MUNICIPAL COMMITIEE, PATIALA v. MODEL TOWN RESIDENTS ASSON. & ORS

Citation: [2007] 8 S.C.R. 719

Court: Supreme Court of India

Bench: S.H. KAPADIA, B. SUDERSHAN REDDY

Case summary

MUNICIPAL COMMITIEE, PATIALA v. MODEL TOWN RESIDENTS ASSON. & ORS.pdf

Judgment text

-: ... ,,. ' ' MUNICIPAL COMMITIEE, PATIALA •-: v. MODEL TOWN RESIDENTS ASSON. & ORS. AUGUST I, 2007 [S. H. KAPADIA AND B. SUDERSHAN REDDY, JJ. ] Punjab Municipal Act, 191/ as amended by Act I/ of 1994; Ss. 3(1), ~ 3(8aa) and 68/Land Acquisition Act, 1894; S.

23/Registration Act, 19081 Constitution of India, 1950; Articles 14 and 226: Levy of house-tax-Amendment made in Section 3 of the Act-As per amendedprovisions, house-tax leviable at different rates on the same property when used by the owner and the tenant and market value of the property could be determined without providing any guidelines-Amended provisions ofLaw-Constitutionality of-Held: 'Rate' in the context oflevy ofhouse-tax means a tax on annual value/rateable value of land/building-Prior to amendment, the tenanted as well as self-occupied premises equated in the ~------"( matter of determination of gross annual rent-However, in case it was not possible for the Municipality to determine th~ gross annual rent in terms of the provisions of law, it could fix the an~ual value in terms of certain formula-legislature has given a great amount of leeway in the matter ·of taxation-Article 14 of the Constitution does not prohibit classification- Classification made between premises occupied by the tenants on one hand and those occupied by the owner himself on the other is wholly reasonable and has direct nexus with the object sought to be achieved-Hence, the High Court erred in holding that Section 3(1)(b) of the Act making an invidious ,..

_~ discrimination between premises in occupation of the tenant and which are self-occupied-Besides as per amended provision uls. 3(8aa), a formula has been evolved to assess house-tax on self-occupied premises whereby tax on annual value could be calculated on the basis of market value of the land taking into account cost of construction and deducting the depreciation- While calculating the market valu,e of the land, Assessing Officer will keep in view the principles mentioned in the Land Acquisition Act-Hence, the High Court erred in striking down Section 3(8aa) on the ground ofabsence of guidelines in the amended provisions in determining the market value of ~ the land legislative power to enact validation law making tht? m effective retrospectively-Power ofJudicial Review-Exercise of-Held: It is not open to the High Court to exercise such powers under Article 226 of the . : . Constitution, particularly in the matter of taxation-Constitution of India, 1950-Artic/e 226.

The question which arosefor determination in these appeals was as to whether the High Court was right in holding, Section 3(l)(b) of the Punjab - . Municipal Act as amended by Act 11 of 1994, whereby the same property is subjected to house-tax at different rates when i~ is occupied by a tenant and landlord and also Section 3(8aa) as amended defining "market value" for the purpose of levying house tax without indicating any guidelines for its determination, as unconstitutional since it suffers from the vice of discrimination.

Appellant-Municipal Committee contended that Section 3(l)(b) of the Punjab Municipal Act, as amended, makes no distinction between self occupied land or building and tenanted land or building; that as per amended provision, annual value ofthe property in occupation of the tenant has to be determined on the basis of actual rent which that property would fetch whereas if the same property if it is in occupation of its owner then the rateable value under the amended provisions shall be calculatedin accordance with Section 3(l)(b) of the Act; that in the case ofcommercial property, it is the tax on the scarce resources, mainly the land whose prices are escalating, which provides an intelligible differentia having requisite connection with the object sought to be achieved; that there cannot be a straight-jacket formula for determination oft~ annual value; and that the State is always entitled to raise its resources by way ofimposition of tax.

Respondent-assessee contended that there is no rational basis for making the classification as introduced in Section 3(l)(b) by way of the amendment, particularly when both the premises, whether let out or self occupied, are subject to rent restrictions under the Act. Allowing the appeals, the Court HELD: (Per KAPADIA, J. ) 1. 1. Prior to the Amending Act of 1994, annual value under Section . ~ 3(l)(b) of the Punjab Municipal Act was defined to mean the gross annual rent at which the house or building could be let out from year to year subject MUNICIPAL COMMITfEE, PATIALA"· MODELTOWNRESIDENTSASSON. 72} to statutory deductions.

Therefore, under the unamended Section the tenanted as well as self-<>ccupied premises stood equated in the matter ofdetermination ofthe gross annual rent However, even under the unamended Act, vide Section 3(1)(c) of the Act, it was stipulated that if in a given case it was not possible for the municipality to determine the gross annual rent, then, 5% of the total sum obtained by adding the estimated present cost ofconstruction, less such amount as the Committee may deem fit to be deducted on account of depreciation to the estimated market value ofthe land (site). Therefore, even under the unamended section, in marginal cases, it was open to the municipality to fix the annual value at 5% of the sum obtained by adding the cost of construction to the market value of the land. ! Para lll (731-D, E, Fl 1. 2.

It appears that on account of increase in the market price of the land in question that the State Legislature amended Section 3(1) by Punjab Amending Act 11 of1994 by which it had been stipulated vide Section 3(1)(b) that in cases where land or building is self occupied, the annual value shall be 5% of the sum obtained by adding the present market value of the land and the estimated cost of construction less 10% deduction on account of ... ~ -- . XX xxx xxx ' 1 18. Frankfurter , J. of the U. S. Supreme Court dissenting in the controversial expatriation case of Trop vs. Dulles observed as under: "All power is, in Madison's phrase, "of an encroaching nature". Judicial power is not immune against this human weakness. It also must be on guard against encroaching beyond its proper bounds, and nor the less so since the only restraint upon it is self-restraint....

Rigorous observance of the difference between limits of power and wise exercise of power - between questions of authority and questions of prudence - requires the most alert appreciation of this decisive but subtle relationship of two concepts that too easily coalesce. No less does it require a disciplined will to adhere of the difference. It is not easy to stand aloof and allow want to wisdom to prevail to disregard once own strongly held view of what is wise in the conduct of affairs. But it is not the business of this court to pronounce policy. It must observe a fastidious regard for limitations on its own power, and this precludes the courts giving effect to its own notion of what is wise of politic. That self-restraint is of the essence in the observance of the judicial oath. for the Constitution has hot authorized the judges to sit in judgment on the wisdom of I. 356 us S6 ! \. tl~ICIPAL CO,t\llTTEE. PATt... LA •·. '. \IODEL TOW1' RESIOE'. 'ITS ASSO[';. [B. St;OERSHAN REDDY.

JJ 741 what Congress and the executive branch do. " 19. When a State action is challenged, the function of the court is to examine the action in accordance with law and to detennine whether the iegislature or the executive has acted within the powers and functions assigned under the Constitution and if not, the court must strike down the action. While doing so the court must remain within its self imposed limits. The court sits in judgment of the action of coordinate branch of the Government. While exercising power of . ,. . , judicial review of administrative action, the court is not an appellate authority. The Constitution does not pennit the court to direct or advise the executive in matters of policy or to sennonize qua any matter w~ich under the Constitution lies within the sphere the legislature or executive, provided these authorities do not transgress their constitutional limits or statutory powers.

" 9 The court cannot usurp the functions assigned to the legislative bodies under the Constitution and even indirectly require the legislature to exercise its power of law making in particular manner. The court cannot assume to itself a supervisory role for the law making power of the legislature under the provisions of the Constitution. The High Court must ensure that while exercising its jurisdiction which is supervisory in nature it should not over step the well recognized bounds of its own jurisdiction. 10. In Chandigarh Administrator and Ors. v. Manpreet Singh and Ors. , [1992) I SCC 380. the High Court while disposing ofa petition under Article 226 of the Constitution changed the categorization and order of priority specified in the Rule framed by the University for giving admissions to engineering colleges. The Supreme Court while reversing the decision observed: ".......

if the High Court thought that this categorization was discriminatory and bad it ought to have struck down the categorization to that extent and directed the authority to reframe the rule. It would then have been upon to the rule making authority either to merge these two categories or delete one or both of them, depending upon the opinion they would have formed on a review of the situation. We must make it clear again that we express no opinion on the question of validity or otherwise of the rule. We are only saying that the High court should not have indulged in the exercise of 'switching' the categories - and that too without giving any reasons thereafter. Thereby, , A it has practicably assumed the role_ofrul~ making authority, or, at any rate, assumed the role of an appellate authority. That is clearly not the function ofthe High Court-acting under Article 226 of the Constitution of India. ''" I. I.

The High Court's directions to make the law in a particular manner B are clearly unsustainable. 12. I agree with s'. H. _Kapadia, J. that the appeals preferred by the State as well . as Municipal Committee, Patiala should be allowed. . . -, . S.. K. S. Appeal allowed. t ' 'r ..... \ ' I l- ~