STATE TRADING CORPN. INDIA LTD.versusNEW DELHI MUNICIPAL COUNCIL

                             (2016) 1 S.CR. 492



A                    STATE TRADING CORPN. INDIA LTD.
                                           v.
                      NEW DELHI MUNICIPAL COUNCIL
                        (Civil Appeal No. 2772 of2009)
B                             FEBRUARY 03, 2016
                    [KURIAN JOSEPH AND ROHINTON
                            FALi NARIMAN, JJ.]
           New Delhi Municipal Corporation Act. 1994 - s. 63 -
    Determination of rateable value of lands and buildings assessable
c   to property tax -- Held: The only basis for fixation of rateable value
    is the annual rent at which the land or building might reasonably
    be expected to be let from year to year. subject to the deductions
    provided under the Act -· Jn cases of self-occupied building the
    annual rent would be fixed on the basis of what the landlord might
D   expect to get from hypothetical tenant - Jn cases of sub-let building
    with the permission of the Govemment, the rateable value has to be
    fixed only on the basis of 75% of the rent received from the sub-
    lessee.
          Ne11• Delhi Municipal Committee Bye-laws - Bye-law 12 -
E   Reliance on - For calculation of annual rent for the purpose of
    s.63 of NDMC Act - Permissibility - Held: Since !here is provision
    and procedure u!s. 63 of NDA1C Act for calculating !he ann11al
    rent, Bye-laws have not to be relied 11po11 for tho! pw11ose · New
    Delhi Municipal Corporation Act. 1994 - s.63.
F           Allowing the ;ippeal, the Court
          HELD: 1. The only basis for fixation of rateable value is
    the annual rent :it which the land or building might reasonably be
    expected to be let from year to year, subject to the deductions
    provided under the New Delhi Municipal Corporation Act (NDMC
G   Act). The High Court's decision that since there was already a
    payment of rent by the sub-lessee, there need not be any other
    exercise for assessment of the reasonable rent, was based on
    bye-law 12 of the New Delhi Municipal Committee Byelaws
    framed under the Punjab Municipal Act, 1911. The 1911 Act has
    been repealed and as per Section 416(2) of the NDMC Act what
H
                                     492
    STATE TRADING CORPN. INDIA LTD. v. NEW DELHI                      493
                MUNICIPAL COUNCIL

is saved is only the provisions under the bye-laws which are not      A
otherwise inconsistent with the provisions of the NDMC Act.
Since there is a provision and procedure under Section 63 the
NDMC Act for calculating the annual rent, one need not refer at
all to the bye-laws since they are apparently inconsistent with
the p,rovisions of the NDMC Act. It is impermissible to refer to
                                                                      B
the bye-laws framed under the Punjab Act in view of specific
provisions made under the NDMC Act providing for the levy,
assessment and collection of property tax. (Paras 5, 6 and 7)
[495-F-G; 496-B-D)
     2. Where the building is self-occupied and where there is
no sub-lease, the annual rent will have to be fixed on the basis      c
what the landlord might reasonably expect to get from a
hypothetical tenant. Such fixation has to be made only as per the
NDMC Act. (Para 11] (498-B-C]
      3. So far as the building sub-let with the permission of
Government is concerned, having regard to the agreement with          D
the Government of India for payment of 25% of the gross rent
fetched from the sub-lessee, the 25% that is being paid to the
Government by the lessee out of the rent collected from the sub-
lessee is inflated to include the extra 25% since the rent actually
available to the lessee is only 75% of the amount actually paid by    E
the sub-lessee to the lessee. Therefore,the rateable value under
section 63 of the NDMC Act, in the case of the appellants coming
under the second category has to be fixed on the basis of 75% of
the amount received from the sub-lessee by the appellants. (Para
10) (497-F-H]
                                                                      F
      Dewan Dau/at Rai Kapoor and Others Vs. New Delhi
      Municipal Committee and Ors. (1980) 1 SCC 685; Ind;a
      Automobiles Ltd. Vs. Calcutta Municipal Corporation
      and Anr. (2002) 3 SCC 388:1980 (2) SCR 607 - relied
      on.
                                                                      G
      Raghunandan Saran Ashok Saran (HUF) Vs. Union of
      India & Ors. 95 DLT 508 (2002) (DB) - referred to.


                       CASE LAW REFERENCE
      95 DLT 508(2002) (DB)         referred to.     Para3            H
494                   SUPREME COURT REPORTS                    [2016] I S.C.R.



 A           (1980) i sec 685                relied on.          Para 9, 10
             1980 (2) SCR 607                relied on.          Para 11


            CIVIL APPELLATE JURISDICTION: Civil Appeal No. 2772
      of2009
 B
             From the Judgment and Order dated 15.12.2005 and 14.02.2006
      of the High Court of Delhi at New Delhi in LPA No. 413 of 2003 and
      Review Petition No. RP 73 of2006
                                        WITH
 C           C. A. NO. 787 OF 2016
             C. A. NOS. 2773, 2774, 2775, 2777, 2778, 2779, 2780, 278! OF
      2009
            P. P. Malhotra, V. Giri, R. P. Shanna, Yasir Rauf, Indra Sawhney,
 D    S. Udaya Kumar Sagar, Bina Madhavan, Akanksha Mehra, J. N. S.
      Tyagi, (For Mis. Lawyer S. Knit & Co.) for the Appellant.
            Rakesh Kr. Khanna, Surya Kant, Pranav Vyas, Vandita Nain, for
      the Respondent.
             The Judgment of the Court was delivered by
 E           KURIAN, J. I. Leave granted in SLP (C) No. 18110/2006.
             2. The basis of assessment of property tax under the New Delhi
      Municipal Council Act, 1994 (in short the "NDMC Act") is the subject
      matter o!'these appeals. In Chapter VIII of Taxation, Section 60 of the
      NDMC Act has dealt with the subject. Under Section 60(l)(a), the
 F    Municipal Council is entitled to levy the property tax. Under sub-section
      (3) the property tax shall be levied, assessed and collected in accordance
      with the provisions of the Act and the bye-laws made thereunder. Section
      61 of the NDMC Act speaks about the rates of property tax and it is
      provided that unless otherwise specified under the Act, the property tax
 G    shall not be less than 10% and not more than 30% of the rateable value
      of lands and buildings. Section 63 of the NDMC Act deals with the
      detennination of rateable value of lands and buildings. The provision
      reads as follows:
             "63. Determination of rateable value of lands and buildings
             assessable to property tax.-(Jj The rateable value of any lar.ds or
 H
     STATE TRADING CORPN. INDIA LTD. v. NEW DELHI                            495
        MUNICIPAL COUNCIL [KURIAN JOSEPH, J.]

      building assessable to any property taxes shall be the annual rent     A
      at which such land or building might reasonably be expected to let
      from year to year less a sum equal to ten per cent of the said
      annual rent which shall be in lieu of all allowances for costs of
      repairs and insurance, and other expenses, if any, necessary to
      maintain the land or building in a state to command that rent:
                                                                             B
      Provided that in respect of any land or building the standard rent
      of which has been fixed under the Delhi Rent Control Act, 1958
      (59of1958) the rateable value thereof shall not exceed the annual
      amount of the standard rent so fixed."
       3. T\lough the learned senior counsel appearing for the appellants    c
sought to place reliance on the proviso under section 63( 1) of the NDMC
Act, 'Ne are afraid the contention cannot be appreciated. The concept
of standard rent is no more available under the Delhi Rent Control Act,
I 958, since the said provision has been struck down in the case of
Raghunandan Saran Ashok Saran (HUF) Vs. Union of India & Others
reported in 95 Delhi Law Times 508 (2002)(DB). Additionally, it is also      D
to be noted that the standard rent in the case of the appellants has never
been fixed under the Delhi Rent Control Act, 1958.
       4. In the cases before us there are two categories of buildings
1)self-occupied and 2) out of the leased premises a portion which is self
occupied and the rest let out on sub-lease under due permission ;rom the     E
Government oflndia. In case the premises is sub-let, there is a condition
that the lessee should pay to the Government 25% of the gross rent
fetched out of the sub-lease.
       5. In the impugned judgments, the High Court has taken the view
that since there is already a payment of rent by the sub-lessee, there       F
need not be any other exercise for assessment of the reasonable rent.
The High Court has based its decision under bye-law 12 of the New
Delhi Municipal Committee Byelaws Relating to the Assessment and
Collection of House Tax. For the purpose of reference, we may extract
the provision of bye-law 12:
                                                                             G
      "12. The annual value ofa building or house which is in the owner's
      own occupation either for residential purposes or for commercial
      purposes and the standard rent of which has not so far been fixed
      by a competent authority may be calculated under section 8( I )(b)
      on the basis ofrents of simi Jar accommodation prevale11t in the
                                                                             H
496                    SUPREME COURT REPORTS                     (2016) I S.C.R.


 A          lo~ality and in the event of the Committee being of the opinion
            that the same is not feasible, the annual value may be calculated
            under section 3(l)(c)."
            6. However, it is pointed out that the Punjab Municipal Act, 1911
      has been repealed and as per Section 416(2) of the NDMC Act what is
 B    saved is only the provisions under the bye-laws which are not otherwise
      inconsistent with the provisions of the NDMC Act. Since there is a
      provision and procedure under Section 63 theNDMC Act for calculating
      the annual rent, one need not refer at all to the bye-laws as quoted
      above since they are apparently inconsistent with the provisions of the
      NDMC Act. In short, it is impermissible to refer to the bye-laws framed
 c    under the Punjab Act in view of specific provisions made under the
      NDMC Act providing for the levy, assessment and collection of property
      tax.
             7. Therefore, the only basis for fixation of rateable value is the
      annual rent at which the land or building might reasonably be expected
 D    to be let from year to year, subject to the deductions provided under the
      Act.
          8. The basis of the impugned judgments which was wholly based
   on the bye-laws having been thus knocked down, we have to get back
   to the provisions under the NDMC Act for the purposes of the fixation
 E of the rateable value which is based on the rent which can be reasonably
   fetched by letting out the premises.
             9. Our attention has been invited to a three Judge Bench decision
      of this Court in Dewan Daulat Rai Kapoor and Others Vs. New Delhi
      Municipal Committee and Others reported in ( 1980) I SCC 685 wherein
 F    this Court has dealt with in detail as to what is the scope of the expression
      "reasonably be expected to let from year to year". The whole
      consideration is available in paragraph 2 of the Judgment which reads as
      under:
             "2. It is obvious from this definition that unlike the English Law
 G           where the value of occupation by a tenant is the criterion for
             fixing annual value of the building for rating purposes, here it is
             th~ value of the property to the owner which is taken as the
             standard for making assessment of annual value. The criterion is
             the rent realisable by the landlord and not the value of the holding
             in the hands the tenant. The rent which the landlord might realise
 H
    STATE TRADING CORPN. JNDJA LTD. v. NEW DELHI                             497
       MUNICIPAL COUNCIL [KURIAN JOSEPH, J.)

     if the building were Jet is made the basis for fixing the annual        A
     value of the building. The word "reasonably" in the definition is
     very important. What the landlord might reasonably expect to get
     from a hypothetical tenant, if the building were let from year to
     year, affords the statutory yardstick for determining the annual
     value. Now, what is reasonable is a question offaet and it would
                                                                             B
     depend on the facts and circumstances of a given situation.
     Ordinarily, as pointed out by Subba Rao, J., speaking on behalf of
     the Court in Corporation of Calcutta v. Padma Devi( I): "a bargain
     between a willing lessor and a willing lessee uninfluenced by any
     extraneous circumstances may afford a guiding test of
     reasonableness. An inflated or deflated rate of rent based upon         c
     fraud. emergency, relationship and such other considerations may
     take it out of the bounds of reasonableness". The actual rent
     payable by a tenant to the landlord wou Id in normal circumstances
     afford relia.ble evidence of what the landlord might reasonably
     expect to get from a hypothetical tenant, unless the rent is inflated
                                                                             D
     or depressed by reason of extraneous considerations such as
     relationship, expectation of some other benefit etc. There would
     ordinarily be in a free market close approximation between the
      actual rent received by the landlord and the rent which he might
      reasonably expect to receive from a hypothetical tenant.. .. "
        10. In the second category of cases before us the actual rent E
payable by a tenant to the landlord is available for verification by the
assessing officer. But the question is whether that rent paid by the sob-
lessee is in normal circumstances and whether it is either inflated or
depressed by reason of any other consideration or relationship. Having
regard to the agreement with the Government of India for payment of F
25% of the gross rent fetched from the sub-lessee, we are inclined to
hold that the 25% that is being paid to the Government of India by the
lessee out of the rent collected from the sub-lessee is inflated to include
the extra 25% since the rent actually available to the lessee is only 75%
of the amount actually paid by the sub-lessee to the lessee. Therefore,
going by the principle settled by this Court in the case of Dewan Dau lat G
Rai Kapoor (supra), the rateable value under section 63 of the NDMC
Act, in the case of the appellants coming under the second category has
to be fixed on the basis of 75% of the amount received from the sub-
 lessee by the appellants. On that basis, the rateable value of the premises
both tenanted and self-occupied will be fixed by the assessing officer. . H
498                    SUPREME COURT REPORTS                    [2016 J I S.C.R.


 A    This is however, subject to the production of proof of payment/adjustment/
      appropriation of the 25% by the lessee with the Government of India.
              I I. As for the first category, where the building is self-occupied
      and where there is no sub-lease, the annual rent will have to be fixed as
      held by this Court in the case of Dewan Dau lat Rai Kapoor (supra) and
 B    in the case oflndiaAutomobiles Ltd. Vs. Calcutta Municipal Corporation
      and Another reported in (2002) 3 SCC 388 on the basis what the landlord
      might re!lsonably expect to get from a hypothetical tenant. Such
      fixation has to be made only as per the NDMC Act. It is for the
      assessing officer to make the fixation in accordance with law. The
      assessment for the disputed period shall be completed within three months
 c    from today.
             12. The impugned judgments are hence set aside. The appeals
      are allowed as above with no order as to costs.
      Kalpana K Tripathy                                          Appeal all011 ed.