Case BriefsSupreme Court

Supreme Court: In a case challenging the validity of computation and levy of property tax based on capital value system under the amended Mumbai Municipal Corporation Act, 1888 (MMC Act), the bench of UU Lalit, CJ* and Ajay Rastogi, J has held that for the purpose of determining capital value, only the present physical attributes and status of the land and building can be considered and not the future prospects of the land.

The Court held that the empowerment in terms of clauses (a) to (e) read with sub-Section (1B) of the MMC Act or the conferral of rule-making power would not permit the Corporation to determine the capital value beyond the scope of said clauses (a) to (e).


The MMC Act authorizes the Municipal Corporation of Greater Mumbai (the Corporation) to   impose property tax on lands and buildings and property tax is one of the main sources of revenue for the Corporation. The MMC Act earlier provided for levy of property tax on the basis of certain percentage of rateable value of the buildings or lands. The basis of determination of rateable value was the annual rent for which such buildings or lands might reasonably be expected to be let from year to year.

However, in 2009, the MMC Act was amended, thereby empowering the Corporation to levy property tax on the basis of capital value as an alternative to the earlier method of levying property tax on the basis of rateable value. The MMC Act was, thereafter, amended by successive amendments as a result of which newly introduced Section 154(1A) and (1B) now authorizes Municipal Commissioner to fix the Capital Value of land and building with the approval of the Standing Committee. The Capital Value Rules of 2010 and Capital Value Rules of 2015 also came into force.

Consequently, a number of petitions were filed challenging the validity of computation and levy of property tax based on capital value system. The Bombay High Court, however, rejected the challenge as to the validity of various provisions of the MMC Act.

Supreme Court’s Analysis

On absence of recommendations by the Finance Commission in relation to measures needed to improve the financial position of the municipalities

While it is true that certain functions are entrusted to the Finance Commission and the recommendations made by the Finance Commission must carry great weightage, it is the Legislature of the State which will ultimately take an appropriate action with respect to the recommendations made by the Finance Commission and the papers placed before it as Sub-Article (2) contemplates that the recommendations made by the Finance Commission along with the explanatory memorandum as to the action taken thereon must be laid before the Legislature of the State.

“If the Legislature itself has taken into account certain prevailing situation, which according to the Legislature is causing some prejudice to the financial health and condition of the municipalities and, therefore, the method of imposition of property tax ought to be changed, it cannot then be said that the matter must necessarily and ought to have emanated from the Finance Commission or that in the absence of such recommendations by the Finance Commission, no steps could have been taken by the Legislature.”

Article 243X of the Constitution states that the Legislature of a State may by law authorize a municipality to levy, collect and appropriate such taxes etc. in accordance with such procedure and subject to such limits as may be specified in law. Hence, the exercise undertaken by the Legislature in the instant case is completely consistent with the empowerment relatable to Article 243X of the Constitution and does not in any way go counter to said empowerment.

On the change the methodology of computation and levy of property tax based on capital value system

Sections 123 to 128 of the MMC Act deal with accounts and annual budget estimates. With the fixed parameters and scope of taxation, as well as, the elements that can be covered by levy of such taxes, depending upon the annual budget estimates, the rates of municipal taxes, fares and charges can certainly be fixed in terms of Section 128 of the MMC Act. In such cases, the width of the tax regime is already decided and the rates of taxes would be dependent upon the annual estimates.

However, after the amendment in question, instead of rateable value, the property tax can now be levied going by the capital value which was not possible through the process of annual estimates and in terms of Sections 120, 123, 125 and 128 of the MMC Act. All that could be done under these provisions would be to vary or change the rates and not the very basis of taxation

Section 154 deals with how rateable value and capital value are to be determined. Sub-section (1) deals with rateable value while sub-section (1A), (1B) and (1C) deal with capital value. The factors on the basis of which capital value can be arrived at are delineated in sub-clauses (a) to (e) of sub-section (1A) of Section 154.  While sub-clause (a) to (d) are clear and well defined, sub-clause (e) refers to the factors as may be specified by rules under subsection (1B) which in turn authorizes the Commissioner, to frame such rules, with the approval of the Standing Committee as respects details of categories of building or land and the weightage by multiplication to be assigned to various such factors and categories for the purpose of fixing the capital value.

Section 154 (1A) – Sub clauses (a) to (d)

Clauses (a) to (d) are physical features or attributes of the land or building which are in existence when the value is to be reckoned. In essence, these attributes are situations “in praesenti”. The buildable potential of the land in future is not an attribute “in praesenti” but is in the nature of   likelihood of user or exploitation of the asset “in futuro”.  However, after the amendments, the emphasis has now changed and the basis for taxation is now to be capital value of land and building.

Capital value can have two dimensions: First, the value of land or building as it stands today or secondly, the value as may be in future as per anticipated development. However, the legislative intent, as is clear from clauses (a) to (d), is about actual status and user as on the date the capital value is to be reckoned or considered. These clauses clearly show that the features contemplated therein must be in existence as on such date and not what would be the projection in future.

Section 154 (1A) –Sub-clause (e)

The said clause can either be read ejusdem generis along with sub-clauses (a) to (d), in which event the scope of any rules to be made in terms of power granted by sub-clause (e) read with sub-Section  (1B), would be relatable to the factors actually in existence and not as something contemplated in future.

However, if the clause is read independently, there is nothing in clause (e) or in the language of sub-Section (1B) that the future prospects of the land in question could be reckoned or noted for arriving at the capital value.

Hence, it is quite clear that the width of clauses (a) to (e) read with sub-Section (1B) do not by any stretch of imagination contemplate taking into account the future prospects of the land in question.

[Municipal Corporation of Greater Bombay v. Property Owner’s Association, 2022 SCC OnLine SC 1542, decided on 07.11.2022]

*Judgment by: CJI UU Lalit

For Corporation: AG K.K. Venugopal and Sr Adv V. Sreedharan

For Respondents: Sr Adv Neeraj Kishan Kaul, Milind Sathe, Shekhar Naphade, Darius   Khambata , Adv H. Devarajan, Abhishek Bharti, Shikhil Suri, Satish Muley

Case BriefsSupreme Court

Supreme Court: In a case where the 3-judge bench of NV Ramana*, SA Nazeer and Surya Kant*, JJ increased the total motor accident compensation of Rs 22 lakhs awarded by the Delhi High Court to Rs 33.20 lakhs after a motor vehicle accident claimed the lives of a man and his pregnant wife, leaving behind his parents and 2 children aged merely 3 and 4, Justice NV Ramana took the liberty to write a concurring opinion with respect to the issue of calculation of notional income for homemakers and the grant of future prospect with respect to them, for the purposes of grant of compensation.

Below are certain facts and figures highlighted by Justice Ramana in his judgment:

 In India, according to the 2011 Census, nearly 159.85 million women stated that “household work” was their main occupation, as compared to only 5.79 million men.

As per the Report of the National Statistical Office of the Ministry of Statistics & Programme Implementation, Government of India called “Time Use in India 2019”, reflects that, on an average, women spend nearly 299 minutes a day on unpaid domestic services for household members versus 97 minutes spent by men on average.

In a day, women on average spend 134 minutes on unpaid caregiving services for household members as compared to the 76 minutes spent by men on average.

The total time spent on these activities per day makes the picture in India even more clear-

“ women on average spent 16.9 and 2.6 percent of their day on unpaid domestic services and unpaid caregiving services for household members respectively, while men spent 1.7 and 0.8 percent.”

Need for fixing notional income for a homemaker

Ramana, J noticed that the sheer amount of time and effort that is dedicated to household work by individuals, who are more likely to be women than men, is not surprising when one considers the plethora of activities a housemaker undertakes. However, the conception that housemakers do not “work” or that they do not add economic value to the household is a problematic idea that has persisted for many years and must be overcome.

Therefore, the issue of fixing notional income for a homemaker, therefore, serves extremely important functions.

“It is a recognition of the multitude of women who are engaged in this activity, whether by choice or as a result of social/cultural norms. It signals to society at large that the law and the Courts of the land believe in the value of the labour, services and sacrifices of homemakers. It is an acceptance of the idea that these activities contribute in a very real way to the economic condition of the family, and the economy of the nation, regardless of the fact that it may have been traditionally excluded from economic analyses. It is a reflection of changing attitudes and mindsets and of our international law obligations. And, most importantly, it is a step towards the constitutional vision of social equality and ensuring dignity of life to all individuals.”

Rationale behind the awarding of future prospects

It was noticed by Ramana, J that the rationale behind the awarding of future prospects is no longer merely about the type of profession, whether permanent or otherwise, although the percentage awarded is still dependent on the same. The awarding of future prospects is now a part of the duty of the Court to grant just compensation, taking into account the realities of life, particularly of inflation, the quest of individuals to better their circumstances and those of their loved ones, rising wage rates and the impact of experience on the quality of work.

Notional income for earning victims i.e. where the victim is proved to be employed but claimants are unable to prove the income before the Court

Once the victim has been proved to be employed at some venture, the necessary corollary is that they would be earning an income. No rational distinction can be drawn with respect to the granting of future prospects merely on the basis that their income was not proved, particularly when the Court has determined their notional income.

Notional income for non-earning victims

The principle of awarding of future prospects must apply with equal vigor, particularly with respect to homemakers. Once notional income is determined, the effects of inflation would equally apply.

“No one would ever say that the improvements in skills that come with experience do not take place in the domain of work within the household.”

Summary of observations

  1. Grant of compensation, on a pecuniary basis, with respect to a homemaker, is a settled proposition of law.
  2. Taking into account the gendered nature of housework, with an overwhelming percentage of women being engaged in the same as compared to men, the fixing of notional income of a homemaker attains special significance. It becomes a recognition of the work, labour and sacrifices of homemakers and a reflection of changing attitudes. It is also in furtherance of our nation’s international law obligations and our constitutional vision of social equality and ensuring dignity to all.
  3. Various methods can be employed by the Court to fix the notional income of a homemaker, depending on the facts and circumstances of the case.
  4. The Court should ensure while choosing the method, and fixing the notional income, that the same is just in the facts and circumstances of the particular case, neither assessing the compensation too conservatively, nor too liberally.
  5. The granting of future prospects, on the notional income calculated in such cases, is a component of just compensation.

[Kirti v. Oriental Insurance Company Ltd., 2021 SCC OnLine SC 3, decided on 05.01.2020]

** Justice Surya Kant has penned the judgment

*Justice NV Ramana has penned a concurrent opinion.

Know Thy Judge| Justice N.V. Ramana


Can subsequent death of a dependent be a reason for reduction of motor accident compensation? Supreme Court answers

Case BriefsSupreme Court

Supreme Court: Taking note of the fact that several Tribunals and High Courts have been awarding compensation for both loss of consortium and loss of love and affection, the bench directed the Tribunals and High Courts to award compensation for loss of consortium, which is a legitimate conventional head.

“There is no justification to award compensation towards loss of love and affection as a separate head.”

The 3-judge bench of SA Nazeer, Indu Malhotra and Aniruddha Bose, JJ was hearing an issue relating to determination of compensation in a motor vehicle accident case.

On Loss of Consortium

The Constitution Bench in National Insurance Company Limited v. Pranay Sethi, (2017) 16 SCC 680, has recognized only three conventional heads under which compensation can be awarded viz. loss of estate, loss of consortium and funeral expenses.

Explaining the law on loss of consortium, the Court said that the right to consortium would include the company, care, help, comfort, guidance, solace and affection of the deceased, which is a loss to his family. With respect to a spouse, it would include sexual relations with the deceased spouse. Parental consortium is granted to the child upon the premature death of a parent, for loss of parental aid, protection, affection, society, discipline, guidance and training. Filial consortium is the right of the parents to compensation in the case of an accidental death of a child.

The Court noticed that in Magma General Insurance Co. Ltd. v. Nanu Ram, (2018) 18 SCC 130, this Court gave a comprehensive interpretation to consortium to include spousal consortium, parental consortium, as well as filial consortium. Loss of love and affection is comprehended in loss of consortium.

The Court, hence, said that it was necessary to provide uniformity with respect to the grant of consortium, and loss of love and affection.

On Future Prospects

In the wake of increased inflation, rising consumer prices, and general standards of living, future prospects have to be taken into consideration, not only with respect to the status or educational qualifications of the deceased, but also other relevant factors such as higher salaries and perks which are being offered by private companies these days. The dearness allowance and perks from which the family would have derived monthly benefit, are required to be taken into consideration for determining the loss of dependency.

The Court, further, reiterated:

  • The age of the deceased should be the basis for applying the multiplier.
  • Reasonable figures on conventional heads, namely, loss of estate, loss of consortium and funeral expenses should be Rs. 15,000/-, Rs. 40,000/- and Rs. 15,000/- respectively. The aforesaid amounts should be enhanced at the rate of 10% in every three years.
  • The decision in Sarla Verma v. Delhi Transport Corporation, (2009) 6 SCC 121, is to be relied upon for determination of the multiplicand, the deduction for personal and living expenses, and the selection of multiplier.

[United India Insurance Co. Ltd. v. Satinder Kaur, 2020 SCC OnLine SC 410 , decided on 30.06.2020]

Also read:

Future income of salaried or self-employed person to be considered while computing compensation under MV Act

Court duty-bound to provide ‘just compensation’ under MV Act irrespective of plea; compensation for ‘loss of consortium’ awarded under Article 142