The tenants are not liable to pay the property taxes to the civic authorities neither it is mandated in any act or local administration rule. rule.
If at all by virtue of the agreements entered into between the tenants and their respective landlords, the obligation to discharge the property taxes has been placed exclusively upon the tenants.
As per the rental agreement the landlord receives the rent exclusive of the property taxes which means that any increase/enhancement of property taxes affects the tenant and tenant alone and not the landlord. The tenants, therefore, have a direct stake in determination/assessment of property taxes.
A gist of settled law with reference to an appeal by tenant in this regard by
Supreme Court of India
Asstt. Gen. Manager Central Bank ... vs Commissioner Municipal ... on 9 May, 1995
Bench: B.P. Jeevan Reddy, Sujata V. Manohar
Appeal (civil) 5405 of 1995
ASSTT. GEN. MANAGER CENTRAL BANK OF INDIA ETC.
COMMISSIONER MUNICIPAL CORPORATION AHMEDABAD ETC. ETC.
DATE OF JUDGMENT: 09/05/1995
B.P. JEEVAN REDDY & SUJATA V. MANOHAR
is given below for your reference.
The contention of the learned counsel for the appellants-tenants is this: by virtue of the agreements entered into between the appellants and their respective landlords, the obligation to discharge the property taxes has been placed exclusively upon the tenants. The landlord receives the rent exclusive of the property taxes which means that any increase/enhancement of property taxes affects the tenant and tenant alone and not the landlord. The tenants, therefore, have a direct stake in determination/assessment of property taxes. Even apart from the agreements between the parties, Section 10 of the Bombay Rent Act empowers the landlord to increase the rent correspondingly where the rates or cesses payable in respect of the said premises (which includes the property taxes) are enhanced. Inasmuch as the liability to pay the property taxes is cast upon the tenants both by virtue of the agreement between the parties and also by virtue of the Bombay Rent Act, the landlords are not taking any interest nor are they filing complaints or taking other proceedings to have the property taxes correctly assessed. In many cases, the landlords are using the enhancement of assessment as a lever of pressure to make the tenant vacate the premises, Notwithstanding such direct interest of the tenant in the matter of determination/assessment of property taxes, the High Court has held that they have no right to file an appeal against the assessment of property taxes. This is causing grave prejudice to the tenants. They are being punished by uncalled for increases in property taxes while at the same time depriving them of the right to appeal and to question the enhancement. The scheme and provisions of the Municipal Corporations Act do enable the tenant to question the assessment or the enhancement in assessment, as the case may be, in respect of the premises occupied by him and also to file appeal and take other proceedings in that behalf. On the other hand, it is submitted by the learned counsel for the corporation that the Act makes the owner of the premises alone primarily liable for property taxes and it is that person alone who is entitled to file a complaint or appeal in case he feels aggrieved by the assessment or enhancement of the assessment. The Act does not confer any such right upon the tenant nor does it recognise any such right of the tenant impliedly. The learned counsel support the reasoning and conclusion of the Gujarat High Court in this behalf.
According to this section, where there has been an increase in the rate, cess or tax imposed upon a premise after the premise has been let to the tenant, the landlord shall be entitled to enhance the rent correspondingly. Indeed, clause (7) of Section 5 defines the expression "permitted increase". It means, an increase in rent permitted under the provisions of this Act and Section 1.0 is one such provision.
A resume of the above provisions discloses (he rights as well as the obligations of the tenants of the premises. Section 10 of the Bombay Rent Act empowered the landlord to pass on the burden of increase in property taxes to the tenant. Having regard to the normal course of human conduct, we must presume that every landlord will invariably pass on the burden of enhancement to the tenant. Section 140 of the Municipal Corporations Act makes him liable to pay the property taxes in case the landlord fails to pay the same. No doubt, this liability is a limited one as explained above and he is also entitled to be reimbursed by the landlord in that behalf, even so it is a liability cast upon him by law. Certain rights arc also conferred upon the Rules aforementioned. Coupled with this is the fact that neither Rules 12 to 20 nor Section 406 contain any words indicating that the landlord alone can file the complaint and appeal. In such circumstances, it would not be just and equitable to deny to the tenant the right of appeal and the right to file the complaint. We are inclined to hold that in the scheme of the Municipal Corporations Act read with Section 10 of the Bombay Rent Act, the tenant does possess the requisite locus standi to file a complaint pursuant to public notice issued under Rule 35(1) or pursuant to special written notice issued under Rule 15(2) as well as the right to file an appeal under Section 406. This should be more so, if there is an agreement between the landlord and tenant whereunder the obligation to discharge and pay the property taxes in cast upon the tenant. IE is true that this is a private arrangement between the parties and cannot form the basis of a legal right but it is certainly an additional factor conferring the requisite locus standi upon the tenant. Even where the Bombay Rent Act is not applicable to a particular building, the existence and proof of such an agreement would enable the tenant to claim the requisite locus standi. Holding otherwise would be grossly unjust to the tenant. While he made liable, statutorily or by private treaty, for the enhancement in the property taxes, he is not being allowed to question the same. It is true, as contended by the learned counsel for the corporation, that no prudent owner of a building will allow the assessment to be enhanced unreasonably just to spite the tenant, it cannot at the same time be said that the tenant has no right to file an appeal against the assessment or enhancement, as the case may be, when he is a person directly affected by such assessment/enhancement. There is yet another circumstance: any person proposing to file an appeal under Section 406 has to deposit the disputed tax as contemplated by Section 406(2)(e) as a condition for entertaining the appeal; since the landlord can pass on the on the enhanced burden to the tenant according to the Bombay Rent Act and also where there is a stipulation between him and the tenant whereunder the liability to pay the property taxes is exclusively placed upon the tenant, the landlord would not be minded to make the trouble of filing the appeal since he would be obliged to deposit the disputed tax; he may think - and probably legitimately - why should he deposit the disputed tax and file the appeal when the burden of the said tax is not falling upon him. This is also a relevant circumstance in favour of reading a right (to object and appeal) in the tenant. At the same time, it cannot be predicated that the special notice contemplated by Rule 15(2) has necessarily to be served upon the tenant. No such right can be claimed by the tenant nor such an obligation be cast upon the corporation. The tenant has to be vigilant. There will be a public notice under Rule 15(1) wherever an enhancement is proposed. Even the special notice under Rule 15(2) may, in the normal course, be served upon him because he is in occupation of the premises but that may or may not happen. (In a given case, the landlord may be residing in a portion of the same building; there may be more than one tenant b the building and so on.) Even if the special notice is not served upon him, he has to file the complaint within time prescribed by the notices and the Rules. He is equally bound to observe the conditions prescribed in sub-section (2) of Section 406 while filing an appeal. Inter alia, he is not only obliged in file the appeal within the prescribed period of limitation but also to make the deposit as contemplated by clause (e) of sub-section (2) of Section 406, subject, of course, to the proviso to the said clause.
In R. Jagannatha Chettiar vs Swarnambal on 15 March, 1984 decided by Madras High Court, it was decided thus;
11. Ex.R2 purports to be the notice issued by the Corporation of Madras in respect of arrears of property tax payable by the landlord from the second half year of 1973-74 to the first half year of 1976-77. Ex.R3 series are the receipts relied upon by the tenant to show that pursuant to Ex.R2, she had paid all the arrears of tax payable by the landlord. The receipts do not support this case of the tenant, in Ex.R3, series, the first receipt is dated 15th October, 1979. That purports to be for the second half year of 1975-76. There is no indication therein that the payment was made by the tenant. The second receipt is dated 6th December, 1979, and that purports to be a receipt for payment made by the tenant for the first half year of 1976-77. The third receipt is dated 6th February, 1980, for the second half year of 1976-77. The next two receipts are dated 9th April, 1980, and 16th April, 1980, in respect of the first and the second half year of 1977-78 and the payment purports to have been made by Loganathan, son of the tenant. The sixth receipt is dated 7th June, 1980, for first half year 1978-79 and that also is in the name of Loganathan. The last receipt in Ex.R3, series is dated 14th August, 1980, in respect of the second half year of 1978-79. That receipt also shows that the payment was made by Loganathan R.W. 2. Ex.R5, shows that an ordinary property tax demand for the second half year of 1980-81 had been issued to the tenant and a payment of Rs. 60-80p had been made on 6th January, 1981. It is thus seen that excepting for the second half year of 1975-76 and the first half year of 1976-77, none of the payments relate to the period mentioned in Ex.R2. If the tenant had not made those payments, then it is obvious that the landlord alone should have paid the arrears of tax and it is his liability to the Corporation of Madras. The evidence also does not disclose that on any prior occasion, the landlord had directed the tenant to pay the property tax or other charges payable by him on the understanding that such payments, if made by the tenant, can be adjusted against the rents payable by her to the landlord. The Appellate Authority was of the view that even before the receipt of Ex.R2, the tenant was called upon orally by the tax collector to pay the arrears of tax due by the landlord. There is absolutely no evidence whatever that prior to the receipt of Ex.R2, the tenant was called upon to make the payments towards tax due by the landlord. In the absence, therefore, of any evidence that previously the landlord used to direct the tenant to pay the arrears of tax on the understanding that such payments could be adjusted from out of the rents payable by her to the landlord, and in the absence of any demand prior to Ex.R2, it is obvious that it was the duty of the tenant, on receipt of Ex.R2 to have contacted the landlord and appraised him about the receipt of the notice under Ex.R2. Indeed, the tenant should have sought the permission of the landlord to make the payments on his behalf, as the evidence does not disclose any prior practice in that regard. Without doing so, the tenant claims that she had made the payments, without even informing the landlord. The son of the tenant examined as R.W. 2 stated in his evidence that whenever a demand for tax is received, he used to show it to the landlord and that the landlord used to direct him to pay the tax and deduct the amount so paid towards rent. Not one such demand has been produced. R.W. 2 would also say that he showed Ex.R2 when it was received from the Corporation of Madras and that the landlord directed him to pay the arrears and deduct it from out of the rents payable by the tenant. If really the arrangement spoken to by R.W. 2 was true, then the receipts for the payment of property tax for the second half year of 1973-74, first and the second half year of 1974-75 and the first half year of 1975-76 should have been made available. But those receipts are not forthcoming and that would ultimately establish that the so-called arrangement by which the tenant was directed to pay the arrears of taxes as mentioned in Ex.R2, subject to the adjustment of such payment towards rent payable, is not true. Ex.R5 is the demand notice for the second half year of 1980- 81 and it is an ordinary notice of demand and has not been issued under R. 29 of Schedule IV to the Madras City Municipal Corporation Act. On receipt of such a notice, in the absence of any arrangement regarding the payment of such taxes the tenant ought to have forwarded that to the landlord for payment. That was not so done. Even with reference to the payment of water charges, there was no distrait notice as such, as it is seen from Ex.R4 that it related to the first half year of 1980-81, while the receipts forming part of Ex. R4 show that the payment had been made for the first and the second half year of 1979-80. Similarly, Ex. RIO shows that a demand was issued for the second half year of 1980-81 for Rs. 22, but there is no receipt to show any payment. Whatever applies to the demands made in respect of property tax would be equally applicable with reference to the demand for water charges also, as the evidence does not disclose that there was any prior arrangement come to between the parties regarding the payment of taxes by the tenant and the adjustment thereof from out of the rents payable by the tenant to the landlord. In the ordinary course of events, even if a demand notice for property tax or water tax had been received by the tenant it was the duty of the tenant to have brought it to the notice of the landlord and only thereafter the tenant should have acted in accordance with the directions given by the landlord or as a prudent occupier of the property, if she was driven to adopt that course. In this case, the evidence does not disclose that the tenant informed the landlord about the receipt of the demand notices and that there was a direction by the landlord that the tenant should pay the property and water taxes and adjust the same out of the rents. In the absence of any such direction or understanding, any payments made by the tenant would only be in the nature of a voluntary payment and would not in any manner bind the landlord nor would it give rise to any right in the tenant for an adjustment of those amounts against the rents payable. Considered in that light, the property and the water taxes claimed to have been paid by the tenant in this case would partake the character of only voluntary payments. It may be that the tenant can recover those amounts in accordance with Section 375 of the Madras City Municipal Corporation Act or by other modes, but that would not shield her from the consequences of non-payment of rents for nearly a period of 11 months without any justification at all. Inasmuch as on the facts and in the circumstances of this case, the payments stated to have been made by the tenant have been held to be voluntary, those payments cannot be taken advantage of by the tenant and cannot be pleaded as an answer to the prayer for an order of eviction on the ground of wilful default.
12. The decision in Basant Lal v. Boora Ram relied on by the learned Counsel for the tenant arose under the provisions of the Transfer of Property Act, and cannot have any application to a tenancy governed by the provisions under the Act. Similarly, the decision in Rupeswari Debi v. M/s. Lokenath Hosiery would also be inapplicable as in that case it was held that there was an agreement that the landlord should pay the owner's as occupier's were compelled to pay the municipal taxes on behalf of the plaintiff, in which case such payment should be regarded as payment of rent. It was also further pointed out that if the payment was a voluntary payment, the position would be different. Earlier, on the facts and in the circumstances of this case, it has been found that the payments stated to have been made by the tenant were only voluntary payments and not compelled or forced payments in the sense that the tenant had no other option except to pay the arrears of property and water taxes payable by the landlord. The reliance upon the decision in N.S. Ramamoorthy v. N.S. Laxmana Achary (1974) 2 M.L.J. 7 (S.N.) also does not assist the tenant. In that case, while recognising that the incurring of expenditure by the tenant for providing amenities and by payment of taxes would be an imprudent expenditure on the part of the tenant, ultimately the Court took the view that technically unauthorised expenditure by tenants ought not to be encouraged, but that in that case, the expenditure was incurred for an amenity which was not provided by the landlord and which amenity was necessary for day today living and, therefore, though the expenditure was an unauthorised one, the non-payment of the rent by the tenant could not be held to be as a result of supine indifference or conscious avoidance. The principle laid down in that decision is that an unauthorised expenditure by the tenant ought not to be encouraged. But since the expenditure in that case was incurred for provision of an amenity, that would mitigate the rigour of wilful nature of the default committed by the non-payment of the rents. The circumstances in this case are very different and that decision cannot, therefore, be pressed into service by the tenant. Thus on a careful consideration of all the facts and circumstances and the evidence, it is clearly established that the tenant, who knew very well her obligations to pay the rents at the rate of Rs. 47-50 p., every month to the landlord and who had also been regularly paying such rents every month, did not pay the rents for the period in question as and when such rents fell due, but had made certain voluntary payments towards property and water taxes and had claimed to deduct those payments out of the rents payable by her. Such a claim was not at all in order and, therefore, the non-payment of the rents for the period in question was only as a result of conscious avoidance amounting to supine indifference and that would justify the passing of an order for eviction against the tenant under Section 10(2)(i) of the Act. Consequently C.R.P. No. 3941 of 1982 is dismissed, while C.R.P . No. 3992 of 1982 is allowed. There will be no order as to costs in both the civil revision petitions.
Now to your questions:
1) There is no such rule that rent includes property tax, the liability of paying property tax will vest on the landlord until and unless there is a written agreement between them that the tenant will pay the property tax, there are many decided cases to evidence this.
2) If it is not a part of agreement condition, you do not have to pay anything, if he is insistently demanding, you may issue him a legal notice asking for the provisions of law under which he is making this claim and and also can warn him that he should not adopt any measure to evict you based on the refusal to pay the property tax which can be termed as an illegal act.
3) You may take decision wisely based on the conditions of the rent agreement and also on the above suggestions.