Holding

The annual value under Section 168 of the Calcutta Municipal Act must be fixed on the basis of the fair rent determinable under Section 8(1)(d) of the West Bengal Premises Tenancy Act, with the contractual rent serving as fair rent for the first eight years and thereafter revised according to the Act’s formula.

Summary

The appellants, East India Commercial Co. Pvt. Ltd., challenged the assessment of their building’s annual value under Section 168 of the Calcutta Municipal Act, 1951, arguing that the fair rent fixed under Section 8(1)(d) of the West Bengal Premises Tenancy Act, 1956 should be the basis, not the actual rent received. The respondent, Calcutta Corporation, contended that the actual rent alone could determine the annual value and that the tenancy‑act provisions were irrelevant. The Supreme Court held that, because the Municipal Act contains no non‑obstante clause and does not prescribe a method of valuation, it must be read together with the Rent Restriction Act, and the annual value cannot exceed the fair or standard rent. Accordingly, the fair rent under Section 8(1)(d) – which for the first eight years equals the contractual rent – is the appropriate measure, after which the rent is to be revised per the Act’s formula. The Court set aside the High Court’s order and directed a fresh assessment in accordance with this principle.

Issues considered

The method of determining annual value under Section 168 of the Calcutta Municipal Act, 1951 for buildings let out but not fixed by the rent controller
Whether the annual value should be based on actual rent received or on fair rent determinable under Section 8(1)(d) of the West Bengal Premises Tenancy Act, 1956
The effect of the absence of a non‑obstante clause in the Municipal Act on the applicability of the Tenancy Act
The relevance of the proviso to Section 8(1)(d) that treats the contractual rent for the first eight years as fair rent

Legislation cited

West Bengal Premises Tenancy Act, 1956s. 2(c), s. 4, s. 8(1)(d)

Subjects

annual valuefair rentproperty tax assessmentmunicipal taxrent controlWest Bengal Premises Tenancy ActSection 168 Calcutta Municipal Actnon‑obstante clausecontractual rent

Judgment

EAST INDIA COMMERCIAL CO. PVT.LTD. ETC. A
v.
CORPORATION OF CALCUTTA

MARCH 30, 1998

[DR. A.S. ANAND, CJ. AND B.N. KIRPAL, JJ.] B

Municipalities-Calcutta Municipal Act, 195 I-Section 168-Property
Tax-Assessment-Determination of Annual Value of the building-Prov1:sions
of Municipal Act have to be read alongwith Rent Restriction Act for
determination of fair rent or standard rent-Ratable value cannot be more C
than fair or standard rent except when Municipal Act itself provides mode
of determination or contains a non-obstante clause-Section I 68 of Calcutta
Municipal Act does not contain any such provision or non-obstante clause--
Held, for fixation of a1111ual value, fair rent determinable under Section
8(/)(d) of West Bengal Premises Tenancy Act, to be taken into consideration. D
West Bengal Premises Tenancy Act, 1956--Section 8(/j(d)-Fair rent-
By virtue of proviso to Section 8(/)(d), such fair rent will be the annual
value of building for a period of eight years ji-0111 date of first letting and
thereafter, the annual value will have to be revised as per formula contained
in Section 8(/)(d), when the provisio will no more be applicable. E
The respondent issued a notice under Section 180 of Calcutta Municipal
Act, 1951 and assessed the annual value of the building constructed by the
appellants at Rs. 63,365. Special Officer disposed off the objection filed by
the appellants reducing the value to Rs. 49,368. In appeal before the Court
of Small Causes, the appellants contended that the annual value of the F
property ought to have been fixed on the basis of fair rent and not on the basis
of actual rent and also moved an application for permission to examine an
expert valuer to prove the cost of construction of the building. The application
was rejected and Revision filed against the order was also dismissed. The
appellants again approached the Court of Small Causes for recalling its G
earlier order. Relying on Dew1111 D1111!11t R11i case, the Court of Small causes
.r. recalled its earlier order. On appeal, the High Court reversed the said order.

In appeal to this Court it was contended on behalf of the appellants that
the fair rent determinable under Section 8(l)(b) of the Tenancy Act would
be the basis of the annual value. H
543

II
544 SUPREME COURT REPORTS [ 1998] 2 S.C.R.

A The respondent submitted that the actual rent received by the appellants
could alone be the basis for determining the annual value and the principle
of fixation of fair rent under Section 8 of the Tenancy Act is wholly irrelevant. ~.

Allowing the appeal, this Court

B HELD: I. The annual value under Section 168 of the Calcutta Municipal
Act has to be fixed on the basis for the fair rent determinable under Section
8 of the Tenancy Act as the Municipal Act does not contain any non-obstante
Clause so as to make Tenancy Act inapplicable nor does the Act provide the
method or basis for determining annual value. 1554-GI

C De11·an Dau/at Rai Kapoor etc. v. Nell' Delhi Municipal Cammi/lee &
another etc., 119801 2 SCR 607, relied on.

Dr. Balbir Singh & Ors. v. MCD & Ors., 119851 2 SCR 439; Morvi
Municipality'" State of Gujarat & Ors., 119931 2 SCC 520; Bhagivant Rai
D & Ors. v. State of Punjab, 119951 5 SCC 440 and NDMC v. M.N. Soi & Anr.,
1197711 SCR 731, cited.

2. For determination of Annual Value, the provisions of Municipal Act
has to be read along with Rent Restriction Act which provides for
determination of fair rent or standard rent. The Reteable Value cannot be
E more than fair rent or standard rent. 1554-EI

3. When Municipal Act provides the mode of determination of the
annual letting value or contains 11011-obstante clause then the annual letting
value will be determined according to the terms of Municipal Act. 1554-FI

Municipal Corporation, Indore & Ors., v. Smt. Raina Prabha & Ors.,
F 119771 I SCR 1017 and Ass/I. Ge11eral Ma11ager, Central Bank of India &
Others v. Commissioner and /\.funicipal Corporation for the City of
Ahmedabad a11d Others, 119951 4 SCC 696, referred to.

The Corporation of Calcutta'" Smt. Padma Devi & Ors., 1196213 SCR
G 49; G1111tur M1111icipal Co1111ci/ v. Guntur Town Rate Players Association,
119711 2 SCR 423; Co1jJOration of Calcutta v. LIC, j19701 2 SCC 44 and
Indian Oil Corporation Ltd. '" Municipal Corporation & Ors., 119951 4 SCC
96, cited.

4. For fixation of annual value fair rent determinable under Section
H 8(1)(b) of West Bengal Tenancy Act, 1956 must be taken into consideration.
EAST !NOIA COMMERCIAL CO. PVT LTD. v. CORPN. OF CALCUTTA [KJRPAL, J] 545
By virtue of proviso to Section 8(l)(d), such fair re~t will be the annual value A
,...,._ of building for a period of eight years from date of first letting and thereafter,
the annual value will have to be revised as per formula contained in Section
8(1)(d), when the proviso will no more be applicable. 1555-C-DJ

4.1. In the present case it is not known as to when the property was
first let out and when does the period eight years come to an end. It is stated B
in the petition that the premises were constructed after 1964 and they were
let. out only in 1966 but the assessing authority has not examined the
question by taking into consideration the effect of the proviso to Section
8(l)(d) of the Tenancy Act. Therefore , it is necessary fo determine as to
when the property was first let out so that for a period of eight years, during C
the subsistence of tenancy, the contractual rent being the fair rent would be
regaried as the basis for fixing the annual value under Section 168 of the
Municipal Act. Thereafter the annual value would be determined in
accordance with Section 8(1)(d) of the Tenancy Act.1555-G-HI

4.2. The impugned judgment of the High Court and the decision of the D
assessing authority is set aside with a direction that the assessing authority
shall make a fresh assessment in accordance with law. 1556-B]

CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 3096-3102
of 1982 Etc.
E
From the Judgment and Order dated 21.4.82 of the Calcutta High Court
in Civil Rule Nos. 2657-63of1980.

D.N. Misra and Pallav Sisodia for Mis. JBD & Co. for the Appellants.

Tapas Ray, L.C. Agrawalla and P.K. Mukherjee for the Respondent. F
The Judgment of the Court was delivered by

KIRPAL, J. Leave granted in SLP(C) No. 7343of1982.

The only question which arises in these appeals relates to the G
detennination of annual value under Section 168 of the Calcutta Municipal
,,>-. Act, 1951 in respect of buildings which are actually let out to tenants on rent
agreed, but not fixed by the Controller under the Rent Restriction Act for the
purpose of assessment of property tax.

The appellant constructed a multi-storey building in Calcutta after the H
546 SUPREME COURT REPORTS (1998] 2 S.C.R.

A year 1956. By notice dated I 0.10.1966 issued under Section 180 of the Calcutta
Municipal Act, 1951 (hereinafter referred to as the 'Municipal Act'), the
respondent assessed the annual value off the said building at Rs. 63365 with
effect from 3rd quarter of 1966-67. The appellant filed objections to the
aforesaid valuation. While disposing of the objections the special Officer
B reduced the value to Rs. 49,368. The appellant filed an appeal against the said
order before the Court of Small Causes, Calcutta. The appeals for subsequent
years for similar orders passed by the special Officer were also filed by the
appellant. The main contention of the appellant in the said appeal was that
the annual valuation of the property ought to be fixed on the basis of fair rent
as contemplated under the Municipal Act read along with the provisions of
C Section 8 (l)(d) of the West Bengal Premises Tenancy Act, 1956 (hereinafter
referred to as the "Tenancy Act" ) and not on the basis of the actual rent
being realised by the appellant.

In order to lead evidence relating to the actual cost of construction of
the building, the appellant moved an application before the Small Causes
D Court for permission to examine an expert valuer as a witness to prove the
cost of construction of the said building. The Chief judge of the Small Causes
Court rejected the said application on the ground that such evidence was
neither necessary not relevant for examining the correctness or otherwise of
the determination of the annual valuation under Section 168(1) of the Municipal
E Act. A revision petition filed against the said order was rejected by the High
Court of Calcutta. After the decision of this Court in the 'ase of Dewan
Dau/at Rai Kapoor etc. etc. v. New Delhi Municipal Committee & another
etc. etc., (1980] 2 SCR 607, wherein it was inter alia held that a building is
governed by the provisions of the Rent Control Legislation and the landlord
cannot reasonably be expected to receive anything more than the standard
F rent, the appellant once again applied to the Small Causes Court for recalling
its earlier order and for permitting the appellant to lead evidence for the
purpose of determination of the actual cost of construction. This application
was allowed as the Chief judge of the Small Causes Court was of the opinion
that in view of the decision of this Court in Dewan Dau/at Roi case (supra),
G the assessing authority has to follow the principle laid down in the Tenancy
Act for determining the fair rent as the building had been constructed after
1956. It accordingly recalled its earlier order dated 7.6.1974 and allowed the
appellant's prayer for examining his expert valuer in order to arrive at the fair
rent of the premises in accordance with the provisions of the Tendency Act.

H The respondent then filed appeals against the aforesaid decision of the
EAST INDIA COMMERCIAL CO. PVT LTD. v. CORPN OF CALCUTTA [KIRPAL, J.] 547

Chief Judge, Small Causes Court. It was contended before the High Court that A
~-
the decision in Dewan Dau/at Rai's case, and other cases where the similar
view had been taken, was distinguishable as the provisions of the West
Bengal Statutes were different. Accepting this contention, the High Court
came to the conclusion that on a correct interpretation of the Municipal Act
and Tenancy Act, the rateable value had to be fixed on the basis of the actual
rent received and not on the basis of cost of construction. The order of the
B
~ Chief Judge Small Causes, Court, who had allowed the examination of a expert
valuer, was accordingly set aside. Hence, these appeals by special leave.

On behalf of the appellant, it has been contended that the provisions
of the Calcutta Municipal Act and the West Bengal Tenancy Act are similar
to the provisions of the corresponding statutes which were the subject of the
c
interpretation by this Court in Dewan Dau/at Rai 's, case (supra) and the other
decisions where the similar view had been adopted and, therefore, it is not
the actual rent but the fair rent determinable under the Tenancy Act which
is relevant for the purpose of assessment to municipal taxes.
D
Shri Tapas Ray, learned senior counsel, on the other hand submitted
that it is the actual rent which was received by the appellant which alone
could be the basis of determining the assessable value and the principle of
fixation of fair rent under Section 8 of the Tenancy Act was wholly irrelevant.

In order to deal with the rival contentions, it is necessary to first refer E
to the relevant provisions of the statutes, Section 168 of the Municipal Act
provides for the method by. which the amount of consolidated rate for the
purpose of assessment of the rent and building has to be fixed. Sub-sections
(!)to (3) of Section 168, which are relevant, read as under:
-4
"(I) For the purpose of assessment to the consolidated rate the F
annual value of any land or building shall be deemed to be the gross
annual rent at which the land or building might at the time of assessment
be reasonably expected to let from year to year, less, in the case of
a building, an allowance of ten per cent, for the cost of repairs and
for all other expenses necessary to maintain the building in a state to G
.. /--
command such gross rent;

Provided that in respect of any land or building the rent of which has
been fixed under the provisions of the West Bengal Premises Rent
Control (Temporary Provisions) Act, 1950 or the West Bengal Premises
Tenancy Act, 1956, the annual value thereof shall not exceed the H
548 SUPREME COURT REPORTS (1998] 2 S.C.R.
A annual amount of the rent so fixed.

(2) If the gross annual rent of any land not ordinarily let cannot be
easily estimated, the gross annual rent of the land for the purpose of
sub-section (I) shall be deerr.~d to be five per cent of the estimated
present value of the land.
B
(3) If the gross annual rent of a building not ordinarily let cannot be
easily estimated, the gross annual rent of the building for the purpose
of sub-section (I) shall be deemed to be five per cent of the value of
the building obtained by adding the estimated cost of erecting the
building at the time of assessment less a reasonable amount to be
c deducted on account of depreciation, if any, to the estimated present
market value of the land valued with the building as part of the same
premises."

At the time when the Municipal Act was enacted it is the West Bengal
Premises Rent Control (Temporary Provisions) Act, 1950 which was applicable.
D Section 3 of the said Act Prohibited the realisation of any rent in excess of
the fair rent and the same was as under :

"3. (I) Subject to the provisions of this Act, any amount in excess of
the standard rent of any premises shall be irrecoverable
notwithstanding any agreement to the contrary.
E
(2) For the purposes of sub-section (1), the rent shall be deemed to
have accrued from day to day.

Provided that nothing in this section or Act shall be deemed to affect
the terms as to rent of a lease entered into before the first day of
F December, 1941, the period of which has not expired."

A charge was brought about, in this regard, by the Tenancy Act, 1956.
Section 4 of the Tenancy Act relating to realisation of excess over the fair rent
is as under:

G "4. Excess over fair rent to be irrecoverable.

(I) A tenant shall subject to the provisions of this Act pay to
the landlord:

(a) in cases where fair rent has been fixed for any premises,
such rent
H
EAST INDIA COMMERCIAL CO PVT LTD. v. CORPN. OF CALCUTTA [KIRPAL, J.] 549

(b) in other cases the rent agreed upon until fair rent is fixed. A
(2) Rent shall be paid within the time fixed by contract or in the
absence of such contract by the fifteenth day of the month next
following the month for which it is payable.

Provided that a tenant may pay the rent payable for any B
month at any time during such month before it falls due.

(3) Any sum in excess of the rent referred to in sub-section (1) shall
not be recoverable by the landlord.'··

Section 2 (c) of the Tenancy Act defines fair rent as, inter alia, meaning that C
rent which is referred to in Section 8 of the Tenancy Act, 1956 and contains
the provisions for fixation of fair rent. It is not in dispute that in the present
case it is clause ( d) of Sub-section ( l) of Section 8 of the Tenancy Act which
is relevant and which reads as under:
"S(l)(d) "Fair Rent" in relation to any premises means.
D
Where such premises have been constructed and let out after the
commencement of this Act, the rent calculated on the basis of annual
payment of an amount equal to 6% per cent, per annum of the aggregate
amount of the actual cost of construction and the market price of the
land on the date of commencement of construction, together with one- E
half of the total amount of the municipal rates and taxes payable
annually in respect of the premises:

Provided that the rent agreed upon between the landlord and the
tenant when such premises are first let out shall, for a period of eight
years from the date of commencement of this Act, be deemed to be F
the fair rent."

Comparing Section 3 of the West Bengal Premises Rent Control
(Temporary Provisions) Act, 1950 with Section 4 of the Tenancy Act, it is
evident, that, notwithstanding any agreement between the landlord and tenant,
under the 1950 Act any rent received in excess of the standard rent was G
irrecoverable Section 4 of the Tenancy Act of 1956, however, does not make
the recovery of the contractual rent irrecoverable so long as fair rent has not
been fixed. Where fair rent is fixed then the landlord can only realise that
amount of rent and any sum in excess of the fair rent is irrecoverable. As
already noticed, in the present case, fair rent had not been fixed under the
Tenancy Act and, therefore, by virtue of Section 4(1) (b) of the Tenanoy Act, H
550 SUPREME COURT REPORTS [1998] 2 S.C.R.

A the contractual rent was not irrecoverable by the landlord.
Our attention has been drawn by the learned counsel for the parties to ~.

many decisions of this Court where the question relating to the determination
of the assessable value under the Municipa! Act in relation to levy of property
tax has been considered. The first such decision, to which reference may be
B made, is that of The Corporation of Calcutta v. Smt. Padma Debi & Others,
[1962] 3 S.C.R. 49. This case arose from Calcutta where the provisions under
Section 127(a) of the Calcutta Municipal Act, 1923 were similar to Section 168
(!)of the Municipal Act, 1951. Having regard to Section 3 of the Tenancy Act
of 1950 whereby amount in excess of the standard rent was irrecoverable,
notwithstanding any agreement to the contrary, this Court came to the
c conclusion that the rental value could not be fixed higher than the standard
rent under the Rent Control Act. It interpreted Section l 27(a)) to mean that
it did not contemplate the actual rent received by a landlord 'to be the annual
value of any building but it contemplated hypothetical rent which he could
reasonably be expected to receive if the building was let out. This hypothetical
D rent could not exceed the standard rent under the Rent Control Act.
·~-
It was submitted by Shri Tapas Ray that Padma Debi's case (supra) is
clearly distinguishable because, unlike Section 3 of the Tenancy Act of 1950,
the appellant was at liberty to receive the contractual rent because of Section
4( I )(b) of the Tenancy Act of 1956 as fair rent had not been fixed and,
E therefore, there was no prohibition to the receipt of the contractual rent. The
contractual rent, it was contended should be regarded as the basis for
determining assessable value. It is no doubt true that there is this difference
in the two Acts but, as we shall presently see, decisions subsequent to
Padma Debi's case (supra), have clearly laid down that this distinction is
irrelevant.
F ~-
In Guntur Municipal Council v. Guntur Town Rate Players' Association,
[1971) 2 SCR 423, this Court had to consider a similar question relating to the
fixation of the annual value. Section 82(2) of the Municipal Act, which was
applicable there, inter alia, stated that the annual value of the lands and
G buildings shall be deemed to be the gross annual rent at which they may
reasonably be expected to be let from month to month or from year to year..
Just like sub-sections (2) and (3) of Section 168 of the Calcutta Municipal Act,
the proviso to sub-section (2) of Section 82 of the T.N. District Municipalities
Act, 1920, which was applicable in the case of Guntur Municipal Council, also
provided for annual value being determined to be a fixed percentage of. the
H total estimated value of the land and cost of building where such building or
EAST INDIA COMMERCIAL CO PVT. LTD. v. CORPN. OF CALCUTTA [KIRPAL, J.J 55)

class is not ordinarily let or in case of buildings where essential amenities are A
not provided by the Municipality. Section 7 of the A.P. Buildings (Lease, Rent
.-<. and Eviction) Control Act, 1960 provided that landlord wuld not claim or
receive anything in excess of the fair rent when fixed by the Controller. In
other words, just like Section 4 of the Tenancy Act of 1950, the landlord could
receive the contractual rent till the Controller fixed the fair rent under the Act.
Even though this provision contained in Section 7 of the A.P. Buildings
B
(Lease, Rent & Eviction) Control Act, 1960 was different from Section~ of the
Tenancy Act of 1950, this Court in Guntur Municipal Council case (supra)
followed and applied the ratio of the decision of this Court in Padma Debi's
case (supra).
c
The principle, namely, that the annual value for the purpose of the
Municipal Act could not be in excess of the standard rent even if the landlord
was entitled to receive the contractual rent in respect of a building to which
the Rent restriction Law applies has been elaborately discussed in Dewan
Dau/at Rai's, case (supra). It was sought to be contended on behalf of the D
.New Delhi Municipal Committee that till the fixation of the standard rent, the
~ 'T landlord could legally receive the contractual rent, more so when the tenant's
right to get the standard rent had come to an end with a limitation for moving
sucn an application having expired, therefore, the annual value should be the
actual rent which was legally received by the landlord. Rejecting this contention,
this Court applied and followed the decision in Padma Debi's, case (supra) E
and also the decision in Corporation of Calcutta v. Life Insurance
Corporation, [1970) 2 SCC 44 where Padma Debi Case and Guntur Municipal
Council, case (supra) had been followed. Dealing specifically with the question
that the contractual rent could be claimed by the landlord lawfully and,
therefore, that should be the basis of the annual valuation, this Court in F
Dewan Dau/at Rai 's, case (supra) at page 625 observed as under:

"Now it is true that in the present cases the period of limitation for
making an application for fixation of the standard rent had expired
long prior to the commencement of the assessment years and in such
of the cases, the tenant was precluded by Section 12 from making an G
application for fixation of the standard rent with the result that the
landlord was lawfully entitled to continue to receive the contractual
rent from the tenant without any let or hindrance. But from this fact-
situation which prevailed in each of the cases, it does not follow that
the landlord could, therefore, reasonably expect to receive the same H
552 SUPREME COURT REPORTS [1998] 2 S.C.R.

A amount of rent from a hypothetical tenant. The existing tenant may be
barred from making an application for fixation of the standard rent and
may, therefore, be liable to pay the contractual rent to the landlord,
but hypothetical tenant to whom the building is hypothetically to be
let would not suffer from this disability created by the bar of limitation
and he would be entitled to make an application for fixation of the
B
standard rent at any time within two years of the hypothetical letting
and the limit of the standard rent determinable under the Act, would
therefore, inevitably enter into the bargain and circumscribe the rate
of rent at which the building could reasonably be expected to be let.
This position becomes absolutely clear if we take a situation where
c the tenant goes out and the building comes to be self-occupied by
the owner. It is obvious that in case of a self-occupied building, the
annual value would be limited by the measure of standard rent
determinable under the Act, for it can reasonably be presumed that
no hypothetical tenant would ordinarily agree to pay more rent than
D what he could be made liable to pay under the Act. The anomalous
situation which could thus arise on the contention of the Revenue ~-
would be that whilst the tenant is occupying the building the measure
of the annual value would be the contractual rent, but if the tenant
vacates and the building is self-occupied, the annual value would be
restricted to the standard rent determinable under he Act. It is difficult
E
to see how the annual value of the building could vary accordingly
as it is tenanted or self-occupied. The circumstances that in each of
the present cases the tenant was debarred by he period of limitation
from making an application for fixation of the standard rent and the
landlord was consequently entitled to continue to receive the
F contractual rent, cannot therefore affect the applicability of the
decisions in the Life Insurance Corporation's case and the Guntur
Municipal Council's case and it must be held that the annual value
of the building in each of these cases was limited by the measure of
the standard rent determinable under the Act."
G We do not think that it is necessary to consider, in detail, any other decision
except to observe that the principle elaborated and laid down in Dewan
Dau/at Rai 's case (supra) has been followed by this Court in Dr Balbir Singh
& Ors. Etc., v. Municipal Corporation of Delhi & Ors., [1985] 2 SCR 439;
etc. Morvi Municipality v. State ofGujarat & Ors., [1993] 2 SCC 520; Bhagwant
H Rai & Ors. v. State of Punjab & Ors., [1995] 5 SCC 440 and New Delhi

-
EAST INDIA COMMERCIAL CO. PVT. LTD. 1·. CORPN. OF CALCUTTA [KIRPAL, J.] 553

Municipal Committee v. MN Soi & Another, [1977] I SCR 73i. A
One decision in which a different view was expressed is the case of
Municipal Corporation, Indore & Ors. v. Smt. Ratna Prabha & Ors., [1977]
1 SCR IO 17. There also the question arose whether for fixing the gross annual
rental value for the purpose of assessment to property-tax, the Corporation
must adopt as the annual value the standard rent which could be fixed under B
the Accommodation Control Act when the premises were let out. While
answering this question in the negative, this Court distinguished the earlier
decisions in the cases of Padma Debi, Life Insurance Corporation, Guntur
Municipal Council and M N. Soi (supra) because the peculiar language of
Section 138(b) of the M.P. Municipal Corporation Act, 1956 which was C
differently worded as it contained a non obstante clause. The said clause read
as under:

"(b) the annual value af any building shall notwithstanding anything
contained in any other law for the time being in force be deemed to
be gross annual rent at which such building, together with its D
appurtenances and any furniture that may be let for use or enjoyment
therewith might reasonably at the time of assessment be expected to
be let from year to year, less an allowance of ten per cent for the cost
of repairs and for all other expenses necessary to maintain the building
in a state to command such gross annual rent." E
[emphasis added]

It is for this reason, namely, the existence of non-obstante clause in Section
138(b) of the said Act, that Raina Prabha's case (supra) was distinguished
and was held to be non-applicable in Dewan Dau/at Rai 's case (supra)
because the Delhi Act did not contain any non-obstante clause like one with
F
which this Court was concerned in Ratna Prabha's case (supra). This
distinction has again been emphasized by this Court in Indian Oil Corporation
Ltd. v. Municipal Corporation and another, [ 1995] 4 SCC 96 which was a
case relating to Section 138(b) of the M.P. Municipal Corporation Act, 1956
where Ratna Prabha 's case (supra) was followed and the other decisions in G
the cases of Dewan Dau/at Rai, Balbir Singh etc. (supra) were distinguished

... )'-
because of the existence of the non-obstante clause in Section 138(b) of the
said Act. In Section 168 of the Municipal Act, with which we are concerned
in the present case, the non-obstante clause is not there. The Municipal Act
is different from the M.P. Municipal Act, 1956. Section 168 of the Municipal H
554 SUPREME COURT REPORTS [1998] 2 S.C.R.

A Act is similar to the corresponding provisions in Delhi and in Andhra Pradesh
and, therefore, it is the ratio of the decisions in the· pses of Prabha Devi,
Dewan Dazdat Rai and Guntur Municipal Council which should apply.

There is one more decision to which reference need be made, i.e., the
case of ~sstt. General Manager, Central Bank of Ind;a & Others v.
B Commissioner, Municipal Corporation for the City of Ahmedabad and Others,
[ 1995] 4 SCC 696. Here again the question arose with regard to the determination
of the annual letting value of the property. It was contended that the principles
of Dewan Dau/at Rai case (supra) should be followed but this contention
was repelled in view of the fact that the Municipal Corporation Act applicable
C in Ahmedabad, after its amendment, itself defined what the annual Jetting
value was to be. This provision also contained a non-obstante clause, similar
to one, which was in M.P. Municipal Corporation Act and as a reason thereof,
the rateable value was determined according to the principles contained in the
Municipal Corporation Act and not as per the fair rent or the standard rent
D determinable under the Rent Restriction Act.

From the aforesaid decisions .the principle which is deducible is that
when the. Municipal Act requires the determination of the annual value, that
Act has to be read along with Rent Restriction Act which provides for the
determination of fair rent or standard rent. Reading the two acts together the
E reteable value cannot be more than the fair or standard rent which can be fixed
under the Rent Control Act. The exception to this rule is that whenever any
Municipal Act itself provides the mode of determination ofth.e annual letting
value like the Central Bank of India's case (supra) relating to Ahmedabad or
contains a non-obstante clause as in Ratna Prabha 's case (supra) then the
F determination of the annual letting value has to be according to the terms of
the Municipal Act. In the Present case, Section 168 of the Municipal Act does
not contain any non-obstante clause so as to· make the Tenancy Act
inapplicable and nor does the Act itself provide the method or basis for
determining the annual value. This Act has, therefore, to be read along with
G Tenancy Act of 1956 and it is the fair rent determinable under Section 8( I)
(d) which alone can be the annual value for the purpose of property tax.

For the aforesaid reasons, we are of the view that the decision of
Calcutta High Court, under appeal, cannot be sustained. The annual value •
under Section 168 of the Municipal Act has to be fixed on the basis of fair
H rent determinable under Section 8 of the Tenancy Act.
EAST INDIA COMMERCIAL CO PVT.LTD. v. CORPN. OF CALCUTTA [KI RP AL, 1.] 555

We, however, find that the proviso to Section 8(1) (d) of the Tenancy A
Act has not been considered so far in dealing with the question with regard
to the fixation of the annual value. The decisions of this Court referred to
hereinabove clearly bring out that the annual value cannot be more than the
'fair rent' or 'standard rent' (whatever may be the nomenclature in the relevant
Jaw of the State) which is determinable under the Rent Restriction Act. The B
proviso to Section 8(1) (d) of the Tenancy Act regards the Contractual rent,
for a period of 8 years, when the premises was first let out, to be the 'fair rent'
When, therefore, the actual value or the annual value for the purpose of
determining the municipal tax has to be the 'fair rent' determinable under the
Tenancy Act then, because of the proviso, it is the agreed rent for a period C
of eight years which is the 'fair rent' and has to be taken into consideration
in determining the property tax. Because of the proviso the annual value of
the building for the period of eight years form the first letting has to be fixed
on the basis of contractual rent and thereafter the annual value will have to
be revised and fixed as per the formula contained in Section 8(1) (d) of the
Tenancy Act namely 6% per cent, per annum on the aggregate amount of the D
actual cost of construction and the market price of the land on the date of
commencement of construction as provided in that provision. To put it
differently it is only the 'fair rent' which can be taken into consideration for
the purpose of fixing the annual value under the Municipal Act. Because of
the fiction created by the proviso to Section 8(1) ( d) of the Tenancy Act, the E
contractual rent is regarded as the 'fair rent' for a period of eight years from
the date the premis.es was first let out. It is for that reason that this figure
of 'fair rent' will be the annual value which will have to be revised after eight
years when the proviso will no. longer be applicable and the 'fair rent' will
have to be determined on the basis of the formula contained in the said F
provision.

In the present case, it is not known as to when the property was first
let out and when does the period of eight years come to an end. It is in the
petition that the premises were constructed after 1964 and they were let out
only in 1966 but the assessing authority has not examined the question by G
taking into consideration the effect of the !Jroviso to Section 8(1) ( d) of the
Tenancy Act. It would, therefore, be necessary to determine as to when the
property was first let out so that for a period of eight years, during the
subsistence of tenancy, the contractual rent being the fair rent will be regarded
as the basis for fixing the annual value under Section 168 of the Municipal H
556 SUPREME COURT REPORTS [1998] 2 S.C.R.

A Act. Thereafter the annual value has to be determined in accordance with
Section S(l)(d) of the Tenancy Act.

Accordingly for the aforesaid reasons, the appeals are allowed. The
impugned judgment of the High Court and the decision of the assessing
B authority is set aside with a direction that the assessing authority shall make
a fresh assessment in accordance with law. Parties to bear their own cost.

N.J. Appeals allowed.