K. Balasubramaniam Vs Commisioner Greater Chennai Corporation (Madras High Court)
i) The amendments by way of impugned Government Order in G.O.Ms.No.53 dated 30.03.2022, Gazette Notification dated 11.04.2022 and Council Resolution (CR) Nos.63 of 2022 dated 30.05.2022 (Chennai) and 94 dated 26.05.2022 (Coimbatore) stand confirmed and challenges to the same are dismissed.
ii) Property tax General Revision Notices for the period 2022-23 (II), i.e., second half onwards are set aside. The petitioners have been enjoying the benefit of interim protection till date. More importantly, seeing as clarity in regard to the entire process has been obtained only pending Writ Petitions, this Court directs that qua the Writ Petitioners, the amendments will be operative on and from the first half of 2023-24, i.e., 01.04.2023 onwards. The challenge to the property tax demands as aforesaid is accepted. However, pending Writ Petitions, if the petitioners have settled the amounts to be paid, they shall continue to do so in line with the amendments that have now been upheld.
iii) The Corporations will ensure that the websites are kept robust and grievance mechanisms are put in place to enable all property tax assesses to seek clarifications in regard to any aspect of property tax assessments.
FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT
PRAYER: Writ Petition filed under Article 226 of the Constitution of India praying to issue a Writ of Certiorarified Mandamus calling for the impugned G.O.Ms.No.53 Municipal Administration and Water Supply (M.A.IV) Department dated 30.03.2022 issued by the first respondent and impugned Notice No.1, Property Tax General Revision 2022-23, Property Tax General Revision Notice 2022-23, vide Notice No.GR-2022SPL/162/422891, dated 08.07.2022 issued by the 2nd respondent, received on 17.10.2022 and quash quash the same as ultra vires and unconstitutional beyond the legislative competence.
COMMON ORDER
A welfare State has necessarily to balance augmenting of its revenues so as to provide for sources of funds for welfare measures and other expenses of the State on the one hand, and mitigating the hardship of taxes as far as possible to its citizens, on the other.
2. The official website of the Income Tax Department refers to the perfect balance achieved by the emperor Manu in this regard stating that ‘As the calf and the bee take their food little by little, even so must the king draw from his realm moderate, annual taxes’. One would assume that this would constitute the method of exaction in all revenue matters, whether Central or State. That said, it is also an admitted position that the taxes imposed on property assume a lions’ share of the resources of the State and thus, the power of the State, nay, the necessity to do so, albeit in a legal, fair and transparent matter, is beyond question.
3. The challenge in the present matters is of three kinds:
a) Challenge to G.O.Ms.No.53 Municipal Administration and Water Supply (MA.IV) Department, dated 30.03.2022 (in short ‘G.O.’/‘impugned G.O.’) and consequential Council Resolution (in short ‘CR’) No.63 of 2022 dated 30.05.2022 issued by the Greater Chennai Corporation, revising the property tax in Chennai and Coimbatore. The resolution passed by the Coimbatore Corporation in CR.No.94 dated 26.05.2022 has not been challenged in any of the Writ Petitions. Both the resolutions are collectively referred to as ‘CR’ for ease of reference.
Though the sweep of the G.O. encompasses the entirety of the State of Tamil Nadu, only the Commissioner and other authorities of the Greater Chennai and Coimbatore Municipal Corporations are arrayed as respondents. In some of the Writ Petitions, the State has also been arrayed as a respondent.
b) Property tax General Revision Notices for period 2022-23, i.e., from 01.04.2022 onwards, which is the effective date for implementation of the new tax rates.
c) The new tax rates are structured on a slab basis and this has come to be questioned in a few Writ Petitions.
4. By way of this common order, I dispose the Writ Petitions filed challenging enhancement to property tax in terms of the Chennai City Municipal Corporation Act,1919 (in short ‘1919 Act’) and the Coimbatore City Municipal Corporation Act, 1981 (in short ‘1981 Act’).
5. I first advert to Writ Petitions in set (a) relating to the challenge to impugned G.O. and CR. The move to enhance rates of property tax stood triggered by a need of augmented funds as well as the mandate cast by the 15th Central Finance Commission for availing grants and entry level conditions for receiving funds under various schemes of the Government of India (GOI). The State Government thus constituted a Committee to look into the present rates of property tax, and determine whether they are commensurate with the need of the State and in line with measures taken elsewhere in the Country for levy and collection of property tax.
6. The Committee had made certain recommendations proposing augmenting of rates of the taxes as well as the Basic Street Rates (BSR). There was also a proposal for adoption of a slab system. The Committee’s report has been accepted by the State in passing the impugned G.O. The G.O. was gazette on 11.04.2022 and a Notification issued for implementation of general revision of property tax within the limits of Greater Chennai and Coimbatore Corporations, with effect from the current year, i.e., with effect from the first half of 2022-23.
7. The Notification had been published on 12.04.2022 (Chennai) and 13.04.2022 (Coimbatore) in both English and vernacular newspapers as per Section 98A of the 1919 Act and there was a call for objections, to be addressed to the Principal Secretary/Commissioner, of the Corporations, within 30 days from date of publication of the Notification. The Notification stated that upon expiry of the 30 day period, objections shall be considered and a decision taken by the Council. This was followed by CR No.63 dated 30.05.2022 and CR No.94 dated 26.05.2022 issued by the two Corporations.
8. The Resolution was passed after having taken note of 30 objections that were received from taxpayer base of 13 lakh (approx.) assessee’s in Chennai. The number of taxpayers in Coimbatore have not been provided. In almost all the cases, the objections have been answered simply relying upon the impugned G.O. and the Notification that preceded the CR. In fine, the CRs provided for revision of the rates as per the basis set out by the Committee, with effect from the first half of 2022-23.
9. Straight away, I may state that reference to the first half of 2022-23 is not merely erroneous but absurd, seeing as the remittance of property tax for every half year is the 15th of the first month comprised in that half-year, i.e., by 15th of April and by 15th of October, of the year concerned. Seeing as the CRs approving the enhancement of rates were passed only on 30.05.2022 and 26.05.2022, the amendment for the first half year for which the last date for payment had already expired by then, has necessarily to be set aside.
10. Furthermore, increase in tax rates cannot be retrospective as settled by Courts over the years, seeing as any enhancement in tax rates and tax burden would affect adversely, the substantive civil rights of the parties. Thus, even at the threshold, this Court makes it clear that the reference to the first half of 2022-23 in the impugned G.O, Gazette and CRs, is erroneous and illegal.
11. The petitioners challenging the G.O., and CRs advance the following submissions:
(i) The impugned revision has been triggered solely by the report of the Central Finance Commission constituted in terms of Article 280 of the Constitution of India. The petitioners argue that it is not for the Central Finance Commission to lay a mandate of this nature upon the State as such mandate is contrary to the Constitutional scheme and the federal structure thereunder. Seeing as the mandate emanates from the diktat of the Centre, the impugned G.O. and CRs are liable to be quashed on this ground alone.
(ii) Article 162 provides for the intervention of the State by means of Executive orders, but only in respect of subjects that are devoid of an enactment which controls or regulates that particular subject. In this particular instance, the levy of property tax by the Corporations is governed by specific enactments. Thus the directions under the impugned G.O. constitute unlawful intervention in an otherwise occupied field.
(iii) The intervention by the State is fatal to the impugned revision, seeing as the respective statutes do not, in any manner, envision a role for the State to play in matters relating to the determination of property tax.
(iv) The 1919 and 1981 enactments provide for the regulation of all matters relating to the levy, assessment, collection and recovery of property tax as well as a framework of statutory remedies for those aggrieved by the orders/assessments. The Councils of the respective Corporations are the ultimate authorities in whom vests all power necessary for the levy of property tax and all matters connected and incidental thereto. The impugned enhancements however, have not emanated from the Council, but at the instance of the State, vide the impugned G.O. This constitutes a usurping of the power of the Council by the State and is an excess of authority in terms of Article 162 of the Constitution of India.
(v) The provisions of the 1919 and 1981 Acts that touch upon the subject of taxation are Sections 98, 98A, 99 and 100, in the former, and Sections 117, 118, 121 and 122 in the latter. These provisions set out a specific methodology for determination of property tax and the impugned G.O. and CRs, do not take note of this methodology and procedure, thus vitiating the same in full.
(vi) The statutory duty and responsibility for determination of the tax as well as revision of rates, is cast upon, and vests specifically in, the revenue authorities, i.e., the authorities of the Greater Chennai and Coimbatore Corporations. However, in the present case, the impugned enhancement stands triggered solely by reason of the mandate/recommendation of the Central Finance Commission.
(vii) Statutorily, the only authority that is entitled to determine all issues relating to property tax, would be the Commissioners of the Corporation and their team of officials and the relevant provisions of the 1919 and 1981 Acts set out a clear and categoric methodology for determination of property tax.
(viii) The procedure set out envisages adequate opportunity to be afforded to the taxpayers by way of a public notice soliciting objections and disposal of the objections in a proper manner. This procedure has not been followed in the present matters and this constitutes a violation of the principles of natural justice that is fatal to the impugned proceedings.
(ix) G.O.Ms.No.53 of 2022 is dated even prior to the Council Resolution, and Sections 99 and 100 of the 1919 Act that correspond to Sections 121 and 122 of the 1981 Act, provide for a very specific procedure in amending the law/rate of tax to be levied.
(x) Sections 99(2) and 121(2) vest exclusive power upon the Councils to levy tax at such percentages of the actual value of buildings and lands as may be fixed by the Councils.
(xi) In the present case, the Councils have merely adopted the basis of enhancement, by way of a diktat from the State, which itself emanates originally from the Central Finance Commission, and this runs counter to the express responsibility statutorily cast upon them.
(xii) Sections 99(3) and 121(3) state that the annual value of any building or land shall be determined by the Commissioners as a basis for the purpose of assessing property tax and Sections 100(2) and 122(3) clarify that the annual value of lands and buildings shall be deemed to be the gross annual rent that they may be reasonably expected to fetch from month to month or year to year, less certain statutory deductions.
(xiii) The Annual Rental Value (ARV) is thus the basis of levy of property tax and evidently, such ARV shall be based only upon the computational methodology set out under the Tamil Nadu Buildings (Lease and Rent Control) Act 1960 (in short ‘Rent Control Act’)
(xiv) The impugned G.O. and CRs refer, in vague terms, to Basic Street Rate (in short ‘BSR’), which is a parameter entirely unknown to the tax paying public of Tamil Nadu.
(xv) BSR, as a concept, was never the methodology for levy of tax, as in the past the assessment of property tax was consistently done on a case to case basis depending upon the returns filed by individual property owners.
(xvi) Apart from being contrary to the methodology set out under the Statute, adoption of a general value, such as a uniform and standardised street rate for the purposes of assessment, would be incorrect insofar as all houses in the street would be grouped as one for the purposes of the rate and individual differences would be entirely lost sight of.
(xvii) Therefore, as the basis upon which the street rates have been arrived at is a mystery, such an unknown and alien methodology cannot be simply thrust upon the citizens without any statutory backing or scientific basis.
(xviii)There was, in 1997 a move to amend the provisions of Sections 99 and 100 of the Act to provide for a standardised methodology for the levy of tax on buildings and lands within the city. Those amendments did not see the light of day and have been abandoned. It is only in those amendments that the concept of a Basic rate had been introduced/contemplated. Having proposed an amendment to make uniform/standard rates as the basis of taxation and not having pursued the same, rather and in fact, actively dropping the proposal, the respondents cannot now, by way of G,.O., Notification and CRs apply an alien basis of taxation, hitherto unknown to the public.
(xix) The impugned CRs provide for the increase in slabs as follows (i) upto 600 sq ft (ii) 601 to 1200 sq ft (iii) 1201 to 1800 sq ft (iv) above 1801 sq ft. The rate applicable is incremental, qua each slab. Some of the petitioners have challenged the introduction of the slab system arguing that there is no basis for the increased factorial at every slab. They also argue that it is discriminatory, particularly to owners of larger properties.
12. The petitioners rely upon the following decisions in support of their submissions:
(i) The Commissioner of Income-tax, Mysore, Travancore-Cochin and Coorg, Bangalore v. The Indo Mercantile Bank Ltd. (AIR 1959 SC 713)
(ii) Guntur Municipal Council v. Guntur Town Rate Payers’ Association, etc. (AIR 1971 SC 353)
(iii) B.R.Dalavai v. Government of Tamil Nadu (91 LW 110) (iv)R.Govindarajan v. The Madurai Corporation (AIR 1984 MADRAS 90)
(v) Municipal Corporation of Delhi and Another v. Mehrasons Jewellers Private Limited [(2015) 9 SCC 719)
(vi) New Delhi Municipal Council and Others v. Association of Concerned Citizens of New Delhi and Others [(2019) 15 SCC 303)
(vii) S.Arunachalam and others v. State of Tamil Nadu Rep. by its Commissioner and Secretary, Local Administration and Water Supply Department, Madras-9 and others [1997 (1) CTC 129)
(viii) Union of India and Others v. Mohit Minerals Pvt. Ltd. (Civil Appeal Nos.1390 of 2022 and batch dated 19.05.2022)
(ix) Lokmanya Mills Barsi Ltd. v. Barsi Borough Municipality, Barsi[(1962) 1 SCR 306]
(x) Patel Gordhandas Hargovindas and Others v. Municipal Commissioner, Ahmedabad and Another [(1964) 2 SCR 608]
(xi) The Mehta Multispeciality Hospitals India Pvt. Ltd. v. The Commissioner, Corporation of Chennai, Rippon Building, Chennai-600 003 and others (W.P.Nos.35304 of 2019 and batch dated 03.03.2021)
(xii) Commissioner v. Griha Yajamanula Samkhya and Others [(2001) 5 SCC 651)
(xiii) Raza Buland Sugar Co. Ltd. v. Municipal Board, Rampur (Civil Appeal No.23 of 1964, dated 30.10.1964)
(xiv) Bangalore Woollen, Cotton and Silk Mills Co. Ltd., Bangalore v. Corporation of the City of Bangalore (Civil Appeals Nos.448 and 449 of 1957, dated 05.04.1961)
(xv) The Berar Swadeshi Vanaspathi and Ors. v. The Municipal Committee, Shegaon and Ors. (Civil Appeal No.234 of 1959, dated 28.03.1961)
(xvi) Municipal Board, Sitapur v. Prayag Narain Saigal and Ors. (Civil Appeal Nos.847-848 of 1966, dated 16.01.1969)
(xvii) City Municipal Council, Mangalore and Ors. v. Frederick Pais and Ors. (Civil Appeal Nos.1302 to 1906 of 1968, dated 13.10.1969)
(xviii) Kunnathat Thathunni Moopil Nair v. The State of Kerala and Ors. (Petitions Nos.13 to 24, 42 and 46 to 54 of 1958, dated 09.12.1960)
(xix) Bharat Kala Bhandar Ltd. v. Municipal Committee,Dhamangaon (Civil Appeals Nos.600 and 679 of 1964, dated 26.03.1965)
(xx) New Manek Chowk Spinning and Weaving Mills Co. Ltd. and Ors. V. Municipal Corporation of The City of Ahmedabad and Ors. (Writ Petitions Nos.133, 156 & 157, 159-171, 178, 184, 206-210 and 234 of 1966, dated 21.02.1967)
(xxi) The State of Kerala v. Haji K.HajiK.Kutty Naha and Ors. (Civil Appeals Nos.1052 of 1968 and batch, dated 13.08.1968)
(xxii) Municipal Board, Hapur and Ors. v. Jassa Singh and Ors. (Civil Appeal No.472 of 1980, dated 04.09.1996)
(xxiii) Nagar Panchayat, Kurwai and Ors. V. Mahesh Kumar Singhal and Ors. (Civil Appeal No.7821 of 2013, dated 06.09.2013)
(xxiv) K.Lakshminarayanan and Ors. v. Union of India (UOI) and Ors. (Civil Appeal No.11887 of 2018, dated 06.12.2018)
(xxv) Jacob Puliyel v. Union of India (UOI) and Ors. (Writ Petition (Civil) No.607 of 2021, dated 02.05.2022)
(xxvi) B.N.Nagarajan and others V. State of Mysore and others (AIR 1966 SC 1942)
(xxvii) Dr.P.Rajaji v. The State of Tamil Nadu and others (2008-4-L.W.564)
(xxviii) Dindigul Anna District Tax Payers Sangam v. Government of Tamil Nadu and another (1994-2-L.W.715)
(xxx) S.Jayanthi and others v. The Pallavaram Municipality and others (W.P.No.11383 of 2016 dated 01.09.2016)
13. The State commences its submissions with a power point presentation (in short ‘PPP’) to bring home the importance of the levy of property tax to its treasury, and the objects and reasons behind such levy. The presentation essentially emphasised the necessity for the impugned enhancement based on economic compulsions, inflation over the years and rising needs of the population that needs to be met by the State.
14. Some academic papers on the relevance and importance of taxes on property to the treasury of a State, as well as the manner in which the taxes are determined, have been circulated. The first one cited is a Guide to Municipal Finance, published by the United Nations.15.
15. The second is a Handbook for Local Governments entitled ‘Municipal Finances’, edited by Catherine Farvacque and Mihaly Kopanyi for the World Bank (Publication number 88878) and the last is a booklet on Municipal Finance authored by A.E.Buck in collaboration with Other Staff Members of The National Institute of Public Administration and The New York Bureau of Municipal Research, published by The Macmillan Company in 1926.
16. The literature circulated elaborates upon the need for assessing properties to tax and the methodologies adopted generally in assessing properties. While providing a historical background to the levy of the tax itself is well taken, I bear in mind that the State enactment is itself of 1919 vintage, going even further back than the dates of the publications cited.
17. Some judgements cited by Mr. T.V.Lakshmanan that I elaborate upon in the later part of this order also provide illuminating historical context to the levy of property tax over the Ages. The state enactment has complete clarity on the mode and methodology to be applied in the assessments of properties, which is the Annual Rental Value, and intervention is required in respect of the manner of implementation of the provisions.
18. The respondents submit that there are 200 wards in the Greater Chennai Corporation, including 93 areas annexed to the Greater Chennai Corporation in 2011 as well as those comprising the erstwhile Corporation of Chennai. There has been no revision in the rates of property tax since 1998 in respect of 107 wards of the Greater Chennai Corporation, and since 2008 in regard to 93 wards added later.
19. General revision of property tax was attempted in 01.04.2018 under G.O.No.73, Municipal Administration and water Supply Department, dated 19.07.2018 and G.O.(Ms) No.76, Municipal and water Supply Department dated 26.07.2018. The proposals contained in the aforesaid were abandoned as instead, G.O.(Ms) No.150 dated 19.11.2019 came to be issued providing for the constitution of a Committee to examine the issues related to general revision of property tax in all capital Urban Local Bodies.
20. The committee was constituted under the Chairmanship of the Principal Secretary to Government (Finance Expenditure) and three members, the Commissioner, Greater Chennai Corporation, the Commissioner of Municipal Administration and the Director of Town Panchayats. One of the reasons for this unprecedented delay is also, according to the State, the reluctance it has felt in adding to the burdens of the populace.
21. Had the State been effective and prompt in enhancing the rate of property taxes in regular general revisions over the years, the tax paying public would hardly have felt the pinch of such phased and staggered enhancement. The Committee ascertained the quantum of increase in property tax bearing in mind market indices like Wholesale Price Index, Cost Inflation Index of the Income tax Department and adopted the GDP growth as being a realistic indicator of property valuation over the years.
22. The respondents also make reference to the recommendations of the 15th Central Finance Commission and emphasis laid therein on the mobilization of own revenues by self-governing bodies. Noting that yields from property tax remain historically low, the Commission has recommended notification of floor rates and indicated that progress in collections and improvement in performance in tax collections will be used as yardsticks for grants-in-aid.
23. That apart, the respondents also emphasize that the present increase is a conservative one, that, by no standards, reflects the actual increase in the rentals of properties. To buttress these submissions, the PPP included pie charts, graphs, histograms and tabulations containing comparisons of the rentals for specified properties (full addresses of the properties were given) selected at random, as well as the properties owned by the some of the petitioners before the Court. The PPP has been printed into booklets and supplied to all the learned petitioner counsel as well.
24. The statistics supplied are to illustrate the yawning gap between the actual rentals in certain areas when compared with the rentals, as determined under the present impugned methodology, the former being substantially higher in several instances. Thus, the specific submission is that in standardising the methodology for computation of ARV, taxpayers will stand to gain, as the ARV determined will be far less than the rent realisations, if taken on actual basis.
25. The details of the properties as provided by the respondents, including full addresses and the rental values, are not extracted in this order in the interests of the privacy of the property owners. To be noted that there has been no rebuttal by the petitioners to the aforesaid statistics and area-wise rental values.
26. The State vehemently objects to the petitioner’s submissions that Basic Street Rate was never part of property tax assessments in Tamil Nadu. The respondents were asked to place on record material to establish this submission, specifically, that a uniform and standardised rate of tax was the basis of taxation at any point in time, in the past. This is to test the rival submissions that BSR constituted a gross departure from the practice followed hitherto as the petitioners argue, and the stand of the respondents to the contrary.
27. The Court takes cognizance of the position that the manner and methodology followed in property tax assessments over the years is unclear, to state the least. While the statutory provisions provide for the adoption of annual rental value (ARV) with statutory deductions therefrom, there was considerable discussion in the course of the hearing as to how the ARV was being determined over the years.
28. There were differing points of view expressed by the petitioners in this regard, some stating that the basis of assessment were their own returns filed several years ago, and some, who came into the tax net more recently, stating that the ARV had been determined after inspection and a process of assessment and others provided no concrete basis for the manner in which their assessments were being finalised till date.
29. Multiple compilations of documents have been filed by the respondents to persuade the Court that BSR has been part of the methodology and assessment procedure for the last 30 years. A detailed study of the documents filed reveals the following sequence of events, commencing from 1977, till date.
30. Even prior to 1977, a team of officials headed by the then revenue officer had been deputed to Hyderabad to study the methods of assessment in other States and how best they could be applied to Tamil Nadu. The then Commissioner and Secretary to Government had embarked upon a comparison of the provisions of the property tax enactments in the State of Tamil Nadu, i.e., Madras City Municipal Corporation Act, 1919, Madurai City Municipal Corporation Act, 1971 and District Municipalities Act, 1920, with the analogous enactments in Hyderabad.
31. The basis of taxation in Andhra Pradesh at that point in time was the annual value of buildings and such annual value comprised the gross rental value. The gross annual rent was itself arrived at, based upon the average rent of selected houses in different streets.
32. Within the general yardstick relating to carpet area of basic rate arrived at, adjustments were made based upon various considerations, such as location, type of construction, nature of use, age of buildings and other unique characteristics. This was the formula under consideration of the Andhra Pradesh Government and the Committee concluded that the Hyderabad formula was an acceptable formula that may be adopted in Tamil Nadu as well. Council Resolution bearing No.534/1977 19.06.1977 was passed to aforesaid effect.
33. While the details of the Council Resolution are unnecessary insofar as they go into the specifics of the various parameters to be adopted by the Corporations in determining annual value and gross annual rent, what impresses is that there has been application of mind to various relevant aspects, and an analysis and exchange of information between the States, at least the Southern States, such as Madras and Hyderabad as early as in 1977, to arrive at a method of assessment that would not just straddle, but also balance the interests of the people and the State. This is commendable.
34. The efforts to rationalize property tax assessment continued and G.O.Ms.No.11 dated 04.01.1983 considered a situation that ‘rent’ may be removed from the ambit of the enactment and that the mode of assessment may be shifted wholesale to a new basis, such as value of land, plinth area, location and usage after dividing the area into various zones and sub-zones. Following this methodology will obviate the necessity for arriving at a annual rental value or fair rent method.
35. After examining the proposal from the Vice Chairman, Madras Metropolitan Development Authority under cover of his letter dated 30.03.1982, the Commissioner, Corporation of Madras was directed to undertake studies in this regard to be carried out by the Operations Research Group (ORG) of the Madras Metropolitan Development Authority under World Bank Systems for rationalization of property tax assessment. The records reveal notes written in hand, calling for the report of the ORG and Annexure VIII of compilation filed by the Greater Chennai Corporation on 21.09.2022 contains a report of the study submitted during September, 1985.
36. Some of the salient features and relevant observations made in the report are extracted below:
Some of the important observations in this regard are:-
1.The ratio of market rent to implicit rent as per ARV varied between 5 to 8 times for residential use. The implicit rent varies between 9 paise to 23 paise, the market rent being in the range of 52 paise and 111 paise.
2.The ratio of market rent to implicit rent varies between 7 to 9 times for commercial use. The implicit rent varies between 16 paise to 33 paise, the market rent being in the range of 151 paise and 225 paise.
The system of tax assessment based on the concept of annual value has not kept pace with rising land values and costs of construction nor with the changing complexities of the urban situation. The tax collections have, therefore, no relation to the phenomenally increased costs of municipal services. The Rent Control Laws and the decisions of the Court applying the Rent Control Laws to the determination of a hypothetical rental value have rendered the whole system irrational and inadequate.
The difficulties created by the Rent Control Acts could be easily removed by the insertion of a non-obstante clause in the legislation authorising the levy. The tax can also be rationalised if annual value is given up as the sole basis for levy.
Built up area of property is by far the most desirable from the point of view of simplicity and avoidance of subjective assessment particularly at the lowest level of administration. Built up area has, in fact, been recognised as a reasonable base of tax by the Privy Council as early as in the case reported in AIR (1944) FC 71. But built up area cannot, however, be the sole basis after the commencement of the Constitution. In fact, the Kerala Building Tax Act of 1951 did this exactly and was struck down on the ground that the various elements such as the character of the building, the place where it is situated, the cost of its construction and the period for which it will endure have not been taken into account.
. . . .
37. Thereafter, G.O.Ms.No.1120 dated 23.11.1987 was issued considering an earlier ban imposed against the quinquennial revision of property tax in the Madras and Coimbatore Corporations. Under this Government Order, the ban was removed. In G.O.Ms.No.1178 dated 10.12.1987, Part I-A in the 1919 Act stood substituted in entirety to provide for the method of assessment of property tax.
38. In terms of this procedure, an assessee was to file a return of property tax within a specific time and if such a return was not filed, the Commissioner was entitled to authorize any person not below the rank of Bill Collector to enter upon, make the inspection of the assessable item, prepare the return and pass an order of assessment in compliance with the principles of natural justice. Part V provides for revision of assessment by a constitution of a Taxation Appeals Tribunal for disposing appeals preferred by those aggrieved by assessments.
39. Annexure XII of the compilation contains minutes of the meeting of the Cabinet held on 26.11.1991. The first item on the agenda was revision of house tax in Municipal Corporations and Item No.1 (b) dealt with house tax revision in Town Panchayats and Panchayats. The minutes, titled as ‘strictly confidential’ have been perused and reveal that the assessment of property tax was to be done based on returns filed by property owners taking into account plinth area and use of the house, location, type of construction and its use.
40. A threshold was set beyond which the basic annual value was not liable to be fixed. This was for both residential areas as well as industrial and commercial establishments in order to prevent a huge and sudden increase. A ceiling was placed on the increase upto 100% on residential houses, marriage halls and cinema theatres and 150% on hospitals, offices, shops and industries. Those decisions were decided to be implemented for District Municipalities as well.
41. Subsequent proceedings in various R.O.C. numbers reiterated the decision of the Government to continue to re-commence and continue with the quinquennial revision of property tax and the guidelines for determination of annual rental value.
42. With this decision arrived at in 1993, there ought to have been a quinquennial revision every 5 years, i.e., in 1998, 2003, 2008, 2013, 2018 and thereafter in 2023. Had this been done, the periodic enhancements could have taken note of all economic conditions in deciding whether to enhance, or otherwise. However, this has not been done leading to the present situation where the enhancement is after a span of nearly two and a half decades, in one single shot.
43. That apart, the guidelines fixed on 14.05.1993 refer to fixation of basic value in the context of different areas, streets and lanes within demarcated zones. There are other parameters in regard to the specifics of the property itself, such as occupation, nature of the building, the use of the building and others that have also been fixed as being relevant.
44. Annexure XVIII of the aforesaid guidelines contains a tabulation of various rates arrived at by the revenue Department of the Corporation of Chennai during the period 1993-94 for different areas and streets. This tabulation, running to 11 pages, contains a location code, location name, rate per sq. ft. in paise and land value per ground in lakhs.
45. Proceedings bearing number 10784/1999 dated 02.12.2004 came to be passed referring specifically to BSR and the proceedings read thus:
