1984 (2) TMI 145 - AT - Income Tax

Tax Tribunal allows building tax as deduction under Income-tax Act for computing property income.

The Tribunal upheld the allowance of building tax paid on the capital value of a new building under the Kerala Buildings Tax Act as a deduction under ... Building Tax, Income From House Property Issues:1. Whether the tax paid on the capital value of a new building under the Kerala Buildings Tax Act is an admissible deduction under section 24(1)(vii) of the Income-tax Act for computing income from property.Detailed Analysis:The appeals before the Appellate Tribunal ITAT Cochin involved the assessment years 1979-80 and 1980-81, with a common ground that the AAC erred in allowing the tax paid on the capital value of a new building under the Kerala Buildings Tax Act as a deduction under section 24(1)(vii) of the Income-tax Act for computing income from property. The assessee had paid Rs. 1,651 each as building tax under the Kerala Buildings Tax Act for the two assessment years and claimed deduction under section 24(1)(vii). The ITO rejected the claim, stating that the building tax is a capital levy and not an allowable deduction. However, the AAC held that the building tax falls under the category of 'any other tax levied by the State Government in respect of the property' as per section 24(1)(vii) of the Income-tax Act.The first contention raised was based on a previous Tribunal order concerning a different case, where it was held that the building tax is a capital levy forming part of the cost of construction and cannot be claimed as a business expenditure under section 37(1) of the Act. However, in the present case, the claim was for deduction under section 24(1)(vii) by the building owner. The Tribunal noted that section 24(1)(vii) does not differentiate between capital and revenue levies, and thus, the previous ruling regarding the nature of the tax did not affect the current claim.The argument of applying the rule of ejusdem generis to interpret clause (vii) was also addressed. The department contended that the expression 'any other tax levied by the State Government' should cover only recurring payments similar to those in other clauses of section 24(1). However, the Tribunal disagreed, stating that the expression in clause (vii) does not occur as a residuary clause and should be interpreted independently. The Tribunal emphasized that the word 'any' in the clause should be construed broadly unless context indicates otherwise.Moreover, the department's reliance on a memorandum explaining the provisions of the Finance Bill, 1968, was dismissed. The memorandum mentioned allowing deductions for taxes levied by the State Government without specifying recurring nature. The Tribunal concluded that the intention was to permit the deduction of all taxes imposed by the State Government on the building, regardless of whether they were recurring or not.Ultimately, the Tribunal found no reason to interfere with the AAC's order and dismissed the appeals, upholding the allowance of the building tax as a deduction under section 24(1)(vii) of the Income-tax Act for computing income from property.