City Municipal Council, Mangalore & Anr. v. Frederick Pais Etc.

Judgment

CIVIL APPELLATE JURISDICTION: Civil Appeals Nos. 1302 to 19@6 Of 1968. Appeals by special leave from the judgment and. orders dat~d September 26, 27 and 29, 1967 of the ~ysore H~gh Court m Writ Petitions Nos. 907, 1004, 1005, 117) and 124' of 1967. Jagadish Swarup, Solicitor-General, C. R. Somasekharan and R. B. Datar, for the appellants (in all the appeals). M. Veerappa and G. Narayana Rao, for respondent No. 1 ·(in all the appeals). S. S. Javali and S. P. Nayar, for respondent No. 2 (in all the appeals). The Judgment of the Court was delivered by Vaidialingam, J. These five appeals, by speci;il leave, by the City Municipal Council, Mangalore and the Commissioner of the City Municipal Council, are directed against the orde~passed by the Mysore High Court in Writ Petitions Nos. 907, 1004, 1005, 1175 and 1245 of 1967, quashing the demand notices issued by the appellants against the first respondent in each of these appeals for payment of property tax for the half-year ending September 30, 1966.

As the grounds of attack levelled against the demand notices by the said respondents are common, we will only refer to the averments contained in Writ Petition No. 907 of 1967 out of which Civil Appeal No. 1302 of 1968 arises. buildings situated in Ward II and Ward XX, within Mangalore Municipality in the South Canara District, which originally formed part of the Madras State and which, on reorganisation of the States, became part of the State of Mysore. The Mysore Municipalities Act, 1964 (Act XXII . of 1964) (hereinafter referred to as the Mysore Act J came into force from April 1, 1965 as per the notification, dated September 23, 1965 issued by the State Governtl}ent. Certain sections 'had already come into force. Till the Mysore Act came ·· into . force, the Mangalore Municipality was governed · by the Madras District Municipalities Act, (Act V of 1920)

(hereinafter called the Madras Act).- The Madras Act had Jlrovided for levy of property tax, the procedure to be adopted for the same and as to how the ann.ual value of a building was to be arrived at as well as the percentage at which the property tax was to be levied. Similarly the Mysore Act had also provided for levy of property tax; prescribing the ascertainment of annual ratable value and also the rate at which the tax was to be levied. Althoµgh the Mysore Act came into force from April 1, 1965 the appellanis issued demand notices for property tax under the said Act for the assessment year 1965-66. In those demand notices, the Municipal Council determined the ratable annual MT,JN!C. COUNCIL v. FREDERICK ( Vaidialingam, !. ) 7 5 3 value. under s. 101 ( 2) of the Mysore Act and assessed the tax on the basis of that annual ratable value, but at rates under the Madras Act.

The tax was paid as per the demand notices. 'But on March 16, 1967 the appellant issued the impugned notices of demand under the Madras Act for payment of property tax for the year 1966'67. The fax demanded on the basis of the Madras Act was considerably higher than that orjginally demanded and paid under. the Mysore Act for the assessment year 1965-66. Notwithstanding the protest made by the first respondent, the appellants threatened to collect the tax as per the demand notices and hence the first respondent filed Writ Petition No. 1907 of 1967 challenging the demand notices. The main grounds of attack against the demand notices, as raised in the said Writ Petition were that after the passing of the Mysore A~t the appellants had no power to levy property tax under the Madras Act and therefore the demands were illegal. · The demand notices were . further attacked on the ground that s.

382 of the Mysore Act, which related to the repeal of many Acts including the Madras Act and the saving provisions contained therein did not justify the issue of the demand notices. The first respondent accordingly prayed for quashing the demand notices issued under the Madras Act. He had also raised certain contentions regarding the levy of health cess included in the notices; but it is unnecessary to refer to those averments as the High Court has held against the first respondent and .that question does not arise in these appeals. The appellants pleaded that under the Mysore Act property tax, among other things, has been imposed after following the procedure prescribed in ss. 95 to 97 therein and the imposition of tax has come into force from April 1, 1967, but for the period in question viz., the year 1966-67 the demands were legal and valid in view of the provisions contained in s. 382 of the Mysore Act. Notwithstanding the repeal of the Madras Act, the provisions contained in s.

382 of the Mysore Act clearly saved the right of the appellants to levy property tax under the Madras Act to adopt· both the annual value as well as the rate of tax as per the a!sessment registers maintained under the said Act. In particular, the appellants relied. upon the second proviso in s. 382(1) of the Mysore Act and the Uiird proviso inserted in th11 said section with retrospective effect, by the Mysore Municipalities (Amendment) Act, 1966 (Mysore Act XXXIV of 1966). According to the appellants, . as necessarily . the imposition of property tax under the Mysote Act, after following the procedure contained therein will take time, the Legislature had made consequential provisions in s. 382 with a view to enable the imposition of property tax under the repealed enactments during the interim perioci. The High Court has, by and large, accepted the contentions of the first respondent.

According to the High Court, although the higher rate of tax under the Madras Act is preserved by A proviso 3 to s. 382(1) of the Mysore Act, ·the provision for the determination of the annual value under s. 82(2) of the Madras Act is not saved. The High Court is further of tlie view that the second proviso to s. 382(1) of the My~ore Act only continues the old impost and the third proviso preserves the old rates and that they do not continue the old annual value. The net result of the decision of the High Court is that 'the Municipal Council has to· determine the annual ratable value of the building as provided bys. 101(2) of the Mysore Act and to assess the property tax at the rate at which it is assessed under the Madras Act. Finally the High Court quashed the demand notices issued by the appellants. The learned Solicitor General, appearing for the appellants, urged that the High Court was in error in interpreting the second and third provisos to s. 382(1) of the Mysore Act.

It was urged that as the levy of property tax after adopting the procedure indicated in the Mysore Act will take time, the Legislature had, by incorporating the necessary provisions in s. 382, particularly the second and third provisos to sub-s. ( 1), preserved the right of the Municipal Council concerned to adopt not only the annual value but also the rate of property tax payable according to the assessment registers maintained under the Madras Act, till they are superseded by anything done under' the Mysore Act. The learned Solicitor General, further urged that the view of the High Court that the annual ratable value has to be determined under the Mysore Act and the computation of the rate of •ax has to be under the Madras Act, was anomalous and was not warranted by the provisions of the Mysore Act. On the oiher hand, Mr. V ee•appa, learned counsel appearing for the first respondent in all the appeals, has supported the view taken by the High Court and urged that a proper interpretation had been placed on s.

382 of the Mysore Act. According to the learned counsel, normally, after the coming into force of the Mysore Act, no assessments could be made under the Madras Act, but s. 382 of the Mysore Act, repealing the Madras Act, had made certain special provisions the . existence of which alone would attract certain actions taken under the Madras Act. In order to appreciate the contentions, noted above, it is necessary to refer broadly to the scheme of the two Acts relating to the levy of property tax. We shall first ,advert to the Madras Act. Under s. 78 (1) power given to the Municipal Council to levy, among other taxes, a property tax. Under sub-s. (3), a resolution of a municipal council determining to levy a tax has to fl ll(!JNlC. COUNCIL v. FREDERICK ( Vaid1alingam, J.) 7 5 5 specify the rate at which such tax is to be . levied and the date u-om wh1cn It shall oe 'ev1ea. . ~t10il.

81 ( l) provides u1at 11 a "-uu_ilcu, oy resoiuuon, . detenrunes tbat a property tax shall be leVled, sucn tax shall oo levied on all bu11dillgs anu iands w1thm tne mumc1pai 1mms save tnqse exempted by tne statute or by any other 1aw. 11uo-sect1on (.t) staces mat the tax shall be levied m such percentages of the annual vaiue or me ouildmgs or lands as may oe bxed oy the Mumcipal Councu, subject to s. 18. under this section, we are infonnea that 25 % has been fixed as the milXl· mum rate. Sub-s. (2) of s. 82 provides that the annuai value ol the lands and bulldmgs shall be deemed to be the gross annual rent at which thl:y may reasonably be expected to be let from month to month or trom year to year less a deduction in the case of buildmgs, of ten per cent of mat portion of such annual rent which ls attributable to buildings alone. It further provides that the said deauction shall be in heu ol aJI allowance 'for repairs or on any Other account.

Section 86 provides tbat tbe property tax shall be levied every halt year and shall, excepting as otherwise · provided in Schedule l V, be paid by the owner witbin thirty days of the commencement of the hall-year. Section 124 provides that the rules and tables embodied in Schedule IV shall be read as part of Chapter Vi, dealing with Taxation and .Finance. Selle· dule IV deals with Taxation and Finance Rllies. Rule 2 provides for the preparation and maintenance of assessment books showing the persons and property liable to taxation under the Act and the assessment books being. made available for in&pection by the tax payers. Rule 6 provides for the value of any· land or building for purposes. of the property tax being determined by the executive authority. Under rule 7, the executive authority has to enter in the assessment books the annual or capital value of all lands and building and the tax payable thereon.

Rule 8 (1) states that the assessment books shall be completely revised by the executive authority once in every five years. Sub-rule (2) thereof pro· vides for amending the assessment books at any time between om general revision and another. in the manner indicated therein. A perulial of the .provisions referred to above, shows that under the Madras Act the property tax is levied. on the annual value of buildings which is deemed to b.~ the gross annual rental vaiue Jess a deduction of ten per cent of that portion of annual rent which is attribuiable to the buildings alone. · The Municipal Council has to pass. a resolution deter ,i.ning to levy the property tax and that resolution should also spec"y the rate at which such tax is to be levied as also the date from which it shall be levied and the ta~ is levied every half year. The executi<e auinority jias to main·· tam the assesslllent books containing entries regarding the annual yalue as Well a.s the tax payable thereon ..

The executive authndty 1s under "an obliga:tlort to completely revise· the assessment books oncein 'ev~ry fi;ve'0 year~. L5SupCI-3 SUPREME OOURT REPOR"!S There is no controversy that the Madras Act was applicable to the C11y ot Mangalore, even after it formed part of the Mysore :state on tne reorgamzation of the States. The Madras Act, as we have mentionea eaIJ1er, was repealed by the Mysore Act, which came mto force with effect from April 1, 1965. Coming to the Mysore Act, Chapter VI deals with Municipal Taxation. ;secuon 94 enables a municipal council to levy a tax on bmldmgs or 1anas or both situated within the municipality, after complying with the procedure indicated therein and subject to any general or special orders of Government and at rates not exceeding thost: specified in Schedules I to VII. The maximum rate has been fixed at 24 % of the annual ratable value.

Section 2 ( l) defines 'annual retable value' as the gross annual rent for which any building or land exclusive of furniture or machinery might reasonably be expected to be let from month to month or year to year. Section 9 5 deals with the procedure to be adopted prelimnary to imposing a tax. Section 101 ( 2) provides that the annual ratable value of a building shall be the gross annual rent as defined in cl. ( 1) of section 2, less a deduction of sixteen and two-thirds per cent of such annual rent. It further states ;;1at the said deduction shall be in lieu of all allowances for repairs or on any other account whatsoever. Section 103 deals with the preparation of an assessment list. Section 382 (I) repeals the various enactments referred to therein, inc1udfng the Madras Act. The first proviso, which saves certain matters, does not come into the picture in this case. The second proviso as well as the third proviso, introduced by the Mysore Municipalities (Ame11dment)

Act, 1966 are relevant for our puroose and they are :;, iollows : "(2) Provided further that subject to the preceding proviso anything done or any action taken (including any appointment or delegation made, tax, fee or cess imposed, notification, order, instrumeni, or direction issued, rule, regulation, form, bye-law or scheme framed, certificate obtained, permit or licence granted or registration effected) under the said laws shall be deemed to have been done or taken under ihe corres· ponding provisions of this Act and shall continue to be in force accordingly unless and until sullerseded by anything done or any action taken under this Act : ( 3) Provided further that noiwithstanding anything contained in the preceding proviso where any tax, duty, fee or cess other than a duty on transfers of immovable properties has been imposed under the said laws at a rate higher than the maximum rate permissible under this Act. such tax. duty. fee or cess may continue to be MUNJC.

COUNCIL \', FREDERICK \Vaidialinga111, J.) imposed and collected at such higher rate unless and until superseded by anything done or any action taken under this Act." The third proviso has been introduced with retrospective effect by the Amending Act. It is not reaUy necessary for us to consider more elaborately the scheme of the Mysore Act. because. even according to the appellants, the procedure indicated therein-whatever may be the procedure, abOut which we express n0 opinion-has not been taken before the issue of the demand notices wh;:;h were under challenge before the High Court. On the other hand, the appellants have exclusively relied on the second and third provisos to s. 382( I) of the Act The learned Solicit1Jr General has urged that the assessmen books under the Madras Act were prepared on April 1, 1964 and, if so, under the second and third provisos to s. 382(1), the property tax can be levied and collected as per the provisions ol the Madras Act.

In particular, the learned Solicitor General placed reliance upon the provisions of the Madras Act relating to the maintenance of assessment books and the assessment oooks having to be revised only once in every five years and pointed out that in this case the assessment books having been prepared on April 1, 1964 they wiU have currency for a period of five years till March 31, 1969. The second proviso to s. 38"2 ( 1) no doubt saves any tax which had been imposed under the Madras Act. Similarly, under the third proviso, the Municipal Council will have authority to collect tax even at a rate higher than the maximum rate permissible under the Mysore Act; but the essential requisite for attraciing the two provisos is that the 'tax should have been imposed under the Madras Act, as per the second proviso and tax at a higher rate should have been imposed again under the Madras Act as per the third proviso.

We are not inclined to accept ,the contention of the learned Solicitor General that by merely preparing the assessment registers under the Madras Act on April : , 1964 it can be stated that a tax has been imposed under the second proviso or a tax at a higher rate has been imposed under the third proviso. We have already referred to th~ material provisions of the Madras Act relating to the levy of property tax. Those provisions show that the municipal tax is an annual tax leviablc for a particular official year and the assessment list on the basis of which the tax is assessed is for such official year. This was the view expressed by this Court in Municipal Cor1,oration v. Hiralal'.'), while interpreting certain provisions of the Madhya Bharat Municipalities Act, 1954. No doubt the wording in the Madhya Bharat Act in ~. 76, dealing with asses5ment list was slightly different, hut, in our opinion, the (1) [1968). 2 S.C.R. 125. mPRBME COUR1 RBPOR1S principle enunciated in that decision regarding the municipal tax oeing an annual tax leviable for a parucular official year and the assessm.:nt list, on the basis or which 1he tax is assessed having currency tor each such otlicial year, is applicable also to the interpretanon of the Madras Act.

No resolution passed by the Municipal Co11nc11 regardmg the levy ot the prnperty tax and the rate al which ii is to be levied, having currency for the year 1966-67, has been brought to our notice. The learned Solicitor General has drawn our attention to the minutes, dated September 15, 1966 as well as the Co\llcil's resolution No. 1280 dated December 20, 1966 relcting to the levy of prope1ty tax in the Cay of Mangalorc for the period in question, under the Mysore Act. Those proccedmgs w1il not assist the appellant as the necessary procedure, unoer the Mysore Act, has not been followed and therefore that resO!lllion cannot have any legal validily, so as to justify lhc imposition of tax. Nonnally, the municipal council will have to prepare a fresh assessment list, every year. By virtue of s. 124 of the Madras Act, the rules and tables ~mbodied m Schedule IV have to be read as part of Chapter VI dealing with Taxatiou and Finance.

Though, ordinarily, the Municipality would hav0 to prepare a fresh assessment list every year, rule 8 of Schedule l V permits the Municipal Council to continue 1he same assessment list for the next four succeeding years and to revise it once every five years. Hut, in order to enable the Municipal Council to levy and collect a tax, it has to pass a resolution determining to levy a tax, the rate at which such tax has to be levied as also the date from which it shall be levi~d. That the tux is an annual tax is also borne out by sub-s. ( 2) of s. 82.

If the contention of the learned Solicitor that the assessment list, once prepared, has to be adopted for five years, is accepted, it will result in the annual value on a particular building or house being static for tive years, during which a municipal council can go on adopting the assessment list prepared in an earlier year aud the owner or occupier of the buildin~ being deprived of the right to object to the valuation regarding the annual value or the tax assessed thereon. This will be the result even though the annual value may have decreased for one reason or the other. It follows that the contention that the preparation of the assessment books amounts to imposing of a tax so as to justify the issue of tl)e demand notice. cannot be accepted. Having due regard lo .the second and third provisos to s.

382(1) and the other material. provisions of the Mysore Act, lhc position is tliat a property tax must have been imposed by the Madras Act and even though the rates of su.ch tax were higher than under the Mysore Act, the said higher tax could be collected. But no such tax having been imposed under the Madras Act, the MUN!C. COUNCIL v. FREDERICK (Vaidialingam, J.) 759 second and third provisos to s. 382( 1) do not apply and hence the demands for payment of property tax for the period are not jtlstified. Though we are not in agreement with s.01ue of the reasons given by the High Court for issuing the writ, the conclusion arrived at by the High Court that the second and third provisos to s. 382( 1) of the Mysore Act do not justify the issue of the demand notices for the period in question, is correct. The result is that the appeals fail and are dismissed with costs. There will be only one hearing fee. V.P.S. Appeals dismissed