1. The above second appeal filed by the Barsi Municipal Council, at the material time constituted under the Bombay Municipal Boroughs Act, 1925 up to June 15, 1966 and thereafter under the Maharashtra Municipalities Act, 1965, raises two points, firstly, whether the civil Court had jurisdiction to entertain the present suit for a declaration that the levy for apportionment of property or other taxes on the plaintiff respondent in respect of the suit property is illegal and ultra vires and for a permanent injunction restraining the defendant from recovering from the plaintiff the arrears and future taxes; and, secondly, whether the two Courts below were right in holding that the levy of the taxes on the respondent-plaintiff was ultra vires the powers of the Barsi Municipal Council.
2. The plaintiff filed the suit on Nov. 11, 1967, seeking the above relief's 011 the basis of the following allegations :--
3. City Survey No. 2555 is an open plot in Barsi Town belonging to the plaintiff. On July 23, 1967, one Dhanraj Nandram Soniminde executed a registered rent-note in favour of the plaintiff, which is produced at Ex. 30. It was a building lease for a period of ten years. The open plot was taken by him for constructing a factory at a rental of Rs.700/- per annum. As per the terms of the rent-note, Soniminde was to construct a building suitable for his factory and officeafter taking non-agricultural permission. He accordingly constructed a building in the year 1959 and the plot was no longer an open plot but was factory premises.
4. The Barsi Municipal Council had levied property taxes on this property in 1961-62 On the basis of the annual letting value of Rs.700/-, the plaintiff was called upon to pay taxes as follows :--
Rs. 125.50 1961.62.Rs. 125.50 1962-63.Rs. 140.00 1963-64.Rs. 139-00 1964-65.Rs 139-00 1965.66.Rs 139.00 1966-67.Rs. 139.00 1967-88.--------------Rs. 947.00
5. According to the plaintiff, the levy of these taxes on him was ultra vires and illegal and he did not, therefore, pay the taxes for the following reasons :--
(1) That the Municipal Council had not only levied all the taxes on the building constructed by Dhanraj Soniminde but also separately on the open land upon which the said building was constructed, though no and was left open after the construction of the building.
(2) That the levy of taxes on the building and also the levy of taxes on the land under the building was not warranted by any of the provisions of the Bombay Municipal Boroughs Act, 1925 as well as the provisions of the Maharashtra Municipalities Act, 1965.
(3) The Rules framed by the Barsi Municipal Council did not envisage levy of tax on buildings as well as land covered by the buildings and this amounted to double taxation.
(4) That the Municipal Council had also levied and recovered property and other taxes on C. T. Section No. 2555 from Soniminde, who was primarily liable to pay the taxes and, therefore, in respect of the same property, the Municipal Council could not serve on the plaintiff a notice of demand dated Aug. 2, 1967 (Ex. 31), calling upon the plaintiff to pay Rs.980.15 and purporting to be a notice under the Bombay Municipal Boroughs Act, 1925 with a note indicating that the action would be taken under the Maharashtra Municipalities Act, 1965.
The plaintiff, therefore, filed the Suit claiming the aforesaid reliefs.
6. The Municipal Council resisted the suit by contending that the suit was not tenable as the plaintiff ought to have filed an appeal before the Magistrate. It denied the claim of the plaintiff and contended, inter alia, that it was not made aware of the terms of the lease. It denied that the tenant constructed the building on the entire open space and submitted that the area of the open space was more than the built portion; and hence it assessed the open space and the built portion separately. It denied that there was any double taxation and contended that Section 125 (2) of the Maharashtra Municipalities Act, 1963 was not applicable to the present case and even if it was held to be applicable, the interpretation put by the plaintiff was illegal and as the plaintiff had not filed any appeal before the Standing Committee or before the Magistrate, the Civil Court had no Jurisdiction to entertain and try the suit. The Municipal Council denied that it was the tenant Soniminde who was primarily liable to pay the tax in respect of the entire property and pleaded limitation.
7. Overruling all the objections of the Municipal Council and carefully considering the documentary evidence produced by the parties in the case, the learned Civil Judge decreed the plaintiff's suit by declaring that the action of the defendant municipality in levying the taxes on the Building and the open space of C. T. Section No. 2555 was illegal and restrained the defendant from recovering the taxes by an injunction and ordered the costs to be paid to the plaintiff, having regard to (1) the contents of the lease (Ex. 30); (2) the provisions of Sections 81 and 85 ol the Bombay Municipal Boroughs Act, 1925 and Section 125 (2) of the Maharashtra Municipalities Act, 1965; and (3) the decisions in Secretary, Mahad Municipality v. Divisional Controller, Bombay State Goods Transport Corporation : (1961)63BOMLR174 , and Municipality of Ankaleshwar v. Chhotalal Ghelabhai Gandhi : (1955)57BOMLR547 .
8. The learned Civil Judge appears to have made use freely of the provisions of both the Bombay Municipal Boroughs Act, 1925 and the Maharashtra Municipalities Act, 1965, without any objection from the parties, in arriving at his conclusion, although, as stated above, the Maharashtra Municipalities Act, 1965 came into force with all its sections only on June 15, 1966 and covered only the demand which was made for the years 1966-67 and 1967-68.
9. The above decision was challenged in an appeal filed by the Municipal Council and the learned Second Extra Assistant Judge, Sholapur, confirmed the decree passed by the trial Court, as he was of the view that the Municipal Council had no authority to levy the tax on the plaintiff in view of the building lease, observing in para 11 of his judgment as follows:--
'The intention of the legislature is clear that when the open plot is let out for building purposes and the tenant builds a structure upon it, it is the tenant or occupier who is primarily liable to pay the tax. In the instant case it has been clearly proved and it is also not disputed that the tenant is the owner of the structure and building. It is also undisputed that he is holding it on a building lease from any person. It would, therefore, follow that it is the tenant occupier who is primarily responsible to pay the tax in respect of such building. The corresponding provision in Section 125 of the Maharashtra Municipalities Act is also similar. Therefore, the provision of law is specific and clear that in cases of owners of a building, on a building lease the tax is primarily liable to be livable on the occupier and not upon the owner of the site and if this be so, the action of Defendant Municipality in levying the tax upon the plaintiff in respect of the building is clearly erroneous and in utter disregard of a statutory provision of law laid down in Section 85 of the Bombay Municipal Boroughs Act and Section 125 of the Maharashtra Municipalities Act. On this short ground alone, the plaintiffs suit was liable to be decreed.'
10. The learned Second Extra Assistant Judge further held that as the assessment was based on Rs.700/- rent, which the tenant was paying, it cannot be said to be a separate assessment in respect of the land. He also overruled the contention raised on behalf of the Municipal Council under Section 110 of the Bombay Municipal Boroughs Act, 1925 that the Civil Court had no jurisdiction, relying on the decision in Balkrishna Dharam das Vora v. Poona Municipal Corporation, (1963) 65 BomLB 119. The said concurrent decrees of the two courts below are challenged in the above second appeal by the Municipal Council,
11. The first point which was urged on behalf of the Municipal Council was that theCivil Court had no jurisdiction to entertain the present suit in view of Sections 110 and 111 of the Bombay Municipal Boroughs Act, 1925. There is no substance in the contention, inasmuch as these sections have been repeatedly interpreted by this Court as not barring the jurisdiction of the Civil Court to entertain a suit where the legality of the levy is challenged, as in the present case. (See Municipality of Ankleshwar v. Chhotalal Ghelabhai Gandhi (1955) 57 BomLB 547, where it was held with regard to the scope of Section 86 of the Bombay District Municipal Act, 1901, which was in pari materia with Section 110 of the Bombay Municipal Boroughs Act, 1925, that an appeal under that section was confined to the valuation and assessment' shown in the entry in the assessment list and to the tax, i.e., the quantum of the sum claimed in the bill and to no other matters). (See also Gopal Mills Co. Ltd. v. Broach Borough Municipality : (1956)58BOMLR300 , which was a case under the Bombay Municipal Boroughs Act, 1925 itself; Municipal Council, Morshi v. Tulsiram, : AIR1978Bom92 , which was a case under the Maharashtra Municipalities Act, 1965, following : (1955)57BOMLR547 ; and the latest decision of the Supreme Court in Bata Shoe Co. Ltd. v. Jabalpur Corpn. : 3SCR182 , which was a case under the C. P. and Berar Municipalities Act, 1922, where the test that is laid down is (at p. 963):--
'Applying the test in Kamala Mills v. Bombay State : 57ITR643(SC) if the appropriate authority while exercising its jurisdiction and powers under the relevant pro-visions of the Act, holds erroneously that an assessment already made can be corrected or that an assessee is liable to pay double duty when Rule 14 (b), in fact, does not justify such an imposition, it cannot be said that the decision of the authority is without jurisdiction. Questions of the correctness of the assessment apart from its constitutionality are, for the decision of the authorities set up by the Act and a civil suit cannot lie if the orders of those authorities are given finality. : 59ITR73(SC) B. K. Bhandar v. Dhamangaon Municipality : AIR1970SC1002 B. M. Lakhani v. Malkapur Municipality and : 3SCR662 Dhulabhai v. State of M. P. Explained.'
12. Applying the above test to the present case, in the light of the interpretation ot Sections 110 and 111 of the Bombay MunicipalBoroughs Act, 1925 in a series of cases by this Court, it must be held that the present suit does not relate to merely the quantum of assessment or the rate of assessment but to the legality of the assessment and hence the civil suit was competent, as rightly held by the two Courts below, so far as the relief's were claimed in respect of the taxes purported to be levied for the years 1961-62 to 1965-66.
13. However, the attention of the two Courts below was not drawn to Section 172 of the Maharashtra Municipalities Act, 1965, which runs as follows:--
'172. No objection shall be taken to any valuation, assessment or levy nor shall the liability of any person to be assessed or taxed be questioned, in any other manner or by any other authority than is provided in this Act.'
The words in Section 172 are not merely 'valuation' and 'assessment', which were interpreted in the decisions of this Court under the Bombay Municipal Boroughs Act, but even the 'levy' or the 'liability' of any person to be assessed can be questioned in an appeal under Section 169 of the Maharashtra Municipalities Act, 1965. In Second Appeal No. 254 of 1972, decided by me on 17-3-1978 (Bom), I have, therefore, taken the view that, inasmuch as there are no limitations on the objections which may be raised before the Magistrate in Appeal, the Legislature had intended that the jurisdiction of the civil Court must be excluded even where the legality of the levy of the tax was challenged.
14. It is true that Section 846 of the Maharashtra Municipalities Act, 1965 does not in terms save the remedy by way of suit in respect of levies made under the Bombay Municipal Boroughs Act, 1925, but, in the absence of any provision, Section 7 (e) of the Bombay General Clauses Act, 1904 would save the plaintiff's right to file the suit for a declaration and for an injunction in respect of the levy of the tax from 1961-62 to 1965-68, though not in respect of the years 1966-67 and 1967-68.
15. Realising the above position, Mr. Naik fairly stated that he will not press the claim in respect of the two years 1966-67 and 1967-68, although he pointed out that the levy of the tax subsequent to the coming into force of the Maharashtra Municipalities Act, 1965 would be patently illegal in view of the plain words of Section 125 (2) of theAct, which applied to the facts of the present case. Section 125 runs as under:--
'125. (1) Subject to the provisions of sub-Section (2), property taxes assessed upon any premises shall be primarily leviable as follows, namely:--
(a) If the premises are held immediately from the Government or from the Council, from the actual occupier thereof:
Provided that, property taxes due in respect of buildings vesting in the Government and occupied by servants of the Government or other persons on payment of rent shall be leviable primarily from the Government;
(b) if the premises are not so held--(i) from the lessor if the premises are let;
(ii) from the superior lessor if the premises are sub-let;
(iii) from the person in whom the right to let the premises vests if they are unlet
(2) If any land has been let for any term exceeding one year to a tenant, and such tenant has built upon the land, the property taxes assessed upon the said land and upon the building erected thereon shall be primarily leviable from the said tenant or any person deriving title from the said tenant by the operation of law or by assignment or transfer but not by sub-lease or the legal representative of the said tenant or person whether the premises be in the occupation of the said tenant or person or legal representative or a Sub-tenant.'
16. It was submitted by Mr. Naik that since the lease was a building lease exceeding one year, which in Clause 4 provided that any municipal taxes that would be levied would be paid by the tenant and the word used in Section 125 (2) is not even building lease but only 'land' and further since the tenant has built upon part of the land leased to him, it is the tenant who is primarily liable under Section 125 (2) of the Maharashtra Municipalities Act, 1965, as held by the trial Court.
17. The submission made by Mr. Naik is quite correct, but, as no suit could be tiled in respect of the years 1966-67 and 1967-68, the plaintiff is not entitled to any relief in respect of the said years. But I hope, the Municipal Council will observe the law and will abstain from recovering what appears to be patently illegal.
18. Turning now to the only other point with regard to the legality of the levy, what was made very clear by Section 125 of theMaharashtra Municipalities Act, 1965 was not so clear under Section 85 of the Bombay Municipal Boroughs Act, 1925. There can be no doubt that under Section 73 of the Bombay Municipal Boroughs Act, 1925, the Municipal Council had the power to levy the taxes on the open plot of land which was built upon, but the manner of levying the tax is prescribed by Section 85 of that Act, which runs as under:--
'85. A tax imposed in the form of a rate on buildings or land or both shall be leviable primarily from the actual occupier of the property upon which the tax is assessed if he is the owner of the property, or holds it on a building or other lease from the Government or from the municipality, or on a building lease from any person. Otherwise the tax shall be primarily leviable as follows, name-ly:--
(a) if the property is let from the lessor;
(b) if the property is sub-let, from the superior lessor;
(c) if the property is un-let, from the person in whom the right to let the same vests:
Provided that where the tax is based on the annual letting value, on failure to recover any sum due on account of such tax from the person primarily liable, such portion of the sum may be recovered from the occupier of any part of the property in respect of which it is due, as bears to the whole amount due the same ratio, which the rent annually payable by such occupier bears to the aggregate amount of rent so payable in respect of the whole of the said property, or to the aggregate amount of the letting value thereof, if any, stated in the authenticated assessment-list, whichever of those two amounts is the greater;
Provided further, that for any sum paid or recovered from any occupier who is not primarily liable under this section, he shall be entitled to credit in account with the person primarily liable for the payment of that sum.'
19. The expression used in section 85 is 'building lease from any person' and it was contended on behalf of the Municipal Council that the two Courts below erred in construing the lease as a building lease when a large portion of the land was still unbuilt upon. According to the learned counsel for the Municipal Council, the first part of Section 85 has no application to the present case, as the entire land is not built upon and only a small portion is built upon by thetenant by constructing factory premises; and hence the second part of the section beginning with the words 'Otherwise the tax shall be primarily leviable as follows, namely, it the property is let from the lessor' will apply to the present case and the Municipal Council had the authority under Sections 73 and 85 to levy the tax on the plaintiff, particularly because the contents of the lease deed were never brought to the notice of the Municipal Council by the plaintiff or his tenant.
20. The two Courts below have negatived the above contention because a resolution was passed by the Municipal Council referring to the annual rent of Rs. 700/-under the lease as the basis on which the tenant and the landlord should be levied assessment separately. The learned Second Extra Assistant Judge has also pointed out the disparity of the assessment between the factory premises and the land to show how arbitrarily the Municipal Council had apportioned the assessment.
21. The two Courts below have also rightly held that in taking into consideration the annual letting value of the entire land at Rs.700/-, the Municipal Council was imposing double tax in respect of the land covered by the factory premises.
22. I find no error of law in the said decision of the two Courts below. The terms of the lease Ext. 30 clearly show that it was a lease taken by the tenant for building factory premises as already stated above. There can he no doubt that the Municipal Council levied the taxes illegally on the plaintiff, ignoring the building lease (Ex. 30) in favour of his tenant and the provisions of Section 85 of the Bombay Municipal Boroughs Act, 1925. The two courts below were, therefore, right in granting the declaration and injunction in respect of the levy purported to have been made under the Bombay Municipal Boroughs Act, 1925 for the years 1961-62 to 1965-66.
23. In the result, the above second appeal is dismissed with costs, subject to the modification in the decrees passed by the two Courts below by confining the operation of the declaration and injunction only in respect of the levy of the tax under the Bombay Municipal Boroughs Act, 1925 for the years 1961-62 to 1965-66.
24. Appeal dismissed.