Delhi High Court
M.C.D. vs Shri Manohar Lal And Anr. on 22 November, 2002
Equivalent citations: 101(2002)DLT292, 2003(66)DRJ246
Author: Sanjay Kishan Kaul
Bench: Sanjay Kishan Kaul
JUDGMENT Sanjay Kishan Kaul, J.
1. The common question of law arises in these petitions as to whether land value of commercial lands can be taken into consideration for determination of rateable value in respect of land for which designated use is residential but the same is being used for commercial purposes.
2. The writ petitions have been filed impugning the order of the appellate authority in terms whereof the appellate authority has been that where a property meant for residential use is being used in part or full commercial purposes, it is not permissible for the assessing authority to take the land rates meant for commercial activities whether proportionately or in full. The appellate authorities were of the view that unless the land has been notified or declared by the Government or any of its agencies as meant for commercial activities, the market price of land in respect of the same cannot be taken by treating the same as meant for commercial activity while fixing the rateable value.
3. The petitioner corporation has contended that once the property is used for commercial purpose, it is the commercial land rates which are liable to be taken into consideration as on the date of commencement of construction. It may be noticed that insofar as the rate of tax is concerned, the same is different for residential and commercial use but that is not the issue to be considered in these petitions. Once the residential property is being put for commercial use, it is the commercial rates which would apply. However, the petitioner corporation has gone further and also taken the commercial land rates as the basis for determination of rateable value of such cases.
4. Learned counsel for the petitioner has relied upon the departmental instructions 12 of 88 issued by the Assessor and Collector stating that once the property is being used for commercial purposes from the first letting and there is no undertaking that the property would be used or let out only for residential purposes and the construction has also been made of such nature which can be used for commercial purpose only, it would be proper to calculate the rateable value on the proportionate basis of residential and commercial user. It was submitted that the departmental instruction has a public purpose behind it and a breach of it should not be encouraged. A number of judgment on this aspect have been referred to in the written submissions but the same need not be referred to as they were never cited at the bar and thus the learned counsel for the respondent had no opportunity to deal with the same.
5. It is further submitted on behalf of the petitioner corporation that in view of the bye-law 2(1) (b)(ii) of the Delhi Municipal Corporation (Determination of Rateable value) Bye-Laws 1994, it is the aggregate of the market value of the land comprised in the premises on the date of change of user of the premises and the cost of construction which would be the basis for determining the cost of the premises. The said bye-law is as under:
"2(1)(b)(ii) Whether the premises were to be used for residential purposes are used for non-residential purposes, the cost of premises shall be the aggregate of market value of land comprised in the premises on the date of change in user of the premises and the cost of construction of the premises or the cost paid or payable for the premises, whichever is higher and the cost of additions and improvements in the premises, whether made by the owner or the occupier."
6. Learned counsel for the respondent assessed on the other hand contended that once a property is meant for residential use, it is the residential land rates which ought to have been adopted inasmuch as the price of land is to be determined when the construction was started and at that time it was not used for commercial purpose. It is further contended that insofar as the bye-laws are concerned, they were not be applicable in most of the cases under consideration since same were notified only on 24.10.1994 and would only have prospective effect as held by the Division Bench of this Court in Punj Sons v. MCD 1997 (65) DLT 473.
7. It was further contended that the only consequence of user of residential property for commercial purposes would be the penal consequence under the Delhi Municipal Corporation Act, 1957 and the DDA Act, 1957. It was further contended that a residential plot being misused for commercial purpose can never fetch the equivalent price of the property where there is authorised and prescribed user for commercial activity.
8. A reference has been made to different provisions of the DMC Act, 1957 including Sections 313, 346(2), 347 to contend that various consequences can be visited upon the property including withdrawal of the sanction for construction already granted. It is further contended that even if the owner contravenes the law, the petitioner corporation cannot be party to it. A reference has been made in this behalf to the judgment of the Supreme Court in The Corporation of Calcutta v. Smt. Padma Debi, AIR 1962 Supreme Court 151. On the issue of the applicability of the bye-laws at least for cases post 24.10.1994, it is submitted that the said bye-law does not provide that land rates of approved commercial area are to be applied. The bye-law only permits the market value of land comprised in the premises on the date of change of user of premises and such land value can be determined only on the basis of actual sale transaction.
9. Insofar as the departmental instruction No. 12 of 88 are concerned, it was submitted that same has no legal basis.
10. A reference has been made to the provisions of Section 6(1) of the Delhi Rent Control Act to contend that Section 6(1)(A)(2)(b) provides the market price of land comprised in the premises on the date of commencement of construction has to be taken and since the land is meant for residential purposes, land rate of residential plots as on the date of commencement of construction at best can be taken into account.
11. A submission has been made on the issue of differenciation between commercial use of residential property and the normal commercial property. It was submitted that there is marked difference in the lay out plan as the authorised commercial centre has all the relevant facilities and larger permissible coverage exists.
12. I have considered the submissions advanced by learned counsel for the parties.
13. In order to deal with the matter in issue a distinction would have been drawn between the two categories of cases - first category, assessment relating to period prior to bye-laws coming into force on 24.10.1994 and the second category of cases relating to assessment years post the bye-laws coming into force. The bye-laws came into force on 24.10.1994 and will apply prospectively in view of the judgment in Punj Sons case (supra).
14. Insofar as the period prior to bye-laws coming into force are concerned, admittedly there was no bye-law in existence though the office circular No. 12/88 had been issued. It is also relevant to note that there was no contrary bye-law or regulations in existence as on that date.
15. The user of residential property for commercial use is a menace which afflicts most parts of Delhi. owners are conscious of the fact, as even contended by learned counsel for the respondent, that the lay out plan provide facilities for the land meant for commercial use which is different from the residential use. Despite this fact such owners use properties for commercial use contrary to the provisions of the DMC Act and the DDA Act. In such a situation can the respondent by permitted to contend that the only option available with the petitioner corporation is to revoke the sanction plan or take action on unauthorised construction but for the determination of rateable value only residential rates will have to be taken into consideration and not the commercial rates? In my considered view the answer to this question would be in negative. Undoubtedly it is open to the authorities to take action against the misuse of residential property for commercial use by either revoking sanction plan or demolish any unauthorised construction, or initiate criminal prosecution. Normally whenever a residential property is put to commercial use it can hardly be stated that construction would be according to sanctioned plan which had been approved for residential use. No doubt in such a case commercial rates of property tax would apply. However, the owners in such cases are using the residential properties for commercial use. If residential land rates are taken into account it would imply that persons who utilise various commercial areas for commercial use would have to pay property tax on the basis of commercial land rates and commercial rate of tax while owners who are misusing the residential property putting it to commercial use only pay commercial rates but the land rates are taken as residential. A party like the respondent who is in the wrong cannot be permitted to contend that the full benefit of the commercial user is not available to them since as per the original sanctioned lay out plan the property was meant only for residential use.
16. In the absence of any bye-law or regulation to the contrary, I see no reason why the principle set out in the departmental instructions No. 12 of 88 can be faulted. It is also relevant to note that in case part of the property is being put to commercial use, it is only the proportionate land area for which commercial rates are to be taken into consideration. I am unable to accept the contention of learned counsel for the respondent that since plans were sanctioned for residential use and the land rates have to be as on the date of commencement of construction, it is only residential land rates which would apply. Firstly in most of cases the property is so built for commercial use which is contrary to sanctioned plan and the construction from day one is meant for the same. Secondly in other cases the property is converted to commercial use thereafter. In both cases once the property is put to commercial use, it will relate back for purpose of determination of rateable value to the date of commencement of construction and for the period when the property is put to commercial use it is reasonable and fair to take the commercial land rates as on the date of commencement of construction for purpose of determination of rateable value.
17. I am thus of the considered view that in all cases prior to bye-laws coming into force the principle which would apply would be that commercial land rates would be taken into consideration as on the date of commencement of construction for purpose of determination of rateable value for the period when the property is put to commercial use. Further in case of partial commercial user of the property, the proportionate area of land should be dealt with accordingly.
18. The other category of cases are one which relate to the period post the bye-laws coming into force. In such cases since the bye-laws itself have come into force, such cases have to be dealt with in accordance with the bye-laws. The relevant bye-law dealing with the cost of premises in such a case is bye-law 2(b)(ii). However a reading of the said bye-law shows that same deals with the change in user of the premises. This would imply that originally the premises were used for residential purposes when constructed but subsequently there is change in user of the premises by putting it to commercial use. In such a case it is the market value of the land as on the date of change of user which is to be taken into consideration. Thus the consequence for a person of putting the residential property to commercial use would be that the market value of land to be taken would be of subsequent date and such owner would have to pay higher tax on the basis that the land rate would be higher for the subsequent date. However, the bye-law does not state as to whether it would be the residential land rates or the commercial land rates which are to be taken into consideration.
19. I see no reason why different principles should apply post the bye-laws coming into force for the reasons set out above. Thus once the property is put to commercial use it has to be commercial land rates which would have to form the basis of assessment of the rateable value. However, the position prior to the bye-law coming into force would be that it is the date of the commencement of the construction which would have been taken into consideration for taking the land rates. However, the effect of the bye-laws coming into force would be that it would not be the date of commencement of construction for taking the commercial land rates into account but the date of change in user of the premises for taking the commercial land rates. Thus there is more severe consequence of residential property being put to commercial use as a consequence of the bye-laws coming into force. It may, however, be noticed that in most cases the property from day one is constructed in such a manner that it can put to commercial use or is completely altered to put it for commercial use. Practically in all such cases there is bound to be violation of sanctioned plan where the plans have been sanctioned for residential use.
20. In view of the aforesaid position, the impugned order of the appellate authority cannot be sustained to the aforesaid extent and is hereby set aside. I consider it appropriate to remand all the matters to the assessing authority to re-determine the rateable value keeping in mind the principles laid down in the present case.
21. The writ petition is allowed in the aforesaid terms leaving the parties to bear their own costs.