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Civil Appeals Nos. 7 and 8 of 1971, decided on 6th May 1976.
(On appeal from the judgments and orders of the High Court of West Pakistan (now Lahore High Court), Lahore, dated the 10th March 1969, in Writ Petitions Nos. 1519 and 1562 of 1968) (The Lyallpur Cotton Mills Ltd, v. The Commissioner, Sargodha Division, Sargodha and another).
-- S. 5 read with West Pakistan Urban Immovable Property Tax Rules, 1958, rr. 6(e) & (f) -Tax-Assessment-Basis-To be either actual gross annual rent, or such gross annual rent as could reasonably be earned during preceding financial year, or such as might reasonably be expected to be fetched from year to year-Premises actually let out on rent and nothing in dispute with regard to actual rents received-Held : Basis of assessment to be gross annual rent received-Owner not to be called upon to pay tax on basis of rent never realised or which he could never receive.
Appellant's factory consisted of factory buildings, offices, and quarters for the labour and staff. The Collector, Excise and Taxation enhanced the assessment for all such units. Appeals were, however, filed against the enhancement of the annual rental value of the quarters for the labour and staff only.
On behalf of the appellants it was contended that the gross annual value of the said quarters for the labour and staff should have been determined on the basis of the rents actually received by them and not on the basis of rents which could be earned in respect of the quarters if they were let out to outsiders at market rate. On behalf of the respondents it was urged that the basis adopted was prescribed under section 5 of the Act read with rule 6(e) and (f) of the Rules framed under the Act.
Held : Section 5 of the West Pakistan Urban Immovable Property Tax Act, 1958 read with rule 6(e) of the Rules framed under the Act clearly contemplates that the basis of assessment should be either the actual gross annual rent or the gross annual rent that could reasonably be earned during the financial year immediately preceding the current financial year or might reasonably be expected to be let from year to year. In the present cases as there is no dispute as to the actual rents received for the disputed quarters, the basis of assessment should have been the gross annual rent earned. The interpretation canvassed for disregards the actual position, and on the contrary accepts as basis a condition that does not exist, and the owner is called upon to pay tax on the basis of rents which he never received and perhaps never can receive. There is no allegation that the rents were deliberately kept low to illegally deprive the authorities of their rightful dues.
-- And West Pakistan Urban Rent Restriction Ordinance (VI of 1959)-Interpretation of statutes-Act V of 1958-A taxing statute ---Ordinance VI of 195)---Governing relations of landlords and tenants---Both statutes intended to serve different purposes-No dispute between landlord and tenant---Question of harmonious construction, held, does not arise.---Interpretation of statute].
---- S. 5 read with West Pakistan Urban Immovable Property Tax Rules 1958, r. 6(e)-Inquiry under r. 6(e)-To be confined to pro perties of similar description in rating area-Comparison to be between similar quarters in a factory or factories in rating area and not with houses or flats built or m-.ant principally for earning income.
Abdus Salam, Advocate Supreme Court instructed by Wajid Hussain, Advocate-on-Record for Appellant.
Riaz Ahmad, Assistant Advocate-General Punjab instructed by Ijaz Ali, Advocate-on-Record (absent) for Respondents.
Date of hearing : 6th May 1976.
.----These are two Civil Appeals by Special Leave of this Court and they have been heard together and are now being disposed of by one order.
2. Leave to appeal was granted to consider the validity of the order of the Taxation Authority under the West Pakistan Urban Immovable Property Tax Act (hereinafter called the Act), 1958 enhancing the gross annual rental value of the residential quarters of the staff and labour in the appellant's factory from Rs. 69,040 to Rs. 1,72,524.
3. It appears that the appellant's factory consists of factory buildings, offices and quarters for the labour and staff. For the period 1952-53 to 1956-57, the gross annual rental value of the entire unit was determined at Rs. 4,50,000 Including Rs. 1,72,524 for the non-factory buildings. Originally, for this period, the Collector, Excise and Taxation, by his order dated 12-2-1953, had fixed the gross annual rental value of the non-factory buildings in the premises at Rs. 69.040. For the period 1962-63 to 1966-67, the annual rental value was enhanced to Rs. 5,25,000.
4. The present dispute between the parties is limited to the enhancement of the annual rental value of the quarters for the labour and staff only.
On behalf of the appellant it has been contended before us that the gross annual rental value of the said quarters for the labour and staff should have been determined on the basis of the rents actually fetched by them and not on the basis of the rents which could be earned in respect of the quarters if they were let out to outsiders at market rate.
On the contrary, Mr. Riaz Ahmad, the learned Assistant Advocate -General, appearing on behalf of the respondents, has contended that the basis adopted by the 'Taxation Authorities was prescribed under section 5 of the Act read with rules 6(e) and (f) of the Rules framed under the Act. The relevant provisions of section 5 of the Act and rule 6(e) and (f ) are in these terms :-
"Section 5. Ascertainment of annual value.-----The annual value of any land or building shall be ascertained by estimating the gross annual rent at which such land or building together with its appurtenances and any furniture that may be let for use or enjoyment with such building might reasonably be expected to be let from year to year, less .....
Rule 6. Preparation of draft valuation list.-(1) In order to prepare a valuation list, the assessing authority shall-
(b) .-----------------------
(c) .-------------------
(d) . . -.--------------------
(e) make an enquiry about the gross annual rent earned or which could reasonably be earned in respect of the property during the financial year immediately preceding the current financial year,
(f) determine, from such other date as may be available, the gross annual rent at which any property in the rating area may reasonably be expected to be let from year to year, if in its opinion the average annual rent of such property ascertained under clause (e) be not fair or reasonable when compared with such rent of any other property in that locality."
Sub-rule (f) is not applicable in the present case. The section read with rule 6(e) clearly contemplates that the basis of assessment should be either the actual gross annual rent or the gross annual rent that could reasonably be earned during the financial year immediately preceding the current financial year or might reasonably be expected to be let from year to year. In the A present cases as there is no dispute as to the actual rents received for the disputed quarters, the basis of assessment should have been the gross annual rent earned. The interpretation sought to be put by the learned Assistant Advocate-General, will result in an unreal and unreasonable situation which according to the accepted principle of interpretation of statutes cannot be accepted. The interpretation canvassed for disregards the actual position, and on the contrary accepts as basis a condition that does not exist, and the owner is called upon to pay tax on the basis of rents which he never received and perhaps never can receive. There is no allegation that the rents were deliberately kept low to illegally deprive the authorities of their rightful dues.
5. The Act and the West Pakistan Urban Rent Restriction Ordinance are intended to serve different purposes, for while the former is a taxing statute, the latter governs the relations of landlords and tenants. In the present cases, there is no dispute between the landlords and tenants. No question off a harmonious construction of these two statutes, therefore, arises.
6. There is another aspect of the case. The enquiry, if any, under rule 6(e) must be confined to properties of similar description in the rating area. In other words, the comparison should have been with similar quarter in a factory or factories in the rating area and not with the houses or flats built or meant principally for earning income.
Both the appeals are accordingly allowed without any order as to costs. The result is that so far as the quarters of the labour and staff of the factory are concerned, the actual rents fetched by them must form the basis for determining the gross annual rental value of those quarters. The enhance ment made in disregard of this basis is set aside.
S. A. H. Appeal allowed.
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