Patel, J.:— This appeal is brought by the Life Insurance Corporation of India who will be referred to as the Corporation against the judgment of the Chief Judge of the Small Causes Court, Bombay, in a valuation matter under the Bombay Municipal Corporation Act of 1888. Before the learned Judge there were several appellants and the questions that arose were common. The Corporation owns the ‘Indian Globe Chambers’ at the junction of Hornby Road and Mangesh Shenoy Street. It is occupied by the tenants of the Corporation. The rateable value for the years 1957–1958 and 1958–1959 was fixed by the Municipal Corporation, at Rs. 1,66,410. In 1958 from April 1, an additional tax known as educational cess came to be imposed at 1½ per cent on the annual letting value. For the year 1959, therefore, a notice was sent to the Corporation of an increase in the rateable value from Rs. 1,66,410 to Rs. 1,68,585. This included the amount of permitted increases under the Rent Act which could be transferred to the tenants. The Corporation made an application to the Assessor and Collector under s. 163 of the Act. The Assessor and Collector fixed the rateable value at Rs. 1,66,180. Though the rateable value was fixed at a lesser amount than that for the year 1958–1959, it was not by reason of the deduction of the permissible increases to be transferred to the tenants but by reason of certain other deductions which the Corporation succeeded in establishing before the Assessor and Collector. Dissatisfied with the result of their complaint, the Corporation appealed to the Chief Judge of the Small Causes Court as provided by the Act along with several others.

2. The two questions raised before the learned Judge were whether the Municipal Corporation was entitled to increase the rateable value—(1) by the increase in the Halalkhore tax and (2) by the additional education cess. In the first case it was conceded before the learned Judge that the Halalkhore tax could not be added on to the actual rent recovered for assessing the rateable value. As to the second, the learned Judge held that the education cess could be added to the actual rental for the purpose. He, therefore, made orders accordingly. The Corporation challenges the decision of the learned Judge. The answer to the question raised depends upon the construction of the relevant provisions of the City of Bombay Municipal Act read in the context of the Bombay Rent Act. Section 154 of the Act does not independently define what is rateable value of a property but it contains a clear provision that it is the amount of annual rent for which the land or building may be reasonably expected to let from year to year less ten per cent of the said rent. It has been consistently held that under this section the rateable value is the amount of rent that a hypothetical tenant may reasonably pay for the premises if they are let from year to year, both the landlord and the tenant being willing to let and to take the building. It has also been held that the annual letting value may not always be equivalent to the actual rent which is recovered by the landlord. It may be that in some cases the actual rent may be more than the annual letting value and in some cases it may be less, depending upon several circumstances. If there had been no Rent Act, which in effect staggered the rents, there could be no question as to how the Corporation would have valued the property in question. The difficulty has arisen because of the Rent Act which prevails in this State.

3. Under the scheme of the Rent Act, no landlord is entitled to charge under s. 7 anything in excess of the standard rent. The section expressly provides that it would not be lawful for a landlord to claim or receive on account of rent of any premises any excess above the standard rent, barring a few exceptions, which are not relevant for the present purpose. Section 18 of the Act makes it penal for any landlord to recover any amount in contravention of the provisions of s. 7. Section 5(10) defines what standard rent is and in this connection it must be noticed that it does not include anything by way of a permitted increase under the provisions of s. 10 to s. 10AA of the Act. The incidence of the municipal taxes under the City of Bombay Municipal Corporation Act falls in this State on the owner. After the Rent Act came into force it was realised, when the prices showed upward trend, the injustice in preventing the landlord from recovering normal rents and at the same time requiring the landlord to meet the taxation on the property and in order to mitigate the hardships created by reason of the necessities of the times some relief was afforded to the landlord by which the landlords were in certain stated cases permitted to recover extra taxes which they were required to pay to the Corporation from their tenants. It is indeed true that ss. 10, 10A, 10AA and 10AAA, when they speak of the increase, speak of it as increase in rent but the sections also make it clear that it shall not be deemed to be increase in rent under s. 7. It is clear, therefore, from the provisions of these related sections that what is allowed to the landlord in addition to the standard rent is not some sort of increase in the rent at all but it merely provides in a specified way the transfer of the burden of some portion of the tax to the tenants because of the rigours of the Rent Act.

4. The first question is whether the rateable value is limited by the provisions of the rent act and if it is so limited whether in any case the burden which is transferred to the tenant can be counted as additional rent which the landlord recovers from the tenant for the purposes of the municipal taxes.

5. Mr. Gumaste has referred to the decision of the Supreme Court in the case of Corporation of Calcutta v. Sm. Padma Debi . [1962] A.I.R S.C 151. where the provision of s. 127(a) of the Calcutta Municipal Act was interpreted by the Supreme Court. The rent of the premises in question was fixed by the Rent Controller at Rs. 550 per month with effect from April 1951 and at Rs. 632-8-0 per month with effect from August 1951. The Municipal Corporation fixed the rateable value at Rs. 1,450 per month. This valuation was challenged. It was contended on behalf of the Corporation that the rateable value under the Municipal Act had no relation to the standard rent earned by a landlord and in support of this argument it relied upon the decision of the House of Lords in Poplar Assessment Committee v. Roberts . [1922] 2 A.C 93.. Their Lordships pointed out the distinction which obtained between the English law and the Indian law—the distinction between the incidence of taxation in the two cases. It has been pointed out that in England the tax falls on the tenants while in India the tax falls on the landlord. In view of this, their Lordships said that where the rents that a landlord can earn are circumscribed by Rent Act, the rateable value will be limited by the rent earned by the landlord. In other words, the rateable value can only be the rent obtainable under the Rent Act. An argument was raised before their Lordships on behalf of the Corporation that any additional burden could be passed on to the tenant by the landlord and, therefore, the landlord would not suffer any prejudice whatsoever. Their Lordships observed that the acceptance of that reasoning—

“would land us in a vicious circle and would enable one to circumvent the provisions of the Rent Control Act, for though a tenant is not liable under an Act to pay a rent higher than the standard rent, by this process he would be compelled to pay a higher rent.” (p. 155).

6. They observed (p. 155):

“…On the other hand, the scope of that section can legitimately be confined to situations giving rise to increase of taxes such as the increase in the rate, etc.”

7. Mr. Shah contends that though it is true that the landlord cannot earn anything more than the standard rent inasmuch as under the provisions of the rent act, the burden could be passed on to the tenant when the Municipal Act imposes burden on the landlord, there can be no reason why once the landlord makes the increase by reason of the taxation, it should not also be regarded as a part of the rent which the tenant pays to the landlord and thus be regarded as increasing the rateable value of the property in question. We would repeat that this must land us again into a cycle of increments every year from figure to figure never intended by the framers either of the Rent Act or of the Municipal Act. This may be illustrated thus: Take for example a building, the rateable value of which is a lac of rupees—at least in Bombay there may be some buildings, which do have this annual letting value. The educational cess would be Rs. 1,500 in respect of this building. Next year, the rateable value, according to the contention of the Municipal Corporation, would be more by Rs. 1,500. If incidence of the educational cess is increased from one and half per cent to five per cent the rateable value would increase by Rs. 6,000 and not by Rs. 1,500. All the taxes payable by the landlord would increase in proportion, including the educational cess. A year thereafter, all this further addition would be added on to the rent and treated as annual letting value. One does not know where the limit would be reached. It seems to us, therefore, that from a practicable aspect, if such a result could be avoided, it ought to be. It is argued by Mr. Shah that ultimately it is the reasonable rent which a hypothetical tenant would pay to the landlord that has to be determined by the Court. Any tenant would be prepared to pay this amount in addition to the standard rent on a reasonable view of the matter and, therefore, this should be considered to be a proper addition to the rent for determining the rateable value of the building. But then, looking to the hardship of accommodation to-day, a tenant would not only be prepared to pay this addition but a far greater addition and it was in order to prevent such payments that the Rent Act was enacted. The framers are also careful in providing that the increase by the landlord made by reason of the additional tax burden in the rent would not be regarded as an increase in the standard rent and such increase is not also included in the definition of the standard rent. It is obvious, therefore, that the standard rent is not affected by any increases allowed under the Rent Act by reason of the additional taxation and if, therefore, the rent or the standard rent which the landlord can recover is limited by the Rent Act under the authority of the decision cited above, we do not see how any further amount can be added to the actual rental and be called the rent of the building which the landlord recovers.

8. It is undoubtedly true, as has been pointed out, that no limit is set either way to the determination of the rateable value under s. 154 of the Municipal Act. We do not see why it should not be held that the Rent Act does set a limit to the rateable value assessable under s. 154. If the landlord cannot recover anything more than the standard rent, then that is a limitation which acts on s. 154 and if that is so, the amount of the increases permitted by the Rent Act because of the increase in taxation cannot be allowed to be added to the rental for the purpose of rateable value.

9. The learned Judge has observed:

“So far as the word ‘rent’ goes in the City of Bombay, it is undisputed that the landlords recover from their tenants such amount as includes all the taxes on the property which are recovered by the Bombay Municipality from the landlord in respect of their properties. If so I cannot understand why this amount which is recovered from the tenants in lieu of the property taxes payable by the landlords as education cess cannot be included as part of the rent.”

10. The landlords recover rents and the tenants pay rents which depend upon the rule of demand and supply. If a property which remained idle for a long time is being occupied by a tenant, the landlord does not consider whether he pays ‘X’ tax or ‘Y’ tax. He is more anxious to let the property to a tenant. If, on the other hand, the tenant is a needy tenant, the landlord does not charge less rent merely because he pays a particular amount of tax. The learned Judge is also in error when he says that the education cess is a part of the property tax or that it is in lieu of the property tax. Section 195E, under which the educational cess is levied, does not justify this inference. The educational cess is in addition to the general tax, which the Corporation recovers and s. 195E provides that it may be recovered as an addition to the general tax. In fact it is recovered merely as an educational cess separately. The learned Judge has observed:

“All these years in the total annual rent which is calculated by the Bombay Municipality under Sec. 154 of the Bombay Municipal Corporation Act, these factors are taken into account and it is the total amount which the tenants pay to the landlord by way of consideration for the occupation of the tenements that is considered as the rent which can be expected by a landlord of the property from a hypothetical tenant.”

11. There is no estoppel, and practice does not necessarily make law. Whether or not the same considerations would apply to the general tax, a part of which is being probably recovered from tenants as permitted increase for determining the rateable value, does not fall to be considered just now, inasmuch as we are concerned only with the educational cess.

12. The learned Judge, in effect, followed the decision of Mr. Justice Datar in Municipal Comr. v. Manecklal . 1961 64 Bom. L.R 107. where the learned Judge has held that the deduction of ten per cent in the annual letting value allowed under s. 154 was intended to be for all purposes and no further deduction could be made from the annual letting value. Against this decision, there was a Letters Patent Appeal being Maneklal v. Municipal Comr. . 1962 65 Bom. L.R 480., where we differed from the learned Judge and held not that any further deductions could be made out of the annual letting value in addition to ten per cent but that the annual letting value itself, was the gross amount recovered by the landlord minus a reasonable return to him for his investment in providing additional amenities to the tenant. Out of the amount determined, ten per cent deduction has to be made for other outgoings as provided by the Act. In our view, really speaking, the ratio of the decision of the learned Judge cannot apply to the question that falls to be decided in the present case. There is no question of making any deduction whatsoever and the only question with which we are concerned is, what is the annual letting value of the property which, in view of what we have said above, is only the standard rent provided by the Rent Act and which alone the landlord can recover from his tenant. Permitted increases do not become part of the rent and as such not the annual letting value.

13. In the result, we set aside the decision of the learned Judge and we direct the Corporation to determine the rateable value by deducting the amount of the education cess from the amount fixed by the Assessor and Collector.

14. We are surprised that no one so far has considered the injustice of allowing a deduction of only ten per cent for all outgoings. The costs of materials and labour charges have gone very high as much as even four and five times of what they were in days past. It is no wonder, therefore, that no landlord even if he wants to make repairs can afford to do so, as the returns are limited and the ten per cent of the rent is too meagre. The result is that so many properties become useless for habitation and ultimately the tenants suffer.

15. If one has regard to the litigations in the Small Causes Court, there would seem to be large number of defaults in the payment of small amount of rents. Under English Statute the deduction is much higher, varying between forty and twenty per cent of the letting value of buildings without land other than garden land and ten per cent for land only. (See the Rating and Valuation Act, 1925 and the Valuation (Metropolis) Act, 1869 as amended by the Rating and Valuation Act, 1928 and by s. 7 of the Rating and Valuation (Apportionment) Act, 1928). It is time that the provision as to deduction is rationalized to meet the present day costs for determination of letting value in all Municipal Acts.

16. The parties to bear their own costs.

17. Order set aside.