Holding

An alteration in the assessment list under Section 123(1) is effective only from the commencement of the official year in which it is made, and the municipality cannot levy tax for an official year that has already expired.

Summary

The Kalyan Municipal Council levied property tax on Usha Paper Products Ltd for the years 1970-71 to 1972-73. After detecting new construction, the Council increased the rateable value of the property by a resolution on 3 October 1973 and served a notice under Section 123(1) of the Maharashtra Municipalities Act, issuing a demand notice on 9 January 1975. The company challenged the demand, and the Bombay High Court held that an alteration to the assessment list is not effective for any period before the official year in which the alteration is made, thus the municipality could not levy tax for an already expired year. On appeal, the Supreme Court affirmed this view, relying on the Full Bench decision in Sholapur Municipal Corporation v. Ramchandra Ramappa Madgundi and the Supreme Court’s own decision in Municipal Corporation of City of Hubli v. Subha Rao Hanumatharao Prayag, holding that the assessment list must be authenticated within the current official year and cannot be applied retroactively. Consequently, the appeal by the municipality was dismissed.

Issues considered

Whether an alteration in the assessment list made under Section 123(1) of the Maharashtra Municipalities Act becomes effective for periods prior to the commencement of the official year in which the alteration is made.
Whether the municipality is entitled to levy property tax for an official year that has already expired.

Legislation cited

Bombay Municipal Boroughs Act, 1925s. 73, s. 82(3)
Maharashtra Municipalities Acts. 123(1), s. 123(3)

Subjects

property taxassessment listofficial yearMaharashtra Municipalities Actretroactive taxmunicipal levyrateable valuetaxation unit

Judgment

KALYAN MUNICIPAL COUNCIL & ORS.
A
v.
USHA PAPER PRODUCTS (P) LTD .. & ANR.

MAY 3, 1988

B IR.S. PATHAK, CJ AND M.H. KANIA, J.]

Maharashtra Municipalities Act-S. 123(1) of-Whether altera-
tion in assessment list becomes effective for any period prior to comm-
encement of official year in which alteration in assessment list is made
and Municipality is entitled to levy tax for any official year or any part
,c thereof already expired under provisions of

After levy of the property tax by the Kalyan Municipal Council
('the Mnnicipal Council') on the immovable properties of the Respon-
dent No. 1 ('the company') in respect of certain years, the Municipal
Council detected certain new construction and alterations in the exist-
D ing properties of the Company, and on October 3, 1973 a resolution was
passed by the Standing Committee increasing the rateable value of the
said immovable property from 1.4.70 to 31.3.74. A demand notice,
demanding additional property tax, Educational cess and Health Tax,
was issued thereafter to the Company. The Company challenged the
notice of demand before the High Court. The High Court decided in
E favour of the Company, holding that alteration made in the assessment
list after following the procedure under section 123(1) of the
Maharashtra Municipalities Act (the 'said Act') did not become effec-
tive for any period prior to the commencement of the official year in
which the alteration in the assessment list was made and the Municipal-
ity was not entitled to levy tax for an official year or any part thereof
F which was already expired. This appeal was filed in this Court agi.inst
that decision of the High Court.

Dismissing the appeal, the Court,

HELD: The ratio of the decision of the Full Bench of the Bombay
G High Court in Sholapur Municipal Corporation v. Ram Chandra
Ramappa Madgundi, 11972] 74 Bombay Law Reporter 469, upon which
the judgment of the High Court impugned in this case was based,
applied to this case. The appellants contended that the said case before
the Full Bench had been wrongly decided and the judgment under
appeal based on that decision was also erroneous. this contention must
H be negatived in view of the decision of this Court in Municipal Corpora-

832
KALYAN MUNICIPAL COUNCIL v. USHA PRODUCTS [KANIA, J. I 833

tion of City of Hubli v. Subba Rao Hanumatharao Prayag & Ors., A
(1976] 3 S.C.R. p. 883, which approved the said decision of the Full
Bench of the High Court, and which is binding on the Court and clearly
applicable to this case. In that judgment, this Court had pointed out that
once it was accepted that the process of levying the tax was complete
only when the assessment list was authenticated and it was only then
that the tax was levied on the rate-payers, the authentication must be B
made within the official year. The tax, being a tax for the official year,
must be levied during the official year and since the levy of the tax. is
complete only when the assessment list is authenticated, it must follow
that the authentication must take place in the official year. The official
year is the unit of taxation as far as Municipal property taxes are
concerned. (8360, G, 837A-BJ c
If an assessment list could be altered at any time if the conditions
set' out in Section 123 of the said Act are satisfied, the result would be
that there would be complete uncertainty in the field of taxation of
property and unwary purchasers of immovable property might be put
to the difficulty of having to discharge the liabilities for property taxes D
for years long prior to the time when they had purchased the immovable
property in order to save the property from being sold in recovery
proceedings. (837B-C]

>. Sholapur Municipal Corporation v. Ramchandra Ramappa
Madgundi, [1972] 74 Bombay Law Reporter 469 and Municipal Cor- E
poration of City of Hubli v. Subha Rao Hanumatharao Prayag & Ors.,
[1976] 3 S.C.R. 883, referred to .
•
'
CIVIL· APPELLATE JURISDICTION: Civil Appeal No. 317
of 1984.
F
From the Judgment and Order dated 10.1.80 of the Bombay
High Court in Special Civil Application No. 1471/75.

P.H. Parekh for the appellants.

U.R. Lalit, B.P. Maheshwari and R.S. Rana for the respondents. G

The Judgment of the Court was delivered by

KANIA, J. This is an appeal against the judgment of a Division
Bench of the Bombay High Court delivered on January 10, 1980. The
appellants before us are the Kalyan Municipal Counci) (referred to H
834 SUPREME COURT REPORTS [1988) 3 S.C.R.

A hereinafter as 'the Municipal Council'), its Chief Officer and the State
of Maharashtra respectively. Respondent No. 1 is a Private Limited
Company and is the owner of an industrial undertaking within the
limits of the Municipal Council. We propose to refer to respondent
No. 1 as 'the Company'.

B The relevant facts lie within a narrow compass and there is no ~··
dispute regarding the same. Property Tax was levied by the Municipal
Council on the immovable properties of the Company within the ter-
ritorial limits of the Municipal Council in respect of the years 1970-71,
1971-72 and 1972-73. In September, 1973, the Municipal Council
claimed that it had detected certain new construction and alterations in
c the existing construction belonging to the Company and a report to
that effect was made to the Standing Committee. A proposal was
submitted to the Standing Committee to increase the property tax in
J
respect of the said immovable property from 1.4.70 to 31.3.74. On
October 3, 1973, the Standing Committee passed a resolution increas-
ing the rateable value of the said .immovable property of the Company
D from 1.4.70 to 31.3.74. After serving a notice on the Company as
required under the provisions of Section 123(1) of the Maharashtra
Municipalities Act (referred to hereinafter as the 'said Act'), and hear-
ing the objections filed by the Company against the proposed increase,
a demand notice was issued on the Company on January 9, 1975
demanding an amount of Rs.51,626.69 and an appropriate amount of ~
E Educational Cess and additional Health Tax. This notice of demand
was challenged by the Company by way of Special Civil Application
No. 147 of 1975 before the High Court of Judicature at Bombay. The
Division Bench of the Bombay High Court which decided the said
Special Civil Application held that the case was covered by the deci-

F
sion of a Full Bench of the Bombay High Court in Sholapur Municipal
Corporation v. Ramchandra Ramappa Madgundi, [1972) 74 Bombay
;r-
Law Reporter, p. 469. The Division Bench of the Bombay High Court
in the impugned judgment has pointed out that there was no dispute
that a notice dated November 17, 1973, being the notice as contemp-
lated by Section 123(1) of the said Act was issued to the Company for
amending the assessment list. This notice was served after 17th
G November, 1973. After analysing the provisions of Section 123 of the
said Act and following the aforesaid decision of the Full Bench, the
).
Division Bench took the view that alteration made in the assessment
list after following the procedure under Section 123(1) of the said Act
does not become effective for any period prior to the commencement
of the official year in which the alteration in the assessment list is made
H and the MUhicipality is not entitled to levy tax for an official year or
KALYAN MUNICIPAL COUNCIL v. USHA PRODUCTS [KANIA, J.] 835
_f
any part thereof which is already expired. The Division Bench pointed A
out in the present case the alteration in the assessment list was made
after 31st March, 1974 and before 31st March, 1975. In view of this the
said alteration could not have the effect of increasing the assessment
for any year prior to the year commencing from 1st April, 1974. It is
the correctness of this decision, which is sought to be assailed before us
~-')! iil this appeal. B

Since the decision· under appeal is based mainly on the said deci-

-
r sion of a Full Bench in the case of Sholapur .Municipal Corporation
v. Ramchandra Ramappa Madgundi (supra), we may briefly refer to

J\ the said decision. That decision was based on the provisions of the
Bombay Municipal Boroughs Act, 1925, but the ratio of the decision
applies to the case before us, because the relevant provisions of the
Bomaby Municipal Borough Act and the said Act are in pari materia.
As far as the question raised before us is concerned, the provisions of
c

Section 82, Sub-section (3) of the Bombay Municipal Boroughs Act
are in pari materia with the provisions of Section 123(3) of the said
Act. The Full Bench of the Bombay High Court in that case came to D
conclusion that. the alteration made, under Section 82(3) of the
Bombay Municipal Boroughs Acf, in the assessment list prepared
under Section 73 of that Act does· not become effective for any period
prior to the commencement of the official year in which the alteration
>· in the assessment list is made and, therefore, the Municipality is not
entitled to levy tax for an official year or any part thereof which has E
already expired. It was also held that the expression "current official

- year" in Section 82(3) of that Act ineans the earliest day in the official
year which is current when the amendment of the assessment list takes
place, that is to say, the expression refers to that official year which is
running at the time when the amendment is made by insertion or
"'-( .. alteration of an entry under Section 82( 1) of the Act. F

The submission of Mr. Parekh, learned counsel for the appel-
!ants, is that the aforesaid case before the Full Bench was wrongly
decided and, as the judgment under appeal follows the said decision of
the Full Bench, that judgment is also erroneous and liable to be set
aside. In our view, this contention must be negatived in view of the G
decision of this Court rendered by a Bench of three learned Judges in
i Municipal Corporation of City of Hubli v. Subha Rao Hanumatharao
Prayag & Ors.,·[1976] 3 S.C.R. p. 883. A perusal of the said 1ecision
makes it clear that this Court took the view that the scheme of relevant
provisions of the Bombay Municipal Boroughs Act, 1925 shows that
the official year is the unit of time for. the levy of property tax under H
836 SUPREME COURT REPORTS [1988] 3 S.C.R.

A that Act. It wa•; further held thatthe expression "current official year"
in the context in which it occurs in Section 82, Sub'section (3) clearly
signifies the earliest day in the official year which is current when the
amendment in the assessment list takes place and that expression ref-
ers only to the official year which is running at the time when the
amendment is made by insertion or alteration of an entry under sub-
B section (1) of Section 82. Thereafter this Court goes on to point out as y~
follows:

"It would, therefore, seem clear, on a combined reading of
Sub-sections (1) and (3) of Sectiion 82, that an amendment,
in order to be effective in levying tax for an official year,
must be made during the currency of the official year. This
c is now well settled as a result of several decisions of
Bombay High Court culminating in the Full Bench decision
in Sholapur Municipal Corporation v. Ramchandra (supra)
and we do not see any reason to take a different view."

D The aforesaid statement in the judgment of this Court clearly
shows that the decision of the Full Bench of the Bombay High Court in
Sholapur Municipal Corporation v. Ramchandra (supra) was approved
by this Court. The decision of the aforesaid Bench of this Court is
binding on us and is clearly applicable to the case before us. In that
judgment this Court pointed out that once it was accepted that the
E process of levying the tax is.complete only when the assessment list is
authenticated and it is only then that the tax is levied on the rate-
payers, it is difficult to resist the conclusion that the authentication
must be made within the official year. The tax, being a tax for the
•
official year, must obviously be levied during the official year and since
the levy of the tax is complete only when the assessment list is
F authenticated it must follow that the authentication must take place in
the official year.

Mr. Parekh urged, although not with much conviction, that the
decision of this Court in the case of Municipal Corporation of City of
Hubli v. Subha Rao Hanumatharao Prayag & Ors. (supra) can be
G distinguished because in that case there was no question of any addi-
tional.construction or new construction being detected. In our view it
is not possible to make any such distinction. The question which arose
before the Court was whether an assessment list which was finalised
and authenticated on July 24, 1952, after the expiry of the official year
1951-52 on 31.3.1952, could be regarded as a good or valid assessment
H list for the official year 1951-52. The entire scheme of the provisions
KALYANMUNJCIPALCOUNC!Lv. USHA PRODUCTS [KANIA,J.] 837

pertaining to the preparation of the assessment list and the levy of A
property tax under the Bombay Municipal Boroughs Act, which is
materialy similar to the scheme under the said Act, was considered and
the aforesaid conclusion were arrived at. There is no substance in the
contention that the said decision can be distinguished. Moreover,
with respect, we see no reason to take a different view from the one
~- taken in the aforesaid case. The official year is the unit of taxation as B'
' far as Municipal Property taxes are concerned and, if the contention of
Mr. Parekh is accepted, the result would be that an assessment list
could be altered at any time if the conditions set out in Section 123 of
the said Act are satisfied, with the result that there would be complete
uncertainty in the field of taxation of property and the unwarry
purchasers of immovable property might be put to the difficulty of c
having of discharge the liabilities for property taxes for years long
prior to. the time when they purchased the immovable property in
order to save the property from being sold in recovery proceedings.

In the result, the appeal fails and is dismissed with costs.
D
S.L. Appeal dismissed.

-~·