Akruti Nirman Pvt. Ltd. and anr. Vs. Brihanmumbai Mahanagar Palika and anr. - Court Judgment

Deshpande D.G., J.

1. Heard learned Counsel for the parties.

2. The appeal is filed by the builder challenging the order of the Additional Chief Judge of Small Causes Court dated 31-3-2000 in Appeal No. 19 of 2000 under Section 217 of the Mumbai Municipal Corporation Act, 1888, and in which the order of assessment passed by the respondents Officer on 10-8-1999 was in question. That order of the respondents was refusal to entertain the complaint of the appellants and confirming rateable value.

3. Following are the facts giving rise to the disputed question :

A huge slum was existing on plot bearing C.T.S. Nos. 426 (part) 428 to 430, 432 to 437, Saiwadi Village, Andheri (East), Mumbai, K/East Ward. It was proposed to implement a scheme for slum rehabilitation by the Government of Maharashtra under Development Control Rules, 33(5) to 33(1). The letter of intent therefore was given by the SRA-Slum Rehabilitation Authority to the appellants. The entire land on which the slum was situated was owned by the Government of Maharashtra. The property vested in the Government of Maharashtra.

4. The Slum Rehabilitation was to be done pursuant to the Letter of Intent in accordance with the terms and conditions mentioned therein and appellants got necessary authority from SRA in that regard. There were more than 1000 occupants or dwellers of the slum and as part of the development project, this slum dwellers had to be provided alternate transit accommodation, their slums or houses were to be demolished, new buildings were to be constructed and all those slum dwellers, to whom alternate transit camp was provided were to be housed in the new buildings. Society for each of the building was to be formed to whom the maintenance of each building was entrusted. Therefore, the question that arises is whether under a Rehabilitation Scheme at the instance of SRA where the plot belongs to the Government, the builder to whom the rehabilitation work is entrusted by SRA, is liable to pay property tax in respect of the transit camp accommodation constructed by him for the slum dwellers.

5. Before considering the aforesaid issue, the facts which are not disputed or were admitted, are required to be noted.

They are that the aforesaid CTS numbers were and are the property of the Government of Maharashtra; it is declared as a slum, SRA Authorities constituted; land vests in the SRA Authority who alone can develop it; that the development is carried by the appellant as per the D.C. Rules 33(5) to 33(10); the transit temporary accommodation is to be purely of a temporary nature and for temporary period i.e. till buildings are constructed and slum dwellers are rehabilitated in those buildings and that transit camp accommodation is constructed with kacha material and there were 326 tenants in the transit camp and the question is whether the builders-appellants are liable to pay taxes as per the order dated 10-8-1999.

6. Before the lower Court the appellants examined one witness Ramani who was Manager of the appellant No. 1 since 1997 and respondents examined Ankush Sawant who was working in K/E ward of B.M.C. It is true that the question involved is basically a question of law but evidence adduced by the parties is of the following nature.

7. Ramani has stated in his evidence that SRA gave the property to them for development pursuant to letter of intent dated 3-12-1998, they were asked by this letter to rehabilitate the slum dwellers at Gaiwadi. Accordingly, the transit camp was constructed for the slum dwellers, the slum property i.e. plot belongs to the Government of Maharashtra. The slum was existing on that plot and the appellants are not liable to pay taxes to the respondents as the property belongs to the Government of Maharashtra. He produced copy of the Government Gazette dated 6-7-1998 at Exhibit 'H', where the appeal property is shown at Sr. No. 14. He stated that slum dwellers were shifted to transit camp and the area which the appellants got for development, buildings were constructed and the persons in transit camp were shifted to the newly constructed buildings. He also produced the guidelines which were given to the appellants by the SRA at Exhibit 'J'. In the cross-examination Ramani has stated that the premises are transit camp, construction is of temporary nature, cost was borne by the appellant No. 1. Rooms of the transit camp were having AC sheets roof and some of G.I. Sheets, walls were of thick A.C. sheets, and the frame were of steel angles and angles were fixed to channel, flooring is of cement. There is not much effective cross-examination of this witness.

8. Then the respondents B.M.C. examined Ankush Sawant who was their Deputy Superintendent. He has stated that he visited the transit camp, he admitted that the property stands in the name of the Government of Maharashtra-SRA Authority. It was occupied through appellant No. 1 and he had given description and the nature of transit camp and then he has stated that he has proposed rent of Rs. 50/- per month for each room on the presumption that the cost of construction may be Rs. 5,000/-. He then submitted the proposal in writing in T.W.R. He was cross-examined by the appellants and in cross-examination he again stated that the appeal property stands in the name of the Government of Maharashtra in the Assessment book, occupier shown as appellant No. 1; as the project is developed by the appellant No. 1 and the person who is in possession of the property is the occupier.

9. He further admitted that appeal property is a transit camp and there is no question of giving it on rent. The transit camp was constructed for accommodating hutment dwellers for the time being and after the construction of the building the person who are in transit camp will have to be shifted. He admitted that the transit camp was constructed for Saiwadi property i.e. Saiwadi slums. He admitted that he decided the price of each room as Rs. 5,000/- but he had no proof or supporting evidence in that regard. He admitted that there were 326 rooms in the 5 buildings of the transit camp and was always aware of slum scheme of the appellants. It was for accommodation of hutment dwellers. He was confronted with Exhibit 'D' which was notice issued by the Corporation and all were members of SRA but he stated that the name of the appellants was added because the transit camp was in their possession. He could not say whether the appellants was liable to pay taxes. He admitted that Exhibit 'D' notices were not served on the appellant No. 1 as the plans were sanctioned in the name of SRA. According to him transit camp is in possession of the appellant No. 1 but the possession was taken for development.

10. It is in this background and the submissions made by both the Advocates the lower Court i.e. Additional Chief Judge of the Small Causes Court, Mumbai, dismissed the appeal and the first appeal is an outcome of the said order. Therefore, the question involved is whether under a Rehabilitation Scheme at the instance of SRA where the plot belongs to the Government, the Builder to whom the rehabilitation work is entrusted by SRA, is liable to pay property tax in respect of the transit camp accommodation constructed by him for the slum dwellers.

11. Mr. Nakhwa strenuously urged on the basis of guidelines for implementation of SRA scheme, about which no dispute was raised by Mr. Sakhare, and provisions of Slum Rehabilitation Act and the B.M.C. Act that impugned order of holding the appellants liable to pay taxes for the slum area, in the aforesaid circumstances and background, was totally and completely illegal. He contended that if the order is allowed to remain in force that will seriously and severally affect all the cases in Mumbai for Slum Rehabilitation cases. If builders are held liable to pay taxes then for transit camp accommodation either they will desist from taking part in the scheme or they will pass on their liability to the purchasers of the flat in the said scheme. He also stated that there is no legal basis for imposing and recovering taxes on transit camp accommodation.

12. On the other hand Mr. Sakhare for B.M.C. contended that appellants were occupiers or persons in possession of transit camp and Corporation was entitled to impose taxes on all buildings whether permanent or temporary and therefore according to him the impugned order did not call for any interference. This in short is the case of the parties, but I will refer to their respective arguments at an appropriate stage.

13. The SRA scheme being the basis of slum development. The object of the said scheme given in guidelines is as under :

'...a comprehensive slum rehabilitation scheme by introducing an innovative concept of using land as a resource and allowing incentive Floor Space Index (FSI) in the form of tenements for sale in the open market, for cross-subsidisation of the slum rehabilitation tenements which are to be provided free to the slum dwellers.'

While preparing the scheme if was noted that such a scheme can only be implemented on slums situate in State Government, Municipal Corporation and housing board lands which did not have a non-confirming reservation like play ground, recreational grounds, schools, hospital etc. Then the observations of Afzulpurkar Committee which recommended slum rehabilitation scheme to the Government have been noted in the said guide-lines. They are as follows :-

'The slums and hutment dwellers of unauthorised structures form an integral part of this vibrant metropolis. All of them undoubtedly have a share in the growth, status and prosperity of this great city. They have had and continue to have a share in building up and maintaining the commercial, industrial and economic importance of Brihan Mumbai. A large percentage of them belong to the Scheduled Castes and Scheduled Tribes. We cannot be oblivious of the fact that slum dwellers have not willingly chosen their shanty structures and unhygienic environment but have been driven to this option due to compelling circumstances as they were thrown out of the formal housing sector, the latter being unavoidable and much beyond their income levels. It is imperative to enhance their standard of living and for which an authorised dwelling unit is a first step in the right direction. This, in turn, will bring about a marked improvement in their hygiene and health as well as raise the level in public hygiene which has fallen to very low ebb. For lifting them from their present levels, cross-subsidisation of the cost of their dwelling units and allotting them free of charge, though not supported by housing philosophy, had become a necessity and a cure in the given situation. The slum dwellers deserve this preferential probably unequal treatment to bring them into the mainstream of social, cultural and economic fabric of this pulsating City. As someone aptly put 'if inequality has to be removed, there have to be unequal laws.' 'The study group has relied heavily on this philosophy'.

14. It is necessary now to refer to the provisions regarding property tax in. The Mumbai Municipal Corporation Act, 1888 (hereinafter referred to as the MMC Act). Chapter VIII of the said Act provides for Municipal Taxation. Section 139 provides that for the purpose of this Act taxation shall be imposed as follows :--

1. Property Tax.

Section 140 provides what shall be the property tax i.e. water tax, additional water tax called as Water Benefit Tax, sewerage tax and sewerage benefit tax, and general tax as per Sub-section (c) a general tax of not less than eight and not more than fifty six percentum of their rateable value, together with not less than one eight and not more than five per centum of their rateable value added thereto in order to provide for the expense necessary for fulfilling the duties of the Corporation arising under Clause (k) of Section 61 and Chapter XIV, then education cess, then street tax and betterment charges.

Explanation of Section 140 provides that expression 'building' includes a flat, a gala, a unit or any portion of the building.

Section 143 provides that general tax shall be levied in respect of buildings and lands in Mumbai. Section 143 reads thus :

' 143. General Tax on what premises to be levied. - (1) The general tax shall be levied in respect of all buildings and lands in (Brihan Mumbai) except -

[(a) buildings and lands or portions thereof exclusively occupied for public worship or for charitable purposes;]

(b) buildings and lands vesting in (Brihan Mumbai) (used solely for public purposes and not used or intended to be used for purposes of profit) or in the Corporation, in respect of which the said tax, if levied, would under the provisions hereinafter contained be primarily leviable from the (Government) or, the Corporation, respectively; [(c) such buildings and lands belonging to any Diplomatic or Consular Mission of a foreign State as Government may by general or special order specify in this behalf.)]

(2) The following buildings (and lands or portions thereof) shall not be deemed to be *** exclusively occupied for public worship or for charitable purposes within the meaning of Clause (a) namely :-

(c) (those) in which any trade or business is carried on; and

(d) (those) in respect of which rent is derived whether such rent is or is not applied exclusively to religious or charitable purposes.

(3) Where any portion of any building or land is exempt from the general tax by reason of its being exclusively occupied for public worship or for charitable purposes, such portion shall be deemed to be a separate property for the purpose of municipal taxation.

Section 144 lays down the procedure regarding payment to be made to the Corporation in lieu of general tax by the Central Government/State Government.

Section 146 lays down that primarily liability of property tax shall be leviable from the actual occupier of the premises upon which the said taxes are assessed, if such occupier holds the said premises immediately from (the Government) or from the Corporation or from fazendar.

Then Sub-section (2) lays down : Otherwise the taxes shall be primarily leviable as follows :

(a) If the premises are let, from the lessor;

(b) if the premises are sub let, from the superior lessor; and

(c) if the premises are unlet, from the person in whom the right to let the same vests.

Section 154 provides as to how the rateable value has to be determined.

Section 3 of the MMC Act is about definition of different terminologies.

Owner' is defined in Sub-section (m), the same reads as under :

'A rent farmer who has takes a lease of a house from its owner on certain terms, comes with the definition of the word 'owner' within the definition of that word in Section 3(m) of the City of Bombay Municipal Act, as he receives the rent of the premises, and as such he is liable to comply with any requisition of the Municipality under Section 248 of the Act.''Building' is defined in Sub-section (s), the same reads as under :

'building' includes a house, outhouse, stable, shed, hut (tank except: tank for storage of drinking water in a building or a part of a building) and every other such structure, whether of massonary, bricks, wood, mud, metal or any other material whatever.''Temporary building' is defined under Sub-section (sb), the same reads as under :

'Temporary building' means any building which is constructed principally of mud, leaves, grass, cloth, thatch, wood, corrugated iron or asbestos cement sheets or such other material and includes a building of what-ever size constructed of whatever material which the commission has allowed to be built as a temporary measure.'Tenement is defined in Sub-section (sa), the same reads as :

'tenement' means a building or a part of a building, other than a temporary building or a part thereof, let or intended to be let or occupied separately.'Premises are defined in (gg), the same is as under : 'Premises' includes messuages, buildings and lands of any tenure, whether open or enclosed, whether built on or not and whether public or private.'

From the aforesaid provisions, it is clear that Municipal Corporation is entitled to recover taxes on buildings which is called property tax. Section 154 lays down that it, is with reference to building or land assessable to a property tax. Therefore the question is whether temporary transit camp accommodation could be said be taxable in the aforesaid legal provisions.

15. Mr. Sakhare drew my attention in this regard to Section 154(3)(c) and the Explanation and according to him the liability of the tax is of the builder under Section 146(3), which reads as under :

'But if any land has been let for any terms exceeding one year to a tenant, and such tenant or any person deriving title howsoever from such tenant has built upon the land, the property taxes assessed upon the said land and upon the building erected thereon shall be leviable primarily from the said tenant or such persons, whether or not the premises be in the occupation of the said tenant or such person.'

16. Mr. Sakhare, also contended that the appellant is a developer and is not doing business for charity. He will be earning profit out of this business and for all purposes the builder has to be considered as an occupier of the building because it is a commercial activity. He further contended that if the transit camp accommodation was for residence, the B.M.C. could levy taxes under Sections 154 and 143(c).

17. As against this, Mr. Nakhwa contended that when transit camp accommodation is provided to hutment dwellers, the appellants cannot be considered as an occupier because after construction he has no control over the transit camp accommodation. Secondly, the appellant was not legally entitled to recover or take or accept any rent or charges from those occupiers of the transit camp. The transit camp were purely of temporary nature and it was constructed as a statutory liability imposed upon the builder under a SRA scheme and duration of the transit camp was temporary because they were to be re-housed in the newly constructed building and then the transit camp to be destroyed or demolished if so required. He also contended that appellant could not be said to be the owner of the transit camp i.e. either of the transit camp or the newly constructed building for the slum dwellers because the land was of the Government and the building is to be given to the slum dwellers in lieu of transit camp to be of the slum dwellers co-operative society. Therefore, according to Mr. Nakhwa the Builder has no right whatsoever in the transit camp accommodation and he constructs them as a statutory responsibility imposed upon him for implementation of the SRA Scheme.

18. Both the Advocates Mr. Nakhwa and Mr. Sakhare relied upon certain Authorities in respect of their contention.

19. Mr. Nakhwa relied upon the judgment of the Supreme Court reported in 2001(2) Supreme Court Cases 633, Delhi Golf Club Ltd. and Anr. v. N.D.M.C. In that case so far as Punjab Municipal Act Section 61(1)(a) was concerned, it was about the property tax levied qua the ownership of the property within the Municipal limits. The tax was also payable by the tenants in perpetuity where there was Periodical lease with renewal from time to time. Then the Supreme Court held that it did not constitute lease in perpetuity and the Supreme Court found that where the Government of India, Ministry of Urban Development was the owner of the property in question and has granted lease of property to Delhi Gold Club Limited for a particular period and renewed the lease from time to time to retain absolute power to terminate lease and resume possession as and when required. The view that the Club would constitute owner for purpose of levy in question did not either sound too reason or could be said to be in conformity with the statutory provisions in force and therefore could not be accepted.

20. Mr. Nakhwa therefore contended that in view of the aforesaid decision that when admittedly the land where the slum was being developed was of the Government and the transit camp was purely of temporary nature, purpose and object, and when the appellant was neither the owner of the land nor the owner of the transit accommodation then the appellant builder could not be made liable for payment of taxes.

21. Mr. Nakhwa also relied upon the judgment of the Supreme Court reported in : [1969]3SCR565 , National and Grindlays Bank Ltd. v. Municipal Corporation for Greater Bombay. The question involved in that appeal was whether the primary liability is imposed upon the appellant i.e. National and Grindlays Bank Ltd. under the MMC Act to pay property taxes to the Municipal Corporation of Greater Bombay in respect of the land owned by the appellant and let on a monthly basis to a third party who has constructed a building thereon. After considering relevant provisions under Sections 140, 146, 147, 155 the Supreme Court held '.. In the first place, that Section 146(2) indicates that Legislature contemplated that in a case where the land and the building are owned by the different persons there should be a composite assessment of property tax.' Supreme Court further held that in case of such a composite unit primarily liability of assessment of taxes is intended to be on the lessor of the land under Section 146(2)(a) of the Act. Reference was also made to the judgment of the Division Bench of this Court reported in : (1954)56BOMLR1132 in Ramji Keshavji v. Municipal Corporation of Greater Bombay, wherein it was held 'that the owner of the land had leased it to a tenant for a period of one year and the tenant had put up a structure constructed thereon, the owner was primarily liable to pay the property tax together with the structure constructed thereon.

22. Therefore Mr. Nakhwa contended that if the State Government was the owner of the land then the tax was to be paid by the Government and not by the appellant.

23. As against this, Mr. Sakhare relied upon a judgment of the Supreme Court reported in : AIR1991SC1362 , Municipal Corporation of Greater Bombay v. New Standard Engineering Co. Ltd. In that case Section 154(3) of MMC Act was involved which provided (a) for rateable value as to how rateable value to be fixed in respect of a building if the building was owned by or belonging to the Government or Housing Board of other similar Body or as per (b) constructed, purchased or occupied on or after the 1st day of April, 1947 as part of a recognized scheme of subsidised housing for industrial workers or persons belonging to lower income groups or poorer classes, and in the Explanation it is stated that '...recognized scheme of subsidises housing for industrial workers.... shall mean such scheme as may be recognized by the State Government from time to time in this behalf, after consultation with the Corporation.' In that, case building was constructed by the respondent New Standard Engineering Co. Ltd. as part of a Government scheme of Subsidised scheme for Industrial Workers. But the question was whether it was a recognized scheme as provided under Sub-section (3)(b) of Section 154.

24. In my opinion, this judgment is of no help because it was not argued by any of the parties before me that the present scheme required any consultation of the Corporation by the Government. The scheme for slum developers is under SRA scheme having its statutory origin and it was a statutory obligation of the builder to provide transit camp accommodation and all the rights in that regard were vested with SRA Authority.

25. Then Mr. Sakhare also relied upon the judgment of the Supreme Court reported in : AIR2003SC2998 , Municipal Corporation of Greater Mumbai and Anr. v. Kamla Mills Ltd. In that case question was about fixing the property taxes and what could be the basis for rateable value.

26. In my opinion, that judgment is of no help to Mumbai Municipal Corporation because the question involved in this appeal is whether the appellants are liable to pay the taxes.

27. Considering therefore this legal position, what is clear is that the temporary transit accommodation is of purely temporary nature. It is a temporary structure or it is a temporary building. Builder is not the owner of the transit camp accommodation. Fie is neither occupier thereof, he is not lessor of the transit camp accommodation because he cannot recovery any rent, he constructs transit camp accommodation as a statutory liability, the transit camp accommodation under the SRA scheme is for the benefit of the slum dwellers and the benefit is to provide them temporary roofs above their head till the buildings are constructed at the slums. The builder appellant does not recover and was not recovering any rent, the land belongs to and is owned by the Government, therefore this is a case where the appellant cannot be held liable to pay taxes. None of the sections regarding tax, as referred by me, bring the case of the Corporation anywhere near to fixing the liability of the appellant for payment of tax for transit camp accommodation. He cannot recover any charges from the occupants of the transit camp accommodation.

28. Mr. Nakhwa drew my attention to this particular scheme published in the Government Gazette dated 15-10-1997 wherein Item No. 4 Temporary Transit Camps, it is laid down that the temporary transit camp shall be provided on or close to the site itself, and if need be on the rear of statutory open space to be left in accordance with D.C. Regulation No. 23. Then he also drew my attention to G.R. dated 24-10-1995 wherein CHAPTER I-A 4(d) provides for provision relating to transit accommodation pending development of the slum rehabilitation area and allotment of tenements on development to the occupants of such area, free of cost.

29. Mr. Nakhwa therefore contended that when the persons shifted to transit camp accommodation are to be provided free of cost accommodation in the newly constructed building and when the appellant working under the SRA scheme cannot charge anything from the occupants, then for all the reasons stated by him transit camp accommodation cannot be the subject of property tax.

30. In view of these facts, I pass the following order :

ORDER

The appeal is allowed.

Impugned order dated 31-3-2000 passed by the Additional Chief Judge, Small Causes Court, Mumbai, in Municipal Appeal No. 19 of 2000 is set aside.

Appeal, filed by the appellants before the Additional Chief Judge, Small Causes Court, Mumbai, vide Appeal No. 19 of 2000 is allowed as prayed and the order Exhibit 'C' dated 10-8-1999 confirming rateable value at Rs. 1,76,040/- net per annum with effect, from 1-12-1998 as per Exhibits A and C, is set aside.

No order as to costs of this appeal.

After this order was pronounced, Counsel for the B.M.C. requested for staying the operation of this order. There is nothing to stay the order and the case does not call for. Hence, prayer rejected.