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PETITIONER: MUNICIPAL CORPORATION OF GREATER BOMBAY

       Vs.

RESPONDENT: ROYAL WESTERN INDIA TURF CLUB

DATE OF JUDGMENT: 13/09/1967

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

CITATION:  1968 AIR  425            1968 SCR  (1) 625  CITATOR INFO :  D          1974 SC1779  (16)

ACT: Bombay Municipal Corporation Act III of 1888, s.  154-Scope- of-Determination   of   annual  rateable   value-Nature   of deductions  that can be allowed  when profits  basis  method used.

HEADNOTE: The respondent club ran a race course and had built  certain structures  on land in Bombay which it had leased  from  the appellant  corporation at an annual rent of Rs. 3.75  lakhs. It had obtained a licence from the State Government to  hold race meetings on its course in Bombay as well as on  another course owned by it in Poona for which ’it had paid a licence fee  of  Rs.  13  lakhs for the  relevant  I  year  and  had apportioned the fee in the ratio of 2: 1 between the  Bombay and the Poona courses. For assessment of the correct rateable value of the property for the rating year 1954-55 the assessing authority made  an assessment  by the profits basis method on the basis of  the Club’s  accounts  for  the year 1953-54 and,  in  doing  so, disallowed   certain  expenses  claimed  by  the   Club   in determining  the net rateable value at Rs.  11,90,187.   The respondent club thereupon’ filed an appeal before the  small Causes Court under s. 217 of the Act and although that Court made a few adjustments, it held the Club had failed to prove that  the  net rateable value determined  by  the  assessing authority was excessive.  The High Court however, in appeal, upheld the Club’s objections as regards the disallowance  of several items of expenditure and held that the gross  annual value  of  the property would, after the  deductions  to  be allowed, come to Rs. 2,15,750; and after deducting therefrom the  statutory  allowance  of 10 percent  under  s.  154  on account of allowances for repairs etc., the net annual value would come to Rs. 1,94,175. In  the appeal to this Court it was contended on  behalf  of the appellant, inter alia, (i) that the 10 percent statutory deduction  allowed  by  s. 154(1) covers  all  expenses  for repairs  and  therefore deduction of costs  of  repairs  and upkeep  of  the course, if allowed, would mean  a  duplicate

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deduction; (ii) that the totalisator maintained by the  Club being ’machinery, its value was not to be included in rating under  s.154(2);  (iii)  that the Club  wag  entitled  to  a deduction of-only half of the licence fee apportioned to the Bombay Course because that fee covered dual purpose i.e. for the premises as a race course and for permission to  conduct race  meetings on the race course; for the first the  burden would  be  on the lessor and for the second on  the  tenant; that  this  was borne out by the scheme of the  Bombay  Race Courses  Licencing  Act 3 of 1912 which was to  licence  the premises  and then to licence the person who runs  races  on such  premises; and (iv) that if the expenses  claimed  were allowed  to be deducted, the net rateable value  arrived  at would  be less than the actual rent of Rs. 3,75,000  payable by the Club to the Corporation and that such a result cannot be  contemplated under any method of assessing the  rateable value.               HELP:Dismissing the appeal:               (i)The  expenses  in  question  were  for  the               maintenance  in good repair of the  race-track               which is the source of 526 receipts  earned by teh Club.  Disbursements for the  upkeep of  the course and all its adjuncts consequently are  proper out-goings incurred for earning the receipts.  They are  not the landlord’s obligation and are not part of or included in teh  statutory deduction of 10 percent in s.  154(1),  which is,  in  lieu  of,  the cost  of  repairs,  insurance,  etc. incurred by,the lessor.  The High Court was therefore  right in deducting such expenses from the gross receipts. (ii) Similarly the expenses incurred for the upkeep and  re- pair  of the totalisator were incurred on an adjunct  neces- sary  to  an efficient race course and must  necessarily  be regarded  as the outgoings of the business.  The  contention that as it was machinery its value could not be included in, rating tinder s. 154(2) had no merit. (iii)  The High Court had rightly allowed the  deduction  of the entire amount of expenditure in connection with the cost of sand and morum, salaries and charges of empolyees,  motor lorry expenses, stores and charges for maintenance of horses ’and  bullocks,  manure  and  garden  expenses,  spares   of tractors  and  other machinery and the wheel tax  and  water tax.  The distribution of these expenses between the  tenant and  the  landlord made by the assessing authority  and  the small Cause Court could not be sustained on the ground  that race meetings were held in Bombay only for Part of the year. There  was nothing to show that the lessor had  to  maintain the  track during the time when race meetings were not  held in Bombay. The  measure in arriving at the net rateable value under  s. 154(1)  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 profit all expenses  reasonably  and properly  incurred  which go to the making of  the  receipts have to be deducted from the gross-receipts. [533D] (iv) The licence obtained by the Club was clearly permission to  run  race meetings on the two race-courses  and  not  an instrument  licensing the premises as a race course.   Since it is the tenant who would hold the race meetings, the  fee, payable  for the licence is his burden and not that  of  the lessor.  Furthermore there was no provision in Bombay Act  3 of  1912  to  warrant  the  construction  that  the  licence obtained under s. 4 had a dual purpose as contended.  [533H-

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534D] (v)  The  rateable  value need not always be  equal  to  the actual  rent.  The measure is what a hypothetical tenant  is expected  to  pay for a lease from year to year  taking  the property  as it exists with all its advantages and  burdens. In  view  of the fact that the Club was  only  in  exclusive possession  of some portions of the land and  the  remainder ’had  to be kept open to the public except on race days,  it was not surprising that the rateable value came to less than the actual rent. [534H; 535C] R.v. Verall [1875] Q.B.D. 9, Sanddown Park CAse [1954] 47 R. T.   351  (CA).  (quoted in Ryde on Rating, 11th  ed.  523); Port  of London Authority v. Assessment Committee, [1920]  A C. 273 at p. 281, referred to.

JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeal No. 15 of 1965. Appeal from the judgment and decree dated April 15 / 16,1963 of  the  Bombay  High Court in Appeal No.  216of  1961  from Original Decree. S.  T  Desai,  0.  P. Malhotra and  0.  C.  Mathur  for  the appellant. S.  V. Gupte, Solicitor-General and Rameshwar Nath, for  the respondent. The Judgment of the Court was delivered by Shelat, J. This appeal by certificate obtained from the High Court at Bombay involves the question as to the true meaning of  s. 154 of the Bombay Municipal Corporation Act,  III  of 1888   and  the  correct  rateable  value  to  be   assessed thereunder. The respondent-Club runs two race courses, one in Bombay and the  other at Poona.  We are concerned in this  appeal  with the  Bombay  race-course  which is  comprised  of  land  and certain  structures standing thereon.  The said land is  the property of the appellant-corporation given on lease to  the Club  for a period of 30 years commencing from June 1,  1944 at  an  annual rent of Rs. 3,75,000.   The  said  structures thereon have been built by and belong to the Club.  The Club has  obtained a licence from the Government of  Maharashtra, permitting the Club to hold racemeetings at both the Courses and for which it paid a sum of licence fees between the  two Courses  in the ratio of 2: 1 and thus licence fees  between the  two Courses in the ratio of 1: 2 and thus the share  of the Bombay Course came to Rs. 8,66,666.  The rating year  in question  is 1954-55.  The assessment was made on the  basis of  the Club’s accounts for the year 1953-54 that being  the year  concluded before the assessment.  According  to  these accounts the gross receipts of the Club came to Rs. 117 lacs and  odd  and the expenses . to Rs. 124 lacs  and  odd;  the accounts  thus  showed a loss of Rs. 7 lacs  and  odd.   The Deputy Municipal Commissioner who is the assessing authority disallowed expenses totalling Rs. 22 lacs and odd as  having been   wrongly   included  in  the  working   expenses   add ’determined.   13,22,430  as  the  gross  annual  rent   and deducting therefrom the 10 percent deduction allowable under s.  15.4 of the Act assessed the net rateable value  at  Rs, 11,90,187.   The respondent-Club thereupon filed  an  appeal before  the Small Cause Court, Bombay, under s. 217  of  the Act.   The  Club claimed in all 19 items of  expenses  which according  to  it ought to have been  allowed.   The  Club,, however, conceded that items 1, 2, 4, 5, 15, 16 and 18  were rightly disallowed.  The remaining items were: 3.   Bombay Course upkeep and repairs

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6.   Track sand and Murum 7.   Legal charges 528 8.   Licence fee 9.   Totalisator upkeep and repairs 10.  Bombay Course salaries and wages, 11.  Motor lorry expenses 12, Grass and charges for maintenance of horses and bullocks 13.  Insurance and garden,expenses 14.  Spares for tractors and machinery parts 19.  Painting. Out  of these, items 3, 9 and 19 were wholly  disallowed  by the  Deputy  Municipal  Commissioner  while  the  rest  were partially  allowed.  As regards Item 19, that is,  painting, Counsel  for  the Club stated before us that  he  would  not press that item.  We are therefore no longer concerned  with that  item.   The Small Cause Court agreed with  the  Deputy Municipal Commissioner in totally disallowing expenses under Items  3  and 9. It allowed however item 7, that  is,  legal charges  which  were  disallowed  by  the  Deputy  Municipal Commissioner.  Regarding Item 6, the view of the Small Cause Court  was that only 7/12th and not 50 per cent deducted  by the assessing authority ought to have been allowed.  It  was also of the view that only 7/12th and not 50 per cent of the expenses  under  Items 10, 11, 12, 13 and 14 ought  to  have been  allowed  by the assessing authority.  As  regards  the licence  fees  the  Club had,  as  aforesaid,  allotted  Rs. 8,66,666  to the Bombay Race Course.  The Small Cause  Court confirmed  the deduction of 50 per cent only of this  amount allowed by the assessing authority.  So far as water tax and wheel  tax were concerned the, Small  cause  Court-confirmed the  deduction  of  3/4th of the these  taxes  made  by  the authority The Small Cause Court held that the pro fits basis method  employed  by the assessing  authority  was  properly employed and further held that the Club had failed to  prove that  the net rateable value of Rs. 11,90,185 determined  by the assessing authority was excessive. Before the High Court the Club agitated the same objections. The  High Court was of the view that considering the  unique nature  of the use of the premises by the Club,  the  proper method for determination of the annual rent was the  profits basis method but upheld the Club’s objections as regards the disallowance of the several items of expenditure.  The  High Court  held that the gross rateable ’value of the  :property would  after  these  deductions be Rs.  2,15,750  and  after deducting  therefrom the statutory deduction of 10  percent. the net rateable value would come to Rs. 1,94,175 a  figure, no  doubt, less than the actual annual rent of Rs.  3,75,000 payable  by the Club under the said lease.   The  appellant- corporation  challenges the correctness of these  deductions allowed by the High Court. 529 Before  we proceed to consider the contentions urged  before us  on behalf of the Corporation, we may first look at  some of the provisions of the Act.  Under s. 139 the  Corporation is  required  to levy property taxes, tax  on  vehicles  and animals, theatre tax and octroi.  Section 140 provides  that property taxes mean water tax, halalkhor-tax and general tax of not less than 8 per cent. and not more than 26 per  cent. of the rateable value of lands and buildings, education cess and  betterment charges.  Section 154 is concerned with  the valuation  of  property  assessable to  property  taxes  and provides  how the rateable value of such property is  to  be determined.  Sub-section (1) runs as follows:-               "In  order  to fix the rateable value  of  any

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             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 percentum  of  the               said annual rent and the said deduction  shall               be in lieu of all allowances for repairs or on               any other account whatever." The  section  provides  only for the  determination  of  the annual  rent  (not the actual rent paid by the  tenant)  for which such land or building might reasonably be expected  to let  from  year to year and then to fix the  rateable  value after deducting therefrom 10 percent. of such annual rent in lieu  of  all allowances for repairs or  any  other  account whatever.  The annual rent has to be worked out on the basis of  what a hypothetical tenant would be willing to  pay  ’as rent  for  the premises to a hypothetical  landlord  who  is prepared to let the premises from year to year as they stand having  regard  to  all  the  advantages  and  disadvantages relating  lo  Such  premises, such as,  the  situation,  the nature  of  the property, the  obligations  and  liabilities attached  thereto and other features, if any, which  enhance or  decrease  their value to such a,  tenant.   The  section simply  enjoins upon the Municipal Corporation to  determine the  annual  rent  and the rateable value  of  the  property therefrom but does not provide for any particular method  of rating  out  of  the  several  well  known  methods  usually followed  in  such  assessments,  such  as  the  comparative method, the contractor’s method, the unit method and profits basis  method, that is, profit-making capacity or  valuation by  reference  to  receipts and expenditure.  (See  Ryde  on Rating  11th ed., 398 and Faraday on Rating, 5th ed. p.  24) The  profits basis method which the assessing authority  has adopted in the present case consists in ascertaining the net annual  value  -of the premises which has to be  worked  out from  the  profits which are made or which  are  capable  of being made out of the premises.  The gross receipts form the starting  point of the calculation and they are those  shown in  the assessee’s accounts for the account  year  concluded last  before  the making of the proposal.  When  these  have been  ascertained, the next step is to deduct therefrom  the expenses of earning those receipts, the cost 530 Of  repairs,  insurance  and  other  expenses  necessary  to maintain the premises in a state to command the hypothetical rent.   The  remaining  balance  is  divisible  between  the tenant, that is,, the tenant’s share, the landlord, that is, the  hypothetical rent or net annual value and  rates.   The tenant’s  share is often estimated by applying a  percentage to  the  tenant’s capital or it may be directly taken  as  a proportion  of  the  divisible  balance  or  by  applying  a percentage to the receipts. (See Halsbury’s Laws of England, (3rd  ed.), Vol. 32, 87-88).  It must be remembered that  it is  not  the  profits  which are  rateable;  they  serve  to indicate the rent at which the premises might reasonably  be expected to let, particularly where profit is the motive  of the  hypothetical tenant in taking the  hereditament.   This method at one stage used to be adopted in the case of public utilities  only.  But there are a number of decisions  which show that at a later stage it began to be employed to  other premises  also  such  as foot ball  stadia,  markets,  race- courses,  etc.  One of the earliest cases where this  method was  applied to undertakings which are not public  utilities is  the case of R. v. Verall(1) which was a case of a  race- course.   In Sanddown Park Case(2) the Court of Appeal  held

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that  in  cases where actual receipts  and  expenditure  are accepted as relevant factors for the ascertainment of  cross value, sums reflecting the tenant’s reasonable profit.  risk and  interest  on capital should be together  treated  as  a charge  on  the  divisible  profits  in  priority  to  other deductions.  The profits basis method has also been  applied to such premises as grey hound race tracks.  Briefly stated, the profits basis method is no more than a calculation based on the profit earning capacity of the premises and as stated by  Lord  Birkenhead  L.C. in Port of  London  Authority  v. Assessment Committee(3):               "By  this  reckoning the amount of  the  gross               receipts is ascertained, and from such  amount               are  deducted  the expenses  of  earning  such               receipts,  the  deductions  provided,  for  by               statute, interest on tenant’s capital and  the               estimated  amount  of  tenant’s  profit.   The               figure  so ascertained would give  the  rating               authority a valuable indication as to the rent               which the hypothetical tenant would be  likely               to   give   for  the  right  to   occupy   the               hereditament  in question and therefore  would               enable  them  to  form an opinion  as  to  the               correct amount of the net annual value for the               purpose of rating." In  the  instant  case, the profits basis  method  has  been adopted for the last several years and approved by the Small Causes Court in several appeals by the respondent-Club.   It appears  that  at one stage the  respondent-Club  raised  an objection regarding its application to the present case.  We need  not  go into the comparative merits of  the  different methods or into the question whether (1)  [1875] Q.B.D. 9. (2)  (1954) 47 R&T 351 (CA) (quoted in Ryde on Rating.  11th ed.523 (3) [1920] A.C. 273 at p, 281. 531 it  can suitably be applied in the present case-or  not,  as Counsel  for  the  Club stated before us  that  he  was  not pressing  that  objection.   We  therefore  proceed  on  the footing  that  this  method  was  properly  adopted  by  the assessing authority.  But that does not end the controversy, for, even. though the principles on which the profits  basis method  is worked out are fairly well-understood,  there  is nevertheless  bound  to be controversy in regard  to  actual working  expenses  shown  in  the  assessee’s  accounts.   A question  would often arise whether these expenses  are  the hypothetical  landlord’s burden or that of the  hypothetical tenant.   If  they  are of the  former  class,  they  cannot obviously   be  claimed  as  deductible  expenses  for   the hypothetical  tenant would not take them into account  while offering  the  rent at which he would take the  premises  on lease. We  now proceed to examine the contentions in regard to  the items  of  expenses  in controversy in the  light  of  these principles.   The first of these items is Item No. 3 of  Rs. 1,07,414  for expenses for upkeep and repairs of  the  race- course.    The  contention  on  behalf  of   the   Municipal Corporation  was  that the 10 per cent  statutory  deduction allowed  by  s. 154(1) covers all expenses for  repairs  and therefor  deduction  of  costs of  repairs  and  upkeep,  if allowed,  would  mean a duplicate deduction.   Even  if  10% statutory  deduction were considered inadequate  looking  to the  present rate of prices, the legislature has fixed  that percentage  as a matter of policy and if it is found  to  be

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inequitable  or otherwise it is for the legislature and  not for  the Court to alter it.  The question, however,  is  not the inadequacy of deduction allowed in section 154(1) but as to  which are the costs of repairs contemplated by the  sub- section.   Under s. 108(m) of the Transfer of  Property  Act the  lessee  is  required to use the leased  premises  as  a person of ’ordinary prudence would use them if they were his own  and must keep them in as good a condition as  he  found them  and must yield them up in the same  condition  subject only  to fair wear and tear and irresistible  force.   There would thus be two implied covenants in a lease: (1) to  keep in repair and (2) to restore in repair.  It would  therefore be the obligation of the tenant to maintain the premises  in good  repair and in the same condition at all  times  during the term of the lease.  The. lessor-bears the burden only in respect of dilapidation to the premises caused by reasonable wear and tear and extraordinary causes such as storm,  flood or  accidental fire.  It will however be seen that the  deed of  lease under which the respondent-Club took the  land  on lease  expressly excludes the applicability of cl.  (in)  of section 108.  That being so the question as to whether it is the  lessor  or the lessee who would be liable  to  pay  for repairs  cannot  be resolved by the  provisions  of  section 108(m).   But the expenses in question are not expenses  for the upkeep and repairs of either the land or the  structures standing on it which have been put up by the Club.  Costs of these repairs may conceivably be the land- 532 lord’s   burden.   Item  3  represents  expenses   for   the maintenance in good repair of the track which is the  source of  receipts  earned by the Club. it is  manifest  that  the track  together with all its fitments has to  be  maintained properly  if the Club were to earn the receipts  and  secure the largest possible attendance of persons willing to bet at the  races and to attract likewise as many horses and  their owners to participate in the race meetings held by the Club. A  well maintained track is obviously one of  the  principal attractions  inducing  as large an attendance  as  possible. Therefore  it  would be in the interest of  the  tenant  who takes  on lease a race course with profit-making  motive  to maintain   the  course  efficiently  and  in   good   order. Disbursements  for  the  upkeep of the course  and  all  its adjuncts  consequently  are proper  outgoings  incurred  for earning  the  receipts.  They are thus  not  the  landlord’s liability  and are not part of or included in the  statutory deduction of 10 percent.  The statutory deduction in section 154(1)  is in lieu of the cost of repairs,  insurance,  etc. incurred  by the lessor.  There is therefore no question  of any  duplication  if expenses incurred by the Club  for  the maintenance  of  the Course were to be allowed as  a  proper deduction.  The High Court was therefore right in  deducting those expenses from the gross receipts. Next  is Item 9 which comprises expenses for the upkeep  and repairs  of  the  totalisator  set  up  by  the  Club.   The totalisator  is  an  apparatus or a  mechanical  device  for registering and showing the total operations and the  number of  tickets  sold  to  betters on  each  horse  in  a  race. Obviously   it  is  maintained  to  ensure   efficient   and expeditious working of the races.  It does mechanically  the work  which  if  done  by  human  labour  would  necessitate employment  of a large number of persons.  It is  almost  an indispensable  adjunct  of  a  modern  race  course  and  is necessary to declare within the short time available to  the betters which are the horses on which heavy betting has been done in a particular race and the total amount of betting on

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each  of  the competing horses in that race.   The  expenses incurred  in  the  upkeep  and repair  of  such  an  adjunct necessary  to an efficient race course must  necessarily  be regarded   as   the   outgoings  of   the   business.    The Corporation’s  contention  that it is a, machinery  and  its value  therefore  is not to be included in rating  under  S. 154(2)  has  no  merit  as  it  is  part  of  the  necessary -equipment of a good race course and its upkeep goes to  the making of receipts. The  next items in controversy are items 6, 10, 11,  12,  13 and  14,  that  it cost of sand  and  moorum,  salaries  and charges  of  employees,  motor lorry  expenses,  stores  and charges  for maintenance of horses and bullocks, manure  and garden expenses, spares of tractors and other machinery  and lastly  the  wheel tax and water tax.  The  only  ground  on which  the  Small  Cause  Court  partially  ,allowed   these expenses  was that since race-meetings were held .in  Bombay for 6 months in a year only, these expenses would partly  be borne by the Club and partly by the lessor.  The High 533 Court  disagreed  with  this view and  rightly  allowed  the deduction  of  the entire amount.  In our view,  it  is  not possible to find any Principle on which it would be possible to hold that if the race meetings are held for 6 months only in Bombay the burden of these disbursements would be on  the tenant  for 6 months and -for the remainder on  the  lessor. There  is  nothing in the lease which would  show  that  the lessor  had to maintain the track during the time that  race meetings were not held in Bombay.  Since it is the Turf Club which  ran  the  race  meetings  it  would  be  the   Club’s obligation  and  not that of the lessor to  look  after  the track’s upkeep and maintenance and therefore it would be the Club  which  would bear the costs of  its  maintenance  even during  the  period  when race meetings  were  not  held  in Bombay.   The  distribution of these  expenses  between  the tenant and the landlord made by the assessing authority  and the  Small Cause Court cannot therefore be supported on  any principle  nor can it be sustained on the mere  ground  that race meetings were held in Bombay only for part of the year. The  measure in arriving at the net rateable value under  s. 154(1)  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 profit all expenses  reasonably  and properly  incurred  which go to the making of  the  receipts have  to be deducted from the grossreceipts.  There  was  no challenge at any stage that these expenses were not properly incurred for the upkeep and maintenance of the race  course. The High Court therefore was right in allowing the deduction of these expenses also. For the relevant year the Club had allotted Rs, 8,66,666 out of the licence fee of Rs. 13 lacs to the Bombay race-course. Counsel  urged that the Club was entitled to a deduction  of Rs.  4,33,333  only as the licence was for a  dual  purpose, viz.,  for the premises as a race course and for  permission to conduct race meetings on. the race-course.  It was argued that for the first the burden would be on the lessor and for the second on the tenant.  The licence Ex.  B shows that  it was  granted to the Committee of the respondent  Club.   The licence is not a joint licence in favour of the  Corporation and  the  Club.   The application for it  was  made  by  the Committee  on  behalf of the Club and not by  the  Municipal Corporation.   If the licence was for a dual  purpose  prima facie the landlord would either apply separately or join the Club  in  the  application.   The  licence  shows  that  the

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application was for "horse racing in the race courses leased by  them"  at  Mahalaxmi, Bombay and in  the  Cantonment  at Poona.      The     licence    is    "granted     to     the licencees............. to hold horse races on the said  race courses."  Condition  I of the licence prescribes  that  the Club could hold only 36 race meetings in a year out of which not more than 16 should be allotted to the Poona racecourse. The  licence is clearly permission to run race  meetings  on the  two  race-courses and not an instrument  licensing  the premises as a race-course.  It is manifest that since it  is the tenant who would hold the race-meetings the fees payable for the licence is his burden 534 and  not that of the lessor.  Mr. Desai. however,  contended that  the’ scheme of the Bombay Race-Courses Licensing  Act, III  of 1912 is to license the premises and then to  licence the  person  who  runs races on such  premises.   He  relied strongly on the long title of the.  Act which states that it was  an Act to provide for the licensing of race-courses  in the  State of Bombay.  Reliance was also placed on,  section 3(i)  which provides that no horse’-race shall be held on  a race-course  for which there is no licence for  horse-racing in force.  But the charging section is section 4 under which the  owner, the lessee or the occupier of a  racecourse  can apply for a licence for horse racing on a race-course.   The licence for horse racing and the obligation to obtain it and to  pay the fee therefor is on the person who  conducts  the business of running the race-course for horseracing.  Such a person  can be either the owner, the lessee or the  occupier of  such a racecourse.  What section 3 does is  to  prohibit horse  racing  on a racecourse unless a  licence  for  horse racing  has been obtained in accordance with the  provisions of  the  Act.  There is no provision in the  Act  which  Mr. Desai could point out which lays down any licence fee for  a race-course.   There  is  therefore nothing in  the  Act  to warrant  the  construction that the licence  obtained  under section 4 has a dual purpose as contended.  Therefore  there can  be  no  justification for dividing the  burden  of  the licence  fees  between  the tenant and  the  landlord.   Mr. Desai, however, argued that even so, the respondent Club was not  entitled  to claim the deduction of  the  licence  fees because it was not the Club but its Committee which  applied for  and obtained the licence.  The Articles of  Association empower  the Committee to act in all matters ,on  behalf  of the  Club.   The  Committee applied  for  and  obtained  the licence on behalf of and as the agent of the Club.  The fees were  expended on behalf of the Club and as expenses of  its business  and it is the Club and not the Committee which  is licensed  to run horse racing on the race-course.  The  Club was therefore entitled to treat the licence fees as its  own expenses  and claim deduction therefor on the  footing  that the fees were expenses incurred by it to earn the receipts. As  regards  the  wheel tax and the water tax  there  is  no justification in distributing them on the ground that during the  time racemeetings were not held in Bombay it  would  be the  landlord’s obligation to pay those taxes.  In our  view there  is  no basis for disallowing a part of  these  taxes. These  again  were  expenses incurred by  the  Club  in  the ordinary  course of its business and were as  necessary  .as other expenses in connection with its business. Counsel  for  the  Corporation lastly urged  that  if  these expenses -were allowed to be deducted the net rateable value arrived  at  would  be  less than the  actual  rent  of  Rs. 3,75,000  payable  by the Club to the Corporation  and  that such  a  result cannot be contemplated under any  method  of

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assessing  the  rateable value.  It is true  -that  the  net rateable value as calculated by the High Court comes to  Rs. 1,94,175 but the rateable value need not always be equal 535 to  the  actual rent.  As aforesaid the measure is  what  a, hypothetical tenant is expected to pay for a lease from year to  Year  taking  the property as it  exists  with  all  its privileges, advantages and burdens.  The leased premises  no doubt  consist  of  a large track of land  but  it  must  be remembered that under cl. (i)(f) of the lease the Club is in exclusive  possession  of  only  certain  portions  and  the remainder  has to be kept open to the public except on  race days  and when training of horses is held.  A large  portion of  the  land  has thus to be kept open for  being  used  as playgrounds for the public.  It is therefore not  surprising that  the  rateable value as determined by  the  High  Court comes to an amount less than the actual rent payable by  the Club. The appeal fails and is dismissed with costs. R.K.P.S.                               Appeal dismissed. 536