1. B. Z. KAIKAUS, J.-All the land in the city of Lahore, whether it be used for agricultural purpose or whether it be the site of a building, is subject to revenue assessment. This is quite in accord with section 48 of the Punjab Land Revenue Act by which all land to whatever purpose applied and wherever situate is liable to payment of revenue to the Government. In the year 1956 there was a fresh assessm ent of the land in what is called the Lahore Urban Assessment Circle by which the land revenue was considerably enhanced. The land revenue of the Faletti's Hotel, Lahore, which was previously on about Rs.600 was raised to Rs.6,453-1-0. The main reason for the increase in revenue was that the basis of the assessment was changed. Whereas previously even so far as the land under buildings was concerned the basis of assessment was agricultural produce, the basis of assessm ent now adopted was the letting value of the land as urban property. The Associated Hotels of India Ltd.. Which is the owner of the Faletti's Hotel, having received a notice of demand for payment of revenue, filed a writ petition in the West Pakistan High Court challenging the legality of the new assessm ent on two grounds :-
(1) that the letting value of the land as urban property could not have been made the basis of assessm ent ; and
(2) that the distribution of the revenue demand on the various properties within the Lahore Urban Assessm ent Circle was not equitable.
2. The learned Judges of the High Court found, on the first conten--tion, that the basis adopted for assessm ent was not in accordance with the Punjab Land Revenue Act (XVII of 1887), but they were also of the opinion that the maximum allowed by the correct basis could exceed the land revenue assessed, and there--fore they did not give effect to the first contention. They found, however, that the order of the Settlement Officer distributing the assessment did not disclose any basis for the great variation between the rates of land revenue applicable to different lands, some being liable to pay only Rs.2 per kanal and others to Rs. 90 per kanal ; they found also that the order for distribution had not been passed after notice to the petitioner ; and they granted mandamus directing the revenue authorities to decide the question of distribution of land revenue after hearing the peti--tioner. In this appeal, by special leave, the Provincial Govern--ment challenges the decision of the High Court in respect of the legality of the basis of the assessment as well as with respect to the direction given for a rehearing.
3. The power of the Provincial Government in respect of revenue assessment is regulated by sections 48-A and 48-B of the Punjab Land Revenue Act (XV %I of 1887) which are reproduced below :- "48-A. Basis of assessm ent.-The assessment of land revenue. Shall be based on an estimate of the average money value of the net assets of the estate or group of estates in which land concerned is situated.
4. 48-B. Limit of assessm ent.-If the land revenue is assessed :as fixed annual charge the amount thereof, and, if it is assessed ;r the form of prescribed rate, the average amount which. According to an estimate in writing approved by the Provincial government will be leviable annually, shall not in the case of any assessm ent circle, exceed one-fourth of the estimated money value of the net assets of such assessm ent circle Provided that nothing contained in this section shall affect any assessm ent in force at the time of the commencement of the Punjab Land Revenue (Amendment)
5. Act, 1928."
6. According to section 48-A the assessment has to be based on an estimate of the average money value of the net assets of an estate or a group of estates. According to section 48-B the annual assessm ent cannot exceed 1/4th of the estimated money value of the net assets. Net assets are defined in section 3 (18) as under :------ "Net Assets" of an estate or group of estates means the estimated average annual surplus produce of such estate or group of estates remaining after deduction of the ordinary expenses of cultivation as ascertained or estimated."
7. Explanation.-Ordinary expenses of cultivation include pay--ments, if any, which the landowner customarily bears whether in kind or in cash either in whole or in part in respect of :-.
(i) water rates ;
(ii) maintenance of means of irrigation ;
(iii) maintenance of embankments ;
(iv) supply of seeds ;
(v) supply of manure ;
(vi) improved implements of husbandry ;
(vii) concessions with regard to fodder ;
(viii) special abatements made for fellows or bad harvests ;
(ix) cost of collection of rent
(x) allowance for shortage in collection of rent ;
(xi) interest charges payable in respect of advances made in cash, free of interest to tenants for the purposes of culti--vation ;
(xii) wages or customary dues paid to village auxiliaries whose products or labour are utilised for the purposes of cultiva--tion and harvesting ; and the share that would be retainable by a tenant if the land were let to a non-occupancy tenant paying rent, whether in cash or in kind, at the normal rate actually prevalent in the estate or group of estates ; In the assessm ent under consideration net assets of urban land have been determined on the basis of the profits arising to the owner of the land by the use to which the land was actually being put. Land has been classified into shops, houses, bunga--lows, factories, cinemas etc. And the income has been determined with reference to the rent payable and the market value of the property. The contention of the respondent which has found favour with the High Court is that net assets have reference only to the income which would accrue if the land was used as agricultural land and have no reference to the income arising on account of the use of the land as urban property.
8. In view of the words in which the definition of "net assets" has been couched it has been very difficult for learned counsel for the appellants to contend that income accruing from the use of land as urban property is within the definition. "Net assets" according to definition, mean the "average annual surplus produce", It is very difficult to apply the word "produce" to the rent of house. And then from this annual "surplus produce" the "ordinary expenses of cultivation" are to be deducted and these words too are wholly inappropriate for expenses incurred in respect of land put to urban use. It seems clear enough that the Legislature when it was defining the words "net assets" had not at all in its contemplation the use of land as urban property. Although land which was used for any purpose what--soever was liable for payment of land revenue, for the purpose of an assessm ent, only its possible agricultural income was to be considered.
9. Learned counsel for the appellant relied upon rule 11 of the Land Revenue Assessment Rules, 1929.
10. These rules provide inter alia for the method by which the money value of the net assts of an estate is to be ascertained and rule 11 is one of the rules by which the method is explained. It is in the following words :------ "11. Miscellaneous Income.--Should the landowners, he--their they take rents in cash or in kind, also enjoy as such any income or dues from lands which have not been taken into account inthe estimates framed under the preceding rules, the amount of such income or dues shall be added to the net assets."
11. Learned counsel for the appellants contends that in accordance with this rule any income which accrues from land apart from its use as agricultural land has also to be taken into con--sideration and has to be a part of the net assets. Taken out of the context in which this rule appears the words of this rule may create an impression that income of every kind is intended, but when we have regard to the whole set of rules which provide for determination of net assets there is not the slightest doubt left that they were not intended to refer to any use of the land as urban property.
12. Rule 1 says the estimate is to be "framed on the basis of rents in kind paid by tenants-at-will prevailing in the estate or group of estates under consideration". The method provided in this rule for calculation is that in the first instance, the "average acreage of each crop on each class of land" is to be calculated. Next, the "average yield per acre of each crop", and then the "average price obtainable by agriculturists for each of the crops" is to be found out and ultimately the "actual share of the gross produce received by landowners in the case of crops which are divided and the rent payable on zabti crops", is to be determined. The land is divided by rule 2 into classes and these classes have reference to the use of land as agricultural. All land which is not culturable is put into one class which is ghair mumkin. Had it been the intention of the framers of this rule that income of land as urban immovable property may also form a basis for the determination of "net assets" we would have found in these rules directions in detail for determining the profits of land and buildings as there are now in respect of income of agricultural land.
13. We may also point out that rule l if itself gives an "indication of the fact that the land which is being dealt with is yielding income is agricultural land. It says : "the land lowers whether take rents-in cash or in kind" and this reference to cash and kind is only to agricultural land. Then the word "also" is used which means that the income which is being referred to in this rule is an additional income for agricultural land. It appears to us that the income which is intended to be included by means of this rule is only the additional income of land, which is either agricultural or capable of being used as such, any yield as part of a forest or as a quary or because it contains fruit-yielding trees and so on.
14. At the same time, it should be understood that we are really riot concerned with what is contained in the Revenue Assessm ent Rules. The rules cannot introduce a basis of assessment which is inconsistent with the Act. What is "net assets" must be determined by a reference to section 3 (18) and if that provision is applicable only to agricultural produce it is not of any avail to try to spell out a different intention from the rules which have been framed under the Act. We hold that the basis adopted for assessm ent in the present case was illegal. We are not inclined, however, to agree with the learned Judges of the High Court in maintaining the assessment on the simple ground that had the net assets been calculated on the correct basis the maximum land revenue which could have been imposed might have exceeded the land revenue which has actually been imposed on a wrong basis. In accordance with section 48-B the maximum land revenue which can be imposed is 1/4th of the net assets and the learned Judges found that the revenue actually imposed was less than 1/4th of the net assets calculated on the basis of agricultural income. If the assessment was illegal it has to be set aside. We cannot say what the assessment might have been had it been calculated on the correct basis. If the Settlement Officer had calculated the net assets on the basis of agricultural income the assessm ent might have been much less than it is now, for he was not bound to bring it to the maximum limit. At the same time, it has to be kept, in mind that if the basis of assessm ent is not altered it will affect the distribution of assessment. At present the distribution purports to he in accordance with the incomes which the different lands yield as urban properties.
15. If net assets are to be calculated on the basis of the agricultural income of the lands the proportion which the income of one property bears to another will change and the distribution will be affected.
16. At present while one class of land is assessed at Rs. 2 per canal, another is assessed at Rs. 90 per canal and such variation in rate will not be possible if agricultural income forms the basis of assessm ent.
17. On behalf of the respondent it has been contended that the distribution had been made without notice to him and was therefore illegal. Reliance was placed on rule 30 of the Land Revenue Assessm ent Rules 1929 which provides for announcement of the assessment. On behalf of the appellant, it was contended that there was no provision at all for a notice before announce--ment of assessm ent and the announcement had been made by a proclamation. We have not found it necessary to go into the various contentions raised because the assessment has to be set aside on the ground that its basis was illegal.
18. Instead of the mandamus granted by the High Court, we grant a mandamus to the effect that the Government shall not take any proceedings for realizations of the land revenue assessed on the basis of the income of land as urban property and shall realise the revenue demand only after determining the "net assets" on a correct basis. No appeal had been filed by the Associated Hotels Ltd., but in an appeal before us we can pass any order that ought to have been passed even though the party in whose favour we pass it has not appealed. An ordinary appellate Court has such a power by virtue of Order XLI, rule 33, C. P. C., and for this Court there is similar provision in Order XLIX, rule 5 of the Supreme Court Rules, 1956, but even apart from that rule, there is an inherent power in this Court to pass any order which in its opinion should have been passed.
19. This appeal stands dismissed with this qualification that the order passed by the High Court is altered as stated above. There will be no order as to costs.