Delhi District Court
Sh. Kirti Abrol vs New Delhi Municipal Council on 7 October, 2020
IN THE COURT OF DINESH KUMAR SHARMA,
PRINCIPAL DISTRICT & SESSIONS JUDGE, PATIALA
HOUSE COURTS, NEW DELHI
In the matter of :
HTA No. 36/18
Sh. Kirti Abrol
S/o Late Sh. Chander Prakash
R/o B2/200, Safdarjung Enclave
New Delhi110 029. .....Appellant
Versus
New Delhi Municipal Council
House Tax Department
9th Floor, Palika Kendra, Sansad Marg
New Delhi110 001. .....Respondent
Date of filing of appeal : 06.11.2017
Date of arguments : 01.10.2020
Date of judgment : 07.10.2020
JUDGMENT
1. Vide this judgment, I propose to dispose of the aforesaid appeal filed under Section 115 of the New Delhi Municipal Council Act, 1994 ("NDMC Act" in short) against the impugned order dated 04.09.2017 passed by Dy. Director (Tax)/Assessing Authority, whereby the Rateable Value of premises bearing No. Shop/Flat No. 61, Sarojini Nagar Market, HTA No. 36/18 Kirti Abrol Vs. NDMC Page No. 1 of 17 New Delhi, was fixed at Rs.43,80,500/ w.e.f. 01.04.2018 onwards.
2. The impugned order dated 04.09.2017 has been challenged on the ground that the same is erroneous, arbitrary and is based on a patently incorrect interpretation of Section 63 of the NDMC Act, 1994. The appellant has challenged the impugned order predominantly on the grounds that it makes a distinction between selfoccupied properties and tenanted properties for the purpose of fixation of rateable value and that the NDMC has completely ignored the provisions of Section 63 of the NDMC Act while passing the impugned order, which is the only provision in the Act for fixation of rateable value. The appellant has submitted that NDMC has no jurisdiction to assess the rate on the actual rent received. The appellant has also submitted that the method to fix the rateable value on the basis of annual rent formed part of the New Delhi Municipal Council (Determination of Annual Rent) Byelaws, 2009, which have been held to be illegal and invalid by the Hon'ble High Court of Delhi in the Writ Petition filed by the appellant bearing W.P. (C) No. 2001/2016 titled Kirti Abrol & Anr. Vs. NDMC. The plea of the appellant is that if the method adopted by the NDMC is taken HTA No. 36/18 Kirti Abrol Vs. NDMC Page No. 2 of 17 to be correct, then it would give rise to inequality amongst the properties in the same area, inasmuch as in the areas like Sarojini Nagar, there are tenanted and commercial as well as self occupied properties in the same locality, thus, the present application of method adopted by the respondent to fix rateable value, would lead to a situation where the value of a tenanted property would be much higher than that of a selfoccupied property, which is certainly not the objective sought to be achieved by the Legislature. The appellant has submitted that the Flat No. 61, Sarojini Nagar Market, New Delhi110 023, was let out w.e.f. 15.12.2008 to M/s Reebok and subsequently, to M/s Peter England. The NDMC has sought to raise the rateable value for Flat No. 61, Sarojini Nagar Market, New Delhi, from Rs.60,500/ in 2006 to Rs.43,80,500/ in 200809 and thereafter, to Rs.95,85,000/ in 201011, taking into account the actual rent of the premises. The NDMC also did not take into account the written reply dated 23.04.2011 and the response dated 10.02.2016 filed by the appellant and assessed the rateable value of the property on the basis of New Delhi Municipal Council (Determination of Annual Rent) Byelaws, 2009. The appellant has further submitted that even if the lease deed of the appellant HTA No. 36/18 Kirti Abrol Vs. NDMC Page No. 3 of 17 is taken into account, the assessment order is erroneous inasmuch as the NDMC had taken the rent of the premises as Rs.4 lakhs, whereas, as per the lease, the rent was only Rs. 2 lakhs of the Flat No. 61, Sarojini Nagar Market, New Delhi.
3. Ld. Counsel for the appellant has submitted that impugned order is liable to be set aside as the NDMC has passed the assessment order mechanically without any application of mind.
4. Notice of the appeal was issued to respondent/NDMC. The respondent has filed detailed reply to the appeal and took a preliminary objection that the appellant is not the owner of the property and does not have locus standi to file the present appeal and that the appeal is not maintainable for noncompliance of Section 116 of NDMC Act. It is further submitted that as per the records of the NDMC, Mr. Raj Paul is the recorded owner of the premises in question. It has further been submitted that the premises in question was inspected and was found to be occupied by M/s Reebok on rent at Rs.4 lakhs per month and therefore, the property was assessed on actual rental basis under Section 63 of NDMC Act. The respondent has strongly denied the other averments taken by the appellant in the appeal.
5. Sh. Sanjay Sharma, Ld. Counsel for the respondent has HTA No. 36/18 Kirti Abrol Vs. NDMC Page No. 4 of 17 submitted that the NDMC has passed the assessment order in accordance with Section 63 of the NDMC Act and on the basis of the facts on record. Ld. Counsel has stated at bar that both the judgments cited by the Ld. Counsel for the appellant (i.e. Ved Marwah v. New Delhi Municipal Council 2018 SCC OnLine Del 8096 and Springdales School v. North Delhi Municipal Corporation 2017 SCC OnLine Del 7050), have been stayed by the Hon'ble Supreme Court vide its order dated 14.09.2018 in SLP No. 28752/2018 titled as NDMC Vs. M/s Pearey Lal and Sons (P) Ltd. & Anr. and order dated 08.05.2017 in SLP No. 14452/2017 titled as NDMC Vs. Springdale's School & Anr.
6. Both the parties have also filed their written submissions on record. I have heard Sh. Mohit Kumar, Ld.Counsel for the appellant and Sh. Sanjay Sharma, Ld.Counsel for the respondent and have also gone through the record carefully.
7. Section 63 of the NDMC Act provides that : "Determination of rateable value of lands and buildings assessable to property tax.
(1) The rateable value of any lands or building assessable to any property taxes shall be the annual rent at which such land or building might reasonably be expected to let from year to year less a sum equal to ten per cent. of the said annual rent which shall be in lieu of all allowances for cost of repairs and insurance, and other expenses, if any, necessary to maintain the land or building in a HTA No. 36/18 Kirti Abrol Vs. NDMC Page No. 5 of 17 state to command that rent:
Provided that in respect of any land or building the standard rent of which has been fixed under the Delhi Rent Control Act, 1958 (59 of 1958) the rateable value thereof shall not exceed the annual amount of the standard rent so fixed. (2) The rateable value of any land which is not built upon but is capable of being built upon and of any land on which a building is in process of erection shall be fixed at five per cent. of estimated capital value of such land.
(3) All plant and machinery contained or situate in or upon any land or building and belonging to any of the classes specified from time to time by public notice by the Chairperson with the approval of the Council, shall be deemed to form part of such land or building for the purpose of determining the rateable value thereof under subsection (1) but save as aforesaid no account shall be taken of the value of any plant or machinery contained or situated in or upon any such land or building."
8. The question as to the assessment of house tax by NDMC was considered in detail by the Hon'ble Supreme Court in New Delhi Municipal Council etc. versus Association of concerned citizens of New Delhi and others in Civil Appeal No. 903 930/2019, decided on 22.01.2019. This SLP was filed by the NDMC against the judgment of Hon'ble High Court of Delhi whereby the Byelaws, 2009, were held to be ultra vires as they HTA No. 36/18 Kirti Abrol Vs. NDMC Page No. 6 of 17 were far beyond the scope and ambit of the powers vested in NDMC under Section 388(1)(A)(9) of the Act. The Hon'ble Supreme Court agreed with the Hon'ble High Court that the impugned Byelaws, 2009, provide UAM (Unit Area Method) which is based on value of the property is foreign to the methodology provided in Section 63 of the NDMC Act. Such Byelaws are, thus, ultra vires the provisions of NDMC Act, and are in excess of the scope and ambit of powers vested in the NDMC Act under Section 388(1)(A)(9) of the NDMC Act.
9. The question before this court was that whether the NDMC has rightly taken into account the actual rent for the determination of rateable value in accordance with Section 63 of the NDMC Act. In this regard, it is advantageous to refer to the judgment of the Hon'ble Supreme Court in New Delhi Municipal Council etc. versus Association of concerned citizens of New Delhi (Supra), wherein it was inter alia, held as under : "68) Various premises, viz: lands and buildings, in respect of which property tax can be levied are mentioned in Section 62. Insofar as rateable value is concerned, the manner of determination thereof is specified in Section 63 of the Act. Since, the method of determination is the fulcrum of the dispute, Section 63 assumes importance for the purposes of deciding the issue in these appeals. It is also an accepted position that the interpretation that is to be HTA No. 36/18 Kirti Abrol Vs. NDMC Page No. 7 of 17 given to this provision would lead to the outcome of the case. For these reasons and for the sake of continuity and clarity, we reproduce Section 63(1) and (2) thereunder:
"Section 63 : Determination of rateable value of lands and buildings assessable to property tax
1. The rateable value of any lands or buildings assessable to any property taxes shall be the annual rent at which such land or building might reasonably be expected to let from year to year less a sum equal to ten per cent of the said annual rent which shall be in lieu of all allowances for cost of repairs and insurance, and other expenses, if any, necessary to maintain the land or building in a state to command that rent:
Provided that in respect of any land or building the standard rent of which has been fixed under the Delhi Rent Control Act, 1958 (59 of 1958) the rateable value thereof shall not exceed the annual amount of the standard rent so fixed.
2. The rateable value of any land which is not built upon but is capable of being built upon and of any land on which a building is in process or erection shall be fixed at five per cent of estimated capital value of such land."
69) As per Section 63(1) rateable value of any lands or building assessable to any property taxes is the 'annual rent'. Further, such HTA No. 36/18 Kirti Abrol Vs. NDMC Page No. 8 of 17 annual rent has to be determined 'at which such land or building might be reasonably be expected to let from year to year....' .
70) The 'rateable value', as per Section 2(42) of the NDMC Act is to be fixed in accordance with the provisions of the Act and the Bye laws made thereunder. Therefore, the first question is as to what are the provisions made in this behalf in the Act. For this Section 63 comes into play which prescribes that 'annual rent' would be rateable value. This annual rent, as per this provisions, is one such land or building is expected to let from year to year minus 10% thereof. The Impugned Byelaws lay down the procedure for fixing of annual rent on UAM. This leads us to the question as to whether this UAM can be stated to be the method of arriving at annual rent which land or building is reasonably expected o let from year to year? Here it may be noted that as per NDMC, Section 63 does not prescribe any particular method for arriving at annual rent and, therefore, this gap has been filled up by the Impugned Byelaws by prescribing the formula based on UAM. It would be difficult to accept such an interpretation of Section 63(1) as sought to be given by the learned senior counsel for NDMC.
71) Section 63(1) is not silent on how to determine the annual rent of a property. This annual rent has to be the one which the land or the property 'might reasonably be expected to let from year to year'. It is, thus, based on the letting yearly value of the property. Such a conviction has come up for interpretation before this Court in a series of cases right from 1960s till date. It would be relevant to note that similar language was used in the unamended provisions HTA No. 36/18 Kirti Abrol Vs. NDMC Page No. 9 of 17 of Delhi Municipal Corporation Act as well as similar acts of some other states.
72) The Corporation of Calcutta vs. Smt. Padma Debi and Others (1962) 3 SCR 49, has analyzed the words 'gross annual rent at which the land or building might reasonably be expected to let from year to year". In a similar provision under the Calcutta Municipal Act, 1923 as Section 63(1) and held as under:
"We shall first look at the provisions of the section to ascertain the meaning: The crucial words are "gross annual rent at which the land or building might at the time of assessment reasonably be expected to let from year to year". The dictionary meaning of the words "to let", is "'grant use of for rent or hire". It implies that the rent which the landlord might realise if the house was let is the basis for fixing the annual value of the building. The criterion, therefore, is the rent realisable by the landlord and not the value of the, holding in the hands of the tenant. This aspect has been emphasized by the Judicial Committee in Bengal Nagpur Railway Company Limited v. Corporation of Calcutta AIR 1942 Calcutta 455)(1).
73) In the case of The Guntur Municipal Council case, this Court again analyzing similar provision under the Madras District Municipalities Act, 1920 held as under :HTA No. 36/18 Kirti Abrol Vs. NDMC Page No. 10 of 17
"...............Section 82 gives the method of assessment. It is provided by subsection (2) of that section that the annual value of lands and buildings shall be deemed to be the gross annual rent at which they may reasonably be expected to let from month to month or from year to year less certain deductions. .....
..............Now Section 82(2) of the Municipalities Act, as stated before, makes provision for the fixation of annual value according to the rent at which lands and buildings may reasonably be expected to be let from month to month or from year to year less the specified deduction. The test essentially is what rent the premises can lawfully fetch if let out to a hypothetical tenant. The municipality is thus not free to assess any arbitrary annual value and has to look to and is bound by the fair or the standard rent which would be payable for a particular premises under the Rent Act in force during the year of assessment......."
74) In Dewan Daulat Rai Kapoor case, this Court held as under:
" .....The criterion is the rent realisable by the landlord and not the value of the holding in the hands of the tenant. The rent which the landlord might realise if the building were let is made the basis for fixing the annual value of the building. The word "reasonably" in the definition is very important. What the landlord might reasonably expect to get from a hypothetical tenant, if the building were let HTA No. 36/18 Kirti Abrol Vs. NDMC Page No. 11 of 17 from year to year, affords the statutory yardstick for determining the annual value. Now, what is reasonable is a question of fact and it would depend on the facts and circumstances of a given situation. ......"
75) Similarly, in Indian Automobiles Ltd. case, it was held that the criterion for calculating annual valuation must be the rent realizable by the landlord and not the value of holdings, and that the word 'reasonably' in the Section was a question of fact.
76) In State Trading Corporation case, while dealing with certain other Byelaws as against the NDMC Act came to the conclusion that:
"7. ......Since there is a provision and procedure under Section 63 of the NDMC Act for calculating the annual rent, one need not refer at all to the byelaws as quoted above since they are apparently inconsistent with the provisions of the NDMC Act. In short, it is impermissible to refer to the byelaws framed under the Punjab Act in view of specific provisions made under the NDMC Act providing for the levy, assessment and collection of property tax.
8. Therefore, the only basis for fixation of rateable value is the annual rent at which the land or building might reasonably be expected to be let from year to year, subject to the deductions provided under the Act."HTA No. 36/18 Kirti Abrol Vs. NDMC Page No. 12 of 17
77) The aforesaid judgments give a clear message that annual rent is to be the one which the landlord might realize if the house was let. The criteria, thus, is the rent realizable by the landlord and not the value of the holding. The test essentially is what rent the premises can lawfully fetch if let out to a hypothetical tenant. In the Guntur Municipal Council case, this Court made it clear that having regard to the provision in the Act, the municipality was not free to assess any arbitrary annual value and has to look to and is bound by the fair or standard rent which would be payable for a particular premises under the Rent Act in force during the assessment.
78) In State Trading Corporation, which was a case directly dealing with this very provisions, namely, Section 63 of the NDMC Act, the Court again reiterated in unambiguous terms 'the only basis for fixation of rateable value is the annual rent at which the land or building might reasonably be expected to let from year to year, subject to the deductions provided under the Act'.
79) Even in common parlance, simple language of Section 63(1) clearly conveys that the rateable value is the annual rent which the property is likely to fetch. The yardstick is the 'letting'. Two words used in this Section convey this meaning very clearly, namely, the word 'rent' in the phrase 'annual rent' and the word 'let'. Therefore, annual rent is to be determined on the basis of the letting value which is expected reasonably. In cases where the property is already let out, actual rate at which the property is let out becomes the amount at which the land or building is reasonably expected to HTA No. 36/18 Kirti Abrol Vs. NDMC Page No. 13 of 17 fetch. Exception may be those cases where the property is let out actually at a rent which is lesser than the rent it would be fetched otherwise. This is the ratio of Mehrasons Jewellers Private Limited. It was a case in respect of premises not controlled by Delhi Rent Control Act. This Court held that the annual rent received by the landlord is what willing lessee uninfluenced by other circumstances would pay to the willing lessor; actual annual rent in these circumstances can be taken as the annual rateable value of the property for assessment of property tax.
80) The question directly arose for consideration in Government Servant Cooperative House Building Society Limited and Others vs. Union of India and Others (1998) 6 SCC 381, this Court noticed the 1988 amendment to the Delhi Rent Control Act and various judgments referred to hereinabove by us and concluded as under:
"8. Therefore, the annual rent actually received by the landlord, in the absence of any special circumstances, would be a good guide to decide the rent which the landlord might reasonably expect to receive from a hypothetical tenant. Since the premises in the present case are not controlled by any rent control legislation, the annual rent received by the landlord is what a willing lessee, uninfluenced by other circumstances, would pay to a willing lessor. Hence, actual annual rent, in these circumstances, can be taken as the annual rateable value of the property for the assessment of property tax. The HTA No. 36/18 Kirti Abrol Vs. NDMC Page No. 14 of 17 municipal corporation is, therefore, entitled to revise the rateable value of the properties which have been freed from rent control on the basis of annual rent actually received unless the owner satisfies the municipal corporation that there are other considerations which have affected the quantum of rent."
81) In case there is a proof and/or material to find out that the reasonable rent could have been more than at which it is actually let out, the actual rent receipt can be discarded by adopting the expected rent which, on the basis of material, can be said to be reasonable. In those cases where the property is selfoccupied or is vacant and not let out, it can be gathered from the rent at which a comparable property is let out. However, in such a case there would be two situations. Going by the dicta laid down in Dewan Daulat Rai Kapoor and other cases, the reasonable rent would be the standard rent which can be determined under the provisions of Delhi Rent Control Act. However, this principle would be applicable only in respect of those properties where Delhi Rent Control Act applies. In other cases, the yardstick would be the letting value of comparable properties, i.e., the rent at which comparable properties are let out. However, such criteria of fixation of standard rent has lost its relevance after the judgment of the Delhi High Court in Raghunandan Saran Ashok Saran (HUF) vide which Sections 4,6 and 19 of the Delhi Rent Control Act which deal with fixation of standard rent, were declared as ultra vires of the Constitution of India. The aforesaid decision has been affirmed HTA No. 36/18 Kirti Abrol Vs. NDMC Page No. 15 of 17 by this Court in State Trading Corporation of India Ltd. case.
82) Be as it may, in the context of the issue at hand, we emphasize that it is the annual letting value fixed in the aforesaid manner which can be the annual rent and not the value of the property in question. The expression 'annual rent' is to be read in contradistinction to 'annual value'. Two concepts are altogether different. Inasmuch as the latter expression relates to annual value of the property which may be based on parameters different from fixing the annual rent of the property."
10. Bare reading of the aforesaid judgment would make it clear that the Hon'ble Supreme Court has clearly held that where the property is let out, the annual rent actually received by the landlord would be a good guide to decide the rent which the landlord might reasonably expect to fetch. Thus, in the present case, I do not find any fault with the reasoning of the NDMC to assess the rateable value on the basis of actual rent received by the appellant. However, the NDMC has failed to explain as to how they have reached at the sum of Rs. 4 lakhs per month as rent of Flat No. 61, Sarojini Nagar Market, New Delhi. This question was specifically asked to the Ld. Counsel for the NDMC. However, the same could not be explained to the satisfaction of the court. This court also feels that the order under HTA No. 36/18 Kirti Abrol Vs. NDMC Page No. 16 of 17 Section 72 of the NDMC dated 04.09.2017 is devoid of any reasoning. Hence, the matter is remanded back to the NDMC to pass a fresh speaking order for assessing the rateable value of premises bearing No. 61, Sarojini Nagar Market, New Delhi. The Dy. Director (Tax)/Assessing Authority, NDMC, shall issue a fresh notice to the appellant for issuing the assessment order under Section 72 of the NDMC Act.
11. Copy of the judgment be sent to Dy. Director (Tax)/Assessing Authority, NDMC, New Delhi.
12. The appeal file be consigned to Record Room.
Digitally signed by
DINESH KUMAR DINESH KUMAR SHARMA
SHARMA Date: 2020.10.07 17:36:09
+0530
Announced through electronic (DINESH KUMAR SHARMA) mode on 07.10.2020 Principal District & Sessions Judge/ New Delhi HTA No. 36/18 Kirti Abrol Vs. NDMC Page No. 17 of 17