MUNICIPAL COMMITIEE, PATIALA versus MODEL TOWN RESIDENTS ASSON. & ORS.

Citation: [2007] 8 S.C.R. 719 · Decided: 01-08-2007 · Supreme Court of India · Bench: S.H. KAPADIA · Disposal: Appeal(s) allowed

Judgment (excerpt)

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MUNICIPAL COMMITIEE, PA TIALA 
A 
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v. 
MODEL TOWN RESIDENTS ASSON. & ORS. 
AUGUST I, 2007 
[S.H. KAPADIA AND B. SUDERSHAN REDDY, JJ.] 
B 
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Punjab Municipal Act, 191/ as amended by Act I/ of 1994; Ss. 3(1), 
3(8aa) and 68/Land Acquisition Act, 1894; S.23/Registration Act, 19081 
Constitution of India, 1950; Articles 14 and 226: 
c 
Levy of house-tax-Amendment made in Section 3 of the Act-As per 
amended provisions, house-tax leviable at different rates on the same property 
when used by the owner and the tenant and market value of the property 
could be determined without providing any guidelines-Amended provisions 
of Law-Constitutionality of-Held: 'Rate' in the context of levy of house-tax D 
means a tax on annual value/rateable value of land/building-Prior to 
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amendment, the tenanted as well as self-occupied premises equated in the 
matter of determination of gross annual rent-However, in case it was not 
possible for the Municipality to determine th~ gross annual rent in terms of 
the provisions of law, it could fix the an~ual value in terms of certain 
formula-legislature has given a great amount of leeway in the matter ·of E 
taxation-Article 14 of the Constitution does not prohibit classification-
Classification made between premises occupied by the tenants on one hand 
and those occupied by the owner himself on the other is wholly reasonable 
and has direct nexus with the object sought to be achieved-Hence, the High 
Court erred in holding that Section 3(1)(b) of the Act making an invidious F 
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discrimination between premises in occupation of the tenant and which are 
self-occupied-Besides as per amended provision uls.3(8aa), a formula has 
been evolved to assess house-tax on self-occupied premises whereby tax on 
annual value could be calculated on the basis of market value of the land 
taking into account cost of construction and deducting the depreciation-
While calculating the market valu,e of the land, Assessing Officer will keep G 
in view the principles mentioned in the Land Acquisition Act-Hence, the 
High Court erred in striking down Section 3(8aa) on the ground of absence 
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of guidelines in the amended provisions in determining the market value of 
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the land 
719 
H 
A 
B 
720 
SUPREME COURT REPORTS 
[2007] 8 S.C.R. 
legislative power to enact validation law making tht?m effective 
retrospectively-Power of Judicial Review-Exercise of-Held: It is not open 
to the High Court to exercise such powers under Article 226 of the 
. Constitution, particularly in the matter of taxation-Constitution of India, 
1950-Artic/e 226. 
The question which arose for determination in these appeals was as to 
whether the High Court was right in holding, Section 3(l)(b) of the Punjab 
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Municipal Act as amended by Act 11 of 1994, whereby the same property is 
subjected to house-tax at different rates when i~ is occupied by a tenant and 
landlord and also Section 3(8aa) as amended defining "market value" for the 
C purpose of levying house tax without indicating any guidelines for its 
determination, as unconstitutional since it suffers from the vice of 
discrimination. 
Appellant-Municipal Committee contended that Section 3(l)(b) of the 
Punjab Municipal Act, as amended, makes no distinction between self occupied 
D land or building and tenanted land or building; that as per amended provision, 
annual value of the property in occupation of the tenant has to be determined 
on the basis of actual rent which that property would fetch whereas if the 
same property if it is in occupation of its owner then the rateable value under 
the amended provisions shall be calculatedin accordance with Section 3(l)(b) 
of the Act; that in the case of commercial property, it is the tax on the scarce 
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resources, mainly the land whose prices are escalating, which provides an 
intelligible differentia having requisite connection with the object sought to 
be achieved; that there cannot be a straight-jacket formula for determination 
oft~ annual value; and that the State is always entitled to raise its resources 
by way of imposition of tax. 
Respondent-assessee contended that there is no rational basis for 
making the classification as introduced in Section 3(l)(b) by way of the 
amendment, particularly when both the premises, whether let out or self 
occupied, are subject to rent restrictions under the Act. 
G 
Allowing the appeals, the Court 
HELD: (Per KAPADIA, J.) 
1.1. Prior to the Amen

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