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PETITIONER: D. C. GOUSE AND CO. ETC.

       Vs.

RESPONDENT: STATE OF KERALA & ANR. ETC.

DATE OF JUDGMENT21/09/1979

BENCH: SHINGAL, P.N. BENCH: SHINGAL, P.N. CHANDRACHUD, Y.V. ((CJ) KRISHNAIYER, V.R. UNTWALIA, N.L. KOSHAL, A.D.

CITATION:  1980 AIR  271            1980 SCR  (1) 804  1980 SCC  (2) 410  CITATOR INFO :  RF         1983 SC 130  (57)  C          1984 SC 420  (15)  RF         1991 SC 686  (13)

ACT:      Kerala Building  Tax Act,  1975-Constitutional validity of-Act imposed  a non-recurring tax based on capital value - State Legislature if competent to impose.

HEADNOTE:      The Kerala  Building Tax  Act, 1975 passed by the State Legislature under  Entry 49  of List  II (Taxes on lands and buildings) is  imposed as  a non-recurring tax on buildings, constructed on  or after  April 1, 1973, the "capital value" of which  exceeds Rs.  20,000/-. The term "capital value" is defined to  mean the  value arrived  at by  multiplying  the ’annual value"  of a  building by  sixteen.  "Annual  value" means the  gross annual  rent on  which the building may, at the time  of completion,  be expected  to let  from month to month or  from year  to year.  Section 6  provides that  the annual value  of a  building shall be the annual value fixed for that  building in  the assessment  books  of  the  local authority (which  includes  a  Municipal  Corporation  or  a municipality and  so on)  within whose  area the building is situate. Section  6(4)  provides  that  in  determining  the annual value  of a  building  regard  must  be  had  to  the location of  the building,  the nature  and quality  of  the structure of  the building,  the capability  of the building and so  on. An  assessee  objecting  to  the  assessment  of building tax assessed or denying the liability may appeal to the Appellate  Authority under  s. 11.  But no  appeal  lies unless the  building tax  due has  been  paid.  Although  no appeal lies  from the  decision of  the Appellate Authority, provision is  made for  reference to the District Court on a question of law and the District Collector is given power to revise  the   order  of  the  Appellate  Authority  and  the Government has  the power  of revision  against the order of the District  Collector.  Jurisdiction  of  Civil  Court  is barred by, s. 27 of the Act.

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    The High  Court, having upheld the validity of the Act, the appellants  in their  appeals impugned  the view  of the High Court.      It was  contended on  behalf of the appellants that (1) the tax levied on buildings being a tax on the capital value of the  assets falls  within the scope of entry 86 of List I of the  Seventh  Schedule  and,  therefore,  is  beyond  the legislative competence of the State Legislature; (2) the Act was unconstitutional  in that  it imposed a tax on buildings retrospectively (over a period of 2 years of its enactment); (3) it  was not  merely a  tax on buildings but a tax on the buildings, and  lands of  those buildings; (4) the method of determining the  capital value of a building on the basis of its annual  value is  hypothetical  and  arbitrary  and  is, therefore, unconstitutional. ^      HELD: 1  There is  no force  in the  argument that  the State Legislature  was not  competent to impose a tax on the buildings under entry 49 of List II. [818 B]      (a) Article  366(28) defines  tax to include imposition of any tax whether general, local or special. The word "tax" in its widest sense includes all money 805 raised by  taxation and  includes tax  levied  both  by  the Central and  State Legislatures as well as rates and charges levied by local authorities [815 D-E]      (b) The term "assets" referred to in entry 86 of List I means "Property  in general, all that one owns." If a tax is levied on  "all that one owns" or his total assets, it would fall within  the purview  of entry 86 and therefore would be outside the legislative competence of the State Legislature. On  the  other  hand,  if  a  tax  is  directly  imposed  on "buildings" it  will bear  direct relation  to the buildings owned by  the assessee.  Though the  building  owned  by  an assessee is  a component  of his total assets, the tax under entry 86  will not  bear any direct or definable relation to his building.  A tax  on "buildings" is, therefore, a direct tax on  buildings as  such. It is not a personal tax without reference to any particular property. [815 H, 816 A-B]      (c) A  tax has  two  elements:  the  person,  thing  or activity on   which it is imposed and the amount of the tax. The amount  of tax  may be measured in many ways. There is a distinction between  the subject  matter of  a tax  and  the standard by  which the  amount of  tax is  measured. Thus  a building may  be the subject matter of a tax like wealth tax (entry 86  List I) or it may also-be the subject of a direct tax under  entry 49 of List II. The two taxes being separate and distinct,  the do not over-lap each other. Therefore the tax  imposed   in  the  instant  case  is  well  within  the competence of the legislature. [816 E-Fl      Sudhir Chandra  Nawn v.  Wealth Tax  officer Calcutta & Ors., [1969] 1 SCR 108; Assistant Commissioner of Urban Land Tax and  ors. v. The Buckingham and Carnatic Co. Ltd., Etc., [1970] 1 SCR 268 referred to.      (d) It is settled law that the quantum of tax levied by the taxing statute and the conditions subject to which it is levied are  matters within the competence of the legislature and so  long as  the tax is not confiscatory or extortionate the reasonableness  of the  tax cannot  be questioned  in  a court of law. [828 D-E]      Rai Ramkrishan  & Ors.  v. The State of Bihar, [1964] 1 SCR 897;  Kunnathat   Thathunni Moopil  Nair v. The State of Kerala & Anr., [1961] 3 SCR 77 referred      2(a). The  Act is  not retrospective  in  the  strictly technical sense  of the  term. A  statute is  deemed  to  be

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retrospective, when  it takes  away or  impairs  any  vested right  acquired   under  existing  laws  or  creates  a  new obligation  in   respect   F’   of   the   transactions   or considerations already past. The Act, though passed in April 1975, had  imposed a  tax on  buildings  with  retrospective effect from April 1973. By so doing it has not taken away or impaired any  vested right  of the  owner  of  the  building acquired under  any existing  law.  Absence  of  an  earlier taxing statute  cannot be  said to  create a  "vested right" under any  existing law.  Nor  has  any  new  obligation  or disability been  attached in  respect  of  any  earlier  tax transaction. If the language of the enactment shows that the legislature thought  it expedient to authorise the making of retrospective rates,  it can  fix the period as to which the rate may be retrospectively made. [828 D-H]      Bradford Union v. Wilts, (1868) LR 3 Q.B. 616; The Tata Iron &  Steel Co Ltd. v. The State of Bihar, [1958] SCR 1355 referred to.      (b) The  choice of  the legislature  to impose a tax on buildings with  effect from  April 1, 1973 cannot be said to be discriminatory.  The choice  of a  date as  a  basis  for classification cannot  be dubbed  as arbitrary  even  if  no particular reason  is forthcoming unless it is shown that it was capricious or whimsical 15-625SCI/79 806 Similarly unless  it is shown that the fixing of the date is very wide  of  the  reasonable  mark  the  decision  of  the legislature must be accepted. [819 C-D]      In the instant case, after the 1961 Act was struck down by this  Court in 1968 the Government declared its intention to introduce  a fresh  Bill so  as to  bring a  new Act into force  from  April  1970.  After  its  introduction  in  the Assembly  it  was  referred  to  a  Select  Committee  which recommended that  the Act  should be brought into force from April  1,   1973.  Two   ordinances  giving  effect  to  the provisions of the draft Bill were promulgated and eventually the Bill became an Act in April, 1975. These facts would not show that  the choice  of the  date of  April  1,  1973  was unreasonable or  that it  was wide  of the  reasonable mark. [819 E-G]      3(a). What  entry 49  of List II permits is the levy of "taxes on lands and buildings." It is permissible Under this entry to levy a tax either on lands as well as buildings, or on lands,  or on  buildings, if  the legislature  decides to impose a  tax only on buildings, the tax would be imposed on all that goes to make or constitute a building. [820 B-C]      (b) The  word "building"  means "that which is built; a structure. edifice;"  The natural  and ordinary meaning of a "building" is,  a "a  fabric of  which it  is composed,  the ground upon  which its  walls stand  and the ground embraced within those  walls." Entry  49 includes  the  side  of  the building as its component part. [820 C-D]      (c) The  definition of  the term  "building" in the Act makes it  clear that  a house, outhouse, garage or any other structure cannot  be erected  without the ground on which it is to  stand. The  expression "building" includes the fabric of which  it is  composed, the  ground upon  which its walls stand and  the ground  within those walls because the ground would  not   have  a  separate  existence,  apart  from  the building. The  ground referred  to in Entry 49 List II would not be  the subject matter of a separate tax, apart from the tax on  the building  standing on it. That being so there is no occasion  to tax  the site separately or to ascertain its value and add it to the value of the fabric. [820 F-G]      (d)  This   is  also   the  position  in  the  case  of

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appurtenances.  An  appurtenance  belongs  to  the  building concerned and  has no existence of its own. An appurtenance, it its  true sense, is an integrated part of the building to which it belongs. [826 F-G]      (e) In  the matter  of fixing  the annual  value of the building under  s. 6  regard must be had to the "location of the building"  and the  "value of  the  land  on  which  the building constructed",  but it  does not  bear on the annual value of  the ground  of the building which does not have an existence  of  its  own  apart  from  the  building.  It  is therefore futile  to contend  that as factors (a) and (f) of sub-section 4  of s. 6 refer to the location of the building and the  value of  the land, the law recognises the separate existence or  entity of  the ground  on which  the buildings stands, so  that the  tax imposed  under it is a tax both on lands and  buildings and  both entities should be separately recognised and determined, and taxed as such [821 C-E]      4(a) When the State Legislature had decided to impose a tax, it was open to it to decide how best to levy it. One of the usual  modes of  levying tax  is to  make provision  for determining the  "rate", or  annual value  of the  building. Rateable value  is the  same as  the net annual value of the building. But 807 if the  Legislature decides  to levy a tax on buildings once for all  or, as a "non-recurring tax on buildings, it has to go beyond  the annual  value, and work out the capital value which could  be  done  on  the  basis  of  capital  cost  of construction of  the building  or its market value or on the basis of  rent arrived  at by  what is known as "higgling of the market"  multiplying it  by a  number which  would  best serve the  purpose of  determining the value of the building and then to specify the rate of tax on it. [822 C-F]      (b) If  the Legislature chose to adopt the annual value as the  basis for working out the capital value it cannot be blamed for it because besides other advantages it is readily available from  the records  of local  authorities and  is a quite simple and reliable basis to work upon. [828 B-C]      (c) The  various methods  of properly valuation are the various facets  to a  difficult problem and no one method is perfect or final or above criticism. The multiple of sixteen adopted cannot  be said to suffer from any constitutional or legal infirmity. [830 G-H]      (d) The  capital value  of a building is not merely the cost of  its bricks  and mortar.  It  may  be  difficult  to provide a  ready or  convenient basis of taxation. There can be no  objection if  the Legislature  decides  to  levy  the annual value  of a building and prescribes a uniform formula for determining  its capital  value. The  four well-accepted methods for  arriving at  the annual  value of the building, are: (I)  The "competitive  or comparative method’’; (2) the ’profits basis";  (3) the "contractor’s method"; and (4) the "unit method".  These four  methods can  be  applied  either singly or in combination. [823 B-E]      (e) The  fundamental object of each of these methods is to find  out the  rent which  the tenant might reasonably be expected to  pay for a building. It is the expectation which is to  be reasonable  and not  necessarily the  rent tor the reasonable expectation  would exclude  any  so-called  black market rent. But there is no rule of law as to the method of valuation to  be adopted for determining the annual value of a  building.  If  the  Legislature  selects  the  method  of determining the  annual value  on the basis of rent, that is the best  evidence of  value. If  it has  been fixed  by the higgling of the market there is neither reason nor authority

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for holding  that it is hypothetical or arbitrary. [823 G-H, 824 A-B]      (f) The  provisions of the Act, taken together, contain the entire  scheme  for  the  levy  and  collection  of  the building  tax   on  the   capital  value  of  building.  The expression "capital  value" is  not the cost of construction of the  building or its market value as wealth but is only a working expression  which, roughly  stated, is  the  taxable value of  the building.  The  State  Legislature  was  quite competent to  select that  as the  basis for  assessing  the building tax. [824 D-E]      (g) There is no inherent illegality if the gross income of the  property were  to be  capitalised for the purpose of determining the  value of  the  property.  firstly,  because there is  nothing to prevent the Legislature from making the expected gross annual rent and thereby the annual value of a building from  being the  unit for multiplication by sixteen for arriving  at its capital value for charging tax under s. 5. Secondly,  by virtue  of s.  6 the annual value forms the basis for  determining the capital value of the building for the purposes of the Act. However what is really taken as the annual value  under the  determining in  s. 2(a)  is not the gross annual rent but the net rent after allowing for the 808 cost of  its repairs  etc. It  is  not  therefore  factually correct to say that the annual value of the buildings in the State is  determined on the basis of their gross annual rent without any  deduction on  account of  repairs.  Nor  is  it correct to  say that  the determination of the capital value was arbitrary  as it was arrived at by multiplying the gross annual rent  by sixteen.  The gross  value of  a building is often made  the datum  point by statute and there is nothing unusual or  illegal about  it particularly  when  there  are statutable deductions from it. [825 C-H]      (h) Section 6(1) accepts the annual value of a building in the  books of  the local authorities as correct. But that would not  justify the  argument that doing so is illegal or unreasonable as long as it can be shown that what is entered in the  assessment books  of the  local authorities has been arrived at  in accordance with a satisfactory procedure laid down for  it in  the statutes  concerned. If  the  procedure prescribed in  that Act is unexceptionable, there is nothing illegal  or   unconstitutional  if  another  taxing  statute provides that the annual value fixed by it shall be accepted as correct  and would  From the basis for the calculation of any other  tax permissible under another statute. such cases there is no necessity for providing another machinery in the other Act and Rules. Moreover ss. 9 to 16 of the Act contain the procedure  and the  machinery for  the assessment of the building tax  on the  returns filed under ss. 7 and 8. These provisions are  adequate in all respects and are not open to challenge. [831 F-H, 832 A-B]      5. (a)  The  argument  that  the  capital  value  of  a building is  bound to  differ  according  to  its  location, amenities and  appurtenances etc.  and that ascertainment of the capital value by multiplying the annual value by sixteen is discriminatory  and violative  of Art. 14, loses sight of the fact  that the  Legislature has defined the annual value to mean  the annual rent at which a building may be expected to let. [833 H, 834 A-B]      (b) A building in an important locality with attractive appurtenance is  expected to  fetch a  higher  rent  than  a building without  those advantages.  The definition  capital value provides  for the  levy of  a higher  building tax  on buildings on which such levy would be justified, because the

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incidence of  the levy  would depend  on the capacity of the building to fetch the rent. [834 B-C]      6. There  is no  force in  the argument that when s. 29 says that  in fixing  the fair rent of a building under s. S of the  Rent Control  Act, the  rent control court would not take into  consideration the  building tax payable under the Act and  that this  makes the provision extortionate because it prevents  the owner  from passing on the liability to the tenant. The  tax being  a non-recurring tax, the question of passing it on to the tenant by splitting it up in proportion to the number of years of the tenancy cannot arise. There is no provision  in the Rent Control Act under which a building tax could  be taken  into consideration  in fixing  the fair rent. [834 D-F]      7. Section  18 which  provides that  tax may be paid in certain prescribed  number of instalments and the proviso to s.  11(1)   which  deals   with  appeals   should  be   read harmoniously. If an assessee is entitled to pay the building tax in  instalments, he  would not be disentitled to file an appeal if  he has  paid those  instalments as  and when they fell due. [834 G-Hl 809

JUDGMENT:      CIVIL APPELLATE  JURISDICTION: Civil Appeal No. 1524 of 1978 A  (From the  Judgment and order dated 29-6-1978 of the Kerala High Court in original Petition No. 4411/77)             CIVIL APPEALS NOS. 2091-2092 OF 1978      (From the  Judgment and Order dated 26-6-1978 and 20-6- 1978 of  the Kerala  High Court  in O.P..  Nos. 3909/74  and 3902/75)             CIVIL APPEAL NOS. 2093-2103 OF 1979      (From the  Judgments and Orders dated 27-6-78, 20-6-78, 30-6-78, 12-6-78,  26-6-78, 22-6-78, 21-6-78, 30-6-78, 20-6- 78, 27-6-78 of the Kerala, High Court in O.P.. Nos. 4833/75, 1006/75, 635/78  and  4740/77,  4096/74,  1820/75,  2258/76, 203/76, 346/78, 3497/75,, and 5620/75 respectively)                CIVIL APPEAL NOS. 2136 OF 1978      (From the  Judgment and  Order  dated  12-6-78  of  the Kerala High Court in O.P. No. 3933/75)                  CIVIL APPEAL NO. 6 OF 1979      (From the  Judgment and  Order  dated  23-6-78  of  the Kerala High Court in O.P. No. 4449/76-K)               ClVlL APPEAL NOS. 27-31 OF 1978      (From the  Judgments and Orders dated 28-6-78, 23-8-78, 28-6-78 5  16-6-78, of  the Kerala  High Court  in O.P. Nos. 3401/77, 4660/75, 1658/77, 3929/75 and 3925/75 respectively)               CIVIL APPEAL NOS. 50-52 OF 1978      (From the Judgments and orders dated 28-6-78, 21-6-78 c 30-6-78 of  the Kerala  High Court  in O.P.  Nos. 3130/77-E, 5470/75 and 799/78 respectively)          CIVIL APPEAL NOS. 188, 266 AND 303 OF 1979      (From the  Judgments and  orders dated  29-6-78, 1-6-78 and of  the Kerala  High Court  in O.P. Nos. 4758/75, 150/76 and 5800/78 respectively) 810              CIVIL APPEAL NOS. 309-311 OF 1979      (From the  Judgments and  Orders dated 23-6-78, 20-6-75 and 24-11-1978  of  the  Kerala  High  Court  in  O.P.  Nos. 3601/76, 4991/75 and 4611/75 respectively)               CIVIL APPEAL Nos 472-473 OF 1979      (From the  Judgment and  Order  dated  29-6-78  of  the Kerala High Court in O.P. Nos. 4283/75 and 4290/77)

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           CIVIL APPEAL NOS. 1543-1546 OF 1978      (From the  Judgment and  Order dated  12-6-1978 of  the Kerala Court in O.P. Nos. 3909, 3970, 252 and 4256/74.)             CIVIL APPEAL NOS. 1689-1693 OF 1978      From the  Judgments and  Orders dated  20-6-1978, 22-6- 1978, 23-6-78,  22-6-78, 296-78,  21-6-78 &  22-6-78 of  the Kerala High  Court in O.P. Nos. 850/75, 1000/75, 4964/75 and 25/76, 1747/76  and 2076/76  and  544/76  and  4804/75K  and 5928/75N, 1889/76G, and 1615/76H respectively)                CIVIL APPEAL NOS. 1556 OF 1978      (From the  Judgment and  Order dated  12-6-1978 of  the Kerala High Court in O.P. No. 1147/75)             CIVIL APPEAL NOS. 1981-2004 OF 1978      (From the  Judgments and Orders dated 28-6-78, 23-6-78, 27-6-78, 22-6-78,  30-6-75, 21-6-78, 20-6-78, 28-6-78, 23-6- 78, 28-6-75, 26-6-78, 12-6-78, 23-6-78, 28-6-78, 20-6-78, 2- 6-78, 27-6-78,  26-6-78, 23-6-78, 28-6-78 and 27-6-78 of the Kerala High  Court in  O.P. No. 3507/77, 3622/77 and 1375/76 and 796/177  and 3005/76  - and  567/78 and 5669/75, 1124/76 and 5173 and 3509/77 and 4445/76 and 3508/77 and 5852/76 and 4230/74 and  3978/76 and 3616/77 and 5328/75 and 2415/76 and 1310/77E and 5810/76G, 940/76D and 3634/76N and 1380/77L and 2742/76 respectively.                ClVlL APPEAL NO. 2105 OF 1978      (From the  Judgment and  Order  dated  20-6-78  of  the Kerala High Court in O.P. No. 5175/75 CIVIL APPEAL Nos 232, 2351, 2352, 2353 AND 2354 OF 197      (From the  Judgments and  orders dated 30-6-1978, 23-6- 78, 811 26-6-78 and  20-6-78  of  the  Kerala  High  Court  in  O.P. Nos.438/78B, 1535/76N and 1443/76E and 5134/75 respectively)             CIVIL APPEAL NOS. 2415-2419 OF 1978      (From the  Judgments and  Orders dated 21-6-1978, 12-6- 78,   30-6-78, 21-6-78  and 27-6-78 of the Kerala High Court in O.P.  Nos. 5581/75,  5240/75, 849/78, 2751/76 and 1552/77 respectively)                CIVIL APPEAL NO. 2497 OF 1978      (From the  Judgment and  Order  dated  20-6-78  of  the Kerala High Court in O.P. No. 4028/75)           CIVIL APPEAL, NOS. 2587/78 AND 67-71/79      (From the  Judgments and Orders dated 30-6-1978, 7-6-78 and  21-6-1978  of  the  Kerala  High  Court  in  O.P.  Nos. 3351/76N, and 6127/75. 6159/75. 5972/75, 4628/77-A & 5755/75 respectively)             CIVIL APPEAL NOS: 129-131 AND 197/79      (From the  Judgments and  Orders dated 21-6-78, 20-6-78 of the  Kerala High  Court in O.P. Nos. 5677/75, 5723/75 and 5263/75 and 5877/75 respectively)     CIVIL APPEAL NOS 265, 420 AND 544, 545 & 580 OF 1979      (From the  Judgments) and  Orders  dated  20-6-79,21-6- 79,22-6-78, 20-6-78  and 22-6-78 of the Kerala High Court in O.P. Nos.  5004/75, 5524/75,  248/76K, 5335/75  and 2962/76G respectively)      CIVIL APPEAL NOS : 1965-1967 AND 2203-2206 OF 1978      (From the  Judgments and Orders dated 25-7-78, 28-6-78, 4-7-78, 3-7-78,  22-6-78, 27-6-78  and 29-6-78 of the Kerala High Court in O.P. Nos. 254/78, 3132/77-F, 4640/75, 1459/78- F, 750/76-E, 704//7-A and 5995/75 respectively)      CIVIL APPEAL NOS: 2583/78, 1/79, 72/79 AND 168/79      (From the Judgments and Orders dated 23-6-78,27-678,23- 6-78 and  29-6-78 of  the Kerala  High Court  in  O.P.  Nos. 260/76-L 1863/ 77E, 1398/76N and 4494/77B respectively) 812        CIVIL APPEAL NOS: 2104/78, 2401/78 AND 2350/78

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    (From the  Judgments and Orders dated 12-6-78, 26-6-78, 30-6-78 of  the Kerala  High Court  in  O.P.  Nos.  4509/74, 5770/76L and 1150/76)             CIVIL APPEAL NOS: 1860-1865 OF 1978      (From the  Judgments and Orders dated 12-4-78, 28-6-78, 29-6-78, 23-6-78,  26-6-78 of  the Kerala High Court in O.P. Nos. 4184/74,  3665/74C, 3932/77(B), 4165/76K and 5815/76(H) respectively)        CIVIL APPEAL NOS: 2256-2257/78, 333/79, 500/79      (From the  Judgments and  Orders dated 21-6-78, 29-6-78 and 27-6-78  of the  Kerala High Court in O.P. Nos. 5494/75, 4716!77, 1285/75 and 3023/76)                ClVlL APPEAL NO. 2207 OF 1978      (From the  Judgment and  Order  dated  23-6-78  of  the Kerala High Court in O.P. No. 4140/76-H)                 CIVIL APPEAL NO. 169 OF 1979      (From the  Judgment and  Order  dated  28-6-77  of  the Kerala High Court in O.P. No. 3117/77)     CIVIL APPEAL NOS: 148-150/79, 304-305/79 AND 409/79      (From the  Judgments and  Orders dated 27-6-78 28-6-78, 20-6-78, 27-6-78.  Of the  Kerala High  Court in  O.P.  Nos. 1941/77, 1903/77, 5176/78, 1047/77(G) and 1306/77E)       CIVIL APPEAL NOS. 2254, 2255/78 AND 267 OF 1979      (From the  Judgments and  Orders dated 27-6-78, 21-6-78 and 27-6-78  of the  Kerala High  Court in  O.P. No.  93/77, 5396/75 and 2277/76-D respectively)      (From the  Judgments and Orders dated 21-6-78 and 30-6- 78 of  the Kerala  High  Court  in  O.P.  Nos.  5416/75  and 4782/77C)           WRIT PETITION NOS. 4375 OF 1978 & 143/79      Under Article 32 of the Constitution)                 ClVlL APPEAL No. 39 OF 1979      (From the  Judgment and  Order dated  ]2-6-1978 of  the Kerala High Court in O.P. No. 4042/74) 813      SPECIAL LEAVE PETITION (CIVIL) No. 6298 OF 1978      (From the Judgment and order dated 5-7-78 of the Kerala High Court in O.P. No. 983/76)      SPECIAL LEAVE; PETITION (CIVIL) NOS: 1137-1138/79      (From the Judgments and orders dated 7-8-78 and 27-6-78 of the Kerala High Court in O.P.I Nos. 3474/77 and 1950/77)      SPECIAL LEAVE PETITION (CIVIL,) NOS: 4861-4862 &                          6154-56/79      (From the  Judgments and  orders dated 26-6-78, 27-6-78 26-6-78, 28-6-78  and 30-6-78  of the  Kerala High  Court in O.P. Nos. 638/77,1530/77, 5485/78, 2950/77 and 884/78)      P. Govindan  Nair (C.As.  1524, 2092-2095/78,  27,  29, 303, 310  and 311/79  T. C. Raghavan (CA 266), T. L. Anantha Sivan and  N. Sudhakaran,  for the  Appellants in CAs. 1524, 2091-2092, 2093-2103,  2136/78, 6,  27-31, 50-52,  100, 266, 303, 310, 311, 309, 472 and 473/79.      Anil B.  Divan (1543-46  and 1556),S. B. Saharya, K. V. Kuriakose (in  all except  1995, 1997, 1998, 29-31, 197, 500 and V.  B. Sallarya  for the  Appellants, in  C.As. 1543-46, 1656, 1689-99, 1981-2004, 2105, 2324, 2351-2352, 2354, 2415- 2419, 2497, 2587/178, 67-71, 129-131, 197, 265, 420, 544-545 and 500/79.      P.  A.   Francis,  (1966)   K.  Sudhakaran  (1967),  P. Paramesuaran (1966-67)  A. S.  Nambiar for the Appellants in 1965, 1966,  1967, 2203, 2204, 2205, 2206, 2353 and 2503/78, 1, 72 and 168/179, 165/79, 2063/78 and for the Petitioner in W.P. 143/79.      P. Kesava Pillai and S. K. Das Gupta for the Appellants in CAs. 2104, 2350 and 2401/78.      P. Govindan  Nair and Mrs. Saroja Gopalkrishnan for the

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Appellants in 1860-64/78.      S. K. Mehta, P. N. Puri and EMS Anam for the Appellants in C.A. 2256, 2257/78, 333, and 500/79 and 2026/79.      S. Balakrishnan  for the  Appellants in  CA 2207/78 and for Petitioner in W.P. 4375/79.      G. B.  Pai (169),  K. J.  John and Manzal Kumar for the Appellants in C.A. 39 and 169/79.      P. Govindan  Nair, Mrs. Baby Krishnan and N. Sudhakaran for the  Appellants. C.A.  148-50,304-305 and 409/79 and for the Petitioners  in SLP  Nos. 4062,  4061, 6298, 5141, 6154- 6156/78. 814      A.  T.   M.  Sampath  and  P.  N.  Ramalingam  for  the Appellants in CA 2254 and 2255/78 and 267/79.      K. P.  P. Pillai  for the  Appellants in  C.A. 542  and 571/79.      N. Sudhakaran for the petitioners in SLP 1137-1138/79.      M.  M.   Abdul  Khader  and  K.  M.  K.  Nair  for  the Respondents in all matters.      The Judgment of the Court was delivered by      SHINGHAL, J.  These cases  relate to  the  validity  of certain provisions  of the  Kerala Building  Tax Act,  1975, hereinafter referred to as the Act, and are directed against the judgment of the Keral High Court dated June 12, 1978, by which the  validity of  those provisions has been upheld. We have heard  these cases together and shall deal with them in this judgment.      In order  to appreciate  the controversy,  it  will  be convenient to  make a brief mention of the background of the Act.      The Legislature  of the Kerala State wanted to impose a tax on  buildings, and  passed the  Kerala Building Tax Act, 1961, which  came into  force on March 2, 1961. Its validity was challenged, and by his judgment dated November 20, 1964, a learned  Single Judge  of the  High Court  held it  to  be invalid and  unconstitutional. The  division bench  took the same view  in its judgment dated July 7, 1966, and dismissed the appeal  of the State. The matter came to this Court, and it also  dismissed the  appeal by  its judgment dated August 13,. 1968,  reported in  State of  Kerala v. Haji K. Haji K. Kutty Naha  and others.  This was so because the Legislature had adopted  merely the  floor area  of the  building as the basis of  the tax  irrespective of all other considerations. The intention  to introduce  a fresh Bill and to levy a non- recurring  tax   on  building  was  stated  in  the  Finance Minister’s budget  speech of  1910-71. A  Bill was published some time  in June,  1970, and  it was stated there that the Act would  be brought  into force  with effect from April 1, 1970. The Bill was introduced in the Legislative Assembly on July S,  1973, and  was referred  to a Select Committee. The Committee  submitted  its  report  on  March  28,  1974.  It recommended that  the Act  may be  brought into  force  from April 1,  1973. As the Bill could not be taken up during the budget session,  the Government of the State promulgated the Kerala Building  Tax ordinance,  1974, on  July 27,  1974 to give effect to the provisions of the Bill as reported by the Select Committee. It was followed by another ordinance dated November 18, 1974 on the lines of the 815 earlier ordinance.  The Bill  was passed soon after, and the Governor gave  his assent  to it  on April  2, 1975. Several writ petitions were filed in the High Court to challenge its constitutional validity.  and we  have made a mention of the High Court’s  impugned judgment  dated June  12, 1978,  from which the  present cases  have arisen.  While  four  Hon’ble

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Judges of  the High  Court have  upheld the  validity of the Act. a different views has been taken by Eradi, J.      The question  which arises  for  consideration  at  the threshold is  that relating  to the  competence of the State Legislature to  enact the  law, on which considerable stress has been  laid by  Mr. P. A. Francis. He has argued that the subject-matter of  the Act being a tax on buildings, it is a tax on  the capital  value of the assets of an individual or company and  falls within the scope of entry 86 of List I of the Seventh  Schedule of  the Constitution,  and  not  under entry 49  of List  II, so that it was beyond the legislative competence of  State Legislature.  The question  is  whether this is so.      The word  "tax" in  its widest sense includes all money raised by  taxation. It  therefore includes  taxes levied by the Central and the State Legislatures, and also these known as "rates  ’, or  other charges, lavied by local authorities under  statutory   powers.  "Taxation"  has  therefore  been defined in clause (28) of article 366 of the Constitution to include "the  imposition  of  any  tax  or  impost,  whether general or  local or special," and it has been directed that "tax.’ shall be ’construed accordingly."      Chapter I of Part XI of the Constitution deals with the distribution of  legislative powers.  Article  246  of  that chapter states,  inter alia,  the exclusive  powers  of  the Parliament and  the  State  Legislatures  according  as  the matter is  enumerated in  List I  or List  II of the Seventh Schedule. Entry  86 of  List I,  in which  reliance has been placed by Mr. Francis, reads as follows:-           "86.  Taxes   on  the  capital  value  of  assets,      exclusive of  agricultural  land,  of  individuals  and      companies; taxes on the capital of companies."      Now the  word "assets"  has been defined in the Century Dictionary (which  is an encyclopedic lexicon of the English language) as follows-           "Property  in   general;  all   that   one   owns,      considered as  applicable to  the payment  of his debts      .... As  a singular.  Any portion  of one’s property or      effects so considered." 816 So if  a tax  is levied  on all  that one owns, or his total assets, it would fall within the purview of entry 86 of List I, and  would be  outside the  legislative competence  of  a State Legislature,  e.g. a  tax on one’s entire wealth. That entry would  not authorise  a tax  imposed  on  any  of  the components of  the assets of the assessee. A tax directly on one’s lands  and buildings will not therefore be a tax under entry 86.      On the other hand, entry 49 of List Ir is as follows,-           "49. Taxes on lands and buildings." If therefore  a tax  is directly  imposed on "buildings", it will bear  a direct relation to the buildings owned by their assessee. It  may be  that the building owned by an assessee may be  a component  of his  total assets,  but a  tax under entry 86  will not  bear any direct or definable relation to his building. A tax on "buildings" is therefore a direct tax on the  assessee’s buildings  as such, and is not a personal tax without reference to any particular property.      It has  to be  appreciated that  in almost all cases, a tax has  two elements  which have  been precisely  stated by Seervai  in   his  "Constitutional  Law  of  India,"  second edition, volume 2, as follows, at page 1258,-           "Another  principle   for  reconciling  apparently      conflicting tax  entries follows  from the  fact that a      tax has  two elements: the person, thing or activity on

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    which the  tax is  imposed, and  the amount of the tax.      The amount  may be  measured in  many ways; but decided      cases establish a clear distinction between the subject      matter of a tax and the standard by which the amount of      tax is  measured. These  two elements  are described as      the subject of a tax and the measure of a tax." It may  well be that one’s building may imperceptibly be the subject matter of tax, say the wealth-tax, as a component of his assets.  under entry  86 (List  I); and  it may  also be subjected to tax, say a direct tax under entry 46 (List II), but as the two taxes are separate and distinct imposts, they cannot be  said to  overlap other  and would  be within  the competence of the Legislatures concerned.      Reference in  this connection  may be  made  to  Sudhir Chandra Nawn  v. Wealth-Tax officer, Calcutta and others.(1) The petitioner  there challenged the demand for the recovery of wealth  tax on  the ground,  inter alia,  that since  the expression  "net  wealth"  included  the  buildings  of  the assessee and  tho power  to levy tax on them was referred to the 817 State Legislature  under entry  49, List  II, Parliament was not competent  .4 to  levy the tax under entry 86 of List I. This Court  rejected the  challenge and laid down the law as follows,-           "The tax  which is  imposed by  entry 86 List I of      the Seventh Schedule is not directly a tax on lands and      buildings. It  is a tax imposed on the Capital value of      the  assets   of  individuals  and  companies,  on  the      valuation  date.   The  tax   is  not  imposed  on  the      components of the assets of the assessee: it is imposed      on the  total assets  which the  assessee owns,  and in      determining the  net wealth  not only  the encumbrances      specifically charged against any item of asset, but the      general liability  of the assessee to pay his debts and      to discharge  his lawful  obligations have  to be taken      into account.      ....          .....           ......             .....      Tax on lands and buildings is directly imposed on lands      and buildings, and bears a definite relation to it. Tax      on the  capital value  of  assets  bears  no  definable      relation to  lands  and  buildings  which  may  form  a      component of  the total  D. assets  of the assessee. By      legislation in  exercise of power under entry 86 List I      tax is  contemplated to  be levied  on the value of the      assets. For  the purpose  of levying tax under entry 49      List II  the State  Legislature  may  adopt  for  deter      mining the  incidence of  tax the annual or the capital      value of  the lands  and buildings. But the adoption of      the annual  or capital value of lands and buildings for      determining tax  liability will  not, in  our judgment,      make the  fields of  legislation under  the two entries      overlapping."      The decision in Sudhir Chandra Nawn’s case was followed by this  Court in  Assistant Commissioner  of Urban Land Tax and others  v. F.  The Buckingham  and  Carnatic  Co.  Ltd., Etc.(1) where  the vires  of the  Madras Urban Land Tax Act, 1966, was challenged with reference to entry 86 of List I of the Seventh  Schedule. The  legal position on that aspect of the controversy was reiterated as follows,-           "But in  a normal  case a  tax on capital value of      assets  bears   no  definable  relation  to  lands  and      buildings which  may or may not form a component of the      total assets  of the assessee. But entry 49 of List II,      contemplates a  levy of  tax on  lands and buildings or

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    both as units. It is not concerned with the division of      interest  or   ownership  in  the  units  of  lands  or      buildings which  are brought  to tax.  Tax on lands and      buildings, is directly imposed on lands and buildings, 818      and bears a definite relation to it. Tax on the capital      value of  assets bears  no definable  relation to lands      and buildings  which may  form a component of the total      assets of the assessee."      There is  therefore no  force in  the argument that the State Legislature  was not  competent to  impose the  tax on buildings under  entry 49 of list II of the Seventh Schedule of the Constitution.      We may  as well  put aside  the other argument that the Act is  unconstitutional as  it was  passed on April 2, 1975 but has imposed a tax on buildings with retrospective effect from April 1, 1973.      Craies on  Statute Law, seventh edition, has stated the meaning of "retrospective" at page 387 as follows,-           "A statute  is to  be deemed  to be retrospective,      which takes  away or  impairs any vested right acquired      under existing  laws, or  creates a new obligation,, or      imposes a  new duty,  or attaches  a new  disability in      respect of transactions or considerations already past.      But a  statute "is  not properly called a retrospective      statute because a part of the requisites for its action      is drawn from a time antecedent to it, passing"." It has  however not been shown how it could be said that the Act has  taken away  or impaired  any vested  right  of  the assessees before  us  which  they  had  acquired  under  any existing law,  or what that vested right was. It may be that there  was   no  liability   to  building   tax  until   the promulgation of  the Act  (earlier the  ordinances) but mere absence of an earlier taxing statue cannot be said to create a "vested  right," under any existing law, that it shall not be levied  in future with effect from a date anterior to the passing of  the Act. Nor can it be said that by imposing the building tax  from an  earlier date  any new  obligation  or disability has  been attached  in  respect  of  any  earlier transaction ar  consideration.  The  Act  is  not  therefore retrospective in the strictly technical sense.      What it  does is  to impose the building tax from April 1, 1973.  But as  was held in Bradford Union v. Wilts,(1) if the language  of the  statute  shows  that  the  legislature thinks it expedient to authorise the making of retrospective rates, it  can fix  the period  as to  which the rate may be retrospectively made. 819      This Court  had occasion to examine the validity of the retrospective levy  of sales  tax in The Tata Iron and Steel Co., Ltd. v. The State of Bihar(1) and it was held that that was not  beyond the  legislative  competence  of  the  State Legislature.      Nor can  the choice  of April  1, 1973  as the  date of imposition of the building tax be assailed as discriminatory with reference  to article  14 of the Constitution. It will, be enough  for  us  to  refer  in  this  connection  to  the following passage  from this  Court’s decision  in Union  of India and  another v.  M/s. Parameshwaran  Match Works  Etc. Which was  a case  under the  Central Excise  and Salt  Act, 1944.-           "The  choice   of  a   date   as   a   basis   for      classification cannot  always be  dubbed  as  arbitrary      even if  no particular  reason is  forthcoming for  the      choice unless it is shown to be capricious or whimsical

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    in the  circumstances. When it is seen that a line or a      point there  must be  and there  is no  mathematical or      logical way  of finding  it precisely,  the decision of      the legislature or its delegate must be accepted unless      we can say that it is very wide of the reasonable mark.      See Louisville Gas Co. v. Alabama Power Co.-240 U.S. 30      at 32 (1927) per Justice Holmes."      It has not been shown in this case how it could be said that the  date (April  1, 1973)  for the levy of the tax was wide of  the reasonable  mark. On  the other  hand it  would appear from the brief narration of the historical background of the  Act that  the  State  Legislature  had  imposed  the building tax  under the Kerala Building Tax Act, 1961, which came into  force on  March 2,  1961, and  when that  Act was finally struck  down as  unconstitutional  by  this  Court’s decision dated  Aug(lst 13, 1968, the intention to introduce a fresh  Bill for  the levy  was made  clear in  the  budget speech of  1970-71. It  will be  recalled that  the Bill was published in  June 1973 and it was stated there that the Act would be brought into force from April 1, 1970. The Bill was introduced in  the Assembly  on July  S,  1973.  The  Select Committee however  recommended that  it may  be brought into force from April 1, 1973. Two ordinances were promulgated to give effect  to the  provisions of  the Bill.  The Bill  was passed soon  after and  received the  Governor’s  assent  on April  2,  1975.  It  cannot  therefore  be  said  with  any justification that in choosing April 1, 1973 as the date for the levy  of the tax, the Legislature acted unreasonably, or that it was "wide of the reasonable mark." 820      The real  controversy in  this case is that relating to the nature  of the  tax, for  it has  been vehemently argued before us  that it  is not merely a tax on buildings, but it is a tax on the buildings, as well as on the lands of those, buildings.      As has  been mentioned, what entry 49 of List II of the Seventh Schedule  of the Constitution permits is the levy of "taxes on  lands and buildings." It is therefore permissible to levy  a taxes either on lands as well as buildings, or on lands, or on buildings. If the Legislature decides to impose a tax  only on  "buildings", the  tax will be imposed on all that goes to make, or constitute, a building.      The word  ’ building"  has been  defined in  the oxford English Dictionary as follows,-           "That which  is built; a structure, edifice: now a      structure of the nature of a house built where it is to      stand." Entry 49  therefore includes the site of the building as its component part.  That, if  we may  say so,  inheres  in  the concept  or   the  ordinary   meaning  of   the   expression "building".      A somewhat  similar point  arose for  consideration  in Corporation of  the City  of Victoria v. Bishop of Vancouver Island(1)  with   reference  to  the  meaning  of  the  word "building" occurring  in section  197(1) of  the Statutes of British Columbia,  1914. It  was held  that  the  word  must receive its  natural and  ordinary meaning as "including the fabric of  which it  is composed,  the ground upon which its walls stand  and the  ground embraced  within those  walls." That appears to us to be the correct meaning of "building."      The Act contains its own definition of what is meant by "building", and  clause (e) of section 2 is to the following effect,-           "(e) "building"  means a house, out-house, garage,                or  any  other  structure  or  part  thereof,

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              whether of  masonry, bricks,  wood, metal  or                other material,  but  does  not  include  any                portable  shelter  or  any  shed  constructed                principally of mud, bamboos, leaves, grass or                thatch or a. latrine which is not attached to                the main structure." There are  two explanations  to the clause, but they are not relevant for  the  controversy  before  us.  The  definition therefore makes  it quite clear that. as a house, out-house, garage or  any other structure cannot be erected without the ground on  which it  is to  stand, the expression "building" includes, the fabric of which it is composed, the ground 821 upon which  its walls  stand and  the  ground  within  those walls. It  is A  equally clear  that the  ground referred to above would  not have  a separate  existence, apart from the building, and  would not  be  "lands’  jointly  stated  with "buildings" as  the subject-matter of the tax in entry 49 of List II.  In other  words, the  "ground" referred  to  above would not  be the  subject-matter of  a separate  tax, apart from the tax on the building standing on it.      It is true that sub-section (4) of section 6 of the Act provides that  in determining the annual value of a building under sub-section  (2) or  sub-section  (3),  the  assessing authority shall,  among other  factors, have  regard to  the "location of  the building",  and the  "value of the land on which the  building is  constructed", but  that is necessary for fixing  the annual value of the "building", and does not bear on  the annual  value of  the ground  of  the  building which, as  we have  shown, does not have an existence of its own-apart from  the  building.  Thus  a  building  which  is located in an important business area of a city, will have a higher annual value than a building located in the outskirts of the city. But any such enhanced value is the value of the building and  not of  its ground,  for what is located in an important business area is not the ground of the building as such, but  the building  itself. It may be that the value of the ground on which the building stands may be known, or may be capable  of being  ascertained. That  is  why  the  other factor mentioned  in sub-section  (4) of  section 6  is  tho value of  that land.  But here  again, as  the land  has  no separate existence  of its  own  the  value  of  the  ground inevitably goes to constitute the value of the building.      Rule 4 of the Kerala Building Tax Rules, 1974, provides that the  return under  sub-section (1) or (3) of section 7, or section  8 of  the Act  shall be  in Form II. Column 2 of that form  makes a  mention of the location of the building, but not  the location  of its  ground or  land, or the value thereof. It  refers only to the annual value of the building in column  (13) and  its capital  value in column 7, so that the location  of the building, as distinct from the location of its ground, or the value of the ground as such, do not go in for  the determination  of the annual or capital value of the building.      It is  therefore futile  to contend that as factors (a) and (f)  of sub-section (4) of section 6 of the Act refer to the location  of the building and the value of the land, the law recognises  the separate  existence  or  entity  of  the ground on which the building stands, so that tho tax imposed under it  is a  tax both on lands and buildings and both the entities should be separately recognised and determined, and taxed as  such. As has been stated, the location or value of the land has 16-625 SCI/79 822 importance of  its own,  and contributes to the value of the

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building standing  on it,  but that  does  not  justify  the argument that  what the  Act provides  is a tax on lands and buildings, and  not merely  on buildings.  There is also the further fact  that while  the Act  provides  the  method  of arriving at  the capital value of the building, on the basis of the  annual value,  it does  not provide  any  method  of assessing the annual or capital value of the ground on which the building stands.      We shall  next examine  the  other  argument  that  the method of determining the capital value of a building on the basis of  its annual value is hypothetical and arbitrary and should be struck down as unconstitutional.      We have  given our  reasons for holding that the tax on buildings, under  the provision of the Act, has been imposed by virtue  of entry 49 of List II of the Seventh Schedule of the Constitution.  So when the State Legislature had taken a decision to impose that tax, it was open to it to decide how best to  levy it.  If the  tax was  to be annual, one of the usual  modes   of  levying  it  was  to  make-provision  for determining what  is known as "rate", or annual value of the building. Rateable  value is  now, in  almost all cases, the same as the net annual value of the building.      But if the State Legislature decides, as in the present case, to  levy a  tax on  buildings once  for all or, as was stated in  the statement  of subjects  and Reasons of one of the Bills,  as a "non-recurring" tax on buildings, it had to go beyond  the annual value, and work out the capital value. This could  be done  in one  of the various modes open to it e.g. On the basis of the capital cost of construction of the building, or  its market  value, or on the basis of the rent arrived at  by what  has aptly been described by Channel J., The Assessment  Committee of  the Brad-Ford-on-Aven Union v. Write(1) as the "higgling of the market", and multiplying it by a  number which, in the opinion of the Legislature, would best serve  the purpose  of determining  the  value  of  the building, and then to specify the rate of the tax on it.      The value  of a  building is not merely the cost of its bricks  and   mortar  or  other  building  material.  It  is therefore difficult  to ascertain  that  cost.  It  is  also difficult to  find out the market value of a building. Doing so would,  at any  rate,  take  time  and  may  be  open  to manipulation or  avoidable criticism,  and may not provide a ready or  convenient  basis  of  taxation.  The  Legislature cannot therefore  be blamed  if it  decides to link the levy with the annual value of a building and prescribes a uniform formula for  determining its capital value and . calculating the tax. Annual value of a building has in fact played as 823 important a  role in  "rating" that,  in  a  converse  case, resort has  some- A times been taken to the capital value or cost of construction to work it out.      As has been stated by Faraday on Rating (fifth edition, page 24)  there are  four recognised  methods of arriving at the annual value of a building,-           1.   The "competitive or comparative method" i.e.,                by finding  out rents  actually paid  for the                building and/or  others of  a  similar  kind,                adjusting them  to bring  them into line with                statutory  conditions,   and  thus   arriving                directly at an estimate of the rent.           2.     The  "profits  basis",  or  calculation  by                reference  to   receipts   and   expenditure,                usually    applied    to    public    utility                undertakings.           3.    The  "contractor’s method",  by which  it is

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              assumed, in  the absence  of  any  other  and                better way  of estimating  the rent, that the                tenant would  arrive at  it  by  finding  the                figure for  which a  contractor would provide                him  with  premises  neither  more  nor  less                suitable for  his purpose,  and the  rate  of                interest on  that cost  which the  contractor                would charge him as rent.           4.    The  "unit method"  by which  schools may be                valued at  so much  a place,  hospitals at so                much a bed, or certain industrial premises at                so much-a furnace, or other unit of output. There is  nothing to  prevent any  of the  four methods from being applied  either singly,  or in combination, as overall checks to the same building.      The fundamental  object in  each of these methods is to find out  the  rent  which  a  tenant  might  reasonably  be expected to  pay for a building. It is the expectation which is to  be reasonable  and not  necessarily the rent, for the reasonable expectation  would exclude  any  so-called  black market rent.  Halsbury (Vol. 23 p. 119 third edition) has in fact defined  "rate" to  mean "a  rate the proceeds of which are applicable  to local  purposes of  a public  nature  and which is  leviable on  the basis of assessment in respect of the yearly  value of property." As has been stated in "State and  Local  Taxation"  by  J.  R.  Hellerstein  (page  684), increasing weight  is being  given to  earnings as a weighty factor in real estate tax valuations. 824      There is  however no  rule of  law as  to the method of valuation to  be adopted for determining the annual value of a building.  Where, however,  the building  has been  let at what is  plainly a  rackrent, that rent is the best evidence of value  if it  has been  fixed  by  the  higgling  of  the market.. If therefore the Legislature selects that method to determine the  annual value  of a building, there is neither reason nor  authority for holding that it is hypothetical or arbitrary.      What the  Legislature has done under the Act is to make it clear  that the  tax is  on buildings,  and  not  on  the grounds on which they stand, or on lands. It has defined [in clause (e)  of section  2] what  a "building"  means. It has also defined  in clause  (a) of  section 2  what is meant by "annual value"  of a  building and  clause (i)  of the  same section defines  "capital value".  Section 6  prescribes the mode  of   determining  the  capital  value  of  a  building according to  the formula  of sixteen times the annual value prescribed in  clause (f)  of section  2. Having  made these necessary provisions,  section S states that a tax, referred to as  "building tax"  in the  Act, shall  be charged at the rate  specified   in  the  Schedule  etc.  There  are  other ancillary provisions,  but it  will be  sufficient for us to say that, taken together, they contain the entire scheme for the levy  and collection  of the building tax on the capital value of  the buildings. The expression "capital value" used in the  Act is  not however  the cost of construction of the building or its market value as a wealth. It is a convenient or a  working expression which may roughly be said to be the taxable value of the building, and the State Legislature was quite competent  to select  that as  the basis for assessing the building tax.      Reference in  this  connection  may  be  made  to  this Court’s decision  in Khandise  Sham Bhat  and others  v. The Agricultural Income Tax officer(1) where it has been held as follows at page 823,-

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         "Where there  is more than one method of assessing      tax and  the Legislature  selects one  out of them, the      court will  not be  justified to strike down the law on      the ground  that the  Legislature should  have  adopted      another method  which, in  the opinion of the court. is      more reasonable, unless it is convinced that the method      adopted is  capricious, fanciful,  arbitrary or clearly      unjust." It may  be mentioned  that this  Court has held in Assistant Commissioner of  Urban Land Tax(supra) that "for the purpose of  Ievying   tax  under   entry  49,  List  II,  the  State Legislature may  adopt for  determining the incidence of tax the annual or the capital value of the lands and 825 buildings." There  is therefore  no  justification  for  the argument to the Contrary      We may  as well  deal here  with the ancillary argument that the  building tax  could not,  at any  rate, have  been based on  the "gross  annual rent"  of  the  building.  Thus argument has  arisen because  clause (a) of section 2 of the Act defines "annual value" as follows,- 1           "annual value"  of  a  building  means  the  gross      annual rent  at which  the building  may at the time of      completion be  expected to  let from  month to month or      from year to year." It is therefore true that the expected gross annual rent has been made  the annual  value of  a building,  but  that,  by itself, cannot  be said  to be  open to  objection  for  two reasons.  Firstly,   there  is   nothing  to   prevent   the Legislature from  making the expected gross annual rent, and thereby the  annual value of a building, from being the unit for multiplication  by sixteen  for arriving  at its capital value for  charging  the  tax  under  section  5.  Secondly, section 6 of the Act states that for determining the capital value for  the purposes  of the  Act, the  annual value of a building shall  be the "annual value fixed for that building in the  assessment books of the local authority within whose area the  building is  situate ’  and a  cross-reference  to section 102  (2) of  the Kerala  Municipal Corporation  Rct, 1961, shows  that  while  the  annual  value  of  lands  and buildings shall  be deemed  to be  the gross  annual rent at which they  may at  the time  of  assessment  reasonably  be expected to  let from month to month or from year to year, a deduction in  the case  of buildings  of fifteen per cent of that portion  of such  annual rent  which is attributable to the building,  alone apart  from their  sites  and  adjacent lands occupied  as appurtenances  thereto shall  be made and that deduction  shall be  in  lieu  of  all  allowances  for repairs or  on any  other account  whatever. As by virtue of section 6  of the  Act the same annual value forms the basis for determining  the  capital  value  of  the  building  for purposes of  the Act,  what really  is taken  as the  annual value under the definition in clause (a) of section 2 is not their gross  annual rent but the net rent after allowing for the cost  of its  repairs etc.  A similar deduction has been provided under  section 100(2)  of the Kerala Municipalities Act, 1960.  It has  not  been  disputed  before  us  that  a provision exists  in the law relating to Panchayats also for actually basing  the tax  on  buildings  at  the  prescribed percentage of the net annual rental value of the buildings.      It is  not therefore  factually correct to contend that the annual value of buildings in Kerala is determined on the basis of  their gross  annual rent. without any deduction on account of repairs etc., and there is 826

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no force  in the  argument that determination of the capital value is  arbitrary as  it is  arrived at by multiplying the gross annual  rent by sixteen. But there is, even otherwise, no inherent  illegality or  vice if  the gross income of the property  were   to  be   capitalised  for  the  purpose  of determining the  value of  the property.  It has  thus  been stated in  American Jurisprudence,  second edition,  in para 762, on  which reliance has been placed by Mr. Govindan Nair as follows.-           "A valuation  of real property for taxation may be      made by  capitalizing gross  income therefrom,  if  the      percentage  used  is  sufficient  to  cover  legitimate      deductions and a fair net return to the owner."      Reference may  also be  made to Faraday on Rating which shows that  the gross  value of a building is often made the datum point  by statue  and  there  is  nothing  unusual  or illegal about  it-particularly  when  there  are  statutable deductions from it as in the present case.      Then it has been argued that under the Kerala Municipal Corporation  Act,   1961,  the   annual  value   is  largely determined on  the basis  of the  value of the land on which the building  has been  constructed and the land appurtenant thereto, but  it is  not permissible to make it the basis of levying the tax on buildings under the Act as it purports to be a  tax only on buildings and not on lands or on lands and buildings. Reference for this argument has been made to that part of  section 102(1)  of the Kerala Municipal Corporation Act  which  provides  that  a  building  shall  be  assessed "together with its site and other adjacent premises occupied as appurtenances thereto".      We have  given our reasons for taking the view that the site or ground on which the building stands is a part of the building. It  has therefore  to  be  taxed  along  with  the fabric, for  the two  of them constitute the building. There is therefore  no occasion  to tax the site separately, or to ascertain its value and add it to the value of the fabric.      This is also the position in the case of appurtenances. An appurtenance  has been  defined  in  the  oxford  English Dictionary as follows,-                "A   thing    that   belongs    to   another,      ‘belonging’; a  minor property,  right, or  privileges,      belonging to  another more  important, and  passing  in      possession with it; an appendage." An appurtenance  thus belongs  to the building concerned and has no  existence of  its own.  This Court  had occasion  to examine the meaning 827 of "appurtenance" in Maharaj Singh v. State of Uttar Pradesh and others and has observed as follows (at page 1085),-           " "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      enjoyment 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

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    the expression  ’appurtenances’. Indeed  ’it is settled      by  the   earliest  authority,   repeated   with-   out      contradiction to the latest, that land cannot be appur-      tenant 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).           In short,  the  touchstone  of  ’appurtenance’  is      dependence of the building on what appertains to it for      its use as building." So even  if it  is presumed,  as has  been argued before us, that there  is some  land as  an appurtenance to a building, then if  the word  "appurtenance" has  been used in its true sense, it  is an  integral part  of the building to which it belongs, while  if the  word has  been used loosely, it will have its  separate existence-quite  apart from the building. In either  case, its  value will not come in for addition to the annual  value of  the building.  It  would  not  matter, therefore, if  under the Corporation Act the annual value of a building includes the value of the appurtenances. for that is really the true annual value of the building concerned.      Another argument  which has  been advanced  is that the multiple of  16 for  ascertaining the  capital  value  of  a building on  the basis  of its  annual value, is unrealistic and arbitrary  and should  be held  to be "confiscatory". It has been pointed out that competing returns from 828 investments range  from 12  to 18 per cent on long term bank deposits. It  has also  been argued that mere multiplication of the  annual value  would give an unrealistic value and is not a satisfactory method of arriving at the capital value.      As has  been pointed  out earlier,  the Legislature has decided to  impose a  non-recurring tax  on buildings in the State.  It  had  therefore  necessarily  to  go  beyond  the ascertainment of  the annual  value, and  adopt one  of  the several ways of ascertaining the capital value of buildings. And if  the Legislature   chose to adopt the annual value as the base for working out the capital value with reference to it, it cannot be blamed for it as, besides other advantages, it was  readily available  from the  records  of  the  local authorities and  was quite  a simple  and reliable  basis to work upon.      The controversy  really centres round the choice of the multiple, to work out the capital value. The Legislature has thought it proper to define "capital value" of a building to mean the value arrived at by multiplying the annual value of a building  by sixteen. There was nothing to prevent it from doing so  for, as  has been  pointed out, it had legislative competence to impose the building tax. And it is by now well settled that  the quantum  of the  tax levied  by the taxing statute and  the conditions  subject to  which it is levied, are matters  within the  competence of  the Legislature: Rai Ramkrishna and  others v.  The State of Bihar.(1) It is also well settled  that so long as the tax is not confiscatory or extortionate,  the  reasonableness  of  the  tax  cannot  be questioned in a court of law: Kunnathat Thathuni Moopil Nair v.  The   State  of   Kerala  and   another  and   Assistant Commissioner  of  Urban  Land  Tax  v.  The  Buckingham  and Carnatic Co. Ltd. (supra) .      It has  to be  appreciated that investment in buildings is a conservative mode of raising income and even if it were presumed that  it does  not yield  the same quick results as some other  forms of investment, it cannot be denied that it involves lesser  risk. So  even if it yields a return of not

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more than  6.25 per  cent or  so, it  cannot be denied that, unlike most  of the other dependable investments, it has the considerable advantage  of giving  to  the  investor  a  far greater return  in the  form of  a more  or less  continuous appreciation of the market value of the buildings.      Our attention  has been  invited to  certain  modes  of investment by  way of  fixed deposits,  or national  savings certificates, which, we are told, 829 yield income  upto about 10 per cent per annum, and would be higher than  the conservative  6.25 per  cent yield  on real estate. But  it cannot  be forgotten  that in fixed deposits and certificates  the money and the interest of the investor remain locked up until the expiry of the term of the deposit or the  certificate. The term of deposit is often quite long if it  has to yield income at the rate of 10 per cent or so. If however  the deposit  is for  a short  period of  say six months, the income from interest may not be far in excess of 6.25 per  cent, which appears to be the basis for fixing the multiple at 16.      Mr. Dewan  has invited  our attention  to  a  statement prepared by  him showing  building tax on gross annual rent, and he has argued that, in one of the cases before us, while the cost  of construction  of  the  building  was  only  Rs. 2,79,686.20 its annual rental income is Rs. 1,34,400,00, its capital value  works to  Rs. 21,50,400.  On and the building tax on it will amount to Rs. 3,04.,610.00. It has been urged that the building tax will thus be far in excess of the cost of construction, and would be extortionate. But the argument misses the  point that  only the cost of construction of the structure cannot  be the full capital value of the building. It  also   overlooks  the  fact  that  the  entire  cost  of construction, on Mr. Dewan’s own showing, would be recovered in about two years because of the high rental income, and if the owner has to pay a non-recurring tax of Rs. 3,04,610.00, that will  be less  than three years rental income, so that, thereafter, his  investment will  be a source of a recurring income of  Rs. 1,34,400.00  for as  long the building lasts. There is  nothing unreasonable  in determining  the  capital value of  a building  yielding so  much annual  rent without reference to  its cost  of construction.  A tax  of  such  a nature cannot  be said  to be  arbitrary or  confiscatory or extortionate. But  even if  it were  assumed that the income from a  building is no, more than 61 per cent, and the whole of it  is denied  to the  owner for a period of 16 years, to coincide with the multiple of 16, it cannot be gainsaid that after the  expiry of  that period,  the owner  would, at any rate, be  able to retain the whole of the income and, in the meantime, benefit  from the appreciation of its market value as years  go by.  Such a taxing statute cannot be said to be "colourable".      It has  in  fact  been  held  by  this  Court  in  Raja Jagannath Baksh  Singh v.  The  State  of  Uttar  Pradesh(1) that,-           ". .  . the  conclusion that  a taxing  statute is      colourable would  not and  cannot  normally  be  raised      merely on  the finding  that the  tax imposed  by it is      unreasonably high or 830      heavy, because  the reasonableness of the extent of the      levy is  always a  matter within  the competence of the      Legislature. Such  a conclusion can be reached where in      passing the  Act the  Legislature has  merely adopted a      device and  a cloak  to confiscate  the property of the      citizen taxed."

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Reference may also be made to S. Kodar v. State of Kerala(1) for the following observation,-           "Generally speaking,  the amount  or rate of a tax      is a matter exclusively within the legislative judgment      and as  long as  a tax retains its avowed character and      does not  confiscate property  to the  State under  the      guise of  a tax,  its  reasonableness  is  outside  the      judicial ken."      As has  been stated  by A.A.  Ring on "the valuation of Real Estate", second edition, page 232, "the most important, and perhaps  the most controversial, and yet the least known phase of property valuation revolves about the procedure for the determination of a market rate of capitalisation through which estimated  future net  income can  be converted into a sum of  present value."  The author  has dealt  with various methods of  property valuation  and the mathematics thereof, but they  are approaches to a difficult problem and the fact remains that  no one  method is  perfect, or final, or above criticism. As  it is,  we  are  unable  to  think  that  the multiple of  16 suffer  from  any  constitutional  or  legal infirmity.      The legality  of the  building  tax  has  however  been challenged on  the further  ground that  the Act,  does  not provide any  procedural machinery  for the assessment of the annual  value  of  buildings  and  is  really  a  colourable exercise  of   legislative  power.  The  argument  has  been advanced with  reference to sub-section (1) of section 5 and has been supported on the basis of this Court’s decisions in Kunnathat Thathuni  Moopil Nair v. The State of Kerala, Raja Jagannath  Baksh Singh v. The State of Uttar Pradesh and Rai Ramkrishna and others v. The States of Bihar ( supra) .      Sub-section (1)  of section  5 of the Act, which is the charging section,  provides that  the building  tax shall be charged at  the rate  specified in  the Schedule  where  its capital value  exceeds Rs. 20,000/-. Clause (f) of section 2 states that  the "capital  value’ of  a building  means  the value arrived  at by  multiplying its annual value by 16. So if the  annual value  of a  building can be ascertained with finality, by  any satisfactory  procedure prescribed by law, it would only require its 831 multiplication by  16 to  determine its  capital value,  and then to  assess   the building tax leviable on it would be a matter of  simple arithmaticaI  calculation according to the table given in the Schedule.      Section 6  of the  Act provides the mode of determining the capital  value  of  a  building.  For  purposes  of  the argument  under   consideration,  sub-section  (1)  of  that section alone  arises for  consideration because  it is  not disputed that sub-section (2), which deals with a case where the annual  value fixed in the assessment books of the local authority is  held to  be "too  low", and  sub-section  (3), which deals with a case where the capital has not been fixed at all,  are on  a different  footing. For them, the factors for determining  the annual value, and the assessing and the appellate and  revisional   authorities etc.  have all  been provided by  the Act  and there  is no   grievance  on  that account. The  question is  whether determining capital value on the  basis of the annual value recorded in the assessment books of  the local authority concerned is arbitrary because of  the   absence  of   the  necessary   machinery  for  its determination.      Sub-section (1) of section 6 reads as follows:-           "6.(1). For  determining the capital value for the      purposes of  this Act,  the annual  value of a building

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    shall be  the annual  value fixed  for that building in      the assessment  books of  the  local  authority  within      whose area the building is situate."      It therefore  accepts the  annual  value  fixed  for  a building in the books of the local authority as correct. But that would not justify the argument that doing so is illegal or unreasonable  as long  as it  can be  shown that  what is entered to  the assessment  books of the local authority has been arrived  at in accordance with a satisfactory procedure laid down for it in the statute concerned. Thus if it can be shown that  the  ANNUAL  value,  in  the  case  of  a  local authority, has  been determined  according to  the procedure laid down  for it  in the  Act governing the constitution of the local  authority and  the assessment and fixation of the annual value  of buildings  situated within  its local area, and if  that procedure  is unexceptionable,  then  there  is nothing  illegal   or  unconstitutional  if  another  taxing statute provides that the annual value so fixed and recorded in the  assessment books  of the  local authority  shall  be accepted as  correct and  form the basis for the calculation of any other tax or impost that may be permissible under the other statute. In such a case, where the necessary machinery for determining  the annual  value has  been provided in the Act and/or the rules of the 832 local  authority,  there  is  no  reason  or  necessity  for providing another  machinery in  the other  Act  and  rules. Doing so  would really mean making avoidable and unnecessary provision,  and   may  nave  the  disadvantage  of  creating confusion and inconsistency for no useful purpose. A case of the nature  contemplated by  sub-section (2) of section 6 is on a  different footing  for there  are reasons  to take the view that  the annual  value fixed  for the  building by the local authority is too low.      Everything therefore  turns on the question whether the law governing  the levy  and fixation  of  annual  value  of buildings in  the areas  of the  local authorities concerned provide the  necessary procedure and the machinery for their assessment and  final fixation. It is not disputed before us that the  three Acts  which bear  on the  question  are  the Kerala  Municipal   Corporation  Act,   1961,   the   Kerala Municipalities Act,  1960, and  the Kerala  Panchayats  Act, 1960.      We had  occasion to  refer to  section  102(2)  of  the Corporations Act  earlier, with  specific reference  to  the annual value of buildings. Section 138 of that Act provides, inter alia,  that the  rules embodied  in Schedule II of the Act shall  be read  as part  of the  chapter on  "Taxation". Rules 4  to 16  provide the  procedure and the machinery for assessment of the property tax (which is oased on the annual value), including  the procedure for moving the Commissioner by a  revision petition  to reduce the tax. Sub-rule (22) of rule 22 provides for the hearing of such applications by the Commissioner and  for their  determination by him under sub- rule (3).  Rule 23  provides for the filing of appeal to the Standing Committee  against  the  revisional  order  of  the Commissioner. Then  there is  provision in  rule 24  for the filing of  appeal to the District Court and there is further provision in rule 26 to the effect that the Court may, if it thinks fit,  state a  case on any appeal for the decision of the High Court and shall do so whenever a question of law is involved if either the Commissioner or the appellant applies in writing in that behalf. Rule 27 provides for the disposal of the  case by  the District  Court in  conformity with the decision of  the High  Court. Moreover  rule 28 provides for

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the correction  of the  assessment books  according  to  the decision of  the Standing? Committee, or the District Court. The  Corporation   Act  thus   provides  all  the  necessary procedure and  machinery for determining the annual value of buildings in a fair and reasonable manner.      We  have   gone   through   the   provisions   of   the Municipalities Act  also, in regard to the procedure and the machinery for  determining the  annual value  of  buildings. Chapter VI of Part III deals with 833 "Taxation and  Finance". Section  150 states  that the rules and tables  embodied in Schedule II shall be read as part of that Chapter.  Rules  7  provides  that  the  value  of  the building for  purposes of  the property  tax (including  the annual value)  shall be determined by the Commissioner. Rule 12 provides  for the  filing of a revision petition and rule 13 provides for its disposal only after hearing the revision petitioner. Rule 24 provides for the filing of appeal to the Municipal Council  against  the  Commissioner’s  assessment. Rule 30  provides for  the appointment of Special officer to exercise the  Councils appellate power. So the Municipal Act also provides  the necessary procedure and the machinery for the proper fixation of the annual value of buildings.      In the  Panchayat Act  also, provision has been made in section 68  for ascertaining  the  annual  rental  value  of buildings. Section  144 provides  for appeals and revisions. Under sub-section (1) of that section the appeal lies to the Panchayat and  then under  sub-section  (2)  to  the  Deputy Director.  Sub-section   (3)  gives   power  to   the  State Government also  to call for and examine the record and pass an appropriate  order. Then  there are the Kerala Panchayats (Taxation and  Appeal)  Rules,  1963.  That  Act  also  thus provides  the   necessary  procedure   and   machinery   for determining the  annual value of buildings in a satisfactory manner.      It is  therefore futile  to contend  that there  is  no adequate procedure  or machinery in the three Acts mentioned above for  the satisfactory  and proper determination of the annual value,  of buildings.  That value  can therefore very well be  made the basis for determining the capital value of a building  and thereby  fixing the  building tax  under the charging section.  Moreover, sections  9 to  16 of  the  Act contain the  procedure and  the machinery for the assessment of the  building tax  on the  returns filed under sections 7 and 8. These provisions are adequate in all respects and are not open  to challenge  with reference  to any  of the cases cited by learned counsel      It has  next been  argued that  as the capital value of buildings is  bound to  differ according  to their location, the standard  of their  construction and  the amenities  and appurtenances etc.  provided by  them, the  provision in the Act for  ascertaining their capital value by multiplying the annual value  by  16  suffers  from  the  vice  of  treating unequals  as   equals.  That,   it  has   been   urged,   is discriminatory  and   violative  of   article  14   of   the Constitution.      But the argument loses sight of the basic fact that the capital value  of  a  building  has  to  be  arrived  at  by multiplying the annual 834 value by  16, and  the Legislature  has taken care to define "annual value" to mean the annual rent at which the building may be  expected to  let. So if a building is situated in an important locality,  or if  its standard  of construction is high, or  if it  has attractive appurtenances etc. to it, it

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would be  expected to  fetch a  higher rent  than a building which  does   not  have  those  advantages.  The  definition therefore  takes care of any possible criticism that the Act suffers from  the vice  of treating  unequals as  equals. It provides for the levy of a highest building tax on buildings on which such levy would be justified, because the incidence of the  levy is  a matter  to be decided on the basis of its capacity to  fetch rent.  The argument  to the  contrary  is therefore quite untenable.      Section 29  of the  Act declares,  for the avoidance of doubt, that  in fixing  the fair  rent of  a building  under section 5  of the  Kerala Buildings (Lease and Rent Control) Act, 1965,  the rent  control  court  shall  not  take  into consideration the  building tax  payable in  respect of  the building under  the Act. That has given rise to the argument that the  provision is extortionate as it prevents the owner from passing on the liability to the tenant.      This argument  can be  answered in three ways. Firstly, learned counsel  could not  point to any of the cases before us in which such a question could be said to have arisen. It cannot therefore  he said  to have arisen for consideration. Secondly,  the  building  tax  being  a  non-recurring  tax, payable by  the owner  once for  all, without  any recurring liability, the  question of  passing it  on to the tenant by splitting it  up in proportion to the number of years of the tenancy, cannot  be said  to arise. Thirdly, learned counsel have not  been able  to refer to any provision of the Kerala Buildings (Lease and Rent Control Act, 1965, under which the building tax could be taken into consideration in fixing the fair rent  of the  building and  section 29  of the  Act has prevented that being done.      Lastly, it has been argued that while section 18 of the Act provides that the tax may be paid in such instalments as may be prescribed, the proviso to sub-section (1) of section 11,  which   deals  with  appeals,  renders  that  provision negatory as  it states  that no such appeal shall lie unless the building  tax has  been paid. The concern of the learned counsel in  advancing this argument is justified; but if the aforesaid  provisions   of  sections  11  and  18  are  read harmoniously  it  would  appear  that  if  an,  assessee  is entitled to  pay the  building tax  in instalments under the prescription referred  to in  section 18,  he  will  not  be identified  to   file  an   appeal  if  he  has  paid  those instalments 835 as and  when they  fall due.  That is  a fair and reasonable view to  take of  the relevant provisions of the Act, and we hold accordingly.      In the result, we find no merit in these cases and they are all  dismissed without  any order  as to  the costs.  We however think  it proper,  in the circumstances in which all this controversy  has arisen  and uncertainty about the true effect of  the provisions  of the  Act has  been created, to direct that  in cases  where the  building tax  has not been assessed so  far,  the  assessing  authority  may  give  the assessees an  opportunity to  produce evidence on which they may want to rely in support of their returns. In cases where the assessments  have been made, but the assessees could not or did  not file  their appeals  within the period specified therefor, we  direct that  they may  be permitted  to do  so within a  period of  30 days  from the date of this judgment and the  appellate authority  may admit those appeals as the prosecution of  these cases  was sufficient  cause  for  not presenting them  earlier. It is clarified that if any matter is pending  before the  Government of  Kerala under  section

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3(2) of  the Act, it will be permissible for that Government to dispose  it of  according to  the law.  So also, in cases where the  High Court  has given an option or opportunity to any assessee  to file  fresh objections before the authority concerned, under  the provisions  of the  Act,  it  will  be permissible for him to do so. P.B.R.                                    Appeals dismissed. 836