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PETITIONER: CITY MUNICIPAL COUNCIL, MANGALORE & ANR.

       Vs.

RESPONDENT: FREDERICK PAIS ETC.

DATE OF JUDGMENT: 13/10/1969

BENCH: VAIDYIALINGAM, C.A. BENCH: VAIDYIALINGAM, C.A. SHELAT, J.M. DUA, I.D.

CITATION:  1970 AIR  417            1970 SCR  (2) 751  1969 SCC  (3) 160

ACT: Mysore Municipalities Act (Mys.  Act 22 of 1964), s. 382(1)- Assessment   registers,  prepared  under   Madras   District Municipalities  Act (5 of 1920)--Registers to have  currency for 5 years-Mysore Act coming into force  meanwhile-Property tax  imposed under Madras Act thereafter--Validity-If  saved under  s.  382(1) and provisos of Mysore Act as  amended  by Mysore Act 34 of 1966.

HEADNOTE: The first respondent was the owner of some buildings  within the  appellant-Municipality.  The appellant was governed  by the Madras District Municipalities Act,, 1920, till April 1, 1965,  when  the Mysore Municipalities Act, 1964  came  into force and thereafter by the Mysore Act.  For the year  1966- 67  the  appellant issued notices of demand for  payment  of property tax under the Madras Act.  The tax was higher  than under  the Mysore Act.  The first respondent challenged  the levy  by  a writ petition, and the appellant  justified  the levy  under  s. 382(1) of the Mysore Act and  its  provisos. The High Court quashed the demand notices. In appeal to this Court, HELD  : Under the second and third provisos to s. 382(1)  of the  Mysore Act if a property tax has- been imposed  by  the Madras Act, even though the rate of such tax is higher  than that  under  the  Mysore  Act,  the  higher  tax  could   be collected.  The provisions of Madras Act namely ss. 78,  81, 82,  124 and r. 8 of ’Schedule IV of the Act, show that  the municipal  tax  is an annual tax leviable for  a  particular official year and the assessment list on the basis of  which the  tax  is assessed is for such  official  year.   Though, ordinarily,  the Municipality would have to prepare a  fresh assessment  list  every  year, r. 8 of Schedule  IV  of  the Madras Act which, by virtue of s. 124 has to be read as part of Chapter VI of the Act dealing with Taxation and  Finance- permits   the  Municipal  Council  to  continue   the   same assessment  list  for  the next 4 succeeding  years  and  to revise  it once every 5 years.  But, in order to enable  the Municipal Council to levy and collect a tax, under s. 78  it has to pass a resolution determining to levy a tax, the rate

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at  which  such tax has to be levied as also the  date  from which  it  shall be levied.  In the present  case,  no  such resolution was passed by the Municipal Council.   Therefore, by  merely  preparing  the assessment  registers  under  the Madras Act on April 1, 1964, which will have currency for  a period  of  5 years till March 31, 1969, it cannot  be  said that  a  tax  or  that  a tax at  a  higher  rate  had  been imposed.No  such  tax having been imposed under  the  Madras Act, the provisos to s.  382(1)  of  the Mysore Act  do  not apply and the demands for payment of    the   property   tax were not justified. [757 E-H; 758 D-H; 759 A] Municipal  Corporation  v.  Hiralal, [1968]  2  S.C.R.  125, followed.

JUDGMENT: CIVIL  APPELLATE  JURISDICTION: Civil Appeals Nos.  1302  to 1906 of 1968. 752 Appeals by special leave from the judgment and orders  dated September  26, 27 and 29, 1967 of the Mysore High  Court  in Writ Petitions Nos. 907, 1004, 1005, 1175 and 1245 of 1967.  Jagadish Swarup, Solicitor-General, C. R. Somasekharan ’and R. B. Datar    for the appellants (in all the appeals). M.   Veerappa and G. Narayana Rao, for respondent No. 1  (in all the appeals). S.   S. Javali and S. P. Nayar, for respondent No. 2 (in all the appeals). The Judgment of the Court was delivered by Vaidialingam,  J. These five appeals, by special  leave,  by the  City Municipal Council, Mangalore and the  Commissioner of  the  City Municipal Council, are  directed  against  the orders  passed  by the Mysore High Court in  Writ  Petitions Nos.  907, 1004, 1005, 1175 and 1245 of 1967,  quashing  the demand  notices issued by the appellants against  the  first respondent in each of these appeals for payment of  property tax  for  the half-year ending September 30, 1966.   As  the grounds of attack levelled against the demand notices by the said  respondents  are  common, we will only  refer  to  the averments contained in Writ Petition No. 907 of 1967 out  of which Civil Appeal No. 1302 of 1968 arises. buildings situated in Ward 11 and Ward XX, within  Mangalore Municipality in the South Canara District, which  originally formed part of the Madras State and which, on reorganisation of  the  States, became part of the State  of  Mysore.   The Mysore   Municipalities  Act,  1964  (Act  XXII   of   1964) (hereinafter referred to as the Mysore Act) came into  force from April 1, 1965 as per the notification, dated  September 23, 1965 issued by   the  State  Government.  Certain sections  had  already come into  force.   Till  the Mysore Act  came  into  force,  the Mangalore  Municipality was governed by the Madras  District Municipalities Act, 1920 (Act V of 1920) (hereinafter called the  Madras Act).  The Madras Act had provided for  levy  of property tax the procedure to be adopted for the same and as to  how the annual value of a building was to be arrived  at as  well as the percentage at which the property tax was  to be  levied.  Similarly the Mysore Act had also provided  for levy  of  property  tax, prescribing  the  ascertainment  of annual ratable value and also the rate at which the tax  was to be levied.  Although the Mysore Act came into force  from April  1,  1965  the appellants issued  demand  notices  for property  tax  under the said Act for  the  assessment  year

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1965-66.   In  those demand notices, the  Municipal  Council determined the ratable annual  753 value  under s. 101 (2) of the Mysore Act and  assessed  the tax on the basis of that annual ratable value, but at  rates under  the Madras Act.  The tax was paid as per  the  demand notices.   But  on March 16, 1967 the appellant  issued  the impugned notices of demand under the Madras Act for  payment of  property tax for the year 1966-67.  The tax demanded  on the  basis  of the Madras Act was considerably  higher  than that  originally demanded and paid under the Mysore Act  for the  assessment year 1965-66.  Notwithstanding  the  protest made  by the first respondent, the appellants threatened  to collect  the  tax as per the demand notices  and  hence  the first  respondent  filed  Writ Petition  No.  1907  of  1967 challenging the demand notices.  The main grounds of  attack against  the.  demand notices, as raised in  the  said  Writ Petition  were that after the passing of the Mysore Act  the appellants  had  no  power to levy property  tax  under  the Madras  Act  and therefore the demands  were  illegal.   The demand  notices were further attacked on the ground that  s. 382  of the Mysore Act, which related to the repeal of  many Acts  including  the Madras Act and  the  saving  provisions contained  therein did not justify the issue of  the  demand notices.   The  first  respondent  accordingly  prayed   for quashing the demand notices issued under the Madras Act.  He had  also raised certain contentions regarding the  levy  of health  cess included in the notices; but it is  unnecessary to  refer  to  those averments as the High  Court  has  held against  the  first respondent and that  question  does  not arise in these appeals. The  appellants pleaded that under the Mysore  Act  property tax,  among other things, has been imposed  after  following the  procedure  prescribed in ss. 95 to 97 therein  and  the imposition  of tax has come into force from April  1,  1967, but  for the period in question viz., the year  1966-67  the demands  were  legal  and valid in view  of  the  provisions contained in s. 382 of the Mysore Act.  Notwithstanding  the repeal of the Madras Act, the provisions contained in s. 382 of the Mysore Act clearly saved the right of the  appellants to levy property tax under the Madras Act to adopt both  the annual  value as well as the rate of tax as per the  assess- ment   registers   maintained  under  the  said   Act.    In particular, the appellants relied upon the second proviso in s.  382(1) of the Mysore Act and the third proviso  inserted in the said section with retrospective effect, by the Mysore Municipalities  (Amendment) Act’, 1966 (Mysore Act XXXIV  of 1966).   According  to the appellants,  as  necessarily  the imposition  of  property  tax under the  Mysore  Act,  after following  the procedure contained therein will  take  time, the Legislature had made consequential provisions in s.  382 with  a view to enable the imposition of property tax  under the repealed enactments during the interim period. The  High Court has, by and large, accepted the  contentions of  the  first  respondent.  According to  the  High  Court, although 754 the higher rate of tax under the Madras Act is preserved  by proviso 3 to S. 382(1) of the Mysore Act, the provision  for the determination of the annual value under s. 82(2) of  the Madras  Act is not saved.  The High Court is further of  the view that the second proviso to s. 382(1) of the Mysore  Act only  continues  the  old  impost  and  the  third   proviso preserves  the old rates and that they do not  continue  the old  annual  value.  The net result of the decision  of  the

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High  Court is that the Municipal Council has  to  determine the  annual ratable value of the building as provided by  s. 10 1 (2) of the Mysore Act and to assess the property tax at the  rate  at  which it is assessed under  the  Madras  Act. Finally the High Court quashed the demand notices issued  by the appellants. The learned Solicitor General, appearing for the appellants, urged  that the High Court was in error in interpreting  the second and third provisos to s. 382(1) of the Mysore Act. it was  urged that as the levy of property tax  after  adopting the  procedure indicated in the Mysore Act will  take  time, the   Legislature  had,  by  incorporating   the   necessary provisions  in  s. 382, particularly the  second  and  third provisos  to  sub-s.  (1),  preserved  the  right  of   the, Municipal  Council  concerned to adopt not only  the  annual value but also the rate of property tax payable according to the  assessment registers maintained under the  Madras  Act, till they are superseded by anything done under’ the  Mysore Act.  The learned Solicitor General, further urged that  the view of the High Court that the annual ratable value has  to be  determined under the Mysore Act and the  computation  of the  rate  ’of  tax  has to be under  the  Madras  Act,  was anomalous  and  was not warranted by the provisions  of  the Mysore Act. On  the other hand, Mr. Veerappa, learned counsel  appearing for  the first respondent in all the appeals, has  supported the  view  taken by the High Court and urged that  a  proper interpretation had been placed on s. 382 of the Mysore  Act. According to the learned counsel, normally, after the coming into force of the Mysore, Act, no assessments could be  made under’  the  Madras  Act,  but s. 382  of  the  Mysore  Act, repealing   the  Madras  Act,  had  made   certain   special provisions  the  existence  of  which  alone  would  attract certain actions taken under the Madras Act. In  order to appreciate the contentions, noted above, it  is necessary  to  refer broadly to the scheme of the  two  Acts relating to the levy of property tax.  We shall first advert to  the,  Madras  Act.  Under s. 78(1) power  given  to  the Municipal  Council  to levy, among other taxes,  a  property tax.  Under sub-s. (3), a resolution of a municipal  council determining to levy a tax has to  755 specify the rate at which such tax is to be  levied and  the date  from which it shall be lived.  Section 81(1)  provides that it a  Council by resolution determines that  a property tax shall be levied, such     tax  shall  be levied  on  all buildings  and lands within the municipal limits save  those exempted by the statute or by any other law. Sub-section (2) states  that the tax shall be levied at such percentages  of the  annual value or the buildings or lands as may be  fixed by  the  Municipal  Council, Subject to S.  78.  under  this section,  we  are informed that 25 % has been fixed  as  the maximum rate.  Sub-s. (2) of s. 82 provides that the  annual value  of the lands and buildings shall be deemed to be  the gross annual rent at which they may reasonably be,  expected to  be let from month to month or from year to year  less  a deduction in the case or buildings, or ten per cent of  that portion  of  such  annual  rent  which  is  attributable  to buildings alone. it further provides that the sale deduction shall  be  in lieu or all allowance for repairs  or  on  any other  account.  Section 86 provides that the  property  tax shall  be  levied every halt year and  shall,  excepting  as otherwise  provided  in schedule IV, be paid lay  the  owner within  thirty  days of the commencement of  the  half-year. Section  124 provides that the rules and tables embodied  in

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Schedule  IV  shall be read as part of Chapter  VI,  dealing with Taxation and Finance.  Schedule IV deals with  Taxation and Finance Rules.  Rule 2 provides for the preparation  and maintenance  of  assessment books showing  the  persons  and property liable to taxation under the Act and the assessment books being made available for inspection by the tax payers. Rule  6 provides for the value of any land or  building  for purposes  of property tax being determined by the  executive authority.   Under  rule 7, the executive authority  has  to enter in the assessment books the annual or capital value of all  lands and building and the tax payable  thereon.   Rule 8(1)  states that the assessment books shall  be  completely revised by the executive authority once in every five years. Sub-rule  (2) thereof provides for amending  the  assessment books  at any time between one general revision and  another in  the  manner  indicated  therein.   A.  perusal  of   the provisions  referred to above, shows that under  the  Madras Act  the  property  tax is levied on  the  annual  value  of buildings  which  is deemed to be the  gross  annual  rental value  less a deduction of ten per cent of that  portion  of annual  rent  is attributable to the buildings  alone.   The Municipal  Council has to pass a resolution  determining  to levy  the  property  tax and  that  resolution  should  also specify  the rate at which such tax is to be levied as  also the date from which it shall be levied and the tax is levied every  half year.  The executive authority has  to  maintain the assessment books containing entries regarding the annual value  as  well as the tax payable thereon.   The  executive authority  is under an obligation to completely  revise  the assessment once in -very five years. L5SupCI-3 756 There- is no controversy that the Madras Act was  applicable to  the City of Mangalore, even after it formed part of  the Mysore State on me reorganization of the States.  The Madras Act,  as  we  have mentioned earlier, was  repealed  by  the Mysore Act, which came into force with effect from April  1, 1965. Coming  to the Mysore Act, Chapter VI deals  with  Municipal Taxation.  section 94 enables a municipal council to levy  a tax  on  buildings  or lands or  both  situated  within  the municipality, after complying with tile procedure  indicated therein  and  subject to any general or  special  orders  of Government  and  at rates not exceeding those  specified  in Schedules I to VII.  The maximum rate has been fixed at 24 % of  the annual ratable value.  Section 2(1)  defines  annual retable  value’  as  the gross annual  rent  for  which  any building  or land exclusive of furniture or machinery  might reasonable be expected to be let from month to month or year to year.  Section 95 deals with the procedure to be  adopted preliminary  to imposing a tax.  Section 10 1  (2)  provides that  the  annual ratable value of a building shall  be  the gross annual rent as defined in cl.. (1) of section 2,  less a  deduction  of  sixteen and two-thirds per  cent  of  such annual  rent.   It further states that  the  said  deduction shall  be  in lieu of all allowances for repairs or  on  any other  account  whatsoever.   Section  103  deals  with  the preparation  of an assessment list.  Section 382(1)  repeals the  various enactments referred to therein,  including  the Madras Act.  The first proviso, which saves certain matters, does  not  come into the picture in this case.   The  second proviso  as  well as the third proviso,  introduced  by  the Mysore Municipalities (Amendment) Act, 1966 are relevant for our purpose and they ire as follows               "(2)  Provided  further that  subject  to  the

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             preceding proviso anything done or any  action               taken (including any appointment or delegation               made, tax, fee or cess imposed,  notification,               order, instrument, or direction issued,  rule,               regulation,  form, bye-law or  scheme  framed,               certificate   obtained,  permit   or   licence               granted  or registration effected)  under  the               said laws shall be deemed to have been done or               taken  under the corresponding  provisions  of               this  Act  and shall continue to be  in  force               accordingly  unless  and until  superseded  by               anything  done or any action taken under  this               Act :               (3)   Provided  further  that  notwithstanding               anything  contained in the  preceding  proviso               where any tax, duty, fee or cess other than  a               duty on transfers of immovable properties  has               been  imposed  under the said laws at  a  rate               higher than the maximum rate permissible under               this  Act.  such tax,. duty. fee or  cess  may               continue to be                757               imposed  and  collected at  such  higher  rate               unless  and Until superseded by anything  done               or any action taken under this Act." The  third  proviso has been introduced  with  retrospective effect by the Amending Act.  It is not really necessary  for us to consider more elaborately the scheme of the Mysore Act because.  even  according to the appellants,  the  procedure indicated therein-whatever may be the procedure, about which we express no opinion-has not been taken before the issue of the  demand  notices which were under challenge  before  the High  Court.   On  the  other  hand,  the  appellants   have exclusively  relied on the second and third provisos  to  s. 382 (1) of the Act. The  learned Solicitor General has urged that the  assesment books  under the Madras Act were prepared on April  1,  1964 and, if so, under the second and third provisos to s. 382(1) the  property  tax can be levied and collected  as  per  the provisions  of the Madras Act.  In particular,  the  learned Solicitor General placed reliance upon the provisions of the Madras  Act relating to the maintenance of assessment  books and  the assessment books having to be revised only once  in every  five  years  and pointed out that in  this  case  the assessment books having been prepared on April 1, 1964  they will have currency for a period of five years till March 31, 1969.   The second proviso to s. 382(1) no doubt  saves  any tax which had been imposed under the Madras Act.  Similarly, under  the  third proviso, the Municipal Council  will  have authority  to  collect tax even at a rate  higher  than  the maximum  rate  permissible  under the Mysore  Act;  but  the essential requisite for attracting the two provisos is  that the  tax should have been imposed under the Madras  Act,  as per the second proviso and tax at a higher rate should  have been  imposed  again under the Madras Act as per  the  third proviso.   We are not inclined to accept the  contention  of the  learned Solicitor General that by merely preparing  the assessment  registers under the Madras Act on April 1,  1964 it  can  be  stated that a tax has been  imposed  under  the second  proviso or a tax at a higher rate has  been  imposed under.the  third proviso.  We have already referred  to  the material provisions of the Madras Act relating to the’  levy of  property tax.  Those provisions show that the  municipal tax is an annual tax leviable for a particular official year and  the  assessment list on the basis of which the  tax  is

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assessed  is  for  such official year.  This  was  the  view expressed   by  this  Court  in  Municipal  Corporation   v. Hiralal(1),  while  interpreting certain provisions  of  the Madhya  Bharat  Municipalities  Act,  1954.   No  doubt  the wording  in  the Madhya Bharat Act in s.  76,  dealing  with assessment  list was slightly different but in  our  opinion the (1)  [1968] 2 S.C.R. 125 758 principle   enunciated  in  that  decision   regarding   the municipal tax being an annual tax leviable for a  particular official year and the assessment list, on the basis or which the  tax is assessed having currency for each such  official year, is applicable also to the interpretation of the Madras Act.    No  resolution  passed  by  the  Municipal   Council regarding the levy of the property tax and the rate at which it  is to be levied, having currency for the  year  1966-67, has been brought to our notice. The learned Solicitor General has drawn our attention to the minutes,  dated September 15, 1966 as well as the  Council’s resolution No. 1280 dated December 20, 1966 relating to  the levy of property tax in the City of Mangalore for the period in  question, under the Mysore Act.  Those proceedings  will not  assist the appellant as the necessary procedure,  under the  Mysore  Act, has not been followed and  therefore  that resolution cannot have any legal validity, so as to  justify the imposition of tax.  Normally, the municipal council will have  to  prepare a fresh assessment list, every  year.   By virtue  of  s. 124 of the Madras Act, the rules  and  tables embodied  in Schedule IV have to be read as part of  Chapter VI  dealing with Taxation and Finance.  Though,  ordinarily, the  Municipality would have to prepare a  fresh  assessment list every year, rule 8 of Schedule IV permits the Municipal Council  to continue the same assessment list for  the  next four  succeeding  years  and to revise it  once  every  five years.   But,  in order to enable the Municipal  Council  to levy  and  collect  a  tax, it  has  to  pass  a  resolution determining to levy a tax, the rate at which such tax has to be  levied as also the date from which it shall  be  levied. That  the tax is an annual tax is also borne out  by  sub-s. (2)  of s. 82.  If the contention of the  learned  Solicitor that  the assessment list, once prepared, has to be  adopted for  five years, is accepted, it will result in  the  annual value  on  a particular building or house being  static  for five  years,  during  which a municipal council  can  go  on adopting the assessment list prepared in an earlier year and the owner or occupier of the building being deprived of the. right to object to the valuation regarding the annual  value or  the tax assessed thereon.  This will be the result  even though the annual value may have decreased for one reason or the  other.   It  follows  that  the  contention  that   the preparation of the assessment books amounts to imposing of a tax so as to justify the issue of the demand notice,  cannot be accepted. Having  due  regard to the second and third provisos  to  s. 382(1) and the other material provisions of the Mysore  Act, the  position is that a property tax must have been  imposed by the Madras Act and even though the rates of such tax were higher than under the Mysore Act, the said higher tax  could be collected.  But no such tax having been imposed under the Madras Act, the  759 second  and  third provisos to s. 382(1) do  not  apply  and hence the demands for payment of property tax for the period are not justified.

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Though  we  are not in agreement with some  of  the  reasons given by the High Court for issuing the writ, the conclusion arrived  at  by  the High Court that the  second  and  third provisos  to s. 382(1) of the Mysore Act do not justify  the issue  of the demand notices for the period in question,  is correct. The  result is that the appeals fail and are dismissed  with costs.  There will be only one hearing fee. V.P.S.                       Appeals dismissed 760