P.N. Kumar & Another Vs Municipal Corporation of Delhi & ... On 21 April, 2010

P.N. Kumar & Another vs Municipal Corporation Of Delhi & ...
on 21 April, 2010
Delhi High Court P.N. Kumar & Another vs Municipal Corporation Of Delhi & ... on 21 April, 2010 Author: Sanjiv Khanna W.P. (C) Nos. 3347/1987 & 1632/1988 1 * IN THE HIGH COURT OF DELHI AT NEW DELHI + WRIT PETITION (CIVIL) NOS. 3347 OF 1987 & 1632/1988 Reserved on : 24th February, 2010. % Date of Decision 21st April, 2010. P.N. KUMAR AND ANOTHER .... Petitioners Through Mr. Lovkesh Sawhney & Mr. Durgesh Kumar Pandey, Advocates. VERSUS MUNICIPAL CORPORATION OF DELHI & OTHERS .....Respondents Through Ms. Amita Gupta & Mr. Sushil Jaswal, Advocates for MCD. CORAM: HON'BLE MR. JUSTICE SANJIV KHANNA 1. Whether Reporters of local papers may be allowed to see the judgment? 2. To be referred to the Reporter or not ? YES 3. Whether the judgment should be reported in the Digest ? YES SANJIV KHANNA, J.: 1. These two writ petitions have been filed by Mr. P.N. Kumar and Jaypee Hotels Limited in respect of property tax assessment under the provisions of Delhi Municipal Corporation Act, 1957 (hereinafter referred to as the Act, for short). Writ Petition(Civil) No. 1632/1988 pertains to a hotel in Rajendra Place and the petitioners have challenged and questioned the assessment order dated 4th September, 1987 fixing the rateable value of the property at Rs.14,57,880/- with effect from 15th July, 1981. In Writ Petition (Civil) No. 3347/1987, the petitioners have challenged and questioned the assessment order dated 4th August, 1983 in respect of vacant land for a hotel in Vasant Vihar for the period 1981-82 (part), 1982-83 and 1983-84 (full). In both writ petitions, the petitioners have asked for refund of the property tax, which were paid. W.P. (C) Nos. 3347/1987 & 1632/1988 2 2. The two writ petitions were taken up together as the petitioners had challenged vires of Section 114 and other provisions of the Act on the ground that they were violative of Article 14 of the Constitution of India.
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P.N. Kumar & Another vs Municipal Corporation Of Delhi & ... on 21 April, 2010
Accordingly, the matter was listed before the Division Bench on 3rd February, 2005. Learned counsel for the petitioners stated that they did not want to press challenge to the vires of Section 114 of the Act. By order dated 28th July, 2008, the matter was accordingly directed to be listed before a Single Bench as per the Roster. The question of vires is, therefore, not being examined. WRIT PETITION (CIVIL) NO. 3347 OF 1987 3. The petitioner No. 2 had given highest bid of Rs. 1,82,00,000/- for purchase of lease hold rights for a vacant piece of land measuring 1250 square meters in community centre Basant Lok, Vasant Vihar, New Delhi in the year 1980. On 9th June, 1981, possession of this land was handed over to the petitioner No.2. The lease deed was executed and registered by Delhi Development Authority on behalf of the President of India on 19th March, 1982. The question raised in the writ petition is whether the petitioner No.2 is liable to pay property tax on vacant land under Section 120 of the Act. The other contention raised by the petitioner relates to the quantification of the capital value of the land and whether the auction bid amount or the auction price paid by the petitioner No.2 can be regarded as the estimated capital value or the market price. The third question raised by the petitioners is whether the stamp duty payable on the lease deed should be added for computing the capital value or market price of land. Lastly, it is submitted that the petitioners are not liable to pay scavenging tax and water tax. 4. The question of payment of property tax on vacant land has been considered by a Full Bench of this Court in Municipal Corporation of Delhi versus Shashank Steel Industries Private Limited, 100(2002)DLT 66(FB) and by a single Judge of this Court in K.K. Enterprises versus Municipal Corporation of Delhi and other cases, 127(2006)DLT 679. In these decisions, Delhi High Court has examined Sections 116 and 120 of the Act. These Sections read as under:W.P. (C) Nos. 3347/1987 & 1632/1988 3 "116. Determination of rateable value of lands and buildings assessable to property taxes.--(1) The rateable value of any land or building assessable to property taxes shall be the annual rent at which such land or building might reasonably be expected to let from year to year less-(a) 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; and (b) the water tax or the scavenging tax or both, if the rent is inclusive of either or both of the said taxes: Provided that if the rent is inclusive of charges for water supplied by measurement, then, for the purpose of this section the rent shall be treated as inclusive of water tax on rateable value and the deduction of the water tax shall be made as provided therein: Provided further that in respect of any land or building the standard rent of which has been fixed under the Delhi and Ajmer Rent Control Act, 1952 (38 of 1952), the rateable value thereof shall not exceed the annual amount of the standard rent so fixed. [Explanation.--The expressions "water tax" and "scavenging tax" shall mean such taxes of that nature as may be levied by an appropriate authority.] (2) The rateable value of any land which is not built upon but is capable of being built upon and of any land on which a building is in process of erection shall be fixed at five per cent of the estimated capital value of such land.
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(3) All plant and machinery contained or situate in or upon any land or building and belonging to any of the classes specified from time to time by public notice by the Commissioner with the approval of the Standing Committee, shall be deemed to form part of such land or building for the purpose of determining the rateable value thereof under sub-section (1) but save as aforesaid no account shall be taken of the value of any plant or machinery contained or situated in or upon any such land or building." 120. Incidence of property taxes.--(1) The property taxes shall be primarily leviable as follows,-(a) if the land or building is let, upon the lessor; (b) if the land or building is sub-let, upon the superior lessor; (c) if the land or building is unlet, upon the person in whom the right to let the same vests: [Provided that the property taxes in respect of land or building, being property of the Union, possession of which has been delivered in pursuance of Section 20 of the Displaced Persons (Compensation and Rehabilitation) Act, 1954 (44 of 1954) shall be primarily leviable upon the transferee.] (2) If any land has been let for a term exceeding one year to a tenant and such tenant has built upon the land, the property taxes assessed in respect of that land and the building erected thereon shall be primarily W.P. (C) Nos. 3347/1987 & 1632/1988 4 leviable upon the said tenant, whether the land and building are in the occupation of such tenant or a subtenant of such tenant. Explanation.--The term "tenant" includes any person deriving title to the land or the building erected upon such land from the tenant whether by operation of law or by transfer inter vivos. (3) The liability of the several owners of any building which is, or purports to be, severally owned in parts or flats or rooms, for payment of property taxes or any instalment thereof payable during the period of such ownership shall be joint and several." 5. The Full Bench of Delhi High Court in the case of Shashank Steel Industries Private Limited (supra) interpreted Section 120 of the Act and held it is a charging Section. As per the said Section, the primary liability to pay property tax on vacant land under clauses (a) and (b) is firstly upon the lessor, if the land or building is let; upon the superior lessor in case the land or building is sub-let; and as per clause (c) upon the persons in whom the right to let or sub-let vests in case the land or building is unlet. Section 120, therefore, fixes liability on the person, who is liable to pay property tax in respect of land or building. The Full Bench observed that the court by process of judicial interpretation cannot make a person liable to pay tax although he is not primarily liable as per the enactment. In such cases, the remedy of the Corporation is to take recourse to such action as may be permissible in law. The Full Bench jurisprudentially examined the concept of ownership consisting of bundle of rights, claims, liabilities or powers and immunities. Reference was made to clause (37) of Section 2 of the Act. An owner is a person, who has propriety rights or superior rights vis-a-vis another person having inferior rights on the property and may be also a person, who for the time being is receiving or entitled to receive rent. Thereafter, the provisions of the perpetual lease deed executed between the President of India as a superior lessor, Mohan Cooperative Industrial Private Limited, the lessor/lessee and Shashank Steel Industries Private Limited, the sub-lessee were examined. It was held that as per the terms of the lease, Shashank Steel Industries Private Limited was not owner of the land in view of the terms of the perpetual lease deed and was not liable to pay property tax under Section 120 clause (c). In W.P. (C) Nos. 3347/1987 & 1632/1988 5
paragraph 40 of the said judgment, the Full Bench answered the questions (a) and (b) i.e., whether the vacant land held under the perpetual lease deed was assessable to property tax if the sub-lessee had not commenced construction of a building upon the vacant land and upon whom the incidence of property tax shall fall in respect of vacant land and observed:- "40. By reason of a covenant, the person, who is not liable to pay tax, under a legislative enactment cannot be made liable therefor, particularly when the Corporation in relation to the sub-lessee is a third party and cannot in law be permitted to derive any benefit therefrom. The said finding also must be held to be contrary to the scope and purport of Section 120(1) of the DMC Act. We, therefore, are of the opinion that in a case where no building has been constructed, the sub-lessee would not be liable to pay the property tax." 6. The Full Bench thereafter examined the third question which reads:- "(c) What would be the meaning of the expression "capable of being built upon" in Section 116(2) of the DMC Act?" 7. This question was answered in the words of the Full Bench as under:- "53. ...........Thus in our opinion unless there exits any statutory interdict, or a genuine impediment beyond the control of the assessee, the property tax is leviable in respect of a land which is otherwise capable of being built upon meaning thereby which falls within such areas/zones of Master Plan and Zonal Development Plan, where construction is permissible." 8. In the case of K.K. Enterprises (supra), a single Judge of this Court examined Section 116 and the effect of the decision of the Full Bench in Shashank Steel Industries Private Limited (supra) interpreting Section 120 of the Act. The interplay between the two Sections was considered. It was held as under:"12. Lengthy arguments have been generated viz-a-viz Section 120 of the Act. What it clarifies is that the lessor shall be primarily liable for payment of property tax; the exceptions have been spelt out in the proviso to the first sub-section, and in the second sub-section. In the present W.P. (C) Nos. 3347/1987 & 1632/1988 6 case it must be kept in mind that the lessor is the DDA. Instead of granting a lease of ninety-nine years and thereby retaining the luxury of theoretical or notional ownership of the land, the DDA could have conveyed absolute rights of ownership, in which event the transferees would become exclusively liable for payment of property taxes. The statute, however, also contemplates the situation where the land has been let for a period of more than one year and the tenant carries out construction thereon, presumably with the consent of the lessor. As I see it, in such an event the rights of the lessee are virtually the same as an absolute owner in fee simple, and therefore property tax is leviable on the tenant or a sub-tenant of such tenant. It is necessary to underscore the fact that the Legislature has not repeated the words capable of being built upon , which are to be found in Section 116(2) in the succeeding Section 120(2). Logically, if the land is capable of being built upon it is liable to property tax, which is payable by the lessor till such time as the lessee builds upon it. According to the petitioner itself, the construction was completed on 3.9.1997 and the DDA granted the Occupancy Certificate on 15.9.1997. Therefore, with effect from September 1997 the liability to pay tax rested entirely on the petitioner. 13. In the facts of the case in hand what has to be considered is whether vacant land tax could have been levied; the answer has already been given above namely that this could have been done commencing from the year 1996-97. The next point to be determined is on whom the property tax is leviable; the answer is that if any liability arose prior to 15.9.1997 it would be recoverable from the DDA and thenceforward from the petitioner. So far as Shashank Steel is concerned, Ms. Mehrotra has contended that a perusal of paragraphs 41, 48 and 49 thereof indicates that the land can be assessed to property tax. The Full Bench has inter alia
opined that "unless there exists any statutory interdict, or a genuine impediment beyond the control of the assessee, the property tax is leviable in respect of a land which is otherwise capable of being built upon meaning thereby which falls within such areas/zones of Master Plan and Zonal Development Plan, where construction is permissible". This, however, begs the questions so far as the issues in the present case are concerned. The intendment of Section 116(2) is very obvious, that is, whilst agricultural land is not susceptible to tax, all lands upon which buildings can be constructed are taxable. W.P. (C) Nos. 3347/1987 & 1632/1988 7 However, by virtue of Section 120(2) the incidence of tax falls on the DDA till the building is complete. Liability of DDA cannot be foisted on the petitioner. In Municipal Corporation of Greater Bombay v. Polychem Ltd., AIR 1974 SC 1779, the Court has clarified that the English doctrine of sterility does not apply in India, and therefore, during the period when construction is ongoing, the property may be assessed to tax as vacant land. The natural corollary is that when the building is fit for occupancy, or has actually been occupied as in MCD v. Piyush Traders, 1989 (1) RCR 389, it is susceptible to levy of property tax as a building." 9. Thus, as per the leaned single Judge the primary liability to pay property tax in case of vacant leasehold land is upon the lessor till such time the lessee builds upon the said land. Accordingly, the lessee will be liable to pay from the date the building was constructed. However, learned single Judge was careful and has clarified the impact of Section 116(2) in the following words:- "11. ............In the present case the petitioner has diligently submitted the building drawings for the sanction of the Appropriate Authority. It is conceivable that it may not have done so for one or two years or more. Would such a party still remain insulated from the liability for payment of vacant land tax. This is what Section 116(2) seeks to clarify. In this example it could obviously not be contended that the petitioner had not built upon the land but it could have done so if requisite steps have been initiated with diligence. It is also conceivable that a person may undertake a process of erection at snail s pace scale so that the building would take several years to be completed. The question that would then arise is whether, within this period the Corporation would be precluded from claiming tax. This position also stands clarified in Section 116(2), the answer being in favour of the Corporation. In the proceeding I would not venture to affirmatively decide the question whether a remission should be given for a reasonable period for obtaining sanction of building plans. In the present case the Plans have been sanctioned in June, 1996 itself. The only remaining aspect is whether even for this period it is the petitioner and not the Lessor, that is, Delhi Development Authority (DDA), which is liable on this account." W.P. (C) Nos. 3347/1987 & 1632/1988 8 10. The submission on behalf of the MCD is that there is a contradiction between the Full Bench decision in the case of Shashank Steel Industries Private Limited (supra) and K.K. Enterprises (supra) and, therefore, the matter should be referred to a larger Bench. In K.K. Enterprises (supra), learned single Judge of this Court has specifically considered the effect of the decision of the Full Bench in Shashank Steel Industries Private Limited (supra) and the decision on question C in the said case and the effect thereof. It also appears that decision in the case of K.K. Enterprises (supra) was appealed against but without success by MCD. Decision in the case of Shashank Steel Industries Private Limited (supra) has been upheld by the Supreme Court in the judgment reported as MCD v Shashank Steel Industries (P) Ltd. AIR 2009 SC 967. It was pointed out that the MCD had also preferred a Special Leave Petition against the decision of Division Bench in the case of K.K. Enterprises (supra) and other cases. The decisions of the Division Bench in K.K. Enterprises (supra) were examined by the Supreme Court in the same judgment but appeals were dismissed. In case there was any contradiction or dichotomy or if the ratio of the full Bench in Shashank Steel (supra) was incorrectly applied in K.K. Enterprises (supra), it was for the MCD to highlight and question the same before the Supreme Court. The Supreme Court examined clauses of the lease deed/sub-lease deeds and has held that the lessee/sub-lessees were not owners of the vacant land, which were owned by the DDA. It was also held that
the stipulation in the sub-lease deed/lease deed that the sub-lessee/lessee is liable to pay the property tax paid by the lessor/superior lessor is merely enabling clause but do not make any difference on the question of primary liability to pay property tax under Section 120 of the Act. It was accordingly observed as under:"19. In this case, we are concerned with the question of primary liability on the vacant land during the period 1982 to 1987. During that period the factory had not come up. Therefore, there was no question of enhanced value on account of accretion taking place during the said period. Therefore, keeping in mind the restriction(s) placed on the sub-lessee we are of the opinion that this is a case of "letting". It is not the case of conferring ownership rights on the sub-lessee. Under the deed, M/s Shashnak Steel Industries (P) Ltd. W.P. (C) Nos. 3347/1987 & 1632/1988 9 remains a sub-lessee. In fact, there is forfeiture/re- entry provided for in the said lease. That right of forfeiture/re-entry can be effected either by the lessor or by the lessee which further shows that the sub- lessee is not in full enjoyment of the leasehold rights in the property in question. 20. For the aforestated reasons on interpretation of the perpetual sub-lease dated 20-2-1981, we are of the view that the said deed cannot be construed as a conveyance of leasehold rights in favour of M/s Shashnak Steel Industries (P) Ltd. We are of the view that this case is that of letting. Therefore, we do not find any infirmity in the impugned judgment. We also agree with the view taken by the Delhi High Court that a bare perusal of the deed would show that the condition imposed on the sub-lessee to pay tax is only as a matter of indemnification and it would not indicate ownership of the leasehold rights in favour of the sub-lessee. 21. Coming to the interpretation of the provisions of Section 120(1) of the said 1957 Act, at the outset we may state that the language of the said section suggests that the intention of the legislature in fixing primary liability of property tax upon the owner of the land is to facilitate the collection of property tax. It is not unreasonable for the legislature to impose the primary liability upon the lessor and to give him the right of recoupment. 22. In the present case, we are concerned only with the question as to whether the Corporation was right in imposing primary liability to pay property tax on the sub-lessee under Section 120(1)(c) of the said 1957 Act. Whether the liability was on Mohan Cooperative Industrial Estate Ltd., is not required to be gone into by us because that is not the case of the Corporation and also because the lease between the President of India and Mohan Cooperative Industrial Estate Ltd. dated 20-3-1980 was not produced before us. We also do not know the basis on which premium was payable by the lessee to the lessor. 23. On a bare reading of Section 120(1)(c), in the context of the deed dated 20-2-1981, we find that the said deed did not operate as a conveyance and that the industrial plot was let out to M/s Shashnak Steel Industries (P) Ltd. Since there was letting in favour of the said Company, Section 120(1)(c) of the said 1957 Act did not apply. 24. For the aforestated reasons, we see no infirmity in the impugned judgment of the Delhi High Court. Accordingly, the civil appeal filed by the Corporation is dismissed with no order as to costs." W.P. (C) Nos. 3347/1987 & 1632/1988 10 11. The clauses of the lease deed dated 19th March, 1982 placed on record are similar to the clauses of the lease/sub-lease which were interpreted by the Supreme Court in the case of Shashank Steel Industries Private
Limited (supra) including Gold Construction Company. No doubt, the petitioner No. 2 had paid premium for acquiring the leasehold rights but the petitioner No. 2 is liable to pay annual lease rent as fixed. There is stipulation that the lessee shall not sub-let, transfer, assign or otherwise part with possession of the whole or any part of the plot without consent of the lessor, who has absolute discretion to refuse consent. There is also stipulation for payment of 50% unearned increase in value of the land and the clause states that no consent shall be given for a period of ten years unless exceptional circumstances exist. On a consent being given, the lessor can impose terms and conditions as the lessor may think fit. Even for mortgaging of the property, permission is required with the pre-emptive right to the lessor to purchase, mortgage or charge property along with building or part thereof. There is restriction on transfer of the lease of the hotel, with right to the lessee but with prior permission to rent, sell or transfer commercial floor space as described in clause 2 of the architectural control restricted to 7% of the permissible floor space. 12. In view of the aforesaid discussion, it is held that the petitioner No. 2 is not covered by clause 120(1)(c) of the Act and will not be liable to pay vacant land tax till the date the building was constructed on the said land. The petitioners have filed on record along with the writ petition, letter dated 11th February, 1983 written by them to the Joint Assessor and Collector, MCD stating that the building was occupied on 18th November, 1982 (at partly completed stage). The petitioner will be liable to pay property tax on vacant land with effect from the said date. It is also clarified that this decision will not affect any assessment order or proceedings relegated on completion of construction of building and or its occupation. If any such proceedings were initiated, findings recorded in this judgment shall not affect the outcome W.P. (C) Nos. 3347/1987 & 1632/1988 11 thereof. As clarified, the petitioner would be liable to pay property tax on vacant land with effect from 18th November, 1982. 13. Section 116(2) of the Act has been quoted above and stipulates that rateable value of any land, which is capable of being built up or on which building is in process of erection, shall be fixed at 5% of the estimated capital value of such land. Relying upon decision of the Supreme Court in Godhara Borough Municipality, Godhara versus Godhra Electricity Company Limited, AIR 1968 SC 1504 and judgment of this Court in Indian Oil Corporation versus Municipal Corporation of Delhi, 1997 1 AD (Delhi) 503 it was contended that estimated capital value of vacant land has to be calculated as per contractors method explained in Ryde on Rating and should be limited to value of land as per the existing use. The said contention cannot be accepted. Judgment of the single Judge of this Court in the case of Indian Oil Corporation (supra) has been over-ruled by a Division Bench of this Court in the Judgment dated 26.7.2005 reported in 2005 (122) DLT 607. The Division Bench has held that the contractor s method cannot be applied where assessment is of capital value of vacant land and observed as under:"5. The contractor's method envisages five stages which have been taken note of by the learned single Judge. The first stage is the estimation of the cost of construction of the building. The second stage is to make deduction from the cost of construction to allow for age, obsolescence and any other factors necessary to arrive at the effective capital value. The third stage is to estimate the cost of the land. The fourth stage is to apply the market rate or rates at which money can be borrowed or invested to the effective capital value of the building and the land. The fifth stage is to consider whether the result of the fourth stage really represents what the hypothetical tenant would pay for the annual tenancy on the statutory terms and to make any necessary adjustments. 6. x x x x 7. x x x x
8. The cases where contractor's method have been made applicable are not in respect of the vacant land but where the building had been constructed upon. W.P. (C) Nos. 3347/1987 & 1632/1988 12 There is no dispute that the value of purchase of the rights in respect of the land by the respondent from the DDA are available. It is this value which has been applied in the determination and considered by the learned Addl. District Judge, Delhi who has approved of this methodology. It cannot be said in such a case that the price of the land is 'mething more' is liable to be excluded from the capital value" 14. The petitioner No.2 in the present case had purchased the leasehold rights of the land in question in an open auction. It is not possible to accept the contention of the petitioners that the bid price paid by the petitioner No. 2 is not the market price but more than the actual market price. This argument does not appeal, as no person will pay or bid and purchase land at a price more than the actual market price and suffer a loss. Market price of a particular piece of land depends upon number of factors including clarity of title, the seller involved, nature of transfer, stipulation or conditions in the lease etc. The price paid by a willing buyer to a willing seller in an open auction is the best indicator of the market price of the said plot/building in the hands of the said buyer in the auction. The auction bid may not be the best indicator of the actual market price in case of transactions between third persons as in such case market price can get depressed for a number of reasons; risks relating to clarity of title, seller involved etc. Actual bid price paid by the petitioners is the best evidence of the market value of the land. The petitioners had given bid and purchased the leasehold rights in land. Auction bid amount paid by a third person is not being applied to compute market value of land in the case of the petitioners. The decisions relied upon by the petitioners do not relate to cases of self purchase of land/building by an assessee in an open auction, but relate to cases where auction price was relied upon in third cases to compute market value or price of land on the date of commencement of construction. In such cases, it has been held that auction price has to be discounted and may not be the true reflector of the actual market price, when a sub-lessee or a lessee of DDA wants to sell the property to a third person and the sale is not directly made by the lessor/superior lessor himself. The decisions in Municipal Corporation of Delhi versus K.P. Gupta, 1990 (2) Delhi Lawyer 337(DB) and W.P. (C) Nos. 3347/1987 & 1632/1988 13 in Raj Kumar & Ors. V. Haryana State & Ors. AIR 2007 SC 3124 are distinguishable. The ratio of these decisions will not be applicable to cases where the assessee himself has purchased a plot of land in an open auction. In such cases, the bid price itself is a true and correct indicator and is the actual market price of land. 15. The stamp duty for registration is to be paid to acquire title or interest in land as per the provisions of Section 54 of the Transfer of Property Act, 1882 and the Indian Stamp Act, 1898. It is a pre-condition for acquiring a valid title. The stamp duty is not paid after a person has acquired title or post acquisition of title or right. It is, therefore, not possible to accept the contention of the petitioners that the component of stamp duty paid by the petitioner No.2 for registration of the lease deed should not be included to compute the market value of land. Stamp duty, unless a contract is to the contrary, is to be paid by the purchaser/lessee. As payment of stamp duty is a condition precedent for acquiring interest under a written lease deed, the said amount has to be added to the auction bid amount to compute the actual market value of land unless the said amount has to be borne and paid by the lessor. Without payment of stamp duty, valid and complete interest as per the written instrument is not transferred to the lessee. In the present case, learned counsel for the petitioners submitted that during the period in question and till the year 2000, in a large number of cases, land/properties were sold/transferred on the basis of Power of Attorney, General Power of Attorney, Agreement to Sell, etc. without execution of a sale deed and payment of stamp duty. It was submitted that in such cases market value of land is not taken by including the stamp duty payable on transfer under the Stamp Act. In other cases, if the stamp duty is taken into account, this would result in discrimination. The so called "transfers" by execution of Agreement to Sell, Power of Attorney, etc. are not "transfers" within the meaning of Section 54 of the Property Act, 1982 (TPA for short). Such transfers do not confer a valid and a legal title on the transferee and are imperfect and only legal protection is available under Section 53 A of the TPA Act and the Contract Act, 1872. In such cases the rights of the "transferee" are far inferior than rights of a purchaser with stamped instrument of transfer in W.P. (C) Nos. 3347/1987 & 1632/1988 14
accordance with Section 54, TPA. Market value of land depends upon the marketability of the said land and in case the "title" which is transferred or transferable is imperfect or incomplete, the market value gets depressed or is lower than the market value where transfers is in accord and as per Section 54, TPA. Thus whether or not stamp duty is to be taken into consideration for computing the market value will depend on facts of each case. In the present case, the auction itself envisages execution of a lease deed and payment of stamp duty for transfer of leasehold rights in favour of the petitioner No.2. The said petitioner was aware when they gave their bid that they were to pay stamp duty for execution of the lease deed. Market value of the land therefore in the present case would include the stamp duty payable for transfer of title in favour of the petitioner No.2. Even if the petitioner No.2 was/is to transfer the land/ property to a third person, they would include the element of stamp duty paid to get the lease deed registered. Ironically, the stand of the petitioners in the writ petition is that till a lease deed was registered a valid and legal transfer was not executed in favour of the petitioner No.2. Thus the plea of discrimination fails. 16. Question of payment of water tax, scavenging tax, etc. are rendered infructuous in view of the finding that the petitioner would be liable to pay tax with effect from 18th November, 1982, the date when the building was partly constructed and occupied. Obviously, when the petitioners had occupied the building, they are liable to pay scavenging tax and water tax, etc. Challenge to vires of the provisions of the Act has been given up. Scavenging tax and water tax, etc, are taxes under the Act and have to be paid irrespective of whether adequate and proper services are rendered or provided by the Corporation. They can be avoided only if the enactment itself provides to the contrary and stipulates that the said taxes are not payable unless the said services are provided. Payment of said taxes, it is well settled, has nothing to do with the rendering or providing of services or a precondition for imposing tax by the Corporation. Thus, it is a different matter that a citizen can insist and even ask for Mandamus in case the State fails to perform its statutory obligation. The W.P. (C) Nos. 3347/1987 & 1632/1988 15 question whether a citizen has any right to stop payment of tax is not raised and not answered. There is no material or evidence to hold that the scavenging tax levied or the rate fixed is contrary to Section 114(1)(b) of the Act. In Panchshila Cooperative House Building Society Ltd v MCD 24(1983) DLT 285, a Division Bench of this Court has rejected a similar contention. 17. The Writ Petition(Civil) No. 3347/1987 is accordingly partly allowed to the extent that the petitioner would be liable to pay vacant land tax with effect from 18th November, 1982 and not for the period prior thereto. However, other aspects/pleas of the petitioner are not accepted. As clarified above, this judgment would not affect any other proceedings or order passed by the MCD assessing the land as well as building to property tax with effect from 18th November, 1982. The respondent MCD will calculate property tax payable/paid by the petitioner No.2 and if any amount is refundable, pay the same within 16 weeks from the date of judgment, failing which they will be liable to pay interest @ 10% per annum from the date of judgment till payment. WRIT PETITION (CIVIL) NO. 1632/1988 18. The petitioner No.2 had purchased leasehold rights in respect of land at Patel Nagar in an auction for Rs.40,60,000/- in the year 1976. A registered lease deed dated 3rd July, 1976 was executed by DDA in favour of the petitioner No.2. The challenge made by the petitioners on computation of the market value of land on the basis of auction bid price paid has to be rejected in view of the aforesaid discussion while deciding Writ Petition (Civil) No. 3347/1987. The petitioner No.2 had purchased the land in question in an open auction and the auction price is the best indicator and in fact the actual and true market value of land. The petitioner No.2 did not dispute the question that the bid amount was the actual and true market value of land and had paid property tax for vacant land computed on the said basis from May, 1977 onwards. In fact, the petitioner No.2 had paid property tax on vacant land computed on the basis of the auction price of Rs.40,60,000/- and registration charges of Rs.2,21,000. The contention of the petitioners, therefore, challenging and W.P. (C) Nos. 3347/1987 & 1632/1988 16
questioning the computation of market value of land in order dated 4th September, 1987 is therefore, not accepted. 19. The petitioners have impugned order dated 4th September, 1987 passed by the Assessor and Collector fixing rateable value of the property at Rs.14,57,880/- with effect from 15th July, 1981. The date 15th July, 1981 has been fixed as this was the date on which hotel on the said plot of land started operations after obtaining necessary permission/licence to run the hotel. The Assessor and Collector has been, therefore, considerate and has not taken the date of actual construction for increasing rateable value. Learned counsel for the petitioners had submitted that cost of lifts, air conditioning plant, etc., cannot be included in the cost of construction. To this extent, there is merit in the contention of the petitioners in view of the decisions of the Supreme Court in the case of Hindustan Lever Limited versus Municipal Corporation of Greater Bombay and Others, (1995) 3 SCC 716 and Krishna Mohan Private Limited versus Municipal Corporation of Delhi and Others, AIR 2003 SC 2935. However, the assessment order dated 4th September, 1987 reveals that some concession/deductions have been granted by the Assessor and Collector while computing cost of construction. Paragraph 3 of the assessment order reads as under:"3. According to the definition of the premises as per D.M.C Act, any fittings affixed to the building for the more beneficial enjoyment thereof have to be treated as a part of the premises and no deductions are permissible for the same. However, pre-operative expenses do not form part of the cost of construction. Similarly, detachable furnishings also do not form part of the building. Likewise, sophisticated sanitary fittings provided in the hotel premises can also be excluded. As per details furnished by the tax payer, pre-operative expenses of Rs. 14,00,545/- and Rs. 1,70,608/- have been debited in the building account and account and sanitary fittings. The sanitary fittings include items, like, Harsha Bath Tubes, fancy fittings & installations and soap dish. These items sjall not form part of the cost of construction. Similarly, cost of D.E.S.U. sub-station installation charges at Rs. 1,31,762 , D.G. set at Rs. 11,25,802/-, fans and coolers W.P. (C) Nos. 3347/1987 & 1632/1988 17 at Rs. 50,467/- and transformer at Rs. 3,24,480/- also do not form part of the cost of construction. The representatives of the tax payer claim that out of Rs. 23,83,878/- representing electrical equipments, these are mostly equipments required for the kitchen and are not for the purposes of the building. I have gone through the fixed assets account and do not find such items in the said account and as such a deduction of about Rs. 10 lacs shall be allowed for such items. Keeping all the factors discussed above into consideration the reasonable cost of construction of the building, after excluding the expenditure on the aforesaid items, is taken in round figure at Rs. 1,45,000,00/-." 20. The matter is remanded back to the Assessor and Collector to re- examine the question whether lifts, air conditioning plant, etc., have been excluded while computing the cost of construction. 21. Accordingly, this writ petition is partly allowed to the extent that the Assessor and Collector will re-examine the question whether cost of lifts, air conditioning plant, etc. have been included while computing the cost of construction. In case no deductions have been made, suitable amount will be deducted for computation of the rateable value. The petitioners will appear before the Assessor and Collector on 14th May, 2010 when a date of hearing for the said purpose will be fixed. The writ petitions are accordingly disposed of. (SANJIV KHANNA) JUDGE
APRIL 21st , 2010. VKR/P
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P.N. Kumar & Another Vs Municipal Corporation of Delhi & ... On 21 April, 2010

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P.N. Kumar & Another Vs Municipal Corporation of Delhi & ... On 21 April, 2010

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Indian Kanoon - http://indiankanoon.org/doc/864509/

Indian Kanoon - http://indiankanoon.org/doc/864509/

APRIL 21st , 2010. VKR/P

Indian Kanoon - http://indiankanoon.org/doc/864509/

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