The Supreme Court has upheld the Delhi High Court judgment that quashed the NDMC (Determination of Annual Rent) Bye-laws, 2009, that had introduced the system of Unit Area Method (UAM) for assessing property tax, on the ground that it is ultra vires the provisions of New Delhi Municipal Council Act.
The bench comprising Justice AK Sikri and Justice Ashok Bhushan agreed with the high court view that the bye-laws framed by the NDMC that introduced the system of UAM, which is based on value of the property that the property is likely to fetch on rental, is foreign to the methodology provided in Section 63 of the NDMC Act, and thus ultra vires the provisions of the NDMC Act.
As per UAM, the system of Unique Area Value (UAV) per sq. ft/meter of a property is fixed with reference to the characteristics of the property such as location, occupancy, age, structure of the said property. This UAV is then multiplied by the area of the vacant land or covered space to arrive at its annual value. When the annual value is determined on the basis of such a formula, property tax thereupon is to be paid by the assessees. Several assesses had challenged the validity of these byelaws before the high court. Allowing their pleas, the high court held that these bye-laws are far beyond the scope and ambit of the powers vested in the NDMC under Section 388(1)(A)(9) of the Act.
The apex court bench, on the appeal by NDMC, observed that Section 63 does not prescribe any particular method for arriving at annual rent and, therefore, this gap has been filled up by the impugned bye-laws by prescribing the formula based on UAM. The court said that the UAM is not in sync with the scheme of Section 63(1) of the NDMC Act.
"We agree with the High Court that the Impugned Bye-laws that provide UAM which is based on value of the property that on rental which the property is likely to fetch and are, there, foreign to the methodology provided in Section 63 of the NDMC Act. Such Bye-laws are, thus, ultra vires the provisions of NDMC Act. They are in excess of the scope and ambit of powers vested in the NDMC Act under Section 388(1)(A)(9) of the NDMC Act," the court said.
The bench observed: "No doubt, in many ways, UAM is a better method in comparison with the earlier method based on annual rent. For this reason, this method has now been followed for the purpose of levying property tax not only in the areas in Delhi itself covered under the Municipal Corporation of Delhi but in many other States as well. However, such a method which may be a better method can be incorporated in accordance with the law. In the present case, it could be done after amending the provisions of the NDMC Act."