R.C Lahoti, J.— The petitioner is aggrieved by an order of assessment dated 28.7.95 assessing the property No. 17- 18, Nehru Place to property tax for the period commencing 1.4.88
2. The relevant part of the order assessing the rateable value of the property is extracted and reproduced as under :—
“Rateable Value is fixed as under :—
FF has been let out to M/s. Modi Rubber Ltd. at the monthly rent of Rs.71,139/- w.e.f 12.12.89 Besides Rs.28,445.60 monthly charge for air conditioning equipment hire Rs. 14,227.80 on a/c of maintenance of open area. These are considered to be the rent.
Apart from above the tenant has given a sum of Rs.6,82,934.40, as security deposit. Interest on security is considered as rent thus the total rent including interest on security comes to Rs. 1,22,359/-.
SF is let out to M/s. Bombay Types International Ltd. on the same conditions as aforesaid. The rent including interest on security of Rs.8,94,614/- comes to Rs. 1,60,285/-.
GF was let out to M/s. Modi Olivetti Ltd. on the same terms and conditions including interest on securities of Rs.6,68,534/-. The rent thus, comes to Rs. 1,19,787/-.
In this way total rent works out to Rs.4,02,430/- & RV after 10% for statutory deduction comes to Rs.43,46,250/-.
The proportionate RV of self occupied portion comes to Rs. 1,60,200/-, in this way total RV comes to Rs.45,06,450/- which is fixed wef 11.12.89”
3. Though challenge was also laid to the vires of the provisions contained in sub-section (3) of Section 116 of the Delhi Municipal Corporation Act, 1957, however, Shri Arun Jaitely, the learned senior advocate appearing for the petitioner has submitted that in the present petition, the petitioner confines his challenge to the following two issues and gives up the challenge laid to the vires of the Section 116 (3) abovesaid. The contentions are :—
(i) that the value of air-conditioning equipment could not have been taken into consideration for assessing rateable value of the property;
(ii) that interest on security could not have been taken into consideration for assessing the rent of the property.
4. In support of the first contention, reliance is placed on the law laid down by the Supreme Court in Hindustan Livers Ltd. v. Municipal Corporation of Greater Bombay & Ors., 1995 (3) SCC 716 wherein pari materia provision of Bombay Municipal Act, 1888 came up for consideration of their Lordships. The cost of air-conditioning machinery was included in the cost of construction for the purpose of assessing the rateable value of the property. Section 154 (2) of the Act provided that the value of any machinery contained in or situated upon any building is not to be included in the rateable value. Their Lordships held :—
“When the legislature sought to exclude the value of machinery of the type mentioned in sub-section (2) from forming a part of rateable value, some meaning has to be ascribed to the provision, otherwise the intention of the legislature would get frustrated. We, therefore, state that the fact that a machinery gets embedded to a building or becomes an integral part of it has no relevance while deciding the question of applicability of the exemption provision.”(para 9)
4.1 Sub-section (3) of Section 116 of the DMC Act reads as under :—
“(3) All plant and machinery contained or situate in or upon any land or building and belonging to any of the classes specified from time to time by public notice by the Commissioner with the approval of the Standing Committee, shall be deemed to form part of such land or building for the purpose of determining the rateable value thereof under sub-section (I) but save as aforesaid no account shall be taken of the value of any plant or machinery contained or situated in or upon any such land or building.” (underlining by us)
4.2 The expression - “no account shall be taken of the value of any plant or machinery contained in or situated in or upon any such land or building,” is pari materia with the expression as employed in the Bombay Act and forming subject matter of interpretation before the Supreme Court in the case of Hindustan Livers Ltd. (supra) and so the law laid down therein would govern the case at hand too.
5. As to the second contention, the learned counsel for the petitioner has placed reliance on the Division Bench decision of this Court in Municipal Corporation Of Delhi… v. S.D.S Bali…, 45 (1991) DLT 215 (para 7). Hon'ble Justice B.N Kirpal (as his Lordship then was) has held speaking for the Division Bench as under :—
“….in determining the rateable value we see no justification as to why it should be presumed that when the security deposit is furnished there will be any earning to the landlord by way of interest or otherwise. Even if it be assumed that the landlord from the security deposit so received, earns some income, by interest or otherwise, that interest or income cannot ipso facto be regarded as an addition to the rent received by the landlord. It is contended by learned counsel for the petitioner that there may be cases where the rent which is received is much below the market rate and disproportionately large amount of security deposit is received, so as to enable the landlord to earn interest thereon. The contention is that in such a case the real nature of transaction should be seen and it would be found that the income from the security deposit was meant to be a part of the rent. We need not go into the merits of this example because in the present case there is nothing to show that the rent which was being charged by the respondents was not market rate. There is no evidence on the record to indicate that security deposit was furnished solely with the view that the rent is depressed and that has compensated by the landlord by earning income from the security deposit so received. It is to be borne in mind that the security deposit which was received by the landlord is refundable. The same has to be returned on the termination of the tenancy and it is merely a security against the non- payment of rent. The Delhi Municipal Corporation income accruing on the security deposit so received and further to permit such frictional or actual income to be regarded as a part of the rent receipt. Normally any income from out of the security deposit cannot be regarded as being a part of the rent.”
5.1 Incidentally, we may refer to yet another Division Bench decision of this Court in Sir Sobha Singh & Sons Pvt. Ltd. v. NDMC, 1996 IV AD (Del) 56. The D.B has observed (vide para 24) :—
“If any property forms subject matter of contractual rent then the rate of rent agreed upon between the parties and which was being actually paid by the tenant and received by the landlord can safely be accepted as determining factor of rateable value unless there be material available to hold the rate of rent having been influenced or depressed by reason of extraneous consideration such as fraud, collusion, relationship, expectation of some other benefit etc.”
The court has noticed some of the instances which might have contributed to depression of rent. To wit—
(1) The landlord has collected huge amount as “Pagri” and is charging nominal rent.
(3) The landlord collects huge amounts as interest-free security and lets out the premises at nominal rent with permission to sub-let. The tenant, after taking over possession, lets out the premises at exorbitant rent.
(4) The premises are let out to a sister concern at low rent with permission to sub-let, and the sister concern lets out the premises for huge amounts.
In the operative part of the order one of the directions made by the Court while directing Assessing Authority to make the assessment afresh is :—
Apart from such other information which the assessing authority may be inclined to collect and such enquiry as the Assessing Authority may deem fit to hold, in particular the assessing authority shall enquire :—
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(ii) whether there is any reason to hold the actual rate of rent applicable between the landlord and the tenant either inflated or depressed by reason of extraneous considerations which would justify the assessing authority discarding such rate of rent for the purpose of finding out the rate of rent at which the premises may be reasonably expected to let.
5.2 In the case at hand, there is no finding recorded by the Assessing Authority that the rate of rent appointed between the parties was an artificial rate of rent or was abnormally below the market rate of rent so as to persuade a finding being recorded that the tenant being made to make a security deposit with the landlord was a device adopted to compensate the landlord against loss of rent by realising interest on the amount of security deposit. In the absence of any such finding, the estimated amount of interest on security could not have been taken as part of rent for the purpose of finding out rateable value of the property.
6. Ms. Madhu Tewatia, the learned counsel for the respondent did not dispute the applicability and relevancy of the law laid down by the Supreme Court in Hindustan Livers Ltd. case (supra) to the provisions of Section 116 (3) of Delhi Act, but she submitted that the Delhi Municipal Corporation has framed bye laws called the Municipal Corporation (Determination of Rateable Value Bye-Laws), 1994 (hereafter-R.V Bye Laws, for short). The R.V Bye-Laws have been notified on 24th October, 1994 and have come into force w.e.f that day. The constitutionality of the R.V Bye-Laws has been upheld by a Division Bench of this Court in Delhi Urban House Owners Welfare Association v. UOI, 1995 (3) AD (Delhi) 1109.
6.1 Ms. Tewatia, placed reliance on following bye-laws (bye-law 2(f) (ii) and (iv) which read as under :—
2(f) ‘rent’ includes :—
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(ii) charges for fixtures and fittings, air conditioning, lifts, elevators, etc. and other similar payments.
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(iv) Where the occupier has paid any amount as security or deposit (not being advance payment towards rent for a period upto one year being adjusted on month to month basis or a security deposit upto a period of six months), an amount calculated at such rate as is being fixed by the bank (for the fixed deposits) on such security or deposit (in excess of one year adjustable advance rent and six months security deposit) for the duration for which the security or deposit has been paid by the occupier;
6.2 Ms. Tewatia submitted that though the R.V Bye-Laws have been notified on 24.10.94, but they are declaratory in nature and having been notified they must be deemed to be relevant and applicable eversince the coming into force of the Delhi Municipal Act for the purpose of interpreting the provisions of the Act.
7. Ms. Tewatia also cited Karnani Properties Limited v. Miss Augustine & Others, AIR 1957 SC 309, wherein the term ‘rent’ has been defined as under :—
“The term ‘rent’ has not been defined in the Act. Hence it must be taken to have been used in its ordinary dictionary meaning. The term “rent” is comprehensive enough to include all payments agreed by the tenant to be paid to his landlord for the use and occupation not only of the building and its appurtenances but also of furnishings, electric installations and other amenities agreed between the parties to be provided by and at the cost of the landlord. Therefore all that is included in the term “rent” is within the purview of the Act and the Rent Controller and other authorities have the power to control the same.”
7.1 She further submitted that in as much as the term ‘rent’ has not been defined in the DMC Act, the common law or dictionary meaning shall prevail and any benefit derived by the landlord by letting out the property to the tenant shall be liable to be included within the meaning of the term “rent”.
8. In our opinion, the law laid down in Hindustan Livers Ltd. case (supra) clinches the issue in so far as the first contention is concerned. It has to be held that the value of the air-conditioning equipment is not liable to be taken into consideration for assessing the rateable value of the land and building nor the hire charges for the equipment are liable to be treated as rent for land and building.
9. On the second issue also the contentions advanced by Ms. Tewatia, the learned counsel for the Delhi Municipal Corporation in defence of the impugned order of assessment cannot be sustained for several reasons.
9.1 Firstly, the order of assessment nowhere refers to the R.V Bye-Laws. It cannot be said that the assessing authority was relying on the R.V Bye-Laws for the purpose of determining the rent and hence the rateable value of the property.
9.2 Secondly, we are of the opinion that the R.V Bye- Laws cannot have a retrospective operation so as to be applicable to a period anterior to 24th October, 1994 the date on which they were notified.
10. Ms. Tewatia, the learned counsel for the MCD submitted that the R.V Bye-Laws are also capable of being treated as public notice by Commissioner within the meaning of section 116(3) of dmc act and hence relevant for determining the rateable value. To this Mr. Jaitely, the learned senior counsel for the petitioner has replied by submitting that before the respondent may rely on Section 116(3) then the respondent shall have to further satisfy the Court that the bye-laws were preceded by a public notice issued by the Commissioner and also by approval of the Standing Committee - the twin requirement statutorily contemplated, which do not appear to have been satisfied before the enactment of the bye-laws.
11. In view of the above discussion it is clear that the respondent can not be allowed to support the impugned order of assessment by reference to the R.V Bye-Laws. It would meet the ends of justice if assessment for the period subsequent to 24.10.94 is left to be made afresh by reference to the R.V Bye-Laws and the petitioner is also left free to challenge the order of assessment for that period on such assessment afresh being made.
12. For the foregoing reasons, the petition is allowed. The impugned order of assessment Annexure P- 10 is set aside. The Assessing Authority is directed to draw up the assessment afresh in accordance with the following directions :
(a) separate assessment shall be made for the period anterior to 24.10.94 and for the period subsequent to 24.10.94;
(b) for the period anterior to the date 24.10.94, the value of air-conditioning equipment shall be excluded from consideration for assessing the R.V So far as the interest on security is concerned, decision to include or not to include the same in the rent shall be taken after collecting material and recording finding consistently with the principles laid down and in the cases of MCD v. S.D.S Bali & Anr. (supra) and Sir Sobhasingh & Sons (supra).
(c) the petitioner shall be bound to make available all such information and documents as may be called for by the assessing authority and if the petitioner fails in making the information and/or the documents available to the assessing authority, the assessing authority shall be at liberty to draw an adverse inference against the petitioner.
(d) the petitioner is directed to appear before the assessing authority on 13.1.97 at 11.00 AM.
13. No order as to the costs.