Municipal house and water tax were not deductible as an annual charge in computing property income under the Income-tax Act, 1922.

Municipal house tax and water tax levied on the annual value of property under the United Provinces Municipalities Act, 1916, and paid by the owner as lessor, were held not to be deductible as an annual charge in computing property income under Section 9 of the Income-tax Act, 1922. The municipal levies were recoverable under the municipal law and constituted a first charge on the property, but they did not amount to an allowable annual charge within Section 9(1)(iv). The deductible annual value of the property therefore could not be reduced by these taxes, and the answer was against the assessee.

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Issues: Whether house tax and water tax levied under the United Provinces Municipalities Act, 1916 and paid by the owner as lessor were deductible from the bona fide annual value of property as an annual charge under Section 9 of the Income-tax Act, 1922.

Analysis: The taxes in question were imposed on the annual value of buildings or land under the municipal law, were recoverable in the manner provided by that Act, and were made a first charge on the property. Following the reasoning adopted in the companion appeal, the Court treated the municipal levy as not constituting an allowable annual charge within the meaning of Section 9(1)(iv) of the Income-tax Act, 1922.

Conclusion: The amounts of house tax and water tax were not deductible from the annual value of the property under Section 9 of the Income-tax Act, 1922, and the answer was against the assessee.

Ratio Decidendi: Municipal taxes imposed on the annual value of property and constituting a first charge on the property do not amount to an allowable annual charge deductible in computing property income under Section 9(1)(iv) of the Income-tax Act, 1922.

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