In Huge Relief To Property Tax Payers, Delhi HC Invalidates NDMC Bye-Laws; Civic Agency To Refund Excess Property Tax [Read Judgment]

In a big relief to property tax payers in the NDMC area, the Delhi High Court has struck down the New Delhi Municipal Council (Determination of Annual Rent) Bye-laws, 2009, and asked it to refund the excess tax collected by it.

The bye-laws were amended and changed the then existing system of determining the rateable value on the basis of the annual rent, at which the land or buildings may reasonably be expected to be let from year to year, to a unit area method (UAM).

In the UAM, first the unit area value (UAV) i.e. per sqft/metre of a property is fixed with reference to the characteristics of the property such as location, occupancy, age and structure. The UAV is then multiplied by the area of the vacant land or covered space to arrive at its annual value.

The high court had received 28 petitions against NDMC charging property tax on vacant land under the amended bye-laws, even when construction is not allowed on most of the vacant land, as the same falls in Lutyens’ zone or is covered under the Archaeological Survey of India regulations.

“The new impugned bye-laws in the present case seek to introduce a completely different system of rateable value than what is provided under the NDMC Act. While the NDMC Act provides for rateable value to be determined on the basis of the annual rent at which the land or building might reasonably be expected to let from year to year, the UAM envisages fixing the UAV with reference to the characteristics of a property and then multiplying the UAV by the area of the vacant land or covered space to find out the ‘annual value',” said Justice S Muralidhar and Justice Pratibha M Singh.

“It is not as if the NDMC was unaware that this could be done only by amending the NDMC Act. Yet only because this might be a time consuming process, it chose the short cut of making the new impugned Bye-laws without amending the NDMC Act. Section 388 (1) of the NDMC Act begins with the expression “Subject to the provisions of this Act”. Clearly, therefore, the legislative intent was to confer upon the NDMC the power to make Bye-laws which were subject to and consistent with the provisions of the Act,” the bench added.

“The court invalidates all actions taken by the NDMC under the new impugned Bye-laws in terms of levy, assessment, collection and enforcement of demand of property tax. All property demands made under the new impugned Bye-laws are hereby invalidated and declared unenforceable…

“In terms of the interim order passed by the Court, referred to hereinbefore, the excess of the tax deposited has to be refunded but the determination of such excess will have to await the making of the assessments in accordance with the extant provisions of the NDMC Act. Such refund of excess tax deposited would be in accordance with the law and together with the interest payable thereon in terms of the NDMC Act. It will be open to the individual tax payers to seek appropriate remedies in regard to refund together with interest at the appropriate stage after completion of the assessment in terms of the extant provisions of the NDMC Act,” it ordered.