1. Pursuant to the provisions of the Bombay Building Repairs and Reconstruction Board Act, 1969, repair cess became payable from November 1, 1970. The landlords of various buildings recovered the repair cess from their tenants and the Bombay Municipal Corporation took into consideration the amount of the repair cess while arriving at the rateable value of the -building under Section 154(7} of the Bombay Municipal Corporation Act. This was challenged before the Small Causes Court at Bombay, which modified the rateable value by omitting the quantum of the repair cess added by the Corporation to the rent while computing the rateable value. Hence this appeal.
2. The Supreme Court, in a decision in Bombay Municipal Corporation v. Life Insurance Corporation of India (1970) 73 Bom. L.R. 900, held:
The educational cess levied under Section 40 of the Bombay Municipal Corporation Act can be included for the purpose of valuation under Section 154(1) of the Act in the annual rent.
The Court referred to the definition of 'permitted increase' in Section 5(7) of the Bombay Rents, Hotel and Lodging House Rates Control Act, 1947 ('Rent Act') and concluded that such an increase becomes part of the rent. After examining the entire gamut of the Sections 9, 10 and 10AA of the Rent Act, the Court felt that the Legislature treated the permitted increase as a part of the rent which the landlord would be entitled receive from the tenant.
3. The cess in the present case has been levied under the Bombay Building Repairs and Reconstruction Board Act, 1969 ('Repairs Act)'. Section 27(1) of the Repairs Act is the charging section under which a re-construction cess at the rate of a certain percentage of the rateable value of the property can be levied. The cess has to be collected by the Corporation in the same manner in which property tax is collected by them. Sub-section (4) of Section 27 of the Repairs Act proceeds to make an allocation of the cess between the landlord and the tenant:
Where an owner is required to pay to the Corporation in respect of any property the cess determined and levied under this section, the share of the owner shall be 10 per cent of the rateable value of the property, and he shall be entitled to recover the remaining amount of the cess levied, by making a proportionate increase in the rent of the various premises in the building, in the same manner as if there was an increase in the general tax; and such increase in rent shall not be deemed to be an increase for the purpose of Section 7 of the Bombay Rents, Hotel and Lodging House Rates Control Act, 1947 or for the purposes of the Bombay Municipal Corporation Act.
4. At this stage, it will be useful to compare the above provisions with those of the Rent Act. Under Section 5(7) of the Rent Act, 'permitted increase' means an increase in rent permitted under the provisions of the Rent Act. This definition of 'permitted increase' predicates upon and acts as an exception to Section 7 of the Rent Act which prohibits any increase above the standard rent. Under Section 10,- where a landlord is required to pay a local authority in respect of any premises any rate, cess or tax imposed or levied for the purposes of such authority, he will be entitled to make an increase in the rent of the premises by an amount not exceeding the increase paid by him. That is to say, Section 10 adjusts the equities between the landlord and tenant and permits the former to increase the rent but only to the extent that he is out of pocket as a result of the rate, cess or tax imposed.
5. Coming now to the provisions of Sub-section (4) of Section 27 of the Repairs Act quoted above, it would be seen that unlike those of Section 10 of the Rent Act, the Repairs Act restricts recovery of the remaining amount of the cess levied to the extent of 90% of the cess, the share of the owner being 10% of the rateable value of the property has to be borne by him.
6. Mr. Walawalkar strenuously argued that so far as the appellant Corporation is concerned, it looks at the potentiality of the building in the matter of expected annual rent and vis-a-vis the landlord and his expected tenant as the entire portion of the cess would go in the computation of the rent, the Corporation is entitled to take into consideration the entire levy as a part of the rent. Though the argument is impressive, I am afraid, it does not do justice to the difference of language used in Sub-section (4) of Section 27 of the Repairs Act and that in Section 10 of the Rent Act. A reading of the two provisions in juxtaposition shows that though both are aimed at permitting the addition of the newly assessed taxes to the rent of the tenements, the former permits a 90% recovery from the tenant while the latter enables the landlord to recover the entire amount from the tenant.
7. This is borne out by the judgment in the Life Insurance Corporation of India's case cited above, where the entitlement of the landlord to receive from the tenant has been made a touch-stone of the computation of permitted increase.
8. In these premises, the appeal succeeds, and it is ordered and declared that the Bombay Municipal Corporation is entitled to consider 90% of the cess payable annually under the Bombay Building Repairs and Reconstruction Board Act as a part of the annual rent for the purpose of computation of rateable value under Section 154 of the Bombay Municipal Corporation Act. As the details of the cess etc., cannot be worked out from the records, the matter is remanded to the Lower Court for computation of the rateable value in accordance with and in the light of the observations above. No order as to costs.