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PETITIONER: MUNICIPAL BOARD, SAHARANPUR

       Vs.

RESPONDENT: SHAHDARA (DELHI) SAHARANPUR LIGHT RAIL CO. LTD.

DATE OF JUDGMENT:       24/11/1998

BENCH: S.B. MAJMUDAR, & M. JAGANNADHA RAO.

ACT:

HEADNOTE:

JUDGMENT: JUDGMENT -------- S.B. MAJMUDAR, J. ---------------- Municipal  Board,  Saharanpur  having  obtained  the certificate  of fitness to appel to this Court under Article 133 of the Constitution of India on 12th August,  1976,  has filed this  appeal.  While grating the certificate, the High Court has observed that the concept and meaning of the words "common compound" used in the Uttar  Pradesh  Municipalities Act, 1916 (hereinafter referred to as ’the Act’) is required to be  decided  in this appeal.  This appeal raises the same contentions which are raised in the Companion  Appeal  being Civil Appeal  No.    1218  of  1976  moved  by the very same appellant - Municipal  Board,  Saharanpur  against  Imperial Tobacco of  India Ltd.  wherein the High Court has granted a similar certificate   of   fitness.      Even   though   the certificates  are  granted  by  the High Court on the common question in both these appeals and even though our  decision of even  date  in Civil Appeal No.  1218 of 1976 will govern the present controversy, we deem it  fit  to  highlight  the facts  particular  to  the  present respondent and the other questions which were canvassed by the  learned  counsel  for the respective parties before us in this appeal. BACKGROUND FACTS: ---------------- The respondent railway company which has now  become defunct,  had  various  immovable properties situated in one complex within the Saharanpur town.  The appellant Municipal Board, duly constituted under the Act, sought to levy  house tax and water tax in connection with the buildings and lands of  respondent  railway  company  during the relevant years. The said taxes  were  sought  to  be  levied  under  Section 128(1)(i).   The  respondent  railway co., functioning since 1905, had several  properties  in  a  vast  contiguous  area within the limits of the Municipal Board.  They included the railway  station, a childerns park, a canteen, a dispensary, administrative offices,  rest-houses,  out-houses,  officers bungalows etc.    The appellant Board issued a notice to the railway company in 1960, assessing the properties to tax  on

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buildings and  also  to  water-tax.    The  appellant  Board determined the annual value with reference to clause (a)  of Section  140  of  the Act and in doing so it treated all the buildings as one unit and  all  the  land  in  the  area  as appurtenant to  the  buildings.  A number of objections were raised by the  respondent  railway  company  but  they  were rejected  by  the  Executive Officer of the Municipal Board. The railway  company  appealed  against  the  order  of  the Executive  Officer  to the District Magistrate under Section 160 of the Act, The District Magistrate  remanded  the  case back  for  proper  calculation of the house tax and directed that the general rate should  not  be  applied  to  all  the buildings  but the buildings should be divided in such a way as to arrive at a fair rate.   The  respondent  company,  or remand,  had  again  submitted to the Executive Officer that certain buildings and approach roads should be  excluded  in calculating the  area.    It  appears  that  there  was some agreement between the parties regarding the total area to be [considered for the purpose of taxation.  But leaving  aside that  agreement,  which no longer remains operative, several objections on merits were raised by the  respondent  railway company but they were all negatived.  In further appeal, the District  Magistrate,  confirmed  the order of the Executive Officer, subject to the modification that the  cost  of  the buildings  for  the  purpose  of calculating annual value be reduced by 10 per cent by  way  of  depreciation  allowance. The tax  on buildings was accordingly fixed at Rs.  3,957.75 paise.  As regards the water-tax, the Magistrate  considered that  the Municipal Board was not entitled to levy water-tax on the Railway Company.  This was on the  basis  that  there was one  hydrant within 600 feet from the railway area.  But it appeared that between the hydrant and  the  railway  area there  lay some area of the Northern Railway surrounded by a wall.   According  to  this  interference   therefore,   the distance  between  the  hydrant  and  the  premises  of  the respondent was more than 600 feet in  a  zigzag  manner  and hence the water-tax could not be levied on this complex. Against  the  said order of the District Magistrate, the respondent railway company filed a Writ  Petition  being 3508  of  1965  in  so far as it referred to house tax while Writ Petition No.  3415 of 1965 was filed by  the  appellant Municipal  Board  urging that the Railway Company was liable to water-tax.  Both these writ petitions were heard together by a learned Single Judge of the Allahabad High  Court,  who took  the  view  that  the lands of the railway company were within the radius of 600 feet from the  nearest  water-stand point  and  hence  they  had  to  be considered for imposing water-tax on the buildings of the respondent railway company situated in these lands.  To that extent, the learned Single Judge set aside the reasoning and finding  of  the  District Magistrate.  However, the learned Single Judge took the view that  so  far  as  the levy of water-tax was concerned, only those buildings in the complex of the respondent which  were within  the radius of 600 feet were liable to pay water-tax. It was also held that the assessment of water-tax had to  be done  building-wise  and  all  the  buildings  should not be treated as one unit for that purpose.  The  assessment  also had to be made as per Section 140 (a) of the Act.  So far as levy  of  house  tax was concerned, it was felt that all the buildings situated in the "common  compound"  could  not  be treated  as  one  unit  in a "common compound" and had to be taxed separately by computing the annual  letting  value  of such buildings and their appurtenants.  Resultantly both the writ petitions were partly allowed by the common order dated 27.2.1970.   That  gave rise to two special appeals moved by

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the respondent railway company being aggrieved by the common order of the learned Single Judge, in so far as the same was party against the respondent on  both  the  writ  petitions. While thee appellant Board also filed a cross special appeal being  aggrieved by the decision of the learned Single Judge regarding water-tax.   All  the  three  appeals  were  heard together  and  were  disposed  of  by a common judgment by a Division Bench of the High Court of Judicature at  Allahabad dated 22nd  July, 1974.  Against the said dicision, as noted earlier, on  the  grant  of  certificate  of  fitness  under Article 133 of the Constitution of India, the present appeal is filed by the Board. RIVAL CONTENTIONS: ----------------- Shri D.K.  Garg, learned counsel  for  the  appellant  Board submitted  that  so  far as levy of water-tax was concerned, the Division Bench of the High Court had committed a  patent error  in  taking the view that even if the water stand pipe of the Board was at a distance of 600 feet from one  of  the building  of  the  respondent  company  situated in the same "common compound" all other buildings situated in  the  very same  "common compound" and belonging to the same respondent could not be subjected to water-tax if such  buildings  were more  than  600  feet of radius from the nearest water stand pipe.  He, however, fairly stated that if it  is  held  that all  these buildings in the "common compound" were liable to water-tax by assessing water-tax, sections 140(a) and 140(b) of the Act as applicable at relevant time had to be  applied and assessment  had to be made on that basis.  So far as the house tax was concerned, it was submitted by  Shri  Garg  in support  of  this  appeal  that  all  the buildings situated within the "common compound" which belong to the same  owner respondent  should be treated as one unit for the purpose of assessing water-tax and house tax.  It  was  next  contended that in any case the 10 per cent depreciation granted by the District  Magistrate  and as confirmed by the learned Single Judge and the Division Bench on the total  assessable  value of  such  buildings  for  the purpose of house tax was ultra vires and beyond the scope of the Act  and  could  not  have been sustained  by  the  Division Bench.  On the other hand, learned counsel for the Liquidator, who is now in-charge  of the  property  of  the  respondent  defunct  private railway company, which is in voluntary winding  up,  submitted  that water-tax  could  not  be  levied  on  all  those  buildings belonging to the respondent company which were  situated  in the  "common  compound",  if  such buildings were beyond the distance of 600 feet radius from  the  nearest  water  stand pipe  and, accordingly, the Division Bench of the High Court was right in taking this view.  It was submitted  that  even assuming  that for the levy of water-tax, radius of 600 feet from the water stand pipe  for  one  of  the  buildings  may attract the  levy  of  water-tax for the entire complex.  So far as the house tax is concerned each individual house with appurtenant land was a unit by itself and all such buildings cannot be treated as one unit as tried to  be  submitted  by learned counsel  for  the appellant.  He also submitted that the grant of 10 per cent depreciation of the  assessment  of annual  letting  value  for the purpose of levy of water tax and house tax on all these buildings was  legal  and  valid. We  may  mention that learned counsel for the appellant also submitted that the special  appeals  were  not  maintainable against the  decision of the learned Single Judge.  However, this contention cannot be countenanced for the simple reason that even the appellant,  aggrieved  by  the  order  of  the Single Judge, has also filed a special appeal and had sought

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the  decision  of  the  Division  Bench of the High Court on merits.   The  Board’s  appeal  was  also  heard  with   the companion appeals of the respondent.  Hence, this contention which is   self-destructive   cannot  be  entrained.    Even otherwise if such contention is  entertained,  it  will  not advance  the  case of the appellant, as the respondent would be well entitled to bring in challenge the main order of the learned Single Judge  directly  before  us  and  the  entire period  till  date will get excluded under Section 14 of the Limitation Act, Thus, this technical  contention  cannot  be countenanced. In view of the aforesaid rival contentions on merits of  the  appeal,  the  following  points   arise   for   our consideration:         1)    Whether  the  Division Bench of the High Court         was right when it held that only those buildings  of         the  respondent,  which  were  situated  within  the         radius of 600 feet from the nearest water stand pipe         of the appellant, could be subjected to water-tax.         2)     Whether for imposition of house tax, all  the         buildings  of  respondent  situated  in  the "common         compound" and forming part of one complex  could  be         treated as one unit for imposing house tax;         3)      Whether  10 per cent depreciation allowed by         the learned District Magistrate and as confirmed  in         the  High Court both by learned Single Judge and the         Division Bench  on  the  assessable  annual  letting         value of such buildings was justified in law; and         4)     What final order?         We will deal with these contentions seriatim. Point No.1: ----------- So  far  as  the contention concerning this point is concerned, by a detailed Judgement in  the  companion  Civil Appeal  No.1218 of 1976 decided today we have negatived this contention. For the  reasons  recorded  therein,  therefore, this contention fails. Point No.1 is, therefore, answered in the  negative  in  favour  of  the appellant and against the respondent. Point No.2: So  far as this contention of the appellant that all the  buildings  situated  within   the   "common   compound" belonging  to  the  respondent  railway  company  should  be treated as  one  unit  for  the  purpose  of  house  tax  is concerned, it becomes necessary for us to have a look at the relevant statutory  scheme.    Section 128 (1)(i) of the Act provides as under:         "128. Taxes which may be imposed (1) Subject to  any         general   rules  or  special  orders  of  the  State         Government  in  this  behalf,  the  taxes  which   a         municipality  may impose in the whole or any part of         a municipality are".         (i) a tax on the annual value of buildings or  lands         or of both." In view of the aforesaid provision, therefore, it has to  be held  that the appellant Board, subject to special orders of the State Government, is  entitled  to  impose  tax  on  the annual value  of  buildings  or  lands  or  of  both.    It, therefore, becomes clear that in the  complex  belonging  to the  respondent  as  number of buildings are situated in the "common compound", house tax can be levied by the  appellant both  on  the  buildings  and also on the other open land in which such  buildings  are  situated.    These  open   lands surrounding   the  buildings  if  not  appurtenant  to  such buildings would be a separate subject  of  house  tax  while

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buildings  with  their  appurtenant  land would form another subject of house tax.  Charge of house tax  will  settle  on all  these  buildings  and  lands  not  comprised  in  these building.   This  becomes  clear  if  we  view   Section   2 sub-section (2)  of  the  Act which defines "buildings".  It reads as under:         "(2) "Building" means  a  house,  outhouse,  stable,         shed, hut or other enclosure or structure whether of         masonry  bricks,  wood,  mud,  metal  or  any  other         material  whatsoever,  whether  used  as   a   human         dwelling  or  otherwise,  and includes any verandah,         platform,   plinth,   staircase,   doorstep,    wall         including  compound  wall other than a boundary wall         of the garden or agricultural land  not  appurtenant         to a house but does not include a tent or other such         portable temporary shelter." The  said  definition  has  to  be  read  with   the definition   of   the   term  "compound"  under  Section  2, sub-section (5). The said term reads as under:            "5.  "Compound" means land, whether enclosed or                not, which is the appurtenance of a building                or the common appurtenance of several                buildings". On  a  conjoint  reading  of  these provisions therefore, it becomes clear that before the  appellant  Board  can  impose house  tax  under  Section  140(a)  on any property situated within its municipal limits if it is a "building"  the  unit of  tax  would  be  the  building  concerned  including  its compound wall and the compound wall would also cover  within it  the  land  situated  in the said compound provided it is appurtenant to the building or a "compound"  appurtenant  to the several  buildings.    It is, therefore, obvious that if the "common compound" in which the housing complex belonging to the common owner is situated is not  an  appurtenance  to several  buildings  within  that complex, then the said land cannot be said to be a part and parcel of the  building  for the purpose  of  house  tax.    For  imposing  house  tax on buildings under Section 140(1)(a) it has to  be  shown  that the buildings with their common appurtenant land or the land in  common appurtenance to several buildings situated nearby are available for imposing such a tax thereon.  It  is  only such  appurtenant  land which can form part of the buildings for attracting house tax assessment proceedings.  But if the "common compound" in which such buildings  with  appurtenant lands  are  situated also includes land which cannot be said to be a common appurtenance to  several  buildings  situated therein  or  separately  appurtenant  to any given building, such land would be outside the sweep of the term "building". Such land, however, on its own could  be  legitimately  made the  subject  matter  of  separate  levy  of house tax as an independent unit being open land.    As  seen  from  Section 140(1)(b)  itself  as the Board can impose the tax on annual value of lands which may not be covered by the sweep of  the definition of  the term "building".  Once that conclusion is reached, it becomes obvious that all the buildings  situated along  with their appurtenant lands in one "common compound" belonging to the same owner cannot be treated  as  one  unit for  the  purpose  of  imposing  house tax under Section 128 (1)(i).  The reasoning of the High Court in this  connection cannot be  found fault with on the scheme of the Act.  It is pertinent to note that "common compound" which  is  relevant for  the water-tax as per Section 129 of the Act to which we have made a detailed reference while deciding the  companion appeal No.     1218  of  1976  is  conspicuously  absent  in connection with imposition of house tax on the annual  value

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of  buildings  or  lands  or  both  as  found in Section 128 (1)(i).   We,  therefore,  endorse  the  reasoning  of   the Division  Bench  of  the  High  Court  which  rejected  this contention of the appellant Board.  Point No.2 is  therefore answered in the negative against the appellant and in favour of the respondent. Point No.3: ---------- That  takes  us  to  the   last   main   point   for consideration.   It has to be kept in view that house tax is to be imposed under Section 128 (1) (i) on the annual  value of buildings  or  lands  or  of  both.  Assessment of annual value has to be done according to the requirement of Section 140 sub-section (1) which defines "annual value" as under:         "(1) "Annual value" means         (a)  in  the  case  of  railway  stations,   hotels,         colleges,  schools,  hospitals,  factories and other         such buildings, a proportion not exceeding five  per         centrum  to  be fixed by rule made in this behalf of         the sum obtained by  adding  the  estimated  present         cost of exacting the building 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  municipality  is  let         for  a  sum  less than its fair letting value, might         reasonably be expected to let from year to year." It  becomes  obvious in the light of the aforesaid provision that up to the limit of 5 per cent of the annual value,  the Board  can  impose  house  tax on immovable properties, like railway stations, hotels, colleges,  school,  hospital  etc. mentioned  in  the  said  provision  but  for  doing  so the estimated present cost of erected buildings concerned has to be kept in view and also the estimated  value  of  the  land appurtenant  thereto is also to be taken into consideration. Now, the phrase "estimated  present  cost  of  erecting  the building"  is entirely differently worded as compared to the phrase "estimated value of the  land  appurtenant  thereto". The  value  of  the building as well as the land appurtenant once arrived at will have to be added for  computing  5  per cent  ceiling  up  to which by rules the Municipal Board can impose house tax on the buildings concerned.  It becomes  at once  clear  that when appurtenant land is to be valued it’s valuation has to be made as per its market  value  obtaining at the  time  of assessment.  But so far as the value of the building  to  which  such  land  is  appurtenant  goes,  the computation  has to be made on the estimated present cost of erecting the building to be subject to  the  tax.    Meaning thereby,  at the time of assessment the cost of construction of such building in its existing state  is  to  be  kept  in view.  Hence such cost must be arrived at by keeping in view the  then  existing state of the building and the cost which would  be   incurred   for   erecting   such   a   building. Consequently  it  becomes  obvious that while estimating the present  cost  of  erecting  the  building  concerned,   the assessing  authority  has  to  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.  It is obvious that if the building is an old

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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. Consequently,   it   cannot   be   said  that  10  per  cent depreciation allowed  by  the  District  Magistrate  and  as confirmed  by  the High Court on the total estimated cost of the building for bringing it within the assessable  tax  net of   house  tax  was  an  exercise  which  was  ultra  vires provisions of the Act or  beyond  the  jurisdiction  of  the assessing authority.  On the facts governing the case, it is seen  that  the railway station belonging to the respondent, was as old as 1905, there may be other buildings within  the complex  which  might  have  seen the light of the day years before the time of assessment.  Naturally, they would not be new buildings which could have said to have been put up only at the time of assessment proceedings.  They were  obviously old buildings.    It is not the case of the appellant or any of them that these buildings  were  new  buildings  recently constructed  when  assessment  proceedings  were  initiated. Consequently, a flat rate of 10  per  cent  depreciation  as granted  by  the  District  Magistrate  while  computing the annual value for house tax purposes, in  the  present  case, cannot said to be an unauthorised exercise.  The third point for  determination,  therefore,  has  to  be answered in the affirmative against the  appellant  and  in  favour  of  the respondent. Point No.4: ----------         As   a  result  of  the  aforesaid  discussion, this appeal succeeds so far as  the  first  point  is  concerned. However,   it  stands  rejected  so  far  as  the  last  two contentions are concerned.  The  appeal  is  partly  allowed accordingly and the Judgment and Order of the Division Bench will  stand  modified in terms of this judgment in favour of the appellant Board. Before parting with this appeal, we may mention that during the  pendency  of  this  appeal,  by  an interim  order dated 20th January, 1977, a three Judge Bench of this Court, directed as under:         "There  will  be  stay  of  restitution  pending the         disposal of the appeal.                 The appellant undertakes not  to  press  the         demand  for  the  recovery  of  the  amount  of  Rs.         98,950/- and any future  dues  from  the  respondent         during the pendency of the appeal in this Court.                The  hearing  of  the appeal is expedited and         the same shall be  listed  for  hearing  along  with         C.A.1218/76."     It  is obvious that the aforesaid order in so far as the interim stay deals with the right of the appellant Board  to impose  water-tax  on  all  the respondent is concerned, now there will remain no occasion for  the  appellant  Board  to grant  any  restitution to the respondent so far as recovery of water-tax for the relevant time in dispute is  concerned. It  will  also  be  open to the appellant Board to press for payment of recovery of water-tax which has  remained  unpaid by   the   respondent  for  the  relevant  year  subject  to assessment of all buildings as separate units  of  taxation. However,  as  the appellant fails on the question of levy of house tax as decided against it while answering point  no.2, so  far as house tax levy is concerned, it will abide by the

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result of this appeal which is partly  decided  against  the appellant  and will be assessed accordingly for the relevant years. The appeal is partly allowed as aforesaid. No costs.