SC relief for Nariman Point properties

MUMBAI: The Supreme Court (SC) on Tuesday set aside a Bombay high court (HC) order passed in 2009 that allowed the Brihanmumbai Municipal Corporation (BMC) to hike property tax by relying on actual, instead of standard rents.

The SC bench—of justices Markandey Katju and Gyan Sudha Misra—also remanded to the HC the matter involving the vexed issue of fixing property tax based on rateable value. The HC has six months to decide on the matter afresh. Till then, the hike in property tax would remain stayed.

The SC order is of significance for the city since it offers respite not only to several commercial high-rises in Nariman Point, but also to other commercial premises not covered under rent control law. The power of the BMC to hike property tax will be tested again before the HC.

The SC was hearing a clutch of petitions challenging the HC order, which said that with effect from April 1, 2000, it was permissible for the BMC to fix property tax on the basis of actual rent received by members of commercial building societies. As a result, Dalamal Towers, Embassy Centre and Maker Towers, besides other buildings in the city’s commercial hub, said their property tax had become steep.

The issue origins in the manner property tax is calculated. Till the Maharashtra Rent Act 2000 was enacted and replaced the old Bombay Rent Act, property tax was always pegged to standard rent, which was frozen to low 1940 levels. Also, till 2000, an HC judgment in the Kamala Mills case impacted the issue. In that order, the HC held that property tax was based on reasonable letting value, which could not be higher than “standard rent”.

The “letting value”, which the occupants or licencee paid to the owner, would usually be much higher. Whether premises were actually let or not was irrelevant to the fixing of rateable value, since what was required to be considered was what a hypothetical tenant would be willing to offer as reasonable rent.

In the SC, Rohinton Mistry and law firm Karanjawala & Co representing Dalamal Towers submitted that the issue was a question for the fixing of rateable value of premises and that standard rent was usually calculated at the first letting after September 1, 1940. In the case of Dalamal Towers, the standard rent was Rs 250 per sq metre. For property tax calculations, the rateable value was treated as annual rent at which land or a building might reasonably be expected to be let.