The two-judge Bench of Supreme Court Chief Justice U U Lalit and Justice Ajay Rastogi recently held that the future capital value of the property is not to be taken for determining the property tax as per The Mumbai Municipal Corporation Act (MMC Act), 1888 and upheld the High Court judgment which had refused to strike the validity of various provisions of the MMC Act.
The Supreme Court also upheld the decision of the High Court in striking down various rules of relevance including Rule 20 of the Capital Value Rules, 2010 on the reasoning that “the effect of said rule would be that the value higher than what was provided for in Stamp Duty Ready Reckoner would be taken into consideration while computing the property tax”.
In the Writ Petition filed before the Bombay High Court by several land owners, the provisions of the MMC Act were upheld but the Rules 20, 21 and 22 of the Capital Value Rules, 2010 and 2015 were struck down as ultra vires to the provisions of the parent act, MMC.
Regarding the retrospective nature of the capital value rules, it was observed by the Apex Court in concurrence with the High Court that, “There being no empowerment to compute and/or levy property tax with retrospective effect by the statute itself, the rule making power, in any view of the matter, could not have created a liability pertaining to the period well before the Rules came into effect. The first ground as set out in paragraph 15 (supra) was, therefore, rightly answered by the High Court against the Corporation. Logically, the Rules having come into force on 20.3.2012, the levy and computation of property tax on capital value would be available and possible on and with effect from 20.3.2012 and not with any retrospective operation”.
In light of the above findings, it was held that future capital value of land/building is not to be taken for determining property tax as per the Mumbai Municipal Corporation Act, 1888 and the rules made cannot have any retrospective effect whatsoever.
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