WP 6945 of 1982
Construction law, multiple taxation
A writ petition was filed by Common Cause, requesting the clarification of ambiguity within the provisions of the Delhi Municipal Corporation Act of 1957.
A 3-judge bench examined the provisions of the Delhi Municipal Corporation Act of 1957 for the purpose of ascertaining the manner of determination of "rateable value" which was necessary for making assessment of property tax under the Act. For the same purpose, properties were classified into four categories:
- Partly self-occupied and partly tenanted
- Restrictive lease hold on which construction is raised
- Where the property has been constructed in stages.
Initially an application was made by Common Cause, specifically for the clarification on the fourth category. Later the Corporation itself made an application for the same purpose and the Government Servants Cooperative House Building Society became a party. The issue in this matter was identified as:
How the rateable value of premises, where the property has been constructed in stages, is to be determined when the premises at the various stages of construction are to be assessed for rateable value?
The Court discussed that when any subsequent addition is made to a premise, three different situations may arise:
- The addition may not be of a distinct and separate unit of occupation but may be merely by way of extension of the existing premises which are self-occupied. In such a case the original premises together with the additional structure would have to be treated as a single unit for the purpose of assessment and its rateable value would have to be determined on the basis of the rent which the owner may reasonably expect to get, if the premises as a whole are let out, subject to the upper limit of the standard rent determinable under the provisions of Section 6(1)(A)(2)(b).
- The existing premises before the addition might be tenanted and the addition might be to the tenanted premises so that the additional structure also form part of the same tenancy. Where such is the case, the standard rent would be liable to increase under Section 7 and such increased rent would be the standard rent of the premises as a whole and within the upper limit fixed by such standard rent, the assessing authorities would have to determine the rent which the owner may reasonably expect to get if the premises as a whole are let out as a single unit to a hypothetical tenant and in such a case, the actual rent received would be a fair measure of the rent which the owner may reasonably expect to receive from such hypothetical tenant unless it is influenced by extra-commercial considerations.
- The addition may be of a distinct and separate unit of occupation and in such a case, the rateable value of the premises would have to be determined on the basis of the formula laid down by us for assessing the rateable value of premises which are partly self-occupied and partly tenanted. The same principles for determining of rateable value would obviously apply in case of subsequent additions to the existing premises.
It was observed that the formula set out in Section 6(1)(A)(2)(b) and 6(1)(B)(2)(b) cannot be applied for determining the standard rent of a subsequent construction, as if that addition was the only structure standing on the land. The assessing authorities cannot determine the standard rent of the additional structure by taking the reasonable cost of construction of the additional structure and adding to it the market price of the land and applying the statutory percentage of 7-1/2 to the aggregate amount.
The market price of the land cannot be added twice over & the formula under Section 6 is applicable only in relation to the premises as a whole. Court categorically decided that the market value of land is not to be added over again & there is no ambiguity which requires clarification apart from that.