1999 (7) TMI 49

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....e deduction of municipal taxes of Rs. 28,687 which pertained to the period prior to the previous year relevant to the assessment year 1976-77 for, which relevant notice of demand dated October 20, 1975, in the relevant accounting year ?" The controversy in this reference pertains to the assessment year 1976-77, the relevant previous year being the year ended on March 31, 1976. The assessee filed a return of income for the above assessment year on September 9, 1976, disclosing total income of Rs. 38,970. The above total income included net income of Rs. 13,669 under the head "Income from house property". On examination of the return, the Income-tax Officer found that in computing her house property income during the assessment year under ....

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....it accrued in the relevant previous year on receipt of the demand notice dated October 20, 1975, by the assessee on December 4, 1975 and, therefore, it was an allowable deduction in the Computation of her house property income for the relevant assessment year. He, therefore, allowed the appeal of the assessee and directed the Income-tax Officer to accept the claim of the assessee for deduction of the above amount of municipal taxes. The appeal of the Revenue against the order of the Appellate Assistant Commissioner was rejected by the income-tax Appellate Tribunal ("the Tribunal"). Hence, this reference at the instance, of the Revenue. We have heard learned counsel for the Revenue, Mr. R. V. Desai. There is no dispute about the fact that....

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....e is entitled to claim deduction of taxes levied by the municipal corporation in respect of the property in the relevant accounting year. What is crucial is the "levy". The deduction is available only when such taxes are levied. It was immaterial whether the assessee paid the same or not. This position, however, has been changed now by a substitution of the above proviso by the Taxation Laws (Amendment) Act, 1984, with effect from April 1, 1985. As a result, for and from the assessment year 1985-86, deduction in respect of taxes levied by the local authority is to be allowed in determining the annual value of the property only in the previous year in which such taxes are actually paid by the owner. However, in the present case, we are not c....