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Writ Petition No. 156 of 1957, decided on 2nd May, 1958.

(a) Punjab Land Revenue Act (XVII of 1887), S. 3, cl. (18)--- Expressions "net assets", "estimated", "produce" ‑ Meaning ‑Working out net assets of estate or group of estates‑Estimate cannot be based on income other than that from agriculture.

Net assets of an estate, or a group of estates, means the estimated average annual surplus produce of such land after deduction of the ordinary expenses of cultivation and have no relation to the income which any such land derives from sources other than that of agriculture. The word "estimated" occurring in clause (18) of section 3 of the Punjab Land Revenue Act, 1887 does indicate that even if any land situated in an estate is not put to agricultural use, the produce of such land which it would have yielded if it had been put to such use has to be taken into consideration for working out the net assets. The income derived from such land if it is put to some use other than that of agriculture would not, however, be "produce" of such land and cannot form the basis of working out its net assets, because the expression "produce" occurring in this clause cannot be considered to be synonymous with the expression "income". If the intention of the Legislature had been that the income derived from land to whatever use it is put should form the basis of working out the net assets, they would have used the expression "income" to make the intention clear.

(b) Punjab Land Revenue Act (XVII of 1887), S. 48 (]) All land, whether used for purposes of agriculture or not‑Liable for payment of land revenue.

M. A. Rahman and Ejaz Husain for Petitioner.

S. A. Mahmud, Advocate‑General and Dr. Naseem Hasan for Respondents.

Dates of hearing : 23rd and 24th April 1958.

--‑The Faletti's Hotel, Lahore, which covers an area of about 66 kanals and is owned by the Associated Hotels of India Limited, , was previously assessed to a land revenue of about Rs. 600, per annum. During the settlement operations of the years 1953‑55 it has been assessed as a shop, to land revenue at the rate of Rs. 91‑4‑0 per kanal, making a total of Rs. 9,453‑1‑0 per annum. A notice of demand, for the half‑yearly Rabbi instalment of 1956, for Rs. 4,726‑8‑6 was received by the hotel and‑ was paid. An additional demand for the same harvest, amounting to Rs. 119‑9‑9, has not yet been paid. Instead, the Managing Agents of the hotel have by means of a petition under Article 170 of the Constitution, moved this Court for the grant of a writ of mandamus directing the Province of West Pakistan, the Settlement Officer, Lahore, and the Tahsildar, Lahore (Respondents Nos. 1 to 3) to with draw the demand notices in question, to refund the sum of Rs. 4,726‑9‑6 already paid and to desist from collecting the amounts mentioned in the demand notices. The legality of the new assessment of land revenue on the petitioners' property has been challenged on a number of grounds specified in paragraph 9 of the petition, but at the time of arguments only the following two grounds were pressed.

(1) That in assessing the land revenue, the letting value of the land occupied by the Faletti's Hotel‑ has been taken into consideration and land revenue has not been assessed on the basis of "net assets" as defined in clause (18) of section 3 of the Punjab Land Revenue Act, 1887.

(2) That the distribution of land revenue demand on the various properties situated within the Lahore Urban Assessment Circle, in accordance with which the land occupied by the Faletti's Hotel has been assessed to land revenue at the rate of Rs. 91‑4‑0 per kanal, per annum, is not equitable.

2. To understand the precise nature of these objections it would be necessary to make a brief reference to some of the provisions of the Punjab Land Revenue Act, 1887. Section 48 of the Act lays down that all land, "to whatever purpose applied and wherever situate", is liable to the payment of land revenue to the Government, except such land as has been wholly exempted from that liability, by any special contract, or the land included in a village site. Section 48‑A provides that the assessment of land revenue shall be based on an estimate of the average money value of the net assets of the estate, or group of estates, in which the land concerned is situated. Section 48‑B provides further that if the land revenue is assessed as a fixed annual charge, the amount thereof, and, if it is assessed in the form of a prescribed rate, the average amount leviable, shall not, in the case of any assessment circle, exceed one‑fourth of the estimated money value of the net assets of such circle. Under section 49 a general re‑assessment of land revenue can be undertaken only with previous permission of the Provincial Government. For determining the mode of assessment the Revenue Officer has first to draw up proposals and after the same have been approved by the Provincial Government (now the Board of Revenue) he is empowared by subsection (t) of section 51 to determine the assessment for each estate. Sub section (3) of section 51 imposes two limitations on the power of the Revenue Officer to determine such assessment. With regard to an assessment circle the average rate of incidence on the cultivated area cannot exceed the rate of incidence of the land revenue imposed at the last previous assessment by more than one‑fourth and in the case of any estate the maximum limit of such increase cannot be more than two‑thirds. The provisions of subsection (3) are, however, not applicable to the case of land situated in an Urban Assessment Circle, for which the only limitation is that imposed by section 48‑B. Next, there is section 56, which empowers the Revenue Officer to distribute the assessment over the various holdings comprised in an estate. Lastly, so far as is relevant to the present purpose, section 60 empowers the Provincial Government to frame rules regarding certain matters. The expression "net assets" has been defined in clause (18) o9section 3, as being the "estimated average annual surplus produce" of an estate, or group of estates, remaining after deduction of the ordinary expenses of cultivation. The "ordinary expenses of cultivation", which include such charges as water rates, maintenance of means of irrigation etc., customarily payable by the land owner, have been specified in the explanation to this clause.

3. Previous to the Lahore Urban settlement of the years 1953‑55 in the case of urban areas, the maximum total assess ment "used to be calculated on the basis of the income of such land as if the whole of it was agricultural land, but while dis tributing the total assessment on the various holdings the purposes to which the sites were put were taken into consideration. In the year 1936, Mr. Abell, Settlement Officer, Lahore who was dealing with the assessment of some Urban areas of the Lahore district, raised the question of the legal basis of the land revenue assessment of the urban lands, which were not used for agri cultural purposes and were not situated in the Colony Towns. After obtaining advice of the Legal Remembrancer and of the then Governor, it was decided that the Government were entitled to one‑fourth share of the "letting value" of the building sites assessed to land revenue and that in finding out that value the use to which such sites were being actually put and the profits which were being derived by the land owners should be taken into consideration. In the Lahore Urban Assessment Circle, which was constituted by means of a Notification dated 23rd December 1942, were included the areas of about forty‑nine revenue estates lying outside the walled city. By a Notification dated the 25th March 1953, issued under subsection (2) of section 49 of the Punjab Land Revenue Act, 1887, as amended by Act III of 1928, the general assessment of the Lahore Urban Area was ordered to be undertaken. By means of a letter No. 1435‑R., dated the 12th June, 1954, from the Revenue Department of the former Punjab Government to the Commis sioner, Lahore Division, contrary to the previous practice, directions were issued that the re‑assessment of the Lahore Urban Area should be based on the principle that the Govern ment were entitled to one‑fourth share of the "letting value" of the building sites assessable to land revenue. The Settlement Officer, Raja Muhammad Afzal Khan, kept in mind these directions and, in his report dated the 27th April 1955, while submitting proposals to the Government for sanction, reported that (1) the total urban area of the Lahore Assessment Circles was 11,445 acres, out of which 5,691 acres were under buildings ; (2) on the basis of "kind rents" the total net assets of the cultivated area came to Rs. 10,80,678 and on the basis of "cash rents", after deducting certain expenditure, the total came to Rs. 15,93,969 and (3) the "letting value" of the sites of buildings of‑ the various categories covering the area= of 5,691 acres, on the basis of the average sale‑price, came to Rs. 86,64,733. He, therefore, proposed that the agricultural land as well as the building sites, in this circle, may be assessed as under :‑

Hie also proposed that the shops, houses, bungalows and Cinemas should be placed in different categories according to their 'localities and assessed to land revenue at various rates, ranging between Rs. 2 to Rs. 90 per kanal, per annum. These proposals were accepted by the Government and, acting under sub section (1) of section 51 of the Act, the Settlement Officer first determined the assessments of the various estates and then, acting under subsection (1) of section 56 of the Act, distributed the assessment over the various holdings.

4. The revenue estate of Mozang, in which the Faletti's Hotel is situated, was previously assessed to an annual land revenue demand of Rs. 15,019, which was apportioned between the land under the buildings and other land as under :‑

Rs.

Land under the buildings ... 12,919

Other land used for purposes of agriculture ... 2,100

Under the new assessment the annual demand of this estate has been fixed at Rs. 1,12,272‑12‑0, which has been apportioned between the two categories as under :‑

Rs. a. p.

Land under the buildings ... ... 1,07,772 12 0

Other land used for purpose of agriculture ... 4,500 0 0

5. A reference to the definition of "net assets", as given in clause (18) of section 3 of the Act, would show that the net assets of an estate, or a group of estates, mean the estimated average annual surplus produce of such land after deduction of the ordinary expenses of cultivation and have no relation to the income which any such land derives from sources other than that of agriculture. The word "estimated" occurring in this clause does indicate that even if any land situated in an estate is net put to agricultural uses, the produce of such land which it would have yielded if it had been put to such use has to be' taken into consideration for working out the net assets. For instance, if any agricultural land is lying vacant for a number of years the estimate of its average annual surplus produce is to be based on the income which such land would have yielded if it had been under cultivation. Similarly, if any land is put to some other use, the estimate of its average annual surplus produce is to be based on the value of the produce which it would‑take yielded if it had been put to agricultural use. The income derived from such land if it is put to some use other than that of agriculture would not, however, be "produce" of such land and cannot, in our opinion, form the basis of working out its net assets, because the expression "produce" occurring in this clause cannot be considered to be synonymous with the expression "income". If the intention of the Legislature had 6 been that the income derived from land to whatever use it is put should form the basis of working out the net assets, they would have used the expression "income" to make the intention quite clear. It cannot, however, be denied that under subsection (1) of section 48 of the Act all land "to whatever purpose applied and wherever situate" is liable to the payment of land revenue, unless it is exempted from such payment. The correct meaning of this provision of law, in our opinion, is that though for working out the net assets of an estate, or a group of estates; the estimate cannot be, based on income other than that from agriculture, after the net assets have been so ascertained, all that land, whether it be used for' purposes of agriculture or not; would be so liable for payment of land revenue. This inter pretation, in our opinion is in accord with the language of sub section (1) of section 48, as well as with that of section 48‑A of the Act. In' fact, this interpretation has always been taken to be the basis of assessment before a contrary decision was taken in the year. 1936, on the reference made by Mr. Abell regarding the assessment of the urban areas of Pattoki and Kasur, in the Lahore District.

6. In view of what has' been stated above, the method adopted by the Settlement Officer, Lahore, in working out the net assets of the Lahore Urban Assessment Circle was not in accordance with law. He should, in our opinion, have worked out the net assets of the total area of 11,448 acres on .the assumption that the whole of at was agricultural land. On the basis of cash rents, however, he found that the net assets of 5,754 acres of land, which were put to agricultural use, came to Rs. 15,93,969. If the net assets of the remaining 5,691 acres, which were under buildings, had also been worked out on' the basis of agricultural income, the net assets of the total area of 11,445 acres would have been in the neighbourhood of about Rs. 30,00,000. Section 48‑B permits the State to levy land revenue not exceeding one‑fourth of the total net assets of an assessment circle and if this limitation had been kept in view, for the Lahore Urban Assessment Circle a total amount of Rs. 7,50,000, per annum, could have been assessed as land revenue. The amount actually assessed is Rs. 4,95,000 per annum, which is well within the limit fixed by this provision of law. Thus, although the method of working out the net assets was not according to law, as the assessment has not exceeded the maximum limit fixed by section 48‑B, the legality of the assess ment should not be allowed to be challenged on this ground.

7. Regarding the distribution of the assessment between the various estates and. holdings, though sections 51 and 56 give this power to the Revenue Officer (Settlement Officer), by the very nature of things that power has to be exercised reasonably and equitably. In fact, rule 23 of the Land Revenue Assessment Rules, 1929, which is worded as follows, envisages the exercise of this power in an equitable manner :‑

" Before making or revising the distribution of a fixed assessment over the several holdings of an estate, the Revenue Officer shall enquire into the usage followed in the previous distribution and in deciding the method of the new distribution, he shall have regard to that usage and to the wishes of the land‑owners, so far as may be practicable and equitable."

It was contended on behalf of the respondents that due notice was given to the land‑owners and some of them appeared before the Settlement Officer and approved of his proposals. There is, however, nothing on the record to show that the petitioners were given a notice of the proposed assessment, which the revenue estate of Mozang was to pay, or of the distribution of the demand on the various holdings including that of the petitioners. The record also does not indicate the basis on which the various properties have been categorised and how some of the urban properties have been assessed to a land revenue demand of Rs. 2 per kanal per annum, and some, like that of the petitioners, to a demand at about forty‑five times that amount. If there had been any material on the record to show that the "letting value" of the land under the Faletti's Hotel was about forty‑five times the "letting value" of the bungalows described as' "III Class", which have been assessed to land revenue at the rate of Rs. 2 per kanal, per annum, and was also about forty‑five times the income of canal‑irrigated agricultural land which was assessed, to land revenue at the same rate, we could have said that the distribution of demand between the various holdings, as well as between the various estates of this Circle, was .made on an equitable basis. In the absence of such material we cannot avoid an inference that arbitrary standards may have been applied. For this reason and also on account of the fact that the petitioners were not heard before the demand in their case was fixed, we direct that the Board of Revenue should hear them and give them an opportunity of placing their point of view before the Board. If after' considering their representation and all other circumstances of the case the Board comes to the conclusion that the assessment in the case of the petitioners was not made on an equitable basis, it will adopt an equitable basis so far as the petitioners are concerned. To this extent only, we set aside the orders passed by the Settlement Officer. In the peculiar circumstances of the case, however, we make no order as to costs.

K. B. A. Order accordingly.

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