K P SONI Vs. UNION OF INDIA

JUDGEMENT

(1.) The only point urged by the learned counsel for the petitioner is that Section 116 of the Delhi Municipal Corporation Act which provides the basis for determination of property tax to be levied on properties falling within Municipal Corporation of Delhi jurisdiction, is ultra vires the Constitution of India. To make good this point the learned counsel first contended that Section 116 shows that the property tax is being levied on rental income from the property and as such it becomes a tax on income which as per Article 270 of the Constitution of India only the Central Government can levy and collect. Secondly, it is contended that the Union Parliament had no legislative competence to enact Section 116. Relevant portion of Section 116 is reproduced as under:

(2.) In support of the first point it is contended that Section 116 bases the levy of property tax on annual rent at which a particular land or building might reasonably be expected to be let from year to year. Normally the standard rent of a property as per the provision of Section 6 of the Delhi Rent Control Act is taken as the rent which a property is reasonably expected to fetch. However, where the rent of a property exceeds Rs. 3,500.00 per month, the property goes out of the purview of the Delhi Rent Control Act. In such cases the actual rent fetched by the property is treated as the rent which it is reasonably expected to fetch. Thus for purposes of Section 116, the actual rent in such cases is taken into consideration for purposes of determination of the rateable value of the property. Since the rateable value is determined on the basis of the actual rent of the property, it is argued that it really amounts to taxing the rental income. It becomes a tax on income which the Municipal Corporation of Delhi cannot levy and collect in view of the provisions of the Constitution of India.

(3.) In our view this contention is totally devoid of merit. A close look at the relevant provision contained in Section 116 shows that annual rent of the property is taken into consideration only for purposes of determination of the rateable value of the property. The property tax has correlation with the rateable value of a property. For purposes of levy of property tax first rateable value of a property is determined. Annual rental income which a property fetches is a factor taken into consideration in determining the rateable value. It cannot be said that rateable value and rental income fetched by a property are the same thing. The tax remains a tax based on rateable value of the property. The method of determining the tax should not be mixed with the nature of tax. Section 114 is the charging section which provides:-