Urban land tax is not deductible as land revenue for house property income computation under the income-tax law.

Urban land tax paid under the Tamil Nadu Urban Land Tax Act, 1966 is not a sum paid on account of land revenue for deduction in computing income from house property under section 24(1)(vii) of the Income-tax Act, 1961. The levy was imposed under a separate statute on the market value of urban land and was payable in lieu of earlier imposts, including land revenue, but a substitute levy is not the same as land revenue itself. Its scheme and character were materially different from land revenue, and the distinction was reinforced by the constitutional treatment of taxes on land and buildings separately from land revenue assessment and collection. The deduction was therefore denied.

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Issues: Whether urban land tax paid under the Tamil Nadu Urban Land Tax Act, 1966 is a sum paid on account of land revenue so as to be deductible in computing income from house property under section 24(1)(vii) of the Income-tax Act, 1961.

Analysis: Section 24(1)(vii) permits deduction only of sums paid on account of land revenue. The urban land tax was levied under a separate statute on the market value of urban land, and section 23 of the Tamil Nadu Urban Land Tax Act, 1966 expressly provided that it was payable in lieu of, among other imposts, the land revenue previously payable under the Madras City Land Revenue Act, 1851. A levy imposed in substitution for land revenue is not the same thing as land revenue itself. The scheme and character of the urban land tax were materially different from land revenue, and the distinction was reinforced by the constitutional classification of taxes on land and buildings separately from assessment and collection of land revenue. Earlier authority on a similar urban property tax also supported the view that such a levy was not land revenue for income-tax deduction purposes.

Conclusion: Urban land tax is not deductible under section 24(1)(vii) as land revenue. The question was answered in the negative, against the assessee.

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