LexGOVERNMENT SERVANT CO-OPERATIVE HOUSE BUILDING SOCIETY AND OTHERS versus UNION OF INDIA AND OTHERS
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A B GOVERNMENT SERVANT CO-OPERATIVE HOUSE BUILDING SOCIETY AND OTHERS v. UNION OF INDIA AND OTHERS AUGUST 5, 1998 [SUJATA V. MANOHAR AND M. SRINIVASAN, JJ.] Municipalities C Delhi Municipal Corporation Act, 1957, Sec. 116-Property tax- Annual Rateable value-Determination of-Property not controlled by Rent Act-Test of 'reasonably expected rent'-Held, actual annual rent received by landlord in absence of special circumstances, would afford good test to decide the rent which landlord might reasonably expect from a hypothetical tenant and could be taken as annual rateable value of the property and D the property tax levied thereof cannot be viewed as tax on income-Delhi Rent Control Act, 1958 (as amended in 1988), Sec. 3. Constitution of India, Art. 245&246, List-I, Entry 82, list-I/, Entry 49 of Sch. VII-Property tax-legislative competence-State legislature is E competent to levy such taxes as subject matter fall in Entry 49, list-I I - Merely because annual rent is taken as the basis for determining the rateable value of the property, property-tax cannot be viewed as tax on income of the owner-The method of arriving at the quantum of tax should not be mixed up with the nature of the tax itself-No relevance to 'Union Territories,' F Parliament can make laws respecting all the entries in all the three lists- Delhi Municipal Corporation Act, 1957, Sec. 113, 114, 116. The appellants are the owners of properties in Delhi, which are governed by the Delhi Municipal Corporation Act, 1957. The appellant received notices under Section 126 of the Act for the assessment year 1988- G 89 and for subsequent years proposing to revise the rateable value of their properties. The assessments of the rateable value of the properties were made on the basis of the actual rent received. In this appeal1 the question came before this court for consideration is how to determine the rateable value when the rent of the properties assessable H to Property-taxes, is not controlled under the Delhi Rent control Act, 1958 996 • GOVT. SER. CO-OP. HOUSE BUILD. SOC. v. U.0.1. 997 • or any other rent control legislation. A Dismissing the appeal, this Court HELD : 1. Where thefe in no artificial control on the rent which is charged, the annual rent actually received by the landlord, in the absence of any special circumstances, would be good guide to decide the rent, which the B 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. There would ordinarily be, in a free-market close approximation between the actual C received by landlord and the rent which he might reasonably expect to receive 1 from a hypot.hetical tenant. Hence, actual rent, in these circumstances, can / be taken as the annual rateable value of the property for the assessment of the property tax. (1000-F-H; 1001-D) The Corporation of Calcutta v. Smt. Padma Debi & Ors. (1962) 3 SCR D 49; Dewan Dau/at Rai Kapoor and Ors. v. New Delhi Municipal Committee and Ors., [1980) I SCC 685; DR. Bablir Singh and Ors. etc. etc. v. Municipal Corporation of Delhi and Ors., [1985) 2 SCR 439 and East India Commercial Co. Pvt. Ltd. v, Corporation of Calcutta, (1998) 4 SCC 368, relied on. 2. It cannot be said that if the annual rent is taken as basis for E determining the rateable value of the property, the property tax will become a tax on the income of the owner, thus falling beyond the legislative competence of the State Legislature as tax on income would fall in Entry 82 of List I instead of Entry 49 of List II of Sch. VII to the constitution. The three lists in the seventh schedule of the Constitution have no relevance to the union Territory of Delhi since Parliament can make law respecting all the entries in all the three lists. An Act of the State legislature entitling a Municipal Corporation to levy property tax on the basis of rateable value of the land and building calculated by the yardstick of annual rent at which such a property can reasonably be leased to a hypothetical lessee, is valid and within F its legislative competence. The tax remains property tax and cannot be viewed G as the tax on income. The method of arriving at the quantum of tax should not be mixed up with the nature of the
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