LexTHE LOKMANYA MILLS versus THE BARSI BOROUGH MUNICIPALITY
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.~larch r4, 306 SUPREME COURT REPORTS [1962] THE LOKMANY A MILLS v. THE BARSI BOROUGH MUNICIPALITY (J. L. KAPUR and J. C. SHAH, JJ.) Municipality - House tax-Fixation of -Annual letting value-Rule directing computation on floor area-If intra vires- M ethod of computation-Bombay Municipal Boroughs Act, 1925 (Born. 18 of 1925), s. 58, r. 2C. The Bombay Municipal Boroughs Act, 1925, empowered a municipality to levy rates on lands and buildings which were to be assessed on the valuation based on the capital or the annual letting value. The Act defined the annual letting value inter alia as the annual rent for which any building or land might reasonably be expected to let from year to year. The General Body oi the Municipality of Barsi framed new rules under s. 58 of the Act for levying rates: for all buildings and non-agricultural lands the rate was to be levied on the annual letting value, but for mills and factories and buildings relating thereto it was pro- vided by r. 2C that the annual letting value was to be fixed on the floor area. The Municipality issued notices of demand under the new r. 2C calling upon the appellant (which is a company owning a textile mill) to pay house and water taxes which were assessed as rates which was paid by the appellants under pro- test. The question to be determined was whether by r. 2C the Municipality was entitled to collect tax leviable as a rate after computing the annual letting value solely on the area of the factory and building relating thereto. Held, that a rate may be levied by a municipality under the Bombay Municipal Boroughs Act, r925, on the valuation made on the basis of capital or on the annual letting value of a building and not on a valuation computed merely on the floor area of the structures, such a rate was clearly not a tax based either on the capital value or on the annual letting value, for "annual letting value" postulates rent which a hypothetical tenant may reasonably be expected to pay for the building if Jet. The Municipality had no power under the Act to ignore the methods of valuation prescribed by the Act, and to adopt a method not sanctioned by the Act. By prescribing valuation computed on the area of the fac- tory building the Barsi Municipality not only fixed arbitrarily the annual letting value which bore no relation to the rental which a hypothetical tenant may reasonably be txpected to pay but rendered the statutory right of the tax payer to challenge the valuation illusory as the objection which the tax payer could raise thereto was in substance restricted to the area of the building and not to its valuation. I • I S.C.R. SUPREME COURT REPORTS 307 The rule adopting a flat and uniform rate on the assump- · tion that all factory buildings within the area of a municipality were not alike in essential features and \Vere not intended to be used for purposes which were alike was not permissible under the Act. The vice of the rule lies in an assumed uniformity of return per square foot which structures of different classes in their nature not similar, may reasonably fetch if let out to tenants and in the virtual deprivation to the rate payer of his statutory right to object to the valution. Rule 2C by the Barsi Borough Municipality under s. 58 of the Bombay Municipal Boroughs Act. 1925, was illegal and ultra vires. The Madras and Southern M ahratta Railway Co. Ltd. v. The Bezwada Municipality, I.L.R. 1945 Mad. r, not applicable. The Borough Municipality of Amalner v. The Pratap Spinning Weaving and Manufacturing Co. Ltd., Amalner, l.L.R. 1952 Born. 918, not approved. Motiram Kcshavdas v. Ahmedabad Municipal Borough, (1942) 44 Born. L.R. 280, referred to. CIVIL APPELLATE JURISDICTION: Civil Appeals Nos. 125 to 129 of 1957. Appeals by special leave from the judgment and decree dated October 7, 1952, of the Bombay High Court in Second Appeals Nos. 601 to 605 of 1952. S. T. Desai, Avadh Behari and B. P. Maheshwari, for the appelants. A. V. Viswanatha Sastri and A.G. Ratnaparkhi, for the respondents. 1961. March 14. The Judgment of the Court was delivered by SHAH, J.-Those five appeals raise a common ques- tion about the validity of Rule 2C framed by the respondent-the Municipality of Barsi under s. 58(j) of the Bombay Municipal Boroughs Act, 1925-herein- after called the Act. The Lokmanvf1 Mills-hereinafter called the appellants-are a company registered under the Indian
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