Nakul Kapur vs Ndmc & Ors.
2011 Latest Caselaw 394 Del

             *IN THE HIGH COURT OF DELHI AT NEW DELHI

                                          Date of decision: 24th January, 2011.

+                                W.P.(C) 4052/2010

%        NAKUL KAPUR                                             ..... Petitioner
                            Through:      Mr. Shanti Bhushan, Sr. Adv. with
                                          Mr. Sanjai K. Pathak, Adv.

                                   Versus

         NDMC & ORS.                                       ..... Respondents
                            Through:      Ms. Madhu Tewatia with Ms. Sidhi
                                          Arora & Ms. Aeshna Singh,
                                          Advocates.

CORAM :-
HON'BLE MR. JUSTICE RAJIV SAHAI ENDLAW
1.       Whether reporters of Local papers may
         be allowed to see the judgment?                     Yes

2.       To be referred to the reporter or not?              Yes

3.       Whether the judgment should be reported             Yes
         in the Digest?

RAJIV SAHAI ENDLAW, J.

1. The writ petition impugns the order dated 9th July, 2009 of the

Assessing Authority of the respondent NDMC revising the rateable value of

Property No.B-36, Malcha Marg, New Delhi from the then existing value of

`77,100/- to `8,00,000/- with effect from 1st April, 2004 and to `72,90,000/-

with effect from 6th November, 2008 and the order dated 15th May, 2010 of

the Additional District Judge dismissing the appeal of the petitioner against

the order of the Assessing Authority.

2. Notice of the writ petition was issued and counter affidavit filed by

the respondent NDMC. After some hearing on 3 rd December, 2010, further

particulars/documents were sought from both the parties and were filed.

The counsels for the parties have been heard.

3. The factual matrix emerging from the documents filed and the

pleading is as under:-

The property comprising of plot of land admeasuring 375 sq. yrds.

and two and a half residential construction thereon, was acquired by

purchase by the mother of the petitioner vide Sale Deed dated 16 th

November, 1995 for total sale consideration of `1,60,00,000/-. The

mother of the petitioner applied to the respondent NDMC for

demolition of the existing construction in the property and for

permission for raising fresh construction and the same was sanctioned

by the respondent NDMC vide order dated 22nd September, 2003.

According to the petitioner, the demolition of the old structure and re-

construction started in the year 2004-2005. The mother of the

petitioner applied for sanctioning of revised construction plan and

which was allowed on 8th June, 2004. The mother of the petitioner

executed a registered Gift Deed dated 6th October, 2008 in favour of

the petitioner. In the said Gift Deed, it is mentioned that the mother

of the petitioner had "demolished the then existing structure of

building on the plot of land underneath the said property and got

building plan sanctioned for reconstruction of a new building on the

said land". The mother of the petitioner at the time of the Gift Deed

was described as the owner of the "plot of land" as distinct from

property and it was further stated that in fact in anticipation of the Gift

Deed, the possession of the "plot of land" had been handed over to the

petitioner on 1st April, 2005. The gift for the purposes of stamp duty

was valued at `1,34,82,500/-. The petitioner on 16th October, 2008

applied for Completion Certificate and which was issued with respect

to the new construction on the plot of land on 12 th November, 2008.

The petitioner on 26th November, 2008 let out the entire newly

constructed property at a rent of `6,75,000/- per month.

4. It is not in dispute that the respondent NDMC on 24th January, 2005

had served a notice under Section 72 of the New Delhi Municipal Council

Act, 1994 for assessment of the plot of land at the rateable value of

`8,00,000/- with effect from 1st April, 2004. It is also not in dispute that

another notice was served on 25th March, 2009 proposing the rateable value

with effect from 6th November, 2008 at `72,90,000/-.

5. The petitioner objected to the aforesaid proposal of the respondent

NDMC by contending that the increase in rateable value from the then

existing of `77,100/- to `8,00,000/- with effect from 1st April, 2004 and to

`72,90,000/- with effect from 6th November, 2008 was 100 fold and not

permissible and the rateable value of similar properties in the neighbourhood

was much less. It was contended that the proposal of the respondent NDMC

was thus discriminatory and arbitrary. It was further contended that the

house tax was in lieu of municipal services and cannot be disproportionate

qua similarly situated properties. Reliance was placed on Dewan Daulat

Rai Kapoor Vs. New Delhi Municipal Committee AIR 1980 SC 541 and

Dr. Balbir Singh Vs. M.C.D. AIR 1985 SC 339.

6. The Assessing Authority of the respondent NDMC after hearing the

petitioners held that as per Section 63(2) of the NDMC Act, 1994 the

rateable value of land which is not built upon but is capable of being built

upon and/or which is in the process of erection, is to be fixed at 5% of

estimated capital value thereof and as such on the basis of the capital value

of `1,60,00,000/- as disclosed in the Sale Deed of the year 1995 in favour of

the mother of the petitioner, determined the rateable value of the land as on

1st April, 2004 at `8,00,000/-.

7. Aggrieved therefrom the petitioner preferred the statutory appeal

under Section 115(1) of the Act. The challenge in the memorandum of

appeal was on the ground of parity only. In addition to the judgments

aforesaid referred to in reply before the Assessing Authority, reliance was

also placed on Lt. Col. P.R. Choudhary (Retd.) Vs. MCD (2000) 4 SCC

577. It was also stated that the entire tax demanded on the basis of the order

impugned, had been paid. It appears that the Additional District Judge also

summoned the assessment list of the locality and on the basis thereof it was

submitted by the petitioner before the Additional District Judge that the

rateable values as revised were not at par with the rateable values of the

other properties in the locality.

8. The said appeal was dismissed vide order dated 15 th May, 2010. It

was held that the judgments relied upon by the counsel for the petitioner

were in accordance with Sections 4, 6 & 9 of the Delhi Rent Control Act,

1958; that Sections 4, 6 & 9 of the Delhi Rent Control Act had in the

judgment of this Court in Raghunandan Saran Ashok Saran (HUF) Vs.

Union of India 95 (2002) DLT 508 (DB) been held to be ultra vires and

void; that this Court in The State Trading Corporation of India Ltd. Vs.

NDMC 104 (2003) DLT 808 has held that the principles of standard rent

shall not be attracted where the premises are actually occupied by the tenant

and the rate of rent is above `3,500/- per month as in the present case; that

the principle of parity as laid down in the judgments in Dr. Balbir Singh

(supra) and Lt. Col. P.R. Chaudhary (supra) was laid down while

determining the rateable value on the basis of the standard rent in terms of

provisions of Delhi Rent Control Act and the Apex Court was not concerned

with cases of actual rent beyond the purview of the Delhi Rent Control Act

as in the present case; that actual rent is the objective criteria and leaves no

scope for any subjectivity and any attempt to reduce the rateable value to

below the actual rent will create a lot of confusion and cause of action. It

was further held that the unit area method had already been enforced with

effect from 1st April, 2009 but the principles thereof could not be applied for

period prior thereto.

9. The senior counsel for the petitioner has before this Court also

argued:-

(a) that the principles of parity are applicable irrespective of

whether the rateable value is determined on the basis of standard rent

or actual rent.

(b) Section 63(1) does not make distinction between self occupied

and let out properties.

(c) that the provisions of Section 63(2) apply only to land which

has not been built up earlier and would not apply to land which has

already been built upon and the building where upon is demolished

for the purposes of re-construction. Reliance in this regard is placed

on Section 109 of the NDMC Act (to which attention was in fact

invited by the counsel for the respondent NDMC) which is as under:-

"109. Demolition, etc., of buildings--If any building is wholly or partly demolished or destroyed or otherwise deprived of value, the Chairperson may, on the application in writing of the owner or occupier, remit or refund such portion of any tax assessed on the rateable value thereof as he thinks fit."

It is contended that land which has already been built upon and

building whereupon is demolished for the purposes of re-construction

would be covered by Section 109 and the rateable value thereof is to

remain as before and to be not fixed in accordance with Section 63(2)

of the Act; rather rebate has to be granted with respect thereto; though

it is admitted that the petitioner having not applied for rebate would

not be entitle thereto but it is contended that the rateable value of such

land would remain the same as before i.e. `77,100/-. It is also

contended that in such situation there may not be any vacant land at

any point of time inasmuch as the work of demolition and re-

construction may go on simultaneously.

(d) it is thus contended that the fixation of rateable value with

effect from 1st April, 2004 at `8,00,000/- under Section 63(2) is

erroneous.

(e) with respect to the revision of rateable value with effect from

1st December, 2008 to `72,90,000/- (inasmuch as with effect from 1st

April, 2009 unit area method came into force), it is contended that the

principles of parity would apply and it is further argued that rather

than ordering reassessment by applying the principle of parity, the

petitioner is willing to pay for the said period also as per the unit area

method even though the tax so computed would be a little higher.

(f) it is contended that house tax cannot be discriminatory and the

principle of parity flows from the Constitution of India itself.

(g) reliance is placed on paras 25 to 27 of Sant Ram Saigal Vs.

MCD 105 (2005) DLT 746 and to para 31 of the State Trade

Corporation of India Ltd. Vs. NDMC 104 (2003) DLT 808 where the

principles of parity were reiterated even in cases of actual letting.

10. Per contra the counsel for the respondent NDMC has contended:-

(i) that even before Sections 4, 6 & 9 of the Delhi Rent Control

Act were declared to be invalid, the assessment of rateable value of

land on which building existed was different from assessment of

rateable value of land alone; that the provisions of the Delhi Rent

Control Act were not applicable to open plot of land; the principle of

standard rent was thus not applicable to vacant land;

(ii) vacant land stands in its own class and is thus not to be

governed by the principle of parity. Reliance in this regard is placed

on The Municipal Corporation of Greater Bombay Vs. M/s

Polychem Ltd. (1974) 2 SCC 198 (paras 12, 22 & 27).

(iii) it is thus contended that vacant land is to be treated differently

and the principle of parity with land which had already been built

upon will not arise.

(iv) that once the statute i.e. Section 63(2) had provided the mode of

assessment of rateable value of the vacant land as 5% of the capital

value thereof, all other modes of assessment are excluded. Reliance is

placed on The Commissioner Vs. Griha Yajamanula Samkhya 2003

MCC 403 in para 34 laying down that where the Act provides the

formula for determination of tax, the same shall prevail.

(v) attention is invited to Asstt. General Manager, Central Bank

of India Vs. Commissioner, Municipal Corporation of the City of

Ahmedabad (1995) 4 SCC 696, with respect to the provisions of the

Bombay Provincial Municipal Corporation Act, 1949 and to East

India Commercial Co. Pvt. Ltd. Vs. Corporation of Calcutta (1998)

4 SCC 368 in relation to the Calcutta Municipal Act, 1951 but during

the course of hearing it was found that the provisions of the said two

Acts are materially different from that of the NDMC Act and as such

the said judgments do not apply.

(vi) with respect to the argument on Section 109 of the NDMC Act,

it is contended that the same applies for remission of tax on the

building and not to remission of tax on land.

(vi) the judgment of the Division Bench in State Trading

Corporation of India Ltd. reported in (2006) 1 AD Delhi 366 is relied

upon to contend that after amendment of the Delhi Rent Control Act

with effect from 1st December, 1988, the rateable value has to be

determined on actual rent basis.

(vii) reliance is placed on Panchshila Co-Operative House Building

Society Ltd. Vs. MCD 24 (1983) DLT 285 where a Division Bench of

this Court laid down that property tax is a tax and not a fee.

(viii) attention is also invited to Delhi Golf Club Ltd. Vs. NDMC

(2001) 2 SCC 633 where also the Apex Court held that the levy of

property tax is not to be viewed as fee to avail municipal services.

11. The senior counsel for the petitioner in rejoinder has contended that

for the period 1st April, 2004 to 30th November, 2008, Section 109 is a

complete answer. He has also contended that the counsel for the respondent

NDMC has not dealt with the judgment of the Apex Court in Lt. Col. P.R.

Chaudhary where it has been observed that the property tax is in lieu of

municipal services and therefore has to be co-related thereto. It is further

argued that the Supreme Court sustained the provisions of property tax in

the Municipal Act which otherwise would have been struck down as

discriminatory, only for the reason of laying down that there has to be parity

between property tax of all properties in the same locality. It is further

argued that it is incongruous that the principle of parity would apply to built

up property and not to land when the municipal services required for land

are far less than that to a built up property.

12. The first question which arises for consideration is as to whether

Section 63(2) laying down the mechanism for determination of rateable

value of any land which is not built upon but is capable of being built upon

and of any land on which the building is in the process of erection, applies

only to land which has never been built upon and would not apply to land

which has earlier been built upon and building whereon has been

demolished.

13. The literal reading of Section 63(2) does not limit the scope thereof to

only virgin land. The expression used, is "the rateable value of any land"

which would also include land which was earlier built upon and the building

whereon has been demolished. The only qualification for a land to fall

under Section 63(2) is that the same is not built upon but is capable of being

built upon. As far as the said qualification is satisfied, it is immaterial

whether it was earlier built upon and building earlier existing thereon has

been demolished.

14. Unless Section 63(2) is so read, it would create a situation where there

is no provision for determination of rateable value of land earlier built upon

and building whereon has been demolished. Though Section 63(1) provides

for rateable value of any land "or" building but the same is found to be

providing in fact for assessment of rateable value of only that land which

has been built upon and not of vacant land. The expression "or" used in

Section 63(1), in the context thereof is to be read as "and". Section 63(1)

contemplates the land or building which might reasonably be expected to be

let. A plot of land in municipal areas can be used either for residential or

commercial/industrial or for institutional purposes only since, the Municipal

Laws prohibit any construction on the land without prior permission and

also lay restrictions on the use of land and open land cannot reasonably be

expected to be let. Also, proviso to Section 63(1) contemplates standard

rent of land "or" building being fixed under the DRC Act. The provisions of

DRC Act do not apply to vacant land. Thus there can be no eventuality of

fixation of standard rent of vacant land. I am therefore of the opinion that

Section 63(1) cannot be said to be providing for mechanism for assessment

of rateable value of vacant land only and is concerned with rateable value of

land with a building/ structure thereon.

15. Thus the only provision in the Statute for determination of rateable

value of vacant land is Section 63(2) and if the same were to be held to not

apply to land, though vacant but having been built upon earlier, it would

create a void and which is not desirable.

16. I am also of the opinion that there is no basis or rationale for

discriminating between the land which has earlier been built upon and the

building whereon has been demolished and the land which has never been

built upon. If the two were to be so discriminated and the rateable value of

land which was earlier built upon and building whereon has been

demolished, were to be determined under Section 63(1) and the rateable

value of the land which has never been built upon, were to be determined

under Section 63(2), it will lead to a situation where the rateable value of

land which has never been built upon but is capable of being built upon is

far more than the rateable value of similarly situated land also capable of

being built upon but on which building was earlier raised and demolished.

17. Had the intention of the Legislature been that Section 63(2) applies

only to land which had never been built upon but is capable of being built

upon, nothing prevented the Legislature from so providing. The Legislature

however chose to use the words "which is not built upon" and not the words

"which has never been built upon".

18. When Section 63(2) within its ambit has included even that land on

which the building is in the process of erection and during which time the

rateable value is to be fixed at 5% of the capital value of land, there is no

reason to hold that the same would not cover land which was earlier built

upon and building whereon has been demolished. This shows that the

applicability of Section 63(2) is not confined to virgin land only.

19. As far as Section 109 is concerned, the same deals only with building

and not with land. It provides for remission of tax assessed on the rateable

value of a building which has been wholly or partly demolished or destroyed

or otherwise deprived of value. The same will thus have no application

whatsoever in determination of rateable value of land.

20. I find that in Municipal Corporation of Greater Mumbai Vs. Kamla

Mills Ltd. (2003) 6 SCC 315 also, the issue culled out by the Supreme Court

was, when a building constructed upon land previously assessed to

municipal tax is demolished for construction of a new building, is it open to

the Municipal Corporation to assess the rateable value of the land till

construction of the building by taking the market value of the land? The

contention of the assessee there also was that the rateable value could not be

revised by taking market value and which was accepted by the High Court.

The Supreme Court however allowed the appeals of the Municipal

Corporation; of course since the Bombay Rent Act applied to vacant land

also, it was held that the rateable value be determined as per standard rent

and not market value. However the NDMC Act as aforesaid provides for

rateable value of vacant land @ 5% of estimated capital value of land. In

my view, the matter is thus no longer res integra.

21. Thus no error can be found with the assessment or rateable value from

1st April, 2004 in accordance with Section 63(2) of the Act. There is no

challenge by the petitioner to the assessment of capital value of land at

`1,60,00,000/- on the purchase price of land and building close to 10 years

ago in the year 1995.

22. The other argument raised by the senior counsel for the petitioner of

there being no vacant land at any time owing to the work of demolition and

re-construction going on simultaneously has no basis in the pleadings of the

petitioner, neither before the Assessing Authority of the NDMC nor before

the Appellate Authority nor before this Court. The petitioner has been

challenging the rateable value only on the ground of parity. This argument

was raised before this Court for the first time after being required to file

additional documents vide order dated 3rd December, 2010. Even

otherwise, the fact remains that the plans got sanctioned by the petitioner

from the respondent NDMC, were not for addition, alteration but were for

demolition and re-construction. The petitioner admits that the sanction for

demolition and re-construction was received on 22nd September, 2003. It is

thus in the normal course of events that by 1st April, 2004, the work of

demolition had been completed and as on 1st April, 2004 there was only a

vacant piece of land, may be under construction and covered by Section

63(2) of the Act. In the registered Gift Deed in favour of the petitioner, it is

expressly recorded that the mother of the petitioner demolished the then

existing structure of building on the said plot of land and thereafter got the

building plans sanctioned for re-construction. The gift as on 6th October,

2008 also was of a vacant plot of land only and not of land with any old

structure existing thereon. Thus the said contention of the petitioner cannot

be accepted.

23. The next question which arises is whether the principle of parity

would apply to rateable value of land assessed under Section 63(2) of the

Act. I am in this regard, inclined to agree with the contention of the counsel

for the respondent MCD that there can be no parity between built up

property and vacant land. The judgment in M/s Polychem Ltd (supra) is

apposite in this regard. Also, the judgment in Griha Yajamanula Samkhya

(supra) clearly lays down that where the Act lays down the formula for

determining rateable value of vacant land, the same shall prevail. Even in

India Automobiles Ltd. Vs. Calcutta Municipal Corporation (2002) 3 SCC

388 it was held that wherever the Municipal Law itself provides the mode

and manner of determination of annual value irrespective of Rent Control

Act, in such cases the determination of rateable value has to be accordingly.

Thus the principles of parity would not apply to the rateable value of land

and it cannot be said that the rateable value of vacant land has to be the same

as the rateable value of other built up properties in the locality.

24. Thus no interference is called for in the determination of rateable

value of the period 1st April, 2004 to 30th November, 2008.

25. As far as the determination of rateable value from 1 st December, 2008

to 31st March, 2009 on the basis of actual rent is concerned, the question

which arises is whether principles of parity would continue to apply even

after the provisions of Rent Act and standard rent have ceased to apply to

determination of rateable value.

26. The judgment in Lt. Col. P.R. Chaudhary though of after the

amendment with effect from 1st December, 1988 to the Delhi Rent Control

Act, in para 4 thereof expressly records that the Court was concerned with

the law as it existed prior to the said amendment. The principle of parity

emerged in the context of determination of rateable value in accordance with

the principles of standard rent in the Rent Act. Though the Municipal

Statutes provided for the determination of rateable value as per the letting

value but the Courts held that since in law, notwithstanding the actual letting

value being more, the owner was entitled to and the tenant liable to pay only

standard rent as determined in the Rent Act, the municipality while

determining the letting value was bound by law i.e. the Rent Act and to treat

the letting value as only that which was permissible under the Rent Act

notwithstanding the actual rent being more, for the reason of the same being

contrary to law. The Delhi Rent Control Act, 1958 in Section 9(4) thereof,

while providing for the determination of standard rent itself provided for the

principle of parity by providing that after determining the standard rent in

accordance with the principles enshrined therein, the Rent Controller shall

have regard also to the standard rent payable in respect to other similar

premises in the neighbourhood.

27. Having found the genesis of the principle of parity in the

determination of standard rent under the Rent Act, I am of the opinion that

the same would not apply when the letting value has to be determined de-

hors the provisions of the standard rent. The Municipal Statute does not

provide for parity. It provides for determination of rateable value as per the

rent at which the property might reasonably be expected to be let. There can

be no better proof of the same than the actual rent fetched by the property.

Moreover, even if the principle of parity were to apply, the parity will have

to be with the other similar properties and parity cannot be with the

properties constructed long back and without the modern amenities. It is not

the case of the petitioner that the rent of `6,25,000/- per month fetched by

the property is not the market rent or that any other similarly situated

property is not fetching or would not have fetched the said rent. The

reasoning given by the two Judge Bench in Lt. Col. P.R. Choudhary for

application of parity for the reason of the two properties in the locality

enjoying the same services is contrary to the three Judge Bench subsequent

judgment in Delhi Golf Club Ltd (supra) of the levy of property tax being

qua ownership of the property and being not in the nature of a fee.

28. Moreover, the challenge with respect to the same is for four months

only and the computation of the tax under challenge for the said period

would be small in comparison to the tax for the remaining period and for

this reason also, it is not deemed appropriate to interfere with the same. It is

significant that the Legislature has made the order of the Appellate

Authority final and this Court is only exercising supervisory jurisdiction and

it is a settled principle of law that in exercise of the said jurisdiction, this

Court is entitled to refuse to interfere even where the petitioner has made out

a case. The Supreme Court in Srikant Kashinath Jituri Vs. Corporation of

the City of Belgaum (1994) 6 SCC 572 has already held that time has come

for review of the soundness and continuing relevance of the view taken in

earlier decisions of the property being determined on fair rent rather than

actual rent.

The writ petition is therefore dismissed, however with no order as to

costs.

RAJIV SAHAI ENDLAW (JUDGE) 24th January, 2011 Bs..