Property Tax: Supreme Court strikes down New Delhi Municipal Council’s Bylaws [Read Judgment]

Property Tax - Supreme Court of India - Taxscan

The Supreme Court of India has struck down New Delhi Muncipal Council ( NDMC ) (Determination of Annual Rent) Bye-laws, 2009. The municipal body’s 2009 bylaws was empowered to charge property tax even on vacant land.

The Petitioners Association of Concerned Citizens of New Delhi & Anr has challenged the constitutional validity of NDMC (Determination of Annual Rent) Bye-laws, 2009. These Bye-laws changed the earlier regime of determining the rateable value for the purposes of levying property tax. These Bye-laws seek to alter the earlier system of determining the rateable value on the basis of he annual rent at which the land or buildings may reasonably be expected to be let from year to year.

On that basis annual rent used to be fixed and a particular percentage was prescribed for the purposes of payment of property tax. The impugned Bye-laws introduced the system of Unit Area Method (UAM). As per this method Unique Area Value (UAV) per sq. ft/meter of a property is fixed with reference to the characteristics of the property such as location, occupancy, age, structure of the said property. This UAV is then multiplied by the area of the vacant land or covered space to arrive at its annual value. When the annual value is determined on the basis of such a formula, property tax thereupon is to be paid by the assessees.

The two judge bench comprising of Justice A.K Sikri and Justice Ashok Bhushan has observed that, “we agree with the High Court that the Impugned Bye-laws that provide UAM which is based on value of the property that on rental which the property is likely to fetch and are, there, foreign to the methodology provided in Section 63 of the NDMC Act. Such Bye-laws are, thus, ultra vires the provisions of NDMC Act. They are in excess of the scope and ambit of powers vested in the NDMC Act under Section 388(1)(A)(9) of the NDMC Act”.

The Court also observed that, “No doubt, in many ways, UAM is a better method in comparison with the earlier method based on annual rent. For this reason, this method has now been followed for the purpose of levying property tax not only in the areas in Delhi itself covered under the Municipal Corporation of Delhi but in many other States as well. However, such a method which may be a better method can be incorporated in accordance with the law. In the present case, it could be done after amending the provisions of the NDMC Act”.

“Since, we are agreeing with the High Court which has quashed the Impugned Bye-laws as ultra vires, it becomes meaningless and irrelevant to go into other issues or other arguments advanced before us. However, we may only add that once the appellants take steps for amending the Act and want to reintroduce the Bye-laws of 2009, many aspects highlighted by the assessees in respect of Bye-laws would be kept in mind. We are not suggesting that the contentions raised by the respondents/assessees relating to validity of different Bye-laws are well-founded, nor are we suggesting that they are illconceived” the Court also said.

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