1. In Mumbai, the Year 2013 marks the dawn of property taxes being imposed, retrospectively from the year 01.04.2010, on the basis of Capital Value of the concerned property as against the earlier practice of taxation based on Rateable Value of the property. This change of regime resulted in significant increase in property tax liability of the property owners. The said change of regime was under challenge before Hon’ble Bombay High Court.
2. The main objects of introducing / shifting to the capital value system was to remove the disparities in tax liabilities between old and new properties / buildings.
3. However, it appears that after introduction of this new regime, the disparities in tax liabilities between old and new properties / buildings have increased multi fold, as the new properties (occupied and assessed post 2010) are being taxed without having any reference to old method of taxation, and the benefit of capping of tax provided u/s 140A are not being bestowed to these new property owners. This, in my view is erroneous interpretation of Amended laws, which were introduced to reduce disparities in tax liability of old and new buildings.
4. After a careful reading of all relevant provisions of MMC Act, and in particularly the reading of Section 140A of MMC Act, which deals with and provides for capping benefit, there is no indication in the said provision, either expressly or by necessary implication, that capping benefit is not available to such properties which are occupied and assessed post year 2010.
5. Now let us interpret Section 140A of MMC act, 1888. The relevant portion of Section 140A is reproduced.
Section 140A: Property taxes to be levied on capital value and the rate thereof:
(1) Notwithstanding anything contained in section 140 or any other provision of this Act, the Corporation may pass a resolution to adopt levy of property tax on buildings and lands in Brihan Mumbai on the basis of capital value of the buildings and lands on and from such date, and at such rates, as the Corporation may determine in accordance with the provisions of section 128:
Provided that, for the period of five years from the date on and from which such property tax is levied on capital value, the tax shall not exceed,— (i) in respect of building used for residential purposes, two times, and (ii) in respect of building or land used for non-residential purposes, three times, the amount of the property tax leviable in respect thereof in the year immediately preceding such date:
6. The plain reading of said section indicates that for the first five years of introduction of capital value system of taxation, the property tax in respect of residential property would not increase more than two times, i.e., if the last tax payable as on 31.03.2010 was Rs.100, the new tax payable under capital value system can be maximum Rs.200 irrespective of whatever tax liability arrives in the computation according to capital value. In so far as non residential properties are concerned, the increase could be maximum Rs.300, if the last tax payable was Rs.100/-. The emphasize of proviso to Section 140A is on “Leviable”, as explained hereinafter.
7. In the reading of section 140A, there is no indication whatsoever, that capping benefit would not be available to such properties which are occupied and assessed post year 2010. As a matter of fact, the said proviso in Section 140A uses the expression, “the tax shall not exceed” which also indicates the intention of the lawmakers that in “any event”, “the tax shall not exceed”, two times in respect of residential property and three times in respect of non residential properties. The said Section does not sought to make any difference as to properties, whether it is occupied prior to Amendments or post Amendments.
8. In the backdrop of the legal expression used in Section 140A, i.e. “the tax shall not exceed”, it is clearly the intention of the lawmakers that under no circumstances, the property owners / occupiers would be burdened with increased tax liability of two times or three times, of what was last “payable” liability, and not last “paid liability”. And lawmakers have nowhere indicated that capping benefit would not be available to such properties which are occupied and assessed post year 2010.
9. A careful reading of 1st proviso to section 140A of MMC Act, 1888, would reveal that the said proviso uses the expression “Leviable”. The expression “Leviable” indicates the “payable liability” and not “paid liability” as on 31.03.2010.
10. In view of the expression “Leviable” in Section 140A, if the property is occupied and assessed post year 2010, the Authorities would notionally calculate the tax liability according to old system of taxation, and would notionally arrive at the tax “leviable” as on that date; and then would give benefit of capping.
11. The whole purpose of introducing Capital value system gets defeated if capping benefit contemplated u/s 140A of MMC act, 1888 is not made available to properties which are occupied and assessed post year 2010, as it would results in huge disparity of property tax. Admittedly, the main objects of introducing / shifting to the capital value system was to remove the disparities in tax liabilities between old and new properties / buildings.
Sandeep Jalan
Advocate
Law
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