Holding

The proviso to clause (b) of sub‑section (2) of Section 127A must be given a purposive construction so that the aggregate annual letting value of all buildings owned by a person is taken as one unit for taxation, denying exemption where the total exceeds Rs 1800.

Summary

The Municipal Corporation of Bilaspur appealed against a Madhya Pradesh High Court order that each tenement must be assessed separately for property tax and that aggregation of annual letting values could be used only for exemption, not for taxation. The dispute centered on Section 127A of the Madhya Pradesh Municipalities Act, 1961, which exempts buildings whose annual letting value does not exceed Rs 1800, but provides a proviso that if the owner holds multiple properties, the letting values are to be aggregated for the purpose of that exemption. The Supreme Court rejected the High Court’s mechanical construction and adopted a purposive approach, holding that the proviso makes the aggregate letting value of all buildings owned by a person a single unit for taxation, thereby denying exemption where the total exceeds Rs 1800. Consequently, the Court allowed the appeal, set aside the High Court judgment, and directed that the decision apply prospectively with no recovery or refund for the past period. No costs were awarded.

Issues considered

Whether the aggregation of annual letting values of multiple buildings owned by a single individual under Section 127A(2)(b) of the Madhya Pradesh Municipalities Act, 1961, should be considered for exemption or for taxation.
Whether the High Court's interpretation that each tenement is to be assessed separately and that aggregation applies only to exemption is correct.

Legislation cited

Madhya Pradesh Municipalities Act, 1961s. 127A(1), s. 127A(2)(b)

Subjects

property taxaggregation of letting valueexemption clausepurposive constructionMadhya Pradesh Municipalities Actmunicipal corporationtax assessment

Judgment

ADMINISTRATOR, MUNICIPAL CORPORATION, BILASPUR
.t
A
v.
DATTATRAYA DAHANKAR, ADVOCATE AND ANR. .....
'"
DECEMBER 5, 1991

B [K. JAGANNATHA SHETTY, R.M. SARAI AND
YOGESHW AR DAY AL, JJ.)

Madhya Pradesh Municipalities Act, 1961 :

Section-127A-lmposition of property tax-Aggregation of annual let-
c ting value of all buildings owned by single individual-To be taken as one unit
for purpose of taxation-Exemption provided by sub-section 2 (b) not available
in such cases.

On the construction of section 127A of the Madhya Pradesh Munici·
I
palities Act, 1961, relating to imposition of Property Tax, the High Court ~
D held that each tenement was to be separately assessed and no tax could '
be levied for a building with annual letting value of Rs. 1000. The High t
Court also held that if a person owns more than one building, the
aggregate annual value of all the buildings cannot be taken into considera·
tion for assessment of tax ; And that if the annual letting value of each
~
quarter not exceeding the limit prescribed, it would be exempt- from
E assessment. -'t
Aggrieved against the said order of the High Court, the appellant·
Municipal Corporation preferred the present appeal.

Allowing the appeal, this Court,
F
HELD : 1.1 The High Court's mechanical approach to construction
is altogether out of step with the modern positive approach. The modern
positive approach is to have a purposeful construction that is to effectuate
the object and purpose of the Act. Section 127 A of the Madhya Pradesh
G Municipalities Act, 1961, must therefore, receive a purposeful construe·
tion. There is no provision for taxation in respect of a building having
annual letting value less than rupees eighteen hundred. Clause (b) of sub-
section (2) expressly exempts buildings and lands, the annual Jetting value
of which does not exceed eighteen hundred rupees. The proviso permits
adding up of annual letting value of all such buildings or lands owned by
H a single individual in the Municipality. But the purpose of the proviso is
to deny exemption to buildings or lands owned by the same person.
[115 D-F]
112

f
,..
j
•

MUNICIPALCORPN. v. DAITATRAYADAHANKAR [SHEITY,J.] 113

1.2 It is quite clear that each building is a unit for the purpose of A
taxation and there is no provision for taxation of building and land of
whiGh the annual letting value is up to rupees eighteen hundred. But when
aggregation of annual letting value of all buildings or lands is permitted,
then all such buildings or lands have to be taken as one unit for the
purpose of taxation. Any other construction ·would render the proviso
nugatory and defeat the object of the Act. [115 G-HJ B

2. It is directed that this decision should be given effect to prospec-
tively and there shall not be recovery from or refund to any person With
regard to the period antecede~t thereto. [116-B]

CIVIL APPELLA1E JURISDICTION : Civil Appeal No. 793 of 1982. C
From the Judgment and Order dated 7.4.1981 of the Madhya Pradesh
High Court in Civil Revision No. 535 of 1980.

S.S.Khanduja and Y.P.Dhingra for the Appellant.
D
Ranjit Kumar for the Respondent.

The Judgment of the Court was deliverect by

K.JAGANNATHA SHETTY, J.-The question raised in this appeal ,,. . /
relates to .the construction of Section 127 A of the Madhya Pradesh Municipali- E
ties Act, 1961, ('The Act'). The relevant portion of section 127A reads:

"127 A. Imposition of Property Tax-{l) Notwithstanding any-
thing contained in this Chapter, as and from the financial year
1976-77, there shall be charged, levied and paid for each financial F
year a tax on the lands or buildings or both situate in a Municipality
other than· class IV Municipality at the rate specified in the table
below:

TABLE
(i) Where the annual letting 6 per centum ofthe
value exceeds Rs. 1800 but annual letting value GI
does not exceed Rs. 6000

(ii) Where the annual letting 81/3 per centum
value exceeds Rs. 6000 · of the annual
but does not exceed letting value E
Rs. 12000
114 SUPREME COURT REPORTS [1991] SUPP. 3 S. C.R.

A (iii) Where the annual letting 10 per centum of the
value exceeds Rs. 12000 but annual letting
does not exceed Rs. 18,000 value

(iv) Where the annual letting 15 per centum of the
value exceeds Rs. 1800 but annual letting
B does not exceed Rs. 24,000 value

(v) Where the annual letting 20 per centum of the
value exceeds Rs. 24,000 annual letting value

2. The property tax levied under sub-section (1) shall not be
c leviable in respect of the (ollowing properties, namely :

(a) buildings and lands owned by or vesting in-

(i) the Union Govefnmcnt;

D (ii) the State Govemme.nt;

(iii) the Council;

(b) buildings and lands the annual letting value of which does not
exceed eighteen hundred rupees :
E
Provided that if any such building or land in the ownership of a
person who owns any other building or land in the same Munici-
pality, the annual letting value of such building or land shall for the
purpose of this clause, be deemed to be the aggregate annual
letting value of all b~ildings or lands owned by him in the Munici-
F pality."

Sub-section (1) of section 127 A is the charging section. Sub-section (2)
provides for exemption. Clause (b) thereof provides that buildings and lands
the annual letting value of which does not exceed eighteen hundred rupees arc
G exempt from taxation. The proviso thereunder States that if any such building
or land in the ownership of a person who owns any other building or land in
the same municipality, the annual letting value of such building or land for the
purpose of clause (b) shall be deemed to be the agrregate annual letting :value
of all buildings or lands owned by him in the Municipality.

H The High Court has pointed out that under.the scheme of the Act for the

f
j
MUNICIPALCORPN. v. DAITATRAYADAHANKAR [SHEITY, J.] 115

purpose of imposition of property tax under sub-section ( l) of section 127A, A
~ each tenement has to be seprately assessed and no tax can be levied for a
building with annual letting value up to rupees eighteen hundred. The aggre-
gation of annual letting value of all buildings owned by a single individual
could be applied only for exemption and not for taxation. The unit of tax is a
building (property) and not a person. If a person owns more than one building
within the urban area to which the Act is applicable, the aggregate annual B
letting value of all the buildings cannot be taken into consideration for
assessment of tax. If the quarters are let out to different persons, each quarter
has to be valued as a separate unit. If the annual letting value of each quarter
does not exceed the limit prescribed by .the Act, it will be exempt from
assessment The High Court relied upon the previous decisions construing the
corresponding provisions in the M.P.Sampatti Kar Adhiniyam, 1964. (See: Om C
Parkash Agganval ,Indore v. Deputy Property Tax Commissioner, M.P .Gwalior
and Ors., 1973 M.P.L.J. 918;National Coal Development Corporation v. State
ofMadhya Pradesh, 1975 M.P.L.J. (NOC) 88; andNihalkaran v, State ofM.P.
1977 JL.J. 712).

·It seems to us that the High Court had a mechanical approach to D
construction.The mechanical approach to construction is altogether out of step
with the modem positive approach. The modem positi:ve approach is to have:t .
a puroseful construction that is to effectuate the object and purpose of the Act. · · · \.
Section 127A must, therefore, receive a purposeful construction. Sub-section
(1) contains a table for taxation. There is no provision for taxation in respect
of a building having annual letting value less than rupees eighteen hundred. E
Clause (b) of sub-section (2) expressly exempts buildings and lands, the annual
letting value of which does not exceed eighteen hundred rupees. The proviso
permits adding up of annual letting value of all such buildings or lands owned
by a single individual in theMµnicipality. The proviso no doubt states that the
annual letting value aggregated shall be deemed to be "for the purpose of this F
clause" meaning thereby for the purpose of clause (b), that is for exemption.
But the purpose of the proviso is to deny exemption to buildings or lands
owned by the same person and of which the .total annual letting value exceeds
rnpees eighteen hundred.

It is quite true that each building is a unit for the purpose of taxation and G
there is no provision for taxation of building and land of which the annual
letting value is tip to rupees eighteen hundred. But when aggregation of annual
letting value of all buildings or lands is permitted, then, all such buildings or
lands have to be taken as one unit for the purpose of taxation. Any other
-'I construction would render the proviso nugatory arid defeat the object of the
Act The Legislature could not have intended that all buildings or lands owned H
116 SUPREME COURT REPORTS (1991) SUPP. 3 S. C.R.

A by a single individual should get exemption from taxation even if their total
letting value exceeds ru~ eighteen hundred ..

The decisions of the High Court taking contrary view cannot be said to
have laid down the law correctly. ·

B In the result we allow the appeal and set aside the impugned judgment
of the High Court. We, however, direct that this decision should be given affect
prospectively and there shall not be recovery from or refund to any person with
regard to the period antecedent hereto.

No costs.

GN. Appeal allowed.

..
\