P.V. Dixit, C.J.

This revision petition, which has come up before us on a reference by one of us, is directed against a decision of the Additional District Judge, Indore, rejecting an appeal preferred by the Petitioners against a determination of the Commissioner, Indore Municipal Corporation, fixing the valuation of a hotel building owned by the Petitioners, for the purpose of assessment to property-tax levied by the Indore Municipal Corporation, at Rs. 43, 405. 20.

Briefly stated, the material facts are that the Petitioners own a hotel building known as Viram Lodge located on the Ravindranath Tagore Marg, Indore. In 1956 the annual gross rental value of this building was determined at Rs. 6,600 and on that basis, property tax of Rs. 464 was levied. On 3rd June 1965 the Assessment Officer of the Corporation revised the annual value of the building and fixed it at Rs. 43,405.20. The Petitioners then preferred objections under Section 147 of the Madhya Pradesh Municipal Corporation Act, 1956 (hereinafter called the Act) to this valuation, which were heard by the Commissioner who, overruling them, reached the conclusion that the annual value of the building was Rs. 43,405.20. Thereafter an appeal was preferred by the Petitioners before the Additional District Judge under Section 149 of the Act, which was dismissed. The applicants have now filed this revision petition under Section 392 of the Act.

The relevant provision of the Act to consider is Section 138 (b) and (c) which is as follows-

138. For the purposes of assessing land or building to the property tax:

(a) *** *** ***

(b) the annual value of any building shall notwithstanding anything contacted in any other law for the time being in force be deemed to be the gross annual rent at which such building, together with its appurtenances and any furniture that may be let for use or enjoyment therewith might reasonably at the time of assessment be expected to be let from year to year, less an allowance of ten per cent for the cost of repairs and for all other expenses necessary to maintain the building in a state to command such gross annual rent.

Explanation I. - For the purpose of this clause it is immaterial whether the building and the land let for use or enjoyment therewith are let by the same contract or by different contracts, and if by different contracts, whether such contracts are made simultaneously or at different times.

Explanation II. - The term gross annual rent shall not include any tax payable by the owner in respect of which the owner and tenant have agreed that it shall be paid by tenant.

(c) the annual value of any building, the gross annual rent of which cannot be determined under Clause (b), shall be deemed to be five per cent on the sum obtained by adding the estimated present cost of erecting the building, leas any amount which the Commissioner may deem it reasonable to deduct for depreciation, to the estimated market value of the land valued with building as part of the same premises:

Provided that-

(i) in calculating the annual value of any land or building under this section the value of any machinery on such land or in such building shall be excluded; and

(ii) When a building is occupied by an owner under such exceptional circumstances as to render excessive a valuation of five per cent on the cost of erecting the building, less depreciation a lower percentage may be taken.

The contention of the Petitioners, was advanced before the Commissioner and, in appeal, before the Additional District Judge and which was repeated before us, was that the annual value of the building determined in accordance with Section 138(b) of the Act could not exceed the annual value determined according to the standard rent in respect of the building under the Madhya Pradesh Accommodation Control Act, 1961; and that the Commissioner did not at all take into account the "standard rent" of the building and the learned Additional District Judge erred in holding that having regard to the language of Section 138(b) the "standard rent" in respect of the building under the 1961-Act was not relevant and could not be taken into consideration. It was further submitted that the annual value of the building was determined by the Commissioner in utter violation of Section 138 (b) and (c); that he erred in proceeding on the basis that each room in the building could fetch rent from Rs. 25 to Rs. 62.90 and including in the area of the building which could be let out the area of bath-rooms, passages, verandahs, open spaces etc.; and that he also did not give due weight to annual rental value of properties in the neighbourhood.

At the outset, it must be stated that at the time of the hearing of this petition, none appeared on behalf of the Corporation. Consequently, we were deprived of the benefit of arguments on behalf of the Corporation in justification of the valuation fixed by the Commissioner. However, after hearing Shri Dhanda, Learned Counsel for the Petitioners, and considering the provisions of Section 138(b) and (c), it is plain to us that the annual value of the building determined by the Commissioner and upheld by the Additional District Judge in appeal is based on no principle. Clauses (b) and (c) of Section 138 are plain enough. According to Clause (b), the annual value of any building is deemed to be that gross annual rent of the building, which it might reasonably be expected to fetch if let out at the time of assessment, less an allowance of ten per cent for the cost of repairs and other expenses necessary for the maintenance of the building. If the annual value of any building cannot be determined under Clause (b), then it has to be determined in accordance with the provisions of Clause (c) of Section 138. Under that clause, the annual value of any building is deemed to be five per cent on the sum obtained by adding the estimated present cost of erecting the building after making a reasonable allowance on account of depreciation.

It will be seen that under Clause (b) of Section 138 it is not the actual rent received by the owner or the landlord that is made the basis of determining the annual value of the building. It is the hypothetical rent which the owner or landlord can reasonably be expected to receive at the time of assessment if the building is let out for the purpose for which it is being used at the time of assessment. The expression "which might reasonably at the time of assessment be expected to be let from year to year" used in Clause (b) of Section 138 is very significant. It indicates "hypothetical rent" cannot be "fantastic" or "black-market" rent in defiance of any statutory provision. It is the rent which a willing landlord may reasonably expect to get and a willing tenant may reasonably be expected to pay having regard to any statutory provision putting a limit on rent of building. Now, Sections 6 and 7 of the M.P. Accommodation Control Act, 1961, plainly lay down that in respect of any accommodation to which that Act applies, no person shall claim or receive any rent in excess of the "standard rent", as defined in Section 7, notwithstanding any agreement to the contrary. That being so, Sections 6 and 7 of the 1961-Act, necessarily put a limit on the annual value of any building that may be determined Under Under Section 138(b) of the Act. The words "notwithstanding anything contained in any other law for the time being in force" used in Clause (b) in no way override the effect of the expression "which might reasonably at the time of assessment be expected to be let from year to year" from which flows a limitation on the annual value of any building. The annual value of any building u/clause (b) may be less than that arrived on the basis of the "standard rent", but it cannot exceed it.

The matter is really concluded by the decision of the Supreme Court in Corporation of Calcutta v. Smt. Padma Debt : AIR 1962 SC 151 , where the Supreme Court construed Section 127 (a) of the Calcutta Municipal Act, 1923, and the provisions of Sections 2 (10) (b), 3 and 33 of the West Bengal Premises Rent Control (Temporary Provisions) Act, 1950. Section 127 of the Calcutta Municipal Act, 1923, ran as follows:

The gross annual rent at which a building or land might reasonably be expected to let from month to month or from year to year shall for the purposes of assessment under this Act be deemed to be the annual value of such building or land.

Section 2 (10) (b) of the West Bengal Premises Rent Control (Temporary Provisions) Act, 1950, defined "Standard rent". Section 3 of the said Act provided that any amount in excess of the standard rent of any premises shall be irrecoverable notwithstanding any agreement to the contrary. Section 33 (a) made it an offence for any landlord to collect rent in excess of the standard rent. The Supreme Court, after stating that under Section 127 (a) of the Calcutta Municipal Act, 1923, the value of property to the owner is the standard in making assessment thereunder, observed that Section 127 (a) did not contemplate the actual rent received by a landlord but a hypothetical rent which he could be expected to receive if the building were let. The "hypothetical rent" was explained by the Supreme Court thus-

Hypothetical rent may be described as a rent which a landlord may reasonably be expected to get in the open market. But an open market cannot include a black market, a term euphemistically used to commercial transaction entered into between parties in defiance of law. In that situation, a statutory limitation of rent circumscribes the scope of the bargain in the market. In no circumstances the hypothetical rent can exceed that limit.

The building, in the present case, of which annual value was to be determined, is a place where the proprietor makes it his business to furnish food or lodging, or both, to travellers or other persons. In other words, it is a hotel. The hypothetical rent of such a building must be determined treating it as a unit and not splitting it up into different units. It would be that rent which a person would be prepared to pay for running a hotel therein with all the amenities that a hotel run in a building would offer to its constituents. As pointed out earlier, in determining the hypothetical rent regard must be had to the provisions of the M.P. Accommodation Control Act, 1961, regarding "standard rent". This does not mean that the Commissioner of the Corporation or the Assessment Officer can proceed to determine the annual value of the building under Section 138 of the Act only after the standard rent in respect of the building is fixed by the Rent Controlling Authority. The Assessment Officer or the Commissioner himself can form an estimate of the standard rent in respect of the building and then see whether the hypothetical rent, which the Petitioners may reasonably be expected to get in the open market for the building for running a hotel therein, exceeds the standard rent or it is below it. It is plain that in determining the annual value of the building in this manner, the annual value or the hypothetical rent of residential buildings or non-residential business premises, which are not used for hotel purposes, in the neighbourhood is altogether irrelevant.

Here, the Commissioner totally ignored the afore stated principles for determining the annual value of the building in accordance with Clause (b) of Section 138. He accepted the annual value determined by the Assessment Officer. The Assessment Officer adopted a method of his own in fixing the annual value. He determined the area in the building which could be let out at 1339.77 sq. metres. Then he held that, having regard to the rent of residential buildings in the neighbourhood and some lodges in other localities, the area in Viram Lodge could be let out at the rate of Rs. 30 per month per 10 sq. metres. Thus he reached the conclusion that the monthly hypothetical rent in respect of the building was Rs. 4,019. On this basis, he took the annual rent of the building as Rs. 48,228. He deducted from Rs. 48,228 an amount of Rs. 4,822-80 being an allowance often per cent for the costs of repairs etc. as provided by Section 138 of the Act and thus held that Rs. 43,405.20 was the annual value of the building under Section 138 (b). The process by which the Assessment Officer and the Commissioner determined the annual value of the building has no relation whatsoever either to the provision of Section 138(b) or to the reality. In taking into account the rent of a room in the hotel for calculating the rent of the entire accommodation in the hotel, the Commissioner and the Assessment Officer overlooked the fact that a lodger in a hotel, even though he has a separate apartment, is not in law in exclusive occupation and is, therefore, in the position of a licensee and the proprietor or the landlord of the hotel retains general control and dominion over the hotel building including the part occupied by the lodger. The rent of the building should have been determined treating it as one unit and as building meant for hotel purposes.

Shri Dhanda, Learned Counsel for the Petitioners, drew our attention to the decisions to the Supreme Court in Municipal Corporation, Greater Bombay v. B.M. I. Turf Club AIR 1968 S C 425. and Century S. and M. Company v. Ulhasnagar Municipality AIR 1968 S C 859. laying down certain principles with regard to valuation under the Bombay Municipal Corporation Act, 1888, and the Bombay District Municipal Act, 1901, of land and building belonging to the Royal Western India Turf Club Ltd., Bombay, and the Century Spinning and Manufacturing Company Ltd., Bombay. It is not necessary to examine those principles in this case or to say whether those principles would or would not be applicable in the valuation of the Petitioners building. We have, however, no doubt that in determining afresh the annual value of Viram Lodge the Commissioner will peruse these decisions of the Supreme Court and derive such assistance and guidance he can therefrom bearing in mind the important fact that the building, of which the annual value he has to determine, is a hotel building and has not the character of a building or land belonging to a race-club or a spinning and ginning textile mill.

It must be added that if the Commissioner thinks that annual value of the building cannot be determined under Clause (b) of Section 138, then he must determine it in accordance with Clause (c) of Section 138 of the Act.

For these reasons, this petition is allowed, the decision of the Commissioner fixing the annual value of the building at Rs. 43,405.20 and of the Additional District Judge, Indore, upholding the decision of the Commissioner, are both set aside, and the matter is remitted to the Commissioner for determining the annual value of the building, in the first instance by the Assessment Officer, in the light of this decision and after giving the Petitioners full opportunity of hearing. The Assessment Officer must also inform the Petitioners of the grounds, reason and material on the basis of which he may found his conclusion about the annual value of the building. This is necessary in order to enable the Petitioners to prefer objections, if any, to the valuation before the Commissioner. The Petitioners shall have costs of this application. Counsels fee is fixed at Rs. 100.