OF 2022 (arising out of SLP (C) No 25687 of 2019) and CONTEMPT CIVITION (C) NO. The Municipal Corporation of Greater Mumbai (“the Corporation” for short) has been established and discharging its duties under the MMC Act. The amendment incorporated an option and empowered the Corporation to levy property tax on the basis of capital value as an alternative to the earlier method of levying property tax on the basis of rateable value.
Section 154 of the Act provides the method of fixing rateable value of any buildings or lands assessable to property tax. On account of these decisions the annual rent to be taken into account for fixation of rateable value of any buildings or lands has been pegged down to the standard rent of any buildings or lands according to the provisions of the Rent Control Acts. Because of the limitations or restrictions brought into play by the provisions of the Maharashtra Rent Control Act, 1999 and the various judgements of the Court in respect of fixation of rateable value for the purpose of levy of property taxes a lot of subjectivity has crept into the system by which the rent of buildings or lands is determined. Due to such restrictions or limitations the income of the Corporation from property tax has remained static.
After studying various systems available for assessment of property taxes within and without India, they have recommended that Capital Value Based System of Assessment in place of the Annual Rental System may be adopted, as according to them the trend in property tax practices in developing countries is to move away from the Annual Rental Value base to Capital Value base. The highlights of the system recommended by the Tata Institute of Social Sciences is the shift from Annual Rental Value to Capital Value as the base for the purpose of levy of property taxes at a certain rate which may be determined by the Corporation and such value is proposed to be adopted as the value of any buildings or lands as is indicated in the Stamp Duty Ready Reckoner for the time being in force as prepared under the Bombay Stamp (Determination of True Market Value of Property) Rules, 1995 and the capital value of the property could then be computed by applying thereto factors such as location, carpet area, type of construction, age of property and user thereof. III of 1888) proposed in this Bill are intended to achieve the above-mentioned objectives.” The MMC Act was, thereafter, amended by successive amendments as a result of which newly introduced Section 154(1A) and (1B) MMC Act now authorizes Municipal Commissioner to fix the Capital Value of land and building with the approval of the Standing Committee. Fines collected under section 83 shall be credited to a separate fund to be called “the Fines Fund” the proceeds of which shall be expended in promoting the well-being of municipal officers and servants other than those appointed under the provisions of Chapter XVIA of this Act, and for the payment of compassionate allowances to the widows of such officers and servants who die while in municipal service and to such other relation of the officers and servants as the corporation may from time to time determine.
The Commissioner shall on or before each fifth day of February, have prepared and lay before the Standing Committee, in such form as the said Committee shall from time to time approve, — (1) (a) an estimate of the expenditure which must or should, in his opinion be incurred by the corporation in the next ensuing Official Year, other than— ***** (ii) expenditure to be incurred by reason of the obligations imposed on the corporation arising out of the transfer to the corporation of the powers, duties, assets and liabilities of the Board of Trustees for the improvement of the City of Bombay constituted under the City of Bombay Improvement Trust Transfer Act, 1925 13 or for any of the purposes of Chapter XII-
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A; and (iii) expenditure to be incurred on account of the Brihan Mumbai Electric Supply and Transport Undertaking; (iv) expenditure to be incurred for the purposes of clause (q) of section 61; (v) expenditure to be incurred for the purposes of Chapters IX and X; (b) an estimate of the balances, if any (other than balances) shown in the accounts maintained under sections 123A and 123C which will be available for re-appropriation or expenditure at the commencement of the next ensuing official year; (c) an estimate of the corporation’s receipts and income for the next ensuing official year other than from taxation and from the Brihan Mumbai Electric Supply and Transport Undertaking and other than that referred to in clause (c) of sub- section (2) and in clause (d) of section 126C and in section 126E; (cc) an estimate of the amount due to be transferred during the next ensuing official year to the municipal fund under the provisions of sections 460KK and 460LL; (d) a statement of proposals as to the taxation which it will, in his opinion, be necessary or expedient to impose under the provisions of this Act in the next ensuing official year; (2) Fixing rates, of municipal taxes and of fares and charges of “Brihan Mumbai Electric Supply and Transport Undertaking ” (1) The Corporation shall, on or before the twentieth day of March after considering the Standing Committee’s proposals in this behalf, — (a) determine, subject to the limitations and conditions prescribed in Chapter VIII, the rates at which municipal taxes shall be levied, and the articles on which octroi shall be levied, in the next ensuing official year: Provided that, the Corporation may determine different rates of property taxes for different categories of users of a building or land or part thereof; and (b) approve, subject to the limitations and conditions which may have been prescribed by or under any of the enactments or any licence referred to in clause (i-a) of sub- section (2) of section 126B, the rates at which the fares and charges in respect of the Brihan Mumbai Electric Supply and Transport Undertaking shall be levied. (3) Notwithstanding anything contained in sub- sections (1) and (2), the Corporation may, at any time during the official years 2010-2011, 2011- 2012 and 2012-2013 determine, separately for each of the said three years, the rates of property taxes for different categories of users of a building or land or part thereof. (4) Save as otherwise provided in this Act, it shall be lawful – for the Corporation to levy all property taxes on the rateable value of buildings and lands until the Corporation adopts levy of any or all the property taxes on such buildings and lands on the capital value thereof under section 140A. (1) The following property taxes shall be levied on building and lands in Brihan Mumbai, namely: – (a) (i) the water tax of so many per centum of their rateable value, or their capital value, as the case may be, as the Standing Committee may consider necessary for providing water supply; (ii) an additional water tax which shall be called ‘the water benefit tax’ of so many per centum of their rateable value, or their capital value, as the case may be, as the Standing Committee may consider necessary for meeting the whole or part of the expenditure incurred or to be incurred on capital works for making and improving the facilities of water-supply and for maintaining and operating such works; Provided that all or any of the property taxes may be imposed on a graduated scale. (2) Any reference in this Act or in any instrument to a water tax or a halalkhor tax shall after the commencement of the Bombay Municipal Corporation (Amendment) Ordinance, 1973, be construed as a reference to the water tax or the water benefit tax or both or the sewerage tax or the sewerage benefit tax, or both as the context may require; 140A. (1) Notwithstanding anything contained in section 140 or any other provision of this Act, the Corporation may pass a resolution to adopt levy of property tax on buildings and lands in Brihan Mumbai on the basis of capital value of the buildings and lands on and from such date, and at such rates, as the Corporation may determine in accordance with the provisions of section 128: Provided that, for the period of five years from the date on and from which such property tax is levied on capital value, the tax shall not: (a)exceed, – (i) in respect of building used for residential purposes, two times, and (ii) in respect of building or land used for non- residential purposes, three times, and (b)where the tax so levied on any building or land, whether used for residential or for non-residential purposes, gets reduced, be less than half of the amount of the property tax leviable in respect thereof in the year immediately preceding such date: shall not exceed, – (i) in respect of building used for residential purposes, two times, and (ii) in respect of building or land used for non- residential purposes, three times, the amount of the property tax leviable in respect thereof feet) or less, shall not exceed the amount of property tax levied and payable in the year immediately preceding the year of such adoption of capital value as the basis. (2) Notwithstanding anything contained in sub-section (4) of section 139A or any other provisions of this Act or Resolution, if any, passed by the Corporation for adopting the levy of property tax on the basis of capital value but subject to the provisions of section 154A, buildings and lands in respect of which the process of fixing capital value is in progress on the 26th August 2010, being the date of coming into force of section 3 of the Maharashtra Municipal Corporations and Municipal Councils (Third Amendment) Act, 2010, until it is so fixed, the tax leviable and payable in respect of such buildings and lands shall provisionally be equal to the amount of tax leviable and payable in the preceding year, that is to say, for the year commencing on the first day of April 2009 and ending on the thirty-first day of March 2010 and such provisional tax shall be leviable and payable for each of the years 2010-2011, 2011-2012 and 2012-2013, according to the provisional bills which may be issued separately for each such year; so, however, that on fixation of capital value of the respective buildings and lands, final bill of assessment of property taxes on the basis of capital value may then be issued for each such year aforesaid. (2A) Notwithstanding anything contained in sub-section (1) or (2) or any other provisions of this Act, the tax on buildings and lands, which are liable to be assessed for the first time on or after the 1st April 2010, shall provisionally be equal to the amount of tax, as if such buildings and lands are liable to be assessed in the year 2009-2010; and on ascertainment of the capital value of such ‘buildings and lands, the corporation may issue a final bill in respect of the years for which they are liable to be assessed, on the basis of capital value thereof and accordingly it shall be the duty of the owner and occupier of such buildings and lands to pay such tax within the period specified in the final bill issued as aforesaid.
Explanation.- For the purposes of this section, after the Corporation adopts the Capital Value as the basis of levy of property tax, the property tax in respect of any taxable building shall be revised after every five years and on each such revision, such amount of property tax, shall not in any case exceed the forty per cent of the amount of the property tax levied and payable in the year immediately preceding the year of the revision. (1A) In order to fix the capital value of any building or land assessable to a property tax the Commissioner shall have regard to the value of any building or land as indicated in the Stamp Duty Ready Reckoner for the time being in force as prepared under the Bombay Stamp (Determination of True Market Value of Property) Rules, 1995, framed under the provisions of the Bombay Stamp Act, 1958, as a base value or where the Stamp Duty Ready Reckoner does not indicate Value of any properties in any particular area wherein a building or land in respect of which capital value is required to be determined is situate, or in case such Stamp Duty Ready Reckoner does not exist, then the Commissioner may fix the capital value of any building or land taking into consideration the market value of such building or land, as a base value.
(1B)
The Commissioner shall with the approval of the Standing Committee, frame such rules as respects the details of categories of building or land and the weightage by multiplication to be assigned to various such factors and categories for the purpose of fixing the capital value under sub-section (1A). (a) Notwithstanding anything contained in sub- section (1C),- (i) due to the spread of COVID-19 pandemic, the capital value of any building or land fixed under sub-section (1A) shall not be revised in the year 2020-21 and the year 2021-22; (ii)for the year 2020-21 and the year 2021-22, the property tax bill for any building or land shall be the same as is for the year 2019-20; (iii) the capital value of any building or land fixed under sub-section (1A) shall be revised in the year 2022-23, as if the clause (i) is not applicable for the year 2020-21 and the year 2021-22. Notwithstanding anything contained in section 154, the rateable value of any building or land or part thereof, for the official year 2009-2010, shall be the provisional capital value of such building and lands in respect of the official years 2010-2011, 2011-2012 and 2012-2013, and such provisional capital value shall be deemed to be the capital value validly and legally fixed under the provisions of this Act, pending fixing the capital value thereof, and it shall be lawful for the Commissioner to treat it as such for the purposes of assessment book kept under the provisions of this Act, and the bill for property taxes issued under sub-section (2) of section 140A shall be deemed to have been validly and legally issued under the provisions of this Act.
(1) To enable him to determine the rateable value or the capital value, as the case may be, of any building or land and the person primarily liable for the payment of any property tax leviable in respect thereof the Commissioner may require the owner or occupier of such building or land, or of any portion thereof, to furnish him, within such reasonable period as the Commissioner prescribes in this behalf, with information or with a written return signed by such owner or occupier- (a) as to the name and place of abode of the owner or occupier, or of both owner and occupier of such building or land; and (b) as to the details in respect of any or all the items as enumerated in clauses (a) to (e) of sub- section (1A) of section 154 in relation to such building or land or any portion thereof. The Commissioner shall keep a book, in such form and manner as he may, with the approval of the Standing Committee, determine, and such book shall be called “the assessment book” in which shall be entered every official year- (a) a list of all buildings and lands in Brihan Mumbai distinguishing each either by name or number, as he shall think fit; (b) the rateable value or the capital value, as the case may be, of each such building and land determined in accordance with the foregoing provisions of this Act; (c) the name of the person primarily liable for the payment of the property taxes, if any, leviable on each such building or land; (d) if any such building or land is not liable to be assessed to the general tax or is exempt from payment of property tax either in whole or in part, as the case may be, the reason of such non-liability or exemption, as the case may be; (e) when the rates of the property taxes to be levied for the year have been duly fixed by the corporation and the period fixed by public notice, as hereinafter provided, for the receipt of complaints against the amount of rateable value or the capital value, In exercise of the powers conferred by clause (e)s of sub- section (1A) and sub-section (1B) of section 154 of the Mumbai Municipal Corporation Act (Act No Bom.III of 1888), and of all other powers enabling him in this behalf, the Commissioner, after having obtained the approval of the Standing Committee, as required under the said sub-section (1B), hereby makes the following rules to provide for the factors and categories of users of buildings or lands and the weightage by multiplication to be assigned to various such factors and categories for the purpose of fixing the capital value of buildings and lands in Brihan Mumbai, namely:- Short title and commencement: – (i) These rules may be called for the Factors and Categories of Users of Buildings or Lands (Assignment of Weightages by Multiplication) Fixation of Capital Value Rules, 2010. User categories of buildings or part thereof and weightages by multiplication to be assigned thereto:- User categories of buildings part thereof shall be as specified column (2) of each of Parts II, III and IV of schedule ‘A’ and the weightages by multiplication to the relative base value, to be respectively assigned thereto for the purpose of fixing capital value, shall be as in column (3) of each of the said Parts II, III and IV of schedule ‘A’. The weightage by multiplication on account of floor factor to be assigned to RCC building with lift: – Weightage by multiplication on account of floor factor to be assigned to a RCC building with lift, for the purpose of fixing capital value, shall be according to the number of floors as shown in column (2) of schedule ‘D’ and the weightage by multiplication to be assigned thereto shall be as shown in column (3) of the said schedule ‘D’.
Built-up area of a flat or a building: (1) The total carpet area of a flat shall be reckoned by including the area of the following items, namely: (i) terrace in exclusive possession, (ii) mezzanine floor, (iii) loft (excluding loft in residential flat) or attic, (iv) dry balcony and (v) niches; and (2) The total built-up area of a building shall be reckoned by including the areas of the following items, namely: – (i) total area of the flats in the building computed in accordance with sub rule (1), (ii) basement, (iii) stilt, (iv)porch, (v) podium, (vi) service floor, (vii) refuge area, (viii) entrance lobby, (ix) lounge, (x) air- conditioning plant room, (xi) air handling room, (xii)
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the structure for an effluent treatment plant and (xiii) watchman cabin (3) The built-up area of any of the following items shall not be reckoned while computing the carpet area of a building or part thereof, namely: – (i) lift room above topmost storey, (ii) lift well, (iii) stair-case and passage thereto including staircase room, (iv) chimney and elevated tank, (v) meter room, (vi) pump room, (vii) underground and overhead water tank, (viii) septic tank, (ix)flower-bed and (x) loft in residential flat (4) Where only the carpet area of a flat or building is available on the record of the Corporation and the total built-up area thereof, computed in the manner as aforesaid in sub-rule (1), or, as the case may be, sub-rule (2), is not available on such record, then the total built-up area of the flat or, as the case may be, of a building shall be arrived at in the following manner, namely :- Built-up area = 1.2 x carpet area as available on the record of the Corporation + the built-up area of the items specified in sub-rule (2) While fixing the capital value of a building or part thereof, the capital value of any of the one or more of the relevant items specified in sub-rule (2) of rule 10 as fixed in accordance with the provisions of sub-rule (2) or, as the case may be, (3) of rule 16, shall be added to the capital value of the building or part thereof. Fixation of capital value of religious buildings :- The capital value of a religious building which is a temple, math, gurudwara, mosque, takth, church, durgah, synagogue, or agiary or the like, and is used or intended to be used for the purpose of religious worship or offering prayers or performance of any religious rites or rituals by a person of, or belonging to, the relevant religion, creed, or sect, shall be fixed at the rate of base value applicable to a residential building as indicated in the Ready Reckoner; and by applying the relevant weightages by multiplication provided for in these rules. Fixation of capital value of mezzanine floor, loft and attic floor: – (a) the capital value of mezzanine floor shall be fixed at 70% of the relative rate of base value of the flat beneath the mezzanine floor; and by applying the relevant weightages by multiplication provided for in these rules; (b) the capital value of loft or attic floor shall be fixed at 50% of the relative rate of base value of the flat beneath the loft, or as the case may be, the attic; and by applying the relevant weightages by multiplication provided for in these rules; Provided that, where the rate of base value applicable to the mezzanine floor, loft or attic floor having regard to its user is higher or, as the case may be, lower than the rate of base value applicable to the flat beneath such mezzanine floor, loft or attic floor, the capital value of such mezzanine floor, loft or attic floor shall be fixed at 70% or 50%, as the case may be, of such higher or lower rate of base value; and by applying the relevant weightages by multiplication provided for in these rules. (2) The capital value of any one or more of the following items, namely:- (i)porch, (ii) air-conditioning plant room, (iii) air-handling room, (iv) structure for an effluent plant, (v) watchman cabin and (vi) refuge area, shall be fixed at 25% of the relative rate of base value of the building or part thereof, if any one or more of these items are part of the building or part thereof; and by applying the relevant weightages by multiplication provided for in these rules. (2) Where only part of a building is demolished or has partly collapsed and the remaining part is yet occupied by occupiers, land beneath the portion of the building which is demolished or has collapsed shall be deemed to be open land and the portion of the structure which is occupied shall be treated as a building, for the purpose of fixing the capital value thereof. The capital value of storage tank.-The capital value of storage tank shall be fixed in the following manner, namely : – (1) storage tank above the ground level :- (a) land – at the rate of open land in the Ready Reckoner and weightage by multiplication to be assigned thereto shall be 1.25, (b) storage tank – capacity of storage tank in litres multiplied by the rate of Rs.40 per litre, with weightage by multiplication to be assigned thereto on account of age factor as in schedule ‘C’, (c) total capital value of a storage tank = total of items (a) and (b).
(2) storage tank below the ground level :- (a) land – at the rate of open land in the Ready Reckoner and weightage by multiplication to be assigned thereto shall be 1.25, (b) storage tank – capacity of storage tank in litres multiplied by the rate of Rs.50 per litre, with weightage by multiplication to be assigned thereto on account of age factor as in schedule ‘C’, (c) total capital value of a storage tank = total of items (a) and (b). Capital value of open land or building or part thereof.-Capital value of open land or building shall be fixed under the provisions of the Act and these rules in the following manner, namely: (1) Capital value (CV) of open land Rate of base value (BV) of a open land according to Ready Reckoner X weightage by multiplication as per user category (UC) (Part I of schedule ‘A’) or approved floor space index (FSI) X area of land (AL).
CV = BV x UC x NTB x AF x FF x CA Examples: – Some examples based and worked out on the formulae as aforesaid are shown in the Appendix. Short title and commencement: -(1) These rules may be called the Factors and Categories of Users of Buildings or Lands (Assignment of Weightages by Multiplication) Fixation of Capital Value Rules, 2015.
Capital value of open land :- Save otherwise provided in these rules, where, within the precincts of a building there is vacant land other than the land appurtenant to the building, such land shall be treated as open land and the capital value thereof shall be fixed accordingly, as provided for in rule 21. The weightage by multiplication to be assigned to a building on account of the age thereof: – The weightage by multiplication to be assigned to a building on account of age factor, for the purpose of fixing capital value, shall be according to the age of the building as shown in column (2) of schedule ‘C’ and the weightage by multiplication be assigned thereto shall be as shown in column (3) of the said schedule “C”. Area of hoarding or tower for the purpose of fixing capital value: -Area of hoarding or tower for the purpose of fixing capital value thereof shall mean, – (a)in the case of a hoarding, the area of the square of the extremities of the poles on which the hoarding is erected plus the area of the hoarding; and (b)in the case of a tower, the area covered by the extremities of the foundation of the tower.
Carpet Area area of a flat or a building: (1) The total carpet area of a flat shall be reckoned by including the area of the following items, namely: (i) terrace in exclusive possession, (ii) mezzanine floor, (iii) loft (excluding loft in residential flat) or attic, (iv) dry balcony and (v) niches; and (2) The total carpet area area of a building shall be reckoned by including the areas of the following items, namely:- (i) total area of the flats in the building computed in accordance with sub rule (1), (ii) basement, (iii) stilt, (iv)porch, (v) podium, (vi) service floor, (vii) refuge area, (viii) entrance lobby, (ix) lounge, (x) air- conditioning plant room, (xi) air handling room, (xii) the structure for an effluent treatment plant room and (xiii) watchman cabin (xix)sewerage treatment plant room (xv) water treatment plant room (3) The carpet area of any of the following items shall not be reckoned while computing the carpet area of a building or part thereof, namely: (i) lift room above (2) While fixing the capital value of a building or part thereof, the capital value of any of the one or more of the relevant items specified in sub-rule (2) of rule 10 as fixed in accordance with the provisions of sub-rule (2) or, as the case may be, (3) of rule 16, shall be added to the capital value of the building or part thereof. Fixation of capital value of mezzanine floor, loft and attic floor:- (a) the capital value of mezzanine floor shall be fixed at 70% of the relative rate of base value of the flat beneath the mezzanine floor; and by applying the relevant weightages by multiplication provided for in these rules; (b) the capital value of loft or attic floor shall be fixed at 50% of the relative rate of base value of the flat beneath the loft, or as the case may be, the attic; and by applying the relevant weightages by multiplication provided for in these rules; Provided that, where the rate of base value applicable to the mezzanine floor, loft or attic floor having regard to its user is higher or, as the case may be, lower than the rate of base value applicable to the flat beneath such mezzanine floor, loft or attic floor, the capital value of such mezzanine floor, loft or attic floor shall be fixed at 70% or 50%, as the case may be, of such higher or lower rate of base value; and by applying the relevant weightages by multiplication provided for in these rules. Explanation – “deleted” (2) Where only part of a building is demolished or has partly collapsed and the remaining part is yet occupied by occupiers, land beneath the portion of the building which is demolished or has collapsed shall be deemed to be open land and the portion of the structure which is occupied shall be treated as a building, for the purpose of fixing the capital value thereof. Capital value of open land or building or part thereof.-Capital value of open land or building shall be fixed under the provisions of the Act and these rules in the following manner, namely: (1) Capital value (CV) of open land Rate of base value (BV) of a open land according to Ready Reckoner X weightage by multiplication as per user category (UC) (Part I of schedule ‘A’) X permissible or approved floor space index (FSI) X area of land (AL). CV = BV x UC x FSI x AL (2) Capital value (CV) of a building – Relative rate of base value (BV) of a building according to Ready Reckoner X weightage by multiplication as per user category (UC) (Parts II, III, or as the case may be, IV of schedule ‘A’) X weightage by multiplication as per the nature and type of building (NTB) (schedule ‘B’) X weightage by multiplication on account of age of building (AF) (schedule ‘C’) X weightage by multiplication on account of floor factor (FF) for RCC building with lift (schedule ‘D’) X carpet area (CA). The petitions also challenged the vires of Capital Value Rules of 2010 and Capital Value Rules of 2015.
In the meantime the petitioners shall pay municipal taxes at the pre-amended rates and also the additional tax at the rate of 50% of the differential tax between the tax payable under the old regime and now payable on the basis of capital value of the property. The submission that the tax in terms of the instant legislation would be one covered by Entry 86 of List I of the Seventh Schedule to the Constitution, was not accepted and the challenge in that behalf was rejected with following conclusions: – “155. Therefore, the conclusion which can be drawn is that the State Legislature was competent to enact provisions regarding property tax based on capital value under Entry-49 of List-II of Seventh Schedule. Similarly, in case of additional water tax, the expenditure incurred or to be incurred for capital works for making or improving the facilities of water supply may not be for a direct benefit to the premises or property subject matter of levy of tax. Where the facilities of water supply or sewerage collection are provided to a land or building, as per the Rules framed under sections 169 and 170 of the BMC Act, the water charges or sewerage charges, as the case may be, by way of fees can be recovered which would have direct nexus with the quality and quantity of services provided. Sub-section (1) of section 195E provides that levy of said additional tax is for the purposes of clause (q) of section 61. The Authority which has power to determine the charge is the Improvement Committee. As per section 49B of the BMC Act, the said Committee consists of 26 elected councilors of BMC. Hence, the main ground of attack in these petitions about the levy of property taxes based on capital value has no relevance to levy of Betterment charges.” (e) Consideration of challenge on the basis of violation of provisions of Chapter IXA and in particular, Article 243-X of the Constitution of India. To conclude, the BMC Act has been already amended in terms of Article 243-ZF. We have already referred to the various provisions including clause (b) of Article 243-W. The powers under the charging sections in Chapter VIII are conferred on the Corporation itself including the power to exercise option of taking recourse to capital value regime for the levy of property taxes. Even the provision of sub-section (1A) of section 154 which confer power on the Commissioner to determine capital value contains more than sufficient guidelines. While observing that the power conferred in sub- Section (1A) of Section 154 of the MMC Act on the Commissioner to fix capital value, was not at all an unguided power and that sufficient guidelines were set out, it was concluded thus: – “185.
An argument is canvassed that there is disparity between five star hotel properties and other hotel properties. (i)
The ground of retrospective operation of the impugned provisions of the BMC Act. By virtue of the impugned amendments, a property in respect of which taxes were not payable earlier does not become subject to taxes. (iii) Rule 20 of the Capital Value Rules of 2010 was held to be ultra vires the provisions of sub-Section (1A) and (1B) of Section 154 of the MMC Act. Rule 3 provides that where within the precincts of the building there is a vacant land other than the land appurtenant to the building, such land shall be treated as open land and capital value thereof shall be fixed as provided in Rule 21. It provides that the capital value of open land will be equal to rate of base value of open land according to SDRR multiplied by weightage by multiplication as per user category. Under sub-section (1B) of section 154 of the BMC Act, the rules can be framed providing for details of categories of buildings or land and the weightage by multiplication to be assigned to various such categories. Under clause (e) of sub-section (1A) of section 154, factors which are to be taken into consideration for determining base value can be subject matter of rules. Rule 20 of Capital Value Rules, 2010 deals with valuation of open land capable of utilizing more than 1.0 FSI or transfer of development right (TDR). Moreover, if rule 20 is implemented, capital value which is higher than SDRR rate will have to be fixed which will be in violation of sub-section (1A) of section 154 which mandates that the Commissioner will take into consideration SDRR rate while finalizing capital value. Our conclusions can be summarized as under: (i) We uphold the constitutional validity of the sprovision of the BMC Act which are under challenge; (ii) The Capital Value Rules of 2010 shall apply prospectively from the date on which the same were made; (iii) We strike down rules 20, 21 and 22 of Capital Value Rules of 2010 and 2015. (iv) As the Municipal Commissioner will require a reasonable time to do the tasks as aforesaid, the interim orders which are operating in these petitions will have to be continued till the service of final bills.
In Writ Petition
No 2592 of 2013, the fresh exercise will have to be undertaken only in relation to the properties in respect of which there is a specific prayer for quashing the notices and bills based on final assessment. We hold that Rules 20, 21 and 22 of the Capital Value Rules of the years 2010 and 2015 are ultra vires the provisions of the Mumbai Municipal Corporation Act, 1888 and, therefore, the same are struck down; (ii) We quash and set aside the special assessment notices and final bills based on final capital value fixed which are specifically the subject matter of challenge in this group of petitions. In those cases where the complaints are lawfully filed within stipulated time pursuant to the special assessment notices, the ad- interim/interim reliefs will continue to operate on the same conditions till the date of service of fresh final bills; (v) Rule is made partly absolute on the above terms; (vi) All pending chamber summonses and notices of motion stand disposed of.”
While issuing notice in the matter on 29.7.2019, by way of interim relief, it was directed: “Pending further consideration, the relationship between the parties shall be governed by interim order dated 24.2.2014 passed by the High Court and more particularly by para 5 as quoted above. However, after the submissions were advanced on behalf of various impleading applicants and other parties including substantive petitions challenging the correctness of the decision of the High Court, submissions were also advanced in response. (Para 13, Pg 9 of consolidated counter affidavit on behalf of Respondents 2 to 4) 4. (Para 13, Pg 9 of consolidated counter affidavit on behalf of Respondents 2 to 4) 4.
Revenue neutral rate means such rate as would yield the same amount of property tax as being levied by the Corporation before introduction of capital value system. Bill No LXXIV of 2010 whereby inserting sub-section (2) in Section 140A to enable the Corporation to issue provisional bills for the year 2010- 11 and treat the rateable value of the building or land as provisional capital value. The said bill culminated into Act No XXVII of 2010 (Pg 51 to 58 in Compilation of Corporation – Vol 4). This is so because there are more than 3 lakh properties of which capital value has to be fixed for the purposes of such levy of property tax thereon, but the volume of work of fixing the capital value of all these properties being so large that it may not be possible for the Corporation to complete the fixation of capital value of all these properties before 31 March 2011. The general election of the Corporation is due in February, 2012 and new Standing Committee will be operative only from the end of March, 2012. The statute provided for transitionary arrangement pursuant to which provisional bills were issued as per Section 140A(2) read with Section 154A of the MMC Act from official year 2010-2011 (under the capital value system), 2011-2012 and till 2012-2013. In case contention raised by assesses is accepted, it would amount to imposition of tax on rateable value even when the statute provides for imposition of tax on capital value w.e.f. Neeraj Kishan Kaul, learned Senior Advocate appearing for Indian Hotels Company Limited which has intervened in the proceedings as well as filed substantial challenge in the form of Special leave Petition (Civil) No.2568 of 2019 submitted that the property tax as a percentage of value was confiscatory and exorbitant. Learned Senior counsel then submitted that the tax could be levied by the body constituted of elected representatives and not by the Standing Committee and that the power to tax could not be delegated. Milind Sathe, learned Senior Advocate appeared for certain entities in IA Nos.110990 of 2019, 163118 of 2019 and 160953 of 2019 and submitted that Rules 20, 21 and 22 of the Capital Value Rules, 2010 and 2015 were rightly struck down by the High Court. Devarajan, learned Advocate who appeared for the Property Owners Association submitted that in terms of Article 243Y(1)(b) of the Constitution the matter ought to have come through the suggestions of the Finance Commission. The learned counsel further submitted that the unit for calculation according to SDRR and the Capital Value Rules, was not the same.
It was further submitted that there could be no retrospectivity to any delegated legislation when the parent Act did not give any indication in that behalf and that the final assessment could have altered the basis in the same financial year and not otherwise. The tax demand for residential units got reduced from Rs.1030 crores to Rs.949 crores while that for the Offices and Banks was reduced from Rs.979 crores to Rs.65 crores and from Rs.342 crores to Rs.222 crores respectively. Thus, according to the Corporation, under the new system only 32.20% units suffered an increase while 21.95 % of the units actually got benefitted as a result of reduction in the property taxes. Article 243Y of the Constitution deals with constitution of Finance Commission whose principal duty is to review the financial position of the municipalities and to make recommendations to the Governor as to the relevant principles which should govern distribution of the net proceeds of taxes and the measures needed to improve the financial position of the municipalities.
As per Clause (2) of Article 243Y, the Governor shall cause every recommendation made by the Finance Commission under the said Article together with an explanatory memorandum as to the action taken thereon to be laid before the legislature of the State.” It is true that certain functions are entrusted to the Finance Commission and the recommendations made by the Finance Commission must carry great weightage. If the Legislature itself has taken into account certain prevailing situation, which according to the Legislature is causing some prejudice to the financial health and condition of the municipalities and, therefore, the method of imposition of property tax ought to be changed, it cannot then be said that the matter must necessarily and ought to have emanated from the Finance Commission or that in the absence of such recommendations by the Finance Commission, no steps could have been taken by the Legislature.
Case Title: MUNICIPAL CORPORATION OF GREATER MUMBAI Vs. PROPERTY OWNERS ASSOCIATION (2022 INSC 1181)
Case Number: C.A. No.-008239-008239 / 2022
