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Municipal taxes would be a part of the "rent" payable by tenant to landlord

In M/S POPAT & KOTECHA PROPERTY vs ASHIM KUMAR DEY, the question before the Supreme Court was whether a tenant who defaults in payment of his/her share of municipal tax as apportioned by the landlord would be in default of rent rendering him/her liable to eviction under the  West Bengal premises Tenancy Act as amended in 2001.

The rent agreement between the parties stipulated that the rent would include all municipal taxes payable and that as and when such taxes are enhanced rent should be proportionately raised. The amendment 2001, the sub-section of section 5, cast the obligation to pay the taxes specifically on the occupier/tenant.

When the property tax was enhanced, the landlord apportioned the tax between the tenants and issued a notice upon the respondent-tenant to pay his share of the municipal taxes. The respondent-tenant in reply requested reconsideration/review of the matter.

The trial court dismissed the eviction suit filed by the landlord for non-payment of taxes on the ground that no documentary evidence with regard to the enhancement of property tax was forthcoming and as the respondent-tenant had been depositing the monthly rent payable with the Rent Controller, the tenant cannot be deemed to be the defaulter.

The appeal before the Calcutta High Court was dismissed on the ground held that even if the municipal taxes are to be held to be part of the rent payable, there is no automatic enhancement of the rent by an unilateral notice on the part of the landlord under Section 20 of the 1997 Act and that such enhancement has to be ordered by the Rent Controller.

The Supreme Court disagreed with both trial court and the High Court and referred to the judgment of the Calcutta High Court in Calcutta Gujarati Education Society and another vs. Calcutta Municipal Corpn. and others which held that the owner or lessor of the property is “primarily” required to satisfy the demand towards tax with right to recover it from the tenant, sub-tenant or the occupant. In case where the lessor or landlord has paid the whole tax including the portion of tax payable by the tenant or sub-tenant, the landlord has to be equipped with the power to get himself reimbursed by recovery of the portion of tax paid by him on behalf of the tenant. Section 231 of the Act, therefore, creates a fiction that the “tax” apportioned on the tenant would be treated as “rent” and would be recoverable as such. The word “rent” has not been defined in the tenancy law and this Court has taken note of this legal position in the case of Puspa Sen Gupta v. Susma Ghose which arose out of the provisions of the Tenancy Act applicable to West Bengal. Rent is a compendious expression which may include lease money with service charges for water, electricity and other taxes leviable on the tenanted premises.
While the provisions of the 1980 Act make it very clear that an occupier as distinguished from the owner i.e. ‘person primarily liable’ is entitled to pre-assessment notice and to participate in the assessment proceedings and also to question the same by way of an appeal, etc. assessment of a part of the premises in occupation of a tenant or different parts of such premises in occupation of different tenants is not contemplated under the 1980 Act. Rather, from the provisions of Section 230 of the 1980 Act, it is clear that the person to be assessed to tax is the person primarily liable to pay i.e. the owner who is vested with the right to recover the portion of the tax paid by him on behalf of the tenant, if required, proportionately to the extent that the value of the area occupied bears to the value of the total area of the property. Under the 1980 Act, in the event of any default on the part of the owner to pay the tax the rent payable by the tenant(s) is liable to be attached.

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