Ramachandra Iyer, J.
1. These are applications under Article 226 of the Constitution to call for the records connected with the Demand Notice No. 176 (Assessment No. 9518) for the half year ending 31st March, 1955 and Demand Notice No. 362 (Assessment No. 9518) for the half year ending 31st March, 1956 and Demand Notice No. 112 (Assessment No. 9518, for half year ending 30th September, 1955 for Door No. 177, Hameempuram, Melapalayam and to quash the proceedings of the respondent Municipality relating thereto.
2. The petitioner is a charitable institution, who owns a private weekly market in Melapalayam. The market consists of land with sheds and buildings bearing municipal door numbers 144 to 177. Upto and during the year 1955-1956 each of the aforesaid numbers had a separate annual value put on it for the purpose of assessing the property tax under Section 82 of the Madras District Municipality Act. The total value for Nos. 144 to 176 was Rs. 1,266 and that for No. 177 was Rs. 36, the entire market was thus assessed to Rs. 1,302. On 2nd March, 1956, the petitioner was served with a notice under Rule 4 of Schedule IV of the Madras District Municipalities Act containing a proposal to enhance the property tax. That notice was to operate for 3 half years from the second half of 1954-1955. In pursuance of that notice there was an assessment which resulted in an increase of the property tax by about 5 or 6 times. The assessment in regard to numbers 144 to 176 is not challenged now. These writ petitions relate to the assessment of door No. 177 for the second half year of 1954-1955 and for the two half years of 1955-1956. It is unnecessary to refer to the details in regard to the assessment beyond stating that the assessment of the annual value was arrived at on the basis of the levy of licence fee for the market which was 15 per cent of the gross income for the previous year from the market. The licence fee for the market was Rs. 1,275. This was fixed at 15 per cent of the gross income of the market by way of fees. From that the total income from the property, Nos. 144 to 177 was taken to be Rs. 8,526. Deducting the annual rental value of door Nos. 144 to 176 as found in the books the annual rental value for door No. 177 was arrived at a sum of Rs. 7,260. It may be noticed that the assessment in respect of the very same property during the first half of 1954-55 was only Rs. 36. The petitioner complains that this assessment was mala fide and was also otherwise without jurisdiction.
3. It is clear from the above that the assessment was adopted on the basis of the gross income received by the petitioner from the market for the previous year.
4. Section 260(2) of the Madras District Municipalities Act specifies the kinds of fees that may be levied in a market. It states:
The council may in any public market levy any one or more of the following fees at such rates and may place the collection of such fees under the management of such persons as may appear to it proper or may farm out such fees (for any period not exceeding three years at a time and) on such terms and subject to such conditions as it may deem fit:
(a) fees for the use of, or for the right to expose goods for sale in, such markets;
(b) fees for the use of shops, stalls, pens or stands in such markets ;
(c) fees on vehicles or pack animals carrying, or on persons bringing, goods for sale in such market ;
(d) fees on animals brought for sale into, or sold, in such markets ; and
(e) licence fees on brokers, commission agents, weighmen and measurers practising their calling in such markets.
5. From the above it can be seen that the fees leviable in respect of a market is not always referable to the value of the property as such or the user of the soil. For instance the levy of a fee on vehicles which bring the goods for sale in the market, and on brokers, commission agents and weighmen cannot in any sense be said to be a fee in respect of the occupations of the property. Section 78 of the District Municipalities Act is the charging section, which authorises the levy of property tax. Section 82 which relates to the method of assessment of the property runs thus:
(1) Every building shall be assessed together with its site and other adjacent premises occupied as an appurtenance thereto unless the owner of the building is a different person from the owner of such site or premises.
(2) The annual value of lands and buildings shall be deemed to be the gross annual rent at which they may reasonably be expected to let from month to month or from year to year. (Less a deduction, in the case of buildings, of ten per cent. of that portion of such annual rent which is attributable to the buildings alone, apart from their sites and the adjacent lands occupied as an appurtenance thereto) and the said deduction shall be in lieu of all allowance for repairs or on any other account whatever.
6. It is unnecessary to refer to the proviso to that Sub-section and to Sub-section (3) of that section. Section 82(2) makes it plain that the annual value of the lands is the gross annual income which may be expected from the property. The word rent itself implies that it is a profit from the property demised. The measure of rateable value is, therefore, defined by the statute as the rent which may be reasonably expected.
7. In M.S.M. Railway Co., Ltd. v. Bezwada Municipality (1944) 2 M.L.J. 35 : I.L.R. (1945) Mad. 1 : L.R. 71 IndAp 113., the Privy Council observed at page 6:
Section 82(3) prescribes how the annual value of lands and buildings is to be ascertained. It is to be deemed to be the gross annual rent at which they may reasonably be expected to let from month to month or from year to year less 10 per cent. in the case of buildings. The spectre of the hypothetical tenant, so familar an apparition in English rating law, is here invoked.
The criterion for the assessment is the rent at which a hypothetical tenant might reasonably be expected to pay for the property in question. As the word rent implies a return or profit for the use of the property, payment that can legitimately be taken as a basis for the calculation of the annual value would be that which would be referable to the use of the property and not any other kind of income which the owner may get.
8. The question, therefore, is whether in regard to the assessment of a market, the gross income earned by the owner of the market, could be taken to be the annual rent which the property would yield if let out to a tenant. I have already referred to the nature of the fees that are generally collected in a market not all of which could be said to be income from the property as such. The municipality in the instant case has proceeded to assess the market to property tax on the basis of the licence fee. The licence fee is calculated at 15 per cent. of the gross income from the market. Such income would include not merely that referable to the rent for the use of the property but also other payments made or fees received by the owner of the market which are set out in Section 260(2) of the Act.
9. In England the right to hold a market is in general, a franchise granted by the King. That conferred a right to hold a concourse of buyers and sellers to dispose of the commodities in respect of which the franchise was given. The essence of such franchise is that the holder had the monopoly of the market. That monopoly carried with it a right to exclude other persons from holding market in the same area. The holder of the franchise was also entitled by virtue of the grant to levy fees for entry into the market. Such a right is not known to the Indian Law, where the holding of a market is an incident of the property. A person, therefore, who owns the property can hold a market in India. But the principles of law relating to rating under the English Law afford guide for appreciating or elucidating the various items of income from a market which could properly be taken account of in assessing the value of a property. In 25 Halsbury's Laws of England (Simonds edition,) at page 397 it is stated thus:
The franchise of toll is an incorporeal hereditament, and as such Was formerly assessable to the land tax, but land tax remains chargeable only where it was chargeable on a property for the land tax year 1948-1949 and the property has not been exonerated.
Inasmuch as tolls in the strict sense of he term, unlike stallages are profits, not of the soil, but of the market, payable in respect of the use of the market and not in respect of any user or occupation of the market-place, they cannot be taken into account in estimating the value of the market-place for the assessment to the general rate, (b) and this is equally the case whether they are granted by charter or payable by statute, and whether they are payable by the buyer upon sales in the market or upon the entry of goods into the market and (e) although they are taken by a corporation and applied to public purposes.
10. In The Queen v. Caswell (1872) L.R. 7 Q.B. 328, it was held that tolls authorised to be taken by an Act of Parliament, in respect of cattle brought into a market for sale, which become due as soon as the cattle were brought into the market place, and before the cattle were put into a pen or tied up, were mere market tolls, and not in the nature of stallage or tolls taken in respect of the use of the soil ; and in assessing the lessee of the market and tolls to the poor-rate in respect of his occupation of the market place, such tolls could not be taken into account as enhancing the value of the occupation.
11. At page 331, Cockburn, C.J., observed as follows;
I am of opinion that this toll, payable for the admission of cattle into the market, is not properly the subject of a rate. The distinction between market tolls and stallage has been long taken and established; though it is, in my opinion to be regretted : for a man, who occupies the soil of a market with the occupation enhanced in value by reason of this toll ought to be assessed to the rates and contribute to the public burthens in proportion to the value of his occupation. But we must abide by the distinction founded on this principle of ancient law, and take it as established that tolls payable merely as market tolls for the use of the market are not rateable, whereas the toll paid for the use of a stall which occupies the soil is rateable.
In that case the distinction made was between the tolls for commodities brought into the market use by virtue of the franchise and not those levied for the use of the land, the latter category alone being taken into account for the levy of a rate. As I have indicated above there is no question of franchise in this country. But that does not mean that all the fees that are levied in the market are for the use of the property. For instance the fees levied in a market may be either for occupation or for mere entry. It is possible to conceive of cases where a person who does not want to occupy any portion of the market brings headloads of goods to deliver over to a vendor in the market. It cannot be said that that person is occupying any portion of the market so as to include the fee paid by him as one in respect of occupation of the premises. Section 260 enables the owner of the market to levy fees on brokers and other businessmen. It cannot be said that such fees are in respect of any property or the occupation of the soil thereof.
12. Mr. K. Veeraswami, who appeared for the municipality referred to the decision in Percy v. Ashford Union (1876) 34 L.T. 579. In that case a person was rated as the occupier of tolls, lands and buildings situated in a cattle market and amongst the gross receipts upon which the valuation was estimated were items for the cattle admitted into the market. A question arose whether the tolls levied for admitting cattle into the market were incident to the soil so as to be taken into consideration for increasing the rates and were not mere market tolls which could not be so rated. It was contended that the levy of fees in regard to the tolls above mentioned were deemed to be under a franchise or incorporeal hereditament and not an incident to the soil. The learned Judges found that there was no evidence of the franchise in the case granting such a right. That decision could only be treated as one based on the facts proved. In Duke of Bedford v. Overseers of St. Paul Covent Garden 51 L.J. 41, it was held that where a market was divided into various stands, shops, or stalls like potato stands, fruit market, flower stands, the tolls levied in respect of such market arose out of the use of the soil and were in the nature of stallage tolls so as to be rateable under the appropriate enactments. It was held in that case that if no specific place was appropriated it should be held to be a toll in the nature of a franchise and not rateable. But if the tolls were paid in respect of the user of definite portion of the soil, they being in the nature of stallage income, could be taken into account for the purpose of assessing the rate.
13. This question has been dealt with in Ryder on Rating, 1946 Edition, at pages 488 to 497, and referring the two cases referred to above the learned author Observes that the real distinction between the two cases, is that in R.V. Caswell (1872) L.R. 7 Q.B. 328, there was no specific appropriation of particular parts of the markets by particular classes of cattle whereas in Duke of Bedford v. Overseers of St. Paul Covent Garden 51 L. J. 41, the market was divided into horse stands, fruit markets, flower stands etc. It is however clear that the assessment for rate under English Law was on the basis of the income received by the use of the soil, and not other income from the property.
14. Under Section 82(2) of the Madras District Municipalities Act, it is only the rent of the hypothetical tenant that should be ascertained and the property assessed for the purpose of taxation. Fees levied in a market which are not in the nature pf rent but which could by virtue of Section 260(2), and the notification thereunder be levied and collected, could not properly form part of any basis for assessment for the purpose of property tax. In the present case the municipality was clearly in error in taking the total licence fee collected from the market as the basis of the levy of property tax for the market.
15. In this connection Mr. Veeraswami, the learned Advocate for the municipality, referred me to the decision in Madurai Municipality v. Kamakshisundaram Chettiar (1955) 2 M.L.J. 369. In that case it was held that though the fair rent was fixed for a building under the provisions of the Madras Buildings (Lease and Rent Control) Act, 1949, the Municipality was not precluded from taking that rent alone, while a higher rent was actually received or could reasonably be expected to be received. That decision was only concerned with the case as to whether the assessing authority could on the terms of Section 82 base the assessment on the rental income by a hypothetical tenant or was restricted to the fair rent fixed under the Control Acts. On the terms of Section 82, the learned Judges held that the former was the correct basis. That decision, however, did not concern itself with the question whether all the profits from the property should be taken into account or only that portion of the profits referable to the rental value alone should be taken into consideration while assessing the annual value under Section 82.
16. In Ramanarain Sons, Ltd. v. Assistant Commissioner of Sales Tax (1955) S.C.J. 808 : (1955) 2 M.L.J. 302 : (1951) 2 S.C.R. 483, the Supreme Court observed at page 497 that when an assessment is not for an entire sum, but for separate sums, dissected and earmarked each of them to a separate assessable item, a Court can sever the items and cut out one or more along with the sum attributed to it, while affirming the residue. But in respect of the totality of the property treated as assessable the wrongful inclusion in it of certain items of property which by virtue of a provision of law were expressly exempted from taxation rendered the assessment invalid in toto. The learned Judges of the Supreme Court approved of a passage in Bennett and White (Calgary), Ltd. v. Municipal District of Sugar City L.R. (1951) A.C. 786, at page 816 to the following effect:
When an assessment is not for an entire sum, but for separate sums, dissected and earmarked each of them to a separate assessable item, a court can sever the items and cur out one or more along with the sum attributed to it, while affirming the residue. But where the assessment consists of a single undivided sum in respect of the totality of property treated as assessable and when one component (not dismissible as tie minimis) is on any view not assessable and wrongly included, it would seem clear that such a procedure is barred, and the assessment is bad wholly. That matter is covered by authority. In Montreal Light, Head and Power Consolidated v. City of West mount 1926 S.C.R. 515, the Court (see especially per Anglin, C.J.) in these conditions held that an assessment which was bad in part was infected throughout, and treated it as invalid. Here their Lordships are of opinion, by parity of reasoning, that the assessment was invalid in toto.
17. From the above statement of the law, it is clear that where an assessment includes in it an item which could not properly be included the whole assessment would be invalid, except in those cases where the part which is bad is severable from the rest. There is no evidence in the present case as to which of the items of fees levied by the owner of the market are exempted from being included as rental income from the property. It should, therefore, be held that the entire assessment is invalid and made without: jurisdiction.
18. I, therefore, issue the writ prayed for quashing the orders for the period covered in these three writ petitions.