M/s.

Lakhpat Film Exchange, Jodhpur

Versus
The State of Rajasthan & Ors.
1997 SCC OnLine Raj 742

Facts :
The petitioner was a firm doing business in film distribution and exhibition of films. The firm
was allotted a particular land in an auction (dated 6th November, 1978 and the effective date
taken to be 1st April, 1979), measuring 4141 square yards and was granted a lease for 99
years. The land was taken for construction of a cinema house and for this purpose a hillock
known as “Khandia Bhakar” was to be removed in order to make the land useful for
construction purposes. An agreement was signed by the petitioner firm and Urban
Improvement Trust, Jodhpur that all the expenses which will be incurred by the firm for
removal of the hillock etc. would be reimbursed in accordance with the PWD basis of rates
by the Urban Improvement Trust, Jodhpur. The hillock cutting work continued from
September, 1979 to December,1993. On 4th September,1982 a proper lease deed was
executed and a symbolic possession of the plot was taken on 30 th January, 1984. The actual
construction of the cinema house commenced in 1986 and the same was completed on 1 st
July,1988. The Assistant Director, Land and Building Tax Department, Government of
Rajasthan, Jodhpur issued a notice under Section 11 of the Rajasthan Land and Building Tax
Act, 1964. The petitioner firm contended in its writ petition that the building constructed
thereupon could be put to use only after 1st July, 1988 and this period could not be taken into
account for computation for the purpose of the Rajasthan Land and Building Tax Act.

Legal Issue :
Whether the petitioner firm had the liability to pay the land and building tax commenced
from 1st April 1979 , the date, the auction price in respect of the disputed land was paid by the
firm ?

Arguments Advanced by Mr. Sandeep Bhandawat ( Counsel for Respondent)

It was contended by Mr. Sandeep that the petitioner-firm was liable to pay land and building
tax with effect from 1.4.1979, the effective date of handing over the possession of the said
land. The auction actually took place on 6th November, 1978, but the effective date was taken
to be the 1st day of the following financial year and that is why 1 st April, 1979 was taken to be
the actual date from which the liability of the writ petitioner did commence. It was argued
that the land in question became liable to tax from the date effective possession was handed
over to the writ petitioner and it could not be construed to be the date from which the writ
petitioner commenced the construction of the cinema house building on the disputed land by
removing the hillock and preparing the entire land worthy of making construction. The writ
petitioner by the execution of “lease” becomes owner by virtue of the second proviso to
Section 2(10) of the Rajasthan Land and Building Tax Act. Thus, the petitioner firm was
liable to pay the land and building tax commenced from 1.4.1979.

Decision of the Court

The court held that the liability to pay the land and building tax commenced from 1.4.97, the
date, the auction price in respect of the disputed land was paid. The ground rent was paid
during the occupation prior to the building site being made worthy of construction. Hence
under Section 17A of the Rajasthan Land and Building Tax Act, 1964, the assessee is liable
to pay simple interest on all the arrear amounts at the rate of 15% per annum for the period it
continued to make default in the payment.