Municipal property tax deduction depends on levy in the relevant year, even if the demand relates to earlier years.

Under the proviso to section 23(1), municipal property tax levied by a local authority is deductible in computing annual letting value to the extent borne by the owner. The decisive expression is "levied", and the statutory scheme of section 24 indicates that Parliament used different language where actual payment or year-specific linkage was intended. Applying that distinction, tax actually levied during the relevant previous year remained deductible even if the demand related to earlier years. The levy under the Madras City Municipal Act was treated as giving rise to liability on levy rather than by a purely automatic charge, so the deduction was allowable.

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Issues: Whether property tax enhanced and levied by the municipal authority in the relevant previous year, though referable to earlier years, was deductible in computing the annual letting value of the property for the assessment year 1971-72.

Analysis: The proviso to section 23(1) permits deduction of taxes levied by a local authority in respect of property occupied by a tenant to the extent borne by the owner. The decisive expression is "levied", and the scheme of section 24 shows that the Legislature used different words where it intended deductions to depend on actual payment or on amounts relatable only to the relevant year. Applying the earlier decision on urban land tax, the Court held that where the municipal tax is actually levied during the relevant year, the deduction cannot be confined merely because the demand relates to earlier years. The levy under the Madras City Municipal Act also supported the view that liability arose on levy, not by a purely automatic charge.

Conclusion: The property tax levied and paid during the relevant year was allowable as a deduction, even though it related to earlier years, and the question was answered in the affirmative in favour of the assessee.

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