TaxTMI 
TaxTMI 
1950 (5) TMI 2
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....ons of Section 9 of the Act. Out of the first item a deduction in the sum of Rs. 48,572 was allowed on the ground that this item represented tenants' burdens paid by the assessee, otherwise the claim was disallowed. The appeals of the assessee to the Appellate Assistant Commissioner and to the Income-tax Appellate Tribunal were unsuccessful. The Tribunal, however, agreed to refer two questions of law to the High Court of Judicature at Bombay, namely- (1) Whether the municipal taxes paid by the applicant-company are an allowable deduction under the provisions of Section 9(1)(iv) of the Indian Income-tax Act ; (2) Whether the urban immoveable property taxes paid by the applicant-company are an allowable deduction under Section 9(1)(iv) or under Section 9(1)(v) of the Indian Income-tax Act. A supplementary reference was made covering a third question which was not raised before us and it is not therefore necessary to refer to it. The High Court answered all the three question in the negative and hence this appeal. The question for our determination is whether the municipal property tax and urban immoveable property tax can be deducted as an allowance under clause (iv) of sub-s....
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....urred by him but one cast on him by law. The Privy Council held that the amount paid by him in discharge of that liability formed no part of his real income and so should not be included in his assessment. Though the decision proceeded on the principle that the outgoings were not part of the assessee's income at all, the framers of the amending Act of 1939 wanted, apparently, to extend the principle, so far as the assessment of property was concerned, even to cases where obligatory payments had to be made out of the assessee's income from the property charged with such payments, and the second sub-clause, namely, " where the property is subject to an annual charge not being a capital charge, the amount of such charge " was added. It is this sub-clause which the appellant invokes in support of its claim to deduction of the municipal and urban property taxes in the present case. In view of the opening words of the newly added sub-clause, the expression " capital charge " also used therein cannot have reference to a charge on the property, and we think it must be understood in the same sense as in sub-clause (1) ; that is to say, the first sub-clause having provided for deduction of i....
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.... of a general tax on all buildings and lands in the city. The primary responsibility to pay this property tax is on the lessor (vide Section 146 of the Act). In order to assess the tax provision has been made for the determination of the annual rateable value of the building in Section 154. Section 166 provides for the maintenance of an assessment book in which entries have to be made every official year of all buildings in the city, their rateable value, the names of persons primarily liable for payment of the property tax on such buildings and of the amount for which each building has been assessed. Section 167 lays down that the assessment book need not be prepared every official year but public notices shall be given in accordance with Sections 160 to 162 every year and the provisions of the said sections and of Sections 163 and 167 shall be applicable each year. These sections lay down a procedure for hearing objections and complaints against entries in the assessment book. From these provisions it is clear that the liability for the tax is determined at the beginning of each official year and the tax is in annual one. It recurs from year to year. Sections 143 to 168 concern t....
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.... them arises at the beginning of each half year and unless a notice of demand is issued and a bill presented there is no liability to pay them and that till then no charge under Section 212 of the Act could possibly arise and that the liability to pay being half yearly in advance, the charge is not an annual charge. It was also suggested that the taxes were a capital charge in the sense of the property being security for the payment. We are satisfied that the contentions raised by the learned Attorney-General are not sound. It is apparent from the whole tenor of the two Bombay Acts that the taxes are in the nature of an annual levy on the property and are assessed on the annual value of the property each year. The annual liability can be discharged by half yearly instalments. The liability being an annual one and the property having been subjected to it, the provisions of clause (iv) of sub-section (1) of Section 9 are immediately attracted. Great emphasis was laid on the word " due " used in Section 212 of the Municipal Act and it was said that as the taxes do not become due under the Act unless the time for the payment arrives, no charge comes into existence till then and that th....
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....aramount nature on all buildings and lands and that being so, a deduction in respect of the amount was mentioned in express terms. Municipal taxes, on the other hand, do not stand on the same footing as land revenue. The law as to them varies from province to province and they may not be necessarily a charge on property in all cases. The legislature seems to have thought that so far as municipal taxes on property are concerned, if they fall within the ambit of clause (iv), deduction will be claimable in respect of them but not otherwise. The deductions allowed in Section 10 under the head " Income from business " proceed on a different footing and a construction of Section 9 with the aid of Section 10 is apt to mislead. Kania, J., in the above case in arriving at his conclusion was influenced by the consideration that these taxes were of a variable character, i.e., liable to be increased or reduced under the various provisions of the Municipal Act and that the charge was in the nature of a contingent charge. With great respect, it may be pointed out that all charges in a way may be or are of a variable and contingent nature. If no default is made, no charge is ever enforceable an....