JAWAD ALI KHAN Vs. KURNOOL MUNICIPALITY

JUDGEMENT

(1.) The plaintiffs are the appellants. This appeal arises out of a suit filed by the plaintiffs for injunction restraining the defendant-Municipality from collecting the tax over and above Rs. 2.450/- for half year from 1-4-1975 for the suit building after declaring that the assessment is illegal. The averments in the plaint may be briefly stated.

(2.) The 1st plaintiff is the owner of the building which was previously bearing door No. 52/2, 52/3, 52/3-A, 52/4 and was assessed to property tax. A partner of the second plaintiff firm took the existing building on lease by registered deed on 2-11-1973 for the purpose of constructing a hotel on the site covered by the above premises. As per the terms of the lease, the second plaintiff agreed to pay a monthly rent of Rs. 800/- from 2-11-1973 for a period of 10 years and Rs. 1,100/- for the remaining five years. It was agreed that the lessee is entitled to construct a hotel of his design and choice and subsequently the hotel was opened. Thereafter the defendant, Municipality issued a notice proposing to increase tax to Rs. 3,358/- per half year on an increased rental value of Rs. 22,400/-. The first plaintiff objected to the proposed tax and the appeal was preferred and as the appeal was not disposed of and in view of the coercive steps taken by trie defendant-Municipality, the suit is filed. The plea of the defendant is that the suit is no maintainable during the pendency of the appeal and the monthly rent stipulated in the lease-deed is low considering the advantages derived from the construction of a huge hotel by the first plaintiff the rental value is enhanced to Rs. 22.400/-.

(3.) The trial court held that there is no material in support of collusion regarding the rent of Rs. 800/- stipulated in the lease deed and the annual rental value of Rs. 22,400/- fixed by the Municipality is illegal and arbitrary. On appeal the lower appellate court endorsed the finding of monthly rent of Rs. 800/- for a period of 10 years and Rs. 1,100/- for the remaining five years under the lease deed but however taking into consideration that the second plaintiff constructed the hotel by spending Rs, 1,05,000/- and that the new construction made by the lessee shall be left after the expiry of the lease without claiming any compensation from the lessor the lower appellate court held as follows : "Thus by the end of the lease period of 15 years, the first plaintiff receives Rs; 96,000/- towards rent for 10 years at Rs. 800/- p.m. and a sum of Rs. 66,000/- towards rent for five years at Rs. 1,100/- p.m. Thus, the 1st plaintiff receives Rs. 1,62,000/- towards rent by the end of the lease period of 15 years. Thus, the lessee parts with Rs.1,62,000/- towards rent to the lessor for the entire lease period of 15 years. Further, the lessee invested Rs. 1,05,000/- for the constructions made in the premises taken on lease by him. Even if the reasonable interest of 6% p.a. is charged on the said amount, the lessee would get Rs. 94,500/- towards interest on the amount of Rs. 1,05,000/- by the end of the lease period of 15 years. Thus, the lessee will be losing Rs. 94,500/- towards interest on the investment made by him on the construction of the building and Rs. 1,05,000/- on the cost of the reconstruction made by him. Thus, by the end of the lease period of 15 years the lessor-first plaintiff get Rs. 3,61,000/- by way of rent and on the reconstruction left over by the lessor. Thus, the amount realised by the lessor year to year in the suit building is more than Rs. 24,000/- which in my opinion can be taken as a safe base to fix the annual rental value". The learned counsel for the appellant Smt. V. Sujatha #1 contended that the approach of the lower appellate court is erroneous and the basis for levy of tax is the agreed rent in the absence of any connivance and the calculations made by the court with reference to interest on the amount invested for construction are irrelevant and not supported by the provisions of the Municipalities Act. The learned standing counsel for the Municipalities contends that the rent that the building is likely to fetch is criterion and the annual rental value estimated at Rs. 22,400/- is reasonable in the circumstances.