The Bombay High Court Wednesday struck down certain rules enacted by the Brihanmumbai Municipal Corporation (BMC) for assessment of capital value of a property, based on which property tax could be levied.
The high court said all the assessments and bills issued under these rules stand quashed.
A division bench of justices Abhay Oka and Riyaz Chagla, however, upheld the constitutional validity of the 2009 amendment to the Maharashtra Municipal Corporation Act that had changed the levying of property tax basis in Mumbai from rateable value on standard rent to capital value.
"Rules 20, 21 and 22 of the Capital Value Rules of 2010 and 2015 are struck down as they are ultra vires to the Corporation Act. All assessments and bills issued under these rules stand quashed and set aside," the bench said in its order.
The court said that the civic body will have to give a fresh hearing to the complaints.
The bench stayed its order till August 31 to enable the BMC to approach the Supreme Court in appeal.
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The bench was hearing a bunch of petitions filed by an association of property owners, builders' associations and charitable institutions, including religious bodies, against the BMC and the Maharashtra government, challenging the levy of property tax on the basis of capital value.
In 2009, the Maharashtra Municipal Corporation Act was amended and a concept of levying property tax on capital value system was brought into force.
The petitioners challenged the constitutional validity of the amended property tax based on capital value of land as opposed to the earlier rateable value based on standard rents and also the validity of the higher land under construction tax.
There were a series of constitutional challenges raised by Property Owners Association and developers to an amendment to the MMC Act and rules framed in 2010 and 2015 for fixation of capital value of lands and buildings.
The rules are void and unconstitutional, the developers had argued.
The capital value of land as the basis for property taxes had led to a steep rise with some owners being served a bill running into tens of crores, the petitioners had claimed.