AJMAL MIAN, J.-The petitioner is a Club with the primary purpose to provide amenities and facilities to its members. The petitioner owned a property bearing No. 21 of CL/9 situated in Civil Lines quarters, Karachi, the plot of land of which had been leased out by respondent No. 4, i.e. The Karachi Municipal Corporation to the petitioner for Club purposes. It seems that respondent No. 3 during June, 1970, issued a notice purpor--ting to be a notice under section 9 of the Sind Urban Immovable Property Tax Act, 1958 (hereinafter referred to as "the Act") for amending the valuation list on the ground of reconstruction of the buildings. The value proposed in the show-cause notice was Rs. 1,64,105 in place of Rs. 7,920 GARV, to which the petitioner filed objections. The same were heard by respondent No. 3, who by his order dated 30-6-1970, reduced the gross annual rental value of the property from Rs. 1,64,105 to Rs. 1,22,728. ,The petitioner being aggrieved by the above order filed Appeal No. 169 of 1970, which was disposed of by respondent No. 2 by an order dated25- 1-1971 further reducing the gross annual rental value from Rs. 1,22,728 to Rs. 1,21,932. But, the petitioner preferred a revision under section 10 of the Act, which was dismissed by an order dated 12-5-1971. The petitioner being aggrieved by the above three orders has filed the present petition.
2.-(a) In support of the above petition Mr. Mohsin Tayebally has made the following submission :-
(i) That the basis adopted by the respondent assessing the annual letting value is in conflict with section 5 of the Act.
(ii) That in any case the premises which are used for a library could not have been assessed.
(b) On the other hand Mr. Abdul Sattar Shaikh, learned Additional Advocate-General, has argued that the assessm ent orders are reason--able as the petitioner was accorded concession as compared to the other residential/commercial buildings situated in the locality.
3. (a) In order to appreciate the respective contentions of the parties, it may be advantageous to refer the section 5 of the Act, which reads as follows :- "5.-(1) The annual value of any land or building shall be the gross annual rent at which such land or building together with any fixtures such as lifts, or electric or other such fittings, may be let out.
(2) The gross annual rent shall be the prescribed amount not exceeding ten per cent of the total value of the land or building.
(3) The total value of any land or building shall, in the prescribed manner, be determined by the prescribed Officer or authority on the basis of the market value thereof and the value of fixtures, if any, therein.
(4) For the purpose of determining the market value, a rating area may be divided in such sub- rating areas, and each rating or sub-rating area may comprise one or more such categories of lands or buildings and there may be such different rates for determination of the market value for the lands or buildings in each rating area, sub--rating area or category, as the case may be, as may be prescribed Provided that the annual value of a building which is subject to any law for time being in force relating to restriction of rent shall not be greater than the annual value of such building immediately before the coming into force of this section."
It may be noticed that under subsection (1) of section 5 the Assessing Authority is required td assess gross annual letting value at which land and building together with fixtures such as lifts or electric or other fittings can be set out. In the instant case, it may be pertinent to refer to Annexure `H'. Which is an extract from the property register of Karachi in respect of the plot in question. From the above extract, it seems that respondent No. 4 has leased out the plot in question, measuring 17,756 square yards, for 99 years for the period commencing from 19-7-1908 at Rs. 90-12-6 rent per annum. From Column 13 it seems that the above grant was subject to the following restrictions :- "That the land will be reverted to the Municipality if the Karachi Club ceases to exist or if the land is used for any, but strictly club purposes."
It is evident that the premises in question cannot be used for any purpose other than for a Club. In this view of the matter it has been urged by Mr. Mohsin Tayebally, learned counsel for the petitioner that the annual letting value was to be assessed by respondents Nos. 1 to 3 on the basis of the annual letting value of other clubs situated in the same locality or on the basis as to how much these premises can fetch if the same are to be let out for club purposes. From the original order of respondent No. 3, it seems that GARV of Rs. 64,105, which was proposed in the show-cause notice under section 9 of the Act was arrived at in accordance with the formula specified exclusively for commercial concerns. However, the peti--tioner was given certain concession for the reason that the premises were used for club purposes. It may be pertinent to observe that no basis has been given as to how the quantum of concession has been arrived at. It may also be noticed that respondent No. 2 in the appellate order gave further concession of few paisas per square yard but without any basis. This order was maintained in revision by respondent No. I.
(b) Mr. Mohsin Tayebally has referred to the case of Lyallpur Cotton Mills v. The Commissioner, Sargodha Division and another (PLD1976SC615) and Abdullah Pir Muhammad v. Commissioner (PLD1971SC130). He has also referred to Halsbury's Laws of England, 3rd Edn., Vol. 32, para. 96 at page 68. Mr. Sattar, A. A.-G. Has referred to Mst. Amina v. Director-General, E & T (PLD 1979 Kar. 176
(1) Reverting to PLD 1976 SC 615, it may be observed that the subject matter of the controversy was inter alia the quarters situated with the factory for occupation of the labourers. In the above case the Assesssing Authority instead of accepting the actual rent realised by the assessee as the rent from the labourerers assessed the letting value of the quarters on the basis "what the same could fetch from the strangers". The petition filed by the assessee was dismissed. However, the Supreme Court allowed the appeal. It may be pertinent to refer the relevant passage from the above judgment at pages 617 and 618, which read as follows :- "Sub-rule (f) is not applicable in the present case. The section read with rule 6(e) clearly contemplates that the basis of assessment should be either the actual gross annual rent or the gross annual rent that could reasonably be earned during the financial year immediately preceding the current financial year or might reasonably be expected to be let from year to year. In the present cases as there is no dispute as to the actual rents received for the disputed quarters, the basis of assessm ent should have been the gross annual rent earned. The interpre--tation sought to be put by the learned Assistant Advocate-General will result in an unreal and unreasonable situation which according to the accepted principle of interpretation of statutes cannot be accepted. The interpretation canvassed for disregards the actual position, and on the contrary accepts as basis a condition that does not exist and the owner is called upon to pay tax on the basis of rents which he never received and perhaps never can receive. There is no allegation that the rents were deliberately kept low to illegally deprive the authorities of their rightful dues.
5------------------------------------------.
6. There is another aspect of the case. The enquiry, if any, under rule 6(e) must be confined to properties of similar description in the rating area. In other words, the comparison should have been with similar quarters in a factory or factories in the rating area and not with the houses or flats built or meant principally for earning income."
(ii) With reference to PLD 1971 SC 130, it will suffice to observe that in the above case the subject- matter of the controversy was several hotels in Karachi. The Municipal Corporation evolved a formula for assessing the hotels namely, 25 percent of the total occupation value of each hotel.
The Supreme Court disapproved the above formula and held that under section 107(1) of the City of Karachi Municipal Act, 1933, the assessment was to be made on the basis of the principle prescribed in section 97(2) for determining the annual rent.
(iii) As regards PLD 1977 Kar. 176, it may be observed that in the above case a Division Bench of this Court while construing section 5 of the Act held that the estimate in regard to gross annual rental value of the property by the Director-General, Excise & Taxation, having jurisdiction in the matter, cannot be interfered with by the High Court even on ground of such estimate being erroneous.
(iv) It may also be pertinent to refer to para. 96 from Halsbury's Laws of England, HIM Edition, Volume 32, which reads as follows :-- "96. Rent that a hypothetical tenant will pay. The hypothetical tenant includes all persons who might possibly take the hereditament, including the person actually in occupation, even though he happens to be the owner of the hereditament. The rent is that which he will pay in the "higgling of the market", taking into account all existing circum--stances and any relevant futuretrends. If the hereditament affords the opportunity for the carrying on of a gainful trade, that fact must be taken into account. If the occupier is the only hypothetical tenant, his ability to pay is a relevant consideration."
(c) In our view the above two Supreme Court rulings clearly lay down that the assessment of an annual letting value is to be made on the basis provided for in the relevant provision of law and not on any other arbitrary basis. We are inclined to hold that the Karachi case in no way supports the - contention of the learned counsel for the respondent, Mr. Abdul Sattar Shaikh, as in the instant case it is not a question of erroneous estimation of gross annual letting value, but the point in issue is, whether there can be an other basis than the basis provided for in section 5 of the Act. Since the premises in question can only be used for club purposes, the only basic on which the annual letting value could have been fixed by respondents Nos. 1 to 3 was to ascertain or to estimate for how much these premises could be let out, if they were. To be let out for club purposes or the comparisonshould have been made between the annual letting values Off the various clubs situated in the vicinity of the petitioner's club. From the impugned order dated 30-6-1970, it is evident that the GARV of Rs. I,64,105 wash arrived at in accordance with the formula specified exclusively for commercialconcerns. In this view of the matter, it is clear that the basis adopted by respondents Nos. I to 3 is contrary to what has been provided for in section 5 of the Act.
4. Reverting to the second contention that in any case the premises which are used for library could not have been assessed in view of section 4' of the Act, reliance has been placed on section 4, clause (d). It may be pertinent to observe that section 4 of the Act provides that the tax shall not be leviable in respect of the properties specified therein, clause (d) buildings and lands or portion thereof used exclusively for educational purposes including schools, boarding houses, hotels and libraries are specified. It has been contended by the learned counsel for the petitioner that in order to attract clause (d) of section 4, it is not necessary that the library should be a public library but there can be a private library also. On the other hand at has been urged by Mr. Abdul Sattar Shaikh that if section 4 is to be read as a whole, it is evident that only those properties are exempted from the levy of the property tax which are used for public purposes. Since we intend to remand the case back to respondent No. 3 we do not wish to express ourselves on the above point. However, it will be open to the petitioner to make a proper application for exemption as provided for under the rules, which will be decided by the respondent in accordance with law.
5. In view of the above discussion the impugned orders cannot be sustained and we, therefore, declare the same as being without lawful authority and the case is remanded back to respondent No. 3 with the direction to assess afresh GARV on the basis provided for in section 5 of the Act. In the circumstances of the case there will be no order as to costs.