1. Heard Sri Ashok Trivedi, Advocate for petitioner and perused the record.
2. The dispute giving rise to present writ petition, filed under Article 226 of the Constitution of India, relates to determination of "Annual Rental Value" (hereinafter referred to as the "ARV") and therefrom determining house tax under the provisions of U.P. Municipal Corporation Act, 1959 (hereinafter referred to as the "Act, 1959") on the property in dispute, which is a commercial building, bearing No. 15/29A, Civil Lines, Kanpur.
3. The relevant factual background for the purpose of present case commences from notice dated 27.03.2000 issued by respondent no. 3 proposing ARV of aforesaid property as Rs. 12,70,125/- and it is said that the house tax would be taken thereon accordingly w.e.f. 01.09.1994. The details to arrive at proposed ARV, mentioned in the notice are as under:
(1) Estimated current value of property after depreciation = Rs. 1,00,44,648/-.
(2) Estimated value of land = Rs. 81,00,000/-.
(3) Total value of land and building (1+2) = Rs. 1,81,44,648/-.
(4) Annual value at the rate of 7% = Rs. 12,70,125/-.
4. The petitioner submitted objection dated 18.04.2000 stating that the ARV proposed in notice is extremely excessive. No basis has been disclosed for arriving at the aforesaid value. As per valuer/engineer's report obtained by petitioner the ARV comes to Rs. 45,66,000/-. It was also said that under Section 174-A, only such value of land is to be included which is appurtenant to the building and not the land over which building is standing. It is said that this aspect has not been taken care of.
5. The respondent no. 3 without passing any reasoned order treated aforesaid proposed value of land and the ARV of building as mentioned in the show cause notice dated 27.03.3000 as final and communicated a cryptic order dated 06.07.2000 to petitioner stating that as per decision of committee, ARV of building, finally determined, is Rs. 6,50,000/-.
6. Aggrieved thereto, petitioner preferred an appeal under Section 472 of Act, 1959, i.e., Assessment Appeal no. 147 of 2000. The appeal was considered by Judge, Small Cause Court, Kanpur Nagar and vide judgment dated 16.05.2002, appeal was dismissed. The First Appellate Court observed that petitioner's valuer has taken market value of land as Rs. 3000/- per sq. meter while Nagar Nigam has taken it as Rs. 6000/- per sq. meter, which is slightly higher but for other aspects, First Appellate Court finds valuation report of counsel of Nagar Nigam, correct, hence no interference called for.
7. The petitioner then preferred second appeal, i.e., Second Appeal No. 31 of 2002, under Section 476 of Act, 1959 before District Judge, Kanpur Nagar which has now been decided vide judgment dated 27.08.2009 and learned Additional District Judge, Court No. 9, Kanpur Nagar has also confirmed the aforesaid assessment made by respondent no. 3.
8. The Second Appellate Court (hereinafter referred to as the "court below") has noted that total area of land is 1350 sq. meter, which includes the land over which building exists as also the appurtenant land. For the purpose of assessment of ARV it has held that value of entire land, is to be taken and not only the appurtenant land excluding the land over which building exist. The court below found that value of land has been taken at Rs. 6000/- per sq. meter and the value of building has been taken as Rs. 5250/- per sq. meter. The said value has been taken in the light of Government Order dated 28.04.1997 which provides that for the purpose of valuation of a commercial building, it should be taken one and half times of valuation of commercial building. The Nagar Nigam has taken valuation of commercial building as Rs. 3580/- per sq. meter while petitioner himself disclosed as Rs. 3625/- sq. meter, therefore, Nagar Nigam by taking one and half times has made valuation as Rs. 5250/-, which is absolutely correct. The said land cannot be valued as per circle rate determined by Collector. It is also found that depreciation of 10% by treating building 10 years old has already been allowed by Nagar Nigam and there is no justification for deducting the cost of water, electricity and sanitary etc. as 10% supervision charges claimed by petitioner.
9. Respondent no. 3 has filed a counter affidavit in which it has basically denied pleadings of petitioner and said that estimated value of land appurtenant will include the land over which building is erected.
10. In the rejoinder affidavit filed by petitioner it has reiterated that has been pleaded in writ petition.
11. The arguments advanced by learned counsel for the petitioner are:
(1) The land over which building has been erected, its value has been taken into account and, therefore, impugned orders ignoring this aspect are illegal.
(2) The liability of tax has been imposed upon petitioner w.e.f. 01.09.1994 and, therefore, Government order issued subsequently, i.e., 28.04.1997 would have no application in the case in hand inasmuch as tax liability has to be determined on the date as the provisions were available on that date.
12. Learned counsel appearing for respondents, on the contrary, sought to support the impugned orders for reasons stated therein and submitted that there is no justification to exclude the land over which building is constructed for the purpose of determining ARV and the impugned orders do not suffer any infirmity, legal or otherwise, hence writ petition deserved to be dismissed.
13. Besides making oral submissions both the parties have also placed on record written arguments.
14. I have heard learned counsel for the parties and perused the record.
15. Though specifically it has not been said anywhere in the writ petition, counter affidavit or rejoinder affidavit as to what is the covered area and open land but in written arguments it has been disclosed that total land is 1350 sq. meter, out of which 536 sq. meter is the land over which building has been constructed and rest 814 sq. meter is open land. This fact during the course of arguments has not been disputed by learned counsel appearing for respondent no. 3.
16. Section 172 of Act, 1959 prescribes taxes to be imposed under this Act and says that, for the purpose of Act, 1959, subject to provisions thereof, and Article 285 of the Constitution, the Municipal Corporation shall impose taxes. There are several kinds of taxes referred to in sub-section (1) and (2) but this Court is concerned, in the case in hand, to "Property Taxes" provided in sub-section (1)(a) of Section 172.
17. Sub-section (3) says that taxes shall be assessed and levied in accordance with the provisions of Act, 1959 and the rules and bye-laws framed thereunder.
18. The kind of property taxes leviable under Section 172(1) are provided in Section 173, which reads as under:
"173. Property taxes leviable.-(1) For the purposes of sub-section (1) of Section 172 property taxes shall comprise the following taxes which shall, subject to the exceptions, limitations and conditions hereinafter provided, he levied on buildings and lands in the City-
(a) a general tax which may be levied, if the Corporation so determines, on a graduated scale;
(b) a water tax leviable in areas where water is supplied by the Corporation;
(c) drainage tax leviable in areas provided with sewer system by the corporation;
(d) a conservancy tax in areas is which the Corporation undertakes the collection, removal and disposal of excrementitious and polluted matter from privies, urinals and cesspools.
2. Save as otherwise expressly provided in this Act or rules made thereunder, these taxes shall be levied on the annual value of buildings or land as the case may be;
Provided that the aggregate of the property taxes shall in no case be less than 22 percent and not more than 32 percent of the annual value of the building or land or both assessed to such taxes, so however, that the general tax shall not be less than 10 per cent and not more than 15 per cent, the water tax shall not be less than 7.5 per cent and not more than 12.5. per cent, the drainage tax shall not be less than 2.5 per cent and not more than 5 per cent and the conservancy tax shall not be more than 2 per cent of the annual value."
(emphasis added)
19. A bare perusal of sub-section (2) makes it very clear that property taxes under sub-section (1) shall be levied on annual value (i.e., ARV) of building or land, as the case may be.
20. Term 'building' has been defined in Section 2(6) of Act, 1959 and reads as under:
"(6) "building" includes a house, out-house, stable, shed, hut and other enclosure or structure whether of masonry, bricks, wood, mud, metal or any other material whatever, whether used as a human dwelling or otherwise, and also includes verandahs, fixed platforms, plinths, door-steps, walls including compound walls and fencing and the like but does not include a tent or other such portable temporary structures." (emphasis added)
21. Similarly, term 'land' has been defined in Section 2(33), which reads as under:
"(33) "land" includes land which is being build upon or is build upon or is covered with water, benefits to arise out of and things attached to the earth or permanently fastened to anything attached to the earth and rights created by legislative enactment over any street."
22. Term "annual value" used in sub-section (2) of Section 173 has been defined in Section 174.
23. Section 174 has undergone several amendments. Prior to 21.01.1987, i.e., U.P. Act No. 3 of 1987, Section 174 as it was, read as under:
"174. Definition of "annual value".-- "Annual value" means--
(a) in the case of railway stations, colleges, schools, hostels, factories and other such buildings, a proportion not below 5 per cent to be fixed by rule made in this behalf of the sum obtained by addition the estimated present cost of erecting the building, less depreciation at a rate to be fixed by rule, to the estimated value of the land appurtenant thereto, and
(b) in the case of a building or land not falling within the provisions of clause (a) the gross annual rent for which such building, exclusive of furniture or machinery therein, or such land is actually let, or where the building or land is not let or in the opinion of the assessing authority is let for a sum less than its fair letting value, might reasonably be expected to be let from year to year:
Provided that where the annual value of any building would, by reason of exceptional circumstances, in the opinion of the Mahapalika, be excessive if calculated in the aforesaid manner, the Mahapalika, be excessive if calculated in the aforesaid manner, the Mahapalika may fix the annual value at any less amount which appears to it equitable:
Provided further that where the Mahapalika so resolves, the annual value in the case of owner occupied building and land shall for the purposes of assessment of property taxes be deemed to be 25 per cent less than the annual value otherwise determined under this section."
24. Section 174 as it initially stood provided that ARV for commercial and non-residential buildings like, railway stations, colleges, schools, hotels, factories and similar other buildings would be computed by, (i) the estimated cost of erecting building; (ii) depreciation as per prescribed extent would be reduced from estimated cost of erection of building; (iii) the value of appurtenant land shall be estimated; (iv) value of erection of building less depreciation and the value of land appurtenant would be the basis to take a proportion thereof, which is not below than 5% of such total cost.
25. In respect of a building not covered by Clause (a) the ARV would be computed by taking a gross annual rate by which such building (excluding furnitures or machinery, if any) or appurtenant land actually let, is excluded. Where the building or land is not actually let out, then it would be opinion of the Assessing Authority, a fair letting value, to which such building or land is expected to be let out from year to year.
26. In Nagar Mahapalika of the City of Kanpur Vs. The Additional Commissioner, Allahabad Division at Kanpur and others, 1963 ALJ 922 the building was initially let out for residential purposes and thereafter it was used as a Tannery with commercial purpose. The question arose, whether it would be covered by Section 140(1)(a) or (b). Hon'ble Gyanendra Kumar, J. after comparing the two sub-clauses of Section 140(1) of Act, 1916 held that scheme and arrangement of Section shows that building has been divided into two categories, i.e., those used as railway stations, hotels, colleges, schools, hospitals and factories etc. and those not used as such. Meaning thereby a building can fall either in category 'A' or 'B' and both are mutually exclusive. One excludes the other and there is no via media. The determining factor is the character in use to which a building is put at the relevant time. The moment a building simplicitor is used for any of the purposes contemplated by category 'A', would immediately be governed by Clause 'A' and not 'B'. For determining ARV under Clause 'A' a proportion not exceeding 5% of estimated present cost of erection of building plus estimated value of land appurtenant would be taken.
27. The manner of determination of ARV under Section 140(1)(a) came to be considered by a Division Bench in Geep Flashlight Industries Ltd., Allahabad Vs. Nagar Mahapalika, Allahabad, 1981 UPLBEC 499. This Court after referring to Section 140(1)(a) and Section 174(a) of U.P. Municipalities Act, 1916 said:
"For purposes of buildings falling within Clause (a) of Section 174 of the Adhiniyam or Section 140 of the U.P. Municipalities Act, the basis for determination of the annual value is to estimate the cost of construction of an existing old building of the same type, design and dimension and therefrom to deduct depreciation at the rate to be fixed by the rules. The cost so calculated would represent the present cost of erecting the building and the annual value is to be determined at not below 5 per cent. of the same."
28. The phrase "estimated present cost of erecting the building" was also explained by this Court by referring to an earlier decision of this Court in Union of India Vs. Municipal Board, Lucknow, AIR 1957 All 452 wherein it was held:
".....these words connote that the cost of the building should be calculated as if a new building were to be erected on the date of assessment but allowance should be made for depreciation in assessing the value depending upon the condition of the building. There may be buildings which may be only ten years old but their condition may have become very bad because they were not maintained properly while there may be other buildings much older but properly maintained which would have a much lesser depreciation in their value. The assessing authority should, therefore, see that the depreciation depending upon the condition of the building is taken into consideration on the basis of the cost of erection on the date, when the assessment has to be made."
29. This Court also held that cost of building is to be calculated on the basis of present cost in erecting a new building of the same type, design, etc., and from the cost so arrived, depreciation is to be deducted. For determining the rate of depreciation the condition of the building is to be taken into consideration. Thereafter, the estimated value of the land appurtenant to building is to be added to such estimated cost.
30. By U.P. Act No. 3 of 1987, Clause (a) was substituted and the words "and other such buildings" were changed by adding the words "commercial buildings and other non-residential buildings" and the amended Section 174(1)(a), w.e.f. 21.01.1987, reads as under:
"(a) in the case of railway stations, colleges, schools, hostels, factories, commercial buildings, and other non-residential buildings, a proportion not below 5 per cent, to be fixed by rule made in this behalf of the sum obtained by adding the estimated present cost of erecting the building less depreciation at a rate to be fixed by rules, to the estimated value of the land appurtenant thereto, and"
31. The amendment in question, as above, appears to have been made so as to make it clear that Clause (a) was in respect of buildings which were not residential and Clause (b) was for residential buildings and land.
32. Further amendment came by U.P. Act No. 17 of 1999. The existing Clauses (a) and (b) were put under sub-section (1) and sub-section (2) was inserted therein. Similarly, Clause (b) was also substituted. The newly inserted sub-section (2) is not relevant for our purpose. Clause (a) of Section 174(1) continued to be the same and Clause (b) which was substituted by U.P. Act No. 17 of 1999, reads as under:
"(b) in the case of a building or land not falling within the provisions of clause (a), twelve times the value arrived at on multiplying the carpet area of the building, or the area of the land, by the applicable minimum monthly rate of rent per square foot of the carpet area in the case of building or the applicable minimum monthly rate of rent per square foot of the area in the case of land, as the case may be, and for this purpose the minimum monthly rate of rent per square foot shall be such as may be fixed once in every two years by the Mukhya Nagar Adhikari on the basis of the location of the building or the land, nature of the construction of the building, the circle rate fixed by the Collector for the purpose of the Indian Stamp Act, 1899 and the current minimum rate of rent in the area for which such building or land and such other factors, and in such manner, as may be prescribed:
Provided that where the annual value of any building would, by reason of exceptional circumstances, in the opinion of the Corporation, be excessive if calculated in the aforesaid manner, the Corporation may fix the annual value at any less amount which appears to it equitable.
Explanation I.--For the purpose of calculation of annual value the carpet area shall be calculated as under:--
(i) Rooms--full measurement of internal dimension;
(ii) Covered Verandah--full measurement of internal dimension;
(iii) Balcony, Corridor, Kitchen and Store--50 per cent measurement of internal dimension;
(iv) Garage--one-fourth measurement of internal dimension;
(v) Area covered by bathroom, latrines, portico, and staircase shall not form part of the carpet area.
Explanation II--The standard rent, the agreed rent or the reasonable annual rent of a building for the purposes of the Uttar Pradesh Urban Buildings (Regulations of Letting, Rent and Eviction) Act, 1972 shall not be taken into account while calculating the annual value of the building." (emphasis added)
33. The aforesaid amendment do away to the cost of building as such for which it is let out and instead provides that ARV would be determined on the monthly rate of rent vis-a-vis the carpet area of the building or the area of the land. The carpet area has been explained and monthly rent per square feet is now required to be determined in general by officials of Nagar Nigam taking into account, location of the building on rent, nature or construction, circle rate determined by Collector etc. This is a substantial change in respect of determining ARV of residential building and lands.
34. Then comes a major amendment in 2009 in Clause (a) which now has also been made relatable to Clause (b). The ARV to be determined in respect of non-residential building now is 12 times of the value arrived at on multiplying with multiplier to be fixed by rules in respect of rental value prescribed for residential buildings. The "land appurtenant to building", words continued in the statute, i.e., Section 174(1)(a), have been done away and now ARV has to be calculated by taking into account "covered area of building or open area of land or both as the case may be". The multiplier is with reference to residential building, i.e., under Clause (b) but the cost of building and land both are not to be added together since word 'or' has continuously been used in Clause (b).
35. Clause (a) of Section 174(1) was again substituted by U.P. Act No. 29 of 2009 and presently, it reads as under:
"174. Definition of "annual value".--(1) "Annual value" means--
(a) in case of railway stations, colleges, schools, hotels, factories, commercial buildings and other non-residential buildings, twelve times the value arrived at on multiplying with multiplier to be fixed by rules in the monthly rate of rent per square foot of residential buildings fixed under clause (b) with the covered area of the building or open area of the land or both, as the case may be." (emphasis added)
36. In the present case we are concerned with a situation as it was prior to 2009.
37. Thus prior to 2009, in respect to building which are covered by Clause (a), and in particular the aforesaid clause as it stood on the date with effect wherefrom the assessment has been made, i.e., 01.09.1994, and the date on which notice for proposed assessment was issued or the order of assessment was passed, the only two requirements for determining annual value were there, i.e., (a) estimated present cost of erecting building (less depreciation at a rate to be fixed by Rules) and, (b) the estimated value of land appurtenant thereto.
38. The legislature knew that definition of land under Section 2(33) included the land over which construction has been erected but in its wisdom it had used the term "appurtenant land" and "cost of erection of building". The cost of erection of building, it cannot be doubted, did not include the cost of land over which building is erected. Now the only question up for consideration is, whether the term "appurtenant land" would include within itself the land over which building has been raised or not.
39. The term "appurtenant land" has not been defined under Act, 1959. Literally the word "appurtenant to" means appurtenant to or belonging to. The word does not mean adjacent to or that the proximity of land is essential. What is essential is the concept of belonging for more beneficial enjoyment of parent property.
40. What the appurtenant land, was a question considered by a Division Bench of this Court in Shahdara (Delhi) Light Rail, Co. Ltd. Vs. Municipal Board, Saharanpur, 1974 UPTC 546. This Court held, "land which falls within the curtilage of a building whereon the occupier of the building can exercise a right of way or any other right for its full enjoyment will be appurtenant to it." Reliance was placed on Trime Vs. Sturminster Rural District Council, 1938 (2) All ER 168.
41. The term "land appurtenant to buildings" in the context of Section 9 of U.P. Zamindari Abolition and Land Reforms Act, 1950 (hereinafter referred to as the "Act, 1950") came to be considered in Maharaj Singh Vs. State of U.P. and others, AIR 1976 SC 2602. The Court said that a position of subordination is something incidental or ancillary or dependant is implied in appurtenant. What is integral is not necessarily appurtenant. Then in paras 32 and 33 the Court said:
"32. Appurtenance', in relation to a dwelling, or to a school, college .... includes all land occupied therewith and used for the purpose thereof (Words and Phrases Legally Defined---Butterworths, 2nd edn). "The word 'appurtenances' has a distinct and definite meaning ....Prima facie it imports nothing more than what is strictly appertaining to the subject-matter of the devise or grant, and which would, in truth, pass without being specially mentioned: Ordinarily, what is necessary for the enjoyment and has been used for the purpose of the building, such as easements, alone will be appurtenant. Therefore, what is necessary for the enjoy- ment of the building is alone covered by the expression 'appurtenance'. If some other purpose was being fulfilled by the building and the lands, it is not possible to contend that those lands are covered by the expression 'appurtenances'. Indeed it is settled by the earliest authority, repeated without contradiction to the latest, that land cannot be appurtenant to land. The word 'appurtenances' includes all the incorporeal hereditaments attached to the land granted or demised, such as rights of way, of common ...but it does not include lands in addition to that granted'. (Words and Phrase, supra).
33. In short, the touchstone of 'appurtenance' is dependence of the building on what appertains to it for its use as a building. Obviously, the hat, bazar or mela is not an appurtenance to the building. The law thus leads to the clear conclusion that even if the buildings were used and enjoyed in the past with the whole stretch of vacant space for a hat or mela, the land is not appurtenant to the prin- cipal subject granted by s. 9, viz., buildings."
42. It is interesting to notice that decision of this Court in Shahdara (Delhi) Light Rail, Co. Ltd. (supra) was also tested by Apex Court in Civil Appeal No. 1219 of 1976 (Municipal Board, Saharanpur Vs. Shahdara (Delhi) Saharanpur Light Rail Co. Ltd., decided on 24.11.1998 and the judgment is reported in 1999(1) SCC 586. The Court said that at the time of assessment the cost of appurtenant building has to be taken as per its market value obtaining at the time of assessment and for the purpose of estimating present cost of erecting building, the Assessing Authority will keep in view the life of the building and also the fact as to when it was earlier constructed and in what present state the building is and what will be the cost of erecting a new building so as to result into erection of such an old building keeping in view its life and wear and tear from which it has suffered since it was put up. The Court has further said:
"It is obvious that if the building is an old one the present cost of erecting such a building would necessary require further consideration to what would be the depreciated value of such a buildings; if a new building is erected at the time of assessment. Such cost, obviously, has to be sliced down by giving due weight to the depreciation so as to make estimation of present cost of the new building to ultimately become equal to the erection cost of the building concerned in its depreciated state."
43. The view taken by this Court, therefore, was confirmed in appeal by Apex Court.
44. In Municipal Corporation of Delhi Vs. Rishi Raj Jain and another, AIR 2006 SC 3268, the meaning of the word 'appurtenant' as explained in Maharaj Singh Vs. State of U.P. and others (supra) has been reiterated and followed.
45. However, in none of these case, I find that any question arose which has been consciously attended by Court, "whether the cost of land over which building has been raised would be included to work out the cost of erection of building" for the purpose of determining ARV or not. To this extent I find that some observations have been made by a Division Bench of this Court recently in Writ Tax No. 208 of 2012, United Provincial Transport Co. and another Vs. State of U.P. and others, decided on 02.03.2012 in the context of Section 174(1)(a) of Act, 1959 but the Court has not expressed any final opinion and instead, dismissed writ petition on alternative remedy. Therefore, this question is left open wide as to whether the words "cost of erection of building" would include the cost of land beneath the building.
46. In wider sense the words "present cost of erecting the building" may include the material cost, labour supervision charges etc. of erection of superstructure as also the part of land over which such superstructure is made but in narrower sense it may not include the land over which such superstructure is raised. The term 'building' has been defined in the Act and a careful reading thereof shows that it does not refer to any part of land or earth over which the building is erected. It talks of superstructure which covers underground plinth, compound wall, foundation etc. but not the land as such. The word 'land' has also been defined separately and it is very wide so as to include within its ambit a "vacant land" as also the land over which a construction is raised or is covered by any other thing like water etc. including the land appurtenant etc. If we read Section 140(1)(a) in the light of definition of "building" and "land" in the Act, I am inclined to hold that cost of land beneath the building over which building is erected, was not intended to be included within the words "cost of erecting building" under Section 140(1)(a) as it was prior to 2009 though as per existing provision it now stands so included. Knowing the definition of "building" and "land" used in the statute, the legislature had used the phrase "cost of erection of building and the word appurtenant land". While using the words 'appurtenant land' wide meaning given to term "land" in the statute has not been imported under Section 140(1)(a) and legislature also knew that in the definition of "building" it has not included the "land" over which building has been raised. The cost of erection of building is normally the same, whether building is raised at place 'A' or 'B' in the same city but the cost of land may defer drastically depending upon its location, nature and other relevant factors. Therefore, inclusion of cost of land is bound to influence the cost of erection of building substantially and in normal course it ought to be included therein but without doing any violence to the plain and simple reading of statute, as it was, it is evident that cost of land over which building has been raised was not included therein, i.e., Section 140(1)(a), as it was in 1994, I find no reason to construe the above provision in a different manner so as to read it more beneficial to the taxing authority and detrimental to the person taxed. While interpreting fiscal statute, the law relating to interpretation is otherwise. In case of ambiguity, an interpretation in favour of subject which is to be taxed is to be preferred. To my mind, this discrepancy must have been noticed by legislature when it made amendment in 2009 and therefrom it is now clear that cost of land in the widest term is now the part and parcel of estimation, relevant for determination of ARV. This also supports my view that prior to 2009, the language of statute, being differently worded, it was not so included so far as Act, 1916 is concerned.
47. In the present case admittedly value of land over which construction was raised, has been included without looking to the language of statute as it then was, therefore, the impugned orders as also the ARV as determined presently cannot be sustained in its entirety. The matter requires reconsideration.
48. The writ petition, therefore, is partly allowed. The impugned judgments and orders dated 16.05.2002 and 27.08.2009 are hereby quashed. The matter is remanded to Assessing Authority to determine ARV afresh in the light of observations made above and in accordance with law.
49. No costs.
Order Date :- 09.04.2014 AK