P L D 1962 (W (PLP)

INAMULLAH, J.‑We heard 12 Writ petitions together. In all these petitions the annual rent determined by the Karachi Municipal Corporation for the purpose of Municipal assessment has been challenged. The petitioners prayed for the issuance of a writ of certiorari quashing the order of the Chief Officer determining the annual rental value of the premises in question or any other appropriate writ.

2. I propose, for the sake of convenience, to dispose of the petitions addressed by the various learned Advocates separately. Though all the Advocates adopted the arguments of Mr. Dingomal, some of them made additional arguments that they thought arose from the particular facts of their cases. This order will dispose of writ petition No. 313 of 1959 Dinshaw B. Avary v. Karachi Municipal Corporation and others, Writ Petition No. 321 of 1959, The Karachi Properties Investment Company Limited v. Karachi Municipal Corporation and others and Writ Petition No. 15 of 1960, Karachi Properties Investment Company Ltd. v. Karachi Municipal Corporation and others. These petitions were argued by the learned Advocate, Mr. Dingomal. He addressed us in Writ Petition No. 313 of 1959 and adopted the same argument for the other two Writ Petitions. It may at once be stated that Writ Petitions No. 321 of 1959 and Writ Petition No. 15 of 1960 are by the same petitioner Karachi Properties Investment Company Limited with only this difference that the latter petition relates to the assessment year 1957‑58, while the former relates to the year 1956‑57.

3. The petitioners Dinshaw B. Avary and Mrs. Avary in Writ Petition No. 313 of 1959 had taken lease of a plot of land from the Karachi Port Trust situated on new Queens Road, Karachi. Some constructions were put on the said plot in 1948 and later on extensions were made from time to time. The petitioners on the 21st May 1955 teased out the plot in question with the buildings standing thereon to Beach Luxury Hotel on a monthly tenancy of Rs. 17,

000. It is not necessary for the purpose of the disposal of the writ petition to mention the several terms embodied in the lease deed except the term that the lessors were liable to pay all rates, taxes and assessments. It has been alleged in the counter affidavit of Abdul Aziz Khan, Chief Assessor and Collector, Karachi Municipal Corporation that the Beach Luxury Hotel is run by the petitioners in the name of a limited company. Mr. Dinshaw B. Avary is the Managing Director of the Beach Luxury Hotel.

4. The last assessment before the impugned assessment was made at the annual letting value of Rs. 17,000 per month. The Karachi Municipal Corporation issued a demand notice at the said annual value for the year 1956‑57 on the 8th of November 1956 ; this was for the period 1‑4 1956 to 31‑3‑1957. The petitioners however received a notice on the 14th of January 1957 from the Chief Assessor and Collector of the Corporation stating that the letting value of the hotel has been fixed at a monthly rent of Rs. 44,940 and that municipal taxes would be charged at that rate after deducting 10 per cent on account of repairs etc. This notice was followed by a bill dated January 15, 1957 whereby the tax at the above rate was demanded for the period extending from the 1st of January 1957, to 31st March 1957. It would therefore appear that the earlier demand notice dated 8th November 1956, stood modified and it extended only to the period from 1st April 1956 to 31st December 1956.

5. The petitioners by their letter of the 11th February 11957, objected to the letting value of the Hotel at Rs. 44,9.10 per month. The main ground of objection was that the building was in fact leased out to the Beach Luxury Hotel at a monthly rent of Rs. 17,000, the contention being that the building could no; reasonably be expected to let at more than Rs. 17,000 per month within the meaning of section 97 (2) of the Karachi Municipal Act 1953 (hereinafter called the Act). This objection was treated as an appeal by the Karachi Municipal Commissioner. He by his order dated 26th July 1957, partly allowed the appeal inasmuch as he reduced the monthly letting value from Rs. 44,940 to Rs. 43,

421. The Municipal Commissioner mentioned in his order that he had given his reasons at length in his order dated June 21, 1957 while disposing of the appeal of Hotel Metropole challenging the assessment order of the Corporation. He was of the view that the Beach Luxury Hotel was of the same class of hotel as Hotel Metropole and therefore the same basis of assessment should hold good for this hotel as well. He came to the conclusion that the 1Vfulliuipai assessment is to be worked out at the rate of 25 per cent of the charges that a lodger paid plus the letting value or shops, show rooms etc. His conclusion was based on the ground that the letting value has to be based on the amount which the occupier of the premises has to pay: In the case of a hotel the Municipal Commissioner held it was the lodger who was the ultimate occupier of the premises and not the person who runs the hotel.

6. The petitioners filed an appeal tinder section 107 of the Karachi Municipal Act, 1933 to the Chief Judge, Small Causes Court, Karachi who dismissed the appeal on 1st of September 1959. After the appeal was dismissed the Corporation issued a demand notice for Rs. 2,32,383‑6‑0 for 1957‑58 and 1,

959. The petitioner paid the amount under protest.

7. The petitioners, as it would appear from paras. 21 and 27 of the petition, challenged the order of the Municipal Commis sioner dated 26th July 1957 and that of the Chief Judge, Small Causes Court dated 1st of September 1959 on the following grounds :‑ (1) that the formula of 25 per cent of the room charges as rent for all the rooms per day was illegal, arbitrary and contrary to the provisions of section 97 (2) of the Act ; (2) that in determining the annual rent for any building for which it might reasonably be expected to let, the provisions of the Rent Restriction Act have to be taken into consideration ; (3) that it has not been found that there would be a tenant to pay the rent of Rs. 43,421 per month ; (4) that the building having been let to Beach Luxury Hotel at a monthly rent of Rs. 17,000 the same having become final could not be increased in view of the provisions of section 4 of the Karachi Rent Restriction Act 1953 (herein after called the Rent Act) ; (5) that the above mentioned formula is in excess of authority or jurisdiction of the Municipal Corporation ; (6) that the Corporation having accepted the monthly rental for the purpose of charging property taxes at Rs. 17,000 was not entitled in law to revise that valuation either for a portion of 1956‑57 or for subsequent years.

8. Mr. Dingomal, the learned Advocate for the petitioners, did not press all the points that he raised in the petition. He confined his submissions before us to three‑fold points namely :‑ (1) that the annual value determined by the Corporation was in contravention of the Karachi Rent Restriction Act 1953 ; (2) that the Municipal Authorities have no power to revise an assessment order after it has become final ; (3) that the fixation of the annual letting value of the building at the rate of 25 per cent of the room charges was beyond the scope of section 97 (2) of the Act. I propose to dispose of these contentions of the learned Advocate separately at some length.

9. In order to appreciate the contention of the learned Advocates for the petitioners it would be useful to give a summary of the provisions of the Municipal taxation. These are given in Chapter III of the Act. Under section 96 (1) of the Act the Corporation is empowered to impose taxes on property. Under section 97 of the Act the Corporation is entitled to levy on buildings and land in the city a general tax, conservancy tar and water tax. All these taxes are to be paid on the annual value of the property. Annual value is defined under section 97 (2) of the Act. It runs as under :‑ "Annual rent (less deduction 10% for which any building or land exclusive of furniture or machinery contained or situate therein or thereon might reasonably be expected to let from year to year and shall include all payments made or agreed to be made to the owner of the building on account of occupation, taxes, insurance and other charges incidental."

10. Section 101 of the Act lays down the responsibility for payment of property taxes. Under subsection (2) of section 101 of the Act if the premises are let the taxes shall be primarily leviable from the lessor.

11. Under section 107 (1) the assessor has to determine in accordance with the principle prescribed under subsection (2) of section 97 of the Act the annual value of buildings and lands for the purpose of assessment. Under subsection (2) of section 107 an appeal shall lie to the Chief Officer against any determination made by the asessor under subsection (1) or to any other officer especially appointed by the Corporation. Under subsection (3) of section 107 of the Act when any question arises as to the liability of any building or land to assessment or as to the basis of principle of assessment an appeal shall lie from the decision of the Chief Officer to the Judge of the Karachi Small Causes Court whose decision shall be final. This summary relating to the municipal tax would be sufficient to dispose of these petitions.

12. Mr. Dingomal the learned Advocate for the petitioners very strenuously contended that the determination of the annual value by the Corporation was in contravention of the Karachi Rent Restriction Act, 1953. For the sake of clarity I would divide the arguments of Mr. Dingomal on this point as under :‑ (1) that the rent between the petitioners and the hotel having become final it could not be increased in view of section 4 of the Karachi Rent Restriction Act ; (2) that under section 2 (b) (c) [2 (2) (c)] of the Rent Act in :elation to buildings constructed after the 15th day of August 1947, the landlord could not charge any amount in excess of an amount which would be more than 6 per cent of the cost of the land and construction of the premises ; (3) that the provisions of the Rent Act override the pro visions of the Municipal Act ; (4) that as it is not lawful for the landlord to charge rent higher than the "fair rent" the annual value should be limited to the fair rent. I will take up these points separately.

13. The contention that the rent between the petitioners and the hotel having become final could not be increased under section 4 of the Rent Act has not much force. Section 4 of the Rent Act runs as under :‑

4. The Controller‑ (a) shall, in the case of premises in respect of which an application is made by the landlord or the tenant, on such application, and (b) may in the case of any other premises, of his own motion, determine, after making such enquiry as he deems fit, the fair rent in accordance with the provisions of this Act Provided that the Rent Controller shall not‑ (a) entertain any application, or (b) take any action on his own motion for determining the fair rent after the lapse of a period of four months next after the date on which the premises are first occupied: Provided further that the foregoing proviso shall not have effect until the expiry of a period of four months from the commencement of this Act. Mr. Dingomal contended, relying on the above provision that the period of four months within which the landlord could have the fair rent determined having expired, he could not apply for the fixation of fair rent. It is true that the landlord could not now apply for the determination of the fair rent. This however, does not mean that he is debarred from increasing the rent. I have given my very anxious consideration to the question whether in case where the tenant has slept over his right to have the fair rent determined under section 4 of the Rent Act the landlord can raise the rent. There is no provision under the Rent Act which restricts the right of the landlord in these circumstances to raise the rent. The only relevant section which need be considered in this connection is section 7 of the Rent Act. It would be useful to reproduce section 7 of the Rent Act. It runs as under :‑

7. Where the fair rent of any premises has been determined in accordance with this Act‑ (a) the landlord shall not claim and shall not be entitled to any rent in excess of the fair rent ; (b) any agreement for the payment of rent in excess of the fair rent shall be null and void in respect of such excess and shall be construed as an agreement for the payment of the fair rent ; (c) when the fair rent of any premises has been determined before the commencement of this Act, any sum in excess of the fair rent paid, before the commencement of this Act in respect of any use or occupation of the premises, (i) after the first day of April 1942, in the case of residential premises, or (ii) after the first day of October 1943, in the case of premises other than residential premises, shall be refunded to the person by whom it was paid, or, at the option of such person, otherwise adjusted ; (d) where the fair rent of any premises has been determined under this Act, after the commencement of this Act, any sum paid in excess of the fair rent for the period commencing from the date of the application for the fixation of the fair rent shall be refunded to the person by whom it was paid, or, at the option of such person, otherwise adjusted." The restrictions contained in sub‑clauses (a), (b), (c) and (d) of section 7 are all dependent upon one condition namely, the determination of the fair rent of the premises in accordance with the Rent Restriction Act. In case the fair rent has not been determined in accordance with the Rent Act there is no bar on the right of the landlord to increase the rent. The Karachi Rent Restriction Act of 1953 does not provide, in the absence of the determination of the fair rent by the Rent Controller, that the rent for the time being paid by the tenant would be fair rent and be binding on the landlord.

14. There is not much force in the contention that under section 2 (2) (c) of the Rent Act the landlord cannot charge any amount in excess of an amount which would be more than 6 per cent of the cost of the land and construction of the premises. Section 2, subsection (2) defines "fair rent". Section 2 (c) [2 (2) (c)] reads as under :‑ "2 (c) "fair rent" means in relation to all premises, resi dential or otherwise, constructed after the 15th day of August 1947, such rent as shall secure to the landlord a net return of six percentum on the total cost, after deducting the taxes, insurance premium for insurance against fire and earthquake but not otherwise and an amount equal to one and half per centum per annum of the total cost by way of expenses for maintenance and repairs. The total cost shall include the value of the land and the cost of the construction of the premises." In the first place section 2 (c) [2 (2) (c)] of the Rent Act only defines as to what is the fair rent in relation to premises which were constructed after the 15th day of August 1947. The question of charging "more rent" will arise only as already mentioned if the fair rent has been determined under section 7 of the Rent Act. In the second place one does not know as to what is the cost of the building. It is a question of fact. It, cannot be gone into in the exercise of writ jurisdiction. The contention of the learned Advocate pre‑supposes that the annual value determined by the Municipal Corporation is more than what is fair rent within the meaning of section 2 (c) [2 (2) (c)] of the Rent Act.

15. The contention that the provision of the Rent Res triction Act would override the provisions of the Municipal Corporation Act has no force. The learned Advocate placed reliance on section 26 of the Rent Act which lays down that the provisions of the Rent Restriction Act shall have effect notwith standing anything inconsistent therewith contained in any enactment for the time being in force. The contention was that the fair rent according to the provisions of the Rent Act would have preference to the annual value as provided under section 97 (2) of the Act. The question of inconsistency between the two provisions does not arise in the circumstances of the present case as no fair rent has been determined.

16. The contention that the provisions of the Rent Res triction Act should be looked into while determining the annual value within the meaning of section 97 (2) of the Municipal Corporation Act was very strenuously debated at the Bar. There is difference of judicial opinion on the point. Reliance has been placed by the learned Advocate of the petitioners op two direct authorities which support the contention that in determining the annual value of the premises regard must be had to the Rent Restriction Act which affects the annual rent payable by the tenant ; these are The Port of Spain Corporation v. Gordan, Grant & Co. Ltd. (P L D 1957 P C 81) and Corporation of Calcutta v. Sm. Padma Debi and others (A I R 1957 Cal. 466). The case of Port of Spain Corporation requires examination at some length. Their Lordships of the Privy. Council in this case held that under the Trinidad law in determining the rateable value of any heredita ment regard must be had to the Rent Restriction Ordinance which affects the annual rent payable to and exigible by the landlord. Their Lordships did not follow the decision of the House of Lords in Poplar Assessment Committee v. Roberts ((1922) 2 A C 93) which held that the Rent Restriction Act of 1920 had no effect on the valuation and ratings under the English Law. The Poplar case was distinguished on the ground of difference in the basis of rating under the two laws. Under the Rent Restriction Act of 1920 the rate was imposed on the occupier. It was the occupier who was liable to pay the charges. If he failed to pay the charges the Municipal authority could by distress and sale of the goods of the occupier recover the dues. Under the Rent Restriction Ordinance of Trinidad the rate is borne by the owner. It is a charge on the rateable hereditament.

17. Their Lordships of the Privy Council after distinguishing the Poplar case from the one before them on the ground that under the English Law the occupier was responsible for the payment of the Municipal taxes and not the landlord proceeded to hold that in determining rateable value of any hereditament in Trinidad regard must be had to the Rent Restriction Ordinance which affects the annual rent payable to and exigible by the landlord. 17‑A. An analysis of the Port of Spain Corporation case would show that their Lordships of the Privy Council came to the conclusion that regard must be had to the Rent Restriction Ordinance in determining the rateable value of any building on the following grounds: (1) that the Rent Restriction Ordinance in Trinidad applied to all buildings ; (2) that the landlords were obliged under the Ordinance to apply to the Assessment Boards to fix a provisional standard rent which could be done with reference to similar lettings of similar premises on the prescribed date ; (3) that under the Trinidad Ordinance it was a criminal offence for a landlord knowingly to receive or a tenant knowingly to pay rent in excess of the standard rent., So far as the Karachi Rent Restriction Act of 1953 is concerned, though it applies to all premises whether residential or non- residential it does not make it incumbent on the landlord to apply for the fixation of fair rent. This, to my mind, is a very important distinction. If under the Karachi Rent Act the landlord was obliged to apply for the determination of fair rent, he could not now, in view of section 7 of the Rent Act increase the rent. Moreover, there is a provision under the Karachi Rent Act which makes it an offence for a landlord to receive or a tenant to pay rent in case where the fair rent has been fixed, if the landlord has realised rent in excess of the fair rent, (sic) is to recover it back or adjust the same.

18. The case of Corporation of Calcutta is a single Judge decision. It has been held in that case that the Corporation in determining the annual value for the purpose of assessment is bound by the standard rent fixed by the Rent Controller under the Rent Control Act. Lahri, J. after considering the various authorities summed up his conclusions as under :‑ "Upon these authorities it is clear that if voluntary payment and acceptance of any rent to excess of the standard rent are not prohibited by statute the valuation for rating purposes is not limited by the standard rent. But if such voluntary payment is illegal the rateable value cannot be fixed higher than the standard rent. The effect of section 33 of the West Bengal Rent Control Act 1950 is to make it illegal for the owner to accept any rent in excess of the standard rent and the result is that according to the very principle approved by the House of Lords in the Poplar Assessment case the present will be governed by ‑the decision of the House of Lords in Soulacoates Union." In the first place, under the Karachi Rent Restriction Act 1953, the receipt of rent in excess of fair rent has not been made punishable. In the second place, it, is only in case where fair rent has been determined under section 7 of the Karachi Rent Act that the tenant can, where he has paid anything in excess of the fair rent, claim the excess to be refunded or he can adjust it towards the rent. It is very important to note so far as the West Bengal Premises Rent Control Act 1950 is concerned that the standard rent has a notional existence even before its actual determination by the Rent Controller. Under section 2 (10) of the Bengal Rent Act standard rent in relation to any premises means the standard rent determined in accordance with the provisions of Schedule A. It would therefore appear that the question of determination of fair rent as required under section 7 of the Karachi Rent Act is not necessary under the Bengal Rent Act. It would further follow that where no fair rent has been fixed and the time provided under section 4 of the Karachi Rent Act has elapsed, there is nothing in the Karachi Rent Act to prohibit the landlord from increasing the rent. There being no notional existence of fair rent under the Karachi Rent Restriction Act, tenants who had not on their occupation of the premises and on the Karachi Rent Restriction Act coming into force got the fair rent determined within four months run the risk of the rent being increased by the landlord. It is not the province of the Court of law to make the provisions of the Rent Restriction Act applicable for the determination of annual value for the purposes of assessment by the Municipal Corporation. It is for the Legislature to amend the law so as to remove the hardship, if any.

19. A perusal of the Karachi Rent Restriction Act how ever would show that the Legislature had the provisions of the Karachi Municipal Corporation Act in view. The Legislature could not ignore the needs of a public Corporation which existed for the good of the public. Its existence and the good that it can do depends upon the various taxes that it is able to realise from the public. The letting value of houses depends upon ‑the need of the public which in turn depends upon the increase in population. What a particular tenant would have paid for a house in Karachi 15 years ago is not the same today. Under Chapter II Schedule VIII of the Act Assessment has to be made every year. It seems that the Legislature was aware of this position and made certain provision in the Rent Restriction Act to meet this eventuality so as not to put the landlord to a doss. In this connection it would be useful to reproduce section 8 of the Karachi Rent Restriction Act 1953. It runs as under :‑ "

8. Where the landlord pays any municipal rates, cesses or taxes in respect of any premises, an increase of the rent thereof shall not be deemed to be an increase for the purposes of this Act and the landlord shall be entitled to the amount thereof in addition to the fair rent if such amount does not exceed any increase in the amount for the time being payable by the landlord in respect of such rates, cesses or taxes over the amount paid, in respect of residential premises in the period of assessment which included the first day of December 1941, and, in the case of premises other than residential premises, in the period of assessment which included the first day of December, 1942: Provided that no such sum in excess of the fair rent shall be payable until the expiry of four clear weeks after the landlord has served on the tenant a notice in writing of his intention to increase the rent, accompanied by a statement showing particulars of the increased amount charged in respect of such rates, cesses or taxes." The only condition as it would appear from a perusal of the above provision that has been put on the landlord to realise the Municipal Taxes in addition to the fair rent is that the Municipal rates do not exceed any increase in the amount for the time being paid by the landlord in respect of such rates over the amount paid in respect of residential premises in the period ~f assessment which included the 1st day of December 1941. In these petitions however this condition would not be applicable. Hotel Metropole and Beach Luxury Hotel did not exist in 1941. In the case of other hotels also it does not appear from the narration of the facts in the various petitions that they existed in 1941. The landlord therefore under section 8 of the Rent Act when he pays any Municipal rates, cesses or taxes in respect of any premises can recover the same in addition to the fair rent.

20. Mr. Sharifuddin, the learned Advocate for the Municipal Corporation placed reliance upon three cases in support of his contention that the Municipal Corporation is not bound to take into consideration the fair rent determined by the Rent Controller in assessing the annual value for the purposes of Municipal Rates. These are :‑ (1) Assessment Committee of the Metropolitan Borough of Poplar v. Roberts 1922 A C V. 2, 93. (2) Madurai Municipality v. Kamakshisundaram Chettiar and another A I R 1956 Mad. 49. (3) Ghulam Ahmed Rogay v. Bombay Municipality A I R 1951 Bom.

320. From a perusal of these cases in the final analysis I have come to the conclusion that a substantial distinction exists between the fair rent and annual value within the meaning of section 97 (2) of the Act. In the first place, there are certain principles for determining the rent (fair rent) under the Rent Restriction Act, while the rent for the purposes of Municipal Assessment is the rent which a hypothetical tenant may pay for the occupation of the building. In the second place, it is possible that the landlord and the tenant may, in order to evade the Municipal assessment, have the fair rent fixed at a normal rate. This possibility in the case of the Hotel Metropole and Beach Luxury Hotel cannot be ruled out. The lessors and the lessee in the case of these two hotels are practically the same. The Municipal Corporation in these circumstances cannot accept the rent for the time being paid but has to determine what a hypothetical tenant will pay for the premises.

21. The contention that the Municipal Authorities could not revise the assessment order after it once became final has not much force. This submission is based on the fact that on the 8th of November 1956, the Municipal Corporation issued a demand notice for the collection‑of taxes for the year 1956 57 (1‑4‑1956 to 31‑3‑1957) at the annual valuation of Rs. 17,000 per month. The assessment according to the petitioners had become final for the year 1956‑

57. It became final in the sense that the petitioner did not prefer any appeal to the Chief Officer or the Chief Judge, Small Causes Court. In this connection reliance was placed by the learned Advocates for the Municipal Corporation on sub‑clause 1 of rule 7 of Chapter 2 Schedule VIII of the Municipal Corporation Act which‑ reads as under :‑ "7 (1) The Chief Officer may at any time amend the list by inserting the name of any person whose name ought to have been inserted, or by including any land or building which ought to have been included, or by altering the assessment on any land or building which has been erroneously valued or assessed through fraud, accident or mistake, or of which the rent has been raised, since the date of assessment, after giving notice to the person interested in the amendment of a time, not less than one month from the date of service of such notice, at which the amendment is to be made." It follows from the above, in the first instance, that the Chief Officer may at any time amend the assessment of any land or building and that the amendment can be made on the ground that it has been erroneously made. In the second place notice of the amendment has to be given to the person interested in the amendment of a time not less than one month from the date of service of such notice at which the amendment is to be made. The word "at any time" is wide enough to mean that even after the assessment has become final, the Chief Officer can, on the ground of error or mistake, reopen it. Whether there was an error in the assessment or not is a question of fact. The Municipal Corporation was of the view that the assessment for the financial year 1956‑57 had been determined at a very low annual value. The Chief Officer in view of rule 7 reproduced above was within his right to rectify the error. The tax on the enhanced annual value was charged only for three months namely 1st January 1957 to 31st March 1957.

22. There is some force in the contention of the learned Advocate that due notice as required by rule 7 of the amendment was not given to the petitioners. The notice to the Hotel is dated 14th January 1957. Under rule 7 the notice should have been given to the person interested in the amendment of a time not less than one month from the date of service of such notice at which the amendment is to be made. So far as the requisite, time for the notice is concerned, the learned Advocate for the petitioners failed to show as to how the petitioners were prejudiced by non‑compliance of this rule. The provision contained in rule 7 in respect of notice appears to be only a directory one and not mandatory. It is true the petitioners did not receive the notice as provided in rule 7, but in the absence of any prejudice to the petitioners, I would not, in the exercise of my discretionary power, quash the order. The learned Advocate for the petitioners failed to suggest any possible prejudice to the petitioners.

23. It was strenuously urged by Mr. Dingomal, the learned Advocate for the petitioners, that the principle underlying sub section (2) of section 97 of the Municipal Corporation Act that the annual rent would be what a hypothetical tenant may reasonably be expected to pay has been disregarded and the Municipal Corporation has taxed the profits or receipts of the hotel. It would appear from a perusal of the judgment of the Commissioner and that of the Chief Judge, Small Causes Court that what has been assessed by the Chief Officer is not the profits or the receipts of the hotel but the rent for which the building could be let out. It has been conceded by Mr. Dingomal, when asked whether what the lodgers paid to the hotel did include the rent for the rooms that they occupied, that the charges did include a certain portion as rent for the room. The Municipal Commissioner arrived at 25 per cent as the rent of the room in the following way. He came to the conclusion that a portion of the charges that the lodgers pay must be as rent for use of the premises. The Municipal Commissioner, while keeping in view section 97 (2) of the Act proceeded to consider the rent for which the hotel building of Hotel Metropole or Beach Luxury Hotel may be let out. At this stage it would be necessary to mention that the Municipal Commissioner in his order relating to Beach Luxury Hotel observed that he had discussed the question of assessment of big hotels in his order dated 21st June 1957 relating to Hotel Metropole. In his opinion the Beach Luxury Hotel was of the same class of Hotel as Hotel Metropole. While discussing the method of determining the annual letting value in the case of Hotel Metropole the Municipal Commissioner observed that similar buildings like Hotel Metropole have been assessed for annual value at 8 annas per square foot. Hotel Metropole occupies a more advantageous position and could be assessed according to the Municipal Commissioner at a higher rate then 8 annas per square foot. In this connection he has given a list of 12 buildings which have been assessed at 8 annas per square foot and 2 buildings which have been assessed at 7 annas 6 ps. per square foot. In this why he found that the annual value of these hotels will be much more than what has been determined by the Chief Officer. He, however, was of the view that the method adopted by the Chief Officer in determining the annual value of the hotel was more reasonable so far as hotels were concerned. He came to this conclusion on two grounds namely, (1) that some space such as the dining hall and office which are used for hotel purposes, though used by the lodgers they did not pay anything extra and therefore to assess the rent as 8 annas per square foot for that space also would be unreason able ; (2) that all the rooms may not be in occupation all through the year.

24. The Municipal Commissioner came to the conclusion that the Hotel charges its visitors certain sum of money which necessarily includes the rent for the space that they occupy. He came to the conclusion that 25 per cent of the charges would be reasonable rent for the space that the visitors were to occupy. It would be profitable to put the reasoning of the Municipal Commissioner in his own words as to how he arrived at 25 per cent for the premises. "It has to be determined as to what portion of hotel charges can be termed as the letting value. Of the room rent fixed by the Controller of Hotels, Karachi 50% is considered to be the charges for food etc. by the Sales Tax Department, vide extract from letter No. STM‑5‑52 from the Commissioner of Sales Tax, Karachi, Sind and Baluchistan, Karachi, to the assessor and Collector 'D' Division, Municipal Corporation, Karachi reading as follows: "With a view, however, to remove any possible hardship in respect of estimates for these charges, it has been decided that while it is not possible to lay down any hard and fast rule, but in normal cases it may generally be assumed that out of a hotel's inclusive charges for board and residence, half is attributable to board and half to residence." 50 % is thus to be allowed as charges for Board. Out of the remaining 50%, the charges for furniture, lightings, other equipments and services, which, in the case of a big hotel like Hotel Metropole can be from 1 5% up to 26% has to be excluded. Then there is the question of giving a margin for the casual vacancies of the rooms. At the same time one must also account for the recoveries made by the Hotel over and above the room charges from: (i) Non‑residential dinners ; (ii) Hiring of the Dining Hall/Banquet Hall. (iii) Bar and Reception Hall. (iv) Cabaret and floor show etc. A certain portion of these recoveries must be rent for use of the premises which should be added to the letting value of the building. This sum in respect of Hotel Metropole is more than sufficient to effect any short fall on account of the casual vacancies. There are the godowns, out houses etc. which are also liable to assessment. If a margin for casual vacancies is allowed, the extra letting value which has been left out must then be taken in account. No margin for casual vacancies is, therefore, justified. After thus deducting 50% for food charges and 20%. for furniture etc. the remaining balance i.e. 300 of the room rents must constitute the bare rental value which can be termed as the reasonable letting value for the purposes of Municipal assessment. The Assessor has, however, actually assessed this year on the basis of 25% of the room rent which, as shown above, is concessional and on the low side."

25. It would appear from the order of the Municipal Commissioner that the annual value has been determined on the basis of the rent which the lodgers paid and not on the basis of the profit or receipt of the income of the hotel. It is important to note that the learned Advocates for the petitioners before the Small Causes Court for Hotel Metropole and Beach Luxury did not challenge the data upon which the Municipal Commis sioner had worked out the letting value of the premises. It would also appear from the observation of the Chief Judge, Small Causes Court that the learned Advocates for the petitioners did not suggest any other possible method for calculating the annual valuation of hotels. The learned Small Causes Court Judge observed while dealing with the case of Beach Luxury as under: "This letting value does not seem to be challenged in any form by the learned Advocate for the appellants. All that he has argued is that the learned Municipal Commissioner should not have adopted this method of calculation as thereby he was not taxing the letting value of the property but the income of the building. This is not a correct stand taken by him."

26. Mr. Dingomal while contending that the method for determining the annual value was not legal contended that the Municipal Commissioner has not given any allowance for the profit that may be included in the sum of 25 per cent of the room charges. This does not appear to have been taken before the Municipal Commissioner or the Chief Judge, Small Causes Court. It has also not been taken in the petition before us. The Municipal Commissioner has allowed deductions for various items in quite a liberal way and that if this point had been taken before him he would have been in a position to say that deduction for profit has been made. This point however cannot be allowed to be taken at this stage in a writ petition.

27. I am of the view that the Chief Officer is not fettered by any rule of law in determining the annual value of an building within the meaning of subsection (2) of section 97 of the Municipal Corporation Act. In this connection I would rely upon the observation of Earl of Halsbury, L. C. 1901 A C

175. His Lordship was considering section 1 of the Parochial Assess ment Act, 1835 which reads as under: "Upon an estimate of the net annual value of the several hereditaments rated thereunto that is to say, of the rent at which the same might reasonably be expected to let from year to year free of all usal tenant's rates and taxes and title commutation rent‑charge, if any, and deducting therefrom the probable average cost of the repairs, insurance and other expenses, if any, necessary to maintain them in a state of command such rent." Earl of Halsbury L. C. observed: "That is the proposition which is put before the parish officers‑that is the question which they have to answer ; and they are to arrive at that value, so far as I know, unfettered by any statute as to the way in which they can do it. I am not aware of any rule of law or any statute : which has limited them as to the mode in which they shall arrive‑at it. It is not a ques tion of law at all‑it is a question of fact." The definition of "annual value" is in terms practically the same as section 1 of the Parochial Assessment Act reproduced above. I would respectfully state that the observations of Earl Halsbury would equally apply to the determination of annual value by the assessor.

28. The case of the Mercy Docks and Harbour Board is also important in another respect. In that case the question was of the assessment of lairages (buildings of brick and wood roofed partly with felt and partly with slate used for reception of cattle brought from abroad and for the cooling and preservation of the carcases). The contention of the Mercy Docks and Horbour Board was that the assessment should be based upon the structure value of the buildings plus the value of the land, as in the case of an ordinary ware‑house, whereas the respondents maintained that the assessment should be based upon the actual average receipts and expenditure in the conduct of the business of a lairage. Lord Halsbury, L. C. while considering the con tention of the parties observed as under: "What you are to find out is what a tenant will reasonably give, looking, surely, at all the circumstances of the particular occupation, including therein the business that has been done on the premises. I think I had occasion to say in a former case that it would be a very extraordinary thing if, although you can give evidence by expert testimony as to what kind of business might be done, you are not at liberty in point of law to ascertain what business has been done. It seems to me that no such proposition could reasonably be maintained. To go into the amounts of profits and losses as if you were finding out what a man's income is would be absolutely irrelevant ; but for the purpose of ascertaining what a tenant would be likely to give, to suggest that that is something which in point of law you have no right to inquire into would be equally absurd. All the circumstances of the particular occupation, the mode in which the trade is being carried on, and the circumstances affecting either the restriction or the amplitude of the trade, are all legitimate subjects of inquiry, and the only question of law is whether the particular tribunal has followed the line I have indicated or not. Surely those who are complaining of what has been done by the Tribunal must establish either that something has been excluded from the calculation which by law ought to be included, or that something has been included which by law ought not to have been included. The question is a question of fact, and the only way in which you get in a question of law at all is with regard to the mode in 'which the question of fact has been dealt with." From the above observations two things follow namely (1) that the mode in which the Chief Officer has assessed the annual value of the hotels is not beyond the scope of subsection (2) of section 97 of the Corporation Act ; (2) that it is for the petitioners to establish that the. Chief Officer has included something which by law he was not entitled to include or excluded something which he should not have by law excluded. It would appear from a perusal of the order of the Municipal Commissioner and that of the Chief Judge Small Causes Court that the petitioners did not urge before them that the Chief Officer should have either included something which he was bound in law to include or should have excluded something which he was by law bound to exclude.

29. I would hold that the learned Advocates for the petitioners have failed to substantiate their argument that the conclusion of the Municipal Commissioner that 25 per cent of the charges was not the rent of the space occupied by the visitors. The petitioners had ample opportunity before the Municipal Commissioner and the Small Causes Court Judge to show that 25 per cent of the charges was not the rent of the space occupied by the lodgers. They did not challenge this. All that they urged was that the formula adopted was beyond the scope of section 97 (2) of the Act. These arguments, it seems, suggested themselves to the learned Advocates when they filed these writ petitions. They cannot be allowed now to urge them as they are based on facts.

30. Mr. Sharifuddin, the learned Advocate for the Municipal Corporation, contended that the method for determining the annual value of hotels was a recognised method. He relied on "Modern Methods of Valuation of Land, Houses and Buildings" by David M. Lawrence and W. H. Rees. The relevant passage is at page 272 and runs as under: "Trade earnings basis.‑This method is chiefly used in the case of public houses, race‑courses and water supply under takings. It is also applied to other properties where con sideration of profits, earned is likely to be a more practical guide to annual value then any of the methods previously described. The gross profits of the undertaking are first ascertained and from these are deducted working expenses to arrive at the average net profit. A further deduction is then made for interest on the capital which the tenant has sunk in the under taking and for tenant's profit. The balance is assumed to be the rent which a hypothetical tenant of the undertaking could reasonably afford to pay from year to year. As a quick check, a percentage (often 4‑8 per cent) may be taken on the gross takings t0 arrive at the gross value of the property direct." As I have already observed relying on the observations of Earl Halsbury, L. C. that there is no rule of law prescribed by any statute for determination of the annual value no hard and fast rule can be laid down as to what should be the percentage of the total charge. towards the letting value of any land or building. Mr. Sharifuddin also relied on Halsbury's Laws of England, Volume 32, Third Edition page 77 which reads as under. "In the absence of rental evidence of value, the accounts, receipts or profits of the occupier of the hereditament may be relevant. The, profits themselves are rateable but they may serve to indicate the rent at which the hereditament might reasonably be expected to let, particularly where, profit is the motive of the hypothetical tenant in taking the hereditament, or where the trade can only to carried on upon that heredita ment. Profits have been taken into consideration in the valuation for rating of, for instance, public utility Undertakings, such A waterworks, docks and harbours, licensed premises, railway refreshment rooms, hotels etc."

31. The cases that have been relied upon in support of the contention that the; formula evolved by the Chief Officer to deter mine the annual value does not bear any relation to the rent which a tenant may reasonably pay requires examination.

32. In the case of Lokmanya Mills Barsi Ltd. v. Bars! Borough Municipality, Barsi (A I R 1961 S C 1358) it was held that the computation of valuation on the basis of area of the factory building was arbitrary and that it bore no relation to the rent which a hypothetical tenant may reasonably pay. It was contended by Mr. Dingomal on the basis of the principle laid down in this case that the formula evolved by the Municipality was arbitrary inasmuch as it bore no relation to the rent that a hypothetical tenant may reasonably pay.

33. I respectfully do not agree with the observations of the Supreme Court. These matters came to the Supreme Court on appeals from decrees passed by the Bombay High Court. The Bombay High Court had held relying on its; earlier decision in A I R 1952 Bom. 441 that the method of taxation adopted by the Municipality on the floor basis had remained unchallenged for a long time and that they were not shown to be capricious, arbitrary and unreasonable and that the valuation of the property by reference to the floor area was not altogether unknown to the law of rating. The High Court further observed, that in assessing the rent which a hypothetical tenant may, pay, several methods are open to the Municipality and if on examining the cases of the factory buildings within their, jurisdiction the Municipality concluded that the rent which the hypothetical tenant may reasonably be expected to pay for these ' buildings ' fits in, with the rent which they had fixed by the valuation and uniform rate, the principle of fixing the annual letting value on the basis of the floor area would not be open to be challenged. The Supreme Court of India refuted the reasoning of the Judges of the High Court in these words. "It was assumed in that case that all factory buildings within the area of the Amalner Municipality were alike in essential features and were intended to be used for purposes which were alike, and that probably the Municipality may have been satisfied that the principle enunciated in the rule impugned worked out on the whole as a fair basis for determining the valuation of the building in question. In "our view, this approach to a rating problem arising under the Act is not permissible. In any event, there is no evidence on the record of this case that the factories and "buildings relating thereto" such as ware‑houses, godowns and shops of the mills situate in the compound of the mills, may be separately let at the uniform rate prescribed by the Municipality. The vice of the rule lies in an assumed uniformity of return per square foot which structure of different classes which are in their nature not similar, may reasonably fetch if let out to tenants. and in the virtual deprivation to the rate‑payer of his statutory right to object to the valuation."

34. I would very respectfully state that the observations of the Supreme Court do not logically meet the arguments of the Judges of the Bombay High Court. The learned Judges of the Supreme Court do not disclose how and why this valuation on the basis of floor area is not permissible. At any rate, so far as these writ petitions are concerned, the observations of the Supreme Court would not apply inasmuch as, in the first place, there are no rules which forbid the petitioners to challenge the valuation before the Municipal Commissioner or the Chief Judge, Small Causes Court. In the second place, the appeal before the Supreme Court was from suits where all : the evidence that could be produced was before the Court. This Court on the writ side cannot examine the evidence for and against especially in view of the fact that the petitioners did not urge before the Small Causes Court Judge that the formula evolved was not based on any evidence. Not only this that the petitioners did not challenge the formula, but they also did not dispute that 25 per cent of the total charges was too excessive a rent for the Apace occupied by the lodgers. In this connection I may refer the case of Madras and Southern Mahratta Railway Co v. Bezwada Municipality (AIR 1944 PC 71). In that case the Municipal Corpo ration while valuing certain lands for the purpose of tax arrived at the annual value of the lands by first ascertaining their capital value which they did by reckoning them as so much per square yard and they then took 6 per cent of the capital value as representing the annual value. The Municipality on the annual value so calculated, imposed a property tax. Their Lordships of the Privy Council approved of this method.

35. In the case of The Secretary of State for India v. Major J. E. Hughes (6 B L R 121), the Cantonment Magistrate has assessed the annual value of race‑course property on the gross income of the race club. This case on the face of it will have no application to the facts of these petitions. The Chief Officer has not assessed the hotels on the gross income of the hotel but on the letting value of the hotel.

36. In the case of Narayanchandra Das v. Chairman Munici pal Commissioners of the Panihati Municipality (I L R 57 Cal, 162) it was held that the method of valuation based upon a percentage of the estimated cost of the buildings in entire disregard of the principle which they were bound by law to adopt as the basis of their assessment was illegal. The decision in this case will have no application as the annual value of the hotels has not been determined by the authorities concerned on the basis of the estimated cost of the buildings.

37. In the case of Nundo Lal Bose and another v. The Corporation for the Town of Calcutta (I L R 11 Cal. 275) it was held that the Commissioners did not adopt the principle which they were bound by law to adopt as the basis of their assessment, namely the gross annual rent at which the house might reasonably be `expected to let from year to year. On the other hand, they valued the building on a certain percentage of its estimated cost. This is not the case in these petitions.

38. Reliance was placed on a Full Bench decision of the Lahore High Court in the case of Lalla Mal Sangham Lal v. Commissioner of Income‑tax, Punjab (I L R 17 Lah. 494). One of the questions before the Full Bench was whether the house tax paid by the tenant on account of the Delhi Municipal House Tax is to be included to arrive at the "annual value". This case on the face of it has no application to the petitions before us.

39. Mr. Dingomal while addressing us punctuated his arguments by stating that the present valuation would work out great hardship to the petitioners. This Court, in the exercise of its writ jurisdiction, is not concerned with the hardship of the petitioners. If the formula evolved by the Corporation is legally permissible it is for the Legislature to give redress to the petitioners, by amending the law.

40. I would, for the reasons given above, dismiss these writ petitions with costs.

41. I consider that the point involved in these petitions is of general importance and I would, therefore, certify, relying upon section 6 of the General Clauses Act, 1897 read with Article 250 of the present Constitution in the absence of any provision in the present Constitution like Article 159 of the old Constitution, that it is a fit case for appeal to the Supreme Court. ANWARUL HAQ, J.‑I agree. A. H. Petitions dismissed.