SC ruling on property tax assessment

By T. Padmanabha Rao

NEW DELHI, MAY 6. ``The intent and purpose of the exercise to determine the `annual rental value' (under the Municipal Corporation Act and Municipalities' Act) is to avoid arbitrariness in the process of assessment of property tax and also to ensure that the landlord does not escape payment of amount due as tax by taking resource to fraudulent and manipulated under-writings of the rental value,'' a three-member bench of the Supreme Court has underlined in the `property tax assessment case''.

``There is no provision in the Hyderabad Municipal Corporation Act, 1955 that the `fair rent' determined under the Rent Control Act in respect of a property is binding on the Commissioner,'' and ``the legislature has wisely not made such a provision because determination of `annual rental value' under the Act depends on several criteria'', the bench said.

Delivering the judgment, Mr. Justice D.P. Mahopatra ruled that - the Andhra Pradesh (A.P.) High Court (HC) therefore ``did not commit any error'' in holding that the determination of `fair rent' under the Rent Control statute would not be binding on the Commissioner for the purpose of assessment of property tax under the Act.

Analysing the `case law' on the subject, the bench held that - ``the order of the State Government making the decision of the (advisory) `committee' binding on the Commissioner is not sustainable and the view taken by the HC in this regard in unassailable.

The bench set aside two (of the nine) conclusions of HC which said that: ``the annual rental value to be fixed by the Commissioner in the corporation areas shall be limited to the fair rent either determined or determinable under the A.P. Building (Lease Rent and Eviction) Control Act.'' and ``the annual rental value in respect of all buildings in Municipal Areas, where rent has been determined under the rent control legislation, would be the gross annual rental on the basis of such rent determined unless, there is any fraud or collusion and that in respect of other buildings in the Municipality areas, the Commissioner has to determine the factors under Section 87(2).''

The bench which included Mr. Justice S.P. Bharucha and Mr. Justice S.N. Phukan was partly allowing a large group of appeals from the Commissioner and certain others against HC's judgment.

``Keeping in view the incidence of the tax, the persons who are to bear the burden of payment of the tax and the effect it will have on the funds of the municipalities for the purpose of development of the area, the legislature vested the power with the Commissioner of the municipal corporation to complete the exercise,'' the bench noted.

``The statute makes provision for setting up committees like the district-level committee; but such committees play an `advisory role' for rendering assistance to the Commissioner in the matter,'' the bench pointed out. ``The Act mandates that the Commissioner shall determine the tax to be paid by the person concerned in the manner prescribed under the statute and the rules,'' the bench noted.

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