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Ramji Keshavji Contractor v. The Municipal Commissioner Of Greater Bombay .
Factual and Procedural Background
This opinion arises from a reference made by the learned Chief Judge of the Small Cause Courts regarding the primary liability for property-tax under the Bombay Municipal Corporation Act when land is leased and a structure is erected by the tenant. The appellant, a landlord, leased an open plot of land to a tenant, Kanse, for one year from April 1, 1949 to March 31, 1950. The tenant constructed a temporary asbestos shed on the land. The Bombay Municipality assessed the land and shed as a single unit and fixed a combined rateable value for the period October 1, 1953 to March 31, 1954. The appellant received a tax bill based on this assessment and appealed, contending he was not primarily liable for the tax on the shed built by the tenant. The reference concerns the question of primary liability for payment of property-tax and not the internal liability between landlord and tenant.
Legal Issues Presented
- Who is primarily liable under the Bombay Municipal Corporation Act to pay property-tax when land is leased and the tenant erects a structure on it?
- Whether the Municipality can treat the land and the building constructed upon it as a single assessable unit for the purpose of fixing primary liability and rateable value.
Arguments of the Parties
Appellant's Arguments
- The appellant contended that he, as the landlord, should not be assessed for tax on the asbestos shed constructed by the tenant, as he was not the owner of that structure.
- The appellant challenged the Municipality's long-standing practice of assessing land and buildings together as a single unit.
Respondent's Arguments
- This information was not available in the provided opinion.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Gopinath Krishna Pradhan v. Municipal Corporation of Greater Bombay | Recognition of the Municipality's right to assess land and building as a single rateable unit. | The court relied on this precedent to support the view that the land and building together form the proper rateable unit for assessment and primary liability. |
Court's Reasoning and Analysis
The court examined section 146 of the Bombay Municipal Corporation Act, which governs primary liability for property-tax. Sub-section (2)(a) establishes that if premises are let, the lessor (landlord) is primarily liable, except in the case of sub-section (3) which applies when land is let for a term exceeding one year and the tenant has constructed a building. Since the lease in this case was for one year and did not fall under sub-section (3), the landlord remains primarily liable.
The court addressed the complexity arising from the fact that ownership of land and structures can differ, noting the appellant's contention that he should not be taxed on a structure he does not own. However, the court referred to section 147, which allows the landlord to recover from the tenant any tax paid in excess of what is attributable to the rent.
The court further analyzed sections 154, 155, and 156 relating to valuation and assessment. These sections refer to "building or land," but must be read in conjunction with section 146, which uses the term "premises." The court concluded that the proper rateable unit for assessment is the land together with any building on it, as the Act defines "land" to include land being built upon or built upon.
The court rejected the proposition that land and buildings should be assessed separately, reasoning this would make it impossible to determine primary liability. The court endorsed the long-standing municipal practice of treating land and buildings as a single assessable unit, consistent with the precedent in Gopinath Krishna Pradhan.
Accordingly, the court held that the Municipality can hold the appellant primarily liable for the property-tax on the combined rateable value of the land and the asbestos shed.
Holding and Implications
The court held that the landlord (lessor) is primarily liable for the payment of property-tax on the land and the tenant's structure when the lease term does not exceed one year and does not fall under the exception in section 146(3) of the Bombay Municipal Corporation Act.
The direct consequence is that the appellant landlord must pay the property-tax assessed on the combined value of the land and the asbestos shed. The decision affirms the municipal authority’s practice of assessing land and buildings as a single unit for tax purposes. No new precedent was created beyond confirming the existing statutory interpretation and municipal practice.
Chagla, C.J:—
This is a reference made to us by the learned Chief Judge of the Small Cause Courts, and the question that arises for our determination is as to who is primarily liable under the Bombay Municipal Corporation Act to pay property-tax when land has been leased to a tenant and the tenant has put up a structure upon that land.
The facts giving rise to this reference are very few and they are that the appellant, who is the landlord, let out an open plot of land to one Kanse for a period of one year from April 1, 1949 to March 31, 1950 on a monthly rent of Rs. 140 and the tenant constructed upon this plot a temporary asbestos shed. The Bombay Municipality treated the land and the shed as a single assessable unit and fixed the combined rateable value at Rs. 5,500 for the assessment period October 1, 1953, to March 31, 1954. After the rateable value was fixed, a bill was presented to the appellant on the basis of this assessment and the appellant filed the appeal before the learned Chief Judge contending that he was not primarily liable for the payment of tax in respect of the shed constructed by the tenant.
It should be made clear at the outset that the question raised in the reference only concerns the primary liability to pay property-tax; it is not concerned with the liability inter se the landlord and the tenant. The statute has fixed the primary liability with regard to property-tax in order to facilitate the collection of property-tax. The principle underlying this statute is that the Municipality should know whom it should hold liable and the Municipality should not be put to the difficulty of ascertaining the actual liability of different persons who may have interest in a particular property. The section we are concerned with is s. 146. Sub-s. (1) deals with the primary liability of an occupier who holds the premises immediately from the Government or from the Corporation or from a fazendar. That is not the case here. Sub-section (2) provides for all other cases (cases other than those falling under sub-s. (1)), and it provides that otherwise the said taxes shall be primarily leviable as laid down in the following sub-clauses; and sub-clause (a) provides:
“if the premises are let, from the lessor”.
Now, in this case, the premises are let and, therefore, the person primarily liable for the payment of tax on these premises would be the lessor, that is, the appellant. Sub-section (3) is an exception to sub-s. (2)(a), and it provides that:
“if any land has been let for any term exceeding one year to a tenant, and such tenant has built upon the land, the property taxes assessed upon the said land and upon the building erected thereon shall be primarily leviable from the said tenant or his legal representative, whether the premises be in the occupation of the said tenant or of his legal representative, or of a sub-tenant”.
Therefore, it is clear that, in every case where premises are let, the primary liability is upon the landlord except in the one case referred to in sub-s. (3), where the primary liability is upon the tenant and not upon the landlord. Admittedly this case does not fall under sub-s. (3) of s. 146. Therefore, in our opinion, it is clear that the primary liability in this case is upon the lessor.
Now the difficulty arises by reason of the fact that in India the view has been taken that one person may be the owner of a land and another person may be the owner of a structure that is built upon the land. Consistently with that view, it is undoubtedly true that in this case the land belongs to the lessor and the asbestos shed put up by the tenant belongs to the tenant; and the contention of the landlord is that he should no be assessed to tax with regard to a part of the premises of which he is not the owner. But in putting forward this contention, the landlord overlooks the provisions of s. 147, which seems to give him the right of recovering from his tenant the amount of tax which he has paid in excess of the tax which the property is liable to pay on the basis of the rent recovered by the landlord. The learned Chief Judge also seems to have doubted the practice followed by the Municipality for a very long period of treating the land and the building constructed upon it as a single assessable unit. In this connection, we might look at the provisions with regard to the valuation of property assessable to property-tax and these provisions are to be found in ss. 154, 155 and 156. Section 154 sub-s. (1) provides that:
“in order to fix the rateable value of any building or land accessable to a property-tax, there shall be deducted from the amount of the annual rent for which such land or building might reasonably be expected to let from year to year a sum equal to ten per centum of the said annual rent and the said deduction shall be in lieu of all allowance for repairs or on any other account whatever.”
This determines the rateable value. This rateable value can be fixed either of a building or of land. The difficulty is caused by this, that whereas in s. 146 the Legislature has used the expression “premises,” in s. 154(1) the expression used is “building or land.” Then s. 155 provides for the right of the Commissioner to enable him to determine the rateable value of any building or land and the person primarily liable for the payment of any property-tax leviable in respect thereof, and to require the owner or occupier of such building or land to furnish him with the necessary information. Section 156 provides for the Commissioner maintaining a book called “the assessment-book,” which book is to contain, among other things, a list of all buildings and lands in Greater Bombay distinguishing each, either by name or number, as he shall think fit. Now, in our opinion, these sections must be read in the light of s. 146. The object of these sections is to fix the rateable value and also to determine who is primarily liable. Therefore, if the primary liability under sub-s. (2) is upon the lessor where the premises are let, the information that would have to be gathered and the rateable value that will have to be fixed would be with regard to premises which would include both the land and the building, if a building was constructed upon the land. It would be untenable to suggest that under ss. 154, 155 and 156 the Municipality should assess land separately from the building. If the Municipality were to do that, then it would be impossible to fix the primary liability as far as the building is concerned. It may also be pointed out that in the Bombay Municipal Corporation Act “land” is defined as land which is being built upon or is built upon, and, therefore, when ss. 154, 155 and 156 refer to “land” it would include any structure put up on the land. Therefore, in our opinion, the scheme of s. 146 and ss. 154, 155 and 156 clearly indicates that, when a land is let and the letting does not fall within the purview of sub-s. (3) of s. 146, and where the landlord is made primarily liable under sub-s. (2) of s. 146, the proper rateable unit is the land with the building standing thereon. The same view was taken of the right of the Municipality to assess land and building as one rateable unit in Gopinath Krishna Pradhan v. Municipal Corporation of Greater Bombay.(2)
The question that has been submitted to us by the learned Chief Judge is whether the Municipality can hold the appellant primarily liable for the property-tax on the basis of the rateable value of the land together with the asbestos shed constructed thereon by his tenant, and the answer we propose to give to this question is in the affirmative.
No order as to costs.
Answer accordingly.
G.N.V
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