1987 (12) TMI 25

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....he case, the Tribunal was correct in law in holding that where deduction has to be allowed in terms of the proviso to section 23(1) of the Income-tax Act, 1961, of municipal taxes, only such amounts for which demand is made for the first time in the accounting period could be allowed as a deduction ? " For the income-tax assessment years 1975-76 and 1976-77, the assessee claimed deduction of Rs. 15,794 and Rs. 15,290, respectively, by way of municipal taxes payable in respect of properties owned by it. The deduction was claimed under the proviso to section 23(1) of the Act. The tax authorities scrutinised the claim and found that Rs. 4,866 and Rs. 7,400 are allowable for these two assessment years by way of tax. In that view, the claim f....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....vied in respect of each accounting period separately and to allow such amounts as deduction. The assessee filed an application under section 256(1) of the Income-tax Act before the Tribunal and at its instance, the Tribunal has referred the question of law which we have already indicated above. Learned counsel for the petitioner, Ranganathachary, contends that the language of the proviso to section 23(1) does not contain any limitation of the amount allowable by way of deduction towards municipal taxes while determining the income from property. According to learned counsel, whatever amount is paid by way of tax in a particular year qualifies for deduction. In support of his contention, learned counsel relied on a decision of the Madras ....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....rty, without consideration regarding its actual payment. We have carefully gone through the decision of the Madras High Court on which reliance is placed by learned counsel for the petitioner. We do not find any authority to support the proposition that whatever tax is paid is allowable as a deduction in the year. The ratio of that decision is also to the effect that whatever tax is levied by the State should be allowed as a deduction, irrespective of the fact whether the assessee had paid that tax in that year. We also notice the effect of the subsequent legislative amendment to be the same. In bringing about amendment with effect from April 1, 1985, the law recognised that an assessee is entitled to claim deduction by way of municip....