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23. One of the main objectives of the Constitution (74th) Amendment Act 1992, is to make urban local bodies efficient units of self-governance. The amendments provide to make them autonomous and to depend more on their own resources. The overview of JNNURM projects property tax to be the single most important tax available to the urban local bodies. It proposes radical reforms of property tax systems. The guidelines emphasize the need for proper mapping of properties using GIS system so that urban local bodies are able to have full record of properties and to bring them under the tax net; make the system capable of self-assessment, which is formula driven and in which the property owner can calculate the tax due, and for improving collections to achieve at least 85% of demand. The objective of the reform as provided in the Overview of JNNURM Mission is to:-

- Make the systems of assessment, collection and information citizen friendly.

- Introduce efficient mechanisms for speedy grievance redressal and dispute settlement."

24. The rationale for the reform to strengthen the financial autonomy of the local body is provided in the overview as follows:-

"1. Rationale for the reform In most states the weaknesses and deficiencies in the current system of property taxation does not allow for full exploitation of the revenue potential of this tax. Property tax is one of the most under exploited tax instruments. To strengthen the financial autonomy of the local body a holistic reform of the property tax system is essential. The present deficiencies occur on account of the present assessment systems as also poor administrative and information systems currently in place.

- Simple to understand, transparent citizen-friendly systems and processes.

- System capable of self assessment and ease of payment by the property owners.

- Lower (possibly almost nil) litigation and associated costs, decrease in revenues locked up for years in litigation.

- Cleaner administration, increasing the faith and trust of citizens in the ULB and councilors.

- Good database and information systems to enable better tax planning and policy making by the ULB."

25. The overview document provides that the reforms in the property tax system should cover, (a) Rate and Base Structure; (b) Valuation and Assessment Systems; (c) Tax Administration and (d) Citizen Interface Mechanisms. The rate and base structure for various properties are unrealistic, low and static, which are increased from year to year reaching a very high level and which result into resistance on the part of citizens. Generally one month's rent as provided tax is proposed to be treated as reasonable with lower and higher limits for the rates of tax from 5% to 20% and with freedom to adjust the rate without government intervention, so that the yield is sufficient to cover the cost of providing the basic urban services. The overview document proposed a flat rate and alternatively progressive sliding scale for property having higher annual value bearing a higher rate of tax with clear distinction between the user category namely residential, institutional and commercial and rationale exemptions for places of worship, agricultural land and charitable institutions. Even when the properties are exempt from tax, the user service charge may be levied to cover the cost of certain basic services such as street cleaning, solid waste management, parking etc. The valuation and assessment provided in the overview document is as follows:-

43. We do not find any arbitrariness, or illegality in Rule 4-A, which providing for non-discriminatory exercise of powers to be carried out by the Municipal Commissioner for fixing minimum monthly rate of rent. Rule 4A is not violative of the provisions of the Act or Section 207A of the U.P. Act of 1959.

44. The U.P. Act of 1959 has adopted the capital value basis for fixing the annual value under Section 174 of the Act. The Explanation-II, which has not been challenged in the writ petitions, specifically excludes the rental value basis for imposing property tax under the Act of 1959. The standard rent, the agreed rent or the reasonable annual rate of rent for the purposes of letting under the UP Act 13 of 1972, is specifically excluded while calculating the annual value of that building. The capital value basis has also been recommended by JNNRUM tax reforms and was approved as a valid and reasonable method, by the Supreme Court in Municipal Committee Patiala vs. Model Town Residents Association and others (supra). It is a legal and valid method for calculating annual value of the property for the purposes of municipal taxation.