TMI Blog2012 (11) TMI 889X X X X Extracts X X X X X X X X Extracts X X X X ..... come Tax Act - ITA 115 of 2004 & ITA 846 of 2004 - - - Dated:- 17-5-2012 - Kalyan Jyoti Sengupta And Joymalya Bagchi, JJ JUDGEMENT Per : K J Sengupta, J : Both the appeals involved common question of fact and law and as such were heard analogously. These appeals are directed against the judgment and order of the Special Bench (E) Kolkata of the learned Income Tax Appellate Tribunal (hereinafter in short as the learned Tribunal) dated 18th December 2003 in relation to assessment years 1997 98 in connection with ITA 38/2001. Both the appeals were admitted by an order of this Court dated 28th April 2004 and as corrected by order dated 21st May 2004 on the following substantial question of law. (1) Whether the learned Tribunal ought not to have held the surcharge of the Municipal Tax was part of the question and/or annual value for the purpose of Section 23(1) of the Income Tax Act 1961 (hereinafter referred to as the said Act) prior to its amendment by the Finance Act 2001 with effect from 1st April 2002. (2) Whether on the facts and in the circumstances of the case the learned Tribunal was justified in law in holding that for the determination of annua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as part of the rent for the purpose of assessment of income under the head income from house property. Being aggrieved by the said decision the assessee preferred appeal before the Commissioner of Income Tax (Appeals) who decided the aforesaid contention in favour of the assessee following decision of the learned Tribunal in the assessee s own case for the assessment year 1986-87 wherein it was held that surcharge of municipal tax collected by the assessee cannot be considered to be the income of assessee. The Revenue, however did not accept this judgment in this assessment year and preferred appeal questioning correctness of earlier decision of the Tribunal relating to the assessment year 1986-87. The Division Bench of the Tribunal viewed this issue required reconsideration by larger Bench of the Tribunal. Therefore, the learned President of the Tribunal constituted the larger Bench which has ultimately rendered decision against which present appeal has been preferred. By the impugned judgment and order the Special Bench of the learned Tribunal held that the surcharge as referred to in KMC Act and collected by the assessee as the owner of the premises from the tenants/ occupi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icipal tax to the extent borne by the owner shall be deducted in the year of actual payment. The said proviso throws light on how the word rent under Section 23(1) (b) should be construed. The deduction under the proviso can be allowed only if the amount to be deducted forms part of the rent in the first place. No deduction can be made in respect of the municipal taxes in terms of the proviso if the same do not form part of the rent. In other words he submits further that in terms of the proviso only the municipal tax borne by the owner can be deducted. The proviso makes it clear that where landlord pays the municipal tax out of the rent he is entitled to deduction of such municipal tax. His further contention is that the amount of surcharge which has been collected by it from the tenants is not borne by the appellant and as such the proviso will not apply in its case. He relied on two decisions in this regard one is of this Court and another is of Supreme Court, in case of CIT v. Gillanders Arbuthnot Co. Ltd. (1983) 142 ITR 598 (Cal.) and CIT v. Dalhousie Properties Ltd. (1984) 149 ITR 708 (SC) respectively. He contends object of the proviso of Section 23 is that where the t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... levant year is to be deducted therefrom as per 1st proviso to Section 23 of the said Act. In support of their contention they have relied on the following authorities: (1990) 2 CLJ 310, 87 ITR 542, (1988) 1 CLJ 536, 87 ITR 542: We have heard the learned Counsel for the parties and having read carefully the aforesaid questions formulated at the time of admission and having considered argument advanced by the learned Counsel for the parties the issue basically involved in this matter is whether the receipt on account of commercial surcharge over and above the municipal rates from the tenants/occupants do form part of income from house property or exigible to tax, though the same is really to be paid by the occupants namely tenants under the KMC Act. We have gone through the judgment of the learned Tribunal. We think conjoint reading of Sections 4 and 5 of the said Act will throw light to determine above issue. We thus set out the said two provisions:- 4. (1) Where any Central Act enacts that income-tax shall be charged for any assessment year at any rate or rates, income-tax at that rate or those rates shall be charged for that year in accordance with, and [subject t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to pay rate including the surcharge realizing the same with rent. According to him rent does not include surcharge then receipt thereof cannot be treated to be the income from house property. He puts it differently that surcharge has no co-relation with the receipt of the rent. Section 193 of the KMC Act provides for incidence and payment of (property tax) on lands and buildings: 193. Incidence of (property tax) on lands and buildings.- (1) The property tax on land and buildings shall be primarily leviable.- (a) if the land or building is let, upon the lessor; (b) if the land or building is subject, upon the superior lessor; (c) if the land or building is subject, upon the person in whom the right to let such land or building vests. (2) The property tax on any land or building which is the property of the Corporation and the possession of which has been delivered under any agreement or licensing arrangement, shall be leviable upon the transferee or licence, as the case may be. (3) The liability of the several owners of any land or building constituting a single unit of assessment, which is 0or purports to be severally owned in parts of fl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y correlation with the rate. We thus are unable to agree to Mr. Khaitan s contention that the payability of the surcharge by the tenant should be kept outside the purview of the rental income from house property as it is not really appropriated or retained by the owner as ultimately it has to be paid or it has to be worked out otherwise by way of agreement. We do not feel usefulness of Mr. Khaitan s contention that as because the amount of surcharge is primarily payable by the occupier/tenant the same loses its character on receipt on account of rent. It is true on reading of the provision of the KMC Act the amount collected by way of commercial surcharge cannot be appropriated or enjoyed by the owner of the property so collected as it is to be paid to the Corporation authorities but then it is receipt of total income within the meaning of Section 5 of the said Act. The provision of the said Act nowhere make distinction as far as concept of income is concerned from enjoyment and appropriation point of view. The moment the amount collected in relation to any transaction whatever may be the nomenclature that receipt has to be termed income. Here the commercial surcharge is receivab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v. CIT (2000) 245 ITR 421 the Supreme Court following the ratio in the cases of Chowringhee Sales Bureau P. Ltd., Sinclair Murray Co. P. Ltd. and Plastic Products Engineering Co. has held amongst other that, the amount collected by the dealer in connection with the sale on account of excise duty was treated to be part of the price of purchase and as such it was treated to be trade receipt and it was exigible to tax. We cannot resist our temptation to note the English decision in case of Paprika Ltd. Anr. v. Board of Trade reported in (1944) 1 All. E.R. page 372 and to quote relevant portion thereof as follows:- When the seller posses on the tax and the buyer agrees to sales tax in addition to the price, the word tax is really part of the entire consideration and the distinction between the two amounts tax and the price loses all significance. Lawrence.J. in that case in His Lordship s own words expressed as follows: Wherever a sale attracts purchase tax, that presumably affects the price which the seller who is liable to pay the tax demands, but it does not cease to be the price which the buyer has to pay even if the price is expressed as x plus purchase ta ..... X X X X Extracts X X X X X X X X Extracts X X X X
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