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REPORTABLE
VERSUS
WITH
JUDGMENT
A.K. SIKRI, J.
Leave granted.
Introductory Remarks:
Signature Not Verified
Digitally signed by
SUSHIL KUMAR
2) These appeals are filed by New Delhi Municipal Council (NDMC)
RAKHEJA
Date: 2019.01.22
17:56:57 IST
Reason:
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from year to year. On that basis annual rent used to be fixed and
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was that the UAM of fixing the annual value as prescribed in the
method of fixing annual rent on the basis of the rent which the
the assessees holding that the impugned Bye-laws are ultra vires
the NDMC Act as they are far beyond the scope and ambit of the
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4) When the matter was argued before us, initially the parties
have been filed by those assessees who were not parties to the
Factual background:
became the capital, for the first time house tax was made
the capital of India, Delhi was detached from Punjab and Delhi
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Enclave covering an area of 1240 sq. miles was formed and new
Committee which was constituted in the year 1916 but came into
effect in the year 1925 when this Delhi Municipal Committee was
was shown as Part-C State. However, in the year 1956, vide the
first election took place in the year 1958. The jurisdiction of MCD
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covers the entire Union Territory of Delhi including the rural areas,
NDMC made the NDMC House Tax Bye-laws, 1962 (‘the 1962
notification dated 24th April, 1964. There are only around 12,000
NDMC area. 20% of these are residential units and rest are
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operate till 1992, when a special status was conferred upon Delhi
10) As per Section 60 of the NDMC Act, the power to levy taxes,
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the said annual rent method in the Bye-laws. Insofar as the MCD
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13) On 13th February, 2006, the NDMC in its meeting discussed that
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24th February, 2009, the GNCTD notified the New Delhi Municipal
were enforced from 1st April 2009 and were made applicable in
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Or
Or
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15) The NDMC Special Committee rejected options (a), (b) and (c). It
Area System.”
16) It is significant that the NDMC Special Committee did not touch
upon the manner of bringing about the above change i.e. whether
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the Act. As such, depending upon the final decision in the matter,
alternative.”
17) Since the impugned Bye-laws are declared by the High Court as
the annual rent for which the land and building were expected to
now be noted:
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Residential 1
Others 6
Self-Occupied or Vacant 1
Others 3
Explanations:-
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Age Factor
19) Let us also scan through the relevant provisions of the Act:
a. Property tax;
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b. x x x x x x
2. X X X X X X
3. The taxes specified in sub-section (1) and sub-section
(2) shall be levied, assessed and collected in accordance
with the provisions of this Act and the bye-laws made
thereunder.
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(2) If any land has been let for a term exceeding one
year to a tenant and such tenant has built upon the land,
the property tax assessed in respect of that land and
building erected thereon shall be primarily leviable upon
the said tenant, whether the land and building are in the
occupation of such tenant or a sub-tenant of such tenant.
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21) Under Section 61 (1) of the NDMC Act, property tax shall be
not less than ten and not more than thirty per cent of the rateable
NDMC Act states that the NDMC may, "when fixing the rate at
which the property tax shall be levied during any year, determine
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fixed.” The second proviso to Section 61 (1) states that “the tax
of municipal taxation.”
22) Under Section 61 (2) of the NDMC Act, the NDMC can exempt
from tax the lands and buildings where “the rateable value does
the NDMC Act to mean “the value of any land or building fixed in
accordance with the provisions of this Act and the Bye-laws made
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25) Section 63 of the NDMC Act sets out the method of determination
expected to let from year to year less a sum equal to 10% of the
said annual rent which shall be in lieu of all allowances for cost of
land or building the standard rent of which has been fixed under
the Delhi Rent Control Act, 1958 (‘DRC Act’), the rateable value
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thereof "shall not exceed the annual amount of the standard rent
so fixed.".
26) Section 632) of the NDMC Act states that the rateable value of
any land which is not built upon but is capable of being built upon
Section 65(1) of the NDMC Act clarifies that lands and buildings
the property tax when the premises are let or sub-let. Section 68
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clarifies who will be primarily liable for the property tax due in
29) Section 70 of the NDMC Act deals with the ‘Assessment List’.
public notice of a date not less than one month thereafter when
notified into and investigated, and the person making them shall
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land or building.
31) After taking note of the aforesaid provisions of the Act as well as
Bye-laws, the Delhi High Court, inter alia, observed that insofar
fixed in accordance with the provisions of this Act and the Bye-
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under the Act. Therefore, the rateable value has to be fixed, both
after year less a sum equal to 10% of the said annual rent. Also,
been fixed under the Delhi Rent Control Act, 1958, the rateable
value thereof ‘shall not exceed the annual amount of the standard
rent so fixed.”
32) Further in the opinion of the High Court though under Section 81
to cover the arrears of municipal taxes and the value of such land
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the aforesaid manner, the High Court has held insofar as NDMC
property and then multiplying the UAV by area of the vacant land
provided under the NDMC Act and, therefore, could not have
Act’.
33) Such a course of action could not be taken without amending the
reproduced below:
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been let, sub-let and properties that are not let out at all.
There is no further classification contemplated in the
NDMC Act on the basis of nature of rights which are
created in respect of such land and buildings.
34) Mr. Sanjay Jain, learned senior counsel appeared on behalf of the
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as per Bye-law 5 the valuation committee sits every year and lays
down the standards for fixing the annual rent. The process
rent’. Thus, the tax has to be on the annual rent which is the
of the NDMC Act for fixing such annual rent. Therefore, it was
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35) Mr. Jain also submitted that the observations of the Delhi High
that even in respect of those properties which are let out, still
accordance with the new Bye-laws which have been struck down
and thereby leaving the properties in question without any tax for
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36) Mr. Jain also submitted that UAM introduced by the MCD has
are not ultra vires the NDMC Act. The NDMC has contended that
as ultra vires the NDMC Act, on the premise that the same
erroneous.
38) NDMC has also contended that the entire functioning and
August, 2017 of the Delhi High Court, NDMC will stand to lose a
63(1) for arriving at annual rent and the said gap has been filed
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to year.
41) Mr. Parag Tripathi, who appeared in the civil appeal arising out of
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law that the term ‘levy’ is a term of wide import and includes
judgments:
(iii) Mafatlal Industries & Ors. vs. Union of India & Ors. 4
basis:
purposes of Section 63(1)” the annual rent for which the lands
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bona fide annual value of land and bona fide annual value of
law 4 the annual value of any covered space shall be the amount
arrived at by multiplying the total area by the base unit area value
(iii) ‘Annual value” for the purpose of arriving at the annual rent
concept and has been applicable to the NDMC area until the
(b) of the Punjab Municipal Act which provides that annual value
shall mean the gross annual rent which a house or building may
(iv) It is, therefore, clear that the term ‘annual value’, which is
of the rent which a particular property would fetch when let for
use or enjoyment.
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43) Mr. Tripathi further submitted that the impugned judgment also
value shall not exceed the standard rent fixed under the Delhi
the High Court has, with respect, lost sight of the fact that
Rent Control Act, 1958 since the Delhi High Court was pleased to
strike down Sections 4,6 and 9 of the said Act dealing with
44) This aspect was also noted by this Court in State Trading
the matter, there was no occasion for the High Court to strike
45) Mr. Tripathi also submitted that various judgments relied upon by
5 95(2002)DLT 528
6 (2016) 12 SCC 603
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47) His submission was that from a conjoint reading of the aforesaid
matters covered under Section 63, i.e., Sections 63(1) and 63 (2).
His further submission was that this Court has, time and again,
Others7:
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land. This is only the ceiling and has to be dealt with accordingly.
49) He also argued that the whole idea behind Section 63(2) is to
only for the period during which the building is fully demolished,
i.e., the land in question becomes fully vacant till such time as the
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percentage of the capital value of the land at 5%, the same would
51) He, thus, argued that a 5% levy is wholly arbitrary and does not
serve any purpose also for the reason that no municipal services
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property tax during the period of vacancy of the land due to the
subject to. Further, any in any case this period during which
senior counsel, M/s. Sanjeev Anand, B.B. Jain and many other
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54) Before concentrating on the main issue of ultra vires, the counsel
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amendments thereto.
ground coverage.
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of the NDMC Act. Therein, that High Court has held that property
this Court.
treated at par in that the same base UAV Rs. 1,000/- per sq. mtr.
for two buildings/houses (of say 1,000 sq. mtr. each built between
B.K. Dutt Colony and the other on Golf Links, where both are
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= Rs. 16,20,000/-
58) It is submitted that fixing the same base unit area value for all the
by the MCD, which has divided the area under its jurisdiction into
six different zones and has provided a separate location factor for
are as under:
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property not on the basis of its user but on the basis of the legal
status of the owner, which goes against the principle that property
tax is a tax on a property and not a tax on the owner. This is also
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on the basis of nature of ownership and that too for a historic and
health, streets, roads, drainage, parks etc. does not change and
arbitrarily clubs all uses “other than residential” into one category
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land and buildings into colonies and groups and specifies base
is done, nut just into ‘residential’ and ‘other than residential’, but
its trustees and partly for running a charity, the tax obligation
Article 14.
(v) Properties which are designated for residential use [as per
the city master plan] and are put to ‘residential cum office use’ by
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area of Rs. 1,200/- per sq. mtr. Instead of Rs. 600/- per sq. mtr.)
little as one room in the barsati floor or outhouse is rented and the
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after the NDMC has taken the stand that the impugned-Bye-Laws
consideration.
(viii) Given that Delhi is one state, there is no reason for different
systems between the NDMC and MCD areas. For this purpose,
India Ltd. case wherein a Single Judge of the High court of Delhi
observed as under:
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of the land is owned by the Government itself and the rest 10% is
burden to pay tax is on the persons, who occupy only 10% land of
India.
60) Adverting to the issue of ultra vires which has appealed to the
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this behalf. Emphasizing the fact that as per Section 63(1) of the
the word ‘rent’ and not ‘value’ and, therefore, the only way for
High Court has dealt with the issue. The respondents, in this
Others11;
11 (1962) 3 SCR 49
12 (1970) 2 SCC 8703
13 (1980) 1 SCC 685
14 (2002) 3 SCC 388
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61) It is thus argued that the High Court has rightly held that the UAM
factor for residential use is 1 but all other use is 6. Similarly, for
taxed. Properties fetch the same rent whether they are owned by
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computing rent.
64) The impugned Bye-laws provide for the calculation of tax to begin
Rs. 1,000/- per sq. mtr. (revised to Rs. 1200/- per sq. mtr. w.e.f.
B.K. Dutt would fetch with one in Golf Links or Prithviraj Road.
66) It is, thus, argued that the Impugned Bye-laws are not a means of
manner:
(a) Firstly, Section 63(2) of the NDMC Act provides for taxation
only on land capable of being built upon. Given that parts of the
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not capable of being built upon. Bye-law 4(2), which provides for
(b) Secondly, the categories created under the Bye-law 4(6) are
have been sub-let and those that are not let out at all. The
of categorization.
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61. This Section, inter alia, provides that the property tax shall be
not less than 10% and not more than 30% of the rateable value of
and buildings for which rates can be prescribed and these rates
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case. For these reasons and for the sake of continuity and clarity,
2. The rateable value of any land which is not built upon but is
capable of being built upon and of any land on which a building
is in process or erection shall be fixed at five per cent of
estimated capital value of such land.”
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year….’ .
70) The ‘rateable value’, as per Section 2(42) of the NDMC Act is to
be fixed in accordance with the provisions of the Act and the Bye-
are the provisions made in this behalf in the Act. For this Section
10% thereof. The Impugned Bye-laws lay down the procedure for
at annual rent and, therefore, this gap has been filled up by the
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71) Section 63(1) is not silent on how to determine the annual rent of
a property. This annual rent has to be the one which the land or
year’. It is, thus, based on the letting yearly value of the property.
Others15 has analyzed the words ‘gross annual rent at which the
15 (1962) 3 SCR 49
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73) In the case of The Guntur Municipal Council case, this Court
74) In Dewan Daulat Rai Kapoor case, this Court held as under:
75) Similarly, in Indian Automobiles Ltd. case, it was held that the
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realizable by the landlord and not the value of holdings, and that
that:
77) The aforesaid judgments give a clear message that annual rent is
to be the one which the landlord might realize if the house was
let. The criteria, thus, is the rent realizable by the landlord and not
the value of the holding. The test essentially is what rent the
the Guntur Municipal Council case, this Court made it clear that
having regard to the provision in the Act, the municipality was not
free to assess any arbitrary annual value and has to look to and
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assessment.
for fixation of rateable value is the annual rent at which the land
clearly conveys that the rateable value is the annual rent which
namely, the word ‘rent’ in the phrase ‘annual rent’ and the word
the property is already let out, actual rate at which the property is
where the property is let out actually at a rent which is lesser than
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This Court held that the annual rent received by the landlord is
Others vs. Union of India and Others16, this Court noticed the
under:
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81) In case there is a proof and/or material to find out that the
let out, the actual rent receipt can be discarded by adopting the
or is vacant and not let out, it can be gathered from the rent at
Dewan Daulat Rai Kapoor and other cases, the reasonable rent
criteria of fixation of standard rent has lost its relevance after the
Saran (HUF) vide which Sections 4,6 and 19 of the Delhi Rent
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which can be the annual rent and not the value of the property in
only then one can say that the impugned Bye-laws are in tune
with the provisions of Section 63(1) of the NDMC Act. After going
through the Bye-laws and the manner in which the rateable value
brief, Bye-law 4 stipulates that the bona fide annual value of land
and bona fide annual value of the covered space of the building.
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further.
84) Thus, we agree with the High Court that the Impugned Bye-laws
rental which the property is likely to fetch and are, there, foreign
Such Bye-laws are, thus, ultra vires the provisions of NDMC Act.
move to amend the Act in order to bring UAM for the purpose of
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with the earlier method based on annual rent. For this reason,
this method has now been followed for the purpose of levying
property tax not only in the areas in Delhi itself covered under the
Since, we are agreeing with the High Court which has quashed
advanced before us. However, we may only add that once the
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87) We may record here that when the matter was heard at a stage
when the counsel for NDMC had argued the matter and even
statement on 16th January, 2018 that the new Bye-laws had been
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88) When the matter came up on 6 th March, 2018, Mr. Sanjay Jain
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assessees are still not satisfied with the decision taken on various
89) One last but very significant aspect is still required to be dealt
year 2009. They were struck down by the High Court vide
impugned judgment dated 10th August, 2017. They held the field
95% of the assessees are agreeable to pay the tax as per Bye-
laws 2009. They have even paid the taxes on that basis. In
assessees who have paid the tax as per Bye-Laws, 2009, their
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this course of action is that these assessees are satisfied with the
.............................................J.
(A.K. SIKRI)
.............................................J.
(ASHOK BHUSHAN)
NEW DELHI;
JANUARY 22, 2019.
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