Recurring property tax as an annual charge is deductible when it is levied yearly on property value and secured on the property.

Recurring municipal property tax and urban immoveable property tax, levied annually on the annual value of the property and made a first charge on it, were construed as an "annual charge" and not a "capital charge" under Section 9(1)(iv) of the Indian Income-tax Act, 1922. The fact that the taxes were collected by half-yearly instalments did not change their true character. On that basis, the taxes were deductible from income from property, and the claimed deduction was allowed.

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Issues: Whether municipal property tax and urban immoveable property tax payable under the relevant Bombay enactments were deductible as an allowance under Section 9(1)(iv) of the Indian Income-tax Act, 1922.

Analysis: The expression "annual charge" in Section 9(1)(iv) was construed to mean a charge securing an annual liability, while "capital charge" was understood as a charge securing a liability of a capital nature. The Bombay Municipal Act, 1888 and the Bombay Finance Act, 1932 showed that the impugned taxes were levied annually on the annual value of the property, though payable by half-yearly instalments for convenience. The liability recurred from year to year and the property was made a first charge for the taxes. The form of collection did not alter the true character of the levy. The taxes therefore fell within the statutory expression "annual charge not being a capital charge".

Conclusion: The municipal property tax and the urban immoveable property tax were allowable deductions under Section 9(1)(iv) of the Indian Income-tax Act, 1922.

Final Conclusion: The appeal succeeded and the assessee was entitled to the claimed deduction of the property taxes from income from property.

Ratio Decidendi: A recurring property tax, imposed annually on the annual value of property and made a charge on the property, is an "annual charge not being a capital charge" within Section 9(1)(iv) of the Indian Income-tax Act, 1922, and is deductible accordingly.

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