1973 PLP 367 (SCMR)

According to section 48‑A the assessment has to be based on an estimate of the average money value of the net assets of an estate or a group of estates. According to section 48‑B the annual assessment cannot exceed 1/4th of the estimated money value of the net assets. Net assets are defined in section 3 (18) as under :‑

"Net Assets" of an estate or group of estates means the estimated average annual surplus produce of such estate or group of estates remaining after deduction of the ordinary expenses of cultivation as ascertained or estimated." Explanation.‑Ordinary expenses of cultivation include pay ments, if any, which the landowner customarily bears whether in kind or in cash either in whole or in part in respect of :‑. (i) water rates ; (ii) maintenance of means of irrigation ; (iii) maintenance of embankments ; (iv) supply of seeds ; (v) supply of manure ; (vi) improved implements of husbandry ; (vii) concessions with regard to fodder ; (viii) special abatements made for fellows or bad harvests ; (ix) cost of collection of rent (x) allowance for shortage in collection of rent ; (xi) interest charges payable in respect of advances made in cash, free of interest to tenants for the purposes of culti vation ; (xii) wages or customary dues paid to village auxiliaries whose products or labour are utilised for the purposes of cultiva tion and harvesting ; and the share that would be retainable by a tenant if the land were let to a non‑occupancy tenant paying rent, whether in cash or in kind, at the normal rate actually prevalent in the estate or group of estates ; In the assessment under consideration net assets of urban land have been determined on the basis of the profits arising to the owner of the land by the use to which the land was actually being put. Land has been classified into shops, houses, bunga lows, factories, cinemas etc. and the income has been determined with reference to the rent payable and the market value of the property. The contention of the respondent which has found favour with the High Court is that net assets have reference only to the income which would accrue if the land was used as agricultural land and have no reference to the income arising on account of the use of the land as urban property. In view of the words in which the definition of "net assets" has been couched it has been very difficult for learned counsel for the appellants to contend that income accruing from the use of land as urban property is within the definition. "Net assets" according to definition, mean the "average annual surplus produce", It is very difficult to apply the word "produce" to the rent of house. And then from this annual "surplus produce" the "ordinary expenses of cultivation" are to be deducted and these words too are wholly inappropriate for expenses incurred in respect of land put to urban use. It seems clear enough that the Legislature when it was defining the words "net assets" had not at all in its contemplation the use of land as urban property. Although land which was used for any purpose what soever was liable for payment of land revenue, for the purpose of an assessment, only its possible agricultural income was to be considered. Learned counsel for the appellant relied upon rule 11 of the Land Revenue Assessment Rules, 1929. These rules provide inter alia for the method by which the money value of the net assts of an estate is to be ascertained and rule 11 is one of the rules by which the method is explained. It is in the following words :‑

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11. Miscellaneous Income.‑‑Should the landowners, whe ther they take rents in cash or in kind, also enjoy as such any income or dues from lands which have not been taken into account in the estimates framed under the preceding rules, the amount of such income or dues shall be added to the net assets." Learned counsel for the appellants contends that in accordance with this rule any income which accrues from land apart from its use as agricultural land has also to be taken into con sideration and has to be a part of the net assets. Taken out of the context in which this rule appears the words of this rule may create an impression that income of every kind is intended, but when we have regard to the whole set of rules which provide for determination of net assets there is not the slightest doubt left that they were not intended to refer to any use of the land as urban property. Rule 1 says the estimate is to be "framed on the basis of rents in kind paid by tenants‑at‑will prevailing in the estate or group of estates under consideration". The method provided in this rule for calculation is that in the first instance, the "average acreage of each crop on each class of land" is to be calculated. Next, the "average yield per acre of each crop", and then the "average price obtainable by agriculturists for each of the crops" is to be found out and ultimately the "actual share of the gross produce received by landowners in the case of crops which are divided and the rent payable on zabti crops", is to be determined. The land is divided by rule 2 into classes and these classes have reference to the use of land as agricultural. All land which is not culturable is put into one class which is ghair mumkin. Had it been the intention of the framers of this rule that income of land as urban immovable property may also form a basis for the determination of "net assets" we would have found in these rules directions in detail for determining the profits of land and buildings as there are now in respect of income of agricultural land. We may also point out that rule l if itself gives an "indication of the fact that the land which is being dealt with is yielding income is agricultural land. It says : "the land lowers whether take rents‑in cash or in kind" and this reference to cash and kind is only to agricultural land. Then the word "also" is used which means that the income which is being referred to in this rule is an additional income for agricultural land. It appears to us that the income which is intended to be included by means of this rule is only the additional income of land, which is either agricultural or capable of being used as such, any yield as part of a forest or as a quary or because it contains fruit‑yielding trees and so on. At the same time, it should be understood that we are really riot concerned with what is contained in the Revenue Assessment Rules. The rules cannot introduce a basis of assessment which is inconsistent with the Act. What is "net assets" must be determined by a reference to section 3 (18) and if that provision is applicable only to agricultural produce it is not of any avail to try to spell out a different intention from the rules which have been framed under the Act. We hold that the basis adopted for assessment in the present case was illegal. We are not inclined, however, to agree with the learned Judges of the High Court in maintaining the assessment on the simple ground that had the net assets been calculated on the correct basis the maximum land revenue which could have been imposed might have exceeded the land revenue which has actually been imposed on a wrong basis. In accordance with section 48‑B the maximum land revenue which can be imposed is 1/4th of the net assets and the learned Judges found that the revenue actually imposed was less than 1/4th of the net assets calculated on the basis of agricultural income. If the assessment was illegal it has to be set aside. We cannot say what the assessment might have been had it been calculated on the correct basis. If the Settlement Officer had calculated the net assets on the basis of agricultural income the assessment might have been much less than it is now, for he was not bound to bring it to the maximum limit. At the same time, it has to be kept, in mind that if the basis of assessment is not altered it will affect the distribution of assessment. At present the distribution purports to he in accordance with the incomes which the different lands yield as urban properties. If net assets are to be calculated on the basis of the agricultural income of the lands the proportion which the income of one property bears to another will change and the distribution will be affected. At present while one class of land is assessed at Rs. 2 per canal, another is assessed at Rs. 90 per canal and such variation in rate will not be possible if agricultural income forms the basis of assessment. On behalf of the respondent it has been contended that the distribution had been made without notice to him and was therefore illegal. Reliance was placed on rule 30 of the Land Revenue Assessment Rules 1929 which provides for announcement of the assessment. On behalf of the appellant, it was contended that there was no provision at all for a notice before announce ment of assessment and the announcement had been made by a proclamation. We have not found it necessary to go into the various contentions raised because the assessment has to be set aside on the ground that its basis was illegal. Instead of the mandamus granted by the High Court, we grant a mandamus to the effect that the Government shall not take any proceedings for realizations of the land revenue assessed on the basis of the income of land as urban property and shall realise the revenue demand only after determining the "net assets" on a correct basis. No appeal had been filed by the Associated Hotels Ltd., but in an appeal before us we can pass any order that ought to have been passed even though the party in whose favour we pass it has not appealed. An ordinary appellate Court has such a power by virtue of Order XLI, rule 33, C. P. C., and for this Court there is similar provision in Order XLIX, rule 5 of the Supreme Court Rules, 1956, but even apart from that rule, there is an inherent power in this Court to pass any order which in its opinion should have been passed. This appeal stands dismissed with this qualification that the order passed by the High Court is altered as stated above. There will be no order as to costs. Appeal dismissed.