D. C. Gouse and Co. Vs. State of Kerala & ANR [1979] INSC 193 (21 September 1979)
SHINGAL, P.N.
SHINGAL, P.N.
CHANDRACHUD, Y.V. ((CJ) KRISHNAIYER, V.R.
UNTWALIA, N.L.
KOSHAL, A.D.
CITATION: 1980 AIR 271 1980 SCR (1) 804 1980 SCC (2) 410
CITATOR INFO:
RF 1983 SC 130 (57) C 1984 SC 420 (15) RF 1991 SC 686 (13)
ACT:
Kerala Building Tax Act, 1975-Constitutional validity of-Act imposed a non-recurring tax based on capital value - State Legislature if competent to impose.
HEADNOTE:
The Kerala Building Tax Act, 1975 passed by the State Legislature under Entry 49 of List II (Taxes on lands and buildings) is imposed as a non-recurring tax on buildings, constructed on or after April 1, 1973, the "capital value" of which exceeds Rs. 20,000/-. The term "capital value" is defined to mean the value arrived at by multiplying the 'annual value" of a building by sixteen. "Annual value" means the gross annual rent on which the building may, at the time of completion, be expected to let from month to month or from year to year. Section 6 provides that the annual value of a building shall be the annual value fixed for that building in the assessment books of the local authority (which includes a Municipal Corporation or a municipality and so on) within whose area the building is situate. Section 6(4) provides that in determining the annual value of a building regard must be had to the location of the building, the nature and quality of the structure of the building, the capability of the building and so on. An assessee objecting to the assessment of building tax assessed or denying the liability may appeal to the Appellate Authority under s. 11. But no appeal lies unless the building tax due has been paid. Although no appeal lies from the decision of the Appellate Authority, provision is made for reference to the District Court on a question of law and the District Collector is given power to revise the order of the Appellate Authority and the Government has the power of revision against the order of the District Collector. Jurisdiction of Civil Court is barred by, s. 27 of the Act.
The High Court, having upheld the validity of the Act, the appellants in their appeals impugned the view of the High Court.
It was contended on behalf of the appellants that (1) the tax levied on buildings being a tax on the capital value of the assets falls within the scope of entry 86 of List I of the Seventh Schedule and, therefore, is beyond the legislative competence of the State Legislature; (2) the Act was unconstitutional in that it imposed a tax on buildings retrospectively (over a period of 2 years of its enactment);
(3) it was not merely a tax on buildings but a tax on the buildings, and lands of those buildings; (4) the method of determining the capital value of a building on the basis of its annual value is hypothetical and arbitrary and is, therefore, unconstitutional.
HELD: 1 There is no force in the argument that the State Legislature was not competent to impose a tax on the buildings under entry 49 of List II. [818 B] (a) Article 366(28) defines tax to include imposition of any tax whether general, local or special. The word "tax" in its widest sense includes all money 805 raised by taxation and includes tax levied both by the Central and State Legislatures as well as rates and charges levied by local authorities [815 D-E] (b) The term "assets" referred to in entry 86 of List I means "Property in general, all that one owns." If a tax is levied on "all that one owns" or his total assets, it would fall within the purview of entry 86 and therefore would be outside the legislative competence of the State Legislature.
On the other hand, if a tax is directly imposed on "buildings" it will bear direct relation to the buildings owned by the assessee. Though the building owned by an assessee is a component of his total assets, the tax under entry 86 will not bear any direct or definable relation to his building. A tax on "buildings" is, therefore, a direct tax on buildings as such. It is not a personal tax without reference to any particular property. [815 H, 816 A-B] (c) A tax has two elements: the person, thing or activity on which it is imposed and the amount of the tax.
The amount of tax may be measured in many ways. There is a distinction between the subject matter of a tax and the standard by which the amount of tax is measured. Thus a building may be the subject matter of a tax like wealth tax (entry 86 List I) or it may also-be the subject of a direct tax under entry 49 of List II. The two taxes being separate and distinct, the do not over-lap each other. Therefore the tax imposed in the instant case is well within the competence of the legislature. [816 E-Fl Sudhir Chandra Nawn v. Wealth Tax officer Calcutta & Ors., [1969] 1 SCR 108; Assistant Commissioner of Urban Land Tax and ors. v. The Buckingham and Carnatic Co. Ltd., Etc., [1970] 1 SCR 268 referred to.
(d) It is settled law that the quantum of tax levied by the taxing statute and the conditions subject to which it is levied are matters within the competence of the legislature and so long as the tax is not confiscatory or extortionate the reasonableness of the tax cannot be questioned in a court of law. [828 D-E] Rai Ramkrishan & Ors. v. The State of Bihar, [1964] 1 SCR 897; Kunnathat Thathunni Moopil Nair v. The State of Kerala & Anr., [1961] 3 SCR 77 referred 2(a). The Act is not retrospective in the strictly technical sense of the term. A statute is deemed to be retrospective, when it takes away or impairs any vested right acquired under existing laws or creates a new obligation in respect F' of the transactions or considerations already past. The Act, though passed in April 1975, had imposed a tax on buildings with retrospective effect from April 1973. By so doing it has not taken away or impaired any vested right of the owner of the building acquired under any existing law. Absence of an earlier taxing statute cannot be said to create a "vested right" under any existing law. Nor has any new obligation or disability been attached in respect of any earlier tax transaction. If the language of the enactment shows that the legislature thought it expedient to authorise the making of retrospective rates, it can fix the period as to which the rate may be retrospectively made. [828 D-H] Bradford Union v. Wilts, (1868) LR 3 Q.B. 616; The Tata Iron & Steel Co Ltd. v. The State of Bihar, [1958] SCR 1355 referred to.
(b) The choice of the legislature to impose a tax on buildings with effect from April 1, 1973 cannot be said to be discriminatory. The choice of a date as a basis for classification cannot be dubbed as arbitrary even if no particular reason is forthcoming unless it is shown that it was capricious or whimsical 15-625SCI/79 806 Similarly unless it is shown that the fixing of the date is very wide of the reasonable mark the decision of the legislature must be accepted. [819 C-D] In the instant case, after the 1961 Act was struck down by this Court in 1968 the Government declared its intention to introduce a fresh Bill so as to bring a new Act into force from April 1970. After its introduction in the Assembly it was referred to a Select Committee which recommended that the Act should be brought into force from April 1, 1973. Two ordinances giving effect to the provisions of the draft Bill were promulgated and eventually the Bill became an Act in April, 1975. These facts would not show that the choice of the date of April 1, 1973 was unreasonable or that it was wide of the reasonable mark.
[819 E-G] 3(a). What entry 49 of List II permits is the levy of "taxes on lands and buildings." It is permissible Under this entry to levy a tax either on lands as well as buildings, or on lands, or on buildings, if the legislature decides to impose a tax only on buildings, the tax would be imposed on all that goes to make or constitute a building. [820 B-C] (b) The word "building" means "that which is built; a structure. edifice;" The natural and ordinary meaning of a "building" is, a "a fabric of which it is composed, the ground upon which its walls stand and the ground embraced within those walls." Entry 49 includes the side of the building as its component part. [820 C-D] (c) The definition of the term "building" in the Act makes it clear that a house, outhouse, garage or any other structure cannot be erected without the ground on which it is to stand. The expression "building" includes the fabric of which it is composed, the ground upon which its walls stand and the ground within those walls because the ground would not have a separate existence, apart from the building. The ground referred to in Entry 49 List II would not be the subject matter of a separate tax, apart from the tax on the building standing on it. That being so there is no occasion to tax the site separately or to ascertain its value and add it to the value of the fabric. [820 F-G] (d) This is also the position in the case of appurtenances. An appurtenance belongs to the building concerned and has no existence of its own. An appurtenance, it its true sense, is an integrated part of the building to which it belongs. [826 F-G] (e) In the matter of fixing the annual value of the building under s. 6 regard must be had to the "location of the building" and the "value of the land on which the building constructed", but it does not bear on the annual value of the ground of the building which does not have an existence of its own apart from the building. It is therefore futile to contend that as factors (a) and (f) of sub-section 4 of s. 6 refer to the location of the building and the value of the land, the law recognises the separate existence or entity of the ground on which the buildings stands, so that the tax imposed under it is a tax both on lands and buildings and both entities should be separately recognised and determined, and taxed as such [821 C-E] 4(a) When the State Legislature had decided to impose a tax, it was open to it to decide how best to levy it. One of the usual modes of levying tax is to make provision for determining the "rate", or annual value of the building.
Rateable value is the same as the net annual value of the building. But 807 if the Legislature decides to levy a tax on buildings once for all or, as a "non-recurring tax on buildings, it has to go beyond the annual value, and work out the capital value which could be done on the basis of capital cost of construction of the building or its market value or on the basis of rent arrived at by what is known as "higgling of the market" multiplying it by a number which would best serve the purpose of determining the value of the building and then to specify the rate of tax on it. [822 C-F] (b) If the Legislature chose to adopt the annual value as the basis for working out the capital value it cannot be blamed for it because besides other advantages it is readily available from the records of local authorities and is a quite simple and reliable basis to work upon. [828 B-C] (c) The various methods of properly valuation are the various facets to a difficult problem and no one method is perfect or final or above criticism. The multiple of sixteen adopted cannot be said to suffer from any constitutional or legal infirmity. [830 G-H] (d) The capital value of a building is not merely the cost of its bricks and mortar. It may be difficult to provide a ready or convenient basis of taxation. There can be no objection if the Legislature decides to levy the annual value of a building and prescribes a uniform formula for determining its capital value. The four well-accepted methods for arriving at the annual value of the building, are: (I) The "competitive or comparative method''; (2) the 'profits basis"; (3) the "contractor's method"; and (4) the "unit method". These four methods can be applied either singly or in combination. [823 B-E] (e) The fundamental object of each of these methods is to find out the rent which the tenant might reasonably be expected to pay for a building. It is the expectation which is to be reasonable and not necessarily the rent tor the reasonable expectation would exclude any so-called black market rent. But there is no rule of law as to the method of valuation to be adopted for determining the annual value of a building. If the Legislature selects the method of determining the annual value on the basis of rent, that is the best evidence of value. If it has been fixed by the higgling of the market there is neither reason nor authority for holding that it is hypothetical or arbitrary. [823 G-H, 824 A-B] (f) The provisions of the Act, taken together, contain the entire scheme for the levy and collection of the building tax on the capital value of building. The expression "capital value" is not the cost of construction of the building or its market value as wealth but is only a working expression which, roughly stated, is the taxable value of the building. The State Legislature was quite competent to select that as the basis for assessing the building tax. [824 D-E] (g) There is no inherent illegality if the gross income of the property were to be capitalised for the purpose of determining the value of the property. firstly, because there is nothing to prevent the Legislature from making the expected gross annual rent and thereby the annual value of a building from being the unit for multiplication by sixteen for arriving at its capital value for charging tax under s. 5. Secondly, by virtue of s. 6 the annual value forms the basis for determining the capital value of the building for the purposes of the Act. However what is really taken as the annual value under the determining in s. 2(a) is not the gross annual rent but the net rent after allowing for the 808 cost of its repairs etc. It is not therefore factually correct to say that the annual value of the buildings in the State is determined on the basis of their gross annual rent without any deduction on account of repairs. Nor is it correct to say that the determination of the capital value was arbitrary as it was arrived at by multiplying the gross annual rent by sixteen. The gross value of a building is often made the datum point by statute and there is nothing unusual or illegal about it particularly when there are statutable deductions from it. [825 C-H] (h) Section 6(1) accepts the annual value of a building in the books of the local authorities as correct. But that would not justify the argument that doing so is illegal or unreasonable as long as it can be shown that what is entered in the assessment books of the local authorities has been arrived at in accordance with a satisfactory procedure laid down for it in the statutes concerned. If the procedure prescribed in that Act is unexceptionable, there is nothing illegal or unconstitutional if another taxing statute provides that the annual value fixed by it shall be accepted as correct and would From the basis for the calculation of any other tax permissible under another statute. such cases there is no necessity for providing another machinery in the other Act and Rules. Moreover ss. 9 to 16 of the Act contain the procedure and the machinery for the assessment of the building tax on the returns filed under ss. 7 and 8. These provisions are adequate in all respects and are not open to challenge. [831 F-H, 832 A-B]
5. (a) The argument that the capital value of a building is bound to differ according to its location, amenities and appurtenances etc. and that ascertainment of the capital value by multiplying the annual value by sixteen is discriminatory and violative of Art. 14, loses sight of the fact that the Legislature has defined the annual value to mean the annual rent at which a building may be expected to let. [833 H, 834 A-B] (b) A building in an important locality with attractive appurtenance is expected to fetch a higher rent than a building without those advantages. The definition capital value provides for the levy of a higher building tax on buildings on which such levy would be justified, because the incidence of the levy would depend on the capacity of the building to fetch the rent. [834 B-C]
6. There is no force in the argument that when s. 29 says that in fixing the fair rent of a building under s. S of the Rent Control Act, the rent control court would not take into consideration the building tax payable under the Act and that this makes the provision extortionate because it prevents the owner from passing on the liability to the tenant. The tax being a non-recurring tax, the question of passing it on to the tenant by splitting it up in proportion to the number of years of the tenancy cannot arise. There is no provision in the Rent Control Act under which a building tax could be taken into consideration in fixing the fair rent. [834 D-F]
7. Section 18 which provides that tax may be paid in certain prescribed number of installments and the proviso to s. 11(1) which deals with appeals should be read harmoniously. If an assessee is entitled to pay the building tax in installments, he would not be disentitled to file an appeal if he has paid those installments as and when they fell due. [834 G-Hl 809
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1524 of 1978 A (From the Judgment and order dated 29-6-1978 of the Kerala High Court in original Petition No. 4411/77) CIVIL APPEALS NOS. 2091-2092 OF 1978 (From the Judgment and Order dated 26-6-1978 and 20-6- 1978 of the Kerala High Court in O.P.. Nos. 3909/74 and 3902/75) CIVIL APPEAL NOS. 2093-2103 OF 1979 (From the Judgments and Orders dated 27-6-78, 20-6-78, 30-6-78, 12-6-78, 26-6-78, 22-6-78, 21-6-78, 30-6-78, 20-6- 78, 27-6-78 of the Kerala, High Court in O.P.. Nos. 4833/75, 1006/75, 635/78 and 4740/77, 4096/74, 1820/75, 2258/76, 203/76, 346/78, 3497/75,, and 5620/75 respectively) CIVIL APPEAL NOS. 2136 OF 1978 (From the Judgment and Order dated 12-6-78 of the Kerala High Court in O.P. No. 3933/75) CIVIL APPEAL NO. 6 OF 1979 (From the Judgment and Order dated 23-6-78 of the Kerala High Court in O.P. No. 4449/76-K) ClVlL APPEAL NOS. 27-31 OF 1978 (From the Judgments and Orders dated 28-6-78, 23-8-78, 28-6-78 5 16-6-78, of the Kerala High Court in O.P. Nos. 3401/77, 4660/75, 1658/77, 3929/75 and 3925/75 respectively) CIVIL APPEAL NOS. 50-52 OF 1978 (From the Judgments and orders dated 28-6-78, 21-6-78 c 30-6-78 of the Kerala High Court in O.P. Nos. 3130/77-E, 5470/75 and 799/78 respectively) CIVIL APPEAL NOS. 188, 266 AND 303 OF 1979 (From the Judgments and orders dated 29-6-78, 1-6-78 and of the Kerala High Court in O.P. Nos. 4758/75, 150/76 and 5800/78 respectively) 810 CIVIL APPEAL NOS. 309-311 OF 1979 (From the Judgments and Orders dated 23-6-78, 20-6-75 and 24-11-1978 of the Kerala High Court in O.P. Nos.
3601/76, 4991/75 and 4611/75 respectively) CIVIL APPEAL Nos 472-473 OF 1979 (From the Judgment and Order dated 29-6-78 of the Kerala High Court in O.P. Nos. 4283/75 and 4290/77) CIVIL APPEAL NOS. 1543-1546 OF 1978 (From the Judgment and Order dated 12-6-1978 of the Kerala Court in O.P. Nos. 3909, 3970, 252 and 4256/74.) CIVIL APPEAL NOS. 1689-1693 OF 1978 From the Judgments and Orders dated 20-6-1978, 22-6- 1978, 23-6-78, 22-6-78, 296-78, 21-6-78 & 22-6-78 of the Kerala High Court in O.P. Nos. 850/75, 1000/75, 4964/75 and 25/76, 1747/76 and 2076/76 and 544/76 and 4804/75K and 5928/75N, 1889/76G, and 1615/76H respectively) CIVIL APPEAL NOS. 1556 OF 1978 (From the Judgment and Order dated 12-6-1978 of the Kerala High Court in O.P. No. 1147/75) CIVIL APPEAL NOS. 1981-2004 OF 1978 (From the Judgments and Orders dated 28-6-78, 23-6-78, 27-6-78, 22-6-78, 30-6-75, 21-6-78, 20-6-78, 28-6-78, 23-6- 78, 28-6-75, 26-6-78, 12-6-78, 23-6-78, 28-6-78, 20-6-78, 2- 6-78, 27-6-78, 26-6-78, 23-6-78, 28-6-78 and 27-6-78 of the Kerala High Court in O.P. No. 3507/77, 3622/77 and 1375/76 and 796/177 and 3005/76 - and 567/78 and 5669/75, 1124/76 and 5173 and 3509/77 and 4445/76 and 3508/77 and 5852/76 and 4230/74 and 3978/76 and 3616/77 and 5328/75 and 2415/76 and 1310/77E and 5810/76G, 940/76D and 3634/76N and 1380/77L and 2742/76 respectively.
ClVlL APPEAL NO. 2105 OF 1978 (From the Judgment and Order dated 20-6-78 of the Kerala High Court in O.P. No. 5175/75 CIVIL APPEAL Nos 232, 2351, 2352, 2353 AND 2354 OF 197 (From the Judgments and orders dated 30-6-1978, 23-6- 78, 811 26-6-78 and 20-6-78 of the Kerala High Court in O.P. Nos.438/78B, 1535/76N and 1443/76E and 5134/75 respectively) CIVIL APPEAL NOS. 2415-2419 OF 1978 (From the Judgments and Orders dated 21-6-1978, 12-6- 78, 30-6-78, 21-6-78 and 27-6-78 of the Kerala High Court in O.P. Nos. 5581/75, 5240/75, 849/78, 2751/76 and 1552/77 respectively) CIVIL APPEAL NO. 2497 OF 1978 (From the Judgment and Order dated 20-6-78 of the Kerala High Court in O.P. No. 4028/75) CIVIL APPEAL, NOS. 2587/78 AND 67-71/79 (From the Judgments and Orders dated 30-6-1978, 7-6-78 and 21-6-1978 of the Kerala High Court in O.P. Nos. 3351/76N, and 6127/75. 6159/75. 5972/75, 4628/77-A & 5755/75 respectively) CIVIL APPEAL NOS: 129-131 AND 197/79 (From the Judgments and Orders dated 21-6-78, 20-6-78 of the Kerala High Court in O.P. Nos. 5677/75, 5723/75 and 5263/75 and 5877/75 respectively) CIVIL APPEAL NOS 265, 420 AND 544, 545 & 580 OF 1979 (From the Judgments) and Orders dated 20-6-79,21-6- 79,22-6-78, 20-6-78 and 22-6-78 of the Kerala High Court in O.P. Nos. 5004/75, 5524/75, 248/76K, 5335/75 and 2962/76G respectively) CIVIL APPEAL NOS : 1965-1967 AND 2203-2206 OF 1978 (From the Judgments and Orders dated 25-7-78, 28-6-78, 4-7-78, 3-7-78, 22-6-78, 27-6-78 and 29-6-78 of the Kerala High Court in O.P. Nos. 254/78, 3132/77-F, 4640/75, 1459/78- F, 750/76-E, 704//7-A and 5995/75 respectively) CIVIL APPEAL NOS: 2583/78, 1/79, 72/79 AND 168/79 (From the Judgments and Orders dated 23-6-78,27-678,23- 6-78 and 29-6-78 of the Kerala High Court in O.P. Nos. 260/76-L 1863/ 77E, 1398/76N and 4494/77B respectively) 812 CIVIL APPEAL NOS: 2104/78, 2401/78 AND 2350/78 (From the Judgments and Orders dated 12-6-78, 26-6-78, 30-6-78 of the Kerala High Court in O.P. Nos. 4509/74, 5770/76L and 1150/76) CIVIL APPEAL NOS: 1860-1865 OF 1978 (From the Judgments and Orders dated 12-4-78, 28-6-78, 29-6-78, 23-6-78, 26-6-78 of the Kerala High Court in O.P. Nos. 4184/74, 3665/74C, 3932/77(B), 4165/76K and 5815/76(H) respectively) CIVIL APPEAL NOS: 2256-2257/78, 333/79, 500/79 (From the Judgments and Orders dated 21-6-78, 29-6-78 and 27-6-78 of the Kerala High Court in O.P. Nos. 5494/75, 4716!77, 1285/75 and 3023/76) ClVlL APPEAL NO. 2207 OF 1978 (From the Judgment and Order dated 23-6-78 of the Kerala High Court in O.P. No. 4140/76-H) CIVIL APPEAL NO. 169 OF 1979 (From the Judgment and Order dated 28-6-77 of the Kerala High Court in O.P. No. 3117/77) CIVIL APPEAL NOS: 148-150/79, 304-305/79 AND 409/79 (From the Judgments and Orders dated 27-6-78 28-6-78, 20-6-78, 27-6-78. Of the Kerala High Court in O.P. Nos. 1941/77, 1903/77, 5176/78, 1047/77(G) and 1306/77E) CIVIL APPEAL NOS. 2254, 2255/78 AND 267 OF 1979 (From the Judgments and Orders dated 27-6-78, 21-6-78 and 27-6-78 of the Kerala High Court in O.P. No. 93/77, 5396/75 and 2277/76-D respectively) (From the Judgments and Orders dated 21-6-78 and 30-6- 78 of the Kerala High Court in O.P. Nos. 5416/75 and 4782/77C) WRIT PETITION NOS. 4375 OF 1978 & 143/79 Under Article 32 of the Constitution) ClVlL APPEAL No. 39 OF 1979 (From the Judgment and Order dated ]2-6-1978 of the Kerala High Court in O.P. No. 4042/74) 813 SPECIAL LEAVE PETITION (CIVIL) No. 6298 OF 1978 (From the Judgment and order dated 5-7-78 of the Kerala High Court in O.P. No. 983/76) SPECIAL LEAVE; PETITION (CIVIL) NOS: 1137-1138/79 (From the Judgments and orders dated 7-8-78 and 27-6-78 of the Kerala High Court in O.P.I Nos. 3474/77 and 1950/77) SPECIAL LEAVE PETITION (CIVIL,) NOS: 4861-4862 & 6154-56/79 (From the Judgments and orders dated 26-6-78, 27-6-78 26-6-78, 28-6-78 and 30-6-78 of the Kerala High Court in O.P. Nos. 638/77,1530/77, 5485/78, 2950/77 and 884/78) P. Govindan Nair (C.As. 1524, 2092-2095/78, 27, 29, 303, 310 and 311/79 T. C. Raghavan (CA 266), T. L. Anantha Sivan and N. Sudhakaran, for the Appellants in CAs. 1524, 2091-2092, 2093-2103, 2136/78, 6, 27-31, 50-52, 100, 266, 303, 310, 311, 309, 472 and 473/79.
Anil B. Divan (1543-46 and 1556),S. B. Saharya, K. V. Kuriakose (in all except 1995, 1997, 1998, 29-31, 197, 500 and V. B. Sallarya for the Appellants, in C.As. 1543-46, 1656, 1689-99, 1981-2004, 2105, 2324, 2351-2352, 2354, 2415- 2419, 2497, 2587/178, 67-71, 129-131, 197, 265, 420, 544-545 and 500/79.
P. A. Francis, (1966) K. Sudhakaran (1967), P. Paramesuaran (1966-67) A. S. Nambiar for the Appellants in 1965, 1966, 1967, 2203, 2204, 2205, 2206, 2353 and 2503/78, 1, 72 and 168/179, 165/79, 2063/78 and for the Petitioner in W.P. 143/79.
P. Kesava Pillai and S. K. Das Gupta for the Appellants in CAs. 2104, 2350 and 2401/78.
P. Govindan Nair and Mrs. Saroja Gopalkrishnan for the Appellants in 1860-64/78.
S. K. Mehta, P. N. Puri and EMS Anam for the Appellants in C.A. 2256, 2257/78, 333, and 500/79 and 2026/79.
S. Balakrishnan for the Appellants in CA 2207/78 and for Petitioner in W.P. 4375/79.
G. B. Pai (169), K. J. John and Manzal Kumar for the Appellants in C.A. 39 and 169/79.
P. Govindan Nair, Mrs. Baby Krishnan and N. Sudhakaran for the Appellants. C.A. 148-50,304-305 and 409/79 and for the Petitioners in SLP Nos. 4062, 4061, 6298, 5141, 6154- 6156/78.
814 A. T. M. Sampath and P. N. Ramalingam for the Appellants in CA 2254 and 2255/78 and 267/79.
K. P. P. Pillai for the Appellants in C.A. 542 and 571/79.
N. Sudhakaran for the petitioners in SLP 1137-1138/79.
M. M. Abdul Khader and K. M. K. Nair for the Respondents in all matters.
The Judgment of the Court was delivered by SHINGHAL, J. These cases relate to the validity of certain provisions of the Kerala Building Tax Act, 1975, hereinafter referred to as the Act, and are directed against the judgment of the Keral High Court dated June 12, 1978, by which the validity of those provisions has been upheld. We have heard these cases together and shall deal with them in this judgment.
In order to appreciate the controversy, it will be convenient to make a brief mention of the background of the Act.
The Legislature of the Kerala State wanted to impose a tax on buildings, and passed the Kerala Building Tax Act, 1961, which came into force on March 2, 1961. Its validity was challenged, and by his judgment dated November 20, 1964, a learned Single Judge of the High Court held it to be invalid and unconstitutional. The division bench took the same view in its judgment dated July 7, 1966, and dismissed the appeal of the State. The matter came to this Court, and it also dismissed the appeal by its judgment dated August 13,. 1968, reported in State of Kerala v. Haji K. Haji K. Kutty Naha and others. This was so because the Legislature had adopted merely the floor area of the building as the basis of the tax irrespective of all other considerations.
The intention to introduce a fresh Bill and to levy a non- recurring tax on building was stated in the Finance Minister's budget speech of 1910-71. A Bill was published sometime in June, 1970, and it was stated there that the Act would be brought into force with effect from April 1, 1970. The Bill was introduced in the Legislative Assembly on July S, 1973, and was referred to a Select Committee. The Committee submitted its report on March 28, 1974. It recommended that the Act may be brought into force from April 1, 1973. As the Bill could not be taken up during the budget session, the Government of the State promulgated the Kerala Building Tax ordinance, 1974, on July 27, 1974 to give effect to the provisions of the Bill as reported by the Select Committee. It was followed by another ordinance dated November 18, 1974 on the lines of the 815 earlier ordinance. The Bill was passed soon after, and the Governor gave his assent to it on April 2, 1975. Several writ petitions were filed in the High Court to challenge its constitutional validity. and we have made a mention of the High Court's impugned judgment dated June 12, 1978, from which the present cases have arisen. While four Hon'ble Judges of the High Court have upheld the validity of the Act. a different views has been taken by Eradi, J.
The question which arises for consideration at the threshold is that relating to the competence of the State Legislature to enact the law, on which considerable stress has been laid by Mr. P. A. Francis. He has argued that the subject-matter of the Act being a tax on buildings, it is a tax on the capital value of the assets of an individual or company and falls within the scope of entry 86 of List I of the Seventh Schedule of the Constitution, and not under entry 49 of List II, so that it was beyond the legislative competence of State Legislature. The question is whether this is so.
The word "tax" in its widest sense includes all money raised by taxation. It therefore includes taxes levied by the Central and the State Legislatures, and also these known as "rates ', or other charges, lavied by local authorities under statutory powers. "Taxation" has therefore been defined in clause (28) of article 366 of the Constitution to include "the imposition of any tax or impost, whether general or local or special," and it has been directed that "tax.' shall be 'construed accordingly." Chapter I of Part XI of the Constitution deals with the distribution of legislative powers. Article 246 of that chapter states, inter alia, the exclusive powers of the Parliament and the State Legislatures according as the matter is enumerated in List I or List II of the Seventh Schedule. Entry 86 of List I, in which reliance has been placed by Mr. Francis, reads as follows:- "86. Taxes on the capital value of assets, exclusive of agricultural land, of individuals and companies; taxes on the capital of companies." Now the word "assets" has been defined in the Century Dictionary (which is an encyclopedic lexicon of the English language) as follows- "Property in general; all that one owns, considered as applicable to the payment of his debts .... As a singular. Any portion of one's property or effects so considered." 816 So if a tax is levied on all that one owns, or his total assets, it would fall within the purview of entry 86 of List I, and would be outside the legislative competence of a State Legislature, e.g. a tax on one's entire wealth. That entry would not authorise a tax imposed on any of the components of the assets of the assessee. A tax directly on one's lands and buildings will not therefore be a tax under entry 86.
On the other hand, entry 49 of List Ir is as follows,- "49. Taxes on lands and buildings." If therefore a tax is directly imposed on "buildings", it will bear a direct relation to the buildings owned by their assessee. It may be that the building owned by an assessee may be a component of his total assets, but a tax under entry 86 will not bear any direct or definable relation to his building. A tax on "buildings" is therefore a direct tax on the assessee's buildings as such, and is not a personal tax without reference to any particular property.
It has to be appreciated that in almost all cases, a tax has two elements which have been precisely stated by Seervai in his "Constitutional Law of India," second edition, volume 2, as follows, at page 1258,- "Another principle for reconciling apparently conflicting tax entries follows from the fact that a tax has two elements: the person, thing or activity on which the tax is imposed, and the amount of the tax.
The amount may be measured in many ways; but decided cases establish a clear distinction between the subject matter of a tax and the standard by which the amount of tax is measured. These two elements are described as the subject of a tax and the measure of a tax." It may well be that one's building may imperceptibly be the subject matter of tax, say the wealth-tax, as a component of his assets. under entry 86 (List I); and it may also be subjected to tax, say a direct tax under entry 46 (List II), but as the two taxes are separate and distinct imposts, they cannot be said to overlap other and would be within the competence of the Legislatures concerned.
Reference in this connection may be made to Sudhir Chandra Nawn v. Wealth-Tax officer, Calcutta and others.(1) The petitioner there challenged the demand for the recovery of wealth tax on the ground, inter alia, that since the expression "net wealth" included the buildings of the assessee and tho power to levy tax on them was referred to the 817 State Legislature under entry 49, List II, Parliament was not competent .4 to levy the tax under entry 86 of List I.
This Court rejected the challenge and laid down the law as follows,- "The tax which is imposed by entry 86 List I of the Seventh Schedule is not directly a tax on lands and buildings. It is a tax imposed on the Capital value of the assets of individuals and companies, on the valuation date. The tax is not imposed on the components of the assets of the assessee: it is imposed on the total assets which the assessee owns, and in determining the net wealth not only the encumbrances specifically charged against any item of asset, but the general liability of the assessee to pay his debts and to discharge his lawful obligations have to be taken into account.
.... ..... ...... .....
Tax on lands and buildings is directly imposed on lands and buildings, and bears a definite relation to it. Tax on the capital value of assets bears no definable relation to lands and buildings which may form a component of the total D. assets of the assessee. By legislation in exercise of power under entry 86 List I tax is contemplated to be levied on the value of the assets. For the purpose of levying tax under entry 49 List II the State Legislature may adopt for deter mining the incidence of tax the annual or the capital value of the lands and buildings. But the adoption of the annual or capital value of lands and buildings for determining tax liability will not, in our judgment, make the fields of legislation under the two entries overlapping." The decision in Sudhir Chandra Nawn's case was followed by this Court in Assistant Commissioner of Urban Land Tax and others v. F. The Buckingham and Carnatic Co. Ltd., Etc.(1) where the vires of the Madras Urban Land Tax Act, 1966, was challenged with reference to entry 86 of List I of the Seventh Schedule. The legal position on that aspect of the controversy was reiterated as follows,- "But in a normal case a tax on capital value of assets bears no definable relation to lands and buildings which may or may not form a component of the total assets of the assessee. But entry 49 of List II, contemplates a levy of tax on lands and buildings or both as units. It is not concerned with the division of interest or ownership in the units of lands or buildings which are brought to tax. Tax on lands and buildings, is directly imposed on lands and buildings, 818 and bears a definite relation to it. Tax on the capital value of assets bears no definable relation to lands and buildings which may form a component of the total assets of the assessee." There is therefore no force in the argument that the State Legislature was not competent to impose the tax on buildings under entry 49 of list II of the Seventh Schedule of the Constitution.
We may as well put aside the other argument that the Act is unconstitutional as it was passed on April 2, 1975 but has imposed a tax on buildings with retrospective effect from April 1, 1973.
Craies on Statute Law, seventh edition, has stated the meaning of "retrospective" at page 387 as follows,- "A statute is to be deemed to be retrospective, which takes away or impairs any vested right acquired under existing laws, or creates a new obligation,, or imposes a new duty, or attaches a new disability in respect of transactions or considerations already past.
But a statute "is not properly called a retrospective statute because a part of the requisites for its action is drawn from a time antecedent to it, passing"." It has however not been shown how it could be said that the Act has taken away or impaired any vested right of the assessees before us which they had acquired under any existing law, or what that vested right was. It may be that there was no liability to building tax until the promulgation of the Act (earlier the ordinances) but mere absence of an earlier taxing statue cannot be said to create a "vested right," under any existing law, that it shall not be levied in future with effect from a date anterior to the passing of the Act. Nor can it be said that by imposing the building tax from an earlier date any new obligation or disability has been attached in respect of any earlier transaction consideration. The Act is not therefore retrospective in the strictly technical sense.
What it does is to impose the building tax from April 1, 1973. But as was held in Bradford Union v. Wilts,(1) if the language of the statute shows that the legislature thinks it expedient to authorise the making of retrospective rates, it can fix the period as to which the rate may be retrospectively made.
819 This Court had occasion to examine the validity of the retrospective levy of sales tax in The Tata Iron and Steel Co., Ltd. v. The State of Bihar(1) and it was held that that was not beyond the legislative competence of the State Legislature.
Nor can the choice of April 1, 1973 as the date of imposition of the building tax be assailed as discriminatory with reference to article 14 of the Constitution. It will, be enough for us to refer in this connection to the following passage from this Court's decision in Union of India and another v. M/s. Parameshwaran Match Works Etc.
Which was a case under the Central Excise and Salt Act, 1944.- "The choice of a date as a basis for classification cannot always be dubbed as arbitrary even if no particular reason is forthcoming for the choice unless it is shown to be capricious or whimsical in the circumstances. When it is seen that a line or a point there must be and there is no mathematical or logical way of finding it precisely, the decision of the legislature or its delegate must be accepted unless we can say that it is very wide of the reasonable mark.
See Louisville Gas Co. v. Alabama Power Co.-240 U.S. 30 at 32 (1927) per Justice Holmes." It has not been shown in this case how it could be said that the date (April 1, 1973) for the levy of the tax was wide of the reasonable mark. On the other hand it would appear from the brief narration of the historical background of the Act that the State Legislature had imposed the building tax under the Kerala Building Tax Act, 1961, which came into force on March 2, 1961, and when that Act was finally struck down as unconstitutional by this Court's decision dated Aug 1st 13, 1968, the intention to introduce a fresh Bill for the levy was made clear in the budget speech of 1970-71. It will be recalled that the Bill was published in June 1973 and it was stated there that the Act would be brought into force from April 1, 1970. The Bill was introduced in the Assembly on July S, 1973. The Select Committee however recommended that it may be brought into force from April 1, 1973. Two ordinances were promulgated to give effect to the provisions of the Bill. The Bill was passed soon after and received the Governor's assent on April 2, 1975. It cannot therefore be said with any justification that in choosing April 1, 1973 as the date for the levy of the tax, the Legislature acted unreasonably, or that it was "wide of the reasonable mark." 820 The real controversy in this case is that relating to the nature of the tax, for it has been vehemently argued before us that it is not merely a tax on buildings, but it is a tax on the buildings, as well as on the lands of those, buildings.
As has been mentioned, what entry 49 of List II of the Seventh Schedule of the Constitution permits is the levy of "taxes on lands and buildings." It is therefore permissible to levy a taxes either on lands as well as buildings, or on lands, or on buildings. If the Legislature decides to impose a tax only on "buildings", the tax will be imposed on all that goes to make, or constitute, a building.
The word ' building" has been defined in the oxford English Dictionary as follows,- "That which is built; a structure, edifice: now a structure of the nature of a house built where it is to stand." Entry 49 therefore includes the site of the building as its component part. That, if we may say so, inheres in the concept or the ordinary meaning of the expression "building".
A somewhat similar point arose for consideration in Corporation of the City of Victoria v. Bishop of Vancouver Island(1) with reference to the meaning of the word "building" occurring in section 197(1) of the Statutes of British Columbia, 1914. It was held that the word must receive its natural and ordinary meaning as "including the fabric of which it is composed, the ground upon which its walls stand and the ground embraced within those walls." That appears to us to be the correct meaning of "building." The Act contains its own definition of what is meant by "building", and clause (e) of section 2 is to the following effect,- "(e) "building" means a house, out-house, garage, or any other structure or part thereof, whether of masonry, bricks, wood, metal or other material, but does not include any portable shelter or any shed constructed principally of mud, bamboos, leaves, grass or thatch or a. latrine which is not attached to the main structure." There are two explanations to the clause, but they are not relevant for the controversy before us. The definition therefore makes it quite clear that. as a house, out-house, garage or any other structure cannot be erected without the ground on which it is to stand, the expression "building" includes, the fabric of which it is composed, the ground 821 upon which its walls stand and the ground within those walls. It is A equally clear that the ground referred to above would not have a separate existence, apart from the building, and would not be "lands' jointly stated with "buildings" as the subject-matter of the tax in entry 49 of List II. In other words, the "ground" referred to above would not be the subject-matter of a separate tax, apart from the tax on the building standing on it.
It is true that sub-section (4) of section 6 of the Act provides that in determining the annual value of a building under sub-section (2) or sub-section (3), the assessing authority shall, among other factors, have regard to the "location of the building", and the "value of the land on which the building is constructed", but that is necessary for fixing the annual value of the "building", and does not bear on the annual value of the ground of the building which, as we have shown, does not have an existence of its own-apart from the building. Thus a building which is located in an important business area of a city, will have a higher annual value than a building located in the outskirts of the city. But any such enhanced value is the value of the building and not of its ground, for what is located in an important business area is not the ground of the building as such, but the building itself. It may be that the value of the ground on which the building stands may be known, or may be capable of being ascertained. That is why the other factor mentioned in sub-section (4) of section 6 is tho value of that land. But here again, as the land has no separate existence of its own the value of the ground inevitably goes to constitute the value of the building.
Rule 4 of the Kerala Building Tax Rules, 1974, provides that the return under sub-section (1) or (3) of section 7, or section 8 of the Act shall be in Form II. Column 2 of that form makes a mention of the location of the building, but not the location of its ground or land, or the value thereof. It refers only to the annual value of the building in column (13) and its capital value in column 7, so that the location of the building, as distinct from the location of its ground, or the value of the ground as such, do not go in for the determination of the annual or capital value of the building.
It is therefore futile to contend that as factors (a) and (f) of sub-section (4) of section 6 of the Act refer to the location of the building and the value of the land, the law recognises the separate existence or entity of the ground on which the building stands, so that tho tax imposed under it is a tax both on lands and buildings and both the entities should be separately recognised and determined, and taxed as such. As has been stated, the location or value of the land has 16-625 SCI/79 822 importance of its own, and contributes to the value of the building standing on it, but that does not justify the argument that what the Act provides is a tax on lands and buildings, and not merely on buildings. There is also the further fact that while the Act provides the method of arriving at the capital value of the building, on the basis of the annual value, it does not provide any method of assessing the annual or capital value of the ground on which the building stands.
We shall next examine the other argument that the method of determining the capital value of a building on the basis of its annual value is hypothetical and arbitrary and should be struck down as unconstitutional.
We have given our reasons for holding that the tax on buildings, under the provision of the Act, has been imposed by virtue of entry 49 of List II of the Seventh Schedule of the Constitution. So when the State Legislature had taken a decision to impose that tax, it was open to it to decide how best to levy it. If the tax was to be annual, one of the usual modes of levying it was to make-provision for determining what is known as "rate", or annual value of the building. Rateable value is now, in almost all cases, the same as the net annual value of the building.
But if the State Legislature decides, as in the present case, to levy a tax on buildings once for all or, as was stated in the statement of subjects and Reasons of one of the Bills, as a "non-recurring" tax on buildings, it had to go beyond the annual value, and work out the capital value.
This could be done in one of the various modes open to it e.g. On the basis of the capital cost of construction of the building, or its market value, or on the basis of the rent arrived at by what has aptly been described by Channel J., The Assessment Committee of the Brad-Ford-on-Aven Union v. Write(1) as the "higgling of the market", and multiplying it by a number which, in the opinion of the Legislature, would best serve the purpose of determining the value of the building, and then to specify the rate of the tax on it.
The value of a building is not merely the cost of its bricks and mortar or other building material. It is therefore difficult to ascertain that cost. It is also difficult to find out the market value of a building. Doing so would, at any rate, take time and may be open to manipulation or avoidable criticism, and may not provide a ready or convenient basis of taxation. The Legislature cannot therefore be blamed if it decides to link the levy with the annual value of a building and prescribes a uniform formula for determining its capital value and . calculating the tax. Annual value of a building has in fact played as 823 important a role in "rating" that, in a converse case, resort has some- A times been taken to the capital value or cost of construction to work it out.
As has been stated by Faraday on Rating (fifth edition, page 24) there are four recognised methods of arriving at the annual value of a building,-
1. The "competitive or comparative method" i.e., by finding out rents actually paid for the building and/or others of a similar kind, adjusting them to bring them into line with statutory conditions, and thus arriving directly at an estimate of the rent.
2. The "profits basis", or calculation by reference to receipts and expenditure, usually applied to public utility undertakings.
3. The "contractor's method", by which it is assumed, in the absence of any other and better way of estimating the rent, that the tenant would arrive at it by finding the figure for which a contractor would provide him with premises neither more nor less suitable for his purpose, and the rate of interest on that cost which the contractor would charge him as rent.
4. The "unit method" by which schools may be valued at so much a place, hospitals at so much a bed, or certain industrial premises at so much-a furnace, or other unit of output.
There is nothing to prevent any of the four methods from being applied either singly, or in combination, as overall checks to the same building.
The fundamental object in each of these methods is to find out the rent which a tenant might reasonably be expected to pay for a building. It is the expectation which is to be reasonable and not necessarily the rent, for the reasonable expectation would exclude any so-called black market rent. Halsbury (Vol. 23 p. 119 third edition) has in fact defined "rate" to mean "a rate the proceeds of which are applicable to local purposes of a public nature and which is leviable on the basis of assessment in respect of the yearly value of property." As has been stated in "State and Local Taxation" by J. R. Hellerstein (page 684), increasing weight is being given to earnings as a weighty factor in real estate tax valuations.
824 There is however no rule of law as to the method of valuation to be adopted for determining the annual value of a building. Where, however, the building has been let at what is plainly a rackrent, that rent is the best evidence of value if it has been fixed by the higgling of the market.. If therefore the Legislature selects that method to determine the annual value of a building, there is neither reason nor authority for holding that it is hypothetical or arbitrary.
What the Legislature has done under the Act is to make it clear that the tax is on buildings, and not on the grounds on which they stand, or on lands. It has defined [in clause (e) of section 2] what a "building" means. It has also defined in clause (a) of section 2 what is meant by "annual value" of a building and clause (i) of the same section defines "capital value". Section 6 prescribes the mode of determining the capital value of a building according to the formula of sixteen times the annual value prescribed in clause (f) of section 2. Having made these necessary provisions, section S states that a tax, referred to as "building tax" in the Act, shall be charged at the rate specified in the Schedule etc. There are other ancillary provisions, but it will be sufficient for us to say that, taken together, they contain the entire scheme for the levy and collection of the building tax on the capital value of the buildings. The expression "capital value" used in the Act is not however the cost of construction of the building or its market value as a wealth. It is a convenient or a working expression which may roughly be said to be the taxable value of the building, and the State Legislature was quite competent to select that as the basis for assessing the building tax.
Reference in this connection may be made to this Court's decision in Khandise Sham Bhat and others v. The Agricultural Income Tax officer(1) where it has been held as follows at page 823,- "Where there is more than one method of assessing tax and the Legislature selects one out of them, the court will not be justified to strike down the law on the ground that the Legislature should have adopted another method which, in the opinion of the court. is more reasonable, unless it is convinced that the method adopted is capricious, fanciful, arbitrary or clearly unjust." It may be mentioned that this Court has held in Assistant Commissioner of Urban Land Tax(supra) that "for the purpose of Ievying tax under entry 49, List II, the State Legislature may adopt for determining the incidence of tax the annual or the capital value of the lands and 825 buildings." There is therefore no justification for the argument to the Contrary We may as well deal here with the ancillary argument that the building tax could not, at any rate, have been based on the "gross annual rent" of the building. Thus argument has arisen because clause (a) of section 2 of the Act defines "annual value" as follows,- 1 "annual value" of a building means the gross annual rent at which the building may at the time of completion be expected to let from month to month or from year to year." It is therefore true that the expected gross annual rent has been made the annual value of a building, but that, by itself, cannot be said to be open to objection for two reasons. Firstly, there is nothing to prevent the Legislature from making the expected gross annual rent, and thereby the annual value of a building, from being the unit for multiplication by sixteen for arriving at its capital value for charging the tax under section 5. Secondly, section 6 of the Act states that for determining the capital value for the purposes of the Act, the annual value of a building shall be the "annual value fixed for that building in the assessment books of the local authority within whose area the building is situate ' and a cross-reference to section 102 (2) of the Kerala Municipal Corporation Rct, 1961, shows that while the annual value of lands and buildings shall be deemed to be the gross annual rent at which they may at the time of assessment reasonably be expected to let from month to month or from year to year, a deduction in the case of buildings of fifteen per cent of that portion of such annual rent which is attributable to the building, alone apart from their sites and adjacent lands occupied as appurtenances thereto shall be made and that deduction shall be in lieu of all allowances for repairs or on any other account whatever. As by virtue of section 6 of the Act the same annual value forms the basis for determining the capital value of the building for purposes of the Act, what really is taken as the annual value under the definition in clause (a) of section 2 is not their gross annual rent but the net rent after allowing for the cost of its repairs etc. A similar deduction has been provided under section 100(2) of the Kerala Municipalities Act, 1960. It has not been disputed before us that a provision exists in the law relating to Panchayats also for actually basing the tax on buildings at the prescribed percentage of the net annual rental value of the buildings.
It is not therefore factually correct to contend that the annual value of buildings in Kerala is determined on the basis of their gross annual rent. without any deduction on account of repairs etc., and there is 826 no force in the argument that determination of the capital value is arbitrary as it is arrived at by multiplying the gross annual rent by sixteen. But there is, even otherwise, no inherent illegality or vice if the gross income of the property were to be capitalised for the purpose of determining the value of the property. It has thus been stated in American Jurisprudence, second edition, in para 762, on which reliance has been placed by Mr. Govindan Nair as follows.- "A valuation of real property for taxation may be made by capitalizing gross income therefrom, if the percentage used is sufficient to cover legitimate deductions and a fair net return to the owner." Reference may also be made to Faraday on Rating which shows that the gross value of a building is often made the datum point by statue and there is nothing unusual or illegal about it-particularly when there are statutable deductions from it as in the present case.
Then it has been argued that under the Kerala Municipal Corporation Act, 1961, the annual value is largely determined on the basis of the value of the land on which the building has been constructed and the land appurtenant thereto, but it is not permissible to make it the basis of levying the tax on buildings under the Act as it purports to be a tax only on buildings and not on lands or on lands and buildings. Reference for this argument has been made to that part of section 102(1) of the Kerala Municipal Corporation Act which provides that a building shall be assessed "together with its site and other adjacent premises occupied as appurtenances thereto".
We have given our reasons for taking the view that the site or ground on which the building stands is a part of the building. It has therefore to be taxed along with the fabric, for the two of them constitute the building. There is therefore no occasion to tax the site separately, or to ascertain its value and add it to the value of the fabric.
This is also the position in the case of appurtenances.
An appurtenance has been defined in the oxford English Dictionary as follows,- "A thing that belongs to another, `belonging'; a minor property, right, or privileges, belonging to another more important, and passing in possession with it; an appendage." An appurtenance thus belongs to the building concerned and has no existence of its own. This Court had occasion to examine the meaning 827 of "appurtenance" in Maharaj Singh v. State of Uttar Pradesh and others and has observed as follows (at page 1085),- " "Appurtenance", in relation to a dwelling, or to a school, college....includes all land occupied therewith and used for the purpose thereof (Words and Phrases legally Defined-Butterworths, 2nd edn.). "The word 'appurtenances' has a distinct and definite meaning....Prima facie it imports nothing more than what is strictly appertaining to the subject-matter of the devise or grant, and which would, in truth, pass without being specially mentioned: ordinarily, what is necessary for the enjoyment and has been used for the purpose of the building, such as easements, alone will be appurtenant. Therefore, what is necessary for the enjoyment of the building is alone covered by the expression 'appurtenance'. If some other purpose was being fulfilled by the building and the lands, it is not possible to contend that those lands are covered by the expression 'appurtenances'. Indeed 'it is settled by the earliest authority, repeated with- out contradiction to the latest, that land cannot be appur- tenant to land. The word 'appurtenances' includes all the incorporeal hereditaments attached to the land granted or demised, such as rights of way. Of common.... but it does not include lands in addition to that granted'. (Words and Phrase, supra).
In short, the touchstone of 'appurtenance' is dependence of the building on what appertains to it for its use as building." So even if it is presumed, as has been argued before us, that there is some land as an appurtenance to a building, then if the word "appurtenance" has been used in its true sense, it is an integral part of the building to which it belongs, while if the word has been used loosely, it will have its separate existence-quite apart from the building.
In either case, its value will not come in for addition to the annual value of the building. It would not matter, therefore, if under the Corporation Act the annual value of a building includes the value of the appurtenances. for that is really the true annual value of the building concerned.
Another argument which has been advanced is that the multiple of 16 for ascertaining the capital value of a building on the basis of its annual value, is unrealistic and arbitrary and should be held to be "confiscatory". It has been pointed out those competing returns from 828 investments range from 12 to 18 per cent on long term bank deposits. It has also been argued that mere multiplication of the annual value would give an unrealistic value and is not a satisfactory method of arriving at the capital value.
As has been pointed out earlier, the Legislature has decided to impose a non-recurring tax on buildings in the State. It had therefore necessarily to go beyond the ascertainment of the annual value, and adopt one of the several ways of ascertaining the capital value of buildings.
And if the Legislature chose to adopt the annual value as the base for working out the capital value with reference to it, it cannot be blamed for it as, besides other advantages, it was readily available from the records of the local authorities and was quite a simple and reliable basis to work upon.
The controversy really centres round the choice of the multiple, to work out the capital value. The Legislature has thought it proper to define "capital value" of a building to mean the value arrived at by multiplying the annual value of a building by sixteen. There was nothing to prevent it from doing so for, as has been pointed out, it had legislative competence to impose the building tax. And it is by now well settled that the quantum of the tax levied by the taxing statute and the conditions subject to which it is levied, are matters within the competence of the Legislature: Rai Ramkrishna and others v. The State of Bihar.(1) It is also well settled that so long as the tax is not confiscatory or extortionate, the reasonableness of the tax cannot be questioned in a court of law: Kunnathat Thathuni Moopil Nair v. The State of Kerala and another and Assistant Commissioner of Urban Land Tax v. The Buckingham and Carnatic Co. Ltd. (supra) .
It has to be appreciated that investment in buildings is a conservative mode of raising income and even if it were presumed that it does not yield the same quick results as some other forms of investment, it cannot be denied that it involves lesser risk. So even if it yields a return of not more than 6.25 per cent or so, it cannot be denied that, unlike most of the other dependable investments, it has the considerable advantage of giving to the investor a far greater return in the form of a more or less continuous appreciation of the market value of the buildings.
Our attention has been invited to certain modes of investment by way of fixed deposits, or national savings certificates, which, we are told, 829 yield income upto about 10 per cent per annum,