G. Ramanujam, J.
1. These two revision petitions have been filed by one and the same person. He has challenged the orders of the Court of Small Causes, Madras fixing the rental value of the petitioner's premise's No. 5D/1, Gandhi Irwin Road, Egmore, Madras at Rs. 525 and for premises No. 5D/2, Gandhi Irwin Road, Egmore, Madras at Rs. 1,350 for the second half year 1970-1971.
2. The rental values of premises Nos. 5D/1 and 5D/2 were ordinarily fixed by the Commissioner of Corporation of Madras, at Rs. 867 and Rs. 2,232 respectively. On appeal to the Taxation Appeals Committee these rental values were reduced to Rs. 650 and Rs. 1,700, respectively. On further1 appeal to the Court of Small Causes, Madras, the rental values had been reduced to Rs. 525 and Rs. 1,350, respectively. In these revisions the basis adopted for fixing the rental value has been challenged by the petitioner on the ground that the fair rent payable in respect of the buildings under the provisions of the Tamil Nadu Buildings (Lease and Rent Control) Act should alone form the basis, and in support of this stand reliance is placed on certain decisions of the Supreme Court.
3. In respect of premises No. 5D/1, the value had been fixed on the basis of the actual rent paid by the lessee of the property who is running a lodging house. In respect of the other premises No. 5D/2, the actual rents received by the petitioner had been ignored and the rent the building is likely to fetch if let to a hypothetical tenant was taken as the basis and the rent that will be paid by a hypothetical tenant has been determined by the Taxation Appeals Committee with reference to the accommodation available, the locality in which the building is situate and the non-residential purpose for which the building has been put to.
4. The contention of the petitioner as regards Door No. SD/2 is that the actual rent received by the petitioner who is the owner of the premises should be taken into account and that the actual rent is only Rs. 625 per month. The lower Court had however expressed the view that the lease deed had not been produced, that it was not known when the building was actually let, that the building is a two-storeyed one, that there are 17 double rooms, one washing room, verandahs, common passage, bath room and F.O.L. in the premises and that having regard to the fact that a lodging house is run in the premises, it will equally fetch a monthly rent between Rs. 400 to Rs. 800 for each floor. It is on this basis the lower Court has fixed Rs. 1,350 as the rental value for this building.
5. It is the petitioners' contention that the rental value of the buildings can be determined only by determining the fair rent fixed by the Rent Controller or if no fair rent has been fixed by him, by determining the fair rent on the basis of the relevant provisions contained in the Tamil Nadu Buildings (Lease and Rent Control) Act. In support of this contention strong reliance has been placed by the learned Counsel on the following decisions of the Supreme Court. In Corporation of Calcutta v. Smt. Padma Debt : 3SCR49 , it was held that on a fair reading of Section 127(a) of the Calcutta Municipal Act, 1923, the annual rent could not be fixed higher than the standard rent fixed under the Rent Control Act. After quoting a passage from a judgment of the Judicial Committee of the Privy Council in Bengal Nagpur Rly. Co. Ltd. v. Corporation of Calcutta (1947) 2 M.L.J. 106 : 74 I.A. 1 : A.I.R. 1947 P.O. 50, showing that a hypothetical tenancy of an improbable character was not contemplated, the Supreme Court expressed:
The word 'reasonably' in the section throws further light on this interpretation. The word 'reasonably' is not capable of precise definition, 'Reasonable' signifies 'in accordance with reason'. In the ultimate analysis it is a question of fact. Whether a particular act is reasonable or not depends on the circumstances in a given situation. A bargain between a willing lessor and a willing lessee uninfluenced by any extraneous circumstances may afford a guiding test of reasonableness. An inflated or deflated rate of rent based upon fraud, emergency, relationship and such other considerations may take it out of the bonds of reasonableness.
In Guntur Municipal Council v. Ratepayers' Association : 2SCR423 , construing Section 82(2) of the Madras District Municipalities Act, the Supreme Court pointed out that for determining the annual value of the buildings under the said section the test essentially is what rent the premises can lawfully fetch if let out to a hypothetical tenant, and that the Municipality has to be bound by the fair or standard rent which would be payable for a particular premises under the Rent Control Act in force during the year of assessment' and is not free to assess the tax on any arbitrary annual value. It was further pointed out in that case that there can be no distinction between build-ling's for which fair rent has been fixed by the Rent Controller and those in respect of which no such fair rent has been axed, that when the Rent Controller has not fixed rent the municipal authorities will have to arrive on their own figure of fair rent in accordance with the principles laid down in the Rent Control Act. Dealing with the plea of inconvenience and procedural difficulties in the application of the principles laid down in the Rent Control Act for fixing fair rent for buildings by the assessing authorities constituted under the District Municipalities Act, the Court expressed:
We are not concerned with the procedural difficulties which may be experienced, we have to declare that the law is and as appears to be well-settled the assessment of valuation for the purposes of tax must be made in accordance with and in the light of the provisions of the Rent Act which would be in force during the period of assessment.
In Delhi Municipality v. M.N. Soi : 1SCR731 , the Supreme Court had to consider the scope of the words 'may reasonably be expected to be let from year to year' occurring in Section 3(1)(b) of the Punjab Municipal Act, 1911 and it was pointed out:
Thus, whatever may be our views on the reasonableness of tying down assessment, for the purposes of rating, to the concept of a rent which has been held to be fair rent in the past but does not bear a real relationship to the prevailing conditions of the market for accommodation if it was uncontrolled, we find it impossible to get over the ratio deddendi of this Court in Smt. Padma Debi's case : 3SCR49 , which we are to follow. This was that, if a rent which is higher than that which con be legally demanded by the landlord and actually paid by a tenant, despite the fact that such violation of the restriction on rent chargeable by law is visited by penal consequences, the Municipal authorities cannot take advantage of this defence of the law by the landlord. Rating cannot operate as a mode of sharing the benefit of illegal rack-renting indulged in by rapacious landlords for whose activities the law prescribes condign punishment.
Thus the Supreme Court has taken consistently the view that the standard of reasonableness has to be judged not from the expectation of a landlord who takes the risk of prosecution and punishment which the violation of the law involves, but the expectation of the landlord who is prudent enough to abide by the law and that therefore, even in cases where the rents actually collected by the landlords are higher than the standard rent the assessment could not be made on the basis of the actual rents received by the landlord but by the fair rent which alone the landlord is entitled to collect legally from the tenants. The above decisions of the Supreme Court have clearly laid down the principle that as a landlord cannot reasonably be expected to let a building for a rent higher than the fair rent in contravention of the rent restriction law, it should be taken that an upper limit has been fixed on the rate of rent that a transaction entered into between the parties in defiance of the law cannot be taken to be the basis for determining the rent Which can reasonably be expected if the building is to be let and that it was not the actual rent received by the landlord but the hypothetical rent which could be expected if the building is to be let is the legal yardstick for determination of the reasonable rent.
6. The learned Counsel for the respondent would however draw my attention to a Bench decision of this Court in Madurai Municipality v. Kamakshisundaram I.L.R. (1956) Mad. 530 : (1955) 2 M.L.J. 969 : 68 L.W.583 : A.I.R. 1956 Mad. 49, wherein Rajamannar, C.J., speaking for the Bench had expressed the view that though the fair rent fixed under the House Rent Control Act may and ordinarily should be taken into consideration by the municipal authorities in computing the annual value under Section 82 of the District Municipalities Act, they are not bound to take such fair rent as necessarily the rent for which the premises may reasonably be expected to be let within the meaning of Section 82 of the Act. Addressing on the question as to whether the annual value for the purpose of Section 82 of the Act should necessarily and always be computed on the basis of the fair rent for the concerned property as fixed under the Madras House Rent Control Act and whether the restriction of rent under the Rent Restriction Act can be regarded as a statutory restriction on the rent realisable by the building, the Bench observed that a statutory restriction on rent payable by a tenant cannot operate as a statutory restriction on the profit earning or rent-earning capacity of the building and that the rental value will not be affected or controlled by the fact that the landlord cannot enforce as against a tenant a rent higher than the statutory standard rent in operation at the time. The Bench quoted with approval the following observation of Lord Parmoor in Poplar Assessment Committee v. Roberts (1922) 2 A.C. 93.
The question, however, remains whether a Restriction on rent under the Rent (Restrictions) Act, 1920, can be regarded as a statutory restriction on the value to an occupier of the profit-earning or rent-earning capacity of the 'Cobden's Head'. Ordinary rent is not a restriction on the profit-earning or rent-earning capacity of an hereditament in the hands of an occupier and has never been so regarded. I am unable to see in what way a statutory restriction on rent payable from a tenant can operate as a statutory restriction on the profit-earning capacity of the 'Cobden's Head', or how the value to an occupier is affected or controlled by the fact that a landlord cannot, enforce as against a tenant, a rent higher than the statutory standard rent in operation at the time.
However, having regard to the decisions of the Supreme Court referred to above Which take a contrary view, the decision in Madurai Municipality v. Kamakshisundaram I.L.R. (1956) Mad. 530 : 68 L.W. 583 : (1955) 2 M.L.J. 369 : A.I.R. 1956 Mad. 49 cannot be taken to be good law so far as it runs counter to the view taken by the Supreme Court in the above decisions. As pointed out by the Supreme Court wherever the buildings are subject to the rent control restrictions the rental value of those buildings should be taken as the fair rent, if any, fixed under the statutory provisions and if no fair rent has been fixed by the Rent Controller the same has to be determined by the municipal authorities by applying the provisions of the Rent Control Act dealing with the determination of fair rent.
7. In this case no fair rent has been fixed in respect of the buildings in question. As regards premises No. 5-D/I, the assessment has been made on the basis of the hypothetical rent. The petitioner contended that the rent which he is receiving is the fair rent and therefore the rental value should be fixed with reference to the actual rents received by him or with reference to the standard rent which has to be determined with reference to the provisions of the Rent Control Act.
8. As regards premises No. 5-D/2, the respondent has proceeded on the basis that the rent-received by the landlord does not represent a reasonable rent, and that the building may fetch a higher rent, if let to a hypothetical tenant, while the petitioner would say that the rent received by him represents the fair and reasonable rent which a hypothetical tenant would pay in respect of that building. In this state of affairs the rental value has to be fixed with reference to the fair rent to be determined for the building applying the provisions of the Rent Control Act. It is true no fair rent has been fixed in respect of this building. But as pointed out by the Supreme Court in such a case the municipal authorities have to apply the provisions of the Rent Control Act and determine the fair-rent for the building before assessing the property to tax. Civil Revisions Petitions Nos. 3275 and 3276 of 1975 are therefore allowed and the matter remitted to the respondent with a direction to compute the fair rent for the building applying the provisions of the Tamil Nadu Buildings (Lease and Rent Control) Act for the purpose of fixing the annual rental value of the building. There will be no order as to costs.