These three first appeals filed by the Municipal Corporation of the city of Ahmedabad functioning under the provisions of the Bombay Provincial Municipal Corporations Act, 1949 ('the Act' for short) raise a common question and are ordered to be heard together, they are referred to a Full Bench, for resolution of the common question. The common question involved in these first appeals is as to whether municipal tax paid directly by the tenant to the Corporation can be included in the annual letting value as defined by Section 2(1A) of the Act, for the purpose of computing gross ratable value of the rented premises for the purpose of levying property tax by the Corporation under the Act.
A similar situation obtains in the present cases. Property tax liability is primarily on the landlord. When by contract of tenancy, a tenant is made to bear the burden of property tax, the tenant bears the burden not as tax payer simpliciter but as occupier of the premises and as part of consideration for such occupation and, therefore, that burden borne by him becomes component of rent. What a landlord collects from the tenant directly or what a tenant pays directly to the Corporation by way of tax, would nevertheless remain in the domain of rent which the tenant pays or becomes out of pocket to that extent and that is the consideration for occupying the tenanted premises. The property tax is thereafter worked out on the basis of annual rent which is comprising of both components, viz. annual rent plus tax burden borne by the tenant and on that basis, primary liability of the landlord to pay property tax is worked out. As in the case of entertainment duty, the duty components borne by a spectator remains part of payment for entertainment. Similarly, tax components borne by the tenant also remains part and parcel of rent paid by him to the landlord for the purpose of occupying rented premises. As in the former case, duty can be levied on the total amount paid by the spectator for getting entry in the cinema hall, similarly in the present cases, tax components of the rent for continuing to occupy rent for rented premises could also legitimately be taken into consideration for computing the property tax leviable primarily from the landlord by the municipal authorities. In the former case, as there is no duty on duty, similarly in the present cases also, there would not be tax on tax but it is tax for the first time to be levied by the Corporation from the person primarily liable to pay tax by correctly computing the annual rent of such premises and, therefore, consequential annual letting value for the purpose of property tax. The last submission of Mr. Modi is, therefore, without any substance and is rejected.
32. These were the only contentions canvassed by the learned Advocates of respondents and Mr. Modi and as there is no substance in any of them, the result is that these contention fail and stated rejected.
33. The upshot of this discussion is that taxes which are paid directly by the tenant to the corporation or paid through the landlord to the corporation authorities can rightly be treated an components of annual rent and, therefore, can form part of annual letting value as defined by Section 2(1A) of the Act.
IN THE HIGH COURT OF GUJARAT
First Appeal Nos. 859, 976 and 1984 of 1991
Decided On: 19.06.1992
Appellants: Municipal Corporation of the City of Ahmedabad
Vs.
Respondent: Canara Bank
Hon'ble Judges/Coram:
S.B. Majmudar, Actg. C.J., Y.B. Bhatt and Akbar Nanjibhai Divecha, JJ.
