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PETITIONER: MUNICIPAL  CORPORATION, INDORE

       Vs.

RESPONDENT: RAI BAHADUR SETH HIRALAL & OTHERS

DATE OF JUDGMENT: 31/10/1967

BENCH: SHELAT, J.M. BENCH: SHELAT, J.M. SHAH, J.C. SIKRI, S.M.

CITATION:  1968 AIR  642            1968 SCR  (2) 125  CITATOR INFO :  D          1970 SC 417  (10)

ACT: Madhya  Bharat Municipalities Act (Act 1 of 1954)  repealing Indore  City  Municipal  Act 4 of 1909--S.  79  of  new  Act permitting an assessment list for taxes on houses and  lands being prepared once in 4 years-Assessment list under old Act adopted  for period covered by new Act-House tax  levied  on gross annual letting nature of houses as under old  Act--New Act  requiring  tax to be levied on net value  after  giving statutory allowance of 10%--S. 2(c) how far saves old  basis of taxation.

HEADNOTE: The  Madhya Bharat Municipalities Act 1954 came  into  force January 26, 1954.  The Indore City Municipal Act, 1909 which had  till then governed the Indore Municipality was  thereby repealed.   Under the repealed Act the  Indore  Municipality used to levy and collect house tax at the rate of 7% of  the gross  annual letting value.  Under  s.  73(2) of  the  1954 Act  house tax was to be assessed on the basis of the  gross annual  letting  value  less  10%  statutory  allowance  for repairs etc.  However, even for the period after the passing of the new Act, the Municipal Corporation, purporting to act under  s.  79’(1)  of  the 1954  Act.  adopted  ,the  latest assessment list prepared under the old Act and levied  house tax  at  the  old rate of 7% of the  gross.  annual  letting value.   The respondents who were trustees of certain  house property  filed a suit challenging the levy on the basis  of the gross annual letting value when s. 73(2) of the 1954 Act required  the  tax to be assessed on the  net  value   after deduction of the statutory allowance.  The suit was  decreed by the ’Trial Court and the appeals filed by the Corporation before the District judge and the High Court were dismissed. The  Corporation  by special leave, came to this  Court  and urged: (i) that the levy at 7% of the gross annual   letting value prescribed under the rules of the Indore Act was saved by  s.  2(c) of the 1954 Act; (ii) that under s.  79(1)  the Corporation was required to prepare a fresh assessment  list only  once in four years, that it was therefore entitled  to adopt  for the years in question the latest assessment  list

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prepared  under  the old Act. and the said  assessment  list having  been so adopted was conclusive evidence  as  to  the annual  rental  value of houses and the  house  tax  imposed thereon.     HELD: (i) While section 2(c) saves the rules and  taxes. imposed  under the old Act it saves them only to the  extent that  they are consistent with the new Act.  The saving  and deeming  provisions of s. 2(c) can only apply if the tax  is assessed in the manner consistent with the provisions of  s. 73, that is, if it is assessed on the net and not the  gross annual   letting   value  after  deducting   10%   statutory allowance.   The Corporation could not be allowed to  go  on imposing  the tax on the basis of the gross  annual  letting value for ever despite the express provision in s. 73.   The tax  imposed  by the Corporation at the rate of  7%  of  the gross  annual  letting value was not therefore saved  by  s. 2(c).  [129E-H]     (ii) Ordinarily the Municipal Corporation has to prepare a  fresh  assessment list every year.  The  legislature  has however  by s. 79(1) empowered the Corporation to adopt  the valuation  and assessment contained in the  assessment  list prepared  in  an  earlier year provided,  however,  that  it prepares a fresh list once in every 4 years.  But sub-s. (2) 126 of  s. 79 provides expressly that when such a previous  list is  adopted  for a particular official year it can  be  done subject  to  the provisions  ss. 75 and 76.    The  list  so adopted  has therefore  to  be  published, has   to   invite objections  and  has  to  be  authenticated  in   the manner prescribed by s. 76(6) after disposing of the objections  if any and it is then only that it becomes conclusive  evidence of  the  valuation  and the tax assessed  thereon  for  that particular  official  year.  If it were otherwise  a  house- owner would have no opportunity to object to the  assessment for  four years even though the value of his house may  have decreased  for  some reason or the other.   Section  79  has therefore to be construed to mean that though a Municipality need not prepare a fresh assessment list every year and need prepare  such list once in every 4 ),ears and can  adopt  an earlier  assessment  list such an adopted list  becomes  the assessment list for that particular year as if it was a  new list and to which ss. 75 and 76 apply.  [130E-131C] Accordingly,  the Corporation was entitled to adopt for  the official  years in question the latest list  prepared  under the  old  Act, and under s. 79 that list  would  become  the assessment  list  for  the  said  years  provided  that  the provisions  of  ss. 75 and 76 are followed.  Even  then  the appellant Corporation would not be. entitled to impose house tax  on the basis of the gross annual letting value as  such imposition would be  inconsistent with s. 73 under which the annual letting value would be the gross annual letting value less 10% statutory allowance.  [131D] Even on the footing that the resolution passed by the Indore Municipality  to  levy  the tax at 7% of  the  gross  annual letting value and on the basis of which the last list  under the ,old Act  was  prepared was saved and was deemed to have been  made  under the 1954- Act it could be deemed  to  have been  so  made  in  so far as it  was  consistent  with  the provisions of the Act.  Therefore to the extent that it  was inconsistent  with s. 73 it was neither saved nor deemed  to have  been made under the Act and had to be adjusted in  the light of the provisions of s. 73(2). [131G-H]

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JUDGMENT: CIVIL APPELLATE JURISDICTION:  Civil Appeal No. 141 of 1965.     Appeal  by  special leave from the  judgment  and  order dated  December 7, 1963 of ’the Madhya Pradesh  High  Court, Indore Bench in Second Appeal No. 378 of 1961.     B.P. Jhandharia, P.C. Bhartari, J.B. Dadachanji and O.C. Mathur, for the appellant.     W.S. Barlingay, V.G. Tambvekar and A.G. Ratnaparkhi, for respondents Nos. 1, 2 and 4 to 7. The Judgment of the Court was delivered by     Shelat,  J.   This appeal by special leave  is  directed against the judgment and order of the High Court  of  Madhya Pradesh in Second Appeal No. 378 of 1961.     The  respondents as trustees of a charitable  trust  are the owners of certain houses situate in Indore City.   Prior to January 26, 1954 the Indore Municipality was governed  by the Indore City Municipal Act, 4 of 1909.  By virtue of  the power  conferred on it by that Act the Municipality used  to levy and collect house tax 127 at the rate of 7% of the gross annual letting value of these houses  and  the  trustees duly paid such  tax.   After  the formation of the State of Madhya Bharat, the legislature  of that State passed the Madhya Bharat Municipalities Act, 1954 which  came  into force on January 26, 1954.  The  1954  Act repealed  amongst other Acts the Indore City Municipal  Act, 1909.  The Indore Municipality however purported to levy the house tax on the basis of the gross annual letting value  at the rate of 7% of such value for the financial years 1953-54 and 1954-55.  This was objected to by the respondents on the ground that under the 1954 Act the tax could be assessed  on the  basis of gross annual letting value less 10%  statutory allowance  in.  lieu  of costs of repairs or  on  any  other account  whatsoever.  The difference came to Rs. 1,461,  and of  this the trustees claimed refund on the ground that  the Municipality  had collected the excess from them under  pain of  distress The Municipality having refused to  refund  the excess  the respondents filed the suit to recover it on  the ground that the excess amount was illegally recovered.   The Trial  Court decreed the suit and the appeals filed  by  the Corporation  in the District Court and the High  Court  were dismissed.     To   appreciate  the  stand  taken  by   the   appellant Corporation   it  is  necessary  to  examine  some  of   the provisions  of  the  two Acts Sec. 21  of  the  Indore  City Municipal Act authorised the Municipal Council to impose tax on houses, buildings or lands within the municipal limits at a  rate  not exceeding 12-1/2% of the gross  annual  letting value.   As  aforesaid,  this Act  amongst  other  Acts  was repealed  by  the Madhya Bharat  Municipalities  Act,  1954. Sec.  2 of the 1954 Act which contains both a repealing  and saving provisions repealed the several Acts set out therein. Clause  (a)  however  provides that such  repeal  shall  not affect  the validity or invalidity of anything already  done under  any  of the said enactments.  Clause (c)  of  sec.  2 provides that all rules, orders, byelaws, notifications  and notices,  taxes and rates, made, passed, framed,  issued  or imposed or deemed to have been made, passed, framed,  issued or  imposed, shall so far as they are not inconsistent  with this  Act,  be  deemed to have been  made,  passed,  framed, issued or imposed, as the case may be, under this Act.  See. 69 authorises a Municipality to impose the several taxes set out therein including the tax on houses, buildings or  lands or  both.   Sec.  70  lays  down  the  procedure  which  the municipality would have to follow before it imposes any  one

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of  those  taxes.   Sec.  73 provides that  when  a  tax  on buildings  or lands or both is imposed, the Chief  Executive Officer  shall cause an assessment list of all buildings  or lands  in  the municipality to be  prepared  containing  the particulars  therein set out.  Amongst such particulars  are the  valuation based on capital or annual letting  value  as the case may be on which the property is assessed.  Sub-sec. 2 provides that in 128 assessing the tax on buildings or lands, where the valuation determined  under clause (d) of sub-section 1 is the  annual letting value, a sum equal to 10% of such valuation shall be deducted therefrom in lieu of allowance for costs of repairs or  on  any account whatsoever.  Sec. 75  provides  for  the publication  of  the assessment list and the. right  of  the owner or occupier of properties included in the list to take inspection thereof and to make extracts therefrom.  Sec.  76 provides  for  a  public notice of time  fixed  for  lodging objections  to such assessment list and the hearing of  such objections.   Sub-sec.  4  of  sec.  76  provides  for   the authentication  of the list.  Sub-section 6 lays  down  that subject  to  such alterations as may be made  therein  under sec.  77  and to the result of any appeal or  revision  made under  sec. 190 in the case of City Municipality and.  under sec. 90 in the case of other municipalities, the entries  in the  assessment list so authenticated shall be  accepted  as conclusive evidence for the purposes of all municipal  taxes of  the valuation or annual letting value of buildings.  and lands  to which such entries respectively refer and for  the purposes of the tax for which such assessment list has  been prepared of the amount of tax leviable on such buildings  or lands "in any official year in which such list is in force." Sec.  79(1)  provides that it would not be necessary  for  a Municipality  to  prepare a new assessment  list  for  every year.   It  further provides that subject to  the  condition that  such assessment list shall be completely  revised  not less  than once in every 4 years the Municipality may  adopt the  valuation and assessment contained in the list for  any year with such alterations as may be necessary for the  year immediately following.  But sub-section 2 lays down that the provisions of s. 75 and s. 76 shall be applicable every year as  if  a  new assessment list has  been  completed  at  the commencement of the official year.     These provisions show that though by sec. 2 the new  Act repealed  the  Indore City Municipal Act,  1909  along  with other  Acts,  the  legislature by sec.  2(c)  saved  certain things  done under the repealed Acts, viz., rules  bye-laws, orders,  notifications  and notices, taxes and  rates  made, framed,  passed,  or imposed or deemed to  have  been  made, framed, passed or imposed under the repealed Acts and  added a fiction that so far as they are not inconsistent with  the new  Act they shall be deemed as if they were made,  framed, passed or imposed as the case may be under this Act.  We are informed  by  Counsel that under the rules  made  under  the repealed  Indore City Municipal Act, 1909  the  Municipality had  imposed  the tax on houses at the rate of 7%  of  their gross annual letting value, that an assessment list on  that basis  was  prepared  for  the year  1952-53  and  that  the Municipality  has been levying tax at the said rate  on  the basis  of  the said assessment list for the  two  subsequent years. 129     Counsel  for the appellant Corporation argued  that  the Corporation  was entitled to levy the house tax at the  rate of 7% of the gross annual letting value and that it was  not

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bound  to  deduct the 10% allowance provided by  sec.  73(2) from  such  gross annual letting value.  The  argument  was, firstly, that the appellant Corporation could do so  because the  rules made under the Indore Act are saved by sec.  2(c) and  therefore  the rate of 7% of the gross  annual  letting value  at which the tax was levied also has been  saved  and secondly,  that  under  sec.  79(1)  of  the  1954  Act  the Corporation  need not prepare a fresh assessment list  every year,  that it has to prepare a fresh assessment  list  only once  in every 4 years, that the Corporation  therefore  can and  in fact has adopted the said list for the two years  in question  and  that being so, the list so  adopted  was.  in force  during the years in question and has to  be  accepted under s. 76(6) as conclusive evidence of the annual  letting value  as  also  for  the amount  of  tax  leviable  on  the buildings  or lands or both.  He contended that  being’  the position the respondents were debarred from objecting to the annual  letting value and the quantum of tax based on it  as entered  against  the respondents’ properties  in  the  said assessment list.     We  are not impressed with these contentions as  in  our view they are not warranted on the true construction of  the provisions  of the Act.  The Indore Municipal Act  being  no longer  in force as from January 26, 1954, obviously no  tax could be levied or imposed thereunder after that date.   The rules made and the taxes imposed under the repealed Act  are no doubt amongst other  things saved and are deemed to  have been  made, framed, passed or imposed under the new Act  but cl.  (c) of sec. 2, it must not be forgotten, lays  down  an important  qualification that they are to be deemed to  have been made, or imposed etc., under the new Act to the  extent that  they  are consistent with the provisions of  the  Act. Sec.  73 read with sec. 69 provides that a tax on houses  or buildings  shall be levied on the annual letting  value  and that  in  assessing  such tax a sum equal  to  10%  of  such letting  value shall be deducted therefrom.  The tax  levied under  the  old Act and the rules framed thereunder  on  the basis  of  the  gross  annual  letting  value  is  obviously inconsistent  with the provisions of s. 73 of the Act.   The saving and the deeming provisions in s. 2(c) can only  apply if  the  tax is assessed in the manner consistent  with  the provisions of s. 73, that is, if it is assessed-on  the  net and  not the gross annual letting value after deducting  10% statutory  allowance in lieu of the costs of repairs or  any other  account whatsoever. If the construction of sec.  2(c) as suggested by Counsel were to.be accepted it would  render sec. 73 (2) nugatory, for, the Municipal Corporation in that case  can go on imposing the tax on the basis of  the  gross annual letting value for ever despite the express  provision for levying tax on the basis of net annual 130 letting  value, i.e., the value arrived at  after  deducting 10% of the gross annual letting value.     The   second   part  of  the   contention   is   equally unacceptable  because, if accepted, it will be  contrary  to the  provisions of sections 75,76 and 79 of the Act.   After going  through the procedure laid down in ss. 70, 71 and  72 sec. 73. enjoins upon the Chief Executive Officer to have an assessment  list  made containing inter  alia  valuation  or annual  letting value at which the property is assessed  and the amount of tax assessed on the basis of such valuation or annual  letting  value.   Under ss. 75   and   76  when  the assessment   list  is  prepared  in  accordance   with   the provisions of sec. 73 it has to be published and time has to be  fixed  for  lodging  objections   against  the   entries

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therein.   After such objections are heard and  disposed  of the  assessment list has to be authenticated as provided  by sec.  76(6).   Sub-sec.  6 of sec. 76 lays  down  that  such assessment   list  when  authenticated  becomes   conclusive evidence  for  purposes of all taxes. of  the  valuation  or annual  letting value and of the amount of tax  leviable  on such  buildings  or lands or both in any  official  year  in which such list is in force.  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 each such official year.  This is supported by the words "such assessment list" and "of the amount of tax leviable in any  official year in which such list is in force"  in  sec. 76(6).     Ordinarily  therefore the Municipal Corporation  has  to prepare a fresh assessment list every year.  The legislature however   has   empowered  by  sec.  79,  as   other   State legislatures have similarly done in several Municipal  Acts, to  adopt  the  valuation and assessment  contained  in  the assessment  list  prepared  in  an  earlier  year  provided, however,  that  it  prepares a fresh list  once:in  every  4 years.   But sub-sec. 2 of sec. 79 provides  expressly  that when  such  a  previous list is  adopted  for  a  particular official  year it can be done subject to the  provisions  of sections 75 and 76. In other words, an assessment list being for a particular official year even when an assessment  list prepared  in an earlier year is adopted it becomes the  list for such subsequent year subject to the procedure laid  down in  secs.  75 and 76.  The list so adopted has therefore  to be  published,  has  to  invite objections  and  has  to  be authenticated in the manner prescribed by sec. 76 (6)  after disposing of the objections if any and it is then only  that it becomes conclusive evidence of the valuation and the  tax assessed  thereon for that particular official year.  If  it were  otherwise,  the  annual letting  value  or  the  value estimated on a particular building or house would be  static for 4 years during which the Corporation can go on  adopting the  assessment  list prepared in an earlier  year  and  the owner or the occupier of the building would 131 be  deprived of the right to object to the valuation or  the annual  letting  value or the tax assessed  thereon  for  at least  4  years  even though the  valuation  or  the  annual letting  value thereof may have decreased for one reason  or the   other.   In  order  to  prevent  such  a  result   the legislature  has provided by sub-section 2 of sec.  79  that where  a municipality adopts a previously prepared list  for any  subsequent year the provisions of ss. 75 and 76   shall be applicable as if a new assessment list has been completed at  the commencement of that particular official year.   The word, "if" appearing in sub-sec. 2 of sec. 79 is obviously a mistake  and must be read as "as if" because the  word  "if" standing by itself makes no sense at all.  Sec. 79 therefore has to be construed to mean that though a Municipality  need not  prepare  a fresh assessment list every  year  and  need prepare  such  list once in every 4 years and can  adopt  an earlier  assessment  list such an adopted list  becomes  the assessment list for that particular year as if it was a  new list and ’to which ss. 75 and 76 apply. The result of the foregoing discussion is that the appellant Corporation  was  entitled  to  adopt  the  assessment  list prepared for the year 1952-53 for the two assessment  years, 1953-54  and 1954-55, under sec. 79 and therefore that  list became  the  assessment  list for each of  the  2  years  in question.  That fact however does not entitle the  appellant

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Corporation  to  impose the house tax on the  basis  of  the gross   annual   letting  value  as   such   imposition   is inconsistent  with  sec. 73 under which the  annual  letting value  would  be  the gross annual letting  value  less  10% statutory allowance.     But the contention was that the tax imposed on the basis of’  the gross annual letting value was saved by  sec.  2(c) and  that saving coupled with the fact that  the  assessment list  prepared  for  1952-53 was adopted for  the  years  in question made the entries in the assessment list so  adopted conclusive  evidence  of the annual letting  value  and  the amount of tax assessed thereon and entitled the  Corporation to  collect  the tax assessed on the  gross  annual  letting value.   Therefore, it’ was argued, both the annual  letting value  and  the  amount  of tax  shown  in  that  list  were conclusive  evidence  and could not be  assailed.    Counsel however forgets that even on the footing that the resolution passed  by the Indore Municipality to levy the tax at 7%  of the gross annual letting value and on the strength of  which the  list for 1952-53 was prepared was saved and was  deemed to  have  been made under the 1954 Act it can be  deemed  to have  been  so made in so far as it is consistent  with  the provisions of the Act.  Therefore, to the extent that it  is inconsistent with sec. 73 it is neither saved nor deemed  to have  been made under the Act and has to be adjusted in  the light of the provisions of sec. 73(2).  It follows that  the appellant-Corporation  was  not entitled to demand  the  tax assessed 132 on the gross annual letting value.  The High Court therefore was right in decreeing the suit and to order refund of  the. said excess amount against the appellant Corporation.     The appeal fails and is dismissed with costs.  The costs of  this appeal as also those in the next appeal No. 383  of 1965 are to be taxed on the footing of one hearing fee. G.C.                                     Appeal dismissed. 133