Delhi High Court
Sri Aurobindo Education Society ... vs Municipal Corporation Of Delhi & ... on 23 August, 2012
Author: Badar Durrez Ahmed
THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment delivered on: 23.08.2012
+ W.P.(C) 8030/2003
VINOD KRISHNA KAUL ... Petitioner
versus
THE LT. GOVERNOR N.C.T. OF DELHI & OTHERS ...Respondents
AND
+ W.P.(C) 8403/2004
DR R.K. GUPTA ... Petitioner
versus
MUNICIPAL CORPORATION OF DELHI ... Respondent
AND
+ W.P.(C) 17454-55/2004
P.N. KUMAR & ANOTHER ... Petitioners
versus
GOVT. OF NCT OF DELHI & ANOTHER ... Respondents
AND
+ W.P.(C) 10617/2005
M/S T.G. LEISURE AND RESORTS PVT LTD... Petitioner
versus
UNION OF INDIA & OTHERS ... Respondents
WP(C) No.8030/03 & Ors Page 1 of 62
AND
+ W.P.(C) 7688/2008
MAHARAJ AGARSEN TECHNICAL
EDUCATION SOCIETY (REGD.) ... Petitioner
versus
MCD & ANR ... Respondents
AND
+ W.P.(C) 7691/2008
DAV COLLEGE TRUST AND
MANAGEMENT SOCIETY ... Petitioner
versus
MCD & ANOTHER ... Respondents
AND
+ W.P.(C) 8723/2008
TAGORE EDUCATION SOCIETY & ANR ... Petitioners
versus
UNION OF INDIA & ORS. ... Respondents
AND
+ W.P.(C) 9341/2009
RAM KRISHAN & SONS CHARITABLE
TRUST & ANOTHER ... Petitioners
versus
UNION OF INDIA AND OTHERS ... Respondents
WP(C) No.8030/03 & Ors Page 2 of 62
AND
+ W.P.(C) 9750/2009
MOUNT CARMEL SCHOOL SOCIETY & ANR ... Petitioners
versus
UOI & ORS ... Respondents
AND
+ W.P.(C) 9812/2009
GR GOENKA EDUCATION SOCIETY (REGD) ... Petitioner
versus
MUNICIPAL CORPORATION OF DELHI ... Respondent
AND
+ W.P.(C) 9822/2009
MAHAVIRA FOUNDATION ... Petitioner
versus
MUNICIPAL CORPORATION OF DELHI ... Respondent
AND
+ W.P.(C) 9827/2009
SRI AUROBINDO EDUCATION SOCIETY (REGD)... Petitioner
versus
MUNICIPAL CORPORATION OF DELHI & ANR ... Respondents
AND
WP(C) No.8030/03 & Ors Page 3 of 62
+ W.P.(C) 9838/2009
MAHARAJA AGARSEN TECHNICAL
EDUCATION SOCIETY (REGD) ... Petitioner
versus
MUNICIPAL CORPORATION
OF DELHI & ANR ... Respondents
AND
+ W.P.(C) 10272/2009
SUMERMAL JAIN EDUCATIONAL & WELFARE
SOCIETY (REGD) ... Petitioner
versus
MUNICIPAL CORPORATION OF DELHI & ANR ... Respondents
AND
+ W.P.(C) 11014/2009
GR GOENKA EDUCATION SOCIETY (REGD) ... Petitioner
versus
MUNICIPAL CORPORATION OF DELHI & ANR ... Respondents
AND
+ W.P.(C) 11015/2009
SRI AUROBINDO EDUCATION SOCIETY (REGD) ... Petitioner
versus
MUNICIPAL CORPORATION OF DELHI & ANR ... Respondents
WP(C) No.8030/03 & Ors Page 4 of 62
AND
+ W.P.(C) 11016/2009
VASUDEVA EDUCATIONAL FOUNDATION
SOCIETY (REGD) ... Petitioner
versus
MUNICIPAL CORPORATION OF DELHI & ANR ... Respondents
AND
+ W.P.(C) 11017/2009
DAV COLLEGE TRUST & MANAGEMENT
SOCIETY (REGD) ... Petitioner
versus
MUNICIPAL CORPORATION OF DELHI & ANR ... Respondents
AND
+ W.P.(C) 11018/2009
DAV COLLEGE TRUST & MANAGEMENT
SOCIETY (REGD) ... Petitioner
versus
MUNICIPAL CORPORATION OF DELHI & ANR ... Respondents
AND
+ W.P.(C) 11019/2009
DAV COLLEGE TRUST & MANAGEMENT
SOCIETY (REGD) ... Petitioner
versus
WP(C) No.8030/03 & Ors Page 5 of 62
MUNICIPAL CORPORATION OF DELHI & ANR ... Respondents
AND
+ W.P.(C) 11020/2009
DAV COLLEGE TRUST & MANAGEMENT
SOCIETY (REGD) ... Petitioner
versus
MUNICIPAL CORPORATION OF DELHI & ANR ... Respondents
AND
+ W.P.(C) 11021/2009
DAV COLLEGE TRUST & MANAGEMENT
SOCIETY (REGD) ... Petitioner
versus
MUNICIPAL CORPORATION OF DELHI & ANR ... Respondents
AND
+ W.P.(C) 11290/2009
SANATAN DHARM ADARSH SIKSHA
SANSTHAN (REGD) ... Petitioner
versus
MUNICIPAL CORPORATION OF DELHI & ANR ... Respondents
AND
+ W.P.(C) 11294/2009
G.R. GOENKA EDUCATION SOCIETY (REGD) ... Petitioner
versus
WP(C) No.8030/03 & Ors Page 6 of 62
MUNICIPAL CORPORATION OF DELHI ... Respondent
AND
+ W.P.(C) 11586/2009
SRI AUROBINDO EDUCATION SOCIETY (REGD) ... Petitioner
versus
MUNICIPAL CORPORATION OF DELHI ... Respondent
AND
+ W.P.(C) 11590/2009
G.R. GOENKA EDUCATION SOCIETY (REGD) ... Petitioner
versus
MUNICIPAL CORPORATION OF DELHI ... Respondent
Advocates who appeared in this case:
For the Petitioner in WP(C) No.8030/2003 : Mr Dipak Bhattacharya
For the Petitioners in WP(C) Nos.10617/2005,
8723/2008 : Mr B.B. Jain with
Mr Sushil Jaswal
For the Petitioners in WP(C) Nos.7688/2008,
7691/2008, 9812/2009, 9822/2009,
9827/2009, 9838/2009, 10272/2009,
11014/2009, 11015/2009, 11016/2009,
11017/2009, 11018/2009, 11019/2009,
11020/2009, 11021/2009, 11294/2009,
11290/2009, 11586/2009, 11590/2009 : Mr S.K. Jain
For the Petitioner in WP(C) 9750/2009 : Mr B.S. Maan with
Mr Jai Prakkash
For the Petitioner in WP(C) Nos.17454-55/2004 : Mr Mukesh, Ms Bhanita and
Ms Neera
For the Petitioner in WP (C) 9341/2009 : Mr Sumer Kumar Sethi
For the Respondent/MCD : Ms Amita Gupta ,
Mrs P.L. Gautam and
WP(C) No.8030/03 & Ors Page 7 of 62
Ms Anshum Jain for
Ms Suparana Srivastava
Ms Maninder Acharya for MCD
in W.P.(C) 8030/2003
For the Respondent/GTNCTD : Ms Zubeda Begum with Ms
Bandana Shukla, Mr Khaleel
Khan for Ms Sujata Kashyap,
Mr Hem Kumar for Mr Sanjeev
Sabharwal and Ms Ruchi
Sindhwani
For the Respondent/UOI : Ms Meera Bhatia
CORAM:-
HON'BLE MR JUSTICE BADAR DURREZ AHMED
HON'BLE MS JUSTICE VEENA BIRBAL
JUDGMENT
BADAR DURREZ AHMED, J
1. In all these petitions (26 in number), there is a challenge to the
unit area method of levying property taxes in Delhi introduced by virtue
of the Delhi Municipal Corporation (Amendment) Act, 2003. It is prayed
that the Delhi Municipal Corporation (Amendment) Act, 2003 and the
Delhi Municipal Corporation (Property Tax) Bye-laws, 2004 be declared
as unconstitutional and as being void ab initio. The challenge, which is
common to all the petitions, is founded on the following pleas: (I) The
Legislative Assembly for the National Capital Territory lacked the
legislative competence to enact the Delhi Municipal Corporation
(Amendment) Act, 2003; (II) The Presidential Assent in the manner
stipulated in Article 239AA(3)(c) was not there; (III) the unit area method
is not a recognised system of valuation; (IV) There are no guidelines for
the exercise of power under the new Section 116A and for classification;
and (V) A flat rate of taxation under the unit area method is arbitrary
and discriminatory and is, therefore, illegal. Apart from these pleas,
which have been taken by all the petitioners, there are some specific pleas
with regard to private unaided schools (22 petitions).
I. Legislative competence
2. It was contended on behalf of the petitioners that the
Legislative Assembly for the National Capital Territory, while enacting
the Delhi Municipal Corporation (Amendment) Act, 2003 (hereinafter
referred to as "the Amendment act of 2003"), lacked the legislative
competence to do so. This was a twofold contention. In the first place, it
was contended that the property tax regime which had been put in place
by virtue of the Delhi Municipal Corporation Act, 1957 (hereinafter
referred to as "the said Act of 1957") had been done so by Parliament. As
such, the property taxes levied under the said Act of 1957 constituted
union taxation and therefore the same could not be altered by a legislature
created for the Union Territory of Delhi and it could only be altered or
varied by a law made by Parliament. For this proposition, the learned
counsel for the petitioners placed reliance on the Supreme Court decision
in the case of New Delhi Municipal Council v. State of Punjab: (1997) 7
SCC 339. Secondly, it was contended that by virtue of article
239AA(3)(a) of the Constitution of India, the legislative assembly of the
National Capital Territory had power to make laws for the whole or any
part of the National Capital Territory with respect to any of the matters
enumerated in the State List or in the Concurrent List insofar as any such
matter was applicable to Union territories except matters with respect to
Entries 1, 2 and 18 of the State List and Entries 64, 65 and 66 of that list
insofar as they relate to the said Entries 1, 2 and 18. It was contended
that Entry 18 of the State List pertained to "land" and therefore property
taxes fell under that entry. And, since the legislative assembly of the
National Capital Territory did not have the power to make a law in
respect of Entry 18 of the State List, it, consequently, lacked legislative
competence while enacting the Amendment Act of 2003 by which a new
regime of property taxes based on the unit area method had been put in
place replacing the old regime of property taxation under the said Act of
1957 which had been enacted by Parliament. It was also contended that
Entry 64 of the State List insofar as it related to Entry 18 thereof was also
excluded from the legislative powers of the legislative assembly of the
National Capital Territory. Entry 64 referred to offences against laws
with respect to any of the matters in the said list. It was submitted that
the penalties prescribed under the Amendment Act of 2003, since they
related to Entry 18 of the State List, were also beyond the legislative
competence of the legislative assembly of the National Capital Territory.
On the basis of these two contentions, it was submitted that the
Amendment Act of 2003, being beyond the legislative competence of the
legislature of the National Capital Territory, was unconstitutional and
was, therefore, void ab initio.
3. On the other hand, it was submitted on behalf of the
respondents that the decision of the Supreme Court in the case of NDMC
v. State of Punjab (supra) was with reference to article 289 (1) of the
Constitution of India and it is in that context that the expression "union
taxation" was considered. That expression, is only pertinent insofar as
article 289 of the Constitution is concerned. According to the
respondents, there is nothing in the said decision of the Supreme Court
which would enable us to detract from the legislative competence of the
legislature of the National Capital Territory in enacting the said
Amendment Act of 2003. With regard to the contention of the petitioners
based on article 239AA(3)(a) of the Constitution, it was submitted on
behalf of the respondents that the taxing power insofar as property taxes
are concerned were derived from and are traceable to Entry 49. The said
Entry 49 deals directly with "taxes on lands and buildings". That entry is
an independent entry and is unconnected with Entry 18 of the State List.
It was also submitted that taxing powers are independent of other powers
and, in support of this contention, reliance was placed on the Supreme
Court decision in the case of State of West Bengal v. Kesoram
Industries Ltd: (2004) 10 SCC 201 as also on All India Federation of
Tax Practitioners v. Union of India: (2007) 7 SCC 527.
(a) The 'Union Taxation' argument:
4. Let us examine the contention in respect of the "Union
Taxation" argument. We note that Article 289(1) of the Constitution of
India declares that the "property and income of a State shall be exempt
from Union taxation". In NDMC v. State of Punjab (supra), the question
which arose for consideration was whether the properties of the States
situated in the Union Territory of Delhi were exempt from property taxes
levied under the municipal enactments in force in the Union Territory of
Delhi. It is in this backdrop that the question of whether the property
taxes under the two Municipal Acts extant in Delhi constituted Union
taxation or not - arose for consideration. While doing so, the Supreme
Court observed that the States put together do not exhaust the territory of
India and that there are certain territories which do not form part of any
State and yet are territories of the Union. The Supreme Court noted that
the States and Union Territories are different entities as was evident from
clause (2) of article 1 and, indeed, from the entire scheme of the
Constitution. It was further observed by the Supreme Court that article
245 (1) prescribed that while Parliament may make laws for the whole or
any part of the territory of India, the legislature of a State may make laws
for the whole or any part of the State. Article 1 (2) read with Article 245
(1) would show that so far as the union territories are concerned, the only
lawmaking body is Parliament. It was also observed that the legislature
of a State cannot make any law for a Union Territory inasmuch as a State
legislature can make laws only for that State. The division of legislative
powers between Parliament and the State legislatures is clearly indicated
in Article 246 of the Constitution. The Supreme Court, importantly,
noted that the division is only between Parliament and the State
legislatures, that is, between the Union and the States and that there is no
division of legislative powers between the Union and the Union
Territories as much as there is no division of powers between States and
the Union Territory. The Supreme Court held that insofar as the Union
Territories are concerned, it is clause (4) of Article 246 that is relevant
and that says that Parliament has the power to make laws with respect to
any matter or for any part of the territory of India not included in a State
notwithstanding that such matter is enumerated in the State list. The
Supreme Court categorically held that as the Union Territory is not
included in the territory of any State, it was Parliament alone that was the
lawmaking body available for such Union Territories.
5. The Supreme Court also noted that in the year 1991, the
Constitution provided for the establishment of a legislature for the Union
Territory of Delhi (National capital Territory of Delhi) by the 69th
(Amendment) act but, the legislature so created was not a full-fledged
legislature nor did it have the effect of transforming the status of Delhi
from a Union Territory to that of a State within the meaning of chapter I
of part XI of the Constitution. The Supreme Court held:-
"All this necessarily means that so far as the union
territories are concerned, there is no such thing as list
I, list II or list III. The only legislative body is
Parliament --or a legislative body created by it.
Parliament can make any law in respect of the said
territories --subject, of course, to constitutional
limitations other than those specified in chapter I of
part XI of the Constitution. Above all, the union
territories are not "states" as contemplated by chapter
I of part XI; they are the territories of the union falling
outside the territories of the states. Once the union
territory is a part of the union and not part of any
state, it follows that any tax levied by legislative body
is union taxation. Admittedly, it cannot be called
"State taxation"-- and under the constitutional scheme,
there is no third kind of taxation. Either it is union
taxation or State taxation."
6. A reference was made to the majority opinion in Re Sea
Customs Act:AIR 1963 SC 1760 to the following effect:-
"It is true that list I contains no tax directly on property
like list II, but it does not follow from that that union
has no power to impose a tax directly on property under
any circumstances. Article 246 (4) gives power to
Parliament to make laws with respect to any matter for
any part of the territory of India not included in a state
notwithstanding that such matter is a matter enumerated
in the State list. This means that so far as union
territories are concerned Parliament has power to
legislate not only with respect to items in list I but also
with respect to items in list II. Therefore, so far as the
union territories are concerned, Parliament has power to
impose a tax directly on property as such. It cannot
therefore be said that the exemption of states' property
from union taxation directly on property under article
289 (1) would be meaningless Parliament has no power
to impose any tax directly on property. If a state has
any property in any union Territory property would be
exempt from union Station on property under article
289 (1). The argument therefore that article 289 (1)
cannot be confined to tax directly on property because
there is no such tax provided in list I cannot be
accepted."
7. With regard to Delhi, the Supreme Court in NDMC v.State of
Punjab (supra) observed as under:-
"The third category is Delhi. It had no legislature
with effect from 1-11-1956 until one has been created
under and by virtue of the Constitution Sixty-ninth
(Amendment) Act, 1991 which introduced Article
239-AA. We have already dealt with the special
features of Article 239-AA and need not repeat it.
Indeed, a reference to Article 239-B read with clause
(8) of Article 239-AA shows that the union territory
of Delhi is in a class by itself but is certainly not a
state within the meaning of article 246 or part VI of
the Constitution. In sum, it is also a territory
governed by clause (4) of Article 246. As pointed out
by the learned attorney general, various Union
Territories are in different stages of evolution. Some
have already acquired statehood and some may be on
the way to it. The fact, however, remains that those
surviving as Union Territories are governed by Article
246 (4) notwithstanding the differences in their
respective set-ups - and Delhi, now called the
"National Capital Territory of Delhi", is yet a Union
Territory."
In the said decision, the Supreme Court further observed that "a tax
levied under the law made by a legislature of a union Territory cannot
be called "State taxation" for the simple reason that Union Territory is
not a "State" within the meaning of Article 246 (or for that matter,
chapter I of part XI) or part VI or Articles 285 to 289". Referring to the
said Act of 1957 as also the New Delhi Municipal Council Act, 1994, the
Supreme Court observed that "tax levied under these enactments cannot
but be union taxation - Union taxation in a Union Territory".
8. It is clear that as long as NCT of Delhi is not a State within the
meaning of Article 246 of the Constitution, any tax levied under a law
(such as the said Act of 1957 as amended by the said Amendment Act of
2003) made by the legislative assembly of NCT of Delhi cannot be
termed as "State taxation". Therefore, by elimination, such a tax would
be classified as Union Taxation as there are only two kinds of taxation -
State taxation and Union taxation. Even the tax regime introduced under
the said Amendment Act of 2003 would constitute Union taxation.
9. But, this has no relevance to the argument of legislative
competence sought to be raised on the part of the petitioners. All that it
means is that taxes under the said Act of 1957 as amended by the
Amendment Act of 2003 would be regarded as Union taxation for the
purposes of Article 289, whenever that question arises. In these writ
petitions there is no issue with regard to the application of Article 289 of
the Constitution.
10. What has to be examined is what is the source of power
behind the Amendment Act of 2003? Did the Legislative Assembly of
NCT of Delhi have the power to legislate on the field of property taxation
or not? This can only be seen from constitutional provisions. There is no
dispute that the NCT of Delhi is not a State; it continues to be a Union
Territory. Thus, Parliament has the full array of powers to legislate in
respect of NCT of Delhi. As pointed out by the Supreme Court in
NDMC v. State of Punjab (supra), insofar as NCT of Delhi is concerned,
it being a Union Territory, "there is no such thing as List I, List II or List
III". And, the only legislative body is Parliament -- or a legislative body
created by it, that is, the legislative assembly for the NCT of Delhi. By
virtue of Article 239AA (Special provisions with respect to Delhi), the
Union Territory of Delhi has been named as the National Capital
Territory of Delhi. Clause (2)(a) of the said Article specifies that there
shall be a Legislative Assembly for the National Capital Territory.
Clauses (3)(a) and(3)(b) of Article 239AA, which are of prime
importance for this set of writ petitions, read as under:-
"(3)(a) Subject to the provisions of this
Constitution, the Legislative Assembly shall have
power to make laws for the whole or any part of the
National Capital Territory with respect to any of the
matters enumerated in the State List or in the
Concurrent List insofar as any such matter is
applicable to the Union territories except matters with
respect to Entries 1, 2 and 18 of the State List and
Entries 64, 65 and 66 of that List insofar as they relate
to the said Entries 1, 2 and 18."
(b) Nothing in sub-clause (a) shall derogate
from the powers of Parliament under this Constitution
to make laws with respect to any matter for a Union
territory or any part thereof."
11. By virtue of the said Article 239AA(3)(a) of the Constitution,
the Legislative Assembly of NCT of Delhi derives power to make laws
for the NCT of Delhi with respect to any matters enumerated in the State
List or in the Concurrent List, insofar as any such matter is applicable to
the Union territories, except matters with respect to Entries 1, 2 and 18 of
the State List and Entries 64, 65 and 66 of that List insofar as they relate
to the said Entries 1, 2 and 18. This is the specific legislative power
given to the Legislative Assembly of NCT of Delhi. In other words the
constitution has made special provisions to empower the Legislative
Assembly of NCT of Delhi to make laws on the specified subjects. Had
these special provisions not been there in Article 239AA, there would
have been no Legislative Assembly of NCT of Delhi and it would have
been only Parliament which would have had the power and competence
to make laws for the Union Territory of Delhi. Therefore, the
fountainhead or source of the power and competence of the Legislative
Assembly of NCT of Delhi is to be found in Article 239AA and it is that
provision which has to be examined to determine as to whether the
Amendment Act of 2003 was within the competence of the said
Legislative Assembly. The whole issue of Union taxation and State
taxation is neither germane nor relevant while determining the
competency of the Legislative Assembly of NCT of Delhi in enacting the
Amendment Act of 2003. If the said Legislative Assembly had the
competence in the backdrop of the provisions of Article 239AA, the fact
that the property tax levied was Union taxation is of no consequence.
Thus, the submission of the petitioners that, because the property tax
regime under the said Act of 1957 was part of Union taxation, the
Legislative Assembly did not have the power or competence to introduce
a different tax regime by virtue of the Amendment Act of 2003, is
untenable.
(b) The 'Entry 18 List-II' argument:
12. This takes us to the discussion of competence within the
precincts of Article 239AA(3)(a) of the Constitution. According to the
petitioners, the Legislative Assembly of NCT of Delhi does not have the
competence to legislate in respect of property taxes because Entry 18 of
the State List has been excluded from its domain by virtue of Article
239AA(3)(a). It has been contended that property taxes would fall within
the said Entry 18 of the State List. Entry 18 of the State List reads as
under :-
"18. Land, that is to say, rights in or over land, land tenures
including the relation of landlord and tenant, and the
collection of rents; transfer and alienataion of
agricultural land; land improvement and agricultural
loans; colonization."
13. We do not see how property taxes fall under this entry. In
fact, the learned counsel for the respondents is right in submitting that the
property taxes fall directly within Entry 49 of the State List which is as
under:-
"49. Taxes on lands and buildings."
Entry 49 of the State List is an independent entry, unconnected with
Entry 18 of the said list. In M.P.V. Sundararamier& Co v. State of
A.P.: AIR 1958 SC 468, a Constitution Bench of the Supreme Court,
inter alia, held that [para 51]:-
"Turning to List II, Entries 1 to 44 form one group
mentioning the subjects on which the States could
legislate. Entries 45 to 63 in that List form another
group, and they deal with taxes. Entry 18, for
example, is "Land" and Entry 45 is "Land revenue".
Entry 23 is "Regulation of mines" and Entry 50 is
"Taxes on mineral rights". The above analysis -- and
it is not exhaustive of the Entries in the Lists -- leads
to the inference that taxation is not intended to be
comprised in the main subject in which it might on an
extended construction be regarded as included, but is
treated as a distinct matter for purposes of legislative
competence."
14. This is reiterated in Kesoram Industries (supra) and in All
India federation of Tax Practitioners (supra). Clearly, Entry 18 of the
State list (List II) falls within the group of general Entries 1 to 44. But,
Entry 49 (Taxes on lands and buildings) falls within the group which
deals with taxes. Thus, property taxes, which are nothing but taxes on
lands and buildings, cannot fall within Entry 18 which is not a taxing
entry at all. The petitioners' contention that property taxes fall within the
ambit of Entry 18 of the State List is clearly untenable.
15. This being the position, the power to legislate on property
taxes is traceable to Entry 49 of the State List, which, has not been
excluded from the domain of the Legislative Assembly of NCT of Delhi
by Article 239AA(3)(a) of the Constitution. Therefore, the said
Legislative Assembly had the power and competence to legislate with
regard to "taxes on lands and buildings" And, therefore, it cannot be said
that the Amendment Act of 2003, was void or ultra vires the Constitution.
As a consequence, the submission of the petitioners that the penalties
prescribed under the Amendment Act of 2003 were beyond the
legislative competence of the said Legislative Assembly, is also to be
rejected.
II. Presidential assent
16. The petitioners have also challenged the Amendment Act of
2003 by submitting that it was repugnant to the said Act of 1957 and that,
therefore, by virtue of sub-clause (c) of clause (3) of Article 239AA of
the Constitution, the Amendment Act of 2003 was void. The argument is
that the said Act of 1957 was sought to be amended by the said
Amendment Act of 2003 and, therefore, the latter Act was repugnant to
the former to the extent of the amendments sought to be introduced.
Furthermore, since the amending act was passed by the Legislative
Assembly of NCT of Delhi and the Act sought to be amended had been
enacted by Parliament, according to the petitioners, the same (ie., the
Amendment Act of 2003) was void in view of the provisions of Article
239AA(3)(c) of the Constitution. It was further contended on behalf of
the petitioners, that the first proviso to the said Article 239AA(3)(c)
ought not to be interpreted in such a way so as to nullify the provision to
which it is a proviso. It was also contended that in any event the court
should examine whether the ingredients and conditions precedent for
invoking the said proviso had been satisfied in this case. The learned
counsel for the petitioners placed primary reliance on Kaiser-i-Hind Pvt.
Ltd v. National Textile Corporation Ltd:(2002) 8 SCC 182.
17. On the other hand, the learned counsel for the respondents
submitted that the Amendment Act of 2003, which had been passed by
the Legislative Assembly of NCT of Delhi, had been reserved for the
consideration of the President and that the assent of the President had
been received on 01.06.2003. That being the case, it was argued, the first
proviso to Article 239AA(3)(c) came into play and, because of this, the
amendments introduced by the Amendment Act of 2003 would prevail in
NCT of Delhi. It was contended that the decision of the Supreme Court
in the case of Kaiser-i-Hind (supra) does not in any way help the
petitioners or run counter to the submissions of the respondents.
18. Article 239AA(3)(c) reads as follows:-
"(c) If any provision of a law made by the Legislative
Assembly with respect to any matter is repugnant to
any provision of a law made by Parliament with
respect to that matter, whether passed before or after
the law made by the Legislative Assembly, or of an
earlier law, other than a law made by the Legislative
Assembly, then, in either case, the law made by
Parliament, or, as the case may be, such earlier law,
shall prevail and the law made by the Legislative
Assembly shall, to the extent of the repugnancy, be
void:
Provided that if any such law made by the
Legislative Assembly has been reserved for the
consideration of the President and has received his
assent, such law shall prevail in the National Capital
Territory:
Provided further that nothing in this sub-clause shall
prevent Parliament from enacting at any time any law
with respect to the same matter including a law adding
to, amending, varying or repealing the law so made by
the Legislative Assembly."
(emphasis supplied)
19. This special provision regarding repugnancy between a
provision of law enacted by the Legislative Assembly of NCT of Delhi
and a provision of law made by Parliament is similar to the general
provisions contained in Article 254 in respect of repugnancy between a
State law and a law made by Parliament in respect of matters enumerated
in the Concurrent List (List III) specified in the seventh schedule to the
Constitution. Generally speaking, in the context of Article 254, a law
made by Parliament shall prevail over a law made by a State in respect of
matters specified in the Concurrent List. There is an exception and that is
provided in clause (2) of Article 254. The said clause (2) stipulates that a
provision of law enacted by the State legislature may yet prevail in the
State, even if it is repugnant to an earlier law made by Parliament, if it
has been reserved for the consideration of the President and has received
the President's assent. A look at Article 254 would demonstrate that
Article 239AA(3)(c) is quite similar to it. Article 254 reads as under:-
"254. Inconsistency between laws made by
Parliament and laws made by the Legislatures of
States.--(1) If any provision of a law made by the
Legislature of a State is repugnant to any provision of
a law made by Parliament which Parliament is
competent to enact, or to any provision of an existing
law with respect to one of the matters enumerated in
the Concurrent List, then, subject to the provisions of
clause (2), the law made by Parliament, whether
passed before or after the law made by the Legislature
of such State, or, as the case may be, the existing law,
shall prevail and the law made by the Legislature of
the State shall, to the extent of the repugnancy, be
void.
(2) Where a law made by the Legislature of a
State with respect to one of the matters enumerated in
the Concurrent List contains any provision repugnant
to the provisions of an earlier law made by Parliament
or an existing law with respect to that matter, then,
the law so made by the Legislature of such State
shall, if it has been reserved for the consideration of
the President and has received his assent, prevail in
that State:
Provided that nothing in this clause shall prevent
Parliament from enacting at any time any law with
respect to the same matter including a law adding to,
amending, varying or repealing the law so made by
the Legislature of the State.
(emphasis supplied)
20. There is one distinction, however, which we must not forget.
While State legislatures have exclusivity over entries in the State List
(List II), there is no exclusivity insofar as the Legislative Assembly of
NCT of Delhi is concerned. In fact, had it not been for the special
provision of Article 239AA(3)(a), the Legislative Assembly would not
have had any power to legislate at all. Since, NCT of Delhi is not a State
and is yet a Union Territory, it would have been Parliament and
Parliament alone which could have made laws in respect of Delhi. This
is so because of clause (4) of Article 246 which states that Parliament has
power to make laws with respect to any matter for "any part of the
territory of India not included in a State" notwithstanding that such
matter is a matter enumerated in the State List. Thus, in a sense, the
entire domain of legislation granted to the Legislative Assembly of NCT
of Delhi by virtue of Article 239AA(3)(a) is a sort of concurrent list in
respect of which both Parliament and the Legislative Assembly of NCT
of Delhi can legislate. But, this is not in derogation of the powers of
Parliament under the Constitution to make laws with respect to any
matter for a Union territory (which includes the NCT of Delhi) or any
part thereof. Since, both Parliament and the Legislative Assembly of
NCT of Delhi can legislate on certain subjects there is every possibility
of there being some repugnancy between the two laws. Consequently, it
has been clarified by virtue of Article 239AA(3)(c) that the law made by
Parliament shall prevail and the law made by the Legislative Assembly
shall, to the extent of the repugnancy, be void. But, as in the case of
repugnancy between State law and law made by Parliament, an exception
has been carved out in the shape of the first proviso to Article
239AA(3)(c).
21. Keeping this similarity between the first proviso to Article
239AA(3)(c) and Article 254(2) in mind, let us examine the Supreme
Court decision in Kaiser-i-Hind (supra), which, inter alia, dealt with
Article 254(2). The question before the Supreme Court was --
"Whether the "assent" given by the President under
Article 254(2) of the Constitution of India with regard
to the repugnancy of the State legislation and the
earlier law made by Parliament or the existing law
could only be qua the "assent" sought by the State
with regard to repugnancy of the laws mentioned in
the submission made to the President for his
consideration before grant of assent? Or would it
prevail qua other laws for which no assent was
sought?"
22. The contention before the Supreme Court was, once the
President grants the "assent" to the State legislation, the State law would
prevail on the said subject and such "assent" would be deemed to be an
assent qua all earlier enactments made by Parliament on the subject. This
contention was, however, negatived. It was held that the "consideration"
by the President and his "assent" under Article 254(2) is limited to the
proposal made by the State Government; the State legislation would
prevail only qua the laws for which repugnancy was pointed out and the
"assent" of the President was sought for and that a proposal by the State
was the sine qua non for "consideration" and "assent".
23. While arriving at these conclusions the Supreme Court
analysed the provisions of Article 254(2) and observed as follows:-
"12. For the purpose of the present case, clause
(2) requires interpretation, which on the analysis
provides that where a law:
(a) made by the legislature of a State;
(b) with respect to one of the matters
enumerated in the Concurrent List;
(c) contains any provision repugnant to the
provisions of an earlier law made by
Parliament or existing law with respect to
that matter;
then, the law so made by the legislature of the State
shall--
(1) if it has been "reserved for consideration
of the President"; and
(2) has received "his assent";
would(sic) prevail in that State."
13. Hence, it can be stated that for the State law
to prevail, the following requirements must be
satisfied:
(1) law made by the legislature of a State should be
with respect to one of the matters enumerated in
the Concurrent List;
(2) it contains any provision repugnant to the
provision of an earlier law made by Parliament
or an existing law with respect to that matter;
(3) the law so made by the legislature of the State
has been reserved for the consideration of the
President; and
(4) it has received "his assent".
14. In view of the aforesaid requirements, before
obtaining the assent of the President, the State
Government has to point out that the law made by the
State Legislature is in respect of one of the matters
enumerated in the Concurrent List by mentioning
entry/entries of the Concurrent List and that it
contains provision or provisions repugnant to the law
made by Parliament or existing law. Further, the
words "reserved for consideration" would definitely
indicate that there should be active application of
mind by the President to the repugnancy pointed out
between the proposed State law and the earlier law
made by Parliament and the necessity of having such
a law, in the facts and circumstances of the matter,
which is repugnant to a law enacted by Parliament
prevailing in a State. The word "consideration" would
manifest that after careful thinking over and due
application of mind regarding the necessity of having
State law which is repugnant to the law made by
Parliament, the President may grant assent. This
aspect is further reaffirmed by use of the word
"assent" in clause (2), which implies knowledge of the
President to the repugnancy between the State law and
the earlier law made by Parliament on the same
subject-matter and the reasons for grant of such
assent. The word "assent" would mean in the context
as an expressed agreement of mind to what is
proposed by the State."
xxxx xxxx xxxx xxxx xxxx
16. Applying the aforesaid meaning of the word
"assent" and from the phraseology used in clause (2),
the object of Article 254(2) appears that even though
the law made by Parliament would have supremacy,
after considering the situation prevailing in the State
and after considering the repugnancy between the
State legislation and the earlier law made by
Parliament, the President may give his assent to the
law made by the State Legislature. This would require
application of mind to both the laws and the
repugnancy as well as the peculiar requirement of the
State to have such a law, which is repugnant to the
law made by Parliament. The word "assent" is used
purposefully indicating affirmative action of the
proposal made by the State for having law repugnant
to the earlier law made by Parliament. It would
amount to accepting or conceding and concurring to
the demand made by the State for such law. This
cannot be done without consideration of the relevant
material. Hence, the phrase used is "reserved for
consideration", which under the Constitution
cannot be an idle formality but would require
serious consideration on the material placed before
the President. The "consideration" could only be to
the proposal made by the State.
xxxx xxxx xxxx xxxx xxxx
25. In our view, for finding out whether the
assent was given qua the repugnancy between the
State legislation and the earlier law made by
Parliament, there is no question of deciding
validity of such assent nor the assent is subjected to
any judicial review. That is to say, merely looking
at the record, for which assent was sought, would
not mean that the Court is deciding whether the
assent is rightly, wrongly or erroneously granted.
The consideration by the Court is limited to the
extent that whether the State has sought assent qua
particular earlier law or laws made by Parliament
prevailing in the State or it has sought general
assent. In such case, the Court is not required to
decide the validity of the "assent" granted by the
President. In the present case, the assent was given
after considering the extent and nature of repugnancy
between the Bombay Rent Act and the Transfer of
Property Act as well as the Presidency Small Cause
Courts Act. Therefore, it would be totally unjustified
to hold that once the assent is granted by the
President, the State law would prevail qua earlier
other law enacted by Parliament for which no assent
was sought for nor which was reserved for the
consideration of the President.
xxxx xxxx xxxx xxxx xxxx
27. In this case, we have made it clear that we
are not considering the question that the assent of the
President was rightly or wrongly given. We are also
not considering the question that -- whether "assent"
given without considering the extent and the nature of
the repugnancy should be taken as no assent at all.
Further, in the aforesaid case, before the Madras High
Court also the relevant proposal made by the State
was produced. The Court had specifically arrived at a
conclusion that Ext. P-12 shows that Section 10 of the
Act has been referred to as the provision which can be
said to be repugnant to the provisions of the Code of
Civil Procedure and the Transfer of Property Act,
which are existing laws on the concurrent subject.
After observing that, the Court has raised the
presumption. We do not think that it was necessary to
do so. In any case as discussed above, the essential
ingredients of Article 254(2) are: (1) mentioning of
the entry/entries with respect to one of the matters
enumerated in the Concurrent List; (2) stating
repugnancy to the provisions of an earlier law
made by Parliament and the State law and reasons
for having such law; (3) thereafter it is required to
be reserved for consideration of the President; and
(4) receipt of the assent of the President.
xxxx xxxx xxxx xxxx xxxx
29. We further make it clear that granting of
assent under Article 254(2) is not exercise of
legislative power of the President such as
contemplated under Article 123 but is part of the
legislative procedure. Whether procedure
prescribed by the Constitution before enacting the
law is followed or not can always be looked into by
the Court.
30. Finally, we would observe that the
challenge of this nature could be avoided if at the
commencement of the Act, it is stated that the Act
has received the assent with regard to the
repugnancy between the State law and specified
Central law or laws."
24. The conclusions arrived at by the Supreme Court in Kaiser-i-
Hind (supra) are summarised in paragraph 65 of the said judgment:-
"65. The result of the foregoing discussion is:
1. It cannot be held that summary speedier procedure
prescribed under the PP Eviction Act for evicting the
tenants, sub-tenants or unauthorised occupants, if it is
reasonable and in conformity with the principles of
natural justice, would abridge the rights conferred
under the Constitution.
2.(a) Article 254(2) contemplates "reservation for
consideration of the President" and also "assent".
Reservation for consideration is not an empty
formality. Pointed attention of the President is
required to be drawn to the repugnancy between
the earlier law made by Parliament and the
contemplated State legislation and the reasons for
having such law despite the enactment by
Parliament.
(b) The word "assent" used in clause (2) of Article 254
would in context mean express agreement of mind
to what is proposed by the State.
(c) In case where it is not indicated that "assent" is
qua a particular law made by Parliament, then it is
open to the Court to call for the proposals made by
the State for the consideration of the President
before obtaining assent.
3. Extending the duration of a temporary enactment does
not amount to enactment of a new law. However such
extension may require assent of the President in case
of repugnancy."
(emphasis supplied)
25. What applies to Article 254(2) would also apply, mutatis
mutandis, to the first proviso to Article 239AA(3)(c). Consequently, what
needs to be seen is whether the "pointed attention" of the President was
drawn to the "repugnancy" between the earlier law made by Parliament
(ie., the said Act of 1957) and the "contemplated" legislation (ie., the
Amendment Act of 2003) of the Legislative Assembly of NCT of Delhi
and the reasons for having such law despite the enactment by Parliament.
This is the meaning given to the expression "reserved for the
consideration of the President". The phrase - "has received his assent",
has been ascribed the meaning of an express agreement of mind on the
part of the President to what was proposed by the government of NCT of
Delhi. In cases where it is not indicated that "assent" is qua a particular
law made by Parliament, then it is open to the Court to call for the
proposals made by the government of NCT of Delhi for the consideration
of the President before obtaining his assent. If these requirements of the
first proviso to Article 239AA(3)(c) are fulfilled then, then the provisions
of law passed by the Legislative Assembly of NCT of Delhi would,
despite repugnancy with the provisions of an earlier law made by
Parliament, "prevail in the National Capital Territory".
26. The preamble of the Amendment Act of 2003 itself recites
that it is "an Act to further amend the Delhi Municipal Corporation Act,
1957". Thus, in the present case there is a clear and direct statement in
the Amendment Act of 2003, which is an enactment of the Legislative
Assembly of NCT of Delhi, that it seeks to further amend the Delhi
Municipal Corporation Act, 1957 (ie., the said Act of 1957), which was
enacted by Parliament much prior to the introduction of Article 239AA in
the Constitution. So, the "pointed attention" of the President was clearly
drawn to the fact that the Legislative Assembly of NCT of Delhi sought
to amend a law made by Parliament. It is obvious that when the President
assented to the said law, he assented to the fact that the Legislative
Assembly of NCT of Delhi was amending the provisions of an enactment
which had been earlier passed by Parliament. And, since the Amendment
Act of 2003 was clearly with reference to a law made by Parliament (ie.,
the said Act of 1957), the "assent" of the President had to be regarded in
that context, that is, qua a particular law made by Parliament. That
being the case, it is not open to the Court to call for the proposals made
by the government of NCT of Delhi for the consideration of the President
before obtaining his assent. All the ingredients of the first proviso to
section 239AA(3)(c) stand satisfied. As a result, the Amendment Act of
2003 would prevail and the amendments introduced by it in the said Act
of 1957 would hold good.
27. Clearly, the Supreme Court decision in Kaiser-i-Hind (supra)
does not support the case of the petitioners. The submissions of the
petitioners on this score also are not tenable.
28. The learned counsel for the petitioners next contended that a
proviso cannot nullify the provision to which it is a proviso. They, inter
alia, placed reliance on the Supreme Court decision in the case of
Dwarka Prasad v. Dwarka Das Saraf: (1976) 1 SCC 128 wherein it was
observed as under:-
"18. We may mention in fairness to Counsel that the
following, among other decisions, were cited at the
Bar bearing on the uses of provisos in statutes: CIT v.
Indo-Mercantile Bank Ltd,[ AIR 1959 SC 713 : 1959
Supp 2 SCR 256, 266 : (1959) 36 ITR 1] ; Ram
Narain Sons Ltd. v. Asstt. CST [ AIR 1955 SC 765 :
(1955) 2 SCR 483, 493 : (1955) 6 STC 627] ;
Thompson v. Dibdin [ (1912) AC 533, 541 : 81 LJKB
918 : 28 TLR 490] ; Rex v. Dibdin [ 1910 Pro Div 57,
119, 125] and Tahsildar Singh v. State of U.P. [ AIR
1959 SC 1012 : (1959) Supp 2 SCR 875, 893 : (1959)
Cri LJ 1231]. The law is trite. A proviso must be
limited to the subject-matter of the enacting clause. It
is a settled rule of construction that a proviso must
prima facie be read and considered in relation to the
principal matter to which it is a proviso. It is not a
separate or independent enactment. "Words are
dependent on the principal enacting words to which
they are tacked as a proviso. They cannot be read as
divorced from their context" (1912 AC 544). If the
rule of construction is that prima facie a proviso
should be limited in its operation to the subject-matter
of the enacting clause, the stand we have taken is
sound. To expand the enacting clause, inflated by the
proviso, sins against the fundamental rule of
construction that a proviso must be considered in
relation to the principal matter to which it stands as a
proviso. A proviso ordinarily is but a proviso,
although the golden rule is to read the whole section,
inclusive of the proviso, in such manner that they
mutually throw light on each other and result in a
harmonious construction.
"The proper course is to apply the broad general Rule
of construction which is that a section or enactment
must be construed as a whole, each portion throwing
light if need be on the rest.
The true principle undoubtedly is, that the sound
interpretation and meaning of the statute, on a view of
the enacting clause, saving clause, and proviso, taken
and construed together is to prevail. (Maxwell on
Interpretation of Statutes, 10th Edn., p. 162)""
29. We fail to see how this decision comes to the aid of the
petitioners. In fact, this decision makes it clear that the golden rule with
regard to interpreting a proviso is to read the whole section, inclusive of
the proviso, in such a manner that they mutually throw light on each
other, resulting in a harmonious construction. Read in this manner it
cannot be said that the first proviso obliterates the provisions of Article
239AA(3)(c). On the contrary, when read a whole, the harmonised
construction of Article 239AA(3)(c) leads to the understanding that a law
made by the Legislative Assembly of NCT of Delhi if repugnant to a
provision of law earlier made by Parliament would be void to the extent
of the repugnancy unless it can be shown that the law made by the
Legislative Assembly of NCT of Delhi had been reserved for the
consideration of the President and had received the assent of the
President in the manner indicated above. We have seen that, as a matter
of fact, the Amendment Act of 2003 had received the assent of the
President and that the ingredients necessary for triggering the first
proviso into action had been satisfied. The obvious conclusion is that a
combined reading of the first proviso and Article 239AA(3)(c) leads to
the end-result that the Amendment Act of 2003 and the amendments
introduced by it would prevail in the NCT of Delhi.
III. No recognized method of valuation
30. It was contended on behalf of the petitioners that the
amendments introduced by the Amendment Act of 2003 do not adopt any
"recognized method of valuation" and are, therefore, arbitrary and
violative of Article 14 of the Constitution. In support of this contention,
reliance was placed on the Supreme Court decision in Lokmanya Mills
Barsi Ltd v. Barsi Municipality: AIR 1961 SC 1358.
31. As pointed out in the Property Tax Guide (Year 2004-05)
issued by the MCD, prior to the amendments introduced in the Act of
1957 by virtue of the Amendment Act of 2003, properties were taxed on
the basis of the annual rent at which such lands or buildings was
reasonably expected to be let out from year to year. Under the "unit
area" based system which was introduced by the Amendment Act of
2003, tax for a particular property is based on the annual value of the
property arrived at by multiplying the unit area value assigned to the
colonies / localities by the covered area of the property and the
multiplicative factors for occupancy, age, structure and use.
32. Under section 113 of the said Act of 1957, the MCD is
required to levy, inter alia, property taxes for the purposes of the said
Act. Sub-section (3) of the said section 113 stipulates that, inter alia, the
property taxes are to be levied, assessed and collected in accordance with
the provisions of the act and the bye-laws made thereunder. Under the
un-amended section 114, the property taxes were levied on the lands and
buildings in Delhi and were calculated as a percentage of "the rateable
value" of the lands and buildings. The determination of "rateable value"
of lands and buildings assessable to property taxes was provided in the
old section 116. It prescribed that the rateable value of any land or
building assessable to property taxes shall be the annual rent at which
such land or building might reasonably be expected to let from year to
year.
33. However, the Amendment Act of 2003 introduced various
amendments consequent upon a change in the method of computing the
property taxes to the unit area basis. By virtue of section 2 of the
Amendment Act of 2003, the words "annual value" were substituted for
the words "rateable value" wherever they occurred in the Act of 1957.
New section 2(1A) was introduced which defined "annual value" to mean
the annual value of any vacant land or covered space of any building as
determined under section 116E. New section 114A stipulated that for
any building, the building tax shall be equal to the rate of building tax as
may be prescribed by the MCD under section 114D multiplied by the
"annual value" of the covered space of the building determined under
section 116A(1) or section 116F. By virtue of newly inserted section
116E(1), the "annual value" of any covered space of a building in any
ward is the amount arrived at by multiplying the total area of such
covered space of the building by the final base unit area value (UAV) of
such covered space and the relevant factors as referred to in section
116A(2)(b). Essentially, the "annual value" of a covered space in a
building, under the new regime, is to be calculated by employing the
following formula:-
Annual Value (AV) = CA x UAV x AF x OF x UF x SF
Where,
CA = Covered Area
UAV = Unit Area Value
AF = Age factor
OF = Occupancy factor
UF = Use factor
SF = Structure factor
Thus, the method of valuation has changed from being based on rateable
value to annual value or, in other words, from being based on the annual
rent the land or building was reasonably expected to be let out from year
to year, to one based on the unit area value (UAV) multiplied by the
covered area and other multiplicative factors mentioned above.
34. With this background, let us examine the contention of the
petitioners that the unit area method is not a recognised system of
valuation and is therefore arbitrary. As mentioned above, this argument
is based entirely on the decision of the Supreme Court in Lokmanya
Mills (supra) and, particularly on the observations in paragraphs 5 and 7
thereof, which read as under:-
"5. By Section 78, sub-section (1), clause (d)
and Explanation to Section 75, the rate to be levied on
lands and buildings may be assessed on the valuation
of the lands and buildings based on capital or the
annual letting value. By the rules in operation prior to
1-4-1947, house-tax and water-tax were levied as
rates in respect of all lands, buildings and non-
agricultural lands on the annual letting value (except
Government buildings). Even under the new rules,
house-tax and water-tax continued to be levied in
respect of all buildings and non-agricultural lands as
rates: but the rate in respect of buildings falling within
Rule 2-C was assessed on a valuation computed on
the floor area of the structures, and not on the capital
value nor on the annual rent for which, the buildings
may reasonably be expected to let. This was clearly
not a tax based on the annual letting value, for Annual
letting value "postulates rent which a hypothetical
tenant may reasonably be expected to pay for the
building if let. A rate may be levied under the Act on
valuation made on capital or on the annual letting
value. If the rate is to be levied on the basis of capital
value, the building to be taxed must be valued
according to some recognised method of valuation: if
the rate is to be levied on the basis of the annual
letting value, the building must be valued at the
annual rental which a hypothetical tenant may pay in
respect of the building. The Municipality ignored both
the methods of valuation and adopted a method not
sanctioned by the Act. By prescribing valuation
computed on the area of the factory building, the
Municipality not only fixed arbitrarily the annual
letting value which bore no relation to the rental
which a tenant may reasonably pay, but rendered the
statutory right of the tax-payer to challenge the
valuation illusory. An assessment list prepared under
Section 78, before it is authenticated and finalised,
must be published and the tax-payers must be given
an opportunity to object to the valuation. By the
assessment list in which the valuation is not based
upon the capital value of the building or the rental
which the building may fetch, but on the floor area,
the objection which the tax-payers may raise is in
substance restricted to the area and not to the
valuation."
"7. If the Municipality of Barsi had adopted any
of the recognised methods of valuation for assessing
the annual letting value, the tax would not be open to
challenge, but the method adopted was not a
recognised method of levying the rate."
(underlining added)
35. In Lokmanya Mills (supra), the tax to be levied on lands and
buildings was to be assessed on the valuation of the lands and buildings
based on capital value or the annual letting value. Thus, the method of
valuation had to bear relation to the capital value or the annual letting
value. But, under the new rules, the rate in respect of buildings falling
within the relevant rule (Rule 2-C therein) was assessed on a "valuation
computed on the floor area of the structures", and not on the capital value
nor on the annual rent for which, the buildings may reasonably be
expected to let. Thus, while section 78(1)(d) and the Explanation to
section 75 of the Bombay Municipal Boroughs Act, 1925 stipulated that
the rate to be levied on lands and buildings may be assessed on the
valuation of the lands and buildings based on capital or the annual letting
value, the new rules prescribed a different method of assessment based
on a "valuation computed on the floor area of the structures". Such a
method of valuation was de hors the Bombay Municipal Boroughs Act,
1925 and was not a method of valuation 'recognised' under the act. The
only two methods 'recognised' under the act were to be either based on
the capital value of lands and buildings or on the annual letting value of
the lands and buildings. This is clear from the following words used by
the Supreme Court -- "The Municipality ignored both the methods of
valuation and adopted a method not sanctioned by the Act." It is in this
context that the Supreme Court observed that the valuation computed on
the floor area of the structures was not a recognised method of valuation.
It was not a recognised method under the Bombay Municipal Boroughs
Act, 1925. But, the Supreme Court decision cannot be construed to mean
that floor area or covered area can never be regarded as a "recognised"
method of valuation. The word "recognised" has been used in the
context of the provisions of the Bombay Municipal Boroughs Act, 1925
and not in a general sense. In any event, insofar as the Act of 1957 (post
- amendment) is concerned, the method of valuation of annual value is
specifically relatable to, inter alia, the covered area and unit area value.
Therefore, in the context of the act in question it cannot be said that such
a method is not a "recognised" method of valuation.
36. Clearly, the arguments on behalf of the petitioners on this
aspect of the matter are without any substance and cannot be accepted.
IV. There are no guidelines for the exercise of power under section
116A and classification.
37. It has been argued on behalf of the petitioners that, by virtue
of section 116A, the Municipal Valuation Committee (MVC) has been
given uncanalised and uncontrolled power in recommending the
classification of the vacant lands and buildings in any ward of Delhi into
colonies and groups of lands and buildings. It has been submitted that, in
particular, section 116A(1)(j) enables the MVC to take into account
omnibus parameters, which are not even spelt out in the Act or were not
even in the contemplation of the legislature, while making its
recommendation regarding classification of vacant lands and buildings
into colonies and groups of lands and buildings. On the other hand, it
was submitted on behalf of the respondents that section 116A does not
suffer from any arbitrariness or the vice of excessive delegation. It was
specifically submitted that the MVC has to function within the
parameters laid down in the Act itself.
38. First of all, let us examine the scheme with regard to the
MVC. Sections 116, 116A, 116B, 116C and 116D of the Act of 1957 (as
amended by the Amendment Act of 2003) are relevant for this purpose
and they read as under:-
"116. Constitution of Municipal Valuation
Committee.- (1) The Government shall as soon as
may be after the commencement of the Delhi
Municipal Corporation (Amendment) Act, 2003, and
thereafter at the expiration of every third year,
constitute by notification in the Official Gazette, a
Municipal Valuation Committee.
(2) The Municipal Valuation Committee shall
consist of-
(a) Chairperson, and
(b) such other members, being not less than two and
not more than six, as the Government may
determine.
(3) The Chairperson and the other members of the
Municipal Valuation Committee shall be appointed by
the Government and the qualifications and experience
requisite for their appointment, the manner of selection,
and other terms and conditions of service including
salaries and allowances, tenure of office shall be such
as the Government may by rules determine.
(4) The salaries and allowances of the
Chairperson and the other members of the Municipal
Valuation Committee shall be paid from the Municipal
Fund.
(5) The functions of the Municipal Valuation Committee
shall be-
(a) to make recommendations to the Corporation on
matters relating to classification of vacant lands
and buildings in any ward of Delhi into colonies
and groups of lands and buildings and fixation of
base value per unit area of vacant land or per unit
area of covered space of building and factors for
increase or decrease, or for no increase or
decrease, thereof;
(b) to consider objections under section 116C, and to
make recommendation thereon; and
(c) to perform such other functions as the
Government may require.
Section 116A. Classification of vacant lands
and buildings into colonies and groups and
specification of base unit area values therefor.-(1)
The Municipal Valuation Committee shall recommend
the classification of the vacant lands and buildings in
any ward of Delhi, referred to in section 5, into colonies
and groups of lands and buildings after taking into
account the following parameters:-
(a) settlement pattern such as plotted housing,
group housing, colony with flats only,
urban village, unauthorized colony,
resettlement colony, rural village and non-
residential areas;
(b) availability of civic and social
infrastructure;
(c) access to roads;
(d) access to district centres, local shopping
centres, convenience shopping centres, and
other markets;
(e) land prices as may, from time to time, be
notified by the Central Government or the
Delhi Development Authority;
(f) use-wise category of any building
including residential building, business
building, mercantile building, building for
recreation and sports purposes, industrial
building, hazardous building and public
purpose building including educational,
medical and such other institutional
building and farmhouse, as may be
specified by the Corporation;
(g) in the case of buildings used for business,
mercantile, recreation and sports,
industrial, hazardous, storage or farmhouse
purposes, the location of such buildings
adjacent to such categories of streets, as
may, subject to the provisions of sub-
section (2), be specified by the
Corporation;
(h) the types of buildings which may be
classified as pucca, semi-pucca or katcha,
as may be specified by the Corporation;
(i) the age-wise grouping of buildings as may
be specified by the Corporation; and
(j) such other parameters as may be
considered relevant by the Municipal
Valuation Committee.
(2) The Municipal Valuation Committee shall
recommend, groupwise,-
(a) the base unit area value of any owner-occupied
vacant land, or any wholly owner-occupied
building of pucca structure, constructed in the
year 2000 or thereafter, and put to exclusive
residential use, and
(b) the factor for increasing or decreasing, or for not
increasing or decreasing, the base unit area
values specified in clause (a), separately in
respect of each of the parameters of type of
colony, use, age, type of structure and occupancy
status of the vacant land or building, as the case
may be, subject to a lower limit of zero point five
and upper limit of ten point zero.
Section 116B. Notification of classification of
vacant lands and buildings into colonies and groups
and specification of base unit area values therefor
and factors for increase or decrease.- (1) The
Corporation shall, having regard to the
recommendations of the Municipal Valuation
Committee, declare its intention to classify vacant lands
and buildings in each ward into such colonies and
groups of lands and buildings as the Corporation may,
by public notice, specify, and shall also specify in such
public notice the base value it proposes to specify per
unit area of vacant land and per unit area of covered
space of building within each such group and also the
factors for increasing or decreasing, or for not
increasing or decreasing, the base unit area values of
vacant lands and buildings referred to in clause (b) of
sub-section (2) of section 116A.
(2) The Corporation shall, on receipt of any
representation from any group in any colony affected
by such classification of lands or buildings into any
group or specification of the base unit area values of
vacant lands or covered space of buildings within such
groups, and the factors for increasing or decreasing, or
for not increasing or decreasing, such unit area values
of vacant lands or covered space of buildings, refer
such representation to the Municipal Valuation
Committee for reconsideration, and the decision of the
Municipal Valuation Committee thereon shall, subject
to the provisions of section 116K, be binding on the
Corporation.
Section 116C. Objection to classification of
vacant lands and buildings into colonies and groups
and fixation of base unit area values and factors for
increasing or decreasing such base unit area
values.--(1) If any owner or occupier of any vacant
land or building in any ward in respect of which a
public notice has been issued under section 116B, has
any objection to the manner of classification of any
group or groups, or the base value per unit area of
vacant land or the base value per unit area of covered
space of building in any group, or the factors as
specified in clause (b) of sub-section (2) of section
116A, he may submit to such officer of the Corporation
as may be authorized by the Corporation in this behalf
his objection in such form, and containing such
particulars, as may be prescribed, within thirty days
from the date of publication of such public notice, and
such objection shall be considered by the Municipal
Valuation Committee, after giving the person
submitting the objection an opportunity of being heard.
(2) The procedure for hearing and disposal of
objections shall be such as may be prescribed.
(3) On the expiry of thirty days from the date of
publication of the public notice under section 116B and
after considering the recommendation of the Municipal
Valuation Committee on the objections, if any, in
accordance with the provisions of this section, the
Corporation shall, by public notice, specify groupwise
the base unit area value of vacant land and the base unit
area value of covered space of building and the factors
referred to in clause (b) of sub-section (2) of section
116A:
Provided that the Corporation shall not alter the
unit area values recommended by the Municipal
Valuation Committee without the approval of the
Government.
Section 116D. Final base unit area values of vacant
land and of covered space of building. - (1) Subject
to the provisions of section 169, the base unit area value
of vacant land and the base unit area value of covered
space of building in any group, as may be specified
under sub-section (3) of section 116C, shall be final.
(2) The Corporation shall publish the final base
unit area value of vacant land and the final base unit
area value of covered space of building as aforesaid and
the factors used for increasing or decreasing, or for not
increasing or decreasing, the final base unit area values
as aforesaid and shall make them available for
inspection by any person free of charge. Copies thereof
shall also be made available to any person on payment
of cost."
39. These provisions make it clear that under section 116 the
Government was required to, soon after the commencement of the said
Amendment Act of 2003, (which it did) and thereafter at the expiration of
every third year, constitute by notification in the Official Gazette, a
Municipal Valuation Committee (MVC). As indicated in section 116(5),
the functions of the MVC are, inter alia, to make recommendations to the
MCD on matters relating to classification of vacant lands and buildings in
any ward of Delhi into colonies and groups of lands and buildings and
fixation of base value per unit area of vacant land or per unit area of
covered space of a building and factors for increase or decrease, or for no
increase or decrease, thereof. The MVC is also required to consider
objections under section 116C and to make recommendations thereon.
40. Now, by virtue of section 116A, the MVC has to recommend
the requisite classification into colonies and groups of lands and
buildings after taking into account several parameters. All these
parameters are spelt out clearly in clauses (a) to (j) of section 116A(1).
All these parameters are germane to the issue of classification of vacant
lands and buildings so as to ensure that unequals are not treated equally.
It can hardly be said that considerations such as -- settlement patterns,
availability of civic and social infrastructure, access to roads, access to
district centres, local shopping centres, convenience-shopping centres and
other markets, land prices, use-wise categories of buildings such as
residential use, business use and other uses, types of buildings (pucca,
semi-pucca or katcha), age-wise grouping of buildings - are arbitrary or
irrelevant. These parameters themselves are clear-cut guidelines given
by the legislature to the MVC while making its recommendation with
regard to classification. These parameters constitute the intelligible
differentia for classification which has a nexus with the object of fairness
in incidence of taxation by not treating unequals as equal. At this point, it
would be instructive to note the observations of the Supreme Court in the
case of Anant Mills Co. Ltd. v. State of Gujarat and Others: (1975) 2
SCC 175:-
"25. It is well-established that article 14 forbids
class legislation but does not forbid classification.
Permissible classification must be founded on an
intelligible differentia which distinguishes persons or
things that are grouped together from others left out of
the group, and the differentia must have a rational
relation to the object sought to be achieved by the
statute in question. In permissible classification
mathematical nicety and perfect equality are not
required. Similarity, not identity of treatment, is
enough. If there is equality and uniformity within
each group, the law will not be condemned as
discriminative, though due to some fortuitous
circumstances arising out of a peculiar situation some
included in a class get an advantage over others, so
long as they are not singled out for special treatment.
Taxation law is not an exception to this doctrine. But,
in the application of the principles, the courts, in view
of the inherent complexity of fiscal adjustment of
diverse elements, permit a larger discretion to the
legislature in the matter of classification, so long as it
adheres to the fundamental principles underlying the
said doctrine. The power of the legislature to classify
is of wide range and flexibility so that it can adjust its
system of taxation in all proper and reasonable ways."
(Underlining added)
41. These parameters fall within the scope of permissible
classification. In taxation matters, a narrow approach to classification
should not be adopted as in the words of the Supreme Court 'the power
of the legislature to classify is of wide range and flexibility so that it can
adjust its system of taxation in all proper and reasonable ways'.
42. A point had been raised that clause (j) of section 116A(1)
["such other parameters as may be considered relevant by the Municipal
Valuation Committee"] is open-ended and leaves unguided and un-
canalised discretion with the MVC. We do not agree with this
submission for the simple reason that the said clause (j) is not to be read
in isolation but in conjunction with the other clauses from which it will
take colour.
43. Sub-section (2) of section 116A requires the MVC to
recommend, groupwise, (a) the base unit area value of any owner
occupied vacant land, or any wholly owner-occupied building of pucca
structure, constructed in the year 2000 or thereafter, and put to exclusive
residential use, and (b) the factor for increasing or decreasing or for not
increasing or decreasing, the base unit area values in respect of each of
the parameters of type of colony, use, age, type of structure and
occupancy status of the vacant land or building as the case may be,
subject to a lower limit of zero point five and upper limit of ten point
zero.
44. Once the MVC makes its recommendations, the MCD, by
virtue of section 116B, is required to declare its intention to classify
vacant lands and buildings in each ward into such colonies and groups of
lands and buildings as the MCD may, by public notice, specify. The
MCD is also required to specify, in such public notice, the base value it
proposes to specify per unit area of vacant land and per unit area of
covered space of buildings within each such group and also the factors
for increasing or decreasing, or for not increasing or decreasing, the base
unit area values of vacant lands and buildings. In terms of section
116B(2), if any representation is received by MCD, pursuant to the public
notice, from any group in any colony, the MCD is required to refer the
representation to the MVC for reconsideration. The decision of the MVC
thereon, subject to the provisions of section 116K, is binding on the
MCD.
45. Section 116C also enables any owner or occupier of any
vacant land or building to submit his objection regarding -- the manner of
classification of any group or groups, the base value per unit area of
vacant land or the base value per unit area of covered space of buildings
in any group and/or the multiplicative factors specified in Section
116A(2)(b) - to the MCD within 30 days from the publication of the
public notice. Any such objection has to be considered by the MVC and
that, too, after giving the objector an opportunity of being heard as per
the prescribed procedure. Once all this is done and 30 days have expired
from the date of publication of the public notice under section 116B and
the recommendations of the MVC on the objections are considered, the
MCD is required by section 116C(3) to issue a public notice specifying,
groupwise, the base unit area value of vacant land and the base unit area
value of covered space of buildings and the factors referred to in section
116A(2)(b). The proviso to section 116C(3) stipulates that the MCD
shall not alter the unit area values recommended by the MVC without
approval of the Government.
46. Ultimately, section 116D(1) stipulates that, subject to the
provisions of section 169, the base unit area value of vacant land and
base unit area of covered space of buildings in any group, as specified
under section 116C(3), shall be final. And, section 116D(2) requires that
the MCD shall publish the final base unit area values and the
multiplicative factors.
47. It is in this manner that the UAV (unit area value) and the
multiplicative factors -- AF (Age Factor), OF (Occupancy Factor), UF
(Use Factor) and SF (Structure Factor) - are determined and notified to
the public at large. As indicated in the counter affidavit filed on behalf of
the MCD in WP(C) No. 8030 of 2003, all these steps were followed. It is
also stated therein that the MVC constituted under section 116 had
considered the objections received pursuant to the public notice dated
03.01.2004 issued by the MCD and had even recommended changes after
giving the objectors opportunity of hearing. It is also stated that the
classification of colonies/areas/localities is based on the parameters
prescribed under the Act.
48. It is pertinent to note that the classification exercise conducted
by the MVC has resulted in eight (8) categories (A to H) in which
colonies/ areas/ localities in Delhi have been placed. Each of these
categories has been prescribed a UAV, ranging from 630 per sq.m for
Category A to 100 per sq.m for Category H. The Age Factor (AF) ranges
from 0.5, for covered spaces constructed prior to 1960, to 1, for covered
spaces constructed in 2000 and thereafter. As regards the Occupancy
Factor (OF), it is 1 if self-occupied and 2 if tenanted. The Use Factor
(UF) varies from 1 for Residential and Public Purpose to 10 for Star
Hotels (3 star & above), Hoardings and Towers. The Use Factor for
Industry, Entertainment, Recreation & Clubs has been specified as 3 and
that of Utilities and Business as 2 and 4, respectively. Finally, the
Structure Factor (SF) for pucca and semi-pucca buildings is 1, while it is
0.5 for kutcha buildings.
49. From the above discussion, it is apparent that clear guidelines
have been prescribed under the new regime for, first of all, classifying
colonies/ areas/ localities in Delhi into different categories depending
upon the parameters as specified in clauses (a) to (j) of section 116A(1)
and, secondly, for arriving at the base unit area values and the
multiplicative factors. Thus, the provisions of section 116A and other
related provisions cannot be regarded as being arbitrary or contrary to
article 14 of the Constitution.
V. A flat rate of taxation under the unit area method is arbitrary
and discriminatory and therefore illegal
50. It was contended that a flat rate of taxation would be invalid
as it disregards the dissimilarities in the lands and buildings. In support
of this contention, the learned counsel for the petitioners sought to place
reliance on the Supreme Court decision in New ManekChowkSpg.
&Wvg. Mills v. Ahmedabad Municipality:AIR 1967 SC 1801. We may
straight away say that the said decision does not support the contention of
the petitioners in the backdrop of the factual matrix of the present case.
This contention of a flat-rate is not tenable because Section 114D of the
Amended Act of 1957 itself makes provision for different rates of tax for
different colonies or for different groups of buildings in such colonies.
Even when we examine the argument within a particular rate of tax, we
find that it is untenable. This is evident from the fact that though the
petitioners are complaining about the flat rate of tax but, they forget that
the flat rate is applied to the annual value which, in turn, is a function of
several variables - Covered Area (CA), Unit Area Value (UAV), Age
Factor (AF), Occupancy Factor (OF), Use Factor (UF) and Structure
Factor (SF). Therefore, just because there is a flat rate of tax, it does not
mean that all lands and buildings are treated identically. The
dissimilarities are brought out in the UAVs and the multiplicative factors
- AF, OF, UF and SF.
51. In New ManekChowk (supra) the Supreme Court observed as
under:-
"11. Our attention was also drawn to other well
known books on Rating like Ryde on Rating, Bean
and Lockwood on Ratingand Graham Eyre on Rating.
Incidentally, we may refer to Witton Booth on
Valuations for Rating (4th Edn.) at p. 125 wherein the
learned author states:
"Reductions of floor areas to units, as
already described, are necessary to effect
reliable comparisons, but it is merely a
mechanical process used in preparing
material for the valuation, the actual
valuation being the decision and application
of the appropriate rate or rental value per
unit of area. This may be exactly to a
standard, and, indeed, it probably will be to
the majority of properties where these are so
nearly alike in character as to be regarded
for rating purposes as identical. Where,
however, rates or rental values per unit of
area are applied indiscriminately, without
discernment -- on the wholesale, as it were
-- inequalities are certain to arise, and these
give rise to the whole method being
caustically referred to as 'valuations by the
foot Rule'."
12. The above comment is sufficient to show that this
method can only be applied where the majority of
properties are so nearly alike in character as to be
regarded identical for rating purposes. There is no
such statement in the affidavit.
13. We are therefore not satisfied that conditions
prerequisite for determination of annual value of
textile factories in Ahmedabad on the basis of rental
value per foot super of floor area existed at the
relevant time nor has it been shown to us that the so-
called contractor's basis was adopted by the municipal
authorities of Ahmedabad. The method is not also one
which is generally recognised by authorities on rating.
Applied indiscriminately --as it appears to have been
done in this case -- it is sure to give rise to
inequalities, as there has been no classification of the
factories on any rational basis. Further, there does not
seem to be any basis for dividing the factories and the
buildings thereof under two general classes as
buildings used for processing and buildings for non-
processing purposes. What was said by this Court in
Lokmanya Mills case [ (1962) SCR 306] applies with
equal force to what has been done here and we must
hold that the municipality did not observe the law and
failed in its duty to determine the rateable value of
each building and land comprised in each of the
textile factories in terms of Rule 9(b) of the Rules
under the Bombay Provincial Municipal Corporations
Act, 1949 so far as the assessment book for the year
1966-67 is concerned."
(underlining added)
52. It is obvious that in the abovementioned case the Supreme
Court found that the flat rate was applied to dissimilar properties
indiscriminately, that is, without making adjustments for the
dissimilarities. But, here, the case is entirely different. Adjustments have
been made for the dissimilarities by employing different UAVs for
different categories of localities/colonies. We have already pointed out
that Delhi has been categorised into eight categories: A to H. The UAV
for Category A colonies is 630 per sq.mt. whereas colonies or areas at the
other end of the spectrum which fall within category H are assigned the
UAV of 100 per sq.mt. Similar colonies and areas have been placed
within the same category. In the same way buildings of different vintage
are treated differently by assigning different Age Factors (AFs).
Different uses have also been assigned different Use Factors (UFs) and so
on. All these operate as weights for differences in areas and types of
lands and buildings. In order to compensate for the dissimilarities, these
"weights" are applied to the covered area to arrive at the annual value, to
which the flat rate of tax is applied. So, by the time the flat rate comes to
be applied, the differences are 'ironed out' by employing different UAVs
and multiplicative factors. Once the annual values are computed, all
lands and buildings are placed on more or less an even keel. The flat rate
of tax is applied to these annual values to arrive at the property tax in
respect of each property. And, there is nothing wrong with this as the
supreme court observed that a flat rate can be applied where the majority
of properties are so nearly alike in character as to be regarded identical
for rating purposes. The process by which annual values are computed
makes the properties alike.
53. Therefore, there is nothing arbitrary or discriminatory in the
flat rate of tax imposed in the context of the unit area regime of property
taxation employed under the amended act of 1957.
54. In any event, as pointed out above, the argument of flat rate is
not tenable inasmuch as Section 114D of the Amended Act of 1957 itself
makes provision for different rates for different colonies or for different
groups of buildings in such colonies. There is also provision for
graduated rates of tax within the minimum and the maximum rates of tax
on the basis of a straight line system. This is evident from Section 114D
and 114E which read as under:-
"114D. Rate of building tax. - Save as otherwise
provided in this Act, the base rate of property tax on
buildings in Delhi shall be between a minimum of six
per cent and a maximum of twenty per cent. of the
annual values of such buildings as may be specified
by the Corporation from time to time:
Provided that the Corporation may, at any time,
prescribe fixed rates between the minimum and the
maximum rates of tax as aforesaid for different
colonies or for different groups of buildings in such
colonies:
Provided further that the Corporation may also
introduce graduated rates of tax within the minimum
and the maximum rates of tax as aforesaid on the
basis of straight line system or any other system as
may be specified by the Corporation.
Explanation.- "Straight line system" shall mean
the system in which the rate of tax is equivalent to the
annual value of a property (X) divided by the
minimum annual value (XI) and Y being added to the
quotient so arrived, Y being the difference between
the maximum rate of tax and the quotient of
maximum (X2) and minimum X1) annual values.]
114E. Rate of vacant land tax. - Save as
otherwise provided in this Act, the rate of tax on
vacant lands in Delhi shall be between a minimum of
six per cent. and a maximum of twenty per cent. of the
annual value of such lands as may be specified by the
Corporation from time to time:
Provided that the Corporation may, at any time,
specify fixed rates between the minimum and the
maximum rates of tax as aforesaid for different
colonies or for different groups of vacant lands in
such colonies:
Provided further that the Corporation may also
introduce graduated rates of tax within the minimum
and the maximum rates of tax as aforesaid on the
basis of straight line system or any other system as
may be specified by the Corporation.
Explanation. - 'Straight line system' shall have
the same meaning as in the Explanation to the second
proviso to section 114D.]"
Hence, this contention of the petitioners is also not tenable.
Schools and Education Societies
55. In twenty-two (22) petitions1 of this batch, the petitioners are
either schools or education societies or trusts which run schools in Delhi.
Apart from the issues of legislative competence etc., which we have
already dealt with, these 22 petitions raise the following common issues:-
WP(C) Nos.8723/2008, 9341/2009, 9750/2009, 11018/2009, 11019/2009, 11017/2009, 11020/2009, 11021/2009,
7691/2008, 11014/2009, 9812/2009, 11294/2009, 11590/2009, 11015/2009, 11586/2009, 9827/2009, 9838/2009,
7668/2008, 11290/2009, 10272/2009, 11016/2009, 9822/2009.
(a) The use factor (UF) for all schools should be 1 (as
applicable for public purpose);
(b) The UAV should be the same for all schools and must be
independent of the areas in which they are located;
(c) There should be no vacant land tax in respect of playgrounds
of schools.
56. Insofar as the issue of Use Factor (UF) is concerned, it must
be pointed out that different UF's have been prescribed for different types
of schools. They are as under:-
Sl. No. Type of School Use Factor (UF)
600/- per month
` 1200/- per month
1200/- per month
From the above table, it is clear that government and government aided
schools have been prescribed a Use Factor of 1 whereas private unaided
schools have been prescribed the Use Factors of 1, 2 or 3 depending on
the fee structure. Those schools (private unaided) which charge fees upto
` 600/- per month would have a Use Factor of 1, whereas those which
charge fees from ` 601/- to ` 1200/- per month would have a Use Factor
of 2 and those charging more than ` 1200/- per month would have a Use
Factor of 3. Such a classification, according to the petitioners, falls
outside the domain of permissible classification.
57. It is argued on behalf of the petitioners that private unaided
schools also fulfill the public purpose of education. It was submitted that
the education societies and trusts which run these schools without the aid
and assistance of the government need to charge fees for sustaining the
institutions. Just because they charge fees, they should not be subjected
to higher property taxes by employing the aforementioned graded Use
Factors. It was also submitted that the schools are run on a non-profit
basis. It was also contended that if the quantum of aid given to the aided
schools is taken into consideration, the cost to society at large would not
be less than the fee charged by the petitioners in their schools. Reliance
was also placed on a Division Bench decision of the Karnataka High
Court in Baldwin Girls High School, Bangalore v. Corporation of the
City of Bangalore: AIR 1984 Karnataka 162, where a differentiation on
the basis of aided and unaided schools for the purposes of exemptions
from property tax was struck down. It was submitted that the lower Use
Factors work in the same way as exemptions and, therefore, by the same
logic the differentiation based on fees charged ought to be struck down.
58. On the other hand, it was contended on behalf of the
respondents that there exists an intelligible differentia, first of all,
between aided / government schools and private unaided schools and
secondly, within the latter category depending on the fee structure. It
was argued that unaided private schools which charge fees upto ` 600/-
per month have been equated with government / aided schools inasmuch
as they have been ascribed the same Use Factor of 1. Only those schools
that charge higher fees are required to pay property taxes based on the
Use Factors of 2 and 3. This is so because charging of higher fees entails
profiteering and, therefore, schools charging higher fees cannot be
regarded as serving a public purpose.
59. While we have no difficulty in agreeing with the respondents
that there exists an intelligible differentia between government /
government-aided schools on the one hand and private un-aided schools
on the other, the question that needs examination is whether this
differentia has a nexus with the object of such classification. The
apparent and ostensible object is that schools which are not running as
profit earning businesses ought to be treated at par with government /
government-aided schools. That is apparent from the fact that
government / government aided schools have a use factor of 1 and so do
private unaided schools, which charge fees upto ` 600/- per month. The
foundation on which the Use Factors of 2 and 3 are assigned to schools
charging fees between ` 601/- and ` 1200/- per month and those charging
fees in excess of ` 1200/- per month, respectively, appears to be the
reasoning or, shall we say, assumption that these schools are profit
making enterprises. But, what if that were not true? What if the schools
charging higher fees were imparting a better quality of education with a
better infrastructure without any individual or group of individuals
profiteering from the enterprise? In such a situation, the nexus between
the intelligible differentia and the object would disappear rendering the
classification to be violative of article 14 of the Constitution. Therefore,
a classification based merely on the fee structure would not be a
satisfactory means of achieving the object. Perhaps, one Use Factor
could be assigned to all schools which are not profit making bodies /
entities, irrespective of the fee structure. And, a higher Use Factor could
be assigned to schools which are being run on a profit-making basis. We
have no means to ascertain as to whether the petitioners before us fall
into one or the other category. While we agree with the petitioners that
the fee structure cannot be the sole determinative factor for ascribing a
particular Use Factor, we are also clear that it is not for us to do this
exercise. Consequently, we direct that this grievance of the petitioners
with regard to the Use Factor assigned to school buildings be considered
by the Corporation and the MVC in the light of observations made above.
In the meanwhile, however, as we have found the classification based on
fee structure alone to be violative of Article 14 of the Constitution and
beyond the mandate of the amended Act of 1957, all schools, irrespective
of the fee structure, would have to be assigned a single Use Factor. And,
since government / government aided schools have been assigned a UF of
one (1), that would be applicable for all schools till the exercise is
completed by the MVC and the Corporation in the light of the discussion
above.
60. We now come to the next submission regarding a uniform
UAV for all schools across the city of Delhi. It is argued that there
should not be any differentiation between schools in different locations as
all schools fulfill the same purpose of imparting education. Here, we
cannot agree with the petitioners. The UAVs have been designed on the
basis of colonies / localities irrespective of the use to which the buildings
are put. We cannot introduce a facet of Use Factor into the concept of
another parameter such as the Unit Area Value (UAV). That would play
havoc with the scheme of taxation. Then, even businesses would claim a
uniform UAV throughout the city. They would say, for example, a shop
is a shop whether it is in Greater Kailash or in a colony falling in a
different category. In fact, even residential flat owners may say that a
residential flat anywhere in Delhi should have the same UAV as, after all,
a residential flat in any area in Delhi remains a residential flat. UAVs are
assigned independent of the use factor and therefore we cannot read a
particular use into the mode of computing the UAV. So, this argument
on the part of the petitioners does not hold much water.
61. The third submission is that there should be no vacant land tax
in respect of playgrounds of schools. It is submitted that these
playgrounds are essential for schools and moreover the building bye-laws
do not permit constructions on these lands. Consequently, both for the
benefit of students and under statutory compulsion, these areas have to be
kept vacant. Thus, it is contended that such vacant lands belonging to
schools ought to be exempted from taxation. Insofar as this submission is
concerned, we feel that courts cannot dictate as to which buildings or
lands should or should not be exempt from tax. It is for the legislature
and the Corporation working within the statute to consider this aspect.
Conclusions
62. In view of the foregoing discussion, the challenge to the Unit
Area Method and to the validity of the Delhi Municipal Corporation
(Amendment) Act, 2003 and the provisions introduced by it in the Delhi
Municipal Corporation Act, 1957, fails. So, too, the consequential
challenge to the Delhi Municipal Corporation (Property Tax) Bye-laws,
2004. Subject to the observations and directions in respect of private-
unaided schools, the writ petitions are dismissed. The parties are left to
bear their own costs.
BADAR DURREZ AHMED, J
VEENA BIRBAL, J
August 23, 2012
HJ/dutt
