Jagannadha Rao, J.
1. This Second Appeal raises a question of validity of assessment of municipal tax for the years commencing from 1st October. 1978. A notice was issued for enhancement of tax on 12-2-1979 as per Ex. A. 1. The building was partly owner-occupied and partly let out to tenants. In the portion occupied by tenants, there are five tenants. In the portion occupied by the landlord there are six rooms. The suit was filed for a declaration that the above said special notice dated 12-2-1979 and the endorsement dated 29-3-1979 of the Municipality were illegal and for consequential injunction restraining the Municipality from collecting the enhanced tax with regard to assessment No. 7757 in Kakinada Municipality. The suit was dismissed by the learned District Munsif by judgment dated 25-6-1982. On appeal by the plaintiff, the learned Subordinate Judge allowed the appeal and decreed the suit as prayed for with costs throughout. The learned Subordinate Judge held that even though no fair rent was fixed under Section 4 of the Andhra Pradesh Buildings (Lease, Rent and Eviction) Control Act? 1960, in respect of the tenanted portions, the Municipal authorities could not treat the actual rent as the fair rentand they were bound to apply the provisions of Section 4 of the said Act and consider whether the agreed rent was fair rent or not or whether it was anything low. Inasmuch as the said aspect was not borne in mind by the assessing authorities, the impugned notice was set aside, Against the said judgment of the learned Subordinate Judge, this second appeal has been preferred by the Municipality.
2. In this appeal, it is contended by the learned counselor the appellant, Sri P. Rajagopala Rao, that the view expressed by the lower appellate Court is contrary to a recent judgment of a learned Single Judge of this Court in K. Suryaprakasa Rao (died) v. Commissioner & Special Officer, Kakinada Municipality, 1989 (2) APLJ 15 (NRC) where it has been held that in the absence of fixation of fair rent under the provisions of A.P. Buildings (Lease, Rent and Eviction) Control Act, 1960 rent paid by the tenant should be treated to be fair rent for the purpose of determination of annual rental value.
3. On the other hand, it is contended by Sri V.L.N.G.K. Murthy for Sri C. Poornaiah that the view taken by the lower appellate Court is consistent with judgments of the Supreme Court and also earlier judgments of this court and that therefore the judgment in K. Suryaprakasa Rao (died) (1 supra) is not correct. It is argued that the provisions of the rent control law have to be taken into consideration by the tax assessing authorities not merely in cases where fair rent is already fixed by the Rent Controller but also where fair rent has not yet been fixed by that officer.
4. Before dealing with the point raised, it is necessary to notice the various changes in the statutes, in recent times, as to the assessment of house properties in Municipalities in A.P. and to refer to the developments in the law as laid down by the Supreme Court. It is, in that context, necessary to examine the language of the statutes in the other States and compare the language of the statute in the Andhra Pradesh Municipalities Act, 1965.
5. The Madras Act of 1920:
Under the Madras District Municipalities Act, 1920 it was provided in Section 82 (2) as follows:
'Section 82 (2): The annual value of lands and buildings shall be deemed to be the gross annual rent at which they may reasonably be expected to let from month to month or from year to year, less a deduction, in the case of buildings, ten percent'..........
The expression 'may reasonably be expected' was construed by the Supreme Court in Corporation of Calcutta v. Smt. Padma Devi : [1962]3SCR49 as follows: 'Though the word ' reasonably' in Section 127 (a) of the Calcutta Municipal Act, is not capable of precise definition, it signifies ' in accordance with reasons'. In the ultimate analysis, it is a question of fact;' a statutory limitation of rent circumstances the scope of the bargain in the market. In no circumstances the hypothetical rent can exceed that limit'. The above said decision was applied by Obul Reddi, J. (as he then was) in Guntur Municipality v. G. Subba Rao, 1968 (2) An.W.R. 94 and Parthasarathi, J. in Vizianagaram Municipal Council v. Viziaramaiah, 1970 (2) ALT 216. The above provision of the Madras Act came up for consideration before the Supreme Court in Guntur Municipal Council v. Rate Payers Association, : [1971]2SCR423 and it was held that reasonable rent is the one which the building would fetch if let out to a hypothetical tenant. The Municipality is bound by the standard rent which would be payable under the Rent Control Act, whether the same has been fixed or not under the Rent Control Law.
6. The A.P. Act of 1965 - (before 1975 amendment) with a proviso:
The A.P. Municipalities Act, 1965 enacted Section 87 to deal with this subject of taxation. Section 87 (2) (b) thereof as it originally stood provided again that:
'Section 87 (2) (b): The annual rental value of lands or buildings shall be determined in such manner as may be prescribed having due regard to the rent received in respect thereof.The section also contains a proviso as to fixation of fair rent under Section 4 of the A.P. Buildings (Lease, Rent and Eviction) Control Act, 1960 and I shall deal with it in greater detail under the next heading.
7. This section came up for consideration before Chinnappa Reddy, J. (as he then was) in Guntur Town Rate Payers' Association v. Guntur Municipal Council, 1978 (1) APLJ 356. The learned judge referred to the two decisions of the Supreme Court in Corporation of Calcutta v. Padma Devi (2 supra) and the decision in Guntur Municipal Council v. Rate Payees' Association (5 supra), the latter arising under the Madras Act, as also to a third decision of the Supreme Court in New Delhi Municipal Committee v. M.N. Soi, AIR 1977 SC 302 which arose under the Punjab Municipal Act, 1911. Section 3 (1) (b) of the Punjab Act defined ' annual value' as meaning, in the case of any house or building,
'the gross annual rent at which such house or building together with its appurtenances and any furniture that may be let for use or enjoyment therewith, may reasonably be expected to let from year to year, subject to the following deductions .....'
The above provision in the Punjab Act was substantially the same as in the Section 82 (2) of Madras Act of 1920 and Section 87 (2) of the A.P. Act, 1965 as it originally stood. Chinnappa Reddy, J. (as he then was) therefore followed the above said three judgments of the Supreme Court and held that, 'where there is no statute controlling the rent which landlord may receive from a tenant, the actual rent received by a landlord from his tenant may possibly afford the best evidence of the hypothetical rent. But where the rent which a landlord may receive from a tenant is statutorily controlled, the hypothetical rent has to be determined by the Municipal authorities, in each case, keeping in view the principles found in statute controlling the rent. Chinnappa Reddy, J. (as he then was) observed:
' It makes no difference whether 'fair-rent' or 'Standard-rent' in fact, been fixed by the Controller or not. If no fair rent or standard rent has been fixed by the Controller, the Municipal authorities are not absolved from the duty of determining the rent at which the building may reasonably be expected to let from month to month or year to year, on the basis of the principles found in the Rent Control statute'.
The learned judge, after following the three decisions of the Supreme Court, dissented from the judgment of Venkatarama Sastri, J. in S.A.No. 285 of 1972 wherein the learned Judge had held that the rent control basis was applicable only if standard rent was fixed by the Rent Controller and not otherwise.
8. The modified proviso - introduced in A.P. Act, 1975 (corresponding to provisos elsewhere)
Coming back to Section 87 (2) of the A.P. Act, 1965, the same was amended by Act 23/1975 with effect from 10-6-1975 by the addition of a modified proviso. After such addition, the section read:
'Section 87 (2): The annual rental value of lands and buildings shall be deemed to be the gross annual rent at which they may reasonably be expected to let from month to month or from year to year less a deduction.........
Provided that in respect of any building and the land appurtenant thereto, the fair rent of which has been fixed under Section 4 of the Andhra Pradesh Buildings (Lease, Rent and Eviction) Control Act, 1960 (Andhra Pradesh Act 15 of 1960), the gross annual rent shall be the amount of the fair rent so fixed.'
Now the proviso covers a case where fair rent ' has been fixed' under the Rent Control law and may give an impression that if fair rent is not fixed under the Rent Control law, the fair rent basis under the Rent Control law need not be followed. But, the Supreme Court held in Corporation of Calcutta v. Life Insurance Corporation, : [1971]1SCR249 that the existence of a similar proviso in Section 168 (1) of the Calcutta Municipal Corporation Act, 1951 made no difference. There the proviso read as follows:
'Provided that in respect of any land or building the standard rent of which has been fixed under Section 9 of the West Bengal Premises Rent Control (Temporary Provisions) Act, 1950, the annual value thereof shall not exceed the annual amount of the standard rent so fixed'.
Shah, J. (as he then was), adverting to cases where no fair-rent is fixed observed:
'By the addition of the proviso, in our judgment, the meaning of the expression 'gross rent at which the land or building might reasonably be expected to let' is not altered.'
Therefore, even by 1970, the law was that the existence of a proviso such as the one contained in Section 168 (1) of the Calcutta Municipal Act, 1951 made no difference between cases where the fair rent has been fixed and where fair rent has not been fixed. Therefore, when the A.P. Legislature introduced the modified Proviso to Section 87 (2) by A.P. Act 23 of 1975, it must be deemed that the Legislature had knowledge of the law as declared by the Supreme Court in Corporation of Calcutta v. Life Insurance Corporation (8 supra) that the proviso in question would make no difference.
9. The judgment of the Supreme Court in Corporation of Calcutta v. Life Insurance Corporation (8 supra) was followed in Devan Daulat Rai Kapoor v. New Delhi Municipality, : [1980]122ITR700(SC) . In this case again, Section 116of the Delhi Municipal Corporation Act, 1957 contained a proviso which read:
'the standard rent of which has been fixed under the Delhi and Ajmer Rent Control Act, 1952, the reteable value shall not exceed the annual amount of standard rent so fixed'.
Bhagwati, J. (as he then was) followed the decision of Shah, J. above referred to and held that in spite of the proviso dealing with cases where the standard rent was fixed b the Rent Controller, the cases where the standard rent was not fixed, were no different. It was observed (at P. 542):
'It was, however, common ground between the parties that this proviso is immaterial and in fact it was so held in Corporation of Calcutta v. Life Insurance Corporation (8 supra)'.
Whether the standard rent was, in fact, fixed or not under the Rent Control law,
'The assessing authority would, in either case, have to arrive at its own figure of the standard rent by applying the principles laid down in the Delhi Rent Control Act, 1958, for determination of standard rent and determine the annual value of the building on the basis of such figure of standard rent'.
This decision was followed in Balbir Singh v. M.C.D., : [1985]152ITR388(SC) by the Supreme Court where there were different types of provisos.
10. Therefore, I am clearly of the view that, even after the introduction 6f the modified proviso in 1975 by A.P. Act 23/75 in Section 87 (2), the position is no different and the fair rent basis has to be followed whether such fair rent has been fixed under the Rent Control Law or not. K. Ramaswamy, J. (as he then was) in K. Ramayya and Ors. v. Guntur Municipal Council , 1988(1) L.S. 262 took the same view in a case where the municipal notices related to 1977, i.e., after the 1975 amendment. The learned judge relied upon Devan Daulat Rai Kapoor' s case (9 supra) and earlier cases. I am in entire agreement with this view.
11. In K. Suryaprakasa Rao (died) v. Commissioner & Special Officer, Kakinada Municipality (1 supra), Niladri Rao, J. was dealing with notices dated 30-12-1978 and 28-3-1979, after the 1975 amendment to Section 87 (2) and thought, because of the proviso - that where no fair rent fixed in regard to a building, the fair rent basis under the Rent Control Law would not be the basis. The learned Judge followed the decision of Seetharam Reddi, J. in B. Mahalakshmamma v. Guntur Municipalities, 1985 (1) APLJ 51 where in the learned judge observed that cases where standard rent is not fixed by the Rent Controller, the Rent Control basis will not apply. Sitarama Reddy, j. had in his turn followed the Division Bench judgment of Ekbote, J. ( as he then was) and Venkateswara Rao, J. in Himmatnagar Rate Payers' Association v. Commissioner, M.C., Hyderabad, 1971 (1) An.W.R. 78 arising under the Hyderabad Municipal Corporation Act, 1956.
12. In view of the Supreme Court judgments in Corporation of Calcutta v. Life Insurance Corporation of India (8 supra), Devan Daulat Rai Kapoor v. New Delhi Municipality (9 supra) and Balbir Singh v. M.C.D. (10 supra), it is clear that the existence of the proviso (as introduced by A.P. Amending Act 23/1975) in Section 87 (2) makes no difference what-so-ever and whether standard rent is fixed as per the proviso or not, there is no difference and the annual rental value must be fixed on the basis of fair rent as provided in the Rent Control Law. Of course, if the Rent Control law does not apply, the agreed rent could prima facie be treated as the fair rent. But in case Rent Control Law is applicable, the fact that the agreed rent is higher than the fair rent determined or determinable , does not enable the assessing authorities under the A.P. Municipalities Act, 1965 to treat the agreed rent as the basis. If the fair rent determined or determinable is lower than the fair (sic. agreed) rent, it is such fair rent that is to be the basis.
13. Therefore, in view of the three Supreme Court judgments, it is not necessary for me to follow the decision of Niladri Rao, J. in K. Suryaprakasa Rao (died), v. Commissioner & Special Officer, Kakinada Municipality (1 supra) or of Seetharam Reddy, J. in B. Mahalakshmamma v. Guntur Municipalities (12 supra) or of Ekbote, J. (as he then was) and Venkateswara Rao, J. in Himmathnagar Rate Payers' Association v. The Commissioner of Municipal Corporation of Hyderabad (13 supra).
14. The non-obstante clause - Ordinance of 1982 which has lapsed - (conflicting views)
Before parting with the case, it is necessary to refer to the amendment by A.P., Ordinance 4/1982 whereby a 'non-obstante clause' was introduced in Section 87 (2) (b) of the A.P. Act, 1965. Before referring to the said clause, it is necessary to state that the said Ordinance, not having been replaced by an Act, has lapsed. That it has lapsed has been duly verified by me. It is unfortunate that most of the text-books available have incorporated the amendment made by the Ordinance 4/1982 even though it has lapsed. I may also point out that there are some differences between the non-obstante clause as in Section 87 (2) (b) - which has since lapsed- and the non-obstante clause in Section 138 (b) of the Madhya Pradesh Municipal Corporation Act, 1956 which came up for consideration before the Supreme Court in Municipal Corporation, Indore v. Smt. Ratna Prabha, AIR 1977 SC 308 . The Supreme Court, basing on the language of the particular non-obstante clause took a different view saying that the fair rent basis under the Rent Control law would not apply if such fair rent is not fixed under the Rent Control Law. This view has, however, been seriously doubted in the later judgment of the Supreme Court in Devan Daulat Rai Kapoor's case ( 9 supra).
15. I need not go in to these aspects inasmuch as the A.P. Ordinance 4/1982 has lapsed. I may also point out that the clauses in the M.P. Act and the A.P. Amendment of 1982 (which has lapsed) are, in fact, not identical. Even otherwise, the doubts raised in Devan Daulat Rai Kapoor's case (9 supra) still remain.
16. In the present case, we are concerned only with the 1975 amendment by which the proviso was introduced in Section 87 (2). As stated by the Supreme Court, though the proviso refers only to cases where fair rent is fixed, the position, even in cases where fair rent is not fixed, is not different. Even there, the fair rent basis under the Rent Control Act has to be followed. If, however, the rent control law is not applicable, the fair rent can, prima facie, be treated as reasonable rent.
17. I, therefore, hold that the view taken by the lower appellate court is correct and the Second Appeal fails and is dismissed. There will be no order as to costs.