Holding

The Commissioner’s power to assess property tax is independent of the advisory committee’s recommendations and the fair rent under the Rent Control Act is not binding, making the Rules merely enabling provisions.

Summary

The Supreme Court examined several writ petitions challenging the assessment of property tax in Hyderabad and other municipal corporations. The core dispute was whether the Municipal Commissioner’s power to determine the rateable value and annual rental value of properties was limited by the recommendations of a District Level Advisory Committee and by the fair rent fixed under the Andhra Pradesh Buildings (Lease, Rent and Eviction) Control Act. The Court held that the Commissioner’s authority, as conferred by the Hyderabad Municipal Corporation Act, 1955, is not fettered by the advisory committee’s recommendations and that the fair rent under the Rent Control Act is not binding, though it may be considered persuasively. The Rules governing the assessment process are merely enabling provisions and do not curtail the Commissioner’s discretion. Consequently, the Court set aside certain findings of the High Court and allowed the appeals in part.

Issues considered

The extent of the Commissioner’s statutory power to determine rateable value and whether it is bound by the District Level Advisory Committee’s recommendations.
Whether the fair rent fixed under the Andhra Pradesh Buildings (Lease, Rent and Eviction) Control Act is binding on the Commissioner for determining annual rental value.
The character of Rules 3‑7 of the Hyderabad Municipal Corporations Rules – whether they are merely enabling provisions or they fetter the Commissioner’s discretion.
The correctness of the High Court’s conclusions on the above points.

Subjects

property taxrateable valueannual rental valuemunicipal corporationcommissioneradvisory committeerent control actstatutory interpretationassessment rules

Judgment

A THE COMMISSIONER
v.
GRIHA YAJAMANULA SAMKHYA AND ORS.

MAY 2, 2001
!-
B [S.P. BHARUCHA, D.P. MOHAPATRA AND S.N. PHUKAN, JJ.]

Municipalities:

Hyderabad Municipal Corporation Act, 1955-Section 212-Rateable
C value, Annual rental value-Determination of for the purpose of property
tax-Need not be the fair rent determined under the Rent Control Act.

Sections 213, 220 and 223-Determination of property tax-
Commissioner s power of-Advice of the District Level Advisory Committee
constituted by the Government-Held, not binding on the Commissioner-
D Hyderabad Municipal Corporation Rules-Rule 7.

Several Writ Petitions were filed in the High Court of Andhra Pradesh
challenging the assessment of property tax of the buildings within the area
of Municipal Corporations and Municipalities in the State of Andhra Pradesh.
E
Section 199 of the Hyderabad Municipal Corporation Act provides that
property tax shall be levied at such percentage of their rateable value as may
be fixed by the Corporation. Section 212 of the Hyderabad Municipal
Corporation Act, 1955 deals with the determination of the rateable value and
states that the annual rental yalue of lands and buildings shall be deemed
F 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 with reference to its location,
type of construction, plinth area, age of the building, nature of use to which
it is put and such other criteria as may be prescribed.

G Section 213 of the Hyderabad Municipal Corporation Act vests power
in the Commissioner to call for information or returns from the owner or
occupier of the assessable premises. Section 220 of the Act provides for
filing of complaint against the amount of rateable value. Section 223 mandates
that the Commissioner shall investigate and dispose of the complaint filed
in the presence of the complainant if he appears before the Commissioner.
II 392
THE COMMR. v. GRIHA YAJAMANULA SAMKHYA 393
Under Rule 7 of the Hyderabad Municipal Corporations Rules the A
Commissioner has to gather the information relating to the prevailing rental
value of the buildings of various categories in a zone and arrive at average
monthly or yearly rent fixable for each category of building per square meter
of the plinth area. Under sub rule (2) of Rule 7, the Commissioner has to
fix the provisional monthly and yearly rent for each category and publish the
same and invite objections and suggestions from the public and revise the B
rental values. The proposal has to be thereafter put up before the District
Level Advisory Committee constituted by the Government for its final
recommendation. Thereafter, the Commissioner has to publish a final
notification. Sub rule (3) of Rule 7 states that the Commissioner shall fix
the monthly or yearly rent for each category in a zone and notify the rate C
.... so fixed .

The High Court disposed of the Writ Petitions holding, inter alia, t'1at

1. The power for determination of the rateable value of the building and
the property, tax belongs to the Commissioner and the Committee constituted D
by the Government has no role to play. The Commissioner is not bound by
the recommendation of the Committee.

2. The annual rental value to be fixed by the Commissioner in the
corporation areas shall be limited to the fair rent either determined or
determinable under the A.P. Buildings (Lease, Rent and Eviction) Control E
Act. The Commissioner may fix· a lesser annual rental value keeping in
consideration the factors as provided under Section 212 of the Hyderabad
Municipal Corporation Act

3. The annual rental value in respect of all buildings in the municipal F
areas, where rent has been determined under the rent control legislation,
would be the gross annual rental on the basis of such rent determined unless
there is any fraud or collusion. In respect of other buildings in the
municipality areas, the Commissioner shall determine rent considering
factors mentioned in Section 87(2) of the Andhra Pradesh Municipalities
~41~~ G
Against the order of the High Court, the Commissioners of the
concerned Municipal Corporations and the Government filed appeals before
this Court.

Partly allowing the appeal, the Court H
394 SUPREME COURT REPORTS [2001] 3 S.C.R.

A HELD : 1.1. The Hyderabad Municipal Corporation Act, 1955 and the
Municipal Corporation Rules provide a complete code for assessment of the ..,.
property tax to be levied for the buildings and lands within the municipal .
corporation. From the statutory provisions, it is clear that the Hyderabad .
Municipal Corporation Act provides that the tax shall be levied at such
percentages of the rateable value as may be fixed by the Corporation. If further
B provides the method and manner of determination of the rateable value. The
determination of the annual rental value which is the basis for calculation
of the rateable value is also provided in the Act and the Municipal Corporation
Rules. (407-D-E] "

C 1.2. There is no provision in the Hyderabad Municipal Corporation Act
that the fair rent determined under the A.P. Buildings (Lease, Rent and
Eviction) Control Act in respect of a property is binding on the Commissioner.
The legislature has wisely not made such a provision because determination
of annual rental value under the Hyderabad Municipal Corporation Act
depends on several criteria. The criteria for such determination provided
D under the Hyderabad Municipal Corporation Act may not be similar to those
prescribed under the A.P. Buildings (Lease, Rent and Eviction) Control Act.
Further the time when such determination was made is also a relevant factor. >-
If in a particular case the Commissioner finds that there has been a recent
determination of the fair rent of the property by the authority under the A.P.
E Buildings (Lease, Rent and Eviction) Control Act he may be persuaded to
accept the amount as the basis for determining the annual rental value of
the property. But that is not to say that the Commissioner is mandatorily
required to follow the fair rent fixed by the authority under the A.P. Buildings
(Lease, Rent and Eviction) Control Act. (407-E-G]

F The Corporation of Calcutta v. Smt. Padma Debi and Ors., (1962) 3
SCR 49; Guntur Municipal Council v. Guntur Town Rate Payers' Association,
(1971) 2 SCR 423; Corporation of Calcutta v. Life Insurance Corporation
of India, (1971) 1 SCR 248; Srikant Kashinath Jituri v. Corporation of the
City of Belgaum, (1994) 6 SCC 572; Assistant General Manager, Central
G Bank of India and Ors. v. Commissioner, Municipal Corporation for the City
ofAhmedabad and Ors., (1995) 4 SCC 696 and East India Commercial Co.
Pvt. Ltd. v. Corporation of Calcutta, [1998) 4 SCC 368, referred to.

2.1. The High Court cannot be said to have committed any illegality in
holding that the powers of the Commissioner are not fettered by the
H recommendation of the Committee. The State Government constituted the
THE COMMR. v. GRIHA Y AJAMANULA SAMKHYA [D.P. MOHAPATRA, J.) 395

Committee under an executive order. The Committee set up by the State A
Government has no statdtory existence. Its recommendations are advisory
and are not binding on the Commissioner. [408-A-C]

2.2. The intent and purpose of the ex~rcise to determine the annual
rental value is to avoid arbitrariness in the process of assessment of the tax
and also to ensure that the landlord does not escape payment of amount due B
as tax by taking recourse to fraudulent and manipulated under writings of
the rental value. For proper implementation of the provisions of the Municipal
Act it is necessary that the power of assessment should be vested in an
authority 'specified' in the statute. The importance of specifying the authority
to assess property tax under the Municipal Act cannot ~e overemphasized. C
Keeping in view the incidence of the tax the persons who are to bear the
burden of payment of the tax and the effect it will have on the funds of the
municipalities for the purpose of development of the area, the legislature
vested the power of assessment of property tax in the Commissioner of the
Municipal Corporation. The statute makes provision for setting up committees
like the District level Committee, but such committees play an advisory role D
. for rendering assistance to the Commissioner in the matter. (408-C-E)

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 4052 of
1996.

From the Judgment and Order dated 29.12.1994 of the Andhra Pradesh E
High Court in Writ Petition No. 15591 of 1993.

WITH
Civil Appeal Nos. 4057-4060

AND F
Civil Appeal Nos. 4061-4088of1996

RF. Nariman, A. Raghuvir, Gopal Subramaniam, L. Nageswara Rao, Roy
Abraham, T.S. Venkataramana, Guntur Prabhakar, A. Subba Rao, A.D.N. Rao,
P. Venkat Reddy, Anil Kumar Tandale, PS. Narasimha, P. Sridhar, V.G. Pragasam, G
L. Nageswara Rao, M.D. Adkar, S.D. Singh, Vishwajit Singh, G. Seshagiri Rao,
S. Muralidhar, R. Santhanakrishnan, Ms. Saroj Patnaik, P.P. Singh and D.
Mahesh Babu for the appearing parties.

The Judgment of the Court was delivered by

D.P. MOHAPATRA, J. The Andhra Pradesh High Court disposed of a H
396 SUPREME COURT REPORTS [2001] 3 S.C.R.

A batch of Writ Petitions involving the controversy regarding assessment of
property tax of buildings located within the iimits of different Municipal
Corporations in the State by the common judgment rendered on 29th December,
1994.

The conclusions arrived at by the High Court have been summed up
B as follows:

"(1) The power for determination of the rateable value of the building
and the property-tax belongs to the commissioner which cannot
be fettered by rules framed under the Acts; ...
(2) The Committee constituted by the Government has no role to
c play and the Commissioner is not bound by their
recommendations.
(3) The annual rental value to be fixed by the Commissioner in the
corpor;ltion areas shall be limited to the fair rent either determined
or determinable under the A.P. Buildings (Lease, Rent and
D Eviction) Control Act.
(4) Subject to the maximum as above the Commissioner may fix a
lesser annual rental value keeping in consideration the factors
as provided for in Section 212 of the Corporations Act.

E (5) The annual rental value in respect of all buildings in Municipal
Areas, ~here rent has been determined under the rent control
legislation, would be the gross annual rental on the basis of
such rent determined unless, there is any fraud or collusion and
that in respect of other buildings in the Municipality areas, the
Commissioner has to determine the factors under Section 87(2).
F
(6) In determining the annual rental value the Commissioner may
resort to plinth area method so as to serve him as a basis and
guide but it will be open to the assess~s to contest the annual
rental value, rateable value or property-tax determined in respect
of their buildings and when objections are raised, the
G Commissioner has to decide those objectively without fettering
his discretion because of the determination already made on the
basis of the plinth area method.
(7) Rules 3 to 7 of the Corporation and the Municipal rules are to
be read only as enabling provisions for the Commissioner to aid
H him in discharge of his functions under the corporation or the
THE COMMR. v. GRIHA YAJAMANULA SAMKHYA [D.P. MOHAPATRA, J.] 397
.,
Municipal Act to arrive at· working figures for the purpose of A
determination but not as feitering his discretion in the matter as
conferred upon him under the statutes.
(8) The form-A publications already made would be deemed to have
been issued by the Commissioner only on such basis as is
stated above and not in pursuance of recommendations of the B
Conunittee.
(9) Before Form-B is issued in respect of buildings and lands, the
Commissioner shall afford opportunity to the assessees to object
to the determinations made and shall decide the objections on
considerations as directed above and provisions of Sections 214 C
to 225 of the Corporations Act shall be scrupulously followed
subject to the provisions of appeal.
Xxx xxx xxx
In the result the writ petitions are allowed to the extent indicated
above, but in the circumstances there shall be no order as to D
costs."
The correctness of the said judgment is under challenge in these appeals
filed by the Commissioners of the Municipal Corporations concerned and the
Government of Andhra Pradesh.
On perusal of the impugned judgment it appears that the main challenge E
in the case was against the determination of the annual rental value of the
buildings within the area of Municipal Corporations and Municipalities in the
State. Since the questions arising in all the appeals are similar and the appeals
arise from a common judgment, all the cases were heard together and they
are being disposed of by this judgment. F
Determination of the questions raised in these cases depends on the
interpretation of the relevant provisions of the Hyderabad Municipal
Corporations Act, 1955, the Andhra Pradesh Municipalities Act, 1955 as
amended by the A.P. Municipalities Act, 1989, the Hyderabad Municipal
Corporations (Assessment of Property Tax) Rules, 1990 (for short 'the Rules') G
and the A.P. Municipalities (Assessment of Taxes) Rules, 1990 (for short the
'Municipal Rules').
Hyderabad Municipal Corporations Act, 1955 (for short 'the
Corporation Act')

Under Section 2(3) 'building' includes a house, out-house, stable, latrine, H
398 SUPREME COURT REPORTS [2001] 3 S.C.R.

A godown, shed, hut, wall, fencing, platform and any other structure whether
of masonry, bricks, wood, mud, metal or of any other material whatsoever.

In section 2(7) 'Commissioner' is defined to mean the Municipal
Commissioner for the city appointed under Section 104 and includes an acting
Commissioner appointed under Section 110.
B Section 2(48) defines 'rateable value' to mean the value of any building
or land fixed in accordance with the provisions of this Act and the rules made
thereunder for the purpose of assessment to property taxes.
Chapter VIII of the Act contains the provisions regarding Municipal
taxation.
c
Sections 197 to 289 are included in the said chapter. In section 197(l)(i)
it is provided that for the purposes of this Act the Corporation shall impose
the following taxes namely :
(a) taxes on lands and buildings.
D Xxx xxx xxx
In section 199 provisions regarding property taxer. are made. Property
taxes include (a) a general tax;(b) a water tax; (c) a drainage tax; (d) a lighting
tax; (e) a conservancy tax. In sub-section(2) it is provided that save as
otherwise provided in this Act these taxes shall be levied at such percentages
E of their rateable value as may be fixed by the Corporation. Provided that
the aggregate of the percentages so fixed shall not in the case of any land
or building be less than 15 per cent or greater than 30 per cent.
(emphasis supplied)
Sections 204 to 206 contain provisions regarding person or persons on
F whom rests the liability for payment of the property tax.
In Sections 207 to 211 are the provisions regarding notice of transfer ·
etc., of premises assessable to property tax.
In sections 212 and 213 are contained the provisions regarding valuation
G of property assessable to property taxes.
Section 212 which deals with the determination of the rateable value
reads as follows:
"212. Rateable value how to be determined "(l) (a) The annual rental
value of lands and buildings shall be deemed to be the gross annual
H rent at which they may reasonably be expected to be let from month
THE COMMR. v. GRIHA Y AJAMANULA SAMKHYA [D.P. MOHAPATRA, J.] 399

to month or from year to year with reference to its location, type of A
,...., construction, plinth area, age of the building, nature of use to which
~ it is put and such other criteria as may be prescribed.
(emphasis supplied)

(b) the annual rental value of lands and buildings shall be deemed to
be the gross annual rent at which they may reasonably be expected B
to be let from month to month or from year to year, less deduction at
{ the rate of 10% for buildings aged upto 25 years; and 20% for the
buildings aged above 25 years; of that portion of such gross annual
>- rent which is attributable to the buildings, apart from their sites and
adjacent lands occupied as an appurtenance thereto and the said
deduction shall be in lieu of all allowances for repairs or on any other
c
account whatsoever.

Provided that a rebate of 40 per cent of the annual rental value shall
be allowed in respect of the residential buildings occupied by the
owner inclusive of the deduction permissible elsewhere." D
In Section 213 power is vested in the Commissioner to call for information
or returns from owner or occupier or enter and inspect assessable premises.
To enable the determination or the rateable value of any building or land and
the person primarily liable for the payment of any property tax leviable in
respect thereof the Commissioner may require the owner or occupier of such E
building or land, or of any portion thereof, to furnish him, within such
reasonable period as the Commissioner specifies in this behalf with information
or with a written return signed by such owner or occupier.

Section 218 mandates the Commissioner to give public notice as far as
possible, when the entries required by clauses (a)(b)(c) and (d) of section 214 F
have been completed, and of the place where the ward assessment book or
a copy of it, may be inspected.

In Section 220 provision is made for receipt of complaints against the
amount of rateable value in the ward assessment book in the office of the
Commissioner.
G

Section 223 mandates that the Commissioner shall investigate and
dispose of the complaint in the presence of the complainant, if he shall
-.,f
appear. and if not, in his absence. (emphasis supplied)
The Ward assessment books which are to be authenticated by the H
400 SUPREME COURT REPORTS [2001) 3 S.C.R.

A Commissioner, is provided under section 224 of the Act.
Rule 3 of the Municipal Corporation Rules contains the provision
..
regarding annual rental value. Sub- rule(l) of Rule 3 provides that the annual
rental value of lands and buildings shall be deemed to be the gross annual
\ent at which they inay reasonably be expected to be let from month to
B month or from year to year with reference to its location, type ofconstruction,
plinth area, age of the building, nature to use to which it is put and such
other criteria as may be specified. (emphasis supplied)

In sub-rule(2) it is laid down that the Commissioner shall gather the
C information relating to the prevailing rental value as specified in Rules 4 to
6 so as to arrive at the rate of rent per month or per year per square meter
of plinth area and then issue a draft notification in a daily newspaper having
circulation in the district and in the District Gazette calling for objection and
suggestions from the public so as to reach the Commissioner within 15 days
from the date of publication of the draft notification, regarding the Division
D of the Corporation into Zones and monthly or yearly rental values per square
metre of plinth area in each Zone. The rule further provides that the
Commissioner should consider the objections and suggestions, if any, received
in response to the said notification and revise the Zones and the monthly or
yearly rents wherever necessary and that he shall place the proposals before
the Committee constituted by the Government for its final recommendations.
E On the basis of the recommendations of the Committee, the Commissioner
shall issue a final notification in Form-A and publish it in a local newspaper
having circulation in the District and_ in the District Gazette for information of
the public.

F Rule 4 contains provisions regarding division of Municipal Corporation ...
area into zones. Rule 5 is regarding classification of buildings and Rule 6
provides that after classification of the buildings based on the type of
construction they shall be further classified taking into consideration the
nature of use of such buildings.

G Rule 7 which contains provision of fixation of monthly or yearly rent
reads as follows (p.355):

"7. Fixation of monthly or yearly rent : 1) All buildings located in a
zone shall be classified based on types of construction and nature of
use, 36 categories of buildings can be identified in each zone based
H on the above criteria. The Commissioner shall gather the information
THE COMMR. v. GRIHA YAJAMANULA SAMKHYA (D.P. MOHAPATRA, J.] 401

relating to the prevailing rental value of the buildings of various A
categories in a zone and arrive at average monthly or yearly rent
fixable for each category of building per sq. metre of plinth area.
(2) The Commissioner shall then provisionally fix monthly or yearly
rent for each category in a Zone per square metre of plinth area and
notify the rate of mo:.ithly or yearly rental so fixed in Form 'N for B
adopting the said rates for fixation of monthly or yearly rental of the
buildings in a zone and publish the same in the District Gazette and
in a local newspaper having circulation in the district calling for
objections or suggestions from the Public for such adoption regarding
the division ofMqnicipality into Zones. The notification shall contain C
the monthly or yearly rental value of the buildings in a Zone together
with the localities/areas with particulars of door numbers included in
the Zone. The objections or suggestions, if any, on the said notification
shall have to be sent to the Commissioner within 15 days from the
date of its publica~ion. The Commissioner shall consider the objections
and suggestions, if any, received in response to the said notification D
and revise the Zones and the monthly or yearly rental values wherever
necessary. He shall then place all the proposals before the District
Level Advisory Comt ·ittee constituted by the Government for its final
recommendations. Thereupon the Commissioner shall publish a final
notification in Form A in the District Gazette and local newspaper E
having circulation in the District for infonnation of the public. (Emphasis
supplied) Note-Any notification issued prior to this amendment by
the Commissioner shall be treated as a draft notification.

(3) The Commissioner shall fix the monthly or yearly rent for each
category in a zone per square metre of plinth area and notify the rate F
of monthly or yearly rent so fixed in Form 'A' for adopting the said
rates fixation of monthly or yearly rental value of buildings in a zone
and for information of the public. The Commissioner shall issue a
notification in Form 'A' furnishing the localities, area included in the
zone and particulars of door numbers included in the zone. The
notification in Form 'A' shall be published in local news}Japers having G
circulation in the area for information of the public.

(4) The Commissioner shall obtain information of all buildings in
respect of plinth area, type of construction, age of building, nature of
use and fix monthly or yearly rental value as per the rate of monthly
rents notified for each category of a building in a zone. The property H
402 SUPREME COURT REPORTS [2001] 3 S.C.R.

A tax assessment list of buildings shall be prepared in Form 'B'.

(5) The rates of monthly or yearly rents for each category of building
...
in a zone shall be revised once in 5 years taking into consideration
the 1ent component of cost of living index prevailing at the time of
preparation of new assessment books. In respect of value of the lands
B on which buildings constructed for the purposes of choultries, hotels,
lodges and cinema theatres whose vatue increases and the income on
the property does not increase, the average rental value shall be fixed
with reference to the income of the property.

(6) In the case of items wherein varying rates are provided, the
c Municipal Corporation shall adopt the rates found suitable for the
particular municipal area after taking the local conditions into account.
The C?nimissioner may also increase the rates so adopted by the
Municipal Corporation by not exceeding 10% over the rates aforesaid
for superior quality of better type of flooring and fine plastering
depending upon the workmanship and cost involved. Where the
D entire ~oof is not of the same description appropriate rates shall be
adopted for the different types of roof for arriving at the total cost of
erection. The rate of cost per square metre plinth area shall be
determined in consultation with the concerned Local Engineer belonging
to Roads ·and Buildings Department in consonance with the price
E levels prevailing at the time of such revision.

(7) In the case of buildings which are partly occupied by the owner
and partly let out on rent, property tax shall be levied as per Rules
6 and 3 ori owner occupied portions and rental portions respectively.

F (8) For the purpose of assessing the vacant land, the estimated capital
value of the land shall be the market value fixed by Registration
Department for the purpose of registration.

[8. Any tax lawfully levied by or on behalf of the Corporation at the
commencement of these rules shall notwithstanding any change in the
G method or manner of assessment under these rules, be continued till
assessment under these rules is made.]"

By virtue of section 5 of the A.P. Municipal Corporation (2nd
Amendment) Act, 1995 (Act No.25 of 1995) the amendment made to the ·,,_
Hyderabad Municipal Act, 1955 by section 3 was extended to and made
H applicable also to the Vishakhapatnam and Vijayawada· Municipal Corporations.
THE COMMR. v. GRIHA YAJAMANULA SAMKHYA [D.P. MOHAPATRA, J.] 403

During the hearing of the cases the main thrust of the argument~ A
advanced by Shri RF. Nariman, learned senior counsel appearing for the
appellants was against the conclusions arrived at by the High Court (para 2)
that the Committee constituted by the Government has no role to play and
the Commissioner is not bound by their recommendations.; and (para 3) that
the annual rental value to be fixed by the Commissioner in the corporation
areas shall be limited to the fair rent either determined or determinable under B
the A.P. Buildings (Lease, Rent and Eviction) Control Act and (para 7) that
the provisions in rules 3 to 7 of the Corporation Rules are only enabling
provisions for the Commissioner to help him in discharge of his functions but
not to fetter his discretion in the matter.

The calculation of rateable value of a property for the purpose of C
determination of property tax by municipal corporation/council has engaged

- the attention of this Court from time to time.

In the case of the Corporation of Calcutta v. Smt. Padma Debi and
Others, [1962] 3 SCR 49, this Court held that on a fair reading of the express D
provisions of s.127(a) of the Calcutta Municipal Act, 1923, the rental value
cannot be fixed higher than the standard rent under the Rent Control Act. It
was further held that words 'gross annual rent at which the land or building
might at the time of assessment reasonably be expected to let from year to
year' in s.127(a) of the Act implies that the rent which the landlord might
realise if the house was let is the basis for fixing the annual value of the E
building. The criterion is the rent realisable by the landlord and not the value
of the holding in the hands of the tenant. The value of the property to the
owner is the standard in making the assessment. Interpreting the word
'reasonably' it was observed that whether a particular act is reasonable or not
depends on the circumstances in a given situation. A bargain between a F
willing lessor and a willing lessee uninfluenced by any extraneous
circumstances may afford a guiding test of reasonableness. The phfase 'at ~e
time of assessment' means that the assessment commences with the making
of the valuation under s.131 of the Act and ends with the determination of
the objection under s.140 thereof. An event which takes place during this
period may be relied upon for assessing the annual value under s. 127(a) of G
the Act.

In the case of Guntur Municipal Council v. Guntur Town Rate Payers'
Association, [1971] 2 SCR 423, this (:ourt held that under Section 82(2) of the
Madras District Municipalities Act (5 of 1920) the test is what rent the
premises can lawfully fetch if let out to a hypothetical tenant. The municipality H
404 SUPREME COURT REPORTS [2001] 3 S.C.R.

A is not free to assess any arbitrary annual value but has to look to and is
bound by the fair or the standard rent which would be payable for particular
premises under the Rent Control Act in force during the year of assessment.
This Court did not agree that the language of s. 82(2) of the Municipalities .
Act any distinction can be made between buildings the fair rent of which has
been actually fixed by the Controller and those in respect of which no such
B rent has been fixed. This Court further held that the assessment of valuation
must take into account the measure of fair rent as determinable under the Act.
It may be that where the Controller has not fixed the fair rent the municipal
authorities will have to arrive at their own figure of fair rent but that can be
done without any difficulty by keeping in view the principles laid down in
C section 4 of the Act for determination of fair rent.

In Corporation of Calcutta v. Life Insurance Corp9ration of India,
[1971] 1 SCR 248), this Court took note of the decision in Smt. Padma Debi s
case (supra) and the interpretation of the proviso to section 168(1) of the
.
Calcutta Municipal Corporation Act, 1951 and observed:
D
"By the addition of the proviso, in our judgment, the meaning of the
expression "gross rent at which the land or building might reasonably
be expected to let" is not altered. In the present case, there is no order
of the Controller fixing standard rent under s. 9 of the West Bengal
Premises Rent Control (Temporary Provision) Act, 1950, but the
E standard rent ~tands determined by the definition of that expression
ins. 2(l)(b) of that Act, which provides (omitting parts not relevant):

" 'standard rent' in relation to any premises means-

(a) ..... .
F (b) where the rent has been fixed under section 9, the rent so fixed;
or at which it would have been fixed if application were made
under the said section."
We are therefore of the view that the High Court was right in
assessing the annual value on the basis of the standard rent as
G statutorily determined."

This Court summed up its views in the following words:

"But under the Act the quantum of the consolidated rate ·depends
upon the annual value ofland or building on t}\e gross re11.t for which
H the land or building might reasonably be expected to let, and not the
(
>---

THE COMMR. v. GRIHA YAJAMANULA SAMKHYA [D.P. MOHAPATRA, J.] 405

gross rent at which the subordinate interest of a tenant may be A
expected to be sublet. In determining the assessment of annual value,
the assessing authority is not concerned with the rent which the
tenant may receive from his sub-tenant. It is the gross rent which the
owner may realize by letting the land or building under a bargain
"uninfluenced by extraneous considerations" which determines the B
annual value. Section 193 only provides for apportionment of
consolidated rate : it is irrelevant in determining annual value."

In the case of Srikant Kashinath .lituri v. Corporation of the City of
Belgaum, [1994] 6 SCC 572, a Bench of three learned Judges of this Court
expressed the doubts as to the soundness and continuing relevance of the C
view taken by this Court in several earlier decisions that the property tax must
be determined on the basis of fair rent alone regardless of the actual rent

- received. The observations of this Court are quoted herein-below:

"Before parting with this appeal, we feel compelled to express our
doubts as to the soundness and continuing relevance of the view D
taken by this Court in several earlier decisions that the property tax
must be determined on the basis of fair rent alone regardless of the
actual rent received. Fair rent very often means the rent prevailing
prior to 1950 with some minor modifications and additions. Property
tax is the main source of revenue to the municipalities and municipal
corporations. To compel these local bodies to levy and collect the E
property tax on the basis of fair rent alone, while asking them at the
same time to perform all their obligatory and discretionary functions
prescribed by the statute may be to ask for the discretionary functions
prescribed by the statute may be to ask for the impossible. The cost
of maintaining and laying roads, drains and other amenities, the salaries F
of staff and wages of employees - in short, all types of expenditure
have gone up steeply over the last more than forty years. In such a
situation, insistence upon levy of property tax on the basis of fair rent
alone - disregarding the actual rent received - is neither justified nor
practicable. None of the enactments says so expressly. The said
principle has been evolved by courts by a process of interpretation. G
Probably a time has come when the said principle may have to be
reviewed. In this case, however, this question does not arise at this
stage and, therefore, it is not necessary to express a final opinion on
the said issue."

In the case of Asstt. General Manager, Central Bank of India and H.
406 SUPREME COURT REPORTS [2001) 3 S.C.R.

A others v. Commissioner, Municipal Corporation for the City of Ahmedabad
and others, [1995] 4 SCC 696, this Court interpreting section 2(1-A)(ii), provisos
(aa) & (aaa) held : '<

"Accordingly, we hold that proviso (aa) means what it says and has
to be applied and followed in the cases covered by it. So far as the
B Municipal Corporations Act is concerned, the annual rent is the actual
rent received where the standard rent is not fixed under Section· 11 of
the Bombay Rent Act and it constitutes the basis for determining the
annual letting value, rateable value and property taxes. That is the
plain effect and meaning of pr.oviso (aa). So far proviso (aaa) is
c concerned, an apprehension was expressed that it would enable the
Commissioner to question the actual rent received in every case and
it would be an endless enquiry. In our opinion, however, the said
provision is conceived to meet situations where the rent put forward ...
as the actual rent received is not a genuine plea, i.e., where it i~ a false
plea. A landlord may let out a building at less than market rent for
D many a reason, e.g., the tenant is a close friend or a close relative or
because the tenant is a charitable or religious organisation. Proviso
(aaa) does not enable the Commissioner to ignore such situation for,
in such cases, the rent actually received is the genuinely stipulated
one. This power is reserved to the Commissioner only with a view to
E ensure that by merely putting forward a figure which is not true,
persons do not escape the correct levy."

Recently, in the case of East India Commercial Co. Pvt Ltd. v.
Corporation of Calcutta, [1998] 4 SCC 368, this Court taking note of several
earlier decisions including Corporation of Calcutta v. Padma Debi (supra);
F Guntur Municipal Council v. Guntur Town Rate Payers' Association (supra);
Corporation of Calcutta v. Life Insurance Corporation of India, (supra);
Municipal Corporation v. Ratnaprabha, (supra) and Central Bank of India
v. Municipal Corporation for the City ofAhmedabad (supra), summed up the
gist of the principles deducible from the decisions in the following words :
G
"From the aforesaid decisions, the principle which is deducible is that
,t
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 rateable value cannot be more than the fair
H or standard rent which can be fixed under the Rent Control Act. The
THE COMMR. v. GRIHA Y AJAMANULA SAMKHYA [D.P. MOHAPATRA, J.] 407

exception to this rule is that whenever any Municipal Act itself provides A
) the mode of determination of the annual letting value like the Central
Bank of India case relating to Ahmedabad or contains a non obstante
clause as in Ratnaprabha case then the 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 B
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 determining the annual value. This Act has, therefore, to
be read along with Tenancy Act of 1956 and it is the fair rent
determinable under Section 8(1) (d) which along can be the annual C
value for the purpose of property tax."

From the statutory provisions noted above, it is clear that the Act
provides that the tax shall be levied at such percentages of the rateable value
as may be fixed by the Corporation. It further provides the method and
manner of determination of the rateable value. The determination of the D
annual rental value which is the basis for calculation of the rateable value is
also provided in the Act and the Rules. The Act mandates that the
Commissioner shall determine the tax to be paid by the person concerned in
the manner prescribed under the statute and the rules. It is our view that the
Act and the Rules provide a complete code for assessment of the property E
tax to be levied for the buildings and lands within the municipal corporation.
There is no provision in the statute that the fair rent determined under the
Rent Control Act in respect of a property is binding on the Commissioner. The
legislature has wisely not made such a provision because determination of
annual rental value under the Act depends on several criteria. The criteria for
such determination provided under the Act may not be similar to those F
prescribed under the Rent Control Act. Further the time when such
determination was made is also a relevant factor. If in a particular case the
Commissioner finds that there has been a recent determination of the fair rent
of the property by the authority under the Rent Control Act he may be
persuaded to accept the amount as the basis for determining the annual rental G
value of the property. But that is not to say that the Commissioner is mandatorily
required to follow the fair rent fixed by the authority under the Rent Control
Act. The· High Court therefore did not commit any error in holding that the
determination of fair rent under the Rent Control statute will not be binding
on the Commissioner for the purpose of assessment of property tax under the
~ H
\.

408 SUPREME COURT REPORTS [2001] 3 S.C.R.

A Coming to the Committee set up by the State Government, we find that
the State Government constituted the Committee under an executive order. ~ \
Our attention has not been drawn to any provision of the Act which empowers
the State Government to constitute such a Committee under the statute. A
provision is made in the Act for District Level Committees; but its role is only
advisory. The Committee set up by the State Government has no statutory
B existence. Its recommendations are advisory and are not binding on the
Commissioner. In this regard also the High Court cannot be said to have
committed any illegality in holding that the powers of the Commissioner are
not fettered by the recommendation of the Committee.

C The intent and purpose of the exercise to determine the annual rental
value is to avoid arbitrariness in the process of assessment of the tax and also
to ensure that the landlord doe& not escape payment of amount due as tax
by taking recourse to fraudulent and manipulated under-writings of the rental
value. For proper implementation of the provisions of the Municipal Act it is
necessary that the power of assessment should be vested in an authority
D 'specified' in the statute. The importance of specifying the authority to
assess property tax under the Municipal Act cam:1.ot be over- emphasised.
Keeping in view the incidence of the tax the persons who are to bear the
burden of payment of the tax and the effect it will have on the funds of the
municipalities for the purpose of development of the area, the legislature
E vested the power in the Commissioner of the Municipal Corporation to
complete the exercise. As noted earlier, the statute makes provision for setting
up committees like the District level Committee; but such committees play an
advisory role for rendering assistance to the Commissioner in the matter.
Therefore, the order of the State Government making the decision of the
Committee binding on the Commissioner is not sustainable and the view taken
F by the High Court in this regard is unassailable.

On the discussions in the foregoing paragraphs, the decision that
emerges is that only the findings/decision of th!! High Court in point nos.(3)
and (5), as stated in the judgment under challenge, are to be set aside. It is
ordered accordingly. The appeals are allowed in part. No costs.
G
B.K.M Appeal partly allowed.