TMI Blog1944 (8) TMI 13X X X X Extracts X X X X X X X X Extracts X X X X ..... ed Provinces Municipalities Act, 1916, and paid by the owner as a lessor under Section 149 of the latter Act should be deducted from the gross amount payable as rent by the tenant of that property. (2)Whether the amount of house tax imposed by the Municipal Board of Allahabad under clause (i) of sub-section (1) of Section 128 of the United Provinces Municipalities Act, 1916, and paid by the owner as a lessor under Section 149 of that Act should be deducted as an allowance from the bona fide annual value of the property determined under sub-section (1) read with sub section (2) of Section 9 of the Income-tax Act, 1922, on the ground that such amount is an annual charge which is not a capital charge, to which the property is subject within the meaning of clause (iv) of sub-section(1) of Section 9 of the Income-tax Act,. 1922. (3)Whether, in determining the bona fide annual value of a property under sub-section (1) read with sub-section (2) of Section 9 of the Income-tax Act, 1922, the amount of the water tax imposed by the Municipal Board of Allahabad under clause (x) of sub-section (1) of Section 128 of the United Pro vinces Municipalities Act, 1916, and paid by the owner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot depend upon the amount of water used. The tax will not be reduced because the occupier prefers, for instance, to draw all his water direct from the Granges. My conclusion is that the assessee has failed to establish his third point. On his first point Mr. Kunzru argues that we should view the term 'annual value' from the position of the owner of the property and treat it as synonymous with advantage to him, that is, we should ignore the burden cast on the tenants and consider only the actual benefit to the owner. He has referred us to the remarks made in Chunnamal v. Commissioner of Income-tax AIR 1931 Lah. 320, by Tek Chand, J., although he admits that the decision in that case was overruled in Lalla Mal Samgham Lal v. Commissioner of Income-tax [1936] 4 ITR 250 (Lah.). He has also drawn our attention to the provisions of Sections 3 and 4 of the Act but in both sections the word 'total' appears and I am satisfied that income throughout the Act means gross income, that is, all that comes or can be deemed to come into the hands of the assessee. The term 'annual value' must be construed in the same sense and, indeed, if it had the meaning Mr. Kunzru woul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the word 'charge' in Section 9(1)( iv) of the Income-tax Act does not include inchoate and contingent charges and that the charges created on property for the payment of house tax and water tax are inchoate and contingent. These charges are created in this Province by Section 177 of the U.P. Municipalities Act, 1916, which says : All sums due on account of a tax imposed on the annual value of buildings or lands or of both shall, subject to the prior payment of the land revenue (if any) due to his Majesty thereupon, be a first charge upon such buildings or lands . The tax which has throughout been referred to as a house tax is imposed under Section 128(1)(i) of the U. P. Municipalities Act where it is described simply as a tax on the annual value of buildings or lands or of both. The water tax is imposed under Section 128(1)(x) where it is described as a water tax on the annual value of buildings or of lands or of both. It is clear, therefore, that there were statutory charges upon the property of the assessee to secure the payment of house and water tax by it. The Tribunul seems to have thought that these charges were inchoate and contingent because they might o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to secure the payment of the same fixed sum every year for ever then I can only say that no such charge can exist and the section is meaningless. If it is suggested merely that there must be some recurring liability, then these taxes imply such liability. In some circumstances a part or whole of the amount paid may be remitted or refunded but the liability to pay is based on the assessment and the assessment itself is not set aside. I may add that there is nothing in the section that I can see which implies that the charge must be to secure the payment of exactly the same sum each year. In the ease of maintenance of a child for instance why should there be no arrangement that the allowance should increase from year to year as the child grew older and his expenditure grew greater? What is there in the section to suggest that a charge to secure payments under such an arrangement would not be an annual charge? I must say I can see no force in the Tribunal's second argument. The third argument is that the Legislature would specifically have mentioned municipal taxes in Section 9 of the Act if it had intended that sums paid on account of such taxes should be deducted from the an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Acts under which it is imposed, but those Acts may be amended or altered at any moment and there is nothing to prevent a Legislature at any time from saying that land revenue shall not be a charge on property. In these circumstances the Central Legislature when it passed the Income-tax Act did not authorise the deduction of land revenue upon the ground that it was a charge. It authorised that deduction on the ground that land revenue was a payment made to Government on account of property and clearly intended to authorise its deduction quite irrespective of the question whether it was or was not a charge upon the property. On the other hand, it did not intend to authorise the deduction of all municipal taxes as such. It intended only to authorise the deduction of such municipal taxes as happen at any time to be charges upon the property. There was no reason, in my judgment, why it should have specifically mentioned municipal taxes if any such taxes came within the general definition of charges. I suppose the underlying argument is that land revenue is a charge upon property but it cannot be the kind of charge contemplated in Section 9(1)(iv), otherwise it would not have been separa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld not be deducted from annual value under the provisions of Section 9(1)(iv) of the Income-tax Act. The learned Judges seemed to have had some difficulty in assigning a meaning to the term annual charge but ultimately came to the conclusion, with which I respectfully agree, that it must mean a charge to secure an annual liability. Beaumont, C.J., thought that the term 'capital charge' must mean a charge on capital and consequently held that a charge to secure the payment of the municipal tax with which he was dealing must be a capital charge. He did not explain how a charge to secure the payment of the tax could differ in this respect from any other charge to which the section could refer. Section 9 of the Income-tax Act refers only to property consisting of buildings and lands. Buildings and lands must always be capital. If capital charges mean charges on capital all charges on buildings and lands must be capital charges. There could be no annual. charges which were not capital charges and that part of the section which allows the deduction of an annual charge not being a capital charge would be meaningless. It is sound rule of construction that we should interpret a st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a monthly or annual payment was a capital charge. He found that the charges created by the City of Bombay Municipal Act were annual charges, because the amounts to be paid were liable to variation, because no charge would be created if the amounts were paid before they fell due, because the charge might not continue for a whole year and because the taxes being recoverable in half yearly installments, if one installment were paid, the charge for the other would be to secure a half yearly and not an annual payment. My general ground for holding that these arguments cannot be accepted is that they could be applied to all charges and, if accepted, would render the provision for the deduction of annual charges quite meaningless. I have already given reasons for thinking that a charge does not cease to be annual because the annual payment which it secures may be varied by subsequent decrees or agreements or in some other way. House and water taxes at least in the United Provinces are fixed for periods of 5 years though they may be varied after those periods by subsequent assessment. Taxes become due and the liability to pay them arises on some definite date and when they become due char ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
