In a major setback to the BMC, the Supreme Court rejected its review petition challenging the Bombay High Court order against its retrospective tax assessment based on the capital value system. Now, the BMC will have to refund thousand crores of rupees to taxpayers who paid property tax for 2010-2012 on the basis of the capital value system. Notably, property tax is the second highest revenue source for the BMC.
BMC had implemented new method in 2012
In 2010, the civic body scrapped its old rateable value system and came up with the new method which was implemented in 2012. However, the taxes based on the new system were collected from 2010 onwards. The Property Owners Association and others had approached the high court challenging the constitutional validity of an amendment to the Mumbai Municipal Corporation Act, 1888 regarding levying of property tax.
SC asks BMC to take back retrospective taxation
In its March verdict, the SC upheld the high court's view and asked the civic body to take back retrospective taxation. The apex court has now directed the BMC to frame new rules and issue fresh bills to the taxpayers. The court has also quashed the special assessment order and bills raised under the new system from 2010 onwards. So, the BMC will have to refund or adjust the excess amount collected from citizens in future bills. The court has further directed the BMC to re-determine the capital value of properties for assessment of taxes and follow the process as provided in the Act. It also says, assessment of vacant land/ open land should be done on a floor space index (FSI) of 1 and not potential FSI.
Will be difficult to refund sum, finding middle way out: BMC source
In his letter to BMC administrator Iqbal Singh Chahal, former Congress corporator Asif Zakaria said, “Despite raising the issue repeatedly for 10 years, the BMC failed in the execution of the capital value system due to faulty implementation. The resulting predicament will have severe financial implications on the working of the civic body.”
“It will be difficult to refund thousand crores of rupees, so we are taking a legal opinion to find a middle way out,” said sources in the civic body. Additional Municipal Commissioner P Velarasu didn't comment on the issue.