1. This is an appeal by an assessee against an order made by Mr. Justice Datar in an appeal under the provisions of the Bombay Municipal Corporation Act, 1888, and involves the interpretation of Section 154 of the said Act which runs as follows:
(1) In order to fix the rateable value of any building or land assessable to a property-tax, there shall be deducted from the amount of the annual rent for which such land or building might reasonably be expected to let from year to year a sum equal to ten per centum of the said annual rent and the said deduction shall be in lieu of all allowance for repairs or on any other account whatever.
Sub-section (2) of Section 154 exempts the value of any machinery contained, or situate in or upon any building or land from being included in the rateable value of such building or land. The rest of the provisions are not material.
2. The assessee owns roughly 75000 sq. yds. of land at Ghatkopar about 3000 feet away from the Agra Road. In the interior of that land he has erected 9 chawls and some other constructions. In order to provide proper access for all these buildings, he has constructed a road measuring about 3000 feet in length and has erected 30 lamp posts 100 feet away from each other thereon. The assessee charges comprehensive rent to the tenants in various chawls. During the assessment proceedings this rent has been taken to be the basis of assessment. The assessee contended that he was required to pay Rs. 1,702-1-6 for electric charges for the 30 lamps on the road and that in assessing the rateable value of the chawls he should get deductions for these expenses. His contention was negatived by the Municipal Corporation but was accepted by the Chief Judge of the Small Cause Court in appeal. The Municipal Corporation came in appeal to this Court and Mr. Justice Datar accepted its contention and restored the decision of the Municipal Corporation.
3. It is contended on behalf of the assessee in this appeal that he is entitled to the proportionate deduction in respect of each chawl out of the electric charges which he pays for all these lamps on the road.
4. Section 139 of the Act empowers the Corporation to levy the four taxes mentioned in the section which includes 'property taxes'. Section 140 provides that the taxes of so many percentages of the rateable value shall be levied. As to the general tax, the Corporation is entitled to levy not less than 8 per cent, and not more than 26 per cent, of the rateable value plus certain, additions with which we are not concerned. The words 'rateable value' have not been denned in the Act but their meaning has to be gathered from the section above-quoted, and they mean annual rent for which the land or building might reasonably be expected to be let from year to year. In arriving at the rateable value the usual and accepted test is what a tenant willing to take the premises would pay to a landlord willing to let but which, neither of the parties is compelled to take or let; in other' words, necessity of neither of the parties either to take or to let the premises has to be taken into account. But as is made clear by Section 140, the property taxes are levied on buildings and lands and not on anything else. We must, therefore, determine what is the rateable value of the building or the land in respect of which the tax is levied. The word 'building' is defined by Clause (s) of Section 3 to include a house, out-house, stable, shed, hut etc., and it may be assumed that it must necessarily include all such permanent fixtures to the buildings as are intended to be integral parts of it. The rateable value, therefore, of this entity must be determined and any compensation which the. landlord may receive or may be deemed to receive for other things cannot be regarded' as part of the rent which forms the basis of rateable value.
5. That this should be so seems to be self-evident from the fact that with changing times the conditions of letting houses also change. In the past tenants would have been glad to take premises without any furniture and other amenities which they would provide themselves. In modern days, very often premises are let with furniture and other amenities which are provided by the landlord. For this the tenant necessarily pays something extra over and above the rent which he would have normally paid only for the building and its necessary fixtures. Even though in many cases the owner of the building charges a comprehensive amount for the furniture, it could not possibly be suggested that what he charges for the furniture must necessarily be regarded as part of the rent-and it is not even so suggested. If that should be so in the case of furniture, could there be any possible reason why it should not be so in the case of other amenities which the landlord provides? In our view, if one has to arrive at the rateable value of the building, cost of the other amenities must be disregarded since the essential purpose of the statute is to tax the land or the building but not the services or amenities ?which are supplied by the landlord.
6. We are supported in this interpretation of the statute by a decision of the English Court of Appeal in Bell Property Trust, Lid. v. Hampstead Assessment Committee  2 K.B. 543. The appellants before the learned Judges were the owners of a block of flats numbering 123 in a building. Bach of these flats was separately let under agreements whereby the tenants paid a comprehensive sum which was described as rent. The amenities or what are called services provided by the appellants were constant hot water, central heating and other services usually provided by the landlords of high class service flats. The appellants claimed a deduction from the gross payment made by the tenants the cost of these amenities. The Divisional Court felt itself bound by the decision in Pullen v. St. Saviour's Union  1 Q.B. 138 and held that the appellants were not entitled to these deductions. The section interpreted in that case was Section 4 of the Valuation (Metropolis) Act, 1869, which is as follows:
The term 'gross value' means the annual rent which, a tenant might reasonably be expected> taking one year with another, to pay for an hereditament, if the tenant undertook to pay all usual tenant's rates and taxes, and the commutation rent charge, if any, and if the landlord undertook to bear the cost of the repairs and insurance, and the other expenses, if any, necessary to maintain the hereditament in a state to command that rent.' Lord Goddard speaking for the Court pointed out that the decision in Pullen's case was never followed and authors of works on this branch of the law have expressed doubts as to its correctness. The Court overruled the decision emphasizing that they saw no difference in principle between the case with which they were dealing and the letting of a furnished flat, and that the law was well-settled in regard to the furnished flat. They applied that law to the question of amenities afforded by the landlord. They relied for this purpose on the cases of The Queen v. Lee (1866) L.R. 1 Q.B. 241 and M'Ewan v. Glasgow Assessor  S.C. 511. They quoted the following observations of Lord Fleming in the last case with approval (p. 554):The yearly rent or value of a flat...was the proportion of the gross rent paid to the owner which could fairly be attributed to the occupation of the heritable subject.
They upheld the contention of the appellants before them that they were entitled to deduction in, respect of costs of those amenities. It is also significant to note that it was not only the actual cost of the amenities that was allowed by the Court but also reasonable profit which the landlord would ordinarily make from such cost i.e. something over and above the actual cost incurred by the assessee. In this connection they observed (p. 555):.The hypothetical tenant, of course, is not concerned with what it costs the landlord to provide these services; he considers only what he can afford to pay for the sum of what he gets, that is, a flat to live in, together with such services and other attractions as may be offered. A man who feels he can. pay a, rent of about 2501., and has been paying that in an old-fashioned flat with open fireplaces, and where the water has to be heated in the kitchen, may well feel that he can pay, say, 2751. or 3001. for one in which he will be provided with domestic hot water and central heating. He would not concern himself with what it cost the landlord to provide those services, but it is none the less true that what he pays for the use of the flat itself is the rent reserved less a proper remuneration to the landlord for providing him with hot water at his taps and in his radiators.
7. It has been very strenuously argued by Mr. Joshi in the first place that there is no analogy between what a landlord charges for furniture and what a landlord charges for services to a tenant. According to him, the provisions of a road and the 30 lamps on the road were integral part of the buildings inasmuch as there would not have been a tenant to occupy any of these chawla unless these amenities were provided. We find it difficult to accept the contention that no tenant would have been willing to occupy any of the premises for want of the road and the lamps on the road. One hay simply to use his observation to see that this cannot be correct. It would only mean that if these amenities were not provided, a prospective tenant would not think of paying the same amount which he agreed to pay because of these amenities; in other words he would be prepared to pay less rent because of the inconveniences that might be caused to him for want of a road and lighting at a night.
8. It was also contended by Mr. Joshi that since the landlord has not shown these charges as separate charges, he cannot now be allowed to claim deduction from the rateable value. This contention also, in our view, has no substance. Cases may very well by visualised and which have occurred very frequently in the past where a landlord in order to avoid paying proper tax artificially increases the hire charges of the furniture or hire charges for certain amenities showing a far less amount as the rateable value. In such a, case it would be almost impossible to contend that the Corporation would be bound by the division made by the owner of the property for the rent and for the cost of the other amenities. If that is so, there can be no reason why merely because a comprehensive sum is charged by the landlord he should, not be entitled to deduct what is in reality reasonable and rational costs of the services which he renders.
9. It was argued that the last clause in Sub-section (1) of Section 154 which permits a deduction of ten per cent, and describes it as 'deduction in lieu of all allowances for repairs or on any other account whatever' must include the cost of these services. Again it is not possible to accept this contention. The words must be taken in their context and if one bears in mind the fact that what is sought to be rated and assessed is not the services but the building the inference would be that the deduction is only for the purposes of repairs and other expenses connected with the building1 and not with the services. In our view, therefore, what is charged for services cannot be included in these words.
10. We were referred to observations in Ryde on Rating, 10th ed., where it is pointed out at p. 323 while referring to Bell Property Trust, Ltd. v. Hampstead Assessment Committee that no reference was made in that case to the dicta in two older cases which suggested that the cost of maintaining common parts was properly deductible not in arriving at gross value but between gross and rateable values. The cases referred to by the learned author are Western v. Kensington Assessment Committee  1 K.B. 811 and St. Marylebone Assessment Committee v. Consolidated London Properties, Limited  A.C. 870. It is sufficient to say as to these cases that there the question that was involved was one of interpretation of a schedule contained in the Act relevant for that purpose which exempted the application of certain clauses of the Schedule to properties parts of which, were separately let. The question involved in the Bell Property case was neither directly involved before the Judges nor was it canvassed.
11. Reliance was then placed on Gulam Ahmed Rogay v. Bombay Municipality (1950) 53 Bom. L.R. 145 which in our view is not relevant to the present purposes at issue. It was held in that case that in arriving at the rateable value the maximum gross value was to be assigned to the property as laid down in the City of Bombay Municipal Act, 1888, and was not limited to the maximum standard rent of the property together with the addition thereto permitted by the Bombay Rents, Hotel and Lodging House Rates Control. Act, 1947. In this connection an observation was made (p. 148):.The rateable value is, therefore, nine-tenths of 'the amount of the annual rent for which such land or building might reasonably be expected to let from year to year.
We are not giving any different meaning from the one which has been given to Section 154 in that case. In our view, it is a matter of application only.
12. Reliance was also placed on Mahad Municipality v. Bombay S.R.T. Corp. (1960) 63 Bom. L.R. 174 where I said (p. 180):.The question is not what to the Court would appear to be reasonable rent for particular premises...but what any tenant expecting to utilise the premises for the purpose for which they are being used with all their advantages and disadvantages would reasonably pay for them.
13. It is argued that this would include the advantages of the amenities offered by the landlord. The observations in a case must be read in the' context in which they are used. When I said that regard had to be had to the advantages and disadvantages, what was meant was advantages and disadvantages which were integral in the situation of the property and its convenience for a particular purpose, as in that case for a stall in the premises of a Transport Office where special custom was bound to be attracted because of the situation, It had no relation to the services which a landlord would afford to a tenant, by incurring extra costs.
14. In our view, with respect, Mr. Justice Datar was in error in saying that the assessee had not disputed the quantum of the rental in his appeal before the learned Chief Judge of the Court of Small Causes. This is rather cutting it too fine and in favour of form rather than substance of the matter. What was accepted before the learned Judge was that a willing tenant would pay to a willing landlord with all the amenities that were afforded by the landlord the rent that was actually being charged. Since the landlord asked for the deduction in respect of the cost of amenities it must be clear that he had disputed the gross rateable value of the building. It is not correct, therefore, to say that he had not disputed the quantum. It is also impossible to regard the lamp posts as integral part of the premises let to the tenants. These are as much and more apart from the buildings as the pieces of furniture which a landlord gives along with the tenement to a tenant.
15. We, therefore, set aside the judgment in appeal and restore that of the Chief Judge of the Small Causes Court. The Corporation will pay the costs of all the Courts.