MUNICIPAL CORPORATION OF HYDERABAD versus P.N. MURTHY & ORS.

Citation: [1987] 2 S.C.R. 107 · Decided: 30-01-1987 · Supreme Court of India · Bench: M.P. THAKKAR · Disposal: Appeal(s) allowed

Judgment (excerpt)

··.( 
MUNICIPAL CORPORATION OF HYDERABAD 
v. 
P.N. MURTHY & ORS. 
JANUARY 30, 1987 
[M.P. THAKKAR AND B.C. RAY, JJ.] 
Hyderabad Municipal Corporation Act, 1955 Section 197, 199, 
202 & 204--Municipal Corporation allotting building under 'Low 
Income Housing Scheme'-Corporation whether prohibited from 
levying and collecting 'property tax' from allottees. 
The appellant-Municipal Corporation of Hyderabad constructed 
houses under "Low Income Housing Scheme" and allotted them to the 
respondents on hire purchase. The agreements executed by the respon-
dents in favour of the appellant provided (1) that the houses would 
remain, till the payment of the last instalment and execution of a con-
veyance in favour of the respondents, as the property of the Corpora-
tion; and (ii) that all Municipal taxes, water taxes and electricity 
charges would be borne by the allottees. 
The appellant served demand notices on the respondents to pay 
house tax in respect of their houses. By that time, the instalments had 
not been fully paid. The respondents challenged the lery of tax on the 
ground that s.202( 1) of the Hyderabad Municipal Corporation Act pro-
hibits the levy of general tax in respect of the aforesaid honses, since 
they had not yet vested unto the allottees nnder the hire purchase agree-
ment. A Single Judge negatived the plea of the respondents-allottees 
and upheld the validity of tax but the Division Bench in a Letters Patent 
Appeal took a contrary view. Hence this appeal by special leave. 
Allowing the appeal, 
A 
B 
c 
D 
E 
F 
HELD: (1) In order to attract s.202( l)(c) of the Hyderabad 
Municipal Corporation Act, a property must satisfy a dual test. The 
property must not only owned by the Corporation, it must also be in the G 
occupation of the Corporation itself. It is in this sense that the word 
'vesting' has been used. The expression 'vest' employed in s.202( l)(c) 
under the circumstances must of necessity be construed as vesting both 
in title as well as in possession. UJG-H] 
Fruit & Vegetable Merchants Union v. Delhi Improvement Trust, 
H 
107 
108 
SUPREME COURT REPORTS 
[1987] 2 S.C.R. 
A AJ.R. 1954 S.C. p. 344 and Richardson v. Robertson, [ 1862] 6 L.T. p. 
75, relied upon. 
(2) The scheme underlying ss. 197, 199, 200 and 204 of the Act has 
to be read and construed in a meaningful, purposeful and rational 
manner. Section l97(l)('i) casts a legal obligation on the Municipal 
B 
Corporation to levy taxes on lands and buildings. Section 199( 1) makes 
it obligatory subject to the exceptions, limitations and conditions to levy 
a general tax, water tax, drainage tax, lighting tax/conservancy tax on 
the buildings and lands in the City of Hyderabad. Whilst the legislature 
makes it obligatory on the Corporation to levy the aforesaid taxes, in so 
far as general tax is concerned an exception is carved out under s.202( I) 
C and the Municipal Corporation is relieved from the obligation of impos-
ing taxes in respect of buildings which are specified in clauses( a) to (d). 
The exception is made on policy and principle. Not arbitrarily. Essen-
tially the properties which are used for public purposes or for purposes 
of the community are exempted. Clause(d) makes it abundantly clear 
that the exemption will not be extended to properties belonging to the 
D Central Government and State Government if the same are used for 
purposes of profit and not a public purpose. The user for the purposes 
of the community is the rationale of the thread of principle which runs 
through all these three clauses viz. clauses (a), (b) and (d) for granting 
exemption. So far as clause(c), which has given rise to the present 
controversy is concerned, a different principle is at the bottom, diffe-
E rent but no less rational. The philosophy underlying the exemption is 
rooted in pragmatism. In so far as buildings and lands which are the 
properties of the Corporation and are used for its own purposes it 
would be an exercise 'in futility to collect taxes from itself in order to 
augment its own resources. Surely the resources would not stand 
augmented when the Municipal Corporation collects the taxes from 
F 
itself. [IUD; 112A-F] 
G 
H 
3. Section 204( 1) which is a part of the packet of sections relating 
to this subject-matter clinches the issue in favour of the Municipal 
Corporation of Hyderabad. It, in terms, provides that property taxes 
shall be leviable primarily from the actual occupier of the premises 
upon which the s

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