Indian Hotels Co. Ltd. And Anr. vs New Delhi Municipal Council And ...
1996 Latest Caselaw 509 Del

JUDGMENT

R.C. Lahoti, J.

(1) Lpa 32/96 has been preferred by the Indian Hotels Co. Limited feeling aggrieved by an order dated 28.2.96 passed by a learned Single Judge of this Court who has directed a writ petition filed by the appellant challenging an order of assessment fixing the annual rateable value of the appellant's property liable to property tax thereon passed by the Director (Tax) to be dismissed as not maintainable in view of availability of an alternate remedy of appeal.

(2) The building in question is known as Hotel Taj Palace Inter-Continental and is situated on plot No. 2, Sardar Patel Marg, New Delhi. A collaboration agreement was entered into on 9.4.85 between the Delhi Development Authority (the Dda, for short) and the appellant whereunder land admeasuring approximately 6 acres was brought in by Dda as its corporate contribution. The Dda was to contribute Rs. 15 crores for the construction licence and operation of the hotel, including the land. On 31.7.90 the Dda informed the Director (Taxation) Ndmc of its having contributed land worth Rs, 5 crores for construction of the Hotel under the collaboration agreement.

(3) In 1983-84, the hotel building was constructed and a five star deluxe hotel has come up. Ever since then the respondent-NDMC has been assessing the hotel- building for property tax from year to year, but the assessment is yet to achieve a finality. For the years 1983-84 to 1991-92, the Assessing Authority has fixed the rateable value by reference to Chapter V of the Delhi Rent Control Act, 1958. All such orders were appealed against and set aside. The appellant has deposited the admitted amount of tax for all these years. For the years 1992-93 to 1994-95 again the hotel building was assessed by reference to Chapter-V of the Drc Act. Appeals have been preferred which are pending before the Appellate Authority. The demand raised by the Ndmc has been stayed by the Appellate Authority, permitting the appellant to deposit admitted amount of tax only.

(4) On 9.12.94, the appellant was asked through a letter by the respondent No. I for certain details about the cost of land, construction, amenities and facilities provided in the hotel. Details and information have been furnished on 10.1.95. On 8.1.95, the respondent-NDMC issued a public notice that the assessment list for the year 1995-96 of the lands and building in the NDMG area had been prepared pursuant to Section 70 read with Sections 72-73 of the New Delhi Municipal Council Act, 1994 (hereinafter Ndmc Act, for short). On 13.2.95 detailed objections disputing fixation of the proposed rateable value were filed on behalf of the appellant. Thereafter a hearing took place on 24.2.95. On 26.12.95, the respondent- Ndmc has notified the assessment list of the buildings within the area of Ndmc as having been finalised for the year 1995-96. So far as the appellant is concerned an order of assessment has been passed on 18th December, 1995 whereby disposing of all the objections preferred on behalf of the appellant the annual rateable value of the hotel property has been appointed at Rs.45,90,88,196.00 less 10%. It may be noticed here itself that this was the annual rateable value appointed also for the year 1994-95 on the basis of Chapter V of Delhi Rent Control Act. This was the rateable value proposed for the year 1995-96 too. It has been maintained finally by the impugned order of assessment dated 18.12.95.

(5) As we have already noticed, writ petition preferred by the appellant has been dismissed in limine by the learned Single Judge.

(6) Cwp 894/96 has been filed by the Dda during the pendency of the Lpa challenging the same order of assessment dated 18.12.95 No. 32/96 which was impugned by the Indian Hotel Company Ltd. in Cw 479/96 before the lean-led Single Judge.

(7) We have carefully perused the order of learned Single Judge. On principle we do not find any fault with the view taken by the learned Single Judge that ordinarily an assessee feeling aggrieved by an order of assessment fixing the rateable value of property must be left free to avail, rather driven to the necessity of availing, the remedy of appeal, it being an efficacious alternate remedy provided by the Act itself. However, as we will notice shortly hereinafter, the present one is a case falling within one of the well recognised exceptions to the ordinary rule of exclusion of writ jurisdiction by availability of alternate remedy. There is a serious question of law arising for decision in the petition requiring to be answered by interpretation of legal provisions. The principles on which an Assessing Authority should proceed to assess a hotel building not let out as a unit and the mode of assessment to be adopted is not free from difficulty. There arc good number of five star and three star hotels in Delhi. Figure of other hotels and lodging houses in Delhi may run into thousands. A large amount of revenue recoverable to a public body is involved. Decision by the High Court on the relevant principles of law setting at rest the controversy with which the Assessing Authorities are being faced from day- to-day would curb the litigation and expedite realisation of revenue. For all such reasons, we are of the opinion that the writ petition should have been heard and disposed of on merits. During the course of hearing of the Lpa, we had made it clear to the I earned Counsel for the parties that if at all we may find the appeal worth being allowed and the civil writ petition worth being heard on merits then we will dispose of not only the appeal but the writ petition also on merits. Both the learned Counsel for the parties had agreed with that suggestion and addressed the Court on the merits of the petition also.

(8) Accordingly Lpa 32/96 is allowed. The impugned order of the learned Single Judge so far as it dismisses writ petition in limine is set aside. Cwp 479/96 is taken up for decision on merits. As the very same order of assessment is impugned in Cwp 894/96, it is also taken up for decision on merits.

(9) Rule D.B. in Cwp 479/96 and Cwp 894/96.

(10) How a hotel building is to be assessed for the purpose of fixing annual letting value is no more res integra in view of the law laid down by the Supreme Court in a recent decision in Ndmc v. East India Hotels & Anr., (Civil Appeal Nos. 42-44/87 decided on 25.8.94.). The hotel property owned by the East India Hotels Ltd. was assessed to property tax for the years 1980-81, 1981-82 and 1983-84. The Assessing Authority had made the assessment following the provisions contained in Section 9(4) of the Drc Act. Two questions arose :- (I)Whether hotel can be regarded as falling within the definition of 'premises' contained in Section 2(i) of the Drc Act, 1958 ? (ii) Whether the annual rental value of the hotel of respondent No. 1 can be assessed in accordance with the principles laid down in Section 6 of the Delhi Rent Control Act or the same has to be assessed in accordance with Section 9 of the said Act ?

Their Lordships held :- (1)The definition of premises as contained in Section 2(i) of the Act includes a hotel and the various provisions contained in the said Act apply to hotels. (2) The special provisions of Chapter V (Sees. 30 to 34) of the Drc Act relating to hotels and lodging houses have no bearing on determination of annual rental value for assessment of the property tax. (3) It cannot be held that in the case of the hotel the principles laid down in Section 6 of the Act cannot be applied and the provisions of Section 9(4) of the Act can be resorted to.

(11) The above said decision settles the major part of the controversy. It is now law of the land that a hotel is a premises and for the purpose of determining rateable value of building in which a hotel is running, recourse has to be taken to principles laid down in Section 6 of Delhi Rent Control Act and Section 9(4) of the Act cannot be resorted to. We will now, therefore, proceed to deal with such other controversies as survive for decision inspite of the Supreme Court decision in East India Hotel's case (supra).

(12) Under Section 61 of the Ndmc Act, property tax is leviable on the rateable value of lands and buildings. Rateable value is defined by Section 2(42) to mean the value of any land or building fixed in accordance with the provisions of this Act and the bye-laws made thereunder. Under Section 63 rateable value of any lands or buildings assessable to any property taxes shall be the annual rent at which such land or buildings might reasonably be expected to let from year to year less a sum equal to 10% of the said annual rent. It is well settled that use of the phrase - "the annual rent at which such land or building might reasonably be expected to let" calls for determination of annual rental value in accordance with the principles applicable to determination of standard rent. (See Dewan Daulat Rai Kapur v. Ndmc, ; Dr. Balbir Singh v. Mcd, and Ndmc v. East India Hotels Ltd, (supra).

(13) Section 6 of Delhi Rent Control Act, 1958 lays down principles for determination of standard rent in relation to any "premises". Premises has been defined by Section 2(i) as under :-    2.Definitions.-In this Act, unless the context otherwise requires,- (i) "premises" means any building or part of a building which is or is intended to be, let separately for use as a residence or for commercial use or for any other purpose, and includes, - (i) the garden, grounds and out-houses, if any, appertaining to such building or part of the building; (ii) any furniture supplied by the landlord for use in such building or part of the building; - but does not include a room in a hotel or lodging house;"  

(14) It is pertinent to note what is excluded from the definition of 'premises' is a room in a hotel or lodging house and not a hotel or lodging house forming a building or a part of the building as a unit. Under Section 2(d) 'hotel or lodging house' means a building or part of a building where lodging with or without board or other services is provided for a monetary consideration.   

(15) Section 6 covers a variety of premises laying down rules for determining standard rent in respect of each of the kinds of premises covered thereunder. Inasmuch as hotel or lodging house is a premises where the owner carries on commercial activity of lodging for a monetary consideration it would be covered by Clause-(B) of Sub-section (1) of Section 6 - "premises other than residential premises".   

(16) Mere reading of Section 6 of Drc Act may raise a doubt in the mind how a hotel-building not let out as a unit would be liable to be assessed for rateable value by finding out standard rent by reference to Section 6(l)(B)(b) of the Delhi Rent Control Act, because it speaks of standard rent in relation to premises other than residential premises let out at any time on or after the 2nd day of June, 1944 but the rent of such premises has not been fixed under the Delhi & Ajmer Marwar Rent Control Act, 1947 or the Delhi & Ajmer Rent Control Act, 1952. However, this aspect need not detain us any longer. Decision of the Supreme Court in Ndmc v. East of India Hotels Ltd. (supra) is a short one but has a reference to an earlier decision of the Supreme Court in Dr. Balbir Singh (supra). A hotel building not let out as a unit to anyone else but where the owner is himself running commercial activity of hotel business would be deemed to be premises other than residential and would be self- occupied. This category of the premises has been dealt with in Dr. Balbir Singh's case (supra) vide para 11. We may reproduce that paragraph for the sake of ready reference. It is as under :-    "NOW,let us take up for consideration the first category of premises, in regard to which the question of determination of rateablevaluearises,namely,where the premises are self occupied, that is, occupied by the owners. We will first consider the case of residential premises. It is clear from the above discussion that the rateable value of the premises would be the annual rent at which the premises might reasonably be expected to be let to a hypothetical tenant and such reasonable expectation cannot in any event exceed the standard rent of the premises, though in a given situation it may be less than the standard rent. The standard rent of the premises would constitute the upper limit of the annual rent which the owner might reasonably expect from a hypothetical tenant, if he were to let out the premises. Even where the premises are self occupied and have not been let out to any tenant, it would still be possible to determine the standard rent of the premises on the basis of the hypothetical tenancy. The question in such case would be as to what would be the standard rent of the premises if they were let out to a tenant. Obviously in such an eventuality, the standard rent would be determinable on the principles set out in Sub-section (1)(A)(2)(b) of Section 6 of the Rent Act. The standard rent would be the rent calculated on the basis of 7" per cent or 8 per cent per annum of the aggregate amount of reasonable cost of construction and the market price of the land comprises in the premises on the date of commencement of construction. The Municipal Corporation, however, contended that where any premises constructed on or after 9.6.1955 and the premises in most of the cases before us are the premises constructed subsequent to 9th June, 1955 have not been let out at any time and have throughout been self occupied, the standard rent of such premises would be determinable under the provisions of Sub-section (2)(b) of Section 6 and any rent which could be agreed upon between the landlord and a tenant if the premises were let out to a hypothetical tenant would be deemed to be the standard rent of the premises and the formula set out in Sub-section (l)(B)(2)(b) of Section 6 would not be applicable for determining the standard rent by reason of non obstante clause contained in the opening part of Sub-section (2) of Section 6. This contention plausible though it may seem is in our opinion is not well founded. It is difficult to see how the provision enacted in Sub-section 2(b) of Section 6 can be applied for determining the standard rent of the premises when the premises have not been out any time. Sub-section 2(b) of Section 6 clearly contemplate a case where there is actual letting out of the premises as distinct from hypothetical lettingout,becauseunderthisprovision annual rent agreed upon between the landlord and tenant at the time of first letting out is deemed to be standard rent for five years from the date of such letting out and it is impossible to imagine how the concept of first letting out can fit in with anything except actual letting out and how the period of five years can be computed from the date of any hypothetical letting-out. It is only from the date of first actual letting out that the period of five years can begin to run and for this period of five years, the annual rent agreed upon between the landlord and tenant at the time of first actual letting out will be the standard rent. Subsection (2)(b) of Section 6 can have no application where there is no letting out and in case of premises which were constructed after 9th June, 1955 which have never been let out at any time the standard rent would be determinable on the principles laid down in Sub-section (1)(A)(2)(b) of Section 6. So also in case of premises which have been constructed before 9th June, 1955 but after 2nd June, 1951 the standard rent would like reasons be determinable after the provisions of Sub-section (1)(A)(2))(b) of Section 6 if they have not been actually let out at any time since their construction but if these two categories of premises have been actually let out at some point of time in the past, then in the case of former category, the annual rent agreed upon between the landlord and the tenant when the premises were actually first let out will be deemed to be standard rent for five years from the date of first letting out and in the case of the latter category, the annual rent calculated with reference to the rent at which the premises were actually let for the month of March, 1958 or if they were not so let, with reference to the rent at which they. were last actually let out shall be deemed to be the standard rent for seven years from the date of completion of the construction of the premises. However, even in the case of these two categories of premises the standard rent after the expiration of the period of five years or seven years as the case may be would be determinable on the principles set out in Sub-section (1)(A)(2)b) of Section 6. Thus in the case of self occupied residential premises the standard rent determinable under the provisions of Sub- section 2(a) or 2(b) of Section 6 in cases falling within the scope and ambit of those provisions and in other cases the standard rent determinable under the provisions of Sub-section (1)(A)(2)(b) of Section 6 would constitute the upper limit of the rateable value of the premises. Similarly on the analogous process of reasoning the standard rent determinable under the provisions of Sub-section (2)(a) or (2)(b) of Section 6 in cases falling within the scope and ambit of those provisions and in other cases the standard rent determinable in the provisions of the Sub-section (l)(B)(2)(b) of Section 6 would constitute the upper limit of the rateable value so as self-occupied non residential premises are concerned, the rateable value of the premises whether residential or non residential cannot exceed the standard rent but, as already pointed out above, it may in a given case be less than the standard rent. The annual rent which the owner of the premises may reasonably expect to get if the premises are let out would depend on the size, situation, locality and condition of the premises and amenities provided therein and all these and other relevant factors have to be evaluated in determining the rateable value, keeping in mind the upper limit fixed by the standard rent . If this basic principle if borne in mind it would avoid vide disparity between the rateable value of similar premises situated in the same locality where some premises are old premises constructed many years ago when the land prices were not high and the cost of construction had not escalated and others are recently premises when the prices of land have gone up almost 40 to 50 times and the cost of construction has gone up almost three to five times in the last 20 years, the standard rent of the former category of premises on the principles set out in Sub-section (1)(A)(2)(b) or (1)(B)2(b) of Section 6 would be comparatively low, while in case of latter category of premises the standard rent determinable on these principles would be unduly high. If the standard rent would be the measure of rateable value there would be huge disparity between the Rv of old premises and recently constructed premises though they may be similar and situated in the same or adjoining locality. That would be wholly illogical and irrational. Therefore what is required to be considered for determining Rv in case of recently constructed premises is as to what is the rent which the owner might reasonably expect if the premises are let out and that is bound to be influenced by the rent which is obtainable for similar premises constructed earlier and situated in the same or adjoining locality and which would necessarily be limited by the standard rent of such premises. The position in regard to determination of Rv of self occupied residential and non residential premises may thus be stated as follows : The standard rent determinable on the principle set out in Subsection (2)(a) or (2)(b) or (1)(A)(2)(b) or (1)(B)(2)(b) of Section 6 as may be applicable would fix the upper limit of the Rv of the premises and within such upper limit the Assessing Authorities would have to determine as to what is the rent which the owner may reasonably expect if the premises are let out to a hypothetical tenant and for the purpose of such determination the Assessing Authorities would have to evaluate factors such as size, situation, locality and condition of the premises and the amenities therein provided. The Assessing Authorities would also have to take into account the rent which the owner of similar premises constructed earlier and situate in the same of adjoining locality might reasonably expect to receive from a hypothetical tenant and which would necessarily be within the upper limit of the standard rent of the premises so that there is no wide disparity between the rate of rent per square foot or square yard Which the owner might reasonably expect to get in case of the two premises. Some disparity is bound to be there on account of the size, situation, locality and condition of the premises and the amenities provided therein. Bigger size beyond a certain optimum good depress the rate of rent and so also would less favourable situation of locality or lower quality of construction or unsatisfactory condition of the premises or absence of necessary amenities and similar other factors. But after taking into account these varying factors,the disparity should not be disproportionately large. We may also point out that until 1980 the Assessing Authorities were giving a self- occupancy rebate of 20% in the property tax assessed on self-occupied residential premises. We would suggest that in all fairness this rebate of 20 per cent may be resumed by the Assessing Authorities because there is a vital distinction from the point of view of the owner between self-occupied premises and tenanted premises and the right to shelter under a roof being a basic necessity of every human being, residential premises which are self- occupied must be treated on a more favourable basis than tenanted premises, so far as the assessability to property tax is concerned."  

(17) Section 6(1)(A)(b) and Section 6(1)(B)(b) - both contemplate similar situations though in respect of residential premises and premises other than residential respectively. It is clear that the standard rent even in cases of self- occupied residential and non-residential premises has to be determined on the principles set out in Sub-section 2(a) or 2(b) or 1 (A) (2)(b) or 1(B)(2)(b) of Section 6 as may be applicable [for the case at hand the applicable provision being Section 6(1)(B)(b)]. That would constitute the upper limit of the rateable value of the premises. Having determined such upper limit the Assessing Authority may in appropriate cases scale down the same by evaluating factors such as size, situation, locality and condition of the premises and the amenities provided therein. Such factors cannot, however, be taken into account for the purpose of crossing beyond the upper limit determined by standard rent rateable value of the premises.

(18) A perusal of the impugned order of assessment dated 18.12.95 shows that having analysed the facts of the case and the material available on record, the Assessing Authority formed an opinion that the assessee had defaulted in supplying complete information and documents though available in its possession and therefore it was not possible to finalise the assessment on cost of construction and market price of the land basis. Having formed that opinion the Assessing Authority has proceeded to fix the standard rent by resorting to Section 9(4) of the Drc Act.

(19) In Dr. Balbir Singh (Supra) their Lordships have disapproved such a course being adopted and have held ;- "It is indeed strange that the Assessing Authorities should have declined to assess the rateable value of 494 properties in South Delhi on the basis of standard rent determinable on the principles laid down in Sub-section (1)(A)(2)(b) or (1)(B)(2)(b) of Section 6, merely on the ground that in the opinion of the Assessing Authorities " the assessees failed to produce the documentary evidence as regards the aggregate amount of reasonable cost of construction and the market price of land comprised in the premises on the date of commencement of the construction." If the assessees failed to produce the documentary evidence to establish the reasonable cost of construction of the premises or the market price of the land comprised in the premises, the Assessing Authorities could arrive at their own estimate of these two constituent items in the application of the principles set out in Sub-sections (1)(A)(2)(b) or (1)(B)(2)(b) of Section 6. But on this account, the Assessing Authorities could not justify resort to Sub-section (4) of Section 9. It is only where for any reason it is not possible to determine the standard rent of any premises on the principles set-forth in Section 6 that the standard rent may be fixed under Subsection (4) of Section 9 and merely because the owner does not produce satisfactory evidence showing what was the reasonable cost of construction of the premises or the market price of the land at the date of commencement of the construction, it cannot be said that it is not possible to determine the standard rent on the principles set out in Sub-section (1)(A)(2)(b) or (1)(B) (1)(b) of Section 6. Take for example a case where the owner produces evidence which is found to be incorrect or which does not appear to be satisfactory; can the Assessing Authorities in such a case resort to Sub-Section (4) of Section 9 stating that it is not possible to determine the standard rent on the principles set out in Sub-section (1)(A)(2)(b) or (1)(B)(2)(b) of Section 6 ? The Assessing Authorities would obviously have to estimate for themselves, on the basis of such material as may be gathered by them, the reasonable cost of construction and the market price of the land and arrive at their own determination of the standard rent. This is an exercise with which the Assessing Authorities are quite familiar and it is not something unusual for them or beyond their competence and capability. It may be noted that even while fixing standard rent under Sub-section (4) of Section 9, the Assessing Authorities have to rely on such material as may be available with them and determine the standard rent on the basis of such material by a process of estimation."

(para 18, page 355). (underlining by us)

(20) A perusal of the impugned order of assessment further reveals that the Assessing Authority had found the following deficiencies on the part of the assessee:- (I)the assessee did not produce a broad break up of expenditure incurred on the construction of the hotel premises for providing the facilities and amenities (para 5.3). (ii) the assessee has informed having incurred expenditure of Rs. 13,05,67,630.00 on building sanitary installation and electric installation initially and further an amount of Rs. 2,22,09,854.00 incurred later on additions and alterations, but the information is not supported by a copy of the relevant audited accounts and the balance sheets (para 5.4); (iii) ledger folio No. 3121 gives the value of improvement to building as on 31.3.94 at Rs. 4,01,25,917.00 , while the assessee was claiming the same figure to be at Rs. 2,22,09,854.00 (para 6.1); (iv) the figures set out by the assessee must have been arrived at after claiming reduction on account of depreciation or loss. However, for the purpose of finding out rateable value any claim of depreciation has to be ignored and actual cost incurred has to be find out which cannot be done for want of complete information (Para 6.2); (v) the cost of leasehold land declared at Rs. 5 crores is grossly understated (para 7.1); (vi) part of the hotel building appears to have been let out as found out on a survey done by the NDMC. The shopping arcade including bank were fetching a monthly income of Rs. 58,811.00 as licence fee to the assessee in the current year. The rent being above Rs. 3,500.00 per month, such accommodation would be outside the ambit of Rent Control Act in view of Section 3(c) of the Drc Act. The building can, therefore, be assessed in different segments.

(21) The Assessing Authority having pointed out the above said deficiencies arrived at the following conclusion :- "IThas, therefore, been considered more expedient to place complete reliance on the figures of the expenditure incurred on die construction of the building as also on the expenditure incurred in additions/alterations thereto upto 31.3.94 as per details furnished by the assessee. As and when the audited balance sheet would be made valuable, these values can be determined on that basis as the assessee would, ordinarily, been (sic.) relying upon the same in its stand under the various tax laws, the company law and its financial transactions. Needless to emphasise that the assessee has to adopt only one stand before the Taxing Authorities and the financial institutions. As such it is considered legally appropriate to adopt this audited balance sheet for the purpose of determining the cost of construction as required by Section 6 of the Delhi Rent Control Act, 1958 as amended."

(22) Vide para 13, the Assessing Authority has said :-    "Keeping in view the aforesaid facts and circumstances of the annual value of the property is maintained at Rs.45,90,88,196.00 less 10% w.e.f. 01.04.95."  

(23) In the opening part of the order of assessment, the Assessing Authority has stated:-    "THENDMC had assessed the annual value of the property at Rs. 45,90,88,196.00 less 10% for the year 1994-95 on the basis of chapter-V of the Delhi Rent Control Act."  

(24) Thus the concluding part of the order of assessment vide para 13 read with the opening sentence of the order of assessment leaves no manner of doubt in holding that the figure of Rs.45,90,88,196.00 was arrived at on the basis of Chapter V of the Drc Act and the same has been maintained for the year 1995-96. This is what the Supreme Court has expressly disapproved in Ndmc v. East India Hotel Ltd. (supra) the Assessing Authority has inspite of having noticed the judgment of the Supreme Court unwittingly fallen into the same error as was corrected by the Supreme Court in East India Hotel's case (supra).   

(25) Yet another serious flaw which we find in the order of Assessing Authority is failure on its part to exercise the power conferred by Sections 77,81,119 and 122 of the Ndmc Act. The Assessing Authority should not have felt helpless and should have exercised the power conferred on it b) the various provisions of the Ndmc Act and compelled the assessee to divulge the required information. At least there should have been no hitch in engaging own Valuer if it was necessitated.   

(26) It was contended by Mr. Sethi, learned Counsel for the Dda that the value of the land has been declared by the Dda at Rs. 5 crores in the collaboration agreement and should have been accepted lands market price of the land. We do not agree. Declaration of value of land for the purpose of collaboration is a matter between parties to the collaboration and the same does not bind the Assessing Authority. The Assessing Authority is free to find out the market price of the land on the date of construction by taking into consideration the comparable sale transactions and in absence thereof the rates notified by L & DO.   

(27) For the purpose of enabling final hearing of the petition, by order dated 13.3.96 we had directed not only the record of assessment proceedings to be produced but also statement to be filed on behalf of the respondent disclosing how the Assessing Authority had arrived at the figure of rateable value as mentioned in concluding para of order of assessment and how that figure was liable to be sustained in accordance with the law laid down by the Supreme Court in the case of East India Hotels (supra). In compliance with the order of the Court a statement has been filed on 20.3.96.   

(28) A perusal of the statement so filed shows that the grounds on which the order of assessment is sought to be defended/sustained are not to be found reflected in the order of assessment. This is yet another reason why it becomes imperative to set aside the impugned order of assessment and direct an assessment afresh.   

(29) For the foregoing reasons, the impugned order of assessment dated 18.12.95 is set aside. The Assessing Authority shall proceed to assess the rateable value of the property afresh in accordance with the principles laid down and observations made hereinabove: The assessee shall appear before the Assessing Authority on 23.7.96. Cwp 479/96 and 894/96 stand disposed of accordingly. No order as to the costs.   

(30) Before parting, we would like to place on record our observations on two very relevant aspects of the law relating to property tax as applicable to the Union Territory of Delhi including New Delhi. The legislation is under Seventh Schedule. List Ii, Entry 49 - Taxes on lands and buildings. This tax is levied by reference to rateable value of lands and building. The mode of determination as provided by Section 63 of Ndmc Act, 1994 and Section 116 of Dmc Act, 1957 is by finding out 'the annual rent at which such land or building might reasonably be expected to let from year to year'. The use of this phrase, specially the word "reasonably" has given rise to voluminous litigation, at least a few cases having travelled upto the Apex Court, the notable of them being Corporation of Calcutta v. Padma Devi, , Corporation of Calcutta v. Life Insurance Corporation of India, ; Guntur Municipal Council v. Guntur Tow Rate Payers Association, , Dewan Daulat RaiKapurv. Ndmc, . Dr.Balbir Singh v. Mcd, and Morvy Municipalities v. Union of Inilia, . The use of the phrase "reasonably" calls for standard rent of the accommodation being determined by the Tax Assessing Authority limited for the purpose of finding out the rateable value. Determining the quantum of standard rent by reference to any premises calls for a complex exercise which the Assessing Authorities burdened with thousands of assessment cases find very difficult to perform with expedition more so when they are faced with unwilling tax payers. In some of the cases the view taken is that for the purpose of finding market price of the land as component of the cost of construction, the Assessing Authority has to apply the same principle which are applicable to land acquisition cases. This calls '. for recording of evidence. The task of Tax Assessing Authorities is rendered difficult cumbersome and time consuming indeed.

(31) In Srikant Kashinath Jituri v. Corporation of the City of Belgaum, a Constitutional Bench presided over by Hon'ble Chief Justice of India has observed :- "Before parting with this appeal, we feel compelled to express our doubts as to die soundness and continuing relevance of the view taken by this Court in several earlier decisions that the property tax must be determined on the basis of fair rent alone regardless of the actual rent received. Fair rent very often means the rent prevailing prior to 1950 with some minor modifications and additions. Property tax is the main source of revenue to the Municipalities and Municipal Corporations. To compel these local bodies to levy and collect the property tax on the basis of fair rent alone, while asking them at the same time to perform all their obligatory and discretionary functions prescribed by the statute may be to ask for the impossible. The cost of maintaining and laying roads, drains and other amenities, the salaries of staff and wages of employees -in short, all types of expenditure has gone up steeply over the last more than forty years. In such a situation, insistence upon levy of property tax on the basis of fair rent alone - disregarding the actual rent received - is neither justified nor practicable- None of the enactments says so expressly. The said principle has been evolved by Courts by a process of interpretation. Probably a time has come when the said principle may have to be reviewed. In this case, however, this question does not arise at this stage and, therefore, it is not necessary to express a final opinion on the said issue."

(32) The problem can be solved very easily by legislative amendment. We fail to understand why the basis of tax on land or building cannot be suitably modified so as to relate it with the actual rent received when the premises are actually let out or with the carpet area or by suitably categorising the buildings by reference to location and/or the nature of user or the length of life enjoyed by them.

(33) A tax is a pecuniary charge imposed by State or public authority upon persons or property to meet the public needs of the authority. Taxation has existed since long. It is not only a means of raising revenue but also a powerful instrument of regulating the economy. Howsoever skilled the draftsman may be, he is after all a human being and ambiguities and loopholes are bound to occur in the drafting. Complexities in the legislative drafting having crept in wittingly or unwittingly, ambiguities and loopholes detected breed corruption. Those who administer the taxation laws if unscrupulous and corrupt, can easily enrich their private coffers at the cost of public coffers. Honest and upright officials find their heads taxed and tables full with piling up pending dockets. The complexity of procedure and difficulties of assessment defy solution. Unscrupulous and shrewd tax payers successfully utilise such complexities and loopholes for digging out holes to escape from the dragnet. Honest tax payers find themselves crushed and feel suffocated. The experience learnt out of thousands of cases which are being filed everyday in the Courts of Law challenging the orders of assessment must set the Legislature thinking of suitably amending the tax provisions so as to simplify the basis of taxation and procedure of assessment.

(34) Yet another aspect which needs to be taken note of by the Legislature is the provision for 100% deposit of tax before filing an appeal. This provision has been introduced obviously in the interest of revenue, so as to see that unwilling tax payers do not delay payment of tax by filing undeserving appeals. Challenge was laid to the vires of Section 170(b) of Dmc Act providing for 100% deposit of tax as a condition precedent to the hearing of the appeal. Challenge has been turned down and the provision upheld as intra-vires by the Supreme Court in Shyarn Kishore & Ors. v. Municipal Corporation of Delhi, . Their Lordships have also held that resort to Articles 226-227 challenging the orders of assessment of property tax should be discouraged when there is an alternative remedy of an appeal - a more satisfactorily solution being available on the terms of the statute itself. An earlier decision of the Supreme Court in Himmat Lal Hari Lal Mehta v. State of Madhya Pradesh, was not placed before the Supreme Court deciding Shyam Kishore's case (supra). In Himmat Lal Hari Lal Mehta's case, the Constitutional Bench has held :- "Moreover the remedy provided by the Act is of onerous and burdensome character. Before the appellant can avail of it, he has to deposit the whole amount of the tax. Such a provision can hardly be described as an adequate alternative remedy."

(35) Be that as it may, the fact remains that inspite of availability of alternative remedy of an appeal good number of writ petitions are being filed before the High Court in evoking its jurisdiction under Articles 226 and 227 of the Constitution. Some of such writ petitions have to be entertained because in the facts and circumstances of those cases the assessee cannot be left to pursue the remedy of appeal which would prove too onerous.

(36) A condition requiring 100% amount of tax to be deposited as a condition precedent to hearing by the Appellate Authority may amount to negation of right of appeal in some cases. To illustrate, a property may be assessed in the name of someone who is neither the owner nor occupier thereof and fixed with liability to pay tax; a property not falling within the limits of the Municipal Corporation may come to be assessed and taxed; property may be grossly overvalued by the Assessing Authority attracting an obligation to pay an amount of tax absolutely disproportionate with the value of the property and means of the owner. In all such cases under the present law, the assessee must deposit the tax before he may deserve a hearing from the Appellate Authority. This provision too deserves to be suitably amended so as to confer a discretionary power on the Appellate Authority allowing dispensation of the deposit of the amount of tax wholly or partially in very deserving cases depending on the facts of individual case and for reasons to be recorded. Provision may be made for payment of interest so as to adequately compensate the Corporation for the delayed recovery in the event of appeal being dismissed or interim order being vacated. Such a provision would serve the ends of justice giving relief to the assessed/appellants in deserving cases and reduce the filing of writ petitions in superior Courts.

(37) Let a copy of this order be placed on the record of Cwp 479/96.