Manoj Kumar Sharma vs Additional District Judge Meerut ...
2017 Latest Caselaw 3698 ALL

HIGH COURT OF JUDICATURE AT ALLAHABAD
 
 

AFR
 
Reserved
 
Court No. - 30
 

 
Case :- WRIT TAX No. - 725 of 2015
 

 
Petitioner :- Manoj Kumar Sharma
 
Respondent :- Additional District Judge Meerut And 2 Others
 
Counsel for Petitioner :- Siddharth Singhal,Nikhil Mishra
 
Counsel for Respondent :- A.S.G.I.,Nimai Das(Amicus Curiae),S.K. Rai,Sandeep Kumar Singh
 

 
Hon'ble Suneet Kumar,J.

The instant writ petition is directed against the order dated 13 July 2015, passed by the Appellate Authority/Additional District Judge (Court no.7), Meerut, arising from order dated 23 June 2010, passed by the Cantonment Board, Meerut Cantt. Meerut,1 in the assessment proceedings.

Facts briefly stated is that the maternal grand-mother of the petitioner, viz. Chameli Devi purchased old grant rights of Bungalow No. 201/201A, West End Road, (Shanti Farms Wedding Gardens), Meerut, from one Shahjahan Begum on 17 December 1954. After her death, Bungalow devolved on Shanti Devi, mother of the petitioner. Presently the petitioner is in occupation of the premises.

In exercise of power conferred under Section 76 of the Cantonment Act, 20062, petitioner was subjected to notice for assessment of Annual Rateable Value3 for the premises for triennial assessment 2008-11. Petitioner was subjected to house tax at Rs. 14,72,366/ vide bill dated 25 July 2009.

Aggrieved, petitioner approached this Court in a petition being Writ Petition No. 1733 of 2009, the assessment order and the consequential demand notice was quashed, Board was directed to pass a fresh order after affording opportunity. Pursuant thereof, fresh proceeding for assessment commenced under Section 73-A of the Act, whereby, the proposed assessment of the premises was assessed at Rs. 5,75,49,716/ per annum taking the entire premises as a commercial establishment. The petitioner entered appearance by filing objection which was duly considered by the third respondent, however, the objection was rejected by order dated 23 June 2010 and the ARV of the premises was determined at Rs. 1,23,22,154/ and the consequent tax at Rs. 22,48,793/ per annum imposed thereon. Aggrieved, petitioner preferred an appeal under Section 93 of the Act which was dismissed by the impugned order, consequently, the demand notice dated 7 August 2015 for assessment year 2008-09 and 2014-15 respectively was raised against the petitioner.

Learned counsel for the petitioner has raised several arguments both pertaining to fact and law. It is not in dispute that petitioner is in occupation of the disputed premises which is an old grant bungalow leased for residential purposes. A finding of fact has been returned which is not being disputed by the learned counsel for the petitioner that the appurtenant land approximately ad-measuring 6500/ square meter is being used commercially by letting it for marriage parties. Consequently, the third respondent assessed the entire premises including the building as a commercial premises.

Learned counsel for the petitioner would submit: (i) section 66 of the Act requires determination of tax leviable on building and not on the appurtenant land; (ii) in view of provision contained under Section 73 and 74 of the Act , there is an obligation to pay tax on building and not on land; (iii) the incidence of tax under Section 74 falls upon the occupier of the building, therefore, the tax cannot be imposed on the land; (iv) the premises being a lease property can be valued as per the fair letting value and in no circumstances, it can be the freehold value of the land.

In rebuttal, Sri S.K. Rai, learned counsel, appearing for the respondents would submit: (i) the premises is an old grant building for residential purposes, admittedly, the premises is being used for commercial purpose, therefore, the authority was justified in assessing the entire premises at commercial rate; (ii) the building and the appurtenant land cannot be assessed separately depending upon its use i.e. residential or commercial; (iii) the authorities were justified in assessing the building commercially applying the rate determined by the Board; (iv) the order passed by the authorities is just and legal and calls for no interference.

The rival submissions fall for consideration.

The facts, inter se, parties are not in dispute. It is not disputed that petitioner is using the appurtenant land of old grant bungalow commercially for purposes other than residential purpose. The land is being let out for marriage party, consequently, the premises i.e. building and land was assessed at commercial rate.

Learned counsel for the petitioner has confined his argument and submission to the issue as to whether the entire premises could be assessed commercially or whether tax leviable in respect of the portion of land and building in which particular class of trade or business is carried on, has to be determined separately and accordingly, taxed separately.

The sole question, therefore, for determination is whether the premises which is being used residentially and a part thereof is being used commercially can be assessed at commercial rate of taxation as a single unit.

Sub-section (d) of Section 2 of the Act, defines "building" which reads as follows:

(d) "Building" means a house, outhouse, stable, latrine, shed, hut or other roofed structure whether of masonry, brick, wood, mud, metal or other material, and any part thereof, and includes a well and a wall other than a boundary wall but does not include a tent or other portable and temporary shelter".

Sub-section (zi) defines "occupier", (zl) "owner", (zt) "resident", (zzc) "trade or commercial premises". The definitions are extracted:

(zi) "occupier" includes an owner in occupation of, or otherwise using his own land or building;

(zl) "owner" includes any person who is receiving or is entitled to receive the rent of any building or land whether on his own account or on behalf of himself and others or an agent or trustee, or who would so receive the rent or be entitled to receive it if the building or land were let to a tenant.

(zt) "resident", in relation to a cantonment, means a person who maintains therein a house or a portion of a house which is at all times available for occupation by himself or his family even though he may himself reside elsewhere, provided that he has not abandoned all intention of again occupying such house either by himself or his family.

(zzc) "Trade or commercial premises" means any premises used or intended to be used for carrying on any trade, commerce or industry".

Chapter V of the Act provides for Taxes and Fees. Section 66 confers general power of taxation on the Board in respect of :(a) property tax, and (b) tax on trades, professions callings and employments.

Sub-section 2 provides that in addition to the taxes specified in sub-section (1) the Board may, for the purposes of this Act, impose any tax which under any enactment for the time being in force may be imposed in any municipality in the State in which the cantonment is situated.

Sub-section (3) empowers the Board to impose, assess and collect tax in accordance with the provisions of this Act, rules and the bye-laws made thereunder.

Section 68 provides norms of property tax to be levied on land and building in the cantonment and shall consist of not less than ten and not more than thirty per cent of the ARV of lands and buildings. The first proviso to Section 68 provides that the Board may, when fixing the rate at which the property tax shall be levied during any year, determine that the rate leviable in respect of lands and buildings or portions of lands and buildings in which any particular class of trade or business is carried on shall be higher than the rate determined in respect of other lands and buildings or portion of other lands and buildings by an amount not exceeding one half of the rate so fixed.

Section 73 defines "annual rateable value" which is extracted:

"73. Definition of "annual rateable value"- For the purposes of this Chapter, " annual rateable value" means-

(a) in the case of hotels, colleges, schools, factories and any other buildings which the Chief Executive Officer decides to assess under this clause, one-twentieth of the sum obtained by adding the estimated present cost of erecting the buildings to the estimated value of the land appertaining thereto; and

(b) in the case of building or land not assessed under clause (a), the gross annual rent for which such building exclusive of furniture or machinery therein or such land is actually let or, where the building or land is not let or in the opinion of the Chief Executive Officer is let for a sum less than its fair letting value, might reasonably be expected to let from year to year.

Section 74 provides that every tax assessed on the ARV of buildings or lands or of both shall be leviable primarily upon the actual occupier of the property upon which the said tax is assessed, if he is the owner of the building or land or holds them on a building or other lease granted by or on behalf of the Government or the Board or on a building lease from any person.

On a plain reading of the provisions extracted hereinabove, it is clear that the property tax can be imposed on either building or land or on both building and land. The incidence of tax is upon the owner or lessee of the building and land. Owner includes a person receiving rent of any building or land letout to a tenant. Occupier includes an owner. Board has been empowered to levy property tax, inter alia, on a portion of land and building in which a particular class of trade or business is carried on, which shall be higher than the rate determined in respect of the land and building (first proviso to Section 68). The Board, therefore, is entitled to subject a building and land to tax separately in the event a portion, thereof, is being used residentially and the other portion (land) commercially.

It is not disputed that the petitioner is owner/occupier and lessee of the bungalow on old grant including the appurtenant land. Admittedly, the land is being used for non-residential purposes, therefore, the incidence of tax would fall upon the petitioner, who being the occupier and lessee of the premises.

Section 66 clearly provides that the Board can impose property tax, as well as, tax on trades, professions calling and employments and reading section 66 along with Section 68, tax on property can be imposed at deferential rate determinable upon the purpose for which the building or land or both building and land or a portion thereof is being used. Therefore, the portion of land or building in which a particular class of trade or business is carried on would be taxed at a higher rate admissible to such trade or business. The portion being used by the occupier for residential purpose shall be taxed at the rate admissible to residential buildings and lands.

The property tax is the percentage of ARV, the ARV in respect of building and land used for commercial purpose, namely hotels, colleges, schools, hospitals, factories and of like nature is to be assessed on the rate estimated from the cost of erecting the building to the estimated value of the land appurtaining thereto and under clause (a) the gross annual rent for which such building exclusive of furniture or machinery therein or such land is actually let or, where the building or land is not let or in the opinion of the Chief Executive Officer is let for a sum less than its fair letting value, might reasonably determined.

Learned counsel for the petitioner placed reliance on the decision rendered by Supreme Court in Municipal Board, Saharanpur Vs. Shahdara (Delhi) Saharanpur Light Rail Co. Ltd.4; to contend that "estimated present cost of erecting the building" and the phrase "estimated value of the land appurtenant thereto" used in sub clause (a) of Section 73 defining ARV would mean that when appurtenant land is to be valued, its' valuation has to be made as per its market value obtaining at the time of assessment. But so far as the value of the building to which such land as appurtenant goes, the computation has to be made on the estimated present cost of erecting the building to be subject to the tax. Meaning thereby, at the time of assessment the cost of construction of such building in its existing state is to be kept in view. Hence such cost must be arrived at by keeping in view the then existing state of the building and the cost which would be incurred for erecting such a building. Such cost, therefore, obviously has to be sliced down by giving due weight to the depreciation so as to make estimation of present cost of the new building to ultimately become equal to the erection cost of the building concerned in its depreciated state.

The methodology or formula adopted by the Board in computation of the ARV and consequently the tax leviable upon the building is not in issue. The controversy in the present petition is confined as to whether the entire premises i.e. land and building being used residentially and commercially could be valued at commercial rate or has to be valued separately and taxed at separate rates admissible on such use to which the portion of building and land is put to. It is admitted that the building of the premises is being used for residential purpose, whereas, the appurtenant land is being used commercially. Therefore, in the facts of the case in hand, if a roof structure whether of masonry brick, wood, metal or any other material whatsoever has been raised on the appurtenant land, it would have to be assessed as 'building' erected for the purpose of commercial use and accordingly, assessed upon determination of ARV. The bungalow if being used for residential purpose would have to be assessed accordingly.

Reliance has been placed on the decision rendered in Ramgarh Cantonment Board and another Vs. State of Jharkhand and others.5 to contend that the power of Board under Section 60(1) of the Act is dependent upon any corresponding analogous provisions in a legislative enactment in respect of municipality. Supreme Court upon analyzing provision of Bihar and Orissa Municipal Act, 1922, held that the municipality has no power to levy any entry tax on mechanically propelled vehicles. When the municipality has no power or competence to levy entry tax on mechanically propelled vehicles, obviously, the Cantonment Board cannot exercise that power which would not fall within the parameter of Section 137 to impose tax on a vehicle used in the ordinary course within the municipality and parked in ordinary course rather than levying entry tax by the Cantonment Board. The decision does not help the petitioner in the present case.

East India Commercial Co. Pvt. Ltd Vs. Corporation of Calcutta6 reliance was placed to contend that while determining the annual value of the property, the Act has to be read along with Rent Control Act for determination of annual value of the property. However, decision clarifies that the exception to this rule is that whenever any Municipal Act itself provides the mode of determination of the annual letting value, the Rent Control Act need not be relied upon. No material has been brought on record to show as to how the Board determines the ARV under Section 73(b). The point advanced by the learned counsel for the petitioner is not involved in the controversy at hand.

For the law and reasons stated hereinabove, in my considered opinion, the Board committed an error in assessing the entire premises i.e. building and land commercially, whereas, the Act mandates that the building and land has to be assessed separately, upon determining the ARV, for the purpose for which the building and land has been put to use by the owner/occupier and tax accordingly. The impugned order and consequential demand notice, therefore, becomes unsustainable, accordingly, is set aside and quashed. The matter is remitted to the Board to pass fresh assessment order within eight weeks from the date of service of the certified copy of the order. Petitioner undertakes to appear before the Board within a week. Since petitioner has not deposited the tax as ordered by the Court, he undertakes to deposit @ Rs. 50,000/ per annum w.e.f. 2008-09 to 2017-18 which shall abide by the final decision of the Board. The amount already deposited shall be adjusted.

Subject o the above, writ petition is allowed.

No cost.

Order Date :- 28.08.2017

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