Before we answer the submission of Dr. Chitale it may be advantageous to refer to the relevant provisions of the Maharashtra Education (Cess) Act (Maharashtra Act XXVII of 1962). Section 4(a) of the said Act provides for the levy and collection of tax (cess) on lands and Buildings at the rates specified in Schedule A on the annual letting value of such lands or buildings. The primary responsibility to pay this tax is cast by Section 8 on the owner of the land or building irrespective of whether or not he is in actual occupation thereof. Section 13 next provides that on payment of the amount of the tax in respect of such land or building the owner shall be entitled to receive that amount from the person in actual occupation of such land or building during the period for which the tax was paid. Under Section 15 any person entitled to receive any sum under Section 13 is conferred for the recovery thereof the same rights and remedies as if such sum were rent payable to him by the person from whom he is entitled to receive the same. It thus seems clear that education cess is a tax and the owner is primarily responsible to pay the same to the local authority and on such payment a right is conferred on him to recover the same from the actual occupant in addition to the standard rent in respect of the demised premises. Sub-section (3) of Section 13 in terms states that the recovery of any amount of tax from an occupier under this provision shall not be deemed to be an increase for the purposes of Section 7 of the Act. It is, therefore, obvious that the landlord has a statutory right to recover the amount of education cess paid by him in respect of the demised premises from the tenant-occupant and such recovery shall not be an unlawful increase under of Section 7 of the Act but would squarely fall within the expression 'permitted increases' as defined by Section 5(7) of the Act. This statutory right to recover the amount of education cess in respect of the demised premises from the occupant-tenant can be quantified by agreement of parties so long as the amount quantified does not exceed the total amount actually paid by the owner by way of education cess. In the present case, it is nobody's contention that the amount of Rs. 120 per month payable by way of education cess and other taxes was in excess of the amount actually payable under the relevant statutes to the local authority. The Gujarat High Court has taken a consistent view that where the tenant is obliged under the terms of the tenancy or by virtue of the statute to pay the tax dues to the landlord, since such taxes which form part of the rent are payable annually the case ceases to be governed by Section 12(3)(a) and falls within the purview of Section 12(3)(b) of the Act. In Maheshwari Mills Ltd., under the terms of the tenancy the tenant was obliged to pay the municipal taxes and property taxes in respect of the demised premises. The Court took the view that such payment was by way of rent and since the municipal taxes and property taxes were payable on year to year basis, a part of the rent was admittedly not payable by the month and, therefore, Section 12(3)(a) was not attracted. In Prakash Surya the tenant had agreed to pay the municipal tax and education cess. The amount payable towards these taxes constituted rent and since the same was payable at the end of the year the Court held that the rent had ceased to be payable by the month and hence Section 12(3)(a) had no application. The same view was reiterated in Vanilla's case where education cess was payable by the tenant by virtue of Section 21 of the Gujarat Education Cess Act, 1962. Since it constituted a part of the rent, to be precise permitted increase under Section 5(7) of the Act, it was held that it took the case outside the scope of Section 12(3)(a) of the Act. In the case of Vishwambhar Hemandas also since the rent was inclusive of taxes the Court held that the case was governed by Section 12(3)(b) of the Rent Act. The Bombay High Court has expressed the same view in Muktabai's case. This Court in the Bombay Municipal Corporation's case held that while Section 7 of the Act prohibits increase above the standard rent it does not prohibit the recovery of increase to which a landlord is entitled under the other provisions of the said statute, namely, increase by way of 'permitted increases'. Education cess is specifically recoverable as rent by virtue of Section 13 and as Sub-section (3) thereof provides that it shall not be treated as increase in rent under Section 7 of the Act, there can be no doubt that such an increase falls with the definition of 'permitted increases' under Section 5(7) of the Act. It, therefore, seems to be well- settled that education cess is a part of 'rent' within the meaning of the Act and when the same is claimed in addition to the contractual or standard rent in respect of the demised premises it constitutes a permitted increase within the meaning of Section 5(7) of the Act and being payable on a year to year basis, the rent ceases to be payable by the month within the meaning of Section 12(3)(a) of the Act. But the question still survives whether the parties can be agreement quantify the said amount and make it payable on a month to month basis provided of course the said amount does not exceed the tax liability of the landlord; if it exceeds that liability it would infringe Section 7 of the Act and the excess would not be allowed as permitted increase within the meaning of Section 5(7) of the Act. A right to recover a certain tax amount from the tenant-occupant under the provisions of a statute can be waived by the owner or quantified by agreement at a figure not exceeding the total liability under the statute. If by agreement the amount is so quantified and is made payable by the month not withstanding the owner's liability to pay the same annually to the local authority, the question is whether in such circumstances the 'rent' can be said to be payable by the month within the meaning of Section 12(3)(a) of the Act? We see no reason why we should take the view that even where the parties mutually agree and quantify the tax amount payable by the tenant to the landlord on monthly basis, the rent should not be taken to be payable by the month within the meaning of Section 12(3)(a) of the Act. A statutory right to recover the tax amount by way of reimbursement can be waived or limited by the holder of such right or the recovery can be regulated in the manner mutually arranged or agreed upon by the concerned parties so long as it is not in violation of statute. If for convenience and to facilitate payment, the parties by mutual consent work out an arrangement for the enforcement of the owner's statutory right to recover the tax amount and for discharging the tenant- occupant's statutory obligation to reimburse the owner, we see no reason for refusing to uphold such a contract and if thereunder the parties have agreed to the tenant-occupant discharging his liability by a fixed monthly payment not exceeding the tax liability. The said monthly payment would constitute 'rent' payable by the month within the meaning of Section 12(3)(a) of the Act.
IN THE SUPREME COURT OF INDIA
Civil Appeal No. 5020 of 1989
Decided On: 15.01.1991
Raju Kakara Shetty Vs. Ramesh Prataprao Shirole and Anr.
Hon'ble Judges/Coram:
K. Jagannatha Shetty, A.M. Ahmadi and R.M. Sahai, JJ.
Citation: (1991) 1 SCC 570
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