Introduction
One of the unexplored areas of law is Property taxation very few people intent to know why the property tax bills are to levy and charged for, it is one of the most important revenue sources to the government treasury. This article to explain various ways of appeal available to the taxpayers and Methodology in calculating the property tax.
Legislative act
Classification of property tax assessment is based on where the said property situated if it falls on under Municipal corporation limit the respective act is applicable for eg If the property is in Chennai
Tax levy provision will be followed as per Chennai city municipal corporation act 1919 and said property falls outside the jurisdiction of the city than The Tamil Nadu District Municipalities Act Rules will be applicable.
Stage of appeal
Taxation appeal forum
If the Taxpayer feel the property tax is incorrectly assessed then they can write to the regional deputy commissioner /Assistant revenue officer of the corporation request to re-assessment of the tax
If the taxpayer not satisfied with the assessment to follow the stages of appeal
Taxation Appellate Tribunal
City Civil Court
High Court
Method of Calculation
1. Monthly Rental Value with respect to each building
2. Floor details
3. Area Square Feet
4. Type of construction
5. Usage
6. Occupancy
7. Rate
8. Calculation
9. Owner/Semi-Permanent rebate
10. Monthly Rental Amount
Residential or Commercial
Based on the above formula and others factors to take into consideration such as the age of the building,nature of the building and other aspects prevailing in the premises and also the years of assessments to be made in respect of the buildings area of the property rate to be fixed by the corporation in levying the property tax.
Case law
Municipal Tax Appeal No: 7/2016
J.Anusuya Vs The Commissioner
In the above, the case the appellant (commercial )has not satisfied with the final assessment order made by the respondent, so filed an appeal before the tribunal in the T.A.T No 15/2015
2. The facts necessary for the disposal of this appeal are as follows:
The appellant owns a building situated at 3537, G.N. Chetty Road, T. Nagar, Chennai 17, consisting of Basement Floors I and II, Ground Floor, I floor to 13th Floors. Out of which, Basements I and II, Ground Floor, I Floor, 2nd floor and 13th floor are used for car parking, shops, Restaurants and other non-residential purpose or commercial purpose. 3rd floor to 13th floor consists of rooms in various types.
The tax was increased to Rs.45,09,721/ w.e.f. I/132014 and Final notice were issued on 20.3.2015 under Notice No.10/1415/8689.
3. The appellant, not satisfied with the Final Assessment order made by the respondent, has preferred the appeal before the Tribunal in T.A.T.No.15/2015.
4. Before the Tribunal the appellant herein contended that while calculating the property tax, the respondent Corporation has to consider the classification only with regard to commercial or residential and the tax ought to be assessed as per Sec.100 of the CCMC Act 1919. The respondent ought to have arrived the Annual value of the building only with reference to the provision of the Tamil Nadu Buildings(Lease and Rent Control) Act 1960 that deal with fixation of fair rent of the buildings. The revision in the Annual value could only be for specific grounds such as the increase in area in the building, increase in the rent and addition or alterations in the buildings etc., The plinth area alone cannot be adopted for fixation of property tax.
The respondent calculated the property tax on the basis of the rate per square feet, which is arbitrary and irrational.
The facilities given by the appellant hotel and the maintenance services are not considered by the Corporation.
The Commissioner has passed final order without following the rules
laid down by the law.
The tax fixed by the Commissioner is excessive and exorbitant and that therefore,
the Final Assessment order is to be set aside.
5. On the other hand, the respondent Corporation has submitted that the appellant is running a five-star hotel in the heart of Chennai City and room tariff is ranging from Rs.4000 to Rs.25,000/.
The property tax is made on the basis of the extent type of roof and usage of the property after giving a necessary rebate, if applicable. The annual rental value of the property is fixed in accordance with the usage of the property at the time of assessment basic rate.
The assessment of appellant hotel is under the category of non-residential and the basement to the 2nd floor of the appellant hotel has been assessed on square feet basis and the assessment of the 3rd floor to 12th floor was made under the room tariff provided by the appellant. As per IV part 1, A 1C(ii) and (vii) of CCMC Act 1919, totally built up area with all infrastructures have been taken into account for assessment and the open area has not been assessed.
The assessment of property tax on Hotels and Lodges in Madras City is supported by G.O.Ms.No.856, dated 19.4.1972 by the Rural Development and Local Administration Department. As per Sec.137(B), CCMC Act 1919, property tax can be assessed in case of escape from assessment.
The appellant has not paid the property tax arrears for the period from II/20142015 which amount to Rs.1,63,92,031/.
Hence, prayed to dismiss the appeal.
6. both sides, the come to the conclusion that the appellant is liable to pay the tax as demanded by the respondent Corporation and there is no valid reason to interfere with the orders passed by the Commissioner and the Tribunal has dismissed the appeal.
7. Aggrieved by the Order of the Tribunal, the appellant has preferred this appeal.
The grounds of appeal are as follows:
The order of the Tribunal is wholly unconscionable in law, contrary to materials on record.
As per the decisions of the Apex Court as well as Hon’ble High Court, the tax is to be assessed following Sec.4 of Tamil Nadu Buildings(Lease and Rent) Control Act. The 4 respondent Corporation failed to appreciate that the 3rd to 12th floors were also similar to basement 1st floor, basement 2nd floor, ground floor, 1st floor, 2nd floor and 13th floor. The respondent erred in accepting the principles relied on authorities of the Corporation of Chennai, namely, a basic rate per sq.ft. x built-up area for calculation of property tax.
The conclusion that the income derived per day received by the appellant is Rs.9,98,809/based on the tariff furnished by the appellant is totally wrong.
Even in a peak season, occupancy of any hotel would not be more than 60%.
The respondent Corporation grossly erred in overlooking the judgments of the Hon’ble Supreme court and also overlooked GO.Ms.No.856, dated 19.4.72.
The tax levied on the basis of the tariff for each room in 3rd to 12th floors of the appellant building is false.
The respondent failed to appreciate the service tax levied by the Central government on rooms in star hotels and also the Luxury tax levied by the State Government.
Sec.29(1) of CCMC Act 1919 has no connection in levying a property tax. The amenities extended by the appellant hotel were not considered by the respondent while assessing a tax.
Sec.99 and 100 of CCMC Act 1919 were not followed while assessing the property tax. The Tribunal failed to appreciate that fixing the half-yearly property tax at Rs.44,52,620/ is totally unreasonable.
Therefore, prayed to allow the appeal setting aside the order of the Taxation Appeals Tribunal. 8. The point that arises for consideration is
(i) Whether the order of the Tribunal is liable to be set aside?
9. POINT:
The appellant would contend that the respondent’s orders and the Tribunal’s order are perse arbitrary, not well considered and are not good orders in law and are contrary to materials on record.
The appellant would also contend that as per the decisions
of the Hon’ble Apex Court as well as the decisions of the Hon’ble High Courts,
the tax is to be assessed as per the provisions of Section 4 of Tamil Nadu Buildings
(Lease and Rent) Control Act but the respondent
Corporation failed to appreciate that the 3rd to 12th floors were also similar to basement 1st floor, basement 2nd floor, ground floor, 1st floor, 2nd floor and 13th floor and that the respondent erred in accepting the principles relied on by the authorities of the Corporation of Chennai, namely, a basic rate per sq.ft. x built-up area for 5 calculation of property tax.
The conclusion that the income derived per day by the appellant is Rs.9,98,809/, based on the tariff furnished by the appellant is totally wrong.
Even in a peak season, occupancy of any hotel would not be more than 60%. The respondent corporation grossly erred in overlooking the judgments of the Hon'ble Supreme court and also overlooked GO.Ms.No.856, dated 19.4.72.
The tax levied on the basis of the tariff for each room in 3rd to 12th floors of the appellant building is false.
The respondent failed to appreciate the service tax levied by the Central government on rooms in star hotels and also the Luxury tax levied by the State Government.
Sec.29(1) of CCMC Act 1919 has no connection in levying a property tax. The amenities extended by the appellant hotel were not considered by the respondent while assessing a tax.
Sec.99 and 100 of CCMC Act 1919 were not followed while assessing the property tax. The Tribunal failed to appreciate that fixing the half-yearly property tax at Rs.44,52,620/ is totally unreasonable.
10. The learned counsel for the appellant would argue that the respondent has been paying the half-yearly tax of Rs.8,68,372/ and the same has been increased to Rs.45,09,721/ w.e.f. I/132014 without proper assessment.
Only based on the tariff rate of rooms, the tax has been fixed but Sec.92(2) of the CCMC Act is very clear that the Annual value of the land and building has to be fixed. The rental amount would differ from month to month and Sec.100(2) has categorically stated that the rental amount need not been taken into consideration. He would further argue that the building as a whole from the ground floor, 1 to 13 floor was considered but the tax levied on the basis of the tariff for each room in 3rd to 12th floors of the appellant building.
The tax assessed for 2nd and 13th floor has been assessed at 5.25 per sq.ft. Further, the learned counsel argued that the entire rooms in the hotel were not booked throughout the year and also the amenities are given to the customers by way of free at the time of booking the rooms,
all were not considered by the respondent but they have simply enhanced the tax without stating any reason.
11. On the other hand, the respondent contends that the appellant is running a five-star hotel heart of Chennai room tariff is ranging from Rs.4000 to Rs.25,000/. The property tax is made on the basis of the extent type of roof and usage of 6 the property after giving a necessary rebate, if applicable. The annual rental value of the property is fixed in accordance with the usage of the property at the time of assessment based on a basic rate. The usage of the buildings are divided into two categories, one is residential and the other one is non-residential.
The appellant hotel is under the category of non-residential and the basement to the 2nd floor of the appellant hotel has been assessed on square feet basis and the assessment of the 3rd floor to 12th floor was made under the room tariff provided by the appellant.
As per IV part 1, A 1C(ii) and (vii) of CCMC Act 1919, the total built-up area with all infrastructures have been taken into account for assessment and the open area has not been assessed. The assessment of property tax on Hotels and Lodges in Madras City is supported by G.O.Ms.No.856, dated 19.4.1972 by the Rural Development and Local Administration Department.
As per Sec.137(B) of the CCMC Act 1919, property tax can be assessed in case of escape from assessment. The appellant has not paid the property tax arrears for the period from II/20142015 which amount to Rs.1,63,92,031/ and as such prayed for the dismissal of the appeal.
12. On careful consideration of the submission put forth on either side, the appellant has come forward with this appeal as against the order of the Tribunal. Admittedly, the appellant is running a five-star hotel in a posh area of the city and the tax has been fixed based on the room tariff.
The hotel comes under a non-residential category for assessment of tax. The appellant himself admitted that the tax for 3rd to 12th floor has been fixed only based on the room tariff and 2nd and 13th floor fixed at Rs.5.25 per sq.ft. The tariff rate has been provided by the appellant and the respondent has taken into consideration of the tariff/per day and calculated into 365 days and taken into consideration and fixed the annual rental value. The only objection raised by the appellant herein is that the entire room in the hotel is not fully occupied throughout the year. Even in the season time 60% of the rooms only occupied and therefore, the tax cannot be fixed on room tariff.
13. The power to access property tax by the corporation flows from Sec.99 to 109 of the Chennai City Municipal Corporation Act 1919, sec 99(2 & 3) of the Act reads : 7 (2) save as otherwise provided in this Act,
these taxes shall be levied at such percentage of the annual value of the building and lands as may be fixed
by the council: Provided that the aggregate of the percentage so fixed
shall not in the case of any land or building, be less than 15 per cent, or greater than
(25) per cent of its annual value.
(3) For the purpose of assessing the property tax, the annual value of any building or land shall be determined by the Commissioner
Further sec 100(2) would also read as such,
(2) The annual value of lands and buildings shall be deemed to be the gross annual rent at which they may (at the time of assessment) reasonably
to be expected to let from month to month or from year to year
(less a deduction, in the case of a building, often per cent of that portion on such annual rent which is attributed to the building alone,
apart from their sites and the adjacent lands
occupied as an appurtenance thereto) and the said deduction shall be in lieu of all allowance for repair or on any other account whatever:
Provided that (a) In the case of (i) Any government or railway building; or (ii)
Any building of a class not ordinarily let the gross annual rent of which Cannot in the opinion of the commissioner be estimated the annual value of the premises shall be deemed to be six per cent of the total of the
estimated market value of the land at the time of assessment and the estimated cost of
erecting the building at such time after deducting for depreciation a reasonable amount which shall in no case be less than ten per cent of such cost and
(b) By machinery (any furniture) shall be excluded from valuations under this section.
14. From the above its clear that annual rental value is to determined by the commissioner taking into account, the gross annual rent expected on the property being let out from year to year.
Based on this determination of annual rental value the act provided for the levy of tax between 15% to 25% of the annual value. 8 14.
With the aforesaid powers handed over to the commissioner, the government which was in receipt of representation with hotelier Association has issued a G.O. in G.O.Ms.No.856 Rural Development under Local Administrative Department dated 19.4.1972 which reads as follows: “Government of Tamil Nadu “Abstract Tax – Property Tax – Madras Corporation Levy of Property Tax on Hotels and Lodges in Madras City – Proposals Agreed.
The Honorary Secretary and Treasurer, South India Hotels and Restaurants' Association, Madras has represented that the property taxes in respect of the hotels and restaurants in the Madras City have been abnormally increased and that the increase, has been done arbitrarily.
He has further represented that the expenses involved in maintaining a hotel together with the amenities and services rendered should be taken into account while an individual hotel is assessed to property tax and that the salaries of staff, provident fund, washing and laundry, maintenance of furniture and sanitation should have the first claim over the room revenue.
The President of the Madras City Lodge Owners’ Association, Madras, has also represented that the criteria in arriving at the rates by the Corporation of Madras in respect of the Hotels and Lodging Houses is not in conformity with the principle and that the entire issue required rethinking and revision.
2. referred to the Commissioner, Corporation of Madras.
The Commissioner, Corporation of Madras has suggested the following classification of hotels and lodges and the procedure of assessment of the said hotels and lodges to property tax:
1. Posh Hotels & Lodging Houses. Annual value to be assessed by taking rental value for lodge portions at 10% of the gross income that may be realised, if all rooms are occupied throughout the year plus reasonable letting value for other portions like restaurant, shops, etc;
2. ‘A’ Class Hotels and Lodging 9 Houses Annual value to be assessed by taking rental value for lodge portions at 30% of the gross income that may be realised, if all the rooms are occupied throughout the year plus reasonable letting value for other portions like restaurant, shops, etc;
3.‘B' Class Hotels and Lodging Houses Annual value to be assessed by taking rental value for lodge portions at 25% of the gross income that may be realised, if all rooms are occupied throughout the year plus reasonable letting value portions like restaurant, shops, etc;
15. It is clear that the above G.O. holds the field levying of the tax on hotels and lodging houses. The G.O. classifies the hotels and lodging houses in 3 categories of hotels. In the case on hand, it is admitted fact that the respondent hotel falls under the 1st category of "Posh hotels and lodging houses.
The G.O fixes the tax at 10% of the rental value for the lodging portions. The commissioner had fixed the annual value of the premises at Rs. 3,63,68,721/ and assessed the tax at Rs.45,09,721/ w.e.f. I/1314.
16. The appellant would state that the annual value fixed by the Corporation was based on the Tariff given by the respondent. Though the respondent had denied the tariff are to be the actual tariffs levied by them on their customer throughout the year, no documents have been produced to substantiate the same and to decry tariff includes amenities etc., That being so, the annual value arrived at by the Corporation based on the rental value cannot be faulted with.
17. The other plank of a challenge is that the Corporation has failed to consider the alleged fact that the vacancy position of the lodging rooms has not been considered. The respondent would allege that the annual rental value has been wrongly calculated in a 10 straight jacket formula without reference to the fact that several of the rooms have remained unoccupied for several days which requires proper rebate and concession.
18. To this argument, the answer lies even in the act itself.
Sec.105 of the Act would read thus under, Sec.105 vacancy remission:
1. When any building whether ordinarily let or occupied by the owner himself has been vacant and unlet for thirty or more consecutive days in any half year,
the Commissioner shall remit so much, not exceeding one half of such portion
of the tax as relates to the buildings only as is proportionate to the number of days during which the building was vacant and unlet in the half year.
2. Every claim for revision under subsection(1) shall be made during the half year in respect of which the remission is sought or in the following halfyear and not afterwards.
3. (a) no claim for such remission shall be entertained unless the owner of the building or his agent has previously thereto delivered the notice to the Commissioner
(i) That the building is vacant and unlet; or
(ii) That the building will be vacant and unlet from a specified date either in halfyear in which notice is delivered or in the succeeding halfyear.
(b) The period in respect of which the remission is made shall be calculated
(i) if remission is sought in respect of the half year succeeding that in which a notice is delivered, from the date of delivery of the notice or from the date on which the building became vacant and unled, whichever is later; and
(ii) If remission is sought in respect of the half year succeeding that in which the notice is delivered, from the commencement of the half year in respect
which remission is sought or from the date on which the building became vacant and unlet, whichever is later
(C)every notice under clause (a) shall expire with the half year succeeding that during which it is so delivered, and shall have no effect thereafter.
19. From the above, it is clear that the appellant hotel ought to have informed and sought for remission within the respective half year.
No record has been produced to show that at any point of time the appellant hotel has either informed the vacancy position or the remission of tax was sought in the previous half year sighting vacancy in an occupation of their rooms. Therefore, a plea would fall flat in the substantive material.
Therefore, the assessment made by the respondent Corporation is in accordance with law and the order of the Tribunal confirming the assessment made by the Corporation need not be interfered. Hence, the appeal is liable to be dismissed. Point is answered accordingly.
20. In the result, this appeal is dismissed and the order of the Taxation Appeals Tribunal dated 2.11.2016 in T.A.T.No.15/15, as well as the Final Notice of the Commissioner, Corporation of Chennai, dated 20.3.2015 under Notice No.10/1415/8689, are hereby confirmed.
To sum up the conclusion in the words of Hon'ble Mr Justice S.M.Subramaniam
Payment of property is a duty of the citizen. Every citizen are utilizing common infrastructure facilities and amenities provided by the Government. They bound to pay the property tax within the time stipulated. Non-payment of property tax is to be construed as an infringement of the right of all other citizens. In the event of utilizing all such common facilities without paying the property tax, the assessee should remind himself that he is utilizing all such amenities at the cost of other taxpayers, who are all promptly paying the property tax, Thus non-payment of property tax infringes the rights of all citizen.
