Hon'ble Vinod Kumar Misra, J.
Vires of Section 174 (1) (a) of U. P. Municipal Corporation Adhiniyam, 1959 has been challenged on the ground of arbitrariness and violative of Article 14 of the Constitution.
Declaration of Rule 4, 4-A and 4-B of the Municipal Corporation (Property Taxes) Rules 2000, as amended in 2013 being arbitrary, illegal and ultra vires, the provisions of Adhiniyam has also been sought.
Petitioner a private limited Company having its registered office at Tilak Nagar, Kanpur owns a premises no. 33/33, Sardar Patel Marg, Allahabad over which it is running a hotel. With effect from 01.10.1999, the annual rental value of the premises was increased to Rs.3,61,200/-. However, on appeal filed by the petitioner, said rental value was reduced to Rs.58,187/-. Again with effect from 01.04.2003, the annual rental value of the premises was enhanced to Rs.22,48,870/-. Second appeal filed by the petitioner was allowed and the annual rental value was reduced to Rs.3,68,557/- and accordingly house tax payable by the petitioner was calculated.
State of U. P. brought an amendment in the Property Tax Rules 2000 in 2013 categorizing the fixation of the annual rental value on the basis of the location of the building, width of road where building is situated and RCC/non-RCC/Kachha type of construction. Based on the amended Property Rules, Municipal Commissioner, Allahabad finalized the list determining the annual rental value of various locations in district Allahabad.
Petitioner received a notice on 15.09.2015 issued by the Tax Superintendent, Zone-III proposing to fix annual rental value of the premises of the petitioner at Rs.38,62,454/- with effect from 01.04.2015. Objection was filed by the petitioner before the Municipal Corporation seeking an opportunity of personal hearing. On 09.02.2016, Nagar Nigam, Allahabad issued a demand notice for a sum of Rs.11,32,229.66 which included a sum of Rs.5,66,114.78 as house tax based on annual rental value of Rs.51,46,498/-. Further a sum of Rs.5,66,114.78 was shown in the notice as arrears.
Sri Rahul Agarwal, learned counsel for the petitioner, submits that Legislature could not have delegated the power of fixation of multiplier for computing the annual value of a non-residential building to the executive and left it to be fixed by Rules. Fixation of multiplier for computing the annual value being a matter of legislative policy could not have been in law delegated to the State Government. It is further submitted that since Municipal Corporation Adhiniyam fails to provide any guidelines on the basis of which the executive may determine the multiplier for computing the annual value and thus, it confers an unguided and uncanalized power on the State Government to determine the multipliers. Provision in section 174 (1) (a) providing for calculation of rent of an open area of land separately for determination of the annual value of a building is arbitrary and violative of Article 14 of the Constitution of India. It is also submitted that mandate of Section 174 (1) (b) of the Act cast a duty upon Municipal Commissioner to fix the minimum monthly rate of rent of the building and it does not postulates fixation of rates of the ward-wise of the buildings. The provision made in this regard in the Property Tax Rules for ward-wise rates of rent is de-hors the Act and is illegal and arbitrary.
Learned counsel also submits that because classification of the building and land in various groups prescribed in Rule 4-A (2) of the Property Tax Rules being not based on any studies and actual market conditions is wholly arbitrary and without any basis. It is also submitted that land appurtenant in the form of setbacks mandatorily required to be set apart under the provisions of the U. P. Urban (Planning and Development) Act, 1973 and the Building bye-laws, the same cannot be treated to be open area of land and no rental value ought to be ascribed to such a land whereas the same has also wrongly and illegally been included while determining the rental value. Fixation of monthly rental value only on the basis of ward-wise and width of road where the building is situate by the Municipal Commissioner, Allahabad without taking into consideration the four factors, namely, (i) location of the building, (ii) nature of construction of building, (iii) circle rate and (iv) current minimum rate of rent provided by Section 174 on the basis of the provision made in the Rules is not only arbitrary but also illegal as Rules cannot take away the discretion of the Municipal Commissioner to evaluate the four factors provided by Section 174 and since the Rules provided totally different factors to be taken into account renders it ultra vires the provisions of the Act.
It is next submitted that demand notice dated 09.02.2016 issued to the petitioner without deciding the objection and without granting opportunity of personal hearing renders it illegal being in violation of principles of natural justice. Lastly, it has been submitted on behalf of petitioner that in the absence of any provisions in the Municipal Corporation Adhiniyam to revise the annual rental value retrospectively, the demand of arrears for previous years is without any authority of jurisdiction.
In reply, Sri S. D. Kautilya, learned counsel appearing for the Nagar Nigam, Allahabad, submits that vires of section 174 (1) (a) has already been upheld by a Division Bench in the case of Clark Hotel Limited Vs. State of U. P. and others, 2011 (3) ADJ 18 (DB). Reliance has also been placed upon another Division Bench judgment in the case of Shiv Sewak Singh and others Vs. State of U. P. and others, decided on 25.05.2012 upholding the authority, manner and process of increase of the property tax for the year 2011-12. Based on the aforesaid two decisions of the Court, it has been contended that not only the vires of Section 174 of the Act has been upheld but the process for increase of the property tax under the Rules had also been upheld and approved.
We have considered the arguments advanced by the learned counsel for the parties and also perused the two case laws, referred to above.
In the case of Clark Hotel Limited (supra), challenge was made to Section 174 (1) (a) of the Adhiniyam 1959 as it stood prior to amendment incorporated by U. P. Act No. 29 of 2009 and thus, there was no occasion for the Division Bench in the said case to consider the issues being raised in this petition after the amendment had been enforced.
Similarly, judgment rendered in the case of Shiv Sewak Singh (supra) relied upon by the learned counsel for the respondent, challenge was made to the increase of property tax levelled in the properties situate within the municipal limits of Allahabad for the year 2011-12 on the basis of geographical information system (GIS) for identifying and calculating the property tax and fixation of annual value of the property for imposition of house-tax.
Grounds for challenging the vires of Section 174 of the Act as well as Rules of 2000, amended in 2013, urged in this petition were not subject matter of consideration before the Division Bench in the said cases as such it has no application.
In our considered opinion, the issue raised in this petition merits consideration Sri S. D. Kautilya appearing for the respondents no. 2 and 3 may file counter affidavit within six weeks.
Learned Standing Counsel representing the respondent no. 1 may file counter affidavit within the same period.
Rejoinder affidavit, if any, may be filed within two weeks thereafter.
List after expiry of the aforesaid priod.
Since the provisions of U. P. Act and the Rules framed thereunder have been challenged as ultra vires, let notice be also issued to the learned Advocate General of the State of U. P.
Considering the facts and circumstances of the case, until further orders of this Court, effect and operation of the impugned demand notice dated 09.02.2016 (Annexure '7' to the writ petition) shall remain stayed subject to the conditions that petitioner deposits a sum of Rs.2,00,000/- (Rupees two lacs) towards house tax within a period of two weeks from today. In case of default, the stay order shall stand automatically vacated.
Dcs 06.05.2016