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Commissioner of Income-tax Vs. M. Ct. Muthiah - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtChennai High Court
Decided On
Case NumberTax Case No. 102 of 1975
Judge
Reported in[1979]118ITR104(Mad)
ActsTamil Nadu Urban Land Tax Act, 1966 - Sections 15; Income Tax Act, 1961 - Sections 24(1)
AppellantCommissioner of Income-tax
RespondentM. Ct. Muthiah
Appellant AdvocateNalini Chidambaram, Adv.
Respondent AdvocateK.J. Rebello, Adv.
Excerpt:
direct taxation - deduction - section 15 of tamil nadu urban land tax act, 1966 and section 24 (1) of income tax act, 1961 - whether tribunal right in holding that payment of arrears of urban tax relating to earlier years by assessee would fall under section 24 (1) (vii) and eligible for deduction in computing assessee's income from property - as per section 24 (1) (c) any sums 'paid' on account of land revenue or any other tax levied by government in respect of property would be deducted before computing income chargeable under head 'income from house property' - emphasis is on actual payment and not on payability - expression 'paid' would permit allowance of amount paid for any year or years - answered against revenue. - .....is overlooked in this submission is that section 24 wherever it contemplates the actual amount paid as deduction uses the appropriate expressions therefor, and wherever it restricts the allowance of the amount relating to the particular year, uses language suitable for that purpose. for instance, where the property is subject to an annual charge the amount of such charge is liable to be allowed as deduction under clause (iv) of sub-section (1) of section 24, the annual charge irrespective of its discharge would represent the deduction. the amount of annual charge in such a case could only be that amount relatable to a particular year. similarly, with reference to ground rent it is provided under clause (v) of sub-section (1) that the amount of such ground rent is to be allowed as.....
Judgment:

Sethuraman. J.

1. The Appellate Tribunal has referred the following question for the opinion of this court under Section 256(1) of the I.T. Act, 1961 (hereinafter referred to as 'the Act').

'Whether, on the facts and in the circumstances of the case, it has been rightly held that the payment of Rs. 8,564 being the assessee's 50% of arrears of urban land tax relating to the earlier years, would also fall under Clause (vii) of Sub-section (1) of Section 24 of the Income-tax Act, 1961, and the same will, therefore, be eligible for deduction in computing the assessee's income from property ?'

2. For the assessment year 1970-71, the assessee was assessed on a total income of Rs. 3,19,310. He made a claim for allowance of Rs. 8,564 which represented the urban land tax paid by him in the previous year relevant to the assessment year 1970-71. The AAC was of the view that the urban land tax related to previous years prior to the year under consideration and that it could not be allowed as deduction. The assessee took the matter on appeal to the Tribunal. The Tribunal, considering the language of Section 24(vii) of the Act, came to the conclusion that the amount was an allowable deduction. It is this conclusion of the Tribunal that is challenged in the form of reference of the question extracted already.

3. Sections 22 to 27 relate to the assessment of income from house property. The annual value of the property consisting of any buildings or lands appurtenant thereto of which the assessee is the owner is chargeable to income-tax under the head 'Income from house property'. Any portion of the property which he may occupy for purposes of any business or profession carried on by him will be excluded from this computation. In the present case, there is no dispute that the assessee was liable to be taxed with reference to the buildings under consideration under Section 22 of the Act. Section 23 provides for the manner of computation of annual value. Section 24 permits certain deductions from the computation of annual value made under Section 23. Section 24(1), so far as it is material, reads as follows :

'Income chargeable under the head 'Income from house property' shall, subject to the provisions of Sub-section (2), be computed after making the following deductions, namely :--......

(vii) any sums paid on account of land revenue or any other tax levied by the State Government in respect of the property ; ..... '

4. The dispute between the assessee and the revenue is whether any amount of urban land tax payable in relation to earlier years is liable to be allowed as deduction.

5. Learned counsel for the department submitted that the assessment of income under the I.T. Act is with reference to a particular assessment year and that each year is different from any other year. It was also her further submission that the deductions from the annual value, as computed could only be such amounts as related to that particular year. Admittedly, in the present case, the sums under consideration represent the urban land tax in arrears. It could not, according to her, be allowed as deductions in the present assessment. What is overlooked in this submission is that Section 24 wherever it contemplates the actual amount paid as deduction uses the appropriate expressions therefor, and wherever it restricts the allowance of the amount relating to the particular year, uses language suitable for that purpose. For instance, where the property is subject to an annual charge the amount of such charge is liable to be allowed as deduction under Clause (iv) of Sub-section (1) of Section 24, The annual charge irrespective of its discharge would represent the deduction. The amount of annual charge in such a case could only be that amount relatable to a particular year. Similarly, with reference to ground rent it is provided under Clause (v) of Sub-section (1) that the amount of such ground rent is to be allowed as deduction. The actual payment of such ground rent is not the criterion. Whether the assessee pays the amount or not, he would be eligible for allowance of the amount of ground rent. Consequently, the implication in Clause (v) is that the amount relating to the particular year would alone be allowable as deduction. In Clause (vi) there is provision for allowance of any interest payable on borrowed capital used for construction of the building. Here also it is clear from the provision itself that whether the assessee paid the interest amount or not, the amount payable with reference to a particular year would alone represent the deduction. However, when it comes to the question of deduction of land revenue or any other tax levied by the State Government the expression used 'any sums paid on account of urban land tax levied by the State Government in respect of the property' would qualify for deduction. The emphasis is on actual payment and not on the payability. In the present case, there can be no dispute about the fact that the assessee paid the relevant sum though it related to some other earlier years. Having regard to the particular expression used, viz., 'paid', the assessee was rightly held eligible for deduction though the amount related to some other year. It is not as if the assessee can claim deduction on the basis of accrual of his liability in one year or by the discharge of the liability on payment for any other year.

6. Our attention was drawn to the provisions of the Urban Land Tax Act. Section 5 of the Tamil Nadu Urban Land Tax Act, No. 12 of 1966, is the charging provision and it contemplates levy of such tax and collections therefor every Fasli year commencing from the date of the commencement of the Act. There are provisions relating to the obligation of any owner to submit a return in respect of the land owned by him. Section 15 provides that in respect of the urban land tax payable for every Fasli year or part thereof there shall be a separate notice of demand containing the particulars mentioned in Section 14 and it shall be served on the assessee. It is only after the service of such notice that the assessee can be proceeded against for the arrears of land revenue. Thus, having regard to the scheme of the relevant Act which levies urban land tax, it is clear that there is no question of any accrual of the liability every year by itself. The amount becomes payable only as and when it is demanded. The statute has advisedly in this context used the expression 'paid' and not any other expression like 'payable' or 'chargeable'.

7. Learned counsel relied on two decisions of the Privy Council in support of her stand that no expenditure relating to any earlier year can be allowed in the assessment of any particular year. There is no question of any general principle applicable with reference to the deductions under the I.T. Act. The deductions in the I.T. Act are provided for by the statute itself and the expression in the statute would govern the allowability of any particular amount. In the case cited, viz., CIT v. Maharajadhiraja Kameshwar Singh of Darbhanga [1933] 1 ITR 94 , one of the points in issue was that the assessee was entitled to deduct the arrears of royalty which had accrued in the previous year up to the date of his possession. The assessee in that case put forward a contention that the amount of royalty due to him before he took possession could not be brought to tax. The question did not relate to any deduction or allowance under Section 24 or any corresponding provisions of the Act of 1922. We do not consider that the said decision has any scope for application to the facts of the present case before us. The other decision relied on is reported in CIT v. Basant Rai Takhat Singh [1933] 1 ITR 197 . That was a somewhat curious case. The assessee had taken on lease for thirty years a property belonging to the cantonment authority. The assessee was required to build a certain building which became the property of the owner. The assessee sought deduction of 1/30th part of the kist of the building in the assessment made on him for the assessment year 1929-30. The Privy Council held that an amount spent in any earlier year could not be allowed as deduction for purposes of computation of the income. It was pointed out that on the true construction of the provision under consideration the allowance must be an allowance incurred in the year in respect of which arise the income,profits and gains, forming the basis of assessment. That was a case where the provisions of Section 12 were under consideration. Section 12 relates to the assessment under 'other sources' and the method of accounting employed which was also relevant. That decision came to be rendered under these special features and we do not consider that the said decision has anything to do with the interpretation raised on the word 'paid' with which we are now concerned. The word 'paid' would permit allowance of the amount paid for any year or years. Therefore, the question that has been referred is answered in the affirmative and against the revenue. The assessee will be entitled to his costs. Counsel's fee is fixed at Rs. 500.


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