempt was made by the Corporation to explain under what circumstances deductions of three 10 per cents, had been allowed in the case of the premises referred to in Ex. 3 series. On the evidence, therefore, all that we can find is that, in the case of certain premises, the Corporation had allowed three 10 per cent, deductions without any materials to explain the circumstances under which such deductions had been allowed.

On behalf of the Union of India, reliance is placed on the provisions contained in the Assessment and Collection Manual as indicating the general practice followed. We may, however, point out immediately that no materials were placed before us to show to what extent the directions contained in the Manual were made under the statutory rule-making powers under the Act. Moreover, the Manual placed before us was of 1917 and the Calcutta Municipal Act which we have to interpret was passed in 1923. An attempt which had been made on a previous occasion to use the rules contained in the Manual was repelled by this Court in the Corporation of Calcutta v. Mati Chand Chaudhuri ILR (1936) Cal. 1215 and it was held that the rules contained in the Manual had not the force of law and might be ignored, if they were inconsistent with the provisions of that Act.

It is, however, contended on behalf of the Appellant that though the rules in the Manual have no statutory force yet they show unmistakably the practice and procedure which the Executive is called upon to follow. Uniformity in practice is not only expected from the Corporation, but all the rate-payers should be treated in the same manner as no differential treatment should be meted out to any particular Assessee.

In Durham County Council v. Tan field, Overseers [1923] 2 K.B. 333, an Assessment Committee acting in accordance with a practice which had always existed in the Union, assessed certain collieries by ascertaining their net annual value upon the basis of the actual output of coal during the previous 12 months. Owing to a strike, there had been no output of coal during four of the previous twelve months. The County Council for the purposes of the County rate basis and of the rate made thereon, refused to follow the prevailing practice and assessed the collieries at a larger sum. On appeal against the County rate basis, the Quarter Sessions held that the practice of taking the actual output for the previous 12 months should have been followed, but on an appeal the case was remitted to the Quarter Sessions for ascertaining the true assessable value of the collieries. It was held that there was no obligation of law requiring that the existing practice should be followed, the only question being what in fact and law was the true assessable value of the collieries-the test was what would a tenant give in the coming year.

Lord Hewart C.J. observed that there is no law which requires that a practice, however convenient it may be and however fairly it may work out over a period of years, must be observed. The question is, apart altogether from any suggestion, that there is a sanction of law behind that practice-what, in fact, was the true assessable value in that case?

We have, therefore, to ascertain in the present case whether in determining the annual value under Clause (a) of Section 127 of the Calcutta Municipal Act, it is incumbent on the part of the Corporation authorities to take into consideration the circumstance that a particular holding consists of a number of smaller tenements, let out to different tenants, with the possibility of some one or more of these tenements remaining vacant for some period or other during a year.

What is required to be determined under Clause (a) of Section 127 of the Calcutta Municipal Act is the gross annual rent at which the entire premises may be reasonably expected to let out from year to year, an allowance of 10 per cent, being allowed for the cost of repairs, etc. In determining what reasonable rent may be expected for the entire premises, if let out to one person, may or may not be the aggregate rent of what each one of the tenements taken separately yields per month. In particular cases, no doubt, the aggregate amount of rent reasonably expected from each one of the tenements may be the rent for the entire premises also.

No doubt, in Clause (a) of Section 127 of the Calcutta Municipal Act no reference is made to anticipated vacancy of the premises being required to be taken into consideration and that is due to the provisions contained in Sections 151 and 152 of the same Act. A rate payer is entitled to a refund of the occupier''s share of the consolidated rate if for a period of 60 consecutive days or more the premises had not been occupied and proper notice of that fact had been delivered to the Corporation under the relevant provisions. The condition precedent to a refund or remission u/s 152 or Section 151 of the Act may be due only if the entire premises remain vacant and not otherwise. If a portion of the premises remains vacant the rate-payer is not, under the provisions of the Calcutta Municipal Act, 1923, entitled to any consideration.

It is only in the case of a bustee that u/s 132 of the Calcutta Municipal Act, the Corporation is bound to cause the land contained within the bustee and of the huts standing on it to be valued separately for purposes of levying the consolidated rate. In the case of other properties, however, subdivision of a particular premises may be allowed only if certain conditions are satisfied, each one of the separate portions being either owned by different co-owners as in Section 133 of the Act or if each one of the portions be physically separated from the rest.

A premises like the one which is now before us for determination of rates cannot be assessed except as one unit; there has been no subdivision and as a matter of fact some portions of the premises being the playground, club house, etc., are available for the common use of all the occupiers.

In England, however, a heriditament which is capable of being separately let out may be separately rated. Mersey Docks and Harbour Board v. Overseers of Birkenhead (1873) 8 Q.B. 445. Even flats in the modern acceptation of the term are separately ratable. The Queen v. St. George''s Union (1871) 7 Q.B. 90, St. Marylebone Assessment Committee v. Consolidated London Properties Limited [1914] A.C. 870.

In view of the special provisions under the English law, which are different from those as under the Calcutta Municipal Act, all that we are required to find out is whether the Calcutta Corporation, while fixing the annual value of an entire premises, consisting of a large number of tenements, should take into consideration the fact that if one person had taken the entire premises as a tenant, could it reasonably be expected that he would pay the gross rental per month which the different tenants of the tenements might in their totality have paid. The fact that the Assessee will not be entitled to any remission for vacancy, although there is a reasonable likelihood of such vacancies, is a factor which cannot be overlooked altogether. What the authorities are required to do is to determine the annual rent at which the entire premises may be reasonably expected to let year to year. The fact that some portions of the premises ordinarily remain vacant is a consideration which cannot be overlooked in determining the gross annual rent which a tenant would give from year to year for the entire premises.

As observed already, the Corporation had not adduced any evidence in the present case. The Assessee had produced before the Court a statement in support of the fact that some tenement or other, being part of the premises 4, Dum Dum Road, had remained vacant during a period of about 10 years. There was no suggestion even questioning the accuracy of the statements. This gives the Court an idea as to what the gross annual rent which may be reasonably expected for the entire premises from year to year for determining the annual value for fixing the rates.

On behalf of the Assessee it is claimed that an allowance of 10 per cent, from out of the gross annual rent expected from all the different tenements added together should be allowed on this account before the fair annual rent as may be reasonably expected is ascertained. We do not think that whenever an Assessee proves within a certain premises that there are many tenements let out to different tenants that a deduction of 10 per cent, from the gross rental of the totality of the rent payable by the tenants of all the tenements taken together can be claimed. Each case must be considered on its own facts-how many separate tenements there are within the premises, the average gross rental for the entire premises which may be expected after allowing probable vacancies from the past experience, if any, and many other considerations.

In the present case, we think that, in addition to the allowance of two deductions by the Corporation at 10 per cent. each, a further deduction of per cent, should have been allowed. That would give the reasonable amount of annual rent of which the entire premises may be reasonably expected to be let from year to year.

These two appeals are accordingly allowed in part and the annual value as was fixed by the Corporation will be further reduced by 7 1/2 per cent, and on such net annual value the rates will be assessed.

The Appellant will be entitled to half the costs of this Court. There will be one hearing-fee for the two appeals.

Renupada Mukherjee, J.

I agree.