It was not surprising therefore that the Supreme Court delivered two detailed judgements relating to this subject last month affecting property values in Mumbai and Delhi.
In the Mumbai case, the question was: whether property tax is to be determined in terms of the Municipal Corporation Act or with respect to the Rent Control Act? ( Municipal Corporation of Greater Mumbai vs Kamla Mills Ltdd ).
The related questions were whether the revision of the rateable value should be with respect to the market value or whether the rateable value should be limited to the standard rent. The Municipal Corporation Act, incidentally, does not define rateable value.
Kamla Mills, a textile unit, owned a large area of land in the city. After a general strike of textile workers, the government permitted textile mills to build houses in their surplus land by demolishing old structures.
The main condition was that the finances generated would be utilised for paying off the dues of the employees. This mill took advantage of the liberal policy and planned a new building complex. The property is now occupied by the National Stock Exchange and the National Security Depository.
The question arose: when a building constructed upon land previously assessed to municipal tax is demolished for raising a new building, is it open to the municipal corporation to assess the rateable value of the land till the construction of the building by taking the market value of the land? Setting aside the judgement of the Bombay High Court, the Supreme Court ruled that the rateable value must be ascertained on the basis of what a hypothetical tenant would offer for it as a reasonable rent.
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