House property deduction and revised return claims fail where tax liability arose earlier and post-draft assessment claims are not maintainable.

Municipal taxes relating to an earlier period were not allowable as a statutory deduction in computing income from house property because the liability and demand arose before the relevant previous year, so the deduction failed and the Revenue succeeded. A revised return filed after the draft assessment order under section 144B could not validly introduce a claim for deduction under section 80MM for merits-based consideration, so that claim was also rejected and the Revenue again prevailed.

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Issues: (i) Whether municipal taxes paid in the relevant accounting year were allowable as a statutory deduction in computing income from house property when the liability and demand related to an earlier period. (ii) Whether a claim for deduction under section 80MM made in a revised return filed after the draft assessment order under section 144B could validly be considered on merits.

Issue (i): Whether municipal taxes paid in the relevant accounting year were allowable as a statutory deduction in computing income from house property when the liability and demand related to an earlier period.

Analysis: The taxes were paid during the accounting year relevant to assessment year 1979-80, but they pertained to an earlier period and the demand had also been raised before the relevant previous year. The liability was therefore incurred in an earlier year and not in the previous year relevant to the assessment year under consideration.

Conclusion: The deduction was not allowable. The answer is in favour of the Revenue and against the assessee.

Issue (ii): Whether a claim for deduction under section 80MM made in a revised return filed after the draft assessment order under section 144B could validly be considered on merits.

Analysis: The question was governed by the binding authority holding that a revised return filed after the draft assessment order under section 144B could not sustain such a claim for consideration on merits.

Conclusion: The claim was not valid in law for consideration on merits. The answer is in favour of the Revenue and against the assessee.

Final Conclusion: Both referred questions were answered against the assessee, and the reference was answered in favour of the Revenue.

Ratio Decidendi: A deduction connected with house property is allowable only when the liability is incurred in the relevant previous year, and a deduction claim introduced in a revised return after the draft assessment stage under section 144B is not maintainable for merits-based consideration.

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