Madras High Court
Coimbatore Municipal Corporation vs K.G. Arts Centre Private Limited on 1 September, 1995
Equivalent citations: (1996)1MLJ112
ORDER Raju, J.
1. The above revision has been filed by the Coimbatore City Municipal Corporation against the judgment of the learned District Judge, Coimbatore, dated 15.6.1986, in C.M.A. No. 66 of 1985, modifying the order of the Chairman, Taxation Appellate Committee made in Appeal No. 6/83-84/II A-6, dated 30.1.1986. The property which is the subject-matter of assessment of tax under the Coimbatore City Municipal Corporation Act is a Cinema Theatre 'Ragam, Thanam and Pallavi' situated at door No. 3, Bungalow Road at Coimbatore, Race Course Area, Coimbatore City. It was said to have been originally assessed on an annual rental value of Rs. 88,801 and the assesses was directed to pay property tax of Rs. 1,107.75 as per half year. The respondent was assessed to property tax, treating the property as a company, carrying on business under the name and style of K.G. Arts Centre, incorporated under the Companies Act of 1956 having purchased the property under two sale deeds, dated 20.8.1979. It is stated that the building originally existing on the property was demolished and a composite cinema theatre Complex, where three cinema theatres are housed had been constructed in the year 1981. The cinema theatres after the completion of the construction came into existence on and from 1.5.1981. On 19.8.1983 the appellant was served with a special notice bearing No. 71168 under Rule 9 of the Municipal Rules revising and enhancing the annual rental value from Rs. 88,801 to Rs. 4,44,448 and the tax liability has been enhanced from Rs. l,107.75 to Rs. 55,444.90 with effect from 1.10.1981.
2. The respondent appears to have preferred a revision petition to the Commissioner of the petitioner Municipal Corporation on 1.9.1983 objecting to the enhancement. On considering the same, the Commissioner of the petitioner Corporation passed the order in the revision petition on 31.1.1984 reducing the tax liability to a sum of Rs. 54,434.45. Thereupon, the respondent filed an appeal to the Chairman, Taxation Appeals Committee of the Municipal Corporation, Coimbatore. The Chairman of the Taxation Appeals Committee, by his order dated 30.1.1985 set aside the order of the Commissioner dated 31.1.1984 and remitted the matter back to the Commissioner for fresh disposal with the observation that the capital value as mentioned in Proviso (a)(ii) to Section 122(2) of the Act should be adopted for assessing the quantum of property tax and that the respondent shall be given liberty to let in further documentary evidence to substantiate the case with reference to the market value of the site or land, and the present cost of the building including electrical fittings, sanitary fittings, furniture, generators, air-condition plant, fire fighting equipments etc. It may be noticed even at this stage that when the respondent filed an appeal before the Taxation Appeals Committee it sustained the plea of the respondent that the assessment of tax should be by adopting the capital value method and not the annual rental value method. The Taxation Appeals Committee also, as noticed earlier, remitted the matter for the consideration afresh of the Commissioner of the Municipal Corporation in the following terms:
In the result, the appeal is allowed in part, and the order of the Commissioner dated 31.1.1984 is set aside, and it decided that the rental value as provided in Section 122(2) of the Coimbatore Municipal Corporation Act 25 of 1981 cannot be adopted for the property in question, and instead the capital value as mentioned in the proviso (a)(ii) to Section 122(2) of the said Act should be adopted for the property in question, and this case is remanded back to the Commissioner for fresh disposal in the light of the observations made in this appeal decision, and the appellant shall be given suitable opportunity to let in documentary evidence to substantiate his case with reference to the market value of the site or land and the present cost of erecting the building including electrical fittings, sanitary fittings, furniture, generators, projectors, air-condition plant, fire fighting equipments etc., and the tax shall be assessed accordingly and break up figures for each item are to be given in the order to be passed by the Commissioner. The order must speak for it self on what basis the tax was assessed and how the tax was calculated and arrived out.
Not satisfied with the relief granted, the respondent pursued the matter further before the learned District Judge, Coimbatore. The learned District Judge, after considering the submission of the petitioner as also the respondent, set aside the order of the Taxation Appeals Committee, and has undertaken the task of fixing the annual value for the assessment of tax and determined the half yearly tax due from 1.10.1981. The determination was made adopting the annual letting value basis in contrast to the capital value method adopted by the Taxation Appeals Committee at the very request of the learned Counsel appearing for the respondent before it. Even to such a claim, the learned District Judge was of the view that the annual letting value method alone should be applied relying on the decision reported in Rajalakshmi Mills Limited v. Singanallur Municipality , and that there was no material produced by the petitioner Corporation before the court that other theatres in Coimbatore City have been assessed on the basis of capital value by producing any relevant documents. As a matter of fact, the learned District Judge had chosen to take into account the comparative statement of the taxes assessed in respect of similar theatres in Coimbatore City to arrive at the quantum of tax liability in respect of the respondent assessee.
3. Aggrieved against the order of the learned District Judge, the above revision has been filed under Section 115 of the Code of Civil Procedure.
4. Mr. P.M. Baskaran, learned Counsel for the petitioner Municipal Corporation contended that the decision in Rajalakshmi Mills Limited v. Singanallur Municipality , relied upon by the learned District Judge has come to be overruled a Full Bench of this Court in the decision reported in Singanallur Municipality v. Vasantha Mills Limited and that therefore, the order of the learned District Judge in so far as it purports to adopt for assessment of the property tax the annual letting value method is contrary to law. The learned Counsel also contended that as per the decision of the Full Bench, it is only the capital value method that has to be adopted and the respondent who was a claimant before the Taxation Appeals Committee for adopting such capital value method cannot be permitted to take inconsistent stand later to contend before the learned District Judge that the annual letting value method should be adopted. As far as the merits as also the correctness of the determination of the tax liability made by the learned District Judge, is concerned it was contended for the petitioner Corporation that the learned District Judge, in any event, ought to have remitted the matter for fresh consideration in the light of the materials on record with liberties to both sides as granted by the Chairman of the Taxation Appeals Committee, and ought not to have itself undertaken the exercise of determining the quantum of tax. On the above submission, it has been contended for the petitioner that the order of the learned District Judge is liable to be set aside and the order of the Taxation Appeals Committee should be restored.
5. Mr. S. Parthasarathy, learned Counsel appearing for the respondent contended that it is not correct for the petitioner to contend that the learned District Judge has chosen to apply the basis of annual letting value to determine the property tax only on the basis of the decision reported in Rajalakshmi Mills Limited v. Singanallur Municipality . According to the learned Counsel, the fact that the Municipal Corporation was unable to demonstrate that the other theatres in Coimbatore City Municipal Corporation were assessed on the capital value method also weighed with the learned District Judge and that therefore the submission of the learned Counsel for the petitioner does not merit countenance. On the merits of the actual determination of the tax liability the learned Counsel for the respondent contended that no objection could be taken to the well considered order of the learned District Judge, in that he has taken into account the stand and valuation adopted by the Commissioner of the City Municipal Corporation in respect of the other theatres situated in the Coimbatore City Limits.
6. The learned Counsel appearing on either side placed before me some judicial pronouncements in support of the respective stand and the reference to them can be made hereinafter. In General Committee, Madras Club v. City Municipal Council (1954) 1 M.L.J. 671, a Division Bench of this Court had occasion to deal with a specific provision in the Madras City Municipal Act, 1919 similar to the one now under consideration before me. It was held, therein that it is not sufficient that a building has actually not been let to bring it within this category of buildings of a class not ordinarily let and that the buildings which are contemplated as belonging to that class are buildings not ordinarily let as buildings like temples, memorial buildings, etc.
7. In Salem Municipal Council v. Subramaniam , another Division Bench of this Court had occasion to consider the valuation and fixation of the tax liability in respect of a cinema theatre under the provision of the Madras District Municipalities Act, 1920. It may be stated at this stage that the Division Bench held that the annual value of the building should be arrived at taking into account all factors necessary to find out what would be the probable rent of the building which a prospective tenant would be willing to pay for the building, if let out. A perusal of the above said Judgment would go to show that though the assessment therein and rate of tax related to a cinema theatre, the question of the nature that has been now raised in this proceeding has not been raised or considered in that case. In this decision, the learned Judges of the Division Bench have also adverted to the decision of the Bombay High Court dealing with valuation of the cinema theatres for the purpose of assessment of property tax under the Bombay Municipal Act which provided, besides the tests of actual rent received or rent of similar theatre in the City, that the value could be arrived at a percentage of the net profits earned from the theatre for the year in question. The said judgment of the Division Bench turns more on the principle of comparative assessment of similar property in the locality.
8. In Rajalakshmi Mills Limited v. Singanallur Municipality , a learned single Judge of this Court had considered in great detail the question in the manner now sought to be raised, with reference to the assessment under the Madras District Municipalities Act, though in respect of a Ginning Factory. It was held therein as hereunder:
The result, therefore, is that on a proper construction of Section 82, Sub-clause (2) of the Act the executive authority will first have to determine whether any of the appellants buildings belong to a class of buildings not ordinarily let in the light of the observations contained in the General Committee, Madras Club v. The City Municipal Council of Madras (1954) 1 M.L.J. 671. It may be seen that in liquidation proceedings of companies like that of the plaintiffs arising under the Companies Act, 1956, leases to run such companies to safeguard the interests of creditors have frequently been ordered by courts. The assumption that such buildings fall under the category of building not ordinarily let is erroneous. Further the plaintiffs buildings do not fall under the category of buildings nor ordinarily let like temples, memorable buildings etc. The executive authority must therefore ascertain the annual value of the lands and buildings belonging to the plaintiffs in each of the cases on the basis provided under the main part of Sub-clause (2) and not to adopt the contractor's method. The executive authority of the defendant Municipality acted erroneously in assuming that it was in his discretion to adopt any of the methods available to them.
9. In Singanallur Municipality v. Vasantha Mills Limited , a Full Bench of this Court has considered the decisions reported in General Committee, Madras Club v. The City Municipal Council of Madras (1954) 1 M.L.J. 671, Addison Paints and Chemicals (P) Limited, Madras v. The Commissioner, Corporation of Madras and Rajalakshmi Mills Limited v. Singanallur Municipality and had chosen to overrule the decisions reported in Addison Paints and Chemicals (P) Limited, Madras v. The Commissioner, Corporation of Madras and Rajalakshmi Mills Limited v. Singanallur Municipality . The Full Bench was also considering the question in the context of Section 82(2) proviso to the Tamil Nadu District Municipalities Act, 1920 with reference to the Assessment of a Mill. The learned Judges of the Full Bench in determining the principle to be adopted for assessment of the property tax under the two different methods have held as follows:
We however, find it necessary to deal with the decisions which have been rendered by this Court and the misunderstanding of those decisions by the lower appellate court. In the General Committee, Madras Club v. The City Municipal Council of Madras (1954) 1 M.L.J. 671, a Bench of this Court had to construe the proviso to Section 100(2) of the Madras City Municipal Act which is in pari materia with the language of Section 82(2) with which we are now concerned. The question before the Bench was whether the building of the Madras Club would fall within the proviso to Section 100(2). The Chief Judge of the Court of Small Causes found that the building could be leased out both for residential and business purposes. It was not contended before him that the building could not be let out, if so desired. The Bench of this Court observed-
In our opinion, the building does not fall within the scope of Sub-section (2) of Section 100 and does not fall within the scope of proviso (a)(ii) of Sub-section (2). The Bench observed that the proviso laid down a particular method of valuation for any building of a class not ordinarily let, the gross annual rent of which cannot in the opinion of the Commissioner be estimate. In construing these words, the Bench observed:
We are clearly of the opinion that the building in question cannot be held to be a building of a class not ordinarily let. It is not sufficient that a building has actually been not let to bring it within the category. So many buildings in which the owners reside are not ordinarily let nor even ordinarily intended to be let. But they certainly do not belong to the category of buildings, of a class not ordinarily let. The buildings which are contemplated as belonging to that class are buildings like temples, memorial buildings etc., with respect we fell that the above observations correctly lay down the law. The question whether a building belongs to a class not ordinarily let out has to be decided with reference to the purpose for which it was put up and the purpose for which it is used. The two examples, given by the Bench are illustrative, and not exhaustive. Buildings like temples and memorial buildings are buildings of a class not ordinarily let, but certainly they are capable of being let and the question whether they are capable of being let or not is irrelevant. In purporting to follow the above decision, a later Bench of this Court in Addison Paints and Chemicals v. Commissioner Corporation of Madras stated as follows:
"In this case unfortunately the learned Chief Judge of the Court of Small Causes has based his conclusion on the short ground that the building is not actually let. He has not considered whether the building is capable of being let." This test, whether the building is capable of being let out or not, is erroneous and does not reflect the correct position of law as laid down in Section 82(2) of the Act. The observations of the Bench have misled a single Judge of this Court in Rajalakshmi Mills Limited v. Singanallur Municipality to apply the test whether a building is capable of being let. The building in that case was also mills and the learned Judge after referring to the General Committee, Madras Club v. City Municipal of Madras (1954) 1 M.L.J. 671 observed, "It may be seen that in liquidation proceedings of companies like that of the plaintiffs (mills) arising under the Companies Act, 1956, leases to run such companies to safeguard the interests of creditors have frequently been ordered by courts. The assumption that such buildings fall under the category of buildings not ordinarily let is erroneous." The learned Judge proceeded to construe the Bench decision as restricting the class of buildings not ordinarily let to temples and memorial buildings. We are of the opinion that this decision has been erroneously rendered, as the test is not whether a building is capable of being let, but whether it belongs to a class not ordinarily let. In the result we hold that the decision in the General Committee, Madras Club v. City Municipal Council, Madras (1954) 1 M.L.J. 671, has correctly laid down the law and that the test applied in Addison Paints and Chemicals Limited v. Commissioner, Corporation of Madras , whether a building is capable of being let or nor is erroneous. We also overrule the decision in Rajalakshmi Mills Limited v. Singanallur Municipality .
10. On a careful consideration of the various decisions placed before me they would go to show that it has been authoritatively laid down by the Full Bench of this Court that the question whether the building belongs to a class not ordinarily let out has to be decided with reference to the purpose for which it was put up and the purpose for which it was used and not whether they are capable of being let or not. The Full Bench reiterated the very same proposition, holding that what has to be seen is not whether a building is capable of being let out but whether it belongs to a class not. ordinarily let. On the said declaration of law of the Full Bench, which is not only binding on me but also seems to be in keeping with a scheme underlying the assessment of the property tax on different categories of buildings if the test of capability of being let is to be taken into account, there will be hardly any property which would stand out of the category of buildings. "Ordinarily let" and, therefore, in my view, the learned Judges of the Full Bench have rightly held that the test should be more on whether it belongs to a class not ordinarily let and not whether it is capable of being let. The fact that some such category of buildings one at times also let is not the indicator or but it has to be seen whether in the large majority of cases or usually or regularly such buildings are let in order decide whether it is not ordinarily let.
11. Finding that the Full Bench decision has overrules the decision which has been relied upon by the learned District Judge and therefore, there is no way out the learned Counsel for the respondent tried to contend that the Full Bench and the other decisions only related to the assessment to property tax of a mill and not the cinema theatre and that, therefore the decision of the Full Bench will have no adverse impact on the decision rendered by the learned District Judge.
12. The learned Counsel for the respondent also relied upon a decision of the Division of the Calcutta High Court, reported the Commissioner, Asansol Municipality v. Kinema Industries (P) Limited , a perusal of the judgment would go to show that though the property assessed therein appears to be a theatre, the question was not considered in the manner in which it is now placed before me. On the other hand, the question before the Division Bench of the Calcutta High Court was with reference to the determination of the annual letting value by adopting the rent of comparable units in the locality. On that view of the matter, this decision can be of no further assistance to the stand taken for the respondent in this case.
13. On a careful consideration of the various decisions placed before me, I am of the view that the preposition of law laid down by the Full Bench of this Court in the decision reported in Singanallur Municipality v. Vasantha Mills Limited , squarely applies to the category of buildings now under consideration before me in this case i.e., a cinema theatre. On a matter of principle, I could not see any or such difference between the assessment of a mill premises or a cinema theatre premises to property tax nor was there any such basic differences in the two categories or these classes of buildings been pointed out with any particular reference to the need, desirability or necessity to treat them differently and adopt different methods of assessment. Though the learned District Judge has pot placed exclusive reliance upon the decision of this Court in Rajalakshmi Mills Limited v. Singanallur Municipality for coming to the conclusion that the property in question has to be assessed by adopting annual letting value method, the other reasons, assigned by the learned District Judge do not also appear to be either sound or reasonable in law. The fact that the other or similar properties in the locality were assessed in the same manner as the property in question was assessed at the earlier stage, by and opting annual letting value method is no justification to mechanically and for that only reason to adopt such valuation of the property is dispute in this case. When the respondent alone has chosen to challenge the legality and propriety of applying the particular method to the case on hand, whatever may be the method adopted in respect of the other similar property in a local area it becomes necessary to objectively and legally consider the issue regarding the correct method applicable in the respondents case and not avoid deciding the same by falling back upon the factum of assessment in respect of some other items of property though of similar class or category as the one under consideration when the other assessments have not been tested by the assessees therein with reference to the legality of the basis adopted. May be, if the principle is settled in the case of the respondent, the petitioner Corporation will be at a liberty to adopt the same method in respect of the other items of properties similarly situated.
14. In the light of the foregoing discussion and the views expressed by me, I hold that applying the ratio of the decision of the Full Bench of this Court reported in Singanallur Municipality v. Vasantha Mills Limited , the cinema theatre in question belonging to the respondent is liable to be assessed under the method applicable to a "class of buildings not ordinarily let" i.e., by adapting the capital value method, and to this extent the order of the learned District Judge is hereby set aside.
15. The order of the learned District Judge is also liable to be set aside on account of the exercise undertaken by him to determine the annual value as also the quantum of house or property tax leviable in respect of the property in question. At the most, the learned District Judge, if at all, should have only declared the position regarding the correct method to be adopted applied and left for consideration regarding the quantum by a fresh determination by the Commissioner after lying down the principle or guidelines for the same.
16. As the second appellate authority the learned District Judge ought not to have usurped the jurisdiction of the assessing authority in that regard. I am of the view that the order of the chairman, of the Taxation Appeals Committee, seems to be more reasonable in the said authority remitting the matter for fresh consideration to the file of the Commissioner. Further, the claim on behalf of the respondent about the adoption of comparative valuation principle is one to be urged before the Commissioner with the relevant materials and it is for the Commissioner to advert to the same and objectively consider all the claims made or if any to be made pursuant to the order of remand to the file of the Commissioner as is expected of him as a quasi judicial authority, dealing with assessment of property tax.
17. For all the reasons stated above, the order of the learned District Judge is set aside and the order of the Chairman, Taxation Appeals Committee shall stand restored and the proceedings shall stand remitted to the Commissioner for considering afresh and the merits of the contentions pertaining to the quantum of assessment alone is left open to be agitated and decided by the Commissioner and thereupon by the various authorities and avenues constituted under the Act.
18. The revision petition shall stand allowed on the above terms. No costs.