PETITIONER:
BHAGWANT RAI AND OTHERS
Vs.
RESPONDENT:
STATE OF PUNJAB AND OTHERS
DATE OF JUDGMENT17/08/1995
BENCH:
RAMASWAMY, K.
HANSARIA B.L. (J)
CITATION:
1996 AIR 95 1995 SCC (5) 440
JT 1995 (6) 245 1995 SCALE (4)850
ACT
HEADNOTE
JUDGMENT
ORDER
Leave granted.
The appeal by special leave arises from the order of the High Court of Punjab and Haryana in Civil W.P. No. 19209/91 dismissing the writ petition in limine.
The admitted facts are that the appellant is having a house in Sangrur. For the assessment year 1987-88, the respondents have assessed the ratable value of the house at Rs.1,50,472.50 after giving standard deductions under s.3(1)(b) of the Punjab Municipal Act, 1911 (for short, ‘the Act’). The basis on which the property was assessed was the rent being received by the appellant from State Bank of India to whom they had let out at Rs. 12,687/- per month. The question is whether the actual rent received by the appellants from the tenant would be the measure for determining annual value. Section 3 (1)(b) of the unamended Act reads thus:
"3(1) "annual value" means-
xxxxxxxxxxxxxxxxxxx
(b) in the case of any house or
building, the gross annual rent at which
such house or building together with its
appurtenances and any furniture that may
be let for or enjoyment therewith, may
reasonably be expected to let from year
to year subject to the following
deductions:
xxxxxxxxxxxxxxxxxxx"
This provision was subject of interpretation by this Court in Diwan Daulat Rai Kapur vs. New Delhi Municipal Committee, 1980 (2) SCR 607, which was followed in Mrs. Shiela Kaushish v. C.I.T., 1981 (4) SCC 121. The question therein was whether the actual rent received from the tenant would from basis to determine the annual value. This court considered the controversy and held thus:
"The argument of the municipal
authorities was that since the standard
rent of the building was not fixed by
the Controller under Section 9 of the
Rent Act in any of the cases before the
Court and in each of the cases the
period of limitation prescribed by
Section 12 of the Rent Act for making an
application for fixation of the standard
rent had expired, the landlord in each
case was entitled to continue to receive
the contractual rent from the tenant
without any legal impediment and hence
the annual value of the building was not
limited to the standard rent
determinable in accordance with the
principles laid down in the Rent Act,
but was liable to be assessed by
reference to the contractual rent
recoverable by the landlord from the
tenant. The municipal authorities urged
that if it was not penal for the
landlord to receive the contractual rent
from the tenant, even if it be higher
than the standard rent determinable
under the privisions of the Rent Act, it
would not be incorrect to say that the
landlord could reasonably expect to let
the building at the contractual rent and
of the contractual rent therefore
provided a correct measure for
determination of the annual value of the
building. This argument was however
rejected by the Court and it was held
that even if the standard rent of a
building has not been fixed by the
Controller under Section 9 of the Rent
Act, the landlord cannot reasonably
expect to receive from a hypothec\tical
tenant anything more than the standard
rent determinable under the provisions
of the Rent Act and this would be so
equally whether the building has been
let out to a tenant who has lost his
right to apply for fixation of the
standard rent by reason of expiration of
the period of limitation prescribed by
Section 12 of the Rent Act or the
building is self-occupied by the owner.
Therefore, in either case, according to
the definition of "annual value" given
in both statutes, the standard rent
determinable under the provisions of the
Rent Act and not the actual rent
received by the landlord from the
rtenant would constitute the correct
measure of the annual value of the
building. The Court pointed out that in
each case the assessing authority would
have to arrie at its own figure of the
standard rent by applying the principles
laid down in the Rent Act for
determination of the standard rent and
determine the annual value of the
building on the basis of such figure of
the standard rent. The Court, on this
view, negatived the attempt of the
municipal authorities each of the cases
to determine the annual value of the
building on the basis of the actual
received by the landlord and observed
that the annual value of the building
must be held to be limited by the
measure of the standard rent
determinable on the principles laid down
in the Rent Act and it could not aexceed
such measure of the standard rent."
When similar contention was raised that the actual rent received will form the basis to determine annual value of the building, another bench of this Court in New Delhi Municipal Committee vs. M.N. Soi and Anr., 1976 (4) SCC 535 held thus as stated in the Headnote:
" It is not the actual rent received
by the landlord but the "hypothetical
rent which can reasonably be expected if
the building is to be let", which has to
be the legal yardstick of a "reasonable
expectation" in an "open market". The
municipal authorities cannot take
advantage of the defiance of the law by
the landlord. Rating cannot operate as a
mode of sharing the benefits of illegal
rackrenting indulged in by rapacious
landlords for whose activities the law
prescribes condign punishment. The
prudence of the landlord has to be
assumed and judged by normal standards
to determine his "reasonable
expectation".
Hence rating is to be governed by
the fixation of rent by rent control
authorities and not by the test of
actual income derived by the landlord.
The concept of reasonableness of
expectation of rent must take the penal
law of the State into account. It is not
the expectation of a landlord who taken
the risk of prosecution and punishment
which the violation of the law involves,
but the expectation of the landlord who
is prudent enough to abide by the law
that serves as the standard of
reasonableness for purpose of rating."
This question was further examined by a bench of three Judges in Balbir Singh vs. M/s M.C.D. AIR 1985 SC 339. This Court said that "The ratable value of a building, whether tenanted or self occupied, is limited by the measure of standard rent arrived at by the assessing authority by applying the principles laid down in the Rent Act and cannot exceed the figure of the standard rent so arrived at by the assessing authority. The standard rent determinable on the principles set out in the Rent Act is the upper limit of the rent which the landlord may expect to received from a hypothetical tenant, but it may in a given case be less than the standard rent having regard to various attendant circumstances and considerations."
Thus, it is settled law that the actual rent received from a tenant is not the measure for determination of the annual ratable value, but the reasonable standard rent expected to be received under the relevant Rent Act. The view taken by the authorities is, therefore, clearly illegal.
It is contended by the respondent that in view of the admission by the appellants in their letter that they are prepared to pay the tax on the basis of the actual rent received from the Bank, they are estopped to go back from the admission and the respondents are right to adopt that as a measure of assessing ratable value. We fail to appreciate the contention as there is no estoppel against the statute. When the statute prescribes particular mode to determine the annual rental value, it has to be done in that manner. Admission wrongly made by the landlord or the owner would not be a ground to deny the statutory benefit.
The appeal is accordingly allowed. The order of the assessing authority and the appellate authority are set aside and they are directed to determine the annual value, to determine the amount of tax, as indicated hereinabove. No costs.