Panchayat:Repo18/Law Manual Page0257

it may fall within the class of buildings not ordinarily let on the other hand, if the building is designed or constructed in such a fashion as to be residential building, it may fall with in the class of buildings ordinarily let, though the intention at the time of construction was not to let the building on rent. The building in which the hospital and the pay-wards are housed do not fall in the class of buildings ordinarily let. The buildings constructed as residential quarters for doctors and nursing sisters fall within the class of buildings ordinarily let and they should have been assessed on that basis. – K.E. Eapen v. Executive Officer – 1973 KLT 42 : 1972 KLJ 991 : 1973 KLR 15.

Relevancy of annual letting value fixed by the local authority in assessment under Income Tax Act - Prima facie the certificate of the local authority afforded evidence to sustain the contention of the assessee that the contract rent was in excess of the reasonable rent that could be excepted from the building. - George v. Commissioner of Income Tax – 1973 KLT 660 : 1973 KLJ 773 : 92 ITR 137 : 1973 KLR 615.

PROPERTY TAX - GENERAL PRINCIPLES

The criterion for determining rateable value of a building is the annual rent which the owner might reasonably expect to get from a hypothetical tenant, if the building were to let from year to year, less certain deductions. What is reasonable is a question of fact and it depends on the facts and circumstances of a given situation. Ordinarily, "a bargain between a willing lessor and a willing lessee uninfluenced by any extraneous circumstances may afford a guiding test of reasonableness” and in normal circumstances, the actual rent payable by a tenant to the landlord would afford reliable evidence of what the landlord may reasonably expect to get from a hypothetical tenant, unless the rent is inflated or depressed by reason of extraneous considerations such as relationship, expectation of some other benefit etc. There would ordinarily be a close approximation between the actual rent received by the landlord and the rent which he might reasonably expect to receive from a hypothetical tenant. But in case of a building subject to rent control legislation, this approximation may and often does get displaced.

Dewan Daulat Rai Kapoor case is an authority for the proposition that the rateable 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 test therefore is not what is the standard rent of the building but what is the rent which the owner reasonably expects to receive from a hypothetical tenant and such reasonable expectation can in no event exceed the standard rent of the building determinable in accordance with the principles laid down in the Rent Act, though it may in a given case be lower than such standard rent.

Within the upper limit of the rateable value of the premises so fixed: the assessing authorities would have to determine the reasonable rent by evaluating factors such as size, situation, locality and condition of the premises and the amenities therein provided. The assessing authorities would also have to take into account the rent which the owner of similar premises constructed earlier and situate in the same or adjoining locality, might reasonably expect to receive from a hypothetical tenant and which would necessarily be within the upper limit of the standard rent of such premises, so that there is no wide disparity between the rate of rent per square foot or square yard which the owner might reasonably expect to get in case of the two premises., Some disparity is bound to be there on account of the size, situation, locality and condition of the premises and the amenities provided therein. But after taking into account these varying factors, the disparity should not be disproportionately large.

While assessing the rateable value of the premises on the basis of the rent which the owner may reasonably, expect to get if the premises are let out, it cannot be overlooked that where the premises consist of different parts which are intended to be occupied as distinct and separate units, the hypothetical tenancy which would have to be considered would be hypothetical tenancy of each part as a distinct and sum total of the rent reasonably expected from a hypothetical tenant in respect of each distinct and separate unit would represent the rateable value of the premises. – Balbir Singh v. M.C.D- (1985) 1 SCC 167 : AIR 1985 SC 339.

Taxes raised by a local authority are not imposed by it as a legislature but as a delegate of the legislature. The tax is a valid one if it is one of the taxes the local authority can raise and the delegate imposes it in accordance with the conditions laid down by the legislature. The taxes that can be raised in exercise of delegated power are predetermined and procedure is prescribed by the Municipal Act. - Municipal Board of Bareilly v. Bharat Oil Co - (1990) 1 SCC 311, 315, 316 : AIR 1990 SC 548.

STAY OF RECOVERY OF TAX - Should be granted only in exceptional cases after carefully examining the matter. For considerations for grant of stay the Court should maintain a uniform practice in passing such interim orders. – Siliguri Municipality v. Amalendu Das – (1984) 2 SCC 436 : AIR 1984 SC 653