Andhra HC (Pre-Telangana)
S.B.H. Co-Op. Bank Officers Welfare ... vs Govt. Of A.P. Rep. By Its Chief ... on 29 December, 1994
Equivalent citations: 1997(2)ALT62
JUDGMENT Lingaraja Rath, J.
1. The challenge in all these Writ Petitions is to the mode of determination of the annual rental value of the buildings in the Municipal Corporation areas and the Municipalities of the State of Andhra Pradesh as has been brought in by the amendments of the Hyderabad Municipal Corporations Act, 1955, hereinafter referred to as " the Corporations Act", and the Andhra Pradesh Municipalities Act, 1965, hereinafter referred to as " the Municipalities Act", by the Andhra Pradesh Municipal Laws (Amendment) Act, 1989 (Act No. 20 of 1989) which came into force on 1-11-1990, and the provisions made for determination of the annual rental value and the rate of monthly or yearly rent of buildings in the Hyderabad Municipal Corporations (Assessment of Property-tax) Rules, 1990 and the Andhra Pradesh Municipalities (Assessment of Taxes) Rules, 1990 respectively framed under the two Acts and referred hereinafter as "the Corporation Rules" and the "Municipalities Rules". So far as the Corporations Act is concerned Section 199 provides for levy of property- taxes of the categories (a) general tax; (b) water tax; (c) drainage tax; (d) lighting tax; and (e) conservancy tax on the buildings and lands and stipulates the levy to be at the percentage of the reteable values of the property as is fixed by the Corporation but so fixed however that the aggregate of the percentage so fixed is not less than 15% or higher than 30% of the rateable value. Section 212 provides how the rateable value is to be determined. Prior to the amendment on 1-11-1990 the provision was that the rateable value of any building or land other than that specified in sub-section (2) was to be fixed by deducting from the amount of the annual rent for which the buildings or lands could reasonably be expected to be let from year to year, a sum equal to ten per cent of the annual rent, and that the deduction shall be in lieu of all allowances for repairs or on any other account whatever. After amendment the Section 212 (1) (a) provides that the annual rental value of lands and buildings shall be deemed to be the gross annual rent at which they may reasonably be expected to be let from month to month or from year to year with reference to its location, type of construction, plinth area, age of the building, nature of use to which it is put and such other criteria as may be prescribed. In sub-section (b) the annual rental value is stipulated to be deemed to be the gross annual rent at which they may reasonably be expected to be let from month to month or from year to year, less a deduction at the rate of 10% for buildings aged upto 25 years; of that portion of such gross annual rent which is attributable to the buildings, apart from their sites and adjacent lands occupied as appurtenance thereto and the deduction shall be in lieu of all allowances for repairs or on any other account whatsoever. The proviso to sub-section states that in respect of residential buildings occupied by the owner the rebate shall be 40 per cent inclusive of the deduction permissible elsewhere. It is submitted at the Bar, that in respect of the Corporations other than the Hyderabad Municipal Corporation, the same provisions of the Act or the Rules apply, by virtue of Section 7 of those Corporations Acts of relative values, for property taxation. Similarly Section 87 of the Municipalities Act was also substituted, by amendment, to provide in place of similar provisions, as was existing in the Corporations Act earlier, that the annual rental value of lands and buildings shall be deemed to be the gross annual rent at which they may reasonably be expected to be let from month to month or from year to year with reference to its location, type of construction, plinth area, age of the building, nature of use to which it is put and such other criteria as may be prescribed. In sub-section (3), of Section 87 provision was made that notwithstanding anything in the Andhra Pradesh Buildings (Lease, Rent and Eviction) Control Act, 1960, the gross annual rent at which the lands and buildings might reasonably be expected to be let from month to month or from year to year, shall be determined by the Commissioner with reference to its location, type of construction, plinth area, age of the building, nature of use to which it is put, and such other criteria as may be prescribed. The Municipalities Rules were framed by G.O.Ms.No. 438 dated 29-10-1990 and the Corporations Rules were framed by G.O.Ms.No. 439 dated 29-10-1990. Rules 3 to 7 of both the rules provide for the annual rental value, zoning of the respective area, classification of buildings, nature of use of the building and fixation of monthly or yearly rent. For proper appreciation Rules 3 to 7 of the Corporations Rules as it stands after amendment by a notification G.O.Ms. No. 375 issued on 7-7-1992 may be extracted:
"3. Annual Rental Value:- (1) The annual rental value of Lands and Buildings shall be deemed to be the gross annual rent at which they may reasonably be expected to be let from month to month or from year to year with reference to its location, type of construction, plinth area, age of the building, nature of use to which it is put and such other criteria as may be specified.
(2) The Commissioner, shall gather the information relating to the prevailing rental value as specified in Rules 4 to 6 so as to arrive at the rate of rent per month or per year per square metre of plinth area and then issue a draft notification in a daily newspaper having circulation in the district and in the District Gazette calling for objections and suggestions from the public so as to reach the Commissioner within 15 days from the date of publication of the draft notification, regarding the Division of the Corporation into Zones and the monthly or yearly rental values per square metre of plinth area in each Zone.
The Commissioner should consider the objections and suggestions, if any, received in response to the said notification and revise the Zones and the monthly or yearly rents wherever necessary. He shall place the proposals before the Committee constituted by the Government for its final recommendation.
On the basis of the recommendations of the Committee, the Commissioner shall issue a final notification in Form-A and publish it in a local newspaper having circulation in the District and in the District Gazette for information of the public.
4. Division of Municipal Corporation into Zones:- The entire Municipal Corporation area shall be divided into convenient territorial zones for the purpose of assessment of taxes based on the following factors, namely :-
(a) Civic amenities like water supply, street lighting, Roads and drains.
(b) Markets and shopping centres.
(c) Educational Institutions.
(d) Banks, Postal Services, public offices.
(e) Medical Institutions.
(f) Factories and Industries, and
(g) Such other relevant factors.
5. Classification of Buildings:- After the division of the Corporation into territorial zones, the building situated in each zone shall be classified as follows based on its nature of construction;
(a) RCC posh buildings: RCC buildings with superior quality of wood, better type of flooring and sanitary fittings and attached bathrooms.
(b) RCC ordinary buildings: RCC buildings with ordinary type of wood, ordinary flooring and sanitary fittings.
(c) Madras terraced or jack arch roofed or stone slabs or slates roofed buildings:
(d) Mangalore tiled roofed or Asbestos roofed or G.I. roofed buildings.
(e) Country tiled buildings.
(f) Huts.
6. Nature of use of the Buildings:- After classification of the buildings 10 based on the type of construction they shall be further classified into the following categories taking into consideration the nature of use of the buildings:
(a) Residential.
(b) Shops, shopping complexes.
(c) Public use, i.e., office complexes, Public and Private Offices, Hospitals and Nursing Homes, Banks, Educational Institutions.
(d) Commercial purposes i.e., Hotels, Lodges, Restaurants, Godowns and other business Establishments.
(e) Industrial purposes i.e., Factories Mills, Workshops and other industries.
(f) Cinema theatres or Places of Public Entertainment.
7. Fixation of Monthly or yearly rent:-
(1) All buildings located in a zone shall be classified based on types of construction and nature of use. 36 categories of buildings can be identified in each zone based on the above criteria. The Commissioner shall gather the information relating to the prevailing rental value of the buildings of various categories in a zone and arrive at average monthly or yearly rent fixable for each category of building per sq.mt. of plinth area.
(2) In respect of all multi-storied buildings rents shall be fixed separately for the following categories.
(a) Cellar
(b) Ground and first floors
(c) Other floors.
(3) The Commissioner then shall fix the monthly or yearly rent for each category in a zone per square metre of plinth area and notify the rate of monthly or yearly rent so fixed in Form 'A' for adopting the said rates for fixation of monthly or yearly rental value of buildings in a Zone and for information of the public. The Commissioner shall issue a notification in Form 'A' furnishing the localities, areas included in the Zone and particulars of door numbers included in the Zone. The notification in Form 'A' shall be published in local newspapers having circulation in the area for information of the Public.
(4) The Commissioner shall obtain information of all buildings in respect of plinth area, type of construction, age of building, nature of use and fix monthly or yearly rental value as per the rate of monthly rents notified for each category of a building in a zone. The property tax assessment list of buildings shall be prepared in Form 'B'.
(5) The rates of monthly or yearly rents for each category of building in a zone shall be revised once in (5) years taking into consideration the rent component of cost of living index prevailing at the time of preparation of new assessment books. In respect of value of the lands on which buildings (were) constructed for the purposes of choultries, hostels, lodges and Cinema theatres whose value increases and the income on the property does not increase, the average rental value shall be fixed with reference to the income of the property.
(6) In the case of items wherein varying rates are provided, the Municipal Corporation shall adopt the rates found suitable for the particular Municipal area after taking the local conditions into account. The Commissioner may also increase the rates so adopted by the Municipal Corporation by not exceeding 10% over the rates aforesaid for superior quality of better type of flooring and fine plastering depending upon the workmanship and cost involved. Where the entire roof is not of the same description appropriate rates shall be adopted for the different types of roof for arriving at the total cost of erection The rate of cost per square metre plinth area shall be determined in consultation with the concerned local Engineer belonging to Roads and Buildings Department in consonance with the price levels prevailing at the time of such revision.
(7) In the case of buildings which are partly occupied by the owner and partly let out on rent, property-tax shall be levied as per Rules 6 and 3 on owner occupied portions and rented portions respectively. , (8) For the purpose of assessing the vacant land, the estimated capital value of the land shall be the market value fixed by the Registration Department for the purpose of registration."
2. In the Andhra Pradesh Municipalities (Assessment of Taxes) Rules, 1990 similar rules are made of which Rules 3 to 7 are relevant for the purpose, though there are some differences. In Rule 3 no amendment has been made as in the Corporations Rules but provision is made for deduction at different rates for buildings of different ages. Rule 4 provide for division of the Municipality into Zones. Rule 5 provides for classification of buildings and Rule 6 provides for further classification of buildings on the basis of their nature of use. Rule 7(1), (1A) and, 7(2) and 7(3) provides as follows:
7. Fixation of monthly or yearly rent:-
(1) All buildings located in a Zone shall be classified based on type of construction and nature of use. Thirty-six categories of buildings can be identified in each Zone based on the above criteria. The Commissioner shall gather the information relating to the prevailing rental value of buildings of various categories in a Zone and arrive at average monthly rent or yearly rent fixable for each category of building per square metre of plinth area. In respect of all multistoreyed buildings rent shall be fixed separately for the following categories:
(a) Cellar.
(b) Ground and first floor.
(c) Other floors (1A) The Commissioner may provide sub-categorisation of localities in a zone particularly for building used for shops and shopping & complexes abutting to the main roads, lanes and sub-lanes in Zones having commercial importance wherever necessary and warranted and fix separate rates for such buildings.
(2) The Commissioner shall then provisionally fix monthly or yearly rent for each category in a Zone per square metre of plinth area and notify the rate of monthly or yearly rental so fixed in Form-A for adopting the said rates for fixation of monthly or yearly rental of the buildings in a zone and publish the same in the District Gazette and in a local newspaper having circulation in the district calling for objections or suggestions from the Public for such adoption regarding the division of Municipality into Zones. The notification shall contain the monthly or yearly rental value of the buildings in a Zone together with the localities /areas with particulars of door numbers included in the Zone. The objections or suggestions, if any, on the said notification shall have to be sent to the Commissioner within 15 days from the date of its publication. The Commissioner shall consider the objections and suggestions, if any, received in response to the said notification and revise the Zones and the monthly or yearly rental values wherever necessary. He shall then place all the proposals before the District Level Advisory Committee constituted by the Government for its final recommendations. Thereupon the Commissioner shall publish a final notification in Form-A in the District Gazette and Local Newspaper having circulation in the District for information of the public."
Note:- Any notification issued prior to this amendment by the Commissioner shall be treated as a draft notification."
(Rule 2 was substituted by G.O.Ms.No. 374, Municipal Administration and Urban Development (MA), 7th July, 1992).
(2-A) ........ ................ ............ ...............
........ ................ ............ ...............
(3) The Commissioner shall obtain information of all buildings in respect of plinth area, type of construction, age of the building, nature of use and fix monthly or yearly rental value as per the rate of monthly rents 45 notified for each category of a building, in a zone. The property-tax assessment list of buildings shall be prepared in Form 'B'.
Under the scheme of the rules, the Commissioner gathers information relating to the prevailing rental value of the buildings of various categories in a Zone and determines the average monthly rent or yearly rent fixable for each category of buildings per square metre of plinth area. The provisions, which to some extent overlap each other, require the Commissioner to provisionally fix the monthly or yearly rent for each category in a zone per square metre of plinth area and notify the rate of the rental so fixed, either monthly or yearly, in Form 'A'. The purpose of the notification is to adopt the rate notified for fixation of monthly or yearly rental value of buildings in a zone and for information of the public. Objections are contemplated to be received to the rate provisionally fixed and to the zoning. On consideration of the objections and suggestions the Commissioner may revise the zones or rental value and is to place all proposals before the District Level Advisory Committee which is to make the final recommendation whereupon the Commissioner again is to publish a final notification in Form 'A'. After such publication the rate so fixed is applied to all buildings in accordance with the categorisation made and their location in the different zones. The tax assessment list is made in Form 'B'. Thus the scheme of the rules is that the rate per square metre of plinth area in the zone for each category of building is fixed after considering the public objections if any but once the rate is so fixed, the Commissioner is to apply the rate to individual buildings and fix the property-tax payable. At that stage no further opportunity is contemplated under the rules and the rate fixed is to be uniformly applied to the buildings in accordance with the categories and zone they belong.
3. Though originally endeavour was made by the learned counsel appearing for the petitioners to assail the constitutional validity of the amendments to Sections 212 and 87 of the respective Acts, yet they fairly did not pursue the submission and instead confined their arguments to the validity of the rules only. The submissions on behalf of the petitioners had been advanced by Mr. Venkataramana and by Mr. Bikshapathy. Mr. Venkataramana has urged the determination of the rateable value on the basis of the monthly or yearly rent fixed for square metre of plinth area to be not in accordance with the provisions of the Act and as inherently suffering from the defect of not representing the annual or monthly rent at which the buildings may reasonably be expected to be let. He hence submits the rules as ultra vires of the Act. The other submission urged by him is of the rules being discriminatory as suffering from the vice of treating unequals as equals and as being inherently incapable of making provisions for differences between buildings to buildings. Mr. Bikshapathy, while adopting the submissions of Mr. Venkataramana, also submits of the entire exercise undertaken in accordance with the rules to be illegal, as the provisions of Section 198 of the Corporations Act has not been followed. He also submits that as the legislative provision is to determine the rateable value on the basis of the gross annual rental at which the buildings are reasonably expected to be let, such rentals can only be determined with reference to rent control legislation for which no different provision can be made in the rules. Answering the objections raised, the submission of Mr. T. Anantha Babu, learned counsel for the Municipal Corporation of Hyderabad, whose arguments have also been adopted by all other counsels appearing for the Municipalities, is that the rules have made provision for determination of the annual rental value the mode of fixation of which is not provided under the Act. The amount or rate of tax is a matter exclusively within the judgment of the legislature and its reasonableness is outside judicial review. Since 1983 the Government of Andhra Pradesh has caused the issue of levying of taxes on buildings situated in the Municipal areas to be studied at depth by various agencies and departments. One such study was published by the Research Centre of Urban and Environmental Studies at Hyderabad in 1985. As a result of the study Section 212 of the Corporation Act was amended. In fixing the annual rental value the amended law has taken into consideration the decision of the Supreme Court in State of Kerala v. Haji K. Kutty, . The procedure for determination of the annual rental value in accordance with the rules regarding zoning, and the other steps, were undertaken after due notice and consideration of objections received for which time for fifteen days had been granted, but objections received even thereafter were also considered. Representations totalling 662 from various organisations like A.P. Chamber of Commerce and Industry, Association of House owners and Individuals were received. Representations of the Chamber of Commerce and rate payers association met the Minister and other officials and explained their view points and they were also considered. The Minister also discussed the issues involved with the Floor Leaders in the Assembly. Several concessions have been given like total exemption of tax for buildings occupied by owners upto annual rental value of Rs. 900/-, rebate for buildings aged more than 40 years to the extent of 30%, exemption to buildings owned and used as recognised educational institutions including charitable hospitals, rebate upto 40% to owner occupied buildings. Rate of vacant land tax has been reduced from 2% to 1% and percentage of taxes lowered in some cases. Besides Government has issued G.O.Ms. No. 168, M.A. on 23-3-1994 giving guidelines that while assessing property-tax when the property has been assessed earlier to 1st October, 1983 and has not been subsequently revised, the assessment by way of general revision is not to exceed 100% of the amount of tax payable on the property immediately before the 1st October, 1983, and where the property has been assessed after 1st October, 1983, the assessment of tax due to the general revision is not to exceed 75% of the amount of tax payable on the property immediately before 1st October, 1983 whether or not tax has been revised after 1st October, 1983. The exercise of the fixation of the taxes on individual houses is yet to take place and only the annual rental value per square metre of plinth area for the different zones has been fixed. The house owners have been asked to furnish information about the respective buildings in the appropriate forms which are being made available and it is only thereafter the assessments would be finalised. The provisions of Section 198 are not attracted as no tax is being levied for the first time.
4. The challenge under Section 198 of the Act finds place in paragraph of the writ petition to which reply is made in paragraph 12 of the counter- affidavit. Section 198 provides that before the resolution by the Corporation is passed imposing a tax specified in Section 197(1) for the first time or at a new rate, it shall direct the Commissioner to publish a notice in the Andhra Pradesh Gazette and in the local newspaper of its intention to do so and fix a reasonable period, not being less than one month from the date of publication of such notice in the Andhra Pradesh Gazette, for submission of objections. After consideration of the objections received within the period specified the Corporation is to pass the resolution to levy the tax and also specify therein the rate at which, the date from which and the period if any, for which/ the tax is to be levied.
5. Obviously all acts of the Corporation is to be by resolutions. If the decision is to levy a tax for the first time or to levy it at a new rate, it has to be by resolution passed for the purpose. Section 198 requires that before the decision is taken by the Corporation by way of resolution either to levy a tax for the first time or to levy it at a new rate, it has to direct the Commissioner to publish a notification inviting objections. Hence the section does not come into play unless either a new tax or a new rate of tax is being proposed. In paragraph 20 of the writ petition the pleading is that Section 198 requires notice inviting objections to be published before the Commissioner imposes taxes or revises the tax. The objection taken is that notice was given only for fifteen days instead of a minimum of thirty days. The pleading itself hence is misconceived as no such notice is required to be given when the tax is to be revised and not its rate. Admittedly either the Corporation or the Municipality is not imposing property-tax for the first time. Hence if the Corporation would have been changing the rate of the property-tax only, compliance of Section 198 was necessary. But revising the tax is a different matter. Under Section 199 the ceiling of the rate of tax is fixed between 15% to 30% i.e., it is not to be less then 15% or more than 30% of the rateable value. In the counter-affidavit the respondents have denied the applicability of Section 198 to the case. The submission made under Section 198 has no substance.
6. In the Corporations Act Sections 199 to 238 deal with levy of property- tax and various other provisions connected with it. The provisions of Section 199 have already been noticed. Section 204 onwards deal with liability to property-tax and reveal a complete scheme devised in the Act itself for determination of the property-tax payable on buildings and lands. The provisions of Section 212 providing for determination of the rateable value has been already referred to. Under Section 213 the Commissioner is vested with the power, for the purpose of determination of the rateable value as also of the person primarily liable for payment of the tax, to require the owner or occupier of the building or any portion thereof to furnish him information or written signed return regarding the name and place of abode of the owner or the occupier or of both, the dimensions of the building or land or of portion thereof and the rent, if any, obtained for such building, or land, or any portion thereof. An assessment book is to be maintained under Section 214 of the Act in which all the buildings either by name or number are listed and in which the rateable value of each building and land as has been determined under the earlier provisions (i.e., Sections 199, 212 and 213), the name of the person if ascertained as primarily liable for the payment of the property taxes and other matters are entered every financial year. Under Section 215 the assessment book is maintained separately for each ward. Section 218 provides that when the entries required by clauses (a),(b),(c) and (d) of Section 214 as has been referred earlier have been completed as far as practicable in a ward assessment book, the Commissioner is to give a public notice thereof and of the place where the ward assessment book or a copy of it may be inspected. The notice is to be published in the Gazette or the local daily newspapers and also by posting placards in conspicuous places throughout the ward. The assessment book remains open to inspection, under Section 219, free of charge to every person who reasonably claims to be the owner or occupier of the premises and also to take extracts without charge from portions of the book. For any person not entitled for free inspection extracts are permitted to do so on payment of fee. Section 220 directs giving of public notice of a day, fixed not earlier than twenty-one days of the publication of the notice, on or before which the complaints against the amount of rateable value as entered in the ward assessment book are to be filed. Under Section 222. all complaints are registered in a book and each complainant shall be given notice in writing of the day, time and place when and whereat his complaint shall be investigated. The next section says that the Commissioner is to investigate and dispose of the complaint in the presence of the complainant, at the time and place so fixed if the complainant appears, or if he does not, then in his absence. The complaint, when disposed of, the result is to be noted in the book of complaints kept under Section 222 and thereafter under Section 224, when all the complaints have been disposed of and the entries in clause (e) of Section 214 have been completed in the ward assessment book, the book shall be authenticated by the Commissioner who has to certify under his signature that except in the cases where amendments have been made to the entries as shown therein, no other valid objection has been made to the rateable value entered in the book. Upon such authentication by the Commissioner the assessment book shall be accepted as conclusive evidence of the amount of each property-tax leviable on each building and land, in the ward, in the financial year to which the book relates. The conclusive nature of the assessment book is subjected to under Section 225 to amendments made by the Commissioner during the financial year, as provided therein. The other provisions are not necessary for our purpose.
7. The Municipal Act however does not make such detailed provisions. While Section 85 vests power in the council to levy the property-tax and define the different components of the tax. Section 87 deals with method of assessment of property-tax which corresponds to Section 212 of the Corporations Act. In the section provision is made under sub-section(3) notwithstanding anything in the Andhra Pradesh Buildings (Lease, Rent and Eviction) Control Act, 1960, the gross annual rent at which the lands and buildings might reasonably be expected to be let from month to month or from year to year shall be determined by the Commissioner with reference to its location, type of construction, plinth area, age of the building, nature of use to which it is put and such other criteria as may be prescribed. Section 88 deals with the general exemptions.
8. As is seen the scheme of levy of property-tax is on the basis of annual rental value which is deemed to be the rateable value of the building. Such value is the gross annual rent at which the building may be reasonably expected to be let having regard to location, type of construction, plinth area, the age of the building, the nature of its use or other prescribed criteria. The 20 determination of rateable value hence has to be determined with respect to each individual building. In the Corporations Act the function of such determination belongs to the Commissioner who, for the purpose, has the authority to call for the informations or returns in respect of the buildings and maintains the assessment book. In the. Municipalities Act the tax is to be determined on identical basis in respect of each building and under the Municipalities Rules, the function of determination has also been assigned to the Commissioner. But under the provisions of both the respective rules, the determination of the rateable vaule though is made in respect of each building, yet the determination is itself made exclusively dependent upon the rate of rent fixed per square metre of plinth area determined under the rules. No doubt provision has been made in the rules for inviting public objections before the rate of rent of different types of buildings in different zones per square metre of plinth area is fixed and the objections, may relate either to the classifications of zones or to the rental value per square metre of plinth area fixed for each zone, but once the zones are fixed and the rates per square metre of plinth area after considering the objections, of the different classes of buildings in the zone are fixed, the Commissioner has no discretion but to fix the rental value of all buildings in the zone according to the rent fixed per square metre of plinth area. The fixation of the rate is done by the Committee constituted by the Government. The Commissioner is only to issue a final notification in Form-A regarding the rate of rent per square metre of plinth area in respect of different zones and classification of the buildings as is finalised by the Committee and thereafter fix the annual rental value in respect of all buildings in any zone only on the basis of the rate finally published in Form-A. Thus so far as the Corporations are concerned, the discretion and judgment of the Commissioner statutorily vested in him is taken over by the Committee constituted under the rules since in effect at both the stages i.e, the determination of the plinth area rate and also at the stage of actual determination of the annual rental value of each building the final decision is of the Committee. So far as the Municipalities are concerned, the exercise of all powers in relation to collection of taxes vests in the Commissioner under Section 56 (1) (d) of the Municipalities Act. Under Section 95 he has the authority, for the purpose of assessing property-tax, to call upon the owner or occupier of land or building by notice requiring him to furnish him with returns of the rent payable for the land and building etc. But the similar position is obtained under the Municipalities rules that the statutory function of the judgment vested in the Commissioner for determination of the annual rental value and the tax is taken over by the Committee constituted and functioning under the rules. The Committees are not bodies constituted under either of the Acts and are referred to only in the rules as being constituted by the Government. Such Committees cannot curtail the amplitude of the operation of the statutory functions to be discharged by authorities under the Act. It has hence to be held that determination of rent per square metre of plinth area by the Committee has no binding effect on the Commissioner and he has no obligation to follow such rates fixed by the Committee. Consequently it has to be held that even if the Commissioner may determine the rental value per square metre of plinth area which question I shall deal with next, yet such determination of his is not subject to any review of the Committee which has no power to exercise over the Commissioner in the matter. Consequently Form- A notifications having been made on the basis of the recommendations of the Committee cannot be allowed to survive.
9. But the question does not rest there. Challenge has been made on behalf of the petitioners to the very method of determination of the annual rental value on the basis of plinth area.
10. The question was considered in N.M.C.S. & W. Mills v. Ahmedabad Municipality, . wherein the Court held that the flat rate method according to the floor area could only be applied where the majority of properties are so nearly alike in character as to be regarded identical for rating purposes. It was observed that the method was not also one which was generally recognised by authorities on rating. Applied indiscriminately it is sure to give rise to inequalities.
11. The question again came to be considered in State of Kerala v. Haji K. Kittty (1 supra) wherein the Court took exception to the provision directing determination of the quantum of tax on the sole test of area of the floor of the building. Exception was taken to the fact that the Legislature had not made any attempt at any rational classification, had not taken into consideration the class to which the building belongs, the nature of its construction, the purpose for which it is used, its situation, its capacity for profitable user and other relevant circumstances which have bearing on matters of taxation and instead had adopted merely the floor area of the building as the basis of tax. The Court held :
"Where objects, persons or transactions essentially dissimilar are treated by the imposition of a uniform tax, discrimination may result, for, in our view, refusal to make a rational classification may itself in some cases operate as denial of equality"
In making the observations, the Court relied upon the decision in N.M.C.S. & W. Mills v. Ahmedabad Municipality (2 supra). In the judgment the Supreme Court pointed out the essential and inherent distinction between building to building which may vary according to their nature of construction, the type of materials used for the construction, the use to which it is put, the location, the potentiality of the profitable user and other relevant factors. Section 212 of the Corporations Act and Section 87 (2) of the Municipalities Act are apparently modelled on the decision of the Supreme Court in State of Kerala v. Haji K. Kittty (1 supra) having provided that the annual rental value is the gross annual rent which the building may reasonably be expected to fetch taking into account its location, type of construction, plinth area, age of the building and nature of the use etc. It would be seen that in both the sections the plinth area is one of the factors to be taken into consideration for determination of the rental value. But an attempt has been made in the rules not to treat it as one of the factors but to churn out a formula on its basis for determination of the annual rental value after classifying the building on the basis of other factors. The Supreme Court itself observed in N.M.C.S. & W. Mills v. Ahmedabad Municipality (2 supra) that the method is not one recognised by the authorities on rating.
12. The question where the statute requires the annual rental value to be fixed on the basis of the gross annual rent at which the building may be reasonably expected to be let has come up for discussion before the Apex Court in number of cases. The law which has been uniformly handed down by the Supreme Court is that where such is the statutory provision the annual rental value has to be fixed in the same way as the fair rent or standard rent is fixed under the respective rent control legislations of the State.
13. In Calcutta Municipality v. LIC of India, . the Supreme Court held relying upon the decision in Smt. Padma Deb's case, . that the gross annual rent at which the building or land might reasonably be expected to let can in no circumstances exceed the standard rent fixable under the rent control legislation and that it is immaterial whether the standard rent for the building has been actually fixed by the controller or not. Even if there is no order of the controller the standard rent, the Court held, stands determined by the definition of the expression in Section 2 (1) (b) of the West Bengal Premises Rent Control (Temporary Provisions) Act, 1950. Section 2(1) (b) of that Act defined standard rent, where it had not been fixed under Section 9, as the rent which would have been fixed if an application was made under Section 9. The same view was reiterated in the decision in Guntur Municipal Council v. Rate-Payers' Association, . in which Guntur Municipal Council was the appellant, saying that the test essentially is what rent the premises can lawfully fetch if let out to a hypothetical tenant and that the Municipality is not free to assess any arbitrary annual value and has to look to, and is bound, by the fair or standard rent which shall be payable for a particular premises under the Rent Control Act in force during the year of assessment. When the Controller has not fixed the fair rent, the municipal authorities will have to arrive at their own figure of fair rent in accordance with the principles laid down in the Rent Control Act.
14. The question was again considered in Balbir Singh v. M/s. M.C.D., (1935) 1 SCC 167. wherein the Court said that the principle for determination was the annual rent at which the properties may reasonably be expected to be let to a hypothetical tenant from year to year less certain deductions so as to arrive at the rateable value under the Municipalities Act and that in making the determination the standard rent determined in accordance with the Rent Act would serve as the upper limit within which the reasonable rent has to be fixed. In paragraph 11 of the judgment Justice P.N. Bhagawati, who delivered the judgment, observed:
"The rateable value of the premises, whether residential or non- residential, cannot exceed the standard rent, but, as already pointed out above, it may in a given case be less than the standard rent. The annual rent which the owner of the premises may reasonably expect to get if the premises are let out would depend on the size, situation, locality and condition of the premises and the amenities provided therein and all these and other relevant factors would have to be evaluated in determining the rateable value, keeping in mind the upper limit fixed by the standard rent."
15. Thus the Court was categorical in its assertion that the standard rent fixed under the rent control laws would be the maximum but that the annual rental value may be below it depending upon the factors pointed out. What was being stressed by the Supreme Court was that the fixation of the annual rental value is an individual and independent exercise for different houses taking into account the various factors pointed out.
16. Morvi Municipality v. State of Gujarat, . was a case where the rules of the Municipality ran counter to the interpretation by the Supreme Court of the expression "annual letting value". The Court said that in different decisions of the Apex Court it had been consistently held that it is not the value of occupation of the property to the tenant, but the rental income from it to the owner which is to be taken into consideration while estimating the reasonable return that a landlord can expect from his property. It is the annual standard/ fair rent which alone can form the basis of the assessment of the property tax by the local authority. Rule 5, to the extent it said that the actual rent received is to be taken into consideration for fixation of the annual letting value, even if it is in excess of the standard rent fixed under the rent control legislation, is contrary to the interpretation because of which the Court confined the application of Rule 5 only to such properties which are not governed by the rent control legislation making it clear that as far as the properties which are amenable to the provisions of the Rent Control Act are concerned, their annual letting value was to be calculated only on the basis of the standard rent determined or determinable under the Rent Control Act.
17. From the resume' of the decisions as above, the principle which is clearly deducible is that where the statutory provision for determination of annual rental value is defined as the gross annual rent at which the building may reasonably be expected to be let either from month to month or year to year, the maximum of the annual rental value, where the building is governed by the rent control legislation, is the standard rent fixed or fixable under the Rent Control Act and that if there is a rule to the contrary it cannot be allowed to hold the field. However if the provisions of the Rent Control Act are excepted by the legislation, the provisions otherwise made by the statute for fixation of annual rental value would operate. The conclusion is fortified directly by the decision of the Supreme Court in Indore Municipality v. Ratnaprabha, AIR 1977 SC 308. wherein Section 138 (b) of the M.P. Municipal Corporation Act was considered. The provision ran as "The annual value of any building shall notwithstanding anything contained in any other law for the time being in force be deemed to be the gross annual rent at which such building, together with its appurtenances and any furniture that may be let for use or enjoyment there with might reasonably at the time of assessment be expected to be let from year to year......". The Court held that it would be proper interpretation of the provisions to hold that where the standard rent of a building had been fixed under Section 7 of the Rent Control Act and there was nothing to show that there had been any fraud or collusion, that would be its reasonable letting value, but where that is not so and the building has never been let out and is being used in a manner where the question of fixing its standard rent does not arise, it would be permissible to fix its reasonable rent without regard to the rent control law. The principle deducible hence is that where the legislation itself makes exception to the applicability of the rent control legislation in determination of the annual rental value but the standard rent in respect of any building has been fixed under the rent control legislation, that would be its reasonable letting value unless there is any fraud or collusion, but that in other cases the annual rental value has to be fixed under the provisions of the law relating to determination of property-tax.
18. Such an exception has been made so far the present case is concerned, in Section 87 (3) of the Municipalities Act that notwithstanding anything in the Andhra Pradesh Buildings (Lease, Rent and Eviction) Control Act, 1960 (referred hereafter as A.P. Rent Control Act) the gross annual rent at which the lands and buildings might reasonably be expected to be let has to be determined by the Commissioner with regard to the different factors like location, type of construction etc. Hence the principle as above would apply to the exception so that if in respect of any building in the municipality areas, the standard rent has been fixed under the Rent Control Act and there is no fraud or collusion, the annual rental value of the building, has to be determined on that basis, but otherwise in respect of other buildings, it has to be fixed only in accordance with the provisions of Section 87(2) of the Municipalities Act. But in respect of buildings in the corporation areas the annual rental value has to be determined by the Commissioner keeping in view the different factors having stated in Section 212 of the Corporation Act subject to the maximum of the amount either fixed, determined or determinable under the provisions of the Rent Control Act.
19. There is also exemption under the A.P. Rent Control Act by notification of the Government in G.O.Ms.No. 636, General Administration (Accommodation-A) Department, dated 29th December, 1983, of the Act not to apply to buildings within ten years of their construction and to buildings the monthly rent of which exceeds Rs. 1,000/-. The G.O. has been issued under the provisions of Section 26 of the Act which confers power upon the Government to exempt buildings. The exemption so made only temporarily suspends the application of the Act to such buildings but at any time may be revoked by the Government. It does not amount to a legislative bar for applicability of the Rent Control Act as in Section 87(3) of the Municipalities Act. Hence despite the exemption, the principle decided in the decision of the Supreme Court shall apply in fixing the annual rental value to the exempted buildings also so far as the Corporation is concerned.
20. Still the further question remains whether the Commissioner cannot at all resort to the plinth area method in determination of the annual rental value either for buildings to which the Rent Control Act applies or for those to which it does not. It has been seen that it is not one of the recognised modes by the valuation authorities. In Municipal Corporation of Greater Bombay v. R.W. Turf Club, . the Court in paragraph 5 listed the several wellknown methods of rating as the comparative method, the contractor's method, the unit method and the profits basis method. In making the list the Court had referred to Ryde on Rating 11th Edition at page 398. In Halsbury's Laws of England, Fourth Edition, Volume 39 reference has been made to (1) Actual rent as evidence of value; (2) Valuation on the profits basis; (3) Valuation with reference to cost of construction or structural value; and (4) Evidence of assessments of comparable hereditaments. Even in the book submitted by the learned counsel for the respondents. Restructuring of Property Tax Administration by MA. Muttalib and Mohd. Akbar Ali Khan, as the result of a study commissioned by the Government of Andhra Pradesh, the summary of recommendations in Chapter 9 does not suggest the plinth area method as one to be adopted. It was stated that "the rateable value should be worked out on the basis of the fair and reasonable rent of the property. This rent may be determined by adopting either the comparative method, contractor's test method, or profit basis method in respect of unlet properties. In the case of let out properties, actual evidence of rental value is taken as the prima facie evidence for working out the rateable value. Further, the rate should be on a graduated scale basis for all kinds of properties put to different uses."
21. The Commissioner having the function to determine the rateable value, has to do so by gathering informations relevant as aid to the determination. The plinth area method though is not a recognised one yet gathering of the informations in the manner stated in Rules 4 to 6 of the Rules by making the classifications and arriving at a formal table of plinth area rate as a tentative conclusion to primarily aid and assist the Commissioner to fix the annual rental value cannot be said to be contrary to the provisions of the statutes. The provision of the statute itself authorises the Commissioner to gather informations. The provisions in Rules 4 to 6 only further aid to formulate some sort of data to fix the valuations. Considering the enormousity and complexity of the problem not only because of the number of houses and lands involved but also because of the appreciation necessary of the differences between different types of buildings, and the requirement that the rental value is to be fixed having regard to the location, type of construction, plinth area, age of the building, nature of use to which it is put etc, no exception can be taken if the rules devise the method to guide the Commissioner in his duties to arrive at a conclusion. The conclusion however must necessarily be tentative and cannot be regarded, as is directed under the rules, to be final and conclusive compulsorily requiring the Commissioner to determine the annual rental value only as per the rate fixed per plinth area as in Form-A. To that extent the rules are inconsistent with the statute. There is intrinsic difference between houses to houses and even in a particular zone, two houses similarly constructed but located at different sites in the zone may fetch different rents. The possibility of differences are myraid which cannot be properly taken account of by an uniform fixation of plinth area rate. The matter was squarely summed up by the Supreme Court in Centry S. & M. Co. v. Ulhasnagar Municipality, . wherein considering assessment on the basis of flat rate on carpet area, the Court said in paragraph 10:
"The annual letting value can be arrived at by any one of the recognised methods. Neither the Rules nor Schedule I constrict the Municipality to adopt anyone particular method of arriving at the annual letting value. It may well be that a flat rate on the carpet area may correspond to the annual letting value of a building in which case it would be the annual letting value as provided by Schedule I which would be the basis of assessment. If it is not, the owner or occupier of the building can legitimately challenge the assessment on the ground that such assessment on the basis of flat rate on the carpet area does not reflect the annual value so calculated. The question is at best one of calculation, viz., whether considering other similar buildings in the locality, their hypothetical rents and other data calculation of the house tax on the basis of carpet area at a flat rate corresponds to their annual letting value."
22. Hence whatever may be the determination on the basis of the plinth area, it would always be open to the assessee to show that the rateable value so determined does not represent the correct picture and that the actual letting value is less or would be less, or that the rateable value fixed by the Commissioner is higher than the fair rent already determined or determinable under the Rent Control Act. If the assessee raises such questions it has to be decided by the Commissioner taking all relevant facts, as are submitted by the assessee, into consideration and he cannot be allowed to say that because I have already fixed the plinth area rate, I will only stick to that and fix the rateable value accordingly. The provisions of the Act itself provide for hearing of the complaints and decision by the Commissioner. Section 218 of the Corporations Act provides, as has been seen, that after entries have been made m respect of the respective matters in clauses (a), (b), (c) and (d) of Section 214, the Commissioner is to give public notice and that complaints can be filed against the amount of rateable value entered in the ward assessment book. The complaints are to be heard and decided by the Commissioner. Such powers of the Commissioner could never be negatived under the rules.
23. Since because such conclusions are reached, that the provisions of Rule 7(4) of the Corporation Rules and Rule 7(3) of the Municipalities Rules requiring the Commissioner to fix the rental value as per the plinth area has to be read down, without declaring them ultra vires, as only providing for fixation of prima facie annual rental value without any finality attached to it. It will be always open to the assessee to question the same on the basis of relevant facts. The Municipalities Act does not provide for the Commissioner to invite any objections or to hear the assessee in determining the rateable value nor provides for any appeal as is provided for under the Corporations Act. In the Corporation Act the appeal provision is Section 282. Hence Section 87(3) of the Municipalities Act will have to be interpreted, in consonance with the principles of natural justice, as being the necessary part of it, that before any determination is made, the assessee is to be heard. Neither the Rules nor the Act provides for it. Under the rules the assessee is heard only at a stage of determination of the plinth area rate but not when the actual determination of the rateable value of his building is made. Since the actual determination is made in Section 87(3) and natural justice must be read as a part of it, it must necessarily be held that the Commissioner before making the determination has to issue notice, hear the assessee and then determine the rateable value.
24. Though Writ Petition No. 1586 of 1993 has been listed along with this batch of cases yet it raises a different question than are agitated in the common batch. The said writ petition deals with the 74th Amendment of the Constitution and the attempt at revision of the property-tax though there has been no election to the Municipal Corporation and such action being contrary to the 74th Amendment of the Constitution. As the question raised in this case is different, it is not decided herein and is deleted from the batch and may be put up for hearing independently before an appropriate Bench.
25. As a result of the aforesaid discussions the conclusions reached are:
(1) The power for determination of the rateable value of the building and the property-tax belongs to the Commissioner which cannot be fettered by rules framed under the Acts.
(2) The Committee constituted by the Government has no role to play and the Commissioner is not bound by their recommendations:
(3) The annual rental value to be fixed by the Commissioner in the corporation areas shall be limited to the fair rent either determined or determinable under the A.P. Buildings (Lease, Rent and Eviction) Control Act.
(4) Subject to the maximum as above the Commissioner may fix a lesser annual rental value keeping in consideration the factors as provided for in Section 212 of the Corporations Act.
(5) The annual rental value in respect of all buildings in municipal areas, where rent has been determined under the rent control legislation, would be the gross annual rental on the basis of such rent determined unless there is any fraud or collusion and that in respect of other buildings in the municipality areas, the Commissioner has to determine the amount keeping in consideration the factors under Section 87(2).
(6) In determining the annual rental value the Commissioner may resort to plinth area method so as to serve him as a basis and guide but it will be open to the assessees to contest the annual rental value, rateable value or property-tax determined in respect of their buildings and when objections are raised, the Commissioner has to decide those objectively without fettering his discretion because of the determination already made on the basis of the plinth area method.
(7) Rules 3 to 7 of the Corporation and the Municipal rules are to be read only as enabling provisions for the Commissioner to aid him in discharge of his functions under the Corporation or the Municipal Act to arrive at working figures for the purpose of determination but not as fettering his discretion in the matter as conferred upon him under the statutes.
(8) The Form-A publications already made would be deemed to have been issued by the Commissioner only on such basis as is stated above and not in pursuance of recommendations of the Committee.
(9) Before Form-B is issued in respect of the buildings and lands, the Commissioner shall afford opportunity to the assessees to object to the determinations made and shall decide the objections on considerations as directed above and provisions of Sections 214 to 225 of the Corporations Act shall be scrupulously followed subject to the provisions of appeal.
26. Some argument was purported to be advanced regarding the proviso to Section 269 (2) as regards levy of penalty for non-payment of property- tax levied. Since the question has not yet arisen, as no tax has been yet levied, the question is left open.
27. In the result the writ petitions are allowed to the extent indicated above, but in the circumstances there shall be no order as to costs.