1. The plaintiffs having lost in both courts have preferred the second appeal. The plaintiffs filed the suit for declaration that the demands for payment of property tax made by the defendant-Municipality for the half years commening from 30th September, 1969 and ending 30th September, 1971 on the basis of an annual rental exceeding Rs. 9,000 is illegal and for a permanent injunction restraining the defendant from collecting the amount as per the demands.

2. It is seen from the pleadings that the plaintiffs were running a hotel in the ground-floor with respect to premises No. 4-A, but the actual No. is 4E. Both the plaintiffs and the defendant have proceeded on the basis that the property of the plaintiffs is situate at 4-E, Dindigul Road, Tiruchi. The defendant also admits the property in question being the property for which the plaintiffs have filed the suit. The plaintiffs rented out the suit premises to one Kuppanna Gounder by means of a registered rent deed, dated 23rd Jane, 1969 for an annual rent of Rs. 7.50. On 28th August, 1969 the plaintiffs received a demand notice for Rs. 2,343-78 as the property tax for the half year ending 30th September, 1969. The plaintiffs preferred an appeal to the Executive Authority and to the Council but they did not succeed. For the half-year ending 31st March, 1970, also, a demand notice for the same amount was received. The plaintiffs were served with a demand notice on 10th October, 1970 for the half-year ending 30th September, 1970 demanding a sum of Rs. 2722,47, as property tax. For the half-year ending 31st March, 1971, a similar notice has been received. For the half-year ending 30th September, 1971, also a similar notice has been received. The assessment of Rs. 2,722.47 per half-year is based on an annual rental value of Rs. 19,368. The annual rental value fixed by the Municipality is arbicrary and whimsical. Hence, the plaintiffs filed the suit for the above said reliefs stated supra.

3. The defendants in their written statement contend that the annual rent received by the plaintiffs exceeded Rs. 5,500. The properties belonging to the plaintiffs were inadequately assessed. The plaintiffs were receiving Rs. 1,250 per month by way of rent for the 27 rooms and three shops. The then Municipal Commissioner fixed the annual rental value at Rs. 17,868 after inspection. Subsequently, the plaintiffs put up additional constructions by way of constructing of two shops en a monthly rental of Rs. 125. After inspection and after ascertaining the rents p; id by the tenants the annual rental value was raised to Rs. 19,368. The lease pleaded by the plaintiffs is not true. It is only for the purpose of reducing the tax payable by them. It is true that the property was originally assessed at Rs. 926.27. The same was revised to Rs. 2,343.78 per quarter since the same was inadequately assessed.

4. The trial court found that the assessment towards the property tax made by the defendant is legal and the plaintiffs have no case. Therefore, learned District Munsif dismissed the suit. Against the dismissal of the suit the plaintiffs preferred an appeal AS No. 521 of 1973 before the Subordinate Judge, Tiruchirapalli, who after going through the oral and documentary evidence and the judgment of the lower court dismissed the appeal. Hence, the plaintiffs preferred this second appeal.

5. The learned counsel appearing for the appellants-plaintiffs contends that the annual rent the plaintifls were receiving was only Rs. 9,000 as per Ex. A-1, which comes to Rs. 750 per month. He has also produced the receipt for the payment of rent from the tenants. But however the learned counsel submits that the tax demanded by the defendant is Rs. 19,368. The property in question is let out to students which consists of 27 rooms and another portion of the property is occupied by a hotel situate opposite to the National College, T-Tiruchirapalli. It appears that during the quinquennial revision in 1967, D.W.1 who was the Special Revenue Officer inspected the building and ascertained the rent and fixed the annual rental value at Rs. 17,865. It is the evidence of the Special Revenue Officer that 27 rooms were let out for Rs. 42 per room per month and three shops were fetching a monthly rent of Rs. 35 per shop. According to him the hotel premises which faces the National College, Tiruchi, would get a sua of Rs. 250. Thus the total rent per, month worked out by D.W.1 comes to Rs. 1,489 and the annual rental value was arived at Rs. 17,865. When once the Municipality wants to revise the annual rental value it should adopt certain procedure as observed in Delhi Municipatity v. M.N. Sci A.I.R. 1977 S.C. 302=90 L.W. 26. S.C. (S.N.) therein it has observed as follows:

assessing authorities are obliged not to assess at a higher rental value than the standard rent fixed under the Rent Control Legislation.

It is not disputed that the premises;in question comes within the purview of the Rent control Act, In the Rent Control Act, there is also a provision for fixing the fair rent. The Supreme Court in DelhiMunicipalityv. M. N. Soi A.I.R. 1977 S.C. 302=90 L.W. 26. S.C. (S.N.) has observed that the assessing authorities, if they want to assess and claim the tax have to take into consideration the standard rent fixed under the Rent Control legislation. Similarly, Ramanujam, J. in Ramaswami v. Commissioner, Corporation of Madras 1977 2 M.L.J. 457=90 L.W. 713 has observed that

..a landlord cannot reasonably be expected to let a building for a rent higher than the fair rent in contravention of the rent restriction laws, it should bo taken that an upper limit has been fixed on the rate of rent, that a transaction entered into between the parties in defiance of the law cannot be taken to be the basis lor determining the rent which can reasonably be expected if the building is to be let, and it was nut the actual rent received by the landlord but the hypothetical rent which could be expected it the building is to be let is the legal yardstick tor determination of the reasonable rent,

Ramanujam J, has also observed that

Wherever buildings are subject to rent control restrictions the rental value has to be fixed with reference to the fair rent, it any, fixed under the statutory provisions for the building and if no fair rent has been fixed by the Rent Controller the Municipal authorities have to apply the provisions ot the Rent Control Act and determine the fair rent for the building betore assessing the property tax (underlining by me).

6. It is clear from the above decisions that if a Municipality or a Corporation wants to assess the property tax it has to take into consideration the provisions of the Rent Control Act and then determine the fair rent for the building in question. In this case, the evidence shows that the plaintiffs were receiving an annual rent of Rs. 9,000 and the tax levied by the Municipality is Rs. 5,443. The annual rental value of Rs. 17,868 was also subsequently raised to Rs. 19,368 on the basis of an erroneous view without following the pith and substance of the decisions of the Supreme Court and the decision of our Court.

7.Learned counsel appearing for the respondent contends that the Municipality arrived at the rental value on going through the receipts issued by the plaintiffs to the tenants, But, it has to be seen as is evident from the aforesaid decisions that the proper procedure to be adopted by the Municipality or the Corporation with regard to the levy of tax is that they should resort to the provisions of the Rent Control Act and then determine the fair rent for the building, and then levy tax. The hypothetical rent which the landlord could have received cannot be the basis for levying tax. On going through the judgments of the courts below and on hearing the arguments of either side, I am of the view that the findings of the courts below are erroneous and contrary to law. The second appeal is therefore allowed and the decrees of the courts below are set aside.

8. The Municipality will issue notice to the appellants-plaintiffs on the basis of the decision mentioned supra and also consider the provisions of the Rent Control Act for fixing the property tax of the building owned by the plaintiffs. In the meanwhile, the plaintiffs will continue to pay tax as they have been paying the tax previously, The plaintiffs have to pay the arrears of tax as per the old rate, within one month from the date of receipt of this order, Each party will bear their own costs throughout.