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PETITIONER: MUNICIPAL CORPORATION OF HYDERABAD

       Vs.

RESPONDENT: P.N. MURTHY & ORS.

DATE OF JUDGMENT30/01/1987

BENCH: THAKKAR, M.P. (J) BENCH: THAKKAR, M.P. (J) RAY, B.C. (J)

CITATION:  1987 AIR  802            1987 SCR  (2) 107  1987 SCC  (1) 568        JT 1987 (1)   285  1987 SCALE  (1)213

ACT:     Hyderabad  Municipal Corporation Act, 1955 Section  197, 199,  202  & 204--Municipal Corporation  allotting  building under  ’Low  Income  Housing  Scheme’--Corporation   whether prohibited  from levying and collecting ’property tax’  from allottees.

HEADNOTE:     The  appellant-Municipal Corporation of  Hyderabad  con- structed houses under "Low Income Housing Scheme" and allot- ted them to the respondents on hire purchase. The agreements executed  by  the  respondents in favour  of  the  appellant provided (1) that the houses would remain, till the  payment of  the  last instalment and execution of  a  conveyance  in favour  of the respondents, as the property of the  Corpora- tion;  and  (ii) that all Municipal taxes, water  taxes  and electricity charges would be borne by the allottees.     The  appellant served demand notices on the  respondents to  pay house tax in respect of their houses. By that  time, the  instalments  had not been fully paid.  The  respondents challenged  ’the levy of tax on the ground that s.202(1)  of the  Hyderabad Municipal Corporation Act prohibits the  levy of  general  tax in respect of the aforesaid  houses,  since they  had not yet vested unto the allottees under  the  hire purchase agreement. A Single Judge negatived the plea of the respondents-allottees and upheld the validity of tax but the Division  Bench in a Letters Patent Appeal took  a  contrary view. Hence this appeal by special leave. Allowing the appeal,     HELD: (1) In order to attract s.202(1)(c) of the Hydera- bad  Municipal  Corporation Act, a property must  satisfy  a dual test. The property must not only owned by the  Corpora- tion,  it must also be in the occupation of the  Corporation itself. It is in this sense that the word ’vesting’ has been used.  The expression ’vest’ employed in  s.202(1)(c)  under the circumstances must of necessity be construed as  vesting both in title as well as in possession. [113G-H] Fruit  &  Vegetable  Merchants Union  v.  Delhi  Improvement Trust, 108 A.I.R. 1954 S.C.p. 344 and Richardson v. Robertson, [1862] 6

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L.T.p. 75, relied upon.     (2)  The scheme underlying ss. 197, 199, 200 and 204  of the  Act has to be read and construed in a meaningful,  pur- poseful and rational manner. Section 197(1)(i) casts a legal obligation  on  the Municipal Corporation to levy  taxes  on lands  and  buildings. Section 199(1)  makes  it  obligatory subject  to  the exceptions, limitations and  conditions  to levy  a  general  tax, water  tax,  drainage  tax,  lighting tax/conservancy  tax on the buildings and lands in the  City of Hyderabad. Whilst the legislature makes it obligatory  on the  Corporation to levy the aforesaid taxes, in so  far  as general  tax is concerned an exception is carved  out  under s.202(1) and the Municipal Corporation is relieved from  the obligation  of imposing taxes in respect of buildings  which are specified in clauses(a) to (d). The exception is made on policy  and  principle.  Not  arbitrarily.  Essentially  the properties  which are used for public purposes or  for  pur- poses  of  the community are exempted.  Clause(d)  makes  it abundantly clear that the exemption will not be extended  to properties  belonging  to the Central Government  and  State Government  if the same are used for purposes of profit  and not  a  public  purpose. The user for the  purposes  of  the community is the rationale of the thread of principle  which runs  through all these three clauses viz. clauses (a),  (b) and  (d) for granting exemption. So far as clause(c),  which has  given rise to the present controversy is  concerned,  a different principle is at the bottom, different but no  less rational. The philosophy underlying the exemption is  rooted in  pragmatism. In so far as buildings and lands  which  are the  properties of the Corporation and are used for its  own purposes  it  would be an exercise in  futility  to  collect taxes  from  itself in order to augment its  own  resources. Surely  the  resources would not stand  augmented  when  the Municipal Corporation collects the taxes from itself. [111D; 112A-F]     3.  Section  204(1)  which is a part of  the  packet  of sections relating to this subject-matter clinches the  issue in favour of the Municipal Corporation of Hyderabad. It,  in terms,  provides that property taxes shall be leviable  pri- marily  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  Corpo- ration.  If  the  property taxes were not to  be  levied  in respect  of the property belonging to the Corporation  which is used and occupied by allottees or other occupiers,  there would be no point or purpose in making the provision in  the aforesaid manner. The provision in terms applies to a situa- tion  where  the  buildings or the premises  are  in  actual occupation of 109 a  person or body other than the Municipal  Corporation  it- self. In such an event, the property taxes would be leviable primarily  from  the said occupier as if the  said  occupier holds the property from the Corporation itself. This  leaves no room for doubt that the Corporation is entitled to impose taxes  on  the buildings which may be owned  by  itself  but which may be in occupation of others. Otherwise, the  provi- sion  contained in s. 204(1) would be rendered  aimless  and otiose. [113B-F]

JUDGMENT:     CIVIL  APPELLATE  JURISDICTION: Civil Appeal No.  123(N) of 1973.

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   From  the Judgment and Order dated 26. 10. 1972  of  the Andhra Pradesh High Court in Writ Appeal No. 444 of 1968. B. Parthasarthy and G .N. Rao for the Appellant. B. Kanta Rao for the Respondents. The Judgment of the Court was delivered by     THAKKAR,  J. Is the Municipal Corporation  of  Hyderabad prohibited from levying Municipal taxes from persons induct- ed by it in the property of its own ownership under the hire purchase agreement? The validity of levy of Municipal  taxes by the Municipal Corporation of Hyderabad from allottees  to whom  the Municipal Corporation had allotted buildings  con- structed  under "Low Income Housing Scheme" launched  by  it was  questioned by the allottees. The learned  Single  Judge upheld the validity but the Division Bench in. appeal, Under Clause  15 of the Letters Patent. took a contrary view.  The Municipal  Corporation  has preferred  the  present  appeal, Appeal  by Special Leave and has contended that the  learned Single  Judge was right in upholding the levy and the  Divi- sion Bench was wrong in holding it invalid.     The facts giving rise to the writ petition instituted by the 72 allottees to whom the houses were allotted need to be stated briefly:--               The Hyderabad Municipal Corporation started  a               scheme  called  Low Income Housing  Scheme  in               1957. In pursuance of that scheme, the  Corpo-               ration  constructed several houses in  various               parts  of  the Hyderabad  City  including  the               locality  of  Malakpet. After  the  houses  at               Malakpet  were  completed,  applications  were               invited from persons belonging to               110               that group for the purpose of allotting  these               houses.  The writ petitioners applied and  the               Corporation allotted the houses to them.  They               are occupying the houses since 1959. The  writ               petitioners  executed agreements in favour  of               the Corporation. According to the terms of the               agreement,  the allottees were put in  posses-               sion  of  the  houses allotted  to  them.  The               allottees were to pay 20% of the sale price as               the first instalment and they were required to               pay  the balance in monthly  instalments.  The               agreement   specifically  provides  that   the               houses  would remain, till the payment of  the               last instalment and execution of a  conveyance               in  favour  of the writ  petitioners,  as  the               property of the Corporation. The allottee  has               been strictly prohibited from selling or mort-               gaging or otherwise disposing of the house  or               even to sublet or part with possession of  the               same.  Even after the writ petitioners  become               owners of the houses, they are precluded  from               selling  the  same within five years  of  such               date. The agreement further provides that  all               municipal taxes and water taxes and electrici-               ty  charges would be borne by  the  allottees.               The writ petitioners were served with a demand               notice on 31-12-1964 asking them to pay  house               taxes  from 1-4-1961 onwards. The  demand  no-               tice,  which the writ petitioners received  on               16-4-1965,  required the writ  petitioners  to               file objections, if any before 15 days of  the               receipt  of the notice. The  writ  petitioners               accordingly  filed their objections  on  29-4-               1965.  The principal contention of  the  peti-

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             tioners was that the houses are not liable  to               be taxed as they vest in the Municipal  Corpo-               ration,  and as the writ petitioners  are  not               the  owners  of the  houses,  Negativing  this               contention, the Municipal Corporation served a               notice  dated  19-6-1966  demanding  from  the               petitioners  taxes for the  period  commencing               from  1st April, 1961 to 31st March, 1965.  It               is this demand notice which has given rise  to               the writ petition, giving rise to the  present               appeal.     The  challenge  to  the levy of taxes is  built  on  the argument  that inasmuch the houses under the  hire  purchase agreement  have  not  yet vested  unto  the  allottees,  the property vests unto the Municipal Corporation and under  the circumstances  Section  202(1) of  the  Hyderabad  Municipal Corporation Act (Act) prohibits the levy of the general  tax in respect of these houses. 111     In  order to deal with the plea of the  allottees  which was  negatived by the learned Single Judge but sustained  by the  learned  Judges  of the Division  Bench,  the  relevant provisions of the Act require to be noticed. They are:- Sections 197(1)(i), 199(1), 202(1) and 204( 1)’     It is no doubt true that until all the instalments under the  hire purchase agreement were paid, the allottees  would not become the owners of the houses for the title would vest unto  them only upon the payment of all the  instalments  as per  the  stipulation  contained in the  agreement.  At  the relevant  point  of time the instalments had  not  yet  been fully  paid.  The title in regard to  the  houses  therefore continued  to  vest unto the Municipal  Corporation  at  the relevant   time.  The  question  then  is  whether   Section 202(1)(c)  makes  it unlawful to levy general tax  from  the allottees  of  these buildings. The  scheme  underlying  the aforesaid packet of provisions embodied in the Act  deserves to  be analysed in this context. Section 197(1)(i)  casts  a legal obligation on the Municipal Corporation to levy  taxes on  lands and buildings. Section 199(1) makes it  obligatory subject to the exceptions, limitations 1.  "Section  197(1)(i): For the purposes of this  Act,  the Corporation  shall  impose the following taxes  namely:  (a) taxes on lands and buildings; X X X X" "199(1):  The following taxes shall subject  to  exceptions, limitations  and  conditions herein provided  be  levied  on buildings  and  lands in the City and shall  hereinafter  be referred  to as property taxes, namely:- (a) a general  tax; (b) a water tax; (c) a drainage tax; (d) a lighting tax; (e) a conservancy tax;" "202(1):  The general tax shall be levied in respect of  all buildings and lands in the city except; (a)  buildings and lands solely used for purposes  connected with the disposal of the dead; (b) buildings and lands or portions thereof solely  occupied and  used for public worship or for a charitable  or  educa- tional purpose; (c) buildings and lands vesting in the corporation; (d) buildings and lands vesting in the Central Government or state  Government  used solely for public purposes  and  not used  or intended to be used for purposes of profit  in  re- spect  of  which the said tax, if levied,  would  under  the provisions hereinafter contained be primarily leviable  from the  Central Government or State Government as the case  may be." "204(1): Property taxes shall be leviable primarily from the

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actual  occupier of the premises upon which the  said  taxes are assessed if such occupier holds the said premises  imme- diately from the Government or from the Corporation." 112 and conditions embodied in the relevant provisions, to  levy a  general  tax, water tax, drainage tax, lighting  tax  and conservancy  tax on the buildings and lands in the  City  of Hyderabad. Whilst the legislature makes it obligatory on the Corporation to levy the aforesaid taxes, in so far as gener- al tax is concerned an exception is carved out under Section 202(1)  and the Municipal Corporation is relieved  from  the obligation  of imposing taxes in respect of buildings  which are specified in clauses (a) to (d). Evidently the exception is made on policy and principle. Not arbitrarily. Essential- ly the properties which are used for public purposes or  for purposes  of  the community are exempted.  For  instance  by clause  (a) buildings and lands which are used for  purposes connected  with the disposal of the dead are exempted  inas- much  as the entire community is interested in such a  user. The  same principle is discernible in regard to  clause  (b) which provides for exemption in regard to lands or buildings solely  occupied  for public worship or  for  charitable  or educational  purpose. The same philosophy is discernible  in the  exemption accorded under clause (d) to  properties  be- longing to Central or State Government which are used solely for  a public purpose. Be it realized that clause (d)  makes it abundantly clear that the exemption will not be  extended to properties belonging to the Central Government and  State Government  if the same are used for purposes of profit  and not  for a public purpose. The user for the purposes of  the community is the rationale of the thread of principle  which runs through all these three clauses (viz. clauses (a),  (b) and  (d) for granting exemption. So far as clause (c)  which has  given rise to the present controversy is  concerned,  a different principle is at the bottom: different but no  less rational. The philosophy underlying the exemption is  rooted in  pragmatism. In so far as buildings and lands  which  are the  properties of the Corporation and are used for its  own purposes,  it  would be an exercise in futility  to  collect taxes  from  itself in order to augment its  own  resources. Surely  the  resources would not stand  augmented  when  the Municipal  Corporation collects the taxes from  itself.  How would  one benefit by taking money from one pocket and  put- ting  it in another pocket of oneself? By  transfering  from one drawer of one’s own cash box into another drawer of  the same  cash box? The whole purpose of levying tax is to  aug- ment  its resources and not merely to engage in an  exercise in accountancy, by crediting in one account and debiting  in another,  which does not result in its resources being  aug- mented in reality. In fact a sizable staff would have to  be employed  for  making the valuation of the  properties,  for making  assessment of the properties, and for making  credit and  debit  entries in the relevant accounts.  That  is  the obvious  reason  why buildings and lands which vest  in  the Corporation and which are in its own use and 113 occupation  are  sought  to be exempted from  the  levy.  Of course  clause (c) which provides for exemptions in  respect of  "buildings and lands vesting in the Corporation" is  not very  happily or perfectly worded. Had it been drafted  with the care and precision to be expected from a perfect drafts- man  (who exists only in theory and not in practice),  there would  have been no scope for the controversy. But  then  if the  entire  scheme is viewed in a common sense  manner,  so that  the scheme makes sense, the matter cannot present  any

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serious  problem.  Section  204(1) which is a  part  of  the packet  of sections relating to this subjectmatter  clinches the issue in favour of the Municipal Corporation of  Hydera- bad, the appellant herein. It in terms provides that proper- ty taxes shall be leviable primarily from the actual occupi- er  of the premises upon which the said taxes are  assessed, if  such occupier holds the said premises  immediately  from the  Government  or from the Corporation.  If  the  property taxes  were  not  to be levied in respect  of  the  property belonging  to the Corporation which is used and occupied  by allottees  or  other occupiers there would be  no  point  or purpose in making the provision in the aforesaid manner. The provision  in terms applies to a situation where the  build- ings or the premises are in actual occupation of a person or body other than the Municipal Corporation itself. 1n such an event  the property taxes would be leviable  primarily  from the said occupier as if the said occupier holds the property from  the Corporation itself. This leaves no room for  doubt that  the  Corporation is entitled to impose  taxes  on  the buildings  which may be owned by itself but which may be  in occupation of others. Otherwise, the provision contained  in Section 204(1) would be rendered aimless and otiose.  Surely the legislature was enacting a purposeful provision and  not a purposeless provision without aim or object.     For the aforesaid reasons we are of the opinion that the learned  Single Judge was right in taking the view that  the buildings and lands vesting unto the Corporation not only in title but also in possession (as polarized from those  vest- ing in title only but not in possession) were exempted  from the  obligation  imposed  by the  legislature  to  levy  the property taxes. Buildings and lands which were merely  owned by  the Corporation but were in actual possession  or  under the  actual use and occupation of some one else, that is  to say persons or bodies other than the Corporation itself  are not  exempted.  In  order to  attract  Section  202(1)(c)  a property  must  satisfy a dual test. The property  must  not only  be  owned by the Corporation, it must also be  in  the occupation  of the Corporation itself. It is in  this  sense that  the word ’vesting’ has been used. And the  proposition that the expression ’vest’ is capable of being used in  this sense, depending on the context in which it is emp- 114 loyed,  is supported by the observations made by this  Court in  Fruit & Vegetable Merchants Union v.  Delhi  Improvement Trust, A.I.R. 1954 S.C.p. 344. It has been observed  therein that the word vest: "is  a word of variable import and a property must  vest  in title or may vest in possession or it may vest in a  limited sense, as indicated in the context  .....  " Reliance  has been placed in this context on a passage  from Richardson  v. Robertson, [1862] 6 L.T.p. 75 wherein  it  is stressed that the ’vesting’ often means ’vesting’ in posses- sion.     The  scheme of the relevant sections has to be read  and construed  in a meaningful, purposeful and rational  manner. The  expression ’vest’ employed in Section 202(1)(c),  under the circumstances must of necessity be construed as  vesting both in title as well as in possession. Be it realized  that there can be no principle in exempting the tenants  inducted by the Municipal Corporation in its property from payment of taxes  if  the terms of the lease so provide.  Just  as  the tenants  who  occupy  the properties  belonging  to  private citizens  have  to pay property taxes if the  terms  of  the agreement so provide, the tenants inducted by the  Municipal Corporation  in  buildings owned by itself have to  pay  the

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property taxes if the agreement so provides. There can be no rational basis for exempting the tenants or persons inducted by  the  Municipal  Corporation in its  own  buildings  from payment  of  such taxes. The concerned  provision  therefore cannot  be read in the manner suggested by the  respondents. The learned Single Judge was perfectly justified in negativ- ing their contentions and in dismissing their writ petition. The  learned Judges of the Division Bench were in  error  in reversing  the  learned Single Judge. We,  therefore,  allow this  appeal,  set aside the order passed  by  the  Division Bench,  and restore the order passed by the  learned  Single Judge  dismissing the writ petition. There will be no  order as to costs. M.L.A.                                                Appeal allowed. 115