P. V. DIXIT Vs. MUNICIPAL COMMITTEE

JUDGEMENT

(1.) THIS case arises on a reference made by the Extra Assistant Commissioner with appellate powers, Nagpur, under Section 83(2), C.P. Municipalities Act, 1922. The point of reference is: whether the expression "gross annual letting value" of property includes sums paid by the tenants to the owner on account of the municipal taxes payable by the latter. In view of the importance of the question both to the taxpayers and the Municipal Committee and other considerations, this case has come up before a Bench of two Judges. The Municipal Committee, Nagpur, served a notice on the appellant regarding the assessment of conservancy tax and water-rate on two houses owned by him but in the occupation of his tenants. The basis of the assessment was "the gross annual letting value" of the houses which meant the sum paid by the tenant as rent and the municipal charges leviable on it. The municipal charges were taken into calculation in two ways: once for determining the annual letting value and again for purposes of their collection. The appellant's contention was that charges were leviable on the actual sum received by him as rent and not the hypothetical rent including the municipal charges (theoretically) payable on it. The rules relating to the conservancy tax (also called cess) and the water-rate are couched in identical terms which are as follows: 3(1). The annual letting value of a building or land occupied by the owner himself shall be deemed to be 5 per cent, on the aggregate sum resulting from the addition of (a) the estimated present cost of erecting the building after deduction of a reasonable amount on account of depreciation, if any, and (b) the estimated present value of the land valued with the buildings as part of the same premises. Provided that in the determination of the annual value no account shall be taken of any machinery. Provided further, that in determining the value of the land, the rental which the building fetches or is likely to fetch shall be taken into consideration. If the house or land be occupied by the tenant the same will be assessed according to the actual rent paid by the tenant.

(2.) THE rules cover two kinds of cases, viz. (1) when the land or building is in the personal occupation of the owner, (2) when it is in the occupation of his tenants. It should be observed that the byelaws use in respect of the first case the expression "the annual letting value" and in respect of the second case the expression "according to the actual rent paid by the tenant." The one is a concept and the other is an empirical reality and it is not unnatural that they should differ. The actual rent may be lower or higher than the letting value. If it is higher, (rare in practice), the Municipal Committee would welcome it ; if it is lower, the Municipal Committee would dispute. It is however surprising that the byelaws are devoid of any provision to resolve the dispute. Perhaps the Committee has confidence in the probity or the good faith of the taxpayers, but that would not make up for the defect in its legal armoury. The idea underlying the material byelaws seems to be to leave it to the owner and his tenant to determine the annual letting value which they do by fixing the actual rent. It appears that for practical purposes the Municipal Committee accept the "actual rent" paid by the tenant as more or less correct estimate of the "letting value." In the rules regarding water-rate, the expression used is "gross annual rental value." It is clear that all these expressions are taken in practice to represent one uniform standard for purposes of assessment of tax or rate. In this proceeding however the Municipal Committee contends that the expression "actual rent" occurring in Rule 3 of the Rules-of Assessment means, as it must, "gross rent," i. e. total sum paid by the tenant to the landlord for the use and occupation of the hereditament or gross annual letting value. The referring Magistrate presumably agrees with the contention as is evident from the tenor of the reference.

(3.) WHILE the statute specifically mentions owner or occupier as liable for payment of conservancy tax, it is in that respect silent in regard to the water rate. The rules of assessment relating to both, say that the tax or the rate would be imposed on every building or land but do not say who is to pay them. That is made clear in the rules for the collection of the tax and the rate whereby the owner is made apparently liable to pay them and when the owner does not reside within municipal limits, his agent residing there or the tenant occupying the building is held liable. The incidence of the tax and the rate falls on the building or land and it shifts to the person in actual occupation of it. Neither of these charges is a tax in the strict sense of the term as they represent the value of the services rendered by the committee to the building or land and eventually to the occupier of it. The person who is benefited by these services is the occupier, who may be the owner himself or a tenant. No building or land which lies vacant is liable to pay this special tax or rate. The liability to pay the charges arises from the actual enjoyment of the services rendered by the committee and it must logically follow that he who receives the benefit must bear the burden. They are therefore essentially tenant's charges although for ensuring collection the liability to pay is laid on the owner as being the permanent representative of the property. That means that if the tenant who actually receives the services fails to pay and the Municipal Committee recovers from the owner, the owner will be entitled to recover it from the tenant. It is here that the house tax presents a contrast. The house tax is payable by the owner alone; but when it is recovered from the occupier, Section 81, C.P. Municipalities Act, gives a right to the occupier to recover the same from the owner even by deducting from the rent payable by him. That clearly shows how an owner's tax like house tax enters into the calculation of the rent. Any charges which the-owner is required to pay qua owner would, by necessary implication, be comprised in the rent.