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PETITIONER: MUNICIPAL CORPORATION OF GREATER BOMBAY

       Vs.

RESPONDENT: M/S POLYCHEM LTD.

DATE OF JUDGMENT20/03/1974

BENCH: BEG, M. HAMEEDULLAH BENCH: BEG, M. HAMEEDULLAH CHANDRACHUD, Y.V.

CITATION:  1974 AIR 1779            1974 SCR  (3) 687  1974 SCC  (2) 198  CITATOR INFO :  RF         1977 SC 302  (6,7)

ACT: Bombay Municipal Corporation Act. 3 of 1888--S. 3(r) and  S. 154--Scope of. Principles for determining rateable value of land on which a building   is  partly  completed--Doctrine   of   sterility- Distinction between English and Indian Law.

HEADNOTE: The respondent company was owner of a large area of land  in Bombay,  on  a  part of which there  was  a  building  under construction.   The  bulk of the remaining  part  was  lying vacant.   The  Assessor  and  Collector  of  the   Municipal Corporation determined the market value of the whole land on a  notional basis and fixed the hypothetical  annual  rental value  of the portion of land on which a building was  being built as well as the vacant land. The  respondent’s  appeal  to  the  Small  Cause  Court  was dismissed.   Applying  the doctrine of  sterility  the  High Court held that although a vacant plot of land was  rateable under-  the provisions of the Bombay  Municipal  Corporation Act and so was land which bad been built upon, yet, any part of land which was being actually built upon was not rateable until the building was finished because no tenant could take it in that condition. In  the appeal to this Court it was contended on  behalf  of the  appellant  Corporation  that the High  Court  erred  in applying  the doctrine of sterility to land  rateable  under the provisions of the Act ; that, the High Court  overlooked the essential distinction between the Indian and English law which was that the basis for determining the rateable  value in India was the value of the property to the owner and  not to the occupier, and, that, every kind of ’land’ as  defined by  s.3(r) of the Act was rateable under s. 1 54 of the  Act simply  because  it had a value to the owner of it  and  not because  it  was  yielding any income  or  was  usefully  or beneficially occupied or enjoyed by tenant or any other kind of occupant paying for the use of it.  Allowing the appeal. HELD : The judgment under appeal is erroneous as it was held there that land which was being rated as vacant ceased to be subject to any rating at all simply because a building began

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to  be made on it by the owner.  The rule of  interpretation that,  where two views are reasonably or equally open,.  the court should adopt the one which benefits the assessee would enable it to do no more than to treat land which is actually being built upon on the same footing as vacant land so  long as  no  structure  capable  of  occupation  and  letting  is completed on it. [702 D-E] Land  which  was being built upon should not be  rated  like land  on  which  a building has  been  actually  constructed unless  and  until the construction had reached a  stage  at which  some occupation of the constructed portion  was  also legally  and  actually possible so that it could.  be  taken into account in determining the rateable value. [701 F] The  doctrine of sterility in the context of the  provisions to  be construed could not apply in this case.  In  England, land which is in the process of being built upon is  equated with  vacant land which is not yielding any profit, so  that it  ceases to be "rateable" land.  But, under  the  statute, all  ’land’ whether vacant or in the process of being  built upon is rateable according to well settled principles.  [700 A] West Bromwich School Board v. Overseers of West Bromwich, 13 Q.B.D. 929 @ 942, Mersey Docks & Harbour Board v.  Overseers of  Llaneilian,14 Q.B.D. p. 770, The Metropolitan  Board  of Works v. The Overseers of West Ham 688 (1870)  L.R.  6 Q.B. 193, The Guardians of the Poor  of  the Sculcoates  Union in the Borough of Kingston-  Upon-Hull  v. Dock  Company  at  Kingston-Upon-Hull, 1895  A.C.  136,  the Church  wardens & Overseers of Lambeth Parish  v.The  London County  Council,  & 1897 A.C. 625 @  630-31,  London  County Council  v. Erith (Churchwardens Overseers of  Parish,  1893 A.C. 562.591, held inapplicable. The  principles upon which lands are rated in  this  country have been practically settled by the decisions of this Court which held that the mode of assessment in every case must be directed  towards  finding out the annual letting  value  of land  which is based on rating of land, and, by  definition, "land" includes land which is either being built upon or has been  built upon.  A reference to the provisions of the  Act shows that, after a building has been completed, the letting value of the building which becomes part of the land will be the primary or determining factor in fixing the annual  rent for  which  the  land  which  has  been  built  upon  "might reasonably  be expected to be let from year to  year".   All that  s  154  seems to contemplate by  mentioning  "land  or building" is that land which is vacant or which has not been built upon may be treated, for the purposes of valuation. on a different footing from land which has actually been  built upon.  The relevant provisions of the Act do not mention and seem  to  take no account, for purposes of  rating,  of  any building  which is only in the course of being  constructed, although  s. 3(r) of the Act makes it clear that land  which is  being  built upon is also "land".  Hence, so long  as  a building  is not completed or constructed to such an  extent that, at least, a partial completion notice can be given  so that the completed portion can be occupied or let, the  land can,  for purposes of rating, be equated with or treated  as vacant  land.  It is only when the building which  is  being put  up is in such a state that it is actually  and  legally capable of occupation that the letting value of the building can  enter  into the computation for rating.   Although  the definition of land, which is rateable covers three kinds  of "land",  yet, for the purposes of rating s.  154  recognises only  two categories.  Therefore, all land must fall in  one

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of  these  two  categories for purposes of  rating  and  not outside. [699 D-G] Corporation  of Calcutta v. Sm.  Padma Debi Ors.,  [1962]  3 S.C.R. 49, Bengal Nagpur Railway Co. Ltd. v. Corporation  of Calcutta,  74  Indian Appeals 1, Bengal Nagpur  Railway  Co. Ltd. v. Corporation of Calcutta, A.I.R 1942 Cal. 455,  Polar Assessment  Committee  v. Roberts, [1922] 2 A.C.  93,  Patel Gordhandas Hargovindas v. Municipal Commissioner, Ahmedabad, [1964] 2 S.C.R. 608, Municipal Corporation of Greater Bombay v.  Royal  Western  lndia Turf Club, [1968]  1  S.C.R.  525, Motichand  Hirachand Ors. v. Bombay  Municipal  Corporation, [1968]  1  S.C.R.  546, Century Spg.   Mfg.   Co.  Ltd.,  v. District  Municipality of Ulhasnagar, [1968] 2  S.C.R.  211, Bombay  Municipal  Corporation  v. L.LC.  of  India  Bombay, [1971] 1 S.C.R. 335, Guntur Municipal Council v. Guntur Town Rate Payers’ Association, [1971] 2 S.C.R. 423, referred to. In  the  instant case the land which was being  assessed  as reteable  so long as it was vacant land had been treated  as entirely  outside  the scope or sphere of  rateability  just because  a building was being erected upon it.  As there  is no  provision in the Act which has the effect of  conferring such an immunity or exemption upon land which is being built upon,  it  is not possible to uphold  the  conclusion  which produces such a startling result. [700C] (The case was sent back to the Assessor and Collector with a direction that the whole land will be valued for the purpose of rating in the relevant year as vacant land.)

JUDGMENT: CIVIL  APPELLATE  JURISDICTION : CiVil Appeal  No.  1828  of 1969. From  the Judgment and Order dated the 4th November 1968  of the  Bombay High Court in Letters Patent Appeal No.  130  of 1964. Niren  De, Y.S. Chitale, S.K. Kadam, P.C. Bhartari and  J.B. Dada chanji for the appellant. A.B.Divan and LN.  Shroff for the respondent. M.C.  Bhandare, B.R. Agarwala Gagrat and Co.,  Vinay  Bhasin and Janedra Lal for Intervener No. 1. 689 Anil B. Divan A.J. Rana and Ashok Grover for Intervener No.2 The Judgment of the Court was delivered by BEG, J.  This appeal, by certification under Article  133(1) (c) of the Constitution, is directed against the Judgment of a  Division  Bench  of the Bombay High  Court  holding  that although  a  vacant  plot  of land  is  rateable  under  the provisions of the Bombay Municipal Corporation Act 3 of 1888 (hereinafter referred to as ’the Act’). and so is land which has  been built upon, yet, any part of land which  is  being actually  built upon is not rateable until the  building  is finished because no tenant could take it in that  condition. In other words the Division Bench upheld what may be  called the  doctrine of sterility with which the land was  said  to have been struck during the period when a building was being actually  put upon it.  The appellant Corporation  questions the applicability of this doctrine to rating of land in this country. Before proceeding further we may briefly give the facts  and circumstances in which the question mentioned above  arises. The respondent Company is the Owner of 6652 sq. yds. of land out  of which 450 sq. yds. were deducted for having,  fallen within  "the set back line".  Out of the remaining  area  of 6202  sq.  yds, 1060 sq. yds. was being built  upon  at  the

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relevant  time whilst the remaining 5142 sq. yds, was  lying vacant  during  the  period  under  consideration.   As  the respondent  Company  did  not lead any  evidence  about  the hypothetical  rent  of  any  part of  land  the  Assessor  & Collector  of  Bombay Municipal Corporation  determined  the market value of the whole land as Rs. 62020/- at Rs.  10/per sq. yd.  He then calculated the hypothetical rent by  taking a  rate  of  interest of 31 % per annum  as  the  reasonable return on this value so that the hypothetical annual  rental value came to Rs. 2170/- From 1-1-1962 the Assessor  divided the  plot  notionally into two parts one ,of 1060  sq.  yds. which  was being built upon and the other of 5142  sq.  yds. which  was  lying  vacant.  He then  assessed  the  probable market  value of the plot which was being built upon  as  Rs 10,600/-  at  Rs.  10/per sq. yd. but as  he  considered  it better  developed  the  fixed 5 % per annum  interest  As  a reasonable  return  on it for determining  its  hypothetical rent  which  came to Rs. 530/-.  For the  vacant  land  also valued  at  the same rate the market value was found  to  be Rs., 51,420/-, but the annual rate of interest to  determine reasonable  return  was  taken as 31 %  only,  as  was  done previously  for  the whole land, so, that  its  hypothetical annual   rent   came  to  Rs.  1800/-.   Thus,   the   total hypothetical annual rental value of the-land for the  period under  consideration  came  to Rs.  2330/-  for  both  parts according to what is known as "the contractor’s test". The respondent company, aggrieved by the assessor’s fixation of rateable value, had appealed to the Small Cause Court  of Bombay  which dismissed the appeal.  The respondent  company then appealed to the Bombay High Court under Section  218(D) of the Act.  The appeal was summarily rejected by a  learned Single Judge of that Court.  On a further appeal, a Division Bench of the High Court, after repell- 690 ing  a preliminary objection to the maintainability  of  the appeal  to it by adopting the view that it was not a  second appeal for the purpose of the Letters Patent, held that  the part of the land which was being built upon was not rateable at all as no tenant could or would take the property in that condition.  Thus, the Division Bench had applied what may be called the "doctrine of sterility".  It observed               "....if  there  is  no  tenant  who  would  be               prepared  to  take the property from  year  to               year  in its then condition,  evidently  there               can be no tax on the same". As  this  doctrine could not apply to the vacant  land,  the order  of the Assessing authority and the principle  applied by it for rating that portion of the land were upheld by the Division  Bench.   No argument was addressed to  as  on  the question whether an appeal lay to the Division Bench, in the circumstances  of  the case.  We,  therefore,  refrain  from considering this question. Learned  Attorney  General  submitted,  on  behalf  of   the appellant Corporation, that the Division Bench had erred  in applying the English doctrine of sterility to land  rateable under the provisions of the Act.  It was contended that  the essential  distinction  between the Indian and  the  English law,  overlooked by the Division Bench, was that  the  basis for determining rateable value in this country was the value of  the  property  to the owner and  not  to  the  occupier. Hence,  it  was urged, every kind of ’land,  as  defined  by Sectoin  3(r) of the Act, was rateable under Section 154  of the Act simply because it had a value to the owner of it and not  because it was yielding any income or was  usefully  or beneficially  occupied or enjoyed by a tenant or  any  other

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kind of occupant paying for the use of it.  It was contended that, in so far as the rent paid by an actual tenant or that which  a  hypothetical tenant would presumably pay  for  the land,  in  the condition it actually was  (i.e.  "rebus  sic stantibus"), is to be taken into account, this could be done only for the purpose of determining the value of the land to the  owner and not, as it had been done in England,  to  its occupant.   This distinction, it was pointed out,  logically flows  from the essentially different bases  of  rateability adopted in India, where even vacant land was rateable,  and, in England, where vacant land was not rateable at all. Another contention advanced was that in any case when  there is  no  evidence  about  the nature or  the  extent  of  the construction  on the land treated as occupied by a  building in the course of construction, it was not possible to  apply the  principle  that  it was withdrawn from  the  sphere  of rateable  land  merely because a building  was  being  cons- tructed  over it.  The effective reply to this argument  was that  it was a matter of admission between the parties  that 1060  sq. yds. of the area was covered by a building in  the course  of  construction.  Our attention was  drawn  to  the statement  of facts on behalf of the appellant and  also  to the  finding of fact that this was the area which  could  be treated  as land which was actually being built  upon.   We, therefore, do not think that there is any point in remanding the case for any further finding 691 upon this question.  We will proceed on the assumption  that the finding. that 1060 sq. yds of land is covered by what is an incomplete building in the course of construction for the relevant period is correct. Learned  Counsel for the respondent urged that whatever  may be the other differences the basic principles of rating  are the  same  both in India and in England as the  annual  rent which would be paid by a hypothetical tenant has necessarily to be determined in order to arrive at the rateable value of land.   According to the respondent, it  followed  logically from  this principle that land which could not have a  hypo- thetical   tenant  could  have  no  rateable   value.    The submission was that the "contractor’s test" was only one  of the  three modes of determining. the annual rateable  value. This  method  was, it was urged not available at  all  as  a substitute  for  determination of  the  annual  hypothetical rent.    It  was,  according  to  the  respondent  and   the Intervener,only  a  means adopted for determination  of  the annual hypothetical rent.  The means could not, the argument proceeds,  displace  the  object  or  the  end  itself   and converted  into  an independent mode  of  assesing  rateable value. The  learned Counsel relied upon various provisions  of  the Act in an attempt to correlate property taxes of which rates were the primary class to beneficial occupation or in  other words to income yielding capacity as it existed at the  time when  the  taxes  were levied, that is to  say,  "rebus  sic stantibus".               Section 3(r) of the Act says               "3(r)  "Land"  includes land  which  is  being               built  upon or is built upon or  covered  with               water  banefits to arise out ’of land,  things               attached to the earth or permanently  fastened               to  anything attached to the earth and  rights               created  by  legislative  enactment  over  any               street";               and Section 3(s) says               3(s)  "building" includes a  house,  out-house

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             stable   shed,  hut  and  every   other   such               structure,  whether of masonry, bricks,  wood,               mud, metal or any other material whatever;" But,  section  143 of the Act seems to  make  a  distinction between  "buildings and land" when it says that the  general tax shall be levied "in respect of all buildings and  land", and,  thereafter, it continues to mention  both,  Similarly, Section  144 mentions "buildings" and "land" as though  they were separate.  Section 144(A) goes on to provide :               "144A. (1) Notwithstanding anything  contained               in  Section 140, the general tax  leviable  in               respect  of any building used for  residential               purposes-               (a) completed, or first let out or occupied on               or after the 1st day of April, 1956 ; and               (b)  consisting exclusively of  tenements  the               annual   rent  of  each  of  which   tenements               determined as provided in sub- 692               section (1) of Section 154, does not exceeding               Rs.12  hundered  or such lower sum as  may  be               generally   determined  by  the   Corporation,               shall,  where  an application is made  to  the               Commissioner in that behalf and for the period               specified in sub-section (2), be-               (i) if such building is owned by or belongs to               a cooperative society registered or deemed  to               be  registered under the  Bombay  Co-operative               Societies  Act,  1925,  seven-tenths  of   the               amount leviable, under Section 140 in  respect               of any other building excepting those referred               to in Section 143 ;               (ii)  if such building is owned by or  belongs               to  any  other person,  eight-tenths  of  such               amount,               (2) (a) if any such building was completed, or               first  let  out or occupied on or  before  the               date  of commencement of the Bombay  Municipal               Corporation (Amendment) Act, 1957,  concession               in  general  tax under this Section  shall  be               available for the period counted from the said               date of commencement upto the 1st day of April               1956.               (b) in all other cases, concession in  general               tax under this section shall be available  for               the period of ten years counted from the’ date               on which any such building shall be completed,               first let out or occupied, whichever shall  be               the earliest.               Explanation-For the purposes of this  section,                             a  building shall be deemed to be  com pleted on               the  date  on  which the  permission  for  its               occupation or use is given or is deemed to  be               given under Section 353-A". Section   353A   provides  for  a  notice   and   completion certificate to be sent by the builder within one month after the  completion  of  the  building  and  the  procedure  for obtaining  the permission by the commissioner for  occupying such  building  or for the use of it after he  is  satisfied that  the provisions of the Act and the bye-laws  have  been ,Complied with.  Section 353A.(2) lays down:               "(2)  No person shall occupy or permit  to  be               occupied  any such building, or use or  permit               to  be  used  the  building  or  part  thereof

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             affected by any such work, until-               (a)   the  permission referred to  in  proviso               (b) to sub-section(1) has been received, or               (b) the Commissioner has failed for twenty-one               days after receipt of the notice of completion               to  intimate as aforesaid his refusal  of  the               said permission". 693 Section  472  gives  a  list  of  continuing  offences  with specified  daily  fines.. It indicates that a  violation  of Section 353A involves a fine of Rs. 100/-per day.  Hence, it was  contended on behalf of the respondent, there can be  no hypothetical   tenant  of  a  building  of  which  the   law prohibits.  any use or occupation.  A building which  is  in the  course  of  construction  would be,  it  was  urged,  a building in an incomplete state of which. no occupation  was possible by an actual or hypothetical tenant of it., There  is  no  doubt that rates belong to  the  category  of property  taxes  mentioned  in Section 139(1)  of  the  Act. Section 146 makes, fresh taxes "Leviable primarily from  the actual  occupier of the premises upon which the  said  taxes are  assessed,  if such occupier holds the  said’.  premises immediately from the Government or from the corporations  or from  a  fazendar".  Section 146(2) makes it clear  that  in other cases they are leviable as follows : "(a)- if the premises are let, from the lessor; (b)  if the premises are sub-let, from the superior  lessor; and (c)  if the premises are unlet, from the person in whom  the right to let the same vests". Section 146(3) lays down that :               "if  any  land  has  been  let  for  any  term               exceeding  one  year  to a  tenant,  and  such               tenant or any person deriving title  howsoever               from such tenant has built upon the land,  the               property taxes assessed upon the said land and               upon  the  building erected thereon  shall  be               leviable  primarily  from the said  tenant  or                             such   person,  whether or not the pre mises  be               in  the occupation of the said tenant or  such               person". Section 147 of the Act provides that, in a case in which the rateable  value exceeds the amount of rent actually  payable in  respect  of land’ occupied, the lessor  is  entitled  to receive   the  difference  between  the  rent  which   would otherwise  be payable and what is  actually  payable.Similar provision  is made in case of sub-tenants.The actual  method of valuation is provided by Section 154(1), which runs :               " 154(1) in order to fix the rateable value of               any building or land assessable to a property-               tax,  there shall be deducted from the  amount               of  the  annual rent for which  such  land  or               building   might reasonably be expected to let               from  year  to  year a sum equal  to  ten  per               centum  of the said annual rent and  the  said               deduction  shall be in lieu of all  allowances               for repairs or on any other account whatever".               Section 155 provides               "155(1).  To enable him to determine the  rate               able  value  of any building or land  and  the               person primarily liable for the payment of any               property  tax leviable in respect thereof  the               Commissioner may require the owner or occupier               of such building.

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694 or  land, or of any portion thereof, to furnish him,  within such  reasonable  period as the Commissioner  prescribes  in this behalf with information or with a written return signed by such owner or occupier- (a)  as  to  the name and place of abode  of  the  owner  or occupier, or of both the owner and occupier of such building or land; and (b) as to the dimensions of such building or land, or of any portion  thereof,  and the rent, if any, obtained  for  such building, or land, or any portion thereof. (2) Every owner or occupier on whom any such requisition ,is made shall be bound to comply with the same and to give true information  or  to make a true return to the  best  of  his knowledge or belief. (3) The Commissioner may also for the purpose aforesaid make an  inspection of any such building of any such building  or land". Section 156 requires the maintenance of an  assessment book. It says "156.  The Commissioner shall keep a book, to be called "the assessment  book" in which shall be entered  every  official year-               (a)  a  list  of all buildings  and  lands  in               greater Bombay distinguishing each, either  by                             name or number, as he shall think fit;               (b)  the rateable value of each such  building               and  land  determined in accordance  with  the               foregoing provisions of this Act;               (C)  the name of the person  primarily  liable               for the payment of the property-taxes, if any,               leviable on each Such building or land;               (d) if any such building or land is not liable               to be ,assessed to the general tax, the reason               of such non-liability;               (e) when the rates of the property-taxes to be               levied  for year have been-duly fixed  by  the               corporation  and  the period fixed  by  public               notice,    as   hereinafter   provided,    for               the .receipt of complaints against the  amount               of  rateable value entered in any  portion  of               the  assessment-book, has expired, and in  the               case  of  any such entry which  is  complained               against when such complaint has been  disposed               of   in   accordance   with   the   provisions               hereinafter  contained, the amount  at  ’which               each building or land entered in such  portion               of the assessment-book is assessed to each  of               the property-taxes, if any, leviable thereon;               (f) if, under Section 169 or 170, a charge  is               made  for  water supplied to any  building  or               land  by  measurement  ,or  the  water-tax  or               charged or water by measurement is 695               compounded for, or if, under section 172,  the               halalkhortax for any building or land is fixed               at  aspecial rate, the particulars and  amount               of such charge, composit ionorrate;" It  is true that the "buildings" and" lands"  are  mentioned separately  in  Sections  154 to 156 of  the  Act.   Section 154(1)  implies that the rateable value of any  building  or land  will be calculated-by determining "the amount  of  the annual rent for which such land or building might reasonably be expected to let from year to year".  Section 156(d) shows that  there may be cases in which some building or land  may

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not be liable to pay any amount as a general tax.  Hence, it was  urged  on  behalf of the respondent,  the  doctrine  of sterility  could be applied in this country just as  it  was applicable in England. The  principles upon which lands are rated in  this  country have  been  practically  settled by the  decisions  of  this Court.   But, no case was brought to our notice in which  an application  of  these  principles  to  land  upon  which  a building was being constructed was involved. in other words, no  case  was cited by any. party in which the  doctrine  of sterility,   as  indicated  above,was  invoked.   We   will, however,  glance  at  the cases cited  before  deciding  the question raised before us. The Corporation of Calcutta vs.  S.M. Padma Debi & Ors., (1) involved  an  interpretation of the  provisions  of  Section 127(a) of the Calcutta Municipal Act, 1923, in the course of which it was observed that the criterion for determining the annual  value of land for purposes of rating is : "the  rent realisable by the landlord and not the value of the holdings in the hands of the tenant".  A reference was made there  to the  decision of the Privy Council in Bengal Nagpur  Railway Co.  Ltd.  vs.   Corporation of  Calcutta  (2)  affirming  a decision of the Calcutta High Court in Bengal Nagpur Railway Co. Ltd. vs.  Corporation of Calcutta(3) on the construction of  Section 127 of the Calcutta Act.  The Privy Council  had indicated  the  distinction  between law  in  India  and  in England as follows               "The   owner  of  land  in  England   is   not               chargeable  with rates, as owner, at all.   If               he leaves land vacant and unoccupied, he  pays               no   rates.   Under  the  Calcutta  Act   mere               ownership  carries with it a liability to  pay               one-half  of the rate assessed on  the  annual               value of the land". In the Calcutta case which went to the Privy Council, a golf club was making use of some land with a few holes made in it for  occasional  practice  by  persons  aspiring  to  become golfars.  The Club used to pay a nominal amount for the  use of  the land.  This Court also referred to the  decision  of the  House  of  Lords  in  Polar  Assessment  Committee  vs. Roberts.(4) to indicate : "The distinction between  occupier and  owner,  in this connection, is of  primary  importance. The  occupation  value  of property may be,  and  often  is, distinct from (1)  [1962] 3 S.C.R. 49. (2)  74 Indian Appeals 1. (3)  AIR 1942 Cal. 455 (4)  (1922) 2A.C. 93. 696 its value to the owner".  This Court then cited the "weighty observations  of  Atkin, L.J., as he then  was,  which  were approved by Lord Carson in his dissenting judgment" (at page 58) :               "   How  then  is  the  annual  rent   to   be               ascertained?    It   is   obvious   that   the               definition  presupposes that the premises  are               deemed  to  be  vacant and are  deemed  to  be               capable of being let". The respondent, however relies upon the following passage in the judgment of this Court(l) (at page 56) :               "A law of the land with its penal consequences               cannot   be   ignored  in   ascertaining   the               reasonable  expectations of a landlord in  the               matter of rent". It  was  urged  on behalf of the respondent  that  the  test

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adopted  by  this Court was to find out the  annual  rent  a hypothetical  tenant would pay so as to  determine  rateable value  from  the point of view of the landlord, It  did  not matter,  according to the respondent, from which  angle  the rateable  value  was  looked at so long  as  the  method  of determining  it  was  really  the same  as  was  adopted  in England.   If  that  was so, it  was  submitted,  the  views expressed  by  this Court in the Calcutta  Corporation  case (supra) did not militate with an application of the doctrine of  sterility where facts warranted it.  We think that  this submission  overlooks  an  infirmity  in  the  doctrine   of sterility  itself; the assumption that what is not  actually yielding rent has no annual rental value. The  next  case cited was patel  Gordhandas  Hargovindas  V. Municipal    Commissioner,   Ahmedabad(2),   where,    after references  to legislative history of rating in England  and in India, this Court said : (at page 628) :               "It would, therefore, be right to say that the               word ’rate’ had acquired a special meaning  in               English  legislative history and practice  and               also in Indian legislation where that word was               used  and  it meant a tax for  local  purposes               imposed by local authorities and the basis  of               the  tax was the annual value of the lands  or               buildings  on or in connection with  which  it               was  imposed, arrived at in one of  the  three               ways which we have already indicated". The three modes were indicated in the following passage  (at page 622)               "It  will  thus  be  clear  from  the  various               statutes  to  which we have referred  and  the               various  books on rating in England  that  the               rate  always had the meaning of a tax  on  the               annual  value  or rateable value of  lands  or               buildings  and this annual value  or  rateable               value  is  arrived at by one of  three  modes,               namely,  (i)  actual rent fetched by  land  or               building where it (1) [1962] 3 S.C.R 49. (2) [1964] 2 S.C.R. 608. 697               is  actually  let, (ii) where it is  not  let,               rent    based   on    hypothetical    tenancy,               particularly  in  the case of  buildings,  and               (iii)  where either of these two modes is  not               available, by valuation based on capital value               from  which  annual value has to be  found  by               applying  a suitable percentage which may  not               be  the same for lands and buildings,  and  it               was  this position which was  finally  brought               out in bold relief by the Rating and Valuation               Act, 1925.  It is clear further that it is not               the Rating and Valuation Act of 1925 which for                             the  first  time  applied the  concept   of  net               annual  value and rateable value as the  basis               for  levying  a  rate for  purposes  of  local               taxation;  that  basis was  always  there  for               centuries before the Act of 1925 was passed". Here,  it  was  held by a majority of five  Judges  of  this Court, that a rule imposing a tax called a "rate", "directly as  a percentage of the capital value", is ultra  vires  the Act and "the assessment based on this manner must be  struck down".  The reasoning adopted was :(at pages633-34):               "If  the law enjoins that the rate  should  be

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             fixed  on  the  annual  value  of  lands   and               buildings,  the municipality cannot fix it  on               the capital value, and then justify it on  the               ground  that the same result could be  arrived               at  by fixing a higher percentage as the  rate               in  case it was fixed in the right way on  the               annual value.  Further by, fixing the rate  as               a  percentage of the capital  value  directly,               the   real   incidence   of   the   levy    is               camouflaged". This case links the nature of the property tax called a rate levied  for local Govt. purposes with the mode  adopted  for its  levy.   Each  mode had necessarily to  be  directed  to finding out the annual rentel value of land as that was what was taxed and not either the capital or the potential  value of land. Municipal  Corporation of Greater Bombay vs.  Royal  Western India  Turf Club(l) was cited to show that the  profit  from the  actual user, in that particular case of same land  used as  a race course, was taken into account.  This Court  said (at page 533) :               "The  measure in arriving at the net  rateable               value  under S. 154(i) is what a  hypothetical               tenant would pay as rent and that would depend               upon  the amount of profits earned from  race-               meetings  held on the race-course.  To  arrive               at  the  correct amount of  such  profits  all               expense,.  reasonably  and  properly  incurred               which go to the making of the receipts have to               be deducted from the gross-receipts". In   Motichand  Hirachand  &  Ors.  vs   .Bombay   Municipal Corporation(2)  where,  as in the Royal Western  India  Turf Club  case (supra), the provisions of the Act with which  we are concerned had come up for consideration, this Court said (at page 548) (1) [1968] 1 S.C.R. 525. (2) [1968] 1 S.C.R. 546. 698               "The  assessing authority for the  purpose  of               fixing  the  rateable value has  therefore  to               determine the annual rent, that is, the annual               rent for which such building might  reasonably               be  expected to let from year to year  and  to                             deduct  the  10 per  cent  statutory allowance               therefrom and arrive at the net rateable value               which  would be equivalent to the  net  annual               rent.  The rateable value is thus taken to  be               the  same as the net annual rent of  the  pro-               Perty.   It is a well recognised principle  in               rating  that both gross value and  net  annual               value  are estimated by reference to the  rent               at  which  the property  might  reasonably  be               expected  to let from year to  year.   Various               methods  of valuation are applied in order  to               arrive at such hypothetical rent. for instance               by  reference to the actual rent paid for  the               property  or  for others comparable to  it  or               where  there are no rents by reference to  the               assessments of comparable properties or to the               profits  earned  from the property or  to  the               cost  of construction.  The expression  "gross               value" means the rent at which a  hereditament               might reasonably be expected to let from  year               to year.  The rent which a tenant could afford

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             to give is calculated rebus sic stantibus,that               is  to say, with reference to the property  in               its  existing  physical condition and  to  the               mode  in  which  it  is  actually  used.   The               hypothetical  tenant includes all persons  who               might possibly take the property including the               person actually in occupation, even though  he               happens to be the owner of the property.   The               rent  is  that  which  he  will  pay  in   the               "higgling of the market", taking into  account               all  existing circumstances and  any  relevant               future  trends.  if the Property  affords  the               opportunity  for the carrying on of a  gainful               trade,  that  fact  also must  be  taken  into               account.  The property is assumed to be vacant               and  to  let  and the material  date  for  the               valuation is that of the proposal which  gives               rise to the proceedings.  The actual rent paid               for the property is not conclusive evidence of               value, though such actual rent may serve as an               indication  as to what a  hypothetical  tenant               can  afford  to pay.  However, if  the  actual               rent is paid on terms which differ from  those               of   the  hypothetical  tenancy  it  must   be               adjusted,  if  possible, to the terms  of  the               hypothetical  tenancy before it  affords  evi-               dence  of  value.  (See  Halsbury’s  Laws   of               England,   (3rd  ed.)  Vol.  32,  P.  60   and               onwards).   It  is also well  recognised  that               while  valuing the property in question  every               intrinsic   quality   and   every    intrinsic               circumstance  which tends to push  the  rental               value   up   or  down  must  be   taken   into               consideration". The Century Spg. & Mfg.  Co. Ltd. vs.  District Municipality of  Ulhasnagar(l), points out that Section 60 of the  Bombay District  Municipal  Act 3 of 1901, with which  we  are  not concerned  here, has left open a determination of the  basis for  each  class  of valuation  to  the  municipality  after defining  annual letting value in Section 3(11) as the  rent for which any land or building might reasonably be  expected to  be let from year to year.  In this case, the  imposition of a flat rate (1) [1968] 2 S.C.R. 211. 699 on  carpet area was held to be within the provisions of  the Act.   It  was, however, observed that the  assessees  could challenge,  each  on the facts of his particular  case,  the application  of  this  method if it results in  a  rate  not corresponding  to  "the annual letting value".   Apart  from emphasising that it is the annual letting value which has to be  determined under the rating enactments, this  case  does not help us in deciding the question now before us. Bombay  Municipal Corporation v. L.LC. of India,  Bombay,(,) repeats that the criterion for fixing the rate is "the  rent realisable  by  the landlord and not the  valuation  of  the holdings in the hands of the tenant". Guntur  Municipal  Council  v.  Guntur  Town  Rate   Payers’ Association(2),   relates  to  the  interpretation  of   the provisions  of the Madras District Municipalities Act  5  of 1920,  where it was held that the assessment must take  into account  the measure of "fair rent" as determined under  the Act. The  above mentioned authorities of this Court,  which  were cited  before  us,  enable  us to  hold  that  the  mode  of

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assessment  in every case must be directed  towards  finding out  the annual letting value of land which is the basis  of rating  of  land, and, by definition, "land"  includes  land which  is  either being built upon or has been  built  upon. Nevertheless,  reference to the provisions of the Act  shows that, after a building has been completed, the letting value of  the  building, which becomes part of land, will  be  the primary or determining factor in fixing the annual rent  for which  the land which has been built upon "might  reasonably be expected to be let from year to year".  All that  Section 154 seems to contemplate, by mentioning "land or  building", is  that  land which is vacant or which has not  been  built upon  may  be  treated,  for purposes  of  valuation,  on  a different  footing from land which has actually  been  built upon.-  But, relevant provisions of the Act do  not  mention and seem to take no account, for purposes of rating, of  any building  which is only in the course of  being  constructed although  Section 3 (r) of the Act makes it clear that  land which is being built upon is also "land".  Hence, so long as a building is not completed or constructed to such an extent that  atleast  a partial completion notice can be  given  so that the completed portion can be occupied and let, the land can,  for purposes of rating, be equated with or treated  as vacant  land.  It is only when the building which  is  being put  up is in such a state that it is actually  and  legally capable of occupation that the letting value of the building can  enter  into  the  computation  for  rating  "rebus  sic stantibus".   Although,  the definition of  land,  which  is rateable,  covers  three  kinds  of  "land",  yet,  for  the purposes of rating Sec. 154 recognises only two  categories. Therefore,.  all  "land"  must  fall in  one  of  these  two categories for purposes of rating and not outside. The doctrine of sterility, in the context of the  provisions we  have to construe, cannot apply here.  In  England,  what happens is that (1)  [1971] (1) S.C.R. 335. (2)  [1971] (2) S.C.R. 423. 700 when  land, which is in the process of being built upon,  is equated with vacant land, which is not yielding any  profit, it  ceases to be rateable land.  But, under the  statute  we have  before  us,  all "land", whether  vacant,  or  in  the process  of  being built upon, or built  upon,  is  rateable according to the well settled principles.  All that can.  be said  is  that, so long as a building being  constructed  on some land is not in a state fit for occupation, its rateable value should not be more or less than that of land which  is vacant.  That, however, is not the object of the  respondent in invoking the doctrine of sterility.  What has happened in the case before us is that the land which was being assessed as  rateable so long as it was vacant land has been  treated as entirely outside the scope or sphere of rateability  just because a building is being erected upon it.  As we find  no statutory provision which has the effect of conferring  such an  immunity  or exemption upon land which  is  being  built upon,  we cannot uphold a conclusion which produces  such  a startling result. The  English authorities where the doctrine  of  "sterility" was  were : West Bromwich School Board v. Overseers of  West Bromwich;(1) Mersey Docks & Harbour Board v. Overseers of  L laneilian;(2)  The  Metropolitan  Board  of  works  v.   The Overseers of West Ham; (3) The Guardians of the Poor of  the Sculcoates  Union  in the Borough of  Kingston-Upon-Hull  v. Dock  Company  at  Kingston-Upon-HUlI;(4)  and,  the  Church wardens  & Overseers of Lambeth Parish v. The London  County

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Council.(5) In the last mentioned case of The London  County Council  relating to a park maintained by a  County  Council for public benefit, Lord Herschell, L.C., after holding that the public was not a rateable "occupier", said;               "Once it has been found, as in this case, that               the occupation cannot as a matter of law be  a               beneficial occupation, there is an end of  the               question.   I  say as matter of  law,  because               that it does not give a beneficial  occupation               as  matter of fact is nothing to the  purpose.               Here  there  is no possibility  of  beneficial               occupation  to  the county council;  they  are               incapable   by  law  of  using  it   for   any               profitable purpose; they must allow the public               the free and unrestricted use of it". These  cases  are not helpful or really  applicable  at  all because   they  are  based  upon  the  concept   of   rating exclusively by reference to the beneficial occupation or  of the income enjoyed by an occupier. It  was,  however,  pointed out by the  respondent  that  in London County Council v. Erith (Churchwardens & Overseers of Parish),   (6)   Lord  Herschell,   L.C.,   expressed   some dissatisfaction  with  the rather wide  application  of  the doctrine of sterility in some cases in England and explained it as follows (at page 591) (1)13 Q.B.D. 929 @ 942. (2)14 Q.B.D. p. 770. (3)(1870) L.R. 6 Q.B. 193. (4)1895 A.C. 136. (5)1897 A.C. 625 @ 630-631. (6)1893 A.C. 562 @ 591. 701 Now,  if  land is "struck with sterility in any  and  every- body’s hands", whether by law or by its inherent  condition, so that its occupation is, and would be, of no value to  any one,  I  should quite agree that it cannot be rated  to  the relief  of the poor. But I must demur to the view  that  the question  whether  profit (by which I  understand  is  meant pecuniary profit) can be derived from the occupation by  the occupier  is  a  criterion  which  determines  whether   the premises  are  rateable, and at what amount they  should  be assessed; and I do not think that a building in the hands of a  school board is incapable of being beneficially  occupied by  them and is not so occupied because they are  prohibited from  deriving pecuniary profit from its use.  Fry L.J.,  in the case of Reg. v. School Board for London (I 7 Q.B.D. 738) said  : "The term ’sterility’ has been introduced  into  the cases because, as a general rule, a profit is produced;  but it  does  not by any means follow that because there  is  no profit  there  is  no  value.   There  could  be  no  better illustration of this than in the present case", I think  the learned  Judge  here points to the true  test;  whether  the occupation be such as to be of value.  This is the  language used  by  Lord Blackburn, and I have already said  that  the possibility  of  making  a pecuniary profit  is  not  in  my opinion the test whether the occupation is of value". We  do  not  think, for reasons already given,  that  it  is necessary  to  examine English cases or authorities  on  the application  of  doctrine of sterility in  England  to  land which  is  being built upon, because,  after  examining  the relevant  provisions  of the enactment before  us,  we  have reached  the  conclusion that land on which  a  building  is being  constructed  does  not cease to  be  rateable  simply because a construction is going on upon it.  The  difference between English law and the position which emerges from  the

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statute before us is vital for deciding the question before- us.   The most that can be said is that land which is  being built upon should not be rated like land on which a building has   been  actually  constructed  unless  and   until   the construction has reached a stage at which some occupation of the  constructed  portion  is  also  legally  and   actually possible  so  that  it  could  be  taken  into  account   in determining the rateable value.  On this aspect, we have not found any material to indicate the state of the building  on land on which it was being constructed.  Evidence would,  no doubt have been there if the building had reached a stage at which any part of it was completed so as to be permitted  to be occupied.  Therefore, we think that the land upon which a building was under construction could and should be rated in the  same way as vacant land. No appeal has  been  preferred against  the  rating  of the vacant  land.   We,  therefore, assume that the rental value reached, even by employing "the contractor’s test", correctly determines what a hypothetical tenant would be reasonably expected to pay from year to year for the vacant land.  The question whether the owner himself or  a tenant is actually occupying the land is not  relevant for  the  purpose  of determining the rateable  value  by  a reference  to the hypothetical tenant.  Here, the  basis  of rating is not the actual income from bene ficial occupation, as it may be in England (even there a tendency to shift 702 the  former  or  traditional base is  discernable),  but  of ownership of land which is capable of beneficial occupation. In  other words, the concept of annual value of the land  to the  owner, though obviously linked up with its  utility  or annual  letting  value,  is  more  comprehensive  than   and different  from the test of the actual income yielded  which has been applied in England in a number of cases. Where,the landlord is in actual occupation the land does not cease  to  have, rateable value.  In such a  case,  rateable value  would  be determined by asking the  question  :  What would  or could be reasonably expected to pay from  year  to year if he was not the owner but wanted to take it on  rent? The  standard of reasonable expectation from a  hypothetical tenant,  applied by contemplating a hypothetical bidding  or higgling  in a market, however difficult and  unsatisfactory as  a method of valuation, has to be resorted to in  a  case beset  with such difficulties as the one before us.   In  no case,  however, could the rental value of land  being  built upon be less than that of the same land when it was vacant. We find the judgment under appeal to be erroneous as it held land  which was being rated as vacant to have ceased  to  be subject to any rating at all simply because a building began to  be  made  on  it in 1961 by  its  owner.   The  rule  of interpretation,  that,  where two views  are  reasonably  or equally  open,  we should adopt the one which  benefits  the assessee,  would enable us to do no more than to treat  land which  is actually being built upon on the same  footing  as vacant  land as long as no structure capable  of  occupation and letting is completed on The  result is that we allow this appeal, and we  set  aside the  judgment and order of the Division Bench.  We also  set aside  the  assessment order with regard to 1060  sq.  yds., which  was  being built upon, and the orders  of  the  Small Cause Court and a learned Judge of the High Court dismissing appeals with regard to this area of land.  We send back  the case  to  the  assessor and Collector  of  Bombay  Municipal Corporation  and direct that the whole land will be  valued, for purposes of rating in the relevant year, as vacant  land just  as  it  was  being  done  in  the  period  immediately

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preceding 1962.  In the circumstances of the case, which  is not free from difficulties, the parties will bear their  own costs. P. B. R.                        Appeal allowed. 703