(Delivered by the Chief Justice)
This is a reference under R. 17 of Schedule IV to the Madras City Municipal Act. It relates to the valuation of the premises of the Madras Club for the assessment of property tax under S. 100 of the Apt. The Commissioner fixed the annual value at Rs. 68,240. This was apparently calculated on the basis that the proviso (a)(ii) to Sub-S. (2) of S. 100 of the Act applied to the case. The Club preferred an appeal to the Taxation Appeals Committee but with no success. The Committee held that the building was definitely of a class not ordinarily let and therefore the only method of assessment of such a building was that set out in the proviso. The assessment was confirmed. The Madras Club then filed an appeal under R. 15(a) of Schedule IV of the Act, to the Court of Small Causes, Madras. The learned Chief Judge of the Court of Small Causes accepted the contention of the Club that the premises in question fell within Sub-S. (2) of S. 100 and not under the proviso. He arrived at this conclusion on a construction of the material provisions alter an inspection of the premises. He found that the building certainly could be leased out both for residential and business purposes. Indeed, it does not appear to have been contended before him on behalf of the Corporation that the building could not be let out if so desired. In our opinion, the building does fall within the scope of Sub-S. (2) of S. 100 and does not fall within the scope of proviso (a)(ii) to Sub-S. (2). That proviso lays down a particular method of valuation for “any building of a class not ordinarily let the gross annual rent of which cannot in the opinion of the Commissioner be estimated.” We are clearly of opinion that the building in question cannot be held to be a building of a class not ordinarily let. It is not sufficient that a building has actually not been let to bring it within this category. So many buildings in which the owners reside are not ordinarily let nor even ordinarily intended to be let. But they certainly do not belong to the category of buildings of a class not ordinarily let. The buildings which are contemplated as belonging to that class are buildings like temples, memorial buildings etc. There is also the further fact that in this case there is no evidence of an expression of the opinion of the Commissioner that the gross annual rent of the building cannot be estimated. We hold agreeing with the Chief Judge that the building in question is not a building which falls within that proviso. It follows that the annual value of the premises should be fixed according to the method provided in S. 100(2). That sub-section runs as follows:
“(2) The annual value of lands and buildings shall be deemed to be the gross annual rent at which they may at the time of assessment reasonably be expected to let from month to month or from year to year, less a deduction, in the case of buildings, of ten per cent of that portion of such annual rent which is attributable to the buildings alone, apart from their sites and the adjacent lands occupied as an appurtenance thereto; and the said deduction shall be in lieu of all allowance for repairs or on any other account whatever.”
The learned Chief Judge of the Court of Small Causes thought that if an attempt were to be made to fix the rent for every portion of such an extensive property as the premises in question the result was bound to be speculative and unsatisfactory and proceeded to fix the rental value at 3 per cent of the capital value of the property. He arrived at the figure of Rs. 11,80,240-7-0 as the capital cost of the building and the land and calculated the annual value at Rs. 35,407-3-0. He found authority for such a procedure in a decision of this Court to which one of us was a party in R.C No. 21 of 1950. That reference was in respect of Premises No. 37, Mount Road, which belonged to a private limited company, Messrs. T.V Sundaram Aiyangar and Sons. At the time of the assessment, it was actually let by the company to a subsidiary company also a private limited company, called the Sundaram Motors Ltd., at a monthly rental of Rs. 1,000. The Rent Controller has fixed the fair rent payable by the subsidiary company to the main company at Rs. 1250 per year. It was contended on behalf of the assessee that as the building had been let out at a particular rent and the Rent Controller had also fixed the fair rent, the annual value of the building under S. 100(2) of the Act should be based only on the fair rent as fixed by the Rent Controller. But having regard to the peculiar circumstances of the case, it was held by this Court that the fair rent determined by the Rent Controller was not entitled to the same weight as in normal cases. The peculiar circumstances were that though the landlord and tenant were separate private limited companies, actually they consisted of the same shareholders and there was really no difference between the two. There was no contest or opposition before the Rent Controller in the proceedings to fix the fair rent and it was not an unnatural inference to draw that the fair rent was fixed deliberately at a low figure for purposes of a reduced assessment to property tax. It therefore became necessary to adopt some other method to ascertain the gross annual rent. This Court considered that 3 per cent on the cost of the land and buildings would be not an unreasonable basis for fixing the annual rental value. It is obvious that this decision cannot serve as a useful precedent for other cases except perhaps for cases in which similar circumstances exist. It certainly does not apply to the present case. This is a case of an extensive property of which it cannot be said that it is not possible to arrive at a gross annual rent at which it may be reasonably expected to let. It was admitted that portions of the property were actually being let to the members of the Club. We thought it best that the Commissioner of the Corporation should after hearing the Club, estimate the gross annual rent. The Counsel for the Corporation and the Club have now represented to us that it has been agreed to fix the annual value at Rs. 43,680. This represents the annual value arrived at after making deductions from the gross annual rent. We, therefore, hold that the annual value of the premises in question is Rs. 43,680.
The questions referred to us are answered as follows:
(1) The property in question should be assessed to property tax under S. 100 (2) of the Madras City Municipal Act and not under proviso (a) to Sub-S.(2).
(2) and (3) The value should not be fixed in this case on the basis of the percentage of its cost. The proper annual value of the premises is Rs. 43,680.
V.C.S