M. Jagannadha Rao, C.J.
(1) This is an application for ad interim injunction restraining the respondents from implementing the assessment orders dated 17.3.93 and 4.6.94 (Annexures P-10 and P-17), bill dated 23.7.93 (Annexure P-11), demand notice dated 30.8.93 (Annexure P-13) and the warrants of distress dated 1.7.94 (Annexures P-20 & P- 21).
(2) The dispute is between the petitioner- India Habitat Centre and the Municipal Corporation of Delhi.
(3) By an order dated 12.7.94 we granted stay of execution of the distress warrants dated 1.7.94 (Annexures P-20 and P-21) pending pronouncement of reasoned orders and we are pronouncing the reasoned order now.
(4) EXS. P-20 and P-21 are attachment orders addressed to the State Bank of India and the Indian Bank, New Delhi for the purpose of attaching the sum of Rs. 41,16,400.00 issued by the Deputy/Asstt. Assessor & Collector, Special Assessment Unit, Minto Road, New Delhi and a copy is addressed to the Executive Director, M/s India Habitat Centre, Habitat Place, Lodhi Road, New Delhi. The recovery under the warrant is made pursuant to Section 114 of the Delhi Municipal Corporation Act,1957 read with Section 156(1) of the Act. Ex P-10 is an order dated 17.3.93 of the second respondent rejecting the objections of the petitioner and determining the rateable value of the land at Rs. 14,00,000 w.e.f. 15.6.88. Ex P-17 is an order of the second respondent dated 4.6.94 rejecting the contention of the petitioner for exemption under Section 115(4) of the Act holding that the petitioner is not entitled to exemption inasmuch as the land is not being used or occupied for charitable purposes and the petitioner- society is not supported wholly or in part by voluntary contributions. Ex P-13, demand notice dated 30.8.93 is a demand for Rs. 34,30,329 being the tax due on the land of the India Habitat Centre on the basis of the rateable value of Rs. 14,00,000.
(5) We shall now briefly mention the facts for the purpose of this miscellaneous application. The Ministry of Urban Development allotted 9.604 acres of land to the petitioner at Lodhi Road, New Delhi for construction of a composite building to accommodate all institutions which are engaged in the promotion of the habitat concept for their office and institutional use. The petitioner took possession of the land on 15.6.88 and then the Municipal Corporation of Delhi proceeded to issue a notice dated 18.12.90 under Section 126 of the Act proposing to assess the rateable value of the land at Rs. 13,44,560 w.e.f. 15.6.88. The petitioner filed objections on 18.1.91 raising various objections and also made a claim for exemption under Section 115(4) and also raised a plea that Section 119 has not been considered and that there is a joint liability of co-owners i.e. the petitioner and the institutions which are to be allotted land eventually. Thereafter, the second respondent issued a revised notice dated 13.3.92 under Section 126 of the Act proposing the rateable value of Rs. 14 lakh w.e.f. 1.4.88 and the petitioner filed fresh objections on 26.3.92 raising the same earlier contentions and giving the list of institutions which were to be allotted the land. Then the second respondent issued a decision on 17.3.93 as per Annexure P-10 holding that the rateable value of the land occupied by the petitioner will be Rs. 14 lakh w.e.f. 15.6.88. Thereafter, it appears that the petitioner filed C.W.P. 4725/93 contending that the question of exemption under Section 115(4) of the Act and the said objections were not considered by the authorities. A Division Bench of this Court passed orders on 4.3.94 granting stay, permitting the petitioner to file comprehensive objections and directed the authorities to decide the matter afresh. The petitioner filed fresh objections on 7.4.94 and 18.4.94, as Ex P-16. The same were rejected under the impugned order Ex P-17 dated 4.6.94 and then the demand notice and the warrants were issued, as stated above.
(6) For the purpose of prima facie case the learned counsel for the petitioner urged before us three contentions. The first one was based upon Article 285 of the Constitution of India read with Section 119 of the Delhi Municipal Corporation Act,1957. contending that the land in question which has been subjected to rateable value by the respondents is the property of the Union of India and,therefore, no tax can be levied. The second contention was that the land is used for a charitable purpose and,therefore, even assuming that the land is taxable, the exemption under Section 115(4) applies. The third point is that the petitioner had allotted the land and buildings thereon to various organisations and they will have to pay the tax assessed.
(7) The India Habitat Centre was established at Lodhi Road, New Delhi as a society under the Societies Registration Act, 1860 on 21.10.87. Its memorandum of association (Ex P-2) shows that the signatories to the memorandum have joined together because of the rapid growth of numerous large and small settlements creating habitat and habitat related environmental problems. The complex socio-economic issues of habitat call for multi-facet action involving various disciplines and organisations and that it was considered necessary to bring together various institutions and individuals and, thereforee, this society is being formed, The aims and objects of the India Habitat Centre are set out in the above said memorandum which read as follows:-
(A)develop an integrated physical environment in which various professions and institutions dealing with different facets of habitat and habitat related environmental issues would function, interact and attempt to resolve habitat related problems in a coordinated manner. (b) promote awareness in regard to habitat related environmental issues including water, air, noise and waste pollution, energy and its conservation, water and human waste management and such other matters. (c) promote better urban and rural settlements relevant to the Indian social, cultural and economic context and related to the life style of its people. (d) inculcate better awareness and sensitivity in regard to all aspects of creative human activity including the significance of art in habitat. (e) document all relevant information pertaining to habitat, human settlements and environmental issues. (f) advise and if needed, assist the Government in the formation and implementation of policies relating to habitat, and human settlements. (g) promote education, research, training and professional development on habitat and human settlement and environment related issues. (i) offer awards, prizes, scholarships and stipends in furtherance of the objectives of the Centre. (j) cooperate and collaborate with other national or international institutions in furtherance of the objectives of the Centre. (k) acquire, hold, improve and develop lands and construct building ana related facilities on behalf of the Members of the Centre. (l) organise and maintain residential hostels, restaurants and other amenities for members, their guests and non-members invited by the Centre. (m) maintain and keep in good repair all buildings and common services. (n) constitute or cause to be constituted Regional Centres at convenient places to promote the objectives of the Centre. (o) do all such other lawful activities as the Centre considers conducive to the attainment of all or any of the above objectives.
(8) The Governing Council of the petitioner consists of the Secretary, Ministry of Urban Development; Chairman & Managing Director, Housing & Urban Development Corporation Ltd; the Joint Secretary (L&I;), Ministry of Urban Development; the Director, Tata Energy Research Institute; the Director, National Institute of Urban Affairs and the Director of the India Habitat Centre.
(9) The membership comprises of three categories - institutional members, corporate members and individual members. Clause 3 deals with the sharing of costs by members. It states that the costs of land, development, construction and maintenance shall be distributed among the allottees determined by the Council in proportion of the space allotted to them. Sub-clause (b) states that the allottees shall also pay to the India Habitat Centre the maintenance and other clingers as may be determined and demanded by the Council from time to time. The General Body of the petitioner society consists of the President, all members of the Council, two nominees of each of the institutional members, all founder members, all corporate members, life members and ordinary individual members.
(10) The Centre shall be controlled by and the management of the affairs shall be entrusted to a Council consisting of the following :- (1) The President of the Centre (2) The Director of the Centre (3) One nominee of the Ministry of Urban Development (4) Chairman & Managing Director, Hudco (5) Nominees of the Institutional Members (6) Two members to be nominated by the President from amongst Corporate Members. (7) Two members to be co-opted. (8) Two members to be nominated by the President from amongst the individual members.
(11) Clause 10 (a) provides that the Council shall be responsible for the management and administration of the affairs of the Centre.
(12) We shall now refer to the allotment order by the Central Government, proposing execution of a perpetual lease. The Central Government issued an order dated 2nd May, 1988 (Ex P3) alloting 9.604 acres of land to the India Habitat Centre for construction of a composite building to accommodate all institutions which are engaged in the promotion of the 'Habitat' concept, for their office and institutional use as well as for providing common areas and facilities to be shared by all such institutions. The allotment was subject to the terms and conditions as given in the memorandum of agreement and the perpetual lease mentioned therein. In para 2 (iii) it is stated that the India Habitat Centre shall be required to pay for the land @ Rs. 8 lakh per acre as premium plus annual ground rent @ 2-1/2% thereon w.e.f. the date of offer of handing over of the plot or the date on which the site is handed over, whichever is earlier. The rate of Rs. 8 lakh per acre was subject to upward revision w.e.f. 1.4.87. India Habitat Centre was required to pay a sum of Rs. 78,75,310 as consideration for the grant of perpetual lease. In addition India Habitat Centre would be required to pay the present day replacement cost of the existing structures minus depreciation. Para 2(vii) states that the space in the composite building shall be allotted to those institutions which are promoting the concept of habitat which are approved for allotment of space by the Ministry of Urban Development. Under sub-clause (viii) India Habitat Centre is empowered to recover from its allottees the cost of the proportionate land related to the space exclusively occupied by them as well as their indivisible share in the common areas and facilities. The rate of premium to be recovered from such undertaking will be the predetermined commercial rates existing on the date of such earmarking plus 2.5% of the premium as annual ground rent. Para 2 (ix) requires the India Habitat Centre to execute a lease agreement in the usual form and for the space to be allotted to the various institutions a separate tripartite agreement in the form of a sub-lease will be executed between the L & D.O, India Habitat Centre and each institution concerned. Para 2 (xvi) reads as follows :-
'THE land in question falls under the jurisdiction of the New Delhi Municipal Committee.'
Para 2 (xvii) states that India Habitat Centre shall be required to pay ground rent half yearly in advance and license fee as stated in that clause. Para 2 (xviii) states that in the event of the dissolution of India Habitat Centre the land allotted and the assets created thereon will stand transferred to an institution having similar aims and objectives subject to the approval of the Government.
(13) The India Habitat Centre is to pay Rs. 78, 74,310 as premium and the possession is to be delivered after completion of the formalities.
(14) From the aforesaid allotment order passed by the Government of India, it is clear that the India Habitat Centre is expressly granted a perpetual lease for a consideration of Rs. 8 lakh as premium per acre and sub-subject to an annual ground rent at 2-1 /2% thereon. The India Habitat Centre is authorised to construct on the land and allot the structures to various institutions which are expressly described as sub-lessees and for that purpose a tripartite agreement is also to be entered into between the Government, the lessee and the sub-lessees. India Habitat Centre is authorised to collect the construction costs and other charges from these sub-lessees. It is in the context of the above legal relationship that we have to consider the prima facie case of the petitioner under the three points mentioned earlier.
(15) So far as the first contention is concerned, the point concerned Article 285 of the Constitution and Section 199 of the Delhi Municipal Corporation Act,1957. Article 285 states that the properties of the Union of India shall be exempt from all taxes imposed by a State or any authority within a State save in so far as Parliament may by law otherwise provide.
(16) Section 199 of the Delhi Municipal Corporation Act,1957 was enacted by the Parliament and Section 119(1) of the said Act reiterates that not with standing anything contained in the foregoing provisions of this Chapter (Chapter VIII), lands and buildings being properties of the Union shall be exempt from the property taxes specified in section 114. We are not concerned with the proviso thereto nor with the sub- clause (2) of Section 119.
(17) The contention that the petitioner is being assessed to property tax on property belonging to the Union of India, in our opinion, prima facie has no force. From the order of allotment dated 2.5.88 (Ex P-3) referred to by us above clearly shows that a perpetual lease was granted by the Union of India to the India Habitat Centre at Rs. 8 lakh per acre plus annual ground rent at 2-1/2 % of that rate and according to para 2 (ix) the Habitat was to execute a regular lease agreement in the usual form and the Habitat Centre is also to execute a tripartite agreement so far as its sub-lessees are concerned. Para 2 (xvi) of the allotment order states by way of clarification that the land in question falls under the jurisdiction of the New Delhi Municipal Committee.
(18) The interest of a lessee of the Government can be the subject matter of property tax and when such interest is being taxed, it cannot be said that the residuary interest of the landlord (Union of India) is being taxed. The units of taxation are distinct in each case. The learned counsel for the petitioner, however, relied upon a Judgment of the learned Single Judge of the Calcutta High Court in Turf Properties Ltd v. Corporation of Calcutta and Others : AIR1957Cal431 which, in our opinion, is clearly distinguishable. The question which arose there was under the Calcutta Municipal Act,1951. The Turf Properties Ltd was a company under the Companies Act and was the trustee of the Royal Calcutta Turf Club, Calcutta and of its properties. The company took land on lease from the Secretary of State for India on 9.10.33 under a regular registered lease deed for 30 years upon an annual rent of Rs. 20,000. It contained a clause that during the demise the lessee shall pay and discharge all rates and taxes, duties, charges, assessment, outgoings whatsoever. No additional buildings or erections could be put up on the land without the approval of the Secretary of State. The lessee could would not be allowed to break upon the surface of the land or lay any drains or pipes or alter or in any way affect the existing state, character, appearance and conditions of the drainage etc. without such consent. There was a covenant against assignment, transfer or under-letting. During the term of the lease, the Secretary of the State could, it was specifically agreed, enter upon for various purposes including military purposes and the lessee should have no claim for compensation. In fact there was another clause which permitted resumption of land within the period of 30 years, if it was required for State purposes. When the Corporation of Calcutta proposed to levy property tax on the land and existing buildings, the same was challenged before the Calcutta High Court. The learned Single Judge, who decided the case relied upon the Article 285 of the Constitution and held that the race course was allowed to be established, but with a condition that in case of military necessity, it must at once efface itself. The notice issued by the Corporation itself shows that the property belonged to the Union of India as owner and there was no material to show that the Corporation was contending that the Union of India was not the owner. It was further contended that inasmuch as a consolidated tax was to be paid both in regard to the interest of the owner and the occupier, the levy was bad. The learned Judge, however, noticed a contention for the petitioner therein (para 21, page 437) that it was open to the State Legislature to make an appropriate law whereby a tax could be imposed upon the lessee or occupier of the land belonging to the Union of India, and that there was no such provision in the Calcutta Act. In para 24 of the Judgment, the learned Judge by summarizing his view of the law observed that there was a distinction between levying a tax on the property of the Union and apportioning the payment between the owner and the occupier and levying a tax directly on the interests of the lessee or occupier although it is an interest carved out of the property of the Union. He further held that the consolidated rate, under the Calcutta Act as it then stood, was not imposed directly on the interest of the occupier. The property is valued and assessed as a whole, irrespective of the fact as to who was the owner or the occupier, and then the liability was apportioned between the owner and the occupier. Though two English rulings, namely Smith v. Vermillion Hills Rural Council [1916] 2 A.C. 569 delivered by the Privy Council and City of Montreal v. Attorney General for Canada [1925) A.C. 136 also decided by the Privy Council were cited on behalf of the Corporation, the learned Single Judge did not say why they were not applicable.
(19) In the present case before us, there is no pleading that the tax is levied by the Corporation on the Lesser's interest in the property as well as on the interest of the perpetual lessee,namely, the India Habitat Centre. In our view, the assessment is with regard to the lessee's interest in the property and, thereforee, there is no consolidated assessment on the interest of both the Union of India and of the lessee so far as the land is concerned. Even otherwise, we do not find any reason as to why for the purpose of computation of tax a consolidated levy cannot be made and why liability of lessee cannot be apportioned. To this extent, prima facie, we are unable to agree with the decision of the Calcutta High Court in Turf Properties case.
(20) On the other hand, we find that in M/s Vishal Builders Pvt Ltd v. Delhi Municipal Corporation and Another (Civil Writ No. 17 of 1977 decided on 3.8.1977) 1978 Tax L.R. 32 (as he then was) clearly held in a more or less similar case that the property tax is livable under the Delhi Municipal Corporation Act,1957 in respect of the lessee's interest not withstanding the provisions of Article 285 of the Constitution and Section 119 of the Act. In that case, the petitioner had acquired a lease-hold right by public auction in certain land on payment of certain consideration. It was held by the learned Judge that the property which continued to belong to the Union, but which was either leased or auctioned and where some subordinate interest is transferred and the property was not exempt from property tax. The definition of 'land' in Section 2(24) of the Act shows that when say, only a lease is created to a person by the Union, i.e. a person becomes a lessee of the Union Government and a leasehold interest is transferred to the lessee and such person could thereafter be made liable to pay property tax in respect of his leasehold interest in the land and such a levy is not prohibited either by Article 285 of the Constitution or Section 119 of the Act. The said holder of subordinate rights cannot claim any exemption and has to pay the tax on the value of the interest transferred to him.
(21) In the present case before us, the lease being a perpetual lease with a right to make constructions on the property and a right to sub-lease the same and make constructions and without any right to resume it during the currency of the perpetual lease is different from the allottee in the Calcutta case. Further, we prima facie agree with the view of D.K. Kapur, J (as he then was) and hold that there is no question of any exemption either under Article 285 or Section 119 of the Act.
(22) In this context, we may also refer to the Judgment of the Andhra Pradesh High Court decided by a Division Bench comprising of Jeevan Reddy, J (as he then was) sitting along with Madhava Rao, J in Electronics Corporation of India Ltd v. The Secretary, Revenue Department, Govt. of A.P, Hyderabad and others : AIR1983AP239 . In that case the Government of India leased out lands to the E.C.I.L. and thereafter the E.C.I.L. raised buildings thereupon and tax was sought to be levied under the A.P. Non Agricultural Lands Assessment Act, 1963 passed by the State Legislature. The Court held that the levy on the use of the land by the lessee was not covered by Article 285 of the Constitution. In that context, Jeevan Reddy, J (as he then was) placed reliance upon the two English cases decided by the Privy Council Smith v. Vermillion Hills Rural Council (supra) and City of Montreal v. Attorney General for Canada (supra).
(23) We have already stated that in the Calcutta case though the two English cases were referred to as part of the arguments, they were not considered in the operative part of the Judgment. For the aforesaid reasons, we are, prima facie, unable to accept the first contention of the learned counsel for the petitioner.
(24) So far as the second contention is concerned, it turns upon the exemption provided by Section 115(4) of the Delhi Municipal Corporation Act,1957. The provision reads as follows:-
'115(4)Save as otherwise provided in this Act, the general tax shall be levied in respect of all lands and buildings in Delhi except- (a) lands and buildings or portions of land exclusively occupied and used for public worship or by a society or body for a charitable purpose : Provided that such society or body is supported wholly or in part by voluntary contributions, applies its profits, if any, or other income in promoting its objects and does not pay any dividend or bonus to its members.'
Explanation : 'Charitable purpose' includes relief of the poor, education and medical relief but does not include a purpose which relates exclusively to religious teaching. '
(25) From the aforesaid proviso it is clear that the proviso requires that the society or body is to be supported wholly or in part by voluntary contributions and that the society or body applies its profits,if any, or other income for promoting its objectives and does not pay any dividends or bonus to its members.
(26) Learned counsel for the petitioner could not: place before us any material to show that the petitioner-society was a body which is supported wholly or in part by voluntary contributions. In fact, the order of allotment made by the Government of India and the memorandum of association show that the India Habitat Centre could develop the land by receiving money for construction from various institutions and then it could allot the space to them - vis-a-vis the India Habitat Centre and the said institutions, they would be in the position of lessee and sub-lessees. All the charges and expenditure have to be borne by the India Habitat Centre, though. it could claim contribution from its sub-lessees. We have referred to the relevant clause in the earlier part of this order. In fact, the founding the birth of the India Habitat Centre or its continued existence is not supported wholly or in part by voluntary contributions.
(27) Learned counsel for the petitioner,however, submitted that in this writ petition we are concerned only with the levy of property tax on the land. It is only after the buildings are constructed and fully occupied and the India Habitat Centre is making profit, then the question would arise as to whether it could apply its profits to charitable purposes. The aforesaid submission, in our view, ignores the word supported which occurs in the first part of the proviso as distinguished from the other words applies its profits. We may state that the exemption is not granted unless firstly the society is supported by voluntary contributions, and secondly it also applies its profits for charitable purposes. There is no material to show that it is supported by voluntary contributions for its birth or continued existence. Even the argument relating to the application of profits is,prima facie, not correct. It is true that unless the buildings are completed and occupied, the question of earning profits might not arise so that the profits could be used for charitable purposes. But in this context, reference has to be made to the letter of the Union of India dated 6.10.87 (Ex P-4) addressed to the Hudco while adverting to the India Habitat Centre it says that the India Habitat Centre is a non-profit making organisation We, there- fore, prima facie, fail to see as to how the Habitat Centre could, even after completion of entire construction, make profit for the purpose of charity. If profits are earned, it may violate the conditions of loan taken from the Hudco as stipulated in the orders of Government. We hold thereforee that, prima facie, the latter part of the proviso in Section 115(4) is also not attracted.
(28) Reliance is placed on the order of the Income Tax authorities dated 28.1.94 (Ex P-5) stating that the activities of the petitioner are charitable within the meaning of Section 2(15) of the Income Tax Act. But it was pointed out by the Municipal Corporation in the impugned order dated 6.6.94 (Ex P-17) that the distinction between the definition of charitable purpose in the Income Tax Act and Delhi Municipal Corporation Act as held by the Supreme Court in the case of M.C.D. v. Children Book Trust : [1992]2SCR535 which reads as under :-
'THE ruling arising out of Income Tax Act may not be of great help because in the Income Tax Act 'charitable purpose' includes the relief of the poor, education, medical relief and the advancement of any other object of general public utility. The advance of any other object of public utility is not found under the Delhi Municipal Corporation Act. In other words, the definition is narrower in scope.'
(29) Yet another contention was raised relying upon certain observations in the above said ruling of the Supreme Court to say that the petitioner must make profit for 5 years and till then Section 115(4) exempts the petitioner. We have already held that the proviso to Section 115 (4) is in two parts. We have held the first part is not satisfied. So far as the second part is concerned, in our opinion, the particular sentence from the decision of the Supreme Court is in fact against the petitioner. It says that even where an institution claims to be using its income for charitable purposes in a particular year, it cannot get the benefit unless for a continuous period of at least 5 years it is able to show that its income is being utilised for charitable purposes so as to claim the benefit under Section 115(4).
(30) We fail to see how allotment of space to All India Brick & Tile and other institutions could amount to either supporting the India Habitat Centre by voluntary contributions or application of its profits for charitable purposes. It is to be noted that one of the objects of the India Habitat Centre is the object relating to promo- corporation of education, research, training and professional development on habitat and human settlement and environment related issues but that is only one among the 15 other objects of the India Habitat Centre. We cannot, thereforee, say that the India Habitat Centre is mainly established by voluntary contributions for charitable purposes so as to attract Section 115(4) of the Delhi Municipal Corporation Act,1957. In fact, not even a single contribution of donation made by any of these sub-lessees has been brought to our notice. We, thereforee, reject the second contention.
(31) The third point raised is that the amounts have to be collected from the various institutions to whom accommodation has been allotted by the India Habitat Centre. We have already pointed out that as per the clause 3 of the memorandum of association read with order of allotment dated 2.5.88, the India Habitat Centre is a perpetual lessee and it is this interest which is now being assessed for property tax. It may be that it has its own sub-lessees from whom it has collected the cost of land, development, construction and maintenance. Clause 3 (b) of the memorandum of association says that the allottees (sub-lessees) shall also pay to the Centre, the maintenance and other charges as may be determined and demanded by the Council from time to time. In other words, the lessee's interest in the land allotted on a perpetual lease is vested in the India Habitat Centre which can be assessed without resorting to sub-lessees. This is not a case where the Habitat Centre is allowed to transfer the rights as perpetual lessee in toto, to the subsequent allottees. The allottees of the Habitat Centre as approved by the Government, are nor by themselves perpetual lessees of the Government of India. They are sub-lessees vis-a-vis the Government. The interest of perpetual lessee continues in the Habitat Centre, not withstanding the sub-lessees and the interest of the Habitat Centre as perpetual lessee and be taxed as one single unit. We reject the third contention.
(32) We, thereforee, hold that no prima facie case is made for grant of stay of recovery of the property tax.
(33) Whatever we have stated in this order will not however come in the way of adjudication of the Writ petition on its merits. In the circumstances of the case, the impugned Warrants of Distress dated 1.7.94 (Exs P-20 and P-21) shall not be executed, provided the petitioner pays to the M.C.D. 1/2 of the demand within two months from today and the other half within two months thereafter. Subject to the above conditions, the C.M. is dismissed