Pradeep Oil Corporation vs Municipal Corporation Of Delhi & Anr

PRADEEP OIL CORPORATION ....Appellant

Versus

MUNICIPAL CORPORATION OF DELHI AND ANR ....Respondents

JUDGMENT

Dr. Mukundakam Sharma, J.

1. Whether an agreement for erection of oil storage tank

together with pump house, chowkidar cabins, switch room,

residential rooms and verandah for storing oil decanted from

the railway tankers, which bring petroleum products to the

site at which they are decanted, would amount to lease or

license, is one of the several questions which falls for

consideration in these appeals, which has arisen out of a Full

1

Bench decision rendered by the High Court of Delhi at New

Delhi while disposing a batch of petitions bearing Nos. LPA 53,

54, 55, 57 and 58/1987.

2. Before dwelling into the question of law involved

hereinabove and in order to appreciate the contentions raised

by the parties hereto, we may notice few basic fact which has

resulted into filing of these appeals.

3. The appellant herein had been granted under the

Government Grant Act separate and distinct licenses by the

President of India acting through Superintendent of Northern

Railway, Delhi for the purpose of maintaining depot for storage

of petroleum products at a yearly license fee of Rs. 20,640/-

and Rs. 31,000/- per annum respectively.

4. Under the aforesaid grant, the appellant had been given

the right to erect/construct `petroleum installation buildings'

consisting of petroleum tanks, buildings and other

conveniences for receiving and storing therein petroleum in

bulk, and consequently possession of land has been given.

2 5. Consequent to the said agreement the administration

granted `exclusive possession' of the said land to the appellant

who entered the land for the purpose and the terms mentioned

therein in the aforesaid agreement/grant. Consequently, the

appellant submitted layout building plans for the construction

of the oil depot and the standing committee of the Municipal

Corporation of Delhi (in short "MCD") approved the layout plan

for the construction of 10 oil storage tanks of petroleum

products.

6. Subsequent to that the appellant raised various

constructions comprising of an administration block etc. along

with huge petroleum storage tanks for storing petroleum

products. A boundary wall around the installations and the

administrative block was also constructed. The nature of the

construction which is stated to be wide range and extensive

user, is more than 40 years old now.

7. The respondent MCD vide its Order dated 17.08.1984

passed an assessment order with regard to the property tax

qua the aforesaid property and confirmed the rateable value

3

proposed by it. The said assessment order was challenged by

the appellant before the appellate Court/MCD Tribunal which

vide its Order dated 12.7.1985 set aside the assessment order

passed by the respondent MCD and held that the appellant is

only a licensee in the property and is not a tenant, therefore,

no property tax can be levied on the appellant under Section

20(2) of the Delhi Municipal Corporation Act, 1957 (in short

"MCD Act"). Aggrieved by the aforesaid order of the appellate

Court, the respondent MCD filed a writ petition. However, the

said writ petition was dismissed by the Ld. Single Judge of the

Delhi High Court on 05.08.1986 holding that the petroleum

storage tanks do not fall within the definition of building

under the MCD Act. It was further held by the Ld. Single

Judge that the grant in favour of the petitioner was a license

and hence the petitioner is not liable for the payment of any

property tax in respect of the land or the petroleum storage

tanks. Challenging the aforesaid order of Ld. Single Judge, an

LPA was filed and subsequently, the same was referred to a

Full Bench of High Court. The Full Bench of the High Court

vide its impugned judgment and order dated 17.09.2002 held

4

that the petroleum storage tanks are a building and the

petitioner was a lessee and not a licensee in the property in

question.

8. It was forcefully argued before us by the learned counsel

appearing for the appellant that no property tax is payable qua

the property in question under the provisions of section 119 of

the DMC Act read with Article 285 of the Constitution of India,

as the property in question is a government property. It was

further contended that the incidence to pay property tax qua

the petroleum installations including the tanks cannot fall

upon the appellant under section 120(2) of the DMC Act

because the appellant is a mere licencee of government land

having permission to construct and consequently having

constructed thereupon is neither a tenant nor a lessee and the

agreement in question does not create any leasehold right or

tenancy in the favour of the appellant. In other words, the

submission was that the agreement in question is a licence

deed. It was further contended that the petroleum storage

tanks/depots are not "buildings" and therefore not subject to

5

property tax. It was also argued that the petroleum storage

tanks/depots being plant and machinery are liable to be

exempted under the provisions of section 116(3) of the DMC

Act.

9. On the other hand, the learned counsel appearing for the

respondent MCD submitted that the indentures in question

are indeed a lease and not a licence. It was argued that the

question as to whether such an oil storage tank would be

building or not is no longer res integra in view of judgment of

the Supreme Court in the case of Municipal Corporation of

Greater Bombay v. Indian Oil Corporation, AIR 1991 SC 686. It

has been further contended that that the question as to

whether the indentures in question constitute lease or license

so as to attract the provisions of Section 120 of the MCD Act

would depend upon the construction thereof. It was urged that

having regard to the nature of the interest conveyed, it would

be erroneous to construe the instrument as a license as the

land having been used for the purpose of construction of a

building, the object thereof being clear, it could not have been

6

construed to be a license and must be construed to be a lease.

It was further argued that it is not a case where it could be

said that no interest in the land had been created by reason of

the instruments in question.

10. Before addressing the rival contentions, it would be

useful to reiterate few relevant provisions of the MCD Act.

"2(3) "building" means a house, out-house,

stable, latrine, urinal, shed, hut wall (other than

a boundary wall) or any other structure, whether

of masonry, bricks, wood, mud, metal or other

material but does not include any portable

shelter".

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"2(24). "land" includes benefits to arise out of

land, things attached to the each or permanently

fastened to anything attached to the earth and

rights created by law over any street:

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"119. Taxation of Union properties.--(1)

Notwithstanding anything contained in the

foregoing provisions of this chapter, lands and

buildings being properties of the union shall be

exempt from the property taxes specified in

Section 114:

Provided that nothing in this sub-section shall

prevent the Corporation from levying any of the

said taxes on such lands and buildings to which

7

immediately before the 26th January, 1950 they

were liable or treated as liable so long as that

tax continues to be levied by the Corporation on

other lands and buildings.

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

"120(2). If any land has been let for a term

exceeding one year to a tenant and such tenant

has built upon the land, the property taxes

assessed in respect of that land and the building

erected thereon shall be primarily livable upon

the said tenant, whether the land and building

are in the occupation of such tenant or a sub-

tenant of such tenant.

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

"123. Property taxes a first charge on premises

on which they are assessed.--Property taxes due

under this Act in respect of any land or building

shall, subject to the prior payment of the land

revenue if any, due to the Government thereon be

a first charge-

(a) in the case of any land or building held

immediately from the Government, upon the

interest in such land or building of the

person liable for such taxes and upon the

goods and other movable properties if any

found within or upon such land or building

and belonging to such person; and

(b) in the case of any other land or building

upon such land or building and upon the

goods and other movable properties/ if any,

found within or upon such land or building

and belonging to the person liable for such

taxes."

8

11. We may also notice the language of Article 285 of the

Constitution of India which reads as follows: -

"285. Exemption of property of the Union from

State taxation

(1) The property of the Union shall, save insofar

as Parliament may by law otherwise provide, be

exempt from all taxes imposed by a State or by

any authority within a State.

(2) Nothing in clause (1) shall, until Parliament by

law otherwise provides, prevent any authority

within a State from levying any tax on any

property of the Union to which such property was

immediately before the commencement of this

Constitution liable or treated as liable, so long as

that tax continues to be levied in that State."

12. It would be useful to examine at this stage the definition

of "lease" and "license" as envisaged under Section 105 of

the Transfer of Property Act, 1882 and section 52 of the

Indian Easements Act, 1882 respectively.

Section 105 of the Transfer of Property Act, 1882 reads: -

"105. Lease Defined.--A lease of immovable

property is a transfer of a right to enjoy such

property, made for a certain time, express or

implied, or in perpetuity, in consideration of a

price paid or promised, or of money, a share of

crops, service or any other thing of value, to be

9

rendered periodically or on specified occasions to

the transferor by the transferee, who accepts the

transfer on such terms."

On the other hand, Section 52 of the Indian Easements Act,

1882 reads as:

"License, defined.--Where one person grants to

another, or to a definite number of other persons,

a right to do, or continue to do, in or upon the

immovable property of the grantor, something

which would, in the absence of such right, be

unlawful, and such right does not amount to an

easement or an interest in the property, the right

is called, a license."

13. A license may be created on deal or parole and it would

be revocable. However, when it is accompanied with

grant it becomes irrevocable. A mere license does not

create interest in the property to which it relates. License

may be personal or contractual. A licensee without the

grant creates a right in the licensor to enter into a land

and enjoy it. In Halsbury's Laws of England, 4th Edition,

Vol. 27 at page 21 it is stated: -

"license coupled with grant of interest: A license

coupled with a grant of an interest in property is

not revocable. Such a license is capable of

10

assignment, and covenants may be made to run

with it. A right to enter on land and enjoy a profit

a prendre or other incorporeal hereditament is a

license coupled with an interest and is

irrevocable. Formerly it was necessary that the

grant of the interest should be valid; thus, if the

interest was an incorporeal hereditament, such

as a right to make and use a watercourse, the

grant was not valid unless tinder seal, and the

license, unless so made, was therefore a mere

license and was revocable but since 1873 the

Court has been bound to give effect to equitable

doctrines and it will restrain the revocation of a

license coupled with a grant which should be,

but is not, under seal."

14. Lease on the other hand, would amount to transfer of

property. In Associated Hotels of India Ltd. v. R.N.

Kapoor, [1960] 1 SCR 368, the following well

established proposition were laid down by a Constitution

Bench for ascertaining whether a transaction amounts to

a lease or a license: -

"27. There is a marked distinction between a

lease and a license. Section 105 of the Transfer

of Property Act defines a lease of immovable

property as a transfer of a right to enjoy such

property made for a certain time in consideration

for a price paid or promised. Under Section 108

of the said Act, the lessee is entitled to be put in

possession of the property. A lease is thereforee

a transfer of an interest in land. The interest

11

transferred is called the leasehold interest. The

Lesser parts with his right to enjoy the property

during the term of the lease, and it follows from it

that the lessee gets that right to the exclusion of

the Lesser. Whereas Section 52 of the Indian

Easement Act defines a license.

Under the aforesaid section, if a document gives

only a right to use the property in a particular

way or under certain terms while it remains in

possession and control of the owner thereof, it

will be a license. The legal possession,

thereforee, continues to be with the owner of the

property, but the licensee is permitted to make

use of the premises for a particular purpose. But

for the permission his occupation would be

unlawful. It does not create in his favor any

estate or interest in the property. There is,

therefore, clear distinction between the two

concepts. The dividing line is dear through

sometimes it becomes very thin or even blurred.

Alone time it was thought that the test of

exclusive possession was infallible and if a

person was given exclusive possession of a

premises, it would conclusively establish that he

was a lessee. But there was a change and the

recent trend of judicial option is reflected in

Errington v. Errington 1952 (1) All ER 149,

wherein Lord Denning reviewing the case law on

the subject summarises the result of his

discussion thus at p. 155:

"The result of all these cases is that, although a

person who is let into exclusive possession is,

prima facie to be considered to be tenant,

nevertheless he will not be held to be so if the

circumstances negative any intention to create a

tenancy."

12

15. It is quite clear that the distinction between lease and

license is marked by the last clause of Section 52 of the

Easement Act as by reason of a license, no estate or

interest in the property is created. In the case of Qudrat

Ullah v. Municipal Board, Bareilly, (1974) 1 SCC 202

it was observed at p. 398 thus: -

"... If an interest in immovable property, entitling

the transferors to enjoyment is created, it is a

lease; if permission to use land without right to

exclusive possession is alone granted, a license

is the legal result."

(emphasis underlined)

16. A license, inter alia, (a) is not assignable; (b) does not

entitle the licensee to sue the stranger in his own name;

(c) it is revocable and (d) it is determined when the

grantor makes subsequent assignment. The rights and

obligations of the lessor as contained in the Transfer of

Property Act, 1882 are also subject to the contract to the

contrary. Even the right of assignment of leasehold

property may be curtailed by an agreement.

13 17. In the present case grant has been made by the President

of India in terms of Section 2 of the Government Grants

Act, 1895 and the Transfer of Property Act, 1882 may

have little bearing in the instant case. The former, i.e. the

Government Grants Act, 1895 being a special statute

would prevail over the general statute, i.e. the Transfer of

Property Act, 1882. Accordingly, the rights and

obligations of the parties would be governed by the terms

of the provisions of Government Grants Act, 1895

whereunder the Government is entitled to impose

limitations and restrictions upon the grants and other

transfer made by it or under its authority.

18. In view of the aforesaid legal position with regard to the

applicability of the Government Grants Act, we have

considered the grant in question after hearing both the

parties at length and perused the entire record.

19. A bare perusal of the grant in question reveals that in the

grant, the appellant herein i.e. grantee has been

described as licensee. But in our considered view the

14

mere use of the word "licensee" would not be sufficient to

hold the grant in question as a license. Simply using the

word "licensee" would neither be regarded as conclusive

nor determinative. In terms of Clause (1) of the said

indenture the licensee was to have the use of a piece of

land for maintaining a depot for petroleum goods received

through railways but thereby his rights to deal with the

property and the goods brought thereon had not been

taken away. Clearly, an embargo has been placed as

regards the user of the construction made thereon to the

extent that the same would be used solely for the storage

of petroleum products but such restriction by itself can

also be imposed in a case of lease. The grant in question

clearly states that the constructions are to be made as

per specifications approved by the Chief Inspector of

Explosives which condition was also otherwise governed

by the provisions of Explosives Act. Further, the pipelines

are required to be laid at railway levels or demised in

favor of the grantee, where for expenses are to be paid by

it. It further sates that the pipelines are to be laid

15

underground in such a manner that vehicles can pass

over that.

20. The present appellant i.e. licensee is required to pay the

sum specified therein which has been described as 'rent'

in terms of Clause 7. It further reveals that the licensee is

also required to pay all taxes payable in respect of the

said land for the time being found to be payable and

proportionately and all cesses, and taxes in respect of the

premises applicable to the land, tanks, works and

conveniences if the same be not separately assessed in

respect thereof. It further stipulates that the licensee

shall not be entitled to assign, mortgage, sub-let or

otherwise transfer the privileges without previously

obtaining the consent in writing of the Administration.

The licensee shall not use the said land or any part

thereof or permit the same to be used for worship, or

religious or educational purposes or for any other

purpose not specified in Clause 1 thereof but such a

claim is not determinative. Clause (9) of the said

16

indenture stipulates that either party would be entitled to

terminate the license without assigning any reasons by

giving to the other party at any time three calendar

months' notice in writing. It is to be noted that even

under Section 106 of the Transfer of Property Act, 1882

no reason is required to be assigned for determining the

lease.

21. Further, Clause 11 of the indenture in question provides

that nothing contained herein be construed to create a

tenancy in favor of the licensee of the said land but again

in our considered view, the mere description of the grant

in question is not decisive. Under the grant in question,

the Administration has been given power under Clause

12 to re-enter upon and retake and absolutely retain the

possession of the said land but the same could be

permissible in law only upon determination of grant

which would require 3 months' prior notice. It is to be

noted that Clause 12 further stipulates that the licensee

shall at all times keep the Administration indemnified

17

against and shall reimburse it towards all claims,

demands, suits, losses, damages, costs etc. which it may

sustain or incur by reason of inconsequence of any injury

to any person or to any property resulting from any

explosion or leakage of any petroleum kept or placed by

the licensee upon the said land.

22. Clause 14 of the indenture in question provides that the

licensee shall follow all petroleum rules and regulations

applicable to the construction, maintenance of petrol

pump or stores and for public safety. It is significant to

note that the aforesaid clause clearly provides that all

taxes in respect of the said patrol pump, stores, buildings

under the control of the licensee shall be paid by the

licensee. However, the rights of the parties on

determination of the grant have been specified.

23. The aforesaid clauses of the indenture in question clearly

shows that a bundle of rights have been conferred upon

the grantee i.e. the appellant herein.

18 24. It is well settled legal position that a deed must be read

in its entirety and reasonably. The intention of the

parties must also as far as possible be gathered from the

expression used in the document itself.

25. In Union Bank of India v. Chandrakant Gordhandas

Shah, (1994) 6 SCC 271, an instrument was held to be

a deed of lease as the lessee was conferred right to

exclusive possession where for various terms of the

indenture which were taken into consideration for finding

out whether the same was lease or a license. Similarly, In

Vayallakath Muhammedkutty v. Illikkal Moosakutty

JT 1996 (6) 665, where the defendant was given

exclusive possession of the disputed premises for

running a hotel but was not given the permission to sub-

lease the property, the document was held to be a

license.

"9. .... this Court has indicated that for a

consideration as to whether a document creates

a license or lease, the substance of the document

must be preferred to the form. It is not correct to

say that exclusive possession of a party is

irrelevant but at the same it is also not

19

conclusive. The other tests, namely, intention of

the parties and whether the document creates

any interest in the property or not are important

considerations."

26. In Om Parkash v. Dr. Ravinder Kumar Sharma, 1995

Supp.(4) SCC 115, a deal was held to be a license where

the keys of the premises was to be taken in the morning

and returned in the evening and a portion thereof was

occupied by the mother of the licensor.

27. In Swarn Singh v. Madan Singh, 1995 Supp.(1) SCC

306 it was held: -

"3. On a careful consideration of the above

arguments, we feel that there is no substance in

any one of them. To our mind it is very clear that

the right granted under the above document is

nothing but a license. Our reasons are as under:

(1) the nomenclature of the document is license.

Of course, we hasten to add that nomenclature is

not always conclusive;

(2) the document in question in no unambiguous

terms says that the possession and control shall

remain with the owner. This is a clear indication

of the fact that no interest in immovable property

has been conferred on the grantee. If it were to

be a case of lease under Section 105 of the

Transfer of Property Act, there must be an

interest in the immovable property. On the

20

contrary, if it were to be a license under Section

52 of the Easements Act, no such interest in

immovable property is created. The case on hand

is one of such.

(4) No doubt there is a statement in the document

that "I shall not sublet it to further anybody else.

This is nothing more than an affirmation of the

requirement that the licensee must use the

property. No doubt under Section 52 of the

Easements Act, license is personal but where an

affirmation is made that such an affirmation

cannot alter the relationship of the parties as

Lesser and lessee. In this view factually the case

Capt. BVD' Douza v. Antonio Fausto Fernandes,

Quoted from the judgment and order dated

3.5.1993 of Andhra Pradesh Admn. Tribunal at

Hyderabad in OA No. 47322/91 and 5668/92,

is distinguishable."

28. In Lilawati H. Hiranandani v. Usha Tandon, AIR

1996 SC 441, an assignment made to the effect that the

owner permitted the licensee to occupy a portion with no right

or interest created in his favor and also undertaken to vacant

the premises within one month, was held to be a case of

license.

29. In view of the aforesaid well settled legal position, whether

a particular document will constitute "lease" or "license"

21 would inter alia depend upon certain factors which can be

summarized as follows: -

(a) whether a document creates a license or lease, the

substance of the document must be preferred to the

form;

(b) the real test is the intention of the parties -- whether

they intended to create a lease or a license;

(c) if the document creates an interest in the property, it

is a lease; but if it only permits another to make use

of the property, of which the legal possession

continues with the owner, it is a license; and

(d) if under the document a party gets exclusive

possession of the property, prima facie, he is

considered to be a tenant; but circumstances may be

established which negative the intention to create a

lease.

30. Reverting back to the factual situation of the case at hand,

admittedly, the appellant is in possession of the buildings

22

in question since 1958. They have been permitted to raise

huge constructions and the nature of construction is of

wide range. An administration block along with tanks for

storing petroleum had been constructed. A boundary wall

around installations and administrative block had also

been constructed. Admittedly, the grantee is in exclusive

possession over the lands in question along with

construction thereon without any let or hindrance from the

Administration. Further, the appellant had been

continuously carrying on their business without any

interference from any quarter whatsoever since 1962. As in

the instant case, exclusive possession has been granted, as

discussed hereinbefore, there is a strong presumption in

favour of tenancy. That being the case, it is for the

appellant to show that despite the right to possess the

demised premises exclusive; a right or interest in the

property has not been created. The burden therefore

would be on the appellant/grantee to prove contra.

23 31. The aforesaid burden is not discharged in the present

case rather for the purposes resisting its eviction from the suit

land in the proceeding initiated under the Public Premises

Unauthorized Occupants Eviction Act, the appellant has taken

the stand pleading non-applicability of the Indian Easement

Act and has themselves termed the arrangement as a tenancy

by describing the fee as rentals. The said factor is also a vital

factor as on the own showing of the appellant the arrangement

was nothing but a lease. The appellant therefore cannot take

up a plea by which they approbate and reprobate at the same

time.

32. In Street v. Mountford, 1985 Appeal Cases 809, it was

held that when exclusive possession is granted in lieu of

only rent payable therefore, the presumption that the

instrument is that of a lease becomes stronger. In the

present case the Administration has also option to revise

the rent. Had it been a case of mere right to use the

property, such provision would not have been there.

Further, the manner in which the rent is to be paid is also

24

important. It is to be paid annually in a case of a license

pure and simple, the indenture would not normally contain

a claim that rent would be paid annually.

33. In Capt. B. V. D'Souza v. Antonio Fausto Fernandes,

[1989] 3 SCR 626 , this Court observed:

"However, this cannot answer the disputed issue

as it creates a license or lease, the substance of

the document must be referred to the form, As

was observed by this Court in Associated Hotels

of India Ltd. v. R.N. Kapoor, [1960] 1 SCR 368 ,

the real test is the intention of the parties --

whether they intended to create a lease or

license. If an interest in the property is created

by the deed it is a lease but if the document only

permits another person to make use of the

property "of which the legal possession continues

with the owner" it is a license. If the party in

whose favor the document is executed gets

exclusive possession of the property prima facie

he must be considered to be a tenant: although

this factor by itself will not be decisive. Judged in

this light, there does not appear to be any scope

for interpreting Ex. 20 as an agreement of leave

and license."

34. It is true that there are indeed certain restrictions which

have been imposed by the Administration with regard to

the construction of the building storage tank, etc., but in

our considered view such restrictions are not decisive for

25

the purpose of determining as to whether a document is a

lease or license as such restrictions could also be imposed

in case of a lease as well. In Glenwood Lumber Co. Ltd. v.

Philips, 1904-1907 All ER (Reprint) 203, it was held:

"In the so-called license itself it is called

indifferently a license and a demise, but in the

Act it is spoken of as a lease, and the holder of it

is described as the lessee. It is not, however, a

question of words, but of substance. If the effect

of the instrument is to give the holder an

exclusive right of occupation of the land though

subject to certain reservations or to a restriction

of the purposes for which it may be used, it is in

law a demise of the land itself."

35. We may also notice the undisputed fact that in the present

case the parties have agreed that for the purpose of

determination of the agreement three calendar months'

notice had to be given. Undoubtedly, such clause in the

document in question has a significant role to play in the

matter of construction of document. Clearly, if the parties

to the agreement intended that by reason of such

agreement merely a license would be created such a term

could not have been inserted.

26 36. It is well settled legal position that a license can be revoked

at any time at the pleasure of the licensor. Even otherwise,

unless the parties to the agreement had an intention to

enter into a deed of lease the Administration would not

have agreed to demise the premises on payment of rent in

lieu of grant of exclusive possession of the demised land

and further stipulated service of three months' notice

calling upon either party to terminate the agreement. In

view of the same, the argument advanced by the learned

counsel of the appellant that a stipulation having been

made in the agreement itself that by reasons thereof the

grantee shall not be a tenant and thus the deed must be

construed to be a license cannot be accepted. In our

considered view, such a clause may at best be one of the

factors for construction of the document in question but

the same by itself certainly be a decisive factor.

37. The next question which needs to be addressed in view of

the aforesaid well settled legal position is whether the

agreement in question should be interpreted as lease or

27

license having regard to the object sought to be achieved by

the provisions of DMC Act.

38. By reason of the provisions of the DMC Act, the MCD is

required to render several services as specified therein for

the purpose whereof, tax is required to be imposed both on

land as also on building. The definition of "land" and

'"building" as provided in the DMC Act must be given its

full effect. As mentioned hereinbefore in the case of

Municipal Corporation of Greater Bombay case (supra),

even an oil tanker has been held to be building.

39. The tax is imposed upon the holders of land and building

by the MCD which is compensatory in nature. The word

"letting out" in the context of the grant therefore must

receive its purposive meaning. The MCD renders services

and the benefits of such services are being taken by all

concerned, viz., the owner of the land or building. Even a

person who is in possession of a land or building, whether

legal or illegal, takes benefits of such services rendered by

the MCD. The MCD for the purpose of realization of tax is

28

not concerned with the relationship of the parties. It is

concerned only with imposition and recovery of tax which is

payable on all lands and buildings in accordance with law.

The exceptions thereof have been enumerated in the Act

itself. Section 119 of the MCD Act is one of such provisions.

Such an exemption clause, as is well known, must be

construed strictly. Section 119 of the MCD Act would apply

if the lands and buildings are the properties of Union of

India. The MCD has the right to levy the property tax in

terms of Section 114 of the MCD Act in the manner as

specified therein.

40. By reason of the agreement in question, the buildings in

question do not belong to the Administration. Admittedly, it

belongs to the grantee i.e. appellant herein. As discussed

hereinbefore, the Oil tanks has been construed as buildings

for the purposes of tax. Therefore, Section 119 of the MCD

Act would not apply to the building in question. That being

the case, the grantee/appellant is liable to pay tax although

the ownership of the land may belong to the

29

Administration. Section 115 of the MCD Act clearly

provides that the general tax shall be payable in respect of

lands and buildings. Such lands and buildings may be in

lawful occupation of the owner. The occupation of the said

building may be lawful or unlawful. Even in a case where

apartments are constructed on the land belonging to the

Government or a statutory body but the occupier of the

apartment is liable to pay tax. If a person encroaches upon

somebody's lands and constructs buildings thereupon, he

would also be liable to pay tax. Once it is held that the

grantee were liable to pay tax, the same becomes payable

from the date of accrual of the liability. The said position is

also fortified from specific stipulation in the agreement that

the liability to pay all taxes including municipal taxes is on

the grantee.

41. The learned counsel for the appellant has placed strong

reliance on the decision of this Court in HUDCO v. MCD;

(2001) 1 SCC 455 to contend that land belonging to the

government is immune from the payment of property tax by

30

virtue of section 119(1) of the DMC Act and Article 285 of

the Constitution of India. In the HUDCOs case vacant land

of the government, prior to execution of the lease deed in

favour of HUDCO, was sought to be taxed and that no

building had been constructed by HUDCO. HUDCOs own

case was that interest in land could pass only on execution

of lease and construction thereon under section 120(2) of

the MCD Act. MCD had invoked Section 120(1) DMC Act to

fasten liability on HUDCO and not under Section 120(2)

DMC Act after construction was made by HUDCO and lease

deed executed bythe government. In that case, this Court

has held that vacant land belonging to the Government was

not taxable by virtue of section 119 DMC Act and Article

285 of the Constitution of India. However, in our

considered view, the case at hand is totally different. The

HUDCO judgment dealt with the case where vacant land

belonging to the lessor/Government and in regard whereto

no lease deed had been executed and no construction had

been made by the lessee/HUDCO. The land belonging to

the central government was sought to be taxed under

31 section 120(1) of the DMC Act which fastens liability on the

lessor. Since land belonged to UOI the same was exempted

from payment of tax until the lease deed was executed and

construction made thereon by HUDCO-under Section

120(2).

42. Incidence to pay tax under section 120(2) DMC Act is with

regard to a composite assessment of land and buildings as

section 120(2) talks of a composite assessment only. In the

present case vacant land or property of Railways is not

sought to be taxed as was in the case of HUDCO Vs. MCD

under section 120(1) DMC Act, but property tax/Composite

Assessment is sought to be made on the

installations/stotage depots having been constructed by

the appellant-by virtue of Section 120(2) DMC Act. It is

important to notice that w.e.f. the date of execution of lease

deed and construction made thereon by HUDCO, HUDCO

has been paying the property tax. HUDCOs case is

therefore not applicable.

32 43. In view of the aforesaid discussion, we are of the considered

view that the document in question constitutes lease in

favor of the appellant-grantee; and accordingly liable to pay

taxes.

44. In view of the same, we find no merit in the present appeal,

accordingly, the same is liable to be dismissed and hence

dismissed. No order as to costs.

..........................................J

[Dr. Mukundakam Sharma ]

............................................J

[ Anil R. Dave ]

New Delhi,

April 6, 2011

33