Madras High Court
Sundaram Fasteners Limited And Ors. vs The Assistant Commissioner Of Urban ... on 1 August, 1988
Equivalent citations: (1989)1MLJ72
ORDER Swamikkannu, J.
1. In all these writ petitions, the main point raised on behalf of the petitioners is that when once the power of resumption of the lands assigned to the petitioners is vested with the respondent-Government, it cannot be held that the lands in question are owned by the petitioners absolutely, in other words as full owners, so as to hold that the petitioners in these writ petitions are liable to pay urban land tax. The petitioners in these four petitions belong to one group of companies, known as Sundaram Fasteners Ltd., Padi, Madras-50. The prayer of the petitioner in W.P.No 4172 of 1982 reads as follows:
To issue a writ of certiorari calling for the records in C.M.A. No. 133 of 1978 on the file of the Urban Land Tax Tribunal, Chingleput, and quash the order therein confirming the order of the Assistant Commissioner of Urban Land Tax, Madras-7, in U.L.T. Case No. 4 of 1385-Korattur, dated 23.6.1978.
Similar prayers have been made in W.P.Nos.4173, 4174 and 4175 of 1982 on behalf of the respective petitioners therein.
2. The contents of the affidavit accompanying the writ petition in W.P. No. 4172 of 1982, disclose the following facts, which may be noted as representing similar facts in all the writ petitions as well. The petitioner (in W.P. No. 4172 of 1982) is a Company licensed under the Industrial Development Regulation Act and is engaged in the manufacture of authomobile components for the manufacture of ancillary items. In pursuance of the grant of licence to manufacture by the Government, the promoter of the petitioner company, Messrs. T.V. Sundaram Iyengar & Sons Ltd., applied to the Government of Tamil Nadu for acquisition and assignment of lands for the establishment of factories. In view of the importance of the items to automobile manufacturers, the Government agreed to acquire and assign certain lands in Padi, Kakapallam and Villivakkam Villages, The Government took out proceedings under the Land Acquisition Act and acquired and assigned lands in favour of Messrs. T.V.S. & Sons Limited, after entering into various agreements with the Company and assigning properties in their favour. By Government Orders dated 25.3.19601 and 16.11.1961 the Government directed acquisition of lands for the purpose of assignment to the Company for establishment of factories. By G.O.Ms. No. 4823 dated 8.11.1961 the Government laid down certain conditions to be followed by the Company regarding maintenance of tank, channels etc. By Articles of Agreement entered into between the Company and the Government, it was agreed that the Governor shall executive certain documents vesting the lands in the Company upon payment of all the moneys mentioned in the agreement and upon certain conditions.
3. The Company was required to establish the new undertakings, pay appropriate assessments annually or ground-rent and in the event of failure on the part of the company to establish factories, it was stipulated that the lands were liable to be resumed by the Government, in which event, the compensation payable to the Company in respect of the resumed lands shall be the value of the lands at the time of 'the acquisition and assignment excluding 15 per cent solatium or the market value prevailing at the time of resumption whichever is less. It is this particular aspect that is very much stressed on behalf of the petitioners herein while putting forth their respective cases for exempting the lands in question from the levy of urban land tax on the ground that the lands are not absolutely owned by the petitioners, but only enjoyed as assignee-holders on behalf of the Government in that the Government can resume the lands assigned at any moment. The Government had also option to resume the lands if they remained unused. In pursuance of the agreements, the Government had also fixed the value of the lands at Rs. 5,060 per acre. Even at the time of the transfer of the lands to the new undertakings of the promoter Company, the Government had permitted the transfer of the lands only at the same cost at which the lands were assigned to the Company. Even in 1972, in its letter dated 20.7.1972 when 11 acres were transferred to M/S. Wheels India Ltd., the Government had approved the sale only at a cost of Rs. 5,060 per acre. Even the sale of lands to M/S. Sundaram Clayton Ltd. on 20.7.1972 was at the same cost of Rs. 5,060 per acre. The sale of 25.81 acres to M/S. Sundaram Fasteners Ltd. in 1971 and the sale of land of 13.70 acres to M/s. Sundaram Abex Ltd., in 1975 were all at the same cost of Rs. 5,060 per acre.
4. The Urban Land Tax Authority assessed the Market value of the lands at Rs. 2,000 to Rs. 4,000 per ground on an erroneous interpretation of the various deeds of agreements and assignments. The petitioner preferred an appeal to the Tribunal which however dismissed the same by its order dated 12.3.1982, holding, without going into the real question in issue, that the petitioner is liable to pay urban land tax, calculated at the market value fixed, since, according to the Tribunal also, the lands had been utilised by the Company and there is no chance of the Government, resuming the land. The Tribunal, according to the petitioner, erred in not considering the fact that the petitioner cannot sell the property out of their volition to any third-party at any time.
5. It is contended .by Mr. A.R. Ramanathan, learned Counsel for the petitioner, that the Tribunal and the Authority below have erred in law thinking that merely because the petitioner has put up the factory on the lands in question, they have become absolute owners of the properties with free right to sell the properties to any third-party. They also erred in thinking that the Government cannot resume the lands so long as the petitioner utilised the lands and as such, the lands will have a free market value and are capable of being freely alienated by the petitioner to any one at a negotiated price. In support of his contentions, learned Counsel for the petitioner relies on the decision of this Court in Kemcos Chemical Industries v. Government of Tamil Nadu and Ors. (W.P. No. 5389/81 of this Court Order dated February 29, 1988). He also relied on the decisions in Lakshmana v. R. Ramier , R.C. Society v. Authorised officer, Land Reforms (1971) 2 M.L.J 85?A.I.R. 1971 Mad. 458 and Victoria P.H.T. Board v. Asst. Commissioner or Urban Land Tax .
6. The point for consideration in all these writ petitions is, whether the lands, having been assigned to the petitioners, have become the absolute property of the petitioners as to attract the assessing provisions of the Urban Land Tax Act XII, 1966.
7. In the counter-affidavits filed in the respective petitions on behalf of the respondents, the Asst. Commissioner, Urban Land Tax, has admitted in paragraph 3, the following facts:
The restrictions referred to by the petitioner are embodied in the deed of assignment of land in usual manner with a view to see that the lands are put to use for the purpose for which they were acquired and handed over. The Government had imposed some conditions to see that the lands assigned to the petitioner for the purpose of establishing a factory, should not be sold to third-parties and should not be used for any other purpose excepting the purpose for which they had been assigned. The petitioner has already constructed factories and there is no breach of condition.
Thus, the contention raised on behalf of the petitioners as well as the facts disclosed in paragraph 3 of the counter-affidavit filed by the respondents show that the assignments of lands made in favour of the respective petitioners are not absolute transfers in character so as to clothe the assignees with full power of disposition. In the deed of assignment there are certain restrictions embodied. These restrictions, according to the respondents, are introduced therein with a view to seeing that the lands are put to use for the purpose for which they were acquired and assigned to the petitioners. The Government had imposed some conditions to see that the lands assigned to the petitioners for establishing factories, should not be sold to third-parties and should not be used for any purpose other than the one for which they were acquired and assigned to them. In this regard, it is also relevant to note that in the Articles of Agreement made on 14.2.1961 between Messrs. T.V. Sundaram Iyengar & Sons Pvt. Ltd., and the Governor of Madras, shows, in Clause (3), the following conditions:
(a) that the land shall be used for the establishment of new industrial undertakings, one for the manufacture of Wheels and Rims for automobiles arid others for manufacturing projects of an allied nature, with scope for future expansion and also for amenities to be provided for under the provisions of the Factories Act.
(b) that the Company shall pay to the Government annually the appropriate assessment or ground rent as the case may be, on lands which shall be liable to revision at any general revision of the land revenue settlement:
(c) that in the event of the Company being wound up or in the event of failure on the part of the Company to carry out the terms of the agreement, that is to say, conditions (a) and (b) above, the lands shall be liable to be resumed and taken back by the Government on repayment to the Company of the amount of the award as finally settled less the 15% awarded for compulsory acquisition or the estimated market value of the land at the time of resumption, whichever shall be less, and if there are any buildings on the land the Government may at their option either purchase the buildings on payment of their estimated value at the time or direct the Company to remove the buildings at its own cost within such time as may be allowed by Government:
(d) that, in the event of the voluntary relinquishment of the land by the Company as not required, the Government may resume the land, if it is required for a Public purpose or if they consider that it should be returned to the original owner. If the Government decide not to exercise this power and inform the Company accordingly, the latter may dispose of the land in any manner it likes. In the event of the resumption of the land under this condition, the compensation payable to the Company shall be the value of the land at the time of acquisition (less 15 per cent awarded for compulsory acquisition) or its estimated market value at the time of resumption, whichever may be less, together with the value of the buildings and other improvements at the time of resumption.
If there are buildings on the land which the Government do not require, the Company shall remove them at its cost.
Thus we find that the lands assigned in favour of the petitioners herein are liable to be resumed by the Government, and in the event of resumption of the lands under this condition, incorporated under Clause (3) in the agreement, the compensation payable to the petitioners shall be the value of the lands at the time of acquisition less 15 per cent solatium awarded, or their estimated market value at the time of resumption, whichever is less. The above clause is pointed out by Mr. Ramanathan, learned Counsel for the petitioners in support of his contention that in the case of an absolute sale by a full-fledged owner of a land he is at liberty to sell it at a cost which he feels reasonable and is not bound by any restrictions, and that when once there is a restriction with respect to alienation of lands, then it cannot be considered the absolute property of the person who holds it. 'Holding' is different from 'owning'. They are absolutely two divergent and different concepts in law. In his order in U.L.T. Case No. 5/1385/75-76/Korattur dated 20.6.1978, the Assistant Commissioner of Urban Land Tax has observed as follows:
The lands of the company form part of the lands acquired and assigned by the Government in favour of T.V. Sundaram Iyengar & Sons (P) Ltd., Madurai, for the construction of a factory for the manufacture of wheels and rims for automobiles and products of allied nature, in No. 61, Korattur, 72 Kakapallam, 73 Villiwakkam, and 80 Padi villages. The lands were acquired in 1960 and 1961 under Part II of the Land Acquisition Act, 1894 on behalf of T.V. Sundaram Iyengar and Sons (P) Ltd. The Government have subsequently conveyed the lands to the Company in accordance with an agreement entered into by it with the Government, the Company was to meet all the costs of acquisition of lands and amounts incidental to acquisition such as the cost of Revenue and Survey Department Staff, the expenses in connection with the suits etc. Clause 2 of the agreement contemplates the vesting of the lands in the company and giving the company an absolute title thereto subject to payment of an assessment or ground rent and certain other condition for the purpose of carrying out the objects of the Company, i.e. for establishing four new industrial undertakings namely (i) Wheels India Ltd., for manufacture of wheels and rims for automobiles, (ii) Lucas-TVS Pvt. Ltd., for the manufacture of vehicle lighting equipment (iii) Sundaram Clayton Pvt. Ltd., for the manufacture of compressors and exhausters and (iv) Brakes India Ltd. for the manufacture of breaks system for automotive and non-automotive vehicles, with scope for future expansion and also for amenities to be provided for under the provisions of the Factories Act, 1948 (Central Act LXIII of 1948,.... All these companies are having their factories in PadiKorattur area, i.e. in the lands acquired and assigned to T.V. Sundaram Iyengar and Sons P. Ltd. The T.V. Sundaram Iyengar & Sons P. Ltd., have transferred most of the lands to the six companies mentioned above and retained with it some lands.... The transfers have taken place with the approval of the Government. For the purpose of this internal transfer of the lands, the Government have fixed certain value for the lands which is based mainly on the cost of acquisition incurred by the parent company and the Government in 1960 and subsequently. This cannot be the market value of the lands as on 1-7-1971 as contemplated in Section 50 of the Urban Land Tax Act, 1966 amended. There had been no case of outright sale of land by Government to T.V. Sundaram Iyengar and Sons (P) Ltd. Section 6 of the Act refers to fixation of market value for the purpose of Tamil Nadu Urban Land Tax Act, 1966 as amended. According to this section, the market value of any urban land shall be estimated to be the price in the opinion of the Asst. Commissioner or the Tribunal, as the case may be, such urban land would have fetched or fetch if sold in the open market. So, the market value of the land has to be estimated by reference to the price which a willing vendor might reasonably expect to obtain from a willing purchaser. This value could be measured by a consideration of the prices that have obtained in the past for similar lands and with reference to location of the land, nearness to a main road, accessibility to road, frontage etc. and depending upon the size and shape of the lands and other special consideration. The lands under reference have been acquired for a specific public purpose, i.e. for establishing certain industries on behalf of M/s. T.V. Sundaram Iyengar and Sons (P) Ltd., on the application to Government and on agreeing to certain conditions prior to acquisition. These conditions are embodied in the deed of assignment of lands with a view to see that the lands are put to use for the purpose for which they were acquired and handed over. So, those usual conditions do not stand in the way of fixing the market value for the purpose of levy of urban land tax as per the provisions of Tamil Nadu Urban Land Tax Act, 1966, as amended.
A careful reading of the above passage in the order of the Assistant Commissioner shows that for the purpose of internal transfer of the lands the Government have fixed certain value for the lands which is based mainly on the cost of acquisition incurred by the parent company and the Government. This rate cannot therefore be the market value of the lands as on 1.7.1971 as contemplated under Section 5-C of the Act. There had been no case of outright sale of lands by the Government to the company. Section 6 of the Act refers to the fixation of market value of lands for purposes of the Act. As already seen, there cannot be a determination of market value as per the provision of Section 6, since the value of the lands has to be fixed at the instance of the Government which has been responsible for the assignment of the lands in question in favour of the petitioners. Various other factors also come to play a part in the case of transfers. Thus, we find that there are restrictions relating to the transfer of the lands in question.
8. The Tribunal in its appellate judgment dated 12.3.1982, while discussing Point No. 1, has held that the Government have assigned the lands to the petitioners with a view to encourage the industrialists for starting various factories and that the petitioners are in possession and management of the case lands in their own right and therefore, they have become the owners of the case lands. This decision arrived at is certainly not in consonance with law. By no stretch of imagination can any one of the petitioners claim to be the owner of the case lands in view of the specific condition in the agreement, extracted supra, covenanted at the time of the assignment of lands to the petitioners. As already seen, it is the case of the Government that it had imposed certain conditions to see that the lands assigned for the specific purpose of constructing and running factories should not be used for any purpose other than that for which they were assigned. Merely on the ground that the petitioners have constructed factories and that they have complied with the conditions, that does not clothe them with the rights which an absolute owner would possess with respect to land. Assignees of lands from Government, by acquisition or otherwise, stand on a different footing altogether. The assignees cannot claim themselves to be absolute owners of those lands which were assigned to them for specific purposes. We have already seen that those lands can be resumed at any time by the Government for the reasons which it considers as apt and justified. In other words, the petitioners can, at any moment, be stripped of their right of even possession apart from the rights which they are enjoying as assignees, inasmuch as they may even be asked to demolish the buildings erected by them and no compensation can be claimed by the petitioners therefor.
9. In W.P. No. 5389 of 1981 of this Court (Kemcos Chemical Industries v. Government of Tamil Nadu and Ors.-Order dated February 29,1988) this Court had occasion to consider the question whether urban land tax is to be paid by the person in whose favour a land had been assigned. In this respect, this Court had observed in paragraph 6 of the judgment in that case as follows:
In Venkataramaiya's Law Lexicon and legal Maxims, the word 'resumption' is described as follows:
The word 'resumption' connoted taking back what was given. For 'resumption' connotes the idea that the land resumed is not the property of the persons from whom it is taken back by the rightful owner. (Raja Rajendra Malojirao Shitobe v. State of M.P. A.I.R. 1953 M.P. 97, at pp.104, 121).
It is an established principle of law that tax can be collected only from the owner of the land. In the instant case, the owner of the land is only the Government and that is clear from the fact that there is a clause relating to resumption of the land from the occupation of the petitioner. The Government is exempted from payment of urban land tax by virtue of the provisions of the Urban Land Tax Act. Therefore, on no ground can the petitioner be made liable to pay urban land tax. Moreover, the petitioner is only an assignee as per the agreement between the petitioner and the respondents. Looked at from any angle, the contentions of the respondents cannot be upheld. So viewed from the legal point of view as well as from the approach of the layman,' 'resumption' means, taking back what has been given in respect of the right of enjoyment of the land in question.
It is not denied by the respondents that it is only for a limited period. It may be for 99 years or 990 years, but yet, possession has been definitely given in favour of the petitioner herein only for enjoyment. That does not mean the entire elements that are available to recognise ownership have been transferred in favour of the petitioner. Under these circumstances, this Court is definitely of opinion that no person, other than the owner of the land, can be assessed under the provisions of the Tamil Nadu Urban Land Tax Act (Act 12 of 1966). In this view, when the entire facts of the instant case before us are looked into, we are unable to see any iota of ownership of land transferred or given in favour of the petitioner herein. The contentions raised on behalf of the petitioner are all legal and valid and are supported by the decision of this Court reported in Victoria Public Hall Trust Board v. AC of Urban Land Tax . In view of the definition of 'Ownership' under Section 2(10) and also in view of the provision under Section 7-A of the Tamil Nadu Urban Land Tax Act, 1966, this Court holds that, unless a person is a full-fledged owner of a piece of land, and so long as it does not exceed the minimum contemplated under the Act, it cannot be assessed to tax. It is not liable to pay tax even though it had entered into a contract.
It is an established principle of law that tax can be collected only from the owner of the land. In this case, it has not been proved that the assignee, viz., the petitioners herein, are owners of the lands in question. The ownership still vests with the Government in that there is a clause relating to resumption of the lands, incorporated in the agreement entered into between the petitioners and the Government at the time of the assignment. Government is exempted from payment or urban land tax by virtue of the provisions of the Act. The concept of 'transfer' as recognised by the provisions of the Transfer of Property Act as well as the concept of 'ownership' as defined in Section 2(10) of the Urban Land Tax Act, 1966, do not bring within their fold the relationship or the right which the petitioners enjoy due to the assignment of the lands in their occupation by Government by virtue of the conditions of assignment which contain the clause relating to resumption. 'Resumption' has been defined in Stroud's Judicial Dictionary, at page 2381 as follows:
(1) 'Resumption' is a word used in the statute of 31 Hen.6, C.7, and is there taken for the taking again into the King's hands such lands or tenements as upon false suggestion or other error he had made livery of to an heir, or granted by patent unto any mand. (Termes de la Lay).
(2) 'Resumption of normal use' (Town and Country Planning Act, 1962 (C.39), Section 13(2). Where land was used as a golf course for 13 years, by the War Department for 3 years, reuse as a golf course was held not to be 'resumption of normal use' under this section (Kingdom v. Minister of Housing and Local Government (1962)1. QB.257).
In Venkataramaiya's Law Lexicon and Legal Maxims, the word 'resumption' is described, which has been extracted in this para (page 14) supra.
10. Thus viewing from any angle, the relationship between the petitioners and the Government on the basis of the agreement of assignment entered into between them, does not bring the petitioners within the definition of 'owners' as per Section 2(10) of the Urban Land Tax Act, 1966. Under these circumstances, necessarily the contention raised on behalf of the petitioners in all these writ petitions has to be upheld holding that the petitioners are not owners of the lands assigned to them by the Government and as such, they are not liable to pay urban land tax. The writ petitions are accordingly allowed. There will be no order as to costs in any one of the petitions.