9911796707
TMI Blog1971 (8) TMI 75X X X X Extracts X X X X X X X X Extracts X X X X ..... ious years to the assessment years 1961-62 and 1962-63, the assessee paid property tax on the cinema houses. Rs. 3,065 was paid in the year 1961-62 and Rs. 2,563 in the year 1962-63. The assessee debited these amounts in the profits and loss account and claimed deduction in computing its total income. The Income-tax Officer disallowed this deduction by his order dated 12th February, 1964. An appeal by the assessee to the Appellate Assistant Commissioner also failed. The Appellate Assistant Commissioner held that the property tax was not admissible deduction under section 10(2)(ix) of the Income-tax Act, 1922, as it was not covered by the expression " land revenue, local rates or municipal taxes ". It was further held that these amounts coul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Income-tax Act, 1961, the question already set out in the opening part of this order has been referred for our opinion. Before we proceed to answer the question, it will be appropriate to refer to the provisions of the Punjab Urban Immovable Property Tax Act, 1940. Section 2(c) defines an owner and is in the following terms : "'Owner' includes a tenant in perpetuity, a mortgagee with possession, and a trustee having possession of trust property." Section 3 is the charging section and the relevant part with which we are concerned is sub-section (4) and is in the following terms : "The tax shall be paid by the owner of the buildings and lands in respect of which it has been levied. " It is clear from the language of the statute that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are really incidental to the trade itself. They cannot be deducted if they are mainly incidental to some other vocation, or fall on the trader in some character other than that of trader. " This test was accepted by the Supreme Court in Travancore Titanim Products Ltd. v. Commissioner of Income-tax. While dealing with the question whether estate duty can be claimed as a permissible deduction under section 10(2)(xv) their Lordships, while dealing with the said provision, summed up the position thus : " The nature of the expenditure or outgoing must be adjudged in the light of accepted commercial practice and trading principles. The expenditure must be incidental to the business and must be necessitated or justified by commercial expediency ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it be said that this was an expenditure which had been incurred by the assessee exclusively for the purpose of it business ? It is quite different to say that the assessee was taxed, because it carried on its business. Only that expenditure will be covered by this clause which the assessee has spent or laid out exclusively for the running or betterment of its business. If a tax has been imposed simply because a person was carrying on a particular business, that, in my view, will not be covered by this clause, because the tax is the result of that person's doing the business. If he had not done that business, the tax would not have been levied on him. The tax, in the instant case, was the outcome of the assessee's carrying on the business. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and property from expropriation, coercive process or assertion of hostile title ; it may also comprehend payment of statutory dues and taxes imposed as a pre-condition to commence or for carrying on of a business ; it may comprehend many other acts incidental to the carrying on of a business. However wide the meaning of the expression may be, its limits are implicit in it. The purpose shall be for the purpose of the business, that is to say, the expenditure incurred shall be for the carrying on of the business and the assessee shall incur it in his capacity as a person carrying on the business. It cannot include sums spent by the assessee as agent of a third party, whether the origin of the agency is voluntary or statutory ;..... This ca ..... X X X X Extracts X X X X X X X X Extracts X X X X
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