1. This reference arises out of the income-tax assessment of Messrs, Dalhousie Properties Ltd. in the assessment year 1966-67, the relevant previous year having ended on the 31st March, 1966. The facts found and/or admitted in the proceedings are as follows : The assessee is a limited company which owns extensive properties and its income from the rent realised is substantial. In the assessment year in question, the assessee claimed a deduction for Rs. 1,78,784, which represented the tax levied by the Corporation of Calcutta as a deductible item in the computation of its income derived from house property.
2. The ITO found that the assessee had raised dispute as to the enhanced taxes levied by the Corporation and that such taxes had not been paid by the assessee who only debited its P & L A/c by Rs. 1,05,764. On the basis of the quantum of municipal tax, the ITO allowed only a sum of Rs. 86,686. He held that the balance, that is, the difference between Rs. 1,05,764 and Rs. 86,686 represented the arrear taxes paid.
3. On appeal, the AAC upheld the order of the ITO on the ground that out of the sum of Rs. 1,05,764 debited in the accounts of the assessee only an amount of Rs. 86,686 related to the year under appeal.
4. Being aggrieved the assessee preferred a further appeal to the Tribunal. On the basis of a chart filed by the assessee in this appeal showing the details of the municipal tax liability, which was not challenged by the revenue, the Tribunal found that the liability for municipal taxes in the relevant accounting year was Rs. 1,78,784. The Tribunal held that under Section 23 of the I.T. Act, 1961, tax levied by a local authority was to be allowed whether they were disputed or not or whether they were paid or not. The Tribunal upheld the contentions of the assessee and allowed the appeal.
5. At the instance of the Commissioner, the Tribunal under Section 256(1) of the I.T. Act, 196J, has drawn up the statement of case and has referred the following question as a question of law arising from its order.
'Whether, on the facts and in the circumstances of this case, the Tribunal was right in holding that the full taxes levied by the Corporation of Rs. 1,78,784 should be deducted under Section 23(1) of the I.T. Act, 1961 ?' The only contention of Mr. B. L. Pal, learned counsel for the revenue, at the hearing was that under Section 23 of the I.T. Act, 1961, the annual value of the property has to be determined after deduction of taxes levied by any local authority to the extent that the same are borne by the owner. Mr. Pal contended that the word 'borne' meant something more than payment in the instant case. He submitted that the owner had not even paid the tax levied and, therefore, it could not be said that he had borne such tax. In support of his contention Mr. Pal cited from Burrows Wordsand Phrases Judicially Defined, 1943 edn., the definition of the word 'bear', as quoted from Budd v. Marshall reported in  50 LJ QB 23 (CA) as follows : 'The covenant (in a lease)...provides that the tenant shall 'bear, pay and discharge the land tax and all other taxes, rates, duties and assessment whatsoever'...The addition of the word 'bear' to the words 'pay and discharge ', in the earlier part of the covenant, has, in my opinion, the effect of more distinctly developing its very comprehensive character.'
6. Dr. Debi Pal, learned counsel for the assessee, has contended, on the other hand, that the entire scheme of determination of annual value of a house property proceeded on a notional basis and, therefore, the question of actual payment did not arise. He submitted further that the authority cited on behalf of the revenue clearly showed that the verb 'bear' had an entirely different meaning than the word 'pay'.
7. It appears to us that the contention of Mr. Pal is without any merit. At the relevant time Section 23 of the I.T. Act, 1961, was as follows:
'23. Annual value how determined.--(1) For the purposesof Section 22, the annual value of any property shall be deemed to be the sum for which the property might reasonably be expected to let from year to year :
Provided that where the property is in the occupation of a tenant and the taxes levied by any local authority in respect of the property are, under the law authorising such levy, payable wholly by the owner, or partly by the owner and partly by the tenant, a deduction shall be made equal to the part, if any, of the tenant's liability borne by the owner.'
8. It would appear from the prov., as it stood at the relevant time, that only where a deduction was claimed by the owner for the tenant's liability to such taxes that the question of the same being 'borne' by the owner would arise. In the instant case, there was no controversy that the liability to pay the taxes was that of the assessee and not that of its tenants. Therefore, it appears to us that arguments of Mr. Pal proceeded on an entirely erroneous basis. Surprisingly, throughout the entire hearing our attention was not drawn to Section 23 as it stood at the relevant time.
9. In any event, we do not accept that where it is laid down that the owner shall 'bear' a certain liability, it means that the owner has already paid the same. This is entirely contrary to the plain meaning of the words.
10. For the reasons stated above, we reject the contentions of the revenue and answer the question in the affirmative and in favour of the assessee. The assessee will be entitled to the costs of this reference.
C.K. Banerji, J.
11. I agree.