2000 JTR(SC) 2040
2001 AIR(SC) 432 ; 2001 AIR(SCW) 20 ; 2001 1 CurLJ 309 ; 2001 89 DLT 185 ; 2000 Supp3 JT 634 ; 2001 1 RCR(Civ) 497 ; 2000 8 Scale 261 ; 2001 8 Scale 261 ; 2001 1 SCC 455 ; 2000 SCR 666 ; 2001 1 SLT 207 ; 2001 KHC 1365 ; 2000 8 Supreme 492
2000(8) Supreme 492
SUPREME COURT OF INDIA
(From Delhi High Court)
B.N. Kirpal, U.C. Banerjee & Brijesh Kumar, JJ.
Housing and Urban Development Corporation Ltd. -Appellant
versus
M.C.D. & Anr. -Respondents
Civil Appeal No. 6645 of 1999
Decided on 13-12-2000
Counsel for the Parties :
For the Appellant : Harish N. Salve, Solicitor General, C. Mukhopadhaya, Manish Kumar and V. Krishna Murthy, Advocates.
For the Respondents : M.L. Varma, Sr. Advocate, Ms. Amita Gupta, Dhananjay Kumar Singh, Advocates.
Act
Referred
:CONSTITUTION OF INDIA : Art.285
DELHI MUNICIPAL CORPORATION ACT : S.119(2), S.120, S.119, S.119(1)
(A) The Delhi Municipal Corporation Act, 1957 governs the assessment and levy of property tax in the relevant jurisdiction. Section 119(1) of the Act expressly exempts lands and buildings that are properties of the Union from property tax. Section 119(2) permits taxation of such property only where possession has been delivered to a transferee in pursuance of the Displaced Persons (Compensation and Rehabilitation) Act, 1954, which is not applicable here. Section 120(1) stipulates that tax is leviable on land leased to the lessor, or on the person in whom the right to let vests if unlet, and does not apply where no lease has been executed and the right to let remains with the Central Government. The assessment for the period from 2nd July, 1990 to 31st March, 1995 was thus not maintainable against the appellant, as the land remained vested in the Union and was not let to the appellant during that period. The formal lease executed on 4th July, 1997 could not retrospectively validate earlier taxation.
(B) Union properties are exempt from municipal property tax unless expressly brought within the tax net by law. Possession under a specific statutory regime is a narrow exception. Tax liability attaches only upon actual letting to a tenant or vesting of the right to let, and cannot be predicated on future or unexecuted agreements.
Facts of the case:
On 1st November, 1990, 42.6 acres of Government land at Andrews Ganj, Delhi was allotted to the appellant for development, with 17.6 acres designated for hostels, guest houses, conference halls, and community facilities, and 25 acres intended for construction of flats for Government servants. No formal lease was executed before 4th July, 1997. In 1994, the authorities levied property tax for the period 2nd July, 1990 to 31st March, 1995 at 5 per cent on the vacant land, which the appellant challenged unsuccessfully before the High Court.
Findings of Court:
The Court held that Section 119(1) exempted the land from tax as it was the property of the Union. Sub-section (2) did not apply because possession was not delivered under the Displaced Persons Act. Under Section 120(1), no tax could be levied as the land was unlet and the right to let remained with the Central Government. The appeal is allowed and the assessment order is set aside.
Issues:
Whether Union property is exempt from municipal property tax under Section 119 of the Delhi Municipal Corporation Act, 1957.
Whether Section 119(2) of the Act permits taxation of Union property based on possession delivered otherwise than under the Displaced Persons Act.
Whether Section 120(1) of the Act can attract liability for land that was unlet and where the right to let remained with the Central Government during the assessment period.
Ratio Decidendi:
The land in question being the property of the Union is exempt from property tax under Section 119(1) of the Delhi Municipal Corporation Act, 1957. Section 119(2) does not apply as possession was not delivered under the Displaced Persons Act. Section 120(1) does not apply as the land was unlet and the right to let remained with the Central Government, and consequently no tax could be levied for the period prior to the execution of a lease in 1997.
Result:
The appeal is allowed. The assessment order is set aside. No costs are awarded.
(A) The Delhi Municipal Corporation Act, 1957 governs the assessment and levy of property tax in the relevant jurisdiction. Section 119(1) of the Act expressly exempts lands and buildings that are properties of the Union from property tax. Section 119(2) permits taxation of such property only where possession has been delivered to a transferee in pursuance of the Displaced Persons (Compensation and Rehabilitation) Act, 1954, which is not applicable here. Section 120(1) stipulates that tax is leviable on land leased to the lessor, or on the person in whom the right to let vests if unlet, and does not apply where no lease has been executed and the right to let remains with the Central Government. The assessment for the period from 2nd July, 1990 to 31st March, 1995 was thus not maintainable against the appellant, as the land remained vested in the Union and was not let to the appellant during that period. The formal lease executed on 4th July, 1997 could not retrospectively validate earlier taxation.
(B) Union properties are exempt from municipal property tax unless expressly brought within the tax net by law. Possession under a specific statutory regime is a narrow exception. Tax liability attaches only upon actual letting to a tenant or vesting of the right to let, and cannot be predicated on future or unexecuted agreements.
Facts of the case:
On 1st November, 1990, 42.6 acres of Government land at Andrews Ganj, Delhi was allotted to the appellant for development, with 17.6 acres designated for hostels, guest houses, conference halls, and community facilities, and 25 acres intended for construction of flats for Government servants. No formal lease was executed before 4th July, 1997. In 1994, the authorities levied property tax for the period 2nd July, 1990 to 31st March, 1995 at 5 per cent on the vacant land, which the appellant challenged unsuccessfully before the High Court.
Findings of Court:
The Court held that Section 119(1) exempted the land from tax as it was the property of the Union. Sub-section (2) did not apply because possession was not delivered under the Displaced Persons Act. Under Section 120(1), no tax could be levied as the land was unlet and the right to let remained with the Central Government. The appeal is allowed and the assessment order is set aside.
Issues:
Whether Union property is exempt from municipal property tax under Section 119 of the Delhi Municipal Corporation Act, 1957.
Whether Section 119(2) of the Act permits taxation of Union property based on possession delivered otherwise than under the Displaced Persons Act.
Whether Section 120(1) of the Act can attract liability for land that was unlet and where the right to let remained with the Central Government during the assessment period.
Ratio Decidendi:
The land in question being the property of the Union is exempt from property tax under Section 119(1) of the Delhi Municipal Corporation Act, 1957. Section 119(2) does not apply as possession was not delivered under the Displaced Persons Act. Section 120(1) does not apply as the land was unlet and the right to let remained with the Central Government, and consequently no tax could be levied for the period prior to the execution of a lease in 1997.
Result:
The appeal is allowed. The assessment order is set aside. No costs are awarded.
ORDER
On 1st November, 1990, 42.6 acres of Government land at Andrews Ganj, Delhi was given by the Government of India to the appellant for development. According to the terms of the allotment letter, 17.6 acres of land was to be developed by the appellant and utilised as a hostel and guest house facilities, conference hall, shopping and other community centre facilities. Out of the money earned therefrom, on 25 acres of land flats were to be constructed for housing Government servants. The said letter envisaged that a lease to this effect would be executed in future.
2. Possession was taken and on 25th March, 1994, even though formal lease had not been executed in favour of the appellant, assessment under the provisions of the Delhi Municipal Corporation Act, 1957 (for short "the Act") was made to property tax for the period 2nd July, 1990 to 31st March, 1995. The assessment was made at the rate of 5 per cent of the value of the land. The assessment was on the vacant land as no building as on that day had yet been erected.
3. The challenge of the appellant to the said levy based on the provisions of Section 119 of the Act did not succeed. It was the contention of the appellant that the land in question belonged to the Central Government and by virtue of sub-section (1) of Section 119 no tax thereof could be levied. Having failed in the High Court, the present appeal by special leave has been filed.
4. Learned Solicitor General for the appellant submits, as had been contended earlier, that under Section 119 (1) the lands and buildings being the properties of the Union are exempt from tax. He submits that the provisions of sub-section (2) of Section 120 did not come into play because a formal lease deed was executed in favour of the appellant by the Central Government only on 4th July, 1997 and it is only thereafter that the interest in the land could be said to have passed on to the appellant. He further submits that even under Section 120(1) the property tax is primarily leviable if the land is let upon the lessor, if it is sublet upon the superior lessor and if it is unlet then upon the person in whom the right to let the same vests. He submits that admittedly no lease deed has been executed during the period 2nd July, 1990 to 31st March, 1995 and, therefore, the land was unlet. He then contends that the right to let this land still vested with the Central Government and did not vest at that point of time with the appellant, for no right under a lease to that effect had been created.
5. Section 119 on which reliance is placed reads as follows :
"119. Taxation of Union properties.- (1) Notwithstanding anything contained in the foregoing provisions of this Chapter, lands and buildings being properties of the Union shall be exempt from the property taxes specified in Section 114 :
Provided that nothing in this sub-section shall prevent the Corporation from levying any of the said taxes on such lands and buildings to which immediately before the 26th January, 1950, they were liable or treated as liable, so long as the tax continues to be levied by the Corporation on other lands and buildings.
(2) Where the possession of any land or building, being property of the Union, has been delivered in pursuance of Section 20 of the Displaced Persons (Compensation) and Rehabilitation) Act, 1954 (44 of 1954) to a displaced person, or any association of displaced persons, whether incorporated or not, or to any other person hereafter in this sub-section and the proviso to sub-section (1) of Section 120 referred to as the transferee, the property taxes specified in Section 114 shall be leviable and shall be deemed to have been leviable in respect of such land or building with effect from the 7th day of April, 1958 or the date on which possession thereof has been delivered to the transferee, whichever is later, and such property taxes shall, notwithstanding anything in the proviso to sub-section (1) of Section 126 or any other provision of this Act, be recoverable with effect from that day or date, as the case may be."
6. It is clear from a reading of sub-section (1) of Section 119 that lands and buildings which are the properties of the Union are exempt from property tax. Mr. M.L. Varma, learned senior counsel appearing for the respondents, however contended that under sub-section (2) of Section 119 when possession of the land is given to any person then property tax can be recovered from that person.
7. In our opinion, on a correct reading of Section 119(2), the aforesaid consequence does not follow. Sub-section (2) of Section 119 provides that where possession of the land or building being the property of the Union has been delivered in pursuance of Section 20 of the Displaced Persons (Compensation and Rehabilitation) Act to (a) a displaced person or (b) an association of displaced persons or (c) to any other person, then the property tax can be recovered from the person in possession. It is clear that the expression to any other person can only be that person to whom possession has been delivered in pursuance of the provisions of Section 20 of the Displaced Persons (Compensation and Rehabilitation ) Act. This obviously is not the position in the present case. Possession was not given to the appellant under the said Act and, therefore, sub-section (2) of Section 119 does not come into play.
8. From the aforesaid discussion, it clearly follows that the land in question being exempt from tax by virtue of Section 119(1) of the Act as it is the property of the Union and furthermore even under Section 120(1) no tax in respect of land could have been levied in the present case on the appellant prior to the same being let to them in 1997.
9. For the aforesaid reasons, this appeal is allowed and the judgment of the High Court and the order of assessment are set aside.
10. There will be no order as to costs.
11. We make it clear that we are not examining or expressing any opinion on the liability of the allottees of HUDCO to pay tax under the Delhi Municipal Corporation Act.
(C.R.) Appeal allowed.
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