REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION CIVIL APPEAL NOS. 6546-6552 OF 2003

PRADEEP OIL CORPORATION              ....Appellant

Versus

MUNICIPAL CORPORATION OF DELHI AND ANR ....Respondents

JUDGMENT

Dr. Mukundakam Sharma, J.

1. Whether  an  agreement  for  erection  of  oil  storage  tank  

together  with  pump house,  chowkidar  cabins,  switch room,  

residential rooms and verandah for storing oil decanted from  

the railway tankers,  which bring petroleum products  to the  

site  at  which they  are  decanted,  would amount  to  lease  or  

license,  is  one  of  the  several  questions  which  falls  for  

consideration in these appeals, which has arisen out of a Full  

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Bench decision rendered by the High Court of Delhi at New  

Delhi while disposing a batch of petitions bearing Nos. LPA 53,  

54, 55, 57 and 58/1987.

2. Before  dwelling  into  the  question  of  law  involved  

hereinabove and in order to appreciate the contentions raised  

by the parties hereto, we may notice few basic fact which has  

resulted into filing of these appeals.

3. The  appellant  herein  had  been  granted  under  the  

Government Grant Act separate and distinct licenses by the  

President of India acting through Superintendent of Northern  

Railway, Delhi for the purpose of maintaining depot for storage  

of petroleum products at a yearly license fee of Rs. 20,640/-  

and Rs. 31,000/- per annum respectively.

4. Under the aforesaid grant, the appellant had been given  

the right to erect/construct ‘petroleum installation buildings’  

consisting  of  petroleum  tanks,  buildings  and  other  

conveniences  for  receiving  and storing  therein petroleum in  

bulk, and consequently possession of land has been given.

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5. Consequent  to  the  said  agreement  the  administration  

granted ‘exclusive possession’ of the said land to the appellant  

who entered the land for the purpose and the terms mentioned  

therein in the aforesaid agreement/grant.  Consequently,  the  

appellant submitted layout building plans for the construction  

of the oil depot and the standing committee of the Municipal  

Corporation of Delhi (in short “MCD”) approved the layout plan  

for  the  construction  of  10  oil  storage  tanks  of  petroleum  

products.

6. Subsequent  to  that  the  appellant  raised  various  

constructions comprising of an administration block etc. along  

with  huge  petroleum  storage  tanks  for  storing  petroleum  

products.  A boundary wall  around the installations and the  

administrative block was also constructed. The nature of the  

construction which is stated to be wide range and extensive  

user, is more than 40 years old now.

7. The  respondent  MCD vide  its  Order  dated  17.08.1984  

passed an assessment order with regard to the property tax  

qua the aforesaid property and confirmed the rateable value  

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proposed by it.  The said assessment order was challenged by  

the appellant before the appellate Court/MCD Tribunal which  

vide its Order dated 12.7.1985 set aside the assessment order  

passed by the respondent MCD and held that the appellant is  

only a licensee in the property and is not a tenant, therefore,  

no property tax can be levied on the appellant under Section  

20(2) of the Delhi Municipal Corporation Act, 1957 (in short  

“MCD Act”).  Aggrieved by the aforesaid order of the appellate  

Court, the respondent MCD filed a writ petition. However, the  

said writ petition was dismissed by the Ld. Single Judge of the  

Delhi High Court on 05.08.1986 holding that the petroleum  

storage  tanks  do  not  fall  within  the  definition  of  building  

under  the  MCD Act.  It  was  further  held  by  the  Ld.  Single  

Judge that the grant in favour of the petitioner was a license  

and hence the petitioner is not liable for the payment of any  

property tax in respect of the land or the petroleum storage  

tanks.  Challenging the aforesaid order of Ld. Single Judge, an  

LPA was filed and subsequently, the same was referred to a  

Full Bench of High Court. The Full Bench of the High Court  

vide its impugned judgment and order dated 17.09.2002 held  

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that  the  petroleum  storage  tanks  are  a  building  and  the  

petitioner was a lessee and not a licensee in the property in  

question.

8. It was forcefully argued before us by the learned counsel  

appearing for the appellant that no property tax is payable qua  

the property in question under the provisions of section 119 of  

the DMC Act read with Article 285 of the Constitution of India,  

as the property in question is a government property. It was  

further contended that the incidence to pay property tax qua  

the  petroleum  installations  including  the  tanks  cannot  fall  

upon  the  appellant  under  section  120(2)  of  the  DMC  Act  

because the appellant is a mere licencee of government land  

having  permission  to  construct  and  consequently  having  

constructed thereupon is neither a tenant nor a lessee and the  

agreement in question does not create any leasehold right or  

tenancy in the  favour of  the  appellant.  In other  words,  the  

submission was that the agreement in question is a licence  

deed.  It  was  further  contended  that  the  petroleum  storage  

tanks/depots are not “buildings” and therefore not subject to  

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property tax.  It  was also argued that the petroleum storage  

tanks/depots  being  plant  and  machinery  are  liable  to  be  

exempted under the provisions of section 116(3) of the DMC  

Act.

9. On the other hand, the learned counsel appearing for the  

respondent  MCD submitted that  the indentures in question  

are indeed a lease and not a licence. It was argued that the  

question  as  to  whether  such  an  oil  storage  tank  would  be  

building or not is no longer res integra in view of judgment of  

the  Supreme Court  in  the  case  of  Municipal  Corporation  of  

Greater Bombay v. Indian Oil Corporation, AIR 1991 SC 686. It  

has  been  further  contended  that  that  the  question  as  to  

whether the indentures in question constitute lease or license  

so as to attract the provisions of Section 120 of the MCD Act  

would depend upon the construction thereof. It was urged that  

having regard to the nature of the interest conveyed, it would  

be erroneous to construe the instrument as a license as the  

land having been used for the purpose of  construction of  a  

building, the object thereof being clear, it could not have been  

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construed to be a license and must be construed to be a lease.  

It was further argued that it is not a case where it could be  

said that no interest in the land had been created by reason of  

the instruments in question.

10. Before  addressing  the  rival  contentions,  it  would  be  

useful to reiterate few relevant provisions of the MCD Act.

“2(3)  “building”  means  a  house,  out-house,  stable, latrine, urinal, shed, hut wall (other than   a boundary wall) or any other structure, whether   of  masonry,  bricks,  wood,  mud,  metal  or  other  material  but  does  not  include  any  portable   shelter”.

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“2(24).  “land”  includes  benefits  to  arise  out  of  land, things attached to the each or permanently  fastened to anything attached to the earth and  rights created by law over any street:

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“119.  Taxation  of  Union  properties.--(1)   Notwithstanding  anything  contained  in  the   foregoing provisions  of  this  chapter,  lands and  buildings being properties of the union shall be  exempt  from  the  property  taxes  specified  in  Section 114:

Provided  that  nothing  in  this  sub-section  shall   prevent the Corporation from levying any of the   said taxes on such lands and buildings to which   

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immediately before the 26th January, 1950 they  were liable  or treated as liable  so long as that   tax continues to be levied by the Corporation on  other lands and buildings.

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“120(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  livable  upon  the said tenant,  whether the land and building  are  in  the  occupation  of  such tenant  or  a sub-   tenant of such tenant.

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“123. Property taxes a first charge on premises  on which they are assessed.--Property taxes due  under this Act in respect of any land or building   shall,  subject  to  the  prior  payment  of  the  land  revenue if any, due to the Government thereon be  a first charge-

(a) in the case of any land or building held  immediately from the Government, upon the  interest  in  such  land  or  building  of  the  person liable  for such taxes and upon the  goods and other movable properties if  any  found within or upon such land or building  and belonging to such person; and  

(b) in the case of any other land or building   upon such land or  building and upon the   goods and other movable properties/ if any,   found within or upon such land or building  and belonging to the person liable for such  taxes.”

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11. We may also notice  the language of  Article  285 of  the  

Constitution of India which reads as follows: -

“285.  Exemption  of  property  of  the  Union  from  State taxation

(1) The property of the Union shall, save insofar   as Parliament may by law otherwise provide, be  exempt from all taxes imposed by a State or by  any authority within a State.

(2) Nothing in clause (1) shall, until Parliament by  law  otherwise  provides,  prevent  any  authority   within  a  State  from  levying  any  tax  on  any  property of the Union to which such property was   immediately  before  the  commencement  of  this   Constitution liable or treated as liable, so long as   that tax continues to be levied in that State.”

12. It would be useful to examine at this stage the definition  

of “lease” and “license” as envisaged under Section 105 of  

the Transfer of Property Act, 1882 and section 52 of the  

Indian Easements Act, 1882 respectively.

Section 105 of the Transfer of Property Act, 1882 reads: -

“105.  Lease  Defined.--A  lease  of  immovable  property  is  a  transfer  of  a  right  to  enjoy such  property,  made  for  a  certain  time,  express  or  implied,  or  in  perpetuity,  in  consideration  of  a  price paid or promised, or of money, a share of   crops, service or any other thing of value, to be  

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rendered periodically or on specified occasions to   the transferor by the transferee, who accepts the  transfer on such terms.”

On the other hand, Section 52 of the Indian Easements Act,  

1882 reads as:

“License,  defined.--Where  one  person  grants  to   another, or to a definite number of other persons,  a right to  do, or continue to do, in or upon the   immovable  property  of  the  grantor,  something  which  would,  in  the  absence  of  such right,  be  unlawful, and such right does not amount to an  easement or an interest in the property, the right   is called, a license.”

13. A license may be created on deal or parole and it would  

be  revocable.  However,  when  it  is  accompanied  with  

grant  it  becomes  irrevocable.  A  mere  license  does  not  

create interest in the property to which it relates. License  

may be personal or contractual. A licensee without the  

grant creates a right in the licensor to enter into a land  

and enjoy it. In Halsbury's Laws of England, 4th Edition,  

Vol. 27 at page 21 it is stated: -

“license coupled with grant of interest: A license  coupled with a grant of an interest in property is  not  revocable.  Such  a  license  is  capable  of  

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assignment, and covenants may be made to run  with it. A right to enter on land and enjoy a profit   a prendre or other incorporeal hereditament is a  license  coupled  with  an  interest  and  is  irrevocable.  Formerly it  was  necessary that  the   grant of the interest should be valid; thus, if the   interest  was  an incorporeal hereditament,  such  as a right to make and use a watercourse, the   grant was not valid unless tinder seal, and the  license,  unless so made,  was  therefore a mere  license  and  was  revocable  but  since  1873 the  Court has been bound to give effect to equitable   doctrines and it will restrain the revocation of a  license  coupled with  a  grant  which  should  be,  but is not, under seal.”

14. Lease on the other  hand, would amount to transfer  of  

property.  In  Associated Hotels  of  India Ltd.  v. R.N.  

Kapoor,  [1960]  1  SCR  368,  the  following  well  

established proposition were laid down by a Constitution  

Bench for ascertaining whether a transaction amounts to  

a lease or a license: -

“27.  There  is  a  marked  distinction  between  a  lease and a license. Section 105 of the Transfer  of  Property  Act  defines  a  lease  of  immovable   property  as  a transfer  of  a right  to enjoy such  property made for a certain time in consideration  for a price paid or promised. Under Section 108  of the said Act, the lessee is entitled to be put in  possession of the property. A lease is thereforee  a  transfer  of  an  interest  in  land.  The  interest  

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15. It  is quite clear that the distinction between lease and  

license is marked by the last clause of Section 52 of the  

Easement  Act  as  by  reason  of  a  license,  no  estate  or  

interest in the property is created. In the case of Qudrat  

Ullah v. Municipal Board, Bareilly, (1974) 1 SCC 202  

it was observed at p. 398 thus: -

“... If an interest in immovable property, entitling   the  transferors  to  enjoyment  is  created,  it  is  a  lease;  if  permission to use land without right to  exclusive possession  is alone granted, a license  is the legal result.”

(emphasis underlined)

16. A license,  inter  alia,  (a)  is not assignable;  (b)  does not  

entitle the licensee to sue the stranger in his own name;  

(c)  it  is  revocable  and  (d)  it  is  determined  when  the  

grantor  makes subsequent  assignment.  The rights  and  

obligations of the lessor as contained in the Transfer of  

Property Act, 1882 are also subject to the contract to the  

contrary.  Even  the  right  of  assignment  of  leasehold  

property may be curtailed by an agreement.

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17. In the present case grant has been made by the President  

of India in terms of Section 2 of the Government Grants  

Act,  1895 and the Transfer  of  Property Act,  1882 may  

have little bearing in the instant case. The former, i.e. the  

Government  Grants  Act,  1895  being  a  special  statute  

would prevail over the general statute, i.e. the Transfer of  

Property  Act,  1882.  Accordingly,  the  rights  and  

obligations of the parties would be governed by the terms  

of  the  provisions  of  Government  Grants  Act,  1895  

whereunder  the  Government  is  entitled  to  impose  

limitations  and restrictions  upon the  grants  and other  

transfer made by it or under its authority.  

18. In view of the aforesaid legal position with regard to the  

applicability  of  the  Government  Grants  Act,  we  have  

considered the grant in question after hearing both the  

parties at length and perused the entire record.

19. A bare perusal of the grant in question reveals that in the  

grant,  the  appellant  herein  i.e.  grantee  has  been  

described  as  licensee.  But  in  our  considered  view  the  

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mere use of the word “licensee” would not be sufficient to  

hold the grant in question as a license. Simply using the  

word “licensee” would neither be regarded as conclusive  

nor  determinative.  In  terms  of  Clause  (1)  of  the  said  

indenture the licensee was to have the use of a piece of  

land for maintaining a depot for petroleum goods received  

through railways but thereby his rights to deal with the  

property  and the goods brought thereon had not  been  

taken  away.  Clearly,  an  embargo  has  been  placed  as  

regards the user of the construction made thereon to the  

extent that the same would be used solely for the storage  

of petroleum products but such restriction by itself can  

also be imposed in a case of lease. The grant in question  

clearly states that the constructions are to be made as  

per  specifications  approved  by  the  Chief  Inspector  of  

Explosives which condition was also otherwise governed  

by the provisions of Explosives Act. Further, the pipelines  

are required to be laid  at  railway levels or  demised in  

favor of the grantee, where for expenses are to be paid by  

it.  It  further  sates  that  the  pipelines  are  to  be  laid  

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underground in such a manner that vehicles can pass  

over that.

20. The present appellant i.e. licensee is required to pay the  

sum specified therein which has been described as 'rent'  

in terms of Clause 7. It further reveals that the licensee is  

also required to pay all  taxes payable in respect of the  

said  land for  the  time  being  found to  be  payable  and  

proportionately and all cesses, and taxes in respect of the  

premises  applicable  to  the  land,  tanks,  works  and  

conveniences if the same be not separately assessed in  

respect  thereof.  It  further  stipulates  that  the  licensee  

shall  not  be  entitled  to  assign,  mortgage,  sub-let  or  

otherwise  transfer  the  privileges  without  previously  

obtaining the consent in writing of  the Administration.  

The  licensee  shall  not  use  the  said  land  or  any  part  

thereof  or  permit  the  same to  be used for  worship,  or  

religious  or  educational  purposes  or  for  any  other  

purpose  not  specified  in  Clause  1  thereof  but  such  a  

claim  is  not  determinative.  Clause  (9)  of  the  said  

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indenture stipulates that either party would be entitled to  

terminate the license without assigning any reasons by  

giving  to  the  other  party  at  any  time  three  calendar  

months'  notice  in  writing.  It  is  to  be  noted  that  even  

under Section 106 of the Transfer of Property Act, 1882  

no reason is required to be assigned for determining the  

lease.

21. Further, Clause 11 of the indenture in question provides  

that nothing contained herein be construed to create a  

tenancy in favor of the licensee of the said land but again  

in our considered view, the mere description of the grant  

in question is not decisive. Under the grant in question,  

the Administration has been given power under Clause  

12 to re-enter upon and retake and absolutely retain the  

possession  of  the  said  land  but  the  same  could  be  

permissible  in  law  only  upon  determination  of  grant  

which would require 3 months' prior notice. It is to be  

noted that Clause 12 further stipulates that the licensee  

shall  at  all  times  keep  the  Administration  indemnified  

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against  and  shall  reimburse  it  towards  all  claims,  

demands, suits, losses, damages, costs etc. which it may  

sustain or incur by reason of inconsequence of any injury  

to  any  person  or  to  any  property  resulting  from  any  

explosion or leakage of any petroleum kept or placed by  

the licensee upon the said land.  

22. Clause 14 of the indenture in question provides that the  

licensee shall follow all petroleum rules and regulations  

applicable  to  the  construction,  maintenance  of  petrol  

pump or stores and for public safety. It is significant to  

note  that  the  aforesaid  clause  clearly  provides  that  all  

taxes in respect of the said patrol pump, stores, buildings  

under  the  control  of  the  licensee shall  be  paid by  the  

licensee.  However,  the  rights  of  the  parties  on  

determination of the grant have been specified.

23. The aforesaid clauses of the indenture in question clearly  

shows that a bundle of rights have been conferred upon  

the grantee i.e. the appellant herein.  

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24. It is well settled legal position that a deed must be read  

in  its  entirety  and  reasonably.  The  intention  of  the  

parties must also as far as possible be gathered from the  

expression used in the document itself.

25. In Union Bank of India v. Chandrakant Gordhandas  

Shah, (1994) 6 SCC 271, an instrument was held to be  

a  deed  of  lease  as  the  lessee  was  conferred  right  to  

exclusive  possession  where  for  various  terms  of  the  

indenture which were taken into consideration for finding  

out whether the same was lease or a license. Similarly, In  

Vayallakath Muhammedkutty v. Illikkal Moosakutty  

JT  1996  (6)  665,  where  the  defendant  was  given  

exclusive  possession  of  the  disputed  premises  for  

running a hotel but was not given the permission to sub-

lease  the  property,  the  document  was  held  to  be  a  

license.

“9.  ....  this  Court  has  indicated  that  for  a  consideration as to whether a document creates  a license or lease, the substance of the document   must be preferred to the form. It is not correct to  say  that  exclusive  possession  of  a  party  is  irrelevant  but  at  the  same  it  is  also  not   

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would inter alia depend upon certain factors which can be  

summarized as follows: -

(a)  whether  a document creates a license or lease,  the  

substance of the document must be preferred to the  

form;

(b) the real test is the intention of the parties -- whether  

they intended to create a lease or a license;

(c) if the document creates an interest in the property, it  

is a lease; but if it only permits another to make use  

of  the  property,  of  which  the  legal  possession  

continues with the owner, it is a license; and  

(d)  if  under  the  document  a  party  gets  exclusive  

possession  of  the  property,  prima  facie,  he  is  

considered to be a tenant; but circumstances may be  

established which negative the intention to create a  

lease.

30. Reverting back to the factual situation of the case at hand,  

admittedly, the appellant is in possession of the buildings  

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in question since 1958. They have been permitted to raise  

huge  constructions  and the  nature  of  construction  is  of  

wide range. An administration block along with tanks for  

storing petroleum had been constructed. A boundary wall  

around  installations  and  administrative  block  had  also  

been constructed.  Admittedly,  the grantee is  in exclusive  

possession  over  the  lands  in  question  along  with  

construction thereon without any let or hindrance from the  

Administration.  Further,  the  appellant  had  been  

continuously  carrying  on  their  business  without  any  

interference from any quarter whatsoever since 1962. As in  

the instant case, exclusive possession has been granted, as  

discussed hereinbefore,  there is  a strong presumption in  

favour  of  tenancy.  That  being  the  case,  it  is  for  the  

appellant  to  show  that  despite  the  right  to  possess  the  

demised  premises  exclusive;  a  right  or  interest  in  the  

property  has  not  been  created.    The  burden  therefore  

would be on the appellant/grantee to prove contra.

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31. The aforesaid burden is  not  discharged in  the  present  

case rather for the purposes resisting its eviction from the suit  

land  in  the  proceeding  initiated  under  the  Public  Premises  

Unauthorized Occupants Eviction Act, the appellant has taken  

the stand pleading non-applicability of the Indian Easement  

Act and has themselves termed the arrangement as a tenancy  

by describing the fee as rentals.  The said factor is also a vital  

factor as on the own showing of the appellant the arrangement  

was nothing but a lease.  The appellant therefore cannot take  

up a plea by which they approbate and reprobate at the same  

time.

32. In  Street  v. Mountford, 1985 Appeal Cases 809, it was  

held that when exclusive possession is granted in lieu of  

only  rent  payable  therefore,  the  presumption  that  the  

instrument  is  that  of  a  lease  becomes  stronger.  In  the  

present case the Administration has also option to revise  

the  rent.  Had  it  been  a  case  of  mere  right  to  use  the  

property,  such  provision  would  not  have  been  there.  

Further, the manner in which the rent is to be paid is also  

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important. It is to be paid annually in a case of a license  

pure and simple, the indenture would not normally contain  

a claim that rent would be paid annually.

33. In  Capt.  B.  V.  D'Souza  v. Antonio Fausto Fernandes,  

[1989] 3 SCR 626 , this Court observed:

“However, this cannot answer the disputed issue  as it creates a license or lease, the substance of   the  document must be referred to  the  form, As  was observed by this Court in Associated Hotels  of India Ltd. v. R.N. Kapoor, [1960] 1 SCR 368 ,   the  real  test  is  the  intention  of  the  parties  --   whether  they  intended  to  create  a  lease  or  license. If an interest in the property is created   by the deed it is a lease but if the document only  permits  another  person  to  make  use  of  the   property "of which the legal possession continues  with  the  owner"  it  is  a license.  If  the  party  in  whose  favor  the  document  is  executed  gets  exclusive possession of the property prima facie  he must be considered to be a tenant: although  this factor by itself will not be decisive. Judged in  this light, there does not appear to be any scope  for interpreting Ex. 20 as an agreement of leave  and license."

34. It is true that there are indeed certain restrictions which  

have been imposed by the Administration with regard to  

the construction of the building storage tank, etc., but in  

our considered view such restrictions are not decisive for  

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the purpose of determining as to whether a document is a  

lease or license as such restrictions could also be imposed  

in case of a lease as well. In Glenwood Lumber Co. Ltd. v.  

Philips, 1904-1907 All ER (Reprint) 203, it was held:

“In  the  so-called  license  itself  it  is  called  indifferently a license and a demise, but in the   Act it is spoken of as a lease, and the holder of it   is described as the lessee. It is not, however, a   question of words, but of substance. If the effect  of  the  instrument  is  to  give  the  holder  an  exclusive right of occupation of the land though  subject to certain reservations or to a restriction  of the purposes for which it may be used, it is in  law a demise of the land itself.”

35. We may also notice the undisputed fact that in the present  

case  the  parties  have  agreed  that  for  the  purpose  of  

determination  of  the  agreement  three  calendar  months'  

notice  had to be given.  Undoubtedly,  such clause in the  

document in question has a significant role to play in the  

matter of construction of document. Clearly, if the parties  

to  the  agreement  intended  that  by  reason  of  such  

agreement merely a license would be created such a term  

could not have been inserted.  

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36. It is well settled legal position that a license can be revoked  

at any time at the pleasure of the licensor. Even otherwise,  

unless  the  parties  to the  agreement had an intention to  

enter  into  a  deed of  lease  the  Administration  would  not  

have agreed to demise the premises on payment of rent in  

lieu of grant of exclusive possession of the demised land  

and  further  stipulated  service  of  three  months'  notice  

calling upon either  party  to  terminate  the  agreement.  In  

view of the same, the argument advanced by the learned  

counsel  of  the  appellant  that  a  stipulation  having  been  

made in the agreement itself  that by reasons thereof the  

grantee shall not be a tenant and thus the deed must be  

construed  to  be  a  license  cannot  be  accepted.  In  our  

considered view, such a clause may at best be one of the  

factors for construction of  the document in question but  

the same by itself certainly be a decisive factor.

37. The next question which needs to be addressed in view of  

the  aforesaid  well  settled  legal  position  is  whether  the  

agreement  in  question  should be  interpreted as  lease  or  

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license having regard to the object sought to be achieved by  

the provisions of DMC Act.  

38. By reason of the provisions of the DMC Act, the MCD is  

required to render several services as specified therein for  

the purpose whereof, tax is required to be imposed both on  

land  as  also  on  building.  The  definition  of  “land”  and  

'”building” as provided in the DMC Act must be given its  

full  effect.  As  mentioned  hereinbefore  in  the  case  of  

Municipal Corporation of Greater Bombay  case (supra),  

even an oil tanker has been held to be building.

39. The tax is imposed upon the holders of land and building  

by the MCD which is compensatory in nature. The word  

“letting  out”  in  the  context  of  the  grant  therefore  must  

receive its purposive meaning. The MCD renders services  

and the benefits  of  such services  are  being taken by all  

concerned, viz., the owner of the land or building. Even a  

person who is in possession of a land or building, whether  

legal or illegal, takes benefits of such services rendered by  

the MCD. The MCD for the purpose of realization of tax is  

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not  concerned  with  the  relationship  of  the  parties.  It  is  

concerned only with imposition and recovery of tax which is  

payable on all lands and buildings in accordance with law.  

The exceptions thereof  have been enumerated in the Act  

itself. Section 119 of the MCD Act is one of such provisions.  

Such  an  exemption  clause,  as  is  well  known,  must  be  

construed strictly. Section 119 of the MCD Act would apply  

if  the lands and buildings are the properties of Union of  

India. The MCD has the right to levy the property tax in  

terms of  Section 114 of  the  MCD Act  in  the  manner  as  

specified therein.

40. By reason of the agreement in question, the buildings in  

question do not belong to the Administration. Admittedly, it  

belongs to the grantee i.e. appellant herein. As discussed  

hereinbefore, the Oil tanks has been construed as buildings  

for the purposes of tax. Therefore, Section 119 of the MCD  

Act would not apply to the building in question. That being  

the case, the grantee/appellant is liable to pay tax although  

the  ownership  of  the  land  may  belong  to  the  

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Administration.  Section  115  of  the  MCD  Act  clearly  

provides that the general tax shall be payable in respect of  

lands and buildings. Such lands and buildings may be in  

lawful occupation of the owner. The occupation of the said  

building may be lawful or unlawful. Even in a case where  

apartments are constructed on the land belonging to the  

Government  or  a  statutory  body but the  occupier  of  the  

apartment is liable to pay tax. If a person encroaches upon  

somebody's lands and constructs buildings thereupon, he  

would also be liable to pay tax.  Once it  is held that the  

grantee were liable to pay tax, the same becomes payable  

from the date of accrual of the liability. The said position is  

also fortified from specific stipulation in the agreement that  

the liability to pay all taxes including municipal taxes is on  

the grantee.  

41. The  learned counsel  for  the  appellant  has  placed strong  

reliance on the decision of this Court in  HUDCO v. MCD;  

(2001) 1 SCC 455  to contend that land belonging to the  

government is immune from the payment of property tax by  

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virtue of section 119(1) of the DMC Act and Article 285 of  

the Constitution of India. In the HUDCOs case vacant land  

of the government, prior to execution of the lease deed in  

favour  of  HUDCO,  was  sought  to  be  taxed  and  that  no  

building had been constructed by HUDCO. HUDCOs own  

case was that interest in land could pass only on execution  

of lease and construction thereon under section 120(2) of  

the MCD Act. MCD had invoked Section 120(1) DMC Act to  

fasten liability  on HUDCO and not  under  Section 120(2)  

DMC Act after construction was made by HUDCO and lease  

deed executed bythe government. In that case, this Court  

has held that vacant land belonging to the Government was  

not taxable by virtue of section 119 DMC Act and Article  

285  of  the  Constitution  of  India.  However,  in  our  

considered view, the case at hand is totally different. The  

HUDCO judgment dealt with the case where vacant land  

belonging to the lessor/Government and in regard whereto  

no lease deed had been executed and no construction had  

been made by the lessee/HUDCO. The land belonging to  

the  central  government  was  sought  to  be  taxed  under  

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section 120(1) of the DMC Act which fastens liability on the  

lessor. Since land belonged to UOI the same was exempted  

from payment of tax until the lease deed was executed and  

construction  made  thereon  by  HUDCO-under  Section  

120(2).

42. Incidence to pay tax under section 120(2) DMC Act is with  

regard to a composite assessment of land and buildings as  

section 120(2) talks of a composite assessment only. In the  

present  case  vacant  land or  property  of  Railways  is  not  

sought to be taxed as was in the case of HUDCO Vs. MCD  

under section 120(1) DMC Act, but property tax/Composite  

Assessment  is  sought  to  be  made  on  the  

installations/stotage  depots  having  been  constructed  by  

the  appellant-by  virtue  of  Section  120(2)  DMC Act.  It  is  

important to notice that w.e.f. the date of execution of lease  

deed and construction made thereon by HUDCO, HUDCO  

has  been  paying  the  property  tax.  HUDCOs  case  is  

therefore not applicable.

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43. In view of the aforesaid discussion, we are of the considered  

view  that  the  document  in  question  constitutes  lease  in  

favor of the appellant-grantee; and accordingly liable to pay  

taxes.

44. In view of the same, we find no merit in the present appeal,  

accordingly, the same is liable to be dismissed and hence  

dismissed.  No order as to costs.

 ..........................................J        [Dr. Mukundakam Sharma ]

 ............................................J

   [ Anil R. Dave ]

New Delhi, April 6, 2011

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