John Beaumont, Kt., C.J.
1. This is a reference made by the Commissioner of Income-tax under Section 66(2), Indian Income-tax Act, 1922, raising the question :
Whether under the provisions of Section 9 of the Act the assessee is entitled to a deduction of Rs. 16,370, being the municipal general tax paid to the Bombay Municipality in respect of the immoveable property belonging to him
2. Section 9 of the Indian Income-tax Act deals with the heading 'Income from property,' and directs that the tax shall be payable by an assessee under that head in respect of the bona fide annual value of property consisting of any buildings or lands appurtenant thereto of which he is the owner, subject to certain allowances. The only allowance, which, it is suggested, applies to this case, arises under Sub-clause (iv), which was amended in the year 1939. The sub-clause reads :
Where the property is subject to a mortgage or other capital charge, the amount of any interest on such mortgage or charge.
3. Then the following words were added in 1939 :
Where the property is subject to an annual charge not being a capital charge, the amount of such charge.
Now, the question is whether any municipal taxes payable under the City of Bombay Municipal Act come within the words 'an annual charge not being a capital charge.' In order to answer that question one must, in the first place, look at the Municipal Act to see the nature of the taxes imposed.
4. Sections 126 and 128 of the City of Bombay Municipal Act, 1888, require the Standing Committee to prepare a budget for the ensuing year, and Section 139 defines the taxes which may be levied, which include property taxes, and amongst property taxes is a general tax, and that is the tax which is relevant for the present purpose. Section 143 provides that the general tax shall be levied in respect of all buildings and lands in the city with the exceptions mentioned. Section 146 directs what persons are to be liable for the taxes; in the case of property let, it is the lessor; in the case of property sub-let, the superior lessor; it may in certain cases be the occupier. Then Section 156 requires the Commissioner to keep an assessment book in which the particulars of the various properties and the amounts of assessment have to be entered; and under Section 166 the entries in that book become binding after an opportunity has been given for objections to be lodged and considered. Section 175 and the following sections provide for the case of a building having been vacant for not less than sixty consecutive days, and for the tax having been paid, and provide in such a case for a refund of part of the tax. Section 197 provides that each of the property taxes shall be payable in advance in half-yearly instalments on each first day of April and each first day of October. Then comes Section 212, which is the section creating a charge, and that provides, so far as material, that property taxes due under the Act in respect of any building or land shall, subject to the prior payment of the land revenue due to Government, be a first charge upon the building or land and upon the goods and chattels found within or upon such building or land and belonging to the person liable for such taxes. So that the property tax is leviable in respect of a year, is payable in advance half-yearly on April 1, and October 1, and when in arrear, the tax becomes charge on the property. The question is whether that tax can be said to be 'an annual charge not being a capital charge.'
5. I do not find it very easy to say what is the meaning of 'an annual charge.' The words in their most natural significance would mean a charge arising annually. But charges as a rule do not arise annually. The words, I think, would cover a charge to secure an annual liability, and in that sense it is argued that this tax is an annual charge. It is to be noticed that the charge only comes into existence when default is made in payment of tax, and naturally ceases as soon as the payment is made. So that the charge is unlikely to endure for a year, since the liability is unlikely to exist for a year. Whether it can be said that this is an annual charge may be doubtful, but it seems to me plain that it cannot be described as 'annual charge not being a capital charge.' I do not know what meaning can be assigned to the expression in the Sub-section 'a capital charge,' except a charge on capital, though it is not necessary to consider the meaning of the expression except in relation to the charge arising under Section 212 of the Municipal Act. To my mind, such a charge is unquestionably a charge on capital, and, in my view, therefore, one cannot say that the general tax falls within the expression 'an annual charge not being a capital charge,'which has been added to Section 9(1)(iv). It is said that those words were added by virtue of the Privy Council decision in Bijay Singh Dudhuria v. Commissioner of Income-tax, Calcutta I.L.R. (1933) Cal. 1029 but if that be so, I think the Legislature must have misunderstood that decision. All that the Privy Council decided in that case was that where a person was entitled to income, and had to pay out of that income an annuity to his father's widow, that annuity was a charge on income, which had in effect priority to his own title, and, therefore, income which was payable to the father's widow never became the income of the assessee liable to assessment under the Act. That case was not dealing with allowances.
6. The question whether municipal taxes ought to be made the subject of an allowance can hardly have been absent from the minds of the Legislature when they amended Section 9(1)(iv), Income-tax Act, because Section 9(1)(v) allows a deduction in respect of any sums paid on account of land revenue, and land revenue for this purpose is on much the same footing as municipal taxes. Moreover Section 10, which deals with allowances which may be claimed by a person assessed in respect of a business, allows deduction of any sums paid on account of land revenue, local rates or municipal taxes in respect of such part of the premises as is used for the purposes of the business. So that it cannot, I think, be questioned that the Legislature had in mind the question whether an allowance should be made in respect of local rates or municipal taxes, and it is, to my mind, inconceivable, if they had meant to allow a deduction of that nature, that they would not have said so in express words. The general nature of deductions allowed from what is assessable income seems to me to be (a) payments necessary to preserve the property, such as payments for ground rent and interest on mortgages and (b) payments necessary in order to enable the income to be earned or received. That seems to be the general principle underlying the deductions allowed by the Act, and, it is difficult, to my mind, to say that payment of municipal taxes falls within such a principle; so that I should not expect to find such taxes allowed as a deduction. The payment of municipal taxes results in the provision of various amenities for the property in respect of which they are paid, and if those amenities were not provided by the Municipality, they would have to be provided in many cases by the owner, and there is no heading under which such payments could be claimed as deductions in respect of income-tax, Therefore, if the Legislature were minded to authorise a deduction in respect of municipal taxes, I should have expected them to say so in clear language, and there would be no difficulty in drafting a sub-section covering the point. I find it impossible to suppose that the Legislature, whatever they may have intended the words to cover, can have intended to include municipal taxes in such an expression as 'an annual charge not being a capital charge.' It is not necessary for us to consider what the exact meaning of those words is. It is sufficient to say that they do not cover municipal taxes which are made a charge on property under Section 212 of the Bombay Municipal Act.
7. That being so, the answer to the question raised must be in the negative.
8. The assessee to pay costs.
9. I agree that the answer should be as stated in the judgment of the learned Chief Justice. I do not propose to accept the burden of defining what would fall within the amending words in Clause (iv) of Section 9. To say the least it is drafted very inartistically. The expressions 'annual charge' and. ' not being of a capital nature 'are not defined anywhere. One can understand annual payment or annual receipt. I do not see how a charge can be annual unless it means a charge in respect of a payment to be made annually. The different meanings given to the word 'annual' in Murrays English Dictionary do not fit in with 'charge' unless the meaning indicated above is given to the expression 'annual charge'. In considering the nature of this charge, it has to be noted that in the first instance the tax is fixed for a whole year, but it is liable to be varied under the power of increasing taxation, when necessary. It is also liable to be reduced if the property remains vacant for the different periods mentioned in the Municipal Act. Again, there is no charge at all till the tax has become due. That is made clear by the words of Section 212 of the City of Bombay Municipal Act. If, therefore, a landlord had paid a sum in advance, and on the Municipality fixing the sum of the tax, before April 1 in a year, the landlord wrote to the Municipality to appropriate what he had paid in advance against the tax for the whole year, there will be no charge at all. The fact that the tax can be paid in two instalments, makes the position peculiar. After the tax is fixed for the year suppose a payment is made for the first half year, but not for the second half under Section 212 of the Municipal Act it is clear that there is a charge on the property for what remains due for the second half. Still, it will not be for the annual payment and therefore not an annual charge. One of the recognised meanings of the word 'annual' is 'anything that lasts for a year'. In my opinion, therefore, the nature of the tax imposed by the Municipal Act does; not bring it under the category of annual charge.
10. The words 'not being of a capital nature' also are not clear. For myself, I do not accept the contention that a document which provides that a certain payment to be made monthly or annually and charged on the immoveable property or the estate of an individual, e.g. a charge declared under an agreement or a decree in favour of a Hindu widow for her maintenance, is a document creating a charge of capital nature. I limit this decision expressly to the words used in Section 212 of the City of Bombay Municipal Act, and having regard to the nature of the tax contemplated by the sections of that Act, The point under consideration, in my opinion, is not free from doubt, but having regard to the fact that in Section 10 there is express provision for the allowance of land revenue, local rates or municipal taxes on the property used for business, profession or vocation, if the Legislature were so minded they could have used the same words in Clause (iv) of Section 9, if a similar allowance was intended there. I think it is highly desirable for the Legislature to make clear what is intended to be covered by the clause inserted in amending Section 9(iv).